Enthusiasm for Capitalism

Harry Gunnison Brown

[Reprinted from the Henry George News, July 1958]

According to the Marxist-Leninist-Stalinist economic philosophy labor produces all that is produced, and income from property is "surplus value." Its adherents manifest little or no interest in differentiating between the capital which, by working and saving, men produce to aid them in further production and, on the other hand, natural resources, urban sites and tracts of land usable for agriculture, forestry and grazing.

There is, however, a philosophy that does distinguish between capital and land and between the incomes yielded by the one and by the other. Adherents of this philosophy stress the thought that, since man-made capital can come into existence only as there is work and saving, and since capital adds to the productiveness of industry, the private enjoyment of income from capital is a desirable -- and a deserved -- incentive to bringing capital into existence.

But they look with less kindly eyes on the private enjoyment of income from land, purely as such, and favor having an increasing amount of such income taxed into the public treasury. For the private enjoyment of such income appears, to adherents of this philosophy, as a requirement from landowners that others pay them for permission to use the earth. More specifically, they think of land rent as payment required by landowners of the payers for permission to work, live on, and draw subsoil deposits from, the earth or those parts of the earth which geological forces and community development have made relatively productive and livable.

Is there or is there not significant reason for distinguishing between the capital that, by working and saving, men produce to aid them in further production and, on the other hand, natural resources, sites and tracts? Is there, in short, good reason for distinguishing between capital and land?

Surely the rent of land is in a very peculiar sense socially produced rather than individually earned, and it ought to be sharply distinguished in thought from interest on capital produced by men's labor and saving. If there is any kind of return which is peculiarly fitted to be a source of public revenue, it is the rent of land.

Time was when the American Declaration of Independence and the struggle of the American states for freedom from political domination by Great Britain, stirred the imaginations of liberty-loving people in many other countries. Today we seek allies and sympathizers in our ideological struggle against the socialistically regimented countries of the Communist bloc. Will it help us in this ideological struggle -- will it stir enthusiasm for capitalism -- if in the "capitalism" that we practice and urge upon others, we include vast private income derived from charging (a) for permission to use -- and history might have been such as to make it so -- navigable lakes and streams, or (b) for permission -- and this is the way history really has made it -- to work on and to live on the earth?

Professor Henry E. Hoagland has stated that vacant lots are the largest single class of property in American cities. His statement is substantiated by a survey of eighty-six cities ranging In population from 900 to over 800,000, the results of which were published in 1955. The survey showed that approximately 43 per cent of the land area -- excluding streets and water areas -- was held vacant.

When land is held out of use speculatively or otherwise, rents which must be paid for apartments or homes and their sites become higher; thus the purchase price of land -- and homes -- increases. Wherever large amounts of land are vacant all public utility services become more expensive to install and maintain. If our taxes were shifted more largely to bare land and reduced or abolished on buildings and other capital, the building of apartment houses and other dwelling units would increase. Capital, because taxed less and thus yielding more, would flow in, causing rents to fall.

Without understanding the theory of land value taxation no economist can be expected to advise wisely regarding what tax policy is favorable to low-cost housing, slum clearance, industrial development or labor productivity. How shall we account, unless by the existence of an unfavorable intellectual climate among the economics professoriate, for the persistent ignoring, by most -- not, of course, quite all -- of our economists and their textbooks, of cause and effect relations so clear and so significant?

"Capitalism" is under heavy attack in a large part of the world. And the college graduates our economics professors have taught, are but poorly armed against the bombardments of communist and socialist ideology, when they can oppose the optimistically idealized programs of the "planners" with nothing better than the contemporary caricature of what capitalism could be at its possible best. Why have they not been shown the blueprint of a free private enterprise system which would be for many a college student, were it adequately explained to him, an acceptable societal goal and an inspiration to personal effort towards its realization?