Our primary social adjustment is a denial of justice. In allowing one man to own the land on which and from which other men must live, we have made them his bondsmen in a degree which increases as material progress goes on. This is the subtile alchemy that in ways they do not realize is extracting from the masses in every civilized country the fruits of their weary toil; that is instituting a harder and more hopeless slavery in place of that which has been destroyed; that is bringing political despotism out of political freedom, and must soon transmute democratic institutions into anarchy. — Henry George, Progress & Poverty (below)

Adams quote -- our generation ... next generation ... that our grandchildren ... - was that meant for everyone, or only the aristocracy, the landed gentry?

Whether we formulate it as an extension of the margin of production, or as a carrying of the rent line beyond the margin of production, the influence of speculation in land in increasing rent is a great fact which cannot be ignored in any complete theory of the distribution of wealth in progressive countries. It is the force, evolved by material progress, which tends constantly to increase rent in a greater ratio than progress increases production, and thus constantly tends, as material progress goes on and productive power increases, to reduce wages, not merely relatively, but absolutely. ... read the whole chapter

In all our long investigation we have been advancing to this simple truth: That as land is necessary to the exertion of labor in the production of wealth, to command the land which is necessary to labor, is to command all the fruits of labor save enough to enable labor to exist. ...

... 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. Take away from man all that belongs to land, and he is but a disembodied spirit. Material progress cannot rid us of our dependence upon land; it can but add to the power of producing wealth from land; and hence, when land is monopolized, it might go on to infinity without increasing wages or improving the condition of those who have but their labor. It can but add to the value of land and the power which its possession gives. Everywhere, in all times, among all peoples, the possession of land is the base of aristocracy, the foundation of great fortunes, the source of power. ... read the whole chapter

But great as they thus appear, the advantages of a transference of all public burdens to a tax upon the value of land cannot be fully appreciated until we consider the effect upon the distribution of wealth.

Tracing out the cause of the unequal distribution of wealth which appears in all civilized countries, with a constant tendency to greater and greater inequality as material progress goes on, we have found it in the fact that, as civilization advances, the ownership of land, now in private hands, gives a greater and greater power of appropriating the wealth produced by labor and capital.

Thus, to relieve labor and capital from all taxation, direct and indirect, and to throw the burden upon rent, would be, as far as it went, to counteract this tendency to inequality, and, if it went so far as to take in taxation the whole of rent, the cause of inequality would be totally destroyed. Rent, instead of causing inequality, as now, would then promote equality. Labor and capital would then receive the whole produce, minus that portion taken by the state in the taxation of land values, which, being applied to public purposes, would be equally distributed in public benefits.

That is to say, the wealth produced in every community would be divided into two portions.

• One part would be distributed in wages and interest between individual producers, according to the part each had taken in the work of production;

• the other part would go to the community as a whole, to be distributed in public benefits to all its members.

In this all would share equally — the weak with the strong, young children and decrepit old men, the maimed, the halt, and the blind, as well as the vigorous. And justly so — for while one part represents the result of individual effort in production, the other represents the increased power with which the community as a whole aids the individual.

Thus, as material progress tends to increase rent, were rent taken by the community for common purposes the very cause which now tends to produce inequality as material progress goes on would then tend to produce greater and greater equality. ... read the whole chapter

When it is first proposed to put all taxes upon the value of land, all landholders are likely to take the alarm, and there will not be wanting appeals to the fears of small farm and homestead owners, who will be told that this is a proposition to rob them of their hard-earned property. But a moment's reflection will show that this proposition should commend itself to all whose interests as landholders do not largely exceed their interests as laborers or capitalists, or both. And further consideration will show that though the large landholders may lose relatively, yet even in their case there will be an absolute gain. For, the increase in production will be so great that labor and capital will gain very much more than will be lost to private landownership, while in these gains, and in the greater ones involved in a more healthy social condition, the whole community, including the landowners themselves, will share.

• It is manifest, of course, that the change I propose will greatly benefit all those who live by wages, whether of hand or of head -- laborers, operatives, mechanics, clerks, professional men of all sorts.
• It is manifest, also, that it will benefit all those who live partly by wages and partly by the earnings of their capital -- storekeepers, merchants, manufacturers, employing or undertaking producers and exchangers of all sorts from the peddler or drayman to the railroad or steamship owner -- and
• it is likewise manifest that it will increase the incomes of those whose incomes are drawn from the earnings of capital.

Take, now, the case of the homestead owner -- the mechanic, storekeeper, or professional man who has secured himself a house and lot, where he lives, and which he contemplates with satisfaction as a place from which his family cannot be ejected in case of his death. He will not be injured; on the contrary, he will be the gainer. ...

... In short, the working farmer is both a laborer and a capitalist, as well as a landowner, and it is by his labor and capital that his living is made. His loss would be nominal; his gain would be real and great. In varying degrees is this true of all landholders. Many landholders are laborers of one sort or another. This measure would make no one poorer but such as could be made a great deal poorer without being really hurt. It would cut down great fortunes, but it would impoverish no one.

Wealth would not only be enormously increased; it would be equally distributed. I do not mean that each individual would get the same amount of wealth. That would not be equal distribution, so long as different individuals have different powers and different desires. But I mean that wealth would be distributed in accordance with the degree in which the industry, skill, knowledge, or prudence of each contributed to the common stock. The great cause which concentrates wealth in the hands of those who do not produce, and takes it from the hands of those who do, would be gone. The inequalities that continued to exist would be those of nature, not the artificial inequalities produced by the denial of natural law. The nonproducer would no longer roll in luxury while the producer got but the barest necessities of animal existence. ... read the whole chapter

To remove want and the fear of want, to give to all classes leisure, and comfort, and independence, the decencies and refinements of life, the opportunities of mental and moral development, would be like turning water into a desert. The sterile waste would clothe itself with verdure, and the barren places where life seemed banned would ere long be dappled with the shade of trees and musical with the song of birds. Talents now hidden, virtues unsuspected, would come forth to make human life richer, fuller, happier, nobler. For

• in these round men who are stuck into three-cornered holes, and three-cornered men who are jammed into round holes;
• in these men who are wasting their energies in the scramble to be rich;
• in these who in factories are turned into machines, or are chained by necessity to bench or plow;
• in these children who are growing up in squalor, and vice, and ignorance, are powers of the highest order, talents the most splendid.

They need but the opportunity to bring them forth.

Consider the possibilities of a state of society that gave that opportunity to all. Let imagination fill out the picture; its colors grow too bright for words to paint.

• Consider the moral elevation, the intellectual activity, the social life.
• Consider how by a thousand actions and interactions the members of every community are linked together, and how in the present condition of things even the fortunate few who stand upon the apex of the social pyramid must suffer, though they know it not, from the want, ignorance, and degradation that are underneath.
• Consider these things and then say whether the change I propose would not be for the benefit of every one — even the greatest landholder? ... read the whole chapter

The truth to which we were led in the politico-economic branch of our inquiry is as clearly apparent in the rise and fall of nations and the growth and decay of civilizations, and it accords with those deep-seated recognitions of relation and sequence that we denominate moral perceptions. Thus are given to our conclusions the greatest certitude and highest sanction.

This truth involves both a menace and a promise. It shows that the evils arising from the unjust and unequal distribution of wealth, which are becoming more and more apparent as modern civilization goes on, are not incidents of progress, but tendencies which must bring progress to a halt; that they will not cure themselves, but, on the contrary, must, unless their cause is removed, grow greater and greater, until they sweep us back into barbarism by the road every previous civilization has trod. But it also shows that these evils are not imposed by natural laws; that they spring solely from social maladjustments which ignore natural laws, and that in removing their cause we shall be giving an enormous impetus to progress.

The poverty which in the midst of abundance pinches and embrutes men, and all the manifold evils which flow from it, spring from a denial of justice. In permitting the monopolization of the opportunities which nature freely offers to all, we have ignored the fundamental law of justice — for, so far as we can see, when we view things upon a large scale, justice seems to be the supreme law of the universe. But by sweeping away this injustice and asserting the rights of all men to natural opportunities, we shall conform ourselves to the law —

• we shall remove the great cause of unnatural inequality in the distribution of wealth and power;
• we shall abolish poverty;
• tame the ruthless passions of greed;
• dry up the springs of vice and misery;
• light in dark places the lamp of knowledge;
• give new vigor to invention and a fresh impulse to discovery;
• substitute political strength for political weakness; and
• make tyranny and anarchy impossible.

The reform I have proposed accords with all that is politically, socially, or morally desirable. It has the qualities of a true reform, for it will make all other reforms easier. What is it but the carrying out in letter and spirit of the truth enunciated in the Declaration of Independence — the "self-evident" truth that is the heart and soul of the Declaration —"That all men are created equal; that they are endowed by their Creator with certain inalienable rights; that among these are life, liberty, and the pursuit of happiness!"

These rights are denied when the equal right to land — on which and by which men alone can live — is denied. Equality of political rights will not compensate for the denial of the equal right to the bounty of nature. Political liberty, when the equal right to land is denied, becomes, as population increases and invention goes on, merely the liberty to compete for employment at starvation wages. This is the truth that we have ignored. And so

• there come beggars in our streets and tramps on our roads; and
• poverty enslaves men who we boast are political sovereigns; and
• want breeds ignorance that our schools cannot enlighten; and
• citizens vote as their masters dictate; and
• the demagogue usurps the part of the statesman; and
• gold weighs in the scales of justice; and
• in high places sit those who do not pay to civic virtue even the compliment of hypocrisy; and
• the pillars of the republic that we thought so strong already bend under an increasing strain.

