Principles of Political Economy Part 3

[Footnote 154-3: C:i::L:r in which C = the capital, i = its interest, L = the piece of land, and r = its rent.]

[Footnote 154-4: There are traces to be found of the fact among the ancient Greeks, that the farm-rent of landed estates paid a smaller interest on the purchase money than was otherwise usual in the country. _Isaeus de Hagn._, 42; _Salmasius_, De Modo Usur., 848.]

[Footnote 154-5: Thus even _North_ and _Locke_, loc. cit.; _Cantillon_, Nature du Commerce, 294.]

[Footnote 154-6: Compare _List_, Werke II, 173. In Belgium, farm-rent per _hectare_ was, in 1830 = 57.25 francs, in 1835 = 62.78, in 1840 = 70.44, in 1846 = 74.50, on an average.

This was at the rate of from 2.62 to 2.80, or an average of 2.67 per cent. on the purchase money. If to this we add the increase in the rise of land between 1830 and 1846, divided by 16, the yearly revenue rises from 2.67 to 3.91 per cent., that is pretty nearly the rate of interest on hypothecation, and is higher or lower in the different provinces, as the former is higher or lower. (_Heuschling_, Resume du Recens.e.m.e.nt general de 1846, 89.) In France, land paid but from 2 to 3 per cent. on the purchase money; but both rents and the price of land have doubled between 1794 and 1844.

(Journal des Econ., IX, 208.)]

[Footnote 154-7: Moreover, whole countries may, because of their great natural advantages, possess, so far as the commerce of the entire world is concerned, something a.n.a.logous to rent. Thus, for instance, North America, although here, this world-rent finds expression in the national height of the wages of labor and of the rate of interest, (_v. Bernhardi_, Versuch einer Kritik der Grunde welche fur grosses und kleines Grundeigenthum angefuhrt werden, 1848, 294.)]

[Footnote 154-8: Writers as old as _Culpeper_, A Tract against the high Rate of Usurie, 1623, and _Sir J. Child_, Discourse of Trade, p. 22 of the French translation, observed the connection existing between a low rate of interest, national wealth and a flourishing state of commerce on the one hand, and a high price of the necessaries of life and of land in the other. _Sir W. Petty_ would estimate the rent of land as follows: If a calf pasturing in an open meadow gains as much flesh in a given time as is equal to the cost of the food of 50 men for a day, and a workman, on the same land, in the same time, produces food for 60 men, the rent of the land must be 50, and the rate of wages 10. (Political Anatomy of Ireland, 62 seq.; compare 54.) Besides, he accounts for the height of rents by the density of the population exclusively, and he would prefer to see both increase _ad infinitum_. (Several Essays on Political Arithmetic, 147 ff.)

The germs of the _Ricardo_ law of rent, in _Boisguillebert_: the price of corn determines how far the cultivation may be extended; by manuring the land, as much corn as desired may be obtained, provided the cost of production is covered.

(Traite des Grains, II, ch. 2 ff.) There is a foreshowing of the same law in the Physiocratic view that only in the production of raw material is there a real excess over and above the cost--_produit net_. Compare _Quesnay_, Probl., economique, 177 ff. Sur les travaux des artisans. (Daire.) _Auxiron_, Principes de tout Gouvernement, 1776, I, 126.

_Adam Smith_ came very near to the true principle in the case of coal mines, but was hindered reaching it in other cases by the false a.s.sumption that certain kinds of agricultural production always yield a rent, while others do so only under certain circ.u.mstances. Besides he always considered the interest of capital fixed in the soil; buildings, for instance, as part of the rent. (Wealth of Nat., I, ch. 11.) Compare _Hume's_ Letter to Adam Smith; _Burton's_ Life and Correspondence of Hume, II, 486; _von Thunen_, Isolirter Staat., I, 15 ff.

