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Proudhon on Economic Rent

Proudhon on Economic Rent
An Addendum to William Schnack’s Response to Kevin Carson

Due to the unorthodox claims made in my last response, I wanted to give some supporting material for my depiction of Proudhon’s take on economic rent. Think of this as a long footnote, rather than the heart of my argument. My position is not reliant on this, as I believe it stands on its own that the private capture of economic rent diverges from the cost principle. On these grounds alone, I believe it a reasonable argument to suggest that a more thoroughly mutualist position — considering the core principles on which its economic form is merely an expression or attribute — would support the community capture of economic rent. I also believe libertarian variants of Georgism provide for the least arbitrary and fairest allocation of possession for occupancy-and-use, and best allow the price mechanism to operate. Nonetheless, I do believe there are times when Proudhon supports something similar to the community capture of economic rent, and I aim to demonstrate some of my reasoning for this here.

In What is Property? Proudhon clarifies that — unlike that which he often refers to as “farm-rent,” the rent paid by the sharecropper to the landlord — when the difference between differing grades of land is shared between producers, the allocation of the economic rent is not a rental payment so much as compensation:

If the form cannot be separated from the object, nor property from possession, possession must be shared; in any case, society reserves the right to fix the conditions of property. Let us suppose that an appropriated farm yields a gross income of ten thousand francs; and, as very seldom happens, that this farm cannot be divided. Let us suppose farther that, by economical calculation, the annual expenses of a family are three thousand francs: the possessor of this farm should be obliged to guard his reputation as a good father of a family, by paying to society ten thousand francs, less the total costs of cultivation, and the three thousand francs required for the maintenance of his family. This payment is not rent, it is an indemnity.

An indemnity is a form of compensation, often as paid by a mutual insurance program. Proudhon speaks of mutual insurance programs, at times placing them alongside mutual credit in his text.

In The Poverty of Philosophy, Karl Marx quotes a set of paragraphs from Proudhon, which ends in, “The moral effect of property having been secured, at present what remains to be done is to distribute the rent.” This is not the only time Proudhon makes a mention of distributing the rent, or rent as compensation. In Interest and Principal he suggests that,

If houses, like money, were gratuitous — that is to say, if use was paid for as an exchange, and not as a loan–land would not be slow in becoming gratuitous also; that is, farmrent, instead of being rent paid to a non-cultivating proprietor, would be the compensation for the difference between the products of superior and inferior soils …

Proudhon often speaks in this sort or similar contrast, between non-cultivating proprietors and producers. Who does Proudhon consider a cultivator? In What is Property? he suggests,

Yes; land has the power of producing more than is needed by those who cultivate it, if by cultivators is meant tenants only. The tailor also makes more clothes than he wears, and the cabinet-maker more furniture than he uses. But, since the various professions imply and sustain one another, not only the farmer, but the followers of all arts and trades — even to the doctor and the school-teacher — are, and ought to be, regarded as cultivators of the land.

It’s important to note that Proudhon wants possession to be transferable, as in an exchange, but this is also what Georgists want. The Georgists, especially the libertarian-minded, have no interest in interfering with exchanges (although land trusts often have a right of first offer clause), but simply wish to take community possession of economic rent. However, when Proudhon offers his version of a Single-Tax, he differs from the Georgists in that he would include capital, as well, within its realm. In Interest and Principal, he says:

Suppose that instead of our system of taxes, so complex, so burdensome, so annoying, which we have inherited from the feudal nobility, a single tax should be established, not on production, circulation, consumption, habitation, etc., but in accordance with the demands of justice and the dictates of economic science, on the net capital falling to each individual. The capitalist, losing by taxation as much as or more than he gains by rent and interest, would be obliged either to use his property himself or to sell it; economic equilibrium again would be established by this simple and moreover inevitable intervention of the treasury department.

Proudhon says “net capital” in this paragraph, and nothing of land, but this is merely three paragraphs and a sentence from the passage quoted above from Interest and Principal in which he addresses compensation. Also, in this passage itself, he is including rent, as well as interest, as the return to the capitalist, which places a degree of ambiguity on whether or not he is including the landlord in the realm of the capitalist.

Similar to the manner in which a George-inspired land trust relies on dual-ownership between the tenant and the board, with tenants owning the buildings and the trust owning the land, and in which the board may reserve the right of first purchase of the tenant’s improvements, Proudhon suggests, in General Idea of the Revolution, that “Towns may bargain with owners for the purchase and immediate payment for rented buildings.” This is the section in which he is speaking of buildings, which is similar, but not exactly the same, as the following section on land, in which he decrees, “Forward! and at full speed, against land rent.” He continues,

Every payment of rent for the use of real estate shall give title to the farmer for a share of the real estate, and shall be a lien upon it.

