"Whiskey is for drinking - water is for fighting over." -- Mark Twain
Paper delivered at the Georgist Scholars Conference at Lafayette College, 1992.
A visit to the verdant beauty of Golden Gate Park in San Francisco would persuade the visitor that this fabled city had abundant water. In fact, the area of Golden Gate Park was once an immense sand dune.
Early illustrations of San Francisco show that there was not a single tree here, the area being too dry and windblown for trees to take hold. But today, "Golden Gate Park looks as if Virginia had mated with Borneo," suggests Marc Reigner, author of Cadillac Desert. Ground water for the park used to be pumped by two of the world's largest windmills. Water is now brought nearly 200 miles by tunnel. In other luxurious parts of Southern California; Bel Air, Pacific Palisades, La Jolla, the water comes from three directions and from a quarter continent away.
As Reisner says, "The whole state thrives, even survives, by moving water from where it is and presumably isn't needed, to where it isn't and presumably is needed. No other state has done so much to fructify the deserts, make over its flora and fauna, rearrange the hydrology God gave it. No other place has put as many people where they probably have no business being. There is no place like it anywhere in the world. Twenty seven million people - more than the entire population of Canada, an economy richer than all but six nations in the world, one third of the table food grown in the United States - and none of it conceivable in the context of the pre-natural order.
Like ancient civilizations dependent on irrigation, California is a state that has grown enormously wealthy based on man's ability to change and to dominate nature - at least for a while. That experience is instructive for California and for all of us.
The California experience covers a gamut of issues: equity and efficiency; economic imperialism; use and abuse of nature; greed, agribusiness and oil; business vs. the family farmer and the residential consumer; farm wealth and growth of population and sprawl in a time when Americans are reconsidering the need for a sustainable economy and society.
This paper will cover two major aspects of the California experience: The early success of the family farm in California, and the impact of state and federal subsidized water on the family farm and the ecology of California.
The Central Valley of California is one of the world's great valleys - 600 miles long, and 50 miles wide, between the rugged snowcapped Sierras and the more gentle coastal ranges. It is as big as England and is the Nile Valley of North America. It is almost equivalent in length to Massachusetts, Vermont and New Jersey combined. It was once shown as the California desert on maps but it is now one of the most productive agricultural regions of the world. The value of a single year of agricultural production today is greater than all the gold mined in California.
In the 1870s, only 20 years after California became a state, the people of the Valley were involved in a water war. This early battle defined some of the historic protagonists in the continuous fight for California water - and led to a revolutionary change in agriculture and land ownership.
The common need for water on land not irrigable by easy gravity diversion from rivers was a major focus of the debates in the 1879 Constitutional Convention. These debates are replete with arguments and discussions about the evils and dangers of land speculation.
Under earlier Mexican rule private use of water was governed by the doctrine of riparian rights. i.e. those owning riparian property (riparian derives from the Latin "ripa" or bank) possessed a right to its use. When California was ceded from Mexico to the United States these rights were preserved. In a move which reinforced the riparian doctrine the first legislature in 1850 adopted the Common Law of England which also included the doctrine of riparian rights.
The rule dictates that the owner of a stream bordering his land had full rights to the use of the water and those owners not contiguous to the stream had no rights to it. Landowners with such water rights could monopolize its use. One such water monopolist was a German immigrant named Henry Miller who acquired lands throughout the Central Valley of California.
It was in the 1860s when Miller rode in from his Gilroy holdings through the Pacheco Pass and first glimpsed the rich river bottom of the San Joaquin. A 1932 promotion brochure of the Miller-Lux Company notes: "Promptly his genius for development and expansion asserted itself. Within a few years he and his partner were the owners of the heart of this great valley, their domain comprising more than half a million acres."
Miller and his associates bought lands along and on both sides of a river for hundreds of miles. This allowed them to control the water and to build private irrigation canals and to sell water to growing surrounding communities. By the 1880s they had acquired over a million acres, leading to a California legend that Miller could move his cattle from the Oregon to the Mexican border and sleep on his land every night.
