WealthandWant theme: Wages

Henry George: The Condition of Labor — An Open Letter to Pope Leo XIII in response to Rerum Novarum (1891)

Since man can live only on land and from land, since land is the reservoir of matter and force from which man’s body itself is taken, and on which he must draw for all that he can produce, does it not irresistibly follow that to give the land in ownership to some men and to deny to others all right to it is to divide mankind into the rich and the poor, the privileged and the helpless? Does it not follow that those who have no rights to the use of land can live only by selling their power to labor to those who own the land? Does it not follow that what the socialists call “the iron law of wages,” what the political economists term “the tendency of wages to a minimum,” must take from the landless masses — the mere laborers, who of themselves have no power to use their labor — all the benefits of any possible advance or improvement that does not alter this unjust division of land? For having no power to employ themselves, they must, either as labor-sellers or as land-renters, compete with one another for permission to labor. This competition with one another of men shut out from God’s inexhaustible storehouse has no limit but starvation, and must ultimately force wages to their lowest point, the point at which life can just be maintained and reproduction carried on.

This is not to say that all wages must fall to this point, but that the wages of that necessarily largest stratum of laborers who have only ordinary knowledge, skill and aptitude must so fall. The wages of special classes, who are fenced off from the pressure of competition by peculiar knowledge, skill or other causes, may remain above that ordinary level. Thus, where the ability to read and write is rare its possession enables a man to obtain higher wages than the ordinary laborer. But as the diffusion of education makes the ability to read and write general this advantage is lost. So when a vocation requires special training or skill, or is made difficult of access by artificial restrictions, the checking of competition tends to keep wages in it at a higher level. But as the progress of invention dispenses with peculiar skill, or artificial restrictions are broken down, these higher wages sink to the ordinary level. And so, it is only so long as they are special that such qualities as industry, prudence and thrift can enable the ordinary laborer to maintain a condition above that which gives a mere living. Where they become general, the law of competition must reduce the earnings or savings of such qualities to the general level — which, land being monopolized and labor helpless, can be only that at which the next lowest point is the cessation of life. ...

I have already referred generally to the defects that attach to all socialistic remedies for the evil condition of labor, but respect for your Holiness dictates that I should speak specifically, even though briefly, of the remedies proposed or suggested by you.

Of these, the widest and strongest are that the state should restrict the hours of labor, the employment of women and children, the unsanitary conditions of workshops, etc. Yet how little may in this way be accomplished.

A strong, absolute ruler might hope by such regulations to alleviate the conditions of chattel slaves. But the tendency of our times is toward democracy, and democratic states are necessarily weaker in paternalism, while in the industrial slavery, growing out of private ownership of land, that prevails in Christendom today, it is not the master who forces the slave to labor, but the slave who urges the master to let him labor. Thus the greatest difficulty in enforcing such regulations comes from those whom they are intended to benefit. It is not, for instance, the masters who make it difficult to enforce restrictions on child labor in factories, but the mothers, who, prompted by poverty, misrepresent the ages of their children even to the masters, and teach the children to misrepresent.

But while in large factories and mines regulations as to hours, ages, etc., though subject to evasion and offering opportunities for extortion and corruption, may be to some extent enforced, how can they have any effect in those far wider branches of industry where the laborer works for himself or for small employers?

All such remedies are of the nature of the remedy for overcrowding that is generally prescribed with them — the restriction under penalty of the number who may occupy a room and the demolition of unsanitary buildings. Since these measures have no tendency to increase house accommodation or to augment ability to pay for it, the overcrowding that is forced back in some places goes on in other places and to a worse degree. All such remedies begin at the wrong end. They are like putting on brake and bit to hold in quietness horses that are being lashed into frenzy; they are like trying to stop a locomotive by holding its wheels instead of shutting off steam; like attempting to cure smallpox by driving back its pustules. Men do not overwork themselves because they like it; it is not in the nature of the mother’s heart to send children to work when they ought to be at play; it is not of choice that laborers will work under dangerous and unsanitary conditions. These things, like overcrowding, come from the sting of poverty. And so long as the poverty of which they are the expression is left untouched, restrictions such as you indorse can have only partial and evanescent results. The cause remaining, repression in one place can only bring out its effects in other places, and the task you assign to the state is as hopeless as to ask it to lower the level of the ocean by bailing out the sea.

Nor can the state cure poverty by regulating wages. It is as much beyond the power of the state to regulate wages as it is to regulate the rates of interest. Usury laws have been tried again and again, but the only effect they have ever had has been to increase what the poorer borrowers must pay, and for the same reasons that all attempts to lower by regulation the price of goods have always resulted merely in increasing them. The general rate of wages is fixed by the ease or difficulty with which labor can obtain access to land, ranging from the full earnings of labor, where land is free, to the least on which laborers can live and reproduce, where land is fully monopolized. Thus, where it has been comparatively easy for laborers to get land, as in the United States and in Australasia, wages have been higher than in Europe and it has been impossible to get European laborers to work there for wages that they would gladly accept at home; while as monopolization goes on under the influence of private property in land, wages tend to fall, and the social conditions of Europe to appear. Thus, under the partial yet substantial recognition of common rights to land, of which I have spoken, the many attempts of the British Parliament to reduce wages by regulation failed utterly. And so, when the institution of private property in land had done its work in England, all attempts of Parliament to raise wages proved unavailing. In the beginning of this century it was even attempted to increase the earnings of laborers by grants in aid of wages. But the only result was to lower commensurately what wages employers paid.

The state could maintain wages above the tendency of the market (for as I have shown labor deprived of land becomes a commodity), only by offering employment to all who wish it; or by lending its sanction to strikes and supporting them with its funds. Thus it is, that the thoroughgoing socialists who want the state to take all industry into its hands are much more logical than those timid socialists who propose that the state should regulate private industry — but only a little.

The same hopelessness attends your suggestion that working-people should be encouraged by the state in obtaining a share of the land. It is evident that by this you mean that, as is now being attempted in Ireland, the state shall buy out large landowners in favor of small ones, establishing what are known as peasant proprietors. Supposing that this can be done even to a considerable extent, what will be accomplished save to substitute a larger privileged class for a smaller privileged class? What will be done for the still larger class that must remain, the laborers of the agricultural districts, the workmen of the towns, the proletarians of the cities? Is it not true, as Professor De Laveleye says, that in such countries as Belgium, where peasant proprietary exists, the tenants, for there still exist tenants, are rack-rented with a mercilessness unknown in Ireland? Is it not true that in such countries as Belgium the condition of the mere laborer is even worse than it is in Great Britain, where large ownerships obtain? And if the state attempts to buy up land for peasant proprietors will not the effect be, what is seen today in Ireland, to increase the market value of land and thus make it more difficult for those not so favored, and for those who will come after, to get land? How, moreover, on the principle which you declare (36), that “to the state the interests of all are equal, whether high or low,” will you justify state aid to one man to buy a bit of land without also insisting on state aid to another man to buy a donkey, to another to buy a shop, to another to buy the tools and materials of a trade — state aid in short to everybody who may be able to make good use of it or thinks that he could? And are you not thus landed in communism — not the communism of the early Christians and of the religious orders, but communism that uses the coercive power of the state to take rightful property by force from those who have, to give to those who have not? For the state has no purse of Fortunatus; the state cannot repeat the miracle of the loaves and fishes; all that the state can give, it must get by some form or other of the taxing power. And whether it gives or lends money, or gives or lends credit, it cannot give to those who have not, without taking from those who have. ...

You assume that the labor question is a question between wage-workers and their employers. But working for wages is not the primary or exclusive occupation of labor. Primarily men work for themselves without the intervention of an employer. And the primary source of wages is in the earnings of labor, the man who works for himself and consumes his own products receiving his wages in the fruits of his labor. Are not fishermen, boatmen, cab-drivers, peddlers, working farmers — all, in short, of the many workers who get their wages directly by the sale of their services or products without the medium of an employer, as much laborers as those who work for the specific wages of an employer? In your consideration of remedies you do not seem even to have thought of them. Yet in reality the laborers who work for themselves are the first to be considered, since what men will be willing to accept from employers depends manifestly on what they can get by working for themselves.

You assume that all employers are rich men, who might raise wages much higher were they not so grasping. But is it not the fact that the great majority of employers are in reality as much pressed by competition as their workmen, many of them constantly on the verge of failure? Such employers could not possibly raise the wages they pay, however they might wish to, unless all others were compelled to do so. ...

See how fully and how beautifully Christ’s life on earth illustrated this law. Entering our earthly life in the weakness of infancy, as it is appointed that all should enter it, he lovingly took what in the natural order is lovingly rendered, the sustenance, secured by labor, that one generation owes to its immediate successors. Arrived at maturity, he earned his own subsistence by that common labor in which the majority of men must and do earn it. Then passing to a higher — to the very highest — sphere of labor, he earned his subsistence by the teaching of moral and spiritual truths, receiving its material wages in the love-offerings of grateful hearers, and not refusing the costly spikenard with which Mary anointed his feet. So, when he chose his disciples, he did not go to landowners or other monopolists who live on the labor of others, but to common laboring-men. And when he called them to a higher sphere of labor and sent them out to teach moral and spiritual truths, he told them to take, without condescension on the one hand or sense of degradation on the other, the loving return for such labor, saying to them that “the laborer is worthy of his hire,” thus showing, what we hold, that all labor does not consist in what is called manual labor, but that whoever helps to add to the material, intellectual, moral or spiritual fullness of life is also a laborer.*

* Nor should it be forgotten that the investigator, the philosopher, the teacher, the artist, the poet, the priest, though not engaged in the production of wealth, are not only engaged in the production of utilities and satisfactions to which the production of wealth is only a means, but by acquiring and diffusing knowledge, stimulating mental powers and elevating the moral sense, may greatly increase the ability to produce wealth. For man does not live by bread alone. . . . He who by any exertion of mind or body adds to the aggregate of enjoyable wealth, increases the sum of human knowledge, or gives to human life higher elevation or greater fullness — he is, in the large meaning of the words, a “producer,” a “working-man,” a “laborer,” and is honestly earning honest wages. But he who without doing aught to make mankind richer, wiser, better, happier, lives on the toil of others — he, no matter by what name of honor he may be called, or how lustily the priests of Mammon may swing their censers before him, is in the last analysis but a beggar-man or a thief. — Protection or Free Trade, pp. 74-75.

In assuming that laborers, even ordinary manual laborers, are naturally poor, you ignore the fact that labor is the producer of wealth, and attribute to the natural law of the Creator an injustice that comes from man’s impious violation of his benevolent intention. In the rudest stage of the arts it is possible, where justice prevails, for all well men to earn a living. With the labor-saving appliances of our time, it should be possible for all to earn much more. And so, in saying that poverty is no disgrace, you convey an unreasonable implication. For poverty ought to be a disgrace, since in a condition of social justice, it would, where unsought from religious motives or unimposed by unavoidable misfortune, imply recklessness or laziness. ...

In the Encyclical however you commend the application to the ordinary relations of life, under normal conditions, of principles that in ethics are only to be tolerated under extraordinary conditions. You are driven to this assertion of false rights by your denial of true rights. The natural right which each man has is not that of demanding employment or wages from another man; but that of employing himself — that of applying by his own labor to the inexhaustible storehouse which the Creator has in the land provided for all men. Were that storehouse open, as by the single tax we would open it, the natural demand for labor would keep pace with the supply, the man who sold labor and the man who bought it would become free exchangers for mutual advantage, and all cause for dispute between workman and employer would be gone. For then, all being free to employ themselves, the mere opportunity to labor would cease to seem a boon; and since no one would work for another for less, all things considered, than he could earn by working for himself, wages would necessarily rise to their full value, and the relations of workman and employer be regulated by mutual interest and convenience.

This is the only way in which they can be satisfactorily regulated.

Your Holiness seems to assume that there is some just rate of wages that employers ought to be willing to pay and that laborers should be content to receive, and to imagine that if this were secured there would be an end of strife. This rate you evidently think of as that which will give working-men a frugal living, and perhaps enable them by hard work and strict economy to lay by a little something.

But how can a just rate of wages be fixed without the “higgling of the market” any more than the just price of corn or pigs or ships or paintings can be so fixed? And would not arbitrary regulation in the one case as in the other check that interplay that most effectively promotes the economical adjustment of productive forces? Why should buyers of labor, any more than buyers of commodities, be called on to pay higher prices than in a free market they are compelled to pay? Why should the sellers of labor be content with anything less than in a free market they can obtain? Why should working-men be content with frugal fare when the world is so rich? Why should they be satisfied with a lifetime of toil and stinting, when the world is so beautiful? Why should not they also desire to gratify the higher instincts, the finer tastes? Why should they be forever content to travel in the steerage when others find the cabin more enjoyable? ... read the whole letter

Rev. A. C. Auchmuty: Gems from George, a themed collection of excerpts from the writings of Henry George (with links to sources)

THE term labor includes all human exertion in the production of wealth, and wages, being that part of the produce which goes to labor, includes all reward for such exertion. There is, therefore, in the politico-economic sense of the term wages no distinction as to the kind of labor, or as to whether its reward is received through an employer or not, but wages means the return received for the exertion of labor, as distinguished from the return received for the use of capital, and the return received by the landholder for the use of land. — Progress & Poverty — Book I, Chapter 2: Wages and Capital: The Meaning of the Terms

I AM aware that the theorem that wages are drawn from capital is one of the most fundamental and apparently best settled of current political economy, and that it has been accepted as axiomatic by all the great thinkers who have devoted their powers to the elucidation of the science. Nevertheless, I think it can be demonstrated to be a fundamental error — the fruitful parent of a long series of errors, which vitiate most important practical conclusions. — Progress & Poverty — Book I, Chapter 3: Wages and Capital: Wages not drawn from capital, but produced by the labor

THE fundamental truth, that in all economic reasoning must be firmly grasped and never let go, is that society in its most highly developed form is but an elaboration of society in its rudest beginnings, and that principles obvious in the simpler relations of men are merely disguised and not abrogated or reversed by the more intricate relations that result from the division of labor and the use of complex tools and methods. . . . And so, if we reduce to their lowest terms all the complex operations of modern production, we see that each individual who takes part in this infinitely subdivided and intricate network of production and exchange is really doing what the primeval man did when he climbed the trees for fruit or followed the receding tide for shellfish — endeavoring to obtain from nature by the exertion of his powers the satisfaction of his desires. If we keep this firmly in mind, if we look upon production as a whole — as the co-operation of all embraced in any of its great groups to satisfy the various desires of each, we plainly see that the reward each obtains for his exertions comes as truly and as directly from nature as the result of that exertion, as did that of the first man.

