FARMERS PAY TOLL TO SPECULATORS
Nordman, Edward
Farmers Pay Toll To Speculators Limited Supply Of Land Loads The Active Farmer With An Unjust Bur c en; Cost Of ^Privilege To Work Too High By EDWARD NORDMAN (Director Wisconsin Department of...
...ECONOMIC life rests upon exchange...
...It is easy to imagine what would happen if this natural inclination were given free rein in the field of exchange...
...The gradual increase in tenancy and in the number of farmers burdened with mortgages ha3 its source in the inaccessibility to the land resulting from inflated prices...
...In every exchange we want and expect to receive at least an equivalent of what we give...
...It is true that in many cases such investments due to over-speculation are disappointing...
...Exchange involves values given and received...
...is shown by the rise in value of a certain eighth of an acre of land in the city of Chicago...
...Their price is, therefore, not determined by the law of supply and demand but is the result of an advantage possessed by the owners of the supply...
...Deflation of Land Values SINCE it neither is just nor possible to unload the inflated price of land on the consumer, the only alternative left is to bring about'conditions which will deflate land values and which will prevent future inflations...
...They would then underbid the shoe-monopolist and in order to meet competition, he would be compelled either to lower his selling price or to go out of business...
...Unlike in our imaginary example of the shoemaker there is no possibility of underbidding them by increasing the supply since natural resources cannot be reproduced...
...The fundamental cause of this inaccessibility is that the selling price of land is above its actual use value...
...Neither had the Astors anything to do with the increase in value of their land in New York nor the owners of valuable lots and business sites in Chicago or any other large city with the increase in the value of these lots...
...The result is that the holders of land and other natural resources are in a position to raise the price above use value...
...so that in 1920 when the population of Chicago increased from 50 to 2,700,000 people the value of this land increased from $20 to $2,448,000...
...What is true of city land is equally true of agricultural land...
...therefore, define a fair and just price as one which results from a free and unhampered action of the law of supply and demand...
...There are, however some basic necessities such as land and other natural resources the supply of...
...Unless the shoemaker had a legal monopoly on making of shoes the exorbitant price would inevitably stimulate others to learn the shoemaking trade and to make shoes...
...It was mentioned in the first article of this series that a cost of production study made of oats in Iowa showed that over half of tho total costs of production, namely, $15.91, was due to the high investment in land...
...Nordman it was shown that the farmer's troubles arise from the fact that he is squeezed between high land prices and high taxes and a low purchasing power of the consumer...
...The farmer, however, is not able to add this item to the" price of his products for as was shown in the preceding article the price of ¦farm products is determined not by their cost of production but by the demand based on the purchasing power of the consumer...
...Cost Of ^Privilege To Work Too High By EDWARD NORDMAN (Director Wisconsin Department of Markets) In the previous articles by Mr...
...A generation ago that piece of land was worth only a few thousand dollars...
...Taking into consideration what has been said above in relation to the law of supply and demand and the obstructions which hinder its free working so far as land and other natural resources are concerned no further explanations are needed to understand that a part of this $15.91 is due to the fact that the supply of la.-d is limited and therefore lends itself easily to monopolization...
...The following example will make clear thi3 important point...
...When a housewife buys groceries she expects to receive in return for the Value in money which she gives the grocer ceTs tain values in groceries...
...This process would go on among the different competitors until a price would be established below which it would be unprofitable to manufacture shoes...
...And .this happens in every case where the supply can be increased without unusual difficulties by human labor...
...It is a well known fact that the prairies of the Middle West constitute the best farming land in the country...
...The principle of justice is clearly violated in this case for the actual tillers of the soil are compelled to pay a toll to the speculator who takes advantage of the limited supply of land and loads the man who is willing and able to cultivate it with unjust burdens...
...Land Values in City and Country THE best illustration of how this oper-ate...
...In New York City the Astor Estate, bought for a song, is now valued at $500,000,000...
...The fact is that all of our natural wealth including land is being rapidly bought up by investors whose object is not the utilization of this natural wealth but lure of gain through speculation...
...A consideration of remedies which will enable him to extricate himself from this position involves a discussion of the reasons for the unduly high prices of land and m consideration of the whole problem of exchange and its relation to the economic life.—Managing Editor's Note...
...Let us first take up the supply side of this proposition...