We honor Liberty in name and in form. We set up her statues and sound her praises. But we have not fully trusted her. And with our growth so grow her demands. She will have no half service!

Liberty! it is a word to conjure with, not to vex the ear in empty boastings. For Liberty means Justice, and Justice is the natural law — the law of health and symmetry and strength, of fraternity and co-operation.

They who look upon Liberty as having accomplished her mission when she has abolished hereditary privileges and given men the ballot, who think of her as having no further relations to the everyday affairs of life, have not seen her real grandeur — to them the poets who have sung of her must seem rhapsodists, and her martyrs fools! As the sun is the lord of life, as well as of light; as his beams not merely pierce the clouds, but support all growth, supply all motion, and call forth from what would otherwise be a cold and inert mass all the infinite diversities of being and beauty, so is liberty to mankind. It is not for an abstraction that men have toiled and died; that in every age the witnesses of Liberty have stood forth, and the martyrs of Liberty have suffered.

We speak of Liberty as one thing, and of virtue, wealth, knowledge, invention, national strength, and national independence as other things. But, of all these, Liberty is the source, the mother, the necessary condition. ...

Only in broken gleams and partial light has the sun of Liberty yet beamed among men, but all progress hath she called forth. ...

Shall we not trust her?

In our time, as in times before, creep on the insidious forces that, producing inequality, destroy Liberty. On the horizon the clouds begin to lower. Liberty calls to us again. We must follow her further; we must trust her fully. Either we must wholly accept her or she will not stay. It is not enough that men should vote; it is not enough that they should be theoretically equal before the law. They must have liberty to avail themselves of the opportunities and means of life; they must stand on equal terms with reference to the bounty of nature. Either this, or Liberty withdraws her light! Either this, or darkness comes on, and the very forces that progress has evolved turn to powers that work destruction. This is the universal law. This is the lesson of the centuries. Unless its foundations be laid in justice the social structure cannot stand.

Our primary social adjustment is a denial of justice. In allowing one man to own the land on which and from which other men must live, we have made them his bondsmen in a degree which increases as material progress goes on. This is the subtile alchemy that in ways they do not realize is extracting from the masses in every civilized country the fruits of their weary toil; that is instituting a harder and more hopeless slavery in place of that which has been destroyed; that is bringing political despotism out of political freedom, and must soon transmute democratic institutions into anarchy.

It is this that turns the blessings of material progress into a curse. It is this that crowds human beings into noisome cellars and squalid tenement houses; that fills prisons and brothels; that goads men with want and consumes them with greed; that robs women of the grace and beauty of perfect womanhood; that takes from little children the joy and innocence of life's morning.

Civilization so based cannot continue. The eternal laws of the universe forbid it. Ruins of dead empires testify, and the witness that is in every soul answers, that it cannot be. It is something grander than Benevolence, something more august than Charity — it is Justice herself that demands of us to right this wrong. Justice that will not be denied; that cannot be put off — Justice that with the scales carries the sword. Shall we ward the stroke with liturgies and prayers? Shall we avert the decrees of immutable law by raising churches when hungry infants moan and weary mothers weep?

Though it may take the language of prayer, it is blasphemy that attributes to the inscrutable decrees of Providence the suffering and brutishness that come of poverty; that turns with folded hands to the All-Father and lays on Him the responsibility for the want and crime of our great cities. We degrade the Everlasting. We slander the Just One. A merciful man would have better ordered the world; a just man would crush with his foot such an ulcerous ant-hill! It is not the Almighty, but we who are responsible for the vice and misery that fester amid our civilization. The Creator showers upon us his gifts — more than enough for all. But like swine scrambling for food, we tread them in the mire — tread them in the mire, while we tear and rend each other!

In the very centers of our civilization today are want and suffering enough to make sick at heart whoever does not close his eyes and steel his nerves. Dare we turn to the Creator and ask Him to relieve it? Supposing the prayer were heard, and at the behest with which the universe sprang into being there should glow in the sun a greater power; new virtue fill the air; fresh vigor the soil; that for every blade of grass that now grows two should spring up, and the seed that now increases fiftyfold should increase a hundredfold! Would poverty be abated or want relieved? Manifestly no! Whatever benefit would accrue would be but temporary. The new powers streaming through the material universe could be utilized only through land.

This is not merely a deduction of political economy; it is a fact of experience. We know it because we have seen it. Within our own times, under our very eyes, that Power which is above all, and in all, and through all; that Power of which the whole universe is but the manifestation; that Power which maketh all things, and without which is not anything made that is made, has increased the bounty which men may enjoy, as truly as though the fertility of nature had been increased.

• Into the mind of one came the thought that harnessed steam for the service of mankind.
• To the inner ear of another was whispered the secret that compels the lightning to bear a message round the globe.
• In every direction have the laws of matter been revealed;
• in every department of industry have arisen arms of iron and fingers of steel, whose effect upon the production of wealth has been precisely the same as an increase in the fertility of nature.

What has been the result? Simply that landowners get all the gain.

Can it be that the gifts of the Creator may be thus misappropriated with impunity? Is it a light thing that labor should be robbed of its earnings while greed rolls in wealth — that the many should want while the few are surfeited? Turn to history, and on every page may be read the lesson that such wrong never goes unpunished; that the Nemesis that follows injustice never falters nor sleeps! Look around today. Can this state of things continue? May we even say, "After us the deluge!" Nay; the pillars of the State are trembling even now, and the very foundations of society begin to quiver with pent-up forces that glow underneath. The struggle that must either revivify, or convulse in ruin, is near at hand, if it be not already begun.

The fiat has gone forth! With steam and electricity, and the new powers born of progress, forces have entered the world that will either compel us to a higher plane or overwhelm us, as nation after nation, as civilization after civilization, have been overwhelmed before. ...

• We cannot go on permitting men to vote and forcing them to tramp.
• We cannot go on educating boys and girls in our public schools and then refusing them the right to earn an honest living.
• We cannot go on prating of the inalienable rights of man and then denying the inalienable right to the bounty of the Creator.

Even now, in old bottles the new wine begins to ferment, and elemental forces gather for the strife!

But if, while there is yet time, we turn to Justice and obey her, if we trust Liberty and follow her, the dangers that now threaten must disappear, the forces that now menace will turn to agencies of elevation. Think of the powers now wasted; of the infinite fields of knowledge yet to be explored; of the possibilities of which the wondrous inventions of this century give us but a hint.

• With want destroyed;
• with greed changed to noble passions;
• with the fraternity that is born of equality taking the place of the jealousy and fear that now array men against each other;
• with mental power loosed by conditions that give to the humblest comfort and leisure; and
• who shall measure the heights to which our civilization may soar?

Words fail the thought! It is the Golden Age of which poets have sung and high-raised seers have told in metaphor! It is the glorious vision which has always haunted man with gleams of fitful splendor. It is what he saw whose eyes at Patmos were closed in a trance. It is the culmination of Christianity — the City of God on earth, with its walls of jasper and its gates of pearl! It is the reign of the Prince of Peace! ... read the whole chapter

It is true that wealth has been greatly increased, and that the average of comfort, leisure, and refinement has been raised; but these gains are not general. In them the lowest class do not share.* I do not mean that the condition of the lowest class has nowhere nor in anything been improved; but that there is nowhere any improvement which can be credited to increased productive power. I mean that the tendency of what we call material progress is in no wise to improve the condition of the lowest class in the essentials of healthy, happy human life. Nay, more, that it is to still further depress the condition of the lowest class. The new forces, elevating in their nature though they be, do not act upon the social fabric from underneath, as was for a long time hoped and believed, but strike it at a point intermediate between top and bottom. It is as though an immense wedge were being forced, not underneath society, but through society. Those who are above the point of separation are elevated, but those who are below are crushed down. ...

So long as all the increased wealth which modern progress brings goes but to build up great fortunes, to increase luxury and make sharper the contrast between the House of Have and the House of Want, progress is not real and cannot be permanent. The reaction must come. The tower leans from its foundations, and every new story but hastens the final catastrophe. To educate men who must be condemned to poverty, is but to make them restive; to base on a state of most glaring social inequality political institutions under which men are not fully equal, is to stand a pyramid on its apex. ...

I propose in the following pages to attempt to solve by the methods of political economy the great problem I have outlined. I propose to seek the law which associates poverty with progress, and increases want with advancing wealth; and I believe that in the explanation of this paradox we shall find the explanation of those recurring seasons of industrial and commercial paralysis which, viewed independent of their relations to more general phenomena, seem so inexplicable. Properly commenced and carefully pursued, such an investigation must yield a conclusion that will stand every test, and as truth will correlate with all other truth. For in the sequence of phenomena there is no accident. Every effect has a cause, and every fact implies a preceding fact.

That political economy, as at present taught, does not explain the persistence of poverty amid advancing wealth in a manner which accords with the deep-seated perceptions of men;

• that the unquestionable truths which it does teach are unrelated and disjointed;
• that it has failed to make the progress in popular thought that truth, even when unpleasant, must make;
• that, on the contrary, after a century of cultivation, during which it has engrossed the attention some of the most subtle and powerful intellects, it should be spurned by the statesman, scouted by the masses, relegated in the opinion of many educated and thinking men to the rank of a pseudo-science in which nothing fixed or can be fixed--must, it seems to me, be due not to any inability of the science when properly pursued, but some false step in its premises, or overlooked factor in its estimates. And as such mistakes are generally concealed the respect paid to authority, I propose in this inquiry take nothing for granted, but to bring even accepted theories to the test of first principles, and should they not stand the test, to freshly interrogate facts in the endeavor to discover their law.

