LVTFan's Blog

Thomas Shearman: The Coming Billionaire (1891)

When there is even one billionaire, there will be several half-billionaires and many hundred-millionaires.  The fact will be an indication of a tremendous concentration of wealth, and of the dwindling proportion of wealth held by the farmers and wage-earners of this country.  The billionaire will bring an army of paupers in his train.  Possibly the actual average wealth of farmers and mechanics then may be a little greater than it is now.  Optimists of that day may assure them that they are richer, by ten dollars each, than their ancestors were; and therefore that all is for the best in this best of all possible worlds.  But the discontent of the masses, under a system which gives to one man a larger amount of wealth than can ever be attained by a million of his fellow citizens who are fully his equals in skill and merit and far his superiors in industry, is certain to be great and ever increasing.  Indeed, universal experience demonstrates that discontent among the masses is far greater than when the weight of oppression is somewhat diminished than it was before.

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The vast majority of any community must always have incomes so small that they cannot help spending three fourths of what they receive.  But the small minority of large property-owners do not need to spend one eighth of their incomes, and as a rule they do not spend one half.  Looking at the subject with reference to accumulated wealth, the man who is worth $1,000 usually spends at least $500 a year on the support of his family, while the man who is worth $1,000,000 rarely spends $50,000.  Indirect taxation, therefore, obviously bears at least ten times as heavily upon the former as upon the latter.  Under absolutely direct taxation, no poor man would ever pay a larger share than a rich man, and, indeed, most of the working classes would pay no taxes at all; because the collection of direct taxes from them would be too laborious and expensive to be maintained. 

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Direct taxation, on a large scale, is near at hand.  The men who bought and paid for the present Congress can now choose what its form shall be.  They can have a general income tax, or they can have something less open to fraud, less inquisitorial in its nature, less oppressive upon honest men, and offering no premium to perjury.  But they know nothing about the science of taxation, and they do not care to learn; so that the whole matter will be left over to the new Congress, and a general income tax, objectionable as it is, seems most likely to be adopted. 

The Coming Billionaire

The Forum, January, 1891, page 546-557

In the FORUM for November, 1889, the question was asked, "Who owns the United States?" and reasons were given for the belief that one half of all the national wealth is owned by 40,000 families and that three fourths of it is in the possession of fewer than 250,000 families.  These estimates were based in part upon official tax returns, but in part, also upon private information as to the wealth of 70 estates, specifically named, each estimated to be worth more than $20,000,000 and averaging $37,500,000.  The correctness of these statistics, as well as that of the inferences drawn from them, has been somewhat bitterly denied.  Hostile critics have assumed that the estimates of individual wealth were based entirely upon newspaper reports; and many newspaper editors, acting presumably upon their own experience, have unhesitatingly declared that such statistics are necessarily worthless.

But not one tenth of these names were given upon the authority of newspaper estimates, while a large majority were given upon very trustworthy private information.  It has been said that no one can tell what a man's wealth amounts to without access to his books, which, it has been assumed, is impossible.  In several instances, however, the information came from persons who had access to the necessary books or had been permitted to inspect the securities; in some cases it was obtained from tax returns; and in other cases it was taken from the oral or written statements of the owners themselves.  For example, one gentleman, whose wealth was set down at $100,000,000 had actually exhibited $75,000,000 in securities, and had testified in a court of law to the possession of $10,000,000 more of one kind, all encumbered.  During the year which has now elapsed, not one tenth of these names have been specified by any one as erroneously entered upon the list or as seriously overrated, and in only three instances has any probable error been established.  These names might be omitted, and their places might be supplied by others of the twenty million grade.  Errors of understatement have been discovered which largely counterbalance all overstatements.  The least that can be said is that there are 70 American estates that average $35,000,000 each, not including Trinity Church, which perhaps should not be classed with strictly individual owners.  During the year, by the consolidation of two estates, one individual has become worth at least $200,000,000.  Two brothers, whose property is held as a unit, together own even a larger amount than this.  Some great estates have been divided up by inheritance, but others have been divided up by inheritance, but others have been still more concentrated by that means.

Henry Ware Allen: Special Privilege

Special Privilege

BY HENRY WARE ALLEN
from Land and Freedom, 1938

As our time honored political maxims become hackneyed they are very apt to pass into what Grover Cleveland would call innocuous desuetude. We subscribe to the sentiment that "eternal vigilance is the price of liberty" and yet little is done to counteract those aggressive forces which nullify that freedom which we profess to prize so highly. Even the prayer, "Thy Kingdom Come," is repeated as a mere wish that something good would happen rather than with a determination to bring about those righteous conditions which make for a heaven on earth. Possibly the most neglected of all of our national ideals is our professed adherence to that most democratic of all maxims, "Equal rights for all and special privileges for none." For at the present time our country is honeycombed with special privilege that has become so entirely entrenched as to be regarded on all sides as vested right. Special privilege is condoned by force of its familiarity. Like vice it is endured, then pitied, then embraced.

