unfit to show itself in the light of reason, in that proportion the dangers to be apprehended from the democracy are lessened, and the advantages to be expected from it are increased. I Thus I will venture to say, though know there are many who disagree with me, that economic discussion, even though it may be of a complicated kind, and such as no democracy as a body may be ever able to follow, is not lost labor from a po litical point of view, even when the democracy seems to be supreme in politics. It affects the democracy not directly but indirectly. Every false theory, any false or garbled set of statistics, which is left unchecked to develop itself, must be regarded as the possible germ of some malignant political fever; and to refute it, to stamp it out, before it has had time to do mischief, is a work quite as important as any party exertions or any party victories. The latter may arrest evil after it has developed itself; the former may prevent its ever being developed at all. A battle fought out in time between half-a-dozen experts may save coming generations from distractions which would bring trouble to millions. I have already urged on readers of this review the extreme importance to conservatism of popular statistical teaching. I wish to urge on them now the equal importance to it of promulgating, by means, not of rhetoric or invective, but of calm and impartial reasoning, a system of sound economic teaching. To do this will be to do something more than to preach the doctrines found in the hand-books of Mill and Fawcett. In the first place the arguments of these writers are almost useless against the Socialists; partly because, as Mill expressly tells us, his school regarded Socialism as, at present, too unpractical a scheme to be argued with; and partly because the most plausible arguments of Socialism have been formulated only within the last twenty years. In the second place, the theories of these so-called orthodox economists are not only incomplete, but in certain most important points they are absolutely unsound. One of these points I now propose to discuss; and I hope not only to enable the reader clearly to realize the truth, but also to make him feel how dangerous is the corresponding falsehood. If the importance of the various parts of any writer's works is to be judged by the extent to which they are severally quoted, and to which their thought or their phraseology forces itself into the life of 37 the community, the most important contribution of Mill to economic science, indeed, one might almost say the most important work of his life, was his invention of the doctrine of the celebrated "unearned increment." There is hardly a chairman of a Radical village meeting who does not know thus much of what passes for orthodox political economy; there are few Radical Parliamentary candidates who know more. The science as a whole they regard as a "toad, ugly and venomous, and this doctrine as "the precious jewel in its forehead;" and this doctrine they have taken from it before they sent it to Saturn. This is the doctrine I am going to ask the reader to consider. And there is at this moment not only a general reason for considering it, but a very particular and a very pressing reason. It has long done duty on Radical platforms as a basis for vague denunciations against a particular class, and for vague hints that some day or other some vast but indefinite amount of wealth may be squeezed out of it for the popular benefit. Large Radical shopkeepers, and Radical financiers, such as Mr. Labouchere, have long found in it a singularly convenient means of diverting the popular hopes, which they live by exciting, from their own fortunes to the fortunes of other people. But till lately their language has been more or less vague; it has never resulted in any definite legislative proposals. Now, however, there are signs that the Radical party, in their diligent search for some new popular cry, are seriously endeavoring to construct one by means of this economic doctrine. The first step was taken by Mr. John Morley some three months since, at Clerkenwell, where he formally included in the Radical programme a special attack upon ground rents; as a thing of the immediate future, and hinted at a further attack at a period more distant. With the details of Mr. Morley's proposals we need not now concern ourselves. The only point I am anxious to dwell upon is the theoretical grounds upon which they were put forward and justified. Naturally, in a political speech, Mr. Morley could do no more than allude to these; but the allusion shows us quite clearly what they are. He referred his hearers to a recent pamphlet on the leasehold system, in which this system is condemned primarily on the following grounds: "That it enables the landlord, without any trouble, industry, or expenditure, to step into the increment at the termination of the lease, that increment being due to the attention, efforts, and outlay of the people | with other kinds of income. They are of the district." I call attention to this constantly tending to outstrip them; their language of Mr. Morley's in order to show ultimate tendency would be to swallow that the arguments at this moment relied them all up. upon by the Radical party are derived from, and are identical with, the arguments of Mill. Those arguments, which are what I propose to criticise, are stated by Mill as follows: Before leaving the subject of equality of taxation, I must [he says] remark that there are cases in which exceptions may be made to it consistently with that equal justice which is the ground-work of the rule. Suppose that there is a kind of income which constantly tends to increase without any exertion or sacrifice on the part of the owners; those owners constituting a class in the community whom the natural course of things progressively enriches, consistently with complete passiveness on their own part. In such a case it would be no violation of the principles on which private property is founded if the state should appropriate this increase of wealth, or part of it, as it arises. This would not properly be taking anything from anybody; it would be merely applying an accession of wealth created by circumstances to the benefit