The Unearned Increment: Its Nature

Arthur James Ogilvy

[A chapter from the book A Colonist's Plea for Land Nationalisation, published in 1901 by the Land Nationalisation Society, London]


Let us begin by taking the unearned increment in its simplest and clearest form.

Suppose I buy Government land at $1 per acre, and quietly holding on while roads are being pushed forward, settlement extending and land values rising, refuse offer after offer till the price reaches 2, when I sell out. Of these 2, one I have acquired by direct purchase; 1 worth of money for 1 worth of land; but the other I have done nothing to acquire.

It is not interest on the purchase-money, for interest is payment for the use of capital, and comes out of the use. Who would expect interest on money tied up in an old rag? There has been no use here.

It is not compensation for risk, for the land could not disappear or deteriorate, and was sure to be wanted.

It may be quite right for all that, that I should have it. That is not the point at present. The point at present is simply to explain the term, and to show not only what it directly means, but what it indirectly implies, for it implies a great deal much more than most people have any idea of.

I have neither done anything to create this increase of value nor rendered any service in return for it. If a sovereign were suddenly to drop into my pocket from the sky, it would not be more completely unearned.

But it has not only been unearned. If that were all, it would be no great matter. If, like the sovereign, it had dropped from the sky, then, though I might be undeservedly the richer, nobody else would be the poorer. My gain would be a clear addition to the sum total of human wealth, out of which others besides myself would in one way or another derive benefit; and, whether or not whatever benefits one without injuring another is fair subject for congratulation.

But it has not only been unearned; it has been drawn from the earnings of others. My gain is others loss.

If I sell goods or perform work for another, then no matter how high I may charge for the goods or the work, I am rendering goods for goods, service for service, earnings for earnings. What I offer is my labour, or the fruits of it, and as the public are free to get the same goods or services elsewhere if my terms don't suit, or to go without them, the fact of their accepting my terms shows that the thing I offer is, under the circumstances, worth the money.

But in the case of this unearned increment on land there is no pretence of any exchange. I offer for it neither labour nor the produce of labour. All I do is to place my hand on a certain portion of the earth's surface, and say, "No one shall use this without paying me for the mere permission to use it." I am rendering no more service in return for this extra pound, either to the purchaser or to society, than if I had acquired exclusive title to the air, and charged people for permission to breathe. And if, instead of selling my land for an additional pound, I let it at a proportionately additional rent the principle would be the same.

The increase of value in my land has arisen from the execution of public works and increase of population, causing an increased demand for the land; in other words, it has arisen from the national progress; and I, so far from aiding in this progress have actually hindered it, by keeping my property locked up and so forcing on intending producers to inferior or less accessible lands; and by holding so much land back have helped to make land so much scarcer, and, therefore, so much dearer, and so have helped to increase the tribute which industry has to pay to monopoly for the mere privilege of exerting itself.

I have employed my land not as an instrument of production, but as a means of extortion. I have bought it, not to use but to prevent other people from using it without my purchased leave; not to earn anything by it but to obtain the power of demanding the earnings of others.

Suppose certain parties, knowing that a road would shortly be made into a particular region, bought from Government the privilege of placing bars across the road (when made) and forbidding anybody to pass until he had paid toll; toll not (as under the old State tolls) to pay for the maintenance of the road, but toll for the mere permission to pass along the road. Every one would recognise that this toll was pure blackmail and not earnings, and the obstructors mere parasites licensed to prey upon the public. But where is the difference between blocking the road and blocking the land that the roads lead to? Where is the difference between levying blackmail on the transport of goods and levying it on their production?

But it will be said, "It was with real earnings that I bought the right to demand this payment."

True. But the point is that whether I bought it or stole it, the thing I have bought or stolen is the privilege of levying blackmail upon industry; of demanding something and giving nothing in return; of laying my hand on the earth's surface and saying to all and sundry, "Give me of the produce of your labour, or be off with you; so much a year if I choose to let it; so much in a lump sum if I prefer to sell it." Whichever of the two forms the demand assumes it is called by political economists "rent," and by that name I shall henceforth call it, because that is the accepted name, and because there is no other compact and handy term by which to express it; but it is not to be confounded with rent in the legal and commercial sense, which includes interest on the cost of improvements. The rent I shall mean is economic rent only; the price charged for the mere use of the land as such, either without any improvements or apart from them: I shall mean "ground rent" in short.

