Part 13

What then is rent? The true answer to this very natural question, obvious and easy though it may seem to be, has been grasped by few only. Let the question be put to a mixed company, and the incapacity to explain the real nature of rent will be found most surprising. One's first impulse is to appeal to Political Economy for an answer, for indisputably rent belongs to its domain; but unhappily Political Economists, for the most part, instead of enlightening have obscured this inquiry for the public mind. Some few amongst them have perceived the true character of rent; but most other economical writers have been led astray into a wrong path by Ricardo. Ricardo's theory of rent was accepted as the orthodox doctrine; but it was a theory from which the common world, landlords and farmers alike, turned away as unworkable. Ricardo was dominated by the passion of giving to Political Economy a strictly scientific treatment, and the explanation of rent he hailed as an excellent instrument for accomplishing his purpose. He built the amount of rent payable by different lands, on the varying fertilities of the soil. Land A paid no rent; its productive powers were unequal to such an effort; it must content itself with rewarding the cultivator alone. Land B presented itself as something better; a feeble rent it could supply. C, D, and E continued the ascending scale; the rents they yielded assumed grander dimensions, till the maximum of fertility and remunerating power was reached. The array wore a splendidly scientific air; it almost rivalled the great law of the inverse square of the distances. But, alas, as Ricardo himself dimly saw, rent bowed to other forces besides mere fertility. Varying distances from manures and markets, dissimilar demands for horsepower for the attainment of the same crops, unequal pressure of rates and taxes, and other like causes compelled rent to sway upwards and downwards in contradiction of the law of fertility; and that was not scientific. But it was true in fact, and Ricardo, under the pressure of necessity, summed up these disturbing causes under the general word situation. Like Mill, he had to recognise that Political Economy, as he and Mill posed it, was "an hypothetical science," and that the stern world of material realities was under the dominion of influences which were not hypothetical nor scientific.[1]

If Ricardo and Mill had contented themselves with laying down what the amount of rent was, governed by the quality of the soil's fertility and by the forces which they feebly recognised by the word situation, no harm would have been done. They would have given a tolerably fair description of the causes on which the magnitude of rent depends. It would not indeed have explained what rent is, but it would have expressed truths with which the common agricultural mind was familiar, and they might have retained the command of agricultural ears. But scientific ambition would not be satisfied with so simple and unpretending a statement. It was resolved that the explanation of rent should take the shape of a scientific doctrine; and with this object it invented an addition to it of whose scientific character there could be no doubt. "It converted the land," in the words of Mr. Mill, "which yields least return to the labour and capital employed on it, and gives only the ordinary profit of capital, without leaving anything for rent, into a standard for estimating the amount of rent which will be yielded by all other land. Any land yields as much more than the ordinary profits of stock, as it yields more than what is returned by the worst land in cultivation." This worst land, which had no rent to give, was erected into a standard which should measure rents as accurately as a yard measures distances, and a pound avoirdupois weights. Most useful indeed is the yard which tells us how far it is to Dover, and the lb. weight which informs us how heavy the load of coals is which has reached our door; and delightful truly, would be an instrument which should tell a disputing landlord and tenants, with unerring precision, how much rent exactly each farm was bound to pay. But this "margin of calculation," this land which pays no rent--what landlord or what farmer has ever inquired for it in the calculation of their rents? Has it ever occurred to the thoughts, or passed the lips, of a single practical agriculturist, in these days of excitement, and anger, and unceasing declamations in the press and tribune on rent? And if it had been found, what possible help could it have brought to a single agriculturist? Such land could be no measure to measure by. A measure must either be a given portion of the thing measured, as a yard of length, or else be an effect of a given force, as the height of the barometer of the pressure of the atmosphere. A piece of land which yields no rent cannot measure one that does, because the non-payment of rent is not the effect of a single force but of many diverse ones. A particular farm may pay no rent because it is isolated by want of roads, or is in a lonely spot, or is far off from manures, or is burdened with excess of taxation, as a whole parish in Buckinghamshire which was said to have gone out of cultivation because no man would face the burden of its poor-rates. What facility for calculation could such a parish furnish to a farmer in Middlesex or Lancashire? The selection of such a standard was a purely illogical process; it confounded effect with cause. The forces which determine rent decree that such a farm cannot pay rent, that is an effect; but its paying no rent could be no cause, by the mere fact alone that it did not yield sufficient net profit, why other lands should pay no rent. The margin of calculation was framed at a particular locality, under its own circumstances, but it could say nothing about the circumstances of another farm and their effects.

