Much of the current administration's comments on tax reform has been along
the line of "It's your money. We want to let you keep more of it." That comment
is largely addressed to the income tax, and generally works out to benefit
highest-earning segments of our population, with some suggestion that those
benefits for the high-earners will of course trickle down to the remainder
of American society. Further, there has been a lot of discussion about an "ownership
which more things would be individually owned, and there would be fewer
safety nets provided from our common spending: one would buy insurance
from the FIRE
sector, rather than falling back on protection offered from revenues collected
in the form of taxes.
Georgists take a different position. We believe that one's wages are inherently
private. Consistent with that, we believe that buildings, being the result
of individual human labor, are also private. But the economic value
of land, having been created as a result of the land's natural endowment,
common spending, should not be privatized. We are persuaded that the
value the land has should be treated as common property.
This is very different from our current system of taxation, which leaves
virtually all of the appreciation of land value in private — and corporate
— hands. Couples get to keep
the first $500,000 of land appreciation every two years on residential
property they live in, completely tax free! Appreciation on properties held
at the time of one's death never
gets taxed in a capital gains tax, and only a tiny percentage is taxed
by estate taxes.
What would a better way look like? Tax what we individually don't make,
what we can't make, and all depend on. All benefits of our common spending
tend to accrue to the holders of land, particularly our best land. Tax that
land value, and we collect for the commons that which we together create!
Rev. A. C. Auchmuty: Gems from George, a
themed collection of
excerpts from the writings of Henry George (with links to sources)
IN socialism as distinguished from individualism there is an unquestionable
truth — and that a truth to which (especially by those most identified
with free-trade principles) too little attention has been paid. Man is primarily
an individual — a separate entity, differing from his fellows in desires
and powers, and requiring for the exercise of those powers and the gratification
of those desires individual play and freedom. But he is also a social being,
having desires that harmonize with those of his fellows, and powers that
can only be brought out in concerted action. There is thus a domain of individual
action and a domain of social action — some things which can best be
done when each acts for himself, and some things which can best be done when
society acts for all its members. And the natural tendency of advancing civilization
is to make social conditions relatively more important, and more and more
to enlarge the domain of social action. This has not been sufficiently regarded,
and at the present time, evil unquestionably results from leaving to individual
action functions that by reason of the growth of society and the developments
of the arts have passed into the domain of social
action; just as, on the other hand, evil unquestionably results from social
interference with what properly belongs to the individual. Society ought
not to leave the telegraph and the railway to the management and control
of individuals; nor yet ought society to step in and collect individual debts
or attempt to direct individual industry. — Protection or Free
Trade, Chapter 28 econlib
THE poverty to which in advancing civilization great masses of men are condemned,
is not the freedom from distraction and temptation which sages have sought
and philosophers have praised: it is a degrading and embruting slavery, that
cramps the higher nature, dulls the finer feelings, and drives men by its
pain to acts which the brutes would refuse. It is into this helpless, hopeless
poverty, that crushes manhood and destroys womanhood, that robs even childhood
of its innocence and joy, that the working classes are being driven by a
force which acts upon them like a resistless and unpitying machine. The Boston
collar manufacturer who pays his girls two cents an hour may commiserate
their condition, but he, as they, is governed by the law of competition,
and cannot pay more and carry on his business, for exchange is not governed
by sentiment. And so, through all intermediate gradations, up to those who
receive the earnings of labor without return, in the rent of land, it is
the inexorable laws of supply and demand, a power with which the individual
can no more quarrel or dispute than with the winds and the tides, that seem
to press down the lower classes into the slavery of want.
But, in reality, the cause is that which always has, and always must result in
slavery — the monopolization by some of what nature has designed for all.
. . . Private ownership of land is the nether millstone. Material progress is
the upper millstone. Between them; with an increasing pressure, the working classes
are being ground. — Progress & Poverty — Book
VII, Chapter 2, Justice of the Remedy: Enslavement of laborers the ultimate result
of private property in land
IT is not in the relations of capital and labor; it is not in the pressure
of population against subsistence that an explanation of the unequal development
of our civilization is to be found. The great cause of inequality in the
distribution of wealth is inequality in the ownership of land. The ownership
of land is the great fundamental fact which ultimately determines the social,
the political and, consequently, the intellectual and moral condition of
a people. And it must be so. For land is the habitation of man, the storehouse
upon which he must draw for all his needs, the material to which his labor
must be applied for the supply of all his desires; for even the products
of the sea cannot be taken, the light of the sun enjoyed, or any of the forces
of nature utilized, without the use of land or its products. On the land
we are born, from it we live, to it we return again — children of the
soil as truly as is the blade of grass or the flower of the field. — Progress & Poverty — Book
V, Chapter 2: The Problem Solved: The persistence of poverty amid advancing
THERE is nothing strange or inexplicable in the phenomena that are now perplexing
the world. It is not that material progress is not in itself a good, it is
not that nature has called into being children for whom she has failed to provide;
it is not that the Creator has left on natural laws a taint of injustice at
which even the human mind revolts, that material progress brings such bitter
fruits. That amid our highest civilization men faint and die with want is not
due to the niggardliness of nature, but to the injustice of man. Vice and misery,
poverty and pauperism, are not the legitimate results of increase of population
and industrial development; they only follow increase of population and industrial
development because land is treated as private property — they are the
direct and necessary results of the violation of the supreme law of justice,
involved in giving to some men the exclusive possession of that which nature
provides for all men. — Progress & Poverty — Book
VII, Chapter 1, Justice of the Remedy: Injustice of private property in land
... go to "Gems from George"
Louis Post: Outlines of Louis F. Post's
Lectures, with Illustrative Notes and Charts (1894)
3. THE SINGLE TAX FALLS IN PROPORTION TO BENEFITS
To perceive that the single tax would justly measure the value of government
service we have only to realize that the mass of individuals everywhere and
now, in paying for the land they use, actually pay for government service
in proportion to what they receive. He who would enjoy the benefits of a
government must use land within its jurisdiction. He cannot carry land from
where government is poor to where it is good; neither can he carry it from
where the benefits of good government are few or enjoyed with difficulty
to where they are many and fully enjoyed. He must rent or buy land where
the benefits of government are available, or forego them. And unless he buys
or rents where they are greatest and most available he must forego them in
degree. Consequently, if he would work or live where the benefits of government
are available, and does not already own land there, he will be compelled
to rent or buy at a valuation which, other things being equal, will depend
upon the value of the government service that the site he selects enables
him to enjoy. 14 Thus does he pay for the service of government in proportion
to its value to him. But he does not pay the public which provides the service;
he is required to pay land-owners.
14. Land values are lower in all countries of poor government
than in any country of better government, other things being equal. They
are lower in cities of poor government, other things being equal, than
in cities of better government. Land values are lower, for example, in
Juarez, on the Mexican side of the Rio Grande, where government is bad,
than in El Paso, the neighboring city on the American side, where government
is better. They are lower in the same city under bad government than
under improved government. When Seth Low, after a reform campaign, was
elected mayor of Brooklyn, N.Y., rents advanced before he took the oath
of office, upon the bare expectation that he would eradicate municipal
abuses. Let the city authorities anywhere pave a street, put water through
it and sewer it, or do any of these things, and lots in the neighborhood
rise in value. Everywhere that the "good roads" agitation of
wheel men has borne fruit in better highways, the value of adjacent land
has increased. Instances of this effect as results of public improvements
might be collected in abundance. Every man must be able to recall some
within his own experience.
And it is perfectly reasonable that it should be so.
Land and not other property must rise in value with desired improvements
in government, because, while any tendency on the part of other kinds
of property to rise in value is checked by greater production, land can
not be reproduced.
Imagine an utterly lawless place, where life and property
are constantly threatened by desperadoes. He must be either a very bold
man or a very avaricious one who will build a store in such a community
and stock it with goods; but suppose such a man should appear. His store
costs him more than the same building would cost in a civilized community;
mechanics are not plentiful in such a place, and materials are hard to
get. The building is finally erected, however, and stocked. And now what
about this merchant's prices for goods? Competition is weak, because
there are few men who will take the chances he has taken, and he charges
all that his customers will pay. A hundred per cent, five hundred per
cent, perhaps one or two thousand per cent profit rewards him for his
pains and risk. His goods are dear, enormously dear — dear enough
to satisfy the most contemptuous enemy of cheapness; and if any one should
wish to buy his store that would be dear too, for the difficulties in
the way of building continue. But land is cheap! This is the
type of community in which may be found that land, so often mentioned
and so seldom seen, which "the owners actually can't give away,
But suppose that government improves. An efficient administration
of justice rids the place of desperadoes, and life and property are safe.
What about prices then? It would no longer require a bold or desperately
avaricious man to engage in selling goods in that community, and competition
would set in. High profits would soon come down. Goods would be cheap — as
cheap as anywhere in the world, the cost of transportation considered.
Builders and building materials could be had without difficulty, and
stores would be cheap, too. But land would be dear! Improvement
in government increases the value of that, and of that alone.
Now, the economic principle pursuant to which land-owners are thus
able to charge their fellow-citizens for the common benefits of their common
points to the true method of taxation. With the exception of such other monopoly
property as is analogous to land titles, and which in the purview of the
single tax is included with land for purposes of taxation, 15 land is the
only kind of property that is increased in value by government; and the increase
of value is in proportion, other influences aside, to the public service
which its possession secures to the occupant. Therefore, by taxing land in
proportion to its value, and exempting all other property, kindred monopolies
excepted — that is to say, by adopting the single tax — we should
be levying taxes according to benefits.16
15. Railroad franchises, for example, are not usually
thought of as land titles, but that is what they are. By an act of sovereign
authority they confer rights of control for transportation purposes over
narrow strips of land between terminals and along trading points. The
value of this right of way is a land value.
16. Each occupant would pay to his landlord the value
of the public benefits in the way of highways, schools, courts, police
and fire protection, etc., that his site enabled him to enjoy. The landlord
would pay a tax proportioned to the pecuniary benefits conferred upon
him by the public in raising and maintaining the value of his holding.
And if occupant and owner were the same, he would pay directly according
to the value of his land for all the public benefits he enjoyed, both
intangible and pecuniary.
And in no sense would this be class taxation. Indeed, the cry of class
taxation is a rather impudent one for owners of valuable land to raise against
the single tax, when it is considered that under existing systems of taxation
they are exempt. 17 Even the poorest and the most degraded classes in the
community, besides paying land-owners for such public benefits as come their
way, are compelled by indirect taxation to contribute to the support of government.
But landowners as a class go free. They enjoy the protection of the courts,
and of police and fire departments, and they have the use of schools and
the benefit of highways and other public improvements, all in common with
the most favored, and upon the same specific terms; yet, though they go through
the form of paying taxes, and if their holdings are of considerable value
pose as "the tax-payers" on all important occasions, they,
in effect and considered as a class, pay no taxes, because government, by
increasing the value of their land, enables them to recover back in higher
rents and higher prices more than their taxes amount to. Enjoying the same
tangible benefits of government that others do, many of them as individuals
and all of them as a class receive in addition a tangible pecuniary benefit
which government confers upon no other property-owners. The value
of their property is enhanced in proportion to the benefits of government
occupants enjoy. To tax them alone, therefore, is not to discriminate against
them; it is to charge them for what they get.18
17. While the landholders of the City of Washington were
paying something less than two per cent annually in taxes, a Congressional
Committee (Report of the Select Committee to Investigate Tax Assessments
in the District of Columbia, composed of Messrs. Johnson, of Ohio, Chairman,
Wadsworth, of New York, and Washington, of Tennessee. Made to the House
of Representatives, May 24, 1892. Report No. 1469), brought out
the fact that the value of their land had been increasing at a minimum
rate of ten per cent per annum. The Washington land-owners as a class
thus appear to have received back in higher land values, actually and
potentially, about ten dollars for every two dollars that as land-owners
they paid in taxes. If any one supposes that this condition is peculiar
to Washington let him make similar estimates for any progressive locality,
and see if the land-owners there are not favored in like manner.
But the point is not dependent upon increase in the capitalized
value of land. If the land yields or will yield to its owner an income
in the nature of actual or potential ground rent, then to the extent
that this actual or possible income is dependent upon government the
landlord is in effect exempt from taxation. No matter what tax he pays
on account of his ownership of land, the public gives it back to him
to that extent.
18. Take for illustration two towns, one of excellent
government and the other of inefficient government, but in all other
respects alike. Suppose you are hunting for a place of residence and
find a suitable site in the town of good government. For simplicity of
illustration let us suppose that the land there is not sold outright
but is let upon ground rent. You meet the owner of the lot you have selected
and ask him his terms. He replies:
"Two hundred and fifty dollars a year."
"Two hundred and fifty dollars a year!" you
exclaim. "Why, I can get just as good a site in that other town
for a hundred dollars a year."
"Certainly you can," he will say. "But
if you build a house there and it catches fire it will burn down; they
have no fire department. If you go out after dark you will be 'held up'
and robbed; they have no police force. If you ride out in the spring,
your carriage will stick in the mud up to the hubs, and if you walk you
may break your legs and will be lucky if you don t break your neck; they
have no street pavements and their sidewalks are dangerously out of repair.
When the moon doesn't shine the streets are in darkness, for they have
no street lights. The water you need for your house you must get from
a well; there is no water supply there. Now in our town it is different.
