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SCI LIBRARY

The Conspiracy Against Homeowners And Tenants

William W. Newcomb



[A booklet [abridged here] published by the author in 1977 and distributed
by Media Foundation for Land Economics, Melbourne, Florida]



PREFACE


Many who read this book will find what I have to say is a shocker, but after they have read it, won't admit to themselves that the conspiracy exists.

Most county commissioners and most city commissioners and most mayors know of this conspiracy; in fact, many men and women deliberately become candidates for the above offices in order to better advantage themselves in the conspiracy.

Another group of public officials who are familiar with the conspiracy are governors, state representatives and senators. Some cash in on the conspiracy while in office, some get into office in order to cash in when they are retired or been defeated from office (as illustrated later in the book.)

Those most knowledgeable are the tax assessors, tax collectors and government property appraisers. Another group, but in private enterprise, who are especially knowledgeable about the conspiracy are: real estate brokers, savings and loan associations, building contractors, lawyers, abstractors and accountants.

There have been a few public officials who have fought the conspiracy. To name some: Tom Johnson, former mayor of Cleveland; another was James Clarkson, former mayor of Southfield, near Detroit; William Onweiler, former representative of Idaho; Floyd Rinehart, former councilman, Indialantic, Florida, Alien Pappas, former mayor of Indian Harbour Beach, Florida; Floyd Morrow, present councilman of San Diego -- and many many more.

There have been many men, who by the power of their pen, have written against the conspiracy: magazine editorials, Raymond Moley, formerly with Newsweek; newspaper articles, Harlan Trott, formerly with the Christian Science Monitor; Walter Ryebeck, formerly with the Dayton Daily News. Max Ways and Gurney Breckenfeld, both with Fortune Magazine, Richard Noyes, Editor, Salem, N. H, Observer, and again, many more.

Only two men in recent years have exposed the conspiracy in hard-cover books: Wylie Young, in Antidote For Madness, (1976, Franklin Publishing Company) and David Hapgood, in The Average Man Fights Back, (1977, Doubleday). In college I went through the experience of having my economics professor wanting to expose the conspiracy, but was not provided with a textbook to do so. But in recent years, there have been many college professors, who through their teachings, forthrightly expose the conspiracy:

Professors Robert Andelson, University of Alabama, Arthur Becker, University of Wisconsin-Milwaukee, Mason Gaffney, University of California, C. Lowell Harriss, Columbia University, Jay W. Forrester, Massachusetts Institute of Technology, Steven Cord, Indiana University, Dick Netzer, New York University, James L. Busey, University of Colorado; also the following university presidents: Robert Hutchins, former Chancellor of the University of Chicago, now President, The Center For Study of Democratic Institutions; Robert C. Wood, University of Massachusetts; A. M. Woodruff, University of Hartford.

In the commercial world, here are some of the men, who through their business affiliations, have done their part in exposing the conspiracy: Carl E. Madden, former Chief Economist for the United States Chamber of Commerce and Andrew Heiskell, Chairman of Time, Inc.

In the above fields of government, journalism, education and business, there are hundreds more authorities than I have listed above. Space limitations prevent it.

You might note, however, that I have not listed a single newspaper syndicate writer, or a single feature writer for some of America's prestigious newspapers.

Clergymen and the churches they serve have been derelict in exposing the conspiracy. They should be the bastion of social service as well as spiritual service to mankind. The late Edward McGlynn was excommunicated by the Pope for his part in exposing the conspiracy, but after world-wide protest, was later reconciled; the late William Reece, a very dear friend of mine, was fired as pastor of the Swedenborgian Church for the same reason; another good friend of mine, now retired, Rev. Wylie Young, formerly pastor of several Presbyterian Churches, has spoken frequently from the pulpit, doing his part in exposing the conspiracy. We suggest your reading his book described later in this book.

If Rev. Billy Graham for the Protestants, Monsignor Fulton Sheean for the Catholics, and Rabbi Marc Tannenbaum for the Jewish faith would jointly mount a great Crusade to expose the conspiracy, the achievement in social justice to all mankind is inestimable!

