The Natural Economic Order/Part I/Chapter 3

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A landowner has the choice of cultivating his land or allowing it to lie fallow. His possession of the land is independent of its cultivation. Land does not suffer from lying fallow; on the contrary, it improves; indeed, under certain systems of cultivation, to let the soil lie fallow is the only method of restoring its fertility.

A landowner, therefore, has no inducement to allow others to use his property (farm, building-site, oil or coal field, water-power, forest and so forth) without compensation. If the landowner is offered no compensation, no rent, for its use, he simply lets his land lie fallow. He is absolute master of his property.

Anyone needing land and applying to a landowner will obviously, therefore, have to make a disbursement called rent. Even if we could multiply the surface of the earth and its fertility, it would never occur to a landowner to let others use his land free of charge. If the worst came to the worst he might turn his property into a hunting ground or use it as a park. Rent is an inevitable condition of every tenancy, because the pressure of competition in the supply of land for letting can never be great enough to make the use of land gratuitous.

How much, then, will the landowner be able to demand ? If the whole surface of the earth were needed for the sustenance of mankind; if no more free land were obtainable far or near; if the whole surface of the earth were in private possession and under cultivation, and if the employment of more labour, the application of so-called intensive cultivation, resulted in no increase of produce; then the dependence of those without property on their landlords would be as absolute as it was at the time of serfdom, and accordingly the landlords would raise their claims to the utmost limit of the attainable; they would claim for themselves the entire produce of labour, the entire harvest, and grant to the labourer, as to a common slave, only what sufficed for his subsistence and propagation. Under such conditions the so-called " iron law of wages " would hold good. Cultivators of the soil would be at the mercy of landowners, and rent would be equal to the yield of the land, less the cost of feeding the cultivator and his draught animals, and less capital-interest.

The conditions which would result in an "iron wage" do not, however, exist; for the earth is much larger and more fertile than is necessary for the support of its present population. Even with present-day extensive cultivation, hardly one-third of its area is exploited, the remainder lying fallow or being unclaimed. If instead of extensive cultivation, intensive cultivation were generally introduced - one-tenth of the surface of the earth would perhaps suffice to provide mankind with the average amount of foodstuffs consumed by the workers at the present day. Nine-tenths of the earth's surface in this case, be left fallow. (Which, of course, does not mean that mankind would be satisfied with such a result. If everyone desired to eat his fill of something better than potatoes; if everyone wanted to have a saddle-horse, a court-yard with peacocks and pigeons, or a rose garden and a swimming-pool the earth might, even with intensive cultivation, be too small).

Intensive cultivation comprises: drainage of swamps, irrigation, mixture of soils, deep ploughing, blasting of rocks, marling, application of fertilisers; choice of plants for culture, improvements of plants and animals; destruction of pests in orchards and vineyards, destruction of locusts; saving of draught animals through railway, canal and motor transport; more economical use of foodstuffs and fodder through exchange; limitation of sheep-breeding through the cultivation of cotton; vegetarianism and so forth. Intensive cultivation requires much labour, extensive cultivation much land.

No one, then, is at present compelled, by complete lack of land, to appeal to the landowners, and because this compulsion does not exist (but solely for this reason) the dependence of those without land on the landowners is limited. But the landowners are in possession of the best land, and it would require a great deal of labour to bring into cultivation the only unclaimed land in settled neighbourhoods. Intensive cultivation, again, involves considerably more trouble, and not everyone is capable of emigrating and settling in the unclaimed lands of the wilderness; apart from the fact that emigration costs money, and that the produce of those lands can be brought to market only at great expense in transport-costs and import-duties.