The moral to be derived from the examination of Ricardo and Mill's theories of rent is clear. The sooner that their margin of cultivation, their standard of the amount of rent, disappears, the better will it be for the interests of society and of Political Economy. It has driven away all agricultural audience from the talk of Political Economy about rent; it is felt to lie altogether outside of the practical world. Let the land which is cultivated without being able to pay rent be inquired into by all means, whenever there is a call for so doing. Let the impeding causes and all their circumstances be explored, but let the inquiry and its results be kept apart from all rent-paying land. The forces which determine that one farm can pay rent and another none are the same for both, either by their presence or their absence; but the two farms have no connection with each other, except as suffering effects from common causes. When this great truth is seen and acknowledged, and when Political Economy has ceased to talk of the non rent-paying land regulating the amount of all rent, the world which it addresses, and for whom it exists, will be won over to listen to its teaching on rent and to think it real.

And now let us face the question, simply, What is rent? It is necessary to distinguish here between two different meanings of the word rent. It is a legal word, connected with the hire of land or forms of real property connected with land, as houses, rooms, and the like. Agricultural rent is different in nature from the rent of rooms. The rents paid for a house or rooms in a large building such as Gresham House have no relation to any particular business carried on in them, much less do they depend on the success of that business. Agricultural rent, on the contrary, is given for the very purpose of engaging in a distinct business, agriculture; and the profits of that business enter largely, in the settlement of rent, into the calculations of the lender and the hirer of the land. It is of agricultural rent exclusively that we are speaking on the present occasion.

In order to make a correct analysis of the subject, let us place ourselves in the position of a farmer who is offered the tenancy of a particular farm. It is necessary, further, to form a clear conception of the fact, and to bear it constantly in mind, that in all acts of selling or hiring, it is the purchaser or hirer, not the seller or the lender, who ultimately decides whether an exchange shall take place. Whatever be the price asked, be it high or be it low, the buyer by giving or refusing it decrees whether a commercial transaction shall be carried out. It is not the landlord but the tenant who will in the last resort determine what the rent shall be. The landlord may select amongst competing farmers the man who will pay the highest rent; still it will be the judgment of that tenant that will decide at last, not only what the amount of the rent shall be, but even whether the farm shall be let at all. The inquiry thus becomes, What are the thoughts, and what the feelings consequent on those thoughts, which traverse the mind of the farmer? He is seeking to borrow the use of land in order to engage in the agricultural business; his motive is profit, such an amount of profit as will, after repaying all his outlay of every kind, yield him the fitting reward for his efforts and his skill. His object is to gain a living out of his farm; and his calculations turn on the inquiry, on what terms of borrowing the use of the land he shall be able to obtain the ordinary profits of trade. Let us accompany him in these calculations.

The landlord opens the debate by naming the rent which he requires for the farm. The question for the tenant becomes, Can the farm afford such a rent? Here, obviously, the productive power of the soil will present itself as the first and most momentous subject of inquiry. It is a productive machine that the farmer is seeking to hire. The strength of that machine, its capacity to turn out much and good work, is the great point to ascertain. The quality of the soil itself is clearly a most important element of the problem; but it is far from being the only force which constitutes the productive power of a farm. What the climate is at the particular locality is a consideration of great weight. Good land in a rainy district will yield an inferior rent to land of the same quality under a more genial sun and a drier atmosphere. Then the water connected with the farm will come under examination. Will it be capable of creating water-meadows, which have such a lifting power for rent in many parts of England? The fertility, too, of the several fields of the farm will differ. The intelligent tenant will feel himself called upon to estimate what amount of crop, what quantity of food for cattle, with his skill and capital, he may reasonably expect to produce. This is the basis of the whole computation--the quantity and quality of the produce that he can fairly reckon on obtaining. And he will not be governed solely by the then existing state of the land. If he is an able agriculturist, he will form a shrewd guess of what he will be able to make it yield by proper treatment. And it is very probable that he will prefer to pay a high rent for good land rather than a lower rent for inferior soil, because he may feel a well-founded confidence in his own resources to work up the greater power of a strong, if even obstinate, farm to larger results.