The fact that it was with real earnings that I bought the land for which I charge rent does not make rent earnings. I may invest earnings in buying a share in a pirate vessel (as a great writer puts it), but the proceeds of piracy are not therefore earnings.

It is the nature of the business whereby I make money, and not the manner in which I got into it that makes the difference between earnings and appropriation.

Earnings mean taking payment for goods or service rendered; appropriation means taking something and giving nothing in return; no matter whether the taking be legal or illegal, or how I acquired the privilege of taking. Anyone can recognise that it is one thing to charge for the fish I caught in the sea, and quite another thing to charge for permission to fish in the sea; one thing to charge for produce I have raised from the land, and quite another thing to charge for permission to raise produce from land.

"Still I have the right to make this charge?"

I am not disputing that.

If Government, with the full consent of the governed, issued licenses authorising to rob on the highway, the robbers, I suppose, would be justified in acting on their privilege; but their gains, all the same, would be appropriation and not earnings, no matter how high they paid for their license or how honestly they came by the money to pay for it. And if the public, disgusted with the system, demanded its immediate abolition, the robbers would have a claim to compensation, but their compensation would have to be assessed, not by the amount of plunder they had expected to make, but by the fee they had paid for their license and the actual loss to which, in one way or another, they had been put by the sudden abolition of a privilege they had honestly paid for.

But it will be said, "Rent is the result of a free contract."

Is it? The Italian peasant who agrees to pay to the brigand on the mountain so much a year in consideration of not being robbed makes a contract, but is it a free contract? If he refuses to pay it the brigand will take his earnings; if the applicant for land refuses to pay rent the landlord will refuse to let him make any earnings. Where is the great difference between the two capes? There is a contract in each case, and the one is about as free as the other.

In neither case is anything given in return for the payment received, except permission to work unmolested in a particular place.

"But," it will be said "in practice the rent of an estate represents real earnings in the shape of improvements made, as well as mere permission to use the land, and how can you separate the two values."

Not only is it quite possible to separate them, but the thing is often done. In London, for instance, the ground rent and the rent for the house often belong to quite different persons. In Ulster, again, the retiring tenant receives the value of his improvements while the landlord keeps the value of the land. And in America, I am told, the land and the improvements are assessed separately and taxed separately.

But all this has really nothing to do with the subject in hand. My concern at present is simply to explain the nature of the unearned increment.

Whether the value of land and the value of the improvements can be separated or not, they are quite distinct elements, just as in a glass of grog, the brandy is brandy and the water water, each with its own distinctive properties and effects, notwithstanding their indistinguishable corn-mixture; and he therefore who lets land levies blackmail upon industry by charging for something which represents no service at all, none the less that at the same time he charges for something else that does represent service.

No doubt there are many other things besides land in which a monopoly of the article will enable the possessor to levy something resembling blackmail; but there are points of difference that distinguish them all from the pure and simple appropriation of land monopoly.

The first is that none of them excludes other people from making a living or from making earnings to any extent by other means than the article monopolised.

If by a day's labour or by pure accident I find a diamond, I may ask a price entirely disproportionate to the value of my labour; but then the public need not buy my diamond unless they like. My finding a diamond does not prevent other people from looking for diamonds with as much chance of finding them as I had, and, if they don't think they are likely to find any by looking for them they can go without, and be none the worse.

But every piece of land appropriated shuts out so many other people from that land, and as all the land (practically speaking) is appropriated, or in one way or another out of reach of the masses, they are at the mercy of the landholders, and have no choice but either to rent it from them as tenants or work for them as labourers on the hardest terms to which competition can drive them ; which means that the landowner has the power of appropriating the greater part of their earnings in return for the mere permission to them to earn anything.

Or suppose that, instead of finding a diamond, I buy tin, and that next week the price goes up to double here there is an additional distinction between my gains and the land speculator's; for not only are the public under no compulsion to buy tin (while they are to rent land), and not only does tin represent the results of labour, and so represent earnings (which land does not), but the magnitude of my gain in most cases represents compensation for great risk.

The earnings of farmers and of miners may average the same, but the farmers' average is made up of pretty equal profits all round, while the miners' average is made up of a few big prizes and many blanks. And what applies to the miner applies also to the speculator in mining products. His occasional large profits represent compensation for great risks, and is thus as much of the nature of insurance as of profit.

