The nineteenth century is commonly described, alike by paternalistic liberals and social democrats, and by the kinds of vulgar "libertarians" who engage mainly in pro-corporate apologetics, as an age of "laissez-faire." But to use such a term in reference to that period is an utter travesty. We have already seen, in our previous chapter on primitive accumulation, how the capitalism of the nineteenth century reflected the violent reconstruction of society by a statist revolution from above. In addition, it was of the allegedly "laissez-faire" nineteenth century that Benjamin Tucker wrote, when he identified the four great forms of legal privilege on which capitalism, as a statist system of exploitation, depended. We will examine those four privileges, central to the structure of "laissez-faire" capitalism, in this chapter. In addition, we will examine a fifth form of state intervention largely ignored by Tucker, even though it was central to the development of capitalism throughout the nineteenth century: transportation subsidies.

Both state socialists and corporate welfare queens, for nearly identical reasons, have a common interest in maintaining the myth of the laissez-faire nineteenth century. The advocates of the regulatory-welfare state must pretend that the injustices of the capitalist economy result from the unbridled market, rather than from state intervention in the market; otherwise, they could not justify their own power as a remedy. The apologists of big business, on the other hand, must pretend that the regulatory-welfare state was something forced on them by anti-business ideologues, rather than something they themselves played a central role in creating; otherwise their worst fears might be realized, and the interventionist state might actually be pruned back. "Laissez-faire" is, therefore, what Albert Jay Nock called it: an "impostor term."¹

Tucker classified, as one of the four forms of monopoly, the state's enforcement of "land titles which do not rest upon personal occupancy and cultivation."³ A great deal of material that he would have included under this heading has already been treated, instead, as part of our analysis of primitive accumulation in the last chapter. That material will not be duplicated; for purposes of the present chapter, it will suffice to point out that the seizure and monopoly of land by the ruling classes in the early days of capitalism has ongoing effects today.

The primitive accumulation described in the previous chapter was only one example of a general historical phenomenon: as the Georgists Oppenheimer and Nock pointed out, the state has, throughout history, made exploitation possible by politically controlling access to the land. The latter, referring to Wakefield's frank ruling class perspective on the land monopoly, commented that "economic exploitation is impracticable until expropriation from the land has taken place."⁴ Henry George's brief survey, in Progress and Poverty, of ruling classes' encroachments on the peasantry's land, is a good introduction. Livy's history of the Roman republic, for example, is dominated by the struggle between the plebians and the patrician landlords. The great landed estates of the aristocracy were carved out of the public domain, originally the common property of the entire Roman people.⁵

The system of land tenure in medieval Europe was established, likewise, by the seizure of land by the feudal ruling classes. By political means, they claimed legal property in the lands already occupied and worked by the peasantry, and compelled them to pay rent on their own land. By political means, likewise, they claimed ownership of vacant lands, and controlled access to it without themselves ever directly occupying or working it. As Adam Smith wrote, "A great part of them was uncultivated; but no part of them, whether cultivated or uncultivated, was left without a proprietor. All of them were engrossed, and the greater part by a few great proprietors." ⁶

This evil was in the process of being remedied in the late Middle Ages. By means such as tenure in copyhold, western Europe was evolving toward a system in which the peasant was a de facto owner, required to pay only a nominal quit-rent set by custom; after that nominal rent was paid, he could treat the land in practice as his own. Had that system been allowed to develop without violence, Europe today might be a continent of small proprietors. But as we saw in the previous chapter, that was not to be.

This last, however, has already been dealt with. In this chapter we examine statist forms of property in land as a general phenomenon. Although the primitive accumulation already recounted is regarded as unjust by all major libertarian theories of property (at least to the extent that they acknowledge its occurrence), these theories are not by any means agreed on what the proper basis of ownership might be. Our next order of business, therefore, is a comparative survey of the major theories of property in land.

The bare principle of private property in land does not carry with it, of any necessity, any particular set of rules of land tenure. Nozick pointed out that any theory of "justice in holdings" must include three major topics: 1) a theory of "the original acquisition of holdings, the appropriation of unheld things"; 2) "the transfer of holdings from one person to another"; and 3) "principles governing how a person may divest himself of a holding, passing it into an unheld state."⁷ Or as Tucker put it, "The question is not whether we should be able to sell or acquire in 'the open market' anything which we rightfully possess, but how we come into rightful possession."⁸ Free market liberals are divided among themselves on how to answer this question.

There are three main rival theories of justice in holdings among free market libertarians--the Lockean, the Georgist, and the mutualist--with Lockeanism predominating. As Bill Orton has characterized their differences, the three schools agree fairly closely on the acquisition of property (i.e, by labor homesteading), but differ considerably on their rules for transfer and abandonment.⁹ All three schools agree that the only legitimate way of appropriating unowned land is homesteading by direct, personal occupation and alteration of it: as Locke put it, by admixture of labor.

In contradistinction to Lockeans, Georgists and mutualists agree in seeing the land, in some sense, as a common patrimony which cannot be permanently alienated from the commons in fee simple. Both differ from the Lockeans on the extent to which appropriation by admixture of labor permanently removes land from this common patrimony. Both groups view the common rights of mankind to the land as inalienable, and the individual's possessory or usufructory right to be in some sense a stewardship on behalf of the general human community. The Georgists, however, attribute to the community a more active role in exercising its ultimate property rights over the commons than do the mutualists, and treat the community as joint owners of the commons in a more active sense. The mutualists, on the other hand, tend to see unoccupied land simply as an unowned commons over which mankind's ultimate ownership rights are latent, and which the individual is free to use as he sees fit without accounting to any proxy for collective rights; but the latent common right of the rest of mankind prohibits the individual from claiming more land than he can personally use at the expense of the common interest, and requires that his possessory title revert to the commons when he ceases to occupy and use the land. In regard to the theoretical status of land, therefore, mutualists and individualists have more in common with each other than with the Lockeans.

