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Think About Land

Our thanks go to Ted Power, whose efforts have helped to ensure that this article is an accurate reproduction of Schumacher’s original essay.

That there should be a massive housing problem in an affluent society is surely an immense and intolerable paradox. Many years ago, as we all remember, we were told by the highest political authority that we had never had it so good. And since then, according to all the statistics, we have had substantial further economic growth. But the prob1em of housing, indeed the problem of homelessness, has grown rather than diminished. Now all this is very strange. Today it takes less labour than ever before to build a house and it can be built faster than ever before. Is it shortage of land that holds us back? Assuredly not. Is it shortage of cash? There is more money knocking about now than ever before, and it is always becoming more abundant. We are told that the national income is currently rising at the rate of 5% in one year.

Now 5% additional national income is two thousand million pounds. Well, this should be enough to buy a lot of houses; but it doesn’t happen that way. All the money that is generated by so-called progress is already bespoken; and it doesn’t go into housing. It goes into – well, you know where it goes- into all sorts of things such as motoring, more air travel, more Channel crossings. But the housing shortage remains. We can and did build Concorde. It has cost us immensely more than anyone had originally thought it would, but we’ve done it. And there’s Maplin, there’s the Channel tunnel. Of course we can do it. What is a mere thousand million pounds? Why should we be able to do all these things and yet be unable to solve the housing problem?

We are doing all these other things because there is a demand. A demand? How do we know? Maplin is many years ahead, the Channel tunnel is many years ahead. How do we know of a demand for these services? Ah! It has all been worked out. It has all been ascertained, don’t you know? It has been calculated. The trend shows that the number of people going to or coming from the continent over the Channel will rise remorselessly from 23.7 million in 1970 to 49.7 million in 1980 and to 97.7 million in 1990. Didn’t you know this?

I can also tell you the number of passengers with vehicles that will cross the Channel: 4.1 million in 1970, 9.6 million in 1980, 20.1 million in 1990, and on these figures of course the only rational thing to do is to provide these facilities. Because we pretend to know all these things, we have to build Maplin, and we have to build the Channel tunnel. But somehow we don’t have to build houses. Who has drawn the curve to tell us how many people will be homeless in 1980 or in 1990?

How many people will be homeless when all these tourists come and go again? Surely there is a demand for houses, for homes; but much of this demand is not what we call effective, because the people who need accommodation, as we all know, cannot afford it.

So we might say: well, society does not care enough to meet a demand that is not effective. But is this quite fair? A lot of people in society certainly care; and look at the legislation that has been passed during recent decades. Any number of laws have been passed to help the homeless and to help the slum dweller but they have never solved the problem. They have almost invariably helped the rich to become richer and left the poor in an even more hopeless situation – although the number of the poor may have shrunk. In fact, all the solutions have turned out to be a part of the problem; and it has emerged quite clearly that there is a root to this problem and until this root is tackled nothing will be of much avail.

But where is the root of this problem? Well I don’t claim to be an expert on housing but I have given a lot of thought to this; I have used a lot of these innumerable reports that have been written; and I believe that the root lies in the private ownership of land.

Of course, this is no original conclusion at all. Over the ages, people have pleaded for the abolition of the private ownership of land – and not Karl Marx only- but nothing has happened. Why has nothing happened? Because the only answer has seemed to lie in nationalisation.

There is the theory that in order to nationalise, in a decent democratic society, you must buy out the private owner. But how could anyone successfully advocate such a buying-out policy? Of course there are others who say: ‘Don’t buyout, instead upset all existing arrangements and confiscate’.

But how could anyone seriously advocate confiscation? If it is a matter of buying out, how could any Government even find the required amount of money? On this point in the debate on the public ownership of land we have got stuck. There is really a double point. First of all public ownership, it is thought, can be achieved only by buying out the private owner and this would cost an enormous amount of money which no one is prepared to raise; but second, and even more importantly, it is thought that public ownership of land will automatically and inevitably mean some type of central administration; and both these prospects are indeed daunting and unacceptable.

The question, however, is this. Why precisely do we want to change land ownership? And the answer seems to me to be quite clear: to inhibit land speculation, to inhibit the private exploitation of the scarcity-value of land, to inhibit as we might say the ‘cornering’ of land, You know what cornering means – for instance, someone buying up (and this has often happened) the total crop of a commodity which others must have in order to live and the supply of which cannot be increased as prices rise. That is called cornering; and land is the ideal article for cornering. No one can exist without some land base. With growing numbers – growing mobility, growing production, growing trade – there’s no doubt that (quite apart from inflation) land values move on a one-way street. Anyone who corners land only has to wait to grow rich. I suggest it follows that the type of private ownership that may be appropriate for many man-made goods – the supply of which can be increased by human work and invention – cannot possibly be appropriate for land.

What then are the alternatives if nationalisation, as commonly conceived, is not an acceptable answer? Let’s look for a middle way, a new type of arrangement which avoids the pitfalls of simple private ownership and equally those of simple nationalisation. Can we find an ownership model with respect to land (and perhaps even with respect to some of the structures on land) which first of all eliminates private land speculation; which secondly eliminates the private windfall gains that inevitably arise and that accrue to anyone who corners the land; which thirdly does not call for compensation payments to those owning the land now; and which fourthly causes the minimum of disturbance to those who now manage and utilise the land in any manner whatsoever provided it is permitted by law?

