The collapsing boundary between land and capital: how ecology is redefining political economy

“ Land, labor, and capital are the factors of production. The term land includes all natural opportunities or forces; the term labor, all human exertion; and the term capital, all wealth used to produce more wealth. In returns to these three factors is the whole produce distributed. That part which goes to land owners as payment for the use of natural opportunities is called rent; that part which constitutes the reward of human exertion is called wages ”

“ Wealth can only be produced by the application of human energy, mental and physical, to the forces of nature around us, and to the material which those forces inform.
This human energy so applicable to the material world and its forces we will call Labour. As for that material and those natural forces, we will call them, for the sake of shortness, by the narrow, but conventionally accepted, term Land. ”

“ Although such loose distinctions may be of use in private business accountings, they are intolerable in the science of Economics, which, like every other science, demands precision in the differentiation of terms.
The application of Man’s powers of body and mind to Natural Resources for the production of Artificial Objects—of Labor to Land for the production of Wealth—is the Productive Process in Economics. ”

“ The term land embraces, in short, all natural materials, forces, and opportunities, and, therefore, nothing that is freely supplied by nature can properly be classed as capital. A fertile field, a rich vein of ore, a falling stream which supplies power, may give to the possessor advantages equivalent to the possession of capital, but to class such things as capital would be to put an end to the distinction between land and capital, and, so far as they relate to each other, to make the two terms meaningless. ”

“ We find, then, that all wealth is produced from the land by labour, and that capital is only a part of wealth, that it has been produced by labour, stored by labour, and is finally used by labour in the production of more wealth. ”

“ The part of our subject which we are now going to consider is called the distribution of wealth, because it teaches us how the wealth produced is distributed (Latin, dis, apart, and tribuere, to allot) between the labourers, the owners of land, the owners of capital, and the government. The part which the labourer gets is called wages; the share of the land owner is called rent; that of the capitalist is interest; and the government take taxes. ”

“ Since, therefore, land, labour, and capital are essential to the production of wealth, it is natural to suppose that the wealth which is produced ought to be possessed by those who own the land, labour, and capital which have respectively contributed to its production. The share of wealth which is thus allotted to the possessor of the land is termed rent; the portion allotted to the labourer is termed wages, and the remuneration of the capitalist is termed profit. ”

“ The science of Economics—that is to say, the science of Business in the broad social sense in contradistinction to the narrow private sense—neither requires nor permits such classifications as slaves with domesticated animals, or mining machinery with natural mineral deposits. ”

“ Some of the Economically desirable things which are included colloquially and for business accountings in the term “wealth” are truly Wealth in the technical Economic sense, let us repeat, since they are Artificial Objects produced by Man from and upon Natural Resources—that is to say, by Labor from and upon Land. But others are not at all in the Wealth category, and putting them there has no other Economic result than confusion. Such of them as consist solely of Natural Resources belong in the Land category. Artificial Objects alone belong in the Wealth category. ”

“ And yet on the part of all except the coal trust, there appears in America a thoughtless disregard for the future. Supplies of copper, iron, and lead in favored positions are likewise limited, and are being rapidly centered in the hands of great companies. The increasing demand for these products insures a steadily rising income from their annual use. The value of the mines, being based on the series of incomes they will yield, may increase while their unused treasures dwindle in quantity. ”

“ The resource base for food, agriculture, fisheries and forestry is under stress and is threatened by problems such as desertification, deforestation, overfishing, overcapacity and discards in fisheries, losses of biodiversity, as well as inefficient use of water, climate change and depletion of the ozone layer. This has a negative impact on both food security and the environment. ”

“ To avoid this major loss, an individual will buy home insurance. That insurance is provided by the market because an insurance company can offer home insurance to many homeowners in different regions of the country, and through diversification the company will on average have many homeowners paying premiums and a few collecting insurance, so diversification allows the company to run a relatively low-risk business. But risks from severe climate change are not diversifiable because their enormous costs would impact the global economy. ”

“ Another objection is that the value of land generally is not more than, nor so much as, the values in labor and capital that have been put upon it since its first settlement. But labor and capital, when applied to land, no more make stable changes therein than when applied to any other matter. After a time the form which they give to land and the changes they make in it, under the influence of natural forces, lose their distinctness, and eventually the land relapses to its natural condition unless additional labor and capital are laid out upon it. ”

