Georgism has a distinctive ethical basis. So a review of the contemporary
relevance of Georgist political economy can usefully begin by making this
explicit. The key moral issue is the private appropriation of public wealth.
As George recognised, land is a ‘gift from nature’ and, as such,
is rightfully a community resource. Hence, those deriving benefits from the
private ownership of land should recompense the community for the privilege.
This principle has strong echoes of the idea of ‘usufruct’, a
pre-capitalist term denoting a person’s legal right to use and accrue
benefits from property that does not belong to them. In return, the user
is obliged to keep the property in good repair and pay all costs as a ‘ground
rent’ (‘Lectric Law Library, n.d). The concept of ‘usufruct’ has
fallen out of common usage, so one hesitates to try to revive it. Moreover,
as Richards (2002) notes, ‘it is difficult to image how this word could
be employed, or brought back into circulation, in the modern world, since
we live in a world in which people tend to be remarkably unsympathetic to
the property rights or claims of others’.
However, the principle of ‘usufruct’ goes to the heart of the
question of how best to balance collective and individual rights and interests.
George’s solution of a tax on the value of land squarely addresses
this issue. By returning a proportion of the land value to the community
in the form of taxation revenue, restitution would be paid for the use of
a community resource. This is an ethical justification for land taxation.
...
Indeed, one could say that the term ‘tax’ is a misnomer because
what is really involved is value created by the community being retained
by the community rather than being appropriated by private landholders. For
example, under current arrangements landowners receive ‘windfall’ gains
when the market value of their land rises as a result of publicly provided
infrastructure being built nearby, or when local government zoning decisions
reclassify their land as appropriate for further development. In this way,
individual landowners stand to reap huge benefits at the expense of community-generated
processes. Such arrangements create an odd incentive: allowing landholders
to appropriate the unearned wealth generated by rising land values, thereby
rewarding this unproductive activity, while taxing productive endeavour.
The Georgist land tax ‘remedy’, by contrast, would eliminate
such perverse incentives and thereby more effectively align private and public
interests in the use of society’s resources. ...
Georgist analysis strongly emphasises landownership as a principal source
of inequality. Because land is a strictly limited resource, its private ownership
necessarily excludes large sections of the community from its benefits. A
landowning class thereby gains political economic power. In George’s
own time the social identity and power of this landowning class was distinctive.
Those who could not afford to buy land were forced to pay rent to the wealthier
few who could. By taxing the value of land, George posited that publicly
created wealth could be recouped from the private landowners and redistributed
throughout the community more equitably in order to address social goals.
Are George’s arguments about land ownership and wealth inequality
relevant today? Australia provides an interesting example, because land is
the single largest item in national wealth. Laurie Aarons outlines the concentration
of farming land in particular in the hands of a few very wealthy corporations
and individuals – what he refers to as ‘corporate squattocracy’ (Aarons,
1999: 23). The relentless increase in urban land values in recent years has
also produced dramatic redistributions of wealth. In the State of New South
Wales, for example, land values increased by about $361 billion over the
period 1993 – 2003. The existing land-based taxes clawed back only
$44 billion in government revenues, comprising only about 12% of the land-related
economic surplus. So 88% was retained as ‘unearned income’ by
landowners (Stilwell and Jordan, forthcoming). A higher rate of land tax
with fewer exemptions could have substantially reduced this private wealth
appropriation. This is not necessarily to posit the desirability of recouping
100% through land tax, because that would certainly raise major problems
of people’s ability to pay, given that much of the increased wealth
resulting from land price inflation has not been realised as current income.
But it is indicative of the current imbalance between private and public
appropriations of the surplus arising from increases in land-based wealth.
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