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Home -> Charles Francis Bastable -> Public Finance -> Chapter II a

Public Finance - Chapter II a

1. Preface

2. Chapter I

3. Chapter I a

4. Chapter II

5. Chapter II a

6. Chapter III

7. Chapter IV

8. Chapter V

9. Chapter VI

10. Chapter VII

11. Chapter VII a

12. Chapter VIII

13. Chapter VIII a

14. Book II Chapter I

15. Chapter II

16. Chapter II a

17. Chapter III

18. Chapter III a

19. Chapter III b

20. Chapter IV

21. Chapter V

22. Book III Chapter I

23. Book III Chapter I a

24. Chapter II

25. Chapter III

26. Chapter III a

27. Chapter III b

28. Chapter IV

29. Chapter V

30. Chapter V a

31. Chapter VI

32. Book IV Chapter I

33. Chapter II

34. Chapter III

35. Chapter IV

36. Chapter V

37. Chapter VI

38. Chapter VI a

39. Book V Chapter I

40. Chapter II

41. Chapter III

42. Chapter IV

43. Chapter IV a

44. Chapter V

45. Chapter Va

46. Chapter VI

47. Chapter VIa

48. Chapter VII

49. Chapter VIIa

50. Chapter VIII

51. Chapter VIIIa

6. The methods of administering state lands may be
reduced to the same classes as those existing in the case of
a large private owner. As in the latter instance the estate
may be worked by the proprietor or let out to tenants, so
may public property be either directly under state administration or be leased to private individuals. The former
system is probably the earliest. The celebrated capitulary
of Charlemagne, entitled de villis, contains a set of regula-
tions for the management of his manors, and in Germany
several parallels are to be found 1 , but the same influences
that caused land-owners to abandon farming by bailiffs
affected the royal estates. A direct financial gain was
procured by letting the lands to tenants. To work effec-
tively a large area of land requires a good deal of capital
applied with intelligence, under diligent supervision. All
these conditions were wanting in public or royal manage-
ment, and therefore the economic advantages of the tenancy
system were so great as to be easily recognised. The
method of direct state administration as a financial policy
has no supporters 2 .

The dealings of the State with agricultural tenants ought,
it is plain, to be modelled on the system of a prudent
landlord. There is no possible reason why .the treatment
of state domains should differ from that applied by private
owners to the management of their properties. In two
respects, indeed, the nature of the public power has peculi-
arities that affect its dealings with land. It is of longer
duration than the individual owner, and it has necessarily
to act through agents. A result of the former is the possi-
bility of longer agreements and a more continuous policy in
the system adopted : the latter makes the use of definite
rules desirable to prevent corrupt action on the part of
officials. Even as regards these special features there is
not much difference between the state property and those
of the largest class of English owners where the method of
estate management is handed on unchanged for genera-
tions, and most of the administrative work has to be done
by paid representatives.
The earliest agricultural tenants are probably to be
found in the serfs who cultivated the soil and paid rents in
labour, or produce, or both. The advance in personal
liberty freed these cultivators from many of the more
degrading incidents of their tenure, and by degrees they
became established as free tenants paying money rents.
In another way a larger class of tenants was created.
Officials in charge of land were bound to account for
a certain return, the surplus, if any, going to them, and
this function of collecting dues with the obligation of
giving a fixed quota to the sovereign, became in many
cases tenancy, passing later on into ownership.

The application of what are called 'commercial principles'
to the letting of land is of comparatively recent introduc-
tion, but it is only at this stage that the idea of conscious
choice between different systems, hitherto followed through
the blind influence of custom, comes prominently forward.
Three forms of tenure are possible, viz. tenancy from year
to year, or in popular language 'at will,' leases for years,
and heritable, extending to perpetual, leases. The first
form has been almost universally condemned, though under
the fair and impartial guidance of a public department it
would be free from some of its most objectionable aspects.
The undue increase of rent and the discouragement to im-
provements characteristic of the tenure would neither of
them be likely to happen under state management. Leases
for years are, however, free from even the chance of such
evils, and it is perhaps wise to adopt this system, as other-
wise the example of the public estates might be put forward
to justify the conduct of private owners in adhering to
yearly tenancies. The exact number of years to be given
in the state leases can hardly be decided on general prin-
ciples. It should be long enough to give full room for