"Miller and Lux were among the state's most hated water monopolists" say historians Bean and Rawls, "because of their success in making strategic acquisitions of riverbank lands with an eye to riparian rights. In spite of their assertion they were cattle raisers and not land speculators, they used their riparian rights in a variety of anti-social ways." What they did was to force landowners to sell out to them; they accumulated enormous underdeveloped and underused holding; and they delayed the process of subdivision and resale to ensure huge speculative profits for themselves.
To the land holdings that gave them control of much of the San Joaquin River area they added a 50 mile stretch along the Kern River. In 1886, in a legal battle with another land baron who hoped to validate an alternate system of defining water rights, "appropriative rights," or the right to divert upstream flows, the California Supreme Court ruled in Lux v. Haggin that Miller had the right to the use of the Kem River undiminished in quality and quantity since he owned all the lands abutting that river. With few exceptions riparian water rights still prevail in California.
The Central Valley farmers were outraged because they were denied access to needed water; water which they now had to buy from landholders like Henry Miller. They organized a legal challenge to this ruling in the California legislature. A special session of the legislature was called. Modesto farmers sent C. C. Wright, a 28 year old school teacher to the session as their representative. Fortunately for the farmers, Wright knew his water law.
The effects of monopoly and speculation on the Jeffersonian ideal of the family farmer was evident to the most casual observer. Newspapers and political parties wrote extensively on the issue. The writings of Henry George, then a prominent journalist in California, helped frame the debate. Wright was evidently influenced by George's anti-monopoly ideas. George believed that all monopolies, but particularly land monopoly, prevented the average man from working and was the major cause of poverty. He proposed a tax on land values to pay for government services and opposed all other taxes on labor and capital. Freed of other taxes, he reasoned the land tax could be easily paid by productive workers but would prove onerous to land speculators.
George's views were well known in Northern California, and appeared in his own newspapers, such as the _Post_, and in papers in Sacramento and San Francisco. George's earliest work, which developed the themes later expounded in _Progress and Poverty_, was "Our Land and Land Policy." In both Sacramento and San Francisco there was strong support for his views. The Democratic Examiner gave George extensive space for his own writings and urged "earnest reflection" on George's theory outlined in his chapter on "Land and Labor."
In Sacramento, the Republican Bee, a McClatchy paper, urged its readers to study "Our Land and Land Policy," according to Dr. Charles Barker, author of a biography entitled _Henry George_. Dr. Barker, who researched all George's writings of that period, states "The Bee believed that George had illuminated the leading question of the day--the one which is absorbing all others--and which must remain the leading question until people in their wisdom have settled it wisely." The _Sacramento Union_, while not so friendly as the _Bee_, quoted George extensively. More to the point, it also held out little prospect for the family farm under current land policies.
Governor Haight, in his inaugural address, and in his final address in 1871 stressed the land problem. "Our land system," he said, "seems to be mainly framed to facilitate the acquisition of large bodies of land by capitalists or corporations, either as donations, or at nominal prices. Barker claims that the inaugural address of Height's successor, Governor Boothe, could easily have been written by George. Boothe called for a tax on land values to cut down speculation, and for the land to be more generally cultivated by farmer-owners.
As editor of the San Francisco _Post_, George did not deal much with the and valleys of California, but focused on private water companies in San Francisco. When he proposed in his _Post_ (May 6,1875) dams be built in the Sierra Mountains from which farmlands could be watered, he urged, "Make the land benefited pay for the expense, and give the people interested the management."
Clearly George's ideas would have great impact on the views of any legislator as well as on farmers seeking land reform. George's vision of a California made up of prosperous family farmers, not landed estates, was the same as that of C. C. Wright.
Wright authored an act in 1887, signed by Governor Bartlett on March 7,1887, to give farmers new powers and thereby weaken the hold of the cattle ranchers and land speculators. His act, which was adopted by the legislature, was not only simple but also democratic. It permitted a majority of voters to "borrow" the sovereignty of the state to create a special district which would build the irrigation systems needed for farming. The farmers would use this power to form a special assessment district with the power of eminent domain to overcome riparian rights and the power to raise funds for dams and canals through the sale of bonds. The bonds would be paid off by a tax on the value of the land in the district. This financing arrangement was ingenious because it imposed no burden on the capital resources of the farmers.
