1
2
3
| Wealth and Want | |||||||
| ... because democracy alone is not enough to produce widely shared prosperity. | |||||||
| Home | Essential Documents | Themes | All Documents | Authors | Glossary | Links | Contact Us |
Third
Way
I. The Concept of Private
Possession of Land
Henry George: The
Land for the People (1889 speech)II. The Rental Value of Land in an Unimproved Condition III. The Question of Tax Abatements IV. Freedom to Transfer Titles of Possession V. Market Determination of the Sizes of Farms VI. The Absence of a Termination Date VII. The Importance of Implementing Other Agricultural Reforms VIII. Summary One of the reasons that the debate is so fierce between the advocates of rental and the advocates of private ownership of agricultural land is that each position has important strengths as well as important weaknesses. This paper argues that there is a third possibility between rental and private ownership that retains the strengths of both while avoiding the weaknesses of both. The third possibility is private possession of land. Now, rent is a natural and just thing. For instance, if we in this room were to go together to a new country and we were to agree that we should settle in that new country on equal terms, how could we divide the land up in such a way as to insure and to continue equality? If it were proposed that we should divide it up into equal pieces, there would be in the first place this objection, that in our division we would not fully know the character of the land; one man would get a more valuable piece than the other. Then as time passed the value of different pieces of land would change, and further than that if we were once to make a division and then allow full and absolute ownership of the land, inequality would come up in the succeeding generation. One man would be thriftless, another man, on the contrary, would be extremely keen in saving and pushing; one man would be unfortunate and another man more fortunate; and so on. In a little while many of these people would have parted with their land to others, so that their children coming after them into the world would have no land. The only fair way would be this-- that any man among us should be at liberty to take up any piece of land, and use it, that no one else wanted to use; that where more than one man wanted to use the same piece of land, the man who did use it should pay a premium which, going into a common fund and being used for the benefit of all, would put everybody upon a plane of equality. That would be the ideal way of dividing up the land of a new country. THE problem is how to apply that to an old country. True we are confronted with this fact all over the civilized world that a certain class have got possession of the land, and want to hold it. Now one of your distinguished leaders, Mr. Parnell in his Drogheda speech some years ago, said there were only two ways of getting the land for the people. One way was to buy it; the other was to fight for it. I do not think that is true. I think that Mr. Parnell overlooked at that time a most important third way, and that is the way we advocate. That is what we propose by what
we call the single tax. We
propose to abolish all taxes for revenue. In place of all the taxes
that are now levied, to impose one single tax, and that a tax upon
the value of land. Mark me, upon the value of land alone -- not
upon the value of improvements, not upon the value of what the
exercise of labor has done to make land valuable, that belongs to the
individual; but upon the value of the land itself, irrespective of
the improvements, so that an acre of land that has not been improved
will pay as much tax as an acre of like land that has been improved.
So that in a town a house site on which there is no building shall be
called upon to pay just as much tax as a house site on which there is
a house. Read the whole speech
Because George asserted, "We
must make land common property," he is sometimes erroneously regarded
as an advocate of land nationalization. But, as we have seen, he was
nothing of the sort. The expropriation of land makes it practically
impossible to fairly compensate people for the improvements to land,
which are their legitimate property. George's system renders to the
community what is due to the community, without doing any violence to
the wealth that has been fairly earned by productive workers.
Common property in land is sometimes discredited by equation with what Garrett Hardin calls "The Tragedy of the Commons." Referring to the common lands that were a major English institution until the mid-nineteenth century, Hardin describes the tendency of individuals, each rationally pursuing self-interest, to overgraze, denude, and use the commons as a cesspool. That which belongs to everybody in this sense is, indeed, in danger of being valued and maintained by nobody. The enclosure movement ultimately brought an end to this ecologically destructive process, but not without literally pushing people off the land, exacting a baneful price in human misery that might well be termed "The Tragedy of the Enclosures." George hit upon a way of securing the benefits of both commons and enclosures, while at the same time avoiding their evils. Land value taxation rectifies distribution so that all receive wealth in proportion to their contribution to its production. This liberates the economic system from exploiters who contribute little or nothing. Apportioning the wealth pie fairly increases the incentive to increase the size of the pie. The market becomes in practice what capitalist theory alleges it to be -- a profoundly cooperative process of voluntary exchange of goods and services. Paradoxical though it may seem, the only way the individual may be assured what properly belongs to him or her is for society to take what properly belongs to it: The ideal of Jeffersonian individualism requires for its actualization the socialization of rent. Just as Marxists err in insisting that everything be socialized, extreme capitalists err in insisting that everything (even public parks and forests!) be privatized. The middle way is to recognize society's claim to what nature and society create -- the value of land and its rent -- so that working people, including entrepreneurs, may claim their full share of what they create. In this balanced approach can be found the authentic verities respectively inherent in socialism and individualism. Read the whole synopsis Robert V. Andelson Henry George and the Reconstruction of Capitalism With the fall of the Iron
Curtain, people all over the world seem
to be searching for a "Middle Way." ...
