Spencer Heath Archive

Item 2233

Citadel, Market and Altar, Chapters 23-25, with some slight revisions of punctuation

 

 

 

CHAPTER 23

The Business of Community Economics

Economics means the management of a house, a city or a state as a community.

 

 A social-ized or civilized condition of men is one in which they cooperate by division of labor in democratic or willing exchange of services one with another.

 

 Civilized men must live in communities because it is only in community life that there can be any voluntary exchange of services; here there must be community services and property in order that private services and property may be created, owned or exchanged.

 

 A hotel or apartment house, an office or professional building or an industrial building is a community because a portion of its space and occupants is designated and given over to the common use and service of all. This refers to means of communication, corridors, stairways, elevators, etc., with all proper furnishings, equipment, services, protections, etc., needful to the inhabitants for their common use and enjoyment, often including heat and air conditioning, light, power, water and gas, and even recreational and educational facilities and other cultural attractions supplied by the proprietors of the community property or under their consent and control.

 

 The community property, with all its services, is under the pro­prietary jurisdiction and therefore contractual administration of its organized owners, each of whom owns not a separate portion but an undivided and therefore united interest in the entire property, in the community as a whole. Thus organized, the proprietors finance and maintain and otherwise administer the whole property and all its services out of the proceeds from their services in renting or leas­ing particular portions and thereby merchandising to their tenants the entire community services and advantages in the proportions that these appertain to each particular portion and are so distributed.

 

 For this purpose, particular portions of the community property are set apart for separate and exclusive occupancy and use. The ex­clusive occupants, present and prospective, themselves determine the value and proper recompense to the proprietors for such of the community services as come to them through their exclusive pos­sessions of these parts. They do this by, in effect, bidding upwards for the occupancies of these separate parts while the proprietors of different communities offer them at downward prices until the highest biddings and the lowest offers meet.

 

 The organized proprietors through their officers supervise the employees and thus administer the community property as their capital. And out of the rents they receive from the separate occupants, the proprietors meet all the costs of current labor and other services, interest on their investment and all other necessary expenses. The balance they retain as profits of administration, or the earnings from their administrative services.[1]

 

 So it is with the basic though but little developed organization of the out-of-doors communities called towns, cities, states and nations. These public communities also are owned by proprietors who hold their proprietary jurisdiction, their title and authority, under power of public opinion — a social institution of property by common con­sent that is prior to all legislation. But the owners of these larger and older communities are not organized in any merger of their proper­ties. Each still holds his separate and divided interest. There is no concentrated owning interest organized to administer the com­munity as a whole by providing the inhabitants with services in such manner as to induce a voluntary and a profitable revenue from them. And these larger communities, though essential to civilization, have been notorious throughout history for their lack of permanence and success. All but the more recent of them have decayed and fallen, and signs are not wanting that these are now on the downward path of their predecessors.

 

  Seldom if ever has any great community gone down except from or after much internal decay, and small communities are no exception to the rule. Let us examine, then, what are the essentials of the suc­cessful and profitable conduct and keeping of the small communities referred to. The whole may be summed up in the one word, manage­ment

 

 Practical persons know that in a community housekeeping, such as a hotel, management above all else is vital to its success. Good management can overcome great adversities, but under no amount of favorable conditions can a business long continue under manage­ment that is bad, neglectful or lacking on the part of its owners.

 

 The great social function of ownership is — administration. This has to do with all of the property and capital, including the purchases and sales of services and products and supervision over the services of all non-owners or employees engaged in the enterprise.

 

 These non-owners, however high in rank, can exercise no original but only the delegated authority of the owners. They come, there­fore, rightly under such supervision. In all successful enterprises of ordinary size, this supervision by owners is definitely performed. But in large-scale business, especially where there is monopoly or governmental control, ownership and management are frequently “divorced;” and high-ranking employees, coming under no ade­quate supervision, assume original instead of delegated powers and proceed to operate the property and business in disregard alike of the interests of its owners and the welfare of those to whom its products and services are sold. This is a condition of internal decay that no small business, community or otherwise, can or ever does long survive.

 

 A large business, however, is like a large organism; it is longer lived. It takes longer to grow and longer to die. This is especially observed in community business. Let a small private community like a hotel spring up; if ownership is divorced from management, it quickly goes down. Let a city or a state arise, and under like conditions it grows more slowly and more slowly declines. And an empire may take centuries to compass its career.

 

 A community organization may exist indoors or out of doors; it may be a building or collection of buildings or it may be a territory. If a building, it may be a hotel or an office or industrial building. If it is a territory, it is a community, a town, city, county or state.

 

 A community must have space, population, services and property. The occupants must have private properties and services and be free to exchange these or the use of them among themselves; and they must own and administer these properties in order to exchange them.

 

 In like manner, the property and services which are common to the community must have community owners to administer and exchange them, the same as individual properties and services must have private or individual owners to administer and exchange them.

 

 In exchange for the community services they receive, the occu­pants of the community give to the owners of the community prop­erties and services a portion of their private properties and services. Such private property and services, rendered by accepted custom or voluntary exchange for community services, is called rent.

 

 The rent paid by the occupants of a hotel or other community building is paid in exchange for the common and general services the occupants enjoy. Special and particular services, not open to all, are purchased and paid for separately as received, and not in the rent.

 

 The rent paid by the occupants of a town, city, state or other territory is paid in exchange for the common and general or public services that the community affords. The amount of rent paid for community services depends upon their exchange or market value as it appears in connection with different plots, according to their size and location, and the demand for them. This is ascertained and fixed by the owners in different communities and different owners in the same community offering their community services (as sup­plied to their respective plots) in competition with one another. This presses rents downward, while those who would occupy the plots and enjoy the services they afford bid upwards against one another until the two sides of the market, the asking and the bidding, are in agreement as to the rent.

