|Wealth and Want
|... because democracy alone is not enough to produce widely shared prosperity.
What the Left Must Do: Share the Surplus
Ed: The co-founder of the USA Greens, “Mr. Geonomist” Jeff Smith, presents another very readable and stimulating perspective. Jeff visited our fair shores last year and left a trail of wet towels wherever he stayed. Sizzling rumours predict Jeff will return soon to continue a romance with a certain Green activist Is that how you’d describe yourself, Anne?
WHAT THE LEFT MUST NOT DO
RENT – THE STUFF OF FORTUNES – ROCKS AND RULES
HOW TO RECOVER RENTS
TAX SHIFT WORKS
TAXING EARNINGS DOESN’T WORK
WIDE-OPEN FIELD OF PLAY
What would you do if you could work two days and take five off? Write? Play soccer? Tend to the community garden? Time off is an option made increasingly viable by our relentlessly rising rate of productivity. French Marxist and media critic Jean Baudrillard, while still advancing the interests of labor, implores the Left to move on from seeing humans as workers to seeing workers as human beings, with more needs than merely the material. Enabling people to live their lives more fully is an issue made to order for rescuing the Left from the doldrums that descended when “history ended”.
What would single mothers do with enough income to stay home? What would minorities do with the wherewithal to begin their own businesses? What would communities do if they did not leak resources up to an upper class and out to a distant lender or tax collector? What would the elite do without our commonwealth? The means to these ends is an extra income apart from labor or capital (savings), that is, a “social salary” from society’s surplus, a “Citizens Dividend” from all the rents, natural and governmental, that people pay for land and to the privileged, redirected to everyone equally. Merely demanding a fair sharing of the bounty from nature and modern society would raise people’s self-esteem, a key component for political involvement. Actually receiving an income supplement would transform our lives and restructure society.
Unless humanity needs militarism, corporate welfare, and debt service, it’s fair to say most public revenue gets wasted. Demanding a dividend – similar to Alaska paying residents a share from oil royalties – forces a new dialog on spending priorities. Beyond arguing “bread not bombs,” a dividend replaces expenditures by politicians (necessarily influenced by donors) with spending by citizens, the people who generate the surplus in the first place. With a dividend, citizens get to see themselves as direct beneficiaries from reigning in the wild spending spree on imperial aggression, disloyal multinationals, and on “borrowing” money that never existed until “lent” by the Federal Reserve.
WHAT THE LEFT MUST NOT DO
Famed for his role in the Karen Silkwood case, union leader Tony Mazzochi also pushes for a shorter workweek. So does In These Times reporter John Judis. Their cause needs help. While the worsening time-famine stresses many, most do not yet call for a social salary. They clamour for jobs.
The Left requests and the Right promises jobs – the Left for the income, the Right in order to keep people in their place. Workers want to be paid for going along with the program. Bosses want to accommodate them, albeit not fully; maintaining some unemployment spooks workers and keeps wages down. Since jobs are the knee-jerk cure of everyone, they can not be the signature issue of the Left. Nor can they lift our sights. The call for jobs does not come from a place of respect but from a willingness to accept the status quo, with prevailing hierarchy left intact.
To deliver a bigger pie, the Right touts efficiency and growth; to better distribute the pie, the Left urges equity and jobs. Yet jobs are less for distributing, more for producing – if that. As automation and globalisation expand the pie, they contract the workforce. Even when, or especially when, people take time off to go to war, output increases, proving we’re well over over-capacity. Juliet Schor in her Overworked American notes this rise in productivity does not bless us with leisure but curses us with unemployment.
However, even when employment is high, jobs still do a lousy job of distribution. They capture less than a fair return to labor while swallowing up our free time. Full employment with a liveable wage may mean jobs with justice for some, but not for those unable to work, and it reduces humans to workers, not players or creators.
Demanding jobs rather than a fair share of society’s surplus implies that there is no commonwealth or that expropriating it by a few is OK. Neither is true. Rents are real, and they are ours. There is a free lunch (just ask the privileged), as those downing it do get money for nothing. And since society, not lone owners, generates these values, that flow of funds belongs to everyone.
RENT – THE STUFF OF FORTUNES – ROCKS AND RULES
The value of a parcel of land is initially based on the natural endowments of the location (“location, location, location”), created not by an owner but by whatever created all of us. Next, land value rises with the presence of society, and grows with the population of society. It’s highest where society is densest, in the city centers, typically 2000 times more valuable than sites in the boondocks. Land values as economic values disappear whenever society quits respecting one’s claim, as in a war zone; there, real estate offices nimbly shut down. And while land titles may be the holy grail of wannabe homeowners, they’re also the ticket to pocket unearned rent by absentee landlords, such as Donald Trump.
