Spencer Heath Archive

Item 1269

Carbon of a letter from Heath to Franklin Wentworth, 30 Garden Road, Wellesley Hills, Massachusetts

September 27, 1939

Dear Mr. Wentworth:

     I beg to thank you for your card and for your kind letter of the twentieth and both you and Mrs. Wentworth for four delightful personal hospitalities and for the hospitality of your minds to some of the ideas that I think are of very high importance and value but which must seem very alien, not to say antagonistic, to what many of us have been cherishing these many years. There is exaltation in seeing what one believes to be a new and brighter star on the horizon, but there is a warmer joy in finding that others can gather its rays and perhaps join in being grateful for its rise. I hope to have the pleasure of seeing you and Mrs. Wentworth again before many months go by and also those two charming and intelligent boys if it is possible. Please remember me to all of them.

     I have written considerably more than you have read, but I am not at all a facile writer. It requires a lot of labor and time to get it in a shape that will be at all satisfactory to me and doubtless a great deal more to make it satisfy any publisher, so it is hard to tell when it will see the light of day. Much of what I have is written for its special appeal to the real estate and land-owning interests. An entering wedge has already been published in one of their national journals and I have just received an inquiry from them saying their editorial committee would be interested in having me prepare another article on real estate valuations. I am wondering how I can keep my next offering to them from being more than they can stand. However, my material does not attempt to change anybody’s psychology but is a frank appeal to the profit motive for the furnishing of public services, the same as for the furnishing of every sound and legitimate private service.

     I copy below from the closing pages of the longest, and, I think, the strongest single presentation I have made.

 

Public and political officers, unlike the owners of land, have no stake or interest in the public values. Like the servants and subordinates in any other business, they need the restraint and supervision of the proprietors of that business, whose property and income is built up by supervised services or destroyed by unsupervised default or devastation. The only authentic and legitimate services of government are those bestowed upon its territory and thus into the charge of those who own that territory. It is the business of these proprietors to administer their property by keeping up the quality of and the demand for these services and to distribute them among the members of the community at prices arrived at in open market and voluntarily paid. But this last is only the sales side of the business. If the proprietors are to have for long any values to sell they must act also on the administration and production side of their business. They must draw public policies away from destruction by taxation and other violence to business and production, and guide them into the ways of public services to the up-building of rent. Properly and democratically organized among themselves, they become the administrators and the beneficial owners (enjoyers of the net revenues) of the largest, most necessary and indispensable and therefore, when well conducted, the most profitable business in the entire world — no less, indeed, than the whole business of government as the organization, production and distribution of community services, like all other services, on a measured market basis and for value received.

 

     All of the foregoing has been stated with a view to land ownership being rehabilitated from its present moribund state into an active and prosperous business for which there is an enormous public need  and to which the returns could not fail to be prompt and vast. The principles of sound business have been kept constantly in view, but it is worthy of note that such thoroughgoing application of these principles as is here proposed contains implications that are of deep and wide social significance. The progressive reduction of taxation and the still faster enhancement of ground rent and land values must surely transform government, from the predacious character in which it finally destroys the society that it serves, into a vast and benign agency of public service, leaving to the barbarous past the “good old plan that he shall take who has the power” and replacing the law of the jungle, as to public costs and services, by the kindly and creative practice of voluntary exchange. This is the way in which piracy became transformed into trade, and commerce redeemed from the rule of force and rapine. And this is the way in which proprietorship in land can redeem government into its proper character as an agency of service on the basis of free exchange. Thus are politics and economics at last reconciled, government itself social-ized, and society made safe and secure.

     It should indeed encourage and even inspire the whole real estate world to realize the happy truth that the owning interest in land, in the proper and effective pursuit of its own business and profits, should be able to come into such magnificent prosperity and rewards, and that at the same time, by the very nature of the social organization itself, and without need of any pretenses of altruism or public spirit, it should also emancipate the arts and industries by securing to all the liberty that is the key to security, the one great freedom that includes all lesser freedoms — to serve and to be served — the freedom of unpenalized production and exchange of services and wealth, with joy and abundance for all who enter in.

