Monday, April 16, 2012

Landed Property - Frédéric Bastiat - Pt 3

Landed Property

We now reach the third hypothetical case, wherein the entire arable surface of the globe has become private property.
Here again we observe two classes: those who possess the soil and those who do not. Will those of the first class be able to oppress the members of the second? And will the second not be forever reduced to offering more and more labor for the same quantity of food?
If I answer this objection, it will be, obviously, for the sake of scientific completeness, for we are still hundreds of centuries away from the time when such a hypothesis could become a reality.
But the fact is that everything indicates that the time must come when the landowners' claims cannot be kept within bounds by the magic words: There is more land to be cleared.
I beg the reader to note that this hypothesis also implies that at that time the population will have reached the extreme limit of the earth's ability to provide sustenance.
This adds a new and important element to the question. It is almost as if I were asked: What will happen when there is not enough air left to fill all the extra lungs in the world?
Whatever theory we may hold on the problem of population, it is at least certain that the population can increase, and even that ittends to increase, since it does increase. The entire economic organization of society is such that it appears to anticipate this trend, with which it is in complete harmony. The landowner always hopes to charge for the use of the natural resources he has at his command, but he is always disappointed in his foolish and unjust demands by the great supply of similar natural resources that do not pass through his hands. Nature's relatively infinite prodigality with her forces keeps him from being anything more than a mere custodian over some of them. Now, what will happen when men will have reached the limits of this bounty? It will no longer be possible for anything more to be hoped for in that direction. Inevitably the trend toward increased population will then come to a halt. No economic system can prevent this from necessarily happening. In the hypothetical case we are considering, any increase in population would be checked by a corresponding rise in the death rate. No proponent of human betterment, however optimistic, can go so far as to assert that the number of human beings can continue to rise when there is no possible chance for a further increase in the supply of food.
Here, then, is a new order; and the laws of the social world would not be harmonious if they had not provided for this contingency, so different from the conditions under which we live today.
The difficulty we foresee can be illustrated in this manner: Imagine a ship in the middle of the ocean with a month to go before reaching land and with only enough food for two weeks. What must be done? Obviously each sailor's ration must be reduced. This is not being hardhearted; it is merely being prudent and just.
Similarly, when the population is extended to the extreme limit of what the earth, with all possible land under cultivation, can support, there will be nothing harsh or unjust about the law that takes the gentlest and most effective means of preventing further multiplication of the species. And once again the solution can be found in the principle of the private ownership of the land. The owner of landed property, under the spur of personal interest, will make the soil produce the most food of which it is capable. By the division of inheritances private ownership of land will make every family aware of the dangers of a rising birth rate. It is very clear that under any other system—communism, for example—there would be no equally strong incentive for greater production nor so firm a brake on increasing population.
In the final analysis, it seems to me that the political economists will have performed their task when they prove that the great and just law of the reciprocity of services works harmoniously as long as further progress is not ruled out for mankind. Is it not reassuring to reflect that, until that time and so long as liberty prevails, it is impossible for one class to oppress another? Are the economists obliged to answer this other question: Granted the tendency of the race to multiply, what will happen when there is no more room on the earth for new inhabitants? Is God holding back, for that epoch, some cataclysm of creation, some marvelous manifestation of His infinite power? Or, in keeping with Christian dogma, must we believe in the destruction of this world? Obviously these are no longer economic problems, but are analogous to the difficulties eventually reached by all sciences. The physicists are well aware that every moving body on earth goes downward and never rises again. Accordingly, the day must come when the mountains will have filled the valleys, when rivers will be as high at their mouth as at their source, when their waters will no longer flow, etc., etc. What will happen then? Should the physical sciences cease to observe and admire the harmony of the world as it now is, because they cannot foresee by what other harmony God will make provision for a state of things that is far in the future but nonetheless inevitable? It seems to me that this is indeed a case in which the economist, like the physicist, should respond by an act of faith, not by an act of idle curiosity. He who has so marvelously arranged the abode where we now dwell will surely be able to prepare a different one for different circumstances.
We judge the soil's fertility and man's skill by the facts that we observe. Is this a reasonable rule to follow? Then, adopting it, we could say: Since it has required six thousand years for a tenth of the surface of the globe to attain a sorry kind of agriculture, how many hundreds of centuries will elapse before its entire surface is turned into a great garden?
