The Economic Causes of War
[A statement issued in May 1927 by the International
Union for Land Value Taxation and Free Trade, London, England,
submitted to the World Economic Confernece, Geneva, Switzerland]
The essential objects of the International Economic
Conference convened by the League of Nations are to consider means
of (A) removing economic causes which lead to war, and (B) promoting
the improvement of the economic position of the of all nations.
These objects are closely related, and cannot attained independently
of each other.
The world of to-day constitutes a single economic organization. In
the changing conditions of modern times there is no longer any
nation which is self-sufficient. Even the United States of America,
which constitutes of one of the largest and most diverse political
states in the world, is vitally dependent upon foreign countries for
a great variety of things which are essential to modern industrial
Even more vital than the obstructions to the transport and exchange
of raw materials and manufactured articles are the conditions
affecting the production and distribution of wealth. The
impoverishment of the peoples of Europe, the growth of unemployment,
the reduction of wages and the gross inequalities in the
distribution of wealth give rise to problems of more than national
importance. They create a state of mind among the masses of every
country which on the one hand threatens the stability of governments
and on the other hand encourages the idea of economic improvement by
means of territorial expansion. The improvement of the material
condition of the people is essential not only from a purely national
standpoint, but also because it will produce that psychology of
belief in the advantages of rewarded toil which will make possible
the intellectual and spiritual emancipation of mankind and make the
idea of war alien to their thoughts.
(A) Economic Causes of War
Apart from the general influence of the economic condition of the
peoples, the specific economic incentives to war may be roughly
classified into two groups: -
The antagonism and friction caused by interference
with exchange and especially by tariffs; and
(1) (2) The struggle for new markets and sources of raw
materials, especially the demand for colonial expansion,
concessions and protectorates.
The Tariff Problem
The economic difficulties of Europe are in a large measure due to
tariff barriers. The new States which have been set up since the war
have in many cases had basic industries separated from the source of
raw material which remained in the parent State, or vice versa. In
the absence of a tariff, this might not have had much economic
effect. It is the tariff which forms the frontier and makes
effective the separation.
The detachment of territory from one State for the benefit of
another or to form an independent State will inevitably cause some
resentment in that State whose area is reduced. But if the transfer
of territory is accompanied by no interference with the economic
life of both States the feeling of resentment is less likely to
persist and to become a menace to the peace of the world.
From the point of view of war or peace there can only be one
conclusion as to the desirability of abolishing all tariffs, and
other barriers to international trade. The removal of the tariff is
in the best interests of the peace of the world ...
The Colonial Question
It is a truism of historical study that the struggle for raw
materials and new markets, expressing itself in colonization,
annexation of territories, establishment of treaty ports, and in
wars for colonial possessions, has been one of the chief sources of
international jealousy and discord.
It is true that the possession of a certain colony by one country
rather than by another need not necessarily be to the advantage or
disadvantage of either. But at present fiscal and other
discriminations are made in favor of the traders, settlers and
industrialists of the possessing country. Most important of all,
grants of concessions to work raw materials over large areas of the
most productive territory are often made to individuals and
companies who may be able to establish a virtual monopoly and become
enriched, while neither the colony nor the parent country gains any
It is, therefore, the duty of those who desire to remove the
economic incentives to war to make certain that the citizens of all
nations receive equality of treatment in respect of access to raw
materials. . . .
(B) Improvement of Economic Position
The removal of the causes of the present stagnation of trade and
the improvement of the economic position of the peoples depends upon
three main factors: -
(1) A sound system of public finance;
(2) Removal of obstacles to exchange, particularly tariffs; and
(3) Increasing the opportunities for the production of wealth.
The more violent fluctuations of the foreign exchanges have been
mainly due to the inflation of the currency as a substitute for
taxation. If means can be found to balance the budget, the currency
can be stabilized and with it the rate of exchange.
The difficulty of balancing the budget is to find sources of
taxation which will be adequate to meet the national expenditure.
The repercussion on industry of the main existing sources of
taxation is so serious that a further increase in the rate of
taxation is dreaded. A new source of revenue must be found.
