Special Privilege
Henry Ware Allen
[Reprinted from Land and Freedom,
January-February 1938 and reprinted in the November-December 1938
issue]
As our time honored political maxims become hackneyed they are very
apt to pass into what Grover Cleveland would call innocuous desuetude.
We subscribe to the sentiment that "eternal vigilance is the
price of liberty" and yet little is done to counteract those
aggressive forces which nullify that freedom which we profess to prize
so highly. Even the prayer, "Thy Kingdom Come," is repeated
as a mere wish that something good would happen rather than with a
determination to bring about those righteous conditions which make for
a heaven on earth. Possibly the most neglected of all of our national
ideals is our professed adherence to that most democratic of all
maxims, "Equal rights for all and special privileges for none."
For at the present time our country is honeycombed with special
privilege that has become so entirely entrenched as to be regarded on
all sides as vested right. Special privilege is condoned by force of
its familiarity. Like vice it is endured, then pitied, then embraced.
There lived in a Colorado city years ago a house-wife who made
convenient use of coal cars on the side track across the street from
her dwelling with which to replenish her stock of fuel. This she did
without any qualm of conscience but as a special privilege which, by
the sanctifying touch of time had grown into a vested right. This
woman doubtless was punctilious in the ordinary obligations of life
and would have hotly resented any statement to the effect that she was
stealing coal. She was guided by that all too common kind of honesty
which is based upon expediency rather than principle. Not on any
account would she have withheld what was due from her to a neighbor
who would have suffered by her delinquency, but the ad- vantage to her
of getting this coal was so great and the loss to some impersonal
owner of same, mine, railroad, or smelter, was relatively so
negligible that the argument was all in favor of her acting in her own
interest without question. No personal equation was involved and if at
first there had been any hesitation on her part of this practice, that
was long ago a thing of the past. But the railroad company put a
watchman on guard and her supply of fuel was thereby stopped. She then
turned to the local charity organization with request for a
continuation of the supply which had thus been rudely taken from her
and the very righteous indignation with which she told her story was
ample proof of entire absence of comprehension on her part that she
had been stealing.
This incident, which is a true story, illustrates very nicely the
evolution and the nature of that special privilege which eventually
becomes a vested right. And if the searchlight of analysis is turned
upon our social system we may be surprised to find the presence of
special privilege in unexpected places and of a volume that is, in the
aggregate, enormous.
As a basis for this inquiry it may be well to state the fundamental
truth that property may be secured in three ways only; first, by
labor; second, by gift; and third, by theft. If this test is
repeatedly kept in mind, the task will become easier. One of the
commonest forms of special privilege is that which is provided under
ninety-nine year leases on valuable business property sites. These
leases convey to the owner of the land a stipulated income after the
tenant has paid all taxes and expenses. In the parlance of political
economy this revenue consists of what John Stuart Mill defined as
unearned increment, a value which is produced by no individual but
which is purely the result of population reflected upon desirable
locations. For this revenue to be turned over to individuals as is now
the unquestioned custom in all of our large cities and to an amount of
billions of dollars annually is a procedure which is precisely in the
same class as the stealing of coal from the railroad car by the
Colorado housewife.
A much larger source of public revenue which is diverted to
individuals is that of the rent of valuable property in excess of a
fair interest return upon the intrinsic value of improvements on the
property. This applies to practically all property located at the
center of our large cities and involves enormous revenues. There is a
mixture here of legitimate return on capital invested with the
unearned increment which belongs absolutely to society but the case is
not less clear on that account.
Another prolific source of public revenue which is diverted to
individuals is that which comes from the lucky possession of oil
wells. This possession frequently gives incomes of thousands of
dollars daily to those who have no more claim on such revenue than is
involved in the possession of the land upon which the wells were
developed. The wealth that has by this means been given to certain
sections of the country and certain groups of people has run into the
billions of dollars. The Osage tribe of Indians in Oklahoma are said
to have been made the richest people in the world due to this special
privilege. Such beneficiaries are no more justly entitled to the
revenue which they receive than was the Colorado woman justified in
stealing coal from the railroad car. It will be said that the oil
industry involves a great deal of capital and that many dry wells are
paid for before a single producing well is developed. This is true and
therefore makes the proposition somewhat more complicated but does not
alter the conclusion.
