Chapter 9, Section 1

The Profit of Landed Property Icon

September 30, 2015

What is the profit of land independent of that accruing from the industry and capital, devoted to its cultivation; and to consider the profit of land in the abstract, and whence it originates, without any inquiry as to who may be the cultivator, whether the proprietor himself, or a tenant under him.

Land has the faculty of transforming and adapting to the use of mankind an infinity of substances, which, without its inter- vention, would be to them of no service; it yields nutriment and vegetative juices to the grain, the fruits, and vegetables, whereon we subsist; as well as to the forests, whereof we construct our houses, ships, and furniture, and whence we derive fuel to keep us warm. Its agency in the production of all these commodities may be called, the productive service of land. And thence it is, that the profit of the proprietor originates.

Many writers think 76 that the value of products is never more than the recompense of the human agency or surplus, that can be set apart as the peculiar profit of land, and constitute the rent paid for its use to the proprietor. The tenor of their argument is this= the proprietor of land lying waste or fallow having also a capital to dispose of, may, at his pleasure, expend it, either in cultivation, or in some other way.

If he reckons that the cultivation of his land will yield him as large a return as any other investment, he will give it the preference; and, indeed, it is found by experience, that this mode of investment is preferred, even though somewhat less advantageous than others, as being at all events more safe. Well= and what do they infer from this? Why, that cultivation yields no return whatever, beyond the interest of the capital engaged in it; 77 and if so, what is there left for the profit on the productive powers of the soil?

