Much of the current administration's comments on tax reform has been along the line of "It's your money. We want to let you keep more of it." That comment is largely addressed to the income tax, and generally works out to benefit the highest-earning segments of our population, with some suggestion that those benefits for the high-earners will of course trickle down to the remainder of American society. Further, there has been a lot of discussion about an "ownership society" in which more things would be individually owned, and there would be fewer safety nets provided from our common spending: one would buy insurance from the FIRE sector, rather than falling back on protection offered from revenues collected in the form of taxes.

Georgists take a different position. We believe that one's wages are inherently private. Consistent with that, we believe that buildings, being the result of individual human labor, are also private. But the economic value of land, having been created as a result of the land's natural endowment, the increase in population, our common spending, should not be privatized. We are persuaded that the value the land has should be treated as common property.

This is very different from our current system of taxation, which leaves virtually all of the appreciation of land value in private — and corporate — hands. Couples get to keep the first $500,000 of land appreciation every two years on residential property they live in, completely tax free! Appreciation on properties held at the time of one's death never gets taxed in a capital gains tax, and only a tiny percentage is taxed by estate taxes.

What would a better way look like? Tax what we individually don't make, what we can't make, and all depend on. All benefits of our common spending tend to accrue to the holders of land, particularly our best land. Tax that land value, and we collect for the commons that which we together create!

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

IN socialism as distinguished from individualism there is an unquestionable truth — and that a truth to which (especially by those most identified with free-trade principles) too little attention has been paid. Man is primarily an individual — a separate entity, differing from his fellows in desires and powers, and requiring for the exercise of those powers and the gratification of those desires individual play and freedom. But he is also a social being, having desires that harmonize with those of his fellows, and powers that can only be brought out in concerted action. There is thus a domain of individual action and a domain of social action — some things which can best be done when each acts for himself, and some things which can best be done when society acts for all its members. And the natural tendency of advancing civilization is to make social conditions relatively more important, and more and more to enlarge the domain of social action. This has not been sufficiently regarded, and at the present time, evil unquestionably results from leaving to individual action functions that by reason of the growth of society and the developments of the arts have passed into the domain of social action; just as, on the other hand, evil unquestionably results from social interference with what properly belongs to the individual. Society ought not to leave the telegraph and the railway to the management and control of individuals; nor yet ought society to step in and collect individual debts or attempt to direct individual industry. — Protection or Free Trade, Chapter 28 econlib

THE poverty to which in advancing civilization great masses of men are condemned, is not the freedom from distraction and temptation which sages have sought and philosophers have praised: it is a degrading and embruting slavery, that cramps the higher nature, dulls the finer feelings, and drives men by its pain to acts which the brutes would refuse. It is into this helpless, hopeless poverty, that crushes manhood and destroys womanhood, that robs even childhood of its innocence and joy, that the working classes are being driven by a force which acts upon them like a resistless and unpitying machine. The Boston collar manufacturer who pays his girls two cents an hour may commiserate their condition, but he, as they, is governed by the law of competition, and cannot pay more and carry on his business, for exchange is not governed by sentiment. And so, through all intermediate gradations, up to those who receive the earnings of labor without return, in the rent of land, it is the inexorable laws of supply and demand, a power with which the individual can no more quarrel or dispute than with the winds and the tides, that seem to press down the lower classes into the slavery of want.

But, in reality, the cause is that which always has, and always must result in slavery — the monopolization by some of what nature has designed for all. . . . Private ownership of land is the nether millstone. Material progress is the upper millstone. Between them; with an increasing pressure, the working classes are being ground. — Progress & Poverty — Book VII, Chapter 2, Justice of the Remedy: Enslavement of laborers the ultimate result of private property in land

IT is not in the relations of capital and labor; it is not in the pressure of population against subsistence that an explanation of the unequal development of our civilization is to be found. The great cause of inequality in the distribution of wealth is inequality in the ownership of land. The ownership of land is the great fundamental fact which ultimately determines the social, the political and, consequently, the intellectual and moral condition of a people. And it must be so. For land is the habitation of man, the storehouse upon which he must draw for all his needs, the material to which his labor must be applied for the supply of all his desires; for even the products of the sea cannot be taken, the light of the sun enjoyed, or any of the forces of nature utilized, without the use of land or its products. On the land we are born, from it we live, to it we return again — children of the soil as truly as is the blade of grass or the flower of the field. — Progress & Poverty — Book V, Chapter 2: The Problem Solved: The persistence of poverty amid advancing wealth

THERE is nothing strange or inexplicable in the phenomena that are now perplexing the world. It is not that material progress is not in itself a good, it is not that nature has called into being children for whom she has failed to provide; it is not that the Creator has left on natural laws a taint of injustice at which even the human mind revolts, that material progress brings such bitter fruits. That amid our highest civilization men faint and die with want is not due to the niggardliness of nature, but to the injustice of man. Vice and misery, poverty and pauperism, are not the legitimate results of increase of population and industrial development; they only follow increase of population and industrial development because land is treated as private property — they are the direct and necessary results of the violation of the supreme law of justice, involved in giving to some men the exclusive possession of that which nature provides for all men. — Progress & Poverty — Book VII, Chapter 1, Justice of the Remedy: Injustice of private property in land

... go to "Gems from George"

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

3. THE SINGLE TAX FALLS IN PROPORTION TO BENEFITS

To perceive that the single tax would justly measure the value of government service we have only to realize that the mass of individuals everywhere and now, in paying for the land they use, actually pay for government service in proportion to what they receive. He who would enjoy the benefits of a government must use land within its jurisdiction. He cannot carry land from where government is poor to where it is good; neither can he carry it from where the benefits of good government are few or enjoyed with difficulty to where they are many and fully enjoyed. He must rent or buy land where the benefits of government are available, or forego them. And unless he buys or rents where they are greatest and most available he must forego them in degree. Consequently, if he would work or live where the benefits of government are available, and does not already own land there, he will be compelled to rent or buy at a valuation which, other things being equal, will depend upon the value of the government service that the site he selects enables him to enjoy. 14 Thus does he pay for the service of government in proportion to its value to him. But he does not pay the public which provides the service; he is required to pay land-owners.

14. Land values are lower in all countries of poor government than in any country of better government, other things being equal. They are lower in cities of poor government, other things being equal, than in cities of better government. Land values are lower, for example, in Juarez, on the Mexican side of the Rio Grande, where government is bad, than in El Paso, the neighboring city on the American side, where government is better. They are lower in the same city under bad government than under improved government. When Seth Low, after a reform campaign, was elected mayor of Brooklyn, N.Y., rents advanced before he took the oath of office, upon the bare expectation that he would eradicate municipal abuses. Let the city authorities anywhere pave a street, put water through it and sewer it, or do any of these things, and lots in the neighborhood rise in value. Everywhere that the "good roads" agitation of wheel men has borne fruit in better highways, the value of adjacent land has increased. Instances of this effect as results of public improvements might be collected in abundance. Every man must be able to recall some within his own experience.

And it is perfectly reasonable that it should be so. Land and not other property must rise in value with desired improvements in government, because, while any tendency on the part of other kinds of property to rise in value is checked by greater production, land can not be reproduced.

Imagine an utterly lawless place, where life and property are constantly threatened by desperadoes. He must be either a very bold man or a very avaricious one who will build a store in such a community and stock it with goods; but suppose such a man should appear. His store costs him more than the same building would cost in a civilized community; mechanics are not plentiful in such a place, and materials are hard to get. The building is finally erected, however, and stocked. And now what about this merchant's prices for goods? Competition is weak, because there are few men who will take the chances he has taken, and he charges all that his customers will pay. A hundred per cent, five hundred per cent, perhaps one or two thousand per cent profit rewards him for his pains and risk. His goods are dear, enormously dear — dear enough to satisfy the most contemptuous enemy of cheapness; and if any one should wish to buy his store that would be dear too, for the difficulties in the way of building continue. But land is cheap! This is the type of community in which may be found that land, so often mentioned and so seldom seen, which "the owners actually can't give away, you know!"