We have a splendid fire department, and the best police force in the
world. Our streets are macadamized, and lighted with electricity; our
sidewalks are always in first class repair; we have a water system that
equals that of New York; and in every way the public benefits in this
town are unsurpassed. It is the best governed town in all this region.
Isn't it worth a hundred and fifty dollars a year more for a building
site here than over in that poorly governed town?"
You recognize the advantages and agree to the terms.
But when your house is built and the assessor visits you officially,
what would be the conversation if your sense of the fitness of things
were not warped by familiarity with false systems of taxation? Would
it not be something like what follows?
"How much do you regard this house as worth? " asks
"What is that to you?" you inquire.
"I am the town assessor and am about to appraise
your property for taxation."
"Am I to be taxed by this town? What for?"
"What for?" echoes the assessor in surprise. "What
for? Is not your house protected from fire by our magnificent fire department?
Are not you protected from robbery by the best police force in the world?
Do not you have the use of macadamized pavements, and good sidewalks,
and electric street lights, and a first class water supply? Don't you
suppose these things cost something? And don't you think you ought to
pay your share?"
"Yes," you answer, with more or less calmness; "I
do have the benefit of these things, and I do think that I ought to pay
my share toward supporting them. But I have already paid my share for
this year. I have paid it to the owner of this lot. He charges me two
hundred and fifty dollars a year -- one hundred and fifty dollars more
than I should pay or he could get but for those very benefits. He has
collected my share of this year's expense of maintaining town improvements;
you go and collect from him. If you do not, but insist upon collecting
from me, I shall be paying twice for these things, once to him and once
to you; and he won't be paying at all, but will be making money out of
them, although he derives the same benefits from them in all other respects
that I do." ...
c. Significance of the Upward Tendency of Rent
Now, what is the meaning of this tendency of Rent to rise with social progress,
while Wages tend to fall? Is it not a plain promise that if Rent be treated
as common property, advances in productive power shall be steps in the direction
of realizing through orderly and natural growth those grand conceptions of
both the socialist and the individualist, which in the present condition
of society are justly ranked as Utopian? Is it not likewise a plain
warning that if Rent be treated as private property, advances in productive
will be steps in the direction of making slaves of the many laborers, and
masters of a few land-owners? Does it not mean that common ownership of Rent
is in harmony with natural law, and that its private appropriation is disorderly
and degrading? When the cause of Rent and the tendency illustrated in the
preceding chart are considered in connection with the self-evident truth
that God made the earth for common use and not for private monopoly, how
can a contrary inference hold? Caused and increased by social growth,
97 the benefits of which should be common, and attaching to land, the just
to which is equal, Rent must be the natural fund for public expenses. 98
97. Here, far away from civilization, is a solitary settler.
Getting no benefits from government, he needs no public revenues, and
none of the land about him has any value. Another settler comes, and
another, until a village appears. Some public revenue is then required.
Not much, but some. And the land has a little value, only a little; perhaps
just enough to equal the need for public revenue. The village becomes
a town. More revenues are needed, and land values are higher. It becomes
a city. The public revenues required are enormous, and so are the land
98. Society, and society alone, causes Rent. Rising with
the rise, advancing with the growth, and receding with the decline of
society, it measures the earning power of society as a whole as distinguished
from that of the individuals. Wages, on the other hand, measure the earning
power of the individuals as distinguished from that of society as a whole.
We have distinguished the parts into which Wealth is distributed as Wages
and Rent; but it would be correct, indeed it is the same thing, to regard
all wealth as earnings, and to distinguish the two kinds as Communal
Earnings and Individual Earnings. How, then, can there be any question
as to the fund from which society should be supported? How can it be
justly supported in any other way than out of its own earnings?
If there be at all such a thing as design in the universe — and who
can doubt it? — then has it been designed that Rent, the earnings of
the community, shall be retained for the support of the community, and that
Wages, the earnings of the individual, shall be left to the individual in
proportion to the value of his service. This is the divine law, whether we
trace it through complex moral and economic relations, or find it in the
d. Effect of Confiscating Rent to Private Use.
By giving Rent to individuals society ignores this most just law, 99 thereby
creating social disorder and inviting social disease. Upon society alone,
therefore, and not upon divine Providence which has provided bountifully,
nor upon the disinherited poor, rests the responsibility for poverty and
fear of poverty.
99. "Whatever dispute arouses the passions of men,
the conflict is sure to rage, not so much as to the question 'Is it wise?'
as to the question 'Is it right?'
"This tendency of popular discussions to take an
ethical form has a cause. It springs from a law of the human mind; it
rests upon a vague and instinctive recognition of what is probably the
deepest truth we can grasp. That alone is wise which is just; that alone
is enduring which is right. In the narrow scale of individual actions
and individual life this truth may be often obscured, but in the wider
field of national life it everywhere stands out.
"I bow to this arbitrament, and accept this test." — Progress
and Poverty, book vii, ch. i.
The reader who has been deceived into believing that Mr.
George's proposition is in any respect unjust, will find profit in a
perusal of the entire chapter from which the foregoing extract is taken.
Let us try to trace the connection by means of a chart, beginning with the
white spaces on page 68. As before, the first-comers take possession of the
best land. But instead of leaving for others what they do not themselves
need for use, as in the previous illustrations, they appropriate the whole
space, using only part, but claiming ownership of the rest. We may distinguish
the used part with red color, and that which is appropriated without use
with blue. Thus: [chart]
But what motive is there for appropriating more of the space than is used?
Simply that the appropriators may secure the pecuniary benefit of future
social growth. What will enable them to secure that? Our system of confiscating
Rent from the community that earns it, and giving it to land-owners who,
as such, earn nothing.100
100. It is reported from Iowa that a few years ago a workman
in that State saw a meteorite fall, and. securing possession of it after
much digging, he was offered $105 by a college for his "find." But
the owner of the land on which the meteorite fell claimed the money,
and the two went to law about it. After an appeal to the highest court
of the State, it was finally decided that neither by right of discovery,
nor by right of labor, could the workman have the money, because the
title to the meteorite was in the man who owned the land upon which it
Observe the effect now upon Rent and Wages. When other men come, instead
of finding half of the best land still common and free, as in the corresponding
chart on page 68, they find all of it owned, and are obliged either to go
upon poorer land or to buy or rent from owners of the best. How much will
they pay for the best? Not more than 1, if they want it for use and not to
hold for a higher price in the future, for that represents the full difference
between its productiveness and the productiveness of the next best. But if
the first-comers, reasoning that the next best land will soon be scarce and
theirs will then rise in value, refuse to sell or to rent at that valuation,
the newcomers must resort to land of the second grade, though the best be
as yet only partly used. Consequently land of the first grade commands Rent
before it otherwise would.
As the sellers' price, under these circumstances, is arbitrary it cannot
be stated in the chart; but the buyers' price is limited by the superiority
of the best land over that which can be had for nothing, and the chart may
be made to show it: [chart]
And now, owing to the success of the appropriators of the best land in securing
more than their fellows for the same expenditure of labor force, a rush is
made for unappropriated land. It is not to use it that it is wanted, but
to enable its appropriators to put Rent into their own pockets as soon as
growing demand for land makes it valuable.101 We may, for illustration, suppose
that all the remainder of the second space and the whole of the third are
thus appropriated, and note the effect: [chart]
At this point Rent does not increase nor Wages fall, because there is no
increased demand for land for use. The holding of inferior land for higher
prices, when demand for use is at a standstill, is like owning lots in the
moon — entertaining, perhaps, but not profitable. But let more land
be needed for use, and matters promptly assume a different appearance. The
new labor must either go to the space that yields but 1, or buy or rent from
owners of better grades, or hire out. The effect would be the same in any
case. Nobody for the given expenditure of labor force would get more than
1; the surplus of products would go to landowners as Rent, either directly
in rent payments, or indirectly through lower Wages. Thus: [chart]
101. The text speaks of Rent only as a periodical or continuous
payment — what would be called "ground rent." But actual
or potential Rent may always be, and frequently is, capitalized for the
purpose of selling the right to enjoy it, and it is to selling value
that we usually refer when dealing in land.
Land which has the power of yielding Rent to its owner
will have a selling value, whether it be used or not, and whether Rent
is actually derived from it or not. This selling value will be the capitalization
of its present or prospective power of producing Rent. In fact, much
the larger proportion of laud that has a selling value is wholly or partly
unused, producing no Rent at all, or less than it would if fully used.
This condition is expressed in the chart by the blue color.
"The capitalized value of land is the actuarial 'discounted'
value of all the net incomes which it is likely to afford, allowance
being made on the one hand for all incidental expenses, including those
of collecting the rents, and on the other for its mineral wealth, its
capabilities of development for any kind of business, and its advantages,
material, social, and aesthetic, for the purposes of residence." — Marshall's
Prin., book vi, ch. ix, sec. 9.
"The value of land is commonly expressed as a certain
number of times the current money rental, or in other words, a certain
'number of years' purchase' of that rental; and other things being equal,
it will be the higher the more important these direct gratifications
are, as well as the greater the chance that they and the money income
afforded by the land will rise." — Id., note.
"Value . . . means not utility, not any quality inhering
in the thing itself, but a quality which gives to the possession of a
thing the power of obtaining other things, in return for it or for its
use. . . Value in this sense — the usual sense — is purely
relative. It exists from and is measured by the power of obtaining things
for things by exchanging them. . . Utility is necessary to value, for
nothing can be valuable unless it has the quality of gratifying some
physical or mental desire of man, though it be but a fancy or whim. But
utility of itself does not give value. . . If we ask ourselves the reason
of . . . variations in . . . value . . . we see that things having some
form of utility or desirability, are valuable or not valuable, as they
are hard or easy to get. And if we ask further, we may see that with
most of the things that have value this difficulty or ease of getting
them, which determines value, depends on the amount of labor which must
be expended in producing them ; i.e., bringing them into the place, form
and condition in which they are desired. . . Value is simply an expression
of the labor required for the production of such a thing. But there are
some things as to which this is not so clear. Land is not produced by
labor, yet land, irrespective of any improvements that labor has made
on it, often has value. . . Yet a little examination will show that such
facts are but exemplifications of the general principle, just as the
rise of a balloon and the fall of a stone both exemplify the universal
law of gravitation. . . The value of everything produced by labor, from
a pound of chalk or a paper of pins to the elaborate structure and appurtenances
of a first-class ocean steamer, is resolvable on analysis into an equivalent
of the labor required to produce such a thing in form and place; while
the value of things not produced by labor, but nevertheless susceptible
of ownership, is in the same way resolvable into an equivalent of the
labor which the ownership of such a thing enables the owner to obtain
or save." — Perplexed Philosopher, ch. v.
The figure 1 in parenthesis, as an item of Rent, indicates potential Rent.
Labor would give that much for the privilege of using the space, but the
owners hold out for better terms; therefore neither Rent nor Wages is actually
produced, though but for this both might be.
In this chart, notwithstanding that but little space is used, indicated
with red, Wages are reduced to the same low point by the mere appropriation
of space, indicated with blue, that they would reach if all the space above
the poorest were fully used. It thereby appears that under a system which
confiscates Rent to private uses, the demand for land for speculative purposes
becomes so great that Wages fall to a minimum long before they would if land
were appropriated only for use.
In illustrating the effect of confiscating Rent to private use we have as
yet ignored the element of social growth. Let us now assume as before (page
73), that social growth increases the productive power of the given expenditure
of labor force to 100 when applied to the best land, 50 when applied to the
next best, 10 to the next, 3 to the next, and 1 to the poorest. Labor would
not be benefited now, as it appeared to be when on page 73 we illustrated
the appropriation of land for use only, although much less land is actually
used. The prizes which expectation of future social growth dangles before
men as the rewards of owning land, would raise demand so as to make it more
than ever difficult to get land. All of the fourth grade would be taken up
in expectation of future demand; and "surplus labor" would be crowded
out to the open space that originally yielded nothing, but which in consequence
of increased labor power now yields as much as the poorest closed space originally
yielded, namely, 1 to the given expenditure of labor force.102 Wages would
then be reduced to the present productiveness of the open space. Thus: [chart]
102. The paradise to which the youth of our country have
so long been directed in the advice, "Go West, young man, go West," is
truthfully described in "Progress and Poverty," book iv, ch.
iv, as follows :
"The man who sets out from the eastern seaboard
in search of the margin of cultivation, where he may obtain land without
paying rent, must, like the man who swam the river to get a drink,
pass for long distances through half-titled farms, and traverse vast
areas of virgin soil, before he reaches the point where land can be
had free of rent — i.e., by homestead entry or preemption."
If we assume that 1 for the given expenditure of labor force is the least
that labor can take while exerting the same force, the downward movement
of Wages will be here held in equilibrium. They cannot fall below 1; but
neither can they rise above it, no matter how much productive power may increase,
so long as it pays to hold land for higher values. Some laborers would continually
be pushed back to land which increased productive power would have brought
up in productiveness from 0 to 1, and by perpetual competition for work would
so regulate the labor market that the given expenditure of labor force, however
much it produced, could nowhere secure more than 1 in Wages.103 And this
tendency would persist until some labor was forced upon land which, despite
increase in productive power, would not yield the accustomed living without
increase of labor force. Competition for work would then compel all laborers
to increase their expenditure of labor force, and to do it over and over
again as progress went on and lower and lower grades of land were monopolized,
until human endurance could go no further.104 Either that, or they would
be obliged to adapt themselves to a lower scale of living.105
103. Henry Fawcett, in his work on "Political Economy," book
ii, ch. iii, observes with reference to improvements in agricultural
implements which diminish the expense of cultivation, that they do not
increase the profits of the farmer or the wages of his laborers, but
that "the landlord will receive in addition to the rent already
paid to him, all that is saved in the expense of cultivation." This
is true not alone of improvements in agriculture, but also of improvements
in all other branches of industry.