Even in this evaluation, already quite reassuring, we are merely making a supposition based on a scientific generalization, or rather, on our present state of agricultural ignorance. But, I repeat, is this an acceptable rule to follow; and does not analogy suggest that the true potentialities of this art, which are perhaps infinite, are beyond our present knowledge? The savage lives by hunting, and he requires five square miles of land. How great would be his surprise to learn that a pastoral people can support more than ten times that number in the same space! The nomadic shepherd, in turn, would be amazed to learn that ordinary agriculture would permit of a population ten times greater. Tell a peasant accustomed to this method that another tenfold increase would be possible by crop rotation, and he would not believe you. And is the rotation of crops, which is the last word for us, also the last word for the human race? Let us, therefore, stop worrying about the fate of mankind. Thousands of centuries lie ahead of it; and in any case, without asking political economists to settle problems that are out of their field, let us confidently leave the fate of future generations in the hands of Him who will call them into existence.
Let us summarize the central ideas of this chapter.
The two phenomena, utility and value, the contribution of Nature and the contribution of man, consequently communal wealth and private property, are to be found in agricultural enterprises as in all others.
In the production of the wheat that satisfies our hunger, something takes place that is quite analogous to the production of the water that quenches our thirst. Does not the sea, which inspires the poet, also stir us, the economists, to fruitful meditation? It is a vast reservoir intended to give drink to all human creatures. Yet they are so far removed from its cooling waters, which, worse still, are filled with brine! But the marvelous resourcefulness of Nature comes to the rescue. The sun warms and stirs this mass and subjects it to slow evaporation. It turns to vapor, and, freed from its salt, which rendered it unsuitable for use, rises to the upper regions of the air. Winds, moving in from all directions, waft it toward the inhabited continents, where the cold congeals it and attaches it in solid form to the mountainside. Soon the warmth of springtime melts it. Its weight carries it down the slopes, and, as it flows through beds of schist and gravel, it is filtered and purified; it spreads out in all directions, feeding the refreshing springs in all parts of the world. This is certainly an immense and ingenious industrial project that Nature carries out for the benefit of mankind. Conversion of materials from one form to another, transportation from one place to another, creation of utility—all the elements of industry are there. Yet where is value? It has not yet been created, and if the so-called labor of God could be charged for (and it would be charged for if it had value), who could say what a single drop of water would be worth?
Yet all men do not have a spring of living water flowing at their feet. To quench their thirst they must still go to some pains, make some effort, practice foresight, employ their skill. It is this supplementary human labor that gives rise to arrangements, transactions,evaluations. In it, then, we find the origin and the basis of value.
With man, ignorance comes before knowledge. Originally, therefore, he was reduced to going after the water he drank and to doing, with a maximum of pains, such additional work as Nature had left him to do. This was the period in the development of exchange when water had its greatest value. Little by little he invented the cart and the wheel, he trained horses, he devised pipes, he discovered the laws of the siphon; in a word, he put part of the burden of his labor on the gratuitous forces of Nature, and proportionally the value of the water, but not its utility, decreased.
And, in this process, something takes place that must be carefully noted and understood if we are to avoid seeing discord where there is actually harmony. The purchaser of the water obtains it on better terms; that is, he exchanges a smaller amount of his labor for any given amount of water at each step along the path of progress, even though, in this case, he is obliged to pay for the instrument by means of which Nature is put to work. Formerly he paid for the labor of going after the water; now he pays for this labor and also for the labor it took to construct the cart, the wheel, and the pipe. And yet, everything included, he pays less. This illustration shows how unfortunate and erroneous is the bias of those who believe that the compensation paid to capital represents an added burden to the consumer. Will these people never realize that capital, in any given case, eliminates more labor than it demands as payment?
The process that has just been described applies equally well to the production of wheat. In it too there exists, antedating human industry, a tremendous, immeasurable industry of Nature, much of which even yet is not understood by the most advanced scientific thinking. Gases and minerals are present in the soil and in the atmosphere. Electricity, chemical forces, wind, rain, light, heat, life are all successively busy, often without our knowledge, transporting, transforming, collecting, dividing, combining these elements; and this wonderful industry, whose activity and utility surpass our understanding and even our imagination, possesses no value. The latter makes its appearance at the first intervention of man, who, in this case, has more supplementary labor to perform than in the other.
