3. FREE-LAND IN PRACTICE
After the land has been nationalised it will be divided according to requirements of agriculture, housing and industry, and leased by public auction, for terms of 1, 5, 10 years, or for life, to the highest bidders. The leaseholders will be given certain securities for the stability of the economic factors upon which they base their offer, so that they cannot be crushed by their contract. This object could be achieved by the guarantee of minimum prices for agricultural products, the currency being adapted to these prices; or by reduction of the rent in case of a general rise of wages. In short, as the purpose of the reform is not to harass the farmer, but, on the contrary, to create and maintain a flourishing state of agriculture and a healthy farming class, everything possible will be done to bring the yield of the soil and farm-rent into permanent agreement.
The possibility of nationalising agricultural land has been repeatedly demonstrated by experience. Land nationalisation converts the whole land of the country into leasehold farms held from the State, and leasehold farms, both private and national, already exist in every part of Germany. Through nationalisation we simply make an existing institution universal.
Leasehold tenure has been objected to on the ground that the tenants will be more inclined to impoverish the soil than the present owners who are personally interested in keeping the soil in good condition. The leaseholder, it is said, squeezes everything out of the soil and then moves on.
This is about the only objection that can be made against leasehold tenure; in no other respect is there any difference between tenants and owners, in so far, at least, as the welfare of agriculture is concerned. For both pursue the same object, namely, to obtain the highest yield with the minimum of labour.
That farming methods tending to exhaust the soil are by no means a peculiarity of leaseholders may be seen in America, where some wheat farmers squeeze their soil to the point of complete exhaustion. Wheat farms that have been so exhausted may be had by the hundred for small sums. In Prussia, on the other hand, the State farms are said to be farmed on model lines. And these farms are worked by leaseholders.
But in any case exhaustion of the soil by the tenants can easily be prevented.
If a leasehold farmer exhausts the soil, the fault invariably lies with the proprietor, who allows the farmer to adopt such methods simply to obtain a higher rent for himself, for a few years. In this case it is not the tenant but the landowner who is guilty of exhausting the soil. Sometimes the proprietor consents to short-term leases only because he does not wish, through granting a longer lease, to lose the chance of a favourable sale. Under such conditions he will not of course find tenants willing to improve the soil, but the evil in this case is not the system of leasehold tenure, but the system of private ownership of the land.
If the landlord wishes to make exhaustion of the soil impossible he can draw up the contract accordingly. If the farmer is bound by contract to keep enough cattle to consume the fodder grown on the farm, and is forbidden to sell hay or straw or farmyard manure, this clause alone is sufficient to protect the soil.
If, in addition to this, the farmer is given full security that the farm will be his for life if he so desires, with a prior right of tenancy for his widow or children, there is no fear of his exhausting the soil, unless indeed his rent is too high, so that he has no interest in prolonging his contract. In this case, however, the above mentioned clause would suffice to prevent exhaustion of the soil, and a similar clause could be devised to meet other conditions. There are soils unsuitable for cattle-breeding but very suitable, say, for wheat-growing. In such cases the farmer could be bound by contract to return to the fields, in the form of artificial fertilisers, what he abstracts from them through the sale of the wheat.
It may also be mentioned that since the discovery of artificial fertilisers, exhaustion of the soil is no longer such a grave problem as it was when the only method of restoring fertility to exhausted soil was to let it lie fallow. Formerly it took a whole lifetime to restore an exhausted field, now fertility is restored promptly by the use of artificial manure.
The condition of Ireland is pointed to as a warning against careless farming by tenants, but we must here remind our readers of the most important feature of nationalisation of the land, namely that rents will no longer enrich private individuals but flow into the public treasury whence they will be restored to the people in the form of reduced taxes, endowment of motherhood, widows' pensions and so forth. If the rents which the absentee landlords, year in, year out, for 300 years, have abstracted from Ireland to spend in idleness elsewhere, had been left to the Irish people, the condition of that country would be very different.
Other examples, such as the Russian "Mir" and the German commonages have been mentioned as warnings against leasehold farming. But here again, as in the case of Ireland, the comparison with nationalisation is inadmissible. In the "Mir" a new distribution of the land takes place regularly every few years, when by deaths and births the number of members of the commune has changed; so that no one ever remains in possession of the same piece of land for any length of time. If a member of the Mir improves the soil, he has to share the benefit with the whole Mir, so his personal gain is small. This system inevitably leads to negligent cultivation, to exhaustion of the soil and impoverishment of the whole community. The Mir is neither communism nor individualism; it has the disadvantages of both and the advantages of neither. If the Russian peasants farmed their land jointly after the fashion of the Mennonites, the common interest would teach them to do what the landowner does for the improvement of the soil. And if they reject communism they must accept the consequences and adopt a system of through-going individualism.