Having completed the first stage, and formed his estimate of the crops and cattle which the land will yield, the tenant will now address himself to the very grave question of the cost which his manufacturing industry will entail. Here he will encounter forces which pay small respect to the beautiful symmetry of hypothetical economic science, and often influence the amount of rent far more powerfully than the fertility of the land. Will his farm be amongst the light and sunny hills of Surrey; or will it be embedded in the stubborn clay of the Sussex weald? Will he need four horses or two only for each of his ploughs? The crop may be the same for both, but the cost will be widely different, and may create much resistance to the landlord's rent. If he appeals to steam-power for help, he must ask himself how far off he will be from the coal-field, how near to him will be the station at which he will buy his coals. So, again, with his manure. Will the lime and the marl be close to his borders, or must he send his carts long distances to the pit or the railway? Then comes the serious question of the place where his buyers dwell; how far he is from his market; what expense of carriage he will be put to. It may be his good fortune to be offered a farm in the neighbourhood of London, or some great manufacturing town. A weighty rent, it is true, may be demanded of him, even some ten or fifteen pounds an acre; but this will not extinguish the attractiveness of such a farm. Better markets, abundant supplies of manure, cultivation by the spade, and high prices, may possess higher claims in his eyes than a small rent in a rural region.

But the computing farmer's arithmetic is not yet over; he has very formidable figures still to face. His land may be burdened with heavy charges of an exceptional kind. His tithe may be unusually large; his poor-rate peculiarly severe; and the school-rate may acutely try his temper and his purse. Worse still, agricultural wages in his locality may be inordinately high, for wide are the discrepancies between wages in different parts of England, and the worth of the wage may not be repaid by labourers demoralized by trade unions. The long arithmetical array of heavy burdens will be duly noted by the incoming tenant, and carefully placed to the debit of the debated rent; but one thing he will not do--he will not search out the position of the farm offered in the brilliant series of ascending fertility, and comfort himself with the reflection that economical science furnishes him with the assurance that a farm standing so high above the margin of cultivation must necessarily be able to pay the rent attached to that position, all these exceptional charges of cost of production notwithstanding.

One item of cost still remains, which the intelligent tenant will investigate before he contracts to take the farm. He will inquire into the condition of the farm--into the outfit, so to speak, which it will require for the full performance of the work which it is fitted to perform. He will endeavour to ascertain the amount of draining which has been effected, the number and state of the farm-buildings, as well as the amount of unexhausted improvements of various kinds which either the landlord or the previous tenant has laid out upon the land. These constitute no real part of the land's fertility, though they increase its power to produce: they are fixed capital in the carrying out of the agricultural business. And here it is important to note that the tenant will not inquire into the amount of money, as such, which the landlord has spent upon his land. He will not pay an additional pound of rent because the landlord can appeal to large figures denoting the capital he has laid out on his fields. This, by itself alone, does not concern the tenant; but it does concern him greatly to learn the actual condition of the farm; and beyond doubt the landlord will be able to demand increased rent, and the tenant will be perfectly willing to pay it, to the extent that the outlay on draining and other improvements has augmented the actual produce of the farm. The tenant looks solely to the working power of the agricultural machine and the results which he may obtain from it; outside of this consideration he takes no account of what outlay the landlord has incurred, any more than of the price which he has given for the property. The tenant will be well aware that if that machinery does not exist, it must be provided by means of an understanding with the landlord, necessarily involving some cost for himself: if he finds it on the ground and at work, he will set down in his calculation an increased estimate of produce without any debit against rent for cost of construction--he will feel that he is hiring a more powerful machine.

The calculating tenant has now formed an estimate of what he may assume as the amount of produce which he can procure from the farm, as also of the cost which the obtaining of that produce in the given locality will entail. He thus reaches the third stage of his investigation--the price which he may reckon on realizing for the products he has raised. Here the peculiar nature of the agricultural business reveals itself. A man who enters upon a new industry, or erects a new mill, or opens a fresh mine, will not inquire for a particular price which he may adopt as the basis of his computations. He will think only of the extent of the demand which exists for the articles that he intends to manufacture. If it is strong and increasing, he will feel sure that the consumers will repay the whole cost of production, interest and capital included, and in addition the legitimate profit attached to the business. If he hires or buys machinery, he will pay the price belonging to it in its own market as a manufactured article, precisely as if he were making purchases in shops; the seller of a steam-engine will not ask how much profit the engine will create for the factory. No doubt, if a site must be bought or hired for the erection of the mill, a higher price for the land will be encountered, in consequence of the prosperity of trade in the particular town or district; but the rate of profit will not rise in the discussion between the landowner and the trader. The price of the land will be regulated by the force of the existing demand for land, a demand which, of course, will gather strength from the swelling profits realized in the trade.

