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SPECULATIONS FROM POLITICAL ECONOMY

By C. B. Clarke, F.R.S.




INTRODUCTION


The following nine articles are "Speculations," by no means altogether
recommendations. They are _from_ Political Economy, i.e. they have
nearly all of them been suggested by considering mere propositions of
Political Economy. Some of them are old, or given me by friends: some
are, I believe, new: these many persons will set aside as unpractical
or impracticable, as that is the approved word by which people indicate
that an idea is new to them. The topics of the nine articles have been
largely taken from those now under political discussion, but they can
hardly be called ephemeral; and, though they do not form a treatise,
they will hardly be called disconnected. As they are speculations, no
trouble has been taken to work out suggestions in detail, or give the
"shillings and pence" correctly.



CONTENTS

1. EFFICIENCY OF LABOUR

2. RECIPROCITY AND RETALIATION

3. UNIVERSAL FREE TRADE

4. THE RANSOM OF THE LAND

5. MAKING THE MOST OF OUR LAND

6. FREE TRADE IN RAILWAYS

7. REFORM IN LAND LAW

8. EQUALISING OF TAXATION

9. WEALTH OF THE NATION




SPECULATIONS _FROM POLITICAL ECONOMY_




1. EFFICIENCY OF LABOUR.

Political economists have not overlooked efficiency of labour: they have
underestimated its importance in the opinion of Edward Wilson, who has
supplied me with the examples and arguments that follow and who has
verbally given me leave to publish as much as I like.

The English workman, especially in a country town of moderate size,
regards capital as unlimited, employment ("work") as limited. A wall six
feet high is to be built along the length of a certain garden: if one
bricklayer is employed, the fewer bricks he lays daily the more days'
employment he will get; if several bricklayers are employed, the fewer
bricks one lays daily the more employment is left for the others. It
thus appears that the more inefficient the labourer is, the better for
himself, his fellow-handicraftsmen, and for "labour" in general: the
more money is drawn from the capitalist.

There is a grain of truth in this view with respect to petty unavoidable
repairs in a narrow locality: but the capital spent on such is as a
drop in the ocean compared with that embarked in a single large work.
Consider the case of the London Building Trade, as practised in the
suburbs on all sides of London. The London bricklayers thoroughly
believe that it is their interest to be inefficient: it is said that
they have a rule that no bricklayer shall ever lay a brick with the
right hand; they have also a rule against "chasing," i.e. that no
bricklayer, whatever his skill, shall lay more than a certain number of
bricks a day; they believe that if the bricklayer laid a larger number
of bricks he would get no more pay for a harder day's work, while the
"work" would afford employment to a smaller number of labourers. Look
however a little further. The speculative builders round London compete
against each other, so that they carry on their trade on ordinary trade
profits. Such a builder is building streets, house after house, each
house costing him £800, and selling for £1000 say; and this, after
paying his interest at the bank, etc., pays him about 10 to 15 per cent
on his own capital embarked. Suppose now that the bricklayers increase
their inefficiency either by a trade rule or by a combination to shorten
the hours of labour. The cost of each house is increased £50 to him:
nothing in the new bricklaying rules or rates affects the purchasers;
the builder estimates that his profits will fall to 5 to 8 per cent on
his capital. He does not care to pursue so risky a business at this rate
of profit; he determines to contract operations. When he goes to his
bank, a branch of one of the gigantic London joint-stock banks, at the
end of the quarter, the manager of the branch comes forward as usual
ready to continue the bank advances; but the builder says simply, "The
building trade is not so good as it was," and declines. The increased
cost of bricklaying has affected all other speculative builders in much
the same way; the consequence is that "gold" accumulates in the branch
banks. The secretaries and managers of the great joint-stock banks do
not let their capital idly accumulate; they buy New Zealand 6 per cents,
or transfer to Frankfort or New York the capital that, but for the rise
in cost of bricklaying, would have gone to the London bricklayers.

In this case it is easy to see that the quantity of work to be done is
not limited. Should the cost of building diminish but a little, the
rate of profit of the builders on their _own_ capital (in many cases not
one-tenth of the capital they employ) will run up to 20 or 30 per cent,
or even more; and at even a 20 per cent profit the bricklayers would
find that a perfect rage for building would set in. Every speculative
builder in the trade would strain his credit to the utmost, and take up
every £100 from his bank that he could induce the bank manager to let
him have.

A second illustration. Forty years ago, on our farm in the south of
England, two men with flails used to begin threshing wheat in the long
barn about 1st November, and used to thresh till 1st April. They
got eight shillings a week with us, but in adjoining counties
seven shillings (and even six) were winter wages. Now the steam
threshing-machine will empty that long barn in two short days' work.
It takes half a dozen men to do the work, and they get about fifteen
shillings a week, though their labour is much shorter and easier than
that of the old flail men. At the same time our farmers now are much
poorer men than they were forty years ago: they have less capital,
they have made for many years past a low rate of profit, and they are
frequently themselves complaining that they cannot afford to pay their
labourers well, and inferring that they should get Protection back
again in some shape or other. The labourers on their part imagine very
generally that their increased wages for less work are due to Mr. Arch
and agitation; that the employers of labour will never pay more than is
wrested from them (this is in large measure true); and that employers
must pay whatever agitators are strong enough to demand (this is wholly
erroneous).

In this case it is evident on the surface that the labourers who thresh
with the steam-thresher are more efficient than the flail-men: their
labour is worth the half-a-crown a day to the employer, and therefore
the employer, however poor, can afford to pay it as he receives it back
with a profit. On the other hand, if the flail-men were raised from
the dead, no farmer would now pay them even eight shillings a week for
threshing; their labour would not be worth even that.

One illustration more. Thirty years ago there were few more wretched
trades than the shoemakers of Northampton. Wages were low, the labour
was severe, the social condition of the workmen was necessarily low
also. The sewing-machine, with some special adaptations to make it sew
leather, increased about sixfold the bootmaking power of a workman. It
is needless to say that the Northampton shoemakers met the introduction
of this machine with the fiercest opposition: they said five-sixths of
their number must be thrown out of employment. The struggle was won by
the machine (as in other cases); shoemakers' wages have ruled 50 to
100 per cent higher ever since, at the same time that the shoemaking
population has largely increased; and the social comforts and character
of the workpeople have improved vastly too. This is an example that has
always puzzled the workmen themselves; but it requires no explanation
after what has been said about the efficiency of labour. The puzzle to
the shoemakers is what becomes of the additional boots and shoes made.
They do not reflect that, even of a necessary of life, only a certain
quantity is used at a certain price. Nothing is more necessary in
London, especially in winter, than coal; but, when coal some years ago
went up to 40s. a ton in London, it was marvellous how people in all
ranks managed to reduce their consumption of coal. Much more in the case
of boots, which will bear the cost of export to remote countries, did
the demand increase as the price fell. A fall of 10 per cent only in the
price of boots would cause every wholesale boot exporter to export on
the largest scale. No doubt the invention of a self-acting machine
which should turn out 1000 pairs of boots an hour at a nominal cost
of workmanship per pair would reduce the shoemakers of Northampton to
idleness and starvation. But in practice it has rarely happened that any
machine has been introduced in any trade that has thus completely choked
the increased demand. It has happened often that the workmen who could
only work the old way, and were not able to take up the new machine,
have been reduced to starvation. Even then, after this generation has
passed away, the new machine-workers have been better off than their
predecessors.

Employers of labour cannot pay as wages more than the labour is worth:
no organisation or rules will make them. But employers may pay a good
deal less than the labour is worth, and often have done so. However
great their profits, there is, according to J. S. Mill, always a tacit
understanding among all employers of labour to pay the minimum the
labourers can be induced to accept. It is only by combination that the
labourers can get the full value of their efficiency. Here Mr. Arch
comes in: I have little doubt that the flail-threshers might, under a
well-managed large trade combination, have got nine shillings a week
instead of eight shillings forty years ago.

But every rise in wages gained by the workmen, unless springing from
or in conjunction with an increase in efficiency, will tell against
themselves; it must increase the price of the article, whether houses,
wheat, or boots; this must diminish the demand for the article, and this
must throw some of the workmen out of employ.

It is difficult to find an example of price of wages which presents
any difficulty of explanation when we apply to it the consideration
of efficiency. If bricklayers were to offer to exert themselves to the
utmost, and do in eight hours the same amount and quality of work they
now do in nine, the speculative builders would doubtless be willing to
give the same wages for eight hours' work that they now give for nine.
In case the labourers by increase in their efficiency are able to get
higher wages, the choice will (in general) lie with them how much of
the increase they take in increased money wages, how much they take in
shortened hours of labour. We thus see how, in an uncivilised community,
owing to the inefficiency of their labour, their whole time and energies
are expended on their hunting, or otherwise providing bare subsistence.
The greater skill of our civilised labourers, working with machines
provided by our science, and profiting by our fixed capital (as our
railway tunnels and embankments), is vastly more efficient: it ensures
the labourers a certainty and regularity of food which the savage does
not enjoy, and provides him a certain margin of leisure beyond what the
inefficient savage labourer can count upon; it also provides the whole
surplus production out of which the intellectual and leisure classes are
supported.

It is to be noted that an increase of efficiency in any industry (and
very largely in the case of industries producing generally essential
utilities) raises real wages in all other industries, and this, whether
the particular trade gains (as we have seen it nearly always do)
or loses, as is conceivable, though rarely occurring. Thus, if the
introduction of a boot-sewing machine lowers the price of boots 50
per cent, this can have no effect in lowering the money wages of farm
labourers; and, as a matter of fact, the fall in cost of boots has
sensibly improved the position of farm labourers. In the same way the
superior efficiency of carriers by railway over the old road carriers
has diminished the cost of coal and all articles (the bulky ones most
sensibly) in all parts of England. There thus arises the instructive
result that handicrafts in which there has been no improvement in the
last forty years have obtained a rise of real wages (amounting in some
cases to 50 per cent) by the improvements in efficiency in all the
trades around them.

To sum up: No man in ordinary business will give a price for anything
that he intends to sell again unless he expects to profit by selling
it again. No capitalist will pay a workman to make a table unless he
expects to sell the table for a sum somewhat exceeding the cost of the
wood and the workman's labour. It follows directly that the one grand
object of the workman, both as an individual, a trade, and a class,
should be to improve the efficiency of his labour. He may gain something
by combination and higgling for the turn of the market, but the limit to
what he can get is the value of his labour to his employer.

In order to attain this improved efficiency the most important
practical aid is piecework. This has done much even in agriculture: the
turnip-hoer by the acre earns more, while he does his work at his own
time with more comfort to himself than the old day-labourer. What
is more important, the men who by head and hand are superior at
turnip-hoeing are able to do the work cheaper than ordinary labourers,
and turnip-hoeing thus falls entirely to the most efficient hoers, whose
efficiency thus again gets constantly improved. There is no doubt to me
that, if the London bricklayers would arrange to work by contract, they
would soon obtain more wages without being compelled (as they imagine
would be the case) to work more severely or longer hours to gain
those wages. If they were more efficient, nothing could prevent the
competition of employers soon giving extra wages for extra value of
work.

But it may, finally, be urged that there is surely such a thing as
over-production. If there is an over-production of boots, trade is flat,
the wholesale dealers find they are making no profit, they stop their
purchases, the workmen are thrown out of employ on a large scale. To
this the reply is that there is almost a necessary alternation of up and
down in every particular trade, whether the efficiency of the workmen
is high or low. If trade is good, the large dealers will extend their
purchases, and very commonly rather over-extend their purchases: a
reaction follows, and _vice versa_ when trade is bad.

