Principles of Economics
By Alfred Marshall
Economic conditions are constantly changing, and each generation looks at its own problems in its own way. In England, as well as on the Continent and in America, Economic studies are being more vigorously pursued now than ever before; but all this activity has only shown the more clearly that Economic science is, and must be, one of slow and continuous growth. Some of the best work of the present generation has indeed appeared at first sight to be antagonistic to that of earlier writers; but when it has had time to settle down into its proper place, and its rough edges have been worn away, it has been found to involve no real breach of continuity in the development of the science. The new doctrines have supplemented the older, have extended, developed, and sometimes corrected them, and often have given them a different tone by a new distribution of emphasis; but very seldom have subverted them…. [From the Preface to the First Edition]
First Pub. Date
London: Macmillan and Co., Ltd.
The text of this edition is in the public domain.
- Appendix A
- Appendix B
- Appendix C
- Appendix D
- Appendix E
- Appendix F
- Appendix G
- Appendix H
- Appendix I
- Appendix J
- Appendix K
BOOK VI, CHAPTER X
§ 1. In early times, and in some backward countries even in our own age, all rights to property depend on general understandings rather than on precise laws and documents. In so far as these understandings can be reduced to definite terms and expressed in the language of modern business, they are generally to the following effect:—The ownership of land is vested, not in an individual, but in a firm of which one member or group of members is the sleeping partner, while another member or group of members (it may be a whole family) is the working partner
The sleeping partner is sometimes the ruler of the State, sometimes he is an individual who inherits what was once the duty of collecting the payments due to this ruler from the cultivators of a certain part of the soil; but what, in the course of silent time, has become a right of ownership, more or less definite, more or less absolute. If, as is generally the case, he retains the duty to make certain payments to the ruler of the State, the partnership may be regarded as containing three members, of whom two are sleeping partners
The sleeping partner, or one of them, is generally called the proprietor, or landholder or landlord, or even the landowner. But this is an incorrect way of speaking, when he is restrained by law, or by custom which has nearly the force of law, from turning the cultivator out of the holding by an arbitrary increase of the payments exacted from him or by any other means. In that case the property in the land vests not in him alone, but in the whole of the firm of which he is only the sleeping partner, the payment made by the working partner is not a rent at all, but is that fixed sum, or that part of the gross proceeds, as the case may be, which the constitution of the firm binds him to pay; and, in so far as the custom or law which regulates these payments is fixed and unalterable, the theory of rent has but little direct application.
§ 2. But in fact the payments and dues, which custom is supposed to stereotype, nearly always contain elements which are incapable of precise definition; while the accounts of them handed down by tradition are embodied in loose and vague impressions, or at best are expressed in words that make no attempt at scientific exactness
We can watch the influence of this vagueness in the agreements between landlord and tenant even in modern England; for they have always been interpreted by the aid of customs, which have ever been imperceptibly growing and dwindling again, to meet the changing exigencies of successive generations. We change our customs more quickly than our forefathers did, and we are more conscious of our changes and more willing to convert our customs into legal enactments, and to make them uniform
At the present day, in spite of minute legislation and carefully drawn agreements, there remains a wide margin of uncertainty as to the amount of capital which the landlord will from time to time invest in maintaining and extending the farm buildings and other improvements. It is in these matters, quite as much as in his direct money relations with the tenant, that the generous and liberal landlord shows himself; and, what is specially important for the general argument of this chapter, alterations in the real net rent required of the tenant are as often made by a quiet readjustment of the shares of the expenses of working the farm that are borne by the landlord and the tenant as by a change in the money rent. Thus corporate bodies and many large private landowners often let their tenants go on from year to year, without any attempt to make the money rents follow the changes in the real letting value of the land; and there are many farms which are not let on lease and yet the rent of which has nominally remained unchanged during the agricultural inflation which culminated in 1874, and during the depression which followed. But in the earlier period the farmer, who knew he was under-rented, could not put pressure on his landlord to lay out capital in drainage or new buildings or even in repairs, and had to humour him as regards the game and in other matters; while just now the landlord, who has a steady tenant, will do many things, that are not stipulated for in the agreement, in order to retain him. Thus, while the money rent has remained stationary, the real rent has changed.