When the property has been entirely paid for, it shall revert immediately to the town, which shall take the place of the former proprietor, and shall share the fee-simple and the economic rent with the farmer.

Notice here that Proudhon places proprietorship with the town, not the individual, but suggests that, similar to a mutual organization, the ownership and surplus be shared out to the individual members. Next, he states the already-quoted bit about towns being able to bargain with the individual owners for repurchase, before stating that,

In that case, provision shall be made for the supervision of the towns, for the installation of cultivators, and for the fixing of the boundaries of possessions, taking care to make up by an increase in quantity for any deficiency in the quality of the land, and to proportion the rent to the product.

Here, again, Proudhon takes care to distribute the economic rent between members, but he does so by ensuring that any lack of quality is made up for with quantity. He does not simply suggest that the rent does not matter, or should not be addressed. In this case, and probably most oftentimes, he feels that rent can be allocated fairly by distributing land more evenly and allowing producers to create more ground-rent. However, he does suggest in places that rent should be used as compensation or indemnity, and I am left to assume that he believes this to be a rare circumstance, as he suggests that it “very seldom happens” that a farm cannot be fairly split (see the first quote in this text). Still more, this passage shows that Proudhon’s thought did not quite separate capital and land in the same way as the modern Georgist, as any “created rent” a Georgist would understand to be interest on capital improvements (including improvement of the soil). This is a matter that makes it impossible to classify Proudhon as a true Georgist, as he, more like Spinoza, treated all real property — land and capital improvements — under the same banner. Still, like Spinoza, this alone does not detract from his place as a proto-Georgist.

Proudhon continues his decree:

As soon as all landed property shall have been completely paid for, all the towns of the Republic shall come to an understanding for equalizing among them the quality of tracts of land, as well as accidents of culture. The part of the rent to which they are entitled upon their respective territories shall serve for compensation and for general insurance.

Here, again, Proudhon addresses the need to balance the rights to economic rent, which he does by distributing quality land and using the rent for compensation and insurance.

Beginning with the same date, the former proprietors who have held their title by working their properties themselves, shall be placed on the same footing as the new, subjected to the same rights; in such a manner that the chance of locality or of succession may favor no one, and that the conditions of culture shall be equal for all.

He plans to treat current occupier-users with the same balanced hand.

The tax on land shall be abolished.

This is interesting. After describing how rent will be used as compensation and insurance, he suggests that land taxes will be abolished. Proudhon certainly has issues with the word “taxes” at times, but I’m not sure this is what he means here. He could take issue, similar to modern Georgists, with taxing the value of land itself, rather than confiscating the rent. Still, I’m not sure. He can’t mean that rent won’t be used for compensation and insurance, because he just said that it will. In the same breath that he describes that “Every payment of rent for the use of real estate shall give title to the farmer for a share of the real estate,” and that “When the property has been entirely paid for, it shall revert immediately to the town, which shall take the place of the former proprietor, and shall share the fee-simple and the economic rent with the farmer,” Proudhon suggests that “the tax on land will be abolished.”

Next, Proudhon suggests that that rural police will be “placed under the control of the municipal councils.” He then clarifies that his entire decree would still occur under the conditions of a voluntary contract. This is, of course, after a long tirade in The General Theory distinguishing contract from government. He says,

I suppose that I need not write a commentary to show that this plan, which is the necessary sequel to the others, is still only the application on a large scale of the idea of contract; that the central authority appears only for the execution of the popular will, which I assume has already been expressed by vote of the electors; that when once the reform has been put in practice, the hand of power will forever disappear from agricultural and farm land affairs.

In his decree, Proudhon has described a network in which land is owned by a commune, which rents at cost for the sake of personal possession. Each member has an equal share in this commune, as described. The commune seems to have a share of the economic rent.

Later on in the General Theory, Proudhon discusses the liberal and socialist approaches to the matter of economic rent. He says,

All the Socialists, Saint Simon, Fourier, Owen, Cabet, Louis Blanc, the Chartists, have conceived agricultural organization in two ways.

Either the laborer is simply a workman associate of a great farming association, called the Commune, or the Phalanstery;

Or each cultivator becomes a tenant of the State, which is the only proprietor, the only landlord; all land having been taken by it. In this case, the ground rent becomes part of the taxes, and may replace them entirely.

The first of these two systems is governmental and Communist at the same time: through this double principle it has no chance of success. It is a utopian conception still-born.