But it must be recollected over-production in all trades at once is
impossible: capital is now not buried in pots by our great joint-stock
banks; if one trade is at standstill the capital is carried to the most
remunerative use that the experienced bank secretaries can discover.
If agriculture is, as we have lately seen it, in a depressed state for
years, inasmuch as wheat is "over-produced" in America till the price in
England falls to 36s. per quarter (and less), at which it hardly pays
to produce it in England; this of itself implies an enormous spur to all
other industries--the real cost of labour has in them fallen (for
the labourer will not be able to keep to himself the whole benefit of
cheapened food)--the rate of profit in all other industries has risen
(_pro tanto_). If we ever do arrive at a state when all the desires are
fully satisfied--when there is over-production in all industries--we
shall have general reduction in the hours of labour: "efficiency" will
take that form.




2. RECIPROCITY AND RETALIATION.

The wealth of England is the sum of the wealth of each individual in
England. An individual may have £10,000 in England, £5000 invested in
Australia. We may reckon his wealth in England either as including or
excluding the £5000, which he could transfer (probably very speedily) to
England in gold if he desired it tangibly. Whichever way we reckon his
wealth and that of other individuals, we shall in like manner in the
sum get the wealth of England: it will be in one case the wealth in
England-in the other case the wealth in England plus the lien which
residents in England have on other countries in the world.

In parallel manner the effective capital of England, which can be
brought into the wages fund, must be the sum of the capital of all the
individuals.

These two self-evident truths are capable of many applications: we
see directly from them that the National Debt, so far as it is held by
residents in England, neither diminishes the national wealth nor affects
the wages fund. We see also directly that any exchange between an
Englishman and a foreigner which gives a profit to the Englishman gives
an equal profit to the English nation.

When a merchant buys 1000 quarters of wheat from America and pays in
gold, he does so to make a profit for himself; but he cannot make a
profit for himself without making an equal profit for the nation. The
exchange of the wheat for gold is profitable to both seller and buyer;
otherwise the bargain would not be struck. A value is added to the wheat
by its being brought from Minnesota (where it is wanted, as all good
things are wanted) to London, where it is much more wanted, and this
increased value is greater than the cost of moving the wheat from
Minnesota to London; this excess is the profit on the exchange which
the buyer and seller divide between them. The exact shares in which they
divide the profit between them depend on some of the most complicated
considerations in the science of political economy. Indeed, political
economy can no more work out a case in figures, even when every
circumstance is given, than political economy can tell in pounds
sterling what should be the rent of a given farm. But the point required
for our present purpose is easy and certain,--unless the English buyer
got _some_ share in the profit he would not give his gold for the wheat.

The great principle of Free Trade is that in this, and in all similar
cases, the individual shall be left to make what profit he can; that his
dealings with foreigners shall be interfered with by Government in no
way; that he shall not be checked in his operations by import duties,
bounties on exports, staples, or any other of the numerous obsolete
interferences in the statute-book. The principle is that each individual
can manage his own trade better than Government can manage it for him;
that, therefore, Government shall let any individual do his best in
trade his own way, knowing that whatever profit an individual makes in
foreign trade is an equal national profit.

It may be shortly stated that in the old Protectionist theory, destroyed
by Adam Smith, gold was considered to be wealth. Hence, if an individual
bought foreign wheat for gold, the English suffered a national loss of
wealth, and the foreign nation made a national gain. It is unnecessary
to occupy space in refuting this (to us absurd) idea, as no refutation
can be more satisfactory than Adam Smith's own.

If I profit on the transaction of buying 1000 quarters of wheat for
gold, I do so irrespectively of all other exchanges by others. Whether
the firm next door to me has succeeded in selling to a Boston house
£2000 worth of Sheffield cutlery or no is a matter entirely beside
my bargain. My profit will depend practically on the movements in the
English corn trade: a small rise in the price of wheat at Mark Lane
between the date of my purchasing by cable the wheat in America and my
selling it at Mark Lane, may give me a large profit, or _vice versa_.
But my exchange of gold for the wheat is a separate transaction of
itself: it stands entirely on its own bottom.

It is perfectly true that if my neighbour in Threadneedle Street does
succeed in selling £2000 worth of cutlery to the New Englander, there is
another distinct national profit to England and to America. [Footnote:
I am assuming for simplicity throughout that every exchange made by
private merchants in this foreign trade is a successful speculation; if
in any particular speculation a merchant loses, his country loses the
same amount. As foreign trade, on the whole, is an enormous national
profit, I am justified in sinking the particular cases of loss. It may
be said, "But perhaps all your exchange of gold for wheat is a national
loss": it is evident that when the trade takes this form the merchants
who import foreign corn stop their operations instantly; in practice
they stop them with prescient instinct.] But whether he succeeds
in making a bargain or not, I object to being interfered with by
Government, and prevented making my own little profit. If my neighbour
is practically deprived of his profitable bargain by Government action
on the part of the Americans--if they are Protectionists and believe
that gold is the only National Wealth, and put a heavy duty on
cutlery--if by doing this they prevent an exchange profitable to both
nations--they stop TWO merchants from a profitable stroke of business.
Whether they injure the English merchant or the Bostonian would-be
purchaser of cutlery MOST is (as above explained) very difficult to
prove in any well-ascertained instance, but it is quite certain that the
interference of the American import duty causes a loss to each merchant
and to each nation.

Where now is Reciprocity and where Retaliation? We can no doubt say to
the Americans, "As you have injured us in the matter of cutlery, so will
we injure you by putting a duty on wheat." But it is merely cutting off
one's nose to spite one's face. In the exchange of gold for wheat the
division of the profit on one transaction is uncertain, but in the long
run it is probably about equal between the English and the American
merchants, i.e. between the English and the American nations. (I am
not overlooking the fact that the ultimate benefit to England is cheap
bread; but it is unnecessary in the present argument to follow the food
down the throats of the consumers: the wheat is really worth to the corn
merchants what they can get for it from the consumers.) We cannot stop
the corn trade with America by a duty (or diminish it) without as great
a loss to ourselves (probably a greater) than to them; the retaliation
in putting a duty on corn because the Americans put a duty on cutlery
would be (with our lights) mere spite: it would be as though a farmer
who took one sample of wheat to market and one of barley, should meet a
factor who offered him his price for the wheat, but would not spring to
his price for the barley, and the farmer should thereupon sulkily carry
both his samples home again.

The ideas of Reciprocity and Retaliation are pure relics of the old
Protectionist commercial theory, viz. that there is always a national
loss in parting with gold--that the foreign trade can only be profitable
to England so long as the value of the exports exceeds that of the
imports, so that a continual accumulation of gold may go on.

Now, first, we may meet this with the abstract scientific argument that
there is no character by which gold can be diagnosed as wealth from
steel or broadcloth. Our merchant who buys wheat for gold could buy from
the Americans wheat for cutlery or wheat for broadcloth. The reason he
gives gold for the wheat is merely because he makes a better profit by
giving gold than by giving anything else in exchange for the wheat. The
nation therefore gets a better profit that way too.

Descending a little from this abstract argument, our opponent says,
"If you go on buying wheat for gold, and cannot sell your cutlery and
broadcloth out of the country for gold, you _must_ run out of gold."
But the fact has been proved by many years' experience not so to be: for
many years our imports have been some £150,000,000 sterling more than
our exports, while our stock of gold in the Bank of England (and the
gold in circulation) remain the same from year to year. This is one
of those many things (like the supply of meat to London) which
will regulate itself perfectly and insensibly (without any violent
disturbances in trade or the money market) if Government will only leave
the matter entirely alone. If our stock of gold is at all short our
merchants give a little less per quarter for American wheat; the
trade is checked; the sensibility of the market--the experience of our
corn-traders--is such that the balance is preserved with very slight
oscillations. The refusal of the Americans (enforced by an import duty)
to purchase our cutlery, etc., _does_ partially check the reflux of gold
to this country, and does lower sensibly the price which the Americans
get for their wheat from us. Errors in political economy avenge
themselves--often fearfully--on their perpetrators. But our objector
will still want to have explained to him where the £150,000,000 sterling
required in England annually comes from. It is not essential to, or
indeed any part of, my present argument to explain this; but I will
anticipate matters so far as to say shortly here that this £150,000,000
is, roughly speaking, the interest on English capital invested in
foreign countries paid in cash to the owners resident in England--it is
equivalent to an annual tribute.

Professor Henry Fawcett's _Lectures on Free Trade_ is a sound and
admirable book: it is occupied a good deal with the practical question
why so few foreign nations have adopted Free Trade, and how such foreign
nations are to be converted to the orthodox creed of Adam Smith. But, as
I think, unfortunately Professor Fawcett has in that book used the words
Reciprocity and Retaliation pretty freely. Their mere use is enough to
fortify a French or American Protectionist in his present policy; he
naturally says, "The English Free-traders themselves admit that we are
making money out of them: we take their gold for our wine and wheat; we
refuse to give our gold for their cutlery and broadcloth: those English
have now to come to us whining for Reciprocity; as to their Retaliation
we are not alarmed--we know they _must_ have wheat and _will_ have
wine." I would wish to expunge the words Reciprocity and Retaliation
from the subject, as being words merely suggestive of false views. But
the most fatal course to the adoption of a Free Trade policy by foreign
nations has been our plan of humbling, begging (and indirectly giving a
consideration for) Commercial Treaties. Such a course is enough to (and
does) counterbalance with foreign nations all our theoretical writings
about Free Trade. We go to France and say, "We will let in your wines at
a lower duty provided you do us the favour and give us the advantage of
lowering your duties on English manufactures." I cannot conceive any way
of putting the matter more strongly calculated to convince the French
that we believe we lose by purchasing their wines and gain by selling
them our manufactures.

It appears to me that if we wish to convince Europe and America of the
truth of Free Trade (as understood by our political economists), our
proper course is to adopt Free Trade ourselves FULLY (if the principle
is good for wheat it is good for tea--I shall return to this), and then
to say to foreigners, "See how we prosper under Free Trade." If the
Americans continue to maintain Protectionist duties on our manufactures,
our line of conduct is not to offer to pay them indirectly to relax
those duties, but to say, "You are losing more by your duties than we
are; the proof of the pudding is in the eating." If I believe, as I do,
that the Americans are gaining less wealth under Protection than they
would under Free Trade, I cannot imagine any plan less likely to convert
them to my views than my going to them and saying, "We will give you
£5,000,000 sterling (or some valued political advantage) if you
will alter your mistaken policy." If this course did not confirm the
Americans in the very deepest suspicions that Protection is really
advantageous to them, and that we in our inmost heart think so too, my
ideas of human nature are altogether at fault. But every foreign debate,
whether in France, Germany, or America, on Free Trade, convinces me
that I am not mistaken in the effect which I attribute to our prayers to
every foreign nation to grant us a Commercial Treaty.




3. UNIVERSAL FREE TRADE.

Wheat is now admitted to England free of duty. Tea pays a duty of about
£4,000,000 sterling a year. This is called a duty for revenue, not for
protection. Tea is an article of universal consumption; the tax on it is
open to the objections against a poll tax or hearth tax, viz. that by it
many a poor old woman is taxed as heavily as far richer people; indeed,
owing to the poor consuming the lower-priced teas, they are by the
present duty taxed at a higher rate than those who can afford the more
expensive teas.