This fact is an important illustration of the general proposition, that the economic theory of rent, the Ricardian theory as it is sometimes called, does not apply to modern English land tenure without many corrections and limitations both as regards substance and form; and that a further extension of these corrections and limitations will make the theory applicable to all forms of Mediæval and Oriental land tenure, in which any sort of private ownership is recognized. The difference is only one of degree.
§ 3. But the difference of degree is very great. This is partly because in primitive times and backward countries the sway of custom is more undisputed; partly because, in the absence of scientific history, shortlived man has little better means of ascertaining whether custom is quietly changing, than the fly, born to-day and dead to-morrow, has of watching the growth of the plant on which it rests. But the chief reason is that the conditions of partnership were expressed in terms which were seldom capable of exact definition and measurement.
For the share of the senior partner in the firm, or the landlord as we may for shortness call him, generally included (either with or without a right to a certain share of the produce) the right to claim certain labour services and dues, tolls and presents; and the amount which he obtained under each of those heads varied from time to time, from place to place, and from one landlord to another. Whenever payments of all kinds made by the cultivator left him a margin beyond the necessaries of life for him and his family, together with those comforts and luxuries which were established by custom, the landlord was likely to use his superior strength to raise the payments in some form or other. If the chief payments were a certain share of the produce, he might increase that share: but, as that could seldom be done without an appearance of violence, he would be more likely to increase the number and weight of his minor imposts, or to insist that the land be more intensively cultivated, and a larger part of it be given to crops that cost much labour and are of great value. Thus changes went on, smoothly for the most part, silently and almost imperceptibly, like the hour-hand of a clock; but in the long run they were very thorough
The protection which custom afforded to the tenant was not indeed unimportant even as regards these dues. For he always knew pretty well what demands he would have to meet at any particular time. The moral sense of all around him, high and low, protested against any attempt on the part of his landlord to make a sudden and violent increase in the payments and dues, the tolls and fines which were recognized as usual; and thus custom rounded off the edges of change.
It is moreover true that these vague and variable elements of rent were generally but a small part of the whole; and that in those not very rare cases in which the money rent remained fixed for very long periods together, the tenant had a kind of partnership in the soil, which he owed partly to the forbearance of his landlord if it happened that the true net value of the land had risen, but partly also to the constraining force of custom and public opinion. This force in some measure resembled the force which holds raindrops on the lower edge of a window frame: the repose is complete till the window is violently shaken, and then they fall together; and in like way the legal rights of the landlord which had long lain latent were sometimes brought suddenly into action in a period of great economic change
§ 4. The question whether the payments made by the cultivator for the use of his land should be reckoned in money or in produce is of growing interest with reference to both India and England. But we may pass it by for the present and consider the more fundamental distinction between the “English” system of rental and that of holding land on “shares,” as it is called in the New World, or the “Metayer
*110” system as it is called in the Old.
In a great part of Latin Europe the land is divided into holdings, which the tenant cultivates by the labour of himself and his family, and sometimes, though rarely, that of a few hired labourers, and for which the landlord supplies buildings, cattle and, sometimes even, farm implements. In America there are few agricultural tenancies of any kind, but two-thirds of those few are small holdings let out to white men of the poorer class, or to freed negroes, on some plan by which labour and capital share in the produce
This plan enables a man who has next to no capital of his own to obtain the use of it at a lower charge than he could in any other way, and to have more freedom and responsibility than he would as a hired labourer; and thus the plan has many of the advantages of the three modern systems of co-operation, profit sharing, and payment by piece-work
*112. But though the metayer has more freedom than the hired labourer he has less than the English farmer. His landlord has to spend much time and trouble, either of his own or of a paid agent, in keeping the tenant to his work; and he must charge for these a large sum, which, though going by another name, is really earnings of management. For, when the cultivator has to give to his landlord half of the returns to each dose of capital and labour that he applies to the land, it will not be to his interest to apply any doses the total return to which is less than twice enough to reward him. If, then, he is free to cultivate as he chooses, he will cultivate far less intensively than on the English plan; he will apply only so much capital and labour as will give him returns more than twice enough to repay himself: so that his landlord will get a smaller share even of those returns than he would have on the plan of a fixed payment
This is the case in many parts of Europe, in which the tenant has practical fixity of tenure; and then it is only by constant interference that the landlord can keep up the amount of labour he puts on his farm, and keep down the use he makes of the farm cattle for outside work, the fruits of which he does not share with his landlord.
