Wednesday, February 20, 2013

Lecky on Henry George and Single Tax movement

"Another doctrine which, in different forms, has spread widely through public opinion is that of Mill about ‘the unearned increment.’ Starting from the belief that the value of land has a natural tendency to increase through the progress of society, and without any exertion or sacrifice on the part of the owner, Mill proposed that this ‘unearned increment’ should be steadily intercepted and appropriated by the State in the form of taxation. It was true, Mill acknowledged, that men had long bought land, which brings a smaller return than almost any other form of investment, through a belief that their income would gradually increase, and with an implied assurance that they would only be taxed in proportion to other incomes. Mill, however, very honestly met this objection by maintaining that the confiscation of the increment should only take place from the present time and with due notice, and that the landlord should have the alternative of receiving from the State the present market value, which includes the present value of all future expectations.

In the long period of agricultural depression through which England and most other countries have passed the doctrine of ‘an unearned increment’ wears an aspect of irony. For many years the market value of agricultural land, instead of rising, has been steadily falling, and history clearly shows that the same phenomenon has taken place in many long periods and in many great countries. If the State takes from the owner by exceptional taxation the normal rise in the value of his land, it may very reasonably be expected by exceptional legislation to compensate him for its fall.

No statement can be more palpably untrue than that ‘unearned increment’ is a thing in any degree peculiar to land. The growth of population and the development of civilisation exercise exactly the same influence on the shares of a railway or a dockyard; on the wages of the labourer; on the fees of the professional man; on the masterpieces of art; on the value of innumerable articles of commerce. In countless cases property is increased, or industry and ability reap larger rewards in consequence of changes which do not lie within themselves, and to which they have contributed nothing, but which are wholly due to extraneous and surrounding circumstances. Ask any rich man which of his investments, without any sacrifice or exertion on his part, have doubled or trebled in value, and you will find that in the great majority of cases they have no connection with land. What reason is there, therefore, for selecting for exceptional and penal taxation the single form of property which usually produces the least return, and which is associated to the greatest degree with the discharge of duties that are eminently useful to the State? And this proposal is made in a country where so large an amount of money has been sunk in land by many generations of proprietors that the actual rent would represent, in very many instances, nothing more than the lowest interest on the outlay; in a country where the value of personal property enormously exceeds that of land, and has been, during the last century and a half, advancing with a vastly greater rapidity. According to Sir Robert Giffen, land in England constituted in 1690 about 60 percent. of the national wealth, and in 1800 about 40 percent. In the United Kingdom it constituted, in 1812, 44 percent.; in 1865, 30 percent.; in 1875, 24 percent.; in 1884, only 17 percent.49

The true explanation of such proposals is political. It is to be found in that almost rabid hatred of the landed interest, growing out of political antagonism, which has characterised large bodies of English Radicals, and which, in a time when the deep agricultural depression forms probably our most serious national evil and danger, makes the increased taxation of land one of the most popular of Radical cries.

One argument, upon which much stress has been put, but which has now, in a great degree, lost its force, is that the land of the country is the source of the food on which its people depend, and that special legislation ought therefore to prevent it from being in the uncontrolled power of the few. As I have already said, I believe that, if any clear case of public welfare can be established, the Government has the right to take complete or partial possession of the land, on condition of compensating the owners. If England were surrounded by a brass wall, and if its people depended for their subsistence on the crops raised within that wall, severe restrictions should undoubtedly be placed on the use of great portions of the soil for parks or sporting purposes. But the situation is much modified when the main supply of food for the people is not derived from English soil, but comes from the United States, from the Colonies, from India, and from Russia, and when this supply pours in with such abundance and at such prices that the best English land is almost crushed by the competition, while the inferior lands have become, as food-producing land, almost useless.

The unreality, however, of the speculation that would separate landed property by a sharp generic distinction as an object of spoliation from all other property speedily became apparent. The same class of reasoners soon found that similar or analogous arguments may be applied to other branches of property, and to defence of other forms of dishonesty. It is a significant fact that while Mr. George in his first book only proposed to rob the landowner, in his second book he proposed equally to rob the fundowner, being now convinced that the institution of public debts and private property in land rested on the same basis. In nearly all the Socialist programmes that are now issued on the Continent the ‘nationalisation of land’ is included, but it is always coupled with proposals for the nationalisation of all capital and means of production, and for the repudiation of national debts."

(Democracy and Liberty, by WEH Lecky)

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