most extensive land proprieters in England, having the management of pro-
perties with a rental of upwards of 400,000, situated in all parts of the United
Kingdom. These are administered upon practically the same principles which
obtain in the cases of the large landed nobility,
the application of the tenant's industry and capital, while
in the interest of the public it should not exceed the time
during which a large increase of the natural value of the
land takes place. Provided that full allowance is made for
the tenant's improvements, thirty years seems a fair term,
and sufficient to eliminate the effects of casual disturbances.
Older than leases for years is the system of hereditary
lease (Erbpacht) that has from early times been connected
with public property. The emphyteusis the form that
it takes in Roman Law was originally developed on the
estates of municipalities, and in the Middle Ages ecclesias-
tical bodies were foremost in granting similar tenures 1 .
The advantages to a corporation of obtaining a settled
rent without the trouble of supervision and calls for
expenditure are greater than in the case of a single owner
who hopes to gain extra rent by his attention and outlay,
and when combined with fines for change of possession
the revenue obtained is generally satisfactory. Neverthe-
less the hereditary lease is in reality a step towards
alienation. The tenant holding by this tenure is part
owner and in course of time tends to take the position of
full owner subject to a rent charge 2 ; more especially is
this true when the fines, as usually happens, are redeemed
by a fixed payment. The head landlord i. e. with regard
to public lands the State is substantially a creditor entitled
to certain remedies if his obligation is not paid. What
seems the most prudent policy, alike on financial and social
grounds with respect to state management of property, is
to follow the system adopted by the best individual land-
owners, and the forms between which choice will generally
lie are the lease for a sufficient term of years and the
hereditary lease ; the former is financially the wisest, but
special circumstances may make the emphyteusis to use
the old title more convenient, when we must remember
that the land revenue is practically converted into a fixed
charge. Leases for lives are open to the objection that
they are uncertain, but by judicious regulations as to
renewals much of the evil of insecurity can be avoided.

The modes of setting vacant farms, the duty of supply-
ing buildings and permanent improvements, and the form
in which rent is to be received, have all been carefully
discussed in the older financial treatises. Most of these
questions belong to practical administration and are, more-
over, not of great interest in modern times. Certain plain
rules may, however, be stated. The claims of successors
to the late tenant should not be overlooked ; it is better
for the tenure to be continued without break, and therefore
the question of new letting ought rarely to occur. When
it does, the best mode of disposal will depend on the cir-
cumstances of the particular district ; with capitalist farmers
letting to the highest bidder is admissible and it excludes all
chance of unfairness. But where, as notably was the case
in Ireland, there is exaggerated competition for land, the
amount of rent payable over a series of years by a solvent
tenant should not be exceeded. In such cases a sale of
the interest subject to a fixed rent seems the best course.
The supply of suitable buildings, and the institution of
permanent improvements must, under a system of short
leases, be carried out by the State, but the modern plan of
advancing public funds for improvements could be easily
applied, the interest on loans being added to the rent
and paid at the same time. Hereditary leaseholds may be
safely left to the tenant as he gains all the benefit of
improvements. The form of rent ought clearly to be, as
far as possible, in money. Special conditions may make
payment in kind more convenient, but this mode of
receiving rent should be only temporary and all possible
efforts be tried to introduce the more definite system of
money payments. Even where for practical convenience
the rent is a fixed part of the total produce, the actual
payment had best be in money, the various articles being
estimated at their money value.

