Land Value Taxation will solve many of the 21st century's most serious social, economic and environmental problems, and promote justice, fairness and sustainability. We CAN have a world in which all can prosper.
Progress and Poverty, by Henry George Here are links to online editions of George's landmark book, Progress & Poverty, including audio and a number of abridgments -- the shortest is 30 words! I commend this book to your attention, if you are concerned about economic justice, poverty, sprawl, energy use, pollution, wages, housing affordability. Its observations will change how you approach all these problems. A mind-opening experience!
Henry George: Progress and Poverty: An inquiry into the cause of industrial depressions and of increase of want with increase of wealth ... The Remedy This is perhaps the most important book ever written on the subjects of poverty, political economy, how we might live together in a society dedicated to the ideals Americans claim to believe are self-evident. It will provide you new lenses through which to view many of our most serious problems and how we might go about solving them: poverty, sprawl, long commutes, despoilation of the environment, housing affordability, wealth concentration, income concentration, concentration of power, low wages, etc. Read it online, or in hardcopy.
Bob Drake's abridgement of Henry George's original: Progress and Poverty: Why There Are Recessions and Poverty Amid Plenty -- And What To Do About It! This is a very readable thought-by-thought updating of Henry George's longer book, written in the language of a newsweekly. A fine way to get to know Henry George's ideas. Available online at progressandpoverty.org and http://www.henrygeorge.org/pcontents.htm
Where Else Might You Look?
Wealth and Want The URL comes from the subtitle to Progress & Poverty -- and the goal is widely shared prosperity in the 21st century. How do we get there from here? A roadmap and a reference source.
Reforming the Property Tax for the Common Good I'm a tax reform activist who seeks to promote fairness and reduce poverty. Let's start with the enabling legislation and state requirements for the property tax. There are opportunities for great good!
Pigou, a key bridge figure in the history of his field, was one of the earliest classical economists to notice that markets do not always produce the best possible social outcomes. The pollution generated by a factory imposes costs on those who live downstream or in the path of its airborne emissions. The risks assumed by banks leading up to the recent financial crisis imposed costs on just about everybody. Market transactions often generate what economists call “externalities” — side effects, sometimes positive but often negative, that affect people who do not participate in the transaction.
Pigou, having recognized the problem, was the first to propose a solution. Society should tax the negative externalities and subsidize the positive ones. This simple notion — if you want less of something, tax it — is why his ideas periodically bubble up in the service of combating a recognizable cost to society, like pollution. We think that his approach offers an answer to another great problem of our time: inequality.
Does the extreme degree of inequality in America today really create, as Pigou would put it, negative externalities? Does the fact that hedge-fund manager Mr. Jones rakes in 100 or 1,000 times what office manager Mrs. Smith earns impose costs on everybody else? Plenty of Americans think not. Defenders of our skewed income distribution point out that a free-enterprise system requires some inequality. Unequal rewards give people an incentive to work hard and acquire new skills. They encourage inventors to invent, entrepreneurs to start companies, investors to take risks. It’s fine in this view that some people get astronomically rich. As Mitt Romney likes to say, “I’m not going to apologize for being successful.”
On the other side, many of us have a gut feeling that inequality has gone too far. Our times are reminiscent of the Gilded Age’s worst excesses. Hence the popularity of the Occupy Wall Street movement’s slogan, “We are the 99 percent.”
LVTfan here: Wouldn't it be better to prevent the inequality by such measures as treating the natural creation as our common treasure, instead of permitting its privatization and then taxing back what is taken? Treating the natural creation, and that which the community creates by its presence and its investment in public goods -- schools, roads, libraries, etc. -- as our COMMON treasure would create equal opportunity for all, a much better idea than permitting some to capture it and then taxing some of their booty back after the fact. When we let some reap what others sow, and then take back a share after the fact, we're still permitting them to reap which deprives the sowers of that right. Whether it be nature doing the sowing, or the community as a whole, no good can come of permitting the privatization of that. Henry George, in "Progress and Poverty" and "Social Problems" showed the logical, efficient, just way to do better.
The game’s true origins, however, go unmentioned in the official literature. Three decades before Darrow’s patent, in 1903, a Maryland actress named Lizzie Magie created a proto-Monopoly as a tool for teaching the philosophy of Henry George, a nineteenth-century writer who had popularized the notion that no single person could claim to “own” land. In his book Progress and Poverty (1879), George called private land ownership an “erroneous and destructive principle” and argued that land should be held in common, with members of society acting collectively as “the general landlord.”
Magie called her invention The Landlord’s Game, and when it was released in 1906 it looked remarkably similar to what we know today as Monopoly. It featured a continuous track along each side of a square board; the track was divided into blocks, each marked with the name of a property, its purchase price, and its rental value. The game was played with dice and scrip cash, and players moved pawns around the track. It had railroads and public utilities — the Soakum Lighting System, the Slambang Trolley — and a “luxury tax” of $75. It also had Chance cards with quotes attributed to Thomas Jefferson (“The earth belongs in usufruct to the living”), John Ruskin (“It begins to be asked on many sides how the possessors of the land became possessed of it”), and Andrew Carnegie (“The greatest astonishment of my life was the discovery that the man who does the work is not the man who gets rich”). The game’s most expensive properties to buy, and those most remunerative to own, were New York City’s Broadway, Fifth Avenue, and Wall Street. In place of Monopoly’s “Go!” was a box marked “Labor Upon Mother Earth Produces Wages.” The Landlord Game’s chief entertainment was the same as in Monopoly: competitors were to be saddled with debt and ultimately reduced to financial ruin, and only one person, the supermonopolist, would stand tall in the end. The players could, however, vote to do something not officially allowed in Monopoly: cooperate. Under this alternative rule set, they would pay land rent not to a property’s title holder but into a common pot—the rent effectively socialized so that, as Magie later wrote, “Prosperity is achieved.”
Readers of this blog know that Lizzie Magie had created her game and started to promote it by the Fall of 1902.
“Monopoly players around the kitchen table”—which is to say, most people—“think the game is all about accumulation,” he said. “You know, making a lot of money. But the real object is to bankrupt your opponents as quickly as possible. To have just enough so that everybody else has nothing.” In this view, Monopoly is not about unleashing creativity and innovation among many competing parties, nor is it about opening markets and expanding trade or creating wealth through hard work and enlightened self-interest, the virtues Adam Smith thought of as the invisible hands that would produce a dynamic and prosperous society. It’s about shutting down the marketplace. All the players have to do is sit on their land and wait for the suckers to roll the dice.
Smith described such monopolist rent-seekers, who in his day were typified by the landed gentry of England, as the great parasites in the capitalist order. They avoided productive labor, innovated nothing, created nothing—the land was already there—and made a great deal of money while bleeding those who had to pay rent. The initial phase of competition in Monopoly, the free-trade phase that happens to be the most exciting part of the game to watch, is really about ending free trade and nixing competition in order to replace it with rent-seeking.
This is a good article, and I commend it in its entirety to your attention. It also provides links to Tom Forsythe's new site, http://landlordsgame.info/, whose graphics show many early versions of the Landlord's Game, which I look forward to exploring. I learned for the first time that the game layout that I had thought was an early one, with a lake in the center, was actually a 1939 version, based on Lizzie Magie's design but published by Parker Brothers. (I ought to have figured that out sooner, since the board includes her married name!)
It is interesting that one of the earlier versions -- 1909 -- was based on Altoona's streets. In the past year, Altoona has shifted to taxing land and not taxing buildings to fund its municipal spending. (This was a gradual shift, accomplished over a number of years; they must have liked the effect!)
As I listen to the 2012 party platforms, I am reminded of what they ought to be focused on, embodied pretty well in this platform from 1886-87.
PLATFORM OF THE UNITED PARTY.
Adopted at Syracuse August 19, 1887.
We, the delegates of the united labor party of New York, in state
convention assembled, hereby reassert, as the fundamental platform of
the party, and the basis on which we ask the co-operation of citizens of
other states, the following declaration or principles adopted on
September 23, 1886, by the convention of trade and labor associations of
the city of New York, that resulted in the formation of the united
"Holding that the corruptions of government and the impoverishment of
labor result from neglect of the self-evident truths proclaimed by the
founders of this republic that all men are created equal and are endowed
by their Creator with unalienable rights, we aim at the abolition of a
system which compels men to pay their fellow creatures for the use of
God’s gifts to all, and permits monopolizers to deprive labor of natural
opportunities for employment, thus filling the land with tramps and
paupers and bringing about an unnatural competition which tends to
reduce wages to starvation rates and to make the wealth producer the
industrial slave of those who grow rich by his toil.
