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.
Urban Development
Concerns about urban policies also raise questions about the current relevance
of Georgist ideas. For example, it is pertinent to ask whether a more uniform
land tax would encourage the more efficient utilisation of urban space.
George argued that, in order to cover the costs of a higher rate of land
tax, landowners would be forced to put their land to its most productive
use, and could not afford to hold it idle. Here is a clear link with the
modern concerns to discourage ‘urban sprawl’ and to promote ‘urban
consolidation.’ To the extent that a higher land tax would encourage
the development of more housing in existing urban areas, the pressures
for housing development in outlying areas would be significantly reduced.
This, in turn, could reduce the burgeoning demand for transport that is
currently characteristic of large cities.
Land tax also impacts on the politics of peripheral urban expansion. Currently,
the prospect of huge capital gains resulting from decisions by local governments
to rezone land from rural to urban acts as an incentive for landowners on
the fringes of built-up areas to lobby for changes that will allow increased
development. Hence, landowners push for rights to subdivision, irrespective
of whether or not there is actual demand (Day, 1995: 3). By creaming off
the gains from windfall increases in land values, land tax obviates this
bias towards relentless urban expansion.
However, the question remains: would a uniform land tax be sufficient to
produce more efficient patterns of urban development? Or would there still
be a need for direct land use controls? Land tax can certainly be a tool
for discouraging the wasteful use of land. It tends to discourage people
from purchasing excessive amounts of land or leaving it idle. However, it
may also encourage the overdevelopment of land in order to produce the income
stream necessary to pay the higher rate of tax.
Critics of urban consolidation such as Patrick Troy (1996) have examined
the potential problems of such overdevelopment, including a range of environmental
impacts such as altered hydrological processes. It seems to be an overly
bold claim that a Georgist land tax alone would be sufficient to achieve
optimal urban development patterns. Land use controls a necessary adjunct
to land tax - in setting minimum requirements for green space, for example.
Local government planning controls are also important to prevent incompatibility
of land uses, such the development of hazardous or unhealthy industrial activities
adjacent to residential areas. Targeted decentralisation policies are a means
of encouraging the further development of regional centres. Such policies
can work in conjunction with land taxes to ease growth pressures in the larger
cities, while addressing long-standing spatial, social and economic inequalities
(Stilwell, 2000: 254-260). The desirability of promoting more decentralised
regional development is consistent with a Georgist perspective, but not altogether
compatible with the claim that land tax would facilitate urban consolidation.
It seems clear that it ‘overburdens’ land tax to expect it alone
to produce the best spatial outcomes, taking account of all the economic,
social and environmental issues involved in urban and regional policy. The
various other policy instruments – including regulations relating to
green space, zoning, and the provision of public infrastructure to pave the
way for decentralisation – are important complements to land taxation.
In other words, land tax is best regarded as a necessary but not sufficient
condition for more effective spatial policy. ...
Georgists have also frequently claimed to be able to explain and ameliorate,
even resolve, the cyclical character of the capitalist economy. George argued
that a higher uniform land tax could reduce the severity of booms and busts
in the housing market by reducing the speculative investment in land. This
would produce more stable economic conditions throughout the economy, removing
the boom-bust cycle to which capitalism is otherwise prone. It is
an argument that has contemporary Australian relevance because the boom-bust
character
of the urban property market is clearly a significant factor in overall cyclical
economic instability. An earlier article on Australian land price
trends by Kavanagh (2001) has illustrated this connection, demonstrating
that, while
the property market is more volatile than the economy as a whole, there has
been a clear temporal connection between the two patterns of cyclical behaviour
over the last half century. Property booms and busts have typically coincided
with swings in overall national economic performance. The policy implication
is that, by smoothing out cycles in the housing market, a uniform land tax
could help to avoid periodic crises in capitalist economies more generally.
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