It is the same with many of the German commons which are generally reputed to be in a wretched condition. The mistake is here the short tenures which encourage rapacious methods of farming. It almost looks as if the village councils were bent on discrediting the common property in order to pave the way for dividing it up; a plan which has been successfully practised in the past. If this suspicion is well founded the poor condition of the common lands should be attributed to the system of private ownership, for it is the hope of converting the commonages into private property that causes their neglect. If the proposal to divide up the commons were made punishable, and the land were declared the inalienable property of the communes, this deplorable state of matters would be quickly remedied.
What the farmer really needs is the assurance that whatever money and labour he expends on improving the soil will benefit him directly and personally, and the rent-contract must be devised to give him this assurance - as it easily can be.
The most important land improvements cannot however be undertaken without infringing the principle of private ownership of the land. How, for instance, is a private individual to construct a road to his fields across the property of his neighbour who may be his enemy ? How do we construct a railway line or a canal through the property of 1000 private individuals ? Here the principle of division of property and of private ownership of land must always give place to legal expropriation. No private individual can construct dykes as a protection against floods along coasts and rivers. The same is true of the drainage of swampy land, where the plan must ignore boundary fines and be adapted solely to the lie of the land. In Switzerland 75,000 acres of land were drained by turning the Aar into the Lake of Biel, an enterprise which required the co-operation of four cantons. In this case the private proprietors could have done nothing whatever, and cantonal ownership had also to be disregarded. In the correction of the course of the Upper Rhine even the principle of Swiss national ownership was not enough; for the undertaking could be carried through only by an arrangement with Austria. How is the private owner on the Nile to get his water for irrigation ? Is the principle of private ownership to be extended to afforestation, on which the climate, the condition of the water courses, navigation, and the health of the whole people depend ? Even the food supply of the population cannot safely be left to the private proprietor. In Scotland, for instance, a few landlords, protected by the laws of private property, depopulated a whole area, burning down the villages with their churches, simply to turn it into a game preserve. The same thing is done by the great landed proprietors in Germany who, under pretext of anxiety about the food-supply of the people, demand protective duties which increase the price of the people's bread. The principle of private ownership of land is incompatible with the interest of hunting and fishing, or the protection of wild birds. And the incapability of private property to fight pests, such as cockchafers and locusts, has been seen in Argentina, where each proprietor confined his efforts to driving the locusts off his fields into those of his neighbour - with the result that these insects multiplied and for three years in succession completely destroyed the wheat crop. Only when the State disregarded private property and had the locusts destroyed wherever they were found, did they disappear. It is much the same in Germany with regard to the fighting of pests. What for instance can the individual vineyard proprietor do against phylloxera ?
Private ownership fails wherever the motive of selfishness of the individual fails, and that usually happens when there is a question of the improvement or protection of the land. If we were to believe the German agrarian party, the principle of private property in land would have to be completely abandoned, since "the plight of agriculture" (meaning the plight of the receivers of rent) of which they complain, can only, according to them, be removed by the forcible interference of the State, acting through protective-duties. So the private owner, according to the landowners, can do nothing for the plight of agriculture.
Private ownership, through the right of succession, necessarily leads to the division of land or to mortgaging. Exceptions are rare, being limited to the case of an only child.
The division of land leads to those dwarf farms which produce general poverty, and mortgaging makes the landowners so dependent on currency policy, interest, wages, freight-rates and protective-duties that in practice scarcely anything remains of private property in land. What we have today is not private ownership of land, but the politics of private ownership of land.
Let us suppose, for example, that agricultural prices fall heavily in consequence of one of the frequent blunders in currency policy, such as the introduction of the gold standard. How is the farmer to raise the interest for his mortgage? And if he does not pay the interest, where is his property ? How is he to protect himself except by his influence on legislation, which allows him to regulate the currency, and consequently the burden of his mortgage, according to his desire ? And if the rate of interest rises, how is he to escape the hammer of the auctioneer ?
The landowner is forced to cling to legislation. Unless he takes an active part in politics, and controls currency, import-duties and railway rates, he is lost. What would become of landowners if it were not for the army ? If the yellow peril becomes a reality and a man without property finds Mongolian rule still more irksome than Prussian discipline, he can throw down his tools and emigrate with his wife and children and a bundle of clothes. So can the landowner - if he is prepared to abandon his landed property.
Thus private ownership of land can be maintained only with the aid of politics, being in itself a product of politics. It may be said that private ownership of land is the embodiment of politics. Without politics there can be no private ownership of land, and without private ownership of land there can be no politics. After nationalisation of the land, politics would become a thing of the past.
