The Unearned Increment
Edgar F. Blanchard
[Reprinted from Twentieth Century Magazine,
THE unearned increment is the increase in the value of property
created by changing conditions. To illustrate: A buys an estate for
$5,000. Unlooked for changes take place in the community; in ten
years' time the population increases from five thousands to fifty
thousands, business increases twenty-fold, the public highways are
macadamized and trolley lines are built through the town. Owing to
these improved conditions, A's property is worth $100,000. The man has
not earned this fortune by any service he has been to society, nor has
he created this increase in the value of his property. He therefore
possesses wealth that he has neither earned nor created.
This shows how many rich people have acquired their wealth, and
larger and larger are the fortunes thus gained. While this method of
acquiring wealth is considered by many a fine art and is legalized by
law, yet in the last analysis such acquisition of wealth is ethically
and economically wrong and with far-reaching consequences.
1. The sense of common justice is violated. Justice demands that
wealth shall belong to those who create it, and upon this ethical
principle Abraham Lincoln defended the Anti-Slavery Movement of his
time. He declared that as the colored people were the actual producers
of the wealth in the South, they should have the greater part of it,
and not merely an existence out of it.
In the illustration used, the increased value of A's property is
created by the improved conditions in the community, and not by his
own efforts, except in so far as he contributes to the improved
conditions. In other words, the increased value of A's property is a
social product; hence according to the law of common justice this
new created wealth belongs to society or the social order, and not to
On the other hand the sense of justice is violated when a person
suffers financial loss through changing conditions over which he has
no control. A man once bought a place in a prosperous community, which
place he greatly improved. After fifteen years of hard work he died.
Although the estate had been greatly improved in many ways, the widow,
who found it necessary to sell, realized only $400 - about one-sixth
of what her husband paid. For various causes there had been a great
depreciation in the value of property in the place during these
fifteen years. Here was an economic tragedy - an industrious man spent
fifteen years at hard labor for naught. This is only one case of many
where honest labor and industry have been cheated out of their
rightful reward, and it is little wonder that many persons are in
despair. Changing conditions have robbed them of the fruit of their
There is indeed little guarantee of justice under the present-day
industrial and economic order. One man acquires a fortune of unearned
wealth,* and another who creates wealth by his industry and toil
becomes the poor man.
2. Speculation is encouraged; and as speculation is encouraged honest
industry is discouraged. This is one of the far-reaching results of a
false economic system, according to the law that a good tree brings
forth good fruit, and an evil tree brings forth evil fruit.
Three facts encourage speculation: that one can acquire unearned
wealth with the sanction of the law; that those who do so are honored
by society; and that there is little assurance that honest labor and
industry will receive their rightful reward. As long as these
conditions prevail, so long will people speculate for unearned wealth.
And there are to-day tens of thousands seeking wealth with no thought
of contributing to the social welfare through their money-making
schemes. Economically and ethically these speculators are parasites
upon the body politic. Society suffers; for much energy which should
be given to productive activities is turned to non-productive efforts
- robbing the actual producers of wealth. President Hyde of Bowdoin
College says that "the craze for getting something for nothing is
one of the most pernicious evils of modern civilization." A
social order in" which speculation is encouraged is unhealthy
ethically and morally. It cannot be otherwise.
3. Development is retarded. This is another evil result of a false
economic system that gives to the individual the unearned increment.
In a New England village a waiting room is needed at the junction of
two trolley lines. A waiting-room here would be a benefit to the
community; but the owner of the land will not sell, because he
believes that in a few years he will be able to get a great deal more
for the property than he can at the present time. This is only one
case of hundreds where people block the wheels of progress through
their efforts to make themselves rich by acquiring the
socially-created wealth on properties.
Furthermore, business enterprises are sometimes forced to seek new
locations where the necessary privileges can be procured. This of
course is a loss to the places from which the industries move. Thus
have hundreds of cities and towns suffered.