No one would think of either mining or speculating in mining products, unless the many blanks were compensated by occasional large prizes. They are the necessary inducements to engage in those callings, and therefore fair earnings when they come. Land, however, is not a speculation in this sense (though even if it were, its profits would still be appropriation and not earnings for reasons already given); it is a sure investment in the sense that it is subject to no extraordinary risks: to no more risks, that is, than such as are inseparable from all human enterprise, even the safest.

The value of land, as of everything else, will oscillate within certain limits, and even in some exceptional cases, as in the sudden diversion of traffic, fall for an indefinitely prolonged period; but these occasional or exceptional perturbations are but as the advance and recession of the waves in a flowing tide. The tide still comes in.

In every country which has any enterprise and progress, land values must rise. The movement may be fast or slow, continuous or interrupted, but it is up not down.

There is not a single factor in a nation's progress that does not add to the value of land. Every road improved and railway laid down; every machine invented and process perfected; every opening of new markets; every improvement in fiscal policy, in order and good Government, in the knowledge and skill, in the morals, manners, and even numbers of the people, every conceivable element, in short that adds to the productiveness of industry, adds to the value of land, and increases the tribute which monopoly can wring from industry; which the man who merely owns the land can exact from him who uses it for the mere permission to use it.

This is why the gradual rise of land value or rent (ground rent only, remember), is called the unearned increment.

So far for its nature. Our next consideration will be its magnitude.

The Unearned Increment: Its Magnitude

Under the system prevailing all over the civilised world every country is appropriated by a (comparatively) few owners.

What these owners do with the land is a matter the State concerns itself very little about. Whether they occupy and use it themselves, or let it to a tenant and live in idleness on the fruits of his labour; whether they cultivate it like a garden, making it yield abundant wealth and maintain hundreds of families, or leave it in a state of nature to carry sheep, excluding the whole rising tide of population from the opportunity of developing its boundless resources because the sheep pay them rather better; whether they open out the mineral treasures hidden in its depths or lock them up by demanding such exorbitant royalties that enterprise either will not attempt the work, or attempts and fails; whether they construct factories and build cities upon it, or turn out the whole population and burn down their dwellings (as in the Scottish Highlands) because a foreign millionaire offers them a higher price for the privilege of turning it into a wilderness to shoot deer in than the children of the soil can give for the mere privilege of earning a living; all these things the State regards as matters of quite secondary consideration with which it is not called upon to interpose, because that would be interfering with the "sacred rights" of property.

The one thing it does concern itself energetically about is to establish "the sacred rights" as fast as possible and in all directions, and ensure that every acre shall have its blackmailer privileged to exclude everybody else from the land he has acquired possession of, and to forbid access to all industry except on payment of the heaviest toll which the keenest competition can compel.

The whole country (that is the whole country worth occupying at any given moment) being thus apportioned amongst these privileged few, they are masters of the situation. The first thing a man requires is room to stand in; and there is no unappropriated room available for the purpose. If he stands on private land he is liable to an action for trespass. If he goes out into the street, the policeman may order him to move on. When night comes on, matters are worse. If he sleeps on somebody's premises he can be apprehended for being on the premises for an unlawful purpose. If he sleeps in the bush he may be locked up as a vagrant without any visible means of support. The State insists that he shall pay blackmail to somebody; not payment for service of any sort rendered, but payment for the mere permission to be somewhere.

Land is the basis of all industry.

All industry consists either

1. In extracting the raw materials of wealth from the land; or

2. In working up, shifting about, or distributing these materials, or in aiding in one way or another some of these processes.

We shall call the one class primary and the other secondary industries.

Farming and mining are the chief examples of the primaries. As to the secondaries, they are legion; and not only are all the materials these last have to operate upon drawn from the land, but so are the tools they work with as well as the food the workmen consume.

It is clear that the extent of the secondary industries will be strictly limited by the primaries; that is, there can be no more persons engaged in working up, shifting about and distributing materials than there are materials (extracted from the land) for them to work up, shift about and distribute and not only is the extent of the secondaries determined by the extent of the primaries, but so also are the profits in the secondaries determined by the profits in the primaries.

Materials must be extracted (or produced) from the land before they can be put to any further use, and men will not leave this necessary preliminary work to take to the secondary work unless they can make as much by the new industry as they could by the old; and they cannot hope to make more, because if they did, the opening in the secondary industries being strictly limited, competitors would at once flock in and bring their profits down.