But even in the most stationary districts the amount and quality of the stock which custom requires the landlord to provide are being constantly, though imperceptibly, modified to suit the changing relations of demand and supply. And if the tenant has no fixity of tenure, the landlord can deliberately and freely arrange the amount of capital and labour supplied by the tenant and the amount of capital supplied by himself to suit the exigencies of each special case
It is obvious then that the advantages of the metayer system are considerable when the holdings are very small, the tenants poor, and the landlords not averse to taking much trouble about small things: but that it is not suitable for holdings large enough to give scope to the enterprise of an able and responsible tenant. It is commonly associated with the system of peasant proprietorship; and we may consider that next.
§ 5. The position of a peasant proprietor has great attractions. He is free to do what he likes, he is not worried by the interference of a landlord, and the anxiety lest another should reap the fruits of his work and self-denial. His feeling of ownership gives him self-respect, and stability of character, and makes him provident and temperate in his habits. He is scarcely ever idle, and seldom regards his work as mere drudgery; it is all for the land that he loves so well.
“The magic of property turns sand into gold,” said Arthur Young. It undoubtedly has done so in many cases in which the proprietors have been men of exceptional energy. But such men might perhaps have done as well or better if their horizon had not been limited to the narrow hopes of a peasant proprietor. For indeed there is another side to the picture. “Land,” we are told, “is the best savings-bank for the working man.” Sometimes it is the second best. But the very best is the energy of himself and his children; and the peasant proprietors are so intent on their land that they often care for little else. Many even of the richest of them stint the food of themselves and their families: they pride themselves on the respectability of their houses and furniture; but they live in their kitchens for economy, and are practically worse housed and far worse fed than the better class of English cottagers. And the poorest of them work hard during very long hours; but they do not get through much work, because they feed themselves worse than the poorest English labourers. They do not understand that wealth is useful only as the means towards a real income of happiness; they sacrifice the end to the means
And it must be recollected that the English labourers represent the failure rather than the success of the English system. They are the descendants of those who for many successive generations have not availed themselves of the opportunities by which their abler and more adventurous neighbours were rising to leading posts at home, and, what is far more important, were acquiring the fee simple of a great part of the surface of the globe. Of the causes which have contributed to make the English race the chief owners of the New World, the most important is that bold enterprise which has made a man, who is rich enough to be a peasant proprietor, generally refuse to be content with the humdrum life and the narrow income of a peasant. And among the causes which have fostered this enterprise, none is more important than the absence of the temptations to wait about for a petty inheritance, and to marry for the sake of property rather than in the free exercise of individual choice—temptations which have often dulled the energy of youth in places in which peasant properties have predominated.
It is partly in consequence of the absence of these temptations that the “farmers” of America, though they are men of the working class cultivating their own land with their own hands, do not resemble “peasant proprietors.” They invest their income freely and wisely in developing the energies of themselves and their children; and these energies constitute the chief part of their capital, for their land generally is as yet of but little value. Their minds are always active, and though many of them have little technical knowledge of agriculture, their acuteness and versatility enable them to find out almost unerringly the best solution of the problem immediately before them.
That problem is generally to obtain a produce large in proportion to the labour spent on it, though small in proportion to the abundant land at their disposal. In some parts of America, however, in which land is beginning to get a scarcity value, and in which the immediate neighbourhood of good markets is making an intensive cultivation profitable, the methods of farming and of tenure are rearranging themselves on the English model. And within the last few years there have been signs of a tendency on the part of native Americans to hand over to persons of recent European origin the farms of the West, as they have already done the farms of the East, and as they did long ago the textile industries.