I end this Preface with a tribute to P. I. Prentice, for 25 years Vice President of Time, Inc., and former editor-publisher of House and Home, one of the great trade journals in the United States. Perry, as I fondly call him, has done more to expose this horrible conspiracy than any other man in recent years. He devoted an entire issue of House and Home to this expose, and has traveled up hill and down dale throughout the United States speaking before business groups, government agencies, national black organizations and social service bodies.

This paperback book you are about to read is only an introduction to the conspiracy. There are many fine hardcover books on the subject, There are many fine foundations with assets totaling over $21,000,000 which financially support programs related to the expose of the conspiracy. There is employment with very good salaries in these foundations as people retire and as some of these foundations expand their operations. (More about this at the end of the book.)

I hope that after you have read "The Conspiracy Against Homeowners and Tenants" you too will help spread the expose.


I. The Conspiracy


It is a curious thing that one man in a small community may become wealthy, attracting to himself, as by some strange alchemy, more money than has ever been in the community before. That man's neighbors, in most instances, are proud of him, though probably a little mystified as to how he amassed his fortune. As a matter of fact, directly or indirectly, every individual in that area has probably helped contribute to this man's accumulation of wealth.

The late Bolton Hall was a lawyer. He knew most of the loopholes by which the rich evade taxes. And to prove that man can grow rich without working, he offered title to farm land plots in New Jersey to anybody willing to pay him merely the annual rent for them. There were no down payments, no payments on a mortgage, just rental payments to Mr. Hall. People settled, built homes, and a new village, named "Free Acres", was created. Meanwhile all the land adjacent to the village rose in value, and Bolton Hall, having acquired it when he conceived the plan for creating Free Acres, realized a handsome speculative profit from the sale of the surrounding land.

When a client asked his advise on the profit possibilities of a proposed venture, Bolton Hall first inquiry was always: "Where's the monopoly in it?

In his book, Prosperity and Security, Ralph Borsodi[1] explained the reasoning back of Bolton Hall's question:

"Of the four methods by which people get what they get out of the world, the one on which you ought to rely (if you wish to profit from the examples furnished you by successful men) is taking what you want from those who happen to possess it, and giving them as little as is necessary in order to be able to take it from them. This ancient and generally respected method, I call exploitation."

There is a predatory type of individual who holds that only saps work and fools make payments. Such men think only of acquiring -- such men let others produce. Such men's lives are eulogized in the pages of biography -- they are credited with knowing the key to success. What are the rules they follow? Briefly, these two;

Rule 1 Create the idea that you are gifted with industry and frugality.

Rule 2 Use force and cunning so beguilingly that the aura of industry and frugality conceals your depredations and hypnotizes even you yourself into the belief that you are honest and brilliant.

Statistical surveys, for instance, in Lundberg's America's Sixty Families and Rich Man -- Poor Man, and Myers' The Rise of Great American Fortunes reveal most conclusively how the Government protects the depredations of the purely acquisitive type of individual.

Congress, through the past hundred years, has been trying to tap large fortunes represented by corporations and estates. It has increased income tax rates, imposed taxes on inheritances, and finally - to close up the loophole of gratuities made within the families of wealthy clans - has enacted a gift tax. Presidential candidates try to win office on correcting our inequitable tax structure, but after they win office in Congress, they add a few patches here and there, but not having studied The Science of Political Economy by the classical economists, they never get at the root of tax reform.

If assets of some men can rise to over one billion dollars -- and the late J. Paul Getty estate and the Rockefellers have these huge assets - without inflicting injustice on those less privileged, we cannot fairly condemn the means used to build multi-million dollar incomes that result in billion dollar assets. But if the method is injurious to all of us as a whole, is it not wiser to get at the source of the malady rather than to try to plug up loopholes that force middle income people to deny their children a college education, and leave the poor still in desperate circumstances?

The means by which America's wealthy families acquire their fortunes can be traced to the following three Platforms of Privilege:

  1. Collecting rents from those who require land, particularly urban sites or mineral resources.
  2. A tariff which the Government, at the behest of "Privilege", has imposed in order to raise domestic prices above a free competitive level.
  3. Control of money and credit whereby excessive interest rates are obtained and perpetual holdings are acquired in the two monopolies indicated above.

