Land is Different from Capital

Frederick Verinder: My Neighbor's Landmark: Short Studies in Bible Land Laws (1911) — 4: The Year of Jubilee: Land and Liberty

§ 8. For there is an essential difference between the "land," which God made, and the "improvements" which the labor of man has made upon the land. "For every house is builded by some man; but He that built all things is God." Not only are improvements made by labor; they have to be maintained by labor. "By much slothfulness the building decayeth; and through idleness of the hands the house droppeth through." Some elementary appreciation of this economic distinction, not perhaps much more definite than that which has found expression in our own proverb, "God made the country and man made the town," may be traced in the provision of the Law as to the sale of houses.

If a man sell a dwelling-house in a walled city, then he may redeem it within a whole year after it is sold; within a full year may he redeem it. And if it be not redeemed within the space of a full year, then the house that is in the walled city shall be established for ever to him that bought it throughout his generations! it shall not go out in the Jubilee.

"But the houses of the villages which have no wall about them shall be counted as [R.V., reckoned with] the fields of the country; they may be redeemed, and they shall go out in the Jubilee" (Lev. 25:29-31).

That is, a house in the town could be sold "out and out," but houses in the open country were treated as a part of the inheritance, and were restored, with it, at the Jubilee. "This provision was made to encourage strangers and proselytes to come and settle among them. Though they could not purchase land in Canaan for themselves and their heirs, yet they might purchase houses in walled cities, which would be most convenient for them, who were supposed to live by trade." ... Read the whole chapter, including footnotes

8. Power in the Wasteland: Understanding Essential Relationships

Many liberation theologists ignore the role of land ownership and do not even include land in the indexes of their books. Yet none would deny that land hoarding and land access are fundamental issues of justice and economic development.

The following two passages by Henry George, the economist who made the most definitive statements on land's role in political economy, illustrate the fundamental characteristics of land that are missed or ignored by modern economic analysts of the left and the right:

Does the passenger who enters a railroad car obtain the right to scatter his baggage over all the seats and compel the passengers who come in after him to stand up? ... We arrive and we depart... passengers from station to station, on an orb that whirls through space — our rights to take and possess cannot be exclusive; they must be bounded everywhere by the equal rights of others. Just as the passenger in a railroad car may spread himself and his baggage over as many seats as he pleases, until other passengers come in, so may a settler take as much land as he chooses, until it is needed by others — a fact which is shown by the land acquiring a value....

On the land we are born, from it we live, to it we return again — children of the soil as truly as is the blade of grass or the flower of the field. Take away from man all that belongs to the land, and he is but a disembodied spirit. Material progress cannot rid us of our dependence upon land.

Beneath all ideologies, there are basic factors and relationships that underlie economic behavior. To understand the (otherwise inexplicable) omission of attention to land's economic importance, it is useful to go back to these basics.

• The term "Land" refers to the whole material universe, exclusive of people and their products. Not the creation of human labor, yet essential to labor, it is the raw material from which all wealth is fashioned. It includes not only soil and minerals, but water, air, natural vegetation and wildlife, and all natural opportunities — even those yet to be discovered. It is a passive factor of production, yielding wealth only when labor is applied to it.
• Labor includes all human powers, mental and physical, used directly or indirectly to produce goods or to render service in exchange. Labor is often thought of as work that is done for hire, at fixed wages, mainly excluded from the risk-taking and decision-making that is normally classed under the heading of "entrepreneurship". Yet labor, properly understood, includes all human exertion in production — including mental exertion. The payment to labor is called Wages. And it is important to remember that the payment, or return, to labor does not include any returns that are the result of monopoly.
• Capital is the economic term that is most profoundly misunderstood and confused. For the term to make sense in any systematic analysis of wealth distribution, we must define capital in its classical sense as "wealth which is used to aid in further production, instead of being directly consumed." Since production is not completed until the product is in the hands of the consumer, products on their way to market, or "wealth in the course of exchange," are also considered capital.