The most immediate predecessors of _Ricardo_, Principles, 2, 3, 24, 31, are _Anderson_ (-- 152); _West_, Essay on the Application of Capital to Land, 1815, and _Malthus_, Inquiry into the Nature and Progress of Rent, 1815. See -- 152. It is wonderful how a theory which, in 1777, remained almost untouched, was in 1815 etc., attacked and defended with the greatest zeal, because it then affected the differences between the moneyed and landed interest. Yet _Ricardo_ did not take into account at all the rent-creating influence of the situation of land in relation to the market, as well as to the "farm-office" (_dem Wirthschaftshofe_). The influence of the system of husbandry on rent, first thoroughly treated by _von Thunen_, loc. cit. What has recently been urged against _Ricardo_ by, for instance, _J. B. Say_, Traite, II, ch. 9; _Sismondi_, N. P., III, ch. 12; _Jones_, Essay on the Distribution of Wealth, 1831 (see Edinburg Review, LIV), bears evidence either of a misunderstanding of the great thinker, or else contains only modifications of some individual abstract propositions of his, stated perhaps too strictly. In judging _Ricardo_, it must not be forgotten, that it was not his intention to write a text-book on the science of Political Economy, but only to communicate to those versed in it the result of his researches, in as brief a manner as possible. Hence he writes so frequently making certain a.s.sumptions; and his words are to be extended to other cases only after due consideration, or rather re-written to suit the changed case.

_Baumstark_ very correctly says: "Rent rises, not because new capital has been invested, but when the circ.u.mstances of trade make a new addition to capital possible."

(Volkswirthschaftliche Erlauterungen uber Ricardo's System, 1838, 567.) _Fuoco's_ Nuova Teoria della Rendita, Saggi economici, No. 1, is nothing but an Italian version of the doctrines of Malthus and Ricardo. The greater number of anti-Ricardo theories of rent have originated from the rapid and apparently unlimited growth of national husbandry in recent times. Thus it is a fundamental thought in _Rodbertus_, Sociale Briefe, 1851, No. 3, that an increase of the price of corn need not attend an increase of population, either uniformly or necessarily. According to _Carey_, The Past, the Present and the Future, ch. 1, 1848, the most fertile land is last brought under cultivation, because it is covered with swamps, forests, etc.; and because it offers greater resistance to the work of the agriculturist, by reason of its luxurious vegetation. The more elevated lands are first cultivated which present fewer obstacles to cultivation on account of their dryness, their thinner crust, etc. Carey generalizes this and thinks he has reversed the _Ricardo_ law of rent! He overlooks entirely that _Ricardo_ speaks only of the original powers of the soil. Now a swampy land which must be dried at the expense of a great deal of labor, possesses less of these original powers than a sandy soil which may be sown immediately. See _Carey_, Essay on the Rate of Wages, 232 ff., and the lengthy exposition of the same doctrine rank with inexact natural science and unhistorical history in the same author's Principles of Social Science, 1858, vol. I.

There is this much truth, however, in Carey's error that, with increasing economic progress, the superiority not only of situation, relatively to the market, but also of natural fertility, may of itself go over to other lands. Thus, for instance, the ancient Slaves used clay soil everywhere as pasturage, and cultivated the sandy soil, because their pick-axes could overcome the resistance only of the latter.

_Langethal_, Geschicte der deutschen Landw., II, 66; _Waitz_, Schlesw. Holstein, Gesch., I, 17. Similarly in Australia: _Hearne_, Plutology, 1864. Compare, _Roscher_, Nationalokonomik des Ackerbaues, -- 34. The word fertility should not be taken too exclusively in its present agricultural sense. In a lower stage of civilization, the facility of military defense or the _ut fons, ut nemus placuit_--_Tacit._, Germ., 16--may have more weight.

The chief difference in the theories of rent consists in this: whether rent is considered a result of production or only of distribution, and an equalization of gain. Compare _Behrens_, Krit. Dogmengeschichte der Grundrente, 1868, 48.]

SECTION CLV.

HISTORY OF RENT.

In poor nations, and in those in a low stage of civilization, especially where the population is spa.r.s.e, rent is wont to be low. In Turkistan, land is valued according to the capital invested in its irrigation.[155-1] In the interior of Buenos Ayres, at the beginning of the nineteenth century, landed estates were paid for in proportion to the magnitude of the live stock on them, so that it seemed, at least, as if the land was given for nothing, or simply thrown in with the purchase. And only a short time since, an English acre in the same country, fifteen _leguas_ from the capital, was worth from three to four pence, and at a distance of fifty _leguas_, only two pence.[155-2] In Russia, also, not long since, the valuation of landed estates was made, not in proportion to the superficies, but according to the number of souls, that is, of male serfs, a _remnant_ suggestive of the previous situation when no rent was paid.[155-3] Where, in relatively uncivilized medieval times, instances of the farming out or leasing of land occur, farm-rents are so small that their payment can only be considered as a mere recognition of the owner's continuing right of property.