Regarding practical treatment of existing land titles, on the other hand, Georgists and mainstream Lockeans have more in common with each other, and mutualists (and to some extent radical Lockeans) are the odd man out. Mutualists and (among Lockeans) the left-Rothbardians, agree that any current titles to land not established by such labor-appropriation are invalid, and that land held by such title should be regarded as unowned and open to appropriation by the first homesteader to mix his labor with it. Lockeans on the more mainstream libertarian right are more willing to accept existing property titles as valid on conventional or positivistic grounds, in the interest of stability. Georgists regard the injustice by which existing titles were acquired as relatively insignificant; the proper remedy is not to nullify existing land titles but, through community collection of rent, to nullify the unjust benefits of holding such titles. The Georgist remedy of the single tax, to a large extent, presupposes a market in land values that deals with titles and transfers in more or less Lockean terms.

On how land, once acquired by admixture of labor, is to be transferred, and on what constitutes abandonment, the three schools differ radically. The Lockeans believe that land, once justly appropriated from an unowned state, may be given away, sold, or rented by the rightful owner, and that ownership is maintained regardless of whether the original owner retains possession or rents it to another occupant. Given the justice of the existing land title, a new owner may establish legitimate ownership by a simple transfer of title, regardless of whether he personally occupies and uses the land. Direct occupancy and use is necessary only for initial appropriation, not for subsequent transfers of ownership. Georgists, besides agreeing with the Lockeans on initial appropriation, are also generally accepting of Lockean standards of transfer, so long as the principle of community collection of ground rent is followed.

Mutualists, however, advocate a much different standard for establishing ownership during subsequent transfers. For mutualists, occupancy and use is the only legitimate standard for establishing ownership of land, regardless of how many times it has changed hands. An existing owner may transfer ownership by sale or gift; but the new owner may establish legitimate title to the land only by his own occupancy and use. A change in occupancy will amount to a change in ownership. Absentee landlord rent, and exclusion of homesteaders from vacant land by an absentee landlord, are both considered illegitimate by mutualists. The actual occupant is considered the owner of a tract of land, and any attempt to collect rent by a self-styled landlord is regarded as a violent invasion of the possessor's absolute right of property.

None of these alternative sets of rules for property allocation is self-evidently right. No ownership claim can be deduced logically from the principle of self-ownership alone, without the "'overlay' of a property system," or a system of "allocation rules."¹⁰ No such system, whether Lockean, Georgist, or Mutualist, can be proved correct. Any proof requires a common set of allocation rules, and a particular set of allocation rules for property can only be established by social consensus, not by deduction from the axiom of self-ownership.¹¹ (However, since all three traditions deduce their theory of appropriation by homesteading from the principle of self-ownership, in so similar a manner, it might be more accurate to say that the labor theory of appropriation common to the different overlays is more plausibly deducible from self-ownership, and less dependent on convention than the rules concerning transfer and abandonment.)

In any case, there is a great deal of practical overlap in their positions. For one thing, the "stickiness" of property is a matter of degree:

Or as Orton put it elsewhere, stickiness is a matter of degree, rather than a qualitative difference between capitalist and socialist property. They are "the same thing... with different parameters" for the length of time necessary to establish abandonment.¹³

For another, since the three systems agree on the standard of legitimacy for appropriating unowned property, much existing property is illegitimate from all three perspectives, to the extent that a large portion was acquired by means other than personal use. Murray Rothbard, for example, pointed to the illegitimacy of most historic land appropriation, even by Lockean standards:

Rothbard later argued in Power and Market that land appropriated by a mere grant from the state was a grant of monopoly power analogous to that of a feudal landlord, enabling the holder of the title to charge a tax or rent on the first legitimate appropriator of the land, and force him to pay tribute for the right to occupy it.

The same was true of feudal appropriation of land in older settled areas:

Clearly, the agreed-upon labor standard of appropriation still leaves much to convention: How much labor is required to appropriate how much land? Is it necessary to physically alter or use every square foot in a parcel of land one claims? Can appropriation by labor take place through the hired labor of others, or is it by personal appropriation only? The exclusion of the state from appropriating land through the labor of its "servants" might also, it seems, exclude the indirect appropriation of land by the labor of those in a private capitalist's hire. The labor standard, depending on the strictness of its interpretation, would mean that a housing development belonged to the construction workers who built it, and not to the contractor who bought the land and hired the labor. Even so, the Lockean standard of labor appropriation rules out a great deal of what Jerome Tucille called "land-grabbism, " or climbing a mountain and claiming all the land you can see,¹⁷ and goes a long way toward remedying the evils associated by Georgists and mutualists with landlordism as such.

According to Mises, large-scale landlordism has always been the result of state-created land monopolies, and not of aggregation of small parcels of land by market processes.

Although the expression "bourgeois nursery tale" does not appear anywhere in the quote above, the import is just as clear as if it did.

In addition to the three schools' agreement on the moral illegitimacy of much existing property in land, there is also much agreement among them, as well, on the exploitative consequences of statist land appropriation. Oppenheimer argued that the monopoly of land by big landlords contributed to the system of unequal exchange by which all labor was exploited--not just the agricultural laborer or peasant, but the industrial worker as well.

Rothbard also pointed to the exploitative effect of state land monopoly, which resulted in raising the rents of land in use and lowering wage rates.

More specifically, "conservation" laws played a key role in the land monopoly by forcibly withholding resources from the market, and thus raising the price of the resources land-owners did sell. It served exactly the same function as output restrictions in any other kind of monopoly.

But that is telling only half the story. In addition to withholding land from production, the state gives favored capitalists preferential access to it. Huge tracts of land are leased to timber, petroleum, mining, and ranching interests, at politically determined rates. For example, most of the devastation of giant redwoods in the Pacific Northwest takes place on land owned by the government, and is only profitable because the lumber companies do not have to buy the land in a competitive market. Likewise, the debate over drilling in ANWAR is not about selling the land to oil companies. It's about giving them preferential access, denied to ordinary citizens, and letting them pay a sweetheart price for the privilege.²³

These two aspects, withholding and preferential access, sometimes dovetailed nicely. The main beneficiaries of conservation policy were "the land-grant Western railroads" and existing timber owners. The railroads' land grants had included not only the rights of way for their roads, but fifteen-mile swaths on either side of the line as well. By charging settlers for homesteading rights, including the most desirable commercial properties in the new railroad towns, the railroads obtained a large income from land speculation, in addition to their primary business of actually operating railroads. Government conservation policies further increased the price of the railroads' land holdings, and along with it added even more to their income from land speculation. The value of timber land, likewise, was raised by the withholding of land. The railroad and timber industries, consequently, were large contributors to the conservation movement.²⁴

Besides the sheer injustice involved in statist land theft, and the ongoing exploitation of the producing classes by parasitic landlords, it has been a great drag on progress. This was true of the feudal system of land ownership in the Old World. Property in land not being in the hands of those who worked it, neither the landlord nor the peasant had an incentive for improving it.