But suppose that government improves. An efficient administration of justice rids the place of desperadoes, and life and property are safe. What about prices then? It would no longer require a bold or desperately avaricious man to engage in selling goods in that community, and competition would set in. High profits would soon come down. Goods would be cheap — as cheap as anywhere in the world, the cost of transportation considered. Builders and building materials could be had without difficulty, and stores would be cheap, too. But land would be dear! Improvement in government increases the value of that, and of that alone.

Now, the economic principle pursuant to which land-owners are thus able to charge their fellow-citizens for the common benefits of their common government points to the true method of taxation. With the exception of such other monopoly property as is analogous to land titles, and which in the purview of the single tax is included with land for purposes of taxation, 15 land is the only kind of property that is increased in value by government; and the increase of value is in proportion, other influences aside, to the public service which its possession secures to the occupant. Therefore, by taxing land in proportion to its value, and exempting all other property, kindred monopolies excepted — that is to say, by adopting the single tax — we should be levying taxes according to benefits.16

15. Railroad franchises, for example, are not usually thought of as land titles, but that is what they are. By an act of sovereign authority they confer rights of control for transportation purposes over narrow strips of land between terminals and along trading points. The value of this right of way is a land value.

16. Each occupant would pay to his landlord the value of the public benefits in the way of highways, schools, courts, police and fire protection, etc., that his site enabled him to enjoy. The landlord would pay a tax proportioned to the pecuniary benefits conferred upon him by the public in raising and maintaining the value of his holding. And if occupant and owner were the same, he would pay directly according to the value of his land for all the public benefits he enjoyed, both intangible and pecuniary.

And in no sense would this be class taxation. Indeed, the cry of class taxation is a rather impudent one for owners of valuable land to raise against the single tax, when it is considered that under existing systems of taxation they are exempt. 17 Even the poorest and the most degraded classes in the community, besides paying land-owners for such public benefits as come their way, are compelled by indirect taxation to contribute to the support of government. But landowners as a class go free. They enjoy the protection of the courts, and of police and fire departments, and they have the use of schools and the benefit of highways and other public improvements, all in common with the most favored, and upon the same specific terms; yet, though they go through the form of paying taxes, and if their holdings are of considerable value pose as "the tax-payers" on all important occasions, they, in effect and considered as a class, pay no taxes, because government, by increasing the value of their land, enables them to recover back in higher rents and higher prices more than their taxes amount to. Enjoying the same tangible benefits of government that others do, many of them as individuals and all of them as a class receive in addition a tangible pecuniary benefit which government confers upon no other property-owners. The value of their property is enhanced in proportion to the benefits of government which its occupants enjoy. To tax them alone, therefore, is not to discriminate against them; it is to charge them for what they get.18

17. While the landholders of the City of Washington were paying something less than two per cent annually in taxes, a Congressional Committee (Report of the Select Committee to Investigate Tax Assessments in the District of Columbia, composed of Messrs. Johnson, of Ohio, Chairman, Wadsworth, of New York, and Washington, of Tennessee. Made to the House of Representatives, May 24, 1892. Report No. 1469), brought out the fact that the value of their land had been increasing at a minimum rate of ten per cent per annum. The Washington land-owners as a class thus appear to have received back in higher land values, actually and potentially, about ten dollars for every two dollars that as land-owners they paid in taxes. If any one supposes that this condition is peculiar to Washington let him make similar estimates for any progressive locality, and see if the land-owners there are not favored in like manner.

But the point is not dependent upon increase in the capitalized value of land. If the land yields or will yield to its owner an income in the nature of actual or potential ground rent, then to the extent that this actual or possible income is dependent upon government the landlord is in effect exempt from taxation. No matter what tax he pays on account of his ownership of land, the public gives it back to him to that extent.

18. Take for illustration two towns, one of excellent government and the other of inefficient government, but in all other respects alike. Suppose you are hunting for a place of residence and find a suitable site in the town of good government. For simplicity of illustration let us suppose that the land there is not sold outright but is let upon ground rent. You meet the owner of the lot you have selected and ask him his terms. He replies:

"Two hundred and fifty dollars a year."

"Two hundred and fifty dollars a year!" you exclaim. "Why, I can get just as good a site in that other town for a hundred dollars a year."

"Certainly you can," he will say. "But if you build a house there and it catches fire it will burn down; they have no fire department. If you go out after dark you will be 'held up' and robbed; they have no police force. If you ride out in the spring, your carriage will stick in the mud up to the hubs, and if you walk you may break your legs and will be lucky if you don t break your neck; they have no street pavements and their sidewalks are dangerously out of repair. When the moon doesn't shine the streets are in darkness, for they have no street lights. The water you need for your house you must get from a well; there is no water supply there. Now in our town it is different. We have a splendid fire department, and the best police force in the world. Our streets are macadamized, and lighted with electricity; our sidewalks are always in first class repair; we have a water system that equals that of New York; and in every way the public benefits in this town are unsurpassed. It is the best governed town in all this region. Isn't it worth a hundred and fifty dollars a year more for a building site here than over in that poorly governed town?"

You recognize the advantages and agree to the terms. But when your house is built and the assessor visits you officially, what would be the conversation if your sense of the fitness of things were not warped by familiarity with false systems of taxation? Would it not be something like what follows?

"How much do you regard this house as worth? " asks the assessor.

"What is that to you?" you inquire.

"I am the town assessor and am about to appraise your property for taxation."

"Am I to be taxed by this town? What for?"

"What for?" echoes the assessor in surprise. "What for? Is not your house protected from fire by our magnificent fire department? Are not you protected from robbery by the best police force in the world? Do not you have the use of macadamized pavements, and good sidewalks, and electric street lights, and a first class water supply? Don't you suppose these things cost something? And don't you think you ought to pay your share?"

"Yes," you answer, with more or less calmness; "I do have the benefit of these things, and I do think that I ought to pay my share toward supporting them. But I have already paid my share for this year. I have paid it to the owner of this lot. He charges me two hundred and fifty dollars a year -- one hundred and fifty dollars more than I should pay or he could get but for those very benefits. He has collected my share of this year's expense of maintaining town improvements; you go and collect from him. If you do not, but insist upon collecting from me, I shall be paying twice for these things, once to him and once to you; and he won't be paying at all, but will be making money out of them, although he derives the same benefits from them in all other respects that I do." ...

c. Significance of the Upward Tendency of Rent

Now, what is the meaning of this tendency of Rent to rise with social progress, while Wages tend to fall? Is it not a plain promise that if Rent be treated as common property, advances in productive power shall be steps in the direction of realizing through orderly and natural growth those grand conceptions of both the socialist and the individualist, which in the present condition of society are justly ranked as Utopian? Is it not likewise a plain warning that if Rent be treated as private property, advances in productive power will be steps in the direction of making slaves of the many laborers, and masters of a few land-owners? Does it not mean that common ownership of Rent is in harmony with natural law, and that its private appropriation is disorderly and degrading? When the cause of Rent and the tendency illustrated in the preceding chart are considered in connection with the self-evident truth that God made the earth for common use and not for private monopoly, how can a contrary inference hold? Caused and increased by social growth, 97 the benefits of which should be common, and attaching to land, the just right to which is equal, Rent must be the natural fund for public expenses. 98

97. Here, far away from civilization, is a solitary settler. Getting no benefits from government, he needs no public revenues, and none of the land about him has any value. Another settler comes, and another, until a village appears. Some public revenue is then required. Not much, but some. And the land has a little value, only a little; perhaps just enough to equal the need for public revenue. The village becomes a town. More revenues are needed, and land values are higher. It becomes a city. The public revenues required are enormous, and so are the land values.

98. Society, and society alone, causes Rent. Rising with the rise, advancing with the growth, and receding with the decline of society, it measures the earning power of society as a whole as distinguished from that of the individuals. Wages, on the other hand, measure the earning power of the individuals as distinguished from that of society as a whole. We have distinguished the parts into which Wealth is distributed as Wages and Rent; but it would be correct, indeed it is the same thing, to regard all wealth as earnings, and to distinguish the two kinds as Communal Earnings and Individual Earnings. How, then, can there be any question as to the fund from which society should be supported? How can it be justly supported in any other way than out of its own earnings?