Evidently nothing whatever. I have endeavoured to put the argument in the clearest and most intelligible light; and I have to observe upon it, that it proceeds upon a partial and imperfect view of the matter, and upon a total neglect of the influence of demand in the fixation of value. I will now endeavour to give a more complete view of the subject. He derives a further benefit from the useful substances to be extracted from its entrails; the stone, metal, coal, peat, &c. &c. Land, as we have above remarked, is not the only natural agent possessing productive properties; but it is the only one, or almost the only one, which man has been able to appropri- ate, and turn to his own peculiar and exclusive benefit. The water of rivers and of the ocean has the power of giving mo- tion to machinery, affords a means of navigation, and supply of fish; it is, therefore, undoubtedly possessed of productive power. The wind turns our mill; even the heat of the sun co- operates with human industry; but happily no man has yet been able to say, the wind and the sun’s rays are mine, and I will be paid for their productive services. I would not be un- derstood to insinuate, that land should be no more the object of property, than the rays of the sun, or blast of the wind. There is an essential difference between these sources of pro- duction; the power of the latter is inexhaustible; the benefit derived from them by one man does not hinder another from deriving equal advantage. The sea and the wind can at the same time convey my neighbour’s vessel and my own. With land it is otherwise. Capital and industry will be expended upon it in vain, if all are equally privileged to make use of it; and no one will be fool enough to make the outlay, unless assured of reaping the benefit. Nay, paradoxical as it may seem at first sight, it is, nevertheless, perfectly true, that a man, who is himself no share-holder of land, is equally inter- ested in its appropriation with the share-holder himself. The savage tribes of New Zealand, and of the north-western coast of America, where the land is unappropriated, have the greatest difficulty in procuring a precarious subsistence upon fish and game, and are often reduced to devour worms, caterpillars, and the, most nauseous vermin= 75 not unfrequently even to wage war on one another, from absolute want, and to devour their prisoners as food; whereas, in Europe, where the appro- priation is complete, the meanest individual, with bodily The productive power of the soil has no value, unless where its products are objects of demand. Travellers, who have ex- plored the interior of America, and other desert parts of the globe, make repeated mention of tracts of the richest land, capable of every kind of culture, yet wholly destitute of any useful or valuable products. But no sooner is a colony estab- lished in the vicinity, or, by some means or other, a market found where the products of the soil will, in the way of ex- change, pay the usual rate of interest upon the requisite ad- vances, than cultivation begins immediately. Up to this point, there is no difference between us. But if any circumstance operate to aggravate the demand beyond this point, the value of agricultural products will exceed, and sometimes very greatly exceed, the ordinary rate of interest upon capital; and this excess it is, which constitutes the profit of land, and enables the actual cultivator, when not himself the proprietor, to pay a rent to the proprietor, after having first retained the full interest upon his own advances, and the full recompense of his own industry. faction and pleasure attached to territorial possession, the consideration, weight, and dignity it communicates, and the titles and privileges with which it is in some countries ac- companied, contribute greatly to increase this natural prefer- ence. Land is an agent gratuitously furnished to mankind at large, by whom it is afterwards exclusively appropriated; but its appropriation does not begin to be profitable to the individual, in whose favour it is made, until its products are an object of demand, and until their supply ceases to be co-extensive with the desire for them, as it is with respect to some other natural objects, air, water, &c. It is true, that land is more exposed than other property to the burden of public taxation, and to the arbitrary exactions of power, precisely because it can neither be removed nor con- cealed. A floating capital may take any shape whatever, and be removed at will It can escape tyranny and civil commo- tions more readily, than even the person of its proprietor. It is a safer object of property; for it is often impossible to attach it, or to make it specifically responsible for the debts of the proprietor. Moreover, it is much less exposed to litigation than landed property. Yet, it is clear, that all these advantages are more than counterpoised by the superior risk of invest- ment; and, that landed property is still preferred to floating capital; since land is dearer, in proportion to its annual re- turns. From those products of the soil only, thus raised in value by the demand, can there accrue that profit to the proprietor which has been called the profit of land; and which is paid in all civilized countries, and especially where manufacture and commerce multiply the objects of exchange. It may some- times happen, that in a particular district of such a country, the rent of land, may be very trifling; as in our own district of Sologne, where it is no more than 20 cents an acre; but this is owing to the want of roads, and particularly of water-car- riage, which makes the charge of bringing its agricultural pro- duce to market, added to the charge of cultivation, absorb nearly The whole value it will there sell for. In some coun- tries, highly civilized and productive in the extreme, land pays no more than 3 or 4 per cent upon its price or purchase-money. Yet, this is no proof of the poverty of the soil; it proves only, that it sells dear. A landed estate may yield 24 dollars the acre, and require very little expense of cultivation; as if it be laid down in pasture, for instance; in such case it must owe most of its value to its natural properties; yet, if it have cost the proprietor 800 dollars the acre, it will yield a return of 3 per cent only. And herein consists the difference between the profit and the rent of land= profit is high or low, according to the quantum of the product; rent, acctording to the quantum of the pur chase-money or price. An acre of land, yielding a profit of one dollar only, will bring as high a rent as an acre yielding a profit of 50 dollars, if 50 times as much has been paid for the one as for the other. Whatever may be the exchangeable price of land and capital one to the other, it is proper to observe, that their interchange makes no variation in the supply of productive agency of land and capital respectively in circulation, and disposable for the purpose of production; consequently, that exchangeable price can nowise affect the real and positive profit of land and of capital. When Richard sells his estate to Thomas, the produc- tive service of the land is at the disposal of Thomas instead of Richard; and that of the capital, given in exchange for it, is at the disposal of Richard instead of Thomas. The only thing, which really varies the amount of productive agency of land in circulation, is the actual amelioration of the soil, by clearing and bringing new land into cultivation, or enlarging the productive power of old land, and thus increas- ing its product. Savings and accumulations of capital are, in the shape of agricultural improvements, transformed into landed property, and made to participate in all the peculiar advantages and disadvantages attached to it. The same may be said of houses, and generally of all capital invested in a fixed and permanent object; it thenceforth loses the character of capital, and assumes that of landed property. Whenever land is bought with capital, or capital with land, occasion is given for a comparison of the returns of the one species of property with the returns of the other. It is pos- sible, that an estate, bought with a capital of 100,000 dollars, may produce but 3 or 4000 dollars per annum, whilst the same amount of capital would yield 5 or 6000 dollars. The lower rate of interest, which the proprietor is content to take on a purchase of land, may be attributed, in the first place, to the superior stability of the investment. Capital can seldom be made productive, without undergoing several changes both of form and of place, the risk of which is always more or less alarming to persons unaccustomed to the operations of in- dustry; whereas, on the contrary, landed property produces without any change of either quality or position. The satis- Whence we may draw this invariable maxim; that the pro- ductive agency of land is possessed of value, which value, like value in general, increases in the direct ratio of the de- mand, and the inverse ratio of the supply; and that, since land differs as much in quality, as in site and position, there is a peculiar demand and supply for each peculiar quality. A de- mand for so much wine, more or less, whatever it arise from, creates a specific demand for as much productive agency of the soil, as may be requisite for its growth; 78 and the extent of