Of the three legalized monopolies, let us analyze one which is a great source of fortunes - one which neither the local or Federal Government have adequately tapped and which, if tapped, would not only force many scions of wealth to earn their livelihood by free competitive effort, but would also create fairer opportunities for all mankind, and reduce the cost of a home and lower the property tax by as much as 35%.

That basic monopoly is vested in the private appropriation of rent from land. Land is Nature's perpetual fountain of sustenance. Even primitive civilizations sensed this, and their economics provided everyone with sufficient land for a livelihood.

Here is a list of just twelve family groups whose fortunes stemmed largely from their monopolization of land and other natural resources:

  • Rockefellers and Standard Oil Associates -- oil lands and world wide ownership of land.
  • Mellons -- oil and bauxite and Pennsylvania real estate.
  • Vanderbilts -- railroad land gifts.
  • Weyerhausers -- timber.
  • Guggenheims -- copper and other minerals.
  • Fields -- Chicago and New York sites.
  • Tafts -- Cincinnati sites.
  • Goelets -- New York sites.
  • Hearsts -- gold and silver lands.
  • J. Paul Getty Estate -- oil.
  • DuPonts -- Delaware sites and mining interests.

It is an erroneous assumption that huge fortunes can accrue entirely from manufacturing and retail exchanges. Most people believe that the Marshall Field fortune came from the great mercantile business bearing that name. Nothing could be further from the truth. When Marshall Field I died in 1906, his holdings were said to be worth about $56,000,000. In 1925 (the last year that incomes on investments could be legally published) the estate was estimated at $180,000,000. Today the Field fortune is believed to be over $250,000,000. But the Field family holds only a small minority interest in the Marshall Field department stores.

But neither Field nor his predecessor-owners created the value of these lands. Land values are created by the presence of people and their social and economic life in and about these areas. Such values are also enhanced by the public services afforded by the city, the county, the state and the federal government. And all these units of government are entitled to draw a share of the revenue from these land values, since all the people in these areas have contributed to the land values and to the maintenance of government services in connection with them.

Despite the fact that income taxes for both the rich and the middle income have been greatly increased, inheritance taxes upped, and gift taxes imposed, still America's wealthy families have most of their immense fortunes intact.


NO SHERMAN ANTI-TRUST LAW IN RENT


As stated above, punitive tax bills are introduced in Congress, aimed at taxing specific fortunes or plugging the loopholes. Obviously any such technique is either discriminatory or ineffectual. Politicians particularly benefit from advance notice of highway routes. Frequently the lawmakers themselves are huge landholders who expect to cash in on unearned increment when they no longer are returned to office. Also, such lawmakers may be at the mercy of party bigwigs who also control vast speculative land holdings. It is for this reason that no "trust-busting" President nor Attorney General has ever seriously challenged this monopoly.

Fantastically enough, real estate is taxed only locally. Wealthy men, acquiring huge areas of either improved or unimproved land, can hold them for "investment" because the Federal Government does not tax such investments. Our laws are so made that these lands can be held indefinitely for speculative purposes, despite the fact that the state or local government is often forced to accept a compromise settlement of unpaid taxes.

In Property Tax Newsletter, published by one of Ralph Nader's groups, it has been pointed out repeatedly that local tax assessors, needing funds to run for election, grossly undertax big owners of improved and unimproved land.

It is also important to remember that even local taxes paid on land and improvements are deductible from Federal Income Tax return. So while the poor landless man now really pays his full income tax, the rich landlord largely escapes paying his share.

Millionaires can lavish huge sums on their various estates, and by their local influence, keep their assessments low. Having thus put their liquid assets into these estates, they can further reduce their true Federal Income Taxes. Moreover, millionaires are big purchasers of local and state bonds, and the income from such bonds is thus far tax-exempt.

Corporation real estate is likewise taxable only locally. The same is true of most natural resources -- often these wealth-laden lands are assessed at only five cents an acre.

Many wealthy men create "art centers" and other seemingly benevolent enterprises for the purpose of deflecting both Federal and local taxation of their monies and of drawing population to a particular section of a city, thereby enhancing the value of land contiguous to their tax-exempt property. Such a project can create huge revenue for the holder of surrounding properties.