“ Integrated Assessment A consistent analysis of both the costs and benefits of policies related to climate change requires a modeling framework with certain characteristics: it should cover national and international greenhouse gas emissions from many sectors of the economy; it should translate emissions of greenhouse gases into changes in the atmospheric and global climate; and it should evaluate the impacts of climate change on people and ecosystems. ”

“ George confines to those things whose destruction would decrease and whose increase would augment the aggregate possessions of a community. Bonds, mortgages, etc., when they are between the members of a community, are not, in this sense, wealth. By land is to be understood all natural capabilities, which are a gift to man. It includes fertile fields, ore-deposits, water-powers, the air, the sea, etc. Rent is the compensation received by the owner of any of these natural capabilities for their use. ”

“ There must be land before labor can be exerted, and labor must be exerted before capital can be produced. Capital is a result of labor, and is used by labor to assist it in further production. Labor is the active and initial force, and labor is therefore the employer of capital. Labor can be exerted only upon land, and it is from land that the matter which it transmutes into wealth must be drawn. Land therefore is the condition precedent, the field and material of labor. The natural order is land, labor, capital ”

“ In business accounts, for example, whatever will bring a price to the owner is accounted Wealth, or Capital as a sub-classification of Wealth, whether the object of the price be a building, a domesticated animal, a slave, a vacant building-lot, an unused agricultural area, or an improved and cultivated farm. Some of those items of “wealth” or “capital” do belong, Economically, in the Wealth category, buildings and domesticated animals being among them; but many fall wholly or in part into one or the other of the two other categories, Labor and Land. ”

“ But we may say that the wealth is divided into three parts—not equal parts—called Rent, Interest, and Wages.
Rent is wealth paid to the landlords for the use of the land. Interest is wealth paid to the capitalists (the owners of tools and stores) for the use of the "capital."
Wages is wealth paid to the workers for their labour in producing all the wealth. ”

“ The law of rent is, in fact, but a deduction from the law of competition, and amounts simply to the assertion that as wages and interest tend to a common level, all that part of the general production of wealth which exceeds what the labor and capital employed could have secured for themselves, if applied to the poorest natural agent in use, will go to land owners in the shape of rent. It rests, in the last analysis, upon the fundamental principle, which is to political economy what the attraction of gravitation is to physics—that men will seek to gratify their desires with the least exertion. ”

“ For a non-agricultural illustration, here are two mineral deposits. One is more easily worked than the other, or more conveniently situated with reference to demand for the mineral product for Consumption. It is therefore more attractive to Labor than the other. Consequently, Labor will naturally yield to the ownership of the superior deposit (Land) a larger proportion of the mineral it extracts (Wealth) than to the ownership of the inferior deposit. The proportionate excess is Rent. ”

“ To this fundamental wrong we340 have traced the unjust distribution of wealth which is separating modern society into the very rich and the very poor. It is the continuous increase of rent—the price that labor is compelled to pay for the use of land, which strips the many of the wealth they justly earn, to pile it up in the hands of the few, who do nothing to earn it. ”

“ The manner in which the sufficient cause to which I have traced them explains the main features of these industrial depressions is in striking contrast with the contradictory and self-contradictory attempts which have been made to explain them on the current theories of the distribution of wealth. That a speculative advance in rent or land values invariably precedes each of these sea sons of industrial depression is everywhere clear. That they bear to each other the relations of cause and effect,279 is obvious to whomsoever considers the necessary relations between land and labor. ”

“ These are the results of private property in land—the effects of a principle that must act with increasing and increasing force. It is not that laborers have increased faster than capital; it is not that population is pressing against subsistence; it is not that machinery has made “work scarce;” it is not that there is any real antagonism between labor and capital—it is simply that land is becoming more valuable; that the terms on which labor can obtain access to the natural opportunities which alone enable it to produce are becoming harder and harder. ”

“ Look over the world to-day, comparing different countries with each other, and you will see that it is not the abundance of capital or the productiveness of labor that makes wages high or low; but the extent to which the monopolizers of land can, in rent, levy tribute upon the earnings of labor. Is it not a notorious fact, known to the most ignorant, that new countries, where the aggregate wealth is small, but where land is cheap, are always better countries for the laboring classes than the rich countries, where land is dear? ”

“ It is not in the relations of capital and labour, it is not in the pressure of population against subsistence, that an explanation of the unequal development of our civilization is to be found. The great cause of inequality in the distribution of wealth is inequality in the ownership of land. ”