To illustrate: In the simplest state of which we can conceive, each man digs his own bait and catches his own fish. The advantage of the division of labor soon becomes apparent, and one digs bait while the others fish. Yet evidently the one who digs bait is in reality doing as much toward the catching of fish as any of those who actually take the fish. So when the advantages of canoes are discovered, and instead of all going a-fishing, one stays behind and makes and repairs canoes, the canoe-maker is in reality devoting his labor to the taking of fish as much as the actual fishermen, and the fish which he eats at night when the fishermen come home, are as truly the product of his labor as of theirs. And thus when the division of labor is fairly inaugurated, and instead of each attempting to satisfy all of his wants by direct resort to nature, one fishes, another hunts, a third picks berries, a fourth gathers fruit, a fifth makes tools, a sixth builds huts, and a seventh prepares clothing — each one is, to the extent he exchanges the direct product of his own labor for the direct product of the labor of others, really applying his own labor to the production of the things he uses — is in effect satisfying his particular desires by the exertion of his particular powers; that is to say, what he receives he in reality produces. — Progress & Poverty — Book I, Chapter 1: Wages and Capital: The Current Doctrine of Wages — Its Insufficiency

How the Worker Creates His Wages

THE laborer who receives his wages in money (coined or printed, it may be, before his labor commenced) really receives in return for the addition his labor has made to the general stock of wealth, a draft upon that general stock, which he may utilize in any particular form of wealth that will best satisfy his desires; and neither the money, which is but the draft, nor the particular form of wealth which he uses it to call for, represents advances of capital for his maintenance, but on the contrary represents the wealth, or a portion of the wealth, his labor has already added to the general stock. — Progress & Poverty — Book I, Chapter 1: Wages and Capital: The Current Doctrine of Wages — Its Insufficiency

THE miner who, two thousand feet underground in the heart of the Comstock, is digging out silver ore, is in effect; by virtue of a thousand exchanges, harvesting crops in valleys five thousand feet nearer the earth's center; chasing the whale through Arctic icefields; plucking tobacco leaves in Virginia; picking coffee berries in Honduras; cutting sugar cane on the Hawaiian Islands; gathering cotton in Georgia or weaving it in Manchester or Lowell; making quaint wooden toys for his children in the Hartz Mountains; or plucking amid the green and gold of Los Angeles orchards the oranges which, when his shift is relieved, he will take home to his sick wife. The wages which he receives on Saturday night at the mouth of the shaft, what are they but the certificate to all the world that he has done these things — the primary exchange in the long series which transmutes his labor into the things he has really been laboring for? — Progress & Poverty — Book I, Chapter 1: Wages and Capital: The Current Doctrine of Wages — Its Insufficiency

LABOR always precedes wages. This is as universally true of wages received by the laborer from an employer as it is of wages taken directly by the laborer who is his own employee. In the one class of cases as in the other, reward is conditioned upon exertion. Paid sometimes by the day, oftener by the week or month, occasionally by the year, and in many branches of production by the piece, the payment of wages by an employer to an employee always implies the previous rendering of labor by the employee for the benefit of the employer, for the few cases in which advance payments are made for personal services are evidently referable either to charity or to guarantee and purchase. — Progress & Poverty — Book I, Chapter 3: Wages and Capital: Wages not drawn from capital, but produced by the labor

THE payment of wages always implies the previous rendering of labor. Now, what does the rendering of labor in production imply? Evidently the production of wealth, which, if it is to be exchanged or used in production, is capital. Therefore, the payment of capital in wages pre-supposes a production of capital by the labor for which the wages are paid. And as the employer generally makes a profit, the payment of wages is, so far as he is concerned, but the return to the laborer of a portion of the capital he has received from the labor. So far as the employee is concerned, it is but the receipt of a portion of the capital his labor has previously produced. As the value paid in the wages is thus exchanged for a value brought into being by the labor, how can it be said that wages are drawn from capital or advanced by capital? As in the exchange of labor for wages the employer always gets the capital created by the labor before he pays out capital in the wages, at what point is his capital lessened even temporarily? — Progress & Poverty — Book I, Chapter 3: Wages and Capital: Wages not drawn from capital, but produced by the labor

To recapitulate: The man who works for himself gets his wages in the things he produces, as he produces them, and exchanges this value into another form whenever he sells the produce. The man who works for another for stipulated wages in money, works under a contract of exchange. He also creates his wages as he renders his labor, but he does not get them except at stated times, in stated amounts and in a different form. In performing the labor he is advancing in exchange; when he gets his wages the exchange is completed. During the time he is earning the wages he is advancing capital to his employer, but at no time, unless wages are paid before work is done, is the employer advancing capital to him. Whether the employer who receives this produce in exchange for the wages, immediately re-exchanges it, or keeps it for awhile, no more alters the character of the transaction than does the final disposition of the product made by the ultimate receiver, who may, perhaps, be in another quarter of the globe and at the end of a series of exchanges numbering hundreds. — Progress & Poverty — Book I, Chapter 3: Wages and Capital: Wages not drawn from capital, but produced by the labor

THE fundamental principle of human action — the law that is to political economy what the law of gravitation is to physics — is that men seek to gratify their desires with the least exertion. . . . Now, under this principle, what, in conditions of freedom, will be the terms at which one man can hire others to work for him? Evidently, they will be fixed by what the men could make if laboring for themselves. The principle which will prevent him from having to give anything above this except what is necessary to induce the change, will also prevent them from taking less. Did they demand more, the competition of others would prevent them from getting employment. Did he offer less, none would accept the terms, as they could obtain greater results by working for themselves. Thus, although the employer wishes to pay as little as possible, and the employee to receive as much as possible, wages will be fixed by the value or produce of such labor to the laborers themselves. If wages are temporarily carried either above or below this line, a tendency to carry them back at once arises. — Progress & Poverty Book III, Chapter 6 — The Laws of Distribution: Wages and the Law of Wages

THE effect of all the circumstances which give rise to the differences between wages in different occupations may be included as supply and demand, and it is perfectly correct to say that the wages in different occupations will vary relatively according to differences in the supply and demand of labor — meaning by demand the call which the community as a whole makes for services of the particular kind, and by supply the relative amount of labor which, under the existing conditions, can be determined to the performance of those particular services. But though this is true as to the relative differences of wages, when it is said, as is commonly said, that the general rate of wages is determined by supply and demand, the words are meaningless. For supply and demand are but relative terms. The supply of labor can only mean labor offered in exchange for labor, or the produce of labor, and the demand for labor can only mean labor or the produce of labor offered in exchange for labor. Supply is thus demand, and demand supply, and in the whole community, one must be coextensive with the other. — Progress & Poverty Book III, Chapter 6 — The Laws of Distribution: Wages and the Law of Wages

THUS, although they may from time to time alter in relation to each other, as the circumstances which determine relative levels change, yet it is evident that wages in all strata must ultimately depend upon wages in the lowest and widest stratum — the general rate of wages rising or falling as these rise or fall.

Now, the primary and fundamental occupations, upon which, so to speak, all others are built up, are evidently those which procure wealth directly from nature; hence the law of wages in them must be the general law of wages. And, as wages in such occupations clearly depend upon what labor can produce at the lowest point of natural productiveness to which it is habitually applied; therefore, wages generally depend upon the margin of cultivation, or, to put it more exactly, upon the highest point of natural productiveness to which labor is free to apply itself without the payment of rent. — Progress & Poverty Book III, Chapter 6 — The Laws of Distribution: Wages and the Law of Wages

LABOR may be likened to a man who as he carries home his earnings is waylaid by a series of robbers. One demands this much, and another that much, but last of all stands one who demands all that is left, save just enough to enable the victim to maintain life and come forth next day to work. So long as this last robber remains, what will it benefit such a man to drive off any or all of the other robbers?

Such is the situation of labor today throughout the civilized world. And the robber that takes all that is left, is private property in land. Improvement, no matter how great, and reform, no matter how beneficial in itself, cannot help that class who, deprived of all right to the use of the material elements, have only the power to labor — a power as useless in itself as a sail without wind, a pump without water, or a saddle without a horse. — Protection or Free Trade — Chapter 25: The Robber That Takes All That Is Left - econlib | abridged

THERE is but one way to remove an evil — and that is, to remove its cause. Poverty deepens as wealth increases, and wages are forced down while productive power grows, because land, which is the source of all wealth and the field of all labor, is monopolized. To extirpate poverty, to make wages what justice commands they should be, the full earnings of the laborer, we must therefore substitute for the individual ownership of land a common ownership. Nothing else will go to the cause of the evil — in nothing else is there the slightest hope. — Progress & Poverty — Book VI, Chapter 2, The Remedy: The True Remedy

AND will not the community gain by thus refusing to kill the goose that lays the golden eggs; by thus refraining from muzzling the ox that treadeth out the corn; by thus leaving to industry, and thrift, and skill, their natural reward, full and unimpaired? For there is to the community also a natural reward. The law of society is, each for all, as well as all for each. No one can keep to himself the good he may do, any more than he can keep the bad. Every productive enterprise, besides its return to those who undertake it, yields collateral advantages to others. If a man plant a fruit tree, his gain is that he gathers the fruit in its time and season. But in addition to his gain, there is a gain to the whole community. Others than the owner are benefited by the increased supply of fruit; the birds which it shelters fly far and wide; the rain which it helps to attract falls not alone on his field; and, even to the eye which rests upon it from a distance, it brings a sense of beauty. And so with everything else. The building of a house, a factory, a ship, or a railroad, benefits others besides those who get the direct profits. Nature laughs at a miser. He is like the squirrel who buries his nuts and refrains from digging them up again. Lo! they sprout and grow into trees. In fine linen, steeped in costly spices, the mummy is laid away. Thousands and thousands of years thereafter, the Bedouin cooks his food by a fire of its encasings, it generates the steam by which the traveler is whirled on his way, or it passes into far-off lands to gratify the curiosity of another race. The bee fills the hollow tree with honey, and along comes the bear or the man. — Progress & Poverty — Book IX, Chapter 1, Effects of the Remedy: Of the Effect upon the Production of Wealth

CONSIDER the effect of such a change upon the labor market. Competition would no longer be one-sided, as now. Instead of laborers competing with each other for employment, and in their competition cutting down wages to the point of bare subsistence, employers would everywhere be competing for laborers, and wages would rise to the fair earnings of labor. For into the labor market would have entered the greatest of all competitors for the employment of labor, a competitor whose demand cannot be satisfied until want is satisfied — the demand of labor itself. The employers of labor would not have merely to bid against other employers, all feeling the stimulus of greater trade and increased profits, but against the ability of laborers to become their own employers upon the natural opportunities freely opened to them by the tax which prevented monopolization. — Progress & Poverty — Book IX, Chapter 1, Effects of the Remedy: Of the Effect upon the Production of Wealth

SHORT-SIGHTED is the philosophy which counts on selfishness as the master motive of human action. It is blind to facts of which the world is full. It sees not the present, and reads not the past aright. If you would move men to action, to what shall you appeal? Not to their pockets, but to their patriotism; not to selfishness but to sympathy. Self-interest is, as it were, a mechanical force — potent, it is true; capable of large and wide results. But there is in human nature what may be likened to a chemical force; which melts and fuses and overwhelms; to which nothing seems impossible. "All that a man hath will he give for his life" — that is self-interest. But in loyalty to higher impulses men will give even life.

It is not selfishness that enriches the annals of every people with heroes and saints. It is not selfishness that on every page of the world's history; bursts out in sudden splendor of noble deeds or sheds the soft radiance of benignant lives. It was not selfishness that turned Gautama's back to his royal home or bade the Maid of Orleans lift the sword from the altar; that held the Three Hundred in the Pass of Thermopylae, or gathered into Winkelried's bosom the sheaf of spears; that chained Vincent de Paul to the bench of the galley, or brought little starving children during the Indian famine tottering to the relief stations with yet weaker starvelings in their arms! Call it religion, patriotism, sympathy, the enthusiasm for humanity, or the love of God — give it what name you will; there is yet a force which overcomes and drives out selfishness; a force which is the electricity of the moral universe; a force beside which all others are weak. Everywhere that men have lived it has shown its power, and today, as ever, the world is full of it. To be pitied is the man who has never seen and never felt it. Look around! among common men and women, amid the care and the struggle of daily life in the jar of the noisy street and amid the squalor where want hides — everywhere, and there is the darkness lighted with the tremulous play of its lambent flames. He who has not seen it has walked with shut eyes. He who looks may see, as says Plutarch, that "the soul has a principle of kindness in itself, and is born to love, as well as to perceive, think, or remember."

And this force of forces — that now goes to waste or assumes perverted forms — we may use for the strengthening and building up and ennobling of society, if we but will, just as we now use physical forces that once seemed but powers of destruction. All we have to do is but to give it freedom and scope. — Progress & Poverty — Book IX, Chapter 4— Effects of the Remedy: Of the Changes that Would be Wrought in Social Organization and Social Life

THE efficiency of labor always increases with the habitual wages of labor — for high wages mean increased self-respect, intelligence, hope and energy. Man is not a machine, that will do so much and no more; he is not an animal, whose powers may reach thus far and no further. It is mind, not muscle, which is the great agent of production. The physical power evolved in the human frame is one of the weakest of forces, but for the human intelligence the resistless currents of nature flow, and matter becomes plastic to the human will. To increase the comforts, and leisure, and independence of the masses is to increase their intelligence; it is to bring the brain to the aid of the hand; it is to engage in the common work of life the faculty which measures the animalcule and traces the orbits of the stars! — Progress & Poverty — Book IX, Chapter 2: Effects of the Remedy, upon distribution and thence on production

... go to "Gems from George"

Louis Post: Outlines of Louis F. Post's Lectures, with Illustrative Notes and Charts (1894)

b. Normal Effect of Social Progress upon Wages and Rent

In the foregoing charts the effect of social growth is ignored, it being assumed that the given expenditure of labor force does not become more productive.93 Let us now try to illustrate that effect, upon the supposition that social growth increases the productive power of the given expenditure of labor force as applied to the first closed space, to 100; as applied to the second, to 50; as applied to the third, to 10; as applied to the fourth, to 3, and as applied to the open space, to 1. 94 If there were no increased demand for land the chart would then be like this: [chart]

93. "The effect of increasing population upon the distribution of wealth is to increase rent .. . in two ways: First, By lowering the margin of cultivation. Second, By bringing out in land special capabilities otherwise latent, and by attaching special capabilities to particular lands.

"I am disposed to think that the latter mode, to which little attention has been given by political economists, is really the more important." — Progress and Poverty, book iv, ch. iii.