 

 In a hotel community, the owners of the community properties, facilities and services administer them for the benefit of the occu­pants. In this way they cause the occupants willingly to pay rent for them to an amount adequate to meet all the costs of maintaining this community and its services and also a profit to the owners to the full value of their administrative services. A hotel not so conducted for the benefit of its occupants will have much of its space either unused or rented at unprofitable rates. Hotel owners, therefore, do ad­minister their properties and do supervise all the servants of the hotel community primarily in the interest of the occupants and thus in their own interest of receiving adequate rent to meet all the costs of the business and assure them their rightful profits besides.

 

 The owners of outdoor communities, towns, cities and states, do not seem to know that their ownership of the space and the area in­cludes also the public capital and services of the communities, and that they are capital owners by the fact that their income from their lands is the earnings of that public capital and comes to them by virtue of such capital ownership, however acquired. These public community owners, therefore, do not consciously administer their property. They leave its management almost entirely in the hands of unsupervised community servants and employees of all degrees, high and low, who hold office and power by getting themselves elected, honestly or otherwise, or by other usurpation.

 

 Since the community owners neither supervise these community servants, as hotel owners always supervise theirs, nor actively ad­minister the community capital and properties vested in them by their ownership of the land, the community income from rents very properly does not pay the owners for any services beyond those that they do perform. Beyond paying the land owners for the services and benefits which, on the whole, the community does receive from them, the net rent does not suffice to pay the cost of the hired services and the carrying charges on the borrowed capital engaged in the community enterprises.

 

 In consequence of their failure to administer and supervise their community properties and servants, the community owners have no funds wherewith to hire public labor and capital. For not taking the authority and responsibility of owners, they forfeit the income and so lose the financial ability to make good their proper authority. The “public servants,” therefore, have excuse, and in fact no alterna­tive but to exact taxes by compulsion and make seizures of the private properties of the inhabitants in order to maintain themselves and their public operations, whether beneficial or otherwise. The occupants of the public communities are thus exposed not only to the devastation of constantly increasing seizures of their property, but also to having the public servants impose their unbridled activi­ties and operations upon them, with but little reference to the public interest and welfare beyond a meretricious popularity as the means of maintaining themselves in place and power.

 

 Although in all respects a public community is, in principle, the same as a hotel, the default of the owners of the community territory, who are also, in effect, the owners of the community property and capital, permits the community welfare and affairs to fall into the hands of elected or self-constituted political “public servants” with­out ownership of, and therefore without responsibility for, the com­munity properties, welfare and values. In the resulting confusion, violence and distress, the despairing population falls at last into the iron arms of dictatorship and a military despotism in which all properties and values are destroyed and barbarism returns.

 

 Civilized life is community life. And community values are the foundation of all other civilized values. The value and income of sites and lands is the value and income from all the community properties, public capital and services that are used in common by the community inhabitants. Failure of the owners to administer these properties and supervise these services so that their income will rise spells the inevitable decline. Rent — the value of land — is the sole index of community services and community values. Upon its rise the progress of civilization depends.

 

 The great social need is a conscious union of ownership and administration in the large community enterprises that are called towns and cities, states and nations. In such union, when happily it comes, these communities will be crowned in strength and beauty, in a peace and glory that will never die.

CHAPTER 24

Questions for the Consideration of Land Owners[2]

BEING THE PROPRIETARY OFFICERS BY AND THROUGH WHOM SOCIETY

EXERCISES A SOCIAL JURISDICTION OVER ITS TERRI­TORY

 

1. Dependence of Value Upon Income

Does not the value of your properties, like the value of any other investment, depend finally upon the income that they return to you?

 

 Is not their present actual value the capitalized net rent that they yield and is not their prospective or speculative value merely the capitalization of prospective rent or prospective increase in the rent yield?

 

 Is not all your capital enhancement due, finally, to the enhance­ment of rent and to the prospects for its enhancement?

 

 Is not the value of occupied land made up of the actual rent capitalized, plus or minus the prospective increase or the prospective shrinkage in the actual income from rent?

 

 And is not the “value” of all unoccupied or non-income-bearing lands merely a speculative value — the capitalization of the prospects for future rent being received?

2. Public Services in Excess of Public Disservices

   Necessary to Land Value: Effective Demand Also

   No Less Necessary

Are not public services indispensable to the existence of all civilized values and, therefore, does not your land have a value only so long as public authority, as a whole, does less harm to your territory and its inhabitants than it does good, and thus makes ground value and ground rent possible?

 

 Is not your net ground rent (the basis of present land value) merely the market expression of the difference between what public au­thority creates and what public authority destroys; i.e., between what it does to and what it does for the inhabitants of your territory?

 

 Is not net ground rent the measure of what is left to you and your tenants (the rent to you and its market equivalent to them) between the right hand of community service and the left hand of property seizure by taxation, with its consequent public distress?

 

 When rising taxation and governmental restrictions make business and production unprofitable, does not this destroy the demand for your sites and locations?

 

 If the demand for your property is being destroyed, what does it avail that it be rich in natural resources or advantages or that it be well supplied with public improvements and services — even though it be located in the midst of population?

3. Public Business Now Poorly Organized —

   Destroying Values In­stead of Creating Them

 Is not government the only business in the world that is conducted exclusively by persons on wages or salaries and carried on without any proprietary supervision?

 

 Do you as the community proprietors who merchandise all public advantages or services to your customers (tenants or purchasers) take any conscious, willing or active part in either the administering or the financing of them?

 

 Are not the community servants (servants of your territory) in need of proprietors to supervise and finance them and sell their services to the public — just as the employees in a private business are?

 

 Is it not your proper interest as the land lords of your communities to finance and administer the services you sell to your tenants, the same as it is for the land lords of a hotel to do so?

 

 If the owners who collect in rents the value of all the general services performed, either in an open community or in a hotel, fail to administer the properties and supervise the services and permit the servants to seize the property, regulate the affairs and prostrate the business of the occupants, will not the one as surely as the other go bankrupt and eventually lose all income?