The reply in defence of these anomalies is, "We have to raise £4,000,000
sterling by a duty on something; on whatever we put it, it will no doubt
be bad." Granting, however, this for a moment, the onus lies on the
defender of the existing tariff to prove that it is better to raise
the £4,000,000 required from tea than from wheat, or than to raise
£2,000,000 from tea, £2,000,000 from wheat. Mr. Raban, a leading
tea-planter in Assam, has observed that if the duty on tea was replaced
by one on wheat to raise the same gross amount, the pressure on the
English poor would be less; while an encouragement would thus be given
both to tea-planting in India and to agriculture in England. I adduce
this case of the duty on tea merely to bring out strongly the fact that
Free Trade in wheat is not universal Free Trade. I do not recommend that
the duty on tea should be replaced by other duties: I am going to raise
the question whether it should not be replaced by direct taxation.

In the case of tea, the duty can hardly be said to be "protective,"
except so far as by raising the cost of tea it impels English drinkers
to have more free recourse than they otherwise would to other drinks;
but in a large number of cases a duty operates both as a revenue and
as a protective duty. It is a curious fact that the fanners, after
unanimously struggling FOR the duty on wheat because it was a protective
duty, subsequently unanimously struggled for thirty years AGAINST the
malt tax (involving a duty on barley) because it was a revenue duty. As
soon, however, as the malt duty was repealed, they discovered that it
had been a protective duty; barley fell in price (malting samples) about
l2s. a quarter, and has never recovered, nor does any farmer now suppose
it ever will. This is rather a complex case, because on the abolition
of the malt tax an equal tax (in gross amount) was put on beer; and it
might be supposed at first sight that this would not affect the price
of barley. It has in several ways: Firstly, Many brewers now brew common
beer with one-third malt, two-thirds molasses, cane sugar, etc. The tax
being on the beer, Government no longer cares whether it is brewed from
malt or from rubbish, and the consumers grow soon accustomed to the
lowered taste of malt in their beer; Secondly, The admission of foreign
malt and barley without duty has quickened the importation by removing
those restraints and interferences which hamper trade out of all
proportion to their expressed amounts in pounds, shillings, and pence.

In order to establish a Universal Free Trade and to make every port in
England a free port, it would be necessary to raise by direct taxation
about £40,000,000 annually, because the excise on beer, etc., would
have to be abandoned with the Customs duties. We will consider the
possibility of raising this £40,000,000 by direct taxation before we
dilate on the advantages which would follow Universal Free Trade.

Ricardo, at the end of his masterly consideration of the effect of
taxation variously levied, comes to the general conclusion that the
best tax is that which is least in amount. Adam Smith and the older
economists held that one test which a well-devised tax had to satisfy
was that it should take the money from the taxpayer insensibly,
indirectly. Now, all taxes that thus insensibly drain the taxpayers
invariably take more in gross from them than reaches the Government. To
raise £40,000,000 by customs and excise costs about £3,000,000; so
that the people have to pay £43,000,000, while the Government gets
£40,000,000. In direct taxes, as income taxes, property rates, the cost
of collection is very small--about two-pence in the pound. In public
as in private business it is much more economic to look payments in the
face and make them with our eyes open than to let the money slip away
in driblets. Moreover, modern politicians think, in opposition to Adam
Smith, that it has a good moral effect on the body politic to be made
to feel exactly what taxes they pay, so that they cannot help knowing
whenever taxation is increased.

A serious objection to indirect taxation is that it always falls with
unfair weight on the poor, as in the case of tea duties stated above.
It may be urged that the existing duties are (except tea) nearly all on
luxuries, as beer, spirits, tobacco. But the English have drunk beer for
many hundred years; the taste for beer is largely fixed by inheritance;
beer as supplying sustenance in a form that _rapidly_ assists exhausted
nature is, to very many at least, as much a necessary of life as tea is.
Whether we believe tobacco to be injurious or not, we have no right to
impose on an article so very largely consumed a duty which amounts to
taxing the poor out of proportion to the rich.

If all the indirect taxes are removed, the poor (at least down to those
earning £1 a week and upwards) must be made to contribute to direct
taxes. It may be urged against Universal Free Trade that the poor are
so ignorant that they would sooner pay sixteen-pence a week in taxes
indirectly than eightpence directly. This might prove a fatal objection
to carrying out Universal Free Trade at the first attempt; but one of
the objects to be gained by direct taxation is the education of the
people. It may also be urged that the whole political power being now in
the hands of the masses, they are so selfish and unjust that if taxation
is made a plain matter they will put all taxation on the rich and
refuse to pay anything themselves. The reply to this is, If this is your
estimate of the understanding and morality of the masses, you should not
have put the whole political power in their hands.

We are only attempting at present to show that the £40,000,000 sterling
(to replace duties and those parts of the excise which hang on duties)
_could_ be raised by direct taxation: we are not attempting to show
the best way it could be raised by direct taxation; it will be seen
hereafter that a portion of it might perhaps be better raised by a
National Property Rate.

The £40,000,000 would be raised by an income tax of sixteen-pence in the
pound--(I am underestimating safely--about a shilling in the pound would
raise it really),--carried down to £156 a year without any reductions;
while incomes of £1 a week paid eightpence weekly, and incomes of £2 a
week paid twelvepence weekly. In the Crimean War the nation endured an
income tax of sixteen-pence in the pound; it is certain that the nation
is richer now, and better able to bear such a rate.

But this is not the strength of the argument. In the Crimean War England
endured sixteen-pence in the pound _extra_, in addition to all existing
taxes (some of which were raised too), and the capital thus taken from
the people was destroyed (much of it) or dissipated in the Crimea. But
the sixteen-pence in the pound here suggested would be in lieu of an
equal amount of taxes taken off (it would be rather less in amount than
the taxes taken off): the nation therefore, would not feel it at all,
though individuals would feel it in different ways. A poor man would
have eightpence a week deducted from his wages, but he would get his
beer at three-fifths the present price, his tea at two-thirds the
present price, etc. He would soon feel that he gained by the change. The
rich would find that they lost; but that loss would, I believe, be made
up to them over and over again.

First, I believe it is impossible to realise the effect on our trade of
having London, Liverpool, etc., free ports. We possess at present half
the ocean trade of the world: with our ports free, we should get a yet
larger share of the world's trade, and secure it permanently. That is to
say, we should certainly keep it until other nations adopted Universal
Free Trade.

Secondly, The fall in the price of tea, beer, etc., would be more than
the amount of the tax remitted: the freedom of universal manufacture
without any Government interference, the liberty to land tea without
delay, and put it into the market without having to advance the duty,
would cause at once a great activity in the trades, and at the same time
a fall in price. By diminishing the need for middle-men the quality of
the beer, tea, etc., would be raised, and adulteration diminished.

Thirdly, The fall in the price of tea and beer would bring down
the price of all competing drinks: it would at first diminish the
consumption of competing drinks. The cheapening the price of some of
the prime necessaries of life would be to some extent divided between
capital and labour. As in the case of wheat, the labourer would be made
better off, while the profits of capital would be raised. A general and
permanent improvement in all trades would result, except possibly in
those of the tea-dealer and brewer--but I do not think they would lose.
I see no end to the developments from Universal Free Trade: we can only
gain some idea of what they would be by tracing as far as we may what
the results of Free Trade in one article--wheat--have been; and in doing
this we must recollect that before 1846 the quantity of wheat imported
was trifling compared with the present importation.

To this scheme of direct taxation Edward Wilson objects, "Taxation
should fall on expenditure, not on income." It is true that our object
must always be to encourage accumulation, and discourage destruction
of capital (expenditure). Practically, it does not appear that a heavy
income tax diminishes the taste for accumulation in England: it does
increase the tendency of large capitalists to invest their capital out
of England, so as to avoid the State charges on capital in England.
But the capital in England and the quantity of English capital invested
abroad are already so enormous that the "tendency" of an increased
income tax may be disregarded. Lastly, it may be objected, Would the
sixteen-pence income tax levied as you propose (or nearly so) raise
£40,000,000? At the time of the Crimean War each penny in the pound
income tax brought in a million sterling. At the present time, each
penny in the pound income tax brings in nearer two millions sterling,
but the productiveness of the tax is much interfered with by the large
remissions now allowed, and subtractions which take effect just where
the contributors to the tax are most numerous, say from £100 to £300
a year. I therefore reckon that, without remissions, the tax of
sixteen-pence in the pound down to £156 a year would produce about
£30,000,000, and that the tax down to £52 a year would about produce
the rest. The _total_ income that income tax is now levied on is nearly
£600,000,000. We need not be surprised at the productiveness of the
income tax. A man of £10,000 a year pays tax on that. But he has a
steward on £300 a year, he is worth to his firm of lawyers £100 a year,
and so on: these pay income tax on the £300 and the £100 over again.
When the income tax is carried down to incomes on £1 a week, the
tax will be levied on the same income over and over again. Even a
spendthrift with £10,000 a year usually scatters more than he actually
destroys.

Lastly, It has not been overlooked that there is an income tax now: and
if the whole proceeds of the sixteen-pence income tax were used to
fill up the deficiency in customs and excise, then we have to make up a
deficiency equal to the present proceeds of the income tax. This
might be done (to start with) by the National Property Rate now to be
suggested. But the expectation is, that with Universal Free Trade, and
the tremendous stimulus thereby given to commerce and manufacture, the
National Income would rise with a bound, and that in two or three years
a much lower rate than sixteen-pence income tax in the pound would
supply the amount of all the indirect taxes abandoned.




4. THE RANSOM OF THE LAND.

Many people see quite clearly that, the population of England being
25,000,000, the next baby born has a right to one twenty-fifth-millionth
part of the area of England in soil of average fertility. The
arrangements of society by which the laud is partitioned among a limited
class, and the complicated rights sanctioned by law in one plot of
land, are considered of no validity as against the natural right of the
new-born baby. I do not see this theory to be self-evident: on the other
hand the supporters of it always give it as fundamental, axiomatic; they
no doubt presume rightly that the land is limited, and that if one man
holds more than his arithmetical share, he must push out somebody
else from his arithmetical share: while a man who keeps a hundred
pocket-knives does not perceptibly hinder other people having numerous
pocket-knives. Still I do not see how this consideration weighs against
Lord Derby's title to his lands, if the body politic has determined that
on the whole it is best for the community that land should not be held
equally by all, and sanctions by law Lord Derby's monopoly of a large
area. On the theory of the natural right of every infant born to its
arithmetical share, the monopolisers of land are liable to a perpetually
recurring ransom: this can only practically be carried out by a special
National Rate on Real Property (_i.e._ Land, with the houses, mines,
etc., inseparably attached to it), which must be in addition to such
taxes as income tax, succession duty, etc., which land already suffers
equally with trades, professions, offices, and personalty. The local
rates in England exceed £25,000,000 annually; and the ratepayers perhaps
reckon this a large enough ransom. I should remark in passing that one
man with 1000 acres of land does not dispossess any more babies of their
rights than do ten men with 100 acres each. The ransom therefore must
be a strictly level rate: to put a higher rate on large holders, or to
despoil large holders of a portion of their landed property, will be to
work the ransom unfairly. It hence will follow that any heavy ransom is
now impracticable. Of late years some farms have gone out of cultivation
because they will not pay the tithe, land tax, and rates already on
them: to put any heavy ransom on the land would at once throw large
areas in England out of cultivation.