“ Here, then, in the relation of rent to wages and interest is the primary cause of the failure of invention and discovery to benefit the workingman. Wages and interest steadily tend to a minimum, but the incontestable fact in material progress is the rise in land-values. The great machinery of modern industry does not benefit labor and capital, because it does benefit the landholder. So long as men can control the land which all must use, they can command all the fruits of labor above what is necessary to a bare living. ”

“ We exclude from the category of capital everything which must be included either as land or labour, and therefore capital consists of those things which are neither land nor labour, but which have resulted from the union of these two original factors of production. Nothing can be capital which is not wealth; only such things can be wealth the production of which increases, the destruction of which decreases, the aggregate of wealth. ”

“ We want to find what it is that determines the division of their joint produce between land, labour and capital; and profits is not a term that refers exclusively to any one of these three divisions. Of the three parts into which profits are divided by political economists, namely compensation for risk, wages of superintendence and return for the use of capital, the third falls under the term interest, which includes all the returns for the use of capital, and excludes everything else ”

“ If a certain value in labor, fertilizer, or material, be applied to an acre of land, it may be more than recovered in the value of the product. Further applications give a product increased not in equal proportion to the former yield, and so on till the value of the last-added agent just balances that of the added product. This is the best adjustment possible, and beyond this point there will be a deficit in value. Just where the equilibrium is found at any time is the margin of cultivation. ”

“ Let us suppose, for instance, an increase in the demand and the price of corn, occasioned by an unusually prosperous state of our manufactures and foreign commerce; a fact which has frequently come within our own experience. According to the principles of supply and demand, and the general principles of the Wealth of nations, such an increase in the price of corn would give a decided stimulus to agriculture; and a more than usual quantity of capital would be laid out upon the land, as appears obviously to have been the case in this country during the last twenty years. ”

“ For you know the nature of this Cumberland soil,—you, who possess much of it, and have won so many fair acres from the wild; you know that my uncle's land, now (save a single farm) scarce worth a shilling an acre, needs but capital to become an estate more lucrative than ever his ancestors owned. You know that, for you have applied your capital to the same kind of land, and in doing so, what blessings— which you scarcely think of in your London library—you have effected, what mouths you feed, what hands you employ! ”

“ Rent, we again see, is the difference between the unequal returns to different parts of the capital employed on the soil. Whatever surplus any portion of agricultural capital produces, beyond what is produced by the same amount of capital on the worst soil, or under the most expensive mode of cultivation, which the existing demands of society compel a recourse to; that surplus will naturally be paid as rent from that capital, to the owner of the land on which it is employed. ”

“ The natural value is synonymous with the Cost Value, and the cost value of a thing, means the cost value of the most costly portion of it.
VIII. Cost of Production consists of several elements, some of which are constant and universal, others occasional. The universal elements of cost of production are, the wages of the labour, and the profits of the capital. The occasional elements are taxes, and any extra cost occasioned by a scarcity value of some of the requisites.
IX. Rent is not an element in the cost of production of the commodity which yields it ”

“ Rejecting, as we have, the old view as to the nature of consumption goods and as to the nature and possibility of the distinction between "land" and artificial capital, we class under wealth all material economic agents whatsoever. The discussion of labor and wages has broadly laid down the principles that apply to the value of human effort, but the factor of directing energy presents in modern society so many important features that it calls for special and fuller consideration. ”

“ I will maintain that this country has been brought to its present high state of cultivation, and consequent internal wealth, by the fostering protection which has invariably been given to agriculture, and which has induced gentlemen to lay out their capital in redeeming waste lands and bringing them into cultivation. The result of such a system would be—to throw out of cultivation the land thus redeemed from waste; to reduce the extent of cultivation of the richer lands, consequently to lessen the productive power of the country ”

“ Rent is also expressed in a selling price. When land is purchased, the payment which is made for the ownership, or right to perpetual use, is rent commuted or capitalized. If I buy land for a small price and hold it until I can sell it for a large price, I have become rich, not by wages for my labor or by interest upon my capital, but by the increase of rent. Rent, in short, is the share in the wealth produced which the exclusive right to the use of natural capabilities gives to the owner. Wherever land has an exchange value there is rent in the economic meaning of the term. ”

