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Lindy Davies: Land and Justice

If we just look at the "ecological footprint," it's easy to be scared of the seemingly unavoidable damage we are doing to the earth. But seeing "the footprint" in terms of its components — subsistence, wealth, and illth — makes it clear that the fact of persistent and growing global poverty is not the inevitable result of population growth. I believe it’s true that the world cannot long support current levels of pollution, waste and habitat destruction — but these problems spring not from production itself — and certainly not from trade, itself — but from privileges, granted to individuals and corporations — things that we can correct, if we choose to.

To solve the problem of land and justice is to remove unjust privilege, by instituting an economic system that rewards production and prohibits extortion.

It’s all about the land: not only is land necessary for all life — land is also necessary for all production. So, as human population increases, and as the production of wealth gets more and more efficient, the demand for land goes up, and, of course, the land factories start cranking out more land!

Wait! They can't DO that, can they?

Wealth — products, widgets — these things are made by human beings. If customers are willing to buy more of them, then manufacturers will make more of them. But human beings can't make land. The supply of land cannot be increased. If the demand for land increases, only one thing can happen: its price will go up.

The owners of land see population and production go up, up, up — and no more land. So, they will only put their land to use if they have an immediate need for the cash. If they can afford to wait, they will wait, because they expect the land's value to increase with time.

That, in a nutshell, is the key to the land problem — the problem of poverty. ... read the whole speech

Mason Gaffney: Land as a Distinctive Factor of Production

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 to gain and defend land. What was won by force has no higher sanction than lex fortioris, and must be kept and defended by force.

After land is appropriated by a nation the original distribution is political. The nature of societies, cultures and economies for centuries afterwards are moulded by that initial distribution, exemplified by the differences between Costa Rica (equal partition) and El Salvador with its fabled "Fourteen Families" (Las Catorce), or between Canada and Argentina.

Political redistribution also occurs within nations, as with the English enclosures and Scottish "clearances", when one part of the population in effect conquered the rest by political machinations, and took over their land, their source of livelihood. Reappropriation and new appropriation of tenures is not just an ancient or a sometime thing but an on-going process. This very day, proprietary claims to water sources, pollution rights, access to rights of way, radio spectrum, signal relay sites, landing rights, beach access, oil and gas, space on telephone and power poles (e.g. for cable TV), taxi licences, etc. are being created under our noses. In developing countries of unstable government the current strong man often grants concessions to imperialistic adventurers who can bolster his hold on power by supplying both cash up front, and help from various US and UN agencies from the IMF to the United States Marine Corps.

Ordinary economic thinking today would have it that a nation that distributes land among private parties by "selling to the highest bidder" is using an economic method of distribution. Such thinking guides World Bank and IMF economists as they advise nations emerging from communism on how to privatise land. The neutrality is specious, at best. Even selling to the highest bidder is a political decision, as 19th century American history makes clear.

The right to sell was won by force, is not universally honoured, and must be kept by continuous use of force. In practice, selling for cash up front reserves most land for a few with front-money advantage, inside information, good contacts, corrupt aids, etc. The history of disposal of US public domain leaves no doubt about this and it is still going on with air rights, water, radio, landing rights, fishing licenses, etc. Choices being made currently are just as tainted as those of 19th century history.

Selling land in large blocks under frontier conditions is to sell at a time before it begins yielding much if any rent. It is bid in by those few who have large discretionary funds of patient money. Politicians, meantime, treat the proceeds as current revenues used to hold down other taxes today, leaving the nation with inadequate revenues in the future.

The ability to bid high does not necessarily come from legitimate savings. The early wealth of Liverpool came from the slave trade. High bidders for many properties today are  middle eastern potentates who neither produced nor saved the wealth they control. Other high bidders are criminals, who find the "sanctity of property" a splendid route for laundering their gains, and a permanent shelter against further prosecution.  Read the whole article

Mason Gaffney: Land as a Distinctive Factor of Production
Landownership imparts superior bargaining power
Labor starves, in contests of endurance; land endures.

A landowner is also a person with labor power.  He or she can earn income like any worker.  Landownership gives income above that, which gives discretionary spending or waiting power.

In contests with capital, land has the greater waiting power because over time capital depreciates, while land appreciates.  Thus landowners (when free of heavy taxation) are noted for their patience.  Patience is the essence of bargaining power.

Because land is fixed, more ownership by one person or group means less ownership by others.  To expand is to preempt, unavoidably.  Thus, the expanding agent necessarily weakens others by the same stroke that strengthens himself.  Landownership often gives market power in the sale of specific commodities and services.  ...
Now consider the market for land titles.  This is the more relevant market as to building, transferring land between uses, and changing parcel sizes.  If the market for land services is slow, the market for land titles is viscous.  There is no flow of supply, none at all.  There is no real turnover in the sense of producing and using up.  There is only ownership turnover: the market only transfers existing titles.  (There is a supplemental market in long leases, not addressed here.)

There are few highly motivated sellers, as there are motivated sellers of spoiling produce and obsolescing computers and vehicles.  Median home-owners are motivated, when transferred to another region.  Few other land sellers come close to that degree of motivation (and the median home represents more capital than land).  Capital depreciates; goods spoil and obsolesce; idle labor starves; but land silently rises in value.

The aggregate of all land changes hands slowly, with one or two percent turnover of ownership annually (measuring the stock by value, not number of parcels - smaller, cheaper parcels turn faster).  But buyers often need adjacent land, or land in particular districts or with particular qualities, and find little or no land on the market, or land controlled by one seller.

