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Special Interests

Had the Law of Gravitation affected vested interests, it would have remained undiscovered. —Macaulay (1800-1859), cited at http://www.earthsharing.org.au/node/88

A government which robs Peter to pay Paul, can always count on the support of Paul. – George Bernard Shaw

"He who sees the truth, let him proclaim it, without asking who is for it or who is against it. This is not radicalism in the bad sense which so many attach to the word. This is conservatism in the true sense." Henry George:  The Land Question

After his book, Perfectly Legal: The Covert Campaign to Rig Our Tax System to Benefit the Super Rich — and Cheat Everybody Else, was published, David Cay Johnston, who covers federal tax issues for the New York Times, said the following in an interview:

After finishing the book, I got off a plane and shared a taxi with a former state senator who is personally very comfortable. He told me that I was being overly kind to politicians in my analysis. He said, "Every year that I was in office I knew who my 10 biggest donors were. I knew that I had to show them that I was working for what they wanted or they would just take their money and go to the other guy. And, you know, I don't think I ever once looked in the mirror and said, 'What am I doing for the average person in my district?'"

Not all those donors are individual constituents; many are lobbyists paid for by our corporations. Consider how ownership of corporate stock is concentrated in a small portion of our society. Yes, 52% of us own corporate stock — but 88% of that stock value is held by the top 10% of us, so the benefits that flow to corporations are not widely shared. (The top 5% of us own 78% of the stock.) Privately held businesses are very concentrated, too: 89% of that value is held by the top 10% of us, and 83% is held by the top 5%.) These are people for whom the lobbyists work, and they are the big donors to political campaigns. They have a large share of the minds of our elected representatives.

Who benefits from what our elected representatives decide on our behalf? Consider one example: pork spending, such as that which appears in the highway bills. Pork spending works to increase the value of specific areas, and those who own the land there are the beneficiaries. Think back a couple generations to two federally funded bridges in New York State, the Verrazano Narrows Bridge and the Tappan Zee Bridge. The first made Staten Island's land valuable; the second, across the Hudson River, made Rockland County's land valuable. Our federal taxes went to pay for that, and private individuals were the big beneficiaries. The alternative? Collect a portion of that increase in land value as our common treasure. Collect a portion of the land value that results from each pork project as our common treasure. Few infrastructure projects do not create sufficient increases in land value to pay for themselves; the question is, who is entitled to that increase? We the people, or certain lucky individuals?

Federal spending is only one of the benefits special interests receive. They also get rules written specially for their needs and well-being: privileges, or "private laws."

Let's work for a world free of privilege. To do that effectively, we need to understand the nature of the privileges that most seriously harm us: the privatization of what is legitimately our common treasure.

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)

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. We have been advancing as through an enemy's country, in which every step must be secured, every position fortified, and every bypath explored; for this simple truth, in its application to social and political problems, is hid from the great masses of men partly by its very simplicity, and in greater part by widespread fallacies and erroneous habits of thought which lead them to look in every direction but the right one for an explanation of the evils which oppress and threaten the civilized world. And back of these elaborate fallacies and misleading theories is an active, energetic power, a power that in every country, be its political forms what they may, writes laws and molds thought — the power of a vast and dominant pecuniary interest. ...

...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

It is an axiom of statesmanship, which the successful founders of tyranny have understood and acted upon that great changes can best be brought about under old forms. We, who would free men, should heed the same truth. It is the natural method. When nature would make a higher type, she takes a lower one and develops it. This, also, is the law of social growth. Let us work by it. With the current we may glide fast and far. Against it, it is hard pulling and slow progress.

By making use of this existing machinery, we may, without jar or shock, assert the common right to land by appropriating rent by taxation. We already take some rent in taxation. We have only to make some changes in our modes of taxation to take it all.*

*Rent in the economic sense is not, as those unfamiliar with economic terminology may assume, the whole amount paid for the use of real estate. It is only that part of such amount which is paid for the use of the bare land or site employed, exclusive of the payment for the use of any buildings or other improvements on it. H. G. B.

In form, the ownership of land would remain just as now. No owner of land need be dispossessed, and no restriction need be placed upon the amount of land any one could hold. For, rent being taken by the State in taxes, land, no matter in whose name it stood, or in what parcels it was held, would be really common property, and every member of the community would participate in the advantages of its ownership.

Now, insomuch as the taxation of rent, or land values, must necessarily be increased just as we abolish other taxes, we may put the proposition into practical form by proposing --

to abolish all taxation save that upon land values.