§ 6. Let us then turn to that English system of tenure. It is faulty and harsh in many respects; but it stimulated and economized the enterprise and energy, which, aided by England’s geographical advantages and freedom from devastating wars, gave her the leadership of the world in the arts of manufacture and colonization and, though in a less marked degree, in agriculture. England has learnt lessons in agriculture from many countries and especially the Netherlands; but on the whole she has taught far more than she has learnt. And there is now no country except the Netherlands which can compare with her in the amount of produce per acre of fertile land; and no country in Europe which obtains nearly so high returns in proportion to the labour expended in getting them
The chief merit of the system is that it enables the landlord to keep in his own hands the responsibility for that part and only that part of the property which he can look after with but little trouble to himself, and little vexation to his tenant; and the investment of which, though requiring both enterprise and judgment, does not demand constant supervision of minor details. His part consists of land, buildings and permanent improvements, and averages in England five times that which the farmer has to supply himself; and he is willing to supply his part in the enterprise with this great capital at a net rent which seldom gives interest at as much as three per cent. on its cost. There is no other business in which a man can borrow what capital he wants at so low a rate, or can often borrow so large a part of his capital at any rate at all. The metayer indeed may be said to borrow an even larger share, but at a much higher rate
The second merit of the English system, which partly follows from the first, is that it gives the landlord considerable freedom in the selection of an able and responsible tenant. So far as the management of land, as opposed to its ownership, goes, the accident of birth counts for less in England than in any other country of Europe. But we have already seen that even in modern England the accident of birth counts for a good deal in the access to posts of command in all kinds of business, to the learned professions and even to skilled manual trades. And it counts for somewhat more in English agriculture: for the good and bad qualities of landlords combine to prevent their selecting tenants on strictly commercial principles, and they do not very often go far afield for a new tenant
§ 7. The number of people who have the opportunity of making a step forward in the arts of agriculture is very great. And since the different branches of agriculture differ from one another in general character less than do those of manufacture, it might have been expected that new ideas in it would have followed one another quickly and have been speedily diffused. But on the contrary progress has been slow. For the most enterprising agriculturists drift towards the town; those who stay behind live more or less isolated lives; and, as a result of natural selection and education, their minds have always been more staid than those of townsmen, and less ready to suggest or even to follow new paths. And further, though a manufacturer is nearly always safe in copying a plan that has worked well with his neighbour in the same trade, a farmer is not: for every farm has slight peculiarities of its own, so that the blind adoption of a plan, that has worked well close by, is likely to fail; and its failure encourages others in the belief that old and tried ways are the best.
Again, the variety in agricultural detail makes the proper keeping of farming accounts very difficult. There are so many joint products and so many by-products, so many complex and shifting relations of debtor and creditor between the several crops and methods of feeding, that an ordinary farmer, even if he were as fond of accounts as he is in fact averse to them, would have great difficulty in ascertaining, otherwise than by a semi-instinctive guess, what is the price that will just pay him to raise a certain amount of extra produce. He may know its prime cost with fair certainty, but he seldom knows its true total cost; and this increases the difficulty of reading quickly the teachings of experience and making progress by their aid
And there is another difference between the mode of action of competition in agriculture and in manufacture. If one manufacturer is unenterprising, others may be able to step into the opening which he leaves vacant: but when one landowner does not develop the resources of his land in the best way, others cannot make up for the deficiency without calling into play the tendency to diminishing return; so that his want of wisdom and enterprise makes the (marginal) supply price a little higher than it otherwise would be
*120. It is however true that the difference between the two cases is only one of degree; since the growth of any branch of manufacture may be retarded perceptibly by any falling-off in the ability and enterprise of the leading firms engaged in it. The chief agricultural improvements have been made by landlords who have themselves been townsmen or at least have associated a good deal with townsmen, and by manufacturers in trades subsidiary to agriculture
§ 8. Though nature yields generally a less than proportionate return to an increased amount of labour of a given efficiency; man’s part conforms generally to the law of increasing return (
i.e. it increases in aggregate efficiency more than in proportion to the number of workers), in agriculture as well as in manufacture
*122. But yet the economies of production on a large scale are not quite similar in the two cases.
Firstly, agriculture must be spread over the broad land: raw material can be brought to the manufacturer for him to work on; but the agriculturist must seek his work. Again, the workers on the land must adapt their work to the seasons, and can seldom confine themselves entirely to one class of work; and in consequence agriculture, even under the English system, cannot move fast in the direction of the methods of manufacture.