SOME ANECDOTES ON FLORIDA


Let me give you the story of two State-funded educational institutions in Florida, with which I am particularly familiar as a result of being a real estate broker:

Back in 1964, the Florida State Cabinet approved of funding for a new "Space Age University" with emphasis on engineering/science courses. It was expected that such a university would be located in our county, Brevard, because the Kennedy Space Center and Cape Canaveral are the sites of the Federal space operations. There was a continuing need for upgrading men and women from Bachelors' Degrees to Masters' to Ph.D's.

Every Chamber of Commerce in Brevard County plus dozens of other organizations were assured that the university would be established in our county, specifically on a site owned by Brevard County and dedicated for a park in Melbourne. Engineers made the usual boring tests of the ground, and it was determined that the ground was not sufficiently stable for such massive buildings. The State Cabinet chose a site north of Orlando which was near land owned by the former Senior Senator in Washington from Florida!

In 1970, a South Campus for Brevard Community College was approved by the same Cabinet, and two groups of land speculators vied for the location of that campus. Brevard's largest landowner and a coterie of other landowners wanted the site to be a part of the dedicated park land, known as Wickham Park. A group of Miami speculators who owned land south of Melbourne, offered a large chunk of land free plus adjoining acreage at a below-market cost. This land owned by the Miami speculators was closer to where lower-income students lived, most of whom could not afford even jalopies for transportation. The northern tract owners, whose land was in the vicinity of the County-owned park, after many, many public hearings, won. Remember, this was the same tract rejected by the State Cabinet on the basis of engineers' rejection of the subsurface!

About the same time the decision was made to use a part of the Wickham Park land, the leader of the speculator consortium built a $300,000 auditorium on the campus of a private college in the City of Melbourne.


THOSE NOT HAVING LAND MUST PAY TWICE TO GOVERNMENT


It must be remembered that for the right of existence on this earth in America and for the right of government services, all those not holding land must pay twice; first to the government in miscellaneous taxes: occupancy taxes, sales taxes, library taxes, street light taxes, sewage, water, pavement, and sidewalk taxes plus documentary stamps and tangible and intangible taxes when the average individual or married couple buy their little lot and house; and second, to the landlord for the rent of the ground carrying the tenant's shelter.

History does not indicate that the American Indians resorted to battle for the private possession of land. Most of the tribes exercised a communal control of the land, and only the coming of the white man brought bloodshed and strife for ownership. With the passage of the several Homestead Acts in the 1840's both the needy landless and the speculators rushed to stake out claims. Every type of subterfuge was used to obtain a title claim within the framework of the Homestead laws.

With each new opening of the frontier came release of the nation from staggering periodic depression such as these immigrants who had fled from in European countries. While hundreds of millions of acres of our land are still idle, according to Wayne Heydecker, former Director of State Planning for New York State, 65% of the population of the United States lives and works in less than 1% of its total area, and 35% of the people have all the rest of the country-over 99% of it.

Bad as it is in our own country, imagine the plight of the landless of Europe and South America, as two examples.

In most countries of Europe there is no tax collected at all on land value. The reason millions of dispossessed migrated to the United States in the 18th and 19th century was that in those days, prior to the industrial revolution, raising crops on land was the basic industry. But most land was owned by Lords of the Manor. In some cases, a Lord would own an entire town, and from every sale of crop, the rent for the land had to be paid first from the crop sale. Thus, the potato famine brought hundreds of thousands of people to our shores from Ireland. They were amongst the people who acquired their 160 acres of land in the Homestead Acts of the 1840's.

When my wife and I were in England in 1973, I noted that the newspapers reported almost daily that a court ordered exemption from taxes was issued for manorial estates of from 1,000 to 20,000 acres! You have read and seen on TV the plight of British industry and its obsolete machine tools; of its powerful labor unions, who are demanding their share. Of the constant down-trend of the British pound; of the millions of dollars paid by the Government in health care, welfare and other social services. It was not the labor unions nor industry (resistant to modernizing its machinery though it be), but the landlord owning class which pays no tax on its land values, which brought the British Empire to its knees. The British Royal Family, in addition to the huge stipend paid by the Government to operate her castles, is one of the wealthiest landlords in the British Isle. The family even owns valuable lands in New York City.