Section II. Of Rent.

surface, adapted to the culture of the grape, determines the supply of that productive service. If the soil, capable of grow- ing good wine, be very limited in extent, and the demand for such wine very brisk, the profit of the soil itself will be ex- travagantly high. When a farmer takes a lease of land, he pays to the proprietor the profit accruing from its productive agency, and reserves to himself, besides the wages of his own industry the profit upon the capital he embarks in the concern; which capital consists in implements of husbandry, carts, cattle, &c. He is an adventurer in the business of agricultural industry; and, amongst the means he has to work with there is one that does not belong to him, and for which he pays rent i.e., the land. It is worthy of remark, that all land, that yields any profit at all, however trifling the amount, even so little as 20 cents the acre, or even less, may be kept in a state of cultivation= and there have been many instances of its cultivation under such circumstances. Herein it differs from capital and industry. A labourer, if he finds himself settled in a place, where his labour does not yield him what he has reason to expect, can migrate to another. So, likewise, capital quickly flows from a chan- nel, that affords a less, to one that affords a greater return. But land has not the same facilities= it is of necessity immove- able; consequently, out of its gross product, after the deduc- tion in the first instance of all advances of capital, with inter- est, as well as of the profits of industry, without which there could be no product whatever, there still remains to be de- ducted the expense of carrying the product to the market, or place of exchange. When these several deductions absorb the whole product of the land, the land itself yields no profit at all, and the proprietor can never succeed in getting a rent from it. Even if he cultivate it himself, he can only gain a profit on his capital and industry, but will receive none what- ever from the bare ownership of the land. In Scotland, there are tracts of unproductive land thus cultivated by the propri- etors, which it would not answer for any one else to under- take. So, likewise, in the back settlements of the United States, there are tracts of great extent and fertility, whose revenue alone would not maintain the proprietors; yet they are, never- theless, cultivated with success= but it is by the proprietors themselves, who consume the product at the place of growth, and are obliged to superadd to the profit of the land, which is little or nothing, the further profit of capital and personal in- dustry, which afford a handsome competency. The preceding section was occupied in explaining the source of the profit of land. Its rent is generally fixed at the highest rate of that profit, and for the following reason. Agricultural adventure requires, on the average, a smaller capital, 80 in proportion, than other classes of industry, reck- oning the land itself as no part of the capital of the adven- turer. Wherefore, there is a greater number of persons able, from their pecuniary circumstances, to embark in agricultural, than in any other speculations; consequently, a greater com- petition of bidders for land upon lease. On the other hand, the quantity of land fit for cultivation is limited in all countries; whereas the quantity of capital and the number of cultivators have no assignable limitation. Landed proprietors, therefore, at least in those countries which have been long peopled and cultivated, are enabled to enforce a kind of monopoly against the farmers. The demand for their commodity, land, may go on continually increasing; but the quantity of it can never be extended.

This circumstance is equally applicable to the nation at large, and to each particular province or district. The number of acres to be rented in each province is incapable of extension; whilst the number of persons in a condition to rent them has no fixed and absolute limit.