If there be at all such a thing as design in the universe — and who can doubt it? — then has it been designed that Rent, the earnings of the community, shall be retained for the support of the community, and that Wages, the earnings of the individual, shall be left to the individual in proportion to the value of his service. This is the divine law, whether we trace it through complex moral and economic relations, or find it in the eighth commandment.

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. ...

Q32. Is not ownership of land necessary to induce its improvement? Does not history show that private ownership is a step in advance of common ownership?
A. No. Private use was doubtless a step in advance of common use. And because private use seems to us to have been brought about under the institution of private ownership, private ownership appears to the superficial to have been the real advance. But a little observation and reflection will remove that impression. Private ownership of land is not necessary to its private use. And so far from inducing improvement, private ownership retards it. When a man owns land he may accumulate wealth by doing nothing with the land, simply allowing the community to increase its value while he pays a merely nominal tax, upon the plea that he gets no income from the property. But when the possessor has to pay the value of his land every year, as he would have to under the single tax, and as ground renters do now, he must improve his holding in order to profit by it. Private possession of land, without profit except from use, promotes improvement; private ownership, with profit regardless of use, retards improvement. Every city in the world, in its vacant lots, offers proof of the statement. It is the lots that are owned, and not those that are held upon ground-lease, that remain vacant.

Q61. If a man buys land in good faith, under the laws under which we live, is he not entitled to compensation for his individual loss when titles are abolished?
A. There is no sounder principle of law than that which, distinguishing the contractual from the legislative powers of government, prescribes that government cannot tie up its legislative powers. Now, land tenures and taxation are so clearly matters of general public policy that no one would deny that they are legislative and not contractual in character. It follows that titles to land, and privileges of more or less exemption from taxation, are voidable at the pleasure of the people. And the possibility of such action on the part of the people is as truly a part of every grant of land as if it were written expressly in the body of the instrument. Moreover, notice was given when Henry George published "Progress and Poverty," and has been reiterated often since in louder and louder tones until the whole civilized world has become cognizant of it, that an effort is in progress to do what is in effect this very thing. That notice is a moral cloud upon every title, and he who buys now buys with notice. It will not do for him when the time comes, to say: "I relied upon the good faith of the government whose laws told me I might buy." He has notice, and if he buys he buys at his peril. Men cannot be allowed to make bets that the effort to retain land values for common use will fail, and then when they lose their bets call upon the people to compensate them for the loss. Read the chapter on "Compensation" in Henry George's "Perplexed Philosopher." ... read the book

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

Q22. What is privilege?
A. Strictly defined, privilege is, according to the Century Dictionary, "a special and exclusive power conferred by law on particular persons or classes of persons and ordinarily in derogation of the common right."

Q23. What is today the popular conception of privilege?
A. That it is the law-given power of one man to profit at another man's expense.

Q24. What are the principal forms of privilege?
A. The appropriation by individuals, or by public service corporations, of the net rent of land created by the growth and activity of the community without payment for the same. Also, the less important privileges connected with patents, tariff, and the currency.

Q25. Where in does privilege differ from capital?
A. Capital is a material thing, a product of labor, stored-up wages; an instrument of production paid for in human labor, and destined to wear out. Capital is the natural ally of labor, and is harmless except as allied to privilege. Privilege is none of these, but is an intangible statutory power, an unpaid-for and perpetual lien upon the future labor of this and succeeding generations. Capital is paid for and ephemeral. Privilege is unpaid for and eternal. A man accumulated in his profession $5,000 capital, which he invested in land in Canada. Ten years later he sold the same land for $200,000. Here is an instance of $5,000 capital allied with $195,000 privilege. This illustrates that privilege and not capital is the real enemy of labor.

Q26. How may franchises be treated?
A. Franchise privileges may be abated, or gradually abolished by lower rates, or by taxation, or by both, in the interest of the community.

Q27. Why should privilege be especially taxed?
A. Because such payment is fairly due from grantee to the grantor of privilege and also because a tax upon privilege can never be a burden upon industry or commerce, nor can it ever operate to reduce the wages of labor or increase prices to the consumer.

Q28. How are landlords privileged?
A. Because, in so far as their land tax is an "old" tax, it is a burdenless tax, and because their buildings' tax is shifted upon their tenants; most landlords who let land and also the tenement houses and business blocks thereon avoid all share in the tax burden.

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.

Q35. Why should land be singled out to bear the bulk of the burden of taxation?
A. Because in the private appropriation of the net rent of land is found the bulk of privilege.

Q55. How would the single tax effect the tenant?
A. It would neither increase nor decrease his land rent. It would reduce his house rent by the amount of the house tax. ... read the whole article

John Dewey: Steps to Economic Recovery

Go to the work of Henry George himself and learn how many of the troubles from which society still suffers, and suffers increasingly, are due to the fact that a few have monopolized the land, and that in consequence they have the power to dictate to others access to the land and to its products -- which include waterpower, electricity, coal, iron and all minerals, as well as the foods that sustain life -- and that they have the power to appropriate to their private use the values that the industry, the civilized order, the very benefactions, of others produce. This wrong is at the very basis of our present social and economic chaos, and until it is righted, all steps toward economic recovery may be temporarily helpful while in the long run useless. ...

I do not claim that George's remedy is a panacea that will cure by itself all our ailments. But I do claim that we cannot get rid of our basic troubles without it. I would make exactly the same concession and same claim that Henry George himself made:

"I do not say that in the recognition of the equal and unalienable right of each human being to the natural elements from which life must be supported and wants satisfied, lies the solution of all social problems. I fully recognize that even after we do this, much will remain to do. We might recognize the equal right to land, and yet tyranny and spoilation be continued. But whatever else we do, as along as we fail to recognize the equal right to the elements of nature, nothing will avail to remedy that unnatural inequality in the distribution of wealth which is fraught with so much evil and danger. Reform as we may, until we make this fundamental reform, our material progress can but tend to differentiate our people into the monstrously rich and frightfully poor. Whatever be the increase of wealth, the masses will still be ground toward the point of bare subsistence -- we must still have our great criminal classes, our paupers and our tramps, men and women driven to degradation and desperation from inability to make an honest living." ... read the whole speech

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

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

Your use, in so many passages of your Encyclical, of the inclusive term “property” or “private” property, of which in morals nothing can be either affirmed or denied, makes your meaning, if we take isolated sentences, in many places ambiguous. But reading it as a whole, there can be no doubt of your intention that private property in land shall be understood when you speak merely of private property. With this interpretation, I find that the reasons you urge for private property in land are eight. Let us consider them in order of presentation. You urge:

1. That what is bought with rightful property is rightful property. (RN, paragraph 5) ...
2. That private property in land proceeds from man’s gift of reason. (RN, paragraphs 6-7.) ...
3. That private property in land deprives no one of the use of land. (RN, paragraph 8.) ...
4. That Industry expended on land gives ownership in the land itself. (RN, paragraphs 9-10.) ...
5. That private property in land has the support of the common opinion of mankind, and has conduced to peace and tranquillity, and that it is sanctioned by Divine Law. (RN, paragraph 11.) ...
6. That fathers should provide for their children and that private property in land is necessary to enable them to do so. (RN, paragraphs 14-17.) ...
7. That the private ownership of land stimulates industry, increases wealth, and attaches men to the soil and to their country. (RN, paragraph 51.) ...
8. That the right to possess private property in land is from nature, not from man; that the state has no right to abolish it, and that to take the value of landownership in taxation would be unjust and cruel to the private owner. (RN, paragraph 51.)

4. That Industry expended on land gives ownership in the land itself. (9-10.)

Your Holiness next contends that industry expended on land gives a right to ownership of the land, and that the improvement of land creates benefits indistinguishable and inseparable from the land itself.

This contention, if valid, could only justify the ownership of land by those who expend industry on it. It would not justify private property in land as it exists. On the contrary, it would justify a gigantic no-rent declaration that would take land from those who now legally own it, the landlords, and turn it over to the tenants and laborers. And if it also be that improvements cannot be distinguished and separated from the land itself, how could the landlords claim consideration even for improvements they had made?

But your Holiness cannot mean what your words imply. What you really mean, I take it, is that the original justification and title of landownership is in the expenditure of labor on it. But neither can this justify private property in land as it exists. For is it not all but universally true that existing land titles do not come from use, but from force or fraud?