7. We are now in a position to deal more fully with
the expediency of extending the state lands. In their
extremest form plans of this kind aim at the acquisition
by purchase of all private landed property. More moder-
ate proposals seek to increase those possessions in a
smaller degree. Any plan of the kind even limited in
the most careful manner is open to overwhelming objections.
It amounts to the creation of a new public department
engaged in countless dealings with what is the most
intricate and complicated form of property ; arrangements
as to valuation, the renewal of" leases, allowances for im-
provements, abatements for unexpected losses, the main-
tenance and audit of innumerable accounts would all fall
to the lot of the department. It would, on the supposition
of purchase, have to pay interest on a large amount of credit card debt.
There would be little hope of a favourable financial result
under such conditions. In short, we may say that if land-
nationalization without purchase is palpably unjust, land-
nationalization with purchase is as evidently inexpedient.
The same arguments apply to smaller acquisitions of land.
They have little chance of being remunerative, while they
so far contract the supply of a much desired commodity
and they necessitate a class of administrative duties that are
of exceptional difficulty. If the alienation of state lands
should only be carried out with due care and deliberation,
the acquisition of new estates can only be justified on
nr^-financial grounds. Practical politics clearly conform
to this rule of prudence. State lands are often alienated
and seldom acquired, and in these latter cases there is
generally some social or political reason as the actuating
cause. We may look on the slow decline of the state
domain as one of the permanent facts of financial deve-

8. So far we have confined our attention to the case of
cultivated land of farms ; as Carey would say where the
ordinary economic motives operate with considerable force.
The State, it seems, had best avoid entangling its interests
with the difficult questions of land tenure, and can hardly
expect any financial advantage from retaining its owner-
ship of land. It does not follow that with regard to other
closely allied forms of extractive industry it may not be
expedient to retain or even extend public ownership. The
principal example is afforded by forests, and in their case
the wisdom of alienation is far less clearly established.
Individual self-interest is not in the same general agree-
ment with public advantage as with regard to ordinary
agriculture. The creation of a forest is a work of time
and technical skill which can hardly bring in recompense
to the originators, and existing forests are a ready resource
for the embarrassed owner. Moreover, forestry is only
applicable to large tracts of land, and is most profitably
carried on where the soil is of little use for other purposes.
The estate of the large owner is, as we saw, not very
differently managed from the state domain, and therefore
some of the usual arguments against public ownership
lose their weight. There is, besides, the important effect
of suitable plantation on climatic conditions, and in some
countries the need of wood as the only available fuel.
There is here a striking example of failure in that harmony
of individual and general interest which was so enthusiasti-
cally set forth by Bastiat and became a ' watchword ' of
what was supposed to be ' Political Economy.' The case
against not simply state owership, but even direct state
management is accordingly deprived of its foundatic ~ ;
while the promotion of his own interest had best be left co
the individual, the interest of the community cannot ahvctys
be safely entrusted to his hands. The real questions at issue
are to be decided by estimates as to (i) the influence of
other than purely self- regard ing motives on the proprietors,
(2) the amount of general interest that is jeopardized by
the possible action of individuals, and (3) the probability
that public management will secure the desired results.
In reference to the first it has been universally remarked
that large proprietors are in many cases willing to give
up a portion of present wealth for the future advantage
and beautifying of their estates, while peasant proprietors
show no such disposition, but, on the contrary, seek imme-
diate gain by the removal of valuable timber l . The
inattention of the State to forests in England compared
with continental conntries is partly explicable on this
ground. English proprietors have done at their own cost
what foreign countries have to secure at the public ex-
pense. Another reason is to be added. The supply of
fuel in England is not dependent in the smallest degree
on the cultivation of timber, and the recent developments
of naval architecture have destroyed the importance of
forests as a source of shipbuilding material, the object to
which the Woods and Forests Department principally
attended. Considerations of climate are besides of less
weight in the case of islands subject to the equalising
influence of the sea. We can thus easily understand the
peculiar attitude of England and the reasons for the very
different policy of the Indian Government where the cir-
cumstances are in all essential points reversed. The
chance of success in state administration of forests depends
on the application of the best scientific and technical
ability to the work which can only be attained by effective
organization. Among examples we may mention the
Indian forests department and the Prussian organization.
The objects of a sound method of dealing with this part
of the public domain are not mainly financial, though good
management may make them yield a surplus. But, as
appeared in dealing with expenditure 2 , it is quite possible
that the general revenue of the State may have to contribute
for the maintenance of the requisite plantings,
when the policy has to be judged on the grounds of
expenditure in general.

