Ethics of Democracy

Part 4, Economic Tendencies
Chap. 7, The Trust and the Single Tax

A great change is going on all over the civilized world similar to that infeudation which, in Europe, during the rise of the feudal system, converted free proprietors into vassals, and brought all society into subordination to a hierarchy of wealth and privilege. Whether the new aristocracy is hereditary or not makes little difference. Chance alone may determine who will get the few prizes of a lottery. But it is not the less certain that the vast majority of all who take part in it must draw blanks. The forces of the new era have not yet had time to make status hereditary, but we may clearly see that when the industrial organization compels a thousand workmen to take service under one master, the proportion of masters to men will be but as one to a thousand, though the one may come from the ranks of the thousand. "Master"! We don't like the word. It is not American! But what is the use of objecting to the word when we have the thing?

- HENRY GEORGE, in Social Problems Ch. V.

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The Ethics of Democracy

by Louis F. Post

Part 4, Economic Tendencies
Chapter 7, The Trust and the Single Tax

A VERY simple illustration of the trust may be imagined by considering the hack service at almost any commodious railway station, whether in city or country. I select a particular one for the sake of being definite. Hackettstown is a New Jersey station on the Delaware, Lackawanna & Western Railway, where the station yard is large enough to accommodate many more hacks than are needed. Several hacks carry passengers between this station yard and any desired place in the town at the uniform charge of a dime. Were more exacted, competition would be stimulated. Realizing this possibility, the hack owners conform voluntarily to what is locally regarded as a fair toll. The business, therefore, is regulated by competition - if not actual, yet potential.

Consolidation of these interests might effect economies. If so, the consolidation would be beneficial to all concerned. Patrons would get better service and pay lower fares; and if displaced employes were hurt by it, their misfortune would be due, not to the labor-saving consolidation of Hackettstown hack interests, but, as is the case with the introduction of labor-saving machines, to fundamental legal obstructions to business in general. The consolidation would be nothing but a union of interests in hacks and horses, a kind of property too easily produced in abundant quantities to be monopolized. Such unions are not in themselves harmful. If they were, all economizing devices would be harmful, and, following Tolstoy, we should have to return to primitive methods of production.

But note the effect were the railroad company to confer upon those hack owners exclusive rights to enter the station yard with hacks. As the station building is so situated with reference to the public highway that competing hackmen could not satisfy the needs of passengers without access to the yard, the privileged hack owners would control the business as a monopoly. Though they still competed with one another, they would be shielded from the competition of outsiders. What if they consolidate now? How radical the difference! The consolidated interests would be more than interests in hacks and horses. They would comprise exclusive rights of entry into the station yard. And therein would lie the evil power of this local hack trust. Freed from all fear of competition, it could make a standard of service to suit itself, and regulate fares upon the basis of extorting "all the traffic would bear."

This illustration is so far typical of business in general as to indicate the point at which the evil of the trust comes in to bedevil modern industry. That point is not where competitive businesses combine; it is where competing monopolies come into the combination. When really powerful trusts are analyzed, their power is found to rest in some form of monopoly - in some species of privilege. Somewhere in every evil trust, though not always obvious, there is a consolidation of exclusive interests analogous to the station yard monopoly of our illustration.

Mr. Charles M. Schwab recognized this when in his testimony before the Industrial Commission he affirmed that the steel trust, of which he was manager, absolutely controls 80 per cent, of the iron ore deposits of this country, and all the best coking-coal lands known.

Specifically, the monopoly interests upon the consolidation of which trusts are erected are numerous and various. They consist of such monopolies as railroad rights of way, pipe-line rights of way, patented inventions, water privileges, street franchises, mining rights, terminal sites, and so on into a long catalogue. But most of them may be properly classified as monopolies of land. Mining rights are obviously land rights. Railroad and pipeline rights of way, terminal sites, and the like, are evidently so.

To make land monopoly the mother of trusts, however, it is not necessary to trace directly to land monopoly every special privilege that may not obviously spring from that source. The important consideration is that all monopolies which do not spring from, are necessarily subordinate to, monopolies of land. A monopoly of iron mines, for instance, confers control over the iron industry in all its ramifications, including all its minor monopolies. That control may be limited by a monopoly of rights of way, and especially of necessary terminal points for the shipment or delivery of products of the iron industry. But this makes no difference to the argument, for both monopolies are monopolies of land. And, if these two land monopolies be united in one trust, that trust is unconquerable, except by a trust that monopolizes still more important natural sources of supply or still more commanding terminal sites.