Arid land which acquired water increased enormously in value. This reflected the increased productivity of the land, which enabled the farmer to pay the cost of the bonds to finance such a district and they did all over the Central Valley and in Southern California. The key principle was that landowners paid the land tax, whether they used the water or not, since it was the availability of the water that increased the value of their land.
The principles that underpinned this elegant fiscal system were sophisticated. Every landholder in an irrigation district was taxed not according to "ability to pay," nor on what each produced, but only in proportion to the value of land to which he has the deed. Since the water enriched the value of the land, the law assures the equitable distribution of all earned wealth on the basis of productive effort. Or to put it another way, this law ensured that those who worked and improved their land were never required to pay more towards the water works of the Districts than the absentee owner or the speculator who held land of the same value in an idle and unimproved state.
Wright intended to aid the small farmer with the help of the populist voters who sent him to the legislature. The democratic vote in the Act amplified this result. In 1887, for example, the vote in the Modesto Irrigation District under the Wright Act was 700-156. Of the 156 votes cast against, 150 were cast by landowners controlling 70,000 out of the 108,000 acres in the district.
Miller was a cattleman and a speculator. He was not interested in farming. So he fought the irrigation districts in many ingenious ways, In one case he paid a prospector to arrive in town the day before an election to vote on the formation of one such district. The prospector announced the discovery of gold in the hills. On election day, most of the local residents were in the hills looking for gold and the election to form the water district failed.
The cattlemen and those who already monopolized the land and water opposed the voting right of non-property owners. Understandably, they were also antagonistic to the requirement that they pay the irrigation tax whether they used the water or not. They argued before the Supreme Court of the United States that they were denied their 14th amendment rights which requires that private property could not be taken without payment.
They were particularly furious because districts could legally take their land and sell it when they didn't pay the district's land tax which was being used to pay for the water works. The Wright Act is "confiscation and Communism under the guise of Law," the attorney for an English estate with large landholdings in San Diego in Southern California charged. The Supreme Court in 1896 disagreed.
In this celebrated case, "Fallbrook Irrigation District. v. Bradley (Case 164, US 112)," the Supreme Court of the United States, in sweeping language, ruled that the Wright Act was constitutional, since arid western lands needed water to be productive the Court said the California legislature had the right to approve the irrigation district concept. The Court called them a "legitimate public use" and not confiscation. It also approved the tax on land values as a legitimate way to raise revenues for the districts.
The Wright Act had an enormous impact. During the ten years after its passage hundreds of irrigation districts were formed which has a significant impact on the structure of land use. Productive farms began to replace cattle trails, and citrus fruits replaced enormous worn out wheat farms. The Henry Millers of California could no longer appropriate the rivers and ground water as private property. The Wright Act had made water available to thousands of farmers.
A significant amendment to the Wright Act also embodies the ideas of Henry George. The revised act exempted "all trees, vines, alfalfa, growing crops and all the structures of whatever class or description," from taxation. The full cost of the irrigation systems to be built would fall on the land, not the improvements. Small farmers could take control of their destiny and bring water to their farms.
So successful were the districts that the Don Pedro Dam (the world's largest at the time) was built solely with the tax revenue from increased land values. The farmers, not the general public, paid for this benefit from the increased productiveness of their land.
The irrigation districts brought prosperity and local development to the valleys of California which were once recorded on the map as "deserts." Many officials, writers, and professors have since recognized the power of this one act. In 1915, the former California legislator from Modesto, L.L. Dennett told the Los Angeles Times, "I doubt if any law ever enacted by our legislature has even approached the beneficial results of this law. It puts a premium upon development and improvement... it has perpetuated to the people and to their children a great heritage... [a] birthright has been preserved not to be administered by a remote national or even state organization, but by the very people whose birthright it is."