4. Land Value a Service Value — Rent the Automatic

   Recompense to Land Owners for Services

 Do you think your tenants pay rent merely for earth or space, or do they pay you for the net balance between the advantages enjoyed and the disadvantages that must be suffered by those who occupy that space?

 

 Is not your net ground rent really the income from the community business remaining to you after all labor and material and public debt costs have been deducted in advance by taxation?

 

 Do you not suffer in your own rents and values from the taxation and restrictions on your tenants — restrictions that smother their business and hinder them from producing the wealth out of which to pay rent — even more than you suffer from the taxes that fall directly on your values and incomes after you receive them — and prevent you from keeping very much out of the little rents that your tenants can pay?

5. Income to Land Owners (Rent) Arises from the

   Administration of Public Capital and Sale of

   Its Services

 Since your final net income is really what the public business earns for you as the public proprietors, after its costs — both necessary and unnecessary, proper and improper — have been deducted by taxa­tion, then is not your income really and precisely what the public capital yields to you above the cost of public labor and public debt?

 

 When each of you became, as land owners, the public proprietors, did you not, in effect, make investment in the public capital with a view to the net income then yielded or then expected to be yielded by it?

6. Land Owners the Equity Owners of the Public

   Capital and In­come — The Real Owners

 Is it not the order of nature and of society that land owners, as the public proprietors, must receive collectively in ground rent whatever net income is yielded by the public capital?[3]

 

 Does not this fact constitute you the beneficial owners and there­fore, in a business sense, the real owners of that public capital?

 

 Is it not highly advantageous to all parties that the real owners of the capital engaged in any service or enterprise should direct and administer that enterprise?

 

 And does this not apply to you, as the proprietors of the public capital that is engaged in the public enterprises, as much as it applies to the private owners of the private capital that is engaged in private enterprises?

7. Obligations of Land Owners to Themselves

   and to Their Com­munities

If you were the proprietors of a hotel instead of an open community, you would know that you owned the capital invested in that hotel and that your income was the earnings of that capital, after deducting all costs.

 

 Would you permit the servants in that hotel to destroy your

in­come by the seizing of property, controlling and destroying their business and violating the liberties of the occupants of your hotel?

 

 Would it not be your very first and obvious duty to yourselves and to your tenants not to sanction these abuses but, rather, to pro­tect them against such fatal exploitation?

 

 Is it not now your corresponding obligation to yourselves and to your tenants to stand between them and further seizures of their property and destruction of their business by taxation, in order to revive demand and thus restore the values of your holdings by making saleable the public advantages that your locations afford?

8. General Tax Relief a Public Service and

   Advantage to Tenants

Does not taxation now stifle business, inhibit its expansion and thus enforce both under-employment and

under-production?

 Is not much of this taxation wholly unnecessary to essential com­munity operations and is it not expended often for purposes in­jurious to your present and prospective tenants and purchasers — prejudicial alike to their welfare and to your values?

 

 Would not the removal or reduction of such unnecessary taxes be a positive boon, a public benefit, service and advantage, to every business that occupies or uses land and pays rent to obtain and enjoy community advantages?

 

 Would not your tenants be benefited first, by the direct amount of their exemption from taxation; second, by relief from the in­direct discouragement of enterprise and curtailment of production caused by the imposition of unnecessary taxation; third, by their relief from those regulative, restrictive and destructive activities on the part of government that give excuse for needless taxation and which unnecessary taxation is imposed to support; and, finally, by their relief from uncertainties as to changes in the tax policies, which so greatly discourage the growth of free and forward-looking enter­prise?

9. Tax Reduction the Key to Restoring and

   Raising Land Values

 Do you think that with all the foregoing benefits and advantages to the conduct of their businesses, that with all your unburdening of industry and wealth production from restrictions and penaliza­tions, your tenants would not bid eagerly for sites and public services until the amount of new rent created would far exceed in amount all of the taxation abolished and all present rents combined?

 

 Would you not receive the entire amount of new rent so created as your proper recompense for your services to your tenants in lifting such burdens from them and safe-guarding their prosperity?

 

 Would not this eventually result in all public values coming to you as rents and all public costs flowing through your hands, making you the paymasters and thus establishing you as the natural super­visors of the community servants, the proper administrators of the community capital and the honorable distributors and merchandisers of its services to the public throughout your communities?

 

10. Public or Community Service — Administration of

   Community Capital — the Only Business Proper to

   Land Owners

As owners, administrators and supervisors of the public capital and labor, would not every act and policy of good administration be rewarded and recompensed to you in superior rents for your loca­tion, while any lapses from good administration would be penalized by diminishing your returns?

 

 Would not such conduct of your business redeem your now pre­carious fortunes and at the same time put the providing of public services upon a value-received basis instead of a privilege basis and redeem government from its present practices of force and indi­rection in obtaining its revenues and from the restrictive policies that impair all revenues and values and so thrust idleness upon land, upon capital and upon men? If you organize yourselves as the public proprietors and guardians of the public welfare in your communi­ties and, exercising your virtual ownership of the public capital, you knowingly administer it — if thus organized and, as responsible owners of the community capital as well as of its lands, you safe­guard your tenants, patrons and purchasers against public violence and expropriation and provide efficient administration of the public services that you sell — will not this far greatest and highest business enterprise in an increasingly prosperous land then yield to you magnificent profits and build for you property values incalculably high?

 

 Great as are these material rewards, you will merit, in addition, the highest civic honor and public acclaim — the lasting gratitude of mankind.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

CHAPTER 25

The Administration of Real Property as Community Services

Real Estate Administration For Profit

 

All business consists in the administration of property, and all net revenue or profit from business is the product of administrative services.

 

 The real estate business comprises the administration of two different kinds of property: (1) land, with the public improvements and services — the public capital — appurtenant to it, and (2) the private improvements and services — the private capital — appurtenant to it. Strictly speaking, in neither case is it land that is owned. In the one case what is distributed or sold is the use of public capital. In the other it is the use of private capital that is distributed and sold. The public capital is appurtenant to the land laterally or horizontally, touching the sides of and lying between the various parcels and plots. The private capital is attached vertically and is appurtenant per­pendicularly to the site. The public capital is public because it im­proves, appertains to and is common to many sites, whereas a private improvement appertains to and is attached to only one site.