In yet another, a more subtle and therefore more effective way, evil trusts are fostered by land monopoly. This is through general speculation in land. In the hope of profiting by increase in land prices, every one who can afford to invest buys land where he thinks it may rise in value. Most of the land so bought is either not used at all or only partly used. It cannot be easily obtained for use, because it is held upon speculation at excessive prices. In consequence of this difficulty, the industrial classes are forced into a glutted labor market, like cattle into a corral. As all processes of industry depend upon land, workers of every grade are huddled together begging for some kind of job. Those that are not actually in the corral are in mortal fear of getting into it. In these circumstances, the industrial classes are an easy prey to whoever has a job to give them. To escape the corral, they accept any terms they can get. They cannot contract in freedom, for they must buy a chance to live. The question with them is not one of more or less income, but of life or death. Thus the monopoly power that trusts acquire from ownership of land is multiplied by the relative weakness of their landless victims. "The destruction of the poor is their poverty." And their poverty, as well as the original power of the trusts, is rooted in, springs from, and is strengthened by land monopoly.

This monopoly not only strengthens the trusts by weakening the contracting power of their workmen; it is also the fundamental cause of the suffering which all classes that eat their bread in the sweat of their own faces are forced to endure from what seems to them the "ravages" of labor-saving machinery and other economizing devices. The only radical remedy, therefore, not only for the evil of the trust but also for the evil effects of what ought to be an unmixed and universal good, namely, labor-saving methods, is the abolition of land monopoly.

This is the comprehensive, because the radical or root remedy, for industrial maladjustment, which Henry George proposed to apply by what has come to be known by the name of "the single tax." It was his idea to continue, in lieu of all other taxes, the tax we already impose upon the value of land - namely, that part of the real estate tax which is measured by the value of sites as distinguished from the value of improvements. To put his proposition in another form, he would abolish all taxes except the one which is measured solely by land values, trusting to the resulting increase in the rate of that single tax to transfer from land monopolists to the public treasury the annual ground rent, potential as well as actual, of all kinds of land - mines and city lots as well as agricultural land - each allotment paying in proportion to its value as mere land, irrespective of the value of its improvements. By this means land monopoly would be abolished. It would be abolished in the only way in which land monopoly can be abolished without reviving it in new forms by turning the state into a monster landlord of unlimited and virtually irresponsible power. For, while it would effectually abolish the monopoly of land, the single tax would preserve private possession under individual occupancy.

If this principle, the principle of the single tax, were fully applied, land monopoly would evidently be impossible. Vacant city lots would not be held long for higher prices, if the owner had to pay as heavy a tax as the owner of improved lots having an equal land value. Farming land could not be kept out of use by the thriftless or the greedy, nor by land-grant railroads, if the unimproved were taxed as much as the improved, the locations being of equal value. The coal and ore mines of the country could not be monopolized and closed against mining, if coal land were taxed well up to its market value whether worked or not. In every direction this tax would put fines upon land monopolists, thereby discouraging land monopoly and opening to general us all the natural opportunities which are now closed by owners who expect to reap a harvest of higher prices in the future.

And while abolishing land monopoly, on the one hand, the single tax would, on the other, abolish all fines upon production, thereby releasing the great body of labor from the corral into which it has been driven, and causing work to bid for men instead of compelling men to bid for work.

Different kinds of cases might require different modes of applying the single tax principle. With reference to transportation, when right of way and mode of operation were inseparable, and even with reference to some kinds of mines, as gold or silver mines, it might be necessary, in order to destroy land monopoly as to them, to place them directly under public management. Where that was true, special modes of applying the single tax principle might be adopted. But in all probability little more would be found necessary in actual experience than the fiscal method of application proposed by Henry George, which, like the single tax principle itself, is also known as "the single tax." At all events this method would be efficient in most cases and with the most vital elements of the problem.

But the question recurs in more concrete form. "How," it is often asked, "could the single tax benefit the small storekeeper, the small manufacturer, the small farmer, and the dependent wage-worker?" Since large farmers, with the advantage of improved and valuable machinery, can produce at lower cost than the small farmer, could they not drive him out of business? In like manner, could not the department store with its vast capital drive out of business the small storekeeper, and the large factory the small manufacturer? How could the single tax offset these great advantages of the capitalist farmers' machinery over the small farmers' rude methods, and those of the large store and factory over the small one? And with all these small employers out of the way, why couldn't the large ones make their own terms with wage workers?

This question assumes, to begin with, that it is desirable to perpetuate small modes of production, like small farming, small manufacturing, and small storekeeping, in behalf of producers on a small scale. That is not necessarily so. In every department of industry in which production can be carried on with greater economy of labor on a large scale than on a small scale, it is desirable that production on the small scale should give way. Whether or not the single tax would permit department stores, mammoth factories, and bonanza farming to put an end to small storekeeping, small manufacturing, and small farming, is therefore beside the question. The real question is whether the single tax would secure to those who now keep small stores, manage small factories, do small farming, and those who work for hire, their just share in the benefits of the change.

Henry George had no expectation of interfering by the single tax with normal concentration in production. On the contrary, he expected the single tax to encourage it. But he expected also that the single tax would open the way to all who so desired, to be equal partners in production - equal, that is to say, in proportion to their contributions of labor. He expected, in other words, that the single tax would bring about in the field of production on a large scale, a system of voluntary cooperation; or, to use his own language in "Progress and Poverty," that under the single tax "we should reach the ideal of the socialist, but not through governmental repression."