Way back in 1909, David Lloyd George, the Liberal Party's Chancellor of the Exchequer, speaking before a roaring crowd of cockney dock workers, attacked the House of Lords with these ringing words:

"It will be asked why 500 ordinary men -- chosen accidentally from among the unemployed-should override the deliberate judgement of millions of people who are engaged in the industry that makes the wealth of the country. It will be asked who ordained that a few should have the land of Great Britain as a perquisite? Who made 10,000 owners of the soil, and the rest of us trespassers in the land of our birth? Where did that table of laws come from? Whose finger inscribed it?

"The Upstairs Class has successfully fought off every effort to tax its land values to support a national budget from that day to this."

And Lloyd George's Question still goes unanswered.

Land monopoly got Britain into Socialism. And see what Socialism brought Great Britain! The once greatest empire of all must now borrow $4 billion (1977) from the International Monetary Fund. God knows whether it will ever be repaid, but you will see on TV the landed class riding their horses to the fox hunt.

Similar examples can be given for Spain, Portugal and Switzerland. My friend, Perry Prentice, retired Vice President of Time, Inc., said to me that a 50 foot x 100 foot lot in the suburbs of Bern, Switzerland sells for $50,000, although the house built on it may cost only $10,000! No tax on land values in Switzerland!

Let us look at South America, It was discovered and developed during the same era as the United States, but a big difference occurred in land acquisition. Except for an occasional George Washington, Cornelius Vanderbilt, John Jacob Astor and James Roosevelt, who acquired sizable tracts of land in the early days of the United States, in South America, huge million acre tracts of land were granted by the Spanish and Portugal governments to the conquerors of the South American natives, and to this day millions of acres of land must be rented for crops from Spanish-Portuguese descendants, and millions more are held out of production, thus shoving up the privately collected rents!

Despite the evidence shown in Europe's and South America's land monopoly stranglehold, and that of India, Pakistan and other poverty stricken lands in Asia and parts of Africa, the typical college professor, such as Walter Heller (University of Minnesota) on the left, asks for more government subsidies and controls; or Milton Friedman (University of Chicago) on the right, asks for removal of all controls, all subsidies and Social Security. Neither of these men appear to understand the essence of land monopoly.


NO GROUND RENT TO PAY FOR WARS


In the last century the United States had had five wars with the young manhood of the country made to fight so that wealthy old men may prosper more. If ever there were a time that wealthy men should pay a greater share of their assets, it is during and for the high cost of wars. Many conscientious members of Congress have sought means of collecting more taxes from the wealthy, but to no avail. They cannot find a way of collecting from the rich without destroying their special privileges (known as loopholes) and government-sanctioned private monopolies. The legislators, therefore, prefer to pass on to future generations the responsibility for paying most of previous wars' costs and for redeeming our hundreds of billions in government bonds.

Abraham Lincoln also had a war to wage and to finance. Unwilling to have the government pay the high interest rates asked by bankers for loans, he issued greenbacks, but he also induced Congress to levy a direct tax on land values. While President, Lincoln was offered an opportunity to acquire some land for personal investment. He refused it. Because he would not speculate in land, he found it easier to propose such a tax law to the Congress of 1861. And, if not too many of our present day lawmakers held large areas of land, we? would have a reasonable chance to pass a similar law - specifically framed to curtail speculation and to encourage production.

Present laws on taxing undeveloped or unimproved land holdings vary according to the locality. In some places, improved land is valued and taxed separately from the buildings thereon, and the assessment is supposed to be based on a fair marker value. But this tax on land us usually far below the annual "rental" value created by society.

Consequently, the landowner who has erected a fine building on his property is penalized by the taxes levied on the building. (In New York City, one of the most beautiful buildings of modern times, the Seagram Building, was deliberately overtaxed because it was such a beautiful building!)

On the other hand, the land beneath Rockefeller Center is not taxed is because it is owned by Columbia University. The land under the Chrysler Building is owned by Cooper's Union, so there is no tax collected on that for New York. The huge World Trade Center built in lower Manhattan in recent years is owned by the New York Port Authority, and was given a special dispensation not to be assessed for collection of taxes.