If profits in the primary industries are high, that is, if the land yields abundantly, and no one steps in to appropriate the fruits, profits in the secondaries will be high too, for otherwise people would leave the secondaries and betake themselves to the land.

If, on the other hand, profits in the primaries are low that is, if either nature is niggardly or someone (the landlord for instance) appropriates the fruits, profits in the secondaries will be low too; for otherwise people would leave the land and crowd into the secondaries till they brought profits down. Now, if all the land is held by a comparatively few people (as is the case) then since the land is the basis of all industry, there will be keen competition for it a competition becoming keener year by year as the competitors multiply and wealth increases, the result of which competition will be that the man of average means and capacity will have to give the very highest price for the land that he will consent to give, rather than go without it, and this highest price will be determined, not by the amount that it takes out of his pocket, but by the amount it leaves behind.

Here, for instance, are three farms of differing fertility estimated to yield to the customary system of farming, 200, 300, and 400 net profit respectively. Then, if the first of these fetches, after a pretty close competition, 100 a year, this shows that no bidder will give more than will leave him 100 to himself, but that the competition of the others will not allow him to retain more ; in other words, that 100 is the lowest he will consent to keep, and the highest he will be allowed to keep, so that 100 a year is the average profit of farming amongst farmers of that class and means. But since he cannot hope to keep more than 100, it does not matter to him what the surplus may be which he is compelled to give up to his landlord; consequently the other two farms will fetch respectively 200 and 300. Of course it is the rate of profit, and not the actual profit of which we are speaking of. The 100 is only quoted as an example. Amongst one class of farmers the reserve will be higher, among another lower, according to their means and the magnitude of their operations.

This is the theory, and it corresponds exactly with the facts; for whether a farmer settles here or there, near a market or far-off, whether he pays 100 a year for an indifferent farm, 150 for a better, or 200 for a better still, he finds that except by some lucky accident his profits as a farmer remain much the same ; which shows that his rent is determined, not by what be has to pay away, but by what he is determined to keep ; and this amount, this rate of profit, will, for reasons already given, determine the rats of profit in all the secondary industries, though they have no visible connection with the land at all.

To put it compactly, the profits of industry all around are determined by the rent of land. That amount of profit which the worker on the land can save from his landlord will be all that the worker at any industry can hope to get, and it will represent that minimum margin to which he will consent to be beaten down rather than go without the land.

What is the minimum margin?

The applicant for the land has a certain amount of capital (otherwise he could not be an applicant), and for this he knows he could get interest, and he also has the capacity to work. Consequently, the least he will determine to keep will be what he could earn as a labourer, plus the interest he could get on his capital. Actually (except in the case of the poorest competitors for the smallest and worst farms) it will be something rather more than this, for his capital, such as it is, gives him a certain advantage in the position. He and his competitors being none of them in danger of immediate want, and therefore not pressed by necessity, will have a tendency to hold back in the bidding when it begins to run high, and to cling to something more than the closeness of the competition might seem to demand ; and the larger his capital the greater will be his advantage, not only because of his greater power and stronger inclination to hold out for better terms, but also because the men of sufficient means to require a large farm, such as he wants, are fewer in number, and the competition in every way less keen and forced. Hence the smallest and worst farms are always the highest rented, which is only another way of saying that the profits on them are smallest.

Still, be the farms large or small, competition will always force rents up, and therefore profits down to the smallest return the average applicant of his class will consent to accept rather than go without the land.

Land, as we have said, is the basis of all industry, and agriculture is the fundamental industry.

Everyone recognises this; and in view of the hard struggle and hand-to-mouth existence of the farmer, all sorts of projects are proposed to ameliorate his lot.

One party advocates protection, another the lightening and equalising of taxation, another cheapness of labour by assisted immigration (making the labourer the scapegoat), another pins its faith on railways, and so on.

Of these proposals some are good, some bad; but their effects whichever way they tend, will not, except for the moment, affect the farmers' profit one way or the other.

Let us suppose protection to be the true policy, and raising the price of some particular article by a duty, say meat, see what the result would be.

The rise of price in meat will produce two opposite effects. It will immediately injure one class of farmers and benefit another. Those who by reason of distance from market, unsuitability of their land for grazing, or its still greater suitability for something else, do not fatten stock, notwithstanding the rise in price (and these will be a very large number), will suffer a distinct appreciable loss in increased household expenses and increased cost of feeding their men, without any advantage to set off; while those on the other hand, with land specially adapted for grazing, who already made a profit by it will make a larger profit still; and those on land passably suited for it, who formerly made their profit by something else, may, perhaps, change their system, and make their profit by grazing instead of by those other things.