After nationalisation of the land, agriculture loses all connection with politics. Just as even today leasehold farmers as such have no immediate interest in the currency, import-duties, wages interest, freight-rates, construction of canals, extermination of pests; that is, in the "great" - and sordid - problems of contemporary politics, simply because in the terms of their leases the influence of all these factors is already allowed for; so, after nationalisation, all farmers will watch the proceedings of Parliament without excitement. They will know that every political measure affecting the rent of their land will be reflected in the terms of the lease. If import-duties are introduced to protect agriculture, the farmer knows that he will have to pay, in the form of a higher farm-rent, for this protection; hence he is indifferent to the proposed duties.
When the land is nationalised the prices of farm products may, without injury to the public interest, be forced so high that it will pay to cultivate sand dunes and boulder-strewn mountain slopes; even wheat growing in flower pots could be made profitable without allowing the cultivators of fertile soil to derive any private advantage from the high prices, since the amount paid on their leases would keep pace with the rise of rent. Patriots who are anxious about the provisioning of their country in war-time should study this remarkable aspect of land nationalisation. With a tenth of the money thrown to the receivers of rent through the wheat-duties, Germany might have converted all her moors, heaths and wastes into fertile soil.
The amount of railway and canal freights, and the politics connected therewith, will not concern the leaseholder any more directly than the ordinary citizen. For if changes in freights were to benefit him, the increase in his rent would annul the advantage.
With nationalisation of the land, politics will, in short, cease to interest the farmer personally, he will be concerned only with legislation for the common weal, with objective politics. Objective politics are, however, no longer politics, but applied science.
It may here be objected that if farmers are able to secure longterm or lifelong leases, they will still be affected by legislation and tempted to seek their private advantage at the expense of the common weal. The objection is valid, but does it not apply with still greater force to the existing private ownership of land, which allows the benefits of legislation to be converted into hard cash in the selling price of the land, as may be seen from the present high price of land resulting from protective-duties ? After nationalisation of the land, however, the taint of politics may be altogether removed by reserving to the State, in the case of lifetime contracts, the right of having rents officially re-adjusted from time to time, just as is now done with the rates on land. (In the case of short-term contracts the rent is adjusted by the farmer himself through the public auction of the lease.) For if the farmer knows that all the advantages to be expected from politics will be converted into rent for the revenue department, he will give up the attempt to influence rent by legislation.
Allowing for all these circumstances, we may sketch a lease contract after nationalisation of the land somewhat as follows:
The lease of the farmstead known as "The Chalk Farm" is advertised for public auction. The auction will take place on St. Martin's Day, and the lease will be granted to the highest bidder.
The farm is estimated to occupy one man in full work. The house and stables are in good repair. Rent hitherto $100. The soil is of the fifth quality, the climate suitable for strong constitutions only.
The State Land-Department undertakes:
The crucial question for the practicability of land nationalisation is this: Will tenants be forthcoming on the above conditions ? Let us suppose that there are but few, so that competition at the auctions is slight. What would be the result ? The amount bid would be low; it would be less than the real rent, and farmers would make correspondingly higher profits. But must not these higher profits act as a stimulus to the farmers who had held back because they were unable to appreciate the new conditions, and had consequently decided to await the verdict of experience ?
It is therefore certain that after a short experimental period competition at the lease auctions would raise farm-rents to the level of the highest rent the land could bear; especially as the risk of the tenure under the new conditions would almost disappear, since the net proceeds of the farm could not possibly fall below the average rate of wages. The farmer would always be assured the average wage for his personal labour, and over and above that he would have the advantage of liberty, independence and freedom of movement.
Let is be further remarked that after nationalisation a farmer would have to be appointed in every locality to supervise the execution of the rent contracts. In every province and district an illustrated list of the farms to be let would be published annually, containing everything that farmers require to know as to the size and the situation of the farms, the crops grown, the prices of farm produce, the farm buildings, previous rent, schools, climate, game and hunting, social conditions and so forth. Since the purpose of nationalisation is not to exploit farmers, great care would be taken to inform tenants about both the advantages and the disadvantages of the farmsteads - whereas at present the landowner never mentions the disadvantages. Many of them, such as damp farmhouses, night frosts, etc. are concealed and can be discovered by the tenant only by indirect enquiry.