104. "The cause which limits speculation in commodities,
the tendency of increasing price to draw forth additional supplies, cannot
limit the speculative advance in land values, as land is a fixed quantity,
which human agency can neither increase nor diminish; but there is nevertheless
a limit to the price of land, in the minimum required by labor and capital
as the condition of engaging in production. If it were possible to continuously
reduce wages until zero were reached, it would be possible to continuously
increase rent until it swallowed up the whole produce. But as wages cannot
be permanently reduced below the point at which laborers will consent
to work and reproduce, nor interest below the point at which capital
will be devoted to production, there is a limit which restrains the speculative
advance of rent. Hence, speculation cannot have the same scope to advance
rent in countries where wages and interest are already near the minimum,
as in countries where they are considerably above it. Yet that there
is in all progressive countries a constant tendency in the speculative
advance of rent to overpass the limit where production would cease, is,
I think, shown by recurring seasons of industrial paralysis." — Progress
and Poverty, book iv, ch. iv.
105. As Puck once put it, "the man who makes two
blades of grass to grow where but one grew before, must not be surprised
when ordered to 'keep off the grass.' "
They in fact do both, and the incidental disturbances of general readjustment
are what we call "hard times." 106 These culminate in forcing unused
land into the market, thereby reducing Rent and reviving industry. Thus increase
of labor force, a lowering of the scale of living, and depression of Rent,
co-operate to bring on what we call "good times." But no sooner
do "good times" return than renewed demands for land set in, Rent
rises again, Wages fall again, and "hard times" duly reappear.
The end of every period of "hard times" finds Rent higher and Wages
lower than at the end of the previous period.107
106. "That a speculative advance in rent or land
values invariably precedes each of these seasons of industrial depression
is everywhere clear. That they bear to each other the relation of cause
and effect, is obvious to whoever considers the necessary relation between
land and labor." — Progress and Poverty, book v, ch. i.
107. What are called "good times" reach a point
at which an upward land market sets in. From that point there is a downward
tendency of wages (or a rise in the cost of living, which is the same
thing) in all departments of labor and with all grades of laborers. This
tendency continues until the fictitious values of land give way. So long
as the tendency is felt only by that class which is hired for wages,
it is poverty merely; when the same tendency is felt by the class of
labor that is distinguished as "the business interests of the country," it
is "hard times." And "hard times" are periodical
because land values, by falling, allow "good times" to set
it, and by rising with "good times" bring "hard times" on
again. The effect of "hard times" may be overcome, without
much, if any, fall in land values, by sufficient increase in productive
power to overtake the fictitious value of land.
The dishonest and disorderly system under which society confiscates Rent
from common to individual uses, produces this result. That maladjustment
is the fundamental cause of poverty. And progress, so long as the maladjustment
continues, instead of tending to remove poverty as naturally it should, actually
generates and intensifies it. Poverty persists with increase of productive
power because land values, when Rent is privately appropriated, tend to even
greater increase. There can be but one outcome if this continues: for individuals
suffering and degradation, and for society destruction. ...
Q32. Is not ownership of land necessary to induce its improvement? Does
not history show that private ownership is a step in advance of common
A. No. Private use was doubtless a step in advance of common use. And because
private use seems to us to have been brought about under the institution of private
ownership, private ownership appears to the superficial to have been the real
advance. But a little observation and reflection will remove that impression.
Private ownership of land is not necessary to its private use. And so far from
inducing improvement, private ownership retards it. When a man owns land he may
accumulate wealth by doing nothing with the land, simply allowing the community
to increase its value while he pays a merely nominal tax, upon the plea that
he gets no income from the property. But when the possessor has to pay the value
of his land every year, as he would have to under the single tax, and as ground
renters do now, he must improve his holding in order to profit by it. Private
possession of land, without profit except from use, promotes improvement; private
ownership, with profit regardless of use, retards improvement. Every city in
the world, in its vacant lots, offers proof of the statement. It is the lots
that are owned, and not those that are held upon ground-lease, that remain vacant.
Q61. If a man buys land in good faith, under the laws under which we
live, is he not entitled to compensation for his individual loss when titles
A. There is no sounder principle of law than that which, distinguishing the contractual
from the legislative powers of government, prescribes that government cannot
tie up its legislative powers. Now, land tenures and taxation are so clearly
matters of general public policy that no one would deny that they are legislative
and not contractual in character. It follows that titles to land, and privileges
of more or less exemption from taxation, are voidable at the pleasure of the
people. And the possibility of such action on the part of the people is as truly
a part of every grant of land as if it were written expressly in the body of
the instrument. Moreover, notice was given when Henry George published "Progress
and Poverty," and has been reiterated often since in louder and louder tones
until the whole civilized world has become cognizant of it, that an effort is
in progress to do what is in effect this very thing. That notice is a moral cloud
upon every title, and he who buys now buys with notice. It will not do for him
when the time comes, to say: "I relied upon the good faith of the government
whose laws told me I might buy." He has notice, and if he buys he buys at
his peril. Men cannot be allowed to make bets that the effort to retain land
values for common use will fail, and then when they lose their bets call upon
the people to compensate them for the loss. Read the chapter on "Compensation" in
Henry George's "Perplexed Philosopher." ... read the book
Charles B. Fillebrown: A Catechism
of Natural Taxation, from Principles of
Natural Taxation (1917)
Q22. What is privilege?
A. Strictly defined, privilege is, according to the Century Dictionary, "a
special and exclusive power conferred by law on particular persons or classes
of persons and ordinarily in derogation of the common right."
Q23. What is today the popular conception of privilege?
A. That it is the law-given power of one man to profit at another man's expense.
Q24. What are the principal forms of privilege?
A. The appropriation by individuals, or by public service corporations,
of the net rent of land created by the growth and activity of the community
without payment for the same. Also, the less important privileges connected
with patents, tariff, and the currency.
Q25. Where in does privilege differ from capital?
A. Capital is a material thing, a product of labor, stored-up wages; an instrument
of production paid for in human labor, and destined to wear out. Capital
is the natural ally of labor, and is harmless except as allied to privilege.
Privilege is none of these, but is an intangible statutory power, an unpaid-for
and perpetual lien upon the future labor of this and succeeding generations.
Capital is paid for and ephemeral. Privilege is unpaid for and eternal.
A man accumulated in his profession $5,000 capital, which he invested in
land in Canada. Ten years later he sold the same land for $200,000. Here
is an instance of $5,000 capital allied with $195,000 privilege. This illustrates
that privilege and not capital is the real enemy of labor.
Q26. How may franchises be treated?
A. Franchise privileges may be abated, or gradually abolished by lower rates,
or by taxation, or by both, in the interest of the community.
Q27. Why should privilege be especially taxed?
A. Because such payment is fairly due from grantee to the grantor of privilege
and also because a tax upon privilege can never be a burden upon industry
or commerce, nor can it ever operate to reduce the wages of labor or increase
prices to the consumer.
Q28. How are landlords privileged?
A. Because, in so far as their land tax is an "old" tax, it is
a burdenless tax, and because their buildings' tax is shifted upon their
tenants; most landlords who let land and also the tenement houses and business
blocks thereon avoid all share in the tax burden.
Q29. How does privilege affect the distribution of wealth?
A. Wealth as produced is now distributed substantially in but two channels,
privilege and wages. The abolition of privilege would leave but the one
proper channel, viz., wages of capital, hand, and brain.
Q35. Why should land be singled out to bear the bulk of the burden of taxation?
A. Because in the private appropriation of the net rent of land is found
the bulk of privilege.
Q55. How would the single tax effect the tenant?
A. It would neither increase nor decrease his land rent. It would reduce his
house rent by the amount of the house tax. ... read the whole article
John Dewey: Steps to Economic Recovery
Go to the work of Henry George himself and learn how many of the troubles
from which society still suffers, and suffers increasingly, are due to the
fact that a few have monopolized the land, and that in consequence they have
the power to dictate to others access to the land and to its products -- which
include waterpower, electricity, coal, iron and all minerals, as well as the
foods that sustain life -- and that they have the power to appropriate to their
private use the values that the industry, the civilized order, the very benefactions,
of others produce. This wrong is at the very basis of our present social and
economic chaos, and until it is righted, all steps toward economic recovery
may be temporarily helpful while in the long run useless. ...
I do not claim that George's remedy is a panacea that will cure by itself
all our ailments. But I do claim that we cannot get rid of our basic troubles
without it. I would make exactly the same concession and same claim that Henry
George himself made:
"I do not say that in the recognition of the equal and unalienable
right of each human being to the natural elements from which life must be
supported and wants satisfied, lies the solution of all social problems.
I fully recognize that even after we do this, much will remain to do. We
might recognize the equal right to land, and yet tyranny and spoilation be
continued. But whatever else we do, as along as we fail to recognize the
equal right to the elements of nature, nothing will avail to remedy that
unnatural inequality in the distribution of wealth which is fraught with
so much evil and danger. Reform as we may, until we make this fundamental
reform, our material progress can but tend to differentiate our people into
the monstrously rich and frightfully poor. Whatever be the increase of wealth,
the masses will still be ground toward the point of bare subsistence -- we
must still have our great criminal classes, our paupers and our tramps, men
and women driven to degradation and desperation from inability to make an
honest living." ... read the whole speech
Henry George: The Great
Debate: Single Tax vs Social Democracy (1889)
Mr Hyndman speaks of the history
the development of England. What is the history of the development of
England? It is the gradual suppression of the common rights –
the gradual making of private property out of what was originally
recognised as common property. (Hear, hear.) It is the gradual taking
of the land of England from the whole people, and making the class
originally tenants landowners. (Hear; hear.) The long series of
usurpations was finally consummated by a no-rent manifesto, by which
the landowning class live off the rents they had agreed to pay for
the use of land, and put them in indirect taxes upon labour.
(Cheers.) What we propose to do is to go back the same way. What we
single tax men would do would be to go back to the old system, to
bring it back in a way adapted to our time; to recognise, not
half-heartedly, but fully, that all men are equally entitled to the
use of the land, and its correlative that each man is absolutely
entitled to that which his labour produces. (Applause.) ... Read the entire article
Henry George: The Condition of
Labor — An Open Letter to Pope Leo XIII in response to Rerum Novarum (1891)
Your use, in so many passages of your Encyclical, of the inclusive term “property” or “private” property,
of which in morals nothing can be either affirmed or denied, makes your meaning,
if we take isolated sentences, in many places ambiguous. But reading it as
a whole, there can be no doubt of your intention that private property in
land shall be understood when you speak merely of private property. With
this interpretation, I find that the reasons you urge for private property
in land are eight. Let us consider them in order of presentation. You urge:
1. That what is bought with rightful property is rightful property. (RN,
paragraph 5) ...
2. That private property in land proceeds from man’s gift of reason.
(RN, paragraphs 6-7.) ...
3. That private property in land deprives no one of the use of land. (RN,
paragraph 8.) ...
4. That Industry expended on land gives ownership in the land itself. (RN,
paragraphs 9-10.) ...
5. That private property in land has the support of the common opinion of
mankind, and has conduced to peace and tranquillity, and that it is sanctioned
by Divine Law. (RN, paragraph 11.) ...
6. That fathers should provide for their children and that private property
in land is necessary to enable them to do so. (RN, paragraphs 14-17.) ...
7. That the private ownership of land stimulates industry, increases wealth,
and attaches men to the soil and to their country. (RN, paragraph 51.) ...
8. That the right to possess private property in land is from nature, not
from man; that the state has no right to abolish it, and that to take the
value of landownership in taxation would be unjust and cruel to the private
owner. (RN, paragraph 51.)
4. That Industry expended on land gives ownership in the land itself. (9-10.)
Your Holiness next contends that industry expended on land gives a right
to ownership of the land, and that the improvement of land creates benefits
indistinguishable and inseparable from the land itself.
This contention, if valid, could only justify the ownership of land by those
who expend industry on it. It would not justify private property in land
as it exists. On the contrary, it would justify a gigantic no-rent declaration
that would take land from those who now legally own it, the landlords, and
turn it over to the tenants and laborers. And if it also be that improvements
cannot be distinguished and separated from the land itself, how could the
landlords claim consideration even for improvements they had made?
But your Holiness cannot mean what your words imply. What you really mean,
I take it, is that the original justification and title of landownership
is in the expenditure of labor on it. But neither can this justify private
property in land as it exists. For is it not all but universally true that
existing land titles do not come from use, but from force or fraud?
Take Italy! Is it not true that the greater part of the land of Italy is
held by those who so far from ever having expended industry on it have been
mere appropriators of the industry of those who have? Is this not also true
of Great Britain and of other countries? Even in the United States, where
the forces of concentration have not yet had time fully to operate and there
has been some attempt to give land to users, it is probably true today that
the greater part of the land is held by those who neither use it nor propose
to use it themselves, but merely hold it to compel others to pay them for
permission to use it.
And if industry give ownership to land what are the limits of this ownership?