Now you may say, this is a tall order; but let’s think about it. And I would invite you to consider the following train of thought. Every piece of land in the United Kingdom has a certain value or price as of now. If the owner wanted to sell it he would have some sort of idea, perhaps after taking professional advice, of what it would fetch. Let us say this value would be ascertained for every piece of land in the United Kingdom – no doubt quite a big job but by no means an impossible one. Of course this value would reflect the current zoning arrangements and many other price-determining factors. Now this value or price I shall call the registered value as of July 1973, expressed in pounds sterling of present purchasing power. To take care of inflation the Government could publish an index showing what the pound sterling of July 1973 will be worth in pounds sterling of any later date. The registered value can thereby be easily adjusted for inflation when occasion for such adjustment arises. I suggest that if an owner wants to sell land he should not obtain more for it than the registered value as up-graded in terms of sterling for inflation. The sale of his land has to be effected via the local authority – which, however, plays a totally passive role unless it, itself, wishes to purchase the land. If it does not wish to buy, the private purchaser can pay the private vendor only the registered value, adjusted of course for inflation; and not a penny more.

But what if, through re-zoning or some other change, the land has become much more valuable? If this is so, there will be many people wishing to buy the land and the highest bidder will get it; but the vendor will receive only the registered value and the surplus will accrue to what I shall call the local authority land fund. And what becomes of the registered value then? If a higher price has in fact been paid in the manner described then this becomes the new registered value. But what happens if a piece of land is for sale but no buyer can be found to pay the registered value? A transaction between vendor and purchaser may then take place at the lower price, which then becomes the registered value.

In short, the current owner and any subsequent buyer is deprived of the chance of making any windfall profits through land ownership; all such profits go automatically into the public hand, what I call the local authority land fund. In those exceptional cases where a particular piece of land declines in value he may indeed not recover his purchase price; but that is the risk he takes in buying land; or, if you like, the price he pays for the immense privilege of land ownership.

I commend this scheme to you for further thought. I claim that it would produce a genuine middle-way solution to the problem of land ownership. It would not in any way impair the freedom of existing landowners to continue in their legitimate activities. Their situation remains exactly as at present, without the slightest disturbance. The new dispensation becomes active only as and when the landowner wishes to get rid of his land – in other words, wishes to cease being a landowner.

I suggest that such a scheme would greatly increase the ability of local authorities to obtain land for public needs at fair prices and would certainly siphon into the public hand all windfall gains arising from the growing scarcity of land; but only as and when there is a sale from willing seller to willing buyer. In short, market forces are allowed to operate as regards land transactions between private individuals, seller and buyer; but they do not lead to the acquisition of private fortunes; and the public hand – the local authority- is fully protected against private profiteering.

I shall not go into any further details here; they can all be settled once the principle has been adopted. Nor am I saying that. if the land problem is resolved in this way, all housing problems will be solved automatically. But I do feel that everything would become a lot easier.

Now let me move on to another line of thinking. For quite some time I have been particularly interested in the question of the proper scale of things. This question seems to me to be the most neglected subject in modern society. “To the size of states,” said Aristotle two thousand three hundred years ago, “there is a limit as there is to other things, plants, animals, implements; for none of these retain their natural power when they are too large or too small, but they either wholly lose their nature or are spoilt.” It’s hard to equal the language of the ancients. Imagine a small island, a small island community of two thousand people. One day a boat arrives and unloads a man who has just been released from prison on the mainland. The discharged prisoner returns home. Will this community have any difficulty in looking after this one man, giving him a bit of human contact, finding him work and re-integrating him into society? Hardly. And now imagine an island community twenty-five thousand times as big, of some fifty million people, and every year twenty-five thousand discharged prisoners return home. It is then the task of various ministries to get them back into normal life together with a number of harassed and over-worked probation officers. What a problem! In fact a problem that has never yet been satisfactorily dealt with.

Now it seems to me that somehow, somewhere, there is a very big lesson to be learnt here. Or imagine that instead of one solitary discharged prisoner presenting his problem to a small island community of 2,000 people, a homeless family of five people appeared – or even two such families of ten people in all. Surely the community would find ways and means to ensure adequate shelter for these two families. But multiply the scale of the situation by twenty-five thousand a community of fifty million people trying to cope with two hundred and fifty thousand homeless people. What a problem! Ministries, officials, rules, regulations, financial arrangements, immense efforts to cope with immense difficulties, and (going by experience) never an adequate solution.

I have just published a book with the title ‘Small Is Beautiful’ and I received a letter which explains this strange and challenging problem of scale from a mathematical point of view. I quote:

The crucial point is that as a monolithic organisation increases in size, the problems of communicating between its components go up exponentially. It is generally reckoned that the maximum size of a productive scientific research team is twelve; over that size everyone spends all his time finding out what everyone else is doing.

