Unearned Increment and Title by Accession

Soft Socialism, as the species has been nicknamed, sums up its policy in the formula: “ From each according to his ability, to each according to his want.” The sentiment as expressing the ideal to which we may all aspire, and toward whose realization we may all work by the lawful means at our disposal, is quite admirable, and leaves nothing to be desired. There are, however, many obstacles to its realization in this workaday and selfish world, and prominent among them is the actual organization of social life. The militant school of socialism therefore acknowledges that much pulling down and other rough work must be done before we can hope to establish the socialist paradise on earth. These militant socialists also have their formulæ, and at the root of them all is the claim of the laborer to the whole product of labor. H. S. Foxwell, Professor of Economics at the University of London, in his interesting introduction to Dr. Anton Menger’s book on the right to the whole produce of labor, does not hesitate to make this assertion: “Dr. Menger does not exaggerate when he says of this principle that it is the fundamental revolutionary conception of our time, playing the same part as the idea of political equality in the French Revolution and its offshoots” (page 6). Dr. Menger discovers scattered suggestions of the doctrine in Locke’s Two Treatises of Government, and it is laid down with sufficient clearness in Adam Smith’s Wealth of Nations. “The produce of labor,” says the father of modern political economy, “ constitutes the natural recompense of wages of labor. In that original state of things which precedes both the appropriation of land and the accumulation of stock, the whole produce of labor belongs to the laborer. He has neither landlord nor master to share with him.” The writers of the classical school of political economy accepted the doctrine and developed it. Ricardo, for example, quotes the following extract with approval from Adam Smith: —

In that early and rude state of society which precedes both the accumulation of stock and the appropriation of land, the proportion between the quantities of labor necessary for acquiring different objects seems to be the only circumstance which can afford any rule for exchanging them for one another. If among a nation of hunters, for example, it usually costs twice the labor to kill a beaver which it does to kill a deer, one beaver should naturally exchange for, or be worth, two deer. It is natural that what is usually the produce of two days’, or two hours’ labor, should be worth double of what is usually the produce of one day’s or one hour’s labor.

Ricardo then adds : —

That this is really the foundation of the exchangeable value of all things, excepting those which cannot be increased by human industry, is a doctrine of the utmost. importance in political economy; for from no source do so many errors and so much difference of opinion in that science proceed, as from the vague ideas which are attached to the word value. If the quantity of labor realized in commodities regulate their exchangeable value, every increase of the quantity of labor must augment the value of the commodity on which it is exercised, as every diminution must lower it. ... If we look to a state of society in which greater improvements have been made, and in which arts and commerce flourish, we shall still find that commodities vary in value conformably with this principle: in estimating the exchangeable value of stockings, for example, we shall find that their value, comparatively with other things, depends on the total quantity of labor necessary to manufacture them, and bring them to market.

Classical political economy reached its highest point of development in the writings of John Stuart Mill. He acknowledged that the question of value is fundamental in political economy: —

The smallest error on that subject [he said] infects with corresponding error all our other conclusions; and anything vague or misty in our conception of it, creates confusion and uncertainty in everything else. Happily [he adds] there is nothing in the laws of value which remains for the present or any future writer to clear up; the theory of the subject is complete.

He therefore accepted the teaching of Ricardo, but thought that besides the quantity of labor the wages also of labor must be taken into account. Seldom, perhaps, has such expression been given to smug contentment and satisfaction; seldom certainly has smug contentment and satisfaction met with so serious a reversal as has the classical theory of value. Certain English revolutionists and socialists who lived at the end of the eighteenth and the beginning of the nineteenth century, were not slow to appropriate the doctrine of the classical economists and apply it to their own purposes. They began to point out that if the value of things was nothing but the quantity of labor put into them, and the laborer had a right to the fruit of his own labor, all the wealth of the country of right belonged to the workers, who by their labor produced it. Dr. Menger traces this doctrine and its application to anarchism and socialism through a succession of English writers, of whom the chief are William Godwin, Charles Hall, and William Thompson. In a very interesting passage, Professor Foxwell regards modern socialism as a protest against the exaggerated individualism introduced into European society at the Renaissance, and especially by the Protestant Reformation. Nowhere at the opening of the nineteenth century was that individualism more pronounced and the consequent sufferings of the masses of the people more severe than in England. It was natural, then, that the swing of the pendulum to the opposite extreme should first be observed in England, the home of laissez faire, and of the bourgeois political economy, as Marx called it. From English socialists the doctrine of the right of the worker to the whole produce of labor was taken over by Marx and Rodbertus, and it thus became the fundamental doctrine of modern scientific socialism. The importance attached to it in modern socialist literature, and the implications contained in it, cannot be better appreciated than in the trenchant language of Mr. Robert Blatchford : —

