RATIONALE OF RENT.
Tao question regarding the effect of the Corn-laws upon rent has been considerably mystified by the partial and one-sided view of rent which has been taken by Messrs. M./mans and RICARDO and their followers.
Rent of land, in the vulgar acceptation of the word, means the sum annually paid for the use of land of which the temporary use is conceded to the payer of the rent, while the right of property in it is retained by the person to whom the rent is paid.
Two questions regarding rent were raised by ADAM Suira—the first while discussing the ingredients of the market-price of com- modities, the second while discussing the laws which regulate the distribution of the wealth of a nation among the different classes of which the nation is composed. The conclusions arrived at by SMITH with regard to the first of those questions was, that rent was an ingredient of price; with regard to the second, he showed that the distribution of the wealth of a nation among the individual citizens was effected by one portion being appropriated as rent, another as profits on capital employed in production, and a third as wages of labour.
About the same time, Messrs. MALTHUS and RICARDO, and also Mr. WEST a barrister, pointed out that rent is not an ingredient in price ; that the payment of rents is the consequence, not the cause of the rise of prices. The explanation of this fact, offered by the economists who advanced this new theory, was in substance the following. Rent consists of the surplus produce of cultivation over and above that part of the produce which replaces capital with ordinary profits. This surplus produce, or rent, arises from and is in proportion to the necessity (caused by the increase of population and capital on a limited field) for resorting to inferior soils, or employing capital on the same soils with inferior returns. " Rent," said Mr. RICARDO, " is that portion of the produce of the earth which is paid to the landlord for the use of the original and indestructible powers of the soil. It is often, however, confounded with the interest and profit of capital ; and in popular language, the term is applied to what- ever is annually paid by a farmer to his landlord. If of two adjoiniag farms of the same extent, and of the same natural fertility, one had all the conveniences of farming-buildings, and besides, were pro- perly drained and manured, and advantageously divided by hedges, fences, and walls, while the other had none of those advantages, more remuneration would naturally be paid for the use of one than for the use of the other ; yet in both cases this remuneration would be called rent. But it is evident, that a portion only of the money annually to be paid for the improved farm would be given for the original and indestructible powers of the soil ; the other portion would be paid for the use of the capital which had been employed in ameliorating the quality of the land, and in erecting such build- ings as were necessary to secure and preserve the produce."
In this passage a sense is attributed to the word " rent " much narrower than that in which it is used by all except the school of economists which adheres to the views of Mr. RICARDO. In this restricted sense the word may be employed without leading to any serious error, so long as the ingredients which enter into price are alone under consideration. But when we come to investigate the laws which regulate the distribution of the annual produce of a nation's industry, it will not do to use " rent" in this narrow sense. In the matter of distribution, we find the annual produce of a community naturally divided into three portions : the share of the labourers— wages ; the share of the capitalist who employs the labourers— profits of stock ; and the share of the proprietor, to whom the capitalist can pay something annually for the use of his property and yet retain for himself the average profits of stock throughout the country—rent. Rent here means the whole of what is paid to the landlord ; and if the word is taken in any more restricted sense, it cannot help us to explain the laws which regulate the distribu- tion of national wealth. A hypothesis or theory which fails to ap- ply in any one case is insufficient ; the failure proves that it rests upon premature generalization. The RICARDO definition of rent is not only objectionable as tending to create two different accepta- tions of the word—that in which it is used by the general public, and that in which it is used by a few abstract reasoners ; it neces- sarily leads to false conclusions regarding the laws which regulate the distribution of natural wealth : for that may be true of what is
called rent by the followers of RICAEDO, which is not true of what is called rent by all the rest of the world—a larger sum, of which the first is only a part. That the errors thus occasioned are of great practical influence, must appear at once to any one who re- flects what an important part of the Corn-law discussion relates to the ratio which rent bears and ought to bear to the shares of the national income allotted to the capitalist and the labourer.