If a man may acquire the ownership of several square miles of land by grazing
sheep on it, does this give to him and his heirs the ownership of the same
land when it is found to contain rich mines, or when by the growth of population
and the progress of society it is needed for farming, for gardening, for
the close occupation of a great city? Is it on the rights given by the industry
of those who first used it for grazing cows or growing potatoes that you
would found the title to the land now covered by the city of New York and
having a value of thousands of millions of dollars?
But your contention is not valid. Industry expended on land gives ownership
in the fruits of that industry, but not in the land itself, just as industry
expended on the ocean would give a right of ownership to the fish taken by
it, but not a right of ownership in the ocean. Nor yet is it true that private
ownership of land is necessary to secure the fruits of labor on land; nor
does the improvement of land create benefits indistinguishable and inseparable
from the land itself. That secure possession is necessary to the use and
improvement of land I have already explained, but that ownership is not necessary
is shown by the fact that in all civilized countries land owned by one person
is cultivated and improved by other persons. Most of the cultivated land
in the British Islands, as in Italy and other countries, is cultivated not
by owners but by tenants. And so the costliest buildings are erected by those
who are not owners of the land, but who have from the owner a mere right
of possession for a time on condition of certain payments. Nearly the whole
of London has been built in this way, and in New York, Chicago, Denver, San
Francisco, Sydney and Melbourne, as well as in continental cities, the owners
of many of the largest edifices will be found to be different persons from
the owners of the ground. So far from the value of improvements being inseparable
from the value of land, it is in individual transactions constantly separated.
For instance, one-half of the land on which the immense Grand Pacific Hotel
in Chicago stands was recently separately sold, and in Ceylon it is a not
infrequent occurrence for one person to own a fruit-tree and another to own
the ground in which it is implanted.
There is, indeed, no improvement of land, whether it be clearing, plowing,
manuring, cultivating, the digging of cellars, the opening of wells or the
building of houses, that so long as its usefulness continues does not have
a value clearly distinguishable from the value of the land. For land having
such improvements will always sell or rent for more than similar land without
If, therefore, the state levy a tax equal to what the land irrespective
of improvement would bring, it will take the benefits of mere ownership,
but will leave the full benefits of use and improvement, which the prevailing
system does not do. And since the holder, who would still in form continue
to be the owner, could at any time give or sell both possession and improvements,
subject to future assessment by the state on the value of the land alone,
he will be perfectly free to retain or dispose of the full amount of property
that the exertion of his labor or the investment of his capital has attached
to or stored up in the land.
Thus, what we propose would secure, as it is impossible in any other way
to secure, what you properly say is just and right — ”that the
results of labor should belong to him who has labored.” But private
property in land — to allow the holder without adequate payment to
the state to take for himself the benefit of the value that attaches to land
with social growth and improvement — does take the results of labor
from him who has labored, does turn over the fruits of one man’s labor
to be enjoyed by another. For labor, as the active factor, is the producer
of all wealth. Mere ownership produces nothing. A man might own a world,
but so sure is the decree that “by the sweat of thy brow shalt thou
eat bread,” that without labor he could not get a meal or provide himself
a garment. Hence, when the owners of land, by virtue of their ownership and
without laboring themselves, get the products of labor in abundance, these
things must come from the labor of others, must be the fruits of others’ sweat,
taken from those who have a right to them and enjoyed by those who have no
right to them.
The only utility of private ownership of land as distinguished from possession
is the evil utility of giving to the owner products of labor he does not
earn. For until land will yield to its owner some return beyond that of the
labor and capital he expends on it — that is to say, until by sale
or rental he can without expenditure of labor obtain from it products of
labor, ownership amounts to no more than security of possession, and has
no value. Its importance and value begin only when, either in the present
or prospectively, it will yield a revenue — that is to say, will enable
the owner as owner to obtain products of labor without exertion on his part,
and thus to enjoy the results of others’ labor.
What largely keeps men from realizing the robbery involved in private
property in land is that in the most striking cases the robbery is not
but of the community. For, as I have before explained, it is impossible for
rent in the economic sense — that value which attaches to land by reason
of social growth and improvement — to go to the user. It can go only
to the owner or to the community. Thus those who pay enormous rents for the
use of land in such centers as London or New York are not individually injured.
Individually they get a return for what they pay, and must feel that they
have no better right to the use of such peculiarly advantageous localities
without paying for it than have thousands of others. And so, not thinking
or not caring for the interests of the community, they make no objection
to the system.
It recently came to light in New York that a man having no title whatever
had been for years collecting rents on a piece of land that the growth of
the city had made very valuable. Those who paid these rents had never stopped
to ask whether he had any right to them. They felt that they had no right
to land that so many others would like to have, without paying for it, and
did not think of, or did not care for, the rights of all.
... read the whole letter
Joseph Stiglitz: October, 2002,
Q: In Globalization and its Discontents, you write (p. 81): "But land
reform represents a fundamental change in the structure of society, one that
those in the elite that populates the finance ministries, those with whom
the international financial institutions interact, do not necessarily like."
JES: Yes. Let me try to approach the question a little more systematically.
Once you take the perspective I just gave, that means the management should
be done in such a way that it maximizes the amount of money available to
the US government from natural resources because they are within its domain
and control. So, looking at the United States, one of the implications of
this is that a foundation such as yours [the Robert Schalkenbach Foundation,
created to promote the ideas of Henry George, as expressed in Progress & Poverty]
ought to be very much against the policies of the US government of giving
away our natural resources. Here is a case where we not only are not taxing
it much, we're actually giving it away.
Q: I assume you're speaking in particular of oil and mineral rights, but
would not Broadband Spectrum rights also be included in that category?
JES: Yes, Broadband Spectrum rights as well. Now, giving away rights such
as those would be anathema to the spirit of Henry George. And the second
part is that when you sell them, you want to do so in such a way as to maximize
the revenues. And whether you decide to sell it or whether you decide to
rent it, would be the question of what is the way that maximizes the extraction
of public revenues.
Q: And those revenues go to the people. Not to private concerns.
JES: Exactly. So you're trying to say, from the perspective of public management,
how can we take this inelastic supply of public resources and maximize the
rents that we can extract from it, consistent with other public objectives?
That is a very deep philosophical approach, and requires a re-thinking of
how we manage all aspects of those public resources. However, much of what
we do is inconsistent with that. Now, the issue of land reform is a little
bit different. There, it's a two-step analysis. My concern that I expressed
about land is that in many developing countries, you have most land owned
by a few rich people, and the land is relatively little taxed. But the land
is worked in a system of sharecropping in which workers have to pay the landlord
50% of their output. In a way, you can look at that 50% as a tax. The sharecroppers
are paying a 50% tax to the landlord. But it's worse than a tax. Because
it's not a land tax, it's a tax on their labor. And it's a tax that goes
to the landlord rather than to society. So the notion is that land reform
could take a variety of different forms. For instance, the government could
take over the land and rent it to the people. Or give it to the people and
have a land tax that would not have the distortionary effect of land reform.
So, in a way, these systems of share-cropping are worse even than anything
that Henry George was worried about in terms of misuse of land. ...
Q: A former Director of Robert Schalkenbach Foundation was given a grant
recently to research the adequacy of land as a tax base. He's a professor
at the University of California, Riverside, named Mason Gaffney, and he wrote
a book titled, "The Corruption of Economics." Are you familiar
with his work?
Q: I'll send you a copy of the book. Basically, he argues that the founders
of neo-classical economics, which, as you know, is the paradigm taught in
schools such as the University of Chicago, distorted the science of economics
to protect vested interests. For example, Rockefeller money was spent to
hire professors of economics with a view to their discrediting the ideas
of Henry George. Did that happen?
JES: My general impression is that most donors that give money to universities
don't take a very strong view of [who should be on] the faculty. Sometimes
it ends up on one side, sometimes on the other. It would have been unusual
[at Chicago], but it could have happened there. What is striking about Chicago
as a school of economic theory is that it's very conservative. One would
have thought that Henry George was someone who would have been liked by "Conservatives."
Q: In that George wanted to reduce tax on the fruits of one's own labor?
JES: Exactly. And you want non-distortionary taxes, so I would have thought
that every "Conservative" would be in Henry George's camp. Now,
as far as I know, I'm one of the few people who keeps emphasizing that you
ought to view Henry George in a broader way, to include natural resources.
I didn't think that people thought about that a hundred years ago. But if
they had, and maybe Rockefeller was smart — he realized that he obviously
didn't want a tax on natural resources.
Q: He wouldn't have wanted rents flowing from natural resources to go to
the people rather than to him.
JES: Yes, he obviously wouldn't like that perspective. But I don't know
if that view was at that time recognized, and I just don't know whether he
actively intervened at Chicago. ... read the entire interview
Alanna Hartzok: In the
History of Thought: Henry George's "Single Tax"
while riding horseback in the Oakland
hills, merchant seaman and journalist Henry George had a startling epiphany. He realized that
speculation and private profiteering in the gifts of nature were the
root causes of the unjust distribution of wealth. The insights
presented in Progress and Poverty,
George's masterwork, launched him to fame. His policy
approach was known at that time as the "single tax" - meaning that
taxation should be shifted off of labor and onto the socially created
surplus value of land and other natural resources. His message
reached as far as the great Russian Leo Tolstoy, who was so taken with
the idea that he frequently referred to George and "Georgism" in his
During the last 20 years of the 19th century
built an impressive populist movement bent on solving the problem of
the wealth gap, and he died in 1897 while campaigning to be New York's
mayor. The "Georgists" were determined to free labor and all productive
effort from the burden of taxation. Land and natural resources were
gifts of nature to be fairly shared by all. The role of government
would be to secure democratic rights to the earth for all people via
the collection of resource rents, the surplus value accruing to natural
wealth, which would be distributed in social goods, services or by
direct citizen dividends.
But just as
solution to the rich/poor gap was gaining momentum, the Georgist
movement was stopped in its tracks. Wealthy individuals poured their
money into leading schools of economics to encourage the writing of
treatises against George and the movements he had spawned. The
ethical perspective that land is a common heritage and the policy
approach of land value taxation were subsequently eliminated from the
field of economics. The newly dominant theory focused on only two
primary factors -- labor and capital -- with capital having the upper
hand as "employing labor." "Labor," of course, is quite capable of
self-employment given access to land. This is what the elites and the
plutocrats feared most - that labor would gain full power to directly
produce capital given conditions of equal rights to the resources of
Alanna Hartzok: Earth
Rights Democracy: Public Finance based on Early Christian Teachings
live in yet another age of rapid
privatization of the remaining commons. The airwaves, also known as the
electromagnetic or radio-frequency spectrum, the most valuable resource
of the information economy, is being given away to huge media
estimate that in the United States alone the commercial value of access
to it could be more than $750 billion. There is a rush to patent
plant material around the world. The attempt to patent sections of the
DNA code itself is but a modern expression of previous centuries of
the whole article
Ethical Land Tenure
I want to tell you the story of
Charles Avilla. A while back I came
across a book called Ownership, Early
Christian Teachings. Avilla was a divinity student in the
Phillipines. One of his professors had a great concern about poverty
conditions in the Phillipines, and was taking students out to prisons
where the cooks were the land rights revolutionaries in the
Phillipines. Because they kept pushing for land reform for the people,
they had ended up in jail. So they were political prisoners who were
reading the Bible and were asking the question, who did God give this earth to? Who does it
belong to? It isn't
in the Bible that so few should have so much and so many have so little.
In the theological world in this upscale seminary he was trying to put
this together about poverty and what the biblical teachings were. He
had a thesis to write and he was thinking he would do something about
economic justice. One of his professors thought there would be a wealth
of information from the church's early history, the first 300 years
after Jesus. So he actually went back to read the Latin and Greek about
land ownership and found a wealth of information about the prophetic
railings of the people in that early time on the rights of the land. ...
In the Judaic tradition, and the Talmudic tradition, how much of
Jubilee justice was actually implemented is a subject of discussion.
Some say it was a good idea but not put in place. Others say it was
substantially put into place.
The Talmudic rabinical discussion is of interest to Georgists
they tried to allocate the land according to the richness of the soil
for agriculture. For better soil,
richer for agriculture, maybe an acre
of that would be allocated. On the poorer soil, these tribes could get
The other thing was some lands
were closer to the market. Some land was
closer to Jerusalem. That is an advantage over those who would have to
travel a longer distance to get to the market.
this, then, we see affirmed the doctrine that natural advantages are
common property and may not be diverted to private gain. Throughout the
ages when wisdom is applied to land problems, we see this emerge..
How do you have an equal
rights distribution of land allocation with reference to the market
problem? For those more advantageously situated, the adjustment was to
be made by money. Those holding land nearer the city should pay in to
the common treasury the estimated excess of value attaining to it by
reason of superior situation. While those holding land of less value by
reason of distance from the city would receive from the treasury a
money compensation. On the more valuable holdings would be imposed a
tax or a lease fee, the measure of which was the excess of their
respective values over a given standard, and the fund thus created was
to be paid out in due proportion to those whose holdings were in less
Read the whole article
Bill Batt: Painless Taxation
Real tax reform could do away with those taxes that are resented
by the large proportion of our population. We could replace all taxes on
wages and on interest by instead taxing economic rent. Rent is windfall income;
it is income that arises not from the efforts of any person or corporation;
it comes about as a surplus gain from common social enterprise. There is
ample moral warrant for society to lay claim to that which it has created,
as well as to that which no individual or party has earned. Analysis increasingly
makes clear that economic rent in all its forms is far larger than official
government figures indicate; in fact it is likely sufficient to supplant
all current taxes on labor and capital (wages and interest) which are acknowledged
to have so many negative effects. Recovering economic rent in all its manifestations
by taxing its various bases actually can foster economic performance and
yield other benefits that make it the natural source of revenue for governments.