There are but a few landlords [he says, in Britain for the British] but they take a large share of the wealth. There are but a few capitalists, but they take a large share of the wealth. There are very many workers, but they do not get much more than a third share of the wealth they produce. The landlord produces nothing. He takes part of the wealth for allowing the workers to use the land. The capitalist produces nothing. He takes part of the wealth for allowing the workers to use the capital. The workers produce all the wealth, and are obliged to give a great deal of it to the landlords and capitalists who produce nothing. Socialists claim that the landlord is useless under any form of society, that the capitalist is not needed in a properly ordered society, and that the people should become their own landlords and their own capitalists. If the people were their own landlords and capitalists, all the wealth would belong to the workers by whom it is all produced.

As labor, then, produces all the wealth of the country, all the wealth of the country belongs of right to the laborer. Rent and interest on capital is unearned increment, surplus value, produced by the worker, but which is filched away from its rightful owner by the landlord and the capitalist. To quote Mr. Blatchford again :—

We all know how the landlord takes a part of the wealth produced by labor and calls it ‘‘rent.’’ But that is only simple rent. There is a worse kind of rent which I will call ‘‘compound rent.’’ It is known to economists as ‘‘unearned increment.’’ I need hardly remind you that rents are higher in large towns than in small villages. Why! Because land is more ‘‘valuable.’’ Why is it more valuable? Because there is more trade done. Thus a plot of land in the city of London will bring in a hundredfold more rent than a plot of the same size in a Scottish valley.

For people must have lodgings, and shops, and offices, and works in the places: where their business lies. Cases have been known in which land bought for a few shillings an acre has increased within a man’s lifetime to a value of many guineas a yard. This increase in value is not due to any exertion, genius, or enterprise on the part of the landowner. It is entirely due to the energy and intelligence of those who made the trade and industry of the town. The landowner sits idle while the Edisons, the Stephensons, the Jacquards, Mawdsleys, Bessemers, and the thousands of skilled workers expand a sleepy village into a thriving town; but when the town is built and the trade is flourishing, he steps in to reap the harvest. He raises the rent. He raises the rent, and evermore raises ' the rent, so that the harder the townsfolk work and the more the town prospers, the greater is the price he charges for the use of his land. This extortionate rent is really a fine inflicted by idleness on industry. It is simple plunder and is known by the technical name of unearned increment. It is unearned increment which condemns so many of the workers in our British towns to live in narrow streets, in back-to-back cottages, in hideous tenements. It is unearned increment which forces up the death-rate and fosters all manner of disease and vice. It is unearned increment which keeps vast areas of London, Glasgow, Liverpool, Manchester, and all our large towns, ugly, squalid, unhealthy, and vile. And unearned increment is an inevitable outcome and an invariable characteristic of the private ownership of land.

There, then, we have a gospel of anarchy and revolution fully developed. It is short, and easily understood by the meanest intellect; it flatters the most powerful of all human passions, pride and cupidity. The worker produces by his labor all the wealth of the world; to the worker, then, all the wealth of the world belongs. What have we to say to this proposition?

In the first place it is a very defective analysis .. which traces such great and widely spread evils to so simple a cause. The abuses of private ownership are doubtless great, and nobody deplores them more than we do. But the evils arising from the abuse of a system should not be attributed to the system itself.