Even among peasants not reduced to serfdom or villeinage, who only paid a portion of their produce as rent and kept the rest, the rents reduced the marginal incentive to labor or to improve the land.²⁶ As evidence for these claims, Smith challenged the reader to compare the condition of great estates in the same family for generations, to that of the estates of small proprietors in the same neighborhood.²⁷

We proceed now to a more detailed account of the unique tenets of the mutualist position on land tenure. Tucker's "occupancy and use" standard of ownership was directly influenced by the land theory of J.K. Ingalls in the United States; but its antecedents went back much further--at least to Godwin and Proudhon.

The Ricardian socialist Hodgskin, in The Natural and Artificial Right of Property Contrasted, seemed in many places to identify the natural right with direct cultivation; his distinction bore a striking resemblance to Nock's later distinction between "labour-made" and "law-made" property:²⁸

In contrasting the class nature of the natural and artificial rights, Hodgskin tended to identify the former with the peasant, and the latter with the landlord, in ways that would certainly make a modern libertarian-lite like (say) Milton Friedman nervous: "The right of property, which is now arming the land-owner and the capitalist against the peasant and the artizan, will, in truth, be the one great subject of contention for this and the next generation...."³¹ He went so far as to describe the state as the organized power of the landowners, and the guarantor of their right to possess the land without actually cultivating it:

Still, in fairness, we should add that Hodgskin's position is ambiguous. It is difficult at times, in a country like Britain with so much feudal baggage in its present distribution of land ownership, to distinguish between criticism of the landed aristocracy and criticism of absentee ownership as such, or between taxation and rent. To assume that he identified rent with taxation in all circumstances, as did Tucker, is begging the question.

The passages above do seem to imply, though, that cultivation is an ongoing title to the land and its produce even in the present, and not merely a means of initially appropriating it. But most of the large land-holdings in England at the time fall under the condemnation of Lockeans (especially left-Rothbardians), as well.

Hodgskin cited a very radical version of Locke on the labor theory of appropriation, in language that might suggest to some a fairly literal interpretation of the need to work the land.

Shortly thereafter, in a rather dense passage, Hodgskin cast doubt on whether the supervisory labor of a gentleman-farmer with several farms was a sufficient natural title to his property, or whether the size conducive to optimal efficiency of such a large enterprise had any bearing on the size which an individual could appropriate by natural means:

Any consequentialist argument concerning the restraint this "natural right of property in land" might exert on the economies of scale can be answered, obviously, with a denial that ownership by "a capitalist," as in "the present condition of society," is the only means by which "any given number of labourers" can combine their efforts in a common enterprise.

But then, Locke was himself ambiguous; he (and especially his Proviso) have been put to much more radical uses than many modern Lockeans would approve.

J.K. Ingalls, probably the strongest direct influence on Tucker's land theory, called for "repealing all laws in regard to land ownership, leaving 'occupancy and use' as it was originally, the only title to land."³⁵ Like the later Georgist Franz Oppenheimer, he saw history in terms of "the courses by which man's natural birthright in the soil has been usurped in every land by a domineering class who, sooner or later, sought the cover of pretended law to sanction unlawful acts, so that they might enjoy quiet possession of dominion obtained by violence."³⁶ Absolute dominion over the land, to the exclusion of the rest of mankind, was possible only through the coercive power of the state, established through "the law of the stronger" or "the rights of the victor"--essentially the same thing described by Oppenheimer as "the political means."³⁷

Ingalls, like Henry George, emphasized the original practice, common to all human societies, of treating land as a communal property to be assigned to individual cultivators only on a usufructory basis. Even under the usurpations of landlords, for most of the state's history, the peasant commune's subjection to the landed aristocracy was still collective. The peasantry continued, in medieval Europe, in Russia, in India, etc., to cultivate the land in common, and to pay tribute to the state or the landlord as a community.³⁸

As described in the Introduction to Part II of this work, the mutualist theory of exploitation emphasizes the role of privilege in restricting labor's access to the means of production, and compelling labor, through the process of unequal exchange, to pay tribute to the owning classes by accepting less than its product as a wage. Ingalls' work on landlordism is an excellent case study of the operation of this principle as it relates specifically to land. Ingalls quoted Adam Smith on the labor-product as the natural wage of labor, in the days before appropriation of land. He contrasted this to Ricardo's subsistence theory of wages, in which the price of labor was determined by the cost of reproduction. The difference between the two, as Ingalls saw it, resulted from the control of land by the landlord rather than the cultivator.³⁹ Or, as we have suggested earlier, Marx's distinction between the price of labor power and the value of the labor-product holds good only after the laboring classes have been deprived of their property in the means of production. The price of labor-power is determined by its reproduction cost, not as an inherent quality of wage-labor, but only where labor is sold in a regime of unequal exchange.

A return on land or capital, as such, could exist only through privilege. Only through the state's legal privileging of the ownership of capital and labor, was it possible for the capitalist or landlord to charge labor a tribute for access to the means of production, and thus to obtain a cumulative increase over time.⁴⁰ The expansion of capital through the magic of compound interest is not, as the Marxists believe, a property of the market. The natural law of the market is for labor to receive its full product. And although he wrote in a time before the marginalists had fully explained the principle of labor's disutility, Ingalls implicitly assumed the principle. In terms quite similar to our own analysis in Chapter 2, Ingalls contrasted the normal price of a commodity in a free market (a price just sufficient to compensate labor for the disutility of its work), with the monopoly rents accruing to the owners of capital or land without regard to their real costs or disutility in acquiring them:

In other words, as we stated in Chapter 2, the power to receive a rent on capital or land without earning it through labor can only enter the calculation of "opportunity cost" by which net profit and rent are calculated, only when the state has first made possible such an unearned rent through its enforcement of legal privilege.