Such a tax is essentially painless. ... read the whole article
Clarence Darrow: The Land Belongs
To The People (1916)
This earth is a little raft moving in the endless sea of space, and the
mass of its human inhabitants are hanging on as best they can. It is as if
raft filled with shipwrecked sailors should be floating on the ocean, and
a few of the strongest and most powerful would take all the raft they could
and leave the most of the people, especially the ones who did the work,
hanging to the edges by their eyebrows. These men who have taken possession
raft, this little planet in this endless space, are not even content with
taking all there is and leaving the rest barely enough to hold onto, but
so much of themselves and their brief day that while they live they must
make rules and laws and regulations that parcel out the earth for thousands
after they are dead and, gone, so that their descendants and others of
their kind may do in the tenth generation exactly what they are doing today — keeping
the earth and all the good things of the earth and compelling the great
mass of mankind to toil for them.
Now, the question is, how are you going to get it back? Everybody who thinks
knows that private ownership of the land is wrong. If ten thousand men
can own America, then one man can own it, and if one man may own it he may
all that the rest produce or he may kill them if he sees fit. It is inconsistent
with the spirit of manhood. No person who thinks can doubt but that he
was born upon this planet with the same birthright that came to every man
like him. And it is for him to defend that birthright. And the man who
will not defend it, whatever the cost, is fitted only to be a slave. The
to the people — if they can get it — because if you cannot
get it, it makes no difference whether you have a right to it or not, and
can get it, it makes no difference whether you have a right to it or not,
you just take it. The earth has been taken from the many by the few. It
difference that they had no right to it; they took it.
Now, there are some methods of getting access to the earth which are easier
than others. The easiest, perhaps, that has been contrived is by means of taxation
of the land values and land values alone; and I need only say a little upon
that question. One trouble with it which makes it almost impossible to achieve,
is that it is so simple and so easy. You cannot get people to do anything that
is simple; they want it complex so they can be fooled.
Now the theory of Henry George and of those who really believe in the common
ownership of land is that the public should take not alone taxation from
the land, but the public should take to itself the whole value of the land
has been created by the public — should take it all. It should be a part
of the public wealth, should be used for public improvements, for pensions,
and belong to the people who create the wealth — which is a strange doctrine
in these strange times. It can be done simply and easily; it can be done by
taxation. All the wealth created by the public could be taken back by the public
and then poverty would disappear, most of it at least. The method is so simple,
and so legal even — sometimes a thing is legal if it is simple — that
it is the easiest substantial reform for men to accomplish, and when it
is done this great problem of poverty, the problem of the ages, will be
solved. We may need go farther. ... read
the whole article
Michael Hudson: The Lies of
the Land: How and why land gets undervalued
Turning land-value gains into
Hiding the free lunch
Two appraisal methods
How land gets a negative value!
Where did all the land value go?
A curious asymmetry
Site values as the economy's "credit sink"
Immortally aging buildings
Real estate industry's priorities
THE FREE LUNCH
* Its cost to citizens
* Its cost to the economy
YOU MAY THINK the largest category
of assets in this countrly is
industrial plant and machinery. In fact the US Federal Reserve
Board's annual balance sheet shows real estate to be the economy's
largest asset, two-thirds of
America's wealth and more than 60
percent of that in land, depending on the assessment method.
capital gains are land-value
gains. The big players do not
want their profits in rent, which is taxed as ordinary income, but in
capital gains, taxed at a lower rate. To benefit as much as
from today's real estate bubble of fast rising land values they
pledge a property's rent income to pay interest on the debt for as
much property as they can buy with as little of their own money as
possible. After paying off the mortgage lender they sell the property
and get to keep the "capital gain".
This price appreciation is
a "land gain," that is, it's
not from providing start-up capital for new enterprises, but from
sitting on a rising asset already in place, the land. Its value
because neighbourhoods are upgraded, mortgage money is ample, and
rezoning is favorable from farmland on the outskirts of cities to
gentrification of the core to create high-income residential
developments. The potential capital gain can be huge. That's why
developers are willing to pay their mortgage lenders so much of their
rent income, often all of it.
For hundreds of years property's
value has been calculated by
discounting its flow of rental income at the going rate of interest.
The lower the interest rate, the higher the price a given rental
stream will justify -- or as property owners express it, the more
years' rent a property will bring. What is so striking about land
values today is that they are rising for reasons independent of their
earnings stream. The major new consideration is their prospect for
future "capital" (that is, land-price) gains. In sum, the ultimate
aim of real estate investors no longer is so much to seek income --
most of which is pledged to their bankers as interest payments on the
property they acquire -- as much as to seek property gains.
Politically opportunites abound. Merely changing zoning in New
York City in the 1980s to allow using commercial loft spaces for
residential purposes had the effect of multiplying asset values five
Whether the gains come from
selling the property or from borrowing
more money against it, the essential phenomenon is the rapid growth
in asset values and real estate's uniquely favored tax treatment.
That's why investors choose real estate instead of bonds or stocks,
and much of the strategy underlying corporate takeovers has followed
the strategies they developed over the past half century.
Nationwide the capital-gains
dimension needs to be incorporated
into the rental revenue statistics to measure real estate's total
returns. This sector's
nearly complete success in escaping the tax
collector has placed an enormous tax burden on everyone else.
the entire article
Fred Foldvary: Geo-Rent: A
Plea to Public
PRIVATIZING THE NEIGHBORHOOD Fortunately, real-estate
practitioners pay no attention to
textbook economics. Increasingly, new communities are developed within
a nexus of private ownership and contract.
- In the United States, four-fifths of new housing
involve membership in homeowner associations (Community Associations
- In China, all major new developments have walls, guards
and private governments (Webster, 2002).
- In Russia (Lentz and Lindner, 2002) and South Africa
Gnad, 2002; Landman, 2002), wealthier citizens privately provide for
their safety in gated communities.
The empirical fact on the ground
is attracting increasing academic
attention from many fields, including urban studies, legal scholars,
and anthropologists, and there have been international scholarly
conferences to explore private communities (Glasz, 2005).
The great challenge concerns
communities of the traditional governmental structure: How are they
converted to a nexus of private property and contract?
Robert Nelson (1999) has proposed a policy for converting
to residential associations, similar to the policy in St. Louis, where
neighborhoods may privatize (Foldvary 1994). Under Nelson’s plan, state
law would permit property owners to petition to form a neighborhood
association within a proposed boundary. Approval would require an
affirmative vote both of 90 percent of the total property value
affected and 75 percent of the individual unit owners. The relevant
governments would 125 then authorize a transfer of services and
property such as streets to the association, accompanied by tax credits
in compensation for the reduction of government expenses. All property
owners in the privatized neighborhood would be required to be members
of the association and pay assessments. Since they would already have
title to the real estate, there is no financial impediment, as there
would be if they had to buy the land afresh.
Conversion to civic associations would not only partially
local governance, it would also result in a shift in public finances,
with lower taxes to the city, replaced by association assessments which
would be much closer to geo-rent. The association would get revenue
from payments either equal per member or based on front footage or
property value. The economic ideal would be payments based on geo-rent,
because the rent would most closely reflect the value of the community
services. But even if there is, say, an equal payment by the real
estate owners, if the properties have about the same market value, the
payments would have the effect of tapping geo-rent, with no excess
My proposal (Foldvary, 1994) for a neighborhood conversion makes
membership in private communities strictly voluntary and open to any
real estate owner. Any person or organization having title to land
would be able to partially secede, to withdraw property and services
from governmental jurisdiction, and create its own governance. The
government could require an exit fee or on-going rental payments to
compensate for its services that the private community would still
benefit from. If most of a neighborhood wishes to privatize but some do
not, those wishing to remain directly under the government would
continue to be under government jurisdiction, and there would then be
agreements for the joint provision of services such as streets that
service both members and non-members. While this may result in a more
complicated arrangement than that of Nelson, I believe it is important
to maintain the voluntary nature of civic associations as much as
possible. Read the entire article
Hydrocarbons are a third set of
valuable resources. The
values involved are
gigantic. The recent merger of the Exxon and Mobil oil
firms was valued at $260
billions, several times greater than the Russian annual
budget. Why should private
parties make off with all this natural value? Several
nations, including some of your
neighbors, support themselves entirely from these
revenues. Norway pays for a
lush welfare state from its oil revenues. Its reserves are
so valuable that the mere
change in their appraised value in several recent years
has exceeded the entire
GDP of Norway. And your oil reserves? If they match your
production, they may
be the largest in the world. ...
Many third-world nations like
Venezuela or Nigeria have
fabulous mineral oil that
they fail to exploit for their own people, letting
sophisticated or ruthless foreign
corporations, in tandem with weak or corrupt insiders,
reap the gains. The
question for Russia is whether to follow their bad example
and become a poor
resource-colony of the west, or whether to assert your own
sovereignty over your
own resources for the benefit of your own people. You need
look no further than
Norway for a model.
Other subsoil resources have
value, too. Many
nations, even backward
ones, gain large parts of their national revenue from
"hardrock" minerals. Bolivia,
Gabon, Jamaica, Liberia, New Caledonia, Papua-New Guinea,
Zaire, and Zambia
have raised over 25% of their budgets this way in recent
years; Chile, Thailand
and Malaysia have taken lesser, but substantial amounts.
Canadian Province, raises large revenues from potash and
uranium; Minnesota, an
American state, from iron ore; and so on. Some other
nations fail to raise much
revenue from fabulous minerals from which others profit,
like S. Africa with its gold
and diamonds, West Virginia with its coal, or Missouri
with its lead mines and
reserves. Russia is a
treasure-house of untapped mineral
wealth that you can and
should tax to alleviate the condition of the Russian
the whole article
Mason Gaffney: Megabucks
for Negabucks: Solving the Water
There’s more than one way to
skin a cat. When Henry George
wrote “We must make land common property” it was in a place
and at a time when most land in sight had been privatized only
recently, using crude methods. “Force and fraud” were not
dim memories in 1879, but a living presence. So George’s phrase
did not strike people then as being any more shocking than it is
today to remind them that the public domain, with its pasturelands,
waters, rights of way, the air, radio spectrum, fish, mineral riches
and timber, belongs to us all in common. Today, to replicate
George’s impact, we would do well to train our sights on the
public domain that is currently being privatized. ... Read the whole article
Mason Gaffney: Oil and Gas Leasing: a Study in
Distributive Socialism also
means administering public lands
pro-actively, affirmatively, to maximize revenue, in the manner of
private landlords. Not to do so is
to let private lessees keep and
privatize the surpluses generated by resources in the public domain.
The NDP in B.C. earned its Socialist stripes by raising rents on
Crown lands owned by the Province ("The Crown Provincial," in
Canadian terms). The Minister of Lands did this directly by
renegotiating timber and other leases, on a site-specific basis. ...
All that may sound familiar to
students of 19th Century American
history, and the privatization of the vast Federal domain. It is a
long story of conflict between cash sales and more democratic means
of placing lands. Those with cash and bank connections naturally
favored cash sales. President Jefferson saw the merit in credit
sales, so from 1801-20, sales were on credit. The system was badly
administered, but so were all other systems of land disposal tried in
that era. Collections became a problem, yet landownership was
democratized. It enabled Andrew Jackson to proclaim on Thanksgiving
Day, 1835, "We thank Thee for the absence of unemployment which in
the King-ridden countries of the world is causing widespread
suffering among the toiling masses and has led to riots ... (and
that) there will be none to freeze, starve, or be beset by the fear
of want this winter or the winters yet to come."
Following the period of credit
sales, the return to cash sales
re-introduced front-money bias. Small owners still had ways of
fighting back at the state and local levels. States and counties and
their subdivisions relied mainly on the property tax. They used this
with good effect, often quite deliberately, to induce absentee
speculators to release large holdings for sale and settlement. The
impact of land taxes is analogous to that of credit sales. The
specter of future taxes is capitalized into lower current land
prices. They in turn let one buy cheaper up front, in return
higher level of deferred payments. The net effect is like extending
permanent credit on equal terms to all potential buyers, something
private credit markets never do or could be expected to do.
... Read the whole article
Mason Gaffney: George's
Economics of Abundance: Replacing dismal choices
with practical resolutions and synergies
Preaching hard trade-offs is not
popular. Voters see through it
as a confession of cluelessness. We hear a lot about voter apathy,
but voters have responded positively at various times to candidates
with positive resolutions, or apparent ones.
Remember the "Phillips Curve" of
the late 1970s? "The public has
to grow up and choose," the gurus said with some condescension. It's
either inflation or unemployment. Soon the voters came up with a
third choice, they retired those unavailing later Keynesians.