Under these circ.u.mstances, it is natural that great landowners, especially in the lower stages of civilization, should exert an especially great influence; and that their low tenants (_Hintersa.s.sen_) are more dependent in proportion to the want of capital and the absence of trade. Hence, these are wont to make up for the smallness of their rent by great honors paid to their landlords, and great services, especially military service.[155-4] Besides, the lords of the manor, in almost every medieval period, have used their influence with the government to cut down the wages of labor by serfdom and other similar inst.i.tutions, and the rate of interest on capital by prohibiting interest, by usury laws, etc.; and thus, in both ways, to artificially increase their own share of the national income.

[Footnote 155-1: _A. Burnes_, Reise nach Bukhara, II, 238.]

[Footnote 155-2: _W. Maccann_, Two Thousand Miles Ride through the Argentine Provinces, London, 1853, I, 20; II, 143. Ausland, 1843, No. 140. Frisian ancient doc.u.ments in which parcels of land are described as _terrae 20 animalium, 48 animalium_, etc. _Lacomblet_, Urkundenbuch, I, 27.

_Kindlinger_, Munster Beitr., I, Urkundenbuch, 24.]

[Footnote 155-3: The custom began to be more usual in Russia also to say "so many _dessjatines_ and the peasantry belonging thereto." This was especially so in the case of very fertile land, as for instance in Orel. See _v.

Haxthausen_, Studien, II, 510. Formerly the bank loaned only 250 per soul, afterwards up to 300 R. Bco. (II, 81). Spite of this _v. Haxthausen_ thinks that rent would be illusory, in Russia, in case agriculture was carried on with hired workmen. (I, Vorrede, XIII.) _Carey's_ remark, "every one is familiar with the fact that farms sell for little more than the value of the improvements," may be true of the United States (The Past, Present and Future, 60.)]

[Footnote 155-4: This condition of things continued in the highlands of Scotland until the suppression of the revolt of 1745. The celebrated Cameron of Lochiel took the field with 800 tenants, although the rent of the land was scarcely 500. (_Senior_, Three Lectures on the Rate of Wages, 45.) "Poor 12,000 pound sterling per annum nearly subverted the const.i.tution of these kingdoms!" (_Pennant._)]

SECTION CLVI.

INFLUENCE OF ADVANCING CIVILIZATION ON RENT.

Advancing civilization contributes in three different ways to raise rents.[156-1] The growth of population necessitates either a more _intensive_ agriculture (higher farming), or causes it to extend over less fertile parcels of land, or parcels less advantageously situated.[156-2] If the growth of population be attended by an increase of capital, this happens in a still higher degree. The people now consume, if not more, at least wheat of finer quality, more and better fed live stock; the consequence of which is, that the demands made on the land are increased. Lastly, if the population be gradually concentrated in large cities, this fact also must contribute to raise rents, because it requires a mult.i.tude of costly transportations of agricultural produce and so increases the cost of production (up to the time of consumption) on the less advantageously situated land.[156-3] [156-4]

As most of the symptoms of a higher civilization become apparent earliest, and in the most striking manner, in large cities, so also a rise in rents is first felt in them. The building of houses may be considered as the most _intensive_ of all cultivation of land and that which is most firmly fixed to the soil.[156-5] Rent has nowhere an unsurpa.s.sable maximum any more than a necessary minimum.

[Footnote 156-1: _Jung_, Lehrbuch der Cameralpraxis, 1790, 182, has so little idea of this that he is of opinion that farm-rent must grow ever smaller.]