The question of the ransom, therefore, is not so all-important as has
been considered; the rates at present being £25,000,000, it might be
possible to levy an additional national rate of £5,000,000 to keep down
the perpetually upspringing rights of new-born infants, without throwing
land out of cultivation to any sensible extent. The whole question
will lie thus between a total rate of £25,000,000 and £30,000,000. I
am about, however, as a corollary to this subject, to suggest a way of
forming a National Rate Book which probably would not materially alter
the present rating, but which would alter entirely the taking of land
for public purposes, and would effectuate all that is good in the phrase
the Nationalisation of Land.

This phrase is liberally used but rarely defined. Different orators
appear to have quite different ideas as to what it means; and when they
explain what they suppose it to mean, they generally prove that, in the
way they understand it, it would be serious national damage.

It is unnecessary to observe that landlords now (omitting individual
exceptions and idiosyncrasies) expend their best endeavours in getting
the best rent they can for their land. They have no prejudices in favour
of farms of a particular size; a landlord of a farm of 1000 acres would
let it directly in five-acre plots if he could get a better (and equally
certain) gross rent by so doing. "Nationalisation" is often taken to
mean that Government is to buy land and let it out in small plots. But
apart from expense of Government management and objections to Government
interference, we may safely assume that there would be a national loss
by this procedure: the private owner would discover very quickly if he
could make a profit by letting his farms piecemeal.

All Government interference can do to improve the produce of the land is
to abolish all restrictive laws, and to make the general tenure of land
such that every piece of land shall fall into the hands of that man who
is able to make the most of it. The National Rate Book now suggested is
designed to accomplish this end. We will subsequently consider how
it might assist public companies. As the suggested way of getting a
National Rate Book is at first sight rather startling, I would premise
that it is no rash invention of mine; it worked admirably in Attica--as
see Demosthenes or Boeckh.

To make the National Rate Book, each landowner values (with the
magistrate) his land at what price he pleases; the State has the right
to buy the land at any time at that price, plus 33-1/3 per cent for
compulsory purchase. The magistrate sees that each separate house, farm,
and plot is valued separately. No person need prove his title; any man
can value any piece of land, and need not prove himself to be owner,
tenant, or agent; but any piece of land valued by no one would be
claimed as public property.

A man who valued himself unfairly low would not be bought out at once
and dispossessed by Government, unless it happened that during that year
his land was taken up by Government or by a railway company for some
public purpose. The regular course of business would be as follows:--An
owner A would put his house and curtilage in the Rate Book at £1200. The
sycophant B would come to the magistrate, offer £1600 for the property,
and lodge the £1600 with the magistrate. The magistrate then, without
divulging the name of the sycophant, would write to A either to rate his
house at £1600 (paying a fine for so doing), or to take £1600 for it.
If he took the £1600, B would get the property, and Government the
increased rate. If A preferred raising his rateable value to £1600, B
would get the fine, Government would get the increased rate.

_The utmost pressure put upon any owner under this system would be that,
if he would not pay rates on x pounds for his property, he would lie
obliged to take x pounds for the property._

The 33-1/3 per cent for compulsory purchase is illusory, and I have only
put it in the statement of the scheme to meet an objection which I know
to be common (and equally illusory). It is clear that if I know I am
going to get 33-1/3 per cent for compulsory purchase, whether from
Government or a secret sycophant, I shall proportionately undervalue my
property. Thus if I estimate the real value of my house and curtilage at
£1200, and feel that I do not care if I sell at that price, I shall put
it down in the Rate Book at £900. This applies to all owners, so that
the allowance for compulsory sale would only artificially depreciate by
one-fourth all the rateable values put down in the magistrate's book.

I have not stopped to cumber the statement of this simple plan by adding
the details necessary to meet severance of a farm by a railway company,
etc. The provisions to meet complicated tenures, etc., would run much
the same as in the Lands Clauses Consolidation Act.

It will be at once seen that this form of Rate Book would really
nationalise the land by bringing each piece into the hands of him who
could make most out of it. If I saw my way to use a piece of laud so
that it should be worth £1000 to me, and if on looking into the Rate
Book I saw that the present owner only considered it worth £600 to him,
I should at once lodge my £900 with the magistrate. A few owners would
really feel as Naboth. They could indulge this feeling by putting a very
high rateable value on their property. The high rates they would thus
have to pay would be the due ransom of the land; but in general every
piece of land would pass into the hands of him who could make most of
it. There would spring up, as in Attica, a large class of professional
sycophants. By their incessant operations, properties small and great
would be continually passing from the slothful and the old-fashioned
to the enterprising and modern-educated. No nationalisation of the land
could get so much out of it or conduce so highly to progress as the
National Rate Book. We should have companies and adventurers buying up
all sorts of pieces of land, just as formerly they speculated in taking
up land for mining in Cornwall. We should see an extraordinary activity
in the employment of capital in England.

For all public improvements, as a new street or a Government military
station, a few minutes with the map and Rate Book would show the
Government officer or engineer the best route or plot to take, and would
also show him the exact cost of the land for the scheme. There would be
no law expenses, no prolonged fights, no juries, no arbitrations.

Wastes, downs, heaths, bogs, would be rated very low. It would be in the
power of Government to take up largely and at small cost large areas
of Surrey heaths, etc., to provide air and recreation ground for
an evergrowing metropolis. In this manner, too, public commons and
quasi-public commons might be secured to the public all over England: a
public-spirited town-council or a local Kyrle Society would have a wide
field and an immense stimulus for action.

I have not stopped to rebut the common (but mistaken) idea that burdens
on the land (being in gross not more than the rackrent) affect the
cultivation. Partners have long drunk at market dinners "Confusion to
the black slug that devours the English farmer." How is it that these
farmers did not (do not) see that there are tithe-free farms (and some
tithe-free parishes) in England, and that the tenants of such farms get
no advantage by being tithe-free?

As I explain elsewhere, a tenant with several years of his lease to
run is (economically considered) a part landowner: if the tithe were
suddenly abolished, tenants with leases would get relief as well as
their landlords. So if a new tax or rate is laid on land (and made
payable by the tenant), all tenants with leases will have to pay such
tax or rate out of their own pocket so long as their lease lasts;
afterwards it will fall wholly on the landlords.

It is repeated now, in nearly every country newspaper, that the English
farmer cannot compete with the American grower because of the burdens on
the land of England. I will not write out (I cannot improve) Ricardo's
proof that rent does not enter into price. The "burdens" on land are
really first charges on the rackrent and do not affect a year-to-year
tenant at all. When a farmer meditates taking a farm he asks not merely
what is the rent: he inquires what is the tithe, what the average amount
of the rates (and is that likely to increase or diminish during the next
seven years); the intending tenant only wants to know what sum in all
he will have to pay for the farm; whether any of this payment is called
tithe or not, or whether some of it is quit-rent, or whether he is to
pay the land tax for his landlord's convenience,--about all this he
cares nothing; they are mere questions of names to him.




5. MAKING THE MOST OF OUR LAND.

John S. Mill, following W. T. Thornton, advocated a system of petty
proprietors against the English system of large farms with hired
labourers. Figures were quoted to show the splendid produce got by petty
proprietors in France and elsewhere--as the result, however, of infinite
toil. The petty proprietors were, moreover, shown to be much better
off than our hired labourers; and the magic of property combined with
independence was represented as having produced a superior class.
These things may have been so, at least in some cases and particular
countries, at the date (before 1846) when J. S. Mill originally put
forward these views. The liberal, and radical writers on political
economy and sociology still follow (most of them) on the same side,
which has become in a manner historically the liberal side. There is
much against it.

First, Production on the large scale is cheaper than on the small; this
is as true of agriculture as of other industries. The large farmer
has one fixed and one movable steam-engine of his own; he has his own
drills, threshing and winnowing machines, reaping and mowing machines.
The petty proprietor may hire these, but at a dear rate, and few of them
can work to any advantage on his small patches of corn. The large farmer
has large fields; he saves area as against the petty proprietors; he has
fewer headlands and fences, harbouring weeds and stopping the sun and
air. The large farmer can work corn and sheep together; one shepherd and
his boy will look after 500 ewes. You may travel 200 miles by rail in
France and not see two flocks of sheep. Sheep-farming is seen all the
world over to be an industry that pays on the large scale; and the want
of it injures the corn produce of the French petty proprietor. Louis
Napoleon sent Lavergne to make a report on English farming; the
substance of his report is, that were France farmed on the English
system by English farmers, the corn produce would be four or five times
what it is now; leaving sheep out of the question.

The advocates of peasant-proprietorship, at least the better informed
ones, do not now suppose that a peasant receiving a few acres out of a
large English average farm (and capital to make a start) could make
a subsistence out of it. They believe that peasant-proprietors could
maintain themselves on small plots of rich land in and close to towns,
working as market-gardeners or cowkeepers rather than as farmers.

This narrows down the peasant-proprietor theory vastly in its practical
application; it remains hardly a national question. But I have been
astonished to see in the neighbourhood of London of late years the large
"gentleman" market-gardeners steadily displacing the smaller and all the
single-handed men. The subject is so important that I will take one of
two instances in detail. I have seen a gentleman market-gardener, eight
miles or so from Covent Garden, growing strawberries, several acres in
each patch. He had young men (a separate staff) out at daybreak to
keep the birds off. The small gardener, growing a few long beds of
strawberries, is ruined by the birds, whether he lets them eat or goes
into the expense and labour of netting. The gentleman has his own large
spring-vans waiting; these vans are fitted for fruit, and as the pickers
gather the strawberries they deliver them in small and frequent parcels
to the packers. The moment the first van is laden it starts at
three miles per hour and travels to Covent Garden itself, where the
strawberries are delivered to the fruit-dealer, who buys them wholesale
of the gentleman-gardener. The small grower has to get his strawberries
to the local railway station, and to arrange to get them from the London
terminus to market; his trouble and expense are considerable; but, more
important still, his strawberries do not come into the hands of the
wholesale dealer in the "condition" that the large grower's do. This
large grower admitted that he was paying £12 an acre per annum for some
of his land; he added, "My labour per acre, and even my manure per acre,
costs so much that I do not think about a few pounds rent more or less."
These gentleman-gardeners are on the average better educated than the
small market-gardeners; they travel about the country, gather hints,
and pick up new good varieties of strawberries, etc. From their scale of
operations and varied sorts of strawberries they can, even in rough
wet weather or in drought, always supply to their wholesale dealer
some fruit. In fine, they beat the small grower at every point;
they undersell him at Covent Garden; they outbid him for desirable
garden-land within reach of London. It may be said that in growing plain
vegetables the small gardener would not be at such a disadvantage. I
will reply (without detailing all my observations) that I have seen the
same gentleman-gardener growing a two-acre plot of early radishes, and
that he completely spoilt early radishes for all the small gardeners.

The advocates of peasant-proprietors have thought cowkeeping hopeful
for small men. In my experience dairies of fifty or sixty cows have an
enormous advantage; they can have perfectly designed dairies; they have
enough cream to make butter daily throughout the year (which saves much
trouble, loss, and occasionally inferior butter); they can maintain
approximately a uniform supply. In short, they beat, undersell, and
displace the small cowkeepers wherever the large dairy is moderately
well managed.

The cottager or peasant-proprietor has, I believe, an advantage in
poultry of all kinds. When poultry are kept in very large numbers
they are more liable to disease, and the diseases are more
disastrous--sweeping off the whole large stock. Fowl and egg farming is
one of the most successful, perhaps the most successful point with the
French peasant-proprietors. To make birdfarming successful the proper
plan is to keep a moderate number of as many birds as possible--fowls,
"galeenies," ducks, geese, turkeys, large pigeons--and to go in for
eggs as well as fowls. I have not seen peasant-proprietors in
England attempting this, which seems to me one of the most hopeful of
experiments for them.