Then, we willingly grant that labor and production is one of the titles to property. A man has a right to the fruits of his industry. We do not grant this grudgingly; on the contrary, as workers, we claim it for ourselves, as we willingly concede it to others. Work is a great blessing, a great safeguard which nobody should forego, and which for most people will ever be a necessity. In the sweat of thy face shalt thou eat bread; If any man will not work neither let him eat. We are the last people in the world to undervalue labor, and to deny it its just claims. The laborer, then, has a right to the fruits of his toil. If a man discovers land which belongs to nobody, and cuts timber there, out of which he constructs a cabin, the cabin is his property, as being the fruit of his labor and skill. He has a right to its exclusive use, no one else, against the reasonable wish of the owner, may make use of the convenience which it affords. The owner has a right to all the advantages which the cabin can afford. It shelters him from rain and cold, it protects him from the too warm rays of the midday sun, it is a defense against wild beasts and other enemies. Any use to which it can be put belongs to him and to him alone, exclusively, because it is his property, the fruit of his labor. Because it is his property he may destroy it if he pleases, and use the material for firewood. He may give it or sell it to another. He may freely dispose of what is his own. To interfere with such a right would be to interfere with the rights of labor, for the products of labor belong to and are at the entire disposal of the laborer. If our laborer is another Crusoe on an island which belongs to nobody else, and he is lucky enough to find and capture a goat, the goat, too, becomes his property. He may kill and eat it if he likes, or he may keep it to furnish himself with milk. He may dispose of it as he likes, because it is his, and a man may do what he likes with his own. All the uses to which it can be put belong to him. If killed, its flesh and skin belong to him. If kept alive, all the uses to which it can be put are his for it is his property. If it happen to have young, the young belongs to the owner of the dam, for the dam, with all its activities, powers and capabilities, belongs to him who reduced it to subjection. If some one else comes to share our Crusoe’s solitude, Crusoe may make him a present of some of his property, or he may barter it for something else of value. When the property by mutual consent is made over to another, it becomes his just as before it belonged to Crusoe. To deny this is to deny the sacred rights of property, it is to deny that a man may do what he likes with his own, it is to deny the liberty of contract, which it is so sovereignly necessary for the good of society to keep as far as possible unfettered.

All that has been said must be admitted by those who maintain the right of labor to labor’s produce. We have simply been developing what is implied by the right of property, and modern English socialists do not deny the right of private property ; they loudly assert that the produce of labor is the private property of the laborer. But if what has been said cannot truthfully be denied, we begin to see the fallacy of the fundamental tenet of modern socialism. That fundamental tenet is that all wealth is the product of labor, and of right belongs to the laborer. Landlords and capitalists are thieves and robbers who not only may with justice be compelled to disgorge their ill-gotten wealth, but who in the interests of justice should be compelled to do so. But what if by free contract it has come into the possession of the present owners from those who had an undoubted right to transfer it? And this in many instances is undeniably the case. We must conclude that labor is undoubtedly one of the titles to property, but it is not the only one nor the chief one.

But, retorts the socialist, even if I admit this, it will not justify the extortionate rent which the landlord charges, nor the interest on barren capital. The unearned increment should be handed over to the community, to the people who make it.

To deny that the unearned increment of wealth belongs to the owner of that wealth is in reality to deny the rights of ownership as they have just been set forth. The owner of the field has a right to all the advantages which the field can afford. All its uses, all its activities and powers belong to him; it is precisely for those uses, activities, and powers that he values it as his private property. The grass which it produces is his, whether he spent labor on it or not; labor is not the sole title to property. If the grass grew without labor it is unearned increment. Similarly, the young animals belong to the animals’ owner, not by the title of labor but from the very nature of the right of property, by which all that the thing owned is, or is capable of becoming, belongs to the owner of it. If a great number of people ‘come and settle round my field, my field rises in value, not because they or I have spent labor on it, but simply because now being more favorably situated with a view to the conveniences of life, it is more highly valued and is worth more than it was before. The enhanced value is unearned increment, but on that account it does not cease to belong to me.

Precisely in the same way the labor of the carpenter or bricklayer becomes more valuable in a thriving and rapidly increasing town. Whereas before he had to be satisfied with thirty shillings a week, he can now easily earn forty shillings. He works neither harder nor longer hours, but because of the increased demand, the value of his labor has increased. The enhanced value is unearned increment, but the carpenter would be very much astonished if he were told that it did not belong to him, but to the community who made it; that if he kept it he would be no better than a thief and a robber. All this is admirably summed up in the old maxim — Res fructificat domino. By the law of nature, by the very nature of the right of property, whatever a thing produces belongs to the rightful owner of that thing. When the produce is due partly to the natural or artificial fertility of the property and partly to human labor, both the owner of the property and the laborer have rights in the produce. It is not possible to define exactly what proportion is due to the owner and what to the laborer. A laborer indeed whose whole working capacity was given to the work has a right to so much of the produce or its equivalent as will support him in decent comfort. The laborer has a duty and a right to live in a manner conformable to the dignity of human nature and his circumstances, and in the case supposed the only means he has to fulfil his duty and to exercise his right must be derived from the fruit of his toil. Beyond saying this no more precise rule for the division of the produce can be laid down, so there is room for amicable arrangement and contract.