But the point is, that after the first start neither those who gain nor those who lose will be any the better or the worse off, for their gain or loss, because at the first renewal of their lease they will transfer the gain or loss to their landlords.

For so long as all the land of the country is in the hands of a comparatively few, so that there are more farmers wanting farms than there are farms for them to have, so long will competition force land values up to their maximum, and rent will mean to the farmer the utmost that he can see his way to giving for the land rather than go without it and let another take his place.

But for the very reason that competition is thus already at its full stretch, it cannot be stretched any farther, and those farmers whose narrow margin of profit is trenched on by their increased expenses consequent on the rise in meat will insist on having that margin restored, and they will be able to carry their point; for they were already giving full value for their farms, and their farms (since they produce no more and yet cost more to work) are now worth less, less not only to the present occupants, but to any one else who might want to take their place; therefore, the landlords cannot play off one against another, and so must accept reduction.

Conversely, where the profits on land, already profitable for grazing, have been increased by the duty, those lands will have become just so much more valuable and will fetch so much more rent.

So, if you made a railway to every farmer's door you would simply make the land more valuable. Compare those districts that have railways with those that have none. In the former you will see a greater population : probably, more cultivation, certainly higher rents, but no higher farm profits; for where the carcass is there will the eagles be gathered together; where returns are high, thither will competitors flock. There may be no actual bidding against each other among the applicants, but this is only because the landlord will kindly take that trouble off their hands. He will put up the rent as high as he thinks he can, too high at first perhaps if so his vacant farm will soon cause him to correct his error, but whatever the process, the result will be the same.

So, if by assisted immigration, you reduce the cost of labour by half, or if by mechanical inventions you enable the farmer to do with half the number of men (which would come to much the same thing to him) you would be simply reducing the cost of working the land, and so increasing the return to be got out of the land, and so increasing the value of land, and so raising rents.

One after another labour-saving appliances have been introduced within the last 20 years ; double-furrow ploughs, reapers and binders, horse rakes, steam threshers, without improving the condition of the farmer in the least. Never have there been so many aids and appliances to industry as there are now, and never has the struggle of the farmer been more severe.

So if you lightened taxation, or even abolished it altogether, it would make no difference to the farmer, beyond the moment. At present some leases stipulate that the landlord shall pay all rates; others that the tenant shall pay them; others again that each shall pay half, but it is all a mere adjustment of rent. The more taxes the less rent, and vice versa.

If the farmer pays more rent it is because he has to pay less taxes, and whether this is owing to the landlord paying them, or to there being none to pay, makes not the least difference to the farmer.

So if nature herself instead of the mere instruments of production were improved ; if the soil were suddenly doubled in fertility; if the sun could be got to shine and the rain to fall exactly when and where it was wanted ; if all weeds and plagues were abolished, it would come to the same thing, and for the same reasons.

The Press is continually preaching that the fault of things all lies with the farmer. He should be more industrious or more provident, he should know something about chemistry, he should buy the best appliances, and use the most advanced methods. It is very good advice in its way perhaps, but it does not touch the question in the least.

If you passed every farmer through a technical college, if by a network of meteorological stations and commercial agencies you supplied him every day with a forecast of the weather, and the state of the markets, if you supplied him gratis with all the best machinery, if you trained him in habits of industry and economy, foresight and skill, till you made him as much superior to what he now is as a steam thresher is superior to a flail, you would enormously increase his efficiency no doubt, but you would not add one farthing to his profits. The whole benefit would go as before to the landlord, and for the same reasons. You would not have eased the pressure of competition, but only have put it into the power of every competitor to offer more. Still, as before, rent would mean the utmost the farmer could be forced to bid for the land rather than go without it.

Granting that there are many things that swallow up much of the surplus that would otherwise come to the farmer; heavy taxes, injudicious laws, bad roads, scarce labour; all these matter nothing (as a great writer says) so long as behind them stands something which swallows all that is left. So long as that something stands waiting with open mouth, abolishing any of these only leaves so much more for it to swallow.

Some people shrink from these conclusions saying, "it is a hard doctrine" (as if truths could be dodged by shrinking from them.)

Others say that the remedy is the fixing of a fair rent.