Next it was Reagan and Laffer, who
said you can have lower tax
rates and higher tax revenues, more defense and a lower deficit. Talk
about panaceas! This one proved to be a fraud, but the voters
loved it until they slowly realized the promise couldn't possibly be
Now it is the privatizers. They have learned to sell the
product by soft-pedaling "trade-offs." Instead, they talk about
"win-win" solutions, a new euphemism for trade-offs that camouflages
them as resolutions, and hides the sneaky truth that much of the wins
come from privatizing public property without compensation. The
public will stop falling for it as they finally realize that most of
these are really "win-win-lose" solutions, with the public as the
loser. Read the whole article
Mason Gaffney: Land as a
Distinctive Factor of Production
Another thing libertarian
philosophers must paper over is the rent-seeking that occurs in the
creation of private tenures. They avidly push privatization as a
grand Panacea, but ignore the process of privatization and its
consequences. Private tenure is often granted under customs that
make it a prize for occupying or fixing some capital on land, and
continuing to operate it with "due diligence" ("use it or lose
it"). Premature investment, settlement and development are
frequent results, seriously distorting the allocation of land, labor
and capital and contributing to the "Congested Frontier" problem
Some assets that are privatized in this way, dejure or defacto,
- England's North Sea oil (where it is called "performance
- water in the 17 western States of the USA, and four
western provinces of Canada; the radio spectrum; licenses to pollute
air ("offset rights," in EPA-speak);
- US farmland under Squatters' Rights (1841) and the
Homestead Act (1862);
- US and Canadian railroad land grants;
- fishing quotas;
- farm production and acreage quotas;
- cartel shares;
- utility franchises with duty-to-serve; etc.
The tolerance of
neo-classically-trained libertarian economists for such distortions
knows no bounds nor shame. A current example in California is
their push to convert conditional water licenses into permanent
property rights. They would give the present licensees perpetual,
alienable property not just in the water, but in past and ongoing
government subsidies to build and operate the water distribution
system.... read the whole article
Jeff Smith: Planning by
Residents need not let rent and
taxes shoot holes in metro
settlement patterns and price out the building of more pleasing
houses and shops. A jurisdiction could adopt geonomics: replace
taxation with the collection and disbursement of rents. Since we do
not collectively build homes and businesses -- homeowners and
business owners do that --we ought not tax them. We do generate
value of land, higher where density is higher. Nobody by himself made
density; we all do that. Via our agent, a local government, we could
collect public rent for public betterment. ... Read the whole article
Jeff Smith: Sharing
Natural Rents to Sustain Human Society
To get rich, or more likely to
stay rich, some of us can develop
land, especially sprawling shopping centers, and extract resources,
especially oil. While sprawl and oil depletion are not necessary,
they are more profitable than a car-free functionally integrated
city. Under the current rules of doing business, waste returns more
than efficiency. We let a few privatize rent -- ground rent and
resource rent -- although rent is a social surplus. As if rent were
not profit enough, winners of rent have also won further state favors
-- tax breaks, liability limits, subsidies, and a host of others
designed to impel growth (20 major ones follow herein).
If we are to sustain our selves,
our civilization, and our
eco-system, we must make some hard choices about property. What we
decide to do with rent, whether we let it reward our exploiting or
our attaining eco-librium, matters. Imagine society waking up
public nature of rent. Then it would collect and share its surplus
that manifests as the market value of sites, resources, the spectrum,
and government-granted privileges. Then we could forego taxing labor
and capital. On such a level playing field, this freed market would
favor efficiency - the compact city - not waste - the mall and
Bill Batt: How Our Towns Got That Way
land came to be transferred to other nobility and usurped under
title in fee simple rather than in usufruct, it came to be regarded
as a private financial asset. Earlier it was regarded as part of
nature, much like air, water, wind and weather. Accounting
now listed land as an asset "owned" in fee simple, and as a liability
on the other side of balance sheets in money "owed" to banks. This
tendency has been extended today so that we have privatized much of
our air, water, wind, and even sunlight. Land came to be simply one
kind of capital, nothing special, nothing requiring further
treatment. Ricardo's Law of Rent became an artifact of intellectual
history. The conflation of land into capital to create two-factor
economics is one of the greatest paradigm shifts in the evolution of
social philosophy. How the premises and terms of economic discourse
have been changed has been documented for the first time in a new
book by a California professor of economics, Mason Gaffney. The
account is put forth in fascinating detail entitled, The
Corruption of Economics. It was indeed a corruption of a
discipline, a deliberate putsch by powerful economic forces with an
interest in seeing such definitions changed, and we have all been
paying the price since that time. This revealing thesis is what I
really want to relate to you, and to explain the dire consequences it
has had for us in our contemporary world. I have come to believe it;
it makes sense to me, both historically and in contemporary analysis,
from several perspectives. ... read the whole article
Bill Batt: The
Compatibility of Georgist Economics and Ecological Economics
approach to taxation had many names: his contemporary
Thomas Shearman wrote two books calling it the “natural tax,” 41 and
more recently it has been referred to as the “incentive tax” 42 and
It should be noted once more that, by whatever name, the “land tax,”
“site value tax,” or “single tax” to George covered a far wider scope
than simply locational sites, even though today this is the base that
is given the most attention. It covered any natural factor element that
humanity chose to put into service. Today,
some of these parts of
nature which have come to be “owned” by private corporations (at least
insofar as their license to such use have become entitlements) are
worth millions. The electromagnetic spectrum that has been
to the communications industry has sometimes been “auctioned” for
one-shot revenue gains, is now for all practical purposes a freehold
in the hands of those industries.44 Were
those spectrum bands retained by governments and “rented,” the revenue
would likely be far greater. Whatever increased value now results
accrues to these private owners instead of to society.
So also in the case of the auctioning of “pollution credits” or
tradeable permits, what in fact constitute the right of power
industries to treat the air as a dump to the full extent which
environmental tolerances allow.45 These
“credits” are now “owned” by the private sector and traded back and
forth among corporations, even though all people experience the
consequences of its treatment. Airport landing slots, “prime time”
broadcasting, and many other time-sensitive dimensions have all been
handed over to the private sector with nominal benefit to the public.
London Mayor Ken Livingstone has been a strong supporter of renting the
landing slots at Heathrow and Gatwick Airports, and is at this very
time exploring a rent recovery scheme to pay for the upgrade of
components of the Jubilee tube line.46... read the whole article
Bill Batt: Water
is often argued that the most
efficient solution to the challenge of providing water to all people is
to employ a paradigm that recognizes water as a good and service to be
priced by market mechanisms. But many conventional economic models fail
to see water as the natural
birthright of all people. To reconcile these positions,
one needs to step back to a framework of thinking arising from 19th
century classical economics. Renewed interest in these, especially by
environmentalists, offers a way of resolving distributive justice with
market efficiency. If you search on Google the words "economic
justice," it brings up first the work of the Banneker Center and
associated sites that rely on a social philosophy especially applicable
to questions about the ownership of nature and its services.
In recent years it has been argued that only the privatized free
is capable of allocating resources in an efficient manner, regardless
whether these goods and services are the product of individual and
corporate industry or the bounty and heritage of all people. If you
believe that the goods and services of nature - its air, water, land,
mineral wealth,and the spectrum of radio waves are all the birthright
of all people, and ought not to be captured for private gain by any
quarter, you will easily subscribe to this philosophy. Known as geonomics, or sometimes Georgism, it grows out of 19th
century classical economic theory, and its greatest exponent was the
self-taught journalist and economist, Henry George. ... read the whole article
Joseph Fels: True Christianity
and My Own Religious Beliefs
Do you question the relationship
between taxation and righteousness?
Let us see. If government is a natural growth, then surely God's
natural law provides food and sustenance for government as that food is
needed; for where in Nature do we find a creature coming into the world
without timely provision of natural food for it? It is in our system of
taxation that we find the most emphatic denial of the Fatherhood of God
and the Brotherhood of Man, because,
Lindy Davies: Ownership
- first, in order to meet our common
needs, we take from individuals what does not belong to us in common;
- second, we permit individuals to take for themselves what
to us in common;
- thus, third, under the pretext of taxation for public
purposes, we have established a system that permits some men to tax
other men for private profit. ... read the whole letter
President Bush's announcement of his vision for an "ownership society"
met with thunderous cheers at the Republican Convention, and much
eye-rolling elsewhere. The Bush Administration would like to start by
encouraging private ownership of our retirement funds and our
health-care decisions. They want to get the heavy hand of government
out of such things and unleash the tremendous efficiency of millions
upon millions of Self-Interested Individual Actors, the husky,
brawling, broad-shouldered capitalism that made this country great.
Prosperity depends on the security of private property and the potency
of individual initiative! This is the self-evident truth that has been
obscured by Hollywood Socialists, Democratic Girlie-men and purveyors
of the Homosexual Agenda.
We should realize, however, that this is hardly a new
initiative. It is
really just the latest wave of an argument that has raged throughout
the history of the United States, about just what -- if anything -- and
on what basis -- if any -- the government can require us to surrender
what we possess. There are some people out there -- and actually a fair
number, after all -- who don't view the Bush Administration's
privatization proposals as extremist at all -- but, rather, too soft.
If we think for a while about some of the ramifications of
-- as we ultimately must, in a complex modern society -- we find very
little clarity on what we really mean by it. We find that we're
actually not at all clear on the “rights, privileges and immunities” to
which "ownership" entitles us. It's such a muddle that the most common
strategy is to throw up one's hands, accept that ownership is whatever
the law says it is at a given time, and move on. ...
In fact, the US
Constitution was so bullish on property that it provided for private
property in human beings, a principle made explicit in Dred Scott vs.
Sandford and many other cases. ...
Read the whole article
James Kiefer: James Huntington and
the ideas of Henry George
Henry George, author of Progress and Poverty,
argued that, while some forms of wealth are produced by human activity, and
are rightly the property of the producers (or those who have obtained them
from the previous owners by voluntary gift or exchange), land and natural
resources are bestowed by God on the human race, and that every one of the
N inhabitants of the earth has a claim to 1/Nth of the coal beds, 1/Nth of
the oil wells, 1/Nth of the mines, and 1/Nth of the fertile soil. God wills
a society where everyone may sit in peace under his own vine and his own
The Law of Moses undertook to implement this by making the ownership of
land hereditary, with a man's land divided among his sons (or, in the absence
of sons, his daughters), and prohibiting the permanent sale of land. (See
Leviticus 25:13-17,23.) The most a man might do with his land is sell the
use of it until the next Jubilee year, an amnesty declared once every fifty
years, when all debts were cancelled and all land returned to its hereditary
Henry George's proposed implementation is to tax all land at about 99.99%
of its rental value, leaving the owner of record enough to cover his bookkeeping
expenses. The resulting revenues would be divided equally among the natural
owners of the land, viz. the people of the country, with everyone receiving
a dividend check regularly for the use of his share of the earth (here I
am anticipating what I think George would have suggested if he had written
in the 1990's rather than the 1870's).
This procedure would have the effect of making the sale price of a piece
of land, not including the price of buildings and other improvements on it,
practically zero. The cost of being a landholder would be, not the original
sale price, but the tax, equivalent to rent. A man who chose to hold his "fair
share," or 1/Nth of all the land, would pay a land tax about equal to
his dividend check, and so would break even. By 1/Nth of the land is meant
land with a value equal to 1/Nth of the value of all the land in the country.
Naturally, an acre in the business district of a great city would be worth
as much as many square miles in the open country. Some would prefer to hold
more than one N'th of the land and pay for the privilege. Some would prefer
to hold less land, or no land at all, and get a small annual check representing
the dividend on their inheritance from their father Adam.
Note that, at least for the able-bodied, this solves the problem of poverty
at a stroke. If the total land and total labor of the world are enough to
feed and clothe the existing population, then 1/Nth of the land and 1/Nth
of the labor are enough to feed and clothe 1/Nth of the population. A family
of 4 occupying 4/Nths of the land (which is what their dividend checks will
enable them to pay the tax on) will find that their labor applied to that
land is enough to enable them to feed and clothe themselves. Of course, they
may prefer to apply their labor elsewhere more profitably, but the situation
from which we start is one in which everyone has his own plot of ground from
which to wrest a living by the strength of his own back, and any deviation
from this is the result of voluntary exchanges agreed to by the parties directly
involved, who judge themselves to be better off as the result of the exchanges.
Some readers may think this a very radical proposal. In fact, it is extremely
conservative, in the sense of being in agreement with historic ideas about
land ownership as opposed to ownership of, say, tools or vehicles or gold
or domestic animals or other movables. The laws of English-speaking countries
uniformly distinguish between real property (land) and personal property
(everything else). In this context, "real" is not the opposite
of "imaginary." It is a form of the word "royal," and
means that the ultimate owner of the land is the king, as symbol of the people.
Note that English-derived law does not recognize "landowners." The
term is "landholders." The concept of eminent domain is that the
landholder may be forced to surrender his landholdings to the government
for a public purpose. Historically, eminent domain does not apply to property
other than land, although complications arise when there are buildings on
the land that is being seized.
I will mention in passing that the proposals of Henry George have attracted
support from persons as diverse as Felix Morley, Aldous
Huxley, Woodrow Wilson, Helen Keller, Winston
Churchill, Leo Tolstoy, William
F Buckley Jr, and Sun Yat-sen. To the Five Nobel Prizes authorized by
Alfred Nobel himself there has been added a sixth, in Economics, and the
Henry George Foundation claims eight of the
Economics Laureates as supporters, in whole or in part, of the proposals
of Henry George (Paul Samuelson, 1970; Milton Friedman,
1976; Herbert A Simon, 1978; James Tobin, 1981; Franco Modigliani, 1985;
James M Buchanan, 1986; Robert M Solow, 1987; William
S Vickrey, 1996).
