The Importance of Land

Henry George:  The Land Question (1881)

I merely wish to correct that impression which leads so many people to talk and write as though rent and land tenures related solely to agriculture and to agricultural communities. Nothing could be more erroneous. Land is necessary to all production, no matter what be the kind or form; land is the standing-place, the workshop, the storehouse of labor; it is to the human being the only means by which he can obtain access to the material universe or utilize its powers. Without land man cannot exist. To whom the ownership of land is given, to him is given the virtual ownership of the men who must live upon it. When this necessity is absolute, then does he necessarily become their absolute master. And just as this point is neared – that is to say, just as competition increases the demand for land – just in that degree does the power of taking a larger and larger share of the earnings of labor increase. It is this power that gives land its value; this is the power that enables the owner of valuable land to reap where he has not sown – to appropriate to himself wealth which he has had no share in producing. Rent is always the devourer of wages. The owner of city land takes, in the rents he receives for his land, the earnings of labor just as clearly as does the owner of farming land. And whether he be working in a garret ten stories above the street, or in a mining drift thousands of feet below the earth's surface, it is the competition for the use of land that ultimately determines what proportion of the produce of his labor the laborer will get for himself.

• This is the reason why modern progress does not tend to extirpate poverty; this is the reason why, with all the inventions and improvements and economies which so enormously increase productive power, wages everywhere tend to the minimum of a bare living. 
• The cause that in Ireland produces poverty and distress–the ownership by some of the people of the land on which and from which the whole people must live – everywhere else produces the same results.
• It is this that produces the hideous squalor of London and Glasgow slums; it is this that makes want jostle luxury in the streets of rich New York, that forces little children to monotonous and stunting toil in Massachusetts mills, and that fills the highways of our newest States with tramps. ... read the whole article

Clarence Darrow: How to Abolish Unfair Taxation (1913)

Everybody nowadays is anxious to help do something for the poor, especially they who are on the backs of the poor; they will do anything that is not fundamental. Nobody ever dreams of giving the poor a chance to help themselves. The reformers in this state have passed a law prohibiting women from working more than eight hours in one day in certain industries — so much do women love to work that they must be stopped by law. If any benevolent heathen see fit to come here and do work, we send them to gaol or send them back where they came from.

All these prohibitory laws are froth. You can only cure effects by curing the cause. Every sin and every wrong that exists in the world is the product of law, and you cannot cure it without curing the cause. Lawyers, as a class, are very stupid. What would you think of a doctor, who, finding a case of malaria, instead of draining the swamp, would send the patient to gaol, and leave the swamp where it is? We are seeking to improve conditions of life by improving symptoms.

Land Basic

No man created the earth, but to a large extent all take from the earth a portion of it and mould it into useful things for the use of man. Without land man cannot live; without access to it man cannot labor. First of all, he must have the earth, and this he cannot have access to until the single tax is applied. It has been proven by the history of the human race that the single tax does work, and that it will work as its advocates claim. For instance, man turned from Europe, filled with a population of the poor, and discovered the great continent of America. Here, when he could not get profitable employment, he went on the free land and worked for himself, and in those early days there were no problems of poverty, no wonderfully rich and no extremely poor — because there was cheap land. Men could go to work for themselves, and thus take the surplus off the labor market. There were no beggars in the early days. It was only when the landlord got in his work — when the earth monopoly was complete — that the great mass of men had to look to a boss for a job.

All the remedial laws on earth can scarcely help the poor when the earth is monopolized. Men must live from the earth, they must till the soil, dig the coal and iron and cut down the forest. Wise men know it, and cunning men know it, and so a few have reached out their hands and grasped the earth; and they say, "These mines of coal and iron, which it took nature ages and ages to store, belong to me; and no man can touch them until he sees fit to pay the tribute I demand". ... read the whole speech

Mason Gaffney: Land as a Distinctive Factor of Production

• Many of them, following John B. Clark and Frank Knight, still deny the distinction as I explain in The Corruption of Economics, a companion volume in this series. 
• Many treat the matter by seizing on and stressing all similarities of land and capital, while ignoring all differences. 
• Some invent gray areas that seem to fuse land and capital, present them as typical, and quickly move on. 
• Many more simply ignore land, which has the effect of accepting the Clark-Knight verdict in practice. 
• Others uneasily finesse and blur the issue by writing "land" in quotes, or trivializing its value, or referring vaguely to "quasi-rents" to comprehend a broad spectrum of incomes both from land and other factors.

H.G. Brown: Significant Paragraphs from Henry George's Progress & Poverty, Chapter 5: The Basic Cause of Poverty (in the unabridged: Book V: The Problem Solved)

The truth is self-evident. Put to any one capable of consecutive thought this question:

"Suppose there should arise from the English Channel or the German Ocean a no man's land on which common labor to an unlimited amount should be able to make thirty shillings a day and which should remain unappropriated and of free access, like the commons which once comprised so large a part of English soil. What would be the effect upon wages in England?"

