The Cause of Business Depression

A. Freeland

[Reprinted from Land and Freedom, March-April, 1933]

America inherited the Roman or quiritary system of land tenure from Britain and France. The old Saxon system of England was superseded by that of the Normans. The common lands were gradually enclosed and turned over to favorites of the Crown. One noble received this mine, another that forest, a county to another, etc. The Duke of Sutherland is said to own one-fifteenth of Scotand. A Scottish noble recently declared that there are a million morons in the Scottish Highlands. The Duke of Westminster, whose ancestral holdings originally consisted largely of a swamp, is now the principal ground landlord of London.

America disposed of the people's patrimony with still more lavish hand. When the Roman empire fell 1,800 men owned practically all of the known world. But the Romans were "pikers" compared with America's billionaires. The iron and anthracite coal deposits were turned over to Morgan, Carnegie, Schwab, et. al., the oil deposits to the Rockefellers, Doheney, Sinclair, Whitney, et. al., the timber (75 per cent of America's logging timber, according to a recent magazine article) to Weyerhaeuser, the Alaska pulp timber to Zellerbach, the power-sites to Stone and Webster, the silver, copper and lead deposits to the Guggenheims and Morgans, etc. The Vanderbilts, Astors, Van Courtlandts, Rhinelanders, Wendels and others of that class control the land in the populous centers. The railroads and the utility corporations generally, through their right-of-way franchises, which in normal times are much more valuable than their physical properties, levy hundreds of millions annually. In addition to these monopolies of natural resources, their beneficiaries possess tariff, patent and other privileges and advantages that give them additional private taxing powers, with the result that most wealth gravitates to a few hands. And this seems quite proper in the eyes of such men as Ogden Mills.

Brisbane declares that eighty-seven men own one-fourth of America's wealth; 504 persons fifty per cent. Federal studies show that one per cent of the people own fifty-nine per cent of the wealth and thirteen per cent of this one per cent, about 160,000 persons, own nine-tenths of the fifty-nine per cent, or fifty-three per cent of the total wealth. While these official figures show better than Brisbane's, still they are bad enough. About the time of the Wall Street crash James W. Gerard declared that fifty-nine men rule the United States. O.O. Mclntyre, quoting from the U. S. Chamber of Commerce, says eighty-seven per cent of the men of America have incomes of less than $2,000, while twelve per cent have between $2,000 and $10,000 and one per cent have over $10,000. A northwestern daily recently stated: "Probably twelve men control, although they do not own outright, the bulk the national wealth." A recent magazine article delares that the Mellons control nearly eight billion dollars of America's wealth.

In one day recently in the State of Mississippi, 39,699 families were dispossessed through tax and mortgage foreclosures. With ten per cent of the people of this one State losing their homes in one day, how long will it be until the American farmer and homeowner will be reduced to peonage comparable to that which obtained during the decline of the Roman empire, when twelve miles of tables, accommodating 100,000 at a sitting, afforded free meals to the poor of the City of Rome, or to that of England, where, during the thirty-six year reign of Henry VIII, every tenth man was hung in chains for the crime of begging? This followed the enclosure of the last of England's common lands. A leading Russian paper declares that two million Chinese have recently died of starvation in one province and thirteen million in another. Is America going the same way?

In six or eight years of comparatively good times the parasitic class collects from the producing masses scores of billions of dollars. The producers cannot buy this surplus back. So-called overproduction (?) follows. Several years of depression are required, with lessened production and waste, such as destruction by rodents, insects, rust, rot, and fire, to reduce this surplus, before capital and labor can again be profitably employed. Schwab recently declared: "We must not complain if we have five or six years of very great depression."

Some attribute industrial depressions to machinery, which they declare displaces labor. But China and India have very little machinery. Others lay our troubles to our finance system. Britain and Canada have not had a bank failure during the past decade, while America had over 9,000, yet times are worse in Britain than in America; worse in silver standard China than in gold standard America. Some would solve the unemployment problem by legalizing intoxicants, but that has not proved a solution in Germany or Britain. None of these proposed remedies recover to society the ground rent which represents nearly one-third of labor's product now taken by a parasitic class, which renders no equivalent.

A recent article in the Literary Digest says: "In Britain one family in twenty owns its home. Two families in twenty own unencumbered homes in America. In France sixteen families in twenty own their homes. " Perhaps this is the reason why twenty per cent of the bread-winners of America and Britain are idle, as against two per cent in France, a country that has been devastated by war in nearly every generation. Since the revolution of 1790 France has risen after each catastrophic, like fabled Antaeas, who renewed his strength when his feet touched the earth.

The U. S. Census reveals the comparative rates of returns on capital invested: Railroads: three per cent; National Banks: six and three-quarters per cent; Insurance: eleven per cent; Manufacturers: fourteen per cent; Mines: 182 per cent. The returns on ore, oil and coal (minerals) represent mostly economic rent.

Total taxes levied in America in 1931 were $13,048,000,000. Economic or ground rent collected approximates the same amount. If this were taken by society taxes could be abandoned. Less than thirty per cent of ground rent goes into public coffers, by far the larger part being retained by a class which, in an economic sense, is parasitic. If ground rent were thus taken by society and taxation abolished, the tendency would be for unused natural resources to be abandoned. The margin of production or rent line would be contracted onto better land. Beyond this line labor would receive its full product. The earnings of labor would multiply. Labor would accumulate and receive its returns. Employers would be in the market for labor, instead of labor seeking employment. This is the natural order.

The cause of industrial depressions is the monopoly of the people's heritage. The remedy is to abolish this monopoly. All other proposed remedies are futile. The fundamental monopoly must be removed first, before other reforms can have perceptible effect. Henry George has indicated the first and all-important step towards general and permanent prosperity. Only ignorance and selfishness stand between the people and plenty. Until this first step is taken practically all other reform work in the economic field represents lost motion. We are just traveling around in circles.