Special Privilege

Henry Ware Allen

[Reprinted from Land and Freedom, January-February 1938 and reprinted in the November-December 1938 issue]

As our time honored political maxims become hackneyed they are very apt to pass into what Grover Cleveland would call innocuous desuetude. We subscribe to the sentiment that "eternal vigilance is the price of liberty" and yet little is done to counteract those aggressive forces which nullify that freedom which we profess to prize so highly. Even the prayer, "Thy Kingdom Come," is repeated as a mere wish that something good would happen rather than with a determination to bring about those righteous conditions which make for a heaven on earth. Possibly the most neglected of all of our national ideals is our professed adherence to that most democratic of all maxims, "Equal rights for all and special privileges for none." For at the present time our country is honeycombed with special privilege that has become so entirely entrenched as to be regarded on all sides as vested right. Special privilege is condoned by force of its familiarity. Like vice it is endured, then pitied, then embraced.

There lived in a Colorado city years ago a house-wife who made convenient use of coal cars on the side track across the street from her dwelling with which to replenish her stock of fuel. This she did without any qualm of conscience but as a special privilege which, by the sanctifying touch of time had grown into a vested right. This woman doubtless was punctilious in the ordinary obligations of life and would have hotly resented any statement to the effect that she was stealing coal. She was guided by that all too common kind of honesty which is based upon expediency rather than principle. Not on any account would she have withheld what was due from her to a neighbor who would have suffered by her delinquency, but the ad- vantage to her of getting this coal was so great and the loss to some impersonal owner of same, mine, railroad, or smelter, was relatively so negligible that the argument was all in favor of her acting in her own interest without question. No personal equation was involved and if at first there had been any hesitation on her part of this practice, that was long ago a thing of the past. But the railroad company put a watchman on guard and her supply of fuel was thereby stopped. She then turned to the local charity organization with request for a continuation of the supply which had thus been rudely taken from her and the very righteous indignation with which she told her story was ample proof of entire absence of comprehension on her part that she had been stealing.

This incident, which is a true story, illustrates very nicely the evolution and the nature of that special privilege which eventually becomes a vested right. And if the searchlight of analysis is turned upon our social system we may be surprised to find the presence of special privilege in unexpected places and of a volume that is, in the aggregate, enormous.

As a basis for this inquiry it may be well to state the fundamental truth that property may be secured in three ways only; first, by labor; second, by gift; and third, by theft. If this test is repeatedly kept in mind, the task will become easier. One of the commonest forms of special privilege is that which is provided under ninety-nine year leases on valuable business property sites. These leases convey to the owner of the land a stipulated income after the tenant has paid all taxes and expenses. In the parlance of political economy this revenue consists of what John Stuart Mill defined as unearned increment, a value which is produced by no individual but which is purely the result of population reflected upon desirable locations. For this revenue to be turned over to individuals as is now the unquestioned custom in all of our large cities and to an amount of billions of dollars annually is a procedure which is precisely in the same class as the stealing of coal from the railroad car by the Colorado housewife.

A much larger source of public revenue which is diverted to individuals is that of the rent of valuable property in excess of a fair interest return upon the intrinsic value of improvements on the property. This applies to practically all property located at the center of our large cities and involves enormous revenues. There is a mixture here of legitimate return on capital invested with the unearned increment which belongs absolutely to society but the case is not less clear on that account.

Another prolific source of public revenue which is diverted to individuals is that which comes from the lucky possession of oil wells. This possession frequently gives incomes of thousands of dollars daily to those who have no more claim on such revenue than is involved in the possession of the land upon which the wells were developed. The wealth that has by this means been given to certain sections of the country and certain groups of people has run into the billions of dollars. The Osage tribe of Indians in Oklahoma are said to have been made the richest people in the world due to this special privilege. Such beneficiaries are no more justly entitled to the revenue which they receive than was the Colorado woman justified in stealing coal from the railroad car. It will be said that the oil industry involves a great deal of capital and that many dry wells are paid for before a single producing well is developed. This is true and therefore makes the proposition somewhat more complicated but does not alter the conclusion.

Another source of revenue which diverts public funds into private hands is speculation in land. Purchase of inside property sure to increase in value is the one investment that has been invariably recommended by shrewd financiers. This speculation is far greater than has been generally realized. More than one-half the area of New York City consists in vacant lots which are held out of use for speculative purposes, and the same is true of all our larger cities. Incidentally, this speculation has the effect of enhancing the selling price of desirable land to artificially high figures. When land which is purchased with a hope of subsequent rise in value, the investor practically lays a trap by which he may secure values that rightfully belong to the community. And this process makes an artificial scarcity of land with consequent artificially high cost to those who must use it. This process of securing a profit, of getting something for nothing, is persistently the same in character as that by which the Colorado housewife secured her supply of coal. Here again objection may be interposed to the effect that land frequently has to be sold for less than it cost. This is an objection that was raised by no less an economist than Francis A. Walker, the foremost critic of Henry George during his life-time. General Walker exclaimed, "Mr. George has much to say about unearned increment. He says nothing, however, about unrequited decrement." Mr. George's rejoinder to this was an expression on his part of his inability to discuss the problem with one who spoke of unrequited decrement in something which originally had no value. In other words, so far as society is concerned its interest is only in the rental value which is produced from year to year and which rises or fall accordingly as population grows or wanes. The important fact is that this increment, whether large or small, belong to the community which produced it.

The most spectacular form of special privilege which we have to deal with today is that provided by the protective tariff. This protection enables the America manufacturer to secure an artificially high price for his product. The common argument in support of the protective system is that the American standard of living must be maintained by this artificial means, but this argument falls to the ground, if at the same time, we permit any improvement in labor-saving machinery which naturally has far greater effect upon the labor market than is produced by the competition of merchandise imported from abroad. The enormity of special privilege due to the tariff is perhaps more conspicuous in the State of Pennsylvania than elsewhere, a single family in Pittsburgh, the direct beneficiaries of the tariff on aluminum, being reputed to be worth in excess of two billion of dollars. There will be found that, with a few rare exceptions, the great fortunes of America are based upon special privilege of one kind or another.

Although there are many minor sources of special privilege which are embedded in our political and social institutions, those above enumerated are the principal ones.

The special privileges provided by legislative action at Washington are in a different class from those which have become a regular part of our system of taxation but are none the less to be condemned. The most flagrant of these in recent times was the appropriation by Congress and approved by President Hoover, of five-hundred-million dollars of tax payers' money for the specific purpose of stabilizing or artificially enhancing the price of wheat, cotton, and other farm products. It was presumed by the makers of this law that it would have the effect of giving artificial advantage to the farming class, which would offset in a measure the special privileges which had been given so generously to Eastern interests by means of the protective tariff. The plea for this farm legislation was repeatedly based upon that consideration.

It so happened that even the immense waste of money involved by the farm marketing act was negligible as an influence in the world wide markets and that it did not affect in any considerable degree the law of supply and demand upon the prices of the agricultural products which were supposed to be favored. But the very fact that this legislation was put through with little opposition furnished a very good illustration of the fact that special privilege legislation is regarded as perfectly legitimate. And this has been further illustrated in monstrous degree by the New Deal legislation under President Roosevelt.

There is everywhere consciousness of a mysterious force which is responsible for easily acquired fortunes on one hand together with an increase of unemployment and consequent lower incomes on the other hand. Each succeeding census report makes more appalling this undemocratic and unjust condition in our social fabric.

If prosperity is to be secure, there must be an end to special privilege of every kind, and a system of taxation inaugurated in place thereof which shall be based upon justice to all. Henry George has demonstrated how this should be done.