"When we have inquired what it is that marks off land from those material things which we regard as products of the land, we shall find that the fundamental attribute of land is its extension. The right to use a piece of land gives command over a certain space — a certain part of the earth's surface. The area of the earth is fixed; the geometric relations in which any particular part of it stands to other parts are fixed. Man has no control over them; they are wholly unaffected by demand; they have no cost of production; there is no supply price at which they can be produced.

"The use of a certain area of the earth's surface is a primary condition of anything that man can do; it gives him room for his own actions, with the enjoyment of the heat and the light, the air and the rain which nature assigns to that area; and it determines his distance from, and in great measure his relations to, other things and other persons. We shall find that it is this property of land, which, though as yet insufficient prominence has been given to it, is the ultimate cause of the distinction which all writers are compelled to make between land and other things." — Marshall's Prin., book iv, ch. ii, sec. i.

94. Of course social growth does not go on in this regular way; the charts are merely illustrative. They are intended to illustrate the universal fact that as any land becomes a center of trade or other social relationship its value rises.

Though Rent is now increased, so are Wages. Both benefit by social growth. But if we consider the fact that increase in the productive power of labor increases demand for land we shall see that the tendency of Wages (as a proportion of product if not as an absolute quantity) is downward, while that of Rent is upward. 95 And this conclusion is confirmed by observation. 96

95. "Perhaps it may be well to remind the reader, before closing this chapter, of what has been before stated — that I am using the word wages not in the sense of a quantity, but in the sense of a proportion. When I say that wages fall as rent rises, I do not mean that the quantity of wealth obtained by laborers as wages is necessarily less, but that the proportion which it bears to the whole produce is necessarily less. The proportion may diminish while the quantity remains the same or increases." — Progress and Poverty, book iii, ch. vi.

96. The condition illustrated in the last chart would be the result of social growth if all land but that which was in full use were common land. The discovery of mines, the development of cities and towns, and the construction of railroads, the irrigation of and places, improvements in government, all the infinite conveniences and laborsaving devices that civilization generates, would tend to abolish poverty by increasing the compensation of labor, and making it impossible for any man to be in involuntary idleness, or underpaid, so long as mankind was in want. If demand for land increased, Wages would tend to fall as the demand brought lower grades of land into use; but they would at the same time tend to rise as social growth added new capabilities to the lower grades. And it is altogether probable that, while progress would lower Wages as a proportion of total product, it would increase them as an absolute quantity. ...

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 fell.

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. ...

Q29. Under the single tax could employers cut wages to the starvation point?
A. No. Under the single tax employers would be constantly bidding for workmen, instead of workmen constantly bidding for employers as is the case now. It is the "oversupply" of labor that makes starvation wages possible, and the single tax would abolish that; not by reducing the supply of labor, the Malthusian device, but by allowing the effective demand for labor to freely increase.

Q34. Would the single tax benefit the debtor class? If so, how?
A. It would. By abolishing the monopoly of opportunities to work, and thus enabling debtors to earn enough, while decently supporting themselves, to honestly pay their debts. The debtor class deserves sympathy, not because it is in debt, but because it is forced by existing institutions to go into debt in order to work, and is then so hampered and harried by the same institutions as to make orderly repayment impossible and bankruptcy inevitable.

Q37. What is the value of a man's labor?
A. What he can get for it under competition in a free market. There is no other test.

Q42. Does not the growth of a community increase the value of other things as well as of land? For example, does it not add to the value of the services of professional men, or of any other business that is dependent upon the presence and growth of the community, as truly as it does to the value of land?
A. Granted that the growth of a community primarily tends to increase profits, the increased profits tend in turn to attract men there to share them. This intensifies competition and tends to lower profits. At the same time it increases demand for land and tends to enhance the value of that. It therefore cannot be said that the growth of a community finally increases the value of other things as well as of land. In fact it does not. Appropriate houses in cities are no dearer than appropriate houses in the country, differences in cost of production being allowed for. And although some professional men get very high wages in thickly populated cities, the average comfort of professional men in cities is no higher than in the country, if as high. Moreover, even if labor values as well as land values were increased by communal growth, it must never be forgotten that labor values must always be worked for by the individual, whereas land values are never worked for by the individual. A lawyer may command enormous fees, but he gets no fee at all unless he works for it; but when land commands enormous rent the owner gets it without doing the slightest work. ... read the book

Charles B. Fillebrown: A Catechism of Natural Taxation, from Principles of Natural Taxation (1917)

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.

Q30. How would the single tax increase wages?
A. By gradually transferring to wages that portion of the current wealth that now flows to privilege. In other words, it would widen and deepen the channel of wages by enlarging opportunities for labor, and by increasing the purchasing power of nominal wages through reduction of prices. On the other hand it would narrow the channel of privilege by making the man who has a privilege pay for it.

Q31. How can this transfer be effected?
A. By the taxation of privilege.

Q32. How much ultimately may wages be thus increased?
A. Fifty percent would be a low estimate.

Q33. What are fair prices and fair wages?
A. Prices unenhanced by privilege, and wages undiminished by taxation.

Q58. What expected result of the single tax needs studious emphasis?
A. That it would unlock the land to labor at its present value for use, instead of locking out labor from the land by a prohibitive price based upon the future value for use. ... read the whole article

Albert Jay Nock — Henry George: Unorthodox American

Louis Post: Outlines of Louis F. Post's Lectures, with Illustrative Notes and Charts (1894)

3. THE DISTRIBUTION OF WEALTH

The chart on the following page displays the fundamental principle of Production, which we considered at the beginning, and also the fundamental principle of Distribution, which is yet to be considered. In the development of the latter will be found the explanation of the divorce in the civilized state of Labor from Land: [chart]

This chart reminds us that Labor (human exertion), by application to Land (natural materials and forces external to man), produces Wealth (the generic term for all those things that tend to satisfy the material Wants of man), and so tends to abolish poverty. No man's poverty can be abolished in any other way, unless it be by gifts, or vulgar robbery, or legalized spoils.

The chart shows also that Wealth distributes ultimately in Wages 82 (a fund made up of the aggregate of the earnings of individual laborers), which corresponds to Labor; and Rent 83 (a fund made up of the aggregate premiums for specially desirable locations), which corresponds to Land.84

82. "What is paid for labor of any kind is called wages. We are apt to speak of the payment given to the common day laborer only as wages; and we give finer names to the payments which are made for some other kinds of services. Thus we speak of the doctor's or the lawyer's fee; of the judge's salary; of the teacher's income; of the merchant's profit; of the banker's interest, and of the professor's emoluments. They are all in reality only payments for labor of different kinds, or for different results of labor, — that is, they are all wages." — Dick's Outlines, p. 23

"Wages is what goes to pay for all the trouble of labor." — Jevons's Primer, sec. 39

"His [the manager's] share is called the wages of superintendence, and although usually much larger than the share of a common laborer, it is really wages of the same nature." — Id., sec. 41.

"The common meaning of the word wages is the compensation paid to a hired person for manual labor. But in political economy the word wages has a much wider meaning, and includes all returns for exertion. For, as political economists explain, the three agents or factors in production are land, labor, and capital, and that part of the produce which goes to the second of these factors is styled by them wages. . . It is important to keep this in mind. For in the standard economic works this sense of the term wages is recognized with greater or less clearness only to be subsequently ignored." — Progress and Poverty, book i, ck. ii.

83. Rent "is what is paid for the use of a natural agent, whether land, or beds of minerals, or rivers, or lakes. The rent of a house or factory is, therefore, not all rent in our meaning of the word." — Jevons's Primer, sec. 40.

"The term rent in its economic sense . . . differs in meaning from the word rent as commonly used. In some respects this economic meaning is narrower than the common meaning; in other respects it is wider.

"It is narrower in this: In common speech, we apply the word rent to payments for the use of buildings, machinery, fixtures, etc., as well as to payments for the use of land or other natural capabilities; and in speaking of the rent of a house or the rent of a farm, we do not separate the price for the use of the improvements from the price for the use of the bare land. But in the economic meaning of rent, payments for the use of any of the products of human exertion are excluded, and of the lumped payments for the use of houses, farms, etc., only that part is rent which constitutes the consideration for the use of the land — that part paid for the use of buildings or other improvements being properly interest, as it is a consideration for the use of capital.

"It is wider in this: In common speech we only speak of rent when owner and user are distinct persons. But in the economic sense there is also rent where the same person is both owner and user. Where owner and user are thus the same person, whatever part of his income he might obtain by letting the land to another is rent, while the return for his labor and capital are that part of his income which they would yield him did he hire instead of owning the land. Rent is also expressed in a selling price. When land is purchased, the payment which is made for the ownership, or right to perpetual use, is rent commuted or capitalized. If I buy land for a small price and hold it until I can sell it for a large price, I have become rich, not by wages for my labor or by interest upon my capital, but by the increase of rent.

"Rent, in short, is the share in the wealth produced which the exclusive right to the use of natural capabilities gives to the owner. Wherever land has an exchange value there is rent in the economic meaning of the term. Wherever land having a value is used, either by owner or hirer, there is rent actual; wherever it is not used, but still has a value, there is rent potential. It is this capacity of yielding rent which gives value to land. Until its ownership will confer some advantage, land has no value." — Progress and Poverty, book iii, chap ii

84. "The primary division of wealth in distribution is dual, not tripartite. Capital is but a form of labor, and its distinction from labor is in reality but a subdivision, just as the division of labor into skilled and unskilled would be. In our examination we have reached the same point as would have been attained had we simply treated capital as a form of labor, and sought the law which divides the produce between rent and wages; that is to say, between the possessors of the two factors, natural substances and powers, and human exertion — which two factors by their union produce all wealth." — Progress and Poverty, book iii, ch. v.

Care must be taken not to confuse the hire of a house, commonly and legally termed "rent," with economic Rent. House rent is really Wages; it is compensation for the labor of house building. But economic Rent is not compensation for anything; it is simply the premiums for advantages of location. ...

Q25. What good would the single tax do to the poor? and how?
A. By constantly keeping the demand for labor above the supply it would enable them to abolish their poverty.

Q27. Would working people, whose savings are in savings banks or insurance companies which own land or have mortgages upon land, lose by the shrinkage in land values?
A. Not if the companies were managed intelligently. Well managed companies would shift their investments as they observed the persistent decline of land values. They would do it even as soon as conditions appeared which would naturally cause land values to shrink. But working people could well afford to give all their savings for the permanent employment and high wages that the single tax would bring about. It is not working people but idle people who would lose anything by the single tax.

wealthandwant editorial comment: Post may be confusing land prices and land value. Land value will continue to rise; land price will fall, as the land tax is capitalized into the price.

... read the book

Henry Ford Talks About War and Your Future - 1942 interview

Henry George: The Crime of Poverty (1885 speech)

... Why, in the rudest state of society in the most primitive state of the arts the labour of the natural bread-winner will suffice to provide a living for himself and for those who are dependent upon him. Amid all our inventions there are large bodies of men who cannot do this. What is the most astonishing thing in our civilisation? Why, the most astonishing thing to those Sioux chiefs who were recently brought from the Far West and taken through our manufacturing cities in the East, was not the marvellous inventions that enabled machinery to act almost as if it had intellect; it was not the growth of our cities; it was not the speed with which the railway car whirled along; it was not the telegraph or the telephone that most astonished them; but the fact that amid this marvellous development of productive power they found little children at work. And astonishing that ought to be to us; a most astounding thing!

Talk about improvement in the condition of the working classes, when the facts are that a larger and larger proportion of women and children are forced to toil. Why, I am told that, even here in your own city, there are children of thirteen and fourteen working in factories. In Detroit, according to the report of the Michigan Bureau of Labour Statistics, one half of the children of school age do not go to school. In New Jersey, the report made to the legislature discloses an amount of misery and ignorance that is appalling. Children are growing up there, compelled to monotonous toil when they ought to be at play, children who do not know how to play; children who have been so long accustomed to work that they have become used to it; children growing up in such ignorance that they do not know what country New Jersey is in, that they never heard of George Washington, that some of them think Europe is in New York. Such facts are appalling; they mean that the very foundations of the Republic are being sapped. The dangerous man is not the man who tries to excite discontent; the dangerous man is the man who says that all is as it ought to be. Such a state of things cannot continue; such tendencies as we see at work here cannot go on without bringing at last an overwhelming crash. ...

We talk about over-production. How can there be such a thing as over-production while people want? All these things that are said to be over-produced are desired by many people. Why do they not get them? They do not get them because they have not the means to buy them; not that they do not want them. Why have not they the means to buy them? They earn too little. When the great masses of men have to work for an average of $1.40 a day, it is no wonder that great quantities of goods cannot be sold.

Now why is it that men have to work for such low wages? Because if they were to demand higher wages there are plenty of unemployed men ready to step into their places. It is this mass of unemployed men who compel that fierce competition that drives wages down to the point of bare subsistence. Why is it that there are men who cannot get employment? Did you ever think what a strange thing it is that men cannot find employment? Adam had no difficulty in finding employment; neither had Robinson Crusoe; the finding of employment was the last thing that troubled them.

If men cannot find an employer, why cannot they employ themselves? Simply because they are shut out from the element on which human labour can alone be exerted. Men are compelled to compete with each other for the wages of an employer, because they have been robbed of the natural opportunities of employing themselves; because they cannot find a piece of God's world on which to work without paving some other human creature for the privilege. ... read the whole speech

Henry George: Thou Shalt Not Steal (1887 speech)

The relation of employer and employed is a relation of convenience. It is not one imposed by the natural order. People are brought into the world with the power to employ themselves, and they can employ themselves wherever the natural opportunities for employment are not shut up from them.

People do not have a natural right to demand employment of another, but they have a natural right, an inalienable right, a right given by their Creator, to demand opportunity to employ themselves. And whenever that right is acknowledged, whenever the people who want to go to work can find natural opportunities to work upon, then there will be as much competition among employers who are anxious to get people to work for them, as there will be among people who are anxious to get work.

Wages will rise in every vocation to the true rate of wages — the full, honest earnings of labor. That done, with this ever increasing social fund to draw upon, poverty will be abolished, and in a little while will come to be looked upon — as we are now beginning to look upon slavery — as the relic of a darker and more ignorant age. ... read the whole article

Henry George: The Wages of Labor

The organisation of man is such, his relations to the world in which he is placed are such – that is to say, the immutable laws of God are such that it is beyond the power of human ingenuity to devise any way by which the evils born of the injustice that robs men of their birthright can be removed otherwise than by opening to all the bounty that God has provided for all!

