Economic Development

In the 1970s and 1980s, there was a group of Georgists and others who called themselves TRED: the Committee on Taxation, Resources and Economic Development. They saw and wrote about how intimately connected taxation and resources are to economic development. It is a focus we would do well to adopt.

Ted Gwartney: A Free Market Strategy to Reduce Sprawl

A Strategy for Economic Development

Economic theory recognizes that when government places taxes on production and on commerce the net result is a reduction in those activities. The reason this occurs is that these taxes add to the cost of production and to the cost of doing business. The ideal public policy would be to reduce taxes on production and commerce and raise public revenue from non-distorting revenue sources.

That non-distorting revenue source is land and natural resources. The central problem which limits the operational success of the economy is the failure to procure the public value which is created by the community.

This value ought to be reserved for the community to pay for public improvements. However, this value is to a large extent diverted into private pockets by speculation in land and natural resource values. The correct approach is to create a system in which no-one, except the citizenry as a whole, is rewarded by the collection of publicly created values.

Economists can agree that the economically efficient public finance system is one in which revenue is drawn from the rent that people pay for the use of land and natural resources. These payments do not distort economic activity. Land rent, because it is pure surplus, could be taken and used for any purpose and there would be no negative consequences for the allocation of labor and capital, or in the use of land and natural resources. If this surplus is invested in needed infrastructure and other public services, it will in turn increase land values for future public investment. ... read the whole article

Frank Stilwell and Kirrily Jordan: The Political Economy of Land: Putting Henry George in His Place

Land is the most basic of all economic resources, fundamental to the form that economic development takes. Its use for agricultural purposes is integral to the production of the means of our subsistence. Its use in an urban context is crucial in shaping how effectively cities function and who gets the principal benefits from urban economic growth. Its ownership is a major determinant of the degree of economic inequality: surges of land prices, such as have occurred in Australian cities during the last decade, cause major redistributions of wealth. In both an urban and rural context the use of land – and nature more generally – is central to the possibility of ecological sustainability. Contemporary social concerns about problems of housing affordability and environmental quality necessarily focus our attention on ‘the land question.’

These considerations indicate the need for a coherent political economic analysis of land in capitalist society. Indeed, the analysis of land was central in an earlier era of political economic analysis. The role of land in relation to economic production, income distribution and economic growth was a major concern for classical political economists, such as Smith, Ricardo and Malthus. But the intervening years have seen land slide into a more peripheral status within economic analysis. Political economists working in the Marxian tradition have tended to focus primarily on the capital-labour relation as the key to understanding the capitalist economy.1 Neo-classical economists typically treat land, if they acknowledge it at all, as a ‘factor of production’ equivalent to labour or capital, thereby obscuring its distinctive features and differences. Keynesian and post-Keynesian economists have also given little attention to land because typically their analyses focus more on consumption, saving, investment and other economic aggregates. ...

George’s advocacy of replacing all existing taxes with a single tax on land values was powerful. He argued that this tax would redistribute the wealth that would otherwise accrue to private landowners, forcing them to repay the community for their exclusive use of a public resource. Moreover, such redistribution would reduce wealth inequalities and allow massive improvements in welfare provisions and public services. In addition, removing taxes on labour and capital would boost economic growth and provide a stimulus to employment. Conversely, taxing land values would reduce speculation in land and depress land prices, allowing greater access to landownership while reducing economic instability.

 

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