'“Holding, moreover, that the advantages arising from social growth and
improvement belong to society at large, we aim at the abolition of the
system which makes such beneficent inventions as the railroad and
telegraph a means for the oppression of the people and the
aggrandizement of an aristocracy of wealth and power. We declare the
true purpose of government to be the maintenance of that sacred right of
property which gives to every one opportunity to employ his labor, and
security that he shall enjoy its fruits; to prevent the strong from
oppressing the weak, and the unscrupulous from robbing the honest; and
to do for the equal benefit of all such things as can be better done by
organized society than by individuals; and we aim at the abolition of
all laws which give to any class of citizens advantages, either
judicial, financial, industrial or political, that are not equally
shared by all others."
We call upon all who seek the emancipation of labor, and who would make
the American union and its component states democratic commonwealths of
really free and independent citizens, to ignore all minor differences
and join with us in organizing a great national party on this broad
platform of natural rights and equal justice. We do not aim at securing
any forced equality in the distribution of wealth. We do not propose
that the state shall attempt to control production, conduct
distribution, or in any wise interfere with the freedom of the
individual to use his labor or capital in any way that may seem proper
to him and that will not interfere with the equal rights of others. Nor
do we propose that the state shall take possession of land and either
work it or rent it out. What we propose is not the disturbing of any man
in his holding or title, but by abolishing all taxes on industry or its
products, to leave to the producer the full fruits of his exertion and
by the taxation of land values, exclusive or improvements, to devote to
the common use and benefit those values, which, arising not from the
exertion of the individual, but from the growth of society, belong
justly to the community as a whole. This increased taxation of land, not
according to its area, but according to its value, must, while
relieving the working farmer and small homestead owner of the undue
burdens now imposed upon them, make it unprofitable to hold land for
speculation, and thus throw open abundant opportunities for the
employment of labor and the building up of homes.
While thus simplifying government by doing away with the horde of
officials required by the present system of taxation and with its
incentives to fraud and corruption, we would further promote the common
weal and further secure the equal rights of all, by placing under public
control such agencies as are in their nature monopolies: We would have
our municipalities supply their inhabitants with water, light and heat;
we would have the general government issue all money, without the
intervention of banks; we would add a postal telegraph system and postal
savings banks to the postal service, and would assume public control
and ownership of those iron roads which have become the highways of
While declaring the foregoing to be the fundamental principles and aims
of the united labor party, and while conscious that no reform can give
effectual and permanent relief to labor that does not involve the legal
recognition of equal rights, to natural opportunities, we nevertheless,
as measures of relief from some of the evil effects of ignoring those
rights, favor such legislation as may tend to reduce the hours of labor,
to prevent the employment of children of tender years, to avoid the
competition of convict labor with honest industry, to secure the
sanitary inspection of tenements, factories and mines, and to put an end
to the abuse of conspiracy laws.
We desire also to so simplify the procedure of our courts and diminish
the expense of legal proceedings, that the poor may be placed on an
equality with the rich and the long delays winch now result in
scandalous miscarriages of justice may be prevented.
And since the ballot is the only means by which in our Republic the
redress of political and social grievances is to besought, we especially
and emphatically declare for the adoption of what is known as the
“Australian system of voting,” an order that the effectual secrecy of
the ballot and the relief of candidates for public office from the heavy
expenses now imposed upon them, may prevent bribery and intimidation,
do away with practical discriminations in favor of the rich and
unscrupulous, and lessen the pernicious influence of money in politics.
In support or these aims we solicit the co-operation of all patriotic
citizens who, sick of the degradation of politics, desire by
constitutional methods to establish justice, to preserve liberty, to
extend the spirit of fraternity, and to elevate humanity.
Mr. Henry George first formulated this idea, which has grown steadily in favor, in 1879. Single-tax men assert as a fundamental principle that all men are equally entitled to the use of the earth; therefore, no one should be allowed to hold valuable land without paying to the community the value of the privilege. They hold that this is the only rightful source of public revenue, and they would therefore abolish all taxation - local, state and national - except a tax upon the rental value of land exclusive of its improvements, the revenue thus raised to be divided among local, state and general governments, as the revenue from certain direct taxes is now divided between local and state governments.
The single tax would not fall on all land, but only on valuable land, and on that in proportion to its value. It would thus be a tax, not on use or improvements, but on ownership of land, taking what would otherwise go to the landlord as owner.
In accordance with the principle that all men are equally entitled to the use of the earth, they would solve the transportation problem by public ownership and control of all highways, including the roadbeds of railroads, leaving their use equally free to all.
The single-tax system would, they claim, dispense with a horde of tax-gatherers, simplify government, and greatly reduce its cost; give us with all the world that absolute free trade which now exists between the States of the Union: abolish all taxes on private issues of money; take the weight of taxation from agricultural districts, where land has little or no value apart from improvements, and put it upon valuable land, such as city lots and mineral deposits. It would call upon men to contribute for public expenses in proportion to the natural opportunities they monopolize, and make it unprofitable for speculators to hold land unused or only partly used, thus opening to labor unlimited fields of employment, solving the labor problem and abolishing involuntary poverty.
29. The states need money. Should they sell their toll roads to private companies?
A. Sure! That would provide a nice pot of money that would help with this year's budget and next year's, and after that, we can leave the problem to a future group of legislators and a new governor!
B. Sure! The private sector will take better care of them and turn a profit to boot!
C. No. The taxpayers paid for those roads to be built, and have a right to more control over them than would exist after privatization.
D. No. The taxpayers own that land, a unique right of way, and selling it off forever is irresponsible and wrong!
E. No. Our society -- any society -- is highly dependent on our infrastructure, and control over it must remain in the public sector.
F. No. Those highways are built on land that was bought or taken from individual property owners for the public good. To turn them over to the private sector, for profit, would be wrong.
G. No. Those highways will increase in value over the coming decades and centuries, and should not become anyone's private property, at any price. Both their economic value and the control over them belongs in the common sector.
H. No. Even if it looks as if it might make sense for our generation, what of future generations? Should we permit the privatization of a common asset they will likely be dependent on?
I. No. Future taxpayers will build more highways intersecting with these current tollroads, and increase their value; were these to be privatized, it would be the private corporation who would reap the benefit of that future public investment.
13. Electric utilities have long been regarded as "widows' and orphans'" stocks. Safe, if not high income. A few years ago, they were deregulated. A recent study has shown that retail electricity prices have increased faster in states that adopted competitive pricing than in those where rates continue to be set by government agencies. We all need reliable electricity. Should we permit the licenses to generate and distribute electricity to be an opportunity to make a windfall profit? (Or should we encourage municipal ownership of vital utilities?)
A. Sure! People and businesses are quite free to move from states without regulation to states with regulation if they choose. They may not mind paying 20% more for their electricity, if other conditions are good. And didn't the utilities earn it?
B. Sure. If local regulatory agencies decide that local best interests conflict with the interests of the corporate shareholders, they can re-regulate. After all, the corporations don't vote.
C. No. Electricity is important and we ought to do what we can to keep the price down so that poor people can afford electricity and still have funds for other costs of living.
D. No. Electricity is vital to the economy, and we ought to do what we can to keep it affordable to ordinary people, and not a source of corporate windfalls.
E. No. Natural monopolies ought to be publicly owned, the prices kept low, and any excess revenue accrue to the public treasury, not to the benefit of private investors.
12. Foreign corporations own the water utilities in parts of New England. Often these companies came with significant acreage on picturesque reservoirs, some within easy commuting distance of New York City. Water is a vital resource, and the infrastructure which supplies it and cleans it is vital to everyone. In other places, including NYC, municipal utilities supply the water. Is private ownership of the water supply acceptable?
A. Sure! Why not?
B. As long as it is regulated by stong public utility commissions
C. No, this should be a public function.
D. Private ownership is fine, as long as it is American corporations. They'll take care of us, and not overcharge us.
E. This is a natural monopoly situation, and rightly should be owned by the local, county or state government, or some local public entity. Clean water is too important to leave to the private sector, even where the supply is abundant.