In order to direct these forces of Nature, to remove the obstacles that hinder their action, man takes possession of an instrument, which is the soil, and he does so without harming anyone, for this instrument has no value. This is not a debatable matter, but a simple fact. Show me, in any part of the world whatsoever, a piece of land that has not directly or indirectly been the object of man's activity, and I will show you a piece of land totally lacking in value.
Yet the farmer, in order to produce wheat, with the help of Nature, performs two very distinct types of labor. One type is directly related to the yearly harvest, is related to it alone, and must be paid for by it alone: things like planting, weeding, harvesting, transplanting. The other, like constructing farm buildings, providing drainage, clearing, fencing, etc., spans an indefinite number of successive harvests; this cost must be distributed over a series of years, a process that is carried out accurately by the admirable device that we call the laws of interest and amortization. The crops furnish the farmer's payment if he consumes them himself. If he exchanges them, he receives in return services of a different type, and the appraisal of the services so exchanged constitutes their value.
Now, it is easy to understand that all this long-range labor that the farmer performs on the soil represents a value that has not yet been paid for, but that surely will be. He cannot be forced to relinquish it and to allow another person to take over his right to it without compensation. Value has been incorporated, implanted in the soil; for that reason we may well say, by metonymy: The soil has value. It has value, in fact, because no one may now acquire it without offering in exchange the equivalent of this labor. But I maintain that this land, to which Nature's productive power had not originally communicated any value, still does not possess any value the more on that account. This power of Nature, which was gratis, is still gratis, and always will be. We may indeed say: This land has value; but what really has value is the human labor that has improved it, the capital that has been expended on it. Consequently, it is completely accurate to say that its owner is, strictly speaking, owner only of the value that he has created, of the services that he has rendered. And what ownership could be more legitimate? It has not been created at anyone's expense; it neither intercepts nor lays a tax on any gift of heaven.
Nor is this all. The capital outlay and the interest on it, which must be spread over successive harvests, far from increasing costs and becoming an extra burden for the consumers, enables them to obtain agricultural products on better and better terms in proportion as the amount of capital increases, that is, as the value of the soil is enhanced. I have no doubt that this assertion will be taken for an overly optimistic paradox, so accustomed are people to looking on the value of the soil as a calamity, if not an injustice. Yet I declare that it is not enough to say that the value of the soil has been created at no one's expense, or to say that it is harmful to no one; it must be stated that, on the contrary, it is to the profit of all. It is not merely legitimate; it is advantageous, even to those who are not landowners.
So here again we have the same phenomenon we just witnessed in regard to drinking water. As we said, as soon as the water carrier invented the cart and the wheel, it is quite true that the consumer was forced to pay for two types of labor instead of one: (1) the labor of making the cart or the wheel, or rather the interest and amortization on this capital outlay; (2) the actual labor that the water carrier was still required to perform. But it is equally true that these two types of labor together do not equal the total amount of labor of one type only that mankind was previously required to perform. Why is this true? Because, thanks to the invention of these mechanical aids, a part of the work has been turned over to the gratuitous forces of Nature. Indeed, it was the prospect of decreased toil that prompted the invention and brought about its adoption.
Exactly the same phenomena are to be observed in the case of land and wheat. Unquestionably, every time the landowner invests capital in permanent improvements, the succeeding crops must be charged with the interest on this capital. But it is equally certain that the amount of labor belonging to the other category, that of unskilled labor that must be performed annually, is also reduced in far greater proportions; so that the landowner, and hence the consumer, obtains each succeeding crop for less and less effort, it being the special characteristic of capital to substitute the gratuitous action of Nature for man's labor, which must be paid for.