Ingalls, like Tucker, devoted a great deal of energy to countering the theories of Henry George. Like Tucker, he minimized the importance of economic rent as such and saw it as a mere side-effect of the general phenomenon of landlord rent--in his words, economic rent "could hardly form a serious difficulty were occupancy made the sole title to land."⁴² Indeed, he went beyond Tucker in his denial that economic rent would exist without landlordism:

Ingalls, in making such a bald assertion, indeed went too far. He virtually admitted as much himself, in conceding that a producer's surplus would exist for owners of superior land even in a regime of occupancy-based ownership: "The man with land of easier tillage, or more productive soil, will be able, doubtless, to obtain the same price for his grain or fruits as the man with poorer soil and shorter crops."⁴⁴

Still, Ingalls did make a good case for the contention that the evils of differential rent were exacerbated by landlord rent, and partially derived from it. For example, he wrote, absentee landlordism itself compelled the cultivation of marginal land to a degree that would not occur were all vacant land open to cultivation, and thus increased the differential between the best and worst land under cultivation.⁴⁵

He also pointed out the fact, commonly neglected in the simplified explanations of Ricardo's rent theory, that land was amenable to a number of different uses, and that a parcel of land that was of inferior quality for producing one crop might be of better than average quality for a different crop. The sorting out of land for its most productive use, among a variety of competing uses, would tend to reduce the differential in productivity between sites.⁴⁶ In addition, the original quality of unimproved land was comparatively less important, by a considerable degree, than the improvements introduced by the labor of the cultivator (e.g., manuring and crop rotation), in determining its fertility. George had argued, in different passages of Progress and Poverty, that increases in population both increased rent by bringing less productive land under cultivation, and made marginal land more productive than before by the application of human labor--two contradictory tendencies.⁴⁷

These arguments, indeed, robbed the Georgist theory of differential rent of much of its force--but only to the extent that the Georgist theory was based on differences in fertility of soil. But the Georgist treatment of rent concerned not only differences in fertility, but site advantages as well. On producers' surpluses accruing to the occupants of land more favorably situated in relation to its market, Ingalls had little or nothing to say. But even though Ingalls did not directly address this point, absentee landlordism has an effect in this regard as well in promoting differential rent. The rent accruing to land with site advantages is artificially increased by the ability of landlords to keep vacant urban land out of the market. The phenomenon is analogous to the one described above, regarding the withholding of more fertile land from cultivation by absentee landlords, in increasing the differential rent of land in superior locations.

As Tucker stated it, the principle of occupancy tenure required the protection "of all people who desire to cultivate land in the possession of whatever land they cultivate, without distinction between the existing classes of landlords, tenants, and laborers, and the positive refusal of the protecting power to lend its aid to the collection of any rent whatsoever...." This system was to be brought about by the refusal of ordinary people to pay rent or taxes, thus "compel[ling] the State to repeal all the so-called land titles now existing."⁴⁸

As Bill Orton argued in the quotes above, no "overlay" of land tenure rules can be deduced self-evidently from the right of self-ownership; further, no system of transfer and abandonment rules can be logically derived even from an agreed labor standard of appropriation. We can, however, evaluate the various sets of rules on prudential or consequentialist grounds, insofar as they promote other shared values, or promote results conducive to commonly accepted standards of fairness. In my opinion, the mutualist system of occupancy-and-use tenure has an advantage over both orthodox Lockean and Georgist systems, in the fairness of its operation.

Both the mutualist and Georgist systems, unlike the Lockean system, deal with the unique scarcity of land, characterized by the saying that "they ain't making any more of it"; both deal with the ethical objection to drawing an income from withholding a resource that one did not create with one's own labor. Lockeans sometimes respond that the same argument applies to all the matter one reworks by one's labor, and indeed to the very atoms in the laborer's own body. The problem with this response is that the atoms in raw materials can be renewed and recombined, and (given a long enough time frame) reproduced in response to virtually any level of demand. The same is not true of the available space in a property site (leaving aside quibbles about marsh reclamation, ocean-farming, space colonies, etc.). Put in a more sophisticated form, the argument to land scarcity is not so much that land isn't the creation of human labor, but that available site area is fixed (or virtually fixed) for a particular area. Even given quibbles about marsh reclamation, etc., the supply of site area is extremely inelastic in the face of demand, in comparison to the supply of movable goods.

At the same time, mutualism has an advantage over Georgism in that it recognizes an absolute individual right of property, so long as it is established and maintained only by personal occupancy. The Georgists, in claiming the right to tax increases in land value, claim a right by "the community" to penalize the occupant for the actions of his neighbors, over which he has no control. My neighbors, in claiming the right to tax me for increases in the value of my land resulting from activities they undertook on their own behalf, resemble the men on the make who wash windshields at intersections, and then demand payment for this unsolicited "service."

Besides the inconsistency of this claim with normally accepted notions of fairness, it has additional practical difficulties. For one, it requires some form of coercive apparatus to assess and collect rent on behalf of "the community"--unlike mutualism, which simply requires voluntary associations to defend the occupant in his possession. (In fairness, though, according to the Georgist property rights "overlay," this isn't coercive in the sense of initiating force, because ultimate property rights are located in the community and the community is simply regulating access to its own commons.) In addition, by funding social services out of rent, rather than user fees, Georgism fails to address the irrationalities produced by divorcing cost from price. Georgists are prone to exaggerate the number of public goods or "territorial monopolies"--assuming that any exist at all. It is conducive to economic efficiency that if any service can be funded by user fees, it should be. The cost of the residuum of public goods, assuming there are any, is likely to be of insufficient cost to soak up all the land-rent collected.