Edward Treadwell, the biographer of Henry Miller, the "Cattle King", noted: "for the smaller farmer irrigation districts are essential, but for the large landowners and cattlemen, they were deemed a menace. They compelled development... they transferred control from the large landholder to the populace. They invaded the liberty of action on which the land barons prospered."
The Chamber of Commerce in Modesto in the same year stated, "as a result of the exemption of improvements many of the large ranches have been cut up and sold in small tracts. The new owners are cultivating these farms intensively. The population of both country and city has increased... the new system of taxation has brought great prosperity to our district. Farmers are now encouraged to improve their property. Industry and thrift are not punished by an increase in taxes."
In the California Law Review in 1957, Albert Henley wrote, "Of public districts in California the most used and useful has been those formed since 1887 under the 'Wright Act' (Cal Water Code ss2O5OO etc.) ... the discovery of the legal formula of these organizations was of infinitely greater value to California than the discovery of gold a generation before. They are an extraordinarily potent engine for the creation of wealth... these laws have combined to change semi-arid lands from expectable permanent slumber as an area of absentee baronies, to one of prosperous independent farms and rural cities offering social as well as economic rewards to the State."
The Wright Act is based on the principle that the holding of large parcels of land out of production or with only a limited return is less desirable than a system which produces resident, productive owners. In fact the California Constitution (XVII-2) still expresses this priority, "The holding of large tracts of land, uncultivated and unimproved by individuals or corporations is against the public interest and should be discouraged by all means not inconsistent with the rights of private property."
Government studies have also shown that districts with small farms tend to be real communities where people invest their time, concern and money. In a classic study of Arvin and Dunibia, two similar Central Valley California communities, Dr. Walter Goldschmidt Of UCLA found that Dunibia in the Alta Irrigation District, an area with small farms was "sociologically superior" than Arvin, an area with large farms. "There is sufficient evidence to indicate that the financing of irrigation by a taxation of land values only was a causal factor in producing smaller farms."
Through the foresight of one school-teacher legislator, California had achieved, by legitimate methods, a revolutionary transfer of the land from the few to the many. C.C. Wright served only one term in the legislature in that spring of 1887. But the districts he envisioned with their tax on land values had achieved a remarkable revolution. Today over five million people live in this once arid valley, and it is the fastest growing region in California.
Property Rights and Productivity
The later development of new water sources with the aid of state and federal water subsidies caused a substantial change in the character of agriculture in California. Under a federal plan, water would be sold at a great subsidy. Underpriced water contributes to enormous economic distortions, pollution, overdrafting of groundwater, and a disregard for the principles of conservation. Absentee owners may also be encouraged to cultivate crops which are often subsidized by the federal government or which put small farmers out of business.
Under the Wright Act property rights were established in land with rent as payment for the right to use the soil fertility but a similar system was not established in water in either the federal or state water projects. "The absence of an ownership rental system for water," says Dale, "has meant that water use has in fact been determined by such things as historical priority, gall, and force and fraud; it cannot be otherwise when property rights do not exist and when the price for the use of available asset is zero."
An analysis of water use worldwide, _State of the World_, edited by Lester Brown, stresses the costs attached to underpricing water. "Much of the pervasive overuse and mismanagement of water in agriculture stems from the near-universal failure to price it properly. Irrigated systems are often built, operated and maintained by government agancies that charge next to nothing for these services."
The federal government of the United States subsidizes four million hectares of land in its western states which receive water under 40 year contracts. Farmers in the Central Valley in California have repaid only 5% of the cost of the subsidy over the last 40 years. "Largely because of this underpricing, one third of the Bureau's (of Reclamation) water irrigates pasture and other low value forage crops that are fed to livestock, even though so many other higher-valued activities need additional water." author Sandra Postel says, "when prices reflect water's scarcity, when the costs of obtaining water go up, or when governments regulate its use, farmers begin to use the resources more by adopting modern technologies and better management practices."