The assessed value of all land in Manhattan is $6,119,856,888. 38% of that land value is tax-exempt. (While we are not interested in this treatise on taxation of buildings, the total assessment in Manhattan is $18,419,004,210. I wrote to both Mayor Beame of New York City and to Governor Carey of New State, and suggested that if New York City would require the huge number of tax exempt organizations to pay a fair share to bankrupt New York, the Federal Government would not have to bail out the city. An administrative assistant of Governor Carey replied that only a small sum was lost through tax exemption. 38% of the land value in New York is tax exempt. I would not call that a small sum.

Consider for a moment the significance of that exemption-in land value only. Now think about your own community, not the land under churches or other non-profit organizations. Just think of the vacant lots downtown, it the residential areas, in the suburban areas, both commercial and residential-all undertaxed in every town or city in America. Usually, there are streets passing them, water, sewer, gas below ground and often electric and telephone lines above or below ground.

You as a taxpayer are helping to pay for those facilities going by that vacant land because the land speculator is only paying a small part of the cost because he is underassessed.

Not only are you paying a part of his taxes, you are also paying in your' income tax the cost of welfare, medicaid, and a multitude of other social service costs that are financed through the Department of Health, Education and Welfare; and subsidized housing that is financed through the Department of Housing and Urban Development -- the two largest funded departments in the United States government next to national security, as represented by the Defense Department.

So your property taxes costs more and your income tax cost more because the owners of the thousands upon thousands of vacant lots and tracts are underassessed all over the United States.

And by virtue of this under-taxation of lots and tracts in the cities -- which are held at unconscionable selling prices, builders must move out into the country, and develop new tracts into subdivisions -- and your city or county is taxed all over again to finance the public facilities to these newly created subdivisions.

Thus is created premature urban sprawl.


WHY LAND PRICES GO DOWN AS LAND TAXES GO UP


People wonder how increasing taxes on land values could bring wider prosperity to the Nation. Income taxes reduce buying power of the public, but if exorbitant, serve as a deterrent to ambition and production.

This is one of the reasons that labor unions in bargaining with management ask for increased fringe benefits in health, dental, and eye care rather than in excessively increased wages.

Any form of taxation -- other than on land values --reduces man's standard of living. All forms of taxes on production: corporate, income, sales, excise, property improvement, inventory-can be passed onto the ultimate user or to the commodity so taxed.

A tax on land-values cannot.

Why?

Land prices in the market-place are arrived at by computing the annual rent at 5%. While interest rates vary, 5% is the conventional return on money for deposits. If a landowner rented his land for $100 per acre, it is assumed that the value of that piece is $2000, the same as if one were to receive $100 return from a bank. (The simplified method of computing the selling price of land is to multiply the annual rent by 20.)

An increased tax on land value reduces the price of land, but not the rent, for full rent must be paid by the leaseholder to someone. When a building is taxed by the county or city, the tax can be passed onto the tenant. But when the land-tax is increased, say, by 25%, the land-owner's rent-take would be $75 instead of $100, and the land which originally could sell for $2000 would now have a selling-value of $1500.

Gradually, over a 5-year period, with the land-tax increased and the building tax proportionately decreased, the land's selling price is reduced (not its value) and it behooves the owner of vacant land or under-improved land to build on that land a structure that will be complementary to the value of that land in relation to the value of its location in the community.

Or put that piece of land on the market to someone who wants to take advantage of the land's lower price under a land-tax economy.

For emphasis, I am repeating:

A tax on land values cannot be shifted either to the lessee of land or to the occupants of buildings on it. Why?

A tax on land values discourages the holder of vacant land from maintaining vacancy and encourages him to put such land on the market, where it comes into competition with improved or tenanted land. Thus, a tax on land values, instead of being shifted to the tenant, will actually reduce the tenant's cost of occupancy.


THE LAW OF RENT: A BASIC THESIS TO ECONOMICS


Its operations are inexorable. It has been at work for centuries in many countries, making a few people fabulously wealthy and millions pitifully poor. We cannot continue to ignore the Law, nor hope to solve our accumulation of social problems until we come to grips with it.

David Ricardo, a British economist and student of James Mills, economist, was the first to voice the essence of it. Adam Smith, the author of "Wealth of Nations", published in 1776, made the first serious attempt to trace the cause and effect relationships in our economic life. James Mill began to puzzle over Adam Smith's observation that too much of England's wealth "went to rent". That was Smith's way of saying that those who owned land (and Smith meant large tracts of land) were able to claim more than their rightful share of the wealth produced.

