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Evening Star, Issue 16086, 11 April 1916, Page 4

It is obviously wrong for the State to permit the appropriation War Profit of war profit by priand vato persons. .Most Land Settlement, people will probably think that the extent of the evil resulting from such appropriation is measured, by the producer's enjoyment of an unearned gain at the expense of the general consumer. But the consequences are more far-reaching. 'There are economic effects not disclosed to a superficial view, but discoverable to a searching ■examination. ].f ..left alone, war profit will hamper tho closer settlement- of the land of this country, and will increase the obstacles in the way of young men getting farm.-; ct their own. In short, war profit means dear laud. Our readers will expect that we first prove that proposition, and. secondly, indicate the grounds for deprecating dear land. Little difficulty is encountered in demonstrating (he influence of high prices for produce upon tho value of the land from which tho produce, is drawn. It is often said that laud is worth as much as it wilt yield, and in this there is a rough approximation to the truth. The land ot Xow Zealand is yielding far more now—not in quantity, but in value—than ever before. 'l.he consequence is a. tendencv iur the price of land to rise. There is a'principle of gravitation to be found hi values. The high price of wool gravitates down to the sheep from which tho wool is clipped: the high price of sheep settles down into a high price of land upon which sheep are pastured. To raise the price of butter is to raise the price of dairy farms. High, values of produce shift their advantage down and down until they find a final resting place in high-priced land. 'This process is tho more certain in its operation the more confidence, the landowners have in the maintenance of high prices for produce. The general belief in the nonunion is that while the present level of prices will not he supported after the war, the level is likely to be above normal for many years. There is substantial reason for this belief. .Europe will be in a condition of disrepair and. dilapidation after the. war. She will require to devote an unprecedented portion of her labor and capital to the restoration of wastes ami the rebuilding of mined places". The work of reconstruction in Belgium alone will be a stupendous undertaking, engrossing the energies of hundred>i of thousands of men for probaly a year or two. Xow, the more men that are- engaged on this work of repair in Europe, the less men will there bo available for the production of the foodstuffs and necessaries that all men mustconsume daily. Quite clearly, Belgium will not be able to export immediately after the war her normal volume of produce. Did the war leave her with an undiminished number of laborers, she would have to employ a much larger proportion than formerly on the mere replacing of buildings and other capital that had been destroyed. .Men so employed cannot live on tho 'buildings they are erecting. Other laborers will have to furnish their tables wiui daily supplies of bread, meat, butter. Belgium will want after the war more of Holland's dairy produce than tlie did before the war. This will mean that Holland will have less to spare for Great BriI tain. Everything, indeed, points to a relative scarcity of foodstuffs for some time succeeding the cessation of hostilities. The total trade of the world will no doubt shrink as compared with tho volume of pre-war trade, for the world will be poorer and tho purchasing power of the nations will be less. In other words, this means that tho nations, after restoring the losses of war, will have surpluses of less dimensions to export. But from the nature nf the case the diminution of purchasing power will show itself chietly in a slackness of demand for articles; of lnxurv. If Europe is impoverished by the war she will devote most of her spending power to the necessaries of life. The market for butter, fchcese, meat, grain, and (to a less- extent., perhaps) wool is likely to be active for several years, despite the commercial depression which peace will no doubt occasion. Xew Zealand, therefore, is calculated to retain her relative prosperity. Being primarily an agricultural and past-oral couutry, she will he able to exploit the poverty of Europe at peace as well as the extremity of Europe at war. The result is that the producers of tiiis country have solid ground for the expectation of the continuance of high prices after the war. To the extent to which they entertain this expectation it will be registered in tlie value of laud. Ultimately a large portiorfof the profit of high prices will be reaped by the fortunate owners of the land from which the high-priced products como It follows that if war profit is not diverted to tho State by means of Special taxation along the lines we have mentioned, justice requires a land tax corresponding in weight to the increased value of land arising from £he high prices oi commodities. Indeed, as it is improbable that our Government will attempt to absorb all war profit by means of expert duties, super income tax, .-sheep or wool tax, etc., an additional land tax should form one -of-the rproposabj o£ tin* nest

! Budget. Dearer land will be the consequence of allowing any war profit to be enjoyed' by lite producers. Xow, apart from the fact that dearer land means an unearned gain to the present owners, what are the disadvantages which it entails. The greatest of all is the burden which dear land imposes upon the rising generation. There are two standpoints from which- one may regard tho land question. One may regard it from the interest of the present possessor or from the interest of tho man who wants to possess. Tho interest of the. former is that land should be dear; that of the latter that it should bo cheap. AY ho re is tho interest of the State? Obviously it coincides with that of the latter. I lie Stato wishes to increase the facilities for settling upon the land. It is anxious to make provision for returned soldiers and generally to make easier a measure of satisfaction of the ever-present kind hunger. It realises that progress lies along tho line of closer and ever closer settlement. To further this purpose, the State in Xew Zealand has pursued a policy of bursting up large estates by heavy taxation, and of compulsorily purchasing extensive areas for close settlement. There is no doubt that cheap land means progress, and means an increase in the number of those who make their living directly out of the soil. The Dominion ought to have twice as many farmers as it has. But allowing laud to become dear through war profit is to erect the greatest hindrance to the accomplishment of tills object. See what dear land involves to a young man wishing to settle upon the land! He finds that if the price' of produce remains high after tho war he has to pay immediately to the present owner the capital value of that anticipated high price. The high prices of commodities will need to be maintained, or the man who now buys land will have difficulty in getting a return adequate for the payment of the high price he has given for his land. When men buy land at a high valuo determined by the high price of goods, and the price of goods subsequently falls, iiuancial embarrassment overtakes them. It was financial embarrassment of this kind which occasioned the banking crisis of 1390-96. Land had been bought at a high figure, which seemed to he justified by the high prices for goods in the seventies. Money was borrowed from tho banks and financial agencies on the security of this high-valued iaud. When the prices of produce fell, multitudes of men were unable to meet their interest charges, and the banks, as well as individuals, suffered. This was the main cause or' the downfall of the Colonial Bank and of tin* crisis .through which the Bank of Xew Zealand passed. AYe must neglect no means of avoiding any degree of such embarrassment again. The best way is to keep land values from becoming inflated by reason of war profit. This will guard new settlers against the perils of embarking as fanners on the crest of a high tide in tho unimproved value of land. Furthermore, the present, owners of laud should not bo permitted to levy toll upon those who will settle upon the land during the next year or two by exacting a price, for their land which represents the capitalised value of the anticipated special profit from ! high prices. One generation of farmers should not in that way be allowed to appropriate all the monetary gain derivable from present and post-war conditions, at the expense of another generation of farmers. -Vow, inflation of tho value of land may be arreted by taxing directly the products of the land, so that the net return to the producer is the normal one, or by taxing the unimproved value of land so that it is kept down to the value obtaining before the war, or by a combination of buth forms of taxation. The provision of an adequate revenue for the prosecution of the. war, the reduction of the cost of living, the cheapening of laud, and the removal of hindrances to closer settlement all demand the diversion of war profit from the individual to the State.