The second point urged by Mill, and still by some, is that
peasant-proprietors are better off than English labourers. With the
present price of agricultural labour in England this seems to be
very generally not the case; the French peasant-proprietors and the
agricultural lower classes in Germany are (with small exceptions) now
worse off than the English farm-labourer; they work very much harder
and they get less to eat. The economic truth doubtless is that the
hired labourer may or may not be better off than the peasant-proprietor,
according to circumstances; and circumstances in England just now are in
favour of the hired labourer.

Then as to independence, it may fairly be questioned whether a good
agricultural workman, now practically liberated from the Law of
Settlement, and who can command a fair wage anywhere, is not really more
independent than a French peasant absolutely tied to a three-acre plot
for life.

The real difference between the advocates of the nationalisation of
the land and the Conservatives is this. The Conservative says, "Leave
everything to its natural course, and let us have no Government
interference. If the peasant-proprietor really can maintain himself
while paying as high a rent as the ordinary farmer, we shall soon
have plenty of them." Or, the Conservative has no objection to
a philanthropist starting a few picked peasant-proprietors as an
experiment. But he objects to starting any gigantic new scheme of
working the land, except as a matter of business; he objects to
Government philanthropy, which means giving away other people's money.

Our farm-labourers, as a rule, know nothing of gardening, and few of
them can command £10 capital. I have sometimes looked round to select a
picked man, and wondered whether, if I put him in a selected five-acre
plot near a town, and also lent him the £200 or so capital requisite to
give him a chance, this picked agricultural labourer would succeed;
and I have inclined to think he would not succeed. I need not therefore
express any opinion as to what would happen if Government were to take
10,000 or 100,000 farm-labourers, advance them £200 each, and place them
in five-acre or ten-acre plots: there would be a tremendous bill to pay,
and the plan of peasant-proprietors would be put aside for many a day.
If the plan is to be successful it must be introduced gradually and in a
business manner, _i.e._ what does not pay must not be persisted in.

The plan, now frequently put forward, that Government is to employ all
men out of work to reclaim and bring into cultivation waste lands, is
liable to additional objections. Who is to fix the wages, the hours of
labour, and the tale of work for the Government labourers? If these were
fixed as the advocates of the plan wish them fixed, Government would
soon have all the labourers of the country in its employ. If, on the
other hand, these were fixed below the market rate, Government would
only have such labour as the Poor-Law Unions now have, and which they
find hardly worth employing.

Leaving this (practically grave) difficulty aside, if a heath or a moor
is now uncultivated it is because nobody sees how it can be profitably
brought into cultivation; it can always at a sufficient outlay be
reclaimed, but that will not be done unless it is calculated that the
rent of the land when reclaimed will pay the interest on the whole
expense of reclamation, and something besides. If Government reclaims
land that private persons cannot reclaim with profit, we may be sure
that Government will suffer a considerable loss. This must be provided
out of taxes: are the promoters of reclamation of wastes by Government
prepared for this?

The wastes of England are the only land left the public. Elsewhere the
public can only walk along a pavement or a high road. The good land is
all pretty well in cultivation; and the best of what is left can give
but a moderate profit on reclamation, while its enclosure, under Act
of Parliament, deprives the public of it for ever. Hence Professor H.
Fawcett, throughout his parliamentary career, put his veto with great
success on all enclosure schemes. It is possible that there might be
a profit on the enclosure of Epping Forest: who will now support that
reclamation?

It is very desirable that wealthy private philanthropic individuals and
wealthy private philosophic societies, should try experiments in small
farming, market-gardening, co-operative farming, reclamation of wastes,
etc. There is no hindrance to their so doing: they can readily hire as
many farms as they please at cheap rents, and subdivide them, and put in
picked labourers with an advance of capital. But that Government should
embark in uncertain speculations of this kind is quite another thing.

The safe general principle, whether in the sale of horses, the letting
of houses, or the letting of land, is that Government should not
interfere; or, to speak more correctly, Government interference should
only interfere to prevent restrictive covenants and to ensure Free
Trade, so that every article (land included) may pass without restraint
into the hands of the man to whom it is worth most. The greater the
individual profit the greater the national profit. Under a section
headed "Law," below, I will say something about the removal of entail,
etc.--a dry but important branch of the question. The National Property
Rate, with the aid of sycophants, would remove many obstructions.

There has been much controversy and several Parliamentary Acts
concerning the regulation of bargains between landlord and tenant. How
a tenant or a landlord can be injured in such a bargain is impossible
to understand, except in so far as a man is injured who gives £30 for
a horse worth only £20. Will Parliament interfere to protect such
horse-purchasers? The matter has been obscured by omitting to notice
that a tenant with a long lease at a fixed rent possesses a share
(often the larger share) of the "landlord interest," in the language of
political economy. As a simple example: A tenant took, say in 1850,
a Scotch farm on a Scotch lease absolute of nineteen years, at £500 a
year. Within two or three years of his so taking it the rise in wool,
potatoes, and other things, caused the value of the farm to rise to £600
a year, and this increased value lasted the whole of his lease and
some time after. Now, treating the increase of value of £100 a year as
permanent (as it was very soon regarded both by landlord and tenant),
it is clear that this £100 a year for the period of the lease (say
seventeen years to run) went to the tenant, not to the landlord; and the
first seventeen years of an annuity in fee is worth more than all the
rest.

It is evident that on a seven years' (absolute) lease the tenant would
similarly get a good share (not the larger share) in all the improvement
in value that occurred during his lease. Up to ten or twelve years ago
the value of land had been rising very steadily in the South of England
for near half a century. Rents were pushed up very generally at the
termination of every lease, though noblemen, great county gentlemen, the
Church, and the Universities, as a rule, never raised the rent on an old
tenant; but they could raise the rent all the more by a jump when a new
man came in. During all these years the tenant-farmers complained rarely
of their leases, though they were often subject to covenant nuisances
about cropping, selling off the farm, game, and incoming for the new
tenant.

But during the last ten years the process is reversed. A farmer took a
farm for £500 a year for seven years in the south of England, and before
the lease had run half out the farm was not worth £400 (and in many
cases not £300). Here the tenant suffered a heavy loss. When in former
years he got a gain he never proposed to allow his landlord 15 per
cent extra rent. But now that the drop in value of such farms has taken
place, and probably will not proceed further, a tenant who takes a
new lease requires no Act of Parliament to protect him: he can protect
himself. By the date the Abolition of the Game Laws (a wrong but
intelligible phrase) was carried, the farmers in the South of England
were in a position not to take any benefit under that Act, but to
covenant for all the game and sporting on their farms for themselves. So
as to the Act regulating the leases between tenant and landlord, where
they chose to avail themselves of it, the tenant now can generally get
more favourable terms outside the provisions of the Act. Farms are so
down, tenants so scarce, that landlords have to give way on all minor
points. Wherever Government interference operates at all, it is almost
sure to operate harmfully. Consider for a moment the case of "incoming."
Formerly, by the "custom of the country" south of London, the incoming
tenant paid for two years' dressing for the corn crops, north of London
he paid the outgoing tenant only for one year's dressing, by the custom
of the country too. The question practically only amounted to increasing
by 5 per cent the capital necessary to take the farm south of London.
Now what can be gained by Government interference in such a matter as
this, in which each farmer and land-agent was in general in favour of
the "custom" he had grown up under?

A prevalent idea is that the land is not highly farmed enough, and
that the land of England might be made to yield much more, and that
Government is to cause this to be done. It is most unfortunate to raise
this theory at the moment when land is "down," i.e. when produce is
cheap, labour expensive. Every farmer knows that the only way to meet
these conditions is to farm "lower." In a south country farm the farmer
will sow much less corn, and try to keep more sheep. In the Western
States of America, where produce is very cheap, labour very dear, the
"lowness" of the farming is always abused by the English traveller
(who thus shows that he knows nothing about either farming or political
economy). A farmer, twenty-five years ago, took a very large and fine
corn farm: it had been worked on the five-course system, i.e. three
white crops in five years; the farmer made a careful calculation whether
a four-course husbandry, i.e. two white crops in four years, would not
be more profitable; it appeared to come to exactly the same thing. At
this juncture a rise of a shilling a week in wages took place; this gave
a clear advantage to the four-course, and the farm was at once worked
round to the four course shift. In this simple case a small rise in
wages brought about a considerable diminution in gross produce, while
the loss to the farmer was small. The remarks in this section have been
directed to the case, common in the South of England, where there has
been within the last twelve years a fall of rent from 25 to 50 per cent.
In pasture farms, in rich land, and in potato farms (wherein you can
keep one-sixth the land in potatoes), the fall in rent has been much
less--sometimes inappreciable.

But, some person may urge, if Government interferes, and compels the
farmer to farm higher than he wishes to himself, the gross produce
will be more, and the employment for labourers will be at the same time
better. True, and this is the quintessence of Protection. The whole
point of Free Trade is to allow capital to be employed where it is most
profitable: high farming is only to be preferred (both for individual
and nation) to low when it is the more profitable. Capital that cannot
be employed to ordinary trade profit on the land must be transferred to
other industries where it will earn the ordinary rate of trade profit;
or, if there is no trade yielding such profit ready to absorb it in
England, the capital must go to the United States or New Zealand and
earn an increased profit. As to the labourers, they must follow the
capital; or they may starve in England leaving few progeny, while the
well-fed labourers of the Western States of America and New Zealand
leave large families: this will do instead of emigration.

It is to be noted that great improvements in farming, especially in
machinery, have been effected in the last thirty years, largely by the
operation of the All England and County Agricultural Societies. I
note further that the people who abuse the farmers for bad farming
and clamour for Government interference to promote high farming,
conspicuously refrain from supporting these agricultural societies.




6. FREE TRADE IN RAILWAYS.

Government might monopolise the retailing of tea in England. At present,
in a country town like Exeter or Canterbury, there may be fifty
grocers selling tea. In their competition they lay out a good deal in
advertisement and handsome shop fronts in the most expensive streets;
they keep (the fifty between them) many more hands than are necessary
to retail the tea. All this outlay has to come out of the consumer.
Government would buy pure tea first-hand in large quantities cheap; a
few trustworthy highly-paid officials would test it, value it, and see
it done up in sealed packages of sizes from 16 lbs. down to 2 oz.: these
might be sold in an odd room attached to the Post Office in each town
and village. There can be little doubt but that a saving in capital
and labour would thus be effected, while the public would get the tea
cheaper and purer than at present. The 2 oz. purchaser, in particular,
would pay a good deal less for 2 oz. of real tea than she pays now for 2
oz. of rubbish.

Or,--Government might hand over the tea-retailing of Canterbury and five
miles round to a company as a monopoly: the state of things would be
something like what we experience in the large stores now: the public
would get their tea probably cheaper (quality considered) than at
present; the company would make a large profit on their capital. If
Government sanctioned two tea-retailing companies at Canterbury, these
would probably make a less rate of profit: though, after the first heat
of fight was over, they would probably agree to sell the same tea at the
same (profitable) rates, and the consumers would gain little out of so
restricted a competition. If a new company were to apply for a private
Act to enable them to retail tea at Canterbury, the old company would
show Parliament that themselves sufficed to satisfy the requirements of
the public.