Rent is the share of the annual produce paid to the owner of land
cultivated by another. Rent is paid because a person possessed of capital finds, that by cultivating a certain piece of land, the price for which he can dispose of his crop, after deducting all the ex- penses incurred up to the moment of its being brought to market, is large enough to afford him the average profits that other capital- ists derive from their stock, and leave a surplus over to pay the landlord for the use of his ground. What is the cause of this sur- plus? Not any mystical "original and indestructible powers of the soil": there are no indestructible powers of the soil ; and if land were unlimited in quantity, and if grain could be brought to market from all lands at an equal remunerative price there would be no rent. The cause of rent is this—To give an article of exchangeable value, there must be a demand for it. The circumstance which determines how much of one article shall be given for another is the cost of production. The price given for an article must be such as to afford wherewithal to remunerate the labourer for his toil and the capitalist for his advance of capital: unless such a price be obtained for an article as to make it worth the while of the labourer and capitalist to produce it, it will not be produced. So long as an article can be multiplied indefinitely as the demand increases, the cost of production will regulate exclusively its rela- tive value to other commodities. If any thing occurs to prevent the further multiplication of the article, and the demand for it still goes on increasing, its relative value, its price, will be raised by the competition of intending purchasers above the mere cost of pro- duction. There are three things requisite to the production of articles of commerce—labour, capital or stock to set labour in motion or increase its productiveness, and the raw material upon which capital is employed. No amount of capital or labour can enable men to produce more of a commodity than there is raw material to work up. Whenever, therefore, the supply of raw material is exhausted, and the demand for the manufactured com- modity continues to increase, the price of the latter will rise above the mere cost of working up. The competition of labourers and capitalists will keep wages and profits at the average level of the country ; and this competition will enable the owner of the raw commodity to obtain for it the whole of that portion of price which is added by the excess of demand over supply to what is necessary to yield the average profits on the capital and wages to the labour- ers employed in its production. The only difference between land and other kinds of raw materials used in the production of mar- ketable commodities, is that it can be used over and over again— that it can be restored to the owner after it has been used. The rent of land is whatever is paid for the temporary use• of land.
This definition embraces the rent paid for land which has been rendered fertile by artificial means, as well as the rent paid for land naturally fertile. The same law regulates the amount of rent in both cases. The farmer possessed of capital will be willing to give in both cases the surplus produce over and above the ordinary profits. He will not refuse it when the land is naturally fertile on tile plea that the owner has been at no expense to make it fertile. He does not ask, when it has been rendered fertile by artificial means, what the improvement has cost the owner, and allow him the usual rate of profits on the capital he has sunk on the land. In the case of natural fertility, as in the case of artificial fertility, he calculates what surplus will remain after he has paid his labourers, defrayed the tear and wear of implements, and received the average profits on his capital ; and this surplus he agrees to give to the landlord. This definition embraces alike the rent which is the consequence of superior fertility of soil and that which is the result of greater facility of access to markets. Some of the followers of RICARDO enumerate this facility among the causes of rent ; but they have not modified the generalized expression of their theory so as to embrace it, and in deducing their inferences they seem entirely to overlook it. This definition also embraces all rent paid for land to whatever use it may be put. The RICARDO definition applies only to rent paid for land used in raising agricultural produce : it excludes the rent of land for building houses, warehouses, docks, &c. ; and yet from this class of rent a large proportion of the income of many of our wealthiest landowners is derived. It excludes the rent of mines and woodlands : for although it is true that great part of what is paid for the use of such properties is the price of the timber or minerals carried away, yet some portion is rent derived from more advantageous situations in regard to markets, or inferior expense of working. It follows from these considerations, that by taking rent in the broad popular acceptation, we not only escape perplexing hasty readers and persons little accustomed to metaphysical hair-split- ting, but really use the word in the only sense in which it can be employed in economical discussions without leading to erroneous conclusions. Only by investigating the phmnomena of the rise and fall of rent in this comprehensive sense of the word, can we arrive at a satisfactory conclusion regarding the real interests of the class of rent-receivers.