But what is meant by a fair rent?

If Brown objects to his present rent of 100, saying it is to6 high, and should be reduced to 80, and yet Jones is standing by prepared to give 100, why should the rent be reduced? Why should Jones be forbidden to have what he is ready to give 100 for, in order that Brown should have it for 80? It is fair neither to Jones nor to the landlord whatever it may be to Brown.

What would Brown think if Jones objected to [pay the 5s. for his wheat that he had agreed to pay, saying it ought to be reduced to 4s., when Smith is standing by ready to give 5s.?

In the open market a "fair price" has no meaning. Hudibras* saying still holds good that f< The value of a thing is just as much as it will bring."

There is a remedy for this evil, and a very simple one, but it is not the fixing of a fair rent.

"But," it will be said, "all farmers are not tenants. Many own the land they occupy." True ; but all that this proves is, not that the preceding remarks are incorrect, but that there is a certain class to whom they do not apply. For the present we will let the exception go for what it is worth. What I shall undertake to show by- and- bye is that it is worth nothing.

But we shall have to present one or two other considerations at some length before we are prepared to deal fully with this. For the present we will let it stand over, only remarking that in farming, tenants are the rule, occupying owners the exception, and that the exceptions grow steadily fewer year by year. Not only in Tasmania, but in all the other colonies, in the United States, and wherever, in short, land is recognised as absolute private property, the divorce between occupation and ownership is proceeding apace, and the very institution which was designed to secure to the producer the full fruits of his labour is becoming the means by which he is compelled to surrender them to another.

The Real Sufferer.

As the landlord by virtue of his monopoly of the land holds the applicant for it at his mercy, so the applicant once in possession holds the labourer at his mercy.

The competition was first for possession of the land, it is now for employment on the land. The competition is in the one case open and direct, in the other disguised and indirect.

Labourers do not usually underbid each other for employment as tenants overbid each other for possession, but it comes to much the same thing as if they did: The more numerous the labourers in proportion to the work to be done the lower the wages, and vice versa.

If the landlords were to divide their land into as many pieces of equal value as there were applicants for it, and were to offer these pieces separately, there would be no competition to run rents up, and the landlord would have to take what he could get for it a merely nominal rent.

To make money by his monopoly he must keep up its character as a monopoly ; that is, he must offer his land in a single block so to speak, and so compel competition.

And just as the landlord forces rents up by offering his whole land for one tenant's occupation, and so setting all to compete for the privilege of being that one, so the occupier in his turn forces wages down by employing as few labourers as he can, and so setting all to compete for the privilege of being among those few.

The secret of his power over the labourer is the same as that of his landlord over him. It is not in his capital as is generally supposed, but in his getting possession of more laud than he can use by his own personal labour, and preventing other people from using it by their personal labour, except for his profit.

The landlord makes the occupier give him his money; the occupier makes the labourer give him his work.

In so far as the occupier can keep his wage expenditure below the general level by doing the same work with fewer men, or paying them less wages, he can retain the savings to himself; but in so far as he only succeeds in keeping down the general cost of labour, he is only keeping down the recognised cost of working the land, and so increasing the value of land, and so raising rent ; and the result of his efforts (as a rule), is only to keep down the general level, for all are playing the same game, and any saving effected by one is soon copied by all, and absorbed in a general reduced cost of production, increasing the value of land and raising rent.

The productiveness of any industry that is, the amount it adds to the general wealth or to the material comforts and enjoyments of the people is measured by the difference in value between the thing produced and the materials used up in producing it.

Thus, if a carpenter in a day makes a door worth 1, using up 8s. worth of timber and nails in the process, the result of his work has been to convert 8s. worth of rough timber into 20s. worth of finished product, exhibiting as the measure of its productiveness a net increase of 12s. How this increase is distributed and applied whether, being an independent artisan, the maker can keep it all to himself, or whether, being a hired servant, he must be content with his day's pay, leaving the surplus to his employer ; whether he receives his share in advance or has to wait for it; whether he consumes it or saves it up all these make no difference to the fact that the increase was 12s.

From which we can see that the maintenance of the labourer forms no part of the real cost of production, but only of his share, as distinguished from the employer's share, of the profit.

If he is working on his own account and not for an employer everyone sees that all he gets for his work is profit, and his maintenance the use (or one of the uses) to which he puts that profit, just as an employer's maintenance is the use (or one of the uses) to which he puts his profit.

