from A Manual of Political Economy
by James E. Thorold Rogers (1868)
The payment made for the use of the soil, known under the name of the rent of land, has attracted the attention of English economists, to a far greater extent than it has that of those who have derived most of their information from foreign countries. The reason is, that the occupation of land in this country is peculiar, and the phaenomena of rent are more manifest. In this country the cultivator of the soil and the owner of the soil are, as a rule, different persons; in other countries they are, as a rule, the same; or, when they are not the same, the owner of the soil rather occupies the position of a perpetual lessor, or mortgagee, than that of a landlord whose contracts with his tenants are constantly liable to revision, and who is able to exercise a considerable control over the acts of the person who occupies and works the soil.
Rent has been defined to be the payment made for the natural powers of the soil. This definition is somewhat vague, because it must be limited by several conditions before it becomes true, and when it is true, it becomes necessary again to define the meaning of the expression ‘natural powers.’ For it will be seen that as long as any part of the territory of a country is unoccupied and unappropriated, rent will not be paid for such natural powers as such a residue possesses in common with other occupied and appropriated soils; and rent will be paid for the use of the appropriated soil only because it is nearer to the market, and its produce may therefore be more easily disposed of. But it would be a mere figure of speech to say that the demand of purchasers for agricultural produce, and the nearness of a field to such a market, had anything to do with the natural powers of the soil.
For example, fertile land in the western parts of the United States is almost worthless, or at any rate is worth no more than a dollar an acre, the price at which the government, which has assumed an ownership in all the land lying within the political limits of the United States, is accustomed to sell it. Land however which lies within ten miles of the city of New York, may bring a rent perhaps as high as any within ten miles of London. The reason why, within the same political community, in two tracts, possessing equal natural powers, the rent of the one is nil, and that of the other is high, is to be found, not in the natural powers, but in the artificial demand of a dense and near population. Before this demand arises therefore, rent will not be paid, for a primary condition of rent is demand for the produce, a demand which becomes more urgent as population increases. Hence the growth of population is intimately connected with the rent of land.
But again, there is no doubt that certain natural powers must exist in land before produce can be obtained from it. Neither corn, nor grass, nor roots, which directly or indirectly form the food of man, will grow on the surface of a rock, or on soils whose chemical properties render them incapable of sustaining vegetation, nor, except partially, on such soils as those whose vegetative constituents are defective. Beyond the conditions that cultivable land must be pulverized and watered, in order that plants may get root and grow, it is necessary that they should also contain certain other constituents which are not found naturally in air and water. Thus, for example, all wheat-growing soils must contain potash, phosphorus, iron, manganese, and sulphur, to judge from the analysis of the grain. These constituents exist in various degrees in various soils, and are supplied in various proportions of sufficiency and solubility by those soils which possess them.
So again, though heat and light and water are generally distributed over the surface of the earth, the extent of their distribution may variably affect the productive powers of the soil. Excessive heat, joined to excessive moisture, is peculiarly favourable to vegetable growth. But it is unfriendly to human life, and these natural forces are therefore, in so far as man cannot live under their influence, of no economical value. But they are also unfavourable to the growth of the most valuable kinds of human food. The best wheat, as a rule, is grown close to the margin of those climates in which it will not grow at all, and becomes inferior the more southerly the soil on which it is cultivated. Fertility, to constitute an economical quantity, must be capable of appropriation and be appropriated.
Again, the demands of population may be very urgent, but rent may be scanty or almost unattainable. I have alluded in a previous chapter to the very different value of land in England, as measured by rent, five hundred years ago and at the present time. While corn has risen about nine times in nominal or money value since that period, the rent of the same plots of arable land has risen from forty to sixty times, while much land which could bear no rent at all has become available for this purpose. But the pressure of population was just as keen during the period referred to as it now is, in point of fact far more keen, for dearths, now happily infrequent, were common in those times, and there was just as much eagerness to cultivate poor soils as there now is.