Consider the following example: To produce the best crops, a field must be cleared of excessive moisture. Let us suppose that labor for this has not progressed beyond the first, or unskilled, category. Let us assume that the farmer must go out every morning with a pail to drain off water standing in spots where it would do harm. It is evident that at the end of the year this act will not have added any value to the soil, but the price of the crop will have been tremendously increased. So will all the prices of all succeeding crops, as long as the science of agriculture does not advance beyond this primitive procedure. But if the farmer digs a ditch, the soil immediately acquires value, for this work belongs to the second category. Such work becomes a part of the soil; it must be paid for by the crops of succeeding years, and no one can expect to acquire the land without paying also for this operation. But is it not true that it nevertheless tends to reduce the value of the crops? Is it not true that, although it required, during the first year, an unusual expenditure of effort, it saves in the long run more than it occasions? Is it not true that henceforth the drainage will be carried out more economically through the application of the laws of hydraulics than it was previously by dint of physical labor? Is it not true that the purchasers of the wheat will profit from the operation? Will they not have reason to deem themselves fortunate that the soil has acquired this new value? And, to generalize, is it not true, then, that the value given the soil is a sign of progress, which is to the benefit not of the owner alone, but of all mankind? How absurd, then, it would be of mankind, and how hostile to its own best interests, to say: The amount added to the price of the wheat for interest and amortization on this ditch, or for what it represents in the total value of the soil, is a privilege, a monopoly, a theft! Reasoning in this wise, the owner, in order to be no longer a thief or a monopolist, would only have to fill in his ditch and go back to the pail. Would you who do not own land be any better off for that?
Enumerate all the permanent improvements that together make up the value of the soil, and you can make the same observation for each one of them. After you destroy the ditch, destroy the fences too, forcing the owner to go back to standing guard on his field; destroy the well, the barn, the road, the plow, the grading, the artificial mould; put back into it the stories, the weeds, the tree roots, and then you will have achieved utopian equality. The soil, and the human race along with it, will have returned to its original state: it will no longer have value. The crops will no longer be burdened with capital. Their price will be free of that cursed element called interest. Everything, absolutely everything, will be done by current labor, visible to the naked eye. Political economy will be greatly simplified. France will support one man for every five square miles of land. All the others will have starved to death; but it can no longer be said: Property is a monopoly; it is an injustice; it is theft.
Let us not, therefore, be insensible to those economic harmonies that pass before our eyes as we analyze the concepts of exchange, value, capital, interest, private property, public ownership. Need I present the entire cycle? But perhaps we have gone far enough to realize that the social world, no less than the material world, bears the impress of the divine hand, from which come wisdom and loving-kindness, and toward which we should raise our eyes in awe and gratitude.
I cannot refrain from returning to a remark of M. Considérant.
Taking as his premise the idea that the soil has value in itself, independent of man's activity, that it is original and noncreated capital, he concludes, logically from his premise, that to convert it into private property is to usurp it. This supposed iniquity moves him to declaim vehemently against modern society. On the other hand, he agrees that permanent improvements add an extra value to this original capital, as an additional element so completely fused with the rest as to be inseparable. What, then, is to be done? For we are confronted with a total value composed of two parts, one of which, having been produced by labor, is legitimate property, and the other, being the creation of God, is an iniquitous usurpation.
This is no small dilemma. M. Considérant solves it by the right to employment.
Humanity's progress on Earth obviously demands that the land not be left in a wild and uncultivated state. Our very Destiny, as Human Beings, therefore, is opposed to the idea that man's Right to the Earth should retain its rude and originalform.
In his forests and savannas the savage enjoys his four natural Rights of Hunting, Fishing, Gathering wild fruits, and Grazing. Such is the original form of his Rights.
In all civilized societies, the man of the common people, the Proletarian, is purely and simply despoiled of these rights. We cannot, therefore, say that his original Rights have changed form, since they no longer exist. The form has disappeared along with the Substance.
Now, what would be the form under which his Rights could be reconciled with the conditions of an industrial Society? The answer is simple.
In the savage state man, to enjoy his Rights, is obliged to act. The Labor of Fishing, Hunting, Gathering, and Grazing is the condition placed upon the exercise of his Rights. His original Rights, therefore, are simply his Right to perform these labors.
Very well, then, since an industrial Society has taken possession of the Earth, and prevents men from exercising on the soil freely and at will their four natural Rights, let this Society grant to them, in compensation for the Rights it takes away, the RIGHT TO EMPLOYMENT: then, if principle and practice are properly understood and carried out, the individual will have no grounds for complaint.