I propose to beg no question, to shrink from no conclusion, but to follow truth wherever it may lead. Upon us the responsibility of seeking the law, for in the very heart of our civilization to-day women faint and little children moan. But what that law may prove to be is not our affair. If the conclusions that we reach run counter to our prejudices, let us not flinch; if they challenge institutions that have long been deemed wise and natural, let us not turn back. ... read the entire chapter

I know of a woman — I have never had the pleasure of making her acquaintance, because she lives in a lunatic asylum, which does not happen to be on my visiting list. This woman has been mentally incompetent from birth. She is well taken care of, because her father left her when he died the income of a large farm on the outskirts of a city. The city has since grown and the land is now worth, at conservative estimate, about twenty million dollars. It is covered with office buildings, and the greater part of the income, which cannot be spent by the woman, is piling up at compound interest. The woman enjoys good health, so she may be worth a hundred million dollars before she dies.

I choose this case because it is one about which there can be no disputing; this woman has never been able to do anything to earn that twenty million dollars. And if a visitor from Mars should come down to study the situation, which would he think was most insane, the unfortunate woman, or the society which compels thousands of people to wear themselves to death in order to pay her the income of twenty million dollars?

The fact that this woman is insane makes it easy to see that she is not entitled to the "unearned increment" of the land she owns. But how about all the other people who have bought up and are holding for speculation the most desirable land? The value of this land increases, not because of anything these owners do — not because of any useful service they render to the community — but purely because the community as a whole is crowding into that neighborhood and must have use of the land.

The speculator who bought this land thinks that he deserves the increase, because he guessed the fact that the city was going to grow that way. But it seems clear enough that his skill in guessing which way the community was going to grow, however useful that skill may be to himself, is not in any way useful to the community. The man may have planted trees, or built roads, and put in sidewalks and sewers; all that is useful work, and for that he should be paid. But should he be paid for guessing what the rest of us were going to need?

Before you answer, consider the consequences of this guessing game. The consequences of land speculation are tenantry and debt on the farms, and slums and luxury in the cities. A great part of the necessary land is held out of use, and so the value of all land continually increases, until the poor man can no longer own a home. The value of farm land also increases; so year by year more independent farmers are dispossessed, because they cannot pay interest on their mortgages. So the land becomes a place of serfdom, that land described by the poet, "where wealth accumulates and men decay." The great cities fill up with festering slums, and a small class of idle parasites are provided with enormous fortunes, which they do not have to earn, and which they cannot intelligently spend. ...

In Philadelphia, as in all our great cities, are enormously wealthy families, living on hereditary incomes derived from crowded slums. Here and there among these rich men is one who realizes that he has not earned what he is consuming, and that it has not brought him happiness, and is bringing still less to his children. Such men are casting about for ways to invest their money without breeding idleness and parasitism. Some of them might be grateful to learn about this enclave plan, and to visit the lovely village of Arden, and see what its people are doing to make possible a peaceful and joyous life, even in this land of bootleggers and jazz orchestras. ... read the whole article

Somehow he did manage to live. By one means or another he got over the peak of his greatest distress, and four years later, in the winter of 1868, he came from California to New York on an errand for a newspaper. He was then not quite thirty years old, and did not even yet have a dollar in his pocket that he could call his own. New York showed him something brand-new in his experience. Up to this time he had not been in a position to see any great show of inequality in the distribution of wealth. Life was simple in the Philadelphia of his boyhood days, and in the rough and new California of his youth one person lived much like another. But now, in the New York of 1868, he saw our western Palmyra in all the shoddy glory of its post-war period, and by all accounts it must have been a most dreadful sight, as repulsive as the pens of Dickens and George William Curtis pictured it. Shoddy riches, shoddy show, shoddy ideals and taste, shoddy people — and on the other hand, whole populations of troglodyte slum-dwellers living at an almost inconceivable depth of wretchedness and degradation.

Years afterward George said that here “I saw and recognized for the first time the shocking contrast between monstrous wealth and debasing want.” What was the cause of it? Again, nobody seemed to know. Like depressions and plagues, it was taken as part of the regular order of nature. It had always existed in large commercial and industrial centers, apparently it was bound always to exist, and it seemed to be just another one of the things that had to be put up with. There was no cure for it, so far as anybody knew. All that could be done was to take some of the curse off it by charity of one sort or another, and this was being done; in fact, it was beginning to be organized on a large scale, more lavishly perhaps than in any other country.

Nevertheless, George reasoned with himself, the thing had to have a cause, for nothing in nature ever happens without a cause. If that cause could be found, a cure might be found; but trying to deal with an effect without knowing anything about its cause would be mere fumbling in the dark. Here, then, was a second question, to which George pledged his lifetime for an answer. The first question was, what is the cause — not any superficial and apparent cause, but the true fundamental cause — of recurrent industrial depressions? The second question was, what is the true fundamental cause of the enormous inequality in the distribution of wealth?

George succeeded in answering these two questions to his own satisfaction while he was still a comparatively young man. This was the only success he ever had in his life; whatever else he touched failed. His one success, however, such as it was, led him through one of the strangest and most remarkable careers ever achieved in America, or for that matter, in the world. ...

Progress and Poverty is the first and only thorough, complete, scientific inquiry ever made into the fundamental cause of industrial depressions and involuntary poverty. The ablest minds of the century attacked and condemned it — Professor Huxley, the Duke of Argyll, Goldwin Smith, Leo XIII, Frederic Harrison, John Bright, Joseph Chamberlain. Nevertheless, in a preface to the definitive edition, George said what very few authors of a technical work have ever been able to say, that he had not met with a single criticism or objection that was not fully anticipated and answered in the book itself. For years he debated its basic positions with any one who cared to try, and was never worsted.

... Much more important, however, is the question whether George’s faith in the common man’s collective judgment was justified; whether such faith is ever justified. Does the common man possess the force of intellect to apprehend the processes of reason correctly, or the force of character to follow them disinterestedly? The whole future of eighteenth-century political doctrine, the doctrine on which our republic was nominally established, hangs on this question — the question, in short, whether republicanism has not put a burden on the common man which is greater than he can bear.

George never had a moment’s doubt of the answer. Yet, seeing what sort of political leadership the common man invariably chose to follow, and the kind of issue that invariably attracted him, he ended the argument of Progress and Poverty with a clear warning, too long to be quoted here, against the wholesale corruption of the common man by the government which the common man himself sets up. It is well worth reading now, whether one finds the root of this corruption in the common man’s weakness of mind and character, or whether one finds it, as George did, in the unequal distribution of wealth. Whatever one may think about that, there is no possible doubt that George’s warning has the interest of absolutely accurate prophecy. ...read the whole article

A land tax abates concentration of wealth and power without limiting ambition or enterprise. It taxes wealth while sparing both capital and income. It puts no cap on ambition and enterprise, except to redirect those useful traits into creation, production, hiring, and capital formation, and away from the zero-sum game of land-grabbing.

It requires no incentive-warping progressive rate: all land is taxed at the same rate, in proportion to value. The tax achieves progressivity by using the observed reality that wealth rises with income, faster than income; and landholdings rise with wealth, faster than wealth. Otherwise put, the land tax offsets concentration because ownership of wealth is more concentrated than income; and ownership of land is more concentrated than other forms of wealth. As George said, "The great cause of the concentration of wealth is concentration of the ownership of land."

At the state or local level, George's program is the answer to California Governor Pete Wilson' dilemma, and every governor's dilemma:

• it untaxes and attracts capital, and encourages capital formation, without giving away the store, or untaxing the rich, or starving the schools and police.
• It raises state revenues from the richest people while attracting business and wealth with the very same stroke.

On the good side, this lack of land collateral would stop lenders' discriminating in favor of landowners, as they do now. It would remove a major cause of the concentration of economic power and control, that is the clustering of credit around original nuclei of large, superior landholdings. The credit is often used to buy still more land, to reserve for possible future use and at the same time to withhold from competitors. Such concentration and market control form the ugly side of extant Western "capitalism," when enterprise degenerates into greed and acquisitions supplant innovations.... read the whole article

Savings rise with income, faster than income. With savings one acquires property, and we would naturally expect therefore higher income groups to own property in proportion to their greater saving, which is a disproportionately high share of their high incomes. And we would also expect a high share of high incomes to come from property.

Musgrave et al. support this. They rank 1948 U.S. "Spending Units" by income and group them, using Treasury sources of data. The highest class got 23% of the income, but 78% of dividend income and 45% of rental income, and only 12% of the wage and salary income.(14) Other sources might be cited, too.

Musgrave et al. omitted capital gains. These are probably the most concentrated source of income, and of course property-derived. Realized gains swell from virtually nothing at the $10,000 income level to about half of income at the million dollar level.(15) Unrealized accrued gains, which we should include in a proper Haig-Simons income concept, are probably larger yet, and more concentrated. There are no easy data on this, but several a priori and indirect reasons to think them concentrated. The rich have a comparative advantage in waiting for deferred cash. They are known to favor growth stocks, undistributed profits, speculative landholdings and unripe minerals, major sources of unrealized accruals.