The common theory entertained about the occupation of land is, that the best soils were first cultivated, that is. those soils the cultivation of which cost least labour in proportion to the produce attained; that as population increased, poorer soils were taken into cultivation; and that, under these circumstances, the better land yielded a rent, the inferior land just paying for the cost of cultivation, and leaving no margin over from which rent could be derived. The theory is quite hypothetical, and has absolutely no historical foundation. It may account for the difference between the rent of two plots of land, both equally open to the same stimulants of demand and the same facilities or difficulties of supplying the demand, but it does not give any real account of the mode by which rents have arisen and have increased. Now there is no great discovery in telling any one, that difference between rents arises from difference in the relative fertility of soils. Every man who rents or lets land is perfectly familiar with this fact.
There is not a shadow of evidence in support of the statement, that inferior lands have been occupied and cultivated as population increases. The increase of population has not preceded but followed this occupation and cultivation. It is not the pressure of population on the means of subsistence which has led men to cultivate inferior soils, but the fact that these soils being cultivated in another way, or taken into cultivation, an increased population became possible. How could an increased population have stimulated greater labour in agriculture, when agriculture must have supplied the means on which that increased population could have existed? To make increased population the cause of improved agriculture is to commit the absurd blunder of confounding cause and effect. Had this theory of rent been merely speculative, no harm would have happened. But it has been carried out into that of population, and a number of imaginary dangers and safeguards have been suggested, from this presumed origin of rent. In dealing with the question of population, a great many fallacies have been defended, and a great many wrong practices encouraged. The development of agriculture, the advantageous cultivation of inferior soils, goes on simultaneously with the numerical decline of that part of the population which labours on and is directly subsisted by the soil.
The question may be asked however, What was the origin of that theory which is alluded to above, and which conceives that rents have arisen from the necessity that has existed of taking inferior lands into cultivation as population pressed on the means of subsistence? The answer is to be found in the same exceptional set of circumstances which originated and confirmed the Malthusian theory of population. The ordinary resources of the community, owing to a succession of deficient harvests, and to the cessation of foreign supplies, consequent upon an exhausting and general foreign war, were curtailed. The laws of the time starved the people. It was therefore advantageous, under an abnormal set of circumstances, to take lands into cultivation which, under the ordinary conditions of supply, would never have repaid the charges of agriculture. Hence arose the notion that rent was invariably due to those causes, to which an enquiry into economical history shows it can be only exceptionally due. If by any mischance, or mismanagement, that fraction of the British population, (amounting as a rule to one-fourth of the whole) which subsists on imported corn, were suddenly deprived of this supply, and the produce of the world were shut out from the British market, (a contingency which we may fairly conceive impossible,) the same circumstances would occur which induced, sixty years ago, the cultivation of grain on poor land, and which gave colour to the opinion that rent was due to the pressure of population on the means of subsistence.
The occupation of inferior soils and the increased fertility of land long cultivated is due to the growth of agricultural art, and is stimulated at once by demand and by high prices of labour. In just the same way as a manufacturer strives to attain greater results at less cost of labour, and thereupon invents, economizes, and adds new and cheaper forces, so the agriculturist busies himself in such inventions and economies as increase his gains, by diminishing the charge of labour, and by effecting a greater return for his outlay. The progress of agriculture, just as with other arts, is due to a judicious interpretation of forces, an intelligent self-interest. There must be a demand, in order that improvement may be stimulated, but we know also, that the demand may be urgent, but the improvement may be slow or nonexistent. To improve agriculture needs capital, industry, intelligence, a sense of security, and a conviction that cost incurred will be remunerated. And this is just what has happened in the history of the art of agriculture. We cannot see this better than by comparing the process of agriculture 500 years ago with that of the present time.