...The labor and expense involved in bringing those lands into productive use are so large as to preclude any possibilities of profit...
...In the city of Madison, Wisconsin, a church society was recently offered $360,000 for about one hundred fifty feet frontage of land on Capitol Square (the business section of the town...
...The result of the working of this law is the establishment of a fair and just price...
...Besides economic effects, namely, a lower cost of production, such deflation is justified on ethical grounds for it will result in eliminating unearned incomes resulting from land monopoly to the benefit of the actual tillers of the soil...
...Nevertheless the bulk of such lands is sold to the settlers for from 15 to 25 dollars an acre...
...Although hardly a generation has passed since the settlement of these lands began more than half of them have already passed out of the hands of the actual toilers of the soil and are operated, either by tenants, or by owners overburdened with mortgages...
...Our best agricultural land is rapidly passing into the hands of the investing class and much of it is either not used at all or so poorly used that it fails to function properly as a stabilizing factor in farming and in national prosperity...
...When we give the railroad company a certain value in the form of money for railroad fare .we expect to derive an equivalent value in pleasure or profit from a trip from one place to another...
...The law of supply and demand' in virtue of which the supply tends to equal the demand and vice versa comes in every time as a check, so to s"J>eak, upon the advantage which the supply side may have and, by evoking competition eliminates that advantage...
...the fact remains, however, that manipulations of this nature, whether gainful or not, operate to inflate land values enormously...
...No extended reasoning is needed to see that the only answer that can be given to this question is a negative one...
...When bought by the settler such lands have no use value...
...This particular shoemaker could, therefore, keep his fellow men in subjection so far as their need of shoes is concerned...
...Freedom of the Market IN THIS definition of a fair and just price one thing should particularly be borne in mind, namely, that action of the law of supply and demand be free and unhampered...
...When an employer hires a clerk or a laborer he expects to receive certain values in labor and services for the values in wages he gives his clerk or his laborer...
...He pays for land on the basis of the selling price and in order not to lose the difference between such selling price and the use value he must include it in the cost of production and expects to be able to add it to the price of his products...
...Law of Supply and Demand LET us see, however, what would happen under competitive conditions...
...This means that /when the demand rises conditions should be such as to allow an increase tin supply and when the supply increases the demand should correspondingly increase to absorb the supply...
...And this can be done in the case of all human necessities which are produced by human labor...
...Let us take a case where only one man in the world knows how to make shoes...
...In 1S30, when the population of Chicago consisted of 50 people the value of this 1-8 of an acre was $20...
...It was also shown that the consumer's purchasing power is insufficient to allow him to make a good demand for farm products...
...We all know, however, that every human being tries to get not only what is coming to him but as much more as he can possibly get...
...is it just that the consumer be charged with an extra margin which is the result not of cost of production but of land inflation...
...It was seen above that in the case of shoes, for example, the supply can be increased through the application of human labor and ingenuity...
...How to bring this about will be discussed in the next article when the remedy for the low purchasing power of the consumer will be taken up...
...As the» population of Chicago and the northwest increased the value of this land increased...
...There can be no clearer illustration of how this principle of justice is violated than in the selling of unimproved cutover lands...
...But were the purchasing power of the consumer what it should be the question would arise...
...And thi3 principle is violated in every case where the user of land for purposes of production is compelled to pay a toll to the owner in the form of an extra price resulting from the monopolization of land...
...This is true of every kind of exchange...
...The church society as such had nothing to do with this growth of value...
...which is limited and cannot be increased by human effort though the demand for them grows constantly due to an ever increasing population...
...The fundamental remedy for the inflated cost of production is, therefore, a deflation of land values...
...We can...
...Figuring on a tract of forty acres the settler is compelled to pay from 600 to 1000 dollars simply for the privilege of going to work...
...he would be in a position to charge for his shoes any price up to the point where people would prefer to go barefooted rather than to pay an impossible and exorbitant charge...
...This increase in value was due purely and solely to the fact that the free action of the law of supply and demand was obstructed by the impossibility of increasing the quantity of this choice land and eliminating the monopolistic advantage possessed by the owners of such land...
...It should be clear to all that the difference between the selling price of land and the use value of such land constitutes an unfair burden to the farmer...
Vol. 16 • January 1924 • No. 1
