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]
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
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
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
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
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 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
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
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
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:
- Collecting rents from those who require land, particularly
urban sites or mineral resources.
- A tariff which the Government, at the behest of "Privilege",
has imposed in order to raise domestic prices above a free
- 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
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
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.
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
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
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
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
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
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
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
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
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
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.
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
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
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
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
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
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
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 -
- 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.
- 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
- 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.
- 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.
- 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
Homeowners, whose greater investment usually rests in the house,
would pay less, often as little as one-third to half what they pay
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.
* 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.