The indispensable prerequisite for the Legality of Property is, therefore, that Society recognize the Common Man's RIGHT TO EMPLOYMENT, and that it guarantee him for a given amount of his activity at least as much in the way of subsistence as a similar amount of activity would have brought him in his original state of savagery.
I do not propose to argue the point in all its ramifications with M. Considérant, for I should become insufferably repetitious in the process. If I proved to him that what he calls noncreated capital is not capital at all; that what he terms the additional value of the soil is not additional value, but total value; he would have to admit that his whole argument breaks down, and with it all his complaints against the manner in which humanity has seen fit to organize itself and to live since the time of Adam. But this controversy would oblige me to restate what I have already said concerning the fact that the forces of Nature remain inherently and unalterably gratuitous. I shall confine myself to observing that if M. Considérant is the spokesman for the working classes, he does them such a disservice that they may well consider that they have been betrayed. He says that the landowners have usurped both the land and all the miracles of vegetation that take place on it. They have usurped the sun, the rain, the dew, oxygen, hydrogen, and nitrogen—at least to the extent that these contribute to the raising of agricultural products—and he asks them to assure the worker, as compensation, at least as much in the way of subsistence for a given amount of activity as a similar amount of activity would have brought him in the original or savage state.
But do you not perceive, M. Considérant, that landed property has not waited for you to issue your injunctions, that it has already been a million times more generous? For, after all, what does your proposal actually come to?
In the original state of savagery, your four rights of fishing, hunting, gathering wild fruits, and grazing supported—or rather, allowed to eke out an existence in all the horrors of privation—approximately one man per five square miles. The usurpation of the land will therefore be deemed legitimate, according to your theories, if the guilty parties support one man per five square miles, with the further requirement that he exert himself as greatly as a Huron or an Iroquois must. Please note that the area of France is only thirty thousand square leagues; that, consequently, provided it support thirty thousand inhabitants in that state of material well-being afforded by a life of savagery, you are content to ask nothing more, on behalf of the workers, from the owners of property. Now, this leaves thirty million Frenchmen who do not have a square inch of land; and among that number there are quite a few—the President of the Republic, cabinet ministers, magistrates, bankers, businessmen, notaries, lawyers, doctors, brokers, soldiers, sailors, teachers, journalists, etc.—who would surely not be disposed to change their way of life for that of an Iowa Indian. Landed property must, therefore, already do a great deal more than you require. You demand from it a right to employment that, within certain fixed limits, and only in return for a certain amount of effort, will provide the masses with a level of subsistence equal to that which a state of savagery could offer them. The system of landed property does much better than that. It offers more than the right to employment; it offers actual employment, and if it did no more than meet the taxes it now pays, that figure is still a hundred times more than you would demand.
Alas! I am sorry to say that I have not yet finished with landed property and its value. I still have to state, and refute in as few words as possible, a plausible and even significant objection.
People will say:
“The facts belie your theory. Undoubtedly, as long as there exists in a country a large amount of uncultivated land, its mere presence will prevent cultivated land from acquiring exorbitant value. Undoubtedly, also, even when all the land has been converted into private property, if adjoining nations have great tracts yet to be tilled, the right of free bargaining will hold the value of landed property within just limits. In these two cases land prices would not seem to represent more than the capital outlay, and rent more than the interest on it. From these facts one must conclude, as you do, that what is done by the soil itself and by the forces of Nature, since it does not figure in the costs and cannot be added to the price of crops, does remain gratis and therefore common to all. All this is plausible. We may well be at a loss to discover the flaw in this line of reasoning, and yet it is fallacious. To be convinced that this is so, we have only to note the fact that in France there is cultivated land ranging in price from a hundred to six thousand francs an acre, an enormous difference, which is to be explained more by reason of the variations in fertility than in previous improvements. Do not deny, therefore, that fertility has its own inherent value; every bill of sale attests to this fact. Anyone buying a piece of land determines its quality and pays accordingly. If two fields are placed side by side and have the same advantages of location, but differ in their soil, the one consisting of rich loam and the other of barren sand, surely the first will be worth more than the second, even though the same capital improvements have been made on both. And, in fact, this is a point about which the buyer is not at all concerned. His eyes are turned toward the future, not the past. He is interested, not in what the land has cost, but in what it will yield, and he knows that its yield will be in proportion to its fertility. Therefore, this fertility has its own specific, intrinsic value, which is independent of any human labor performed on it. To maintain the contrary is to attempt to find the justification for private property in ingenious quibblings, or rather in a paradox.”
