Ground Rent

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

Q46. How can it be possible that speculative land values cause business depressions when, as any business man will tell you, the whole item of land value — whether ground rent or interest on purchase money — is one of the smallest items in every business?
A. You overlook the fact that the item of speculative rent is the only item which the business man does not get back again. The cost of his goods, the expense of clerk hire, the rent of his building, the wear and tear of implements, are all received back, in the course of normal business, in the prices of his goods. Even his ground rent, to the extent that it is normal (i.e., what it would be if the supply of land were determined alone by land in use, and not affected by the land that is held out of use for higher values), comes back to him in the sense that his aggregate profits are that much greater than they would be where ground rent was less. But the extra ground rent which he is obliged to pay, in consequence of the abnormal scarcity of land, is a dead weight; it does not come back to him. Therefore, even if infinitesimal in amount, as compared with the other expenses of his business — and that is by no means admitted — it is the one expense which may break a thriving business down. Besides, it is not alone the ground rent paid by the business man for his location that bears down upon his business prosperity; the weight of abnormally high land values in general presses upon business in general, and by obstructing the flow of trade forces the weaker business units to the wall. It is not altogether safe to deduce general economic principles from the ledgers of particular business houses.

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John Dewey: Steps to Economic Recovery

You cannot study Henry George without learning how intimately each of these wrongs and evils is bound up with our land system. One of our great national weaknesses is speculation. Everybody recognizes that fact in the stock market orgy of our late boom days. Only a few realize the extent to which speculation in land is the source of many troubles of the farmer, the part it has played in loading banks and insurance companies with frozen assets and compelling the closing of thousands of banks, nor how the high rents, the unpayable mortgages and the slums of the cities are connected with speculation in land values. All authorities on public works hold that the most fruitful field for them is slum clearance and better housing. Yet only a few seem to realize that with our present situation this improvement will put a bonus in the pockets of landlords, and the land speculator will be the one to profit financially — for after all, buildings are built on land.

So with taxation. There are all sorts of tinkering going on, but the tinkers and patchers shut their eyes to the fact that the socially produced annual value of land — not of improvements, but of ground-rent value — is about five billion dollars, and that its appropriation by those who create it, the community, would at once relieve the tax burden and ultimately would solve the tax problem. Of late the federal government has concerned itself with the problems of home ownership, but again by methods of tinkering that may easily in the long run do more harm than good. The community's acquisition of its own creation, ground-rent value, would both reduce the price of land and entirely eliminate taxes on improvement, thus making ownership easier. And how anyone expects to solve the unemployment question by putting the sanction of both legality and high pecuniary reward upon the ability of the few to keep the many from equal access to land and to the raw material, without which labor is impossible, I do not see — and no one else does. For the tinkerers assume that unemployment must continues, only with government assistance to those who are necessarily out of work. By all means let us help those that now need it, but for the future let us prevent the cause instead of merely mitigating the effects. ... read the whole speech

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

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. ... read the whole article