The position of the farmer who is seeking to discover what is the proper consideration for the hire of a farm is radically different from that of an ordinary manufacturer. As all land in England can be said to pay rent, it is clear that its products are sold at such a profit as enables the tenant to reward his landlord for his loan. The sale of what he makes is therefore certain, but the price which it will fetch is anything but certain. His business is subject to influences which very materially affect the quantity of his products, and still more the prices which they will command. He is dominated by the seasons; but it may be argued that their fluctuations may be guarded against by basing the calculation on their average character. The statement is well founded, and every sensible farmer will take the average season as his rule in computing; yet even the average season, as recent experience has too sadly shown, may sweep over a large cycle of years with very disturbing results. But there are other and very formidable difficulties which the farmer is called upon to face. The price which his produce will command depends on forces of great and varying power which are entirely beyond his own control, and often are incapable of being estimated beforehand. He is necessarily met by foreign competition; and that competition itself is stronger or weaker according to the commercial position of the countries which bring it to bear. Further, the state of the home market itself cannot be prejudged. The produce of English land will certainly be demanded and sold; but its price is vastly influenced by the prosperity or adversity of English trade. The rate, for instance, at which meat will be sold will vary prodigiously according as the multitudes of British workmen are earning high or low wages. The fortunes of foreign nations will weigh on the cultivating farmer; they are buyers of English wares, and their financial condition will act on British manufactures and recoil, for good or evil, on British agriculture.

The combined action of these manifold and diverse forces generates a special and very important effect. It imprints on the hire of land a distinct and unique feature of its own; it imparts its peculiar characteristic to rent. The position of the farmer is not that of a man engaged in a business, and buying or hiring a machine which is required for carrying it on; it is rather the situation of one who is examining whether he can reasonably enter upon the business at all. One feeling governs that situation; the tenant must be able to live by it by means of a natural profit after all expenses have been repaid. Thus, the payment for the use of the land takes the form of handing over to the landowner all excess of profit above the fitting reward for the farmer. This seems manifestly the best method for giving the required security to the tenant, whilst it provides the lender of the use of the land a reward just in itself and compatible with the continuous cultivation of the soil. Such a system is not unacceptable to the landlord; he cannot hope to maintain a fixed rent which the returns yielded by the agricultural business do not furnish. To insist upon such a condition would be simply to compel the farmer to renounce the farm. And he will not obtain such a rent from any other tenant; for the one he dismisses has no other motive for leaving except the fact that the farm will not provide such a rent. On the other hand, if he is dissatisfied with the rent offered by the tenant, he has in the competition of tenants desirous of hiring the farm a sure test for ascertaining whether the offer is just or deficient.

It follows, from the preceding analysis, that rent depends on the prices realized by agricultural produce compared with the cost of their production, the farming profits included. A high price does not in every case imply a correspondingly high rent, for the cost of raising agricultural produce varies immensely in different localities; still, as a rule, elevated prices will raise up rents with them. The same truth holds good of every business: it must yield repayment of all cost of manufacturing, and reward the manufacturer with the necessary profit, or it will cease to exist. But agricultural price encounters two serious embarrassments not to be found to an equal degree in other trades. It is, in the first place, powerfully acted upon by the vicissitudes of the weather: a bountiful harvest, coming in contact with great commercial profits, brings a full and often an augmented price, to the great advantage of the farmer; a poor harvest, falling on a depressed trade, often fails to reap a price corresponding with the diminution of the supply. There is but one remedy wherewith to meet the fluctuations of such a market--a remedy, unfortunately, too little heeded by most farmers. The great law of the average harvest must be ever borne in mind, ought ever to govern the conduct of the intelligent farmer: he is bound, by the very nature of his business, to reserve the excess of profits of the good year to balance the deficient return of the failing crop. His rent ought to be, probably is, founded on this principle; his practice often exhibits profuse self-indulgence under the temptations of the prosperous time, in utter thoughtlessness about the future.

We have now reached the full explanation of rent. It is surplus profit--that is, excess of profit after the repayment of the whole cost of production, beyond the legitimate profit which belongs to the tenant as a manufacturer of agricultural produce. The interest which he would have reaped from placing capital which he has devoted to the farm in some safe investment, such as consols or railway debentures, forms necessarily a portion of the cost of production. He would have realized some 4 per cent. on the investment without risk or effort of any kind. This interest constitutes no reward for engaging in agriculture.