The immediate concrete proposal favored by most Georgists today is that
cities shall tax land within their boundaries at a higher rate than they
tax buildings and other improvements on the land. (In case anyone is about
to ask, "How can we possibly distinguish between the value of the land
and the value of the buildings on it?" let me assure you that real estate
assessors do it all the time. It is standard practice to make the two assessments
separately, and a parcel of land in the business district of a large city
very often has a different owner from the building on it.) Many cities have
moved to a system of taxing land more heavily than improvements, and most
have been pleased with the results, finding that landholders are more likely
to use their land productively -- to their own benefit and that of the public
-- if their taxes do not automatically go up when they improve their land
by constructing or maintaining buildings on it.
An advantage of this proposal in the eyes of many is that it is a Fabian
proposal, "evolution, not revolution," that it is incremental and
reversible. If a city or other jurisdiction does not like the results of
a two-level tax system, it can repeal the arrangement or reduce the difference
in levels with no great upheaval. It is not like some other proposals of
the form, "Distribute all wealth justly, and make me absolute dictator
of the world so that I can supervise the distribution, and if it doesn't
work, I promise to resign." The problem is that absolute dictators seldom
resign. ... read the whole article
Ted Gwartney: A Free
Market Strategy to Reduce Sprawl
- Unused land is far more abundant than we realize.
- End the Public Subsidy of Land Speculation and Sprawl
- Counterproductive growth limitations and regulations
should be abolished.
- A Strategy for Urban Renewal
- A Strategy for Economic Development
- Public Finance by Self-Financing
A Strategy for
Economic theory recognizes that
when government places taxes on
production and on commerce the net result is a reduction in those
activities. The reason this occurs is that these taxes add to the
cost of production and to the cost of doing business. The ideal
public policy would be to reduce taxes on production and commerce and
raise public revenue from non-distorting revenue sources.
That non-distorting revenue source
is land and natural resources.
The central problem which limits the operational success of the
economy is the failure to procure the public value which is created
by the community.
This value ought to be reserved
for the community to pay for
public improvements. However, this value is to a large extent
diverted into private pockets by speculation in land and natural
resource values. The correct approach is to create a system in which
no-one, except the citizenry as a whole, is rewarded by the
collection of publicly created values.
Economists can agree that the
economically efficient public
finance system is one in which revenue is drawn from the rent that
people pay for the use of land and natural resources. These payments
do not distort economic activity. Land rent, because it is pure
surplus, could be taken and used for any purpose and there would be
no negative consequences for the allocation of labor and capital, or
in the use of land and natural resources. If this surplus is invested
in needed infrastructure and other public services, it will in turn
increase land values for future public investment. ...
It was estimated that the BART
transportation system in San
Francisco produced two times more land value than it cost to build.
The public recaptured only a small part of the cost from benefits
provided by land taxes and user fees. Most of the cost came from
external sources, unrelated sales and income taxes. Most of the
profits went into only a few pockets.
Thus, the claim that a community
is short of capital is
misleading. In fact, a community could become self-sufficient in the
supply of capital from internal sources. But a precondition for this
is the reduction of taxes on productive capital and labor. Examine,
for example, what would happen as a result of the elimination of
taxation of buildings. This decision, not to penalize people who
invest their savings in new buildings, leads to the stimulation of a
higher level of national income, higher saving, and the creation of
new capital. According to the study made by Tideman and Plassmann
(1998, The Losses of Nations, Fred Harrison, editor, Orthila Press),
shifting taxes off buildings, production and distribution, and onto
land and natural resources, could increase the gross national product
by 25%, or one trillion 1998
($1,000,000,000,000). .... Read the
Fred E. Foldvary — The
Ultimate Tax Reform: Public Revenue from Land Rent
Frank Chodorov, a fervent individualist and founding editor of The Freeman,
published by the Foundation for Economic Education and still a leading
libertarian journal of ideas, became in 1937 director of the Henry George
School of Social
Science in New York City, serving until 1942. Like most followers of Henry
George, Chodorov regarded a charge on land value as not a true tax, which
arbitrarily extracts wealth, but a “payment for the use of a location,
determined by the higgling and haggling of the market, and it makes
no difference to the land user whether he pays rent to the city fathers or
to a private owner.”26
Explaining the value of a location derives to a great extent from community
services, rather than the efforts of the landowner as such, Chodorov noted “it
would seem logical that this value — which we call land rent — should
go to defray the expenses of these common services.”27 ... read
the whole document
Charles T. Root — Not a Single Tax! (1925)
Every community has an indefeasible original right to the land on which it
exists, and to all the natural, unmodified properties and advantages of that
particular area of the earth's surface. To this land in its natural state,
undrained, unfenced, unfertilized, unplanted and unoccupied, including its
waters, its contents and its location, every individual in the community (which
may consist of any political unit selected) has an equal right, while all the
individuals together have a joint right to the value for use which society
has conferred upon these natural advantages.
This value for use is known as "Land Value," or by the not particularly
descriptive but generally adopted name of "Economic Rent."
Briefly defined the land value or economic rent of any piece of ground is
the largest annual amount voluntarily offered for the exclusive use of that
ground, or of an equivalent parcel, independent of improvements thereon. Every
holder or user of land pays economic rent, but he now pays most of it to the
wrong party. The aggregate economic rent of the territory occupied by any political
unit is, as has been stated above, always sufficient, usually more than sufficient,
for the legitimate expenses of the government of that unit. As also stated
above, the economic rent belongs to the community, and not to individual landowners.
On the other hand, the result of every utilization or enhancement of the natural
advantages of land (such as farm profits, the rent and selling value of buildings
and other improvements), when accomplished by an individual, belongs wholly
to that individual, and should never, and need never, be taken from him by
Under the normal system which this article advocates, the user of land would
pay substantially the same economic rent as now, for the reason that economic
rent is fixed by the payer and not by the payee; but it would be paid to the
credit of the community instead of for the benefit of the individual landowner.
And the economic rent is all the land user would have to pay; no taxes on industry
or personal product and no other forced contribution for governmental purposes.
It follows that, under the normal system, the holder of unimproved land would
usually contribute more than at present toward the expenses of government,
while the holder of well improved property would contribute, in most instances,
less than the total of his present taxes.
To illustrate simply, let us suppose a state which has never parted with its
natural income but is supported by its own economic rent. ...
This principle of economic rent applies to all the users of land, including
mining, use of waterpower, and rights of way over or under its surface. Had
this principle always been recognized, and the economic rent always been retained
by the community, taxation would never have been heard of. When the economic
rent is reclaimed by the community, the need of taxation will disappear.
Let us roughly restate the proposition: All members of the community having
a joint right to the income which the social advantages of the land will command,
they are all partners in this income.
Therefore, when one of their number wishes to take for his private use a parcel
of this land, he should buy out his partners, i.e., the rest of the community,
by paying regularly into the common treasury the economic rent of that parcel,
instead of paying, as at present, the purchase price, i.e., the right to collect
the economic rent, in a lump, to some other individual who has no more original
right to it than himself.
But before this time the reader, unless he has given previous attention
to the subject, is full of objections to the above doctrine: "How about the
law?" he is asking. "Hasn't a man the right to buy a piece of land
as cheaply as he can, to do what he pleases with it, and hold on to it till
he gets ready to sell?" The answer is that at present he certainly
has this statutory right, which has been so long and so universally recognized
that most people suppose it to be not only a legal, but a real or equitable
right. A shrewd man, foreseeing the direction of growth of population in
city, for example, can buy a well-located block at a moderate figure from
some less far-seeing owner, can let it grow up to weeds, fence it off against
comers and give it no further attention except to pay the very small tax
usually imposed upon vacant land.
Meantime the increasing community builds up all around it with homes, banks,
stores, churches, schools, paving and lighting the streets, giving police and
fire protection, etc., and at last comes to need this block so urgently that
the owner is fairly begged to sell it, at three or ten or fifty times what
it cost him. Quite often the purchaser at this enormous advance is the very
community which has through its presence and the expenditure of its taxes created
practically the whole value of the land in question!
It was said above that an individual has a statutory right to pursue this
very common course. That was an error. The statement should have been that
he has a statutory wrong; for no disinterested person can follow the course
of land speculation as almost universally practiced, without feeling its rank
How did so evident a wrong become so firmly established? ...
The landlords, being also the lawmakers, have seen to it that their tenure
of this easy money should not be disturbed, but on the contrary have so buttressed
it with centuries of legislation, precedents, and judicial decisions, that
any proposition to hark back to the terms of the original bargain, whereby
the owners of the land agreed to pay the expenses of the government, is now
denounced as anarchy and sacrilege.
Lapse of time, however, never can transform wrong into right, nor can a buyer
acquire any better title than the seller possessed. The economic rent belongs
to the community, which can and will begin to reclaim it as soon as the voters
thoroughly awake to the facts and the right and wrong of the matter, which
are not hard to grasp when the subject is presented in its simplest form.
An illustration has already been given of the case of a piece of farm land.
Let us take an example in a large city. Let us take a corner lot centrally
located in New York City, the title to which lot is held by, say, Mr. John
William Rhinelastor. This lot was a part of an old Dutch farm, and is an heirloom.
It did not cost the present owner anything, nor his father nor his grandfather.
There is a little old building on it, which has always been rented at a figure
ten times as large as the taxes imposed, so that the owner has been handsomely
subsidized each year for storing his title-deeds during a period of the city's
growth in which the increase in population and the expenditure of public money
in that neighborhood have raised the value of this corner location to, say,
two hundred times its early value.
About now, Mr. Rhinelastor decides that he will go abroad to live, and can't
be bothered with this piece of property. But knowing that the pressure of population
is sure to increase and that the expenditure of public money to the benefit
of this land must continue, he will not sell it. So he gives a twenty-one year
lease to the corner for, say, $20,000 a year net, with a privilege to the lessee
of renewals at advancing figures. The lessee agrees to pay all taxes.
Now what is this net $20,000 a year, which will be regularly remitted to
Mr. Rhinelastor, in Europe or wherever he may be, given in payment for? Not
the old building — the first thing the lessee does is to pull it down.
Not for the land itself — it is all rock, which has got to be blasted
out as part of its improvement.
Clearly it is paid for a location or site value, which the community, and
the community only, has built up and paid for. In other words, the present
$20,000 rental, and the larger one which that location will command in later
years, is strictly a community product, and as such belongs to the community
and not to Mr. Rhinelastor.
That the latter has no good right to it is at once evident when we remember
that "When one man gets something for nothing somebody else has got to
give something for nothing." Here are $20,000 that some men and women
have got to work to earn every year to hand over to a man who does not
render, and does not feel any obligation to render, one dollar's worth
of public or
private service in return. Such is the wild travesty of justice which we
call law. It is not comical only because it is frankly tragic in its social
Now suppose this $20,000 and all the rest of this same community product — i.e.,
the site or location rent of its ground — were paid every year to
its rightful owner, the treasurer of New York City, what would become of
with its inseparable retinue, Fraud, Evasion, Perjury, Inequality, and
an all-pervading public sense of injustice?
An authority on municipal taxation estimates the present economic rent of
the land embraced in the City of New York at from $350,000,000 to $400,000,000.
Assuming the lesser of these figures and adding the receipts from licenses,
fees and fines, New York City should receive, of her own income, enough to
pay all her own legitimate bills, to make her proper contributions to county
and state and build a new subway or its equivalent every year.
And this with nobody paying a dollar of taxes, or, if we except the fines,
a dollar that he was not ready and glad to pay for his own advantage.
We repeat, this is not taxation; but for the sake of those who cannot grasp
the idea of public revenue without taxation, let us state the matter in their
Think of a tax which both assesses itself and collects itself, which burdens
no one, which is paid voluntarily, and only by those who do so for their
own profit or other advantage. Compare this with our present system of taxes,
everyone despises, which can be collected in full only from the very scrupulous
and from the helpless, from trust funds of widows and orphans, or from
estates which lie naked before the tax gatherer on the records of court;
a system which
drives men of property from state to state and town to town in flight from
the assessor, and well-nigh forces many worthy citizens to practices of
evasion which must make it hard for them to look into their own mirrors during
season for "Correction of Assessments;" there can be but one
verdict upon such comparison.
But again the voice of the objector is heard, possibly to this effect: "This
plan may be all right for the community, but how about poor Mr. Rhinelastor?"
In reality the landowner would not suffer so much from the restoration of
the public revenue as might at first appear. For one thing, whereas he is now
taxed, at least in theory, not only on land, but on buildings, cash, bonds,
and all other personal property, and perhaps on his income as well, he would
then have no taxes at all to pay. Furthermore the economic rent is not the
full measure of the possible earning capacity of the land, but will always
be less than the offerer expects to make out of its use.
Again, while it must be firmly insisted that the economic rent is the rightful
property of the community and not of the landowner, the community would probably
never take it all. Communal ownership of land is not desirable, even if it
were practicable. Individual ownership and management are best, and it is not
at all improper for the community to allow the owner something for caring for
the land to which he holds title, and for collecting and transmitting to the
treasury the economic rent.