Among those who do own material amounts of property, concentration is high relative to that of income. The top 10% of income receivers, as income is usually defined and reported, get about 30% of all income. Every study of property owners shows figures in another ballpark altogether. Table I summarizes what several such studies show about the top group. Note that most of these figures show only concentration among those who own enough property to be counted, thus understating concentration among the whole population.  ...

Corporate shares are not taxable property, but of course corporate income is mostly derived from taxable property.(18) Some will object that corporations have many owners and should not be treated as single units. That is true, but again, it smacks of regression fallacy. Wealthy owners also have many corporations, and in general corporate shares are the most concentrated kind of asset.

Ownership of large property gives one control of other assets. Property is borrowing power and credit rating: all studies show interest rates to be very regressive with size and quality of collateral, and terms easier. But simple borrowing is only the beginning. With great wealth one goes into banking and exerts multiple leverage. The story has been told many times, if not as well, since Brandeis' Other Peoples' Money: collateral, leverage, conglomerates, interlocking directorates, mergers, lender suasion, industrial leadership, pyramiding, the Wallenberg Grip, subcontracting market power, control of dealerships, . . . . Control is power and status (psychic income), and control is a source of additional income, as revealed by the premium prices of shares during battles for control.

Data in Table I probably understate concentration, for four general reasons: omitting the unpropertied, accepting and reporting regressive assessments, accepting the bias in partial inventories, and accepting and reporting straw owners as separate owners.

As to housing, it is the rich who have second homes, hobby farms, summer resorts, tax shelters, ski houses, Caribbean hideaways, lake frontage, and advance sites for future building. Yet studies of income and housing, from which some would damn the property tax, compare a full statement of income (at least wage income) with housing narrowly defined. Walter Morton (p. 143) goes so far as to judge the entire property tax on the basis of housing alone. He not only omitted second homes, but other property comprising half the total: commerce, industry, rental, vacant, farm, forest, mineral, water, and miscellaneous. Again, ownership of these is concentrated among those ranking high in the housing scale.

4. Accepting straw owners as separate owners ...

1. "Ability-to-pay" derives from wealth as well as current income. James Tobin, Arnold Zellner, Taylor and Houthakker, Harold Somers, and others have stressed this lately. The old cliche that "taxes are paid out of income" is as empty as the one that we consume "out of income." We spend money, and it is not labelled.

2. The property tax asserts a public equity in land which was won and is defended by joint efforts, and whose value derives from public works and spillovers, not from the owners' efforts. It exempts human effort, thus rewarding service to the community and denying the state any equity in the bodies of its citizens whose freedom and dignity is thus enhanced in their capacity as human beings, as distinct from owners of wealth.

3. Property taxes reduce the differential effect of inherited wealth on the current generation. They strike directly at concentration of economic and other power based on wealth, promoting competition and equal opportunity. Property as collateral is a source of invisible income (credit rating). Taxing property reduces the differential advantage of the rich in credit rationing.

4. Property income of a given dollar value places the receiver on a higher welfare plane than labor income, because he needn't work for it. $10,000 a year received by dint of working long hours in a coal mine with black lung disease is not the same as $10,000 plus a life of ease.

a. Politics guides the original distribution.

 

The initial distribution of land -- the origin of property in land -- is military, legal, and political, not economic.  The prime business of nations throughout history has been gaining and defending land.  What was won by force has no higher sanction than lex fortioris, and must be kept and defended by force.

Who buys to hold these vast reserves for distant future use? They are of investment grade only for those with waiting power. Unripe lands and resources are probably the most closely held assets there are. Poor people and small businessmen need busy capital right now. Only a few of the wealthiest people have the deep pockets and slack money to buy far ahead, to maintain high reserve/output ratios. These markets in far future values are their special preserve.

The bonus system originated on private uplands. It was a way for big oil firms to dazzle various rustics, pressed for cash, by tempting them with front money for their mineral rights. The companies had the cash, the connections, and intimidating expertise; they wrote the rules their way. The rules included a cap of 12.5% on the long-term "royalty," the only means by which lessors participated over the long pull, and retained a share in gushers and bonanzas that proved in excess of original estimates - estimates much better known to the bidders than the lessors. When the companies moved onto public lands they brought the same system with them. It was by then an industry standard.

The only "bid variable" in this system is the bonus. With the royalty capped, there are large potential surpluses to attract bonus bids. The Physiocratic rule of compensation applies: a low royalty translates into a high leasehold value. The advantage of this to "the industry" - meaning the largest firms that are its most visible spokesmen and exemplars - is that it screens out many bidders, those pressed for front money. It reserves the field for a much smaller number of players, increasing their bargaining power.

It is a common belief that property tax relief is "good for farmers." It certainly raises the private share of economic rent. That in turn raises the investment grade of farmland and encourages its purchase as a store of value, a place to park slack money. This may be at odds, however, with using it as a vehicle for enterprise and an outlet for workmanship. Lower farm property taxes are associated with lower ratios of capital to land, and labor to land, both over time and among states. They are also associated with bigger mean farm size and less equal distribution of farm sizes.

In the sections that follow, I first document the rise of inequality in the distribution of farmland that followed a sharp drop in farm property tax rates after 1930. Then I show, by cross-sectional analysis, a positive relationship between higher property tax rates and more intensive use of farmland, which in turn is associated with more equal distribution of farmland. Conversely, I find property tax relief associated with underuse and underimprovement of land.

• rising acreages mean there are fewer farms overall.
• Rising labor prices per farm mean aspiring farmers who lack prior wealth can no longer buy in.
• Rising Gini Ratios mean acreage is less equally shared among a given number of farms.
• Rising Gamma factors mean the higher quality land is moving into bigger farms.
• The Gamma data are confirmed by rising shares of cropland and irrigated land in vast farms.
• Rising P/C ratios reflect a higher LSREV, and they mean it is harder for a newcomer to acquire any farm acres.

The combination means the agricultural ladder has been pulled up. Entry is nearly impossible for farmers lacking outside finance; exit and latifundiazation proceed apace. These changes accompanied and followed a 40 percent drop in farm property tax rates.  ...

THE LESSER IMPROVEMENT OF BIGGER FARMS

A result of rising concentration is the separation of land from capital. With some exaggeration, American latifundia are now lands without buildings, but buildings cluster on smaller farms, many without enough land. This implies at least three points.

• First, building wealth is more equally distributed than land wealth.
• Second, the property tax would be more progressive if changed to a pure land tax, exempting buildings.
• Third, many latifundia are not being used to their potential, while capital on some small farms is undercomplemented with land. I support the case first using national data, and then by comparing states.

The yield per acre of most crops stays level or rises with harvested acres per farm. At the same time, sales per dollar of real estate fall somewhat. (21) The most likely reason is that the quality of harvested land rises with quantity. There is, to be sure, a trade-off between quality and quantity, but there is also a bond. Whoever can afford more can afford better. Which effect is stronger? The question must be resolved by data.  ...

The 1940 Census of Agriculture was the last to separate $L from $B, overall. In 1940 the building share of real estate value ($B/[$L+B], or BSREV) was .69 in the lowest acreage bracket, .31 for all farms, and .12 for farms of 1,000 acres and over.

AELOS (1988) gives no comparable comprehensive data, but it does give two series that test the point and have the advantage of disaggregation. One is for "owner-operators" and one for "landlords with debt." For the owner-operators, ranked by acres per farm, BSREV was .63 for farms under 10 acres; .29 for all farms; and .12 for farms of 2,000 acres and over. (37) Building values are much more equally distributed among these farms than land values. ...

CONCLUSION

One may at least firmly conclude that large farm units are less improved and less peopled than small and medium-sized farms. There are two possible interpretations. One is that big farms are more efficient, getting more from less, but that is refuted by their getting less output per $L. The other is that Veblen was right, many of them are oversized stores of value, held first to park slack money and only secondly to produce food and fiber, and complement the owner's workmanship. The Florida 9 [the high LSREV states] may represent a home grown rural "third world" of large, underutilized landholdings that preempt the best land and force median farmers onto small farms on low-grade land.

The issue cannot be settled in a few words, but the implications for tax policy are the same either way. If large units are more efficient, they can bear heavier taxes. If they are less efficient, heavier PTRs will induce them to release surplus land for others, which will tend at the margins to equalize factor proportions, moving more states from the Florida toward the Wisconsin model. Read the whole article

Walt Rybeck: Have We Forgotten The Foundation?

The land ethic and land practices, which served our economy and cities so well, sadly fell into disrepair. Here are five of the more important reasons:

• One: By 1900 the frontier was gone. The country was virtually all fenced in. Historian Frederick Jackson Turner in the 1890s underscored the frontier's importance. Its free or cheap land had been a safety valve for labor. Workers who felt exploited could go West--strike out on their own.
• Two: Prodigious concentrations of wealth materially altered the economic landscape. Some of these were based on railway land giveaways. Most were tied to natural resource monopolies -- of coal, timber, oil, cattle lands and so forth -- whose owners found ways to fend off land taxes.
• Three: A shift from local to federal power occurred in the political arena. The national government had to grow to save the Union and execute the Civil War. It also expanded to combat abuses of giant combines and trusts. To underwrite this growth, Congress turned primarily to tax-ing production and incomes.
• Four: At the urging of land monopolists who practically owned many state legislatures in the late 1800s, state governments discarded property taxes, replacing them with income and sales taxes. Local governments also gradually began to decrease their reliance on property taxes.
• Five: The property tax itself was transformed. It became less a tax on land values, increasingly a tax on improvements--that is, on houses, stores, offices and other edifices on the land. These factors gave rise to slums, to panics (as depressions were then called), and a widening gap between the haves and have-nots. As a corrective, Henry George in his 1879 masterwork, Progress and Poverty, urged Americans to address the land problem. He inspired a large popular following, but many academics, politicians, economists and captains of industry asked scornfully, "What land problem?"