But yet there are considerable forces tending to push it in that direction. The progress of invention is constantly increasing the number of serviceable, but expensive machines, for most of which a small farmer can find employment during only a very short time. He may hire some of them; but there are many the use of which he can get only by cooperation with his neighbours; and the uncertainties of the weather prevent this plan from working very smoothly in practice
Again, the farmer must go beyond the results of his own and his father’s experience in order to keep abreast of the changes of the day. He should be able to follow the movements of agricultural science and practice closely enough to see their chief practical applications to his own farm. To do all this properly requires a trained and versatile mind; and a farmer who has these qualities could find time to direct the general course of the management of several hundred, or even of several thousand acres; and the mere superintendence of his men’s work in matters of detail is not a task fitting for him. The work which he ought to do is as difficult as that of a large manufacturer, who would not spend his own strength on minute supervision which he can easily hire subordinates to do. A farmer, who can do this higher work, must be wasting his strength on work that is beneath him, unless he employs many gangs of workmen each of them under a responsible foreman. But there are not many farms which give scope for this, and there is therefore very little inducement for really able men to enter the business of farming; the best enterprise and ability of the country generally avoid agriculture and go to trades in which there is room for a man of first-rate ability to do nothing but high class work, to do a great deal of it, and therefore to get high earnings of management
If it be assumed, as is the modern fashion, that the farmer is not to work habitually with his men and to encourage them by his presence, it seems best for the economy of production that farms should be as large as is practicable under the existing conditions of land tenure; so as to give room for the use of highly specialized machines and for the exercise of great ability on the part of the farmer. But if a farm is not very large, and if, as is often the case, the farmer has no greater ability and activity of mind than is commonly to be found among the better class of working foremen in manufactures; then it would be best for others, and in the long run for himself, that he should return to the old plan of working among his men. Perhaps also his wife might return to some of those lighter tasks in and near the farmhouse which tradition ascribes to her. They require discretion and judgment, they are not inconsistent with education and culture; and combined with it they would raise and not lower the tone of her life, and her real claims to a good social position. There is some reason for thinking that the stern action of the principle of natural selection is now displacing those farmers, who have not the faculty to do difficult head-work, and yet decline to do hand-work. Their places are being taken by men of more than average natural ability who, with the help of modern education, are rising from the ranks of labourers; who are quite able to manage the ordinary routine work of a model farm; and who are giving to it a new life and spirit by calling their men to come and work, instead of telling them to go and work. Very large farms being left out of view, it is with rather small farms worked on these principles that the immediate future of English agriculture seems to lie. Small holdings have great advantages wherever so much care has to be given to individual plants, that machinery is out of place. But modern applications of scientific methods are giving an increasing importance to that economy of technical skill which can be attained in a large nursery for choice flowers and fruits, with several highly paid assistants.
§ 9. We may next consider how far landlords will in their own interest adjust the size of holdings to the real needs of the people. Small holdings often require more expensive buildings, roads and fences, and involve greater trouble and incidental expenses of management to the landlord in proportion to their acreage than do large holdings; and while a large farmer who has some rich land can turn poor soils to good account, small holdings will not flourish generally except on good soil
*125. Their gross rental per acre must therefore always be at a higher rate than that of large farms. But it is contended that, especially when land is heavily burdened by settlements, landlords are unwilling to incur the expense of subdividing farms, unless they see their way to rents for small holdings that will give them, in addition to high profits on their outlay, a heavy insurance fund against the chance of having to throw the holdings together again; and that the rental for small holdings, and especially for those of only a few acres, is extravagantly high in many parts of the country. Sometimes the prejudices of the landlord and his desire for undisputed authority make him positively refuse to sell or let land to persons who are not in harmony with him on social, political or religious questions. It seems certain that evils of this kind have always been confined to a few districts, and that they are rapidly diminishing, but they rightly attract much attention; for there is a public need in every district for small holdings, as well as large; for allotments and large gardens; and generally for holdings so small that they can be worked by people who have some other occupation
And lastly though peasant proprietorship, as a system, is unsuited to the economic conditions of England, to her soil, her climate, and the temper of her people, yet there are a few peasant proprietors in England who are perfectly happy in this condition; and there are a few others who would buy small plots of land and would live happily on them, if they could get just what they wanted where they wanted it. Their temper is such that they do not mind working hard and living sparely, provided they need call no one master; they love quiet and dislike excitement; and they have a great capacity for growing fond of land. Reasonable opportunity should be given to such people to invest their savings in small plots of land, on which they may raise suitable crops with their own hands; and at the very least the present grievous legal charges on the transfer of small plots should be diminished.