But what we are presented with, from Right to Left, is not a coordinated structure embodying the best elements from both sides, not even a well-thought-out attempt at syncretism, but rather a bewildering welter of jerry-built solutions, each one based on political and emotional considerations and lacking any functional relationship to a unified system of socio-economic truth -- let alone any rootage in a grand scheme of teleology or ethics. A little Socialism here, and a little Capitalism there; a concern for the public sector here, and a concession to the profit motive there; a sop to the "underprivileged" here, and a bow to incentive there - put them all together, and what have you got? Nothing but a great big rag-bag, a haphazard pastiche of odds and ends without any bones and without any guts! Nevertheless, there is a Middle Way. There is a body of socio-economic truth which incorporates the best insights of both Capitalism and Socialism. Yet they are not insights that are artificially woven together to form a deliberate compromise. Instead, they arise naturally, with a kind of inner logic, from the profound ethical distinction which is the system's core. They arise remorselessly from an understanding of the meaning of the commandment: "Thou shalt not steal." This Middle Way is the philosophy associated with the name of Henry George. I like to picture economic
theory as a vast jigsaw puzzle
distributed across two tables, one called Capitalism and the other,
Socialism. But mingled with the genuine pieces of the puzzle are
many false pieces, also distributed across both tables. Most of us
are either perceptively limited to one table, or else we are unable
to distinguish the genuine pieces from the false. But Henry
George
knew how to find the right pieces, and, therefore, he was able to put
the puzzle together -- at least in its general outlines. I don't
claim that he was infallible, or that there isn't further work to be
done. Yet if I find a little piece of puzzle missing here or there,
it doesn't shake my confidence in the harmony of the overall pattern
he discerned. It doesn't make me want to sweep the puzzle onto the
floor and start all over again from scratch. Read
the whole article Bill Batt: The Compatibility of Georgist Economics and Ecological Economics The justice in the Georgist
tradition grows out of the premise that one
is entitled to what one makes with one’s own hands or mind, but one is
not personally entitled to the gains that grow out of communal efforts.
Those are owed to and should be returned to the community. The justice
inherent in ecological economics, to the extent that it has solidified,
involves a recognition that preservation of natural capital is in the
interest of everyone. Both recognize and value the preservation of a
world commons in nature. Both appreciate the diversity preserved in
local community institutions and cultures. Both accept models based on
self-regulating assumptions — in one case using the phrase “steady
state” economics, in the other case the recovery of land rent in the
pursuit of open and stable markets over monopoly control. There is
great promise in the confluence of the two perspectives: they offer a
solution to the age-old challenge of resolving what in the world ought
to be public and common, and what else ought to be individual and
private. It remains now for proponents of each perspective to continue
exploring commonalities.
Alternatives that have been tried in the past, both classic capitalism and socialism, suggest that neither has served the interests of humanity well in the long term. Ecological economics has no theory of property as such, and Georgism here offers a proven course of application. To Georgists, ownership is linked to use and not to freehold title. Holding individual property under license of the community, and under terms which the community stipulates, is an idea with a long tradition, well accepted, and needing only to be revived in contemporary political, legal and economic discourse. Combined with the pricing device of collecting land rent, ecological economics will have a tool by which to circumscribe and even reverse the centrifugal forces of a new economic imperialism. This is truly the beginning of a “Third Way” when other theories seem to be moribund. read the whole article Mason Gaffney: Henry George 100 Years Later: The Great Reconciler Neo-classical economists give us
only a hard choice: we may have equity, or efficiency, but not both. By
contrast, George's program reconciles equity and efficiency. Think of
it! George takes two polar philosophies, collectivism and
individualism, and composes them into one solution. He cuts the Gordian
knot. Like Keynes after him, George inspires us by saying, "Forget the
bitter tradeoffs; we can have it all!" ... read the whole article
Mason Gaffney: George's Economics of Abundance: Replacing dismal choices with practical resolutions and synergies Introduction:
Resolutions vs. trade-offs
1. Equity, Efficiency, and Incentives a. Equity and
efficiency
b. Reconciling progressivity and motivation. 2. Reconciling
demand side and supply side economics
a. Aggregate. Consumption and
production
b. Investing and Saving 3. Micro
"structural" reform coupled with macro reform
4. Local, state, and national applications 5. Relieving labor without burdening capital 6. Urban renewal without subsidizing evictions 7. Contains urban sprawl, improves urban linkages among complementary land uses, without overriding market choices. a. Taxing land
sharpens market incentives via the leverage effect noted earlier.