 

 The land with its public improvements yields to its owner, above taxes, a net revenue that is called ground rent. The private improve­ments yield to their owner, above ordinary interest and expenses, a net revenue that is properly called the profits of administration, or the earnings of administrative labor.

 

 The ownership and management of real estate, then, is a special division of general business in the fact that it is the administration of fixed instead of movable and personal properties. It differs from a commercial, manufacturing or industrial business only in that the property being administered, with the services incorporated in it, is not being passed from hand to hand as in these industries, but the

services of it are divided up into periods of time and sold piecemeal, as it were, under various tenancies, and, except where full title is transferred, the physical turnover of the business takes the form of renewals and replacements, instead of transfers of ownership outright. In a very primitive economy, the owner-administrator, such as a farmer, merchant or manufacturer, is commonly the owner of and must administer different kinds of property. He owns personal prop­erty in his products, which are his moving capital, or turnover, and also in his movable equipment and appliances. He owns real estate in all his fixed equipment and improvements. This is his fixed capital. And he also owns real estate in his land, and in this he has the services of public capital as the basis of its value. Not only must he administer all these various kinds of property, but he must supervise all the subordinate labor he engages to assist him in his enterprise. Such organization of industry is simple only in the sense of there being but little division of labor; from the standpoint of the multiplicity and wide diversity of the functions the owner must perform, his situation is not simple but highly complex.

 

 The whole development of industry consists in its being divided up into many different kinds of units that are structurally separate and distinct but that are connected together by the system of com­mercial exchange. This division takes place along the lines of the different kinds of properties and services to be administered. The more highly the type of administration suitable for one kind of property is developed, the less such an owner or organization of owners can afford to have its capital tied up in properties requiring a different type of administration. This is exemplified in chain sales organizations, the owners of which cannot afford to have their capital tied up in, or to give administrative services to, the buildings they occupy, much less the land and the public improvements ap­purtenant to it. In like manner, the most highly specialized business and professional persons seldom own the premises they occupy, not because they lack the necessary resources but because they cannot give effectively the special administrative services that such prop­erties require.

 

 So it comes to pass that in an advanced economy, and especially in metropolitan communities, the different types of properties are held generally under separate ownership and administration. The movables, in both turnover and appliances, are owned and managed by tenants of buildings or of other private improvements on land. These buildings, with all their fixed appliances and services, are owned and administered by persons or organizations who are them­selves tenants of the lands they occupy. And these lands, with all the public appliances and services appurtenant to them, are ad­ministered by persons and organizations who own them and who, because of their titles as proprietors and the services they perform, are, in effect, public officers distributing the use and benefits of public capital — servants of the community as a whole.

 

 Every tenant in a building, residing or carrying on business there, is a purchaser of the services that the building provides. It is the proper and useful business of those who own and administer the building to see that all the services of the building to its tenants are adequately and efficiently supplied. Their whole profit from the building is the product of this administrative activity. This includes general upkeep and maintenance, the purchase of materials and supplies and the payment of wages for labor engaged in upkeep and in all the services that are provided for the tenants. All of this, and the interest paid on or credited to the fixed investment, is the cur­rent capital turnover. The only profit of the enterprise, the only return for administrative services, will be the amount by which the returns from rentals exceed all these current costs.

 

 Now, since building space and services are sold in open market, it is clear that the rentals represent the market value of the space and services. It is the aim and duty of good administration to make and maintain this value at the highest level. This requires, first, that the services be supplied and maintained, but over and above this, it also requires that everything that is possible be done to keep up the public demand. This branch of building or hotel administration ex­tends to such matters as protecting the tenants from all theft, injury or insubordination on the part of the service personnel, as well as policing the premises and guarding the tenants against everything inimical to their comfort and prosperity. All of these negative services maintain the demand and therefore the value of the positive services supplied.

 

 Now just as the building owners depend for their market upon the demand for building services by the owners of movable goods and services, so do the owners of land depend upon the demand of those who own and administer building properties and services. The building or hotel owner sells services; so does the land owner; and good administration has in both cases two aspects: not only the keeping up and improvement of the services themselves, but also the building up and maintaining of a proper and sufficient demand for them.

 

 It must be granted that building owners have thus far shown a keener consciousness of the essentials of their business. They have not at great cost purchased buildings, only partly tenanted or yield­ing but little income, and then abandoned them to the mercies of the servants and employees without supervision or control or sufficient funds, permitting them to find the costs and deficiencies by levies on the properties and operations of the tenants. Building owners are too wise for this. But the owners of lands and locations do some­thing very similar. They purchase costly sites, idle or only partly tenanted and yielding little income. They contribute a portion of the cost of the public benefits received by their properties, yet they leave the conduct of these services entirely unsupervised in the hands of the public servants themselves. But, instead of doing anything to protect their present or prospective tenants in the quiet use and enjoyment of buildings or other improvements, the site owners acquiesce and even encourage the public servants and authorities in their practice of levying on and seizing the properties and demoraliz­ing the business and belongings of the occupants of the buildings. Land owners do not know or do not realize that all these charges laid against the tenants of buildings and against the tenants of the land, who own the buildings — that all these respectable depredations against both kinds of tenants drastically limit their rent-paying power and cancel out the advantages for which all these tenants pay.

 

 This condition manifests itself in two ways: first, as to the lands and the buildings actually occupied, it cuts down the amount of rent that can be offered or paid by the occupants, and, second, by its deterrent effect upon new tenants and new occupancies, it limits and tends to hold down the entire demand for land and building services to that of present occupants alone. The result is that only the lands and buildings that are in present use have any present or income value, and all those potential properties kept out of use in this manner have no present actual value at all, however much may be the invest­ment in them without income — unless they be allowed a mere gam­bler’s value, the value of speculative hopes or expectations. And the carrying of all such idle properties without income as often happens through long periods of depression is a heavy loss of capital earnings and profits for all owners of land and buildings, besides the actual melting away of capital in obsolescence and depreciation.