The slow ownership turnover cited above applies to total real estate, i.e. land including any buildings on it.  Ownership turnover is even slower for bare land.  If the average building lasts 50 years, only 2% of the land is available for re-use in any given year.  Only a fraction of that 2% is for sale; the rest is renewed by the same owner.  Whoever wants to buy available land in any particular area is unlikely to be faced with the "many sellers" premised by the competitive model.... read the whole article

Mason Gaffney:   Privatizing Land Without Giveaway (1990)
In a massive general land sale, most land would be bid up by a small number of buyers with surpluses of "patient money," many of them looking toward use or resale in the distant future. These buyers are the kind stigmatized as "land speculators," for their traditional indifference to highest and best current use of land. ... read the whole article
Mason Gaffney: Oil and Gas Leasing: a Study in Pseudo-Socialism
Pseudo-Socialism is what happens when resources in the public domain are leased below a market rental, giving away part of the public interest. That has the effect of installing the lessee as though he were the owner. The BLM, leasing grazing privileges on Federal lands in the west, has fallen into this pattern conspicuously and notoriously, subject to pressure from western Senators who have the power of many votes in the U.S. Senate relative to their state populations. The dollar values are small, but the object lesson is visible, depressing, and cautionary.
  • Some other bad examples are school section lands in the middle states. These originated as Federal land grants intended to support local schools. Some of them are corruptly let to insiders in "sweetheart deals" for token rents.
  • Another bad example is the County of Los Angeles, which owns lands in the Marina del Rey district. One parcel lay idle for 25 years in the control of a politically well-connected developer who finally went bankrupt and walked away from it, leaving unpaid even the token rent charged.
  • A third bad example is ironic: Fairhope, AL, founded and chartered specifically as a "single-tax colony," to exemplify the principles of Henry George. The Fairhope Corporation owns the land and collects the ground rent for public purposes. However, when a new generation arose "that knew not Joseph" it proved politically impossible to keep colony ground rents up to market.

Another aspect of Pseudo-Socialism, practised by Interior Secretary James Watt, is to offer for immediate sale, for spot cash, much more than the current market can absorb. For example, in April, 1982, Interior leased out coal reserves in the Powder River Basin of Wyoming and Montana. The sale comprised 1.6 billion tons, at 3.5 cents/ton. Leases were for 50 years, with few development requirements. The industry already had a 200 year supply under lease, with the result that few bid, and they bid low. The winning bidders were a tiny number of huge corporations, those with slack money to buy reserves for the far future.

Meantime, on the Outer Continental Shelf (OCS), a billion acres (ten times the area of California) was to be leased before 1984. Before that, major oil firms had about 1/5 of that area under lease, looking many years or several decades ahead of need. This helps explain why a recent Alaska sale, an old Naval Petroleum Reserve (NPR 4), fetched only 14% of the anticipated amount.

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.

What is being bought? Are these not "leases," contracts to pay rent? No, these leases are not that. Here is the heart of Pseudo-Socialism. The U.S. Government leases mineral-prone lands under the "Bonus Bid System," whereby most of the payment is required up front in spot cash. This makes a "lease" more like a sale, a sale in which buyers are screened by their banking connections rather than by their ability to find and produce hydrocarbons.  ... Read the whole article

Mason Gaffney: Who Owns Southern California?

Irvine Company. In Orange County the remaining developable land is in a very few "strong, patient" hands. Smallholdings were sold and developed early. The largest holder is the Irvine Company, which is now led by Donald Bren of Newport Beach, the 30th richest American on Forbes' list. The holding is variously listed at 68,000 acres to 80,000 acres, about 1/6 of all the land in Orange County. Most of it is still undeveloped.

It was a Spanish land grant that got its Scotch name when James Irvine married into the family. It was tied up for years by the trustees of the Irvine Estate, according to various lawsuits and public statements of heiress Joan Irvine Smith of Middleburg, Virginia. Control passed to a Michigan group led by Henry Ford II and William Taubman and Max Fisher of Michigan, and more recently to Donald Bren of Newport Beach. Bren is a major contributor to Republican Party campaigns, as O'Neill (of Mission Viejo) is to Democratic campaigns. (James Minor, recently deceased potato baron of Riverside County, contributed to both, and showed special interest in electing the County Sheriff.)

All holders have devoted major efforts to contesting their property tax assessments. Property taxes on undeveloped land drain cash from an owner, getting his attention, and are for many owners their primary motive to dispose of surplus land. Until quite recently the Irvine policy was never to sell, only to lease land. Confrontations with lessees over escalating ground rents have been highly visible, and probably contributed to the recent Assessor's decision to upvalue the assessment considerably in excess of Bren's 1983 purchase price [L.A. Times, 1/29/84]. The Assessor has an unlikely ally also in Joan Irvine, who claims her shares have been undervalued in various settlements. Bren took the Assessor to court, but the resulting figure was nearer the Assessor's than Bren's.

Bren is not accelerating development and sales. In 1988 he cut the staff by 20%. The policy is to skim the cream of the market, but very slowly, by limiting development to highest quality. California's Proposition 13 of 1978, capping property taxes at 1% of market value, keeps the burden low and tolerable when prices are rising at 20% a year.

Rancho Mission Viejo is second in size at 38,000 acres. It is held by Richard O'Neill and his sister, Alice O'Neill Avery, 317th and 318th richest Americans on Forbes' list. Richard O'Neill is prominent in California Democratic Party politics. Irvine and O'Neill representatives are from time to time on various citizens' advisory committees to the NAGS campus at UCR.

The Mission Viejo Company, with 9,100 acres, comes in third. It is held by Philip Reilly. ... read the whole article


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Wealth and Want
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