Tucker's version of mutualist land tenure leaves some questions open, or at least inadequately answered. Perhaps the most important was raised by "Egoist," in correspondence with Liberty. Egoist pointed out the seeming contradiction between wage labor and occupancy-based ownership: "....if production is carried on in groups, as it now is, who is the legal occupier of the land? The employer, the manager, or the ensemble of those engaged in the co-operative work? The latter appearing the only rational answer...."⁴⁹ Tucker, unfortunately, did not respond to this particular item in Egoist's letter, and therefore we cannot be sure how he would have dealt with this issue. It is, clearly, something that can be answered only at least as much by local social consensus as by logical deduction from principle.

Another question only partially answered is that of economic rent. Tucker gave little attention to issues of economic rent from superior fertility or site advantage. He believed that absentee landlord rent far outweighed it in importance, and that it could be safely left alone so long as landlordism was abolished.

It was Oppenheimer, ironically a Georgist, who demonstrated why most rent deriving from site and fertility advantage would be relatively insignificant in a system of occupancy and use tenure. Oppenheimer, like Tucker, admitted that rent might accrue to land from advantages in fertility or location, without resulting from any exploitative relationship existing. But while the holders of such land might have to work less for the same income, he believed the forces of the market would still prevent large concentrations of wealth resulting from the holding of superior land. Oppenheimer regarded rent per acre as less important than the total rent accruing to a single owner.

Still, this is relevant mainly to differential rent based on superior location or fertility of land--not to scarce natural resources like minerals.

As we have seen, arguments for the superiority of one set of property rules over another can be established only on consequentialist grounds (i.e., on the basis of prudential assessments of how they lead to results consistent with commonly accepted ideas of "fairness"), and not deduced from principle. Any decentralized, post-state society, following the collapse of central power, is likely to be a panarchy characterized by a wide variety of local property systems. For them to coexist peacefully, all three property systems must reflect the understanding of their most enlightened proponents. Those favoring each of the property system must be willing to admit that it is not self-evidently true, or at least be willing to acquiesce to the system favored by majority consensus in each particular area.

Bill Orton, who favors Lockean (or "sticky") property, has made some provocative observations on how property metasystems have coexisted in the past, and speculations on how they are likely to do in the future. The three major metasystems we have examined in this section are agreed that aggression is bad. The reason they come into conflict is that they differ greatly in how they define "aggression." Accusations of aggression or initiation of force, according to Orton, result from conflicting property overlays. "Liberty (and initiation of force) is defined in terms of property rights...."⁵¹

In the past, proponents of one or the other metasystem have often been lacking in the forbearance needed to coexist peacefully with other property systems. And today, many libertarian socialists and anarcho-capitalists see the very existence of other property systems as an affront.

Orton expressed hope for peaceful coexistence of property systems, after "separation of property and state":

The coexistence of different systems of property in a panarchy would require an agreement by all parties to respect the rules established by majority consensus in each area, along with an arbitration system for disputes:

In every system of class exploitation, a ruling class controls access to the means of production in order to extract tribute from labor. The landlord monopoly, which we examined in the last section, is one example of this principle. And until the nineteenth century, the control of land was probably the single most important form of privilege by which labor was forced to accept less than its product as a wage. But in industrial capitalism, arguably, the importance of landlordism has been surpassed in importance by the money monopoly. Under that latter form of privilege, the state's licensing of banks, capitalization requirements, and other market entry barriers enable banks to charge a monopoly price for loans in the form of usurious interest rates. Thus, labor's access to capital is restricted, and labor is forced to pay tribute in the form of artificially high interest rates.

Individualist anarchists like William Greene⁵⁸ and Benjamin Tucker viewed the money monopoly as central to the capitalist system of privilege. As Tucker pointed out, the capitalist bank, in the case of a secured "loan," does not in fact lend anything. The banker "invests little or no capital of his own, and therefore, lends none to his customers, since the security which they furnish him constitutes the capital upon which he operates...."⁵⁹ What the banker actually does is perform the simple service of making the "borrower's" property available in a liquid form. And because of the state's laws, which restrict the performance of this "service" to those with enough available capital to meet its capitalization requirements, he is able to charge a usurious price for it.

The process of obtaining a banking charter from the government, either federal or state, was described by Karl Hess and David Morris in Neighborhood Power:

In a genuinely free banking market, any voluntary grouping of individuals could form a cooperative bank and issue mutual bank notes against any form of collateral they chose, with acceptance of these notes as tender being a condition of membership. Tucker and Greene usually treated land as the most likely form of collateral, but at one point Greene speculated that a mutual bank might choose to honor not only marketable property as collateral, but the "pledging ... [of] future production."⁶¹ But assuming that the mutual bank limited itself to rendering liquid the property of its members, there would be, strictly speaking, "no borrowing at all":

Were the property owned by the working class freed up for mobilization as capital by such means, and the producers allowed to organize their own credit without hindrance, the resources at their disposal would be enormous. As Alexander Cairncross observed, "the American worker has at his disposal a larger stock of capital at home than in the factory where he is employed...."⁶³

Abundant cheap credit would drastically alter the balance of power between capital and labor, and returns on labor would replace returns on capital as the dominant form of economic activity. According to Robinson,

And the result would be a drastically improved bargaining position for tenants and workers against the owners of land and capital. According to Gary Elkin, Tucker's free market anarchism carried certain inherent libertarian socialist implications:

Given the worker's improved bargaining position, "capitalists' ability to extract surplus value from the labor of employees would be eliminated or at least greatly reduced."⁶⁶ As compensation for labor approached value-added, returns on capital were driven down by market competition, and the value of corporate stock consequently plummeted, the worker would become a de facto co-owner of his workplace, even if the company remained nominally stockholder-owned.

Near-zero interest rates would increase the independence of labor in all sorts of interesting ways. For one thing, anyone with a twenty-year mortgage at 8% now could, in the absence of usury, pay it off in ten years. Most people in their 30s would own their houses free and clear. Between this and the nonexistence of high-interest credit card debt, two of the greatest sources of anxiety to keep one's job at any cost would disappear. In addition, many workers would have large savings ("go to hell money"). Significant numbers would retire in their forties or fifties, cut back to part-time, or start businesses; with jobs competing for workers, the effect on bargaining power would be revolutionary.