Since man can live only on land and from land since land is the reservoir of matter and force from which man’s body itself is taken, and on which he must draw for all that he can produce – does it not irresistibly follow that to give the land in ownership to some men and to deny to others all right to it is to divide mankind into the rich and the poor, the privileged and the helpless?

Does it not follow that those who have no rights to the use of land can live only by selling their labor to those who own the land?

Does it not follow that what the Socialists call “the iron law of wages,” what the political economists term “the tendency of wages to a minimum,” must take from the landless mass of mere laborers – who of themselves have no power to use their labor – the benefits of any advance or improvement that does not alter this unjust division of land?

Having no Power to employ themselves, they must, either as labor-sellers or land-renters, compete with one another for permission to labor; and this competition with one another of men shut out from God’s inexhaustible storehouse, must ultimately force wages to their lowest point, the point at which life can just be maintained.

This is not to say that all wages must fall to this point, but that the wages of that necessarily largest stratum of laborers who have only ordinary knowledge, skill, and aptitude, must so fall. The wages of special classes, who are fenced off from the pressure of competition by peculiar knowledge, skill, or other causes, may remain above that ordinary level.

Thus, where the ability to read and write is rare its possession enables a man to obtain higher wages than the ordinary laborer. But as the diffusion of education makes the ability to read and write general, this advantage is lost. So, when a vocation requires special training or skill, or is made difficult of access by artificial restrictions, the checking of competition tends to keep wages in it at a higher level. But as the progress of invention dispenses with peculiar skill, or artificial restrictions are broken dawn, these higher wages sink to the ordinary level. And so, it is only so long as they are special that such qualities as industry, prudence, and thrift can enable the ordinary laborer to maintain a condition above that which gives a mere living. Where they become general, the law of competition must eventually reduce the earnings or savings of such qualities to the general level.

Land being necessary to life and labor, where private property in land has divided society into a landowning class and a landless class, there is no possible invention or improvement, whether it be industrial, social, or moral, which, so long as it does not affect the ownership of land can prevent poverty or relieve the general conditions of mere laborers.

For, whether the effect of any invention or improvement be to increase what labor can produce or to decrease what is required to support the laborer, it can, so soon as it becomes general, result only in increasing the income of the owners of land, without benefiting the mere laborers. ...

Nor can the State cure poverty by regulating wages. It is as much beyond the power of the State to regulate wages as it is to regulate the rates of interest. Usury laws have been tried again and again, but the only effect they have ever had has been to increase what the poorer borrowers must pay, and for the same reasons that all attempts to lower by regulation the price of goods have always resulted merely in increasing their price.

The general rate of wages is fixed by the ease or difficulty with which labor can obtain access to land, ranging from the full earnings of labor, where land is free; to the least on which laborers can live and reproduce, where land is fully monopolised. ...

It is often assumed that the labor question is a question between wage-workers and their employers; but working for an employer is not the primary or exclusive occupation of labor. Primarily men work for themselves without the intervention of an employer. And the primary source of wages is in the earnings of labor, the man who works for himself and consumes his own products receiving his wages in the fruits of his labor.

Are not fishermen, boatmen, cab-drivers, peddlers, working farmers – in short, all the many workers who get their wages directly by the sale of their services or products without the medium of an employer – as much laborers as those who work for the specific wages of an employer?

In considering remedies these workers are seldom thought of. Yet in reality the laborers who work for themselves should be first considered, since what men will be willing to accept from employers depends manifestly on what they can get by working for themselves.

It is assumed that all employers are rich men, who might raise wages much higher were they not so grasping. But is it not the fact that the great majority of employers are as much pressed by competition as their workmen – many of them constantly on the verge of failure? Such employers could not raise the wages they pay, however they might wish to, unless all others were compelled to do so. ...

The natural right which each man has is not that of demanding employment or wages from another man, but that of employing himself! That of applying his own labor to the inexhaustible storehouse which the Creator has in the land provided far all men!

Were that storehouse open – as we would open it – the demand for labor would keep pace with the supply, the man who sold labor and the man who bought it would become free exchangers for mutual advantage, and all cause for dispute between workman and employer would be gone.

Then, all being free to employ themselves, the mere opportunity to labor would cease to seem a boon; and since no one would work for another for less, all things considered; than he could earn by working for himself, wages would necessarily rise to their full value, and the relations of workman and employer be regulated by mutual interest and convenience.

This is the only way in which they can be satisfactorily regulated!

It is often assumed that there is some just rate of wages that employers ought to be willing to pay and that laborers should be content to receive; and it is imagined that if this were secured there would be an end of strife. This rate is thought of as that which will give workingmen a frugal living, and perhaps enable them by hard work and strict economy to lay by a little something.

But how can a just rate of wages be fixed without the “niggling of the market,” any more than the just price of corn, or pigs, or ships, or paintings can be so fixed? And would not arbitrary regulation in the one case as in the other check that interplay that most effectively promotes the economical adjustment of productive forces?

Why should buyers of labor, any more than buyers of commodities, be called on to pay higher prices than in a free market they are compelled to pay? Why should the sellers of labor be content with anything less than in a free market they can obtain?

Why should working-men be content with frugal fare when the world is so rich? Why should they be satisfied with a lifetime of toil and stinting when the world is so beautiful? Why should not they also desire to gratify the higher instincts, the finer tastes? Why should they be for ever content to travel in the steerage when others find the cabin more enjoyable? ... read the whole article

Henry George: The Great Debate: Single Tax vs Social Democracy (1889)

The cause of industrial depressions is not too much production, but it is the speculative increase in the value of land, and throwing idle men back to compete with each other for work. (Applause.) That is the cause. (Hear, hear.)

Henry George: Progress & Poverty: The Current Doctrine of Wages — Its Insufficiency

Winston Churchill: The People's Land

The drag on enterprise It is monopoly which is the keynote, and where monopoly prevails, the greater the injury to society the greater the reward of the monopolist will be. See how all this evil process strikes at every form of industrial activity.

The municipality, wishing for broader streets, better houses, more healthy, decent, scientifically planned towns, is made to pay, and is made to pay in exact proportion, or to a very great extent in proportion, as it has exerted itself in the past to make improvements. The more it has improved the town, the more it has increased the land value, and the more it will have to pay for any land it may wish to acquire.
The manufacturer proposing to start a new industry, proposing to erect a great factory offering employment to thousands of hands, is made to pay such a price for his land that the purchase price hangs round the neck of his whole business, hampering his competitive power in every market, clogging him far more than any foreign tariff in his export competition, and the land values strike down through the profits of the manufacturer on to the wages of the workman.
The railway company wishing to build a new line finds that the price of land which yesterday was only rated at agricultural value has risen to a prohibitive figure the moment it was known that the new line was projected, and either the railway is not built or, if it is, is built only on terms which largely transfer to the landowner the profits which are due to the shareholders and the advantages which should have accrued to the traveling public. ... Read the whole piece

Patrick Edward Dove, quoted by James Dundas White in a pamphlet entitled "Land-Value Policy"

"Political economists have insisted much on the small matters that affect the value of labor. By far the most important is the mode in which the land is distributed. Wherever there is a free soil, labor maintains its value. Wherever the soil is in the hands of a few proprietors, or tied up by entails, labor necessarily undergoes depreciation. In fact, it is the disposition of the land that determines the value of labor. If men could get the land to labor on, they would manufacture only for a remuneration that afforded more profit than God has attached to the cultivation of the earth. Where they cannot get the land to labor on, they are starved into working for a bare subsistence." [Patrick Edward DOVE, Theory of Human Progression, 1850, p. 406 n]

Kris Feder: Progress and Poverty Today

A central feature of the British classical school was the classification of productive resources into three "factors of production" - labor, land, and capital. Most classical economists had conceived of these in terms of three great social classes (the workers, the landed aristocracy, and the capitalists). George, on the other hand, identified them as functional categories, distinguished by the conditions under which the factors are made available for production.

In a competitive economy, the earnings of the factors of production measure their separate contributions to the value of the product. Payments for the use of labor are called wages; payments for land are called rent; the income of capital is interest. In George's terms, the distress of the working classes had to do with a persistently low level of real wages. "Why," he asked, "in spite of increase in productive power, do wages tend to a minimum which will give but a bare living?"

The book proceeds systematically. First, George explores the prevailing scholarly and popular explanations, which relied principally on the famous population theory of Malthus, in combination with the "wage fund" theory of British political economy. Together these theories implied that the aggregate income of labor depends upon the amount of capital devoted to the payment of wages. An increase in wages required an increase in the amount of capital per worker. However, any rise in living standards above mere subsistence motivated workers to marry younger and bear more children, until population growth caused capital per worker - and, therefore, wages - to recede again.

To George, the Malthusian analysis was abhorrent: It asserted that no institutional reform could fundamentally alter the pattern of income distribution, and that charitable support for the needy only compounded the problem - by lowering death rates and raising birth rates. Fortunately, he found this theory of wages to be theoretically flawed on several grounds. He also found it to be incompatible with empirical facts, based on historical case studies from Ireland, China, India, the United States and elsewhere. Today, most development economists agree with George that famine and mass poverty have more to do with faulty human institutions than with the limitations of nature. ...

George emphasized that unequal distribution is itself wasteful of wealth.

Unemployment and underemployment of labor mean that energy and intelligence go untapped. For those who find work, he said, high wages stimulate creativity, invention, and improvement, while low wages encourage carelessness. Inadequate education of the poor multiplies the loss. There are the damages done by poverty-related vice and crime, and the substantial costs of protecting society against them. There is the burden upon the wealthy of providing welfare support for the very poor - or risking social upheaval if they do not. Moreover, said George, social institutions by which some prosper at others' expense cause talent and resources to be diverted from productive enterprise to unproductive conflict, as individuals find that competing for political advantage can be more lucrative than competing for market success.

In short, an unjust system of privileges and entitlements tends to cause misallocation of resources, macroeconomic instability and stagnation, political corruption, and social conflict that ultimately may threaten whole civilizations.

George's central contribution was to show that the distinction between individual property and common property forms a rational basis for distinguishing the domain of public activity from that of the private. Read the whole article

Nic Tideman: Basic Tenets of the Incentive Taxation Philosophy

The Proper Disposition of Returns to Different Factors of Production
The idea that the rent of land is properly collected by governments is an example of the more general idea that it is important to distinguish the different "factors of production" identified by classical political economy. The return to each factor has a proper destination.

The contributions of human abilities to productive efforts are called "labor," the return to labor is called "wages," and the appropriate recipients of wages are those whose labor contributes to productive activities.
The contributions of past human products to productive efforts are called "capital," the return to capital is called "interest," and the appropriate recipients of interest are those who past saving made the creation of capital possible.
The contributions of government-assigned opportunities to the productive process are called "land," the return to land is called "rent," and the appropriate recipient of rent is the public treasury.

Replacing Existing Taxes
When we say that the appropriate recipient of rent is the public treasury, it should be understood that this is not in addition to existing sources of public revenue, but rather instead of existing sources of public revenue.

Those who contribute labor to productive processes should be allowed to keep the wages that result from their labor.
Those whose saving makes the creation of capital possible should be allowed to keep the interest that accrues from the use of capital.
But there is no one who has a corresponding claim to the return to land. This is the reason that fees for the use of land and other opportunities assigned by government ought to be the primary source of government revenue.

While one might call such fees "taxes," we consider that designation inappropriate, because the word "tax" connotes an exaction from someone of something to which he or she has a just claim, and we deny that there are such just claims with respect to land. We expect that the collection of fees for the full value of opportunities assigned by governments would provide adequate revenue for all necessary government expenditures.... Read the whole article

Ted Gwartney: Estimating Land Values

Characteristics of Land
Land, in an economic sense, is defined as the entire material universe outside of people themselves and the products of people. It includes all natural resources, materials, airwaves, as well as the ground. All air, soil, minerals and water is included in the definition of land. Everything that is freely supplied by nature, and not made by man, is categorized as land.

Land holds a unique and pivotal position in social, political, environmental and economic theory. Land supports all life and stands at the center of human culture and institutions. All people, at all times, must make use of land. Land has no cost of production. It is nature's gift to mankind, which enables life to continue and prosper.

Land's uniqueness stems from its fixed supply and immobility. Land cannot be manufactured or reproduced. Land is required directly or indirectly in the production of all goods and services. Land is our most basic resource and the source of all wealth.

Land rent is the price paid annually for the exclusive right (a monopoly) to use a certain location, piece of land or other natural resource. People receive wages for work, capital receives interest for investment, and land receives rent for the exclusive use of a location. Equity and efficiency require that the local general public, who created land value, should be paid for the exclusive use of a land site. That Payment is in the form of a land tax.

When considering world-wide economics, most people think that land rent contributes only a small insignificant portion of value. But as societies progress, land has become the predominant force in determining the progress or poverty of all people within a community. Land in major or cities is so costly that people are forced to move further away and travel great distances in order to get to work and social attractions. In the more developed countries of the world, land rent represents more than 40% of gross annual production.

Since land is fixed in supply, as more land is demanded by people the rent will increase proportionally. Demand is the sole determinant of land rent. Changes in land rent and land taxes have no impact on the supply of land, because the land supply is fixed and cannot be significantly expanded. Labor and capital are variable in supply. A higher price for commodities causes more labor and capital to make itself available. Labor and capital are rewarded for their work. A high price is an incentive to work harder and longer, while a low price is not an incentive to work harder and longer. ...

If only a small amount of land rent remained to be capitalized after land taxes were collected, land could have a lower market value. It would, however, continue to have the same rental or productive value to the community.

Not only is land rent a potentially important source of public revenue, the tax on land is a means of limiting excessive speculation in land prices. This would ensure that the equal opportunity to be productive would be available to all citizens. With limited money to invest, people could invest in productive equipment and wages, rather than in high land prices which produce no additional tangible wealth. ...

Adam Smith, in The Wealth of Nations, suggested that any "tax" should be a charge for services which benefit all people and are more efficiently performed by a single cooperative effort. He postulated four principles of taxation which any source of revenue should meet:

1. Light on the production of wealth, and does not impede or reduce production;
2. Cheap to collect, requiring few collectors, and easy to understand;
3. Certain; can't be avoided, little opportunity for corruption, and provides adequate revenue;
4. Equitable and fair, payment for benefits received, impartial, and just.

Collecting public revenue from land rent is the only revenue source, or "tax", that meets these criteria. ...