The following is a summary of the effects of nationalisation of agricultural land: Abolition of private profit from rent, and consequent elimination of what is called "agricultural distress", of protective-duties and politics as we know them. Abolition of private ownership of land, hence elimination of mortgages, of subdivision of the land and of family quarrels after inheritance. No landlords, no landslaves, but instead general equality. No landed property, and therefore complete freedom of movement and settlement, with all its beneficent consequences for the health, character, religion, culture, happiness and joy of life of mankind.
In mining, nationalisation of the land is even simpler to carry out than in agriculture. Instead of leasing the mines, the State could invite employers and co-operative societies to tender for working the mine and accept the lowest tender per ton of output. The State could then sell the output to the highest bidder. The difference between the two prices is rent, and goes into the public treasury.
This simple method can be applied where machinery of a permanent kind is unnecessary; as for example in the case of peat, moors, brown-coal deposits, gravel, clay and sand pits, quarries, certain oilfields, etc. It is the system at present generally adopted in State forests, where it has long been found satisfactory. The administration of the forest agrees with the workers in public contract on the wage to be paid for a cubic meter of timber, the lowest bidder obtaining the contract. The timber is felled and trimmed into piles of certain standard dimensions and then sold by public auction. Fraud is almost impossible, because the buyers at once complain if given short measure. It would be the same in surface mining. The buyers would supervise the work at the pits. The workers could, if they wished, co-operate, and so dispense with the services of an employer (a system which, by the way, they have yet to learn), because no capital worth mentioning is required. The pit belongs to the State; and the workers need only their implements.
In coal pits, as in deep mining generally, the matter is more complicated, as plant is required. There are, however, several solutions, all workable.
A fourth system leaving the sale of the output also to the workers cannot be recommended, because the selling price is dependent on too many factors.
For large mines with thousands of workers the first system would probably be the best, for medium-sized mines the second system, and for the smallest mines the third system.
The difference between the selling price and the running costs would be paid into the public treasury as rent.
For the sale of the produce of the mines two systems could be applied:
If the Products were sold at fixed prices and an increased demand at these prices could not always be satisfied, speculation would come into play. Where the quality is not uniform, sale by public auction is the only way of avoiding complaints.
Water-power is a peculiar kind of product of the land, which in some regions is already of great importance and is destined to become still more important with the progress of technical science. For the larger power stations which supply towns with light and with energy for tramways, municipal enterprise would be simplest, especially as the running of such power stations offers few difficulties. In the case of lesser water power used directly for industries such as flour-mills and saw-mills, the sale of power at a uniform price, to be adjusted to the price of coal, would be more practical.
Somewhat greater are the difficulties of nationalising the land on which towns are built, if it is desired to exclude arbitrary management and nevertheless secure for the State the full rent. If we are satisfied with a moderately efficient solution, the leasehold system existing in the greater part of London could be adopted. By this system the land is secured to the tenant for whatever use he likes for a term of 50 to 70 years (in London 99 years), the annual rent being fixed in advance for the whole term of the tenure. The rights of the tenant are negotiable and inheritable, so the houses erected on the land are saleable. Thus if in the course of time (and in 100 years many things may change) ground-rents rise, the tenant is the gainer; and the gains - in London for example - may be very large; if, on the other hand, ground-rents fall, the tenant has to bear the loss, which may also be very large. As the houses erected on the land serve as pledges for the payment of the rent, the tenant cannot escape the loss. The full rent of the house serves as security for the landlord.
But cities, as the history of Babylon, Rome and Venice teaches us, are subject to vicissitudes, for little is needed to sap their vitality. The discovery of the sea-route to India brought Venice. Genoa and Nurnberg low, deflecting the traffic to Lisbon; and with the opening of the Suez Canal Genoa was resuscitated. The same is likely to happen with Constantinople after the opening of the Baghdad railway.
Furthermore we must here recall that our present currency laws offer no guarantee whatever that currency policy may not any day be directed, at the bidding of the creditor class, towards a general fall of prices such as occurred in 1873 when silver was demonetised. The possibility always exists that gold, in its turn, may also be demonetised, and the supply of money then reduced so as to cause a general fall of prices of say 50%, by which the fortunes of private and public creditors would be doubled, at the expense of the debtor class. In Austria this was done with paper money, in India with silver, so why should not the same trick be played with gold?
Thus there is not the slightest guarantee that ground-rents will be maintained during the whole term of the contract at the level on which the lease was based. The influence of politics and a thousand economic circumstances - to which must be added the probability that after nationalisation of the land the present tendency of the population to concentrate in towns will be reversed - make long-term leases exceedingly risky, and for the risk the lease-giver, in the present case the State, must pay in the form of a reduced rent.
