Progress and Poverty

This chapter examines the effects of population growth on wealth distribution, excluding the factor of technological advancement. The accepted explanation for the reason why population growth translates into land rent increase is the fact that it leads to an increased demand for agricultural production. The latter is supported by Malthusianism and its concept of population growth running into the limitation of food supply. This theory does not consider the growing labor efficiency of cultivating land by producing larger quantities of wealth. Eventually, the cultivation of poor-quality land may indeed reduce the minimum return on labor. Overall, however, an “increase of population, as it operates to extend production to lower natural levels, operates to increase rent and reduce wages as a proportion, and may or may not reduce wages as a quantity” (232). However, this is not the only way in which rents increase as the population grows.

When a small frontier settlement gradually expands to become a city the size of San Francisco, so does its productivity. All the benefits of a city are linked to the land, “And rent, which measures the difference between this added productiveness and that of the least productive land in use, has increased accordingly” (239). Natural resources, such as coal deposits, have obvious value, but many of the land’s superior qualities are actually brought about by population growth. Overall,

[T]he effect of increasing population upon the distribution of wealth is to increase rent, and consequently to diminish the proportion of the produce which goes to capital and labor, in two ways. First, by lowering the margin of cultivation. Second, by bringing out in land special capabilities otherwise latent, and by attaching special capabilities to particular lands (241, emphasis added).

Population growth leads to a rent increase and an increase in productivity. This chapter examines the development of industrial production, excluding the population factor, upon wealth distribution. The impact that technological advancement has on industrial production is “to save labor—that is, to enable the same result to be secured with less labor, or a greater result with the same labor” (242). For example, the division of labor increases the power of productivity.

The second consequence of labor-saving technologies is “to extend cultivation, and, where this lowers the margin of cultivation, to increase rent” (242). This tendency to increase land rent is as follows: “Wealth in all its forms being the product of labor applied to land or the products of land, any increase in the power of labor, the demand for wealth being unsatisfied, will be utilized in procuring more wealth, and thus increase the demand for land” (247).

As technology continues to advance, the production margin will decrease, while rent will grow. Since progress may be limitless, so too can the rent increase be. Overall, “in the improvements which advance rent, are not only to be included the improvements which directly increase productive power, but also such improvements in government, manners, and morals as indirectly increase it” (252).

Population growth and the increase in productive power each lead to an increase in land rent rather than advancing wages or interest. As a result, the growth of wealth “goes ultimately to the owners of land in increased rent” (253). However, there is another link between material progress and wealth distribution: “the confident expectation of the future enhancement of land values, which arises in all progressive countries from the steady increase of rent, and which leads to speculation, or the holding of land for a higher price than it would then otherwise bring” (253).

The limits of growing cities correspond to “the margin of cultivation in agriculture” (255). Beyond these limits, land value is linked to speculation anticipating further expansion. Overall, “the general and steady advance in land values in a progressive community necessarily produces that additional tendency to advance which is seen in the case of commodities when any general and continuous cause operates to increase their price” (257). However, there are limits to the increase in land rent based on speculation. Such limits are linked to the fact that “wages cannot be permanently reduced below the point at which laborers will consent to work and reproduce” as well as “interest below the point at which capital will be devoted to production” (258).