 

 This vast disemployment of potentially valuable land because of the destruction of all demand for it — because of the limitation on the demand for and earning capacity of buildings, which, in turn, comes from the hazards and poor earnings on the part of those who use building space and services (which again reflect their low pro­duction due to the scant purchasing power of all their customers) — this places an enormous burden upon land ownership such as no other one kind of property ever has to bear. In fact, this burden is the reflex of the burdens borne by every kind of property and busi­ness that there is, for it is only the profit arising out of every other kind of business and services that creates and constitutes any demand for the use and services of land.

 

 It is well, therefore, to consider just what service it is that land owners have to sell. To do this, let us first look at the building owner. He does not sell mere space, but the services with which he sur­rounds and conditions the space, these comprising the administrative services that he directly performs and all the services that he hires and purchases from others, including the use of the public capital that he receives from the owner of the land. Thus, the building owner shows the true pattern for the value of the land:[4] For it is not the land itself but the supply of public advantages, amenities and immunities surrounding and enjoyed at the site that constitutes the basis of all its present value.

 

 But the mere presence of public advantages is not enough. Every kind of service, including commodities, comes into being through human activity, but no service or commodity has any value except in the presence of human demand, and this demand must itself con­sist of other services or commodities that are offered (through open market) in exchange.

 

 The real value of the land, then, like any other value, depends first upon the kind and amount of services and advantages the tenant will receive, and, second, it depends upon the effective demand on the part of actual or immediately prospective tenants. This effective demand arises out of the amount of services and commodities (wealth) that the occupants are permitted to create and control in connection with their use of the land, and the rent they offer to pay (which is the current value of the land) is that portion of this wealth which goes in open market in exchange for the public advantages that come to them through possession of the land. The land value, therefore, as seen by the occupier, is the value of the public services he receives and pays for; as seen by the owner it is the value of the rent — wealth — that is given by the occupier in exchange for the services he receives.

 

 It is the right of the occupier to receive public services, and the right of the owner, as public distributor, to receive rent for dis­tributing these services. The rent is, in fact, the only thing of value that the owner (as land owner) receives or has any right to receive. This right is expressly conferred upon him by the spontaneous will and power of the whole society. In virtue of his position thus es­tablished, he is, taken collectively, the proprietary department of the society. Because of his official proprietorship, there must flow into his collective hands the control and disposition by sale to tenants of the net services resulting from all the activities, both good and bad, of the current political or public service department of society. These public servants and officers, as such, are not proprietors. They own no part of the territory. Out of property publicly seized, they receive stipulated wages and salaries as distinguished from profits arising out of ownership and administration. The proprietor, on the contrary, depends for his earnings or profits upon the net income remaining to him after all the labor costs (wages and salaries) and all the capital costs (interest) of the public services have been met.

 

 With the administrative position of the land-owning proprietor thus seen to be similar to the position of the proprietor in the con­duct of any other business, it remains to point out the ways in which he is accustomed to exercise his administrative functions and the direction in which such activity on his part can be most profitably extended. And since the public services must extend, in varying degree, to the whole territory and so serve the interest of all the proprietors of a community, it is necessary that they associate them­selves together and act, for the most part, collectively and in their organized capacity. This is essential, alike for unity and consistency of action, and to constitute a solvent, and thereby a responsible, public authority.

II

Business consists in nothing but the contractual and proprietary (non-political) administration of property, and of services connected therewith, by its owners on behalf, presently and prospectively, of others. Property and services so administered is called capital, and the net recompense to owners, above costs, for such services is called profit. As regards manipulation and maintenance of capital, business administration is technological and physical; as regards the making and performing of contracts, it is psychological and social. All ad­ministration culminates in the transfer of jurisdiction over property or the use of property or of services, in exchange for money or other instruments of debt and credit whereby equivalent other property or services, similarly administered, is obtained. All owner-adminis­tration culminates in sales, and only by owners can either ownership or use be rightly transferred.

What the proprietors of land have to sell, and do sell, is the net public services received by the occupants of their sites. Tenants and lessees are their patrons and customers. The “public servants” (political) operate the service and production department whence arise the physical services that are sold. Each proprietor is custodian and dis­tributor of so much of these as attach to and give rental value to his particular site. Individually, he distributes to the tenant who can make the most productive use of, and thereby pay the highest rent (or price) for, the services the site affords.[5] Collectively, he owes to his tenants and to himself the duty of protecting them from property seizures and political domination, all in the interest of higher pro­ductivity and purchasing power and consequent further demand for locations.

 

 The land-owning proprietary interest, as a group, have relations with two classes of persons, public and private —political persons who perform public services (and disservices) upon the public terri­tory (both directly and through toll-taking public corporations created and controlled by them) and provide them publicly through the public rights of way, using public capital for this; and private persons who carry on production and all private services upon the private territory, using private capital in connection therewith and distributing these goods and services among themselves by private contracts. These last, exchanging their products and services, con­stitute all private industry and trade. But private industry must have public security of property and possession,[6] public rights of way for communications and exchange, and other common services that can be supplied only by or under a united public authority, either politi­cal or proprietary.

 

 Since such services can be delivered only through highways and to nothing but the locations served by them, it is the function of the publicly established (and recorded) proprietors to make these services (such as they are) available to the private occupants and users. Free bargaining to pay ground rent establishes the market value of the services supplied to each location and provides a just and proper basis for payment according to the measure of public services (less disservices) that each occupier individually receives. Thus, through the proprietors, even in their unorganized condition, the rent-paying occupants obtain access to all the community advantages, whatever they may be, by free negotiation and without either party in any way coercing the other.