b. Fosters resident ownership, civic participation 8. Reconciles
common rights to land with private tenure
9. Paying the debt while also making jobs 10. Making labor cheaper to hire without lowering wage rates 11. Adding people and capital w/o diluting resource base 12. Fostering economy in government in the very process of raising revenue 13. Enhance evironment and conserve resources while making jobs Summary A summary of
reconciliations
1. Couples equity with
efficiency.
2. Couples progressivity with motivation. Abates concentration of wealth and power while widening the scope of productive ambition and enterprise. 3. Makes more jobs without inflation. Raises demand-side and supply-side together, "leveling them upwards." 4. Raises both inducement to invest and inducement to save, at any income level. Also raises saving by raising income level. 5. Couples structural reform and macro reform. 6. May be applied at local, state, and national levels, together or jointly, in small degrees or large. 7. Relieves labor of taxation without burdening capital, and vice versa. 8. Renews cities without subsidizing evictions. 9. Contains urban sprawl, infills and coordinates cities without superimposing planning on the market. 10. Fosters resident ownership and civic participation without laws against absentee ownership, or other use of compulsion, but in the very process of lubricating land markets. 11. Asserts common rights to land while strengthening private tenure. Permits of privatizing without giveaway. 12. Allows paying off public debts while fostering full employment through (true) fiscal stimulus. 13. Makes labor cheaper to hire while raising real wage rates (take-home pay, disposable income). Thus makes jobs without lowering wage rates or "making work." 14. Lets regions, nations, and the world add population and capital without diluting their resource bases. 15. Fosters economy in government in the process of raising revenue. 16. Saves the environment in the process of intensifying land use. 17. Smoothes business cycles without depending solely on contra-cyclical fiscal or monetary policy. Stabilizes and secures financial institutions with only minimal regulation. 18. Effects land reform and redistribution abroad and at home, urban as well as rural, without government expense, and without acreage limitations, working through free markets. 19. Equalizes credit ratings for land buyers without any controls over lenders. Summary Dismal trade-offs, deadlocks, and standoffs are just mental blocks and smokescreens. Henry George began with a quest for justice in sharing the rent surplus. He found that justice and efficiency are not at odds, we can have both. This trade-off that many economists expound is a stall, a put-off to enervate and unman us so we won't do anything. It may ease the conscience to think justice must be sacrificed for efficiency, and schools starved and libraries closed to free up incentives, so nothing, really, can ever be done. We all feel compassion by nature but, to survive and stay whole in this world of beggars and bandits, learn to harden our hearts and cork it in. We learn to screen out evidence of suffering and injustice, and rationalize what we cannot deny. This mindset, while understandable, is unaffordable in a period of dangerous national decline, and growing division between haves and have-nots. What we have shown here is not just that we can have both justice and efficiency, but more, we cannot have either one without the other. If we don't share rents efficiently, in the Georgist manner, social and political pressures will continue to cause inefficient sharing and eventual dissipation. Economic discourse is afflicted with pessimists who firmly cling to mutually inconsistent positions at the same time, each posing an insoluble problem. Some, for example, believe the world is racing to starvation, and favor limiting demand through birth control, while in another context they deplore "overproduction," or "underconsumption," and favor choking off farm production to keep farmers from losing money. George, of course, would see demand as the answer to supply, and land as the field on which the twain may meet and satisfy each other, leveling them upwards. Again, some favor cheap power and good roads for rural areas, regardless of cost, and then favor low-density zoning to keep people out. George, of course, would favor infilling to make full use of short interior lines at high capacity, and lower cost per customer. Epilogue: how the public demonstrates its preference for resolutions over dismal choicesIt is part of George's genius that his proposals solve one problem by resolving it with another, turning two problems into one solution. It is something like tuning up the orchestra for a concert, turning dissonance into harmony, and keeping the beat together, turning cacaphony into rhythm. It is the mark of good solutions that they reconcile and resolve, rather than simply "trade-off." 1 1 If you ever immerse yourself in mathematics deeply enough to find different proofs of the same proposition, you recognize the epiphany when it all comes together, and everything supports and confirms everything else. Then you know you have the right answer. Good ideas and good policies support and reinforce each other. That is what George means when he
writes that "the laws of the
universe are harmonious." That is what Founding Fathers like
Washington, Jefferson and Franklin meant by a "natural order." Like
them, George is a deist in spirit, a believer in the consistency of
the universe. The concept that some things are more "natural" than
others is not arbitrary. The clue that one has found the "natural" law is that
it makes forces harmonize and team together instead of clashing, and neutralizing
each other. 2 The principle of
constructive
synthesis - a touch of Hegel - is another way of perceiving the value
of turning cacaphony into harmony.