The farmer knows all this, and the landowner likewise. So before the farmer makes up his mind to emigrate; before he sets about draining the neighbouring swamp; before he turns to market gardening, he will ask the landowner what rent he demands for his field. And before answering the question the landowner will think the matter over and calculate the difference between the proceeds of labour on his field and the proceeds of labour (* We again call attention to the difference between the product of labour and the proceeds of labour. The product of labour of the emigrant may be ten times larger, yet the proceeds of his labour the same.) on waste land, garden land, or unclaimed land in Africa, America, Asia, or Australia. For the landowner is determined to obtain this difference for himself; this is what he can claim as for his field. As a general rule, however, there is not much calculation. In these matters both parties are guided by experience. Some hardy young fellow emigrates and, if he reports favourably, others follow. In this way the supply of labour at home is reduced, the consequence being a general rise of wages. If emigration continues, wages will rise to a point at which the would-be emigrant becomes doubtful whether he had not better stay at home. This indicates that the proceeds of labour at home and in the new country are again equal. Sometimes an emigrant makes an estimate beforehand. So it may be worth while examining such a calculation.

We may assume that the same amount of working capital is required as in Germany, so it is not included in the estimate

An Emigrant's Estimate

Travelling expenses for himself and family $1000
Accident and life insurance during the voyage 200
Health insurance for acclimatisation, that is, the slim which an insurance company would charge for the special risk due to the change of climate 200
Prospecting and fencing 600
Cost of emigrating and settling $2000
These expenses, which the farmer in Germany does not incur, are added to the working capital. the interest on which is charged to working costs: 5% on $2000 $100
We assume that the settler, with the same amount of the same amount as on his native competition of which is here to be considered. We remember that the farmer, like any other producer, in the products of his labour but only in the goods for consumption which he can obtain for that is, in the proceeds of his labour. The settler must send his products to market and convert the money he obtains for them into the goods he needs for consumption. And he must pay for the conveyance of these goods to his new home. The market for the exchange of his products is, as a rule, distant; if we suppose it to be Germany, a country which is forced to import large quantities of agricultural produce, the emigrant will have to pay:
Freight-charges for cart, railway, ship and lighter 200
Import-duty in Germany 400
Freight-charges for fighter, ship, railway and cart for the goods received in exchange 200
Import-duty in the new country 100
TOTAL $1000

In the above estimate the conversion of the product of labour into the proceeds of labour, usually effected by way of commerce, the emigrant for freight, customs-duties and commercial profit the sum of $1000, an expense which the cultivator of German soil avoids. If, therefore, the latter pays $1000 in rent for a piece of land which yields the same product of labour as the emigrant's homestead, the proceeds of his labour are equal to those of the emigrant.

There is the same economic difference in favour of the above piece of land when compared with waste land brought under cultivation in Germany, but here instead of transport costs and customs-duties, we have to enter the interest on the capital employed for reclaiming the land (drainage of a swamp, mixture of the different layers of soil, liming and manuring). In the case of intensive cultivation the difference consists, not of interest and freight, but of the cost of cultivation.

Rent, then, tends to reduce the proceeds (not the produce) of labour to the same general level everywhere. Whatever agricultural advantages well-cultivated German farm land possesses over the Luneburg Heath or, through its proximity to the markets, over unappropriated land in Canada, are claimed by landlords as rent, or appear, if the land is sold, as its price, which is simply the rent capitalised. All differences in land as regards fertility, climate, access to the markets, customs-duties, freights and so forth are levelled by rent. (It should be noted that in this connection wages are not mentioned; the omission is intentional).

Economically speaking, rent on land reduces the globe for the farmer, manufacturer and capitalist (if he is not a landowner), to a perfectly uniform surface. As Flürscheim puts it: "Just as the inequalities of the ocean bed are transformed into a level surface by the water, so inequalities of land are levelled by rent". It is a remarkable fact that rent reduces the proceeds of labour of all cultivators of the soil to the yield which may be expected from unreclaimed land at home, or from unclaimed land in the far-off wilderness. The notions of fertile, barren, loamy, sandy, swampy, rich, poor, well or badly situated, are rendered, economically speaking, meaningless by rent on land. Rent makes it a matter of indifference to a man whether he cultivates moorland in the Eiffel, or a market-garden at Berlin, or a vineyard on the Rhine.