Georgism has a distinctive ethical basis. So a review
of the contemporary relevance of Georgist political
economy can usefully begin by making this explicit. The
key moral issue is the private appropriation of public
wealth. As George recognised, land is a ‘gift from
nature’ and, as such, is rightfully a community
resource. Hence, those deriving benefits from the private
ownership of land should recompense the community for the
privilege. This principle has strong echoes of the idea
of ‘usufruct,’ a pre-capitalist term denoting
a person’s legal right to use and accrue benefits
from property that does not belong to them. In return,
the user is obliged to keep the property in good repair
and pay all costs as a ‘ground rent’
(‘Lectric Law Library, n.d). The concept of
‘usufruct’ has fallen out of common usage, so
one hesitates to try to revive it. Moreover, as Richards
(2002) notes, ‘it is difficult to image how this
word could be employed, or brought back into circulation,
in the modern world, since we live in a world in which
people tend to be remarkably unsympathetic to the
property rights or claims of others’.
However, the principle of ‘usufruct’ goes
to the heart of the question of how best to balance
collective and individual rights and interests.
George’s solution of a tax on the value of land
squarely addresses this issue. By returning a proportion
of the land value to the community in the form of
taxation revenue, restitution would be paid for the use
of a community resource. This is an ethical justification
for land taxation. ...
Indeed, one could say that the term ‘tax’
is a misnomer because what is really involved is value
created by the community being retained by the community
rather than being appropriated by private landholders.
For example, under current arrangements landowners
receive ‘windfall’ gains when the market
value of their land rises as a result of publicly
provided infrastructure being built nearby, or when local
government zoning decisions reclassify their land as
appropriate for further development. In this way,
individual landowners stand to reap huge benefits at the
expense of community-generated processes. Such
arrangements create an odd incentive: allowing
landholders to appropriate the unearned wealth generated
by rising land values, thereby rewarding this
unproductive activity, while taxing productive endeavour.
The Georgist land tax ‘remedy’, by contrast,
would eliminate such perverse incentives and thereby more
effectively align private and public interests in the use
of society’s resources. ...
Georgist analysis strongly emphasises landownership as
a principal source of inequality. Because land is a
strictly limited resource, its private ownership
necessarily excludes large sections of the community from
its benefits. A landowning class thereby gains political
economic power. In George’s own time the social
identity and power of this landowning class was
distinctive. Those who could not afford to buy land were
forced to pay rent to the wealthier few who could. By
taxing the value of land, George posited that publicly
created wealth could be recouped from the private
landowners and redistributed throughout the community
more equitably in order to address social goals.
Are George’s arguments about land ownership and
wealth inequality relevant today? Australia provides an
interesting example, because land is the single largest
item in national wealth. Laurie Aarons outlines the
concentration of farming land in particular in the hands
of a few very wealthy corporations and individuals
– what he refers to as ‘corporate
squattocracy’ (Aarons, 1999: 23). The relentless
increase in urban land values in recent years has also
produced dramatic redistributions of wealth. In the State
of New South Wales, for example, land values increased by
about $361 billion over the period 1993 – 2003. The
existing land-based taxes clawed back only $44 billion in
government revenues, comprising only about 12% of the
land-related economic surplus. So 88% was retained as
‘unearned income’ by landowners (Stilwell and
Jordan, forthcoming). A higher rate of land tax with
fewer exemptions could have substantially reduced this
private wealth appropriation. This is not necessarily to
posit the desirability of recouping 100% through land
tax, because that would certainly raise major problems of
people’s ability to pay, given that much of the
increased wealth resulting from land price inflation has
not been realised as current income. But it is indicative
of the current imbalance between private and public
appropriations of the surplus arising from increases in
land-based wealth. ...
read the whole article