• Ecologists know it.
• Sprawl and crawl people know it.
• Many elected officials, homebuyers, and people trying to start a farm or a business know it.

• Habitat volunteers build houses for the poor, making recipients and its volunteers feel real good. This is a fine example of charity combined with self-help, and it spreads awareness of a great social ill. But more housing is being abandoned and demolished than Habitat is able to build.
• This same treadmill effect undermines federal efforts. HUD has spent billions on public housing, urban renewal and enterprise zones. Some of these programs have retarded urban decline but their strongest advocates would not claim they have come close to stopping or reversing it.
• Cities offer tax abatements to revive decaying business districts. Yet after new buildings are established, the cities hit owners with the same tax burden that helped cause decay in the first place.
• Some builders turn to what I call "designer sprawl." They mimic old towns and are clearly less wasteful of land than unplanned sprawl. Yet they often invade wheat fields and wood lots far from the job centers, transit lines and cultural institutions that comprise real communities -- while large quantities of usable sites that are well served by infrastructure lie fallow in those real cities and towns. These stumbling efforts recall an architectural parallel -- when people first tried rather pathetically to restore old neighborhoods with false storefronts, tarpaper bricks and Permastone.

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. ...

Hudson: Lies of the Land

Michael Hudson and Kris Feder: Real Estate and the Capital Gains Debate

Capital gains taxation has been a divisive issue in Congress at least since the debates surrounding the Tax Reform Act of 1986, which, aiming to eliminate tax loopholes and shelters and preferences, repealed preferentially low tax rates for long-term gains.1 To bring effective capital gains tax rates back down again was President Bush’s “top priority in tax policy.“2 In 1989, Senate Democrats blocked a determined drive to reduce effective tax rates on the part of Bush, Republican Senators Packwood, Dole and others, and a few Democratic allies.3 The administration argued that the tax cuts would stimulate economic growth and induce asset sales, thereby actually increasing federal tax revenues; Congressional Democrats countered that the plan benefited mainly the wealthy, and that tax revenues would in fact decline.4 The Joint Committee on Taxation projected that budget shortfalls beginning in 1991 would sum to about $24 billion by 1994 --  and that most of the direct benefits would go to individuals with over $200,000 in taxable income. House Speaker Thomas S. Foley said that a third of the savings would be enjoyed by those with gross incomes over one million dollars. ...

The most frequently heard arguments for reducing capital gains taxes are:

No capital gains duties are levied on estates passing to heirs. Indeed, inheritors of real estate may begin re-depreciating their income-yielding buildings afresh at the new (typically higher) transfer price. The estates bequeathed by the richest one percent of the population (over $600,000 in value) are now taxed at a 55 percent rate if not sheltered, but of course these are the estates most likely to shelter inheritance and gift bequests. For instance, assets given as gifts are taxed only at the time they come to be sold. If the capital gains tax were reduced or abolished, the deferral would become permanent.

Most capital gains reaped by business partnerships accrue to real estate firms, which shelter personal income by avoiding incorporation. IRS statistics ranking capital gains in terms of how long the assets were held show that many of these gains represent quick “flips." Often these are land that has been rezoned from a low-value to a high-value use. Retaining the capital gains tax would have little effect on deterring such speculation.

Properties held for longer periods of time by these partnerships typically are sold or swapped after having been fully depreciated. Swaps’ have long been permitted to the real, many almost perpetually free of income taxation. The logic for this loophole seems at first glance to be much like that for personal homeowners’ exemptions in selling a home to move somewhere else, without having to pay a capital gain tax in the process; but the analogy is specious. Homeowners cannot take a depreciation tax credit unless their property generates rental income, and most do not generate any income against which to claim CCAs31. In contrast, the capital gains which commercial real estate investors record for income-tax purposes are calculated, not merely on the gain in the property’s market price (as with owner-occupied homes), but on the excess of selling price over depreciated book value.

Reported capital gains in real estate were understated as a result of exclusions. On the other hand, much direct investment included the cost of land, commercial buildings, and plant and equipment. Taking this into account, we estimate that roughly 70 percent of the capital gains calculated by the IRS for 1985 probably represent real estate. Even this estimate may understate the role of land and real estate. In 1985, anticipating the planned 1986 tax reform which would raise the capital gains tax rate from 20 to 28 percent, many investors sold their securities that had registered the largest advances. Some 40 percent of the capital gains reaped by selling these stocks probably represented real estate gains. A major spur to the LBO movement driving up the stock market was an awareness that real estate gains were not being reflected in book values and share prices;36 as land prices leapt upward-funded in part by looser regulatory restrictions on S&L lending against land -- raiders bought publicly traded companies and sold off their assets, including real estate, to pay off their junk-bond backers. In effect, not only were rental income and profits being converted into a flow of interest payments; so also were capital gains. ...

The Political Context of Real Estate Taxation
Much of the public discussion of capital gains policy has been conducted with little reference to empirical research as to their actual character and composition in the US economy. Capital gains, and savings in general, are defended on the assumption that they are automatically transformed into new direct investment. Yet the more layers has the debt pyramid, the smaller is the proportion of savings used to finance direct investment. Moreover, our investigation suggests that a large and expanding share of the economy's capital gains -- as they are defined, measured and taxed -- has little discernible impact on net investment or employment.

IRS estimates of capital gains measure only the small proportion that individuals are obliged to declare after all the exemptions and exclusions have been utilized. There is no estimate of the volume of capital gains generated each year, and no adequate breakdown as to where these gains occur. This statistical lacuna means that the economic cost of assorted tax loopholes is not being calculated. There is no sound statistical basis for calculating the total returns being taken by investors, or the proportion of those returns paid in taxes.

When statistics are lacking, it often is because some interest groups are benefiting in ways they prefer not to see quantified and publicized. If land assessments lag behind actual increases in market value, for instance, land speculators, as well as homeowners, will pay less than their legislated tax share. Also -- and of direct relevance to our thesis -- the failure to distinguish statistics on land values and other real estate gains from non-real-estate capital gains in industry and finance makes it easier for the real estate industry to get its own taxes reduced along with industries in which capital gains tax cuts do indeed tend to spur productivity.

Henry George: How to Help the Unemployed   (1894)

What that injustice is may be seen by whoever will really look. We have only to ask to find. ...

"Scarcity of employment" is a comparatively new complaint in the United States. In our earlier times it was never heard of or thought of. There was "scarcity of employment " in Europe, but on this side of the Atlantic the trouble -- so it was deemed by a certain class -- was "scarcity of labor." It was because of this "scarcity of labor " that negroes were imported from Africa and indentured apprentices from the Old Country, that men who could not pay their passage sold their labor for a term of years to get here, and that that great stream of immigration from the Old World that has done so much to settle this continent set in. Now, why was there "scarcity of employment" on one side of the Atlantic and "scarcity of labor" on the other? What was the cause of this difference, of which all other social and political differences were but consequences? Adam Smith saw it, and in his "Wealth of Nations" states it, but it did not need an Adam Smith for that, as everyone who knew anything of the two countries knew it. It was, that in this country land was cheap and easy to get, while in Europe land was dear and hard to get. Land has been steadily growing dear in the United States, and as a consequence we hear no longer of "scarcity of labor." We hear now of "scarcity of employment."

In the first quarter of this century an educated and thoughtful Englishman, Edward Gibbon Wakefield, visited this country. He saw its great resources, and noted the differences between the English-speaking society growing up here and that to which he had been used. Viewing everything from the standpoint of a class accustomed to look on the rest of mankind as created for their benefit, 'what he deemed the great social and economic disadvantage of the United States was "the scarcity of labor." It was to this he traced the rudeness of even what he styled the upper class, its want of those refinements, enjoyments, and delicacies of life common to the aristocracy of England. How could an English gentleman emigrate to a country where labor was so dear that he might actually have to black his own boots; so dear that even the capitalist might have to work, and no one could count on a constant supply ready to accept as a boon any opportunity to perform the most menial, degrading, and repulsive services? Mr. Wakefield was not a man to note facts without seeking their connection. He saw that this "scarcity of labor" came from the cheapness of land where the vast area of the public domain was open for settlement at nominal prices. A man of his class and time, without the slightest question that land was made to be owned by landlords, and laborers were made to furnish a supply of labor for the upper classes, he was yet a man of imagination. He saw the future before the English-speaking race in building up new nations in what were yet the waste spaces of the earth. But he wished those new nations to be socially, politically, and economically newer Englands; not to be settled as the United States had been, from the "lower classes" alone, but to contain from the first a proper proportion of the "upper classes" as well. He saw that "scarcity of employment" would in time succeed "scarcity of labor" even in countries like the United States by the growth of speculation in land; but he did not want to wait for that in the newer Britains which his imagination pictured. He proposed at once to produce such salutary "scarcity of employment " in new colonies as would give cheap and abundant labor, by a governmental refusal to sell public land, save at a price so high as to prevent the poorer from getting land, thus compelling them to offer their labor for hire.