There lived in a Colorado city years ago a housewife who made convenient use of coal cars on the side track across the street from her dwelling with which to replenish her stock of fuel. This she did without any qualm of conscience but as a special privilege which, by the sanctifying touch of time had grown into a vested right. This woman doubtless was punctilious in the ordinary obligations of life and would have hotly resented any statement to the effect that she was stealing coal. She was guided by that all too common kind of honesty which is based upon expediency rather than principle. Not on any account would she have withheld what was due from her to a neighbor who would have suffered by her delinquency, but the advantage to her of getting this coal was so great and the loss to some impersonal owner of same, mine, railroad, or smelter, was relatively so negligible that the argument was all in favor of her acting in her own interest without question. No personal equation was involved and if at first there had been any hesitation on her part of this practice, that was long ago a thing of the past. But the railroad company put a watchman on guard and her supply of fuel was thereby stopped. She then turned to the local charity organization with request for a continuation of the supply which had thus been rudely taken from her and the very righteous indignation with which she told her story was ample proof of entire absence of comprehension on her part that she had been stealing.

This incident, which is a true story, illustrates very nicely the evolution and the nature of that special privilege which eventually becomes a vested right. And if the searchlight of analysis is turned upon our social system we may be surprised to find the presence of special privilege in unexpected places and of a volume that is, in the aggregate, enormous.

As a basis for this inquiry it may be well to state the fundamental truth that property may be secured in three ways only; first, by labor; second, by gift; and third, by theft. If this test is repeatedly kept in mind, the task will become easier. One of the commonest forms of special privilege is that which is provided under ninety-nine year leases on valuable business property sites. These leases convey to the owner of the land a stipulated income after the tenant has paid all taxes and expenses. In the parlance of political economy this revenue consists of what John Stuart Mill defined as unearned increment, a value which is produced by no individual but which is purely the result of population reflected upon desirable locations. For this revenue to be turned over to individuals as is now the unquestioned custom in all of our large cities and to an amount of billions of dollars annually is a procedure which is precisely in the same class as the stealing of coal from the railroad car by the Colorado housewife.

A much larger source of public revenue which is diverted to individuals is that of the rent of valuable property in excess of a fair interest return upon the intrinsic value of improvements on the property. This applies to practically all property located at the center of our large cities and involves enormous revenues. There is a mixture here of legitimate return on capital invested with the unearned increment which belongs absolutely to society but the case is not less clear on that account.

Another prolific source of public revenue which is diverted to individuals is that which comes from the lucky possession of oil wells. This possession frequently gives incomes of thousands of dollars daily to those who have no more claim on such revenue than is involved in the possession of the land upon which the wells were developed. The wealth that has by this means been given to certain sections of the country and certain groups of people has run into the billions of dollars. The Osage tribe of Indians in Oklahoma are said to have been made the richest people in the world due to this special privilege. Such beneficiaries are no more justly entitled to the revenue which they receive than was the Colorado woman justified in stealing coal from the railroad car. It will be said that the oil industry involves a great deal of capital and that many dry wells are paid for before a single producing well is developed. This is true and therefore makes the proposition somewhat more complicated but does not alter the conclusion.

Another source of revenue which diverts public funds into private hands is speculation in land. Purchase of inside property sure to increase in value is the one investment that has been invariably recommended by shrewd financiers. This speculation is far greater than has been generally realized. More than one-half the area of New York City consists in vacant lots which are held out of use for speculative purposes, and the same is true of all our larger cities. Incidentally, this speculation has the effect of enhancing the selling price of desirable land to artificially high figures. When land which is purchased with a hope of subsequent rise in value, the investor practically lays a trap by which he may secure values that rightfully belong to the community. And this process makes an artificial scarcity of land with consequent artificially high cost to those who must use it. This process of securing a profit, of getting something for nothing, is persistently the same in character as that by which the Colorado housewife secured her supply of coal. Here again objection may be interposed to the effect that land frequently has to be sold for less than it cost. This is an objection that was raised by no less an economist than Francis A. Walker, the foremost critic of Henry George during his lifetime. General Walker exclaimed, "Mr. George has much to say about unearned increment: He says nothing, however, about unrequited decrement." Mr. George's rejoinder to this was an expression on his part of his inability to discuss the problem with one who spoke of unrequited decrement in something which originally had no value. In other words, so far as society is concerned its interest is only in the rental value which is produced from year to year and which rises or fall accordingly as population grows or wanes. The important fact is that this increment, whether large or small, belongs to the community which produced it.

The most spectacular form of special privilege which we have to deal with today is that provided by the protective tariff. This protection enables the America manufacturer to secure an artificially high price for his product. The common argument in support of the protective system is that the American standard of living must be maintained by this artificial means, but this argument falls to the ground, if at the same time, we permit any improvement in labor-saving machinery which naturally has far greater effect upon the labor market than is produced by the competition of merchandise imported from abroad. The enormity of special privilege due to the tariff is perhaps more conspicuous in the State of Pennsylvania than elsewhere, a single family in Pittsburgh, the direct beneficiaries of the tariff on aluminum, being reputed to be worth in excess of $2 billion. There will be found that, with a few rare exceptions, the great fortunes of America are based upon special privilege of one kind or another.