of society instead of allowing it to become an unearned appendage to the riches of a particular class. Now this [Mill proceeds] is actually the case with rent. The ordinary progress of a society which increases in wealth is at all times tending to augment the incomes of landlords; to give then both a greater amount and a greater proportion of the wealth of the community, independently of any trouble or outlay incurred by themselves. They grow richer, as it were, in their sleep, without working, risking, or economizing. What claim have they, on the general principle of social justice, to this accession of riches? In what would they have been wronged if society had, from the beginning, reserved the right of taxing the spontaneous increase of rent to the highest amount required by financial exigencies? Now these arguments, as a moment's reflection will show anybody, can be reduced to the following propositions: I. Every increase in income, which takes place independently of the recip. ient's efforts, may with equity be appropriated by the State, should circumstances require it. II. Incomes from land are the only kind of incomes which increase independently of the recipient's efforts. III. Circumstances are likely to require the appropriation of their increase, because they increase at a rate exceptional and peculiar to themselves. They are ever becoming not only greater absolutely, but greater relatively to wealth of all other kinds. They do not take their luck If these propositions are true, the conclusions Mill draws from them deserve our respectful consideration. If they are not true, his conclusions deserve no consideration at all; they are simply the mischiev ous hallucinations of a highly gifted man; and it is really to the interest of every party, it is obviously the duty of the Conservative party, to exhibit them to the world in their right character. Are the propositions true? Are all of them true? Or are any of them true? This is what I propose to consider. One thing is at once apparent, that the first of them stands on a different footing from the two others. The first deals with a matter of opinion, about which it is con ceivable that persons equally well instructed may differ. The two others deal with mere matter of fact, about which, were once sufficient instruction given, there would be no more room for any differences of opinion than there is about the mileage of the Great Western Railway. Again, the first proposition merely states a general principle, which has, in itself, no special reference to land. The reference to land is confined to the two others. It is therefore on these that we will concentrate our whole attention, and we will ask, with regard to each of them in turn, if, as a statement of facts, or in other words as a piece of news, there is any or what truth in it. I am going to point out that there is absolutely no truth in either, that the first of them has no definite relation to fact whatever; and that the second has a very definite relation indeed, because it is the direct inversion of fact. Let us begin then with the proposition that incomes from land are the only kind of incomes which increase independently of their recipient's efforts. To begin then, we must remember that we are not arguing with Socialists, or with people who think that property generally is an illegitimate thing. Mill did not think this; Mr. Morley does not think this. Mr. Morley, in the very speech from which I have already quoted, held up investments in stocks and shares as a type of what was legitimate and desirable. As for Mill, it is quite true that he wished to limit the amount of property which a man might leave to any one person; but he expressly states that the amount he has in view is an amount that would place the to Smith's property is a small wateringplace which suddenly becomes fashionable, or that there is a chalybeate spring in it, which some highly influential invalids suddenly take to preferring to the springs at Hombourg. From one cause or the other the property acquires a value for building purposes. An hotel is built, a villa, a church, a street; and before Smith has been ten years in possession the ground that was originally worth two pounds an acre comes to be worth thirty. Here steps in Mill, and his Radical fol possessor "in easy circumstances, with the advantages of leisure, and all the real enjoyments which wealth can give, except those of vanity." Even this limitation is advocated by him as a pious opinion rather than an integral part of his economic system; and apart from this, except in one single particular, he differed in his views as to property from any ordinary Conservative only in being able to use more arguments in defence of them. No one was a sterner defender of the legitimacy of interest, and, within limits, of rent; and no one ever, in a more trench-lowers after him. They call indignant ant or more decided way, combated all proposals for a progressive tax upon incomes. Thus, though he thought it, for many reasons, a bad thing that young men should start in life with unearned incomes of extravagant dimensions, he never questioned either the rightfulness or the utility of unearned incomes as such. Socialists question them, but Mill did not, and English Radicals, as distinct from Socialists, do not. attention to the fact that while Smith has been perfectly idle his income has grown from one thousand a year to fifteen thousand; and they tell him that though he has a perfect right to his thousand, to the added fourteen thousand he has no moral right whatever. These, they say, belong properly to the State, to the State as the representative of the community, because it has been produced by the growth of the community in general, and has not been produced in any way by Smith, the landlord, who has done nothing beyond signing leases, except smoke and drink sherry and bitters. Justice therefore demands that incomes derived from land, because they are liable to this exceptional kind of increase, shall be subjected to legislation altogether peculiar to themselves. Are But how do these unearned incomes, all incomes in fact that are not wages, that are neither wages of labor nor wages of superintendence, arise? They arise either