This was the essential part of what was once well known as the Wakefield plan of colonization. It is founded on a correct theory. In any country, however new and vast, it would be possible to change "scarcity of labor" into "scarcity of employment" by increasing the price put on the use of land. If three families settled a virgin continent, one family could command the services of the others as laborers for hire just as fully as though they were its chattel slaves, if it was accorded the ownership of the land and could put its own price on its use. Wakefield proposed only that land should be held at what he called "a sufficient price" -- that is, a price high enough to keep wages in new colonies only a little higher than wages in the mother-country, and to produce not actual inability to get employment on the part of laborers, but only such difficulty as would keep them tractable, and ready to accept what from his standpoint were reasonable wages. Yet it is evident that it would only require a somewhat greater increase in the price of land to go beyond this point and to bring about in the midst of abundant natural opportunities for the employment of labor, the phenomena of laborers vainly seeking employment. Now, in the United States we have not attempted to create "scarcity of employment" by Wakefield's plan. But we have made haste by sale and gift to put the public domain in the hands of private owners, and thus allowed speculation to bring about more quickly and effectually than he could have anticipated, more than Wakefield aimed at. The public domain is now practically gone; land is rising to European prices, and we are at last face to face with social difficulties which in the youth of men of my time we were wont to associate with "the effete monarchies of the Old World." Today, as the last census reports show, the majority of American farmers are rack-rented tenants, or hold under mortgage, the first form of tenancy; and the great majority of our people are landless men, without right to employ their own labor and without stake in the land they still foolishly speak of as their country. This is the reason why the army of the unemployed has appeared among us, why by pauperism has already become chronic, and why in the tramp we have in more dangerous type the proletarian of ancient Rome.

These recurring spasms of business stagnation; these long-drawn periods of industrial depression, common to the civilized world, do not come from our treatment of money; are not caused and are not to be cured by changes of tariffs. Protection is a robbery of labor, and what is called free trade would give some temporary relief, but speculation in land would only set in the stronger, and at last labor and capital would again resist, by partial cessation, the blackmail demanded for their employment in production, and the same round would be run again. There is but one remedy, and that is what is now known as the single-tax -- the abolition of all taxes upon labor and capital, and of all taxes upon their processes and products, and the taking of economic rent, the unearned increment which now goes to the mere appropriator, for the payment of public expenses. Charity can merely demoralize and pauperize, while that indirect form of charity, the attempt to artificially "make work" by increasing public expenses and by charity woodyards and sewing-rooms, is still more dangerous. If, in this sense, work is to be made, it can be made more quickly by dynamite and kerosene.

But there is no need for charity; no need for "making work." All that is needed is to remove the restrictions that prevent the natural demand for the products of work from availing itself of the natural supply. Remove them today, and every unemployed man in the country could find for himself employment tomorrow, and his "effective demand" for the things he desires would infuse new life into every subdivision of business and industry, even that of the dentist, the preacher, the magazine writer, or the actor.

The country is suffering from "scarcity of employment." But let anyone to-day attempt to employ his own labor or that of others, whether in making two blades of grass grow where one grew before, or in erecting a factory, and he will at once meet the speculator to demand of him an unnatural price for the land he must use, and the tax-gatherer to fine him for his act in employing labor as if he had committed a crime. The common-sense way to cure "scarcity of employment" is to take taxes off the products and processes of employment and to impose in their stead the tax that would end speculation in land.

But, it will be said, this is not quick enough. On the contrary, it is quicker than anything else. Even the public recognition of its need, by but a part of the intelligence and influence that is now devoted to charity appeals and schemes, would have such an effect upon the speculative price of land as to at once set labor and capital to work.  Read the entire article

Henry George: Justice the Object -- Taxation the Means (1890)

This is the shore of the Pacific. This is the Golden Gate. The westward march of our race is terminated by the ocean, which has the ancient East on its farther shore; no farther can we go. And yet here, in this new country, in this golden State, there are men ready to work, anxious to work, and yet who, for longer or shorter periods, cannot get the opportunity to work. The farther east you go, the worse it grows. To the man from San Francisco, who has never realised it before, there are sights in New York that are appalling. Cross the ocean to the greater city — the metropolis of the civilised world — and there poverty is deeper and darker yet. What is the reason? If there is more wealth wanted, why don't they get more?

Let us begin this study of the likely causes of our troubles by asking two questions:

• Are we over-populated?
• Are the earth's resources inadequate for this population?

Regardless of its size relative to other planets, with its circumference of about twenty-five thousand miles, to any mere mortal who must walk to the station and back each day, it is huge. Roughly ninety-six million miles separate the sun from the earth on the latter's eliptical journey around the sun. At this distance, the earth makes its annual journey in its elliptical curve and it spins on its own canted axis. Because of this cant, the sun's rays are distributed far more evenly, thus minimizing their damage and maximizing their benefits.

Consider the complementarity of nature in the case of the two forms of life we call vegetable and animal, in their respective uses of the two gases, oxygen and carbon dioxide, the waste product of each serving as the life-giving force of the other. Any increase in the one will encourage a like response in the other.

Marvel at the manner in which nature, with no help from man or beast, delivers pure water to the highest lands, increasing it as to their elevation, thus affording us a free ride downstream and free power as we desire it. Look with awe at the variety and quantity of minerals with which this world is blessed, and finally at the fecundity nature has bestowed so lavishly throughout both animal and vegetable life: Take note of the number of corn kernels from a single stalk that can be grown next year from a single kernel of this year's crop; then think of the vastly greater yields from a single cherry pit or the seeds of a single apple, or grape or watermelon; or, turning to the animal world, consider the hen who averages almost an egg a day and the spawning fish as examples of the prolificacy that is evident throughout the whole of the animal world, including mankind.

If this marvelous earth is as rich in resources as portrayed in the foregoing paragraph, then the problem must be one of distribution:

• how is the land distributed among the earth's inhabitants, and
• how are its products in turn distributed?

George has described this world as a "well-provisioned ship" and when one considers the increasingly huge daily withdrawals of such provisions as coal and petroleum as have occurred say over the past one hundred years, one must but agree with this writer. But this is only a static view. Consider the suggestion of some ten years ago that it would require the conversion of less than 20% the of the current annual growth of wood into alcohol to fuel all the motors then being fueled by the then-conventional means. The dynamic picture of the future is indeed awesome, and there is every indication that that characteristic has the potential of endless expansion. So how is it that on so richly endowed a Garden of Eden as this world of ours we have only been able to make of it a hell on earth for vast numbers of people?

In our economy, land is a ready object of speculation, and its value is constantly reflecting this evil. What happens in a rising market, the up side of a business cycle, is that investors see rising prices in land as indicative of a boom. Thereupon, they try to increase their holdings in such land, only to discover that their present returns will not pay for the present costs of land; the current price of land is not based on what the yield of that land is today, but on what it is projected to be two or three years from now. The difference tends to increase until a point is reached where the imarginal buyer of land suddenly finds himself unable to meet the rising costs to which he has subjected himself. With bankruptcy threatening him or having already been forced upon him, the land passes from his hands, and the market temporarily becomes overpriced. The bankruptcies increase, and ultimately land values are brought back to levels which represent current productivity, at which point the new boom will have started. ...

The wringing out of land speculation from the dynamics of economics will remove that unacknowledged offence which has so labored the economic profession and the public at large. As Henry George discovered and as Homer Hoyt so brilliantly depicted speculative land prices as the cause of this bitter cycle, so will its removal rid society of this hitherto hidden defect. It will put the land market on a current value basis and eliminate the terrible risks to which that market has always been subject in the past.

The reason for such speculation under the present practices is obvious. All products of labor are subject to increases or decreases depending on supply and demand. When an oversupply of any commodity begins to rear its ugly head, prices tend downward and production is thereby lessened until there is a contrary swing upward. Land, on the other hand, is of fixed supply. Nothing man does can increase or decrease the amount of land, and therefore that brake that operates in the field of production does not apply to land values and prices.

Just think of the social benefits that would accrue to a society that could, at a stroke, rid itself of the potential hazards to which all prior societies have been so subject. Production will then occur on a steadily rising level, demand increases as the well-being of society improves, new techniques develop, new inventions are made, and all these will be benefits to the community as a whole, and not just to the land-owners as in the past.

Back in the early days of this century, Winston Churchill saw and recorded an example of this. There had been a ferry fare over the river Thames for the common laborers who lived on the wrong side of the river to pay in order to get to work. A spirit of nobility prompted the absorption of this fare by the City, and almost immediately rents in the working class area were increased by the same amount as the fare had been. When this thing was done, the guys who got the benefit were not the poor working class people, but the owners of the homes in which they lived, or, more accurately and more critically, the owners of the land on which those homes stood. The laborers were thus charged a higher rent, and that rent diverted the benefit from the seemingly intended beneficiary (i.e., the public) to landowners in the affected area.

This occurs every day in this country. A new road is built, or a superhighway is constructed, which makes access to a particular site much easier. We tell ourselves that we justify this as an expenditure of public funds by the benefits that accrue to the traveling public; but the benefits go, in the form of higher land prices and rents, to the owners of the sites that are served by this new road. If you doubt this, consider the jockeying for the insider information or for influence over the selection.