Co-operation might seem likely to flourish in agriculture and to combine the economies of production on a large scale with many of the joys and the social gains of small properties. It requires habits of mutual trust and confidence; and unfortunately the bravest and the boldest, and therefore the most trustful, of the countrymen have always moved to the towns, and agriculturists are a suspicious race. But Denmark, Italy, Germany, and lastly Ireland have led the way in a movement which seems full of promise for organized co-operation in the handling of dairy produce, in the making of butter and cheese; in buying farmers’ requisites and in selling farmers’ produce: and Britain is following in their wake. The movement is however of limited scope: it scarcely touches work in the field itself.
As co-operation might combine more of the advantages of all systems of tenure, so the cottier system of Ireland often combined the disadvantages of all; but its worst evils and their causes have almost disappeared and the economic elements of the problem are just now overshadowed by the political. We must therefore pass it by
§ 10. The failures of the English system of land tenure in Ireland have brought into clear relief difficulties which are inherent in it, but which have been kept in the background in England by the conformity of the system to the business habits and the character of the people. The chief of these difficulties arise from the fact that while the system is competitive in its essence, the conditions of agriculture even in England offer a strong resistance to the full action of free competition. To begin with, there are special difficulties in ascertaining the facts on which that action must be based. We have just noticed the difficulty of keeping exact farming accounts: to this must be added that a farmer’s calculations as to the rent which it is worth his while to undertake to pay, are further hampered by the difficulty of deciding what is a normal harvest and a normal level of prices. For good and bad seasons come so much in cycles that many years are required to afford a trustworthy average of them
*128: and in those many years the industrial environment is likely to have changed much; the local demand, the facilities for selling his own produce in distant markets and those which assist competitors from a distance to sell their produce in his local markets may all have changed.
The landlord in determining what rent to accept is met by this difficulty and also by another, arising out of variations in the standards of ability among farmers in different parts of the country. The producer’s surplus, or English rent, of a farm is that excess which its produce yields over its expenses of cultivation, including normal profits to the farmer: it being assumed that that farmer’s ability and enterprise are such as are normal for farms of that class
in that place. The difficulty in view is to decide whether these last words are to be interpreted broadly or narrowly.
It is clear that if a farmer falls below the standard of ability of his own district, if his only forte is in driving hard bargains, if his gross produce is small and his net produce even smaller in proportion; in such a case the landlord acts in the interest of all when he hands over the farm to a more competent tenant, who will pay better wages, obtain a much higher net produce and pay a somewhat higher rent. On the other hand, when the local standard of normal ability and enterprise is low, it is not clearly right from an ethical point of view, nor is it clearly in the business interests of the landlord in the long run, that he should endeavour to take to himself a greater rent than can be paid by a farmer who reaches that standard; even though it could be obtained by importing a farmer from another district in which the standard is higher
Closely related to this question is one as to the freedom the tenant should have to develop the natural capabilities of his land at his own risk, with the understanding that if he is successful he is to retain something more than mere normal profits on his enterprise. So far as minor improvements go, this difficulty is in a great measure met by long leases. These have done much for Scotland: but they have disadvantages of their own. And as has been often observed, “the English tenant has always something of a lease even when he has no lease”: and again, “there are traces of
métayage even in tenures which are thoroughly English.” When seasons and markets are favourable to the farmer, he pays his full rent and avoids making demands on the landlord that might set him thinking whether the rent ought not to be raised. When things go badly, the landlord, partly from sympathy and partly as a matter of business, makes temporary remissions of rent, and bears the expense of repairs, etc., which he would otherwise have left for the farmer. There may thus be much give and take between landlord and tenant without any change of nominal rent
Custom has always given to the English tenant some partial security for compensation for improvements made by him; and legislation has recently caught up custom, and even passed it. The tenant is now practically secure against the raising of his rent on account of increased yield of the soil due to improvements of a reasonable nature made by himself: and on leaving he can claim compensation for the unexhausted value of them, to be fixed by arbitration
Finally a word may be said as to private and public interests with regard to open spaces in towns. Wakefield and the American economists have taught us how a sparsely inhabited new district is enriched by the advent of every new settler. The converse truth is that a closely peopled district is impoverished by every one who adds a new building or raises an old one higher. The want of air and light, of peaceful repose out-of-doors for all ages and of healthy play for children, exhausts the energies of the best blood of England which is constantly flowing towards our large towns. By allowing vacant spaces to be built on recklessly we are committing a great blunder from a business point of view. For the sake of a little material wealth we are wasting those energies which are the factors of production of all wealth: we are sacrificing those ends towards which material wealth is only a means
Economic History. Mention has already been made of the ways in which primitive forms of divided ownership of the land hindered progress, I. II. 2.
