'The production of wealth is the result of agreement between labor and capital, between employer and employed. Its distribution, therefore, will follow the law of its creation, or great injustice will be done."
Leland Stanford
Being that land is the source of all wealth, its availability to us is of critical importance. In the first part of this article, Surplus and Capital, Part One, we assumed unlimited availability of the land to all. In this article, we will take a position closer to reality, limited land ownership and opportunity of use. We also assumed the lack of force in reference to land holdings. We will continue this fairy tale premise even though the use of force and land entitlement are like two pigs in a poke! By eliminating as many contingencies as possible, we are attempting to get at the root actions that might occur surrounding surplus and capital when obvious wrongdoing and evil intent has been ruled out.
Land is limited, not infinite, and at some point humans run into the circumstance in which enough land to provide sustenance or produce surplus and wealth is not available to all. For all practical purposes, land has grown scarce and become a commodity. This is of critical importance for the simple reason that the source of all wealth, land, is now accessible by a segment, rather than the entire population.
The most obvious reason for this would seem to be population growth but surprisingly we have little evidence to back this up. Although there are a lot of people on the planet, six billion plus and growing, we have never had a "free" approach to land appropriation. Bloodshed, coercion or threat of bloodshed and fraud have for the most part determined who owns the ground beneath us; so who knows how many billions could be supported if access to land was granted in a more civilized manner, whatever that might be.
As we discussed in the first article, the owner of surplus or capital must decide what to do with his bonus production. The outstanding difference we now have is a segment of the population that cannot rely on the land to provide their sustenance. The have been added by default, to our group in the last article that didn't possess the ability to transform land into daily bread, no matter the supply of land. They were not able to apply themselves to the task. The newcomers in this group don't necessarily lack the know-how, they may be very capable, they simply don't have the opportunity. A reason could simply be they were born too late. Their fate, their sustenance is in the hands of the Capitalist.
These disadvantaged must receive a level of payment for their labor that at minimum equals sustenance. This is a given. But is there any motivation or even possibility that they will earn above that level, bringing some of the surplus or capital within their control?
Some of the group will have a labor value that will compel the Capitalist to reward them above this level. Their skills will create demand and the return they produce for the employer will make it possible for them to attain a higher level of earning. But others have no such special abilities. Their "wage" is reliant on the supply of their labor. The demand for labor will be there, as long as surplus or capital is produced. Without use, capital is merely overproduction and ultimately waste.
If unemployment exists, if there is labor that wants to work and cannot find work, the base wage will never rise above sustenance level. There will always be someone who would willingly replace one who demands a wage above sustenance. There is no land to return to, and there is no option but to sell your labor to someone with the means to compensate you for your time. We have of course, never achieved full employment.
In fact, one of the primary uses of capital in the modern economy is to avoid full employment. The natural balance between labor and capital is disturbed when "cheap" capital is made readily available. Combine our "fiat" monetary system with our "tariffed" {highly taxed} labor supply and any sensible entrepreneur will choose whenever possible the use of discounted capital over surcharged labor.
When land becomes scarce, rent ensues. This is the ability of the controlling interest of the land to charge for the utility of the land. The rent must come from the surplus, since the tenant must meet his sustenance. Can the landlord claim the totality of the surplus?
If the supply of tenants is greater than the supply of land, then the landlord can claim the entire surplus production of the land because tenants must meet their daily needs first and worry about surplus second. If the supply of land is greater than the supply of tenants, then in order to compete for tenants, the landlord must share a portion of the surplus or capital with the tenant, which means the tenant has become a capitalist.
However, as we assume no monopoly or force is to be applied to the land, then this "sharing" of the surplus between tenant and landlord eventually leads to a surplus of tenants. If a tenant receives a portion of the surplus and realizes that the entire surplus can be his with entitlement, then he merely has to save enough capital to purchase his own parcel.