These evils arising from the unearned increment going to the
individual have already assumed gigantic proportions and are rapidly
growing. The national welfare is threatened; for let these evils
continue to grow as they have been doing during the last half century,
and they will lead to an oppressive and tyrannical feudalism of
wealth, and a government "of the people, by the people and for
the people" will be a thing of the past.
A dyspeptic cannot be cured of his trouble so long as he eats food
that distresses him; and the evils described cannot be checked so long
as the unearned increment goes to the individual. The remedy is in a
new economic system governing the ownership of property, in stringent
laws against the acquisition of unearned wealth, and in assuring to
honest industry its rightful reward.
Instead of the individual having absolute claim upon property, there
should be a joint-ownership of property between the government and the
individual. The individual should have the increase in value on
property that he has created by making improvements on the same, and a
portion (perhaps twenty-five per cent) of the socially-created
increase in value. The large share of the socially-created wealth (the
unearned increment) should be taken by the government. The twenty-five
per cent of the socially-created wealth would be a sufficient
incentive for a man to interest himself in the general prosperity of
his city or town.
Furthermore, the government should reimburse people suffering
financial loss on account of changing conditions over which they have
no control. The depreciation in the value of property is the
exception. It is seen only in local districts and is owing to local
conditions. This depreciation in property-values is insignificant
compared with the general increase in property-values, which increase
in many places is going on by leaps and bounds. Consequently it would
be an easy matter to make this reimbursement.
It would be necessary under the proposed plan to have all property
appraised by the government at frequent intervals (perhaps once in
every two or three years), and to have estimated the socially-created
increase or decrease in the value of property.
All the taxes should be raised from the socially-created wealth, and
in this way this wealth would be returned to society. This would put
the taxes where they belong - on those growing rich through the
acquisition of the unearned increment; and people struggling for an
existence would be relieved of the tax-burden.
It would not take seventy-five per cent of the socially-created
increase in the value of property to pay the taxes of the country. The
difference between what it did take and the seventy-five per cent of
the socially-created wealth could remain in the hands of the holders
of the property as a loan to be called for when needed.
According to this joint-ownership plan, private parties would not
have the sole claim upon the hidden treasures of earth, which
treasures man never created. Promoters who dig oil wells and develop
mines should be richly rewarded for the service they render society.
These promoters might be allowed to operate the oil wells and mines
until they realized a thousand dollars profit for every dollar
expended in the work. This would surely be a sufficient reward for
encouraging adventurers. After the thousand dollar profit is realized,
the government should either operate the works or take a liberal share
of the proceeds.
Furthermore, stringent laws should be enacted against the acquisition
of wealth through methods and operations that do not contribute to the
social welfare. This would put all speculative and get-rich quick
schemes for "making money" under the ban, and speculating
for unearned wealth would become both unpopular and unsafe.
Such an ethical industrial and economic system as described would be
superior to the present-day order of things. There would be fewer
multimillionaires and more general prosperity, fewer disheartened
honest and industrious persons and more contentment among the masses.
Thrift and honest industry would be encouraged and manhood developed.
A higher moral tone would pervade society and a higher state of
civilization would be realized. The world is waiting for this forward
step in human history.
"The same human nature is at work now as always. The same
everlasting passion for tyranny and the same everlasting passion for
liberty still in the same everlasting conflict. To-day the struggle is
a step higher than one hundred years before. Then it was as to the
right of men as men to a voice in the management of that industry we
call government - dealer in forts, coinage, courts, harbors, postage
stamps. Now it is the right of men as men to a voice in any other
industry which has become of supreme social importance, for the right
of the people to be free from taxation without representation in any
business which has so great a power over us that it governs us, to
have a voice in any industry so great that those who own it own us, to
a vote in any property so great that it is a government, whether it be
the control of the railroads or the light of the cities, or the supply
of the necessaries of life, like coal, oil, salt, steel, or anything
else."-Henry Demarest Lloyd.
* Gifts and inheritances are nut considered as unearned wealth, as
the term is used in article.