In those days, then, half the arable land lay in fallow. The amount produced was, to take wheat as an example, about eight bushels the acre in ordinary years, i. e. little more than a third of an average crop at the present time. There were no artificial grasses. Clover was not known, nor any of the familiar roots. As a consequence, there was little or no winter feed, except such coarse hay as could be made and spared. Cattle were small, and stunted by the privations and hard fare of winter. The average weight of a good ox was under four cwts. Sheep too were small, poor, and came very slowly to maturity. The average weight of a fleece was not more than two lbs. With ill-fed cattle, there was little or no manure. Iron was very dear, costing, to take wheat as a standard of relative value, nine times as much as it does now. But the number of persons engaged in agriculture was nearly as numerous as it now is. It embraced, to be sure, nearly the whole population, though all their labour did not produce an eighth part of that which is gathered at present. Permanent improvements of the soil too were very imperfectly carried out, not for want of will, but for want of knowledge. The farmers of the time were shrewd enough, but they knew very little. Rough draining, ditching, and ridging were used in wet soils, and this drainage was sometimes done on a large scale where land admitted its use. But their ploughing was superficial, and as for selecting breeds of cattle, though they had many varieties of oxen and sheep, it was useless to think of it. No selection could be effectual when the stock was half starved in the winter; for improvement in the breed of cattle is only possible when food is plentiful and regularly supplied.
The development of agricultural science, and its application to practical farming, is not the result of a pressure of population upon the means of subsistence, (such an event would rather check than aid it,) but the effect of intelligent self-interest. The customary demand existed, and if the farmer could satisfy it at one-third the cost, he could at least be able to appropriate a portion of that percentage. Hence the introduction of roots, originally, it seems, from Holland, the discovery of artificial grasses, the supply of artificial manures, the analysis of the chemical properties possessed by the soil, the adaptation of mechanical forces to agricultural processes, and the selection of seeds and cattle. All these discoveries and adaptations have increased produce, or diminished cost, or both.
Now if these discoveries and substitutions had not been conditioned by the occupation of a large area of the earth’s surface, most of the benefit would have been the property of the producer, the labourer, and the consumer. Everybody is now sharing in the benefit of Watt’s and Arkwright’s discoveries, for the commodity is cheapened, and the process is free. The general benefit of these agricultural discoveries lies in the fact that a large portion of the population was liberated for other productive energies, and that the resources of society were pro tanto increased. But the particular or special benefit lies with the owner of the soil, the person who licenses another to use it, and who is able, by reason of the fact that the instrument of agriculture is limited in extent, to exact, in accordance with a social law, a certain compensation from the occupier. The landowners of a country, in short, are, as agriculture advances, in the position which a nation would be with regard to the interest of money in case the capital which could be employed were a rigid and invariable quantity, and its productive use were regularly increased. The landowners possess just such a capital, and they are continually enabled to raise the interest on advances of land, as the science of cultivation increases.
Assuming then that the demand for the produce of land is constant, we shall find that the proper definition of rent is:—all that remains in the price at which the produce of land is sold, when the cost of production is deducted. If the average produce of a farm is worth £1000, and the average cost of production is £800, the average rent of the farm will infallibly be, should the land be let by open competition, £200. Of course, as in other business, exceptional skill, early adaptation of new discoveries, judgment in interpreting the rise and fall of markets, will give one farmer an advantage over another; but if agricultural skill be generally diffused, nothing will prevent the excess of price over cost from finding its way to the landowner in the shape of rent.
The landowners in this country, whose influence was overwhelming in the legislature, were well enough aware that high prices of agricultural produce involved high rents for land. They had unhappily adopted, at least those who were most intelligent among them, the position that rent is due to the pressure of population, and the consequent occupation of inferior soils; and they therefore strove to starve population, and force this unproductive cultivation, by excluding the general mass of the population from the foreign market of supply. To some slight extent, and in appearance to a large extent, they succeeded; for the machinery of the poor-law enabled them to put part of the charge of labour on those who did not employ labour with a view to profit. But in the greater part of this scheme they failed, and inflicted on themselves evils similar to those which they strove to put
on others, and to a great extent did put. They wished to keep the people poor, in order that they might maintain a high price of wheat. They kept the people poor, and they lowered rents, because they could not appropriate more in the shape of rent than the quantity by which the demand of purchasers could exalt the price of produce over the cost of production, and as they narrowed the circle of purchasers, they lowered the motives of improvement, and stinted the powers of the cultivator.