from the rent of land or from the interest of invested capital. Now, if we put aside the question of capital invested in the funds, all invested capital is invested in some business. Thus every one, not a But is what is assumed here true? landowner, who has an independent in- incomes from land liable to any kind of come, has it because he has shares in increase from the chance of which other some business or businesses—in a rail- incomes are precluded? Let us turn from way, for instance, or in a brewery, or in a Smith to Moses, and see if this is so. line of steamships, or in a factory for the Eight or nine years ago, when Moses production of some new invention. Let came into his property, bicycles were only us then take two men, the one Smith, a just beginning to be popular, and trade in landowner, who shall represent all incomes Mexico was in a state of great depression. from land, the other, Moses, an owner of Since that time, the use of bicycles among shares in certain business enterprises, certain classes has become universal; and who shall represent all incomes from all the prosperity of Mexico has, we will say, other sources. They both start in the increased by leaps and bounds. The conworld, at twenty years of age, with similar sequence is, that the financial history of incomes, a thousand a year each; Smith's Moses runs as follows. He started with being derived from five hundred acres a thousand ten pound shares in the bicycle fairly rented, that of Moses from twenty factory, which at the time yielded five per thousand pounds worth of shares, half of cent. They now yield thirty per cent., them in a Mexican railway, half of them and are worth seventy pounds cash, inin a factory of new patent bicycles at stead of ten. With regard to his Mexican Coventry. Thus far, in the eyes of Mill, railway shares, a similar thing has hap and in the eyes of every Radical, the posi-pened. He started with two hundred of tion of both could be perfectly unassail- these, each of which annually yielded him able. Each would have an undisputed right to his income, and it would be a monstrous injustice on the part of the State to take anything from either beyond the ordinary taxes. Now, however, let us suppose that close £2 10s. They were nominally shares of a hundred pounds, but when he came into them they were worth only fifty. As time goes on, however, the traffic on the railway augments; larger and larger dividends are declared. The shares are presently at par; by-and-by they are at one hundred | very rare order. But we are not talking and fifty. The income of Moses from his of the production of a given income by the railway shares has trebled. Perhaps some exertion of given qualities. We are talk. will say that these suppositions are arbi- ing of something quite distinct. We are trary. But are they so? They are no talking of the subsequent growth of that more arbitrary than the supposition with income, the personal qualities in question regard to Smith, the landlord. That ad- remaining unchanged. Thus, the sale of mittedly represents a notorious fact. Can a patent bicycle depends partly, of course, any one say that our suppositions with on the merits of the patent; but it depends regard to Moses do not represent facts also on the social conditions of the comequally notorious? It is evident that they munity, and on the number of people whose means and habits enable them to do. No one can for a moment doubt it. purchase an admittedly desirable thing. Up to a certain point the sale of bicycles will depend on the improvement of their construction. Beyond this point it will depend on the growth of the lower-middle class. The same is the case even more plainly with railways. Beyond a certain point the profits of a railway do not depend on the speed of the trains, or on the excellence of the carriages, but on the condition of the localities which the railway connects, and the general prosperity of the country in which it lies. And now we come to the important question. How does the increment in the income of Moses differ morally from the increment in the income of Smith? Except accidentally, it does not differ at all. Accidentally, of course, dividends differ from ground rents; accidentally, one set of ground rents differs from another set; and so far as the argument with which we are at present dealing is concerned, bicycle factories and Mexican railway shares differ from villa sites no more than villa sites at Westgate differ from villa sites at Ground becomes valuable because, as Worthing. The growth of the incomes derived from both is equally independent wealth increases, there are more people of any exertion on the part of the recip- who want to build houses. A bicycle ients of the incomes. According to Mill, business becomes valuable for precisely as we have seen, Smith "grows rich, as it the same reason, because there are more were, in his sleep, without working, risk-people who want to buy bicycles; a railing, or economizing." His accession of way becomes valuable because there are riches has been "spontaneous," due to more people who want to travel by it. "the natural course of things," that is to The fact is, in any changing society, it is say, to the energy and the industry of the the characteristic of every kind of propactive part of the community, who are erty, not of land alone, or of land spereally the authors of all progress. This cially, to be liable to changes in value, may be true enough; but if it is true of entirely independent of any change in Smith, it is equally true of Moses. He itself. Every kind of independent inhas nothing to do with the management of come, as the general wealth increases, I the bicycle factory; he has nothing to do do not say will increase spontaneously, with the management of the Mexican rail- but is liable to increase spontaneously; way. Whatever personal qualities have and every kind of increase, increase from gone to make either of these enterprises land included, is in the same way liable succeed, they have been personal qualities to decrease.