Robert Caro, in his biography of Robert Moses, recalls the time in the early 1920s that Moses suggested to the authorities the building of a causeway from the Long Island mainland over to Jones Island. This proposal was rejected outright by the Long Island Park Commission. Some months later, Moses presented them with a drawing showing precisely where this causeway would run, and, after a suitable period of during which these public employees could buy up the land along the proposed highway, he resubmitted his proposal. This time, they officially approved the suggested construction.

In the town of Antioch, Illinois, there were two developments underway almost simultaneously. In the one, roads were provided, together with water and sewer lines, but no sidewalks; in the other, just across a main road from the first, the mayor of the city had storm sewers, curbs and sidewalks installed at public expense, for which of course, any prospective buyer or tenant would gladly pay for use of that land the higher price these added benefits provided. Any reader will recognize this chain of events and set of economic relationships as being the course of everyday life and business at the local, state and national level. The cynic would say that a primary motivation for entering local or even national politics would be the opportunity for personal gain offered daily by publicly financed improvements. ...

Thus, the benefits of a tax-supported public work accrued once more not to the benefit of the public at large, but to that of a very limited and narrowly defined class, those who were rich enough to own land in that location.

There are undoubtedly many other problems to be resolved before the ills of our society are cured; but what many do not recognize and understand is the primacy of the adoption of land value taxation over all these other corrections. The reason for that can be very simply stated: If any of these other measures already adopted have no merit and have only added to the burden of our problems, then they are disqualified at the outset. On the other hand, if they are of themselves beneficial, any benefit from them will be immediately capitalized into land values and will therefore exacerbate the very problems which otherwise might be helped toward a cure. Thus it is that our first step toward any possible remedy for the awesome plight into which we have been led increasingly over the recent years must be the adoption of land value taxation.  ... read the whole essay

 "Hold on once more," I hear, "not so fast, how about the mansions of rich people?" Another fair question: how, indeed, can you justify exempting them from taxation? The answer may astonish you. Here are some data from British Columbia that speak to the point. They are from the area around Vancouver (The "Lower Mainland") and the southern part of Vancouver Island, around Victoria, where over half the people in the province live. B.C. practices high quality professional assessment; data from its rolls are quite reliable, as such things go.

 Cities and districts around Vancouver and Victoria are ranked, in Table 1, according to the land value per property (single-family residences). These range from nearly $700,000 each in the "University Endowment Lands" district (very posh), to around $40,000 each in the "Victoria Rural" district (more modest). The last column, LSREV (Land Share of Real Estate Value), shows the land value (L) as a share of the total value (B+L). 

 These shares range from a high of 80% on the University Endowment Lands (UEL) down to 38% in Colwood (the lowest), and 39% in Victoria Rural (next to lowest). In between, the numbers follow the trend closely. The dearer the land parcels, the higher is the "land fraction" (the fraction of total real estate value that is land value). From such data, one might formulate a rule along the lines that "the lot value increases with the square of the house value." It is hard to be so precise, and not necessary. The relevant rule we need here is just that people's house values are more alike than their lot values. It is lot value, more than house value, that divides the rich from the poor.

•  The average house (ex land) in the posh UEL jurisdiction is worth 2.8 times the average in the Victoria Rural jurisdiction ($173.1/$61.9).
• The average land parcel (ex building) in the UEL is worth 17.5 times the average in the Victoria Rural jurisdiction ($692.5/$39.6).

 Now do us both a favor, please. Pause and savor that comparison. Let it linger, as though you were testing a slow sip of wine from Fredonia's famous grapes. Roll it on your tongue, mull sensually over its aroma and bouquet, and, getting back to business, mull cerebrally over its full import. The house that shelters the very rich family is worth 2.8 times the house of the modest family; but the land under the house of the very rich is worth 17.5 times the land of the modest. Seventeen and one half times as much! Again, it is lot value, more than building value, that divides the rich from the poor. Seldom will you find an economic rule more strongly supported by data. It's just a matter of presenting the data so as to test and bring out the rule.

An American counterpart of Vancouver's "University Endowment Lands" is Beverly Hills, California, where land value composes some 80% of residential values, and the mean parcel is worth something like a million dollars. Beverly Hills, with its great wealth and mansions, is known as "Tear-down City." Every year many a grand old palace that once sheltered some renowned matinee idol, and rang to scandalous parties, is torn down to salvage its site for the next, grander one. In a land boom, such as crested in 1989, half the city goes to the brink of demolition and replacement.

 What do those data tell us? The rich as a rule do not live next to the poor. Rather, they cluster in neighborhoods with much higher lot values. The poor seek shelter first, and go where it is affordable. The rich put a high premium on location, neighborhood, views, and grounds, resulting in higher land fractions in their real estate. Mansions are visible evidences of wealth, impressing viewers powerfully; land values are invisible. The perceptual bias is to underrate the invisible, if you are not regularly in the real estate market. In the numbers, however, land and buildings are equally visible, and their message is clear. It is land value more than house value that divides the rich from the poor. Ergo, a tax shift from buildings to land is a shift from the poor to the rich, even though the houses of the rich are exempted. It makes the property tax more progressive.

 To be sure, those data are grouped by separate municipalities, not neighborhoods within municipalities. The poor of Colwood cannot tax the rich in the UEL, except through a higher level of government. However, what is true among municipalities is also true among neighborhoods within municipalities. Indeed, if we divided Vancouver into neighborhoods, the contrasts might be sharper than those shown. The UEL, for example, is really just a neighborhood in Vancouver that, for historical reasons, happens to be reported on separately. Harold Brodsky has done neighborhood comparisons in Washington, D.C.; Margaret Reid in Chicago; Richard Muth in various cities. They tell the same story. If we are very lucky, some Institute or Foundation concerned with land policy will see the importance of this question, and support teams of researchers and graduate students testing the point in a dozen American cities. San Francisco, with its scores of well-defined neighborhoods, would be a natural. Compare exclusive St. Francis Woods (top of the line) with the crowded Richmond District, and both with Visitacion Valley (the pits). I surmise the findings would reinforce those presented above. Meantime, nothing stops you from checking things out in your own town.  ...   Read the whole article

Nic Tideman: The Constitutional Conflict Between Protecting Expectations and Moral Evolution

Power, Population and Process

There are two other difficulties that are more serious.

• First, the existing distribution of recognized exclusive rights to natural opportunities (land, mineral resources, fishing rights, water rights, etc.) is the outcome of a game of power, and those who have won at this game have great power are loathe to part with their winnings.
• Second, Malthusian analysis has led people to expect that if the value of exclusive use of natural opportunities were distributed equally, population would expand until everyone was at a subsistence level.

There is a solution to the second problem, contained in the idea that all persons have equal rights to the use of natural opportunities. If the crowding effects of additional persons outweigh the beneficial effects of greater economies of scale, then any region that has an above-average population growth rate is appropriating more than its share of the scarce natural opportunity to be a parent. The costs that this region thereby imposes on other regions can justly be subtracted from what would otherwise be its claim on the value of using natural opportunities. Each region could then decide for itself whether to pass those costs on to individual couples who decide to conceive children.

Similarly, when a region imposes costs on others through interregional pollution, the costs so imposed should be subtracted from the region's claim to the value of exclusive use of natural opportunities. The great challenge is to overcome the entrenched power that benefits from continued blindness to moral necessity. The mechanism must not be force of arms, for that entails too great a risk of installing a new power elite who would be as unprincipled as the first. Nor should the mechanism be the power of majorities, through legislation and referenda, for these processes can also be used for the selfish aggrandizement of those who control them. It is good that constitutions prohibit the taking of property without just compensation. It is to be hoped that courts will interpret such restricitons as prohibiting taxes that take all of the value of things currently regarded as property.

When respect for a newly understood moral truth requires the dissappointment of previously protected expectations, those who would push their fellow citizens to incorporate that truth into the governmental process should be obliged to have their ideas reviewed in a constitutional amnedment process that will ensure that they will be adopted only if a broad consensus on them is achieved. When people are ready to see a new moral truth, that truth can overcome such a hurdle. ... read the whole article

Nic Tideman: The Case for Site Value Rating

In primitive societies, land is generally regarded as not ownable. No one made the land, so how can anyone own it? Ownership generally originates in conquest. In England, titles to land originated in the claim of William the Conqueror to own all the land because he was king. He granted to dukes, earls, etc. the right to collect rent from designated territories in exchange for their promises to fulfill various obligations to him. In the seventeenth century the nobility succeeded in removing all of their obligations to the crown, but they retained their rights to land. A substantial part of the great inequality in wealth in the United Kingdom can be traced to ancient patents of nobility that granted rights to collect rent.

One highly visible consequence of allowing land rents to be privately appropriated is that young people find it nearly impossible to buy houses. The price of a "house," in the Southeast of Britain at least, is primarily the price of land. If the rent of land were collected publicly, the price of land would be inconsequential, and the price of a house would be the cost of the materials and labour that went into building it. It should be recognized that if the site value of land were taxed, the payment of such taxes would make it more expensive to live in large cities than in small towns, but young people would be better able to afford it because other taxes would be reduced, and the mortgages to which people would need to commit themselves would not be nearly as great.

The justice of collecting the rent of land can be generalized to the justice of collecting a fee for any privilege that governments grant to some individuals and not others. ... read the whole article

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

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. Thus 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.