 

 But the relation of the public proprietors to those public persons who are assumed to perform services that are of value to the occu­piers is wholly different. Notwithstanding that these are properly a service class, they act and assert themselves virtually as masters. For in the course of development of “free institutions,” they have in­herited the kingly power of seizing private property, a power un­known to Anglo-Saxons for centuries until their Norman con­querors laid upon them the slave technique of despotic Rome. This right to seize property that the Norman kings fought for, and the Tudors and Stuarts so freely and fatally practiced, has been carefully preserved to their present-day successors in power, whether by popu­lar election or otherwise, in what is now tamely tolerated, for want of any known alternative public revenue, as the power of taxation and regulation.

 

 So we have in the business of community administration today the anomalous condition of the proprietors, who purvey all the net public value that there is, standing idly by while the “service” de­partment, uncontrolled by any responsible supervisory authority, seizes increasingly the production and private property of the popu­lation and so imperils not alone the freedom but all the values of the land. Taxation is said now to be seizing more than a third of all the wealth and income — rent, wages, interest and profits — now with so much hazard and under so many restrictions produced. The public “servants,” taken in the aggregate, are permitted to set their own wages and other expenses and to be paid not by way of recom­pense for services, as other servants are, but out of their seizures by taxation and out of their public borrowings on the faith of future seizures. They are under no definite or effective responsibility to any authority apart from themselves. Their practice, in the main, consists in legislating special privileges and more and more public funds and plunder into the hands of special groups and classes whose sup­port they seek for their continuance in office and in power.

 

 Such is the body of servants over whom the proprietors of each community, beginning at the local level, must take supervisory con­trol. And this is imperative to them, for, as taxation mounts ever higher, rent cannot fail to decline. This must follow so long as public revenue is raised by force and spent on favored classes and groups.

 

 As public revenue is now raised and expended, there can be no long-term outlook for anything but decline in land values and rent. This is so, not simply because the whole of present taxation is forced tribute instead of payment by voluntary exchange, but because it diverts funds from rent. In addition, seizures by taxation create an indirect charge against the public services, and thereby against rent, owing to the loss and damage it inflicts upon all users of land by hampering and demoralizing their business and productivity. It is necessary to deduct from the advantages of the public services in gross all taxes or other compulsory charges, direct and indirect, laid on those who receive the services, in order to arrive at the residuum which is their net value. This net value is precisely what is sold to the occupants of the served sites and paid for by them willingly for value received.

 

 Since this net value of the public services to land is all that its proprietors can sell, it is only by enlarging this net value that their income can be in­creased.

 

 This is just where land owners should organize and give their best powers of supervision and constructive administration. It is a field highly potential for profit and in which there is a tragic need for such services. It is enormously inviting. It can be made fruitful to the community and thereby of unexampled profit to the whole land­owning interest in return for whatever cultivation they shall give to it.

 

 Considering the peculiar manner in which the political public revenue is raised — precisely contrary from what is desirable and legitimate in any other field — it would be a matter of surprise if it did not have its well-known devastating effects upon the whole system of measured and balanced and thereby reciprocal exchange. The underlying evil is that taxation diverts out of the goods and services contributed to the common pool for exchange very large and increasing proportions of the goods and services that, but for this, would be distributed back to those who have contributed them. Not only this, but by establishing fictitious bank deposits and other­wise counterfeiting the numerical instruments and symbols of exchange, government pretends to an opulence that is not its own. Government not only diverts to itself the proper purchasing power of the tax payers; it creates also an artificial plethora of fictitious pur­chase instruments in nowise dependent on the quantity of goods and services to be bought. More dollars have to buy less goods. The goods value per dollar goes down and prices thus rise. Government finance creates the illusion that money is wealth, and wealth, in terms of money, seems to increase. Traders, seeing prices rise, are tempted to trade the same actual wealth back and forth among them­selves and thus “make money” without producing any goods to buy with it. They even buy “on margin” wherewith to increase the volume and velocity of their exchanges and of their imaginary values, keeping swift pace with parallel government borrowings, until at last their “money” will buy but little if anything at all. Money values collapse and the losses are “written off,” except as government underwrites them by subsidies and loans or other fictions that bring actual goods and services to the hands of its favorites to the detriment and loss, soon or late, of everyone else. The process is cyclical, just as alternations of chill and fever mark the reactions of biological organisms in general when their basic metabolism is seriously impaired.

 

 During the inflation, almost everybody wants to buy and nobody wants to sell — except at a higher price. Such “profits” are not created by any productive administration of property or any in­crease of wealth but only by doing as government does — treating money as though it were wealth instead of counters of wealth, rising prices as though creating riches. During the deflation that follows, almost everybody wants to sell and nobody wants to buy — except at a lowered price and at forced sales. That is what is generally the matter with land values. They cannot have any long-term rise except it be on the basis of actual services rendered in the administration of them — of the community services that are automatically recom­pensed by them. So long as services that are common to entire com­munities, large or small, are relinquished to politicians organized not productively but politically as government, there is no way for them to finance the public needs except by seizing private money and credits — which are titles to property — and by writing themselves fictitious titles and credits wherewith to seize more and more out of the common pool. The alternative is for the community owners themselves unitedly to administer the common services wherewith their properties must be in common and unitedly served.

 

 It is well known that practically all of the supposed public services, as well as public disservices, are supplied and maintained out of the proceeds of direct and indirect taxation in all its thousand-fold rigors and insidious forms. Political public works are not supplied in re­sponse to any economic demand on the part of those who are com­pelled to meet the usually extravagant cost of them, nor are these “services” distributed in proportion to the contributions of those who are forced to provide their cost. There is no balanced relation of exchange between what anyone surrenders in taxes and what he receives in public protection or other benefits. It is a fact of nature and of society that politically administered public advantages cannot be returned in the same manner or proportion as their cost is col­lected. And any attempt by tax payers to get value-in-exchange for what is taken from them could lead only to further violence and confusion.

