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