Whenever this is the case, the bargain between the land-holder and the tenant must always be greatly in favour of the former; and, whenever there is any portion of the soil, which yields to the latter more than the interest of his capital and the wages of his industry, a higher bidder will soon offer himself. The liberality of a few proprietors, the distance at which they hap- pen to reside, the ignorance of others, and even of the farm- ers themselves, and the imprudence of a few more, may some- times operate to depress the ratio of rent below the maximum of profit; but these are accidental circumstances, which act for a season only, and can never prevent the regular and con- stant action of natural causes, which must in the end prevail. It is obvious, that land, though in a state of cultivation, vields no profit, when no farmer will pay rent for it, which is a con- vincing proof that it gives no surplus, after allowing for the profit of the capital and industry requisite for its cultivation. In the instance just mentioned, the effect is occasioned by the distance of the market; the expense of transport swallows up the profit, which might otherwise be made of the land. Other instances might be adduced, in which badness of seasons, war, or taxation, have produced the same effect, and partially or totally absorbed the profit of land, and thus thrown it out of cultivation. 79

Besides this advantage accruing to the land-holder, derived from the very nature of things, he has likewise in general the advantage of possessing, or being able to accumulate greater wealth, and sometimes credit, patronage and influence, into the bargain= but the first advantage is alone sufficient to in- sure him the sole benefit of any circumstances, that may hap- pen to enhance the profit of land. The opening of a canal or road, the increase of population, wealth, and affluence in the province, always operate to raise his rent. He also benefits by every improvement in the cultivation; for a man can afford to pay dearer for the hire of an instrument, when he knows how to turn it to better account. ants so confident of undisturbed possession, as to build upon ground held on lease. Such tenants improve the land, as if it were their own; and their landlords are punctually paid; which is less frequently the case elsewhere. The land is sometimes cultivated by persons possessed of no capital whatever= the proprietor furnishes himself the requi- site capital, as well as the land. They are called in France, metayers, and commonly pay to the landlord half the gross product. This arrangement is to be met with only in the in- fancy of agriculture, and is of all others the least conducive to improvement; for the party who bears the expense of ame- lioration, whether landlord or tenant, makes the other a gra- tuitous present of half the interest on his advances. This kind of tendency was more common in the feudal times, than it is at present. The lords were above tilling the land themselves, and their vassals had not the means. The largest incomes were then derived from the land, because the lords were large pro- prietors; but they bore no proportion to the extent of the land. Nor was this owing to the defect of agricultural skill, so much as to the scarcity of capital devoted to improvements. The lord felt little anxiety to improve his property, and expended, in a way more liberal than productive, an income that he might easily have tripled. He levied war, gave feasts and tourna- ments, and maintained a numerous retinue. If we look at the then degraded condition of commerce and manufacture, superadded to the insecurity of the agricultural interest, we need go no further for the explanation of the reason, why the bulk of the community was in the extreme of indigence; and why, independently of every political cause, the nation itself was weak and impotent. Five departments would now be able to repel attacks, which overwhelmed all France at that pe- riod= but happily for her, the other states of Europe were no- wise in a better condition.

When the proprietor himself expends a capital in the improvement of his land, in draining, irrigation, fences, buildings, houses, or other erections, the rent then includes, in addition to the profit of the land, the interest likewise of the capital so expended. 81

The farmer may sometimes undertake these expenses of ame- lioration himself; but he can only calculate on receiving in- terest on the outlay during the continuance of his lease= at the expiration of which, the benefit must devolve to the land- holder, being wholly incapable of removal= thenceforward the landlord derives the whole profit, without having made any of the advances= for he receives a proportionate increase of rent in consequence. The farmer should, therefore, engage only in those improvements, whose effects will last no longer than his lease; unless the lease be long enough, to allow the profit arising from his improvements to repay the whole out- lay, together with the interest. It is in this way, that long leases operate to increase the product of the land; and it is evident the effect will be the greatest, when the land is farmed by the proprietor himself; for he is far less likely, than the farmer, to lose the benefit of such advances; every judicious improve- ment yields him a permanent profit, and the original outlay is amply Tepaid, when the land is finally disposed of. The farmer’s certainty of reaping the advantage till the end of his lease, is equally conducive to the improvement of landed prop- erty with the length of leases. On the contrary, such laws and customs, as authorize the cancelling of leases in specified cases, as in case of sale by the proprietor, are highly prejudi- cial to agriculture; since the farmer will hardly venture to undertake any considerable improvement, if kept in continual fear of seeing an intrusive successor appropriate the recom- pense of his ingenuity, labour, and capital. In fact, every im- provement he should make would but increase the risk of that injustice; for land is far more saleable in good condition than otherwise.


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