Take Italy! Is it not true that the greater part of the land of Italy is held by those who so far from ever having expended industry on it have been mere appropriators of the industry of those who have? Is this not also true of Great Britain and of other countries? Even in the United States, where the forces of concentration have not yet had time fully to operate and there has been some attempt to give land to users, it is probably true today that the greater part of the land is held by those who neither use it nor propose to use it themselves, but merely hold it to compel others to pay them for permission to use it.

And if industry give ownership to land what are the limits of this ownership? If a man may acquire the ownership of several square miles of land by grazing sheep on it, does this give to him and his heirs the ownership of the same land when it is found to contain rich mines, or when by the growth of population and the progress of society it is needed for farming, for gardening, for the close occupation of a great city? Is it on the rights given by the industry of those who first used it for grazing cows or growing potatoes that you would found the title to the land now covered by the city of New York and having a value of thousands of millions of dollars?

But your contention is not valid. Industry expended on land gives ownership in the fruits of that industry, but not in the land itself, just as industry expended on the ocean would give a right of ownership to the fish taken by it, but not a right of ownership in the ocean. Nor yet is it true that private ownership of land is necessary to secure the fruits of labor on land; nor does the improvement of land create benefits indistinguishable and inseparable from the land itself. That secure possession is necessary to the use and improvement of land I have already explained, but that ownership is not necessary is shown by the fact that in all civilized countries land owned by one person is cultivated and improved by other persons. Most of the cultivated land in the British Islands, as in Italy and other countries, is cultivated not by owners but by tenants. And so the costliest buildings are erected by those who are not owners of the land, but who have from the owner a mere right of possession for a time on condition of certain payments. Nearly the whole of London has been built in this way, and in New York, Chicago, Denver, San Francisco, Sydney and Melbourne, as well as in continental cities, the owners of many of the largest edifices will be found to be different persons from the owners of the ground. So far from the value of improvements being inseparable from the value of land, it is in individual transactions constantly separated. For instance, one-half of the land on which the immense Grand Pacific Hotel in Chicago stands was recently separately sold, and in Ceylon it is a not infrequent occurrence for one person to own a fruit-tree and another to own the ground in which it is implanted.

There is, indeed, no improvement of land, whether it be clearing, plowing, manuring, cultivating, the digging of cellars, the opening of wells or the building of houses, that so long as its usefulness continues does not have a value clearly distinguishable from the value of the land. For land having such improvements will always sell or rent for more than similar land without them.

If, therefore, the state levy a tax equal to what the land irrespective of improvement would bring, it will take the benefits of mere ownership, but will leave the full benefits of use and improvement, which the prevailing system does not do. And since the holder, who would still in form continue to be the owner, could at any time give or sell both possession and improvements, subject to future assessment by the state on the value of the land alone, he will be perfectly free to retain or dispose of the full amount of property that the exertion of his labor or the investment of his capital has attached to or stored up in the land.

Thus, what we propose would secure, as it is impossible in any other way to secure, what you properly say is just and right — ”that the results of labor should belong to him who has labored.” But private property in land — to allow the holder without adequate payment to the state to take for himself the benefit of the value that attaches to land with social growth and improvement — does take the results of labor from him who has labored, does turn over the fruits of one man’s labor to be enjoyed by another. For labor, as the active factor, is the producer of all wealth. Mere ownership produces nothing. A man might own a world, but so sure is the decree that “by the sweat of thy brow shalt thou eat bread,” that without labor he could not get a meal or provide himself a garment. Hence, when the owners of land, by virtue of their ownership and without laboring themselves, get the products of labor in abundance, these things must come from the labor of others, must be the fruits of others’ sweat, taken from those who have a right to them and enjoyed by those who have no right to them.

The only utility of private ownership of land as distinguished from possession is the evil utility of giving to the owner products of labor he does not earn. For until land will yield to its owner some return beyond that of the labor and capital he expends on it — that is to say, until by sale or rental he can without expenditure of labor obtain from it products of labor, ownership amounts to no more than security of possession, and has no value. Its importance and value begin only when, either in the present or prospectively, it will yield a revenue — that is to say, will enable the owner as owner to obtain products of labor without exertion on his part, and thus to enjoy the results of others’ labor.

What largely keeps men from realizing the robbery involved in private property in land is that in the most striking cases the robbery is not of individuals, but of the community. For, as I have before explained, it is impossible for rent in the economic sense — that value which attaches to land by reason of social growth and improvement — to go to the user. It can go only to the owner or to the community. Thus those who pay enormous rents for the use of land in such centers as London or New York are not individually injured. Individually they get a return for what they pay, and must feel that they have no better right to the use of such peculiarly advantageous localities without paying for it than have thousands of others. And so, not thinking or not caring for the interests of the community, they make no objection to the system.

It recently came to light in New York that a man having no title whatever had been for years collecting rents on a piece of land that the growth of the city had made very valuable. Those who paid these rents had never stopped to ask whether he had any right to them. They felt that they had no right to land that so many others would like to have, without paying for it, and did not think of, or did not care for, the rights of all.

 

... read the whole letter

Joseph Stiglitz: October, 2002, interview

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: A former Director of Robert Schalkenbach Foundation was given a grant recently to research the adequacy of land as a tax base. He's a professor at the University of California, Riverside, named Mason Gaffney, and he wrote a book titled, "The Corruption of Economics." Are you familiar with his work?

JES: No.

Q: I'll send you a copy of the book. Basically, he argues that the founders of neo-classical economics, which, as you know, is the paradigm taught in schools such as the University of Chicago, distorted the science of economics to protect vested interests. For example, Rockefeller money was spent to hire professors of economics with a view to their discrediting the ideas of Henry George. Did that happen?

JES: My general impression is that most donors that give money to universities don't take a very strong view of [who should be on] the faculty. Sometimes it ends up on one side, sometimes on the other. It would have been unusual [at Chicago], but it could have happened there. What is striking about Chicago as a school of economic theory is that it's very conservative. One would have thought that Henry George was someone who would have been liked by "Conservatives."

Q: In that George wanted to reduce tax on the fruits of one's own labor?

JES: Exactly. And you want non-distortionary taxes, so I would have thought that every "Conservative" would be in Henry George's camp. Now, as far as I know, I'm one of the few people who keeps emphasizing that you ought to view Henry George in a broader way, to include natural resources. I didn't think that people thought about that a hundred years ago. But if they had, and maybe Rockefeller was smart — he realized that he obviously didn't want a tax on natural resources.

Q: He wouldn't have wanted rents flowing from natural resources to go to the people rather than to him.

JES: Yes, he obviously wouldn't like that perspective. But I don't know if that view was at that time recognized, and I just don't know whether he actively intervened at Chicago. ... read the entire interview

Alanna Hartzok: In the History of Thought: Henry George's "Single Tax"

Bill Batt: Painless Taxation

Abstract
Real tax reform could do away with those taxes that are resented by the large proportion of our population. We could replace all taxes on wages and on interest by instead taxing economic rent. Rent is windfall income; it is income that arises not from the efforts of any person or corporation; it comes about as a surplus gain from common social enterprise. There is ample moral warrant for society to lay claim to that which it has created, as well as to that which no individual or party has earned. Analysis increasingly makes clear that economic rent in all its forms is far larger than official government figures indicate; in fact it is likely sufficient to supplant all current taxes on labor and capital (wages and interest) which are acknowledged to have so many negative effects. Recovering economic rent in all its manifestations by taxing its various bases actually can foster economic performance and yield other benefits that make it the natural source of revenue for governments. Such a tax is essentially painless. ... read the whole article

Clarence Darrow: The Land Belongs To The People (1916)

This earth is a little raft moving in the endless sea of space, and the mass of its human inhabitants are hanging on as best they can. It is as if some raft filled with shipwrecked sailors should be floating on the ocean, and a few of the strongest and most powerful would take all the raft they could get and leave the most of the people, especially the ones who did the work, hanging to the edges by their eyebrows. These men who have taken possession of this raft, this little planet in this endless space, are not even content with taking all there is and leaving the rest barely enough to hold onto, but they think so much of themselves and their brief day that while they live they must make rules and laws and regulations that parcel out the earth for thousands of years after they are dead and, gone, so that their descendants and others of their kind may do in the tenth generation exactly what they are doing today — keeping the earth and all the good things of the earth and compelling the great mass of mankind to toil for them.