[Footnote 156-2: According to _Schmoller_, in the Mittheilungen des landwirthschaftlich. Inst.i.tuts zu Halle, 1865, 112 seq., the average farm-rent of the Prussian domains per _morgen_, and the population to the square mile, amounted:

===============+============+============+============+============ _District._ | _1849._ | _1864._ | _1849._ | _1858._ ---------------+------------+------------+------------+------------ | _Thalers._ | _Population_ | | _per square mile_ Konigsberg, | 0.73 | 1.16 | 2076 | 2298 Gumbinnen, | 0.59 | 0.76 | 2059 | 2249 Danzig, | 1.02 | 1.51 | 2656 | 2926 Marienwerder, | 0.63 | 1.06 | 1944 | 2135 Posen, | 0.69 | 1.07 | 2789 | 2857 Bromberg, | 0.69 | 1.10 | 2116 | 2322 Stettin, | 1.07 | 1.73 | 2355 | 2614 Coslin, | 0.83 | 1.30 | 1735 | 1940 Stralsund, | 0.95 | 1.50 | 2347 | 2549 Breslau, | 1.19 | 1.45 | 4733 | 5034 Liegnitz, | 1.17 | 1.75 | 3676 | 3763 Oppeln, | 0.86 | 1.20 | 3973 | 4433 Potsdam, | 1.08 | 1.59 | 3317 | 3640 Frankfort, | 1.29 | 2.00 | 2446 | 2660 Magdeburg, | 2.31 | 2.98 | 3290 | 3508 Werseburg, | 2.35 | 3.03 | 3934 | 4270 Erfurt, | 2.04 | 2.55 | 5621 | 5735 Munster, | .... | 2.03 | 3192 | 3299 Minden, | 2.48 | 2.62 | 4841 | 4808 ===============+============+============+============+============

Compare the review of rents in the states of the Zollverein, in _v. Viehbahn_, Statistik, II, 979. It is difficult to compare different countries with one another in this respect, because it is seldom certain whether the word rent means exactly the same thing in them. Besides, it should not be overlooked, how difficult it is to ascertain what rent, in the strict sense of the term, as used by _Ricardo_, is.]

[Footnote 156-3: Moreover, the rise of rents, in so far as it depends on the greater cost of transportation to a growing market, becomes progressively slower. The concentric circles about that point increase in a greater ratio than the radii.]

[Footnote 156-4: As to the history of rents in England, a comparison of the years from 1480 to 1484, with the most recent times, shows that the amount of rent estimated in money in agricultural districts, where no very great "improvements" have been made, have increased as 1 to 80-100, while the price of wheat has increased 12-fold and wages 10-fold. (_Rogers_, in the Statist. Journal, 1864, 77.) According to _Hume_, History of England, ch. 33, it seems that rents under Henry VIII. were only 1/10 of those usually paid in his time, while the price of commodities was only of the modern. _Davenant_, Works, II, 217, 221, estimates the aggregate rent of land, houses and mines, at the beginning of the seventeenth century, at 6,000,000; about 1698, at 14,000,000; capitalized respectively at 72,000,000 and 252,000,000. About 1714, _J. Bellers_, Proposals for Employing the Poor, puts it at 15,000,000; about 1726, _Erasm. Phillips_, State of the Nation in Respect to Commerce etc., at 20,000,000; about 1771, _A.

Young_, at 16,000,000; about 1800, _Beeke_, Observations on the Income-Tax, at 20,000,000; about 1804, _Wakefield_, Essay on Political Economy, at 28,000,000; about 1838, _McCulloch_, Statist., I, 535, at 29,500,000. The poor tax in England and Wales, in 1841, was on a valuation of 32,655,000. (_Porter_, Progress, VI, 2, 614); 1864-5, the annual value of lands, 46,403,853 (Stat. Journal, 1869.) Moreover, the income from houses, railroads, etc. (real property other than lands), increased very much more than that received from pieces of farming land; between 1845 and 1864-5, the former by 392.8 per cent., and the latter by 27.9 per cent. (_Hildebrand's_ Jahrbb., 1869, II, 383 seq.); and the income tax of 1857 on 47,109,000. There was a still more rapid growth of rent in Scotland. In 1770, it was only 1,000,000-1,200,000: in 1795, 2,000,000; in 1842, 5,586,000. (_McCulloch_, I, 576, ff.) In Ireland, about 1776, it was only $900,000, according to _Petty_. (Political Anatomy of Ireland, I, 113.) _A. Young_ a.s.sumed it to be 6,000,000 in 1778; _Newenham_, View of Ireland, about 1808, 15,000,000. In many parts of the Rosendale Forest in Lancashire, the land is leased by the ell, at 121, and even at 131 per acre; i. e., more than the whole forest of 15,300 acres was rented for in the time of James I. In many of the moorland portions of Lancashire, rent has risen in 150 years, 1,500 and even 3,000 per cent. (Edinburg Rev., 1843, Febr., 223.)