In a country where there are no laws to give an artificial bias to the natural distribution of the annual revenue of the whole com- munity, rents, it is clear, must rise as the nation advances in popu- lation and wealth. An increased population will require the culti- vation of a greater breadth of land to supply it with food. There can be but one price of food in any market ; and that price will be determined by the cost of production on the least fertile and least favourably situated lands. The surplus produce of all other lands will go to constitute rent. An increased population will render more houses necessary ; and this too will bring an accession of rent to those landlords who are favourably situated. An in- crease of national wealth will lead to a demand for a greater variety of agricultural produce—for garden-ground in addition to corn-fields—for larger houses, with numerous out-houses and pleasure-grounds around them—for ground whereon to erect the factories and storehouses of a busy and opulent commu- nity. It will be found advisable to expend capital in the construc- tion of roads and canals, and in the invention of improved modes Of conveyance, by means of which distant lands will in a manner
be brought nearer to the centres of industry and made to partici- pate in the advantages which radiate from them. In the course of these improvements, experiments are made and means devised by which the same land is made to yield a greater amount of produce without increasing the capital expended or the labour employed on it : all this increased produce flows ultimately into the pockets of the landowners. The improvements made on farms by skilful farmers—the improvements made by those who make an erroneous estimate of the profits to be derived from them—all tend, what- ever may be the fortune of the person making the improvements, ultimately to raise rents. It is a law of Nature, that in propor- tion as a country advances in population, wealth, and civilization, the emoluments of the proprietors of land must increase also : this is an advantage of which no power on earth can deprive the land- lords.
On the other hand, it is equally clear, that when a nation retro- grades in prosperity, the landowners must participate in the general depression. In our last number we adverted to means by which the landowners might for a time continue to extract larger rents from a population in a state of declining prosperity. Want of suffi- cient employment for a redundant labouring population, and want of an adequate field of profitable employment for capital, may, by the efforts of competition, lower wages and the profits of capital; and a larger surplus being thus left, the landlords might profit by the deteriorated condition of the other classes. But such a state of affairs, it is clear, could not be lasting. An under-paid and consequently under-fed labouring class effects less by the same apparent amount of labour. The capitalists would lose heart and throw up the business, or carry it on in a scrambling unsatisfactory manner, which must ultimately redound to the disadvantage of the landlords. Nay, more : in a country where there are not a variety of profitable employments for the younger branches of the families of the landowners, the increase of their own numbers will soon give but a bad account of the rents. All attempts on the part of a legislative body of landowners to avert the necessity of their being dragged down by the common distress of the other classes, or even to appropriate to themselves in seasons of prosperity a larger share of the national wealth than is allotted to them by the natural law which regulates its distribution, are unavailing. They only serve to narrow the field of commercial enterprise, to prevent the expan- sion of national wealth, or to diminish it. At beat, they can only increase the ratio of rent to wages and profits, not the positive amount of rent ; and the positive amount of their own share is of ranch more consequence to them than its proportion to the shares of other people. They may secure to themselves for a time a larger share of the annual income of the nation than they are fairly entitled to ; but they accomplish this by an arrangement which ultimately impoverishes the whole community, themselves among the rest. Last week we illustrated the effects of the Corn-law upon rent historically, by reference to facts. In the present paper we have endeavoured to reason them out upon abstract prin- ciples. Both processes have led to the same conclusion. The pains and space occupied in trying to solve the same problem by two different methods have not been wasted. The identity of the result in both eases is calculated to afford greater confidence in the accuracy of each. There are some minds which require to have the imagination satisfied by tangible facts, others which cannot be satisfied unless by the establishment of comprehensive general principles. At the present time, no trouble ought to be grudged that has a tendency to elicit truth regarding the ques- tion of the Corn-laws. That question, it is clear, has taken possession of the national mind. The great body of the people feel that a chronic state of distress has for a number of years existed in the country, and is increasing. They have fixed upon the Corn-law; and they say it contravenes a law of Nature—it is a law to prevent the introduction of food which would otherwise be brought into the country. They will not be satisfied—the fermentation cannot be allayed—until the experiment has been tried to better the condition of the people by allowing an unrestricted trade in food. Resistance to the growing determina- tion among the people to have the trial made, may avail for a brief season longer; but it will be borne down at last, with increase of risk and the certainty of injury to all interests. It is most desira- ble that the landowners should take a dispassionate, unexaggerated view of the subject in all its bearings. If they did so, they would find that they have been accustomed to exaggerate the benefits the Corn-law is capable of bestowing upon them, and to anticipate dis- advantages from its repeal which have no foundation in reality.
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