Let us, therefore, investigate what really gives value to the soil.
I ask the reader to remember that at the present time this question is a most vital one. Previously it could be either dismissed or treated superficially by economists, as a question of little more than passing interest. The legitimacy of private property was not then contested. Such is no longer the case. New theories, which have been only too successful, have cast doubt among even the best minds regarding the right to property. And on what do the authors of these theories base their complaint? On just the allegation contained in the objection I have presented above. On just this fact, which unfortunately has gained acceptance by all schools of thought, that the soil derives from its fertility, from Nature, an inherent value that has not been transmitted to it by any human agency. Now, value is not transferred gratis. Its very name excludes the idea that it is gratuitous. Therefore, we say to the landowner: You demand from me a value that is the fruit of my labor, and you offer me in exchange another value that is the fruit neither of your labor nor of anyone's labor, but of Nature's bounty.
And, make no mistake about it, this indictment would be a terrible one if it were based on fact. It did not originate with Messrs. Considérant and Proudhon. It is to be found in Smith, in Ricardo, in Senior, in all the economists without exception, not merely as a theory, but as an indictment. These authors have not stopped at attributing an extrahuman value to the soil; they have gone so far as to deduce clearly the consequences of this theory and to brand landed property as a privilege, a monopoly, a usurpation. To be sure, after thus blasting it, they have defended it in the name of necessity. But is such a defense anything more than a flaw in reasoning, which the logicians of communism have been quick to set right?
It is, therefore, not for the sake of yielding to an unfortunate proclivity for quibbling that I take up this delicate subject. I should have preferred to spare the reader and myself the tediousness that even now I feel is gathering over the final pages of this chapter.
The answer to the objection that I have just presented is to be found in my theory of value, which is set forth in chapter 5. There I stated: Value does not necessarily imply labor; even less is it necessarily proportional to labor. I showed that value is based less on the pains taken by the one who surrenders what is exchanged than on the pains spared the recipient, and for that reason I attributed it to something that includes both elements: service. A great service can be rendered, I said, at the cost of very little effort, and a very minor service can be rendered with great effort. The only result, then, is that labor does not necessarily receive a remuneration that is always proportional to its intensity, either in the case of the man living in isolation or in that of the man living in society.
Value is determined after bargaining between two contracting parties. Each one brings to the bargaining his own point of view. You offer me wheat. Of what importance to me are the time and trouble it may have cost you? What I am concerned about is the time and trouble it would cost me to obtain it elsewhere. The knowledge you have of my situation may make you more or less demanding; the knowledge I have of yours may make me more or less ready to come to terms. Hence, there can be no necessary measure of the payment you are to receive for your labor. That depends on circumstances and the value they give to the two services being exchanged. Soon we shall take up an external factor, called competition, whose function it is to regularize values and to make them correspond more and more closely to effort. Yet this correspondence is not of the essence of value, since it is established only under the pressure of a contingent fact.
Keeping this in mind, I can say that the value of the soil is created, fluctuates, is set, like that of gold, iron, water, an attorney's advice, a doctor's consultation, the performance of a singer or of a dancer, or an artist's painting—like all values; that it obeys no special laws; that it constitutes property that is of the same origin, the same nature, and is as legitimate as any other property. But it does not at all follow—this must be clear by now—that, of two efforts applied to the soil, one may not be better remunerated than the other.
Let us revert to that most simple of all industries, the one best fitted to illustrate the tenuous dividing line between man's onerous labor and Nature's gratuitous collaboration. I refer to the humble labor of the water carrier.
A man fills a barrel with water and brings it home. Does he own a value that necessarily is proportional to his labor? In that case the value would be distinct from the service that the water can render. Furthermore, it could not fluctuate, for labor that has once been performed is not susceptible of increase or diminution.