The case of tea is a very specious one. By Government taking to itself
each branch of business in succession till all was in Government hands
we should arrive at Communism. For each successive interference of
Government a reason from economy can generally be found: as in the case
of telegraphs, so in the case of tea. The real objection to Government
monopolising the retail of tea is, that so long as we live under a
system of competition we had better stick to that plan altogether. At
every turn of our present struggling system there is waste; but the
ultimate effect of competition is to reduce the waste to a minimum. In
the extreme case of tea it is pretty clear that the system of stores
will, when fully developed, give the public all or nearly all they might
hope to get from Government retailing, and at the same time will reduce
the loss by competition among tea-retailers.

But there is one industry, one branch of the public service, which
should be the very last to be monopolised or restricted by Government,
viz., the carrying of passengers and goods from one place to another,
especially carrying by railway; and yet this particular industry is
hampered by law and restricted by monopolies above all others--as I
suppose, most unnecessarily; but I will take a few cases in detail
before arguing from the general principle of Free Trade.

There is one railway from London to Brighton: there are two railways
from London to Exeter. There are fewer quick trains daily from London to
Brighton than from London to Exeter. There are third-class carriages
at a penny a mile on all the quick trains from Waterloo to Exeter: from
London to Brighton the only penny a mile train starts at an inconvenient
hour and travels exceedingly slow. The Brighton charge express fares on
every convenient quick train they run; the South-Western have no express
fares at all. The South-Western third-class carriages are padded, and as
comfortable as the first; the Brighton third-class carriages are bare,
very long, and run so badly that the shaking, the rattling of glass, and
the draughts, keep everybody (who can possibly afford it) out of them.

Naturally there have been numerous schemes for a second railway from
London to Brighton in the course of the last twenty-five years. The
present railway company has (they are not to blame for it) opposed each
scheme tooth and nail. They have shown that they themselves satisfy the
requirements of the public, and at the same time do not make a very high
dividend. If a new grocer required an Act of Parliament to set up as
a tea-retailer in Canterbury, could not all the existing tea-retailers
there prove most triumphantly that an additional grocer was not wanted,
and that their own profits were reasonable? It is not too much to
say that the greater part of the evidence admitted by Parliamentary
Committees against proposed new railways is foolery: without wasting
time on it, the Parliamentary Committee might assume as proved that no
monopolist trader wants a competitor. But the only safety for the public
is in competition. In railway competition the public always profit: if
the two companies agree to run at the same fares, the public gain
in number and speed of trains, better carriages, and attentive
consideration of their comfort. Moreover, in the case of two railways
between London and Exeter, or between London and Brighton, the two
lines only meet (not then quite) at the two termini; and the public is
accommodated at all the new intermediate stations where there was no
station at all before.

The North-Western Railway was many years ago opposing a directly
competing scheme. They brought before the Parliamentary Committee the
late Mr. Horne, whom they justly credited with ability enough to throw
dust in the eyes of almost any Parliamentary five. Mr Home's evidence
was: "I understand railway traffic as well as anybody; the public are
deluded in thinking they would gain by competition: the two companies
might fight for a week or two, then they would more wisely agree, and
put up their fares above the present North-Western fares, till they had
recouped themselves out of the public all they had lost by their fight."
This did very well for the Parliamentary Committee; but it is a fallacy.
At present the North-Western Railway, though empowered by law to
charge three-pence a mile first-class, charge twopence a mile only:
why?--because twopence a mile they find to be on the whole the most
paying rate. Ergo, after the fight with their directly competing brother
was over, they would settle down to twopence a mile again. The public
could not lose by the competition; they might gain. All experience shows
that they invariably do gain.

In France, Government has restricted the construction of railways very
greatly, and protected the monopoly of each existing company closely.
The mileage of railway open in France, in proportion to area and
population, is very small in comparison with that in England. Moreover,
the French lines are worked by quasi-Government officials, whose object
is to avoid work, and still more to avoid responsibility, and who will
not make the slightest effort to accommodate the public: they do not
wish the trade at their station increased. Under this system the traffic
on the French railways is low; especially when we consider how little
each is interfered with by other lines, and what a broad band of country
it has to drain.

The immense progress made by England since 1846, as compared with the
progress of France or of Germany, is often attributed _solely_ to Free
Trade. I believe Free Trade has done much for us: but I am sure that
our railway superiority (to France, Germany, etc.) has done much also.
Probably no one who has not _resided_ some time in a French town (say a
station on a main railway 150 miles from Paris as the least favourable
case for my argument) can realise the enormous disadvantage by loss
of time that a French business man is under, as compared with the
Englishman. To get some necessary manufactured article from Paris is
a matter of days; during which his machinery may all stand still. The
communication with Paris, however, is where the Frenchman suffers least:
the number of trains is so small, and the slowness of all (but the
express) is such that the "local" traffic is nothing: unless a man
intends to go a good many miles he would ride or even walk rather than
go by train. He does not mind getting up at 2 a.m. to go to Paris; but
he will not get up at that hour to go six or eight miles, especially if
he is given no choice as to the hour at which he must return.

But the usual remark about the French railways is, "See how much better
they manage these things in France. While our railway companies are all
spending their money in fighting and in competition, and pay dividends
of 4 or 5 per cent, the French railways have their routes settled by
Government engineers, and pay 8 or 10 per cent." I am going to propose
a plan for stopping all company fighting in England for ever: but--as to
the dividend--it can only mean that, like any other Government monopoly,
the French public are being made to pay more for travelling than they
need.

As regards the interest of the public, the rate of dividend paid by a
great railway company is of very small importance. For many years the
South-Western Company paid double the dividend the Great Western did.
How did this affect the work each did for the public--the conveyance of
passengers and goods? Many common highways have been made by parishes
and landowners combined for the public convenience; the capital so laid
out paid no direct interest (the road was a highway, not a turnpike):
how does this case differ from a railway that pays no dividend on the
original stock? If the railway carried me from Exeter to London in five
hours for thirteen shillings, what does it matter to me whether
the company pays 2-1/2 per cent or 6-1/2 per cent to its original
shareholders? In a very few small and special cases we have seen a
railway line not pay for the working, and be closed. In a few other
cases, where the dividend paid is less than 4-1/2 per cent, it is
possible that the utility of the line to the public is less than the
loss of the shareholders in a non-paying investment. I say this is a
possible and conceivable case--in some very short lines or in some very
thinly inhabited districts. Such cases I believe rare. Not rarely the
initial cost of the line has been seriously increased by promotion,
legal and parliamentary expenses, enormous sums extorted for land,
severance, etc.; if these expenses can be done away with, these cases of
railways constructed at a loss _on the whole_ to the nation may be made
fewer still.

The way in which the railway monopoly, the monopoly of the great
companies, has grown up is noteworthy. To enable a company to take
the land of a private man compulsorily a private Act of Parliament was
necessary. The Parliamentary Committees then said, We will not enable
you to dispossess forcibly private owners of their land for "a public
purpose" unless you further shew that this includes a public advantage.
Private owners were of course let in to show cause against a new
railway; they always talked like Naboth (the Parliamentary Committees
must have been wearied by the continual references to Naboth), but the
genuine private owners sold themselves at the last minute; after they
had pushed the company up to the highest bid, they well knew that this
was above what they could get in the after arbitration, and "closed,"
withdrawing their opposition the last day in the Committee room. The
opposition company, besides the grounds of insufficient need for a new
line, etc., always supports and comforts the opposing landowners: but
the great resource of the opposing company is to hire a landowner to
oppose, especially a local attorney or agent who owns land proposed to
be taken by the new line. Such an attorney, employed professionally by
the opposing company, cannot be bought off at any price; he is a real
Naboth, and in his character of a dispossessed landowner he will
fight for the company every point that they cannot decently fight for
themselves.

Opposing a railway bill in Parliament has thus become an art; so much
so, that no independent small line can be made unless they can get the
support of one (at least) of the great companies that are supposed
to occupy the area. The lines made (economically often) by the great
companies themselves are not primarily designed for the accommodation of
the public, but for the private purposes of the great company; sometimes
they are made merely to diddle another great company.

It is well to compare the law regarding making a new railway with that
for making a new main-drain in the fens. In the latter case the new
drain company receives extraordinary powers and may put a rate on the
land benefited. In the case of a railway passing through a farm, the
common estimate is that it adds a shilling an acre value to the rent of
the farm; if there is a station on the farm it often adds much more
to the agricultural value. Landlords are up to this: a landlord
triumphantly told me, "I got £7000 from that company for cutting me up;
but I would have given them £14,000 to cut me up more." (In this case,
however, building value came in.) But the disgraceful squabbling of
companies, who "sell" any owner without scruple when they come to terms
among themselves, has disgusted landlords from actively supporting
railway schemes.

A great deal of the opposition between rival companies has been from
their point of view an error, as they have subsequently discovered for
themselves. When the Great Western Company first opened their station
at Basingstoke there was war between them and the South-Western, who
thought all their London West-End passengers would transfer themselves
to the Great Western at Basingstoke in order to avoid a cab drive from
Waterloo to Paddington. Some passengers do so transfer themselves. But
_via_ Basingstoke a fine trade sprang up between the south of England
and the Oxford and Leamington route, which far more than compensated
the South-Western Company for the London passengers they lost at
Basingstoke. So in a very few years there was peace at Basingstoke, and
a through-carriage daily from Birkenhead to Southampton. I think it
is impossible to estimate how much one railway company profits by the
facilities afforded by all the surrounding companies. The loss at a
limited number of competing termini is seen; the gain in the local and
cross-country traffic is not.

I propose Free Trade in Railways. I mean that any person or company
shall be free to make a railway wherever they please. They will have,
before commencing the line, to lodge with the Board of Trade the cost of
the land they take as valued in the National Rate Book, with the 30
per cent for compulsory purchase. They will not have to lodge the money
where they have come to terms with the owner; and the Board of Trade
will allow them to construct the line in reasonable sections. Having
lodged their money, the company (or private speculator) will only have
to go to work under the (amended) Lands Clauses Consolidation Act.

If this scheme were sanctioned we should have in the course of the
next twenty years, _as I estimate_, £100,000,000 additional invested in
England profitably--not under Government pressure, but by business men
to get interest. Even where the new lines paid little interest we should
get the accommodation of the public. We should have no big village
without its railway; and we should have a great extension of private
sidings. On the eastern half of England we might get a great number of
narrow gauge steam trams running along the present trunk roads. (Suppose
a steam tram from London to York by the Royston route, going through
all the towns, running trams an hour apart all day, going eight miles an
hour through the towns, sixteen or twenty miles an hour in the country,
taking up and setting down everywhere, would it not pay?)

The only objection to Free Trade in railways is that it would injure the
existing railway monopoly. Under this principle no monopoly ever would
have been or ever will be put down. But I believe the existing great
companies would very generally gain by Free Trade in railways.

For, first, few new railways would be in direct competition with the
old. The old lines have level roads; they can run quicker and with less
wear and tear than the new ones, which would generally have steeper
gradients. The new Free Trade lines would be in the main a network in
the interstices of the present lines. By this the existing companies
would gain enormously; they would be the trunk lines which the network
would feed. It is true that there would soon be a second line to
Brighton; the present Brighton Company would possibly pay as good a
dividend then as they do now. But if they did not, it would only show
how they tax the public now as well as hinder trade. I am not bound to
show that the monopolists would profit by Free Trade; I deny that
the monopolists have any vested interest in their monopoly, or that
Parliament, i.e. the nation, has made any covenant with them that their
monopoly shall never be invaded.

