Q: I want to follow-up on what you had said some months ago about land reform:
JES: "The main, underlying idea of Henry George is the taxation of
land and other natural resources. At the time, people thought, "not
really that too," but what was underlying his ideas is rent associated
with things that are inelastically supplied, which are land and natural
And using natural resource extraction and using land rents as the basis of
taxation is an argument that I think makes an awful lot of sense because
it is a non-distortionary source of income and wealth.
Q: In Globalization and its Discontents, you write (p. 81): "But land
reform represents a fundamental change in the structure of society, one that
those in the elite that populates the finance ministries, those with whom
the international financial institutions interact, do not necessarily like."
JES: Yes. Let me try to approach the question a little more systematically.
Once you take the perspective I just gave, that means the management should
be done in such a way that it maximizes the amount of money available to
the US government from natural resources because they are within its domain
and control. So, looking at the United States, one of the implications of
this is that a foundation such as yours [the Robert Schalkenbach Foundation,
created to promote the ideas of Henry George, as expressed in Progress & Poverty]
ought to be very much against the policies of the US government of giving
away our natural resources. Here is a case where we not only are not taxing
it much, we're actually giving it away.
Q: I assume you're speaking in particular of oil and mineral rights, but
would not Broadband Spectrum rights also be included in that category?
JES: Yes, Broadband Spectrum rights as well. Now, giving away rights such
as those would be anathema to the spirit of Henry George. And the second
part is that when you sell them, you want to do so in such a way as to maximize
the revenues. And whether you decide to sell it or whether you decide to
rent it, would be the question of what is the way that maximizes the extraction
of public revenues.
Q: And those revenues go to the people. Not to private concerns.
JES: Exactly. So you're trying to say, from the perspective of public management,
how can we take this inelastic supply of public resources and maximize the
rents that we can extract from it, consistent with other public objectives?
That is a very deep philosophical approach, and requires a re-thinking of
how we manage all aspects of those public resources. However, much of what
we do is inconsistent with that. Now, the issue of land reform is a little
bit different. There, it's a two-step analysis. My concern that I expressed
about land is that in many developing countries, you have most land owned
by a few rich people, and the land is relatively little taxed. But the land
is worked in a system of sharecropping in which workers have to pay the landlord
50% of their output. In a way, you can look at that 50% as a tax. The sharecroppers
are paying a 50% tax to the landlord. But it's worse than a tax. Because
it's not a land tax, it's a tax on their labor. And it's a tax that goes
to the landlord rather than to society. So the notion is that land reform
could take a variety of different forms. For instance, the government could
take over the land and rent it to the people. Or give it to the people and
have a land tax that would not have the distortionary effect of land reform.
So, in a way, these systems of share-cropping are worse even than anything
that Henry George was worried about in terms of misuse of land. ...
Q: Has President Mugabe of Zimbabwe's misuse of government power to return
land to its so-called "rightful owners" given land reform a bad
JES: That's true, but it doesn't have to be done that way. Now, one of the
things that is again in the spirit of Henry George is that, if you have land
taxes, then the market value of land goes down. What you're willing to pay
for land is the difference between what you pay and what you get to keep
after paying your land taxes. So, in a Henry George world, the amount of
compensation would be very low. So one could argue that moving toward a land
tax would facilitate that reform. Once we raise rates on land taxes, the
market value will have to go down. The government can buy the land and redistribute
it to the workers, and they then would be able to keep the fruits of their
labor. They will continue to pay the land tax, but the product of their own
efforts — their labor — will be their own, as opposed to sharing
fifty percent with the landlord.
Q: Do you think land reform could possibly find a way onto the political
agenda in the United States?
JES: No. Land reform is not a big issue in the United States because we
don't have a lot of sharecropping. There's some, but it's very limited.
Q: What countries do you regard as the most politically open to tax reform
as a means of achieving meaningful land reform?
JES: I think some countries in South America are moving in that direction.
They're beginning to do this form of taxation because they want the land
to be utilized. Some people own land but make no use of it.
Q: You mentioned the World Bank's program titled "Market-Based Land
Reform." Is that the only international forum in which there is a chance
of gaining politically-effective support for "land value taxation" as
an instrument for land reform?
JES: There's not a lot [of] discussion going on in those circles about land
reform. The World Bank is still talking about it, as in the program I was
talking about. And certain countries are continuing to talk about it within
themselves. But the IMF is not, and I don't know of any NGO (nongovernmental
organization) that is. ...
Q: In your opinion, would it be more effective to attempt to achieve support
from economists about the need for such reform, or to bypass them in seeking
to build popular support independently from them, in that the views of mainstream
economists on the topic of land reform might fairly be characterized as an "intransigent"?
JES: There are some economists who are interested in this. I think most
economists would like the idea, and would support it. But, economists spend
their time on things that they think have marketability. So it isn't that
they don't think it's a good idea; they don't think there's any resonance
in it. President Bush is still talking about the inheritance tax, and income
tax, and they want to get involved in what other people are talking about.
It's a social phenomenon, I think. So, if you get a lot of other people talking
about it, then they'll join the fray.
Q: You are aware that Henry George was a critic of the moral foundations
of our economic institutions. What do you think of reform efforts toward
land value taxation based on an appeal to morality?
JES: What it fits into is that there is a wide view today that we should
tax environmental "bads" such as pollution and the like. And switch
from taxing good things like labor. So, in a way, that's where it comes in:
let's stop taxing good things like labor, and tax things that are resources.
So the argument is, "why tax things that are contributing to society?" ... read
the entire interview