Another question is, what becomes of the buildings after the expiration of the tenure? If the buildings fall to the State without compensation the lease will take care, in building his house, not to make it last longer than the term of his lease, so in the majority of cases the buildings will have to be pulled down when they lapse to the State. To a certain extent it is an advantage if houses are not built for eternity, since every time they are rebuilt new technical improvements can be incorporated; but the disadvantages are far weightier, as may be seen in the case of the French railways. The land occupied by these railways was leased to private railway companies for 99 years with the condition that at the expiration of the lease the whole should lapse to the State without compensation. The result is that construction and maintenance have been adapted to this clause. The State is not to succeed to more than can be helped; it is to come into possession of railways in articulo mortis, of scrap-iron and debris. It is in consequence of this short-sighted contract that the French railways give such an impression of neglect - even now, long before the expiration of the contracts. The same thing would happen if building sites were let with the condition that on expiration of the lease the buildings should lapse to the State.
A somewhat better plan would be to have the buildings valued and paid for by the State. But on what principle is the valuation to be made? There are two possibilities:
If compensation were determined simply by building costs and state of repair, the State would have to pay dear for many a useless, bungled building only fit to be pulled down. The builders would make short-sighted, ill-considered plans, knowing that, whatever the result, the State must pay the cost. On the other hand if we leave building costs out of account and base the valuation on other considerations, the building plans would have to be submitted for approval to the State, which would mean bureaucracy, tutelage and red tape.
Hence the best method seems to me to be the following: to lease the building sites for an indefinite period; not, however, at a rent fixed in advance for ever, but at a rent adjusted in accordance with a re-valuation of ground-rents, to be undertaken by the State at regular intervals of 3, 5, or 10 years. In this way the builder's risk in connection with the ground-rent would be reduced almost to nil, while the State would collect the full rent without having to trouble about the buildings. The whole responsibility for the best use of the building-site would rest with those whom it concerns, namely the builders. Perfect accuracy in calculating ground-rent and consequently the amounts to be paid for the leases, cannot, of course, be expected, but it would at any rate be possible to adjust the amount payable on the leases so as neither to kin enterprise nor to defraud the State.
In order to calculate the ground-rent for the different parts of a city the State could itself build a tenement house in every quarter of the city. The building plan would be devised with a view to securing the highest possible rent. From the yield of the building, interest on the building capital (as long as interest exists), repairs. depreciation, fire-insurance etc. would be deducted and what remained would be the ground-rent for all other buildings situated in the same street or in an equally good locality.
Even by this method ground-rent could not be calculated with perfect accuracy, since a great deal would depend on the building plan of the normal tenement house. It would be necessary, therefore, to devise this normal plan with special care. But in any case the builders would never have any reason to complain, since shortcomings in the normal tenement would result in a reduced yield of rent, and this deficit would affect the calculation of ground-rent and result in a lowering of the ground-rent for all building sites.
With this plan builders would have a direct personal interest in keeping their houses in good repair and in devising wen throughout building plans; for every advantage of their houses over the normal house would be to their profit.
Finally we should mention that as the principal factor in the calculation of the amount of ground-rent in the rent of houses is the rate of interest on the building capital, it will be necessary to determine in advance, that is, before the contracts are signed, by what method the rate of interest is to be computed. In the calculation of the ground-rent it makes a vast difference whether the interest paid on the building capital is reckoned at 4, 3.5, or 3%.
Suppose for example, that the capital for a building scheme is $100,000, the house-rent $10,000, and the rate of interest 4%. The interest on the building capital is then $4000, so the ground-rent, that is, the rent to be paid on the lease is $6000. But if the rate of interest is 3 %, only $3,000 would be deducted from the rent of the house, so the ground-rent would be raised to $7,000 a difference which, if not founded on an incontestable, contractual basis, would cause a chorus of complaint. A fall in the rate of interest from 4% to 3% would make a difference of at least 20 million marks in the calculation of the ground-rent for the city of Berlin. It is therefore clear that the rate of interest upon which the calculation is based must not be subject to arbitrary manipulation.
In the following part of this book, treating of the money reform, there is a full discussion of the computation of pure capital-interest, to which the reader is referred. I here suggest, quite independently of the other discussion, that the average dividend of all home industrial shares quoted on the Stock-Exchange should be taken as the rate of interest for building capital. In this way building capital would be assured the average yield of industrial capital, the building industry would in consequence be freed from all risk and would attract a large bulk of capital, to the benefit of the tenants. For everyone desiring a safe investment would invest his money in houses, which would always yield the average dividend.
This rate of interest would, of course, be used only for calculating the ground-rent of the normal tenement house.
Without taking into account modifications which can be finally determined only by experience, we therefore obtain the following broad outline of a lease contract between the State and the builder.
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