Very well, then, the very day after the water barrel has been filled and delivered, it can lose all its value, if, for example, it rains during the night. In that case, everybody has his supply of water; the barrel of water can render no service; it is no longer wanted. In the language of economics, there is no demand for it.
On the other hand, it can acquire considerable value if exceptional, unforeseen, and urgent demand arises.
The result is that man, working with the future in mind, can never know in advance exactly what that future holds in store for his labor. The value incorporated in a material object will be greater or less according to the services it will render; or, rather, human labor, the source of this value, will receive, according to circumstances, a greater or a smaller remuneration. Such eventualities fall within the domain of foresight, and foresight, too, is entitled to its reward.
But, I ask, what do these fluctuations of value, the variations in the price paid labor, have to do with Nature's marvelous industrial achievement, with the wonderful laws of physics that, without help from us, transport the waters we drink from the ocean to the spring? Because the value of this barrel of water varies according to circumstances, must we conclude that Nature sometimes charges a great deal, sometimes very little, and sometimes not at all, for evaporation, for the transportation of clouds from the sea to the mountains, for freezing, for melting, and all the wonderful industrial activity that feeds the spring?
The same is true of agricultural products.
The value of the soil, or rather of the capital invested in the soil, is composed not of one element, but of two elements. It depends not only on the labor that has gone into the soil but also on society's capacity to reward that labor, on demand as well as on supply.
Take the case of a field. Not a year goes by in which some work of a permanent nature is not done on it, and, by the same token, its value is enhanced.
Furthermore, new roads are built, and others are improved; law enforcement becomes more efficient; new markets are opened up; there are increases in population and in wealth; new careers are opened to intelligence and skill; and these changes in the physical environment and the general prosperity result in additional remuneration for labor past and present, and, concomitantly, greater value for the field.
In all this there is neither injustice nor special privilege for the landowner. Every line of work from banking to manual labor presents the same phenomenon. Each one finds its own remuneration enhanced through the mere fact of improvement in the surroundings in which it is carried on. This action and reaction of the prosperity of each one on the prosperity of all, and vice versa, is the very law of value. How completely erroneous it is to conclude from this evidence that the soil or its productive forces have a so-called value of their own can be seen from the fact that in intellectual work, in the professions and occupations in which material things and physical laws play no part, the same benefits are enjoyed. This is not exceptional, but the universal experience. The lawyer, the doctor, the teacher, the artist, the poet, are better paid, for the work they do, in proportion as their city or nation increases in prosperity, as the taste or the demand for their services grows, as the general public is both willing and able to remunerate them better. The simple sale of a doctor's or a lawyer's practice or of the good will of a business concern is carried out on this principle. Even the Basque Giant and Tom Thumb, who make their living by the mere display of their abnormal stature, exhibit themselves to their greater profit before the curious throngs of well-to-do city dwellers than before a few poor villagers. In this case demand does not merely contribute to value; it creates it entirely. Why should we feel that it is exceptional or unjust for demand also to have an influence on the value of land and of agricultural products?
Will it be alleged that the value of land can thereby rise exorbitantly? Those who say so have certainly never considered the enormous amount of labor that has gone into arable land. I venture to state that there is not a field in France that is worth as much as it cost, that can be exchanged for as great an amount of labor as has actually been expended on it to bring it to its present state of productivity. If this statement is well founded, it is conclusive. It does not permit of the least hint of injustice being charged against the principle of landed property. Therefore, I shall come back to this subject when I have occasion to consider Ricardo's theory of rent. I shall show that we must apply also to capital invested in land the general law that I have formulated in these terms: In proportion as capital increases, what it produces is distributed among the capitalists or landowners and the workers in such a way that the former's relative share constantly decreases, although their absolute share increases, while the latter's share increases in both respects.
The illusion that leads men to believe that productive forces have a value of their own because they have utility, has been responsible for many miscalculations and catastrophes. It has often involved them in premature efforts at colonization whose history reads like a lamentable chronicle of martyrs. They reasoned thus: In our country, we can acquire value only through labor; and when we work, we receive value only in proportion to our labor. If we went to Guiana, to the banks of the Mississippi, to Australia, or Africa, we could take possession of vast stretches of land, uncultivated, to be sure, but fertile. Our reward would be that we should become the owners both of the value that we should create and of the intrinsic value that is to be found in this land.