As his labor belongs to the laborer there is nothing to prevent him from hiring it out to an employer at any reasonable rate. As money in our modern capitalistic society is a means of production, as it may readily be exchanged for land, machinery, and other means of production, money has in fact become virtually productive, and therefore the lender of money rightly charges interest for his loan; he shares in the produce of the money just as the landlord shares in the produce of his land.

Besides the natural increase of property due to natural fertility which we have hitherto been considering, property may increase by additions being made to it either by the agency of natural forces or by the will of man. The gradual additions made to land by the action of a river or of the sea, called alluvion in English law, is an instance of an addition being made to property by natural forces. The mixing of liquids belonging to different owners, called confusion, and of solids, called commixture, are examples of additions to property made by the will of man. All these instances, like that of natural fertility, are comprised by jurists under the general name of Accession as a recognized title to property. In these latter instances, however, the law of nature is not so clear and definite. English law agrees with Roman in applying the maxim that what is accessory follows the principal when questions of ownership of the whole mixed property arise. Although the principle is quite in accordance with reason, yet reason does not seem to demand such a solution as peremptorily as it requires that the produce of the natural fertility of property should belong to the owner of that property. In fact, when we descend to particulars the principle is not applied absolutely and universally in Roman or in English law.

Thus, a gradual increase made to land becomes indeed the property of that land’s owner by alluvion, but if the increase was made suddenly the property rights remain as before. So also if a piece of another man’s timber is built into a house, the timber becomes the property of the owner of the house, but by law he must make compensation to the owner of the timber. Commixture is a species of accession where movables belonging to one owner are mixed with similar movables belonging to another. The principles of English law on the question are entirely at one with those of the Roman law. The owners in general retain a right to claim a proportion of the mixture or its value.¹

¹ Encyclopaedia of the Laws of England, s.v. Commixture.

There is a special law with regard to money:

“If another’s coins have been paid without the owner’s knowledge or against his will, they remain the property of him to whom they belonged. If they had been mixed so that they could not be distinguished, it is written in the books of Gaius that they become the property of the person who received them, so that the owner would have an action for theft against the person who had paid them.”²

² L. 78, Dig. De solutionibus.

Lugo applies and explains this law in the following interesting passage : —

If you received stolen money not gratuitously, but in payment of some debt, and by mixing it with a larger sum made it your own, when the owner of the money subsequently appears you are bound to nothing; for you are not bound on account of an unjust taking, since you received it in good faith; nor by reason of the thing received, because the thing received has now been consumed by the mixing and stands just as if you had spent it; nor, finally, are you bound insofar as you have been enriched, since by that occasion you acquired no profit at all, but had what was otherwise owed to you: the law Si alieni, de solutionibus speaks chiefly of this case when it says that the owner of the money has an action only against the thief; because, of course, the person who had received it in payment had not thereby been enriched, and moreover had already acquired ownership of it through the mixing.³

³ De Justitia, vi., n. 171.

This seems to be modern English and American law: —

Where a person [writes Mr. Attenborough] is entrusted with goods or money for a particular purpose and he misapplies the property with which he is entrusted, the proceeds of such misapplication may be claimed by the owner of the goods or money as, e.g., if A delivers money to B to buy a horse for him and B buys a carriage with the money, A is entitled to the carriage. In such a case it makes no difference into what other form different from the original the change may have been made, whether it be into that of promissory notes for the security of the money which was produced by the sale of the goods, or into other merchandise; for the product of, or substitute for, the original things still follows the nature of the thing itself as long as it can be ascertained to be such, and the right only ceases when the means of ascertainment fail, which is the case when the subject is turned into money, and mixed and confounded in a general mass of the same description.⁴

⁴ The Recovery of Stolen Goods, 1906.

Where it is to be observed that both according to Roman and English law the transference of dominion in the money is not ascribed merely to the receiving of it for value, but to the mixing or commixture of it with one’s own moneys. It could be followed up if it remained separate and distinguishable, it cannot be followed up after mixture with one’s own.