Under industrial capitalism, Tucker argued, the money monopoly reinforced the monopoly of land and capital. Site rent, as such, depended mainly on the enforcement of absentee land titles. The availability of all vacant land for homesteading would cause ground rent, as such to fall to zero through competition. But in built-up areas, the value of improvements and buildings outweighed that of the site itself. And the availability of interest-free credit would, likewise by competition, would cause house rent to fall to zero. Nobody would pay rent on a house when he could get the wherewithal, interest free, to build one of his own. And by the same token, nobody would accept significantly less than his labor product in return for the use of the means of production, when he and his fellow workers could mobilize the interest-free capital to buy their own. "In this situation," as Gary Elkin wrote, "it would be absurd for workers to pay someone else (i.e. a capitalist) more for the use of tools and equipment than a fee equal to their depreciation and maintenance costs plus the cost of the taxes (if any) and utilities involved in housing them."⁶⁷

In addition to all this, central banking systems perform an additional service to the interests of capital. First of all, a major requirement of finance capitalists is to avoid inflation, in order to allow predictable returns on investment. This is ostensibly the primary purpose of the Federal Reserve and other central banks. But at least as important is the role of the central banks in promoting what they consider a "natural" level of unemployment--until the 1990s around six per cent. The reason is that when unemployment goes much below this figure, labor becomes increasingly uppity and presses for better pay and working conditions and more autonomy. Workers are willing to take a lot less crap off the boss when they know they can find a job at least as good the next day. On the other hand, nothing is so effective in "getting your mind right" as the knowledge that people are lined up to take your job.

The Clinton "prosperity" was a seeming exception to this principle. As unemployment threatened to drop below the four per cent mark, a minority of the Federal Reserve agitated to raise interest rates and take off the "inflationary" pressure by throwing a few million workers on the street. But as Greenspan testified before the Senate Banking Committee, the situation was unique. Given the degree of job insecurity in the high-tech economy, there was "[a]typical restraint on compensation increases." In 1996, even with a tight labor market, 46% of workers at large firms were fearful of layoffs--compared to only 25% in 1991, when unemployment was much higher.

Thus the willingness of workers during the Clinton "boom" to trade off smaller increases in wages for greater job security seems to be reasonably well documented. For the bosses, the high-tech economy is the next best thing to high unemployment for keeping our minds right. "Fighting inflation" translates operationally to increasing job insecurity and making workers less likely to strike or to look for new jobs.

Although Tucker included patents and tariffs among his big four privileges, he approached them in a largely individualistic manner, as a source mainly of monopoly prices to the consumer. He ignored, for the most part, the effects of patents and tariffs on business structure, and their role in promoting cartelization in the late nineteenth century. Patents and tariffs, along with transportation subsidies (a form of government intervention that Tucker ignored in his own time) together laid the foundation in the late nineteenth century for what was to become twentieth century monopoly capitalism.

The patent privilege has been used on a massive scale to promote concentration of capital, erect entry barriers, and maintain a monopoly of advanced technology in the hands of western corporations. It is hard even to imagine how much more decentralized the economy would be without it.

Although right-libertarians of all stripes are commonly stereotyped as apologists for big business, Murray Rothbard was not shy about denouncing patents as a fundamental violation of free market principles:

It is sometimes argued, in response to attacks on patents as monopolies, that "all property is a monopoly." True, as far as it goes; but property in land, even when based on occupancy alone, is a monopoly by the nature of the case. A parcel of land can only be occupied and used by one owner at a time, because it is finite. By nature, two people cannot occupy the same physical space at the same time. "Intellectual property," in contrast, is an artificial monopoly on the right to perform a certain action--to arrange material elements or symbols in a particular configuration--which is not otherwise restricted of necessity to one person at a time. And unlike property in tangible goods and land, the defense of which is a necessary outgrowth of the attempt to maintain possession, enforcement of "property rights" in ideas requires the invasion of someone else's space.

Patents make an astronomical price difference. Until the early 1970s, for example, Italy did not recognize drug patents. As a result, Roche Products charged the British national health a price over 40 times greater for patented components of Librium and Valium than charged by competitors in Italy.⁷¹

Patents suppress innovation as much as they encourage it. Chakravarthi Raghavan pointed out that research scientists who actually do the work of inventing are required to sign over patent rights as a condition of employment, while patents and industrial security programs prevent sharing of information, and suppress competition in further improvement of patented inventions.⁷² Rothbard likewise argued that patents eliminate "the competitive spur for further research" because incremental innovation based on others' patents is hindered, and because the holder can "rest on his laurels for the entire period of the patent," with no fear of a competitor improving his invention. And they hamper technical progress because "mechanical inventions are discoveries of natural law rather than individual creations, and hence similar independent inventions occur all the time. The simultaneity of inventions is a familiar historical fact."⁷³

The intellectual property regime under the Uruguay Round of GATT goes far beyond traditional patent law in suppressing innovation. One benefit of traditional patent law, at least, was that it required an invention under patent to be published. Under U.S. pressure, however, "trade secrets" were included in GATT. As a result, governments will be required to help sup- press information not formally protected by patents.⁷⁴

And patents are not necessary as an incentive to innovate. According to Rothbard, invention is motivated not only by the quasi-rents accruing to the first firm to introduce an innovation, but by the threat of being surpassed in product features or productivity by its competitors. "In active competition... no business can afford to lag behind its competitors. The reputation of a firm depends upon its ability to keep ahead, to be the first in the market with new improvements in its products and new reductions in their prices.⁷⁵

This is borne out by F. M. Scherer's testimony before the FTC in 1995.⁷⁶ Scherer spoke of a survey of 91 companies in which only seven "accorded high significance to patent protection as a factor in their R & D investments." Most of them described patents as "the least important of considerations." Most companies considered their chief motivation in R & D decisions to be "the necessity of remaining competitive, the desire for efficient production, and the desire to expand and diversify their sales." In another study, Scherer found no negative effect on R & D spending as a result of compulsory licensing of patents. A survey of U.S. firms found that 86% of inventions would have been developed without patents. In the case of automobiles, office equipment, rubber products, and textiles, the figure was 100%.