The amount of rents in Prussia, _Krug_ a.s.sumed to be in 1804, 50,000,000 thalers, and _von Viebahn_, Zollverein Statistik, II, 974, in 1862, 116,500,000 thalers. _Lavergne_ a.s.sumed the rents of France after 1850 to be 1,600,000,000 francs (Revue des deux Mondes, Mars, 1868); and _Dutot_, Journal des Economistes, Juin, 1870, in 1870, at 2,000,000,000. In Norway, the capitalized value of all the land was a.s.sessed at 13,000,000,000 thalers in specie, in 1665; in 1802, at 25,500,000; in 1839, at 64,000,000 thalers. _Blom_, Statistik von Norwegen, I, 145. The older such estimates are, the more unreliable they are.]

[Footnote 156-5: In Paris, in 1834, the square _toise_ = 37 sq. feet, in the Rue Richelieu and Rue St. Honore, cost 1,500 to 2,000 francs; in Rue neuve Vivienne, 2,500 to 3,500 francs; in 1857, from 200 to 500 francs per square meter, = 10 sq. feet, was very usual. (_Wolowski_.) Before the gates of Paris, the rent amounted to as high as 250 francs per _hectare_; at Fontainebleau, to only from 30 to 40. (Journal des Economistes, Mars, 1856, 337.) In Market Square, Philadelphia, land was worth from 3,000 to 4,000 francs per sq. _toise_, and in Wall Street, New York, about 4,000 francs. (_M. Chevalier_, Letters sur l'Amerique, 1836, I, 355.) In St. Petersburg, after 6 years, the house frequently falls to the owner of the area. (_Storch._ by _Rau_, I, 248 f.) In Manchester, the Custom House area cost from 10 to 12 pounds sterling per square yard; in the center of the city, as high of 40, that is, nearly 200,000 per acre. In Liverpool, in the neighborhood of the Exchange and of Town Hall, the cost is from 30 to 40 pounds sterling. (Athenaeum, Dec. 4, 1852.) In London, a corner building on London street, erected for 70,000, with only three front windows, pays a rental of 22,000. (Allg. Zeitung, 1 Febr., 1866.) The villa at Misenum--a very beautiful location--which the mother of the Gracchi bought for about 5,000 thalers, came into the possession of L. Lucullus, consul in the year B. C.

74, for about 33 times as much. _Mommsen_, Romisch. Gesch., II, 382.]

SECTION CLVII.

HISTORY OF RENT.--IMPROVEMENTS IN THE ART OF AGRICULTURE.

Improvements in the art of agriculture which are confined to individual husbandmen leave rent unaffected. They do not perceptibly lower the price of agricultural products, and only effect an increase of the reward of enterprise which is entirely personal to the more skillful producers and does not attach to the ground itself.

But how is it when these improvements become general throughout the country? If population and consumption remain unchanged, the supply of agricultural products will exceed the demand. This would compel farmers, if there be no avenue open to exports, to curtail their production. The least fertile and most disadvantageously situated parcels of land will be abandoned to a greater or less extent, and the least productive capital devoted to agriculture, withdrawn. In this way, rent goes down both relatively and absolutely, although the owners of land may be able to partially cover their loss by the gain which results to them as consumers and capitalists.[157-1] (-- 186). After a time, however, and as a consequence of the diminished price of corn, population and consumption will increase, and entail an extension of agriculture and a consequent rise in rents.[157-2] If it, relatively speaking, reaches the same point as before, it still is absolutely much greater than before.