Making land public does not guarantee that the public end up with the rent. The public’s steward, the state, often lets public resources at “fire-sale” prices, unduly enriching Chevron, Arco, Kerr-McGee, Weyerhauser, etc. The state gifts enormously valuable licenses for TV, radio, and cell phones to GE, Disney, Time Warner, and Clear Channel. The metaphor, “field of knowledge”, lets us see patents and copyrights as flags; by excluding innovative outsiders, they not only skew techno-progress (thus addicting civilization to oil) but also enrich those few who can afford to corral them: GM, DuPont, and Microsoft. Similarly, a utility franchise lets AT&T pay investors, and Enron insiders, handsomely.
Buying a land title – the granddaddy of all privileges – typically requires a mortgage, which disguises rent as “interest”. Pierre Joseph Proudhon (1809-1865), French journalist/anarchist, noted: "As long as land monopoly is maintained, the few can take possession of what Nature free of charge has granted to everyone, and usury will penetrate the whole society, and we will have banks, which instead of being servants for the exchange of goods will become powerful extorters." He called this one; today’s banks do bleed the economy.
What does the central bank, the private consortium dubbed the Federal Reserve, lend to the US? Nothing. Given the power to create money by Congress (which the Constitution had given to Congress), from no savings at all but merely from legal standing, it manufactures credit, which the US borrows, at interest. The US exempts this interest from its income tax; people who hold US bonds – mainly the wealthy – keep this income tax-free.
The much and justifiably criticized corporation is in essence its corporate charter, given value by limiting the liability of managers, directors, and investors. It’s worth at least the cost of the insurance payments not made by the corporation, which would equal the costs imposed upon worker, customer, and nature. As the “need” arises, legislatures extend limited liability even further: Congress legally lowered the greater risk of nuclear power to benefit Westinghouse, of the Valdez oil transport spill for Exxon, and the Y2K software design bug for Microsoft. Politicians define legally “safe” amounts of polluted air and water for GM and Monsanto, keeping safe the wealth of those responsible.
Not to be outdone by any legislature, the Supreme Court has ruled in favour of compensating landowners for environmental “takings”, but has remained silent about landowners compensating the public for any “givings”, as when site values skyrocket near a new light rail stop. Molly Ivins wrote,
"Henry George must be in his grave spinning' like a cyclotron. We, the people at large, make the land more desirable; and then the landowners want us to pay them because we won't allow them to poison the air or to pollute the rivers." (1995 March)That’s how great fortunes are made: by sloughing off private costs (which become “negative externalities”) while soaking up public benefits (some “positive externalities”). Land titles, corporate charters, and other privileges – mere pieces of paper – are worth trillions each year. The corporations – from the Federal Reserve to Exxon (both founded by the “oiligarchy”) – that receive these privileges make their owners rich or richer. Their wealth is not compensation for the exertions of either labor or capital, not profit in the market from output, but rent from present lobbying of legislatures or past conquest of others’ lands. Thus laws (“privilege” means “private law”) funnel multi-trillions of dollars each year from the many to the few.
Rentiers become the elite or rise higher up among the upper echelon, the puppeteers of our puppet state. Their ranks grow with every techno-advance that spurs a new monopoly and pushes up locational values.
HOW TO RECOVER RENTS
Trillions are enough money that the present beneficiaries spend fortunes on electing their water boys to Congress and state legislatures. Why do public servants agree to let public assets go for peanuts? Partly out of habit, partly because the recipients contribute mightily to their political campaigns, but also.
Well, not exactly “always”. Once there was a powerful movement to shift taxes off wages, onto rents. It was not Marxism, eventho’ one of the first demands in the Communist Manifesto was to tax land (acknowledging the history of the enclosures of farmland which forced surplus labor to work cheap in the then new factories in cities). It was the movement of the Single Tax on land, spearheaded by Henry George.
George, author of the classic, Progress and Poverty (1879, in its day more popular than Das Kapital), was Labor’s candidate for the mayoralty of New York in 1886, an election he won but a victory he was denied by the machinations of Tammany Hall. Samuel Gompers (1850-1924), union organizer who campaigned for George, said,
"I believe in the Single Tax. I count it a great privilege to have been a friend of Henry George and to have been one of those who helped to make him understood in New York and elsewhere."
TAX SHIFT WORKS
Whenever George’s followers convinced society to shift taxes off earnings, onto rents, that opened up opportunity. As collecting land rent knocks down land price, and as speculators turn into developers, and as formerly procrastinating governments become leasers, then the use of land rises. Using land requires labor, raising the demand for workers. More employment means higher wages.
As taxing land spurs employment, taxing labor and capital does just the opposite. Taxing salaries makes it more expensive to hire people. Taxing earned profits makes it more expensive to invest in firms that hire people. If you want jobs, don’t tax them. Demanding jobs while taxing wages is irrational. When we tax (or in other ways reduce) one’s efforts, most people naturally produce less. Less output not only shrinks private assets but also the formation of public assets downstream.