3
2. In this view, the "natural harmony" is recognized by its power to reconcile. Deadlocks and standoffs resolve into teamwork, yielding gains at little or no cost. Today, philosophers may avoid terms like "natural law." Call it what you will, it is a powerful idea and a worthy goal. Fashions and terms change: principles endure. Economists today offer us mainly "trade-offs" and hard choices. For every good thing we must give up another, so net gains are just marginal. That is the approved posture: it makes one seem hard-headed, worldly, and practical. Too much positive thinking sounds suspiciously optimistic, and invites rebellious cynical muttering that "there ain't no free lunch." It goes back at least to Malthus, who offered mankind the hard choice of food vs. sex. That sort of thinking is what made people call economics "the dismal science." A true resolution is much more to be desired. To get one good thing we get a second one as well. It is remarkable how many "hard choices" are turned into benign resolutions in George's program. He is a genius at finding the essential harmony of interests now concealed beneath confused thinking. Instead of a dismal trade-off, there is a "free lunch," or "synergy": the whole is greater than the sum of its parts. Such grand resolutions, when possible, deserve to be called "true win-win solutions." 4 4. As commonly used today, "win-win solution" is just a euphemism for a trade-off, in which the loser of a resource "wins" by getting paid. Often it is worse: the "winnings" of one or both parties represent resources stolen from the public domain, while concealing the loss to the public. The
most obvious such true win-win
solution is putting the
unemployed to work. Recognizing this truth is no monopoly of
George:
Keynesian economists long insisted that there is no social cost in
putting the unemployed to work. It is a measure of the bankruptcy
and myopia of many economists today that even those voices are muted,
and that obvious gain is denied: working is called a "sacrifice of
leisure," just another trade-off. Unemployment has become
"job-searching." 5 It is
more likely a
sacrifice of burglary, vandalism, drug-use, jail time, loitering,
looting, collecting welfare, and sullen misery. Trading such bad
time for the gratification, pride, on-the-job learning, and moral
uplift of working is not a trade-off, but a double gain. It is a
true "free lunch," if you will. ... read the whole article
Some of our unresolved problems
today include
There is much to be humble and concerned about. Western capitalism has shown the
world that "personal interest is
the irreplaceable motive power of production and progress." Let us
trumpet this showing with pride, and preach to the world. Let us also
allow that personal interest can, if badly handled, lead to inhumane
excesses and abuses. A worthy goal is to combine capitalist drive
and efficiency with socialist egalitarianism. How? Synthesis does not
mean some vaguely compromising "middle way," but the best
constructive combination of workable elements from each way. The
specific centerpiece of policy proposed here is social collection of
land rent, coupled with private collection and retention of incomes
drawn from labor and from creating capital. ... read the whole article
Lindy Davies: Socialism, Capitalism and Geoism But
the term "socialism" does mean
something, and it is often
identified with the quest for economic justice. The basic assumption
underlying it is that the market place, under conditions of pure
laissez-faire competition, is incapable of securing to society an
equitable distribution of wealth. Socialists assert that if the
market
is left alone to decide who is to get how much of the world's goods,
the result is a division of society into classes and the emergence of a
struggle between the exploiting class and the enslaved working class.
Competition becomes "cutthroat competition", fostering trusts, cartels
and monopolies. Instead of making earnings proportional to service
rendered, the market place gives the highest rewards to the most
unscrupulous exploiters.