The definition of the Law of Rent would drive even the most erudite person up the wall, but because it is inexorable, and because fortunes are made through its natural workings, I will state the Law herein.

This, then, is the Law of Rent:

The rent of any given piece of land is fixed by the excess of its productivity of the poorest land in use.

One word of caution before proceeding to an elaboration of the Law of Rent; Productivity can mean many things: crop lands; use of land for developing a subdivision; use of land for building a shopping center; use of land for building a factory or an industrial park; use of a tract of land that is the four corners of an interchange where gas stations, motels, restaurants and gift shops are erected -- on what was once a rural field.

Everyone lives off the land. Food, clothing, shelter, everything that people use comes from the earth.

When economists say "land" they mean air and water and minerals, electricity, timber, oil chemicals, radio and TV channels -- the whole earth with all its natural resources.

Automobiles, houses, books, chairs, TV sets, food, windows, pencils, pictures -- nearly everything people want and need has to be produced by applying labor to land, or to things that come from the land.

In the early days of this country, when good land was to be had for the taking, any able bodied man could support himself and his family. Because land was available, there were not the extremes of poverty and wealth that exist today. There was no welfare system. The only people who had to be supported by charity were the aged or the handicapped who could not work.


WHY DID POVERTY DEVELOP AS WEALTH INCREASED?


As technology has become more productive, the nation has become more and more affluent. But with progress has come poverty until today, in the richest nation in the world, twenty-five million people are receiving some form of aid from HEW.

It is easy to trace the process by which the nation got into the present economic mess:

The first settlers on the virgin land of this continent, naturally chose the most productive land. They fenced in as much as they could and made a good living. Perhaps some found rich land that produced $1,000 a month.

When that high quality land was all taken up, the next wave of settlers moved onto land that would produce, say, $900 a month.

This created an opportunity for those who owned $1,000 a month land to rent it. The newcomer was offered the opportunity to work that land at a rent of $100 a month. This would leave him a net of $900, which is as much as he could get on any available land, so he accepted the offer.

But people kept settling on the land that produced $900 a month until it was all taken up. The next wave of population had to settle on land that would produce less -- say $800 a month.

Now, those who owned land producing $1,000 a month could rent it for $200, which would leave the renter a net of $800 for his labor. Since that is all he could produce on land that was available to him free, some of the newcomers rented the good land at that figure.

At this stage, of course, the land grossing $900 a month could be rented for $100, since that left the renter just as will off as he would be on free land producing $900 worth of crops.

Keep in mind that these figures apply not only to agricultural land and crops, they apply also to timber land, mining land and any land that is valuable because it is productive. The most valuable land was that at crossroads, where stores could be built and cities grew up.)

As the population grew and people were forced to settle on less and less productive land, this process continues. When the free land that was available would produce only $200 a month, the first settlers whose land produced $1000 a month, could charge rent of $800 a month.

Those who owned $900 a month land, charged $700 rent. Those who owned $800 a month land, charged $600. No matter how productive the land, all that any renter could earn for his labor was $200 a month-the figure he could produce on land that was available free.

As population continued to grow the need for land continually increased, and as demand increased, rents increased. Which meant there was less and less for the workers who produced it all.

The owners of the better land no longer had to work; they lived of the perpetually increasing rent.

This is the basic pattern in economics. The unearned income accruing to land inevitably increases as population increases. This economic principle can no more be changed than the law of gravitation can be changed.

This is the reason why it is also inevitable that progress and poverty develop together in an economic order which permits the first settlers and their heirs to charge all who come after them for access to the earth.

But the process doesn't stop when the only land will produce only $200 a month. The day will come when the free land will produce only $100 'a month. Rents on all land take everything above $100 a month, and all wages fall to this level.

Finally, the only free land left is almost non-productive. Workers get pushed clear off the end of the economic scale, and the government has to support them -- or comes the revolution.

The United States is in this position now--with more and more people unable to earn their living, and the government having to provide for them. Arthur Burns, as chairman of the Federal Reserve Board, has proposed that the federal government supply jobs at government expense to enough people to hold the unemployment total down to 3,000,000 jobless.

