Land Use and Capital; H. L. Smith

HARRY LEE SMlTH HISTORICALLY the ownership of land has been vested in the ruling classes. Often the monarch himself owned all the land. Public (collec tive or governmental) ownership is a primitive institution commencing with tribalism and persisting throug h the feudalism of the middle ages. Only during the past two centuries has private ownership of land found wide acceptance. But even today, a third of the world lives under communism which adheres to the archaic concept of public lands. In addition, there is considerable socialistic pressure in the free world to extend public control over all land use. In the United States today about 60 per cent of the land is privately owned. During the nineteenth cen tury it was national policy to transfer as much land as possible to the private sector. Now the process is reversing. Mr. Smith is a businessman in California. The importance of the institution of private property to well-being and even· to survival bears further analysis.

When Columl1us discovered America the natives did not have the wheel, the plough, horses, livestock, or the concept of private land ownership. The extremely inefficient hunting society of the North Ameri<?an Indian required 'about ten square miles of land to support one Indian. Marion Clawson, the author of America's Land & Its Uses, and the former director of the Bureau of Land Management, makes this com ment: "Given their technology, the Indians had probably reached the numbers that represented the carrying capacity of the.land. All of the area of the present United States that was habitable at all was occupied by some tribe or tribes; there were no empty lands." But today we have plenty of empty lands despite an increase of 541 542 THE FREEMAN September population from possibly 300,000 Indians to over 215,000,000 Ameri cans. Furthermore, the Indian exis tence was precarious and marginal; either drought or a severe winter could produce famine.

Sixteenth-century England also considered itself to be overpopu lated for an agricultural society. This produced the incentive to seek colonies overseas, especially in North America. Agricultural Use of Land Agricultural land can support about 250 times as many people as land used for hunting. So to make the land support additional num bers, our early settlers cleared the land for agricultural use. Today, the three big uses of land are for crops, forests, and grazing. Together they account for 89 per cent of the total. To~ay's farmer uses 23 per cent of the land area of the United States for crops. He no longer provides all of the inputs as did the pioneer, but buys about 70 per cent of his needs in the form of fertilizer, feed, ma chinery' fuel, and water. This requires capital. He produces 2 1/2 times the total output of farmers of only 60 years ago, with one-third the man-hours and one-half the cultivated land.

This agricultural efficiency is unique in history, with the result that the United States is the bestfed nation on earth and leads the world in agricultural exports. Our present forest lands comprise 32 per cent of the total land area. About two-third~ of this is composed of small unproductive stands which someday might be consolidated and exploited. Growth of new lumber outpaces new cutting by 1.6 to 1, and this ratio has been increasing steadily since the 1920's. Due to the use of other building materials, total lumber consumption has hard ly changed since World War I. Also, lumber companies are just getting started on forestation techniques similar to those which have revolu tionized farming during the past 60 years. With sufficient capital input, there is no danger of running out of lumber. The biggest agricultural use of land is for grazing-34 per cent of the total. This is also the least productive use of farm land. With more and more cattle being raised on farm feed lots, a good deal of this grazing land remains unused open space.

Finally, 10 per cent of the land has miscellaneous uses, some of them quite important. They include lands for transportation, recreation, water storage, mining, and defense. How Cities Serve the People This leaves only one per cent, which is the area occupied by all of our cities. Actually, cities of over 1976 LAND USE AND CAPITAL 543 25,000 inhabitants occupy only one half of one per cent of all land. Never has land been used more efficiently than that. The secret of making land sup port more and more people is the application of technology and capital-the dichotomy proposed by Adam Smith. They seem. to grow together. But of the two, capital is by far the more important. While agricultural technology is freely available to the poorer nations of the world, they cannot avail them selves of this knowledge due to lack of capital. It was the advent of political freedom for the individual which induced agricultural efficiency. This required fewer farmers. The dis placed farmers went to the cities where they produced capital which further enhanced agricultural prod uctivity. Today, in a very real sense, our food is produced in the cities.

The United States is 73 per cent urbanized; but California, which is 87 per cent urban, leads the nation in agricultural output. Agricultural land should yield to urbanization, since the cities pro vide the capital which is the touchstone of massive food produc tion. During the past 60 years, as a consequence of agricultural effi ciency, half of our cropland has been retired but is available for food production if needed. We need have no fear of running out of food due to the paving over of agricultural land. The application of capital to land not only produces abundant food. It also has generated an ever-increas ing quantity of energy which acti vates mechanical servants in our homes and industries. And the com bined uses of capital and land yield more and more raw materials, either conventional or synthetic. Some Wasteful Practices As we added millions of immigrants to the carrying capa city of the land of the United States over the past 500 years, the avail able capital was not sufficient to keep the land in prime health. Some cropland was over-ploughed, some forest land was over-cut, some graz ing land was overgrazed. Capital in the form of deep-well pumps, seed, and fertilizer can cure such ills. But despite the relative scarcity of capital, the land proved to be any thing but "fragile" and supported its burden remarkably well.