While the major argument for raising public revenue from land rent and natural resources is because it is equitable and fair, it is also the most efficient method of raising the revenue which is needed for public facilities and services. Land is visible, can't be hidden and its valuation is less intrusive than valuations of income and sales. Taxes on labor and capital cause people to consider alternative options, including working with less effort, which produces less real goods. For example, a tax on wages will reduce after-tax net wages and weaken the incentive to work. A person might be willing to work hard for a wage of $20 per hour, but decide to drop out if the taxes take $8 and the net wage is only $12 per hour. Economists claim that present taxes account for a 25% loss in production in the United States. Production and consumption would be greatly improved if public revenue came primarily from land rather than a wage tax. The same would occur when buildings and machinery are taxed. The tax on building reduces the quantity and quality of buildings produced. A tax on sales, commerce or value added reduces consumption, production and net wealth. Sales tax evasion in the United States has exceeded 30% in recent years.

As new inventions and more efficient ways of producing goods are discovered, people's economic well-being is not improved, because they have lost access to land and must pay both rent and taxes. (5) Instead of rent being used to provide community services, capital and wages must be depleted, which obstructs private enterprise. ...

Not only is land rent potentially an important source of public revenue, collecting all of it would ensure that the equal opportunity to be productive would be available to all citizens. People could fund useful buildings, equipment and wages, rather than having to buy land at inflated prices. Many countries, including the United States, were started on the premise of using land rent to fund public services. Many countries suffer economic loss because they no longer collect the market rent of land.

The value of land can be estimated with an acceptable accuracy, at a cost which is very small compared to the revenue to be obtained. A proper system of assessment and taxation of land can provide for the proper economic use of the land. A land site should be available to the user who can make the highest and best use of the site and maximize the site benefits for all people. A land tax can provide a major source of public revenue which the local governing body could use for the benefit of all people. A land tax can prevent the dispossession of our children, the future producers in the society. Justice requires that land values, which are created by society and nature, be made available for public improvements. This is the responsibility of good government.Read the whole article

Nic Tideman: A Bill of Economic Rights and Obligations

Our nation was founded on the idea that we are all created equal, that we are endowed by our Creator with certain inalienable rights, and that among these are life, liberty, and the pursuit of happiness.

In living, expressing our liberty, and pursuing happiness we sometimes conflict with one another, so we need a shared understanding of the extent of the sphere of equal rights given to every person, and beyond that sphere our obligation to respect the rights of others. This Bill is concerned with the economic aspects of these rights and obligations.

Article 1: Each person has the right to decide whether and how to use his or her talents. Those who are self-employed have a right to the full economic product of their efforts. Those who are employed by others have a right to the full amount of the compensation that their employers agree to pay them. Thus Congress and state legislatures shall levy no tax on wages or interest or spending. ...

Article 1 says that we have a right to what we produce: as workers, as entrepreneurs and as savers. Neither Congress or state legislatures may tax this income, or our corresponding spending. While they may not levy taxes on these things, Article 3 says that Congress and state legislatures are required to place levies on states and state subdivisions respectively, to equalize the per capita annual value of access to natural opportunities, to compensate for the harms that activities in states cause for other states, and to compensate for losses to future generations. Article 4 permits Congress and state legislature to finance activities that have benefits beyond a single subdivision, but only by levies on subdivisions, not by taxes on persons. ... Read the entire article

Alanna Hartzok: Earth Rights Democracy: Public Finance based on Early Christian Teachings

The primary cause of the enormous and growing wealth gap is that the land and natural resources of the earth are treated as if they are mere market commodities from which a few are allowed to reap massive private profits or hold land and resources out of use in anticipation of future profits. Henry George, the great 19th century American political economist and social philosopher, proposed a solution to a problem that too few understood at the time and too few understand today. Early Christian teachings drew upon deep wisdom teachings of the Jubilee justice tradition when they addressed this problem. The problem is the Land Problem.

The Land Problem takes two primary forms: land price escalation and concentrated land ownership.

As our system of economic development proceeds, land values rise faster than wages increase, until inevitably the price paid for access to land consumes increasing amounts of a worker's wages. In classical economics, this dilemma is called the "law of rent" and has been mostly ignored by mainstream economists. The predictability of the "law of rent" - that land values will continually rise - fuels frenzies of land speculation and the inevitable bust that follows the boom. A recent Fortune cover story informs us that there are big gains and huge risks in housing speculation in about 30 predominantly coastal markets that encompass 100 million people. Since 2000, home prices in New York, Washington, and Boston have surged 56% to 61%. Prices jumped 58% in Miami and Los Angeles and 76% in San Diego where the median home price county-wide is $582,000. The gap between home prices and fundamentals like job growth and incomes is greater than ever.[7]
The second form of the Land Problem is the fact that in most countries, including the United States, a small minority of people own and control a disproportionately large amount of land and natural resources. Data suggests that about 3% of the population owns 95% of the privately held land in the US. Less than 600 companies control 22% of our private land, a land mass the size of Spain. Those same companies land interests worldwide comprise a total area larger than that of Europe - almost 2 billion acres.... Read the whole article

Karl Williams: Social Justice In Australia: INTERMEDIATE KIT

We've just seen how returns from land are, by nature, monopolistic and, by rights, should be returned to the community. But how do we calculate this amount?

WHO GETS THE COCONUTS?
It's perhaps best illustrated by the Robinson Crusoe scenario, where he finds himself alone on a desert island. Rob naturally settles on the best available land which, for argument's sake, can produce 20 coconuts per acre per month. Along comes Man Friday, who gets the second-best land producing 18 coconuts per acre. This best, freely-available land of Friday is called the marginal land and, as we'll see, determines both the level of wages and that of rent.

For how much could Rob rent out his land - 2 coconuts or 20 coconuts per acre? Friday would only be prepared to pay 2, because he can already get 18 from his. So here's our first definition, that of the Law of Rent: The application of labour and capital equipment being equal, the rent of land is determined by the difference between the value of its produce and that of the least productive land in use. So if Man Saturday comes along (the next day?!) and finds that the best available land can only produce 15 coconuts per acre, Rob could rent his land out to Saturday for 5 coconuts per acre, and Friday for 2.

What then determines the level of wages? When Friday came along and could work land yielding 18 coconuts per acre in a month, then he wouldn't accept wages offered by Rob for less than 18 coconuts. But when Saturday arrived, suddenly Friday could only command 15 per month, because Rob knows that the going rate (that applicable to Saturday at the margin) is only 15. So here we have the Law of Wages, which is the corollary of the law of rent: Wages are the reward that labour can obtain on marginal land, i.e. the most productive land available to it without paying rent.

Of course it all gets more complicated by technology, trade unions, immigration, the existence of a pool of unemployed, personal preferences, levels of education etc., but these strong underlying laws always hold. But let's now tie up the factors of production. Rent is the return to land, wages are the return to labour, and interest is the return to capital. The law of interest can be stated thus: Interest is the return that the use of capital equipment can obtain on marginal land, i.e. the most productive land available to it without paying rent.

PROGRESS AND POVERTY, SIDE BY SIDE
So here's the alarming paradox of progress marching side by side with poverty. Those who have grabbed the best land get richer and richer (from increasing rent) while the tenants and wage-earners get poorer and poorer for having to accept lower and lower wages as the margin is pushed out to less productive land). Henry George, in his classic Progress and Poverty drove home this point, but took about 600 pages to deal with all the complications and fine details not examined here. It's no wonder that the unmasking of this great paradox - the title of his book - hit the 19th century world like a great revelation. And it's no wonder that vested interests, through the neoclassical economics that they fostered, knew they had to shut him up. And, by successfully silencing him, it's no wonder that, despite all efforts, increasing and ever more alarming disparities of wealth are the norm world-wide.

But, anyway, how many coconut-basketsful of LVT should we collect? Chuck away all those calculators, guys, for the answer is simple: Collect the rent, the whole rent, and nothing but the rent. Assuming that everyone has to do the same amount of work to produce their differing yields of coconuts, when Friday came along then we'd collect 2 coconuts per acre from Rob. This would leave 18 coconuts in each of their hands, and 2 coconuts of rent or LVT collected. When Saturday arrived we'd collect 5 from Rob and 3 from Friday, which would leave 15 coconuts in everyone's hands and 8 coconuts of rent collected. Result: everybody effectively shares equally in the bounty of Our One Earth, and we have a natural, non-punitive form of revenue raising with which to fund infrastructure.

We've already seen how speculators can presently hold on to idle parcels of land, waiting for unearned increases in their value to accrue to them. But here's another curse of land speculation: by locking up productive land, it forces newcomers out to less productive land. By "pushing back the margin", the evil of speculation simultaneously raises rents and lowers wages. LVT makes it impossible for speculators to enjoy unearned income. ... Read the entire article

Mason Gaffney: Land Rent in a Tax-free Society (Outline of remarks by Mason Gaffney, for use at Moscow Congress, 5/21/96)

4. Some of the benefit of abating existing taxes will lodge in higher after-tax wage rates, rather than higher rents. For the present and near future, however, the supply of labor in Russia is highly elastic because so many potential workers are now unemployed, or underemployed, or occupied in crime. In this condition, raising demand for labor will raise payrolls by raising the number of good jobs, more than by raising wage rates. On balance, therefore, this effect on jobs will create new rents, more than it cuts into old ones. After Russia shall have achieved full employment, wage rates may rise and cut into the surplus of land rents, but if this should then create a new kind of problem (which I doubt), it is more pleasant, and easier to solve, than those that afflict you now. Read the whole article

Mason Gaffney: Red-Light Taxes and Green-Light Taxes

I. Shared postulates
II. What is waste, and what should we do about it?

A. What is waste?
B. Two kinds of green taxes
C. Two kinds of containment policy

III. Raising wage rates
IV. The need for user charges

Classical political economists looked at what determines how income is shared among land, labor and capital. They established that when settlement moves out or up to poorer lands, wage rates fall and land rents rise. They called it diminishing returns.

Malthus, Ricardo and Mill attributed this mainly to population growth. Darwinism reinforced the idea. This expansion of human settlement also invades wildernesses, and floodplains, and erosive soils, and forests, and waters, and the air, etc. Thus, what was bad for labor was also bad for green values. Read the whole article

Mason Gaffney: Land as a Distinctive Factor of Production

High land price guides investors to prefer kinds of capital that substitute for land. Although capital cannot be converted into land, it can substitute for land, and does so when rents and land prices are high. John Stuart Mill long ago pointed out that the structure and character of capital is determined by the level of rents and wages.19 Such substitution is an integral part of the equilibrating function of markets; the human race could never have attained its present numbers and density without it. High wages evoke labor-saving capital; high rents evoke land-saving capital. It is useful to carry this farther, and recognize five kinds of substitutive capital evoked by high rents and land prices:

a.      Land-saving capital, like high buildings.
b.      Land-enhancing capital, meaning capital used to improve land for new, higher use.
c.      Land-linking capital, like canals and rails and city streets.
d.      Land-capturing (rent-seeking) capital, like squatters' improvements, and canal and rail lines built to secure land grants, and dams and canals built to secure water rights.
e.      Rent-leading capital.

Tip O'Neil, the former Speaker of the US Congress, is oft-quoted that "All politics is local politics." One might say the same of market power. Some lands are sold or leased with covenants against competition, as Gimbel's Department Store holds a covenant on a lot adjoining its parent store on 3rd Street and Wisconsin Avenue, Milwaukee. Such anticompetitive arrangements, however blatant, are intra-state, and apparently immune from sanctions under US Federal anti-trust laws. Scholars of industrial organization, many of them doing outstanding work otherwise, pay these grass-roots matters little heed. Researchers and activists concentrate on commodity markets at national and world levels -- the ones subject to Federal sanctions, such as they are. They could probably find more severe and blatant market failure in local land markets.

Bargaining power increases with the number of options one has. A large landowner with a chain of holdings in different jurisdictions is positioned to bargain, to play off one against the other. Thus, the Disney Corporation, 1991-93, considered rebuilding and expanding Disneyland at its current site in Anaheim, or in Long Beach where it had tenure over another suitable site. Using this leverage it won concessions from both cities, "finally" choosing to expand in Anaheim. It has yet to do so, however, and nothing is really final. Disney has many other sites around the world.

Likewise, land is a basis for oligopsony power in local labor markets. A city's labor pool is often faced with a local employers' association whose membership is limited by the amount of industrial land within reach of the labor pool. Migrant farm labor is faced with statewide employers' associations who have the advantages of limited numbers, wealth, ancient roots and stability. Labor unions that organize a local plant are faced with the threat of the "runaway shop", or merely reallocating work among plants, when the employer owns plants elsewhere.

Custom has dulled us to it, but a corporation is a pool of separate individual landowners bargaining in concert. A century ago, corporations and limited liability were viewed with suspicion and apprehension. Today, hundreds and thousands of separate landowners pool their corporate strength against labor, as a matter of course. Some employees bargain through unions, but not as a matter of course, and hardly ever with international options. In the US, less than 20% of the labor force is unionized, yet many, probably most economists treat labor as the only threatening monopoly. They see corporations as benign; a prime cause carried by many economists today is to eliminate the corporate income tax completely. Would we saw such support for eliminating the payroll tax, the most obvious cause of unemployment.Read the whole article

Mason Gaffney: The Relationship Between Property Taxation and the Concentration of Farm Land Ownership

Vanishing Farmers and Unaffordable Farms

You might say this would be a blessing for the farmers who were now more free of these property taxes.

However, it didn't work out that way. The mean acres per farm (the average, that is) had remained fairly constant for 65 years (1870-1935) at about 155 acres, despite two major industrial merger movements, including the steel industry. After 1935 the mean value took off and had tripled to 462 acres by 1987. As the number of farms were falling, national population was on the rise. In 1900 there was one farm per 11 Americans; in 1987 there was one farm per 113 persons.

Farms became unaffordable for folks starting at the bottom of the agricultural ladder.

Real wage rates, meanwhile since 1955, have not risen as fast as real land prices, and they haven't risen at all since 1975. This has raised the labor-price of land (the number of days/years a person must work at the average wage rate in order to raise the price of a farm.) Coupling this with rising acres per farm, the labor-price of a farm roughly tripled, from about 6 years' wages (before payroll deductions) in 1954 to about 17 years' wages in 1987. That, of course, doesn't mean you could buy a farm in 17 years, unless you didn't eat anything and saved every penny of your wages to buy a farm. Read the whole article

Winston Churchill: The Mother of All Monopolies

It does not matter where you look or what examples you select, you will see that every form of enterprise, every step in material progress, is only undertaken after the land monopolist has skimmed the cream off for himself. and everywhere today the man or the public body that wishes to put land to its highest use is forced to pay a preliminary fine in land values to the man who is putting it to an in- ferior use, and in some cases to no use at all. All comes back to the land value, and its owner for the time being is able to levy his toll upon all other forms of wealth and upon every form of industry.

A portion -- in some cases the whole -- of every benefit which is laboriously acquired by the community is represented in the land value, and finds its way automatically into the landlord's pocket.