Another source of revenue which diverts public funds into private
hands is speculation in land. Purchase of inside property sure to
increase in value is the one investment that has been invariably
recommended by shrewd financiers. This speculation is far greater than
has been generally realized. More than one-half the area of New York
City consists in vacant lots which are held out of use for speculative
purposes, and the same is true of all our larger cities. Incidentally,
this speculation has the effect of enhancing the selling price of
desirable land to artificially high figures. When land which is
purchased with a hope of subsequent rise in value, the investor
practically lays a trap by which he may secure values that rightfully
belong to the community. And this process makes an artificial scarcity
of land with consequent artificially high cost to those who must use
it. This process of securing a profit, of getting something for
nothing, is persistently the same in character as that by which the
Colorado housewife secured her supply of coal. Here again objection
may be interposed to the effect that land frequently has to be sold
for less than it cost. This is an objection that was raised by no less
an economist than Francis A. Walker, the foremost critic of Henry
George during his life-time. General Walker exclaimed, "Mr.
George has much to say about unearned increment. He says nothing,
however, about unrequited decrement." Mr. George's rejoinder to
this was an expression on his part of his inability to discuss the
problem with one who spoke of unrequited decrement in something which
originally had no value. In other words, so far as society is
concerned its interest is only in the rental value which is produced
from year to year and which rises or fall accordingly as population
grows or wanes. The important fact is that this increment, whether
large or small, belong to the community which produced it.
The most spectacular form of special privilege which we have to deal
with today is that provided by the protective tariff. This protection
enables the America manufacturer to secure an artificially high price
for his product. The common argument in support of the protective
system is that the American standard of living must be maintained by
this artificial means, but this argument falls to the ground, if at
the same time, we permit any improvement in labor-saving machinery
which naturally has far greater effect upon the labor market than is
produced by the competition of merchandise imported from abroad. The
enormity of special privilege due to the tariff is perhaps more
conspicuous in the State of Pennsylvania than elsewhere, a single
family in Pittsburgh, the direct beneficiaries of the tariff on
aluminum, being reputed to be worth in excess of two billion of
dollars. There will be found that, with a few rare exceptions, the
great fortunes of America are based upon special privilege of one kind
or another.
Although there are many minor sources of special privilege which are
embedded in our political and social institutions, those above
enumerated are the principal ones.
The special privileges provided by legislative action at Washington
are in a different class from those which have become a regular part
of our system of taxation but are none the less to be condemned. The
most flagrant of these in recent times was the appropriation by
Congress and approved by President Hoover, of five-hundred-million
dollars of tax payers' money for the specific purpose of stabilizing
or artificially enhancing the price of wheat, cotton, and other farm
products. It was presumed by the makers of this law that it would have
the effect of giving artificial advantage to the farming class, which
would offset in a measure the special privileges which had been given
so generously to Eastern interests by means of the protective tariff.
The plea for this farm legislation was repeatedly based upon that
consideration.
It so happened that even the immense waste of money involved by the
farm marketing act was negligible as an influence in the world wide
markets and that it did not affect in any considerable degree the law
of supply and demand upon the prices of the agricultural products
which were supposed to be favored. But the very fact that this
legislation was put through with little opposition furnished a very
good illustration of the fact that special privilege legislation is
regarded as perfectly legitimate. And this has been further
illustrated in monstrous degree by the New Deal legislation under
President Roosevelt.
There is everywhere consciousness of a mysterious force which is
responsible for easily acquired fortunes on one hand together with an
increase of unemployment and consequent lower incomes on the other
hand. Each succeeding census report makes more appalling this
undemocratic and unjust condition in our social fabric.
If prosperity is to be secure, there must be an end to special
privilege of every kind, and a system of taxation inaugurated in place
thereof which shall be based upon justice to all. Henry George has
demonstrated how this should be done.
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