However, many are proud to rally behind the banner of "capitalism". They contend that free competition makes the fullest possible use of the gifts of nature and human ingenuity. When the admirable equilibrium of the market is upset by do-gooders trying to secure their idea of fairness, the result is unemployment, stagnation and corruption. Capitalists and socialists may appear to disagree about everything -- but on one crucial point of political economy their views are uncannily similar. Both tend to lump land and capital under the single heading of "capital," and many even include money as capital. This confusion prevents socialists from seeing the possibility of a beneficial free market without the element of monopoly. And it prevents capitalists from seeing the fundamental role of the public sector in a just and prosperous market economy. It may seem odd that both "capitalists" and "socialists" speak of the justice of their system and the vile in-justice of their opponents'. (Of course, the emotion behind such discussions is often heightened by a kind of home-team fervor.) Is there any universal standard of justice upon which economic policy can be based? The answer lies in clarifying the question of the rightful basis (if there is one) of public vs. private ownership. For the thorough-going free-market capitalist, "public ownership" of anything is anathema: the community's interests are best served by the unhindered interactions of self-interested producers and traders. But the poverty, suffering and environmental destruction that come under such a "private property" regime cannot be denied. Because of this, the great bulk of social-policy debate revolves around how much of the efficiency of free enterprise must be traded for public interference, imposed in the name of equity. The question of the rightful balance between public and private control becomes one of expediency and political fashion, lacking any guiding principle. Indeed, modern "neoclassical economics" denies that any such principle exists. For Henry George, however, the principle was clear. The value of natural opportunities belongs entirely to the community, and the production of wealth by labor, using capital, should be entirely unhindered by the penalty of taxation. For George, the most important question was not the amount of wealth that should be taken by the community, but the kind of wealth that should rightfully go to the community, because it is a value that the community has created. In recent years, this understanding of the distinctive character of natural opportunity (land) as a factor of production has led to the coining of a new term: Geoism, indicating a philosophy based on the rightful understanding of the place of the Earth (Geo-) in economic life .... Read the whole article
Mason Gaffney: Neo-classical Economics as a Strategem Against Henry George Henry George, in contrast, had a genius
for reconciling-by-synthesizing. Reconciling is far better than merely compromising.
He had a way of taking two problems and composing them into one solution,
as we lay out in detail infra. He took two polar philosophies, collectivism and individualism,
and synthesized a plan to combine the better features, and discard the worse
features, of each. He was a problem-solver, who did not suffer incapacitating
dilemmas and standoffs.
As policy-makers, neo-classical economists present us with "choices" that are too often hard dilemmas. They are in the tradition of Parson Malthus, who preached to the poor that they must choose between sex or food. That was getting right down to grim basics, and is the origin of a well-earned epithet, "the dismal science." Most modern neo-classicals are more subtle (although the fascist wing of the otherwise admirable ecology movement gets progressively less so). Here are some dismal dilemmas that neo-classicals pose for us today. For efficiency we must sacrifice equity; to attract business we must lower taxes so much as to shut the libraries and starve the schools; to prevent inflation we must keep an army of unfortunates unemployed; to make jobs we must chew up land and pollute the world; to motivate workers we must have unequal wealth; to raise productivity we must fire people; and so on. The neo-classical approach is the "trade-off." A
trade-off is a compromise. That has a ring of reasonableness to it, but it
presumes a zero-sum condition. At the level of public policy, such "trade-offs" turn
into paralyzing stand-offs, where no one gets nearly what he wants, or could
get. It overlooks the possibility of a reconciliation,
or synthesis, instead. In such a resolution,
we are not limited by trade-offs between fixed A and B: we get more of both. ...
Thus, George would cut the Gordian knot of modern dilemma-bound economics by raising demand, raising supply, raising incentives, improving equity, freeing up the market, supporting government, fostering capital formation, and paying public debts, all in one simple stroke. It's quite a stroke, enough to leave one breathless. In practice, landowners
faced
with high land taxes often choose
another, even better, course than hiring more workers: they sell the
land to the workers, creating an economy and society of small
entrepreneurs. This writer has documented a strong relationship between
high property tax rates, deconcentration of farmland, and intensity of
land use (Gaffney, 1992).... read the whole essay
|
|
to
email this page to a friend: right click, choose "send"
|
||||||
Wealth
and Want
|
www.wealthandwant.com
|
|||||
... because democracy
alone hasn't yet led to a society in which all can
prosper
|
||||||