For throughout the whole of the controversy on the nature of rent, people argued persistently, as though everything was to be measured by wheat. Wheat was the staple food of the people, and therefore, every process of production was to be referred to this standard. But the staple food of the people is one thing, the staple industry of the home-producer is another. To limit the latter by the former, unless under compulsion, is prodigious folly. But this was done by the corn-laws, which prevented the farmer from seeking to supply a market for other agricultural produce, by forcing him to devote all his energies to the production of wheat. The act was only less absurd than it would be to abandon all the cultivation of grain in the south of England, in order to take up with that of vineyards.
At the present time we know better. The farmer, it is true, grows wheat, it may be advantageously, but also it may be necessarily, as one in the rotation of crops. But he also grows other kinds of grain, and especially provides meat and dairy produce; articles in which he is naturally protected, because they cannot be imported, or cannot be easily imported from foreign countries. Now no one pretends to say that the soil of Great Britain has gone out of cultivation since the repeal of the corn-laws, or is occupied less beneficially for the landowner. On the contrary, there has been a regular annual rise in rent, since the repeal of the corn-laws. The fact is, if the farmer has lost on the cultivation of wheat, he has gained on that of barley, probably on that of oats, while the price of meat is fifty per cent. higher, and butter and milk, especially in country places, are nearly twice the price they were twenty years ago. The farmer, in short, has turned that to account which free-trade in corn has silently taught him; has abandoned, or resigned in some measure, the production of wheat to the American farmer and the Russian peasant, and has occupied himself in producing that which pays him better, and ultimately increases the margin from which rent is payable. The cheaper the artizan or other labourer can get bread, the better able is he to buy meat, for the larger overplus there is in wages above the price of the first necessaries of life, the larger means are there for buying the secondary necessaries, its comforts, and its luxuries. A densely peopled country like England is, as I have said before, like a vast city, to which the less peopled parts of the civilized world are an agricultural country, which is glad to send its overplus of provisions in exchange for the luxuries and conveniences of a manufacturing region.
Since therefore the rent of land is all that is over and above the price at which the produce of land is sold, after the cost of production is deducted, we shall find that what measures the rent of agricultural land, equally measures the rent of business premises. A large trading house in one of the great London thoroughfares may be let at, say £2000 per annum of rent. Now some part of this sum is interest on capital expended in the building itself. Let this amount to £10,000, and, at six per cent., be £600 a year: the remaining £1400 is ground-rent, i.e. is a payment made for a particular site because it has certain conveniences, productive powers, or, to use an analogous term, fertilities, which another site, on which a building equally costly might be erected, would not possess. The person who rents such premises believes, and no doubt with good reason, that it is worth his while to pay this large rent, because he recovers it in the business qualities of the site. And we may be quite sure that, roughly and on an average, the superior business properties of such a site as I have described are worth just the difference between the rent of an equally costly building in a locality which has no such advantages, and the rent of a place which has them. Exactly the same rule will apply to the rent of a coal or other mine, a shooting moor, a salmon stream, or any other right of using the surface of the earth by purchase from its owner.
These facts, which explain the origin of rent and the measure of its extension, will also account for great fertility or capacity on the part of some soils not being followed by the rent which apparently should be derivable from them. For example, it is constantly the case that land which has only lately been taken into cultivation (such for example as the gentler declivities of chalk downs) will bear a rent of, say eighteen shillings an acre, while old arable land will bear no more than thirty shillings, and this while the produce of wheat on the former is not more than twelve bushels, that of the latter is twenty-eight bushels the acre. On investigation, and on all other crops being taken into account, this seeming discrepancy will always be explained by the comparative cost of production. It will be found for instance that the cost of ploughing, dressing, and manuring the richer land is greater, that the capital employed is more to the acre, that it costs more to get the crop in, and so forth; and that we may be quite sure of the formula (supposing the rent in each case were to be equally determined by competition) being as follows:—As eighteen shillings are to thirty shillings, and as twelve bushels of wheat, &c., are to twenty-eight bushels, so is the cost of producing the smaller quantity to the cost of producing the larger.