If there is a rise in wages, rents are able to move forward, because the workers can afford to pay a little more.
If the opening of a new railway or a new tramway, or the institution of an improved service of workmen's trains, or a lowering of fares, or a new invention, or any other public convenience affords a benefit to the workers in any particular district, it becomes easier for them to live, and therefore the landlord and the ground landlord, one on top of the other, are able to charge them more for the privilege of living there.

Some years ago in London there was a toll-bar on a bridge across the Thames, and all the working people who lived on the south side of the river had to pay a daily toll of one penny for going and returning from their work. The spectacle of these poor people thus mulcted of so large a proportion of their earnings appealed to the public conscience; an agitation was set on foot, municipal authorities were roused, and at the cost of the ratepayers the bridge was freed and the toll removed. All those people who used the bridge were saved sixpence a week. Within a very short period from that time the rents on the south side of the river were found to have advanced by aboutsixpence a week, or the amount of the toll which had been remitted.

And a friend of mine was telling me the other day that, in the parish of Southwark, about 350 pounds a year, roughly speaking, was given away in doles of bread by charitable people in connection with one of the churches, and, as a consequence of this, the competition for small houses, but more particularly for single-roomed tenements, is, we are told, so great that rents are considerably higher than in the neighbouring parish.

All goes back to the land, and the landowner, who, in many cases, in most cases, is a worthy person utterly unconscious of the character of the methods by which he is enriched, is enabled with resistless strength to absorb to himself a share of almost every public and every private benefit however important or however pitiful those benefits may be. Read the whole article

Nic Tideman: Applications of Land Value Taxation to Problems of Environmental Protection, Congestion, Efficient Resource Use, Population, and Economic Growth

VII. Economic Growth

Recognition of the equal rights of all to natural opportunities, through land value taxation and its extension to charges for the use of other resources, is not only just and efficient, but has the capacity to make a major contribution to economic growth. This occurs through a variety of paths.

The most important path is that public collection of the value of exclusive use of natural opportunities provides revenue that makes it possible to remove taxes from the earnings of labor and capital. When people are taxed less, they earn more. Using data that emerged from changes in U.S. tax rates, Feldstein has estimated that the elasticity of earnings with respect to the fraction of income not taken at the margin by federal taxes is at least 1.0 (and more for workers in higher tax brackets).6 When the entity that removes a tax on labor is less than global, this action also attract labor to the region.

When taxes are removed from capital, the effect is even more powerful, as long as the entity removing the tax is less than global. Capital is extremely mobile in response to regional changes in net returns. It is highly counterproductive for any locality or nation to tax capital, because there will be virtually no effect on the return to capital after taxes. Capital will merely be driven from the taxed region until the return after taxes matches what can be obtained elsewhere. If the whole world removes taxes from capital, the resulting increase in the rate of return to capital will increase the rate of saving, but the adjustment will occur over some years.

Taxing land has an additional effect that increases the stock of capital. A tax on land represents a redistribution from living adults to the young and unborn, who will now be born with rights to land. Unless there is a perfectly offsetting reduction in the desire to accumulate assets to transfer to the next generation, this redistribution will induce the living, who now have fewer assets, to accumulate at a more rapid rate than they would otherwise do. That is, saving and capital accumulation will increase.

Taxing land also increases the efficiency with which land is used. This occurs through three paths.

First, a tax on land reduces the return to land speculation, and therefore reduces the quantity of land speculation.
Second, as taxes on land are capitalized into the selling price of land, the result is the substitution of a recurring cost (the annual tax) for a one-time cost (the purchase price). This makes land relatively more attractive to bidders with high discount rates and relatively less attractive to bidders with low discount rates. To the extent that the former are more entrepreneurial and the latter more passive investors, land will tend to flow into the hands of persons who will choose to use it more intensively.
The third path by which a tax on land increases the efficiency with which land is used is that, for those who are using land inefficiently, it substitutes an explicit cost (the tax) for an implicit one (the income foregone by inefficient use).

Psychologically, explicit costs tend to be more effective in motivating efficient behavior than implicit ones.

VIII. An Estimate of the Magnitudes of the Consequences of Taxing Land

For all of the above reasons, the substitution of tax on land for taxes on labor and capital will increase the efficiency of an economy. To estimate the magnitudes of these consequences, one needs a model of the economy. Consider the following model. There is a three-factor CES (constant elasticity of substitution) production function:

Q = (aTà + bLà + cKà)(1/à). (1)

where Q is output, T is the quantity of land, L is the quantity of labor, K is the quantity of capital, a, b and c are coefficients, and à is related to the elasticity of substitution, å, by à = 1 - 1/å. Land has a completely fixed supply. Labor is assumed to have an elasticity of supply of 0.8 (adjusting Feldstein's number for the fact that he was considering only federal income taxes. Capital is assumed to be supplied perfectly elastically. Taking the ratio of compensation of employees to Net Domestic Product in National Income and Product Accounts, I assume that labor receives two thirds of output. Somewhat arbitrarily, I assume that the remaining third is divided equally between land and capital. I estimate that the marginal tax rate on labor is 43% (28% for the federal income tax, 12% for the combination of state income taxes indirect taxes, and 3% for the Medicare tax--I treat social security as having benefits equal to its costs, and therefore not a tax.) I estimate the marginal tax rate on land and capital at 50% (28% for the federal income tax, 12% for the combination of state income taxes and indirect taxes, plus 10% for profits taxes). The elasticity of substitution is a parameter that I am very unsure of. But Feldstein has estimated that the marginal welfare cost of taxation is 1.65, and I get that result with a å of 0.68, so I assume that å = 0.68.

I have a spreadsheet that takes parameters such as the ones named and determines what would happen (in a comparative static framework) if all taxes were removed from labor and capital, and 100% of the rent of land were taxed. Here are the results:

The quantity of labor would increase by 55%.
The quantity of capital would increase by 145%.
Output would increase by 53%.
The wage before taxes would fall by 1.7%, but the wage after taxes would increase by 72%.
The rent of land would increase by 87%, and would provide more than enough revenue for all existing expenditures of all levels of government in the U.S., other than social security.
The aggregate improvement in well-being of citizens would be about 12.6% of output, or about $1 trillion per year.... Read the entire article

Fred Foldvary: The Rent, the Whole Rent, and Nothing but the Rent

Real-estate land rent and rentals arise from the differing productivity of various sites: rent is the differential between the productivity of a site relative to the least productive marginal sites. This is the same as the "marginal product" of land as used in economics. Buying land for speculation anticipating higher future rentals not paid for by the landowner can induce higher prices for land that shifts the margin to inferior lands, raising the rents on superior lands and lowering wages set at the margin. ...

The public and community collection of rent puts land at its most productive use, maximizing the wages of workers while minimizing sprawl as well as boom/bust cycles. We need to understand rent to fully understand the market process and the cause and remedy of many of today's social problems.Read the whole article

Nic Tideman: Using Tax Policy to Promote Urban Growth

Urban growth is desired because it raises peoples' incomes. In a market economy, incomes can be divided into components derived from four factors of production:

the rent of land,
the wages of labor,
the interest received from owning capital, and
the profits of entrepreneurship (the activity of choosing investments and organizing production).

Thus a successful urban growth strategy in a market economy must either increase the amounts of land, labor, capital and entrepreneurship that are used in a city or increase the payments that are made per unit of each factor, or both.

The land that a city has is fixed (or if it changes, it does so at the expense of other administrative units). Therefore, with respect to land, socially productive urban growth means adopting policies that raise the productivity of land. Labor, on the other hand, is reasonably mobile, and capital is highly mobile. Entrepreneurship springs up and fades away with the rise and fall of opportunities. Therefore, in a market economy, the payments that must be made to attract these factors are substantially outside the control of a city. Thus the growth of a city with respect to labor, capital and entrepreneurship is achieved primarily by making the city a place that attracts more of these factors, taking the rates of wages, interest and profits that must be paid to attract them as given by market forces.

Tax policy is critical for urban growth because taxes on the earnings of labor, capital and entrepreneurship drive these factors away. A city that desires to grow should refrain from taxing wages, interest or profits and concentrate its taxes on land, which does not have the option of moving away.

Certain other sources of public revenue, in addition to the rent of land, have the characteristic of not discouraging growth. These sources of revenue involve either charging people for using scarce opportunities that no one created, as with land, or charging people for the costs that their actions impose on others.

A city that wishes to grow should confine its search for revenue to these sources. In this way it will attract more labor, capital and entrepreneurship, thereby raising the rent of land, which can be collected publicly without discouraging growth.

Additions to the stock of capital are extremely important for urban growth, because of the impact of abundant capital on wages and rents. When capital is abundant, labor and land are more productive, and the more productive they are, the higher wages and rents are. ...

... Every activity that is continued should pass a test of providing adequate value for money. Most of the worthwhile activities of local governments raise the rental value of the land in the vicinity of the activity by enough to pay a substantial fraction if not all of the costs of the activity.

Thus the rental value of land is a natural first source of financing for local public expenditures.

Making the rental value of land a principal source of local public revenue has both an equity rationale and an efficiency rationale. The equity argument for social collection of the rent of land is founded on a recognition that the rental value of land has three sources.

Part of the rental value of land is the gift of nature--the fertility of soil, the value of good rivers and harbors, the depletable value of minerals, and so on. This part of the rental value of land should be collected publicly because no individual has a just claim to more than a proportionate share of it. Public collection is just either if it is followed by an equal distribution to all citizens or by spending on activities that provide equal benefits to all.
A second part of the rental value of land comes from the provision of public services. The local agencies that provide these services can justly claim the increase in the rental value of land that results from their activities.
A third part of the rental value of any particular site arises from private activities that are conducted in the vicinity of that site. Social collection of this part of the rental value of land is particularly appropriate if this money is used to reward those private activities according to how much they increase the rental value of land.

The efficiency argument for social collection of the rent of land has two parts.

First, the rental value of land has the rare quality of being a source of public revenue that does not discourage productive activity. If people are taxed according to their labor earnings, they can be expected to work less, and to tend to move from the places that tax them. If people are taxed on their investments and savings, they can be expected to save and invest less, and to find it attractive to put their savings and investments in other places where they will not be taxed as much. But when the rental value of land is collected, no one will reduce the amount of land in existence, and no one will move his land elsewhere. Thus social collection of the rent of land does not reduce the productivity of an economy in the way that most other sources of public revenue do.
The second part of the efficiency argument is that social collection of the rent of land tends to make land more available to those who want to start new enterprises. When the rent of land is not collected publicly, those who have rights to land will tend to ignore the possibility of releasing it to someone who might make better use of it. On the other hand, if those who have rights to land are required to make annual payments equal to the market value of the rights they hold, then these continuing payments will induce people to ask themselves regularly whether they ought to release the land to someone who can make better use of it.

To achieve the potential efficiency of public revenue from land, it is important that people not be charged more for the use of land, just because they happen to be using it particularly productively. The rental value of land should be reassessed regularly, the values that are determined should vary smoothly with location, and they should be available for public inspection so that all users of land can see that they are being charged amounts commensurate with what their neighbors are being charged.

Social collection of the rent of land also facilitates the privatization of land. If every user of land is charged annually according to the rental value of the land that he or she holds, then it is possible to undertake a just privatization of land simply by passing out titles to the current users of land.

No one will be disadvantaged by not receiving land. Future generations will not be deprived by not having been awarded shares. And the community will have a continuing income from the rent of land.

The efficiency that is entailed in using the rent of land to finance public activities applies to certain other sources of public revenue as well:

1. Charges on any publicly granted privileges, such as the exclusive right to use a portion of the frequency spectrum for radio and TV broadcasts.
2. Payments for extractions of natural resources. Such payments should be set at levels that yield the greatest possible revenue of the resources, in present value terms.

3. Taxes on pollution. Every individual or enterprise that pollutes the air, water or ground should be required to pay the estimated cost of the pollution it generates. The effect of pollution on the rental value of surrounding land is one possible measure of its cost.

4. Taxes on any other activities that reduce the rental value of surrounding land.

5. Taxes on activities such as driving or parking in crowded streets, where one person's activities reduce opportunities for others. The administration of such charges may be so expensive that it is not worth implementing them, but if the administration can be handled sufficiently cheaply, these charges are efficient to the extent that they only charge people for costs imposed on others.

6. Taxes on activities, such as the consumption of alcohol, which impose costs on others (e.g., higher traffic fatalities).

7. Charges for local public services, such as water, electricity, sewer connections, etc. It is not generally desirable to make every service completely self-financing. Rather, what is desirable is that each user be required to pay the marginal cost of the service he receives. Extensions of service networks are efficient when they increase publicly collected land rents by enough to cover the costs not covered by user charges.

8. A self-assessed tax on permanent improvements to land, at a very low rate (perhaps 1/10 of 1% per year). With a self-assessed tax, each possessor of land names a price at which he would be willing to part with the land he possesses (and any immovable improvements). He pays a tax proportional to the value he names, and anyone who wishes to may take over possession at that price. The value of such a tax is that it makes it much easier to assemble land for redevelopment, and to identify appropriate compensation when land is taken for public purposes.

All of the above taxes are positively beneficial and should be collected even if the revenue is not needed for public purposes. Any excess can be returned to the population on an equal per capita basis. If these attractive sources of revenue do not suffice to finance necessary public expenditures, then the least damaging additional tax would probably be a "poll tax," a uniform charge on all residents. If some residents are regarded to be incapable of paying such a tax, then the next most efficient tax is a proportional tax on income up to some specified amount. Then there is no disincentive effect for all persons who reach the tax limit. The next most efficient tax is a proportional tax on all income.

It is important not to tax the profits of corporations. Capital moves from where it is taxed to where it is not, until the same rate of return is earned everywhere. If the city refrains from taxing corporations they will invest more in St. Petersburg. Wages will be higher, and the rent of land, collected by the government, will be higher. The least damaging tax on corporations is one that provides a complete write-off of investments, with a carry-over of tax credits to future years. Such a tax has the effect of making the government a partner in all new investments. With such a tax the government provides, through tax credits, the same share of costs that it later receives in revenues. However, the tax does diminish the incentive for entrepreneurial activity, and it raises no revenue when investment is expanding rapidly. Furthermore, the efficiency of such a tax requires that everyone believe that the tax rate will never change. Thus it is best not to tax the profits of corporations at all. If the people of St. Petersburg want to share in the profits of corporations, then they should invest directly in the corporations, either privately or publicly. The residents of St. Petersburg would be best served by refraining from taxing the profits of corporations. Creating a place where profits are not taxed can be expected to attract so much capital that the resulting rises in wages and in government-collected rents will more than offset what might have been collected by taxing profits.