Now, the question is, how are you going to get it back? Everybody who thinks knows that private ownership of the land is wrong. If ten thousand men can own America, then one man can own it, and if one man may own it he may take all that the rest produce or he may kill them if he sees fit. It is inconsistent with the spirit of manhood. No person who thinks can doubt but that he was born upon this planet with the same birthright that came to every man born like him. And it is for him to defend that birthright. And the man who will not defend it, whatever the cost, is fitted only to be a slave. The earth belongs to the people — if they can get it — because if you cannot get it, it makes no difference whether you have a right to it or not, and if you can get it, it makes no difference whether you have a right to it or not, you just take it. The earth has been taken from the many by the few. It made no difference that they had no right to it; they took it.

Now, there are some methods of getting access to the earth which are easier than others. The easiest, perhaps, that has been contrived is by means of taxation of the land values and land values alone; and I need only say a little upon that question. One trouble with it which makes it almost impossible to achieve, is that it is so simple and so easy. You cannot get people to do anything that is simple; they want it complex so they can be fooled.

Now the theory of Henry George and of those who really believe in the common ownership of land is that the public should take not alone taxation from the land, but the public should take to itself the whole value of the land that has been created by the public — should take it all. It should be a part of the public wealth, should be used for public improvements, for pensions, and belong to the people who create the wealth — which is a strange doctrine in these strange times. It can be done simply and easily; it can be done by taxation. All the wealth created by the public could be taken back by the public and then poverty would disappear, most of it at least. The method is so simple, and so legal even — sometimes a thing is legal if it is simple — that it is the easiest substantial reform for men to accomplish, and when it is done this great problem of poverty, the problem of the ages, will be almost solved. We may need go farther. ... read the whole article

Michael Hudson: The Lies of the Land: How and why land gets undervalued

YOU MAY THINK the largest category of assets in this countrly is industrial plant and machinery. In fact the US Federal Reserve Board's annual balance sheet shows real estate to be the economy's largest asset, two-thirds of America's wealth and more than 60 percent of that in land, depending on the assessment method.

For hundreds of years property's value has been calculated by discounting its flow of rental income at the going rate of interest. The lower the interest rate, the higher the price a given rental stream will justify -- or as property owners express it, the more years' rent a property will bring. What is so striking about land values today is that they are rising for reasons independent of their earnings stream. The major new consideration is their prospect for future "capital" (that is, land-price) gains. In sum, the ultimate aim of real estate investors no longer is so much to seek income -- most of which is pledged to their bankers as interest payments on the property they acquire -- as much as to seek property gains. Politically opportunites abound. Merely changing zoning in New York City in the 1980s to allow using commercial loft spaces for residential purposes had the effect of multiplying asset values five or tenfold.

Whether the gains come from selling the property or from borrowing more money against it, the essential phenomenon is the rapid growth in asset values and real estate's uniquely favored tax treatment. That's why investors choose real estate instead of bonds or stocks, and much of the strategy underlying corporate takeovers has followed the strategies they developed over the past half century.

Nationwide the capital-gains dimension needs to be incorporated into the rental revenue statistics to measure real estate's total returns. This sector's nearly complete success in escaping the tax collector has placed an enormous tax burden on everyone else.   read the entire article

• In the United States, four-fifths of new housing developments involve membership in homeowner associations (Community Associations Institute, 2005).
• In China, all major new developments have walls, guards and private governments (Webster, 2002).
• In Russia (Lentz and Lindner, 2002) and South Africa (Jürgens and Gnad, 2002; Landman, 2002), wealthier citizens privately provide for their safety in gated communities.

All that may sound familiar to students of 19th Century American history, and the privatization of the vast Federal domain. It is a long story of conflict between cash sales and more democratic means of placing lands. Those with cash and bank connections naturally favored cash sales. President Jefferson saw the merit in credit sales, so from 1801-20, sales were on credit. The system was badly administered, but so were all other systems of land disposal tried in that era. Collections became a problem, yet landownership was democratized. It enabled Andrew Jackson to proclaim on Thanksgiving Day, 1835, "We thank Thee for the absence of unemployment which in the King-ridden countries of the world is causing widespread suffering among the toiling masses and has led to riots ... (and that) there will be none to freeze, starve, or be beset by the fear of want this winter or the winters yet to come."

Following the period of credit sales, the return to cash sales re-introduced front-money bias. Small owners still had ways of fighting back at the state and local levels. States and counties and their subdivisions relied mainly on the property tax. They used this with good effect, often quite deliberately, to induce absentee speculators to release large holdings for sale and settlement. The impact of land taxes is analogous to that of credit sales. The specter of future taxes is capitalized into lower current land prices. They in turn let one buy cheaper up front, in return for a higher level of deferred payments. The net effect is like extending permanent credit on equal terms to all potential buyers, something private credit markets never do or could be expected to do. ... Read the whole article

Preaching hard trade-offs is not popular. Voters see through it as a confession of cluelessness. We hear a lot about voter apathy, but voters have responded positively at various times to candidates with positive resolutions, or apparent ones.

Remember the "Phillips Curve" of the late 1970s? "The public has to grow up and choose," the gurus said with some condescension. It's either inflation or unemployment. Soon the voters came up with a third choice, they retired those unavailing later Keynesians.

Next it was Reagan and Laffer, who said you can have lower tax rates and higher tax revenues, more defense and a lower deficit. Talk about panaceas! This one proved to be a fraud, but the voters loved it until they slowly realized the promise couldn't possibly be delivered.

Mason Gaffney: Land as a Distinctive Factor of Production

• England's North Sea oil (where it is called "performance bidding");
• water in the 17 western States of the USA, and four western provinces of Canada; the radio spectrum; licenses to pollute air ("offset rights," in EPA-speak);
• US farmland under Squatters' Rights (1841) and the Homestead Act (1862);
• US and Canadian railroad land grants;
• fishing quotas;
• farm production and acreage quotas;
• cartel shares;
• utility franchises with duty-to-serve; etc.

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.

Joseph Fels:   True Christianity and My Own Religious Beliefs

• first, in order to meet our common needs, we take from individuals what does not belong to us in common;
• second, we permit individuals to take for themselves what does belong to us in common;
• thus, third, under the pretext of taxation for public purposes, we have established a system that permits some men to tax other men for private profit. ... read the whole letter
  

James Kiefer: James Huntington and the ideas of Henry George

Henry George, author of Progress and Poverty, argued that, while some forms of wealth are produced by human activity, and are rightly the property of the producers (or those who have obtained them from the previous owners by voluntary gift or exchange), land and natural resources are bestowed by God on the human race, and that every one of the N inhabitants of the earth has a claim to 1/Nth of the coal beds, 1/Nth of the oil wells, 1/Nth of the mines, and 1/Nth of the fertile soil. God wills a society where everyone may sit in peace under his own vine and his own fig tree.

The Law of Moses undertook to implement this by making the ownership of land hereditary, with a man's land divided among his sons (or, in the absence of sons, his daughters), and prohibiting the permanent sale of land. (See Leviticus 25:13-17,23.) The most a man might do with his land is sell the use of it until the next Jubilee year, an amnesty declared once every fifty years, when all debts were cancelled and all land returned to its hereditary owner.

Henry George's proposed implementation is to tax all land at about 99.99% of its rental value, leaving the owner of record enough to cover his bookkeeping expenses. The resulting revenues would be divided equally among the natural owners of the land, viz. the people of the country, with everyone receiving a dividend check regularly for the use of his share of the earth (here I am anticipating what I think George would have suggested if he had written in the 1990's rather than the 1870's).

This procedure would have the effect of making the sale price of a piece of land, not including the price of buildings and other improvements on it, practically zero. The cost of being a landholder would be, not the original sale price, but the tax, equivalent to rent. A man who chose to hold his "fair share," or 1/Nth of all the land, would pay a land tax about equal to his dividend check, and so would break even. By 1/Nth of the land is meant land with a value equal to 1/Nth of the value of all the land in the country.