Here's another item from an 1896 California weekly. It is a little difficult for the 21st century reader to remember that "road" at that time was shorthand for "railroad" or sometimes "streetcar line."
Incidently, only a rather small portion of the material in The San Jose Letter strikes me as particularly Georgist. (You'll see most of it here!)
The First Street Road and Single Tax
The San Jose Letter, May 30, 1896
A very good illustration of the unfairness and unjustness of our land system was furnished by the failure of the First Street Electric Road Company. Jacob Rich, practically the company, has been a pioneer in local street car building, has failed, and stepped aside for others to reap the benefits of his toil and experiments.
It would be better for the community if the roads were all owned and operated by the city, but since they are not, and could not be, under existing conditions, the individual whose enterprise secures them is entitled to the gratitude of the people.
Rich spent thousands in experimenting on the San Jose and Santa Clara road. At the moment it began to pay, he found himself so situated, financially, that he was obliged to dispose of the property, thereby sinking a large fortune. Along the line of this particular road are situated many building lots. These lots doubled and trebled in value on account of the road. But Rich was not benefited. Individual owners, who stayed quietly at home, laughed at Rich as a crank, and condemned his road, found their fortunes doubled on account of it, but Rich got nothing. He was obliged to dispose of even the road itself, when it began to pay, a poorer man by many thousands of dollars. But I have not heard of one land owner whose property was benefitted by the road offering to help him out.
After getting free from the Santa Clara road tangle, Rich mortgaged his real estate, and hypothecated his securities to raise money to build the First street line, and the numerous extensions of the system. He then bonded the property to improve it, and eventually came to the end of his magnificent fortune. He failed then, disastrously.
The building of the First street line and its extensions have made many holders of suburban property wealthy. Rich does not get the benefit of this. He built the lines that have made the property more desirable for building purposes; has put the extra value upon them in fact, but he gets nothing for it, and the very people who have been benefited are now condemning him for losing his money in such an unprofitable venture.
Under a system of single tax the benefit of the increased value of the land to the community, which was occasioned by the new lines of street cars, would have been enjoyed by the whole people and not by individuals. Had the car lines been built by the municipality, by the people, the money lost in establishing and perfecting them would have been made up by the increased amount the community, the whole people, would have received from their outlying lands.
For instance, if the rent, which the people received for the lands before the roads were built, equaled 5% of their value as agricultural lands, when their value became doubled or trebled on account of the new demand for them as residence lots, caused by the building of the car lines, the rent or single tax would become double what it had been before the improvements were made. Thus the increased revenue from the land would make up the deficit that might result on account of the road before it became established. In a word, the losses growing out of the first few years' expenses of the road would be borne by the whole community who would in return be benefited by the increased value of the suburban lands. One man would not be ruined by the experimental line, while another had his fortune doubled or trebled, but the advantages and disadvantages would be shared by all.
The people recognize that something is decidedly wrong in our economic system. They all turn doctors of economics to remedy the matter, and set up economic cure-alls, warranted to make everybody sick. Apparently sane men tell us that "high protection" will result in all the economic reforms on the list. Others are for low tariff, others for single standard, others for free silver, others for prohibition, and so on and so on to the end of the chapter. Everything is tried, and has been tried over and over again, but the only thing that will ever permit men to enter the struggle of existence unhampered will be a system of single tax by which natural resources would be turned to the use of the whole community, and not to the benefit and advantage of individuals.
A progressive, energetic man like Jacob Rich would not then be beggared by his endeavors to improve conditions in the community, while the non-progressive Silurian of a land-holder has his fortune doubled and trebled through the efforts of another.
Paul Krugman's column in the NYT Sunday was entitled "Things to Tax," and I thought it was a bit broad-brush.
"Let me suggest two areas in which it would make a lot of sense to raise taxes in earnest, not just return them to pre-Bush levels: taxes on very high incomes and taxes on financial transactions."
I don't disagree with either of those as a starting point, but neither goes to the root of the problem, which I believe to be the sorts of privileges we have given out, or somebody's ancestors put in place and we've not even thought about questioning. They are so familiar to us that we don't question them any more than we think about breathing. So (switching metaphors) we find ourselves barking loudly up the wrong tree -- while the critters in the other trees are smiling broadly!
The best answers I know to which tree we ought to be barking up come from the writings of Henry George. Several speeches were what I was first inspired by:
Whether or not your own orientation is theological, I think you might appreciate these.
We ought not to be taxing indiscriminately. What we tax matters greatly. Some provide Natural Public Revenue -- and we ought to socialize that revenue -- and other possible objects of taxation ought not to be taxed at all -- privatize them!
Should we tax the ones who have bought or inherited or otherwise acquired our very choicest land -- that in our biggest cities, well-served by taxpayer-provided infrastructure and services?
Should we tax the ones who, in effect, own our most valuable natural resources, or have access to resources we send our military to protect on our behalf?
Should we tax those who benefit from monopolies of various kinds, such as owning our water companies, our electric utilities, our cable-tv companies, or monopolies of their own creation?
Should we tax those who benefit from privileges of various kinds, such as the possession of our airwaves, landing/takeoff rights at busy constrained airports (think LGA at rush hour)?
Should we tax those who benefit by taking some fraction of every financial transaction, even if that transaction doesn't create additional value for the economy as a whole?
Should we tax those who benefit from the activity or inactivity of the FIRE sector, which Joe Stigitz says is creaming 40% of the profits made by the productive sectors of the economy?
Or should we just tax all the high-income people, without going to the root of the privileges which produce undeserved wealth for some at the expense of the rest of us.
The answers to these questions matter.
Go to the root. Understand what is privilege, and what is an actual contribution to the economy. Understand what is someone's free lunch, paid for by the labor of others. Understand who reaps what they haven't sown. Correct these things.
An old idea. Look up Henry George's writings from the late 19th century, which kicked off the Progressive movement and still inspire many of us.
Short term, maybe, changing the income tax brackets is appropriate. But it doesn't get at the root of the problem.
This appeared in an 1896 California weekly called the San Jose Letter. It makes the distinction between the intent of the Single Tax, which is decidedly individualistic, and Socialism, which is not. (Many people, when they first hear about collecting rent to fund government, jump to a conclusion that it is somehow socialistic. It does socialize something we are used to treating as private property, but those who stop to think it through will see the logic and justice of socializing that which the community creates, particularly so because it makes it possible to privatize that which is rightly private: that which the individual creates.)
Single Tax vs. Socialism
The idea of socialism is based upon the theory that each person should have an equal share of all that is produced, irrespective of what the person produces. Lawrence Grunland wishes to make modifications in that plan by establishing grades according to the different kinds of work,but to that extent is he compromising with our present system and discountenancing ideal socialism.
The theory is summed up in their demand that "all means of production and distribution be owned and operated by the government," as the chief plank of their platform. As every person who works intelligently is employed in either production or distribution, every one would be in the employ ol the Government.
The curse of the race today is the concentration of power in a few hands. It was concentration of power that made slaves of nearly all the people of Egypt, of Rome, and the same is being repeated today. And yet the socialists want to enter upon such a system of concentration as the world has never seen.
But it is claimed that the people would choose their own overseers. The people of San Francisco, of Chicago, of New York, elect the members of the city councils, but who would want to place in the hands of these men the control of all the means of production and distribution — the management of every conceivable line of business and pursuit — and consequently the wages that shall be paid in the different grades, the hours of work, and also the assignment of the kinds of work that each one shall do. Pause a moment and think of the rings that must of necessity spring up under such a system. Or who would want to place in the hands of Grover Cleveland the destiny of the 70,000,000 people of the United States? The president now has more power than any human being should be entrusted with, but it is not a drop in the ocean compared to the power he would have under the co-operative commonwealth.
Instead of giving our government heads and legislative bodies more power, we need to curtail them in that which they already have. Give the people of the smallest political divisions local option in taxation and other matters to the fullest extent possible, and take from Congress the power to build up one industry or one section at the expense of another, under the guise of raising revenue or protecting certain grades from competition, and they, the people, will soon learn what is best for them, for, by experiments, that which proves to be the best for one will be adopted by others.