 

 But the societal organization in any settled community affords the institution of property in land, with its incidence of rent, to provide for the fair and orderly distribution of public benefits by free and voluntary exchange on the measured basis — the market basis — of value received. This is the great office, the societal function, of land ownership — the just and fruitful distribution by free contract of all the special advantages, natural resources and public services of the community as they appertain to its particular parts. Any benefits not distributed to the territory of the society through its common ways and communications, and therefore not attaching to and reflected in the rent of land, are necessarily private services. All private services are provided by and exchanged between and among private persons, so far as this distribution is not discouraged and prevented by pro­hibitory laws. These private services, performed by the occupants of the private parts of the community, constitute all private wealth and create all the demand that there is for land — for the public services to land for which rent is paid. Any benefit or property conferred upon a private person, class or group by political authority is, ipso facto, not a community service but a private service, a special privilege, conferred at public cost and expense. This is all to the detriment of public service and thereby a deduction against rent.

 

 Public services can be distributed in exchange for rent only to the extent that the private demand for them is active and alive. What­ever burdens private industry must bear, whatever restrictions upon its voluntary operations and exchanges are imposed, whatever in­hibitions it suffers by reason of the hazards and uncertainties with which it is beset; all these influences, both directly and indirectly, destroy its capacity to make profitable use of community resources and services, thus paralyzing the demand for land. Considering the magnitude of taxation, the violent and vexatious manner in which it is imposed and the destructive purposes for which its proceeds are so largely used, it may be wondered how long any demand for land can continue and that far more of it is not idle and unused. Paradoxi­cal as it may seem, the taxation which supports the public servants and all their works so bears upon industry and trade as eventually to all but destroy the demand for public services and with it their value, as measured in the value of land. But what value does remain, what­ever rent is paid represents the final residuum, the net benefit delivered to the territory, of all the services performed by or under the public authority.

 

 Taxes are always a charge against rent. For taxes are taken always by force or by stealth, and rent can be taken only from what remains, and this only by contract and consent. If taken otherwise it is not rent; it becomes taxation, taken indirectly by stealth when not wrung by force. Modern land owners have no political or any other coercive power. They perform the great public service of mer­chandising the country’s resources and advantages into the most productive hands. Rent is their payment for this great public service. But taxation, being imposed without regard to the value, by market measure, of any benefit conferred, is a charge against rent, for it cuts down the demand for and hence the market value of all public services and thus destroys rent.

 

 From whatever angle viewed, it must be seen that the administra­tion of land has to do not merely with the land as such but with the common and general services that are supplied to it. It is to the in­terest of organized land owners, therefore, not only to distribute the sites and resources into the hands of those capable of the most productive (value-wise) and thereby most profitable use of them, but to protect and defend their functional freedom, and thereby their productivity of the wealth out of which alone rent can be paid and land values thus rise. The implications of a positive ad­ministrative policy by the organized proprietary interest are at once a challenge to their public spirit and an invitation to almost unimaginable affluence and prosperity. The initial obstacles are small and the incentive to proceed will be fed by accumulating rewards. Success will be contagious and emulated far and wide. With land owning organized and conducted as a business, good administration will rise above all wishful thinking into intelligent action — the high­est service to self through the greatest service to all. No other policy is progressive or profitable or sound.

III

 When men learn the art of peaceful exchange, they cease to wander in search of subsistence. Settling in communities, they rise above mere dependence on crude nature by the arts they develop in serving and exchanging with one another. This they cannot do without protection and services that are common to the community as a whole. But so far as these are maintained by taxation, their value is canceled and finally extinguished and the society dies. Meantime, whatever community values remain unextinguished by taxation at­tach themselves to the territory as the net value of the land. During whole periods of civilization, as long as there remain any public values, the institution of property in land determines that ground rent shall flow into the hands of proprietors in recompense for their services in making societal, non-political allocations of the land. This natural and historical fact establishes the authority of land owners to administer the community services and guarantees them adequate and automatic returns, so far as this authority is exercised and its implied obligations performed.

 

 The alternative field of action, the political, is marked by the com­plete absence of any general and conscious policy of public service. In the national, the state and even local governments, public power is exercised largely at the behest or dictation of pressure groups and special interests, each seeking special advantages for itself through measures detrimental to others and to the public as a whole. A listing of these would range from trade and manufacturers’ associations to the grocers’ and plumbers’ local unions; from learned professional societies to the organized barbers and beauticians, not forgetting the endless seekers after subsidies, pensions and doles. The multiplicity of their conflicting interests, their clamor for privileges and the de­mands of each for the burdening and restricting of the others turns the process of government into an orgy of conflict instead of the performance of public services. The political officers seize property — taxes. They levy tribute. And they use the public funds to main­tain themselves in office and in the continued exercise of their deadly powers. Even such balance of benefits above public injuries as they may confer, they are not able to distribute fairly because they are not owners. There is political but not contractual ownership or authority in their hands.

 

 The owners of lands, sites and locations, on the contrary, consti­tute the one group in society whose interests rise superior to all this conflict and destruction. This group, always maintained by the au­thority of social custom, common law, automatically disposes of all the net public advantages. They are the real purveyors of public services in exchange for rent, the only group whose primary in­terest is in the productiveness and prosperity of all the rest.

 

 Community proprietors need to learn how greatly the taxes wrung out of their land users come out of their own pockets as well. For every dollar so seized cuts into the earnings and profits of their tenants and thus reduces their capacity to pay rent. Moreover, the injury to all parties is not limited in amount to the dollar seized. The uncertainty alone is heavily deterrent against commitments and plans. This reduces the employment of both labor and capital, destroying the demand for land and all that it affords. And when that tax dollar is spent, more than often it is used to finance further repressions of, and depredations upon, the productive industry and exchange whence all income to land owners must arise. An enlightened land­owning policy of service to and protection of land users would not only retrieve that dollar to present and prospective lessees, but could reverse completely this whole train of evil into freedom and pros­perity for all. The increasing income to land would provide easily a margin for the continuance of any real community services that the remission of taxes might impair, and with the tax method of com­munity finance finally discontinued, the value of the community services and amenities, and of the community itself, would become incalculably high. Out of their rising rents and values, the well or­ganized land owning interest could easily maintain all essential serv­ices and enjoy net returns far greater than ever before.