The one exception was drugs, in which 60% supposedly would not have been invented. I suspect either self-deception or disingenuousness on the part of the respondents, however. For one thing, drug companies get an unusually high portion of their R & D funding from the government, and many of their most lucrative products were developed entirely at government expense. And Scherer himself cited evidence to the contrary. The reputation advantage for being the first into a market is considerable. For example in the late 1970s, the structure of the industry and pricing behavior was found to be very similar between drugs with and those without patents. Being the first mover with a non-patented drug allowed a company to maintain a 30% market share and to charge premium prices.

The injustice of patent monopolies is exacerbated by government funding of research and innovation, with private industry reaping monopoly profits from technology it didn't spend a penny to develop. In 1999, extending the research and experimentation tax credit was, along with extensions of a number of other corporate tax preferences, considered the most urgent business of the Congressional leadership. Hastert, when asked if any elements of the tax bill were essential, said: "I think the [tax preference] extenders are something we're going to have to work on." Ways and Means Chair Bill Archer added, "before the year is out... we will do the extenders in a very stripped down bill that doesn't include anything else." A five-year extension of the research and experimentation credit (retroactive to 1 July 1999) was expected to cost $13.1 billion. (That credit makes the effective tax rate on R & D spending less than zero).⁷⁷

The Government Patent Policy Act of 1980, with 1984 and 1986 amendments, allowed private industry to keep patents on products developed with government R & D money--and then to charge ten, twenty, or forty times the cost of production. For example, AZT was developed with government money and in the public domain since 1964. The patent was given away to Burroughs Wellcome Corp.⁷⁸

As if the deck were not sufficiently stacked already, the pharmaceutical companies in 1999 actually lobbied Congress to extend certain patents by two years by a special act of private law.⁷⁹

Patents have been used throughout the twentieth century "to circumvent antitrust laws," according to David Noble. They were "bought up in large numbers to suppress competition," which also resulted in "the suppression of invention itself."⁸⁰ Edwin Prindle, a corporate patent lawyer, wrote in 1906:

The exchange or pooling of patents between competitors, historically, has been a key method for cartelizing industries. This was true especially of the electrical appliance, communications, and chemical industries. G. E. and Westinghouse expanded to dominate the electrical manufacturing market at the turn of the century largely through patent control. In 1906 they curtailed the patent litigation between them by pooling their patents. G.E., in turn (later to become the patriarchal see of Gerard Swope), had been formed in 1892 by consolidating the patents of the Edison and Thomson-Houston interests.⁸² AT&T also expanded "primarily through strategies of patent monopoly." The American chemical industry was marginal until 1917, when Attorney-General Mitchell Palmer seized German patents and distributed them among the major American chemical companies. Du Pont got licenses on 300 of the 735 patents.⁸³

Patents are also being used on a global scale to lock the transnational corporations into a permanent monopoly of productive technology. The single most totalitarian provision of the Uruguay Round is probably its "industrial property" provisions. GATT has extended both the scope and duration of patents far beyond anything ever envisioned in original patent law. In England, patents were originally for fourteen years--the time needed to train two journeymen in succession (and by analogy, the time necessary to go into production and reap the initial profit for originality). By that standard, given the shorter training times required today, and the shorter lifespan of technology, the period of monopoly should be shorter. Instead, the U.S. seeks to extend them to fifty years.⁸⁴ According to Martin Khor Kok Peng, the U.S. is by far the most absolutist of the participants in the Uruguay Round. Unlike the European Community, and for biological processes for animal and plant protection.⁸⁵

The provisions for biotech are really a way of increasing trade barriers, and forcing consumers to subsidize the TNCs engaged in agribusiness. The U.S. seeks to apply patents to genetically-modified organisms, effectively pirating the work of generations of Third World breeders by isolating beneficial genes in traditonal varieties and incorporating them in new GMOs--and maybe even enforcing patent rights against the traditional variety which was the source of the genetic material. For example Monsanto has attempted to use the presence of their DNA in a crop as prima facie evidence of pirating--when it is much more likely that their variety cross-pollinated and contaminated the farmer's crop against his will. The Pinkerton agency, by the way, plays a leading role in investigating such charges--that's right, the same folks who have been breaking strikes and kicking organizers down stairs for the past century. Even jack-booted thugs have to diversify to make it in the global economy.

The developed world has pushed particularly hard to protect industries relying on or producing "generic technologies," and to restrict diffusion of "dual use" technologies. The U. S.-Japanese trade agreement on semi-conductors, for example, is a "cartel-like, 'managed trade' agreement." So much for "free trade."⁸⁶

Patent law traditionally required a holder to work the invention in a country in order to receive patent protection. U.K. law allowed compulsory licensing after three years if an invention was not being worked, or being worked fully, and demand was being met "to a substantial extent" by importation; or where the export market was not being supplied because of the patentee's refusal to grant licenses on reasonable terms.⁸⁷

The central motivation in the GATT intellectual property regime, however, is to permanently lock in the collective monopoly of advanced technology by TNCs, and prevent independent competition from ever arising in the Third World. It would, as Martin Khor Kok Peng writes, "effectively prevent the diffusion of technology to the Third World, and would tremendously increase monopoly royalties of the TNCs whilst curbing the potential development of Third World technology." Only one percent of patents worldwide are owned in the Third World. Of patents granted in the 1970s by Third World countries, 84% were foreign-owned. But fewer than 5% of foreign-owned patents were actually used in production. As we saw before, the purpose of owning a patent is not necessarily to use it, but to prevent anyone else from using it.⁸⁸

Raghavan summed up nicely the effect on the Third World:

Corporate propagandists piously denounce anti-globalists as enemies of the Third World, seeking to use trade barriers to maintain an affluent Western lifestyle at the expense of the poor nations. The above measures--trade barriers--to permanently suppress Third World technology and keep the South as one big sweatshop, give the lie to this "humanitarian" concern. This is not a case of differing opinions, or of sincerely mistaken understanding of the facts. Setting aside false subtleties, what we see here is pure evil at work--Orwell's "boot stamping on a human face forever." If any architects of this policy believe it to be for general human well-being, it only shows the capacity of ideology to justify the oppressor to himself and enable him to sleep at night.