The abusive or wasteful use of land seemed to bottom.in the 1920's and there has been an improving trend since then. With 73 per cent of our population living on one per cen t of the land, open space has increased. We have set aside mil lions Df acres for nothing but recrea tional use. This is in contrast to the American Indian who, technically speaking, had no. spare open space. He dedicated all of his labor and 544 THE FREEMAN September capital (which was the land) to survival. Another thing that happened in the 1920's was that land use stop ped changing. Except for taking certain crop and grazing lands out of production, overall land use maps of 50 ye~rs ago look very much like those of today. Also, despite con tinuing urbanization, the propor tion of the population living in major cities of over 250,000 has not changed in 50 years. Our urban growth has been mainly in subur ban satellite cities. But this "urban sprawl" has used but a fraction of one per cent of the land.

How Cities Develop The value of urban land is 1 1/2 times the value of all other lands combined, even though urban land is but one per cent of the total. This is an indication of the value we place on capital-producing land compared to any other use. Further more, the carrying capacity of urban land is incredibly high. Cities can carry densities as high as 600,000 persons per square mile. This might be compared to 25 per sons carried on a square mile of typical farmland. If 600,000 persons were placed on a one-sQuare-mile island covered with asphalt, they would obviously perish. Giving them food would not be a long range solution. Also, massive education on wealth-producing techniques would, of itself, not save them. Even massive grants of capital would probably be politically dissipated. Only the gra dual building up of lines of transportation, communication, energy generation, and industrial production over time would allow for a thriving community. Such is the case of Hong Kong. Such is the miraculous power of private capital.

The poorer nations of the world benefited little from the industrial revolution except in one regard: medical knowledge developed in the West has reduced their death rate. The resultant swollen population must be kept alive by increasing t,he carrying capacity of the land. This requires financing. Obviously there is 'a precarious balance between urban and rural life. If the capital-producing ability 'of the Uni ted States were destroyed, the land could barely support a third of our present population as pastoral inhabitants. The rest would perish. This is exactly what happened in April of 1975 when the Cambodian communists drove the inhabitants of Phnom Penh and other cities out into the jungles and fields. Many of them have perished. Stalin did the same thing when he disbanded Rus sian farm communities in the 1930's to enforce collective farming. Millions perished on the Russian steppes.

1976 LAND USE AND CAPITAL 545 Cities Under Attack In a similar but less extreme vein, our American cities are under attack. There are master planners who have suggested that our cities be entirely rebuilt, at enormous cost. Such land use planners often put the priorities of the upper middle class above those of the less fortunate members of society. For instance, despite an energy crisis, planners would allow esthetics to take precedence over heated homes in the matter of coal strip mining. Also, despite high lumber prices, the priorities of hunters and cam pers are considered more important than cheap housing in the matter of efficient clear cutting on forest land. And invariably, planners believe that urbanization should yield to farm land which, as we have seen, is detrimental to massive food production. Over the generations, planners often reverse themselves. In the past, city governments have ruined all private urban transit systems by prohibiting needed fare increases.

Now city planners urge the spend ing of billions in tax funds for public mass transit systems. In the past, the federal government has fostered the growth of suburbs through FIlA financing of new homes and by building freeways. Now planners propose the spending of billions in tax funds for urban renewal. Since taxation is a prime enemy of capital formation, the process is not only painful but destructive. No society in history has ever developed such a rich, heal thy, and comfortable life as that of the American urban dweller. Yet critics of city life can only see urban sprawl, congestion, decay, poverty, pollution, smog, crime, and social injustice. This attitude pervades the thinking of most city planners. They are not interested in the wealth-creating function of cities. For them, cosmetic improvement takes precedence over business vitality, employment, growth, and economic well-being. Planners take up valuable central city space for government buildings, parks, and green belts. They often oppose such innovations as industrial parks, con dominium complexes, mobile home parks, and shopping centers, all of which are developments of the past 40 years and none of which were foreseen by city planners.

What makes modern govern ments tend to be hostile toward capitalistic cities? Among other things, the modern city is a machine for the creation of private capital. It is the manifesta tion of, and the vehicle for, the emancipation of peasants who for merly lived in rural squalor. It has elevated millions of urbanites into the heady realm of material well· being formerly enjoyed only by the 546 THE FREEMAN September ruling classes. The process has pro duced a vast economic hierarchy. Many intellectuals look on the capitalist businessman with the same contempt that the nobility formerly held for the peasant, since now the peasants have committed the unforgivable sin of becoming rich. Urban Development, Up from Serfdom If we look for a moment at the history of cities, we find that urban life has been the exception rather than the rule. Historians have dis torted the past by writing mainly about the tiny but powerful ruling classes which tended to live in cities-hence the word "urbane:' Most cities of the past were political cities, buH t for the protection and pleasure of the monarch and his court. Such cities produced nothing and tended to be an economic blight on the surrounding countryside.