9. The necessities of practice have led States to a
recognition of the special advantages of directly controlling
forests. In all nations they form the largest part of the
public land, the figures for France have already been
given, and the same general features mark the position
in other countries. The broad result is that about one-
third of the forests of Germany are held by the States ;
about one-sixth by communes and quasi-public bodies ;
very little over half remaining in private ownership. In
Austria one-fourth belongs to public bodies, and in Norway

The excess of forests over other state land is easily
explained when we call to mind that they are the last
remnants of the old common property. To a primitive
community land with timber is of little service. When, at
a later time, wood rises in value the one aim is to clear the
soil as speedily as possible, and land still under trees is
waste. The fact that poor soil is often best suited for
planting tends to confine it to land of this kind, since more
fertile land is turned to other and better uses. The recent
movement towards reafforesting is for the same economic
reason directed towards inferior land, and it is only by
adopting this policy that new forests can be made even
tolerably remunerative. There is almost a consensus of
competent opinion in favour of state action for the pur-
pose of increasing the area under trees, and directly ad-
ministering those areas by a skilled and well-organized
staff 1 .

Most European countries have a considerable area of
uncultivated land which would be particularly suitable for
planting and a well-considered system of purchase by the
State, perhaps accompanied and facilitated by the sale of
the other parts of public landed property is likely to be
advantageous. The financial results cannot be of much
importance. Prudence and judgment may, however, save
a good deal of unnecessary expenditure and combine the
two ends of public economy utility and saving of effort.

10. The division of control over landed property
between the central and local governments can hardly be
arranged on general principles. Historical conditions and
the special features of each case are the principal factors in
the settlement. Management by a central department is
open to the dangers of laxity in administration along with
pedantry in the application of inflexible rules. Public
estates so placed have all the defects attributed to the
absentee proprietor. Local bodies have a different but not
less serious draw-back, viz. the danger of jobbery and
intrigue in the administration of what ought to be applied
to the best advantage of the community. This evil is of
varying magnitude according to the size of the body.
Among the larger German States as, e. g. Wiirtemberg or
Baden, it disappears completely. In a small French or
Swiss Commune it is at its maximum. The dealings with
public or quasi-public property by small corporate bodies
need to be carefully controlled and regulated, and this
necessity has been recognised. Thus the French Communes
are unable to sell or grant a lease of their lands for more
than eighteen years without the sanction of the Prefet in
the council of the Prefecture 1 . The property of British
corporations has in former times suffered from the want of
such control, as has also that of the Swiss communes.
When local government is applied to a sufficiently large
area and public spirit is operative, landed property is
generally better managed than it would be by a central
department. The concessions to tenants are more liberal,
but except where the land is within an urban district, its
sale is probably advisable if there is a local debt sufficient
to absorb the purchase money : where this is not so there is
the danger of the price, which is really capital, being treated
as current revenue. The retention of building sites by
corporations is, where practicable, the happiest solution of
the vexed problem of taxation of ground rents, and their
alienation should not, unless in the exceptional cases of
extraordinary pressure or special encouragement to small
proprietors be sanctioned.

The above considerations are in some degree modified
with regard to forests. So far as the inhabitants of rural
districts obtain fuel from the communal possessions there
is no reason to object to local management. But in modern
times the need of husbanding and developing the national
forests has become too important an end to be surrendered
to the care of persons whose views are from the nature of
the case certain to be limited to a particular district and
the present advantage. The result has been a very general
centralization of management in this respect. France, Italy,
Switzerland, and the United States have all dealt with the
matter as one for the central government. The Swiss
cantons, so jealous of their autonomy, have not refused to
surrender the control of forests to the Federal government.
All the conditions that we noticed in a former chapter as
tending in favour of central management are in operation
here. General interest, need of trained intelligence, and of
unity of control make it expedient to continue the policy
of centralization.

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