Some twenty years ago, working for the National Coal Board, I became interested in the problem of accidents in the pits. At that time we had two hundred and fifty thousand accidents a year. Someone drew my attention to a mine outside the National Coal Board, which did not actually produce coal but some other mineral by exactly the same methods of extraction as we applied in the coal mines. The accident rate at that mine was much the same as in the coal pits. One day the management in charge of this one single mine decided to do something about these accidents and virtually abolished them. So we studied their methods, which were perfectly straightforward, and said to ourselves: “What they can do, we can do”. They had one mine, we had six hundred; but then our resources, staffs, etc. were certainly in proportion the same as theirs. So the National Coal Board said, “When it is a matter of people getting hurt or killed, we cannot afford to lose any time. Let us apply these proven methods of accident prevention in all six hundred collieries right away.” We did not succeed – although of course, in the twenty years since then, the safety record of the coal mines has improved beyond recognition. But at that time, I repeat, we did not succeed the way this outside firm with only one mine to worry about had, in fact, succeeded.

It took me a long time to understand this strange and paradoxical thing. If one able safety engineer with his team can succeed in one mine, why can’t six hundred able safety engineers with their teams succeed in six hundred mines? The answer is that one man requires no administrative superstructure to do his work; he himself, as team leader, is the superstructure; but six hundred team leaders do require (or everybody appears to think they do) an administrative superstructure.

And now let me make this point: administration to be well done is a very difficult job which requires a very high level of intelligence. It is much more difficult than accident prevention underground. It follows that only the best talent is good enough for administration; and if you need an administrative superstructure because of the scale of the operation (six hundred mines instead of one) then you simply cannot avoid your best people being sucked into administrative posts; and then only the second or third rate people remain to do the job itself.

I am making this point very seriously against the people who say, “Yes, we set up a big structure, but of course it must not be bureaucratic.” If it is not to be bureaucratic it will absorb all the best talents you have at your disposal. And this is not all. Once you need an elaborate administrative superstructure, the people who actually do the work cannot give the best that is in them because they are being administered (and this is nobody’s fault) by people far away whom they have probably never met except at impersonal briefing meetings.

This experience, reinforced by many similar ones in the last twenty odd years, has led me to the conviction that small is beautiful – where small, of course, does not mean infinitely or absurdly small but the order of size, or scale, which the mind can fully encompass, – so that large administrative superstructures can be dispensed with.

Good administration, let me repeat, demands superlative talents and intelligence; and bad administration is the worst of all evils. So this whole question of scale I consider to be absolutely central and one of the most neglected questions in the modern debate. I quoted Aristotle and repeat: “When things become too large or too small they either wholly lose their nature or are spoilt”, or as my grandmother used to say “Everything too is of evil”.

Finally, let me put to you yet another train of thought. I started by saying that it was very strange indeed that we, an affluent society, should have failed to solve the housing problem; and indeed that failure is quite inexcusable considering that it makes a mockery of all talk about social justice. It also makes a mockery of all pretensions to economic rationality, because the social costs of inadequate housing, the costs in terms of delinquency, crime, ill-health, mental break-downs, unemployability – all these social costs are beyond computation; and I have no doubt whatever that they immensely outweigh the real costs of adequate housing.

But be this as it may, I do not wish to leave you with the impression that the current affluence of Britain, or indeed of Western Europe, is an achievement unlikely to be challenged or disturbed. This so-called achievement is based on certain specific and temporary practices and constellations which are, to put it crudely, on the way out. When I say practices, I mean living on capital instead of income. A vital part of our capital today is oil: a non-renewable product over the provision of which we, in Western Europe, have virtually no control at all. And the constellation is a moment in history during which we can still obtain this oil, a constellation of power which is rapidly changing. The world economy (and this means primarily the affluent twenty per cent of mankind) is demanding an increase of oil supplies of 7% every year, while a growing number of oil-producing countries, to secure their own longer-term future, have already decided not to let their oil output rise beyond the 1971 level, The countries which have already taken this decision are Venezuela, Libya and Kuwait; and they, between them, account for more than one third – thirty-five per cent to be exact- of all the oil that flows into international trade. Are we prepared for an oil crunch? How vulnerable is our affluence in case of an oil supply crunch? What is the meaning of those projects which I quoted (of the number of Channel travellers with cars, or without cars) in the event of real difficulties, in terms of price or quantity, with oil?

If we continue to think that we can live it up today because our children are bound to be richer, more affluent than ourselves, then I suggest we are making our calculations without asking the people who are, in effect, making this affluence possible. Therefore, does not all this point towards the need for a fundamental reorientation of what has been called our life-style? And this includes some of what my political friends call ‘the system’, a reorientation towards a much more decentralised pattern, a much greater autonomy and self-reliance of small communities and, above all, a much more flexible, just and rational use of land – apart from very many other things.

Publication By

E. F. Schumacher

Ernst Friedrich Schumacher was an internationally influential economic thinker, statistician, and economist in Britain. His ideas became popularized in much of the English-speaking world during the 1970s. He is best known for his critique of Western economies and his proposals for human-scale, decentralized, and appropriate technologies. E. F. Schumacher was born in Germany in 1911. … Continued

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