Court Rolls in the
Dictionary of Political Economy observes that “we shall never know how far the tenure of the mediæval tenant was precarious until these documents have been examined.”
Orissa, I. 55-9.)
In the greater part of India the cultivator holds directly from the Government under a lease the terms of which can be revised at intervals. And the principle on which those leases are arranged, especially in the North-West and North-East, where new land is being settled, is to adjust the annual payments due for it to the probable Surplus Produce of the land, after deducting the cultivator’s necessaries and his little luxuries, according to the customary standard of the place, and on the supposition that he cultivates with the energy and skill that are normal in that place. Thus as between man and man in the same place the charge is of the nature of economic rent. But, since unequal charges will be levied in two districts of equal fertility, of which one is cultivated by a vigorous and the other by a feeble population, its method of adjustment as between different districts is rather that of a tax, than a rent. For taxes are supposed to be apportioned to the net income which actually is earned, and rents to that which would be earned by an individual of normal ability: a successful trader will pay on ten times as large an actual income ten times as large a tax as his neighbour who lives in equally advantageous premises and pays equal rents.
The whole history of India records little of that quiet stability which has come over the rural parts of England since war, famine, and plague have ceased to visit us. Extensive movements seem to have been nearly always in progress, partly in consequence of the recurrence of famines (for, as the Statistical Atlas of India shows, there are very few districts which have not been visited at least once by a severe famine during this century); partly of the devastating wars which one set of conquerors after another has inflicted on the patient people; and partly of the rapidity with which the richest land reverts to a thick jungle. The land which has supported the largest population is that which, when deprived of its human inhabitants, most quickly provides shady harbours for wild beasts, for venomous snakes, and for malaria; these prevent the return of the refugees to their old homes, and cause them often to wander far before they settle. When land has been depopulated, those who have the control over it, whether the Government or private persons, offer very favourable terms in order to attract cultivators from elsewhere; this competition for tenants very much influences the relations of cultivators and superior holders for a long distance around them; and therefore, in addition to the changes of customary tenure, which, though impalpable at any time, have been always going on, there have been in almost every place many epochs in which the continuity even of the former custom has been broken and keen competition has reigned supreme.
These disturbing forces of war, famine, and plague were frequent in mediæval England, but their violence was less. And further, the rate of movement of nearly all changes in India has been greater than it would have been if the average period of a generation were as long as in the colder climate of England. Peace and prosperity therefore enable Indian populations to recover from their calamities more quickly; and the traditions which each generation holds of the doings of its fathers and grandfathers run back for a shorter time, so that usages of comparatively recent growth are more easily believed to have the sanction of antiquity. Change can move faster without being recognized as change.
Modern analysis may be applied to the contemporary conditions of land tenure in India and other Oriental countries, the evidence as to which we can examine and cross-examine, in such a way as to throw light on the obscure and fragmentary records of mediæval land tenures, which may indeed be examined, but cannot be cross-examined. There is of course great danger in applying modern methods to primitive conditions: it is easier to misapply them than to apply them rightly. But the assertion, which has been sometimes made, that they cannot be usefully applied at all appears to be based on a conception of the aims, methods and results of analysis, which has little in common with that presented in this, and other modern treatises. See
A Reply in the
Economic Journal, Sept. 1892.