“ The owner who uses a thing himself gets the advantage in the product as clearly as if he collected rent from a borrower. Houses lived in by the owners, house furnishings, clothing, books, all scarce and durable agents, are yielding rents in this logical sense. To the economist, therefore, the problem of economic rent, as one of the grand divisions of the problem of value, remains of undiminished importance, for in these unceasing streams of uses emanating from our environment, is found the basis for the value of all durable wealth. ”

“ Discovery of new lands and of new natural deposits continually enlarges the economic supply of the agents most nearly fixed in physical amount. This proposition states a historical fact. Any explanation of the economic occurrences of the last five centuries or of the immediate future, that ignores this fact of the increasing supply of many kinds of land and natural resources in the markets of the civilized world, must lead to false conclusions. The rate of this movement has been more rapid in the past century than theretofore, and perhaps more rapid than it will be henceforward ”

“ The fertile material in the food shipped for human consumption five miles away from the field is almost absolutely lost. Engineering skill has as yet succeeded in saving hardly a fraction of the fertile organic matter that flows into the sewers, that is dumped into river and ocean, and that is buried in heaps at the borders of our cities. On the other hand, the increased use of iron, coal, and timber, as a result of encouraging manufactures, has very effectually aided in exhausting the natural resources of the country. ”

“ The whole of the fixed capital takes part in the process of production, for physically the mass of usable objects, premises, machinery, labouring cattle, are completely employed. It is their peculiarity as fixed capital, on the other hand, that only part of the value is absorbed in the production of value, since in the process of reproduction (again postulating simple reproduction) , all that matters is to replace in their natural form the values which have been actually used up as means of subsistence and production during a year’s production. ”

“ His real wealth is in proportion, not to his gross, but to his neat rent.
‘The gross revenue of all the inhabitants of a great country comprehends the whole annual produce of their land and labour; the neat revenue, what remains free to them after deducting the expense of maintaining, first, their fixed, and secondly, their circulating capital, or what, without encroaching upon their capital, they can place in their stock reserved for immediate consumption, or spend upon their subsistence, conveniences, and amusements. ”

“ Nor do I believe that any great physical change, as of climate, or any unusual degree of isolation, to check immigration, is necessary in order that new and unoccupied places should be left for natural selection to fill up by improving some of the varying inhabitants. For as all the inhabitants of each country are struggling together with nicely balanced forces, extremely slight modifications in the structure or habits of one species would often give it an advantage over others ”

“ We may infer this from our frequent inability to predict whether or not an imported plant will endure our climate, and from the number of plants and animals brought from warmer countries which here enjoy good health. We have reason to believe that species in a state of nature are limited in their ranges by the competition of other organic beings quite as much as, or more than, by adaptation to particular climates. ”

“ But this is a false view; we forget that each species, even where it most abounds, is constantly suffering enormous destruction at some period of its life, from enemies or from competitors for the same place and food; and if these enemies or competitors be in the least degree favoured by any slight change of climate, they will increase in numbers; and as each area is already fully stocked with inhabitants, the other species must decrease. ”

“ On the other hand, in some cases, as with the elephant and rhinoceros, none are destroyed by beasts of prey: even the tiger in India most rarely dares to attack a young elephant protected by its dam.
Climate plays an important part in determining the average numbers of a species, and periodical seasons of extreme cold or drought, I believe to be the most effective of all checks. ”

“ Harmful seasonal and inter-annual instability of food supplies can be reduced. Progress should include targeting on minimizing the vulnerability to, and impact of, climate fluctuations and pests and diseases. To effect timely transfers of supplies to deficit areas and the conservation and sustainable use of biodiversity, use should be made, in efficient combination, of climate early warning systems, transfer and utilization of appropriate agricultural, [1] fishery and forestry technologies, production, and reliable trade, storage and financial mechanisms. ”

“ In the main, however, public ownership is simply a business proposition which must be justified by its economic results. In the case of a general social benefit not to be secured without public ownership, as popular education or the climatic effect of forests, the only question to answer is whether the utility is worth the cost. In [Pg 523] the case of industries already in private hands, as waterworks, gas and electric lighting, there is needed, to make a wise decision possible, a knowledge of the effect a change to public ownership will have on value. ”

“ Small Island Developing States face the threat of land loss and erosion due to climate changes and sea level rises and have particular needs for their overall sustainable development. Improvements in trade, transportation, communication, human resources, stabilization of income and higher export earnings will increase food security in these countries. ”