This ideal would be reached through the radical change in the distribution of wealth which the single tax would effect. The system, being of general application, would automatically distribute products in two funds. The first fund would consist of the distinguishable earnings of individuals; the second, of the rent or value or premiums for exceptional natural and communal opportunities for production. Among individual workers, the first fund would be divided in proportion to their usefulness; the other fund would go to the community as a whole. The natural law or social force by which this equitable distribution would be made, is free competition, which, like air pressure, so long as it exerts itself not in one direction but in all, produces equilibrium.

To those who understand the true nature of free competition, and do not confound it with the monopolistic phenomena of the present day, which superficial writers mistakenly allude to as "competition," it is perfectly clear how the result outlined above would come to pass under the single tax. But there are those who fail to grasp the idea, and I venture a suggestion.

When it is asked, How would the small farmer, the small manufacturer, the small storekeeper and the wageworker fare under the single tax, with the big factory, the bonanza farm and the department store ruling the roost? might it not be more pertinent to ask, How the department store, the great factory, and the bonanza farmer would fare, if they could get no one to work for them? Think a moment of the effect the single tax would have upon the labor market. Everyone who monopolized land that other people wanted to use, would have to pay a tax upon it so nearly approximating its annual value that he could never hope to recoup the tax unless he used the land to its full capacity. He would therefore so use it himself, or would relinquish it to some one else. But land cannot be used on any but a primitive scale without the employment of men. Men must be employed, no matter how much machinery there may be. Machinery will not work itself. Consequently, everybody who owned land would either have to hire enough men to work it to the full, or give it up to somebody who would. In either case the effect upon the labor market would be the same, namely, a brisk demand for labor in all departments and of all grades, a demand that would constantly exceed the supply. Jobs would be hunting for men, instead of men hunting for jobs. The inevitable effect of that would be the disbandment of the army of the unemployed, increase of wages, and the consequent independence of workmen. Workmen, though hired, would then have to be treated as industrial equals. They could no longer be treated as serfs. If they objected to their treatment by one employer, they could easily find others; and if they objected to being hired by any employer, they could themselves become cooperative producers on a large scale, hiring one another.

The way, therefore, in which the single tax would relieve small producers and dependent wage-workers would be by causing favorable conditions in two respects. First, by so increasing the effective demand for labor as to keep it always in excess of the supply; and, second, by clearing the way for successful voluntary cooperative organizations among producers.

The one thing to bear in mind with reference to the single tax principle is that it contemplates the abolition of land monopoly and the consequent freeing of industry from all monopoly shackles and trammels. It would accomplish this by making competition free. Competition being the antithesis of monopoly, to abolish one is to establish the other. To make competition free, therefore, is to apply the natural remedy to the ills that flow from monopoly. Now, all the ills which seem to come from normal production on a large scale are caused by the same monopolistic circumstances that make the evil trust possible. To get rid of them, we must adopt the same remedy that is required for the trust. Free competition must be established.

Whoever will consider what free competition means, will realize the beneficently progressive character of the effects that would be produced by the introduction of a principle like that of the single tax, which is simply an effective method of unshackling competition. With competition freed and monopoly abolished no one could fail to secure his equitable share in the benefits of social growth. To all such the new modes of production which were more prolific and required less labor, would be welcomed as a boon. It is the operation of the principle of monopoly, not of free competition, that makes them now a menace. If the great factory, the department store, capitalistic farming, or any other normal species of large production is a menace to any industrial class, it is not because such method is in itself bad, but because the injured class is divested of its competing power. Restore that power by abolishing monopoly through making competition free, and special difficulties of adjustment which now seem insuperable obstacles, would prove to be the merest shadows in the path. What labor of all grades needs is not to be helped but to be freed. Being freed, it would help itself. It can be freed only by abolishing the monopoly of land, for land is the native element of labor.

By means of the single tax principle the abolition of land monopoly can be fully accomplished. By means of the single tax method it can be far advanced. Under this simple land reform, sound in economics and unassailable in morals, no one could hold any kind of land out of use without suffering serious and continual loss. Land would have to be used, and be well used, or be abandoned. There would be no profit in mere ownership. That goal being reached - indeed, long before it had been fully reached - trade having meanwhile and by the same method been freed by the abolition of commercial and industrial taxes, and of highway obstacles, the benefits of economic improvement would be generally diffused and the evil spirit of the trust would be exorcised. With the annual value of special landed advantages applied to common use and no longer retained by private owners; with taxes on industry thus made unnecessary, and consequently abolished; with highways freed from special privilege; with unused land everywhere made freely accessible, and the barriers of the industrial corral thus broken down; with demand for productive work thereby made to exceed supply, and through the free interplay of all the economic forces of consumption and production perpetually to maintain that excess, - with these demonstrable effects of the single tax realized, there would be no more possibility of subjugating labor and monopolizing business with paper agreements, than of holding back the waters of Niagara with a paper dam.

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