They set out, and harsh reality is not slow in confirming the truth of my theory. They work; they clear the land; they drive themselves to the point of exhaustion; they undergo hardship, suffering, sickness; and then, after they have made their land fit for production, they find, if they try to sell it, that they cannot get back what it cost them, and they are forced to acknowledge that value is of human creation. I defy anyone to cite an example of colonization that at the beginning was not a disaster.
Upwards of a thousand labourers were sent out to the Swan River Colony; but the extreme cheapness of the land [eighteen pence, or less than two francs, an acre] and the extravagant rate of labour, afforded them such facilities and inducements to become landowners, that capitalists could no longer get anyone to cultivate their lands. A capital of £200,000 [five million francs] was lost in consequence, and the colony became a scene of desolation. The labourers having left their employers from the delusive desire to become landowners, agricultural implements were allowed to rust, seeds rotted, and sheep, cattle, and horses perished from want of attention. A frightful famine cured the labourers of their infatuation, and they returned to ask employment from the capitalists; but it was too late.6
The Australian Association, attributing the disaster to the cheapness of the land, raised the price to twelve shillings. But, adds Carey, from whom I take this quotation, the real cause was that the farm workers were convinced that the land had intrinsic value, apart from any work done on it, and were eager to appropriate this so-called value, which they assumed would virtually assure them a yearly rent.
The sequel provides me with an even more conclusive argument.
In 1836, the landed estates of the colony of Swan River were to be purchased from the original settlers at a shilling an acre.7
Thus, this soil, for which the company had charged twelve shillings—and on which the settlers had spent much time and money—was now resold for one shilling! What had happened to the value of the productive and indestructible powers of Nature?8
The vast and important subject of the value of land has not been exhaustively treated, I realize, in this chapter, which was written at intervals in the midst of constant interruptions: I shall return to it, but I cannot close without submitting one observation to my readers and particularly to economists.
Those illustrious scholars who have contributed so much to the progress of political economy, whose lives and works breathe the spirit of benevolence and philanthropy, who, at least in certain respects and within the areas of their investigation, have discovered for us the true solution to the problems of society, men like Quesnay, Turgot, Smith, Malthus, Say, have not escaped, I do not say refutation, which is always in order, but slander, defamation, and the coarsest of insults. To attack their writings, and even their motives, has almost become the fashion. It will be said, perhaps, that in this chapter I myself furnish arms to their detractors, and, indeed, this is hardly the moment for me to turn against those whom, I most solemnly declare, I look upon as my first instructors, my guides, and my masters. But, in the last analysis, must not my highest allegiance be to truth, or to what I consider to be truth? Where in the world is there a book into which no error has crept? Now, in political economy, just one error, if we press it, if we torture it, if we insist upon drawing all its logical implications from it, will eventually be found to include all other errors; it will lead us to chaos. No book exists, therefore, from which an isolated proposition cannot be taken out of context and be declared incomplete, false, and consequently as involving a world of errors and confusions.
In all good conscience I believe that the definition that the economists have given of the word value is an error of this kind. We have just seen that this definition placed them in a position where they themselves cast grave doubt upon the legitimacy of landed property, and, by logical deduction, upon the whole system of capital; and only by an illogical chain of reasoning did they stop short of disaster along this road. Their inconsistency saved them. They redirected their steps toward the way of truth, and their error, if such it be, stands as the only blemish on their works. The socialists came along and laid hold of this definition, not to refute it, but to adopt it, to strengthen it, to make it the starting point for their propaganda, and to expatiate on all its implications. There has been in our time imminent danger to society in all this, and for that reason I felt it my duty to speak my mind completely, to trace this erroneous theory back to its very beginnings. Now, if one wished to conclude from my remarks that I have parted company with my masters, Smith and Say, with my friends Blanqui and Garnier, solely because they failed to grasp the full significance of one line out of all the many pages in their excellent and learned writings, and perhaps misused, as I believe, the word “value”; if one should conclude on that account that I no longer have faith in political economy and the economists; I can only protest—and that I do, most emphatically, as is evidenced by the very title of this book.

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