I have suggested three great changes: (1) Perfect Free Trade at all our
ports; (2) The exploitation of the land through the National Rate Book
machinery; (3) Free Trade in Railways. Of these the last is clearly
advisable, nor is there anything (in my opinion) to be urged on the
other side. At the same time it is not less important than either of
the two other suggestions. But the three would work best together--each
aiding and reacting on the other; they would thus provide "progress"
(which means comfort to all classes) in England for at least two
generations of men. If there was no National Rate Book, the new railways
would have to pay exorbitantly for the land they took up under the
existing arbitration system; they would be relieved merely from the
parliamentary opposition of other companies and of private individuals.
The private owner must be deprived of his present privilege of
parliamentary opposition, which gives him the power to extort an
exorbitant price for his land--because a company can always oppose in
the garb of some private owner whom they have hired.

A less but important branch of this reform is the narrowing of
Government interference under pretence of protecting the public. Great
expenses are thus thrown on railway companies. The companies cannot,
therefore, charge increased fares, but such expenses diminish the number
of new railway schemes brought forward. Nor do Government rules protect
the public so well as the old plan (abolished by Chief-Justice Cockburn)
of making the railway company pay for killing or injuring people. Now,
after a great railway smash, the company comes forward and shows that
there was no negligence on their part; that in the signals, breaks,
etc., they had satisfied all the Board of Trade regulations, and
the injured passengers can get nothing. The real way to protect the
passengers is to allow the company to make their own arrangements, and
to compel them to pay heavily for killing and maiming passengers. This
is quite defensible in theory, as in the case of manslaughter by an
individual we give him some punishment out of our civilised respect
for human life, though he may have been little to blame. Great cost is
thrown on railway companies (i.e. much injury is done the public) by
standing orders (cast-iron orders) about gradients, etc. The company's
solicitors order the company's engineer to comply with standing orders
at all costs rather than introduce any special clause. The consequence
is that we see much money spent and a most inconvenient level-crossing
placed at the entrance to some large town, where a steep gradient for
two hundred yards on a straight piece of road (to which there is no
objection) would have avoided all difficulty. The responsibility in all
such cases should be thrown on the company, and Government interference
abolished.




7. REFORM IN LAND LAW.

The transfer of stock in the name of two trustees in the funds is
done in a few minutes at small expense. The transfer of land in South
Australia is done in a few minutes at small expense at the Government
registry. The transfer of land in England requires an uncertain time
and cost--usually some weeks, and 5 per cent on the purchase money;
sometimes months, and 10 to 25 per cent on the purchase money. It
is equally expensive and slow in the register counties of York and
Middlesex. The Acts of Brougham, Bethell, Cairns, to facilitate transfer
have not materially reduced the evil. In many cases, however much the
land may be wanted for public or other purposes, the lawyers tell
you that no title can be made without a private Act of Parliament--so
effectually has the land been tied up.

The common idea is that this peculiar difficulty, delay, and cost in
the transfer of land arise from the law of inheritance and the legal
machinery of entail; but stock in the funds can be virtually entailed
and made to "follow the estate," and yet this stock can be transferred
just as readily as any other stock.

The explanation is known to every lawyer; but I have met with more than
one Member of Parliament who, though blatant about entail, understood no
more about the matter than a chimney-sweep.

The point is that, under English law, the trusts in the case of stock
attach to the trustees, not to the stock; in the case of land, the
trusts attach to the land itself as well as to the trustees. Hence, when
I purchase stock of trustees I need not trouble about how they apply the
purchase money; in the case of land I have to go into the whole title.

A simple illustration. I provide for a daughter £300 a year by putting
£10,000 in the hands of two trustees in the funds. Should the trustees
prove rascals, sell the stock, and decamp with the money, my daughter
will lose everything; the purchaser from the trustees can hold the stock
clear of all charges or liability. But if I provide for my daughter by
charging an estate with £300 a year for her, then however wrongfully
that estate may be sold, mortgaged, or otherwise dealt with, she gets
safely her £300 a year. If the bank B has advanced money on mortgage on
that estate, not knowing the existence of the charge of £300 a year for
my daughter's benefit, the law simply says to the bank, "It was your
business to know; you should have completely investigated the title
before you advanced your money."

It follows, therefore, that if, with a Government Land Registry Office
(say one for each county), you required the purchaser only to get in the
legal estate, _i.e._ holding him not responsible for the trusts or
the application of the purchase money, then land could be transferred
exactly as money in the funds is now, in spite of all the complications
of our law (or rather custom) of entail.

The law of entail in England (so called) is not what the popular orators
suppose. The eldest son inherits really; that is, if there be no will,
no settlement, or other disposition of the property. But there nearly
always is. It is a very rare thing for the heir-at-law to take land
(except some very small pieces) by the law of inheritance. As to entail,
it is practically carried out by a continued system of surrender
and re-settlement--a device of lawyers which is, in its historical
development, an evasion (rather than a part) of the law. Nevertheless,
I think it is a matter of importance that the shackles which fetter land
should be loosened, and that the present powers of owners to tie up
land legally should be very much curtailed. It is a sad proof of the
way riches cling to the heart of man even when he is leaving this world,
that, whatever powers of tying up land are sanctioned, an owner will
usually exert them to the uttermost. He is leaving his property, but he
will keep a hold on it fifty years after he is dead if he can. He will,
after exhausting his powers in life interests, leave the residuum to
an unborn child "in strict tail-male so far as the rules of law will
permit;" and he will stick in a springing use to effect that, if his
greatnephew, the Rev. George, should ever from an Anglican become a
pervert to Roman Catholicism, he shall take no benefit under the will.

Now the fact is that all tying up is to the detriment of the public. No
man can provide for all contingencies. Indeed he can see so little a
way ahead that in a few years it frequently happens that all the careful
provisions of the will are working exactly as the testator would have
desired them not to work. Land tied up is always worth less to the
owner because it is tied up; and we have seen that the interest of the
commonwealth is the sum of the interests of all its component members.
When you tell me that an estate is now of small value to its life-owner
and unget-at-able for any public purposes, in consequence of a will made
by a man who died twenty years ago, it appears to me that you shew me
convincingly that we have not Free Trade in land.

I would propose that, either by will, settlement, or other instrument,
an owner should be able to give any number of life interests, and
nothing more; all trusts being placed outside the law. The first
objection will be that if the powers of owners are so restricted, the
desire for the ownership of land will be lessened: the value of all the
land in England will fall. This might be so, I admit, to some extent;
and it would favour the employ of the land for agricultural profit.

The next objection is that it would become necessary to give land (and
money) directly to women without the intervention of trustees: that
women do not understand business and require to be taken care of. My
reply is that they always will require to be taken care of unless they
are entrusted with the management of their own affairs. The loss to the
nation, the expenses, the sacrifice of time and labour in trusteeships,
have now assumed gigantic proportions. If women were given their own
property to manage, some would (at first) fool it away: we know what
high interest, adventurers, unprincipled persons, etc., can effect. But
each woman defrauded or stripped of her property to starve would be
a warning to all the rest: in a few years women would manage their
property just as well as men. I believe they would manage it better.
A smaller percentage of women would gamble on the Stock Exchange, the
Mining Exchange, Austrian and Spanish lotteries, and horse-races; and
a much smaller percentage of women would embark in desperate "business"
speculations, heavy purchases of foreign produce, etc.

It should be noted that in cutting down the powers of owners to legally
tie up, I do not interfere with honourable trusteeships of any kind not
enforceable by law or in equity. Such exist now, and more largely than
is generally supposed. The absolute devises and bequests to friends (not
relatives) are often on private (not expressed) trust to provide for
illegitimate children or numerous other purposes which a man may not
wish to parade to his family.




8. EQUALISING OF TAXATION.

There has been no readjustment of the land tax for very many years. It
is a property rate, and originally was rateably levied at four shillings
in the pound. By the small increase in value of some land, the large
increase in value of other land, since the days of Queen Anne, it has
now become unequal in the highest degree. The farm A, gross rental £100
a year, has a land tax of £5 a year; the suburban estate B, gross rental
£1000 a year, has a land tax of £2:l0s. a year. The land tax assessors
were sworn in annually (twenty years ago, and may be still) to assess
the tax equally, but it was perfectly understood that the tax was to be
collected every year on the old long-standing assessment.

Suppose that the estates A and B above were reassessed, and that the
land tax on A was put 15s. per annum, that on B £6:15s. a year. Land
tax can be redeemed at about thirty years' purchase. The effect of the
readjustment would have been to take about £120 from the owner of B and
give it in a lump sum to the owner of A. It is probable that the present
owners of both A and B (or predecessors under whom they claim) had
purchased the estates A and B after the land tax had become fixed on
them, and the amount of land tax would then have been fully considered
in the price paid.

We see thus that in the case of the land tax, as we saw above of the
tithe, and as is also the case in any tax permanently on, a disturbance
of the existing taxation is inequitable. This point is so much
misunderstood that I will give one more illustration.

I am purchasing an estate, intending to farm it myself. There are 400
acres of land, and I reckon the land worth 30s. an acre. I am willing
to give twenty-five years' purchase. I find the tithe is £100 a year. I
therefore propose to give twenty-five times £500 = £12,500 for the land.
But before the bargain is completed I find that the tithe is £150 a
year. I at once sink my bid to twenty-five times £450 = £11,250, and buy
the estate at that price. The next year some financier "equalises" the
tithe, and my tithe is reduced to £100. Is it not clear that, by the
equalisation, I pocket £1250, and somebody else loses it?

New taxes when imposed should be "equal," as far as can be arranged.
When a legacy duty was imposed, it would have been just to impose a
succession duty also. But, after the legacy duty had been imposed twenty
years with no succession duty, it was similarly inequitable to put on a
succession duty; for quantities of land had been bought in the interval
of twenty years at a slightly higher price than if there had been no
legacy duty, because there was no succession duty.

The proposal for "equalising" taxes is usually put forward in order to
get a somewhat larger gross income from the taxes equalised, or as a
political cry. Nothing can be more absurd than the cry that the land is
over-burdened in comparison with other property. There is no comparison
in the case. Some land being tithe free, some land tax free, some nearly
rate free, those persons who do not trouble themselves to master the
political economy may yet be satisfied that the "burdens" of the land
affect neither the farmer, the labourer, nor the produce of the farm;
the burdens fall _wholly_ on the landlord (a farmer with a lease being,
as above shown, a part landlord). The efforts of some Conservative
orators for the last twenty-five years to prove the contrary are
erroneous in the reasoning; or I should say, much of the "reasoning"
does not hang together at all. Without formally refuting these efforts,
I repeat that they are fully refuted in the result.

It is therefore that I have insisted above that, in order to carry out
the proposed ransom of the land, a new Property Rate, separate from
and in addition to all other taxes, is necessary. Though the manner of
levying a National Property Rate which I have proposed lends itself very
nicely to getting in such an extra tax, it is not at all on that ground
that I have suggested the new manner of levy. The object of the new
manner of levy and the sycophants is to get every piece of land in the
country into the hands of that man who can make most of it; including
herein as an important item the cheap and easy acquisition of land
required for Government, public and commercial (railway, etc.)
enterprises.

In any great reform of our whole system of taxation a disturbance of
existing interests must take place. Though I would not disturb existing
interests for the sake of mere equalisation or official beauty of work,
I would not let the fear of disturbing private interests stand in the
way of any real or important reform. The introduction of Universal
Free Trade and the abolition of all duties would be accompanied by a
disturbance; but, as far as I can see, no one would lose, while many
would gain enormously.