Dr. Mason Gaffney of U.C. Riverside, in his paper "Whose Water--Ours," argues that higher water prices not only induce conservation, but may actually increase production. "You substitute capital and labor for water on the same land, and after raised yields per acre,... you cannot afford to dump high-priced water on barley, alfalfa, rice or irrigated pasture..,"
Gaffney explains that higher priced (or realistically priced) water would lead to better controls. "From primitive furrows... to sprinklers, spitters and drip. This lets you do new things like growing avocados on steep hillsides, formerly barren, yielding more dollars of product for less water."
He says that rationalizing water use, (which is the proper aim of economics), is inherently conserving. The state inputs water at about $2,000 per acre foot, 100 times what some farmers (including Gaffney himself) pay. The economics of water in California, he reports, is based on hydro-imperialism, and leads to the ethical assumption that "conservation is for sissies."
The enormous social benefits that result from a system in which land ownership and use rights are clearly matched by fiscal obligations stand in contrast to the social friction generated by not applying a similar system to water. The point is made by Professor Alan Binder: "The market fails to safeguard the environment. When items of great value, like clean air and water, are also free of charge it is unsurprising that they are overused, leaving society with a dirty and less healthful environment than it should have."
The Federal Government Provides Subsidized Water
Federal water development began in the early part of the century. In 1902 a strong populist feeling against huge land holdings and ranches in the west of the United States led to the Passage of the National Reclamation Act and put the federal government of the United States into the dam business. Unlike the Wright Act, the federal government, not the owners, paid much of the costs of producing the water. Capital costs were to be repaid by the user, but interest was to paid by the general taxpayer. It would be as if a family bought a home for $37,000 with the capital cost over a 20 year period with the interest or carrying charges of $68,000 paid by the general taxpayer.
F. H. Newell, the first Commissioner of Reclamation, summarized the purpose of the Reclamation Act of 1902 in the following way: "The object of the Reclamation Act is not so much to irrigate the land as it is to make homes... It is not to irrigate the lands which now belong to large corporations or to small ones; it is not to make these men wealthy; but it is to brings about a condition whereby that land shall be put into the hands of the smaller owner."
The major purpose of the Reclamation Act was to recover the land for small family farms. The Act therefore limited the number of acres to 160 that could be supplied with subsidized water. Contracts were also signed with some large landowners holding more than 160 acres to allow them to receive the water at low rates for ten years at which time they were required to sell off the excess acreage at prewater prices. This requirement was designed to spread as far as possible the bonanza of increased land values. But neither the contracts nor the Act have been enforced.
As a result, corporations such as Southern Pacific, the largest landholder in California, are "temporarily" irrigating their acreage with water sold at $9 per 326,000 gallons (one acre foot). Most of the farmers who hooked into the Central Valley Project in the 1950s are paying $3.50 an acre foot, a penny for every 7,730 pounds of water. Water in the California desert is cheaper than sand.
The government could have achieved its populist goal of the family farm by the use of an instrument like the Wright Act instead of an acreage limitation, according to Robert Durrow, Executive Secretary of the Irrigation District Association of California. Before a California Assembly Interim Committee on water, Durrow stated, "The method of taxing only the land and not the improvements tends to have, at least in good part, the same result as intended by the 160 acre limitation." He goes on to say that "in any completely and properly planned water project all direct beneficiaries should pay allocated costs up to their full worth."
Since the advent of cheap water in the Valley, "agriculture can hardly be referred to as farming... (it's) Big Business," says Professor Gerald Haslam writing in _Sierra_ magazine. "Corporations whose officers are more adept at picking stock options than tomatoes control great tracts and direct ranch managers who in turn direct laborers. Their domains are enormous. In 1981 just eight companies owned two thirds of the state irrigated acreage in three southern counties. Those 'farmers' include Chevron USA (37,793 acres), Prudential Insurance Co. of America (25,105 acres), Getty Oil Company (35,384 acres), Shell Oil Company (31,995 acres)."
The distribution of water in California is very disproportionate. 85% is used by agriculture; 10% is used by households (mainly urban users) and 5% is used by industry. Of the 85% of water used by agriculture, there is also an unequal distribution. Four crops receive 45% of the water: irrigated pasture land (which is in lieu of feed, which would cost $100,000,000); Alfalfa to feed cattle; Cotton and Rice. Cotton and rice are a surplus crop and are subsidized by the federal government under a separate program.