One of the proper functions of government is to own and operate natural monopolies, because individuals or corporations will not operate them for the benefit of the public where it conflicts with their own interests. But because the government should own and operate a natural monopoly, such as the telegraph, where in the very nature of things there can be no real competition that is no reason why the government should own and operate the bake shops, the barber shops, and the truck gardens.
In opposition to the claim that "each is entitled to an equal share of all that is produced, irrespective of what he produces," I claim that each is entitled to all that his labor produces and no more, and that the community should take for governmental expenses that which the community produces and no more, viz.: land values.
Judge Maguire of San Francisco, in the course of a speech in congress, said: "There is a natural right of ownership existing between everything produced by labor and the labor that produced it. That right springs from every man's ownership of himself and of his mental and physical powers. Owning himself, he has a natural right of ownership in the things and values that his own mental and physical powers produce, and he can manifestly, without violating any principle of natural justice, transfer his right in such things to another upon any terms which may be satisfactory to him. This is a matter with which neither society at large nor any individual can properly have any concern. The things that he produces are his, because he has produced them; because their forms of utility would not have existed but for his productive effort, and it is no hardship to any other man in the world to be deprived of that which would not have existed at all but for the labor of him who produced it.
"If the labor of a dozen men indisguishably contributes to the production of anything of value, it belongs, by the same law, not to any one of them, but to the whole dozen. So, if a value be produced by the indistinguishable labor of a community of one hundred thousand or a million people, it belongs by the same law of natural right to all, and not to any individual, or to any number less than the whole. Therefore the rental value of land belongs to the community which produces and maintains it by the same natural right which gives to each individual man the wealth which his labor entirely produces."
To give this practical effect, the single taxers would take all taxes off labor and labor's products and put them upon land values. This would make it unprofitable for individuals to hold large tracts of land unused — in fact impossible, as the taxes on large tracts of idle land would soon eat up all the owner's income from the other sources. The Miller & Lux estate, comprising 14,500,000 acres, which includes more than one-fourth of the arable land of the state of California, is almost wholly unused. Under the single tax, this would soon be open to the people who actually wanted to use it, and every man in the state who wanted a home and a place to make a living could have one. Fully nineteen-twentieths of the arable land of California is unused or nearly so.
By our indirect manner of raising government revenue each producing family pays $40 yearly government tax; $40 of protected monopoly tax in higher prices for goods, and $80 per year that is now taken to pay dividends on watered stocks in railroads, telegraph and kindred monopolies. All these as well as state and county taxes would be done away with, except on land values irrespective of improvements. This would make land freer to labor than it was in California forty years ago; freer than it was on the Atlantic seaboard two hundred years ago. With the land open to all, none need to work for another for less wages than his labor is worth. Under such conditions who need be in want?
Karl Marx, the noted socialist, relates the incident of a rich English capitalist conveying to one of the British colonies a vast store of machinery and materials for the establishment of a great factory, together with three thousand people of the working class — men, women and children — to work in the projected factory. How immediately after landing at their destination, men, women and children left him without so much as a servant to carry water from the river to cook a meal; left him and his machinery; and the machinery lay and rotted on the ground and the factory was never erected. Why did they leave him? The same inducement that brought him and his capital from the shores of "Merrie England" — they could get free land, all they wanted of it, for the taking. With land free to use capital can not oppress labor, and the single tax would make land free to use.
"ARE WE SOCIALISTS?" Thomas B. Preston, in the Arena, December, 1899
It is socialistic to make the revenues of the government a burden on industry. Revenues there must be, but they should not bear upon industry. In fact, the taxation of any product of labor is simply taking from the laborer part of his earnings. To such an extent we are socialists. Any other form of taxation than that on the value of land is essentially socialistic because any other tax is passed on from the seller to the consumer, and takes part of the latter's earnings without compensation, for use by the community. Any tax on earnings is socialistic, although it may not go so far as to take all a man earns. The substitution for our present system of a single tax amounting to the full rental value of land would sound the death-knell of socialism.
While we sin so deeply in our present bungling, socialistic way by forcing individuals to give up part of the proceeds of their labor, by fining a man who builds a house more than if he were maintaining a public nuisance, by tariffs which hinder trade with foreign countries, and add millions to private fortunes at the expense of the people, and by a thousand indirect taxes which make life harder for men without their being able easily to see the reason, on the other hand we foolishly leave to individuals those great agencies which are the outcome of social growth — the product of the inventive genius of a few men, if you like, but which after a time grow so powerful as to become the very arbiters of life and death. Prominent among such agencies are the railroad and the telegraph. They can crush communities out of existence and enrich the owners at the expense of their fellow men. They have already become the chief source of corruption in government. The ownership of these agencies by the community becomes a necessity for the continuance of social progress. Otherwise these monopolies can go on increasing and concentrating until a few persons are enabled, through them, to appropriate the wealth of a community. In so far as socialism demands the state ownership of agencies of this nature, it is proceeding in the right direction. There are many other agencies besides the railroad and the telegraph, such as the supply of water, gas, light, heat, telephones and means of transit and communication, in which the American idea of free competition is a fallacy. Here we are too individualistic. The right to make war and peace was long ago taken from individuals and vested in the community. So at a later stage was the carriage of letters. National quarantines, boards of health, public schools, are all examples of applied socialism in its legitimate sense. But why should we stop here? The existence of such great monopolies as the railroad and the telegraph is a standing menace to the life of the Republic. Let us munificently reward the inventors or appliances which shall add to the comfort and convenience of the community, but allow these agencies to be owned perpetually by individuals never!
We are socialistic where we should respect the rights of the individual, and we are individualistic when individualism is a crime against the Commonwealth. And so we go blundering on. When our stupid and oppressive system leads men to cry out against it, and riot and murder follow, we hang a few anarchists. When monopolists, grown bold through long years of immunity, attempt to rob a little more openly, by pools and combinations or by direct bribery, we create interstate commissions to watch them, or we send a few to prison, allowing others to escape to Canada; repressing a little here those who complain too loudly, where we should rather rectify their grievances, and lopping off a little there the enormous unearned profits, which we should abolish altogether. Meanwhile our two classes of tramps are increasing — those who travel around the world in flowing palaces, living upon the toil of others, without using their capital in any legitimate enterprise and those who go afoot, pilfering from cornfields and hen roosts — both classes an unjust burden on a hard working, long suffering community. We have arrived at a critical period of our history, where we must meet the demands of social progress, or our civilization will perish as surely as did the fallen empires of former ages. Already the mutterings of revolt are growing louder and louder, while upstart monopoly was never so insolent and imperious as it is today. Let us be warned in time, and, discarding all half measures, face the issue like men, and not go on trusting to luck, foolishly dreaming that somehow, at some time, existing wrongs will right themselves.
I am including this because I find it timely and timeless; because it provides a good simple mathematical look at the perversity of our current tax system, and because it illustrates my notion that when Leona Helmsley said "WE don't pay taxes; the little people pay taxes," she was not describing tax evasion but actual tax structures.
Henry George, Jr., was a U. S. Congressman. His most famous writing is "The Menace of Privilege."
WHO ARE THE CRIMINALS?
BY HENRY GEORGE , JR. Copyright, 1901, by The Abbey Press, 114 Fifth Avenue, New York
I. Who are the Criminals? 5 II. French Aristocracy of Privilege 6 III. New York Aristocracy of Privilege 10 IV. Robbery of Masses by Classes 12 V. Nature and Extent of Robberies 13 VI. How to Stop the Robberies 18 VII. The Criminals 23
I. WHO ARE THE CRIMINALS?
In considering the problem of how to check or control vice and crime in New York the question at once raised is: Who are the criminals? Who are they who cause these dreadful evils in the community? For unless we know exactly where the disease lies how can we attempt a remedy?
II. FRENCH ARISTOCRACY OF PRIVILEGE.
When the French Revolution broke loose the people followed the lead of men who seemed no better than a pack of devils, for they maimed, they brutally tortured and they slew. Women, whose only offense was that they were members of an arrogant and grinding aristocracy, were stripped naked, treated with every indignity and killed with every mark of ferocity. Old men and young children belonging to the upper classes were butchered, and persons of blameless life and humane intention were trampled under foot when they attempted to stay the carnival of blood.