Naturally, an acre in the business district of a great city would be worth as much as many square miles in the open country. Some would prefer to hold more than one N'th of the land and pay for the privilege. Some would prefer to hold less land, or no land at all, and get a small annual check representing the dividend on their inheritance from their father Adam.

Note that, at least for the able-bodied, this solves the problem of poverty at a stroke. If the total land and total labor of the world are enough to feed and clothe the existing population, then 1/Nth of the land and 1/Nth of the labor are enough to feed and clothe 1/Nth of the population. A family of 4 occupying 4/Nths of the land (which is what their dividend checks will enable them to pay the tax on) will find that their labor applied to that land is enough to enable them to feed and clothe themselves. Of course, they may prefer to apply their labor elsewhere more profitably, but the situation from which we start is one in which everyone has his own plot of ground from which to wrest a living by the strength of his own back, and any deviation from this is the result of voluntary exchanges agreed to by the parties directly involved, who judge themselves to be better off as the result of the exchanges.

Some readers may think this a very radical proposal. In fact, it is extremely conservative, in the sense of being in agreement with historic ideas about land ownership as opposed to ownership of, say, tools or vehicles or gold or domestic animals or other movables. The laws of English-speaking countries uniformly distinguish between real property (land) and personal property (everything else). In this context, "real" is not the opposite of "imaginary." It is a form of the word "royal," and means that the ultimate owner of the land is the king, as symbol of the people. Note that English-derived law does not recognize "landowners." The term is "landholders." The concept of eminent domain is that the landholder may be forced to surrender his landholdings to the government for a public purpose. Historically, eminent domain does not apply to property other than land, although complications arise when there are buildings on the land that is being seized.

I will mention in passing that the proposals of Henry George have attracted support from persons as diverse as Felix Morley, Aldous Huxley, Woodrow Wilson, Helen Keller, Winston Churchill, Leo Tolstoy, William F Buckley Jr, and Sun Yat-sen. To the Five Nobel Prizes authorized by Alfred Nobel himself there has been added a sixth, in Economics, and the Henry George Foundation claims eight of the Economics Laureates as supporters, in whole or in part, of the proposals of Henry George (Paul Samuelson, 1970; Milton Friedman, 1976; Herbert A Simon, 1978; James Tobin, 1981; Franco Modigliani, 1985; James M Buchanan, 1986; Robert M Solow, 1987; William S Vickrey, 1996).

The immediate concrete proposal favored by most Georgists today is that cities shall tax land within their boundaries at a higher rate than they tax buildings and other improvements on the land. (In case anyone is about to ask, "How can we possibly distinguish between the value of the land and the value of the buildings on it?" let me assure you that real estate assessors do it all the time. It is standard practice to make the two assessments separately, and a parcel of land in the business district of a large city very often has a different owner from the building on it.) Many cities have moved to a system of taxing land more heavily than improvements, and most have been pleased with the results, finding that landholders are more likely to use their land productively -- to their own benefit and that of the public -- if their taxes do not automatically go up when they improve their land by constructing or maintaining buildings on it.

An advantage of this proposal in the eyes of many is that it is a Fabian proposal, "evolution, not revolution," that it is incremental and reversible. If a city or other jurisdiction does not like the results of a two-level tax system, it can repeal the arrangement or reduce the difference in levels with no great upheaval. It is not like some other proposals of the form, "Distribute all wealth justly, and make me absolute dictator of the world so that I can supervise the distribution, and if it doesn't work, I promise to resign." The problem is that absolute dictators seldom resign. ... read the whole article

Ted Gwartney:  A Free Market Strategy to Reduce Sprawl

• Unused land is far more abundant than we realize.
• End the Public Subsidy of Land Speculation and Sprawl
• Counterproductive growth limitations and regulations should be abolished.
• A Strategy for Urban Renewal
• A Strategy for Economic Development
• Public Finance by Self-Financing

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. ...

Thus, the claim that a community is short of capital is misleading. In fact, a community could become self-sufficient in the supply of capital from internal sources. But a precondition for this is the reduction of taxes on productive capital and labor. Examine, for example, what would happen as a result of the elimination of taxation of buildings. This decision, not to penalize people who invest their savings in new buildings, leads to the stimulation of a higher level of national income, higher saving, and the creation of new capital. According to the study made by Tideman and Plassmann (1998, The Losses of Nations, Fred Harrison, editor, Orthila Press), shifting taxes off buildings, production and distribution, and onto land and natural resources, could increase the gross national product by 25%, or one trillion 1998 dollars ($1,000,000,000,000).  .... Read the whole article

Fred E. Foldvary — The Ultimate Tax Reform: Public Revenue from Land Rent

Frank Chodorov, a fervent individualist and founding editor of The Freeman, published by the Foundation for Economic Education and still a leading libertarian journal of ideas, became in 1937 director of the Henry George School of Social Science in New York City, serving until 1942. Like most followers of Henry George, Chodorov regarded a charge on land value as not a true tax, which arbitrarily extracts wealth, but a “payment for the use of a location, determined by the higgling and haggling of the market, and it makes no difference to the land user whether he pays rent to the city fathers or to a private owner.”26 Explaining the value of a location derives to a great extent from community services, rather than the efforts of the landowner as such, Chodorov noted “it would seem logical that this value — which we call land rent — should go to defray the expenses of these common services.”27 ... read the whole document

Charles T. Root — Not a Single Tax! (1925)

Every community has an indefeasible original right to the land on which it exists, and to all the natural, unmodified properties and advantages of that particular area of the earth's surface. To this land in its natural state, undrained, unfenced, unfertilized, unplanted and unoccupied, including its waters, its contents and its location, every individual in the community (which may consist of any political unit selected) has an equal right, while all the individuals together have a joint right to the value for use which society has conferred upon these natural advantages.

This value for use is known as "Land Value," or by the not particularly descriptive but generally adopted name of "Economic Rent."

Briefly defined the land value or economic rent of any piece of ground is the largest annual amount voluntarily offered for the exclusive use of that ground, or of an equivalent parcel, independent of improvements thereon. Every holder or user of land pays economic rent, but he now pays most of it to the wrong party. The aggregate economic rent of the territory occupied by any political unit is, as has been stated above, always sufficient, usually more than sufficient, for the legitimate expenses of the government of that unit. As also stated above, the economic rent belongs to the community, and not to individual landowners.

On the other hand, the result of every utilization or enhancement of the natural advantages of land (such as farm profits, the rent and selling value of buildings and other improvements), when accomplished by an individual, belongs wholly to that individual, and should never, and need never, be taken from him by taxation. ...

Under the normal system which this article advocates, the user of land would pay substantially the same economic rent as now, for the reason that economic rent is fixed by the payer and not by the payee; but it would be paid to the credit of the community instead of for the benefit of the individual landowner. And the economic rent is all the land user would have to pay; no taxes on industry or personal product and no other forced contribution for governmental purposes.

It follows that, under the normal system, the holder of unimproved land would usually contribute more than at present toward the expenses of government, while the holder of well improved property would contribute, in most instances, less than the total of his present taxes.

To illustrate simply, let us suppose a state which has never parted with its natural income but is supported by its own economic rent. ...

This principle of economic rent applies to all the users of land, including mining, use of waterpower, and rights of way over or under its surface. Had this principle always been recognized, and the economic rent always been retained by the community, taxation would never have been heard of. When the economic rent is reclaimed by the community, the need of taxation will disappear.

Let us roughly restate the proposition: All members of the community having a joint right to the income which the social advantages of the land will command, they are all partners in this income.

Therefore, when one of their number wishes to take for his private use a parcel of this land, he should buy out his partners, i.e., the rest of the community, by paying regularly into the common treasury the economic rent of that parcel, instead of paying, as at present, the purchase price, i.e., the right to collect the economic rent, in a lump, to some other individual who has no more original right to it than himself.

But before this time the reader, unless he has given previous attention to the subject, is full of objections to the above doctrine: "How about the law?" he is asking. "Hasn't a man the right to buy a piece of land as cheaply as he can, to do what he pleases with it, and hold on to it till he gets ready to sell?" The answer is that at present he certainly has this statutory right, which has been so long and so universally recognized that most people suppose it to be not only a legal, but a real or equitable right. A shrewd man, foreseeing the direction of growth of population in a city, for example, can buy a well-located block at a moderate figure from some less far-seeing owner, can let it grow up to weeds, fence it off against all comers and give it no further attention except to pay the very small tax usually imposed upon vacant land.