But — and right here is one of the prime advantages of the abolition
of taxation — Mr. Rhinelastor, in order to get satisfactory return
from his land, must improve it. Unless he is satisfied with a small income
it, to wit, the proportion of the economic rent which the community chooses
to leave in his hands, he must put upon his land the best building the
location will warrant. The rents of this building will be his in their
one dollar of them being taken from him by taxation. If he is not prepared
or not willing to do this he would probably find it more profitable, before
he leaves the country, to sell the land to some one of the many persons
who are eager to build upon it. It will always be salable, although not
means at present figures.
Now imagine for a moment the effect upon the appearance of a city and upon
the comfort of its population which would result from the change of fiscal
policy which this article proposes. At present, a tempting premium is placed
upon keeping land unimproved or inadequately improved, while a heavy penalty
is imposed upon improvement. Most land appreciates constantly. All buildings
depreciate from the moment of completion. Yet the building is taxed equally
with the land.
What incentive does such a system offer the speculative landowner to put up
a commodious, well-lighted modern structure in place of the old ruin which
now pays him so well? The old one cannot depreciate much more, and while paying
a trifling tax because of its physical worthlessness, he is thereby enabled
to collect and pocket the economic rent of the ground, which the community
is continually rendering more valuable. The new building would absorb a large
amount of capital, would begin to run down even before it could be occupied,
and would be taxed to the limit. Why then is not the landlord justified in
letting well enough alone, enjoying the growing economic rent, and waiting
till he can get a fancy price for the right to collect it?
But reverse the conditions. Reclaim for the community its natural income,
making it expensive either to keep needed land vacant or to withhold it from
the ready and willing to improve it to the full extent of its possibilities.
Does it require severe intellectual effort to foresee the results? Better
and better houses, apartments, tenements, offices and stores, more employment
for labor in all enterprises now held back by the shadow of the tax-gatherer,
an end of all tax-lying, tax-evasion and tax-injustice, and withal, a public
revenue adequate to all real public needs.
What a contrast to the existing plan of pouring public money into the laps
of individual landowners ... read the whole article
Frank Stilwell and Kirrily Jordan: The
Political Economy of Land: Putting Henry George in His Place
Indeed, one could say that the term ‘tax’ is a misnomer because
what is really involved is value created by the community being retained
by the community rather than being appropriated by private landholders. For
example, under current arrangements landowners receive ‘windfall’ gains
when the market value of their land rises as a result of publicly provided
infrastructure being built nearby, or when local government zoning decisions
reclassify their land as appropriate for further development. In this way,
individual landowners stand to reap huge benefits at the expense of community-generated
processes. Such arrangements create an odd incentive: allowing landholders
to appropriate the unearned wealth generated by rising land values, thereby
rewarding this unproductive activity, while taxing productive endeavour.
The Georgist land tax ‘remedy’, by contrast, would eliminate
such perverse incentives and thereby more effectively align private and public
interests in the use of society’s resources. ...
Georgist analysis strongly emphasises landownership as a principal source
of inequality. Because land is a strictly limited resource, its private ownership
necessarily excludes large sections of the community from its benefits. A
landowning class thereby gains political economic power. In George’s
own time the social identity and power of this landowning class was distinctive.
Those who could not afford to buy land were forced to pay rent to the wealthier
few who could. By taxing the value of land, George posited that publicly
created wealth could be recouped from the private landowners and redistributed
throughout the community more equitably in order to address social goals.
Are George’s arguments about land ownership and wealth inequality
relevant today? Australia provides an interesting example, because land is
the single largest item in national wealth. Laurie Aarons outlines the concentration
of farming land in particular in the hands of a few very wealthy corporations
and individuals – what he refers to as ‘corporate squattocracy’ (Aarons,
1999: 23). The relentless increase in urban land values in recent years has
also produced dramatic redistributions of wealth. In the State of New South
Wales, for example, land values increased by about $361 billion over the
period 1993 – 2003. The existing land-based taxes clawed back
only $44 billion in government revenues, comprising only about 12% of the
economic surplus. So 88% was retained as ‘unearned income’ by
landowners (Stilwell and Jordan, forthcoming). A higher rate of land tax
with fewer exemptions could have substantially reduced this private wealth
appropriation. This is not necessarily to posit the desirability of recouping
100% through land tax, because that would certainly raise major problems
of people’s ability to pay, given that much of the increased wealth
resulting from land price inflation has not been realised as current income.
But it is indicative of the current imbalance between private and public
appropriations of the surplus arising from increases in land-based wealth. ... read the whole article
Peter Barnes: Capitalism
3.0: Preface (pages ix.-xvi)
I’m a businessman. I believe society should reward successful initiative
with profit. At the same time, I know that profit-seeking activities have
unhealthy side effects. They cause pollution, waste, inequality, anxiety,
and no small amount of confusion about the purpose of life.
I’m also a liberal, in the sense that I’m not averse to a role
for government in society. Yet history has convinced me that representative
government can’t adequately protect the interests of ordinary citizens.
Even less can it protect the interests of future generations, ecosystems,
and nonhuman species. The reason is that most — though not all — of
the time, government puts the interests of private corporations first. This
is a systemic problem of a capitalist democracy, not just a matter of electing
If you identify with the preceding sentiments, then you might be confused
and demoralized, as I have been lately. If capitalism as we know it is deeply
flawed, and government is no savior, where lies hope? This strikes me as
one of the great dilemmas of our time. For years the Right has been saying — nay,
shouting — that government is flawed and that only privatization, deregulation,
and tax cuts can save us. For just as long, the Left has been insisting that
markets are flawed and that only government can save us. The trouble is that
both sides are half-right and half-wrong. They’re both right that markets
and state are flawed, and both wrong that salvation lies in either sphere.
But if that’s the case, what are we to do? Is there, perhaps, a missing
set of institutions that can help us? ...
For much of this time I was president of Working Assets, a company that
donates 1 percent of its gross sales to nonprofit groups working for a better
world. These donations come off its top line, not its bottom line; the company
makes them whether it’s profitable or not (and many years we were not).
It occurred to me that 1 percent is an exceedingly small portion of sales
for any business to return to the larger world, given that businesses take
so much from the larger world without paying. How, for example, could we
make any goods without nature’s many free gifts? And how could we sell
them without society’s vast infrastructure of laws, roads, money, and
so on? At the very least, I liked to think, we ought to pay a 1 percent royalty
for the privilege of being a limited liability corporation. ... read
the whole chapter
Peter Barnes: Capitalism
3.0 — Chapter 2: A Short History of Capitalism (pages 15-32)
Enclosure, in which property rights are literally taken or given away, is
half the reason for the commons’ decline; the other half is a form
of trespass called externalizing — that is,
shifting costs to the commons. Externalizing is as relentless as enclosure,
yet much less noticed, since it requires no active aid from politicians.
It occurs quietly and continuously as corporations add illth to the commons
without permission or payment.
The one-two punch of enclosure and externalizing is especially potent. With
one hand, corporations take valuable stuff from the
commons and privatize it. With the other hand, they dump bad stuff into the
commons and pay nothing. The result is profits for corporations but a steady
loss of value for the commons. ... read
the whole chapter
Peter Barnes: Capitalism
3.0 — Chapter 4: The Limits of Privatization (pages 49-63)
It’s tempting to believe that private owners, by pursuing their own
self-interest, can preserve shared inheritances. No one likes being told
what to do, and words like statism conjure fears of bureaucracy at best and
tyranny at worst. By contrast, privatism connotes freedom.
In this chapter, we look at Garrett Hardin’s second alternative for
saving the commons: privatism, or privatization. I argue that private corporations,
operating in unconstrained markets, can allocate resources efficiently but
can’t preserve them. The latter task requires setting aside some supplies
for future generations — something neither markets nor corporations,
when left to their own devices, will do. The reason lies in the algorithms
and starting conditions of our current operating system. ...
Free Market Environmentalism
One other version of privatism is worth considering. Its premise is that
nature can be preserved, and pollution reduced, by expanding private property
rights. This line of thought is called free market environmentalism, and
it’s favored by libertarian think tanks such as the Cato Institute.
The origins of free market environmentalism go back to an influential paper
by University of Chicago economist Ronald Coase. Writing in 1960, Coase challenged
the then-prevailing orthodoxy that government regulation is the only way
to protect nature. In fact, he argued, nature can be protected through property
rights, provided they’re clearly defined and the cost of enforcing
them is low.
In Coase’s model, pollution is a two-sided problem involving a polluter
and a pollutee. If one side has clear property rights (for instance, if the
polluter has a right to emit, or the pollutee has a right not to be emitted
upon), and transaction costs are low, the two sides will come to a deal that
How will this happen? Let’s say the pollutee has a right to clean
air. He could, under common law, sue the polluter for damages. To avoid such
potential losses, the polluter is willing to pay the pollutee a sum of money
up front. The pollutee is willing to accept compensation for the inconvenience
and discomfort caused by the pollution. They agree on a level of pollution
and a payment that’s satisfactory to both.
It works the other way, too. If the polluter has the right to pollute, the
pollutee offers him money to pollute less, and the same deal is reached.
This pollution level — which is greater than zero but less than the
polluter would emit if pollution were free — is, in the language of
economists, optimal. (Whether it’s best for nature is another matter.)
It’s arrived at because the polluter’s externalities have been
For fans of privatism, Coase’s theorem was an intellectual breakthrough.
It gave theoretical credence to the idea that the marketplace, not government,
is the place to tackle pollution. Instead of burdening business with page
after page of regulations, all government has to do is assign property rights
and let markets handle the rest.
There’s much that’s attractive in free market environmentalism.
Anything that makes the lives of business managers simpler is, to my mind,
a good thing — not just for business, but for nature and society as
a whole. It’s good because things that are simple for managers to do
will get done, and often quickly, while things that are complicated may never
get done. Right now, we need to get our economic activity in harmony with
nature. We need to do that quickly, and at the lowest possible cost. If it’s
easiest for managers to act when they have prices, then let’s give
them prices, not regulations and exhortations.
At the same time, there are critical pieces missing in free market environmentalism.
First and foremost, it lacks a solid rationale for how property rights to
nature should be assigned. Coase argued that pollution levels will be the
same no matter how those rights are apportioned. Although this may be true
in the world of theory, it makes a big difference to people’s pocketbooks
whether pollutees pay polluters, or vice versa.
Most free marketers seem to think pollution rights should be given
free to polluters. In their view, the citizen’s right to be free of pollution
is trumped by the polluter’s right to pollute. Taking the opposite
tack, Robert F. Kennedy Jr., an attorney for the Natural Resources Defense
Council, argues that polluters have long been trespassing on common property
and that this trespass is a form of subsidy that ought to end.
The question for me is, what’s the best way to assign property
rights when our goal is to protect a birthright shared by everyone? It
turns out this is a complicated matter, but one we need to explore. There’s
no textbook way to “propertize” nature. (When I say to propertize,
I mean to treat an aspect of nature as property, thus making it ownable.
Privatization goes further and assigns that property to corporate owners.)
In fact, there are different ways to propertize nature, with dramatically
different consequences. And since we’ll be living with these new property
rights — and paying rent to their owners — for a long time, it
behooves us to get them right. ... read
the whole chapter
Peter Barnes: Capitalism
3.0 — Chapter 5: Reinventing the Commons (pages 65-78)
Suppose you buy a house for $300,000, and without improving it, sell it
a few years later for $400,000. You pay off the mortgage and walk away with
a pile of cash. Your private wealth increases. But think about what caused
the house to rise in value. It wasn’t anything you did. Rather, it
was the fact that your neighborhood became more popular. That, in turn, resulted
from population shifts, a new highway perhaps, an improved school, or the
beautification efforts of neighbors. In other words, your increased wealth
is a capture of socially created value. It shows up as private wealth but
is really a gift of society. ... read
the whole chapter
Peter Barnes: Capitalism
3.0 — Chapter 9: Building the Commons Sector (pages 135-154)
A spectrum or airwaves trust would have a distinct mission: to reduce the
influence of corporations on our democracy. Its economic and ecological impacts
could be significant (reducing corporate political influence will improve
many policies), but they’re secondary to the political objective.
According to a study by the New America Foundation, the market value of
the airwave licenses we’ve given free to corporate broadcasters is
roughly $500 billion. It’s possible this value will decline as unlicensed
wi-fi spreads, but meanwhile broadcasters sell our airwaves to advertisers
and reap billions that belong, at least in part, to all of us.
Part of that money comes from political candidates who must purchase TV
and radio ads to get elected. The problem isn’t so much the unearned
windfall broadcasters collect; rather, it’s the fact that candidates
are compelled to pay it to them. That makes politicians kowtow to corporate
donors in order to pay broadcasters. Other democracies give free airtime
to political candidates, but we protect the broadcasters’ lock on our
airwaves. By privatizing our airwaves, in other words, we’ve effectively
privatized our democracy. The job of a spectrum trust would be to take back
our democracy by taking back our airwaves.
This could be done in a couple of ways. One wouldn’t require an actual
trust: Congress could simply say that, in exchange for free spectrum licenses,
broadcasters must give a certain amount of free airtime to political candidates.
Alternatively, broadcasters could pay for their licenses, with revenue going
to a nonpartisan trust. That trust would allocate funds to candidates for
the purchase of TV and radio ads; the allocation formula would take account
of cost differences between media markets and other relevant variables. Neither
of these approaches would prevent corporations from lobbying or contributing
to candidates’ other expenses, but they would level the political playing
field by greatly reducing the sums candidates have to raise to get elected.
the whole chapter