Now, the objective of all economic behavior is the satisfaction of human desires. Human beings always seek to satisfy their desires with the least exertion: this self-evident proposition lies at the heart of our concepts of economic value and exchange. The primary thing needed for satisfaction is, of course, the tangible things, made from natural resources, that satisfy human desires and have exchange value. Things that meet these four fundamental criteria are termed "wealth". But money, bonds, and mortgages are but claims upon and measures of this value; they are not the wealth they symbolize.

A clear understanding of these basic definitions points immediately to the primacy of land as an economic factor. Human beings have inescapable material needs of food, clothing and shelter. Regardless of how long a chain of exchanges they may pass through in a modern economy, these things ultimately have their source in the land; they can come from nowhere else. Human beings need land in order to live. But if we must pay rent to a private land "owner" for access to the gifts of nature, it amounts to being charged a fee for our very right to live.

Land's value goes up when population increases and technological and economic development make labor more productive. Those who "own" land often withhold it from use, expecting to capture its increased value in the future — thus, the possession of land enables people to take an income that they did nothing to produce.

Speculative withholding of land has disastrous consequences. Peasants who seek land on which to survive are pushed out to poorer and poorer lands. These "sub-marginal" lands become their alternative place for self-employment. With such a poor alternative, they have no choice but to accept very low wages. Rent — the payment to landowners — absorbs more of the wealth produced on all sites.

Land speculation also prevents development near the center of cities, pushing it to the outskirts while the center decays from neglect and slums increase. The "sprawl" engulfs farms and forests, even as it raises the price of land, making use and development more costly.

Rapid destruction of the Amazon rain forest in Brazil dramatizes how the unnatural phenomenon of sprawl has an ominous worldwide impact on the environment. In Brazil, ten per cent of the landowners own 80 percent of the land, while one million peasants are forced off the land each year. And a mere one per cent controls 48 percent of the cultivable land. The only place in Brazil where there is land for the taking is in the Amazon rain forest. The destruction of the rain forest is caused by a system that perpetuates artificial land shortages. Nearly four-fifths of Brazil's arable land is covered by sprawling latifundios, most of which are held by speculators who produce nothing.

Here is the root cause of poverty. When laborers are faced with the choice of either bare subsistence wages or land that can barely maintain life, labor itself is marginalized and cannot effectively bargain on its own behalf. Wages, generally, on all land, are driven down toward the point of bare subsistence. Returns to capital are also depressed for the same reason, deterring investment. When this is carried to an extreme — when people can no longer afford the goods being produced and when there is little profit in applying capital — the economy collapses. The inflated land market, on which the speculative frenzy has fed, collapses too.

Since the Great Depression, such total ruin has been minimized in more developed nations through Keynesian measures: monetary expansion, massive public works and welfare programs. In Third World countries, such Keynesian expedients, which support high speculative rent levels, work only if demand for exports is strong. When that demand weakens, the weight of external debt becomes so crushing as to defy redemption.

The Third World debt crisis is taken by many as the clearest sign of the correctness of dependency theory. It is asserted that Western moneylenders have extended loans to corrupt regimes, knowing that the nations' peoples would have to sacrifice to bear ever-increasing burdens. But when we recognize the land problem as the basic cause of the kind of economic collapse that has led to the "foreign debt crisis", it becomes clear that Western financial interests did not create those maladies but rather exploited the hapless economic policies of developing nations for their own gain.

Some defenders of the status quo admit that all land titles may be traced either to acts of force or fraud (or to the more respectable-sounding "priority of occupation"). But, they add, we cannot start over; society has for centuries given legal sanction to private landed property. Innumerable contracts have been executed on the basis of this sanction, and these include the good faith purchase of land. For society to withdraw this sanction, they claim, would be a breach of trust.

The passage of time, however, cannot turn a wrong into a right. Kings and popes and governments never had the moral right to vest in perpetual ownership what God intended for the benefit of all. If the acquisition of a benefit under the law were to establish such a vested right, no law could ever be amended, since it would invariably work to someone's disadvantage.

Obviously, change that further rends the fabric of society is usually self-defeating. And the vast majority of beneficiaries of unjust structures — the beleaguered middle classes — are not intentional wrongdoers but passive recipients of unearned wealth from a flawed system they did not create. The dismantling of these structures, therefore, should, whenever possible, be done in ways that avoid excessive hardship for them. But it must be done.

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