Meantime the increasing community builds up all around it with homes, banks, stores, churches, schools, paving and lighting the streets, giving police and fire protection, etc., and at last comes to need this block so urgently that the owner is fairly begged to sell it, at three or ten or fifty times what it cost him. Quite often the purchaser at this enormous advance is the very community which has through its presence and the expenditure of its taxes created practically the whole value of the land in question!

It was said above that an individual has a statutory right to pursue this very common course. That was an error. The statement should have been that he has a statutory wrong; for no disinterested person can follow the course of land speculation as almost universally practiced, without feeling its rank injustice.

How did so evident a wrong become so firmly established? ...

The landlords, being also the lawmakers, have seen to it that their tenure of this easy money should not be disturbed, but on the contrary have so buttressed it with centuries of legislation, precedents, and judicial decisions, that any proposition to hark back to the terms of the original bargain, whereby the owners of the land agreed to pay the expenses of the government, is now denounced as anarchy and sacrilege.

Lapse of time, however, never can transform wrong into right, nor can a buyer acquire any better title than the seller possessed. The economic rent belongs to the community, which can and will begin to reclaim it as soon as the voters thoroughly awake to the facts and the right and wrong of the matter, which are not hard to grasp when the subject is presented in its simplest form.

An illustration has already been given of the case of a piece of farm land. Let us take an example in a large city. Let us take a corner lot centrally located in New York City, the title to which lot is held by, say, Mr. John William Rhinelastor. This lot was a part of an old Dutch farm, and is an heirloom. It did not cost the present owner anything, nor his father nor his grandfather. There is a little old building on it, which has always been rented at a figure ten times as large as the taxes imposed, so that the owner has been handsomely subsidized each year for storing his title-deeds during a period of the city's growth in which the increase in population and the expenditure of public money in that neighborhood have raised the value of this corner location to, say, two hundred times its early value.

About now, Mr. Rhinelastor decides that he will go abroad to live, and can't be bothered with this piece of property. But knowing that the pressure of population is sure to increase and that the expenditure of public money to the benefit of this land must continue, he will not sell it. So he gives a twenty-one year lease to the corner for, say, $20,000 a year net, with a privilege to the lessee of renewals at advancing figures. The lessee agrees to pay all taxes.

Now what is this net $20,000 a year, which will be regularly remitted to Mr. Rhinelastor, in Europe or wherever he may be, given in payment for? Not for the old building — the first thing the lessee does is to pull it down. Not for the land itself — it is all rock, which has got to be blasted out as part of its improvement.

Clearly it is paid for a location or site value, which the community, and the community only, has built up and paid for. In other words, the present $20,000 rental, and the larger one which that location will command in later years, is strictly a community product, and as such belongs to the community and not to Mr. Rhinelastor.

That the latter has no good right to it is at once evident when we remember that "When one man gets something for nothing somebody else has got to give something for nothing." Here are $20,000 that some men and women have got to work to earn every year to hand over to a man who does not render, and does not feel any obligation to render, one dollar's worth of public or private service in return. Such is the wild travesty of justice which we call law. It is not comical only because it is frankly tragic in its social results.

Now suppose this $20,000 and all the rest of this same community product — i.e., the site or location rent of its ground — were paid every year to its rightful owner, the treasurer of New York City, what would become of taxation, with its inseparable retinue, Fraud, Evasion, Perjury, Inequality, and an all-pervading public sense of injustice?

An authority on municipal taxation estimates the present economic rent of the land embraced in the City of New York at from $350,000,000 to $400,000,000. Assuming the lesser of these figures and adding the receipts from licenses, fees and fines, New York City should receive, of her own income, enough to pay all her own legitimate bills, to make her proper contributions to county and state and build a new subway or its equivalent every year.

And this with nobody paying a dollar of taxes, or, if we except the fines, a dollar that he was not ready and glad to pay for his own advantage.

We repeat, this is not taxation; but for the sake of those who cannot grasp the idea of public revenue without taxation, let us state the matter in their own language.

Think of a tax which both assesses itself and collects itself, which burdens no one, which is paid voluntarily, and only by those who do so for their own profit or other advantage. Compare this with our present system of taxes, which everyone despises, which can be collected in full only from the very scrupulous and from the helpless, from trust funds of widows and orphans, or from estates which lie naked before the tax gatherer on the records of court; a system which drives men of property from state to state and town to town in flight from the assessor, and well-nigh forces many worthy citizens to practices of evasion which must make it hard for them to look into their own mirrors during the season for "Correction of Assessments;" there can be but one verdict upon such comparison.

But again the voice of the objector is heard, possibly to this effect: "This plan may be all right for the community, but how about poor Mr. Rhinelastor?"

In reality the landowner would not suffer so much from the restoration of the public revenue as might at first appear. For one thing, whereas he is now taxed, at least in theory, not only on land, but on buildings, cash, bonds, and all other personal property, and perhaps on his income as well, he would then have no taxes at all to pay. Furthermore the economic rent is not the full measure of the possible earning capacity of the land, but will always be less than the offerer expects to make out of its use.

Again, while it must be firmly insisted that the economic rent is the rightful property of the community and not of the landowner, the community would probably never take it all. Communal ownership of land is not desirable, even if it were practicable. Individual ownership and management are best, and it is not at all improper for the community to allow the owner something for caring for the land to which he holds title, and for collecting and transmitting to the treasury the economic rent.

But — and right here is one of the prime advantages of the abolition of taxation — Mr. Rhinelastor, in order to get satisfactory return from his land, must improve it. Unless he is satisfied with a small income from it, to wit, the proportion of the economic rent which the community chooses to leave in his hands, he must put upon his land the best building the location will warrant. The rents of this building will be his in their entirety, not one dollar of them being taken from him by taxation. If he is not prepared or not willing to do this he would probably find it more profitable, before he leaves the country, to sell the land to some one of the many persons who are eager to build upon it. It will always be salable, although not by any means at present figures.

Now imagine for a moment the effect upon the appearance of a city and upon the comfort of its population which would result from the change of fiscal policy which this article proposes. At present, a tempting premium is placed upon keeping land unimproved or inadequately improved, while a heavy penalty is imposed upon improvement. Most land appreciates constantly. All buildings depreciate from the moment of completion. Yet the building is taxed equally with the land.

What incentive does such a system offer the speculative landowner to put up a commodious, well-lighted modern structure in place of the old ruin which now pays him so well? The old one cannot depreciate much more, and while paying a trifling tax because of its physical worthlessness, he is thereby enabled to collect and pocket the economic rent of the ground, which the community is continually rendering more valuable. The new building would absorb a large amount of capital, would begin to run down even before it could be occupied, and would be taxed to the limit. Why then is not the landlord justified in letting well enough alone, enjoying the growing economic rent, and waiting till he can get a fancy price for the right to collect it?

But reverse the conditions. Reclaim for the community its natural income, making it expensive either to keep needed land vacant or to withhold it from the ready and willing to improve it to the full extent of its possibilities.

Does it require severe intellectual effort to foresee the results? Better and better houses, apartments, tenements, offices and stores, more employment for labor in all enterprises now held back by the shadow of the tax-gatherer, an end of all tax-lying, tax-evasion and tax-injustice, and withal, a public revenue adequate to all real public needs.

What a contrast to the existing plan of pouring public money into the laps of individual landowners ... read the whole article

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

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. ... read the whole article

Peter Barnes: Capitalism 3.0: Preface (pages ix.-xvi)

I’m a businessman. I believe society should reward successful initiative with profit. At the same time, I know that profit-seeking activities have unhealthy side effects. They cause pollution, waste, inequality, anxiety, and no small amount of confusion about the purpose of life.

I’m also a liberal, in the sense that I’m not averse to a role for government in society. Yet history has convinced me that representative government can’t adequately protect the interests of ordinary citizens. Even less can it protect the interests of future generations, ecosystems, and nonhuman species. The reason is that most — though not all — of the time, government puts the interests of private corporations first. This is a systemic problem of a capitalist democracy, not just a matter of electing new leaders.

