A Point of Principle
The True Form of Economic Liberalism
Eli F. Heckscher
[An excerpt from "Old and New Economic
Liberalism" Reprinted in Land & Liberty,
August-September, 1965]
This extract from "Old
and New Economic Liberalism" by Professor Eli F. Heckscher, the
famous Swedish economist, which was published in Stockholm some
years ago, has been translated by Mr. Ole Wang of Norway, a
Vice-President of the International Union for Land Value Taxation
and Free Trade.
SO FAR there is a high degree of harmony in free competition. But
then there is another factor which we have so far intentionally not
considered, namely, the natural resources. There is no need to point
out that they have an importance for the satisfaction of human wants
fully comparable to that of capital (saving) and labour. Furthermore,
natural resources are available in a degree insufficient for all the
purposes which they can serve, and it therefore follows that they must
command a price which, by preventing a too high demand, will lead to
such utilisation as is considered most important. Land, or building
sites of various kinds, water power, mineral deposits, etc. must
therefore have a value or command a price; and in many cases a very
high price, seeing that they are indispensable and that their quantity
has not been increased. All this is true, but does not belong here.
The question is not whether the natural resources should command a
price, but whether this price should create an income for
their owners - and there is all the difference in the world between
these two questions. We have seen that interest on capital was
not only a necessary price but was also required as an income,
because otherwise saving would be very much reduced, but nothing
similar applies to the profits derived from natural resources, ground
rent or whatever you will call it. In other words; saving is a result
of endeavour, of conscious human acting, but land, mineral deposits,
water power, etc., are not in any sense the result of human activity.
If interest disappears saving will, to a more or less degree, stop;
but if the rent attaching to natural resources is withheld from their
owners, not a single acre of land, or ton of ore, or horsepower in a
waterfall, will cease to exist. Therefore, the price of natural
resources as an income for their owners can never become part of a
harmonious economic system, however much some of the less discerning
and less distinguished inheritors of the liberal political economy
have tried to prove it.
(Here follow some
considerations on personal natural gifts, which the author says
cannot be considered in the same light as impersonal natural
resources).
It therefore seems to me that it is impossible for a new economic
liberalism to reject in principle the idea of the community
appropriating the yields of the natural resources. Ricardo, who was
the foremost expounder of the Law of Rent (even though not the first
to discover it), was not in favour of this appropriation. However,
rather than being the result of theoretical economic reasoning his
aversion was, as far as I understand, due to a general idea that any
state interference was inexpedient. The philosophy of the old
economic liberalism scarcely deserves much respect. It is as a purely
economic theory that it endures. As such its value has not appreciably
diminished.
As is known, the school which advocates the appropriation by the
community of the natural resources or their yield, is called Georgeism.
It is a belief sometimes met with even amongst politically educated
liberals, that Georgeism more or less coincides with socialism. No
mistake could be greater. Far from coinciding with socialism,
Georgeism is the most pronounced old school liberalism that now
exists. It is even scarcely an exaggeration to say that the social
view represented by Georgeism is that the state should collect the
economic rent, but not be further concerned with economic or social
life, and it is worth noting how many things Georgeists have in common
with such ultra-individualists as Herbert Spencer.
The appropriation of the ground rent is often proposed to take the
form of land-value or ground rent taxation. Like the problems of
monopolies, it is a very complicated and far from easily realised
programme. Its possibilities and limitations would necessitate an
extensive discussion which does not belong here. What concerns us here
is only the point of principle that this programme must form part of
the new economic liberalism, which cannot fulfil its mission or live
up to its teaching without it.
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