Or if the labourer, working for an employer, chooses to fast till his employer has realised the product and paid him out of that product the wages agreed upon, again everyone will see that they are not cost but profit; the labourer's share and the employer's share being the two parts into which the total profit is divided.

But if instead of working for himself or waiting and fasting, he arranges to receive in advance from his employer the value (or part of it) of that profit which he would have made if he had been working for himself, or the value of the wages he would have received out of the product if he had waited and fasted, still what he receives remains essentially the same, the profit and not the cost of the work. It is only the time and the manner of his receiving it that is changed; still, as before, the proposition holds good that wages (of which maintenance forms a part) is something to be added to the employer's profit, not set off against it, in the national account, and that to reduce wages is not to increase the general profits of industry but only to apportion a smaller part of it to the labourer who is worst off and most in need of it, and so leave a larger part for the employer, the landlord, or some other person who is generally better off and less in need of it.

An industry that does no more than provide bare maintenance for a single man from day to day is to that extent a productive industry, a gain and not a loss, though it provide neither rent to a landlord nor profit to an employer.

An industry that provides not only for a man but for a family is more productive still, a greater gain still, notwithstanding that it represents increased consumption.

One that not only provides bare maintenance but comforts and enjoyments as well is a still greater good, and gain to the country, a cause for rejoicing, not regret. And yet if labourers' maintenance and wages are, as is generally thought, the cost and not the profit of industry, all these earnings should be lamented as expense, and the greater the productiveness of any such industry as we have supposed, the greater the loss to the country. The proceeds of labour, generally speaking, are divided amongst three people, the labourer, the employer, and the landlord. No one reckons the landlord's or the employer's maintenance as part of the cost of production, and yet they persist in reckoning the labourer's as such. Relatively, to the employer, it may be, but absolutely, to the country, it is not. However, this is but a side issue, of small consequence to my main purpose, so we will pass on.

The employer always has to wait for his share till the product is realised, while the labourer generally, and the landlord some times, receives his in advance; and the employer sometimes makes a miscalculation and gives more to the landlord in rent or to the labourer in wages than a due regard to his own profit would warrant ; or the enterprise may miscarry, and there may be no increase to divide, or to make good what he has advanced. But such miscalculations and failures do not affect the general proposition that, taking industry as a whole, wages, profits, and rent, are the three different portions into which its proceeds are divided. And since, as we have seen, the competition for possession of the land keeps profits down to a minimum, either rent will be determined by wages, or wages by rent; that is to say, the larger the share of the proceeds the labourer gets, the less will there be left for the landlord, and vice versa; but as the landlord owns the land, he is master of the situation, and rent determines wages.

But to say that rent determines wages, is to say that rent devours wages. The labourer gets so little because the landlord gets so much.

[NOTE. I have adopted the division into rent, wages, and profits, instead of into rent, wages, and interest, because though less scientifically accurate, it is sufficiently accurate for my present purpose, and enables me to keep my subject within more manageable limits.]

Kent devours wages.

Suppose the labourer to ask for a rise and the farmer to refuse, on the ground that he cannot afford it.

But presently something happens. A railway is made or a mine opened in the neighbourhood, or some improved process enables a greater yield to be obtained at the same cost, and there is now an appreciable surplus. The labourer comes forward again and says, "You can afford it now."

"Unfortunately, no," replies his employer. "I might have done so, but my lease is nearly up, and these advantages you refer to having made the land more valuable, my landlord has notified that he means to raise the rent; and as there certainly is a greater surplus available for rent than there was, I must give it, for if I don't someone else will ; and so, as far as I am concerned, the surplus you calculate upon has vanished."

In short, whenever there is an increase in the productiveness of industry creating an additional surplus, and the labourer stretches forth his hand for a share of it, the landlord pushes him aside, and takes it all himself ; but as he keeps well out of sight in doing so, using the employer as his instrument, his action is not perceived. And as it is in the present so it has been in the past. Inventions and discoveries have within the last century doubled the productiveness of industry over and over again, but the labourer has no more benefited by them than the employer has. The increase has been enormous, but, in the primary industries at any rate, the landlord has taken it all.

But some will say, "The labourer's exertion is a fixed quantity. The increased productiveness of his industry is in no degree due to himself, but to the improved appliances he works with, and, that being so, the person who supplies these appliances that is, the employer has a right to the increase.