Who will dare say that these revolutionary leaders, these butchers, were not criminals — criminals whose bloody hands must shine down through history? They were men turned to monsters; brutes with human intelligence, striving for new ways to torture and kill.
But whence came they? Not from without. They sprang up within. They represented the spirit of retaliation — of fiendish retaliation for the centuries of wrong done them and theirs. They were the progeny of poverty made by robbery. Their deeds were the deeds of monstrous criminals, but they themselves were the spawn of hideous injustice — an injustice that gave to the few riotous feasting and gorgeous raiment and to the many rags and black bread filled with maggots.
The aristocrats during centuries of power had appropriated the soil of France, and all other Frenchmen had to purchase the privilege of living in their native country. Not content with this, the upper classes had thrown upon the masses all those heavy taxes which it was the plain intent only the landowners should bear. They shifted upon the common people all the expenses of an extravagant, aristocratic government, and through ground rents sucked away all the people's remaining substance, save just enough to keep them alive and at work. Who were making the masses so poor and wretched was as plain as day. The masses themselves could see, and when they raised the sword against the aristocracy all hell seemed to break loose.
Who were the criminals? Why, of course they were criminals — horrible, revolting criminals — who did this guillotining, who committed these butcheries.
But who made these criminals? Clearly those who bore so heavily upon the people — the aristocrats, who kept the people in fearful poverty and ignorance which bred the spirit of bloodthirsty tigers.
The aristocracy, therefore, were the primary, the real criminals.
III. NEW YORK ARISTOCRACY OF PRIVILEGE.
I wish to proceed with greatest caution, with utmost conservatism. Yet candor compels me to ask: Have we not in our community an aristocracy of privilege — an aristocracy far more rich, far more powerful than was the aristocracy of old France? And have we not a corresponding poor class? Is it not true that half the population of Manhattan Island is living in what Ex-Mayor Hewitt rightly calls "those terrible tenements?"
That Prince of the Church, Bishop Potter, has proposed in the emergency that we have noonday prayer meetings. By all means, we all say. Let us bow ourselves before Almighty God and ask for relief from this social scourge. Yet what if, while we pray, we abate not the power of our aristocracy of privilege; what if we do nothing to mitigate the poverty of the million tenement dwellers?
The distinguished divine has also proposed a military police. If that were good, would not a local standing army be better? It would keep order, at least for a time. But would it cure the general poverty among the masses? Would it not rather act like a lid fastened down on a volcano — work well, until fire and molten stone and destruction belched forth? What then?
IV. ROBBERY OF MASSES BY CLASSES.
Assuming that we are sincerely trying to make civic conditions better, that we are seeking a cure (if there be a cure) for the general vice and crime in the community, should we not ask ourselves some plain questions? Is it not the truth that we have an aristocracy? Is it not the truth that we have a poor class? Is it not certain that the rich are growing richer and the poor poorer and more numerous?
I believe that there can be but one answer — yes.
Yet I can see no reason for this state of things unless it be that the classes are robbing the masses.
V. NATURE AND EXTENT OF ROBBERIES.
LET us consider how the classes may be robbing the masses into poverty.
It is said that when the first Dutchmen came sailing into New York Bay they bought Manhattan Island for $24. That was for the land alone, no houses or other improvements being here. Today the selling value of the bare land of this same Manhattan Island is at least $3,000,000,000. Those who possess the land of this island, now get what is equivalent to a ground rental of $150,000,000 a year, with this sum steadily swelling. The ground rental of Greater New York cannot be less than $225,000,000 yearly.
This vast sum is paid over to the landlord aristocracy — for what? For doing nothing. The people multiplied from a ship's crew to several millions in and about the island and behold! the vast value of land which in the beginning sold for but $24. The increment of value obviously has not been produced by individuals; it is entirely aside from and in addition to the value of improvements, which spring from human labor, which are produced by individuals. This increase in land value is a publicly-made value. It of right belongs to all the people. Do all the people get it? No, the few whom we recognize as the owners of this land claim that value and get it. The people at large in the community get nothing. Do not these landed aristocrats — of which the old French nobility were in many respects prototypes — rob the community? Do they not go far toward robbing a large part of the people into poverty?
Take another instance of robbery of the many by the few. Observe what we are doing about public franchises. A public franchise is a public right of way, a public highway. Modern civilization, with its intense centralization, its condensed population, and its interdependence of individuals, makes these highways of vital importance to the community. They are the arteries of the body-social, the channels of intercommunication and transportation, of heat, and water, and light, and power, and sewage. Were they suddenly destroyed, a large part of the population would die as quickly as a member of the human organism withers up and dies when the flow of blood is cut off from it.
Then if these public franchises, these public rights of way, these public highways, are so vital to the body-social, so necessary to the well-being of the people, what should be our policy toward them? What is our policy toward them? Why, in the case of water and sewage we treat them as public property, operating them publicly through public officials. But what do we do in respect to the other franchises? What do we do regarding street railroads, telephones and telegraphs, electric lighting and heating and gas, and steam supply? All these public franchises are treated as if they were private franchises. Upon all these public highways we allow private individuals to set the claim of ownership; to make charge upon the people; make charge upon the body-social for its blood, as it were. And a conservative estimate of the annual value of these public franchises in Greater New York at this time is $30,000,000.
Here, then, we have two forms of grand, constant, continuous robbery of the people — an aristocracy of privilege appropriating public ground rents and public franchise values, so that a few of the population are enabled to live in palaces while a million crowd into tenements.
VI. HOW TO STOP THE ROBBERIES.
Now the masses of the people of Greater New York lose annually by the appropriations of the landed and franchise aristocracy —
In ground rents
In franchise values
While they are compelled to pay in various taxes for the support of local government
Which makes in all
What shorter way is there to relieve poverty and to do social justice than to abolish the $98,000,000 of general taxes, which fall mainly upon industry or the fruits of industry and terribly hamper the masses of the people; and then what more simple than to appropriate for local governmental expenses that sum out of the $225,000,000 of publicly-made land values? Why not further lighten the load of the masses by taking over into public ownership and management all public municipal franchises, just as are water and sewage now; and then why not cut down their cost of service to the public that $30,000,000 which now represents purely franchise value in the charges of the private corporations that possess and manage them?
For a third step, why not make these municipal utilities free to the public, meeting the expense of their operation by another appropriation of the publicly-made land values?
And for a fourth step, why not appropriate for an old-age pension to every citizen, rich and poor alike, for public parks, for public lectures and concerts, or for any other or for all such purposes — all that still remains of the publicly-made land values?
What would be the result of such a policy? It would be that all the people in Greater New York would be relieved of the burden of $98,000,000 of various taxes; that the great charge of the many branches of the public franchise service on the people would be entirely wiped out and abolished; and that the whole of land values, that is, of ground rents, would be enjoyed by all the people equally, being appropriated for public uses.
Would this make any difference in the community? The welkin is made to ring by the most influential of the tax-payers when, under present conditions, the taxation authorities raise or lower the tax rate even 1%. What, then, would happen if all taxation were lifted from the fruits of toil, if public utilities were made free, and if land values were to benefit, not a class, but the whole people?
Such a tax would be just, because it would fall on this publicly-made value; it would be certain, because land cannot be hidden or lessened in amount; it would force all unused or inadequately used valuable land into its highest use, for no one could afford to hold such land vacant for a speculation, as very many do now.
Land in Greater New York would therefore be cheaper — how much cheaper may be judged by the fact that two-thirds of the land within the city limits, though extremely valuable, is not now used. This unused land would compete with the used land for users, so that land values in the community generally would fall. At the same time all building materials, being relieved of present taxation, would be far cheaper, making two of the chief elements for house building would be greatly less in cost, and consequently, larger, lighter, better dwelling accommodations in every way could and would be supplied to the masses of the people, and especially to the million now living in tenements.
What would help the poorest would be of direct and indirect benefit to all others in the community; and this would be but one of a large harvest of good results that the people would reap from such a policy.
The privileged classes, the aristocrats, would lose their privileges, but they would have no less rights than any and all other citizens of Greater New York.
VII. THE CRIMINALS.
That able and public-spirited citizen, Mr. President Baldwin, of the Long Island Railroad, and Chairman of the Chamber of Commerce Anti-Vice Committee of Fifteen, has said that this is not the time for "idealist scheme of reform." But we are trying to put down vice and crime in the community; and the question is: Who are the criminals?
