To the Editor of the Pall Mall Gazette.

     Sir,--Allow me to make a few observations on some statements referring to my supposed views by the writer of the article "Short Notes on Land Nationalization," which appeared in your issue of the 24^th ult. The writer acknowledges that much of what I say with regard to the unequal distribution of wealth and the general evils of landlordism is correct; but in the latter part of the article he so mixes up my proposed remedy with that of Mr. George and of other land reformers that I do not feel disposed to reply to this portion of his remarks, though I shall be glad to do so if he will confine himself to my own facts and proposals, as stated in my book on "Land Nationalization," which I hardly think he can have read through. It is with his statistical argument that I now wish to deal, as he maintains that it "cuts away the whole foundation for the special remedy suggested by Mr. Wallace and Mr. George." He states that the total increase in the value of land, houses, and mines, as shown by income tax returns, was 65½ millions from 1862 to 1880, and he adds (without a particle of proof) that "the largest proportion" of this increase was due to improvements. He then states that the increase in the income of the country for the last twenty years was reckoned by Mr. Dudley Baxter at between 600 and 700 millions, and from these alleged facts just as they stand he draws the inference given above. Surely never was a more striking example given of "how not to use statistics." For note, first, that one side of the comparison is taken for eighteen years and the other side for twenty; that one side is taken from one authority, with a deduction at hap-hazard, the other from another authority, and professedly "an estimate." Secondly, no notice is taken of the fact that the wealth-producing population has increased about 20 per cent. in the twenty years, while the land, the owners of which absorb so much of the proceeds of their labour, has not increased at all. Thirdly, we have to consider that the whole increase in the rents of land and houses is a deduction from the increased incomes of the people. Fourthly, that food and many other necessaries, as well as all rates and taxes, have increased enormously, and form important deductions from the increased incomes of the people. And, lastly, that an unknown but enormous amount of income is drawn directly or indirectly from foreign countries. These various considerations render such rough and undigested figures as your correspondent gives utterly worthless and misleading. Let us, however, see what we can learn from one official authority--the income tax returns, as given in the "Financial Reform Almanack for 1881," the only book I have at hand to refer to. Taking the last twenty years therein given, 1858 to 1878 (and making the necessary corrections for the transference of railways, canals, waterworks, mines, &c., from Schedule A to Schedule D in 1866), I find the increase of the annual value of lands, tenements, and tithes to be about 60 millions on 85 millions, or 70 per cent. Referring to Schedule B, we find that agricultural land increased 17 millions on 52, or 33 per cent. This leaves an increase of 37 per cent. estimated on house property, &c.; and if we allow even 20 per cent. for improvements (probably more than the truth), and add the remaining 17 per cent. to the 33 per cent. on agricultural land, we arrive at 50 per cent. as the unearned increment on landed property generally during the twenty years, equal to 42½ millions.

     Now, turning to Schedules D and E, which give all the incomes from trades, professions, salaries, &c., we find an increase of 135 millions on 120 millions, or about 11.2 per cent. This looks at first sight as if the gain by the people had been much greater than that by the landlords, but a little consideration will show that it does nothing of the kind. For, first, of this 135 millions the above 42½ millions at least have been absorbed by the landlords in increased rents; and we must also take into account that tenants are subject to many charges--for renewals of leases, for repairs, for taxes on the landlord's property, for loss by game, and for improvements which the landlord confiscates, and which, together, make the payments to the landlords very much greater than they appear to be. Next, we have an enormous reduction from the apparent increase of income owing to the increase of rents of houses (as distinct from land), of rates and taxes, and in the cost of food and of wages. These items make probably a reduction of one-third in addition to the third paid in increased land rents; so that the effective increase in the average incomes of the classes enumerated above is only about 37½ per cent., or 45 millions. But this reduced amount is divided among a population greater by about 20 per cent., so that the real increase is less than 30 per cent. Yet, again, we have to remember that a large but unknown portion of this is drawn from foreign and colonial sources. Let us suppose this part to be only 10 millions, and we have left 35 millions of increased income during twenty years for the whole of the middle classes of the country, as the reward of greatly increased activity and knowledge and generally harder work. Contrast this with the 42½ millions increase of land values, absorbed by a very limited and already enormously wealthy class, who have done nothing but receive and spend it, and we shall be impressed with the truth which Mr. George so eloquently expounds, but which the father of political economy, Adam Smith, clearly perceived more than a century ago--that the landlords necessarily absorb most of the surplus wealth produced by an advancing community. In the "Wealth of Nations," at the end of Chap. XI. of Book I., he says:--"Every improvement in the circumstances of society tends, either directly or indirectly, to raise the real rent of land, to increase the real wealth of the landlord. . . . The real value of the landlord's share, his real command of the labour of other people, not only rises with the real value of the produce, but the proportion of his share to the whole produce rises with it."

     In my critic's second paper (January 29) it is objected that I propose a perpetual quit rent to be paid by all future tenants to the State, and that this would practically transfer the future unearned increment to these tenants. I thank the writer for pointing out this oversight in my book, though I cannot admit that the point was not foreseen and provided for. In the scheme of the Land Nationalization Society, drawn up by myself a year before my book was published, it is declared that all quit rents are to be "subject to revision (say once in a generation) to adjust any important changes in inherent value." This proviso has, I now find, been unfortunately and quite unintentionally omitted in my book. As to the further objection, that unless speculative prospective values of land are taken into account injustice will be done, I totally differ from the writer, though this is a matter of detail which may well be left till nationalization takes place. Such speculative values have no doubt been paid for in the past, but it is now generally admitted that the principle is unsound, especially when the prospective increase of value is an "unearned increment" due wholly to society at large. Such increments already realized must be recognized, because some simple principle must be acted on in order to avoid such tedious and costly investigations into every single case as would render any scheme of nationalization unworkable.

     The objection as to houses depends on the assumption that there are hardly any houses already in existence. There would be really no more difficulty than there is now; and it is really absurd to suppose that society could not adapt itself to a condition of things which already largely prevails in other countries. With the lower rents produced by the absence of land monopoly and building speculation, every occupier of a house would be able to purchase it by a terminable rental no heavier than that which he now pays for a mere tenancy.

     I will only remark, in conclusion, that your correspondent is mistaken in supposing that I believe that the persistence of poverty and the low condition on the labouring poor is "entirely due to the existence of private property in land." If he will turn to my "Land Nationalization," p. 17, he will find that I suggest two sources of the evil and two remedies; but I maintain that landlordism is the greatest and most fundamental evil, and that its abolition in the way I have advocated will greatly facilitate the removal of those evils which depend on the tyranny of capital, the helplessness of workmen, and the unequal distribution of wealth.

Alfred R. Wallace.
January 29.