* The property from which that have had nothing to do with Smith. the increase is derived, whether land or But a point still more important is this, shares, ex hypothesi, remains the same, so that the chief part of the increment in far as the owner is concerned. He spends question has not been due to the personal nothing on the land; he has no control qualities of any one connected with these over the shares. So far as he is conenterprises at all. It has been due, as the cerned, the only thing that can change is increment in rent has been due, to the the relations between the property and general progress of the community. Here, surrounding circumstances; and if these however, let me guard against a misunder- circumstances change, as in every progresstanding. I do not say that to make any sive society they do, these relations, for business succeed personal qualities of a better or worse, may at any moment special kind are not necessary. They are. To start a new line of railway, to start the manufacture of a new vehicle such as a bicycle, so as to make the undertaking yield the expected rate of profits, we require personal qualities of, it may be, a of anything else. This is as true of the value of building-land as it is Land at Cannes for instance, which had been continually rising for a long period, up till a few years ago, during the last few years has been declining, and it is quite possible that in another hundred years it may become similar to what it was when Lord Brougham made his first purchase. change also. Liability, then, spontane | value of one of his portraits is two hunously to increase in value, or decrease in value, is one of the attributes inherent in property of every kind. All property is liable to an unearned increment, just as all property, as Mill omitted to remark, is equally liable to an undeserved decrement. And landed incomes, because they grow in this way, no more differ from incomes of other kinds than a sucking duke because he grows differs from a sucking stock-jobber. If this is not abundantly clear already, there are other facts which will illustrate it, of a yet simpler kind. Let us turn to the case of old books, of works of art, or of pictures. The value of these is constantly changing as we all know. It rises during one decade, it falls during another; and could one construct a barometer, which, attached to any one of such objects, would register the price it would command in the open market, the mercury would be always rising or falling from one year to another. And all this while the owner would be as passive as any landlord. Lying in his chair by the fire and looking round him at the masterpieces on his walls, he might virtually see silver in one place being transmuted into gold, gold in one place being alloyed with silver, by some mysterious agency abroad in the world without, wholly independent of himself, and which he can neither calculate or control. dred pounds; and this state of things continues for ten years, during each of which his time has been fully occupied. He has painted, we will say, one portrait a month, and his annual income has been two thousand four hundred pounds. Now every one would admit, indeed no one could deny, that the painter earned by his skill just what his skill was worth. The world has known what he could produce, and the judgment of the world, which in these cases is the ultimate court of appeal, has settled the value of the product. This applies, I say, to the first ten years during which the world has known him. At the end of this period, however, certain changes begin to develop themselves. A new art critic has arisen, who has edu cated the public taste; a considerable number of immense fortunes have been made, the possessors of which have all of them artistic tastes, and all of them want to have their portraits painted. The consequence is that the painter, instead of having as formerly twelve commissions a year, has now sixty. He cannot execute all. He cannot execute more than twelve. The consequence is, he has to raise his price; and instead of receiving two hundred pounds for a portrait, he finds that he literally has a thousand thrust upon him. Thus his income rises from £2.400 a year to £12,000. There is an increment of £9,600. Now what has been the cause But there is more still to add. If we of this increment? Has the painter been really accept seriously the distinction the cause of it? How can that be? He drawn by Mill, and now being brought into does nothing more than he used to do. He prominence by the Radical party, between is able to do nothing more than he used to the parts of incomes that are inherited or do. He works no harder, and no longer. earned, and those that are neither inherited He has no more skill. And yet there is an nor earned, but grow while the recipient increment in his income of £9,600. A is passive, we shall have to pass on from similar phenomenon, and one equally faincomes derived from property, to in- miliar, shows itself in the case of doctors. comes which are the wages of skill and A doctor at some Spa has a certain reclabor. These are liable to exhibit pre- ognized skill in dealing with a certain cisely the same phenomenon of an un- class of complaints. His fee is a guinea, earned increment. Of incomes the whole and his time is fully occupied. As years of which, from one point of view, is go on, however, an increasing number of earned, we are constantly able to discrim- rich people over-eat themselves, and come inate a part which, from another point of to the waters over which this doctor preview, is not earned. I have already al- sides. Perhaps a king is amongst them, luded to pictures, and how they increase whom he happens to cure of a stomachin value. Let us now consider the skill ache. He is at once beset by patients and labor of the painter. Whatever a from every quarter of Europe; and his painter makes by painting, from one point fee consequently doubles itself. This inof view, it is obvious that he earns, So crement is no more due to the doctor much skilled labor exchanges for so much than a similar increment in the painter's money. Now let us suppose that a por- case is due to the painter. To quote trait-painter, when his skill has come to Mill's words, they have neither of them maturity, discovers, by what Adam Smith "worked" any harder, they have neither calls the higgling of the market, that the of them "risked," they have neither of |