As with patents, we are interested here in the aspects of tariffs that Tucker neglected: their effect in promoting the cartelization of industry. In the next chapter, on the rise of monopoly capitalism, we will see the full-blown effects of what Schumpeter called "export-dependent monopoly capitalism." That term refers to an economic system in which industry cartelizes behind the protection of tarriff barriers; sells its output domestically for a monopoly price significantly higher than market-clearing level, in order to obtain super-profits at the consumer's expense; and disposes of its unsellable product abroad, by dumping it below cost if necessary.

The tariff was commonly called "the mother of trusts" by the populists of a century ago, because of the way it facilitated collusion between large domestic producers and the creation of oligopolies. Mises, in Human Action, described the dependence of cartels on tariff barriers (especially interacting with other state-enforced monopolies like patents). Of course, in keeping with his usual "pro-business" emphasis, Mises treated the large industrial firms, at worst, as passive beneficiaries of a state protectionist policy aimed primarily at raising the wages of labor. This parallels his view of the early industrial capitalists, and their non-implication in the primitive accumulation process, in the previous chapter.

According to Kolko's account in The Triumph of Conservatism, the large trusts at the turn of the twentieth century were not able to maintain their market share against more efficient smaller firms. The stabilization of most industries on an oligopoly pattern was possible, in the end, only with the additional help of the "Progressive" Era's anti-competitive regulations. The fact that the trusts were so unstable, despite the cartelizing effects of tariffs and patents, speaks volumes about the level of state intervention necessary to maintain monopoly capitalism. But without the combined influence of tariffs, patents, and railroad subsidies, it is unlikely they would have been able to make even a credible attempt to organize such trusts in the first place.

One form of contemporary government intervention that Tucker almost entirely ignored was transportation subsidies. This seems odd at first glance, since "internal improvements" had been a controversial issue throughout the nineteenth century, and were a central part of the mercantilist agenda of the Whigs and the Gilded Age GOP. Indeed, Lincoln has announced the beginning of his career with a "short but sweet" embrace of Henry Clay's program: a national bank, a high tariff, and internal improvements. This neglect, however, was in keeping with Tucker's inclination. He was concerned with privilege primarily as it promoted monopoly profits through unfair exchange at the individual level, and not as it affected the overall structure of production. The kind of government intervention that James O'Connor was later to write about, that promoted accumulation and concentration by directly subsidizing the operating costs of big business, largely escaped his notice.

At the end of the previous section, we noted that the failure of the trust movement reflected the insufficiency of railroad subsidies, tariffs and patents alone to maintain stable monopoly power. But without the government-subsidized "internal improvements" of the nineteenth century, it is doubtful that most national-scale industrial firms would even have existed, let alone been able to make attempts at collusion.

Adam Smith argued over two hundred years ago for the fairness of internalizing the costs of transportation infrastructure through user fees.

But that's not the way things work under what the neoliberals like to call "free market capitalism." Spending on transportation and communications networks from general revenues, rather than from taxes and user fees, allows big business to "externalize its costs" on the public, and conceal its true operating expenses. Chomsky described this state capitalist underwriting of shipping costs quite accurately:

Every wave of concentration of capital in the United States has followed a publicly subsidized infrastructure system of some sort. The national railroad system, built largely on free or below-cost land donated by the government, was followed by concentration in heavy industry, petrochemicals, and finance. Albert Nock ridiculed the corporate liberals of his time, who held up the corruption of the railroad companies as examples of the failure of "rugged individualism" and "laissez-faire."

The modern telecommunications system goes back to the Bell Patent association, organized in 1875; the various Bell systems were consolidated as AT&T in 1900. Without the government's enforcement of its huge arsenal of patents on virtually every aspect of telephony, a centralized communications infrastructure would have been impossible on anything like the present scale.⁹³ And that is leaving out entirely the role of government franchises and right-of-way grants in the rise of the AT&T monopoly.

The next major transportation projects were the national highway system, starting with the system of designated national highways in the 1920s and culminating with Eisenhower's interstate system; and the civil aviation system, built almost entirely with federal money. The result was massive concentration in retail, agriculture, and food processing.

The most recent such project was the infrastructure of the worldwide web, originally built by the Pentagon. It permits, for the first time, direction of global operations in real time from a single corporate headquarters, and is accelerating the concentration of capital on a global scale. To quote Chomsky again, "The telecommunications revolution... is... another state component of the international economy that didn't develop through private capital, but through the public paying to destroy themselves...."⁹⁴

The centralized corporate economy depends for its existence on a shipping price system which is artificially distorted by government intervention. To fully grasp how dependent the corporate economy is on socializing transportation and communications costs, imagine what would happen if truck and aircraft fuel were taxed enough to pay the full cost of maintenance and new building costs on highways and airports; and if fossil fuels depletion allowances were removed. The result would be a massive increase in shipping costs. Does anyone seriously believe that Wal-Mart could continue to undersell local retailers, or corporate agribusiness could destroy the family farm?

It is fallacious to say that state-subsidized infrastructure "creates efficiencies" by making possible large-scale production for a national market. The fact that a large, centralized infrastructure system can only come about when the state subsidizes or organizes it from above, or that such state action causes it to exist on a larger scale than it otherwise would, indicates that the transaction costs are so high that the benefits are not worth it to people spending their own money. There is no demand for it by consumers willingly spending their own money, at the actual costs of providing the services, risks and all, without state intervention.

If production on the scale promoted by infrastructure subsidies were actually efficient enough to compensate for real distribution costs, the manufacturers would have presented enough effective demand for such long-distance shipping at actual costs to pay for it without government intervention. On the other hand, an apparent "efficiency" that presents a positive ledger balance only by shifting and concealing real costs, is no "efficiency" at all. Costs cannot be destroyed. Shifting them does not make them any less of a cost--it only means that, since they aren't being paid by the beneficiary of the service, he profits at someone else's expense. There Ain't No Such Thing As A Free Lunch.

Intellectually honest right-libertarians freely admit as much. For example, Tibor Machan wrote in The Freeman that