If you identify with the preceding sentiments, then you might be confused and demoralized, as I have been lately. If capitalism as we know it is deeply flawed, and government is no savior, where lies hope? This strikes me as one of the great dilemmas of our time. For years the Right has been saying — nay, shouting — that government is flawed and that only privatization, deregulation, and tax cuts can save us. For just as long, the Left has been insisting that markets are flawed and that only government can save us. The trouble is that both sides are half-right and half-wrong. They’re both right that markets and state are flawed, and both wrong that salvation lies in either sphere. But if that’s the case, what are we to do? Is there, perhaps, a missing set of institutions that can help us? ...

For much of this time I was president of Working Assets, a company that donates 1 percent of its gross sales to nonprofit groups working for a better world. These donations come off its top line, not its bottom line; the company makes them whether it’s profitable or not (and many years we were not). It occurred to me that 1 percent is an exceedingly small portion of sales for any business to return to the larger world, given that businesses take so much from the larger world without paying. How, for example, could we make any goods without nature’s many free gifts? And how could we sell them without society’s vast infrastructure of laws, roads, money, and so on? At the very least, I liked to think, we ought to pay a 1 percent royalty for the privilege of being a limited liability corporation. ... read the whole chapter

Peter Barnes: Capitalism 3.0 — Chapter 2: A Short History of Capitalism (pages 15-32)

Enclosure, in which property rights are literally taken or given away, is half the reason for the commons’ decline; the other half is a form of trespass called externalizing — that is, shifting costs to the commons. Externalizing is as relentless as enclosure, yet much less noticed, since it requires no active aid from politicians. It occurs quietly and continuously as corporations add illth to the commons without permission or payment.

The one-two punch of enclosure and externalizing is especially potent. With one hand, corporations take valuable stuff from the commons and privatize it. With the other hand, they dump bad stuff into the commons and pay nothing. The result is profits for corporations but a steady loss of value for the commons. ... read the whole chapter

Peter Barnes: Capitalism 3.0 — Chapter 4: The Limits of Privatization (pages 49-63)

It’s tempting to believe that private owners, by pursuing their own self-interest, can preserve shared inheritances. No one likes being told what to do, and words like statism conjure fears of bureaucracy at best and tyranny at worst. By contrast, privatism connotes freedom.

In this chapter, we look at Garrett Hardin’s second alternative for saving the commons: privatism, or privatization. I argue that private corporations, operating in unconstrained markets, can allocate resources efficiently but can’t preserve them. The latter task requires setting aside some supplies for future generations — something neither markets nor corporations, when left to their own devices, will do. The reason lies in the algorithms and starting conditions of our current operating system. ...

Free Market Environmentalism
One other version of privatism is worth considering. Its premise is that nature can be preserved, and pollution reduced, by expanding private property rights. This line of thought is called free market environmentalism, and it’s favored by libertarian think tanks such as the Cato Institute.

The origins of free market environmentalism go back to an influential paper by University of Chicago economist Ronald Coase. Writing in 1960, Coase challenged the then-prevailing orthodoxy that government regulation is the only way to protect nature. In fact, he argued, nature can be protected through property rights, provided they’re clearly defined and the cost of enforcing them is low.

In Coase’s model, pollution is a two-sided problem involving a polluter and a pollutee. If one side has clear property rights (for instance, if the polluter has a right to emit, or the pollutee has a right not to be emitted upon), and transaction costs are low, the two sides will come to a deal that reduces pollution.

How will this happen? Let’s say the pollutee has a right to clean air. He could, under common law, sue the polluter for damages. To avoid such potential losses, the polluter is willing to pay the pollutee a sum of money up front. The pollutee is willing to accept compensation for the inconvenience and discomfort caused by the pollution. They agree on a level of pollution and a payment that’s satisfactory to both.

It works the other way, too. If the polluter has the right to pollute, the pollutee offers him money to pollute less, and the same deal is reached. This pollution level — which is greater than zero but less than the polluter would emit if pollution were free — is, in the language of economists, optimal. (Whether it’s best for nature is another matter.) It’s arrived at because the polluter’s externalities have been internalized.

For fans of privatism, Coase’s theorem was an intellectual breakthrough. It gave theoretical credence to the idea that the marketplace, not government, is the place to tackle pollution. Instead of burdening business with page after page of regulations, all government has to do is assign property rights and let markets handle the rest.

There’s much that’s attractive in free market environmentalism. Anything that makes the lives of business managers simpler is, to my mind, a good thing — not just for business, but for nature and society as a whole. It’s good because things that are simple for managers to do will get done, and often quickly, while things that are complicated may never get done. Right now, we need to get our economic activity in harmony with nature. We need to do that quickly, and at the lowest possible cost. If it’s easiest for managers to act when they have prices, then let’s give them prices, not regulations and exhortations.

At the same time, there are critical pieces missing in free market environmentalism. First and foremost, it lacks a solid rationale for how property rights to nature should be assigned. Coase argued that pollution levels will be the same no matter how those rights are apportioned. Although this may be true in the world of theory, it makes a big difference to people’s pocketbooks whether pollutees pay polluters, or vice versa.

Most free marketers seem to think pollution rights should be given free to polluters. In their view, the citizen’s right to be free of pollution is trumped by the polluter’s right to pollute. Taking the opposite tack, Robert F. Kennedy Jr., an attorney for the Natural Resources Defense Council, argues that polluters have long been trespassing on common property and that this trespass is a form of subsidy that ought to end.

The question for me is, what’s the best way to assign property rights when our goal is to protect a birthright shared by everyone? It turns out this is a complicated matter, but one we need to explore. There’s no textbook way to “propertize” nature. (When I say to propertize, I mean to treat an aspect of nature as property, thus making it ownable. Privatization goes further and assigns that property to corporate owners.) In fact, there are different ways to propertize nature, with dramatically different consequences. And since we’ll be living with these new property rights — and paying rent to their owners — for a long time, it behooves us to get them right. ... read the whole chapter

Peter Barnes: Capitalism 3.0 — Chapter 5: Reinventing the Commons (pages 65-78)

Suppose you buy a house for $300,000, and without improving it, sell it a few years later for $400,000. You pay off the mortgage and walk away with a pile of cash. Your private wealth increases. But think about what caused the house to rise in value. It wasn’t anything you did. Rather, it was the fact that your neighborhood became more popular. That, in turn, resulted from population shifts, a new highway perhaps, an improved school, or the beautification efforts of neighbors. In other words, your increased wealth is a capture of socially created value. It shows up as private wealth but is really a gift of society. ... read the whole chapter

Peter Barnes: Capitalism 3.0 — Chapter 9: Building the Commons Sector (pages 135-154)

A spectrum or airwaves trust would have a distinct mission: to reduce the influence of corporations on our democracy. Its economic and ecological impacts could be significant (reducing corporate political influence will improve many policies), but they’re secondary to the political objective.

According to a study by the New America Foundation, the market value of the airwave licenses we’ve given free to corporate broadcasters is roughly $500 billion. It’s possible this value will decline as unlicensed wi-fi spreads, but meanwhile broadcasters sell our airwaves to advertisers and reap billions that belong, at least in part, to all of us.

Part of that money comes from political candidates who must purchase TV and radio ads to get elected. The problem isn’t so much the unearned windfall broadcasters collect; rather, it’s the fact that candidates are compelled to pay it to them. That makes politicians kowtow to corporate donors in order to pay broadcasters. Other democracies give free airtime to political candidates, but we protect the broadcasters’ lock on our airwaves. By privatizing our airwaves, in other words, we’ve effectively privatized our democracy. The job of a spectrum trust would be to take back our democracy by taking back our airwaves.

This could be done in a couple of ways. One wouldn’t require an actual trust: Congress could simply say that, in exchange for free spectrum licenses, broadcasters must give a certain amount of free airtime to political candidates. Alternatively, broadcasters could pay for their licenses, with revenue going to a nonpartisan trust. That trust would allocate funds to candidates for the purchase of TV and radio ads; the allocation formula would take account of cost differences between media markets and other relevant variables. Neither of these approaches would prevent corporations from lobbying or contributing to candidates’ other expenses, but they would level the political playing field by greatly reducing the sums candidates have to raise to get elected. ... read the whole chapter