He would at once tell you that common wages throughout England must soon increase to thirty shillings a day.

And in response to another question, "What would be the effect on rents?" he would at a moment's reflection say that rents must necessarily fall; and if he thought out the next step he would tell you that all this would happen without any very large part of English labor being diverted to the new natural opportunities, or the forms and direction of industry being much changed; only that kind of production being abandoned which now yields to labor and to landlord together less than labor could secure on the new opportunities. The great rise in wages would be at the expense of rent.

Take now the same man or another — some hardheaded business man, who has no theories, but knows how to make money. Say to him: "Here is a little village; in ten years it will be a great city — in ten years the railroad will have taken the place of the stage coach, the electric light of the candle; it will abound with all the machinery and improvements that so enormously multiply the effective power of labor. Will, in ten years, interest be any higher?"

He will tell you, "No!"

"Will the wages of common labor be any higher; will it be easier for a man who has nothing but his labor to make an independent living?"

He will tell you, "No; the wages of common labor will not be any higher; on the contrary, all the chances are that they will be lower; it will not be easier for the mere laborer to make an independent living; the chances are that it will be harder."

"What, then, will be higher?"

"Rent; the value of land. Go, get yourself a piece of ground, and hold possession."

And if, under such circumstances, you take his advice, you need do nothing more. You may sit down and smoke your pipe; you may lie around like the lazzaroni of Naples or the leperos of Mexico; you may go up in a balloon, or down a hole in the ground; and without doing one stroke of work, without adding one iota to the wealth of the community, in ten years you will be rich! In the new city you may have a luxurious mansion; but among its public buildings will be an almshouse.

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

Mason Gaffney:  The Partiality of Indexing Capital Gains (1990)

Land is not formed, like capital, by saving and investment; land is not reproducible. For that very reason land tends to appreciate, and therefore has to be a major source of what are misleadingly called "capital" gains. Again for that very reason, there is no supply-side kick in untaxing gains. Most of them are land gains, and should be called that. To use land as a store of value is macro-economically unproductive at best, and on balance counterproductive and destabilizing (considering its effect on financial institutions like the S&Ls). ...

As to borrowing on land, that can be worse than barren when the financial system rises and falls on a land bubble, as it has and is. ...

Ignoring land and its distinctive attributes has the effect of treating land as though it were true, reproduceable capital, to be formed by saving and investing, to be routinely worn out and replaced in the normal course of life and business. It lets advocates of investing and capital formation abuse the legitimate case for macro incentives, exploiting the case to camouflage unearned, nonfunctional rents and increments to land value.

Tantamount to ignoring land is minimizing its weight. Thus one may acknowledge it indulgently, while actually dismissing it. In fact, though, land comprises some half the assessed value of taxable real estate in California, and is not dismissable. Half the assessed value means more than half the market value because of assessment discrimination favoring land. A raft of studies of assessment discrimination, like the sales/assessment ratio studies of the U.S. Census, show consistent patterns of discrimination favoring land. In addition to ordinary assessment discrimination there is much legislated underassessment, for land in forest, farm, country club, and other favored uses. ///

... most of us resident in California have been through one or more years since 1976 when the value of our homes alone rose by more than our annual salaries. ...

We are not pushing for a general wealth tax, but for impartiality and accurate thinking about indexing capital gains, a policy that would protect some forms of wealth, but not others. This apparently temperate, common-sense proposal is in fact partial and discriminatory. Worse, it protects most where the macro-social benefits are least. Read the whole article

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

Land is the most basic of all economic resources, fundamental to the form that economic development takes. Its use for agricultural purposes is integral to the production of the means of our subsistence. Its use in an urban context is crucial in shaping how effectively cities function and who gets the principal benefits from urban economic growth. Its ownership is a major determinant of the degree of economic inequality: surges of land prices, such as have occurred in Australian cities during the last decade, cause major redistributions of wealth. In both an urban and rural context the use of land – and nature more generally – is central to the possibility of ecological sustainability. Contemporary social concerns about problems of housing affordability and environmental quality necessarily focus our attention on ‘the land question.’ ...

Wealth Inequality

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

see also:
The Land-Residual vs. Building-Residual Methods of Real Estate Valuation, http://www.michael-hudson.com/articles/realestate/0110LandBuildingResidual.html

The Methodology of Real Estate Appraisal: Land-Residual or Building-Residual, and their Social Implications http://www.michael-hudson.com/articles/realestate/0010NYURealEstate.html

How to lie with real estate statistics: The Illusion that Makes Land Values Look Negative; How Land-Value Gains are Mis-attributed to Capital http://www.michael-hudson.com/articles/realestate/01LieRealEstateStatistics.html

Where Did All the Land Go? - The Fed’s New Balance Sheet Calculations: A Critique of Land Value Statistics http://www.michael-hudson.com/articles/realestate/01FedsBalanceSheet.html