Six Centuries of Work and Wages, ch. X.)
tenant’s-share curve would be drawn standing one-half (or one-third or two-thirds) as high above
AC does; the area below that curve would represent the tenant’s share, that above the landlord’s.
OH being, as before, the return required to remunerate the tenant for one dose; he will, if left to his own devices, not carry cultivation beyond the point at which the tenant’s-share curve cuts
HC: and the landlord’s will therefore be a less proportion of the returns to a slighter cultivation than under the English plan. Diagrams of this kind may be used to illustrate the way in which Ricardo’s analysis of the causes that govern the Producer’s Surplus from land, apply to systems of tenure other than the English. A little further change will adapt them to such customs as those found in Persia, where land itself is of small value; and “the harvest is divided into five parts, which are apportioned as follows, one part to each: 1, land; 2, water for irrigation, etc.; 3, seed; 4, labour; 5, bullocks. The landlord generally owns two, so he gets two-fifths of the harvest.”
On the elasticity of Metayage in France see an article by Higgs and Lambelin in the
Economic Journal, March 1894; and Leroy-Beaulieu,
Répartition des Richesses, ch. IV.
Starting as in the last note, let the Circulating capital supplied by the landlord be represented by the distance
OK marked off along
OD. Then, if the landlord controls the amount
OK freely and in his own interest, and can bargain with his tenant as to the amount of labour he applies, it can be proved geometrically that he will so adjust it as to force the tenant to cultivate the land just as intensively as he would under the English tenure; and his share will then be the same as under it. If he cannot modify the amount
OK, but can still control the amount of the tenant’s labour, then with certain shapes of the produce curve, the cultivation will be more intensive than it would be on the English plan; but the landlord’s share will be somewhat less. This paradoxical result has some scientific interest, but little practical importance.
Unseen Foundations of Society, especially p. 374.
Although peasant proprietors resemble the heads of other small businesses in their willingness to work harder than those whom they hire and for less reward; yet they differ from the small masters in manufacture in this, that they often do not hire extra labour even when it would pay them well to do so. If all that they and their family can do for their land is less than enough for it, it is generally under-cultivated: if more, it is often cultivated beyond the remunerative limit. It is a common rule that those who give the time which is free from their main occupation to some other industry, often regard their earnings in this last, however low, as an extra gain; and they sometimes even work below what would be a starvation wage to those who depend on that industry for support. This is especially true when the side-industry is that of cultivating, partly for the pleasure of doing it, a small plot of land with imperfect appliances.
English Farming, ch. VI. gives some instances of prolonged resistance to changes, and adds that an Act had to be passed in England as late as 1634 “agaynst plowynge by the taile.”
versus very small ones; but the cheapness of steam-power and “motor” power obtained from petrol, etc., tells on the side of very large farms, except in so far as the use of field steam machinery can be hired economically and at convenient times.
Our knowledge on many disputed points would be much increased and valuable guidance gained for the future if some private persons, or joint-stock companies, or co-operative associations, would make a few careful experiments of what have been called “Factory farms.” On this plan there would be a central set of buildings (there might be more than one) from which roads and even light tramways extended in all directions. In these buildings the recognized principles of factory management would be applied, machinery would be specialized and economized, waste of material would be avoided, by-products would be utilized, and above all the best skill and managing power would be employed, but only for its proper work.
The evidence before the Committee on small holdings, 1906 [Cd 3278] discusses very fully the advantages and disadvantages of ownership for small holders; with apparently a balance of opinion against ownership.
In 1904 there were in Great Britain 111,000 holdings between 1 and 5 acres; 232,000 between 5 and 50 acres; 150,000 between 50 and 300; and 18,000 above 300 acres. See
Ib. Appendix II.
History of Prices, Vol. VI. App. III.
Tenants’ Gain not Landlords’ Loss, ch. X.
Under the Act of 1900 the arbitrator was to assign such compensation as would “represent fairly the value of the improvement to an incoming tenant,” after deduction for any part of that value which might be due to evoking dormant “inherent capabilities of the soil.” But this deduction was struck out by the Act of 1906; the interests of the landlord being regarded as sufficiently secured by the provisions requiring his consent in some of those cases, in which such dormant capabilities might be evoked; and by giving him an opportunity of taking the risks himself in the rest.