Many things obscure our understanding of this process. The fact that hundreds of thousands of skilled workers organized into labor unions draw good wages and salaries keeps us from seeing clearly that the great mass of people are being crowded out by the perpetual increase in rents at the expense of wages.

Even those union workers who draw good incomes are being robbed by this process because they have to pay in taxes to support those who are crowded off the end of the economic scale, so that their good incomes can hardly keep up with their total expenses. Even though their gross pay is high, they are hard pressed to make ends meet-and it becomes harder and harder as the rents collected by those who own the earth are continually raised.

Once we understand the process which leads to economic disaster, it is not difficult to know what to do about it. But it is difficult to do it -- in fact, it is impossible, because those who are collecting rent from the land -- without working for it-are not willing to give up that privilege. They are not about to permit the changes to be made that would save the society.

We have discussed only one of the three basic monopolies -- the chief one -- that monopoly which prevents you from having shelter for your family or space for your enterprise unless you pay tribute to some one else for the use of that part of the earth you need.

Government must have the income it needs, but this revenue should be provided by a system of taxation that does not foster special privileges nor favor the social parasite at the expense of the common producer.

P. I. Prentice, for 25 years Vice President of Time, Inc., and one time editor-publisher of "House and Home" the most prestigious trade publication in the construction industry, has said that the builders did not complain about the high cost of labor and materials. They repeatedly told him "When rural raw land reaches $10,000 per acre, do you wonder we have to build condominum apartments, and thus put 200 living units upward on a more two or three acres of land. Roomy three bedroom houses can even be built for $25,000 but by the time we builders subdivide the land, the individual lot represents almost HALF the cost of the purchase price of the home!"

When Government is ready to collect the full economic rent of land -- regardless of improvements -- a new day of prosperity will dawn, and -

  1. Speculators now controlling vast areas of idle land will find it expedient to build badly needed houses, develop entirely new communities, or put their title deeds on the market.
  2. Those holding land desecrated by dilapidated tenements will be forced to tear them down and build modern housing, in order to command more than the ground rent. Instead of the mayors of the cities appealing to every new President of the United States to feed them hundreds of millions of federal dollars, the mayors could meet the costs of city services by taxing only the land. Huge blocks of slums would be torn down and new housing erected by apartment house builders, rather than by subsidy. The building program would be so enhanced that hundreds of thousands of people would be glad to return to the city with its many cultural facilities.
  3. Others controlling well located plots, upon which obsolete stores stand, will find the land a good investment only if they replace these buildings with modern structures. The construction industry is an important part of our economy. Unemployment from 1975-77 hovered between 7.5% and 8.5%. A construction boom would emphatically reduce that cost in human misery -- unemployment.
  4. The removal of taxes from buildings and improvements will be an incentive for extensive new building and for general remodeling. An active building program will stimulate other industries, and both skilled and unskilled labor will find a livelier market for their services. Cities and sectional environs within cities will be more spacious.
  5. The taxation of land values, in lieu of the present heavy taxation on improvements and the under-taxation of the land itself, would mean a more equitable tax policy for different classes of land holdings. In most shopping center areas, where huge location values are created by the constant pressure of population movement, owners would pay more land value taxes. But commercial buildings in older downtown areas that have been by-passed by the new shopping malls, would enjoy a lower land value tax cost than their present land-and-building cost are today.

Homeowners, whose greater investment usually rests in the house, would pay less, often as little as one-third to half what they pay now.

I have been in the building and/or real estate business for 30 years in Melbourne, Florida. It saddens me to see young couples unable to buy or build a home under the conditions of inflated land; and to see retired people have to live in mobile homes because land inflation has depreciated their life-time savings.

I have taken several thousand words to tell why homes cost so much, why sites for commercial buildings and professional buildings cost so much so that the goods you buy in the store and the medical, and legal services you buy from the doctor and lawyer costs so much.

NOTES


* Economist, social philosopher, author of Flight From The City, This Ugly Civilization and many other expose books. Founder, School of Living and the Village of Bayard Lane, near Suffern, N.Y. The School of Living later moved to Heathcote, Freeland, Md. 21053, Rt. 1, Box 129.