The taxes that promote urban growth have at least one of two features.

The first feature that a growth-promoting tax can have is that it can serve to allocate a naturally occurring resource among competing potential users. Charges for the use of land, for the use of the frequency spectrum and for depleting natural resources share this feature.
The second feature that a growth-promoting tax can have is that of being a charge for the costs imposed on the city by the person who pays the tax. This feature is shared by taxes on pollution, taxes on other activities that reduce the value of surrounding land, taxes on imposing congestion and other costs on other residents of the city, charges for the marginal cost of publicly provided services, and a self-assessed tax on property, reflecting the hindrance to future growth represented by existing development.

A city that confines itself to these taxes can expect to attract capital rapidly, and therefore to experience rapid growth, raising the wages of its citizens and the publicly-collected rent of its land. Read the whole article

Jeff Smith Share Rent, Transform Society

If society decided to share among its members all the annual value of society's sites and resources and air space, what would happen? Read the whole article

Jeff Smith: What the Left Must Do: Share the Surplus

A surfeit of jobs, the consequence of recovering rents, goes nicely with the flagship goal of a life of leisure, the consequence of sharing rents. Further, when jobs seek people instead of vice versa, not only can workers hold out for higher wages – as in the tech industries in the 1990s – but they also gain the leverage to metamorphose corporations into co-ops, long an ideal of the Left. Having to pay government for limiting its liability or to operate under full liability, corporations would want to share risk, giving labor leverage to negotiate not just higher wages, but also co-manage, and eventually erase the distinction between management and worker, which is a co-op. 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 to the 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 automobile....

Drawing their cue from the public, governments tolerate "rentention", the private retention of publicly-generated land values. Lacking this Rent, states turn to taxes. But to grow the economy, all governments -- left, right, or undecided -- hustle to stimulate development; they cut taxes and slop subsidies. Going beyond the call of duty, the state excuses producers' their routine pollution and limit liability, thereby cutting the cost of insurance. Companies that don't impose on nature, worker, or customer are not benefited at all but lose a competitive advantage. On this tilted playing field, one with the lumps of subsidies and the tilts of taxes, technologies lean and clean have a hard time competing as suppliers of materials, homes, food, rides, and energy. ...

Now wipe out the taxes, subsidies, liability limits, and rent retention. Instead, replace all that with running government like a business. Charge full-market value for state acknowledgements (the seven secret subsidies):

corporate charters,
standards waivers,
utility franchises,
monopoly patents,

communication licenses,
resource leases/claims, and
land titles/deeds

Collecting rent for government-granted privileges would not only raise trillions but also whittle corporations down to a competitive size, less hazardous to democracy.

Besides charging what privileges are worth, government should also replace license with responsibility ("internalize the externalities"). To temper the temptation to use lands both fragile and valuable, society could impose surcharges - an Ecology Security Deposit, Restoration Insurance, Emission Permits, and fines when users exceed standards. To minimize all these charges, producers would seek sustainable alternatives. Getting and sharing rent from land titles is the centerpiece of this geonomic revenue reform. Each phase of such a revenue shift motivates sustainable choices in its own way.

1. Get the rent. Having to pay over rent to community makes speculation not worth the bother. So owners use their land and resources more efficiently. Using some land more intensely means using other land not at all. Plus, intense use augments the housing stock, lowering the housing cost. Pittsburgh, while taxing land six times more than buildings, enjoyed the most affordable housing of any major US city. More residents are owner occupants who choose to improve their homes, plugging heat leaks, etc.

2. De-tax wages and interest. Removing such taxes while collecting rent moves investment funds in the opposite direction, from extraction and speculation into advancing physical capital and hyper-training labor. The resultant investment shift would accelerate techno-progress, helping us get more from less.

3. De-subsidize favored producers. Besides giving lobbyists a reason to contemplate a career change, abolishing subsidies would force producers to cut waste, to call on all the tools and techniques extolled by Amory Lovins and other green industrialists.

4. Pay out the rent. Getting money for nothing, would people still pursue mindless consumption of goodies or switch to mindful consumption of leisure? The pressure to consume stuff for prestige should be lessened by the increased equality in society. Everyone would pay in land dues equal to the value of the nature they claim and get back rent dividends equal to everyone else. These dues and dividends would narrow the income gap.

To sustain that which we love, we must transform our relationships to nature, to government, and to each other. We need to become geonomists in worldview, theory, discipline, and policy. Geonomics creates an economy that's not at war with but aligned with the natural world. ... Read the whole article

Fred Foldvary: A Geoist Robinson Crusoe Story

Once upon a time, Robinson G. Crusoe was the only survivor of a ship that sunk. He floated on a piece of wood to an unpopulated island. Robinson was an absolute geoist. He believed with his mind, heart, and soul that everyone should have an equal share of land rent.

Since he was the only person on this island, it was all his. He surveyed the island and found that the only crop available for cultivation was alfalfa sprouts. The land was divided into 5 grades that could grow 8, 6, 4, 2, and zero bushels of alfalfa sprouts per month. There was one acre each for 8, 6, and 4, and 100 acres of 2-bushel land. For 8 hours per day of labor, he could work 4 acres. So he could grow, per month, 8+6+4+2 = 20 bushels of alfalfa sprouts, much more than enough to feed on.

One day another survivor of a sunken ship floated to the island. His name was Friday George. Friday was a boring talker and kept chattering about trivialities, which greatly irritated Robinson. "I possess the whole island. You may only have this rocky area," said Robinson. ...

Robinson realized that it did not matter which lands he possessed. He could possess better land, but so long as the rent is split equally, if the wage rate is equal, their income will not be affected. Lawyers say that possession is nine tenths of the law, but the law of rent says, possession does not matter.

If the rent is split equally, those who possess land and want to maximize their income will possess only that amount that maximizes income for all. If they possess too much land, they would drive wages down and rents up, leaving less for the possessors. So it does not matter who owns what land, if the rent is equally split. ... Read the whole piece

Fred Foldvary: Underprivileged or Rights-Deprived?

Poor folk are often labeled "underprivileged" and richer folk are called "privileged." For example, there is a book titled "One Nation, Underprivileged: Why American Poverty Affects Us All." But "privileged" and "underprivileged" are confused and misleading expressions. If you think the poor are "underprivileged," then you don't really understand poverty.

What is a "privilege?" The term originally meant "private law." A privilege is a special advantage or prerogative or immunity or benefit given only to some people only because they have power or are favored by those with power. If everyone is entitled to something, like freedom of expression, or if everyone may obtain an item such as a passport with the same rules applying to all, then it is not a privilege but a right.

Whether a rich person is "privileged" depends on how he got the money. ...

So if a person is poor, it is not because he is lacking in special protections, subsidies, and other privileges. A person is usually poor because he has been deprived of the natural right to work. Governments world-wide impose barriers between labor and productive resources, keeping some workers deprived of labor and others who do work deprived of their earnings from labor.

Taxes on wages create a wedge between the cost of labor to employers and the take-home pay of the worker. More costly labor results in less employment. Taxes on the income from capital goods and on the sale of goods has the same effect. There are unemployment taxes, disability taxes, and payroll taxes that increase the tax wedge. On top of that, there are minimum-wage laws that prevent the least productive workers from getting hired. There are permits, zoning, and other rules and costs that also prevent some workers from becoming self-employed.

Deprived of the full natural right to peaceful enterprise and labor, and the natural right to fully keep one's earnings, the poor have little or no income, and depend on charity and governmental assistance. To call them "underprivileged" is a lie. The rights-deprived poor do not need privileges. They just need government to stop interfering with their right to work and save!

The really underprivileged folks are all consumers, taxpayers and those who are restricted from peaceful and honest practices or have to pay extra to the government while others are unrestricted and non-taxed. These people lack privileges which others have. The proper remedy is not to expand privileges, but to eliminate all governmental privileges. That is why libertarians and geoists alike have the motto: "Equal rights for all; privileges for none!"
Read the whole article

Fred Foldvary: See the Cat

Picture an unpopulated island where we're going to produce one good, corn, and there are eleven grades of land. On the best land, we can grow ten bushels of corn per week; the second land grows nine bushels, and so on to the worst land that grows zero bushels. We'll ignore capital goods at first. The first settlers go the best land. While there is free ten-bushel land, rent is zero, so wages are 10. When the 10-bushel land is all settled, immigrants go to the 9-bushel land.

Wages in the 9-bushel land equal 9 while free land is available. What then are wages in the 10-bushel land? They must also be 9, since labor is mobile. If you offer less, nobody will come, and if you offer a bit more than 9, everybody in the 9-bushel land will want to work for you. Competition among workers makes wages the same all over (we assume all workers are alike). So that extra bushel in the 10-bushel land, after paying 9 for labor, is rent.

That border line where the best free land is being settled is called the "margin of production." When the margin moves to the 8-bushel land, wages drop to 8. Rent is now 1 on the 9-bushel land and 2 on the 10-bushel land. Do you see what the trend is? As the margin moves to less productive lands, wages are going down and rent is going up. We can also now see that wages are determined at the margin of production. That is the "law of wages." The wage at the margin sets the wage for all lands. The production in the better lands left after paying wages goes to rent. That is the "law of rent." If you understand the law of wages and the law of rent, you see the cat! To complete our cat story, suppose folks can get land to rent and sell for higher prices later rather than using it now. This land speculation will hog up lands and make the margin move further out than without speculation, lowering wages and raising rent even more.

Now we have good news and bad news. The good news is that when we put in the capital goods we first left out from the example above, the tools and technology increase the productivity of all the lands. If production doubles, rent doubles, and wages go up. Wages won't double, because workers have to pay for the tools, but even if wages go up 50 percent, that's good news, and why industrialized economies have a high standard of living. Also, high skills enable educated workers to have a wage premium above the basic wage level. The bad news is that the technology enables us to extend the margin to less productive land, which lowers wages again. So there is this constant race between technology raising wages and lower margins reducing wages.

It's bad enough that a low margin sets the wage level at the poverty level, especially in countries with low technology and low skills. Government then taxes away a large chunk of those wages, which hurts those workers with higher wages. The result is a highly unequal distribution of income. Workers have the low wage set at the margin and reduced further by taxes, while the owners of land get all the extra production as rent, but pay less in taxes because of tax breaks to landowners. (Capital-goods returns boil down to wages and rents, because capital goods are ultimately produced using land and labor.)

Behold the cat! The margin at the least productive land sets low wages, and the rest goes to rent, resulting in inequality, with poverty for low-skilled workers. If we see the cat, the remedy is also clear: stop taxing workers, and let everybody share the rent. ... Read the whole article

The Most Rev. Dr Thomas Nulty, Roman Catholic Bishop of Meath (Ireland): Back to the Land (1881)

Land Values intended by Providence for Public Purposes.
I have already observed that the chief peculiarity of the land of a country was that its value was never stationary, that it was always progressive and rising, that in fact it increased in a direct ratio with the growth of the population and the advancing progress of the industry of the nation.

It would seem as if Providence had destined the land to serve as a large economical reservoir, to catch, to collect and preserve the overflowing streams of wealth that are constantly escaping from the great public industrial works that are always going on in communities that are progressive and prosperous.

Besides the permanent improvements that are made in the land itself, and which increase its productiveness and value, there are other industrial works not carried out on the land itself, but on its surroundings and in its vicinity, and which enhance its value very considerably. A new road is made for the accommodation of a district; a new bridge is thrown across a river or a stream to make two important localities accessible to each other; a new railway passes close by and connects it with certain large and important centres of industry; a new factory or a new mill is erected, or a new town is built in the neighbourhood.

Industrial works like these add very materially to the value of all the land in their vicinity. It is a well-known fact that a new railway has in several instances doubled the value of the land through which it passed, in consequence of the increased facilities it had afforded for the sale of its agricultural products.

In every state of society, which is progressive and improving, such industrial works are continually going on, and hence the value of the land is rising also everywhere. But its value rises enormously with the enlarged growth of the population of a nation, and with the increased productiveness of its industry.

Wages Do Not Keep Pace.
The United Kingdom furnishes an example that is singularly illustrative of this fact. Says Mr. Cairnes: "A given exertion of British labour and capital will now produce in a great many directions five, ten or twenty times, in some instances perhaps a hundred times the result which an equal exertion would have produced a hundred years ago. It is not probable that industry is, in any direction whatever, less productive now than it was then; yet the rate of wages, as measured by the real well-being of the labourer, has certainly not advanced in anything like a corresponding degree; while it may be doubted if the rate of profit has advanced at all." A given amount, then, of British capital and labour is now ten or twenty times more effective than a hundred years ago, while, on the other hand, the quantity of such effective labour and capital now engaged in British industrial production is perhaps twenty times larger now than formerly. ...

Landlords Sow Not, But They Reap. ....

The Great National Property Which Landlords Are Permitted to Appropriate. ...
... Those who hold the ownership of the land hold also the ownership of all the accessions of value it receives from all quarters. This increase in the value of their property cost no sacrifice, demanded no painful effort of labour. Even while they slept their rent rolls went on increasing and multiplying.

The value continually imparted to the land by the industrial exertions of the community, in the construction of harbours and bridges, in the making of new roads and railways, in the erection of new factories, mills and houses, etc., has all gone with the land, has all been confiscated and appropriated by the owners of the soil.

Professor Cairnes feels sorely perplexed to account for some of the anomalous results of this appropriation. He says: "A bale of cloth, a machine, a house, owes its value to the labour expended upon it, and belongs to the person who expends or employs the labour; a piece of land owes its value, so far as its value is affected by the causes I am now considering, not to the labour expended on the land, but that expended on something else -- the labour expended in making a railroad or in building houses in an adjoining town; and the value thus added to the land belongs not to the persons who have made the railroads or built the houses, but to someone who may not have been aware that these operations were being carried on -- nay, who perhaps has exerted all his efforts to prevent their being carried on. How many landlords have their rent rolls doubled by railways made in their despite!"

Professor's Unwitting Testimony
It never occurred to Mr. Cairnes that he had here given, quite unconsciously to himself, an unanswerable argument, ex absurdo, to prove the injustice of the appropriation of the land. If the land had not been confiscated no such absurd or unjust result could have followed. The value imparted by labour to the land, exactly like "the bale of cloth, the house or the machine," would belong to the persons who expended or employed that labour, that is to say, to the public, by whose industrial exertions it had been created.

Lastly, the vast accessions of value which the land is constantly receiving from the proceeds of that "self-imposed tax" which the nation levies on itself in the high prices it pays for the "raw products of the soil," together with the increased productiveness of the soil itself, go all, as Mr. Cairnes is forced to confess, "neither to profits nor to wages nor to the public at large, but to swell a fund ever growing, even while its proprietors sleep -- to the rent roll of the owner of the soil."