Initially this is easy as the great availability of land provides lower relative rents and land values, along with greater tenant surplus, thus easing the transition from tenant to owner. As the progression proceeds the opposite parameters take effect; relative rents rise until they absorb the entire surplus, along with high land values which create obstacles to ownership of land and access to capital for the remaining tenants.
It is at this point that population comes into play. As we mentioned in paragraph four, we have not been able to fully experience the effect of population since force, fraud and the resulting monopoly control of the land have "hastened" and distorted and misdirected the natural flow of capital. The effect has been to artificially scarcify the land base, through force or fraud, thereby concentrating ownership and the resulting surplus into the hands of the elites. This has been repeated throughout history whether our subject is Feudalism, Colonialism, Socialism or Capitalism. Some of these systems have better mottos but the end result has been similar; capital, the surplus of production has not been allowed to be naturally distributed.
We have observed the production of surplus under two conditions, that of a landed people {Surplus and Capital, Part One} and that of limited land. In our examples, surplus has arisen from the super productivity of the land parcel or from the application of labor upon the land.
The land is the source of all wealth. Humans provide the labor that transforms this latent wealth into actual produced goods and possible surplus. This surplus, the capital, can be used to aid and augment the production process. But by itself, unused either thru consumption or reentry into the production process it is analogous to bushels of grain with no rows to seed or mouths to feed.
This is a simple concept greatly misunderstood and a root cause of our present economic problems. Capital has been taken under the cover of religion and spirituality. Somehow, we are led to believe that it mysteriously transforms and reproduces itself sprinkling drops of wealth evenly throughout society as it goes! It is all knowing, all powerful and of course, all good!
This has led to the belief that mere possession of capital produces a greater amount of itself. We perceive that capital ownership in and of itself manufactures increased and more widespread wealth. Our entire monetary system is built on this premise. This false tenet is the foundation of the empire. It is completely and entirely false.
We are presently witnessing the results of this belief system. Whether the world will maintain this cult, this religion, or cast it off for another idea, hopefully based more in the principles of freedom, is yet to be seen.
Capital is good for the simple reason surplus is good. Surplus is good because it represents future sustenance. It represents security. It is beneficial when it is consumed, saved for future consumption or used to increase future production. It is not within the nature of "surplus" to deprive others of their sustenance. That is a situation we are well aware of. It is known as a "deficit"!
Other Related Articles by Author:
The Land Value Fee, Why It Works.
Defining Socialism, Part One: The Land Mass
©2009 Gene DeNardo, all rights reserved. You must have written permission from the author in order to republish this work.
Published: Saturday, March 7, 2009
Last modified: Saturday, March 7, 2009
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Reader Comments:
Posted By: Walt Thiessen
Date: 2009-03-07 12:45:12
"Being that land is the source of all wealth..."
What a distortion! The human mind is the source of all wealth, not land. Without human minds, land would be incapable of creating nearly all of the stuff our society has in it today. If you think land is the source of all wealth, I suggest you go to your backyard and dig up that new computer or that new lounge chair you want that's growing back there.
Posted By: gene
Date: 2009-03-07 16:45:24
Hi Walt, I didn't know you were so metaphysical!
The mind is the source of thought. It wouldn't do me much good to think that computer or lawn chair into my house either! or think that hole you want me to dig. the mind might help me think of an implement like a shovel to make it easier, but we still have to dig that hole and mine the ore and cut that tree [hickory I THINK is best] for the handle. And all that resource that we shape into wealth, is still there whether we think it is or not. But if the land goes away, a mind is just a thought!
Posted By: Edu Montesanti
Date: 2009-04-03 11:33:03
Hi, dear Gene! It's benn so long! I've been having problems with my mail - hackers. Sorry.
Is your family 'Dott Sotta"?
I looked for them here, on our phone list of São Paulo, didn't find anyone with this surname.
It's funny how our the 'Chart "manager"... We write to this site and receive some kind of strange message, not constructive,chane his treatment...
God bless you!
(write me!)