Let us be frank with ourselves: Who are the criminals? Are they the housebreakers, the unfortunate women who walk the streets and the police officials who take blood-money? Or are they those who rob the masses of the people into poverty — deep, biting, degrading poverty?
Are not the aristocrats of privilege, knowingly or unknowingly, the criminals we should first consider in an examination of civic disease in New York?
I'd read some other things by White, but found this particularly compelling and relevant, in the era after the U. S. Supreme Court's decision in the Citizens United case, and as the "Occupy Wall Street" movement grows.
THE DARTMOUTH COLLEGE CASE DECISION.
John Z. White in the St. Louis Mirror of Oct. 4, 1906 With an Introduction by Wm. Marion Reedy, Editor of The Mirror.
Mr. Bryan's proposal of government ownership of railways; Mr. Folk's proposal of taxing corporations upon the actual value of their property, including franchises, or upon the earning capacity as an estimate of valuation; every proposal to do anything to a corporation that the corporation doesn't want done, is met with the proclamation by corporation lawyers: "You can't do it. Marshall's decision in the Dartmouth College case forbids. That decision holds a charter, or a franchise, is a contract, that no State can impair the obligation of contracts. If the corporations aren't willing to submit to those things you can't do them without impairing the obligation of contracts." This Marshall decision is the backbone, the vitality of all corporate power. It is the secret of corporate tyranny over the people. It is the buttress of every corporation iniquity which reformers try to remedy. It is the fetich of all the courts. It is the gospel of all lawyers. It is sacred because it was formulated by Webster, and embodied in the law by Marshall and Story. It has been so for 87 years. But now the law as laid down by these giants is questioned. Their logic is attacked. The conclusions of the Supreme Court that have been held sacred and binding on all courts forever are denied. They are shown to be absurd. With government ownership and corporation regulation the intensely vital issues they have become, we shall hear much of the Dartmouth College decision being as unassailable as Divine Writ. The war of the new democracy, the true republicanism of this day and the future, must be against this decision, which supports all the corporation iniquities and infamies. This article by John Z. White sounds the first note of the battle cry to which all American radicals must rally, for the law of the Dartmouth College decision is the issue upon which both the great parties are to split in such way that all those in both parties who believe in liberty, in the rule of reason, in freedom from the tyranny of "artificial persons" will eventually be in one party, and all the beneficiaries of the tyranny and corruption of artificial persons will be in another party. Marshall's decision has made for the enslavement of men to corporations. It must be reversed and its logic denounced if this government is to fulfil the purposes of its founders or realize the hope and faith of mankind that found expression in the Declaration and in the Constitution.
EDITOR OF THE MIRROR.
* * *
The people of the United States are much disturbed by private monopolies.
Very many, possibly the majority, appear to view the situation as hopeless.
All manner of remedial measures are proposed.
Kansas attempted a public oil refinery; various municipal enterprises are under consideration; it is even suggested that the amount of business that one corporation may do shall be limited to a given fraction of the total business of the country in any particular line; while a message from the President to Congress informs us that state regulation of railroads has thus far achieved but little.
"How not to do it," is still the distinctive characteristic of American public life.
Is the President not aware of the fact that early in our history the Supreme Court adopted a policy and established a precedent that deprived the people of their natural remedy for corporate aggression?
The doctrine affirmed by the decision in the Dartmouth College case is the source of most of our present industrial abuses.
Instead of seeking the overthrow of that doctrine, our so-called statesmen seem bent on devising schemes that admit its truth, but attempt to dodge its consequences.
* * *
Daniel Webster conducted the case for the college.
John Marshall and Joseph Story delivered the principal opinions.
Those opinions were essentially repetitions of Webster's argument.
On fundamental law Blackstone was favorably quoted.
The case is interesting. Story said so, and in this respect his opinion is sound.
* * *
As told by Wheaton, the story is as follows:
In 1754 Dr. Wheelock began teaching the Christian religion to Indian children. He included some white children, and added educational to religious instruction.
The school was charitable, and contributions were sought. Finally the favorable attention of Lord Dartmouth and others in England was secured.
Originally, Dr. Wheelock intended to bequeath the school and its funds to twelve men with power to fill vacancies, that the trust so formed be perpetual.
The English contributors believed an incorporated organization more desirable, and in 1769 there was secured from the English crown a charter.
The "Trustees of Dartmouth College" is formed in harmony with the plan of Dr. Wheelock, being composed of twelve men who, with other privileges, have power to fill vacancies, and thus is self perpetuating.
The charter declares its provisions unalterable by the crown, and that the twelve trustees may make rules and regulations for the government of the college not repugnant to the laws of Great Britain or New Hampshire.
After the Revolution the State of New Hampshire increased the number of trustees to 21, and appointed a board of 25 overseers.
The college corporation resisted this action, and was defeated before the Supreme Court of that State.
The constitution of New Hampshire (art. 15) reads: "No person shall be deprived of his property, or immunities, or privileges, put out of the protection of the law, or deprived of his life, liberty or estate, but by judgment of his peers, or the law of the land."
The New Hampshire court said: "That the right to manage the affairs of this college is a privilege within the meaning of the bill of rights, is not to be doubted. But how a privilege can be protected from the law of the land by a clause in the constitution declaring that it shall not be taken away but by the law of the land is not very easily understood."
Upon appeal to the Supreme Court of the United States it was held that the charter from the crown is a contract, and therefore that said laws are null and void, because in violation of the Constitution of the United States, which reads (art. 1, sec. 10): "No State shall pass any law impairing the obligation of contracts."
* * *
In his contribution to this interesting case Judge Story said: "It is a principle of the common law . . . that the division of an empire works no forfeiture of obviously vested rights of property."
And of course the division of empire does not destroy sovereign power — that power passes, it does not disappear.
The people of England, through their agent, Parliament, as an act of sovereignty, can, could and did revoke grants made by the crown. All grants issued by the crown were and are subject to this condition.
Webster admitted this power of Parliament, but urged that "in modern times it has exercised this power very rarely;" that "even in the worst times this power of Parliament to repeal and rescind charters has not been exercised;" that "Parliament could not annul charters as a matter of ordinary legislation, but only as an act of omnipotent sovereignty;" that "no legislature in the United States has such power."
The people of New Hampshire, by their sovereign agency (legislative, executive and judicial), declared these laws in full force and effect.
When these agree has not sovereignty spoken? What further appeal is possible — save to the mob?
Therefore, unless the Constitution of the United States delegated to the Federal Government power to annul charters, or prohibited it to the States, it has continued to reside in each State as an inherent sovereign right.
The tenth amendment to the Constitution reads: "The powers not delegated to the United States by the Constitution, nor prohibited by it to the States, are reserved to the States respectively, or to the people."
There was no pretense that power to annul charters was delegated to the United States, but it was held the clause declaring that "No State shall pass any law impairing the obligation of contracts," is such prohibition to the States.
In our early history some of the States too readily altered the basis of debt liquidation. For this reason this Constitutional prohibition was inserted, and yet this decision pretends that in it is concealed the destruction of a great sovereign prerogative.
And even a hasty perusal of the proceedings of the Constitutional convention show the subject under consideration to have been private contracts.
Even if a grant be absurd or unjust, or secured through corruption, still are the sovereign people helpless. According to this decision there is no power in the United States that can annul charters -- because of a Constitution ordained "to promote tranquillity," and to secure other "blessings."
* * *
The vital question before the Supreme Court, therefore, was -- Is the charter from the crown a contract?
Chief Justice Marshall disposed of the matter by saying: "It can require no argument to prove that the circumstances of this case constitute a contract."
On the contrary, very energetic argument is required; much more forceful than any advanced by either counsel or court.
* * *
As a point from which to view the matter in hand, let us first perceive the conditions of equitable social adjustment.
Blackstone says truly that: "The laws of nature are coeval with mankind and are binding everywhere and at all times," and that "all human enactments derive whatever force and vitality they may have from their conformity to those great originals," and that "any human laws made in contradiction of the laws of nature must eventually fail and become null and void."
As a condition of nature, then, men live on the earth, and must produce things from its materials in order to continue life.