There is enough prima facie appearance of reason in this to have made it worth discussing if the employer really got it, but he does not. He gets interest, no doubt, on the additional expense he has incurred in procuring the appliance, but he gets none of the increase of wealth due to the increased efficiency of labour when aided by the appliance, (once the appliance has come into general use); that, as we have seen, goes to increase the value of land and raise rents, and while the employer does not gain, the labourer in most cases actually loses; for the usual result of labour-saving inventions, in the primary industries at any rate, is not that the employer retains the same hands to do more work, but that he discharges some of his men and does the old amount of work with fewer hands.

It is the landlord, who has neither invented, nor supplied, nor put to use the appliances, who gets the whole benefit of them.

To see that it is rent that devours wages, look at it another way.

Suppose the labourers demanding an increase and being refused, were to say "Well, in six months we shall strike, so look out; meanwhile we shall prepare for the struggle." So they save money, subscribe funds, and organise; and at the time appointed present themselves, provisioned and prepared.

What would happen?

Would the farmers refuse, and so all industry cease, or would they consent to pay more than they could afford and go bankrupt?

Neither of these things would happen. The farmers would simply turn to their landlords and say, "You see how it is. We cannot afford higher wages, and the labourers won't work without them. Accept a reduced rent, or we throw our farms on your hands."

What could the landlords do? Their rents are determined by competition, and here is competition suddenly come to a stop. They must make the best of the situation, and accept the reduction.

And so industry would go on as before, and the farmers make the same profit as before. All that would have happened is that labour would have gained a march upon monopoly and the labourer have wrested from the landlord part of the blackmail he was accustomed to pay.

For it is the labourer from whom it is wrung. It is by keeping down wages that the landlord thrives. The employer is merely the instrument, who, for a consideration cut down by competition to the lowest figure, undertakes all the trouble, the risk, and the odium of the squeezing.

The price of labour, like the price of everything else, is determined by supply and demand, and it is said that if employment is scarce it is because there is not profitable employment on the land for all. Ah! but profitable for whom? For the labourers, for the country, or for one or two privileged people?

Here is a farm, selected from the assessment roll of this district as a fair sample of a so-called agricultural farm consisting of 640 acres and rented at 150. It keeps, I believe, at the outside, two men at work the year round ; any other applicants for employment being dismissed with the formula, "No work for you."

Two men to a whole square mile! And this on a farm within 15 miles of the port of Hobart, and containing hardly an acre unfit for cultivation.

All the produce that comes off this farm has to be raised by the labour of these two men. and must realise over and above their wages and keep and all collateral working expenses, a surplus of rent, 150; rates and taxes, 20; employer's profit (say), 100; total 270; being a profit of 135 to each man. No man, in short, is allowed the opportunity to earn a living on this square mile of cultivable land unless he produces, over and above the supply of his own modest wants, a net annual surplus of 135 to hand over to somebody else.

If employment is restricted, it is land monopoly that restricts it.

It is not that there is not abundance of land to use, abundance of use to put it to, and abundance of profit to be made from it, but that the tendency of monopoly is to keep hungry mouths off rather than to take willing hands on. It is naturally concerned only to get as big a share as possible to itself, and is not concerned whether other people have a chance to get a share or not.

The occupier will not engage more men than he can help.

But suppose his hand is forced.

Suppose the Trade Unions were to change their tactics (as they may do any day), and instead of trying to restrict the field of employment were to undertake to extend it. Suppose a Trade Union of farm labourers were to say to the farmer, "You have been accustomed to employ two men only on this farm. Well, not a man shall take service with you unless you undertake to engage four, and at the same wages."

Does anybody doubt that the two extra men could produce more than they consume and use up, and so be productively employed ? And if the net surplus to hand over to the landlord were less, why he would have to take less.

The earnings of the two extra men, reckoning their wages and keep only, would be 100 a year, and if that left a surplus of 20 less for the landlord, there would still be 80 to the good. For, as I have elsewhere pointed out, the labourer's maintenance (much more his whole earnings), so long as he replaces what he receives, is not cost of production but profit; the labourer's share of it. If an industry does nothing more than maintain one man continuously it is to that extent productive.

But the landlord's position is too strong for him to stand in much fear of such combinations as these, and the whole tendency of affairs is to increase his power.

The landlords as a class get more, without the least exertion, outlay, or risk, out of the labour of the community than they could if the whole working community were their slaves.