Who controls produce in California?
The unenforced acre limitation has led to bigger holdings and fewer smaller holdings, according to the California Institute of Rural Studies, "Half of the farmland in California today is owned by absentee owners." The _California Nader Report_ says "The failure to enforce the acre limitation deprives small farmers of their only chance go buy good land cheaply.
The Census reports in the 1980s make clear that agricultural produce in California is now controlled, not by the small farmer, the desired recipient of the government largess, but by large farmers who hire migrant labor to run their absentee agribusinesses. "The overwhelming majority of California farm production is now controlled by a relatively small number of "industrial farms,"says Don Villarejo in his thorough analysis of the water subsidy issue in California agriculture.
This ominous trend that the family farmer is being squeezed out by absentee corporations using migrant workers is also reported by other observers. How unlike the impact of the Wright Act which encouraged resident productive farmers. In the Westlands Water District, the democratic voting privileges of the Wright Act do not apply. Voters get one vote for every $1 of assessed land values. As a result big landowners dominate the Board.
In 1982 the data on California Farm production showed that the biggest 6% of the state's farms ranked by annual sales accounted for 73% of farm cash receipts. This six percent comprised 4990 farms (out of California's 82,463) and all but 247 of these reported expenditures for directly hired farm laborers. In fact these 4743 farms accounted for 75% of all expenditures for hired farm laborers.
A study by Professor Dean MacCannel refines and extends Dr. Goldschmidt's analysis of the effect of corporate farms on community life. Like Goldschmidt, MacCannel and his associates discovered a negative correlation between farm size and social amenities not only in the Central Valley but in the vast sunbelt region which extends from California to Florida.
MacCannel examined Census tracts, Postal Zip Codes, and areas bounded by city limits in 42 communities in the Western San Joaquin Valley and found negative correlations between farm size and community social conditions. The larger the farm size in the community, the poorer were the social conditions. The smaller the farm size, the better the community's social conditions.
MacCannel indicates that the most negative correlations were median family income, adults with high school diplomas, adults with 4 year college degrees, professionals in the labor force, home ownership, households with complete plumbing and medical services.
The poverty of the social conditions in these areas is demonstrated in the startling fact that six of the ten metropolitan areas in the United States with the highest proportion of inhabitants receiving general assistance (welfare) are in California's Central Valley. They include Visalia (15.9%); Stockton (14.4%): Yuba City (12.4%); Fresno (12.3%) Modesto (11.8%) and Redding (11.6%). It is more than ironic that an arch over the main street as you enter Modesto expresses the Californian view of water, "Water, Wealth, Contentment, Health."
The immensity of this correlation between large industrial farms and poverty in the Valley is also demonstrated when we examine the wages of the hired workers in these areas which are considered "industrialized farms." A survey of California farm workers done by Richard Mines for the University of California in 1986 showed that farmworker households with four members reported average annual earnings of $8750. Both figures are well below the official poverty level. California agriculture's heavy dependence on numerous low-paid laborers creates rural communities which are home to a large proportion of the state's working poor. Mines found that more than 80% of California farm workers are Mexican or Mexican-American. Therefore, these workers are both poor and members of an ethnic minority.
MacCannel obtained similar results in the 42 San Joaquin Valley communities which he studied. "The greater the proportion of the community population in the agricultural labor force, the lower the median family income of the community and the poorer the social conditions."
An examination of the communities in the Westlands Water District by the California Institute for Rural Studies reveals a similar pattern of poor communities created by absentee companies who pay low wages. The WWD comprising a total of 603,093 acres (more than 94% of which is irrigated, making it the largest single recipient of federal water in California) is one of the largest districts in California. It is home to only two communities: Cantuca Creek and Huron, Another two, Five Points and Mendota, are located at the edge of the district. The data regarding social conditions in these communities is just as distressing.
Median family income in Cantuca Creek and Huron was found to be $14,159 and $11,705 respectively. Both statistic