However, it is also pertinent to note that land ownership today is significantly less concentrated than in George’s time, with around 70% of Australians being home-owners (including those in the process of purchasing their homes with mortgage finance). According to the recent Household, Income and Labour Dynamics in Australia (HILDA) Survey, home-ownership is unevenly distributed between income groups, with 56% of households in the lowest income quintile owning their own homes, compared to 85% of those in the highest quintile (Kohler et al, 2004: 10). But this distributional inequality is significantly less marked than the ownership of other assets, such as shares for example. Of course, most land ownership for residential purposes involves very small tracts, typically only about one-sixth of an acre in the suburban areas of the major cities. Flat-owners, growing annually as a proportion of the population, usually own less land and do so more indirectly through strata property titles. So the form of land tax (that is, whether flat rate or on a progressive scale, whether applying to all land or only that above a ‘threshold’ value, or exempting owner-occupied property) becomes crucial to its effectiveness as a mechanism for tackling distributional inequality. It is also crucial to the political acceptability of land tax reform.

In addition, it is apparent in modern economies that not all socioeconomic inequalities stem from the unequal capture of the economic surplus associated with land. Inequalities are also generated by unequal access to capital, educational and employment opportunities. These inequalities are imperfectly correlated with wealth deriving from land ownership. Hence, additional means of redress are needed, as J. K. Galbraith and other institutional economists have consistently argued (e.g. see Galbraith, 1992; 2002: chapter 3). For example, ‘floors,’ such as minimum wage requirements and ‘social security’ payments, must be provided to guarantee a minimum income to all members of society, including those excluded from the production process. A strong, albeit unfashionable, case can also be made for ‘ceilings’ to limit excessive salaries, such as those of some top corporate executives, which far outweigh their productive contributions to society. The average executive remuneration levels in major Australian companies increased from 22 times average weekly earnings to 74 times average weekly earnings in the period 1992-2002 (Shields et al, 2003: iii). It may be, as George argued, that ‘the increase of land values is always at the expense of the value of labour’ (George, 1966: 224) but the complex distributions of income received by capital and labour are not readily explicable in terms of an analysis focusing exclusively on land. ... read the whole article

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

Most Europeans who settled North America hoped to leave feudal inequities behind. They envisioned a competitive meritocracy rather than a permanent aristocracy. Unfortunately, it was not to be. Slavery was the first anomaly; it took a civil war to end that. Then came the epic grabs of land and robber barons, neither of which we’ve undone.

Fast-forward to my generation’s watch. If ever there was a time when a rising tide should have lifted all boats, this was it. After World War II, America went on an almost uninterrupted growth binge. Per capita economic output, adjusted for inflation, tripled between 1950 and the end of the century. The stock market rose about fortyfold. Mutual funds and tax-sheltered retirement accounts spread stock ownership to the masses. In the 1960s, the federal government launched an all-out War on Poverty. And yet, at the end of the century, the distribution of private wealth was more unequal than it had been in 1950. In cold numbers, the top 5 percent owned more than the bottom 95 percent (see figure 2.3).

Why did this happen? There are many explanations. One is that welfare kept the poor poor; this was argued by Charles Murray in his 1984 book Losing Ground.Welfare, he contended, encouraged single mothers to remain unmarried, increased the incidence of out-of-wedlock births, and created a parasitic underclass. In other words, Murray (and others) blamed victims or particular policies for perpetuating poverty, but paid scant attention to why poverty exists in the first place.

There are, of course, many roots, but my own hypothesis is this: much of what we label private wealth is taken from, or coproduced with, the commons. However, these takings from the commons are far from equal. To put it bluntly, the rich are rich because (through corporations) they get the lion’s share of common wealth; the poor are poor because they get very little.

Another way to say this is that, just as water flows downhill to the sea, so money flows uphill to property. Capitalism by its very design maximizes returns to existing wealth owners. It benefits, in particular, those who own stock when a successful company is young; they can receive hundreds, even thousands of times their initial investments when the company matures. Moreover, once such stockholders accumulate wealth, they can increase it through reinvestment, pass it on to their heirs, and use their inevitable influence over politicians to gain extra advantages — witness the steady lowering of taxes on capital gains, dividends, and inheritances. On top of this, in the last few decades, has been the phenomenon called globalization. The whole point of globalization is to increase the return to capital by enabling its owners to find the lowest costs on the planet. Hence the stagnation at the bottom alongside the surging wealth at the top.

A critical piece of this analysis is that very few new shares of corporate stock are issued. As author Marjorie Kelly has pointed out, most established corporations finance growth through retained earnings and debt. They’re just as likely to buy back outstanding shares as to issue new ones. Consequently, old wealth is rarely diluted. When new money flows into the stock market, its main effect is to increase the wealth of existing stockholders and their fortunate heirs. Thus, of the total gain in marketable wealth that occurred in the United States between 1983 and 1998, more than half went to the top 1 percent.

The companies that do issue new stock are the young ones — the Microsofts, Apples, and Googles. Entertainers and athletes aside, most new multimillionaires are early stockholders in corporations like these. In these cases, however, the distribution of gains is so tilted in favor of these early stockholders that the skewed pattern of wealth distribution is replicated. New wealth joins old wealth, but the concentration remains the same. There’s no mechanism for dispensing wealth — even new wealth — more evenhandedly. ... 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.

The Algorithms of Capitalism 2.0

If you’ve ever used a computer spreadsheet, you know what an algorithm is. Each cell in the spreadsheet contains a set of instructions: take data from other cells, manipulate the data according to a formula, and display the result. The instructions within each cell are algorithms.

If you think of the economy as a huge spreadsheet, with each cell representing a producer, consumer, or property owner, you can see that the behavior of the whole is driven by the algorithms in the cells. Our current operating system is dominated by three algorithms and one starting condition. The algorithms are:
(1) maximize return to capital,
(2) distribute property income on a per-share basis, and
(3) the price of nature equals zero.
The starting condition is that the top 5 percent of the people own more property shares than the remaining 95 percent.

The first algorithm is what drives corporations. It tells them to sell as much as they can, pay as little as possible for labor, resources, and waste disposal, and make shareholders happy every quarter. It focuses the minds of managers every day. If they work in marketing, they wake up thinking about how to sell more; if there’s no demand for their product, they must create some. If they work in finance, they worry about margins and leverage. If they’re in labor relations, they bargain hard, replace long-term employees with temps, and shift jobs to places where wages are lower. All the while, the CEO feeds sweet numbers to Wall Street.

The second and third algorithms then mesh with the first. It’s the combination of these algorithms that causes the wheels of capitalism to devour nature and widen inequality among humans. At the same time, nothing in the algorithms requires or encourages corporations, either individually or collectively, to preserve anything.

This doesn’t mean people inside corporations don’t think about protecting nature, raising their workers’ pay, or giving something back to society. Often, they do. It does mean their room for actually doing such things is too narrow to make a difference. Nor does it mean that, from time to time, some brave mavericks don’t briefly flout the corporate algorithm. They do that, too. What I’m saying is that, in the great majority of cases, the corporate algorithm and its brethren are obeyed. For all practical purposes, the publicly traded corporation is a slave to its algorithm. ... read the whole chapter

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

Everyone knows what private wealth is, even if they don’t have much of it. It’s the property we inherit or accumulate individually, including fractional claims on corporations and mutual funds. In the United States in 2005, this private wealth (minus mortgages and other liabilities) totaled $48.5 trillion. As previously noted, the top 5 percent of Americans owns more of this treasure than the bottom 95 percent.

But there’s another trove of wealth that’s not so well-known: our common wealth. Each of us is the joint recipient of a vast inheritance. This shared inheritance includes air and water, habitats and ecosystems, languages and cultures, science and technologies, social and political systems, and quite a bit more. ... read the whole chapter

Peter Barnes: Capitalism 3.0 — Chapter 7: Universal Birthrights (pages 101-116)

Universality is also what distinguishes the commons sector from the corporate sector. The starting condition for the corporate sector, as we’ve seen, is that the top 5 percent owns more shares than everyone else. The starting condition for the commons sector, by contrast, is one person, one share.

The standard argument against third wave universal birthrights is that, while they might be nice in theory, in practice they are too expensive. They impose an unbearable burden on “the economy” — that is, on the winners in unfettered markets. Much better, therefore, to let everyone — including poor children and the sick — fend for themselves. In fact, the opposite is often true: universal birthrights, as we’ll see, can be cheaper and more efficient than individual acquisition. Moreover, they are always fairer.

How far we might go down the path of extending universal birthrights is anyone’s guess, but we’re now at the point where, economically speaking, we can afford to go farther. Without great difficulty, we could add three birthrights to our economic operating system: one would pay everyone a regular dividend, the second would give every child a start-up stake, and the third would reduce and share medical costs. Whether we add these birthrights or not isn’t a matter of economic ability, but of attitude and politics.

Why attitude? Americans suffer from a number of confusions. We think it’s “wrong” to give people “something for nothing,” despite the fact that corporations take common wealth for nothing all the time. We believe the poor are poor and the rich are rich because they deserve to be, but don’t consider that millions of Americans work two or three jobs and still can’t make ends meet. Plus, we think tinkering with the “natural” distribution of income is “socialism,” or “big government,” or some other manifestation of evil, despite the fact that our current distribution of income isn’t “natural” at all, but rigged from the get-go by maldistributed property. ... read the whole chapter