They existed by taxing the peasants who lived outside the city's walls. Most of our ancestors were such peasants, and our present middle class population consists of emanci pated peasants. In fact, most of our ancestors were serfs, bound to the soil by the ruling classes. This kept the masses out of the cities and retarded upward social mobility, technological pro gress, and capital formation. Such things had to await the political freedoms put into practice during the eighteenth century. In the fifth century BC, the Roman dictator Cincinnatus was asked about the secret of his success as a ruler. He took his interrogator into a nearby wheatfield and with his sickle proceeded to lop off the tops of wheat stalks which had the temerity to grow taller than the average. So have rulers generally tended to lop off the heads of individuals whose success has threatened their power, wealth, or social prestige. This reactionary policy of egalitarianism for the masses is fundamental to com munist and socialist doctrine.

"Hubris" is the word the Greeks gave to the urge to rule the lives of others. It is hubris which has moti vated the Stalins and the intellec tual planners of the West to play with people's lives and fortunes as though they were pawns on a chess board. This arrogance deludes those with political power into believing that they can mold a city more effectively than can the economic forces of the market place. The city of Houston has no zoning ordinances. The economic forces which have shaped Houston have been thoroughly analyzed by Ber nard Siegan in his excellent book Land Use Without Zoning. In dis cussing land use maps of various cities with city planners, Siegan found that, when looking at 1976 LAND USE AND CAPITAL 547 Houston land use maps, the experts were not aware that they were examining an unplanned city. The most effective force in shap ing a city is Adam Smith's Invisible Hand. It is the same Invisible Hand which has produced open space where none existed before, which has created arable land when required, and which has made the land produce in abundance. In the case of cities, some unexpected by products have been the magnifi cence of the Manhattan skyline, the quaintness of New Orleans' Latin Quarter, and the vitality of down town Houston. For those who see beauty in vitality, all capitalist cities are beautiful.

The city planners of Phnom'Penh effectively accomplished their pur pose of eliminating the hated mid dle class. But the American city planner, while striking at the "greedy" middle-class builder or developer, harms the poor man most of all. During the past 20 years total housing costs and expenses have risen 303 per cent while disposable income rose only 183 per cent. Real estate taxes have soared 341 per cent. This has all been brought about by government intervention in the market place, including cost ly delays, increased public service costs, competing with private industry for capital funds which induce high interest rates, and land rationing through zoning. Controlled growth in cities has the same effect as controlled growth in any other sector of the economy. By discouraging production, economic goods, including land, be come scarce and prices rise. A Gor ollary to the law of supply and demand provides that when prices rise the first person to be deprived of goods and services is the poor man.

Increased costs curtail the eman cipation of the peasants. The Importance of Capital for Economic Growth There is no force more likely to produce mass starvation among the peasants of the world than the prejudice of Third World leaders against private capital formation. On the other hand, in the United States we need have no fear what soever of famine at the present time. By historical and Third World standards, hunger and poverty have practically been eliminated. The fluid which has made this possible is private capital. Marion Clawson has this to say regarding our fortunate situation. "There seems little rea son for concern about the nation's ability to feed itself. By increasing agricultural output and by shifting to more cereals and less meat in the national diet, the country can feed 10, or 20, or even more times its present population. .. The ultimate food productive capacity is so far above the present level that there is 548 THE FREEMAN September nothing to be gained from trying to estimate just how large it is."

This statement claims that, given enough capital and economic incen tive, the land area of the United States could feed the entire present population of the earth. Of course, China, Russia, and India each could also feed many times their own populations. But to do so would require a shift to laissez faire capitalism -a condition not likely to be accepted by any of the existing governments; certainly not by the communists or socialists. As Albert Jay Nock has repeatedly warned - the deadliest enemy of the free and self-sufficient individual is the State. Socialist misuse of capital is in sharp contrast to its efficient use under free enterprise. Russia was the leading exporter of food before the revolution, but today cannot feed herself. In desperation the Soviets have allotted 31 per cent of available capital to agriculture in contrast to only 4 per cent in the United States. But the Soviet farmer remains only one-tenth as productive as the American farmer, due to lack of proper incentives.

Since all individuals on earth have different and ever-changing priorities, the coercively imposed priorities of governments and plan ners can only act against the interests of individuals. Govern ments tend to oppose or dissipate capital formation by controlling economic activity and by redistributing income. As we have seen, this can have serious conse quences for the carrying capacity of the land, resulting in starvation in the marginal economies. Intellectual planners and environmentalists picture them selves as guardian angels, protect ing the land against ravage by irresponsible entrepreneurs bent on profit. But instead of building a beautiful paradise, their coercive methods might, in the long run, produce the primitive hell of Cam bodia. As was said by the seven teenth-century philosopher Blaise Pascal: "Man is neither angel nor brute, and the unfortunate thing is that he who would act the angel acts the brute." f) •BIBLIOGRAPHY· Population and History by E.A.

Wrigley, McGraw-Hill. America's Land and Its Uses by Marion Clawson, Johns Hopkins Press. The Myth or OverPopulation by Rousas Rushdoony, Craig Press. The Unheavenly City by Edward C. Banfield, Little, Brown and Com pany. World Cities by Peter IIall, McGraw Hill. Land Use Without Zoning by Ber nard Siegan, Lexington Books, D.C. Heath.