    

     With reference to a plan for the satisfactory handling of mines, I am not able to propose any special solution for this because to my mind it is quite adequately covered by the general solution, which is simply the Henry George plan to abolish all taxation of, or on behalf of, labor and capital and let nature carry on. It is only necessary to abolish compulsions by abolishing the taxation that is itself compulsion and that is only necessary to support compulsion. We do not sufficiently realize that with the system of service and exchange by voluntary engagements in free play there could be no exclusions from any of the instrumentalities of production. All land, like all wealth, that functioned otherwise than for personal use or gratification would be included in the exchange system and therefore its ownership and administration would be open to all persons upon the same terms, i.e., the terms democratically prescribed by the election of any and all persons who desired to vote in the open markets. When taxation limits or blocks the exchanges then the owners of capital are deterred from engaging the services of private persons. By the same token, they are deterred from engaging themselves to pay for many public services. This so cuts down the demand for land, that is, for public services, at all of those locations at which, by reason of situation or natural deposits or both, there would otherwise be a great effective demand for public services. This cutting down of the amount of business and production that can be carried on causes some of the most favored locations and some of the richest deposits to remain out of use. But there is some business being done by those who are being least injured or most favored by the tax situation and so some of the best locations and richest deposits are  in use. Now, this limited amount of business constitutes all the actual and effective demand for public services that there is. Hence the public services have no value and the land has no value at the otherwise desirable but unoccupied locations. Now the owners of the well situated or richly endowed locations — as good as any of the others — but which remain idle, feel that their locations should bring just as much rent or price as the others. They do not realize that the other locations have absorbed all demand for public services that there is and that therefore theirs have no value at the present time and may never have any; so they try to hold on for what they think are current prices. But let us suppose they should reduce their prices. Then this competition would tend to lower the value of all the locations, used and unused. But would it actually do so? The answer is, No. This is because the limited amount of business can occupy only a limited amount of land and resources without being less efficiently done. It is not land nor the cheapness of land that brings business into activity; but business activity and nothing else is what brings land into use. The “passive factor” does not govern the active factor.

 

     However, it may be asked how it is that even when business is severely limited some of it is frequently done on land that is less favored in location or resources. Such business, in general, is done by persons whose capital and technical resources and (or) personal skill and capacity are relatively primitive and limited. These “marginal” enterprises are relatively few and relatively unprofitable, when not absolutely so. If it were not for the volume of business being limited by taxation and other political action against it the larger volume would give rise to more of that complexity of organization that simplifies the functioning of the individuals engaged in it. Employment would be widened in variety as well as in volume and thus doubly enabled to utilize the more limited talents of the erstwhile marginal man. But increasing taxation and restrictions on production will cut down volume and lead to further concentration on the most favored locations and corresponding dispersion towards marginal locations. The ultimate effect of a continuation of this tendency, if long continued, is to reduce the whole population to a lower and lower level of industrial technique and finally to a primitive subsistence.

     Under a free economy, however, a community would no more have recourse to its least desirable resources than the owner of widely varying lands would cultivate his harshest and least productive fields or bring his water or fuel from the places where it was least abundant and most remote. Of two coal deposits, one near and one remote, only the near one (if ample) would be used. At the near deposit there would be much activity, much need and much demand for public services and security of property and possession, at the far point little or none. Competition will fix the rent or royalty at the near point to the value of the public services there. It will also fix the return to capital and labor. This leaves the natural advantages to manifest themselves in the abundance of the product and thus distribute themselves throughout the population in the form of low unit prices for the product. Rent, wages and interest will all be paid out of the proceeds from the coal, and the coal itself will become “real” wages, interest and rent to those who finally purchase it, depending on the sources of their pecuniary incomes.

 

     Somewhere I have taken it as my thesis that a free exchange system causes and a partially free exchange system tends to cause every kind of natural advantage or benefit that comes to some of its members to be distributed, by the effects of abundance on the price level, over the entire membership of the exchange system precisely in proportion to the market value of their respective contributions to it. And, conversely, every disadvantage is equalized in the same way, by scarcity raising the price level. This principle applies to all the natural factors that either favor or hinder production. The final incidence of taxation — of all  taxation — doubtless, is in the higher prices resulting from the scarcity of production caused by it. Thus all taxes finally become income taxes that cut down everybody’s income in proportion to the market value of whatever services he renders to obtain it.

     I hope you have not felt obliged to read this long letter all at one time or in any other way except as you have the mood and leisure for it. I should have stopped long ago for I am planning to go to New York tomorrow noon and have many things to do.

     I should certainly be glad to discuss many matters further with you, especially how the social equities are to be preserved in respect to mines and other natural resources.

     Are you not likely to be visiting your daughter in Washington before many months? I would love to have you and Mrs. Wentworth visit me here and make this a base of operations for Washington — only thirty miles away.

     I appreciate all your cordiality,

Sincerely,

I would appreciate it very much to have you sometime send me your daughter, Cynthia’s new name and address.

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