More Thoughts on the Theory of Interest

Laurie J. Quinby

[Reprinted from Land and Freedom, March-April 1938]

If, properly, I interpret the comments of Mr. W. G. Stewart, it appears to me that I had covered the essential points of his kindly "criticism" in my article under discussion. Yet, he is entitled at least to some elucidation of what I said, in the event that my statements were not sufficiently clear.

In all research based upon scientific principles, there should be a clear and definite understanding in the use of terms. Henry George was always definite in making this truth paramount. It seems to me that never could there be any reason for differences of opinion with respect to any truth, if they who expound it used the same language. For instance, would not a universal language go far to promote universal peace?

Mr. Stewart says we agree "that rent-yield from land investments (about one-half of all) is unnatural." Is he not here falling into the error of some "professors of economics" of confusing rent and interest? If he means "rent" as including payment for the use of land and the improvements upon it, he is. If he uses the term "rent" in the same sense as did Henry George, that is, payment for the use of land alone (unimproved), then I do not comprehend his meaning "about one-half." One hundred per cent of it is "unnatural," if by the latter term he means that it is unnatural for any individual to appropriate it to his personal advantage. But rent is when we understand it as compensation for the use of land. It is not "unnatural," but strictly natural viewed from the standpoint of natural law. It arises solely and naturally from the demand of mankind for the use of land, from which not one individual of us may escape, so long as we mini with our fellows. It will do this despite the fact of whether it "owned" by one or by many. That fact forms the sole basis for a claim that "The rent of land belongs to the people." If the [unreadable] is true, our claim is just having its foundation in natural justified "Rent" which is paid for the use of both land and improvements two-fold, which obliges one discussing the scientific principle of it distinguish between compensation for the land or site itself and t improvements upon it. That for the land properly is rent. The part for improvements is interest or wages. If the improvements have been made through the employment of labor of others, the return (yield) is interest. If it is for improvements performed the "owner" himself, it is wages.

(Parenthetically, who of us has not heard the shallow socialism statement, "Socialism includes the government ownership of land As if that fact would alter or annihilate the natural law of rent. Land and its value are two different things. One is a natural product. The other is truly the product of human association and social a individual necessity of toil and enterprise. If only F. D. R. can grasp this simple truth, it would save him from some of the blindness of his methods.)

Quoting Mr. Thompson's article, Mr. Stewart asks if the followers; Henry George will dispute the statement "so long as wealth can puchase land that will yield a revenue, just so long will man refuse to loan wealth without demanding a similar return." Of course not, it does that imply the converse? Does it mean that after government appropriates rent, men will lend "wealth" "without demanding similar return?" Perhaps it might be so, but that will be when we work without wages and lend without interest.

As a general rule men do not lend "wealth" except as wealth may be estimated as capital. They do not lend wealth at all in make a loan of money, for the simple reason that money is not wealth, merely a representative of wealth. No sane person borrows more simply for the sake of having it. He converts it at once into wealth in the form of food, clothing or shelter, or into capital for some business enterprise. The reason for the fact that wages and interest rise or fall together is that both are essential to the production of wealth. It is not wealth that earns interest, but capital. Neither labor nor capital can be employed without the aid of the other. Demand for one involves demand for the other. Wages compensate labor, interest compensates capital.

Regarding question No. 2, I agree that rent does and always does affect the returns (yield) of products generally. For regardless of what power collects it, it must come out of the production of wealth and only they who produce the wealth will pay it. But the difference between the social appropriation of rent and its private collection, as now, is, that what is paid will go as recompense for services which government, as representative or agent of the social compact, shall render, instead of into private coffers of persons living upon the sweat and blood of mankind. And that would be [unreadable] difference!"

With reference to the natural increase in raising "pigs, wheat, … etc.," there is indeed a "special help" on the part of nature. That is, the natural laws of growth or increase do aid labor, but let us forget that it is labor alone which is the beneficiary, or should be … this "special help." In domestic affairs, the calf does not develop into a cow, except through the toil of man, nor does the juice of grapes become wine except through the same means employed in various ways. To the laborer, in these as in all cases, belongs the fruit toil.