Although there are many minor sources of special privilege which are embedded in our political and social institutions, those above enumerated are the principal ones.

The special privileges provided by legislative action at Washington are in a different class from those which have become a regular part of our system of taxation but are none the less to be condemned. The most flagrant of these in recent times was the appropriation by Congress and approved by President Hoover, of $500,000,000 of tax payers' money for the specific purpose of stabilizing or artificially enhancing the price of wheat, cotton, and other farm products. It was presumed by the makers of this law that it would have the effect of giving artificial advantage to the farming class, which would offset in a measure the special privileges which had been given so generously to Eastern interests by means of the protective tariff. The plea for this farm legislation was repeatedly based upon that consideration. It so happened that even the immense waste of money involved by the farm marketing act was negligible as an influence in the world wide markets and that it did not affect in any considerable degree the law of supply and demand upon the prices of the agricultural products which were supposed to be favored. But the very fact that this legislation was put through with little opposition furnished a very good illustration of the fact that special privilege legislation is regarded as perfectly legitimate. And this has been further illustrated in monstrous degree by the New Deal legislation under President Roosevelt.

There is everywhere consciousness of a mysterious force which is responsible for easily acquired fortunes on one hand together with an increase of unemployment and consequent lower incomes on the other hand. Each succeeding census report makes more appalling this undemocratic and unjust condition in our social fabric.

If prosperity is to be secure, there must be an end to special privilege of every kind, and a system of taxation inaugurated in place thereof which shall be based upon justice to all. Henry George has demonstrated how this should be done.

Mother Earth, Boom-Bust, Free Trade, Dogs-in-the-Manger (landlordism), and widely-spread Prosperity

THE EARTH OUR MOTHER

Man is a land animal as much as a fish is a water animal. Not only does man live on land but all of his wants are supplied by or from land. The earth is, literally, his mother. He will perish quickly if he has not access to the breast of his earth mother and will suffer and squall and become panicky if he has not free access to earth's breast and cannot obtain sufficient nutriment. His relation to land is fundamental and can be broken or disturbed only at great peril and loss to him and to society.

Production and consumption will always be in equilibrium and commerce and exchange will always flow smoothly, if all men at all times have equal and free access to nature's storehouse of wealth and if there are no dams -- tariff, -- etc. to interfere with the exchange of products. Free land and free trade are therefore, essential to economic justice; to give all an equal opportunity to produce goods and to exchange them without paying toll to anyone. When goods are produced and exchanged freely, it is reasonably certain that production and consumption will run so closely together that there can be no serious panics or long periods of depression. Serious maladjustment can and will occur only when production and exchange are interfered with and to the extent that they are interfered with.

The private ownership of land, that is, the taking of economic or land rent by private land owners, or landlords, most seriously interferes with some men's access to mother earth. Landlords are not only dogs in the manger; they are a class and about the only class, except the tariff beneficiaries, that consume without producing; that do not give a quid pro quo for what they get.

The capitalist supplies capital and is entitled to the interest that he gets. The laborer --wage, salary or fee earner -- produces goods or gives services and is entitled to what he gets in exchange. The landlord produces neither the land nor the land rent and is not, therefore, entitled to the rent that he takes. He is the only one who takes out of the economic pot without putting something into it. He is the only one who can and does live off the labor of others. He is the greatest of all economic leeches.

Professor Thorold Rogers said, in 1870:

"Every permanent improvement of the soil, every railroad and road, every bettering of the general condition of society, every facility given for production, every stimulus supplied to consumption, raises rent. The landowner sleeps, but thrives. He alone, among all the recipients in the distribution of products, owes everything to the labor of others, contributes nothing of his own. He inherits part of the fruits of present industry, and has appropriated the lion's share of accumulated intelligence."

If, as in ordinary times, the landlord takes only a moderate rent, that is, charges only the actual rental value of land to the capitalist and laborer who use land, production and consumption proceed normally, for society has fairly well adjusted itself to this unjust system. In times of great prosperity -- so-called -- when there is great speculation in land values and they rise rapidly, the landlords can and do take even more than the normal rental value of land; that is, more rent than is produced by society. Access to land then becomes so difficult and the prices that producers have to charge for food, clothing and shelter become so high that consumers are unable, after paying excessive rent, to purchase all of the goods produced. Hence, the glut in the market; the decline in the prices of commodities; the collapse of the over-extended credits; business failures; closed mills; idle labor and low wages. The business depression does not end until land values have declined to or below normal for the population. Soon thereafter business begins to revive, mills to open, unemployment to decrease, wages to advance and prosperity to return. Industry will continue on the up-grade until rents again become excessive. Most, if not all, periods of prosperity end with real estate booms. Even our present war prosperity will probably continue until there is a boom in city, farm, forest and mine land values.

The Single Tax Year Book (1917)

A Tariff for Revenue

No one can defend a protective tariff as a means of raising revenue, since the treasury gets the lamb's share and somebody else the lion's.

--excerpt from The Single Tax YearBook (1917)