Unlike taxing earned incomes, which shrinks the pie, collecting rent grows the pie. While taxes on effort lessen the motivation to produce, charging people rent for what’s already been provided, by definition, does not diminish the motive to produce. Instead, recovering rent removes the private profit from speculating in land and resources. And once we redirect revenue from sweetheart deals (e.g., Pentagon contracts), tax breaks (e.g., depletion allowances), and subsidies (e.g., agri-business support) into a general dividend, then why bother currying favours from the state? Finding rent-seeking from both nature and the legislature less profitable, investors would turn to improving production: new technology and worker re-training, providing society more from less.
In The Nation, Robert Fitch ('90 Oct 29), author of The Assassination of New York (1993), stated,
"A tax levied on land used for commercial purposes is the ideal tax. It would fall on the richest families and institutions, it can't be shifted to consumers and owners can't move their property to another state. Almost invariably, if you tax something the capitalists will produce less of it and charge you more for it. But land is different. Most of it was produced once and for all by God."
Increasing taxes, fees, or dues upon land, resources, and privileges won’t force firms to raise prices; the ones who try to will lose customers to those who don’t; in the end, all will have to settle for smaller profits. On the other hand, de-taxing labor and capital, by lowering overhead, lets firms lower the price of their products, while competition drives them to. The resultant lower cost of living – coupled with higher wages and the social salary – lets those with enough stuff work less, so those without enough stuff can work more.
Given the collateral damage by most taxes, the Left must make clear that the extra income is to come not from taxes upon people’s legitimate earnings but from rent, making it a social salary from society’s surplus. While opponents will cry “redistribution”, the Left can point out that sharing the commonwealth is actually “predistribution.” Acting like a REIT (Real Estate Investment Trust) for the public, government would merely recover and disburse rents before the elite or their friendly politicians have a chance to misspend society’s surplus.
As Goldschmidt showed in his classic 1940s study of two towns in California’s Central Valley – Arven and Dinuba (one town of owner occupants, the other a one-company town) – where people have a stake, they vote, attend hearings, and use parks and libraries. Government responds, filling potholes, funding schools, etc. Improving people’s lot in life increases their participation in civic affairs.
The reform of collecting ground rent in lieu of taxing buildings lowers the cost of housing, which raises the rate of owner occupancy. When Pittsburgh PA taxed land six times their rate on buildings, their affordable housing, stable neighbourhoods, and low crime rate won the once strong union town the title of “America’s Most Liveable City” twice in the mid 1980s. Succumbing to pressure applied by speculators, in 2000 the Steel City returned to the conventional property tax. Construction starts in 2001 in the rest of Pennsylvania fell 1.5%; in Pittsburgh, 38.1%. For 2001 and 2002, compared to 1999 and 2000, building permits declined 21.3% while nationwide they rose 6.7% (Incentive Taxation, 2003 June, Henry George Fdn).
Eventho’ its advocates must overcome the visceral dislike of the more familiar tax on both land and buildings, the proposal to collect ground rents has enjoyed popular support. In the mid 1990s, the people of Allentown Pennsylvania (whose sorry state inspired pop singer Billy Joel) voted twice to shift their property tax off buildings, onto locations. They had to vote twice because after expressing their preference the first time, the real estate lobby put the question on the ballot again, where it passed by an even larger margin. Since shifting its tax base, the town revitalized its center and neighborhoods, drawing praise from Richard Florida in his Rise of the Creative Class (2002). Allentown is one of 20 jurisdictions in Pennsylvania that levy land more highly than improvements.
A surfeit of jobs, the consequence of recovering rents, goes nicely with the flagship goal of a life of leisure, the consequence of sharing rents. Further, when jobs seek people instead of vice versa, not only can workers hold out for higher wages – as in the tech industries in the 1990s – but they also gain the leverage to metamorphose corporations into co-ops, long an ideal of the Left. Having to pay government for limiting its liability or to operate under full liability, corporations would want to share risk, giving labor leverage to negotiate not just higher wages, but also co-manage, and eventually erase the distinction between management and worker, which is a co-op.
An entry point for proposing an extra income for everyone is the income gap, highlighted by outrageous CEO pay. With society soaking up rents, leaving little excess in corporate coffers, and with a more participatory management and directorship – one including employees and stockholders – directors would no longer have either the means or the motive to lavish pay and benefits on CEOs, that breed of salesman with excellent old-boy connections and superbly apt at schmoozing. The new managers and directors, acting on behalf of the greater good, would redirect profit from CEO aggrandizement to dividends paid to the growing class of shareholders, which would include workers, moving society closer to Louis Kelso’s ideal of universal stock ownership.
