Spencer Heath Archive

Item 1221

Fragment of carbon of letter from Heath to Kendal, judging from a footnote referring to Item 1219.

Just prior to February 17th, 1937

… as an aid to labor under proper administration of the capital it adds to the productiveness of administrative labor by an amount that pays something to administrative labor after taking care of all depreciation or maintenance and also of obsolescence. Any capital that does not do this is being improperly administered and the loss will fall on the administrator, if he is the owner of the capital. If he is a borrower of the capital, the loss falls upon him to the extent that he is responsible (that he owns anything) and the balance of the loss must fall on the lender who took a bad risk. All borrowed capital, under proper administration will add to the productiveness of the administrative labor by an amount sufficient to provide for all depreciation and obsolescence, for interest at the current or agreed rate upon the borrowings, and, finally, a net return to the administrator sufficient to induce him to borrow and manage the capital. Any capital that does not enable its administrator to meet all these charges and still have some profit or advantage left for himself is capital that is not socially efficient or productive. Not much capital of this kind can be used, nor for very long.

Coming down to the case of the land-owners who virtually are the owners of all the unborrowed public capital because their rents represent the earnings of such capital, it is clearly to be seen that in the absence of taxation to maintain it the public capital would depreciate and become obsolescent unless the landowners themselves maintained it out of their enhanced rents. If they did not so maintain the public capital, then the public capital would run down in its value and earning power and in this manner create less rent. The land-owners simply cannot have their cake and eat it too. If they would have their capital unimpaired they must use part of their rent to maintain it from depreciation and obsolescence. If they do not use part of their rent in this way the capital will run down and this will pull their income down by a greater amount than it would have cost them to maintain the capital out of their unimpaired income.

I expect to come downtown tomorrow and hope to see you — perhaps lunch together. Best regards.

Sincerely,

Spencer Heath

I still have the answers to those three questions to re-write and send to you.