On the same ground of equality of new taxation I should propose to
replace the amount now levied in duties mainly by an income tax. That
is a perfectly level tax; the idea that temporary incomes ought to pay a
lower rate is fallacious. We are all agreed to tax the poor at a _lower_
rate; we have now a section of advanced Radicals proposing to tax the
rich at a higher rate. One present candidate for Parliament is even
willing to tax people of £100,000 a year and upwards at nineteen
shillings in the pound. This of course, or anything approaching it, is
unpractical. But I have suggested above, as a rough plan in accordance
with the existing one, eight-pence a week on incomes of £1 a week,
twelvepence a week on incomes of £2 a week, sixteen-pence a week on
incomes of £3 a week and upwards. The question may very fairly be
raised, Why stop this process at £3? why not continue the series and
develop it into a mathematical law? This might be done more easily with
a sixpenny income tax than a heavy one. To tax earnings and savings
(that is an income tax) instead of expenditure can only be carried a
certain way; if the tax is large enough to diminish saving and promote
living up to one's income, and at the same time to send capital abroad,
its effects would be serious. For a particular and noble purpose I have
suggested sixteen-pence in the pound (which we bore without serious
inconvenience in the Russian war); I should imagine twenty to
twenty-four pence in the pound about the maximum that could be imposed
for any purpose--such as the prevention of hostile invasion. It must
be noted that more than the maximum bearable cannot be put on large
incomes, £100,000 a year, etc., any more than on small ones. Indeed it
is rather the contrary; for persons with large incomes are usually the
very people who already invest largely abroad, and who could (and would)
transfer their capital rapidly out of the country if they were subjected
to anything like confiscation.

Instead therefore of proceeding _upwards_ in our income tax
sliding-scale we must proceed downwards. Taking sixteen-pence in the
pound as the maximum rate we can impose on the big fish, the problem
will be, What is the highest income to which you will allow any
remission from the maximum rate? I think those having above £150 a
year possess more than the necessaries for healthful existence; looking
therefore to the equity and productiveness of the tax, I suggested
remission to those earning less than £3 a week.




9. WEALTH OF THE NATION.

The Wealth of Nations is a well-considered title. The economists
anterior to Adam Smith conceived England as surrounded by a barrier
impassable to property and money except by trade. In trade there was
an exchange apparently on equal terms; but the old economists saw a
difference in nature between imports and exports; when wool was sold
to Flanders gold was received, and remained somewhere in the nation;
it formed the national purchasing power, and could hire mercenaries or
otherwise command foreign labour and productions. Inversely, when we
imported wine or tea, we had to part with a portion of our national
purchasing power, while the wine and tea went down our throats, leaving
nothing in its place. It appeared clear that for any increase in
national wealth the value of the exports must exceed that of the
imports. Every well-prepared boy can now show in ten minutes' scribbling
in a Government examination the ridiculous folly of the old economists;
but several of them were experienced London merchants, and perhaps were
not the complete idiots they are now triumphantly shown to be. If they
had been asked whether wool was a part of the national wealth they
might have returned an answer that their modern detractors are not quite
prepared for.

Adam Smith and his followers, and still more closely Ricardo, divided
their Political Economy into two parts: in the first they consider the
wealth of the nation without the "complication" of foreign trade, _i.e._
they, in fact, contemplate no money or goods as going out or coming
in whatever. They then in separate chapters, forming a big appendix,
consider the effects of Foreign Trade as a series of exchanges. They
do not discuss even the payment of a lump sum of gold to a victorious
nation. Senior, in his _Handbook of Political Economy_, has considered,
first, the economy of the world conceived as a solitary, island of
small size in a world-covered sea; secondly, he treats foreign trade
by conceiving two such islands. There is no better way of treating
Political Economy than this; and it is well for the beginner to conceive
the solitary island with fifty (or a limited number of) families only
on it, and work through the ordinary theorems (with figures) in this
restricted case. Whatever is true of the fifty families in a small
island must be true for 5,000,000 families in a big island.

The facilities of modern communications have caused most countries to
differ in their circumstances materially from the conditions assumed by
Adam Smith and his successors as axioms. In the case of England,
owing to its numerous wealthy colonies, gigantic foreign trade, and
consequently world-over-spread capital, the circumstances are so
completely altered that many results of the grammar of Political Economy
no longer apply even in the rough to England. If Adam Smith had been
asked what would happen to England if the imports for one year exceeded
the exports by £150,000,000 sterling, he would have given the same
answer as his predecessors, who reckoned wealth in gold and silver, or
more probably he would have declined answer, pronouncing such a state
of things an impossible conception. It is now as difficult to treat
politico-economically the wealth of the nation as the wealth of
Warwickshire--a difficulty that Adam Smith would have shrunk from.

It is true that every abstract proposition concerning rent, capital,
and wages now (and always) holds true for the whole world; but, so
conceived, the propositions give no practical result. These things do
not lesson the value of the science of Political Economy, Mr. Ranken
or Dr. Pole would estimate very highly the value of a knowledge of
elementary mechanics to the humblest engineer, though such elementary
mechanics might not extend to the consideration of friction, etc., and
might not be applicable to any bridge or steam-engine.

Of this £150,000,000 that is now annually remitted to England, not
in the way of exchange, some small portion is transferred by wealthy
Australians returning to settle in England for purchase of houses, etc.,
in England; but by far the greater portion is the interest of capital
owned by men resident in England, but invested abroad: it may be shortly
termed tribute. This is mainly invested in the Colonies and India; New
Zealand and Australia taking large shares. There is also much English
capital invested in Continental railways, etc.; but it is noteworthy
how capital (as well as commerce) follows the flag. The English capital
invested in the United States is absolutely large, but relatively (to
that invested in Canada, etc.) very small. It is certain that if the
United States were under Queen Victoria the amount of English capital
invested there would be far greater than at present.

As far as England is concerned this £150,000,000 a year is a tribute
paid her by the rest of the world. New Zealand or South Australia may
take up a million sterling in London (because they get the loan placed
there at 5 or 6 per cent, while the local rate of interest in Australia
is far higher) in order to make a railway which perhaps pays the local
Government as much as the interest of the money they give to England.
Still, the capital being once fixed in Australia while (by hypothesis)
the stock is held in England, the result is equivalent to a tribute.

All Liberal stump-orators now agree in telling the agricultural
population that their improved position is due to Free Trade (in wheat),
and that therefore they should vote for the Liberals. Nothing is done
more confidently in politics and history than the settling the causes of
events, or predicting what would have been the course of events had
some result been different, as, for instance, had the separation of the
United States from England not occurred. The truth is that in politics
causes are many; they act and react on each other in their operations;
and to say exactly how much is due to one cause, or how much that cause
acting alone would have effected, is impossible. To get some judgment
how much of the present prosperity of the agricultural labourers
(admitted on all sides as compared with their position in 1846) is
due to free importation of wheat alone, let us (merely as a scientific
artifice) imagine that a regular sliding-scale duty on wheat were put
on now, bringing wheat to 48s. a quarter permanently. What would be the
effect on the agricultural population? We may suppose that the produce
of the duty, were it five or eight millions, or any other sum, was
employed in remitting the duties on tea or other productions generally
consumed by agricultural labourers. The placing of wheat at 48s. a
quarter permanently would at once recall a good deal of capital to the
land, it would carry out further the margin of cultivation, and at the
same time cause a higher farming of that within the non-existing margin;
in both ways it would raise the demand for agricultural labour, and
would raise wages.

On the whole, I incline to think that a sliding-scale duty on wheat
up to 48s. a quarter would not perceptibly alter the position of the
agricultural labourer, or might possibly improve it: it would lower the
wages and diminish the profits of capital in other trades. This is not
(as before explained) a fair way of arguing the question; because it
is impossible to calculate the indirect effects of Free Trade in wheat,
which ultimately came round to benefit the agricultural labourer.

But considering how the efficiency of the agricultural labourer has been
improved by improved machines since 1846, it is hardly possible to doubt
that the agricultural labourer is much more indebted to the engineers
than to the Corn Law League for his improved position. Under "machines"
too may be included railway communications: also let us not forget
how much the agricultural labourer owes, not only to drills and
mowing-machines, but to boot-sewing machines, improved tea-ships, etc.

If we look to the general increase of wealth in England since 1846, the
first thing that strikes us is the increase in the tribute, which is
about thrice what it was. This increase is largely imperial, i.e. due to
colonisation, annexation, etc. But here again we must not overlook
the reaction of causes on each other: our Free Trade in corn, our
improvements in machinery and ships, have so largely contributed to
spread our empire that it becomes impossible to disentangle the separate
work, or indeed to speak of any one cause as a simple element: the
causes all act together.

England is the most comfortable country in the world for a rich man to
live in, and consequently rich men congregate there; or, if they
travel, keep a headquarters there. In this way we have congregated a
disproportionate population in England. It may be argued that it would
be a healthier economic state if the exports and imports balanced, and
if the population of England was no larger than the country itself could
grow wheat for, _at a price not exceeding 40s. a quarter_. However that
may be, the important point for the working men of England to mark
is, that every loss of rich men resident, every loss of tribute,
every reduction of the wage-fund, every pressure on the population to
emigrate, everything that leads in the direction of a self-supporting
England, means immediate pressure on the poor, with reduction of wages.
That is the only way emigration could be by natural law enforced. It is
the poor, the labouring population, who are so hugely interested in the
empire. Of all the follies taught to the labouring man the most foolish
is the doctrine that the empire abroad is maintained to provide incomes
for the rich, at the cost of the taxes paid for wars by the poor. It
matters comparatively little to the rich whether they live at Florence
or Dresden four or eight months in the year, whether the population of
England is to be maintained stationary, to increase at its present rate
of increase, or to be squeezed down to half its present number: but it
matters vitally to the poor. Whether, ultimately, after our empire is
gone and the population of England is stationary at fifteen millions
say, the poor in England would be better off than now is a very
difficult question, concerning which doctors differ; but it is
absolutely certain that during the Banting process, in the reduction of
the population down to that fifteen millions by a process of starvation
and emigration, continued for two generations of men, the poor would
have to go through experiences altogether novel. It is a thing that
would revolutionise England; and in spite of the superior education
of our labourers might lead to a break up of society. Starvation and
bankruptcy make any and every man a Radical if not a Communist.

To keep the poor comfortable for the present and for many years
immediately in front of us, we require a continual increase in the
wealth laid out in England annually in the purchase of labour. The
growth of the empire, the profitable investment of capital in foreign
countries (whereof the interest is paid and consumed in England), is one
great resource: the profitable investment of capital in England itself
is the other great, probably safer, resource. To effect this we require
every acre of land to fall into the hand of the man (or company) who can
make most of it: we require a Universal Free Trade that shall render
our hold on the commerce of the world secure until all nations adopt
Universal Free Trade (when we shall gain so much in other ways that we
shall be able to afford to share our monopoly with others); we require
the removal of all restraints on railways, tramways, electric lights,
etc., that hamper or prevent the employment of capital in England (in
other words, that send English capital abroad). Finally, underlying the
whole, and as the prime cause that shall induce capitalists to employ
their capital in England rather than to send it abroad, we require the
labour of every working man to be in the highest degree efficient: this
retards the fall of the natural rate of profits to a minimum, and the
attainment of the stationary state. Whatever ideal beauty has been
discovered in the stationary state by J. S. Mill, it is pretty clear
that England is not approaching it. It is as difficult for us to stand
still as it is impossible to go back; and our only (third) course open
(for the present and for many years to come) is to progress.