Some, if able, will rob, or wantonly or carelessly injure others, and to prevent such trespass all the people (strictly, the majority) within a given territory organize the police power.
To utilize the earth efficiently it is necessary that parcels be exclusively occupied by individuals. To this end the whole people ordain a method of holding land.
In other words, each man has the right to peacefully occupy and use the earth, and the only known way to maintain this right (security of person and property) is by the exercise of the supreme force.
This supreme force is sovereignty. Sovereignty is dominion; government its organized agency.
States are not corporate agencies to be compelled. They are sovereign agencies that command. They bow not to the past; they rule not the future; but they control the present.
To yield this power in any degree is, in that degree, to yield the only power in nature whereby civilized society is possible.
To argue that sovereignty can, in part, surrender itself, is to argue that a thing can divest itself of its essential characteristics.
If we argue that sovereignty can partly surrender itself, must we not logically agree that it can do so wholly?
Sovereignty is the arbitrary will of the majority, and finds justification for its exercise in the fact that nature (i. e., the constitution of man, together with that of his environment) compels the assertion of that will.
The supreme force is often used to the disadvantage of some, but such act is in violation of natural equity and "must eventually become null and void."
This is nature's social law. "Conformity to this great original" is the State's duty.
* * *
It will be observed that sovereignty does not originate in the divine right of the King, nor in the legislature, nor in the so-called social compact, nor in the conscious contract that James Wilson tried to deduce from the assertion that governments derive "their just powers from the consent of the governed."
Like the right of each man to peacefully use the earth, sovereignty exists of itself. The State is but the agency of sovereignty, organized to conserve this right to peacefully occupy.
Plainly, while a State may contract with a citizen to build a school house, it cannot contract with him regarding matters of sovereignty.
Such act would be an attempt to "agree" that the greatest force is not the greatest force — an attempt in degree to surrender sovereign agency.
A charter gives power to the possessors as against other citizens, but not as against the State.
A State therefore may create a corporation by permitting a group of persons to exercise sovereign powers, but such act is to delegate, not to surrender power. It is a license, a permit — nota contract.
In short, a State may delegate portions of its power, but it can abdicate no part of its sovereign agency.
Any agent may make contracts as to matters in the conduct of business proper to his agency, but who will urge that he may contract away any part of the title to the enterprise itself? Are we to understand that an agent may absolve himself of his agency, in any degree?
A corporation holds power only because it is sustained by sovereignty. It is not only created by law, but also is sustained by law, and has no being save for law.
To admit the power to grant charters and deny the power to annul them, is like admitting the existence of one side of an object while disputing the existence of the other side; or like asserting the positive and denying the negative pole of electricity; or like disputing the similar conversion of a syllogism.
* * *
The Supreme Court was right, when, in the "Slaughter House" and other cases, it held that no part of the police power may be "contracted" away. Each citizen must submit to this phase of sovereign authority.
But is land-holding less a result of sovereignty than police regulations? One may refuse a particular parcel of land, but cannot refuse all land and live. Either as owner or tenant he must conform to the methods ordained. He may, however, refuse to erect any building.
Men and land include all things social, and if sovereignty be asserted as to these it is complete.
* * *
Webster dimly perceived that to contract, all parties must be free to withhold consent, and he said: "What proves all charters of this sort to be contracts is that they must be accepted, to give them force and effect."
Can we not with equal justice say the relation between master and slave is contractual?
The master grants permission to attend a picnic. The slave "accepts" — and we have a contract.
Or, the master commands a like act, and the slave refuses, even preferring death — and no contract results.
Is not the permission or the command without "force and effect" unless the slave "accepts"?
"Accept," says the master, "and live a slave, or fail to 'accept' and die a man."
Corporations live. Men die. Therefore, says the State, according to this decision, accept this charter and live an artificial, immortal person, or fail to accept and die as the God of nature designed in his "great originals."
* * *
If we are agreed as to the nature of sovereignty and its agency, we perceive the validity of the British rule that the Parliament can annul charters. Also we will be able to note the virtue of the positions taken by the court.
Two principal assumptions were made:
First, that land grants are irrevocable. Second, that corporations are persons.
Some positions were evaded, but, on the important matter of "privileges" there is agreement, as follows:
Blackstone said: "Franchise and liberty are used as synonymous terms, and their definition is, a royal privilege, or branch of the King's prerogative, subsisting in the hands of the subject."
Webster quoted Prof. Sullivan as saying that, "The term liberty signifies the privileges that some of the subjects, whether single persons, or bodies corporate, have above others, by the lawful grant of the King."
Webster then said: "The plaintiffs have such an interest in this corporation."
Privileges, then, are partialities, favoritisms, "grants of the King's prerogative," "advantages that some have above others."
Per contra: They are handicaps, burdens, oppressions, tyrannies upon those same "others."
"What is one man's privilege is another man's right," is a wise saying attributed to Andrew Carnegie.
Of corporations Justice Story said: "An aggregate corporation at common law is a collection of individuals united into one collective body, under a special name, and possessing certain immunities, privileges and capacities in its collective character which do not belong to the natural persons composing it. . . . It is in short an artificial person, existing in contemplation of law, and endowed with certain powers, and franchises, which, though they must be exercised through the medium of its natural members, are yet considered as subsisting in the corporation itself, as distinctly as if it were a real personage."
Marshall said of this corporation: "An artificial immortal being was created by the crown, capable of receiving and distributing forever, according to the will of the donors, the donations which should be received by it."
And said Webster: "A grant of corporate powers and privileges is as much a contract as a grant of land."
"Was it ever imagined," asked Story, "that land voluntarily granted to any person by a State was liable to be resumed at its own good pleasure?"
The nature of privileges is agreed to; also that corporations hold privileges; also that "a grant of franchises is not in principle distinguishable from a grant of any other property," as asserted by Story.
But cannot the State take the physical thing, land, under power of eminent domain; and did not John Marshall say, in Providence Bank v. Billings (4 Peters, 562), referring to a land grant, that: "This grant is a contract, the object of which is, that the profits issuing from it shall inure to the benefit of the grantee? Yet the power of taxation may be carried so far as to absorb these profits. Does this impair the obligation of contracts? The idea is rejected by all," etc.
If the State can take the land under condemnation, and its value (profits) by taxation, what becomes of the contention of Webster and Story that land granted may not be resumed? And we are all agreed that land grants and franchises stand or fall together.
Thus one principal assumption is destroyed. It has no validity in reason, and from a different point of view, as shown in the case cited, even Marshall was able to perceive the truth.
* * *
The second principal assumption was necessary to the conclusion, because if the corporation was not a "person," there was no party with whom the crown might contract.
It is agreed that a contract is "an agreement between two or more persons to do or not do a particular act."
As a corporation does not exist until the charter issues, it would seem that, if the charter is a contract, the corporation must be a party to its own creation.
Perhaps the State creates a corporation, or artificial person, and then contracts with that artificial person to do what it has already done, viz., create a corporation.
Story dealt with this point in the following manner:
"From the nature of things, the artificial person called a corporation must be created before it can be capable of taking anything. When, therefore, a charter is granted, and it brings the corporation into existence without any act of the natural persons who compose it, and gives such corporation any privileges, franchises, or property, the law deems the corporation to be first brought into existence, and then clothes it with the granted liberties and property. . . . There may be, in intendment of law, a priority of time, even in an instant, for this purpose."
The corporation must exist before it is "capable of taking anything."
Certainly; and it must "be" before it can contract to "be." To "be" is one of its liberties, and all of its liberties are in the "contract."
As Marshall said: "A corporation is an artificial being, invisible, intangible, and, existing only in contemplation of law, it possesses only those properties which the charter expressly confers upon it."
One of which properties is to "be." "The law deems the corporation to be first brought into existence and then clothes it," etc. Never mind about clothing it. Get the thing born first — as a contract.
Story said those who oppose his view should "consider whether or not they do not at the same time establish that the grant itself is a nullity for precisely the same reason."
As a contract, we do establish "precisely" that.
* * *
Story had yet another line of approach. He said: "An executory contract is one in which a party binds himself to do or not to do a particular thing. An executed contract is one in which the object of the contract is performed."
The non-professional mind can readily perceive how one may contract to make a pair of boots, or to sell or to deliver a pair, but how can one contract to make a pair that is already made?