Let us suppose that there are three cla.s.ses of land of equal extent in a country, which for an equal outlay of capital produce 100,000, 80,000 and 70,000 bushels yearly. The rent of the land here would be equal to at least 40,000 bushels. If the yield of production now doubles, while the demand for agricultural products also doubles, the aggregate harvest will be 200,000 + 160,000 + 140,000 bushels, and consequently rent will have risen to at least 80,000 bushels. But this increase of rent has injured no one. If the population increases in a less degree than the productiveness of the land, the consumer may, to a certain extent, gain largely, and the landowner better his condition. However, great agricultural improvements spread so gradually over a country, that, as a rule, the demand for agricultural products can keep pace with the increased supply. But even in this case, that transitory absolute decline of rent may be avoided; and it cannot be claimed universally, as it is by many who are satisfied with mumbling Ricardo's words after him, that an increase of rent is possible only by an enhancement of the price of the products of the soil. Where the development of a people's economy is a normal one, the rent of land is wont to increase gradually, but at the same time to const.i.tute a diminishing quota of the entire national income.[157-3]

Improvements in milling,[157-4] and in the instruments of transportation[157-5] adapted to agricultural products, and the introduction of cheaper[157-6] food, have the same effect as improvements of agricultural production. All such steps in advance render an increase in population, or in the nation's resources, possible without any corresponding increase in the amount paid to landowners as tribute money.[157-7]

The foregoing facts furnish us the data necessary to decide what influence permanent soil improvements have on the rent of land.[157-8]

The improved parcels of land now grow more fertile. Their rentability also increases, while that of the others becomes not only relatively but absolutely less, if the demand remains unaltered. The whole is as if capital had been transformed into fertile land, and this added to the improved land.

[Footnote 157-1: Since it has seemed absurd to many writers to say that an improvement in the art of agriculture may cause rents to decline (compare _Malthus_, Principles, I, ch. 3, 8), _John Stuart Mill_, Principles, IV, ch. 3, -- 4, prefers to put the question thus: whether the landowner is not injured by the improvement of the estates of other people, although his own is included in the improvement.

Compare _Davenant_, Works, I, 361. And so the long agricultural crisis through which Germany pa.s.sed at the beginning of the third decade of this century was produced mainly by the great impulse given to agriculture (_Thaer_, _Schuerz_ etc.), while population did not keep pace with it.

Similarly, at the same time, in England, _McCulloch_, Stat., I, 557 ff. Of course, the less fertile pieces of land declined even relatively most in price. From 1654 to 1663, Switzerland experienced a severe agricultural crisis, attended with oppressive cheapness of corn, a great decline in the price of land, innumerable cases of insolvency, revolts of the peasantry, emigration, etc. (_Meyer von Knonau_, Handbuch d. schweiz. Gesch., II, 43.) The Swiss had, precisely during the Thirty Years' War which spared them, so extensively developed their agricultural interests, that now that other countries began to compete with them, they could not find a market large enough for their products. For English instances of similar "agricultural distress" in the seventeenth and eighteenth centuries, see _Child_, Discourse on Trade, 73, 124 seq.; _Temple_, Observations upon the U. P., ch. 6; _Tooke_, History of Prices, I, 23 seq., 42. Even where there have been no technic improvements, a series of unusually good harvests may have the same results, of which there are many instances scattered through _Tooke's_ first volume.

There is great importance attached in England to the difference between those agricultural reforms which save land and those which effect a saving in capital and labor.

The latter, it is said, decrease the money rent of the landowner by depreciating the price of corn, but leave the corn-rent unaltered. The former, on the other hand, decrease the rent both in money and corn, but the money rent in a higher degree. (_Ricardo_, Principles, ch. 2; _J. S. Mill_, Principles, IV, ch. 3, 4.)]

[Footnote 157-2: When the demand for products of the soil which minister to luxury, such as fat meat, milk, vegetables, is increasing, a greater cheapness of the necessary wheat may raise rent, for the reason that lands are now cultivated which were not formerly tillable. Thus, there is now land in Lancashire which could not formerly be planted with corn, because the laborers would have consumed more than the harvest yielded. Since the large imports of the means of subsistence from Ireland these lands have been transformed into artificial meadows, gardens, etc.

(_Torrens_, The Budget, 180 ff.) Compare _Adam Smith_, I, 257, ed. Bas. _Banfield_ would misuse these facts to overturn the theory of Ricardo. (Organization of Industry, 1848, 49 ff.)]