Land-Value Taxation is capable of yielding a great volume of
revenue. It has no injurious effect upon production, exchange or
international trade because it is not added to the price of
commodities. It is a source of revenue which automatically expands
as society progresses and the need of revenue becomes greater; and
it falls upon a value which is unearned by any individual, but is
created solely by the presence and activities of the Community.
Removal of Tariff Barriers
The abolition of tolls, octrois, and internal obstacles to trade
has never been regretted in any country. The constitutional
prohibition of such barriers to free production and exchange over
the vast and diversified territory occupied by the 48 States of the
American Union is an unquestionable factor in the relatively great
prosperity of the United States. If the whole world constituted one
State, no intelligent person would advocate tariffs between its
administrative units. There is an evident inconsistency in
supporting a League of Nations pledged to world peace, while at the
same time advocating the maintenance of national tariffs on the
theory that the producers in different nations are (in the economic
field) enemies. In fact, the whole tenor of protectionist literature
is that tariffs are means of making one nation rich at the expense
of another. . . .
It is true that in practically all countries the tariff supplies a
large fraction of the public revenue. But it is not true that the
necessary revenue cannot be obtained otherwise; The revenue of any
country must be obtained from the annual produce of its land, labor
and capital. The system of taxation adopted is merely a means of
determining what amount shall come out of the pocket of each
individual citizen and the method by which it shall be collected.
The tariff is a method which imposes the load in the most burdensome
way, interfering with the handicapping the international division of
labor. It also has the vicious effect of concealing how much each
citizen does in the end pay, and of enabling some citizens to make
an actual profit out of it by setting up monopolies. ...
Stimulating Production of Wealth
Although the removal of tariff barriers will encourage the flow of
commodities and facilitate the division of labor, and the
stabilization of the exchanges will have a similar effect, these
measures are not alone sufficient to ensure prosperity and
international peace. They might lead to a position similar to or
possibly somewhat better than that existing previous to the World
War. But that, although advantageous as compared with the
instability of the present time, leaves much to be desired and hoped
The working masses, upon whose assent the present system is based,
are becoming increasingly dissatisfied in the knowledge that their
condition does not improve in the same ratio as science and
technical knowledge progresses. Large bodies of men unemployed and
great accumulations of capital lying idle are a menace to the
stability of States, and consequently to the peace of the world. . .
Modern civilization contains within itself a canker which destroys
or frustrates its own progress. The increase of population, the
improvement in the technique of production and the march of
invention cause a stronger and stronger demand for land to supply
the necessary materials and sites for industry, commerce and
agriculture. The more rapid is the growth of population and the
development of industry, the more rapid is the increase in the value
Speculation and holding of land out of use is, therefore, most
acute just where its effects are most injurious. The result of land
being held out of use is to diminish the available supply of
something already limited in quantity, and, therefore, to increase
the price of what is allowed to be used. The production of
commodities of all kinds is then restricted, prices rise, and there
is in effect an increase in the cost of production. The distribution
of wealth is also affected, more going to incomes derived from mere
ownership, less to active producers.
The laws of most countries fail to prevent this speculative holding
of land out of use. Indeed, this is positively facilitated by the
exemption from taxation which valuable unused land generally enjoys.
It is not necessary to elaborate here the argument that the value of
land is particularly suited to be a source of public revenue. This
has been demonstrated by economists of the highest standing. What we
are concerned to show is that Land-Value Taxation supplies an
essential link in the solution of most economic problems.
It provides an alternative source of public revenue, by which the
tariff can be abolished, a measure which is vital to the economic
organizations of the world today and to the cause of peace.
It will enable the budgets to balance and so obviate the excuse for
inflation and violent fluctuation of the exchanges.
It makes for the economic stability of international trade, and for
closer co-operation between the nations.
It provides a means of stimulating production by forcing unused
land into use, the essence of Land-Value Taxation being that it is
levied on the full value of the land even if unused. The result will
toe increase of trade, more employment, less competition for work,
higher purchasing power and higher wages.
Applied in colonies and protectorates this policy means that those
who hold the land there will be obliged to work it and to produce
the raw materials which other countries require.