The second system seems more liberal: It leaves the cultivator his own master in his work, subjects him to no orders, imposes upon him no rules. In comparison with the present lot of farmers, it is probable that, with the greater length of leases and moderation of rents, the establishment of this system would encounter little opposition in the country. I admit, for my part, that I hesitated for a long time over this idea, which grants some liberty, and which I could reproach with no injustice.

Proudhon shows some softness toward the ideas of Mill and the Physiocrats, but then he continues,

Nevertheless I have never been completely satisfied with it. I find in it always a character of governmental autocracy which is disagreeable to me: I see in it a barrier to liberty of transactions and of inheritances; the free disposition of the soil taken away from him who cultivates it; and this precious sovereignty, this eminent domain, as the lawyers say, forbidden to the citizen, and reserved for that fictitious being, without intelligence, without passion, without morality, that we call the State. By this arrangement, the occupant has less to do with the soil than before; the clod of earth seems to stand up and say to him: You are only a slave of the taxes; I do not know you!

Here, he seems to reject the idea, especially on the basis that the state would remain in charge, but not so fast… we must remember that Proudhon does not think highly of the state (at least, as he defines it here). He continues,

What is called economic rent in agriculture has no other cause than the inequality in the quality of the land: without this inequality there would be no economic rent, since there would be no means of comparison. Therefore if anybody has a claim on account of this inequality, it is not the State, but the other land workers who hold inferior land.

Still more, in what I believe to be a translation done by Shawn Wilbur of The Theory of Property, Proudhon says:

[A]gainst the excess of taxation and the extravagances of the tax officials, I demand a tax reform, established on the rent itself for pivot: against the civil list, I demand, with the division of the landed estates, participation in the land-rent.

I’m not alone in my evaluation of Proudhon’s program. Denis William Brogan reports, in Proudhon, that:

According to Proudhon taxation is simply the share each citizeny has to pay of the cost of providing state services. The state, like any individual or corporation, ought to sell its services at cost price. Of these services some citizens will use a bigger share than others, the rich will get more than the poor, so ought to pay more. But, although an income tax seems just at first sight, it is added to the cost of goods, and so is spread over the community, like an ordinary tax on consumption. He attacks a progressive income tax as tyrannical and futile, for all taxes become indirect taxes on consumption, the ‘result is zero’. A tax on land values, even if the state took only a third of the revenue from this source, would pay all legitimate expenses of government. In a well-organised state, government services should not be more than a tenth of the gross revenue of the community, but until that happy deflation of the state is achieved, most taxes should be left alone for most reforms are fictitious! There can be no real justice in taxation in a society which permits economic inequality, there is the root of the matter. There are, of course, obvious improvements to be made in detail; the duties on wines should be reduced, but those on tobacco kept, (Proudhon was fond of wine and a non-smoker); houses should be taxed, so as to break up the great towns.

Again, my argument is not dependent on Proudhon, but I do find this aspect of Proudhon’s writings to be convenient to my project. While certainly not as well laid-out as many areas of his theory, and certainly not having the quality of the modern Georgist position, it does seem that Proudhon has a concern for economic rent and wants to resolve the issue.

I understand that there are areas that distinguish Proudhon from George beyond their feelings about the state. Unlike George, Proudhon felt that rent largely comes about by way of improvements and that is was mainly a rural concern. He places much less concern on the issue of ground-rent than George, and seems to believe that labor can eventually put an end to the differences of land. Still (and granted, this makes up a very small portion of his work) he does address the rent in the quoted material above.

No matter, I am willing to back my position as an original synthesis if I must. If this is the path I must take, it will be in order to more thoroughly address the matter of unearned increase. If I must stray from the original project, so be it, as I believe this to be an expression closer to the heart of mutualism, which is centered around values of justice based on balance, cost, and reciprocity (the economic forms of mutualism are not necessarily its substance). Still, I believe the above quotes to support the idea that Proudhon anticipated — though sloppily and without consistency — the thought of Henry George. This may be the reason for George’s statement in opening Progress and Poverty:

What I have done in this book is to unite the truth perceived by Smith and Ricardo with the truth perceived by Proudhon and Lassalle.* I have shown that laissez faire — in its full, true meaning — opens the way for us to realize the noble dreams of socialism.

No matter the connection between Proudhon and George, or the consistency of Proudhon’s position on economic rent, I think it would do best for mutualists to support geoanarchism as a non-arbitrary manner of distinguishing occupancy-and-use, and to better approximate cost. Personal possession and social inheritance of rent would also better satisfy middle ground between the socialist left and the capitalist right. Mutualism has always found its strength in synthesis and balance.

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