Seemingly, in the court's view, a charter is an executed contract. That is, "the object of the contract is performed." But this does not relieve the situation. For, even though the making and the performance of the contract be simultaneous, there can be no contract without parties, and the corporation or artificial person does not exist until the charter issues.
Not only is the "person" artificial but the whole concept is artificial and woodeny and bears no semblance to those "great originals" to which Blackstone rightly declared all permanent law must conform.
One feels impelled to warn the profane reader that this is not a discussion of farce-comedy.
* * *
The facts in the case appear simple enough, before Webster indulged in intellectual gymnastics, or the court applied its alchemy.
It seems that a group of persons applied for, and received, "an advantage above others," a "branch of the King's prerogative," or a privilege sustained by sovereign power, that is, a charter.
The grant being secured, the group thereby becomes an organisation of persons upon whom the State has conferred certain specified favors.
If the corporation is an artificial person "in contemplation of law," it can be very bluntly be asserted that the law assumes as true what is not true, but is absurd.
When told that in the eye of the law his wife supposed to act under his direction, Mr. Bumble replied: "If the law supposes that, the law is a ass — a idiot. If that's the eye of the law, the law's a bachelor; and the worst I wish the law is, that his eye may be opened by experience — by experience."
We are getting experience, and it is to be hoped our eyes will open. Mr. Bumble's estimate of the law was, in some respects, extremely accurate.
The second assumption seems untenable, and with its dismissal the case vanishes.
A corporation is an organization — not an organism, and certainly not a person.
Its charter is but the expression of the grant of authority conferred. If the State has power to confer, it also has power to withhold or withdraw — that is, to annul. Unless, of course, there is some power in government greater than sovereign agency.
* * *
Story suggested that power to annul charters might be reserved by the legislature, either in each charter or a general law.
Such reservation surely cannot give to a legislature a power not already possessed. Otherwise an act may not only tend, as Webster feared, but easily secure, "the union of all powers in the legislature."
And if the legislature cannot so add to its own powers, but can by act secure the reservation, does it not follow that the reservation exists regardless of the act?
Does a legislature possess power through contract with individual citizens, or is its power delegated to it by the sovereign people?
After agreeing to the nature of privilege, and listening to the definition of corporations, and observing Justice Story's assurance that these grants imply on the part of the grantor "a contract not to reassert the right" (although it is agreed that Parliament can annul), and being told that "the only effect of the charter was to give permanency to the design;" in fact, being duly impressed with the solemnity of the whole proceeding (and why should not artificial, immortal beings be viewed with awe?), we are suddenly startled by Marshall's assertion that "From the fact that a charter of incorporation has been issued nothing can be inferred which changes the character of the institution or transfers to the government any new power over it."
If this assertion is true, why do men seek charters?
If the character of the institution was not changed, what contract was made?
And what did Story mean in saying that a corporation possesses "certain immunities, privileges and capacities in its collective character which do not belong to the natural persons composing it"?
We must infer a change in the character of the institution, and that change is the possession of political powers not before held.
It is these political powers that Story said "do not belong to the natural persons composing" the corporation.
These "branches of the King's prerogative" are political because the whole of the King's prerogatives are political. The State is political. It has political power only to give.
It was to this sort of power that Webster referred when, after describing privilege, he declared that his clients "have such an interest in this case."
The character of the institution was changed by the exchange of a private for a public administrator. All corporations are public for the reason that all their powers are derived from the State. Corporate powers are part of the State — (sovereign powers subsisting in the hands of the citizen, — to use our terms in place of the British form).
On the same point Mr. Hopkinson, of counsel for the college, asked: "If the property of this corporation be public property, when did it become so? It was once private property; when was it surrendered to the public?"
The property was not surrendered to the public, but its administration was given to the public by the voluntary act of its owners.
The owners preferred to entrust it to a publicly established agency (viz., the corporation), rather than to leave it by bequest to private parties, in accord with the original intention of Dr. Wheelock.
* * *
Distinguishing between public and private corporations and indicating that the physical property with which a college corporation is endowed is called its "foundation." Story said: "If the foundation be private, though under the charter of the government, the corporation is private, however extensive the uses may be to which it is devoted, either by the bounty of the founder, or the nature and objects of the institution."
And in this class of private corporations he places hospitals, banks, canals, insurance, turnpike and bridge companies.
This conclusion gives to a corporation the character of its physical property, while common sense asserts its character to be that of the source of its authority.
It is a corporation because the State created it. Is it not more in harmony with right reason to say, ''if the grant be from the public, the corporation is public, however slight be the uses to which its political power is devoted"?
Do the privileges of a corporation spring from its foundation, or from the State?
Its power "to be" is of the State; its permanence, or "immortality," is of the same source.
How can we say that the privileges of a corporation are sovereign powers in the hands of a citizen, and at the same time say the corporation is private?
To classify corporations as civil and eleemosynary, or as public and private, is to divide them according to their uses, and is entirely proper as an aid to convenient identification; but to make this classification on the basis of philosophical distinction is merest twaddle.
A corporation is a group of persons holding "privileges," and the nature of privileges is agreed to. Whether the corporation is used to conduct a Sunday school, a great city, a railroad, or a manufacturing plant is immaterial.
A gun, whether a toy pistol or the most improved rifle, is still a gun; and whether in the hands of an honest man defending his home, or in the hands of a highwayman attacking his victim, it is still a gun.
A corporation holds political power. Its power to "be" is political. And all the fancy balancing indulged by counsel and court operates to conceal, not to destroy, this truth.
* * *
The New Hampshire court, as before stated, said it was difficult to understand "how a privilege can be protected from the law of the land by a clause in the Constitution declaring that it shall not be taken away but by the law of the land."
In reply Webster quoted Blackstone as follows: "And first it (i. e., the law), is a rule; not a transient or sudden order from a superior, to or concerning a particular person; but something permanent or universal. Therefore a particular act of the legislature to confiscate the goods of Titus or to attaint him of high treason does not enter into the idea of a municipal law; for the operation of this act is spent on Titus, and has no relation to the community in general; it is rather a sentence than a law."
Webster added, "Everything that may pass under the form of an enactment is not therefore to be considered the law of the land. Such construction would render constitutional provisions of highest importance inoperative and void."
All of which is true, but the case in hand is an instance of the "universal and permanent" rule that sovereignty can annul charters.
Webster seems to have dodged the issue, or begged the question; which reminds us that of one of counsel's arguments Story said, "The fallacy of the argument consists in assuming the very ground in controversy."
This is precisely the method of the court throughout most of this case.
Many eminent authorities, voicing sound doctrines as to the proper relation between sovereignty and the person, were quoted — and then the doctrines were applied to corporations.
Herein lies the plaintiff's need for asserting corporations to be persons — and herein is the lameness of this absurd decision.
* * *
In conclusion, sovereignty is not a subject of contract.
Nature forces the majority to be sovereign. Sovereignty of necessity relates to persons and to land.
These two exist of themselves. All else in the social state is subsidiary.
The whole string of sophistries indulged by the court were to the end that these simple truths be submerged.
It is only as these simple truths are clearly apprehended that social freedom is possible. Marshall was a Tory. His whole career proves it. A Tory is not a friend of freedom.
The truth is that power to regulate corporations or annul their charters inheres in each State — save for this precedent.
Deprived of this power by this invasive rule, the people flounder on, rapidly losing faith in the great American experiment.
Does anyone doubt that our Western States would long since have regulated railroads and other corporations in the interest of common honesty if the group of attorneys called the Supreme Court did not bar the way?
The people think they live under the Constitution, in fact, they live under Marshall's decisions.
If it were not for the slavish submission of the present court to the name of Marshall, would we need to be outraged by the spectacle of sovereign States like Idaho, Montana and Colorado in the West, and Pennsylvania and New Jersey in the East, lying bound at the feet of a lot of soulless corporate pirates, as reckless of human rights as any horde that ever sailed the Spanish Main?
Let the court confine itself to its own affairs, and leave the States to attend to theirs.
The decision was in degree destructive of the rights of the States (which in itself is of no moment), and thereby of the people's rights (which is of great moment).
It was not adjudication. It was usurpation. Thus far it has been endured.
One Judge dissented. Let us revere his name — it was Duvall.