Campaigning for a Citizens Dividend dislodges the Left from the issues of the bygone Industrial Era and orients the Left toward the solutions of the future. Getting back onto the cutting edge positions the Left for a solution instead of against a problem, which progressives, by definition (“pro” meaning “for”), should be. Demanding the fundamental reform of a dividend sets the agenda, drawing down the strength of the Right, while winning the spotlight, new adherents, and building up the Left.
In An Intelligent Woman’s Guide to Socialism and Capitalism (1928), George Bernard Shaw told how he began his political career as a Georgist but left to found the Fabians in order to promote a social salary. HG Wells likewise faulted George for not faulting the state’s misspending and focusing squarely on taxation. While more famous for his tax shift, Henry George did endorse the idea of a dividend. Martin Luther King in his own "Where Do We Go From Here?" cited George then proposed an extra income that would be dynamic, that would “automatically increase as the total social income grows.” This is precisely what a Citizens Dividend does; as progress pushes up site values, one’s share of the resultant Rent rises, too. The stratospheric land costs in Silicon Valley, Silicon Forest, and silicon anywhere exemplify how the advances in machines show up in the costs of locations.
Former United Auto Workers President Douglas Frazier said, “one day, we are going to ask ourselves, did anyone make the oil and minerals and then put them in the ground? We will then realize that they belong to all of us." (before the National Conference on Alternate State and Local Policies in 1979, July 3-5) That day is dawning.
Already, Alaskans own oil and share royalties. Among environmentalists, top economists Herman Daly and James Robertson both endorse sharing rents in lieu of taxing earned income. Daly, ex of the World Bank and grandfather of ecological economics, back in the 1970s noted the savings from folding many social programs into a social salary. Robertson, ex-advisor to the British Cabinet and Bank of England and co-founder of The Other Economic Summit and Schumacher College, in many of his writings urges the tax shift and a Citizens Dividend. The Corporation for Economic Development and Americans for Equitable Climate Solutions also promote a rent dividend.
Groups with like goals might help win a social dividend. Altho’ they don’t yet care where the money comes from, the venerable Technocracy and the upstart Basic Income Network promote an income supplement; some minority groups demand reparations. Others advocate a shorter workweek: the woman’s group, 9 to 5, and an academic group, Society to Reduce Human Labor. In Europe, scholars debate an extra income apart from one’s labor or capital. All these movements beyond the mainstream might be ready to rally around sharing society’s commonwealth.
The time famine, made a more bitter pill to swallow by the yawning income gulf, could slide the rest of society toward a social salary, too. Across the aisle, many Rightists argue for replacing subsidies with vouchers, as for education, a cousin of an extra income. A rational Rightist (if that’s not an oxymoron) might just go along with this more fundamental reform, the Citizens Dividend.
WIDE-OPEN FIELD OF PLAY
Petitioning for jobs – crumbs for being good peons – is only settling. Legislating an income outright will exert every sinew of the Left. To win distributive justice, activists could lobby each breadth of government, including the global. Since recovering rent spurs development (see our prize-winning “Bootstrap Development”), the Left could raise this banner besides merely opposing globalisation. At the other end of the political arena, the ones to disburse the revenue need not be federal authorities; local ones could do the job. They could pay residents a Housing Voucher from collected site rent, which is way highest in commercial areas, often owned by outsiders. In the state arena, activists can advance the Alaska model, as international activists do for sharing the oil wealth among the peoples of Iraq and Nigeria.
Meanwhile, ignoring our common assets guarantees that we continue to pay rent rather than begin to receive rent. Conversely, insisting upon a fair share could win us the world we want. While it breaks an old habit to leave jobs behind in favour of fair distribution, just recognizing surplus empowers people. It reaffirms the very existence of our commonwealth and challenges the narrow view of property as exclusively private. While the Left gets excoriated for wanting to be big spenders, demanding a dividend in lieu of waste and a shift of taxes from individual effort to social surplus helps refurbish the Left’s image.
The call to share the commonwealth enjoys an unshakable moral base and gets high marks for real world success, unlike taxes upon true earnings. Once implemented, sharing rent will grant us leisure – time enough to evolve and reconnect with friends, family, and neighbours – and drain away fortunes rather than let the fortunate continue to soak society. Hence support for shifting taxes and paying dividends to the citizenry grows already, without the Left’s leadership. It’s time to run with the banner of an extra income for everyone, in the halls and capitols of governments everywhere. To liberate humans from exploitive labor, let us advance the sharing of society’s surplus.
To prove I'm not tilting marx-ward, I fear I may one day soon have to write "What the Right must do (or quit doing)," too.
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Wealth and Want
... because democracy alone hasn't yet led to a society in which all can prosper