 

 As the necessity for taxation is outgrown, all honest profits, in­comes and values will be enormously enhanced. Without the monstrous restrictions on production, both direct and indirect, that are now of necessity imposed, the splendid liberation and expansion of productive industry would carry with it a corresponding require­ment for public services, and therewith a mighty expansion of de­mand for the use and occupancy of land. Even without any improve­ment physically in the public services themselves, the increase in the demand for them and in their market value as attached to land would be vast indeed. In response to the new demand, all well served lands formerly idle or but little used would be drawn into profitable use, the untaxed occupiers gladly paying rent to the owners accord­ing to the then market value of the public services supplied and the freedom and opportunity enjoyed.

 

 If the organized proprietors of the land should perform such a mighty service to its inhabitants as to render all taxation unnecessary, their reward would consist in certainly a very large part of the whole excess of the previous taxation above necessary public costs and, in addition, all the increased net revenue coming to the land that had been idle or only partly or poorly improved or employed. The clear gain to the unburdened and liberated inhabitants, to active capital and labor, under full freedom of production and exchange would be unimaginably high, and the net income to land in return for com­munity administration would be tremendous indeed. The revenue by way of rent even now springs from a public service that is essen­tial and fundamental, even though it be unconsciously performed. It is the automatic recompense to title holders in exchange for an essential public service of distribution — for their non-political allo­cation of sites and resources through the social mechanism of the market and thereby into the hands of the most productive and effi­cient users, for only such can offer the highest rent or price. Not only do they seek out, albeit unwittingly, the most productive users. What is even more important, their negotiation of acknowledged titles provides an alternative to force and arms, to the anarchy of un­organized violence or the essential tyranny of political distribution and administration.

 

 These reflections are not to suggest that all taxation could be abolished at one time, but to make plain the position occupied by the owners of land in relation to taxation and the public services, to illustrate the great principle involved and to point out a constructive policy benefiting both the public and themselves.

 

 Notwithstanding that it is as yet almost wholly unorganized, the land interest has been able in many communities to procure legisla­tion setting limits to taxation on its own kind of property. But, with mounting public budgets, this is only to shift the burden to bear upon other kinds of property and production and thus diminish the demand for real estate and make land even more idle and unpro­ductive than before. What is required is not directly to ease the burden on real estate, but to unburden all those forms of production and exchange that create the wealth and services on which the de­mand for real estate depends.

 

 If the owners of community buildings should find their tenants being impoverished by the service personnel in charge, they would not withhold the necessary supervision and control to put an end to it. Yet the public community “servants,” by their seizures of property and infringements of liberty, impoverish all users and occupiers of land. Their limited productivity limits the demand for land and its public services. In depressed periods, great numbers fail in business and are unable to pay any rent at all. The burdens imposed, including the indirect effects, more than offset the advantage, if any, conferred. How much greater the injury to business and production than the amount of taxes taken, it is impossible to estimate; the inhibition on enterprise is incalculably severe. It is only when the indirect cost is considered, how this may be many times greater than the tax itself, that it can be realized what a mighty impairment is made to the ad­vantages of occupancy for which site value is paid.

 

 The land-owning interest, as such, is not engaged in any physical use of the land. It has no private business interest that taxation can burden or destroy. It is therefore impossible for any tax relief to site values to bring any benefit beyond the flat amount of the tax. But a tax laid on the use or the user of land diminishes its worth to the user not only by the amount of the tax but also by the amount of indirect damage to the business for which the land is used. It is more vital to the land owner that the use of land should be exempted than exemption of the land itself. For untaxing the use of land brings bene­fits to both user and owner, instead of giving the owner an exemp­tion that can be more than canceled by the additional burden thus thrown onto the user of the land. For in the prosperity of all who are engaged in production and exchange, and in this alone, lies the demand for the public services afforded by land. It should not be supposed that these wealth-producing, land-using interests can ob­tain any considerable tax relief for themselves. In their many special fields, they are too far divided for effective resistance; and, like land owners, their profits come from what they do for others, not what they do for themselves.

 

 Starting at the level of least resistance, the proprietary interest can extend tax benefits and exemptions to the business world of land users with corresponding enhancements of rent. With taxes on pro­duction finally abolished and ground rent thus enormously en­hanced, a small part of this would suffice to support the public services at existing levels. All beyond this could be turned back for extensions and improvements after provision for liberal dividends on the original property invested. And all turned back for either maintenance or extension would be contributions to public services, voluntary and self-imposed for profit, the very opposite from taxa­tion for public purposes, contrary in every way. Thus, the proprie­tary interest can come completely into its proper position of respon­sible supervision over its community affairs by a conscious, enlight­ened and profitable administration of the public capital. For even now their income, such as it is, comes from the administration of public capital — or from as much of it as serves the common needs of the community. This fact alone makes them, in effect, the equitable owners of capital that is administered by political trustees.

 

 The real estate interest is, potentially, the most powerful of all business groups. When it seeks relief merely by shifting direct taxa­tion into more indirect forms, it simply puts the business and pro­duction of its customers under increasing burdens that constantly weaken the demand for and the value of all property. But when it serves all its tenants and purchasers by lifting such restrictions upon them, then, by such public service, the real estate interest will be serving itself doubly well. That part of it which owns improvements on land will be enabled to operate these improvements to full capac­ity for eager tenants at rentals based upon flourishing business activi­ty and abundant production. And those whose investments are in land will find themselves beset with demand for their formerly idle locations and with increasing bid and demand for the locations al­ready in use. The effect upon rental and sales values can better be imagined than described. And such a boom in rents and values would be permanent and not collapse, for it would be based on the actual production of wealth and not upon artificial values and debts that can never be paid.