Private Property in Land the Real Robber of Labour.

Thus the appropriation of God's gifts in the land led naturally, and as a matter of course, to the appropriation of an enormous amount of the wages and earnings of the nation, which, in the designs of Providence, kept constantly dropping into the land, accumulating on the land, and adding to the value of the land, not for the enrichment of the landlords, but for the support of the public burdens of the State.

Now a system of Land Tenure which thus despoils the people of a nation of a vast amount of their earnings, which transfers a valuable property which they have created by patient, painful and selfdenying efforts of their labour, to a class who do not labour at all, and make no sacrifices whatever, can, I think, be fairly characterised as a system of national spoliation. The hardworking, industrious masses of the nation are taxed twice, and for an enormous amount each time. They are taxed first for the benefit of the owners of the soil, to supply them with all the comforts, enjoyments and luxuries which they desire, and are taxed again to the amount of eighty millions annually for the government and defence of the country.

With two such enormous drains on the productive industry and labour of the country, I cannot share in the astonishment which Mr. Cairnes feels at finding that, notwithstanding the increased productiveness of British industry, "the rate of wages, as measured by the real well-being of the labourer," has not improved to any material extent, "while it may be doubted whether the rate of profit has advanced at all."

Both Capital and Labour are Exploited.
Both capitalists and operatives, therefore, are intensely disappointed and supremely dissatisfied with these disheartening results, and mutually reproach each other with fraud and foul dealing in the division of their common earnings. Their mutual misunderstandings and rival claims to a larger share than they actually receive have given rise to "lockouts" on the one side and "strikes" on the other; to combinations of capitalists among the employers and "Trade Unions" among the labourers. Thus their mutual relations, which ought to be of the friendliest character, have at last settled down into the permanent form of an insane internecine war, which inflicts irreparable injury on the common interests of both.

It never occurs to either side that a third party could possibly be liable to blame. I think I have shown that neither party has received, or at all events can retain for his own use and enjoyment, its fair share of their common earnings. The existing system of Land Tenure, like a great national thief, robs both parties of an enormous amount of their earnings for the benefit of a class who do not labour at all.

As the operatives complain the louder, so the case they make against the capitalists seem really the weaker and the worse founded of the two. Mr. Cairnes, with many others, proved to evidence that unless in rare and exceptional cases it is perfectly impossible for the capitalist to withhold from the operatives their fair share in their common earnings.

Higher Money Wages but Lower Purchasing Power.
Does it therefore follow that the strong, widespread and permanent feeling of discontent which prevail among the labourers is the result of fancy or imagination, having no solid foundation whatever in fact?

Undoubtedly this feeling proves the labourers to have substantial grievances, although I think they have failed to trace them to the causes that have really produced them. The money wage of the English operative is now considerably higher than in any past period of English history. But if his money wage is now high, the price of the raw products of the soil, that is to say, of the necessaries and comforts of life, is vastly higher still.

A given amount of money will not now procure for him the same quantity of food and of the other necessaries of life as formerly. In purchasing the raw products of the soil, he must pay not only for the necessaries and comforts of life which he enjoys himself, but also for the comforts and luxuries which go to the enjoyment of the owners of the soil. The price, therefore, of the raw products is a payment and a tax; a payment for what he consumes himself, and a tax for what is consumed by others.

Then again, a vast margin of the earnings of the English people is expended in direct and indirect taxation. The public burdens of every nation fall mainly on the vast masses of that nation, and the operatives of England are the vast masses of the English nation.

If the English operatives could only retain for their own use and benefit the vast sums which, under the existing system of Land Tenure, go on the one hand to the owners of the soil, and the sums that an economical system of taxation would save for them on the other, their material comforts and enjoyments would be multiplied a hundred fold. Under the existing state of things their condition is utterly incapable of any improvement in the future. Read the whole letter

A.J.O. [probably Mark Twain]: Slavery

Suppose I am the owner of an estate and 100 slaves, all the land about being held in the same way by people of the same class as myself. ...
Suddenly a brilliant idea strikes me. I reflect that there is no unoccupied land in the neighbourhood, so that if my laborers were free they would still have to look to me for work somehow. ...
Most of them think they would like to have a piece of land and work it for themselves, and be their own masters. ...
"But," softly I observe, "you are going too fast. Your proposals about the tools and seed and your maintenance are all right enough, but the land, you remember, belongs to me. You cannot expect me to give you your liberty and my own land for nothing. That would not be reasonable, would it?" ...
Still I am ready to do what I promised — "to employ as many as I may require, on such terms as we may mutually and independently agree." ...
So they all set to at the old work at the old place, and on the old terms, only a little differently administered; that is, that whereas I formerly supplied them with food, clothes, etc., direct from my stores, I now give them a weekly wage representing the value of those articles, which they will henceforth have to buy for themselves. ...

Instead of being forced to keep my men in brutish ignorance, I find public schools established at other people's expense to stimulate their intelligence and improve their minds, to my great advantage, and their children compelled to attend these schools. The service I get, too, being now voluntarily rendered (or apparently so) is much improved in quality. In short, the arrangement pays me better in many ways.

REJOICE! I AM CAPITAL AND I EMPLOY PEOPLE!

But I gain in other ways besides pecuniary benefit. I have lost the stigma of being a slave driver, and have, acquired instead the character of a man of energy and enterprise, of justice and benevolence. I am a "large employer of labour," to whom the whole country, and the labourer especially, is greatly indebted, and people say, "See the power of capital! These poor labourers, having no capital, could not use the land if they had it, so this great and far-seeing man wisely refuses to let them have it, and keeps it all for himself, but by providing them with employment his capital saves them from pauperism, and enables him to build up the wealth of the country, and his own fortune together."

Whereas it is not my capital that does any of these things. ...
But now another thought strikes me. Instead of paying an overseer to work these men for me, I will make him pay me for the privilege of doing it. I will let the land as it stands to him or to another — to whomsoever will give the most for the billet. He shall be called my tenant instead of my overseer, but the things he shall do for me are essentially the same, only done by contract instead of for yearly pay. ....

For a moderate reduction in my profits, then — a reduction equal to the tenant's narrow margin of profit — I have all the toil and worry of management taken off my hands, and the risk too, for be the season good or bad, the rent is bound to be forthcoming, and I can sell him up to the last rag if he fails of the full amount, no matter for what reason; and my rent takes precedence of all other debts. ...

If wages are forced down it is not I that do it; it is that greedy and merciless man the employer (my tenant) who does it. I am a lofty and superior being, dwelling apart and above such sordid considerations. I would never dream of grinding these poor labourers, not I! I have nothing to do with them at all; I only want my rent -- and get it. Like the lillies of the field, I toil not, neither do I spin, and yet (so kind is Providence!) my daily bread (well buttered) comes to me of itself. Nay, people bid against each other for the privilege of finding it for me; and no one seems to realise that the comfortable income that falls to me like the refreshing dew is dew indeed; but it is the dew of sweat wrung from the labourers' toil. It is the fruit of their labour which they ought to have; which they would have if I did not take it from them.

This sketch illustrates the fact that chattel slavery is not the only nor even the worst form of bondage. When the use of the earth — the sole source of our daily bread — is denied unless one pays a fellow creature for permission to use it, people are bereft of economic freedom. The only way to regain that freedom is to collect the rent of land instead of taxes for the public domain.

Once upon a time, labour leaders in the USA, the UK and Australia understood these facts. The labour movements of those countries were filled with people who fought for the principles of 'the single tax' on land at the turn of the twentieth century. But since then, it has been ridiculed, and they have gradually yielded to the forces of privilege and power — captives of the current hegemony — daring no longer to come to grips with this fundamental question, lest they, too, become ridiculed.

And so the world continues to wallow in this particular ignorance — and in its ensuing poverty and debt. Read the whole essay

Henry George: How to Help the Unemployed (1894)

... Yet why is it that men able to work and willing to work cannot find work? ..

For the question of the unemployed is but a more than usually acute phase of the great labor question -- a question of the distribution of wealth. Now, given any wrong, no matter what, that affects the distribution of wealth, and it follows that the leading class must be averse to any examination or question of it. For, since wealth is power, the leading class is necessarily dominated by those who profit or imagine they profit by injustice in the distribution of wealth. Hence, the very indisposition to ask the cause of evils so great as to arouse and startle the whole community is but proof that they spring from some wide and deep injustice. ...

... So that, whether we begin at the right or the wrong end, any analysis brings us at last to the conclusion that the opportunities of finding employment and the rate of all wages depend ultimately upon the freedom of access to land; the price that labor must pay for its use....

... Today, as the last census reports show, the majority of American farmers are rack-rented tenants, or hold under mortgage, the first form of tenancy; and the great majority of our people are landless men, without right to employ their own labor and without stake in the land they still foolishly speak of as their country. This is the reason why the army of the unemployed has appeared among us, why by pauperism has already become chronic, and why in the tramp we have in more dangerous type the proletarian of ancient Rome.

These recurring spasms of business stagnation; these long-drawn periods of industrial depression, common to the civilized world, do not come from our treatment of money; are not caused and are not to be cured by changes of tariffs. Protection is a robbery of labor, and what is called free trade would give some temporary relief, but speculation in land would only set in the stronger, and at last labor and capital would again resist, by partial cessation, the blackmail demanded for their employment in production, and the same round would be run again. There is but one remedy, and that is what is now known as the single-tax -- the abolition of all taxes upon labor and capital, and of all taxes upon their processes and products, and the taking of economic rent, the unearned increment which now goes to the mere appropriator, for the payment of public expenses. Charity can merely demoralize and pauperize, while that indirect form of charity, the attempt to artificially "make work" by increasing public expenses and by charity woodyards and sewing-rooms, is still more dangerous. If, in this sense, work is to be made, it can be made more quickly by dynamite and kerosene.

But there is no need for charity; no need for "making work." All that is needed is to remove the restrictions that prevent the natural demand for the products of work from availing itself of the natural supply. Remove them today, and every unemployed man in the country could find for himself employment tomorrow, and his "effective demand" for the things he desires would infuse new life into every subdivision of business and industry, even that of the dentist, the preacher, the magazine writer, or the actor.

The country is suffering from "scarcity of employment." But let anyone to-day attempt to employ his own labor or that of others, whether in making two blades of grass grow where one grew before, or in erecting a factory, and he will at once meet the speculator to demand of him an unnatural price for the land he must use, and the tax-gatherer to fine him for his act in employing labor as if he had committed a crime. The common-sense way to cure "scarcity of employment" is to take taxes off the products and processes of employment and to impose in their stead the tax that would end speculation in land.

But, it will be said, this is not quick enough. On the contrary, it is quicker than anything else. Even the public recognition of its need, by but a part of the intelligence and influence that is now devoted to charity appeals and schemes, would have such an effect upon the speculative price of land as to at once set labor and capital to work. Read the entire article

Mason Gaffney: Cannan's Law

Everything above points to there being a low ceiling on Georgist taxation applied locally. Henry George recognized that the power elite of landowner/employers use Malthus' doctrine to oppose raising wages -- it would just spawn an invasion of new brats into the work force, they said, bringing wage rates back down to bare subsistence. To make his points, George had to refute Malthus. George's view mostly prevailed, with exceptions, until fairly recent times. Neo-classical economists even hijacked it, with a reverse spin, to trivialize land values. Whatever we may think of Malthus today, there is no doubt that the fear of population increments from outside the taxing polity now plays the role that George ascribed to Malthusianism, and plays it with devastating effect. ...

Public spending should feature "Citizen Dividends." These are social dividends limited to citizens, thus discouraging free or illegal immigration that would dilute the dividends and erode their voter support. (The degree, pace, and conditions of legal immigration is an issue to treat separately.) Dividends take many forms other than outright per head cash grants. The G.I. Bill was a splendid example. Social Security payments are another. School equalization payments based on a.d.a. are another. A state or province cannot easily restrict benefits to its old time citizens, as Zobel showed -- but a nation can.

At the same time, there should be no more capital grants to localities for public works. When cities pay for their own public works they must attract population to justify the capital outlays and service the debt. ... read the whole article

Mason Gaffney: George's Economics of Abundance: Replacing dismal choices with practical resolutions and synergies

10. Making labor cheaper to hire without lowering wage rates

Georgist policy removes the many big tax wedges between worker and employer, and employer and customer, and worker and consumable goods. Thus labor can cost the employer less, while the worker gets more disposable income after-tax. Many economists inveigh against the minimum wage, claiming it overprices labor. It is a matter of suspicion that they are then silent on the deadly effects of the payroll tax, which affects workers at all levels. Sales taxes, too, cut into real wages, yet many of these same economists would raise sales taxes and introduce VAT. President and Mrs. Clinton now speak seriously of raising payroll taxes even more, to finance the new health plan.

There is a high elasticity of demand for labor. This may be observed in farming, for example, where landowners have avoided union wage rates simply by shifting their land from fresh fruits and vegetables to labor-sparing uses like small grains or cotton. Conversely, removing the payroll tax burden will move owners to shift land back into labor-using enterprises.... read the whole article

Living Wage

Fred Foldvary: The Living Wage

There is a proposal in San Francisco, California, to establish a minimum wage of $11 per hour for companies that provide services or lease land from the city. Those who favor this argue that the high cost of living in San Francisco warrants requiring this wage floor so that those workers can afford housing and other living expenses. ...

If many workers in the city were to receive a net increase in wages, this extra money would be a pot of gold for their landlords.

Those landlords not under rent control would be able to raise the rents of their low-income tenants, since if the tenant could afford to live there before the raise, he can also afford it if the higher rent brings him back to the same after-rent income.
Those tenants in rent-controlled apartments would get a double subsidy, rent and wages, increasing the inequality between those with privileges and those who were not lucky enough to get the government grants.

So the effect of local "living wage" laws are generally higher taxes, higher rents and fewer services for the residents, greater inequality, and not that much improvement in the well-being of the poorest workers and of the city community. The superficial appeal of this programs that only treats the effects of poverty dissolves when subjected to economic analysis.

The fundamental reason why the least-able workers have low wages is that their labor has a low productivity and that a large chunk of their wage is taken away by taxes. The best remedy is to deal with the root cause of the problem: change the school system to raise the educational level of the students, and stop taxing wages when earned or spent. Shift the tax base from wages to land rent. These reforms would raise the pure market wages of the least able workers. Then employers would willingly pay the higher wages because the workers are worth it. Read the whole article

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

Home	Top of page	Essential Documents	Themes	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