Chapter II. What is the Source of Property Incomes?

What is the ultimate source from which the landlord derives his rents, the industrial or commercial capitalist his profits, and the money-lending capitalist or investor in State or Municipal loans, his interest?

This is a question to answer to which economists have written at great length, but most of what has been written does not throw much light on the question. It is a curious thing that some of the earlier

writers were more clear and helpful than those who have followed them. This is partly owing to the fact that the outward and confusing appearance of things serves to hide the underlying reality, and partly also because many of the later writers have been more interested in defending the capitalists against criticism than in uncovering truths inconvenient to the capitalist system of society.

Socialists are indebted to Karl Marx for his revealing study of the economics of capitalism. His explanation stands alone as the one unshakeable doctrine, yet it is rejected not only by the capitalist economists and politicians whose motive for hostility is understandable, but also by such parties as the Labour Party which criticise capitalism and seek to improve it. It is our purpose in this chapter to show that the gulf which separates the socialist, on the one side, from capitalists and Labour Party reformists on the other is their respective attitudes towards Nationalisation and State control of industry, can be traced back to the acceptance by the capitalists and by the Labour Party of unsound economic theories and their rejection of the only satisfactory explanation, that of Karl Marx. Wrong theory, in the field of economic and politics, as elsewhere, leads to wrong policies and wrong actions.

The question to be answered is “What is the ultimate source of rent, profit and interest?” How is it that property owners who do not themselves play any active part in growing food, manufacturing clothes and building houses, nevertheless are able to eat the choicest foods, wear the best clothes and live in the most spacious and convenient houses?

Of course the landlord knows that he receives rent from his tenants, whether those tenants are factory owners, farmers, or house-occupiers. The factory owner knows he receives his profit from the sale of the goods produced by the workers in his factory. The money-lending capitalists (including the investor in Government or Municipal loans) knows that his interest likewise comes ultimately out of the proceeds of the sale of goods. Though the interest paid on State Loans, etc., comes actually out of taxes and rates levied by the Government or Local Councils, those who pay the rates and taxes also derive their incomes directly or indirectly from the sale of goods. Likewise, the worker who rents a house is able to pay the rent only because his employer has sold goods and can pay wages out of the proceeds of past sales of the goods the worker produced for him.

Ultimately, therefore, all forms of property income and also all the wages and salaries of the members of the working class arise from the sale of commodities, that is goods produced for sale.

What is it that gives goods of all kinds a value and enables them to be sold at their appropriate prices which provide both for the wages of the workers and for the profits, rent and interest of the propertied class? The explanation is that commodities have values which arise from what Marx termed the “socially necessary labour” embodied in them. To take a simple explanation, a bicycle worth £6, a suit of clothes worth £6, and a certain weight of gold worth £6, all have the same value because the amount of labour required in their production is the same. This illustration is expressed in simple form in order not to complicate it with unnecessary detail, but it should be observed in order to avoid misunderstanding firstly that the selling price of an article may in practice deviate from value, and secondly only that labour is value-producing which is “socially necessary” labour – mere wasted labour due to the inefficiency or laziness of the individual concerned does not count.

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