Thus it comes to pass that the rent of grass or meadow land is so much higher than that of arable. It costs less to cultivate it, and the margin of rent is greater. The farmer can always pay more, the less capital he needs for cultivation. This fact is equally clear in the history of rent derived from the same parcels of land. Arable rents, as I have said, have risen from forty to sixty times, natural meadow-land rents have risen from ten to twelve times only; for that which was possessed of these qualities five hundred years ago was, with some slight differences, cultivated with as little cost as it now is.
As the rent of land is that which remains over and above the cost of production, it is paid last, i.e. when all the other contributories are satisfied. Such a state of things is perhaps never historically exhibited, for as a rural population, however poor, can always be made to pay some tax, so they may be always made to pay some rent. Such a rent however is artificial, just as the rent of land would be in those parts of the United States where a dollar an acre is paid for fresh prairie, or in the Australian colonies where a pound an acre is charged for grants of public land, these regulations being accompanied by prohibitions of squatting. The rents of the middle ages were rather taxes than rents, sums extracted from the subject peasantry rather than compensations for the use of a natural agent, the amount of which was limited and the whole appropriated. But though the satisfaction of rent comes last, the amount of rent, as my reader will anticipate, is an increasing quantity. If by some device or invention the produce of the soil could be procured at half the cost at which it is procured at present, nothing could prevent the whole difference from being (other things being equal) paid as rent, just as the product of past inventions has been and is appropriated by the landowner as soon as these inventions are generally used. Such an appropriation is inevitable if we recognize a permanent property in land, and if a right be conferred on the owner of securing all the future as well as the present value of his estate. Such a right has almost invariably been accorded, because it is believed that industry in developing the resources of the soil would not be exercised were the ownership imperfect or contingent, or liable to sudden determination on paying the present capital value of the usufruct. If this be the case, it will be seen that the argument is very strong for securing fixity of tenure for the occupier of the soil as well as for the owner.
My reader will now be able to anticipate the causes which will increase rent and those which will diminish it, viz. everything which diminishes or enhances the cost of production. Thus the introduction of machinery, if, as is invariably the case, it is cheaper in the gross than human or animal labour, will tend to increase rents. Of course machinery is costly; but no one would use it except it were cheaper than other labour and unless it lowered the cost of production. And on the other hand, any increase in the cost of labour, any scarcity of labour which cannot be compensated by an increased use of animal or mechanical labour, will tend to, and in the end will ultimately effect, a diminution of rents. Every permanent improvement of the soil, every railway and road, every bettering of the general condition of society, every facility given for production, every stimulus supplied to consumption, raises rent. The landowner sleeps, but thrives. He alone among all the recipients in the distribution of products owes everything to the labour of others, contributes nothing of his own. He inherits part of the fruits of present industry, and has appropriated the lion’s share of accumulated intelligence. But if he gets it from no merit or labour of his own, he gets it by the operation of natural causes. The only hindrance to his prosperity is his too frequent wish to be wiser than nature, more eager to grasp than society is to give, and therefore to be apt to hinder the beneficence of other men, in his desire to intercept their earnings before they begin to pour them into his lap.
What has been said applies only to those powers of the soil to whose development the landowner has contributed nothing. Those which are the result of positive outlay on his part, exactly like every other kind of fixed capital, are constituted in the immediate anticipation of profit, and like every similar investment, are followed by profit if the outlay be wise. In some cases, as for example in the draining of Whittlesea Mere and the great enclosure near Beddgelert, the rent of such land may be entirely interest on capital. In the great majority of cases however, as for instance in subsoil and surface draining, the outlay which renders the land more fertile is very small beside the capital value of its unimproved powers. Nor, again, do these statements apply to payments made for the use of houses, and which are familiarly but improperly called rents. These are merely payments, the ground-rent being deducted, for the use of capital invested in buildings, and are exactly analogous to interest on advances; for the tenant borrows a house on which he makes a periodical payment, in just the same way that a borrower gets a loan for which he pays a periodical interest.
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