As we have seen, the value of land is at the beginning of society nothing, but as society develops by the increase of population and the advance of the arts, it becomes greater and greater. In every civilized country, even the newest, the value of the land taken as a whole is sufficient to bear the entire expenses of government. In the better developed countries it is much more than sufficient. Hence it will not be enough merely to place all taxes upon the value of land. It will be necessary, where rent exceeds the present governmental revenues, commensurately to increase the amount demanded in taxation, and to continue this increase as society progresses and rent advances. But this is so natural and easy a matter, that it may be considered as involved, or at least understood, in the proposition to put all taxes on the value of land. That is the first step upon which the practical struggle must be made. When the hare is once caught and killed, cooking him will follow as a matter of course. When the common right to land is so far appreciated that all taxes are abolished save those which fall upon rent, there is no danger of much more than is necessary to induce them to collect the public revenues being left to individual landholders.

Wherever the idea of concentrating all taxation upon land values finds lodgment sufficient to induce consideration, it invariably makes way, but there are few of the classes most to be benefited by it, who at first, or even for a long time afterward, see its full significance and power.

  • It is difficult for workingmen to get over the idea that there is a real antagonism between capital and labor.
  • It is difficult for small farmers and homestead owners to get over the idea that to put all taxes on the value of land would be unduly to tax them.
  • It is difficult for both classes to get over the idea that to exempt capital from taxation would be to make the rich richer, and the poor poorer.

These ideas spring from confused thought. But behind ignorance and prejudice there is a powerful interest, which has hitherto dominated literature, education, and opinion. A great wrong always dies hard, and the great wrong which in every civilized country condemns the masses of men to poverty and want, will not die without a bitter struggle. ... read the whole chapter

Henry George:  The Land Question (1881)

... it is best that the truth be fully stated and clearly recognized. He who sees the truth, let him proclaim it, without asking who is for it or who is against it. This is not radicalism in the bad sense which so many attach to the word. This is conservatism in the true sense. ...

We have here abolished all hereditary privileges and legal distinctions of class. Monarchy, aristocracy, prelacy, we have swept them all away. We have carried mere political democracy to its ultimate. Every child born in the United States may aspire to be President. Every man, even though he be a tramp or a pauper, has a vote, and one man's vote counts for as much as any other man's vote. Before the law all citizens are absolutely equal. In the name of the people all laws run. They are the source of all power, the fountain of all honor. In their name and by their will all government is carried on; the highest officials are but their servants. Primogeniture and entail we have abolished wherever they existed. We have and have had free trade in land. We started with something infinitely better than any scheme of peasant proprietorship which it is possible to carry into effect in Great Britain. We have had for our public domain the best part of an immense continent. We have had the preemption law and the homestead law. It has been our boast that here every one who wished it could have a farm. We have had full liberty of speech and of the press. We have not merely common schools, but high schools and universities, open to all who may choose to attend. Yet here the same social difficulties apparent on the other side of the Atlantic are beginning to appear. It is already clear that our democracy is a vain pretense, our make-believe of equality a sham and a fraud.

Already are the sovereign people becoming but a roi fainéant, like the Merovingian kings of France, like the Mikados of Japan. The shadow of power is theirs; but the substance of power is being grasped and wielded by the bandit chiefs of the stock exchange, the robber leaders who organize politics into machines. In any matter in which they are interested, the little finger of the great corporations is thicker than the loins of the people. Is it sovereign States or is it railroad corporations that are really represented in the elective Senate which we have substituted for an hereditary House of Lords? Where is the count or marquis or duke in Europe who wields such power as is wielded by such simple citizens as our Stanfords, Goulds, and Vanderbilts? What does legal equality amount to, when the fortunes of some citizens can be estimated only in hundreds of millions, and other citizens have nothing? What does the suffrage amount to when, under threat of discharge from employment, citizens can be forced to vote as their employers dictate? when votes can be bought on election day for a few dollars apiece? If there are citizens so dependent that they must vote as their employers wish, so poor that a few dollars on election day seem to them more than any higher consideration, then giving them votes simply adds to the political power of wealth, and universal suffrage becomes the surest basis for the establishment of tyranny. "Tyranny"! There is a lesson in the very word. What are our American bosses but the exact antitypes of the Greek tyrants, from whom the word comes? They who gave the word tyrant its meaning did not claim to rule by right divine. They were simply the Grand Sachems of Greek Tammanys, the organizers of Hellenic "stalwart machines." ... read the whole article

Henry George: Political Dangers (Chapter 2 of Social Problems, 1883)

[08] But to the changes produced by growth are, with us, added the changes brought about by improved industrial methods. The tendency of steam and of machinery is to the division of labor, to the concentration of wealth and power. Workmen are becoming massed by hundreds and thousands in the employ of single individuals and firms; small storekeepers and merchants are becoming the clerks and salesmen of great business houses; we have already corporations whose revenues and payrolls belittle those of the greatest States. And with this concentration grows the facility of combination among these great business interests. How readily the railroad companies, the coal operators, the steel producers, even the match manufacturers, combine, either to regulate prices or to use the powers of government! The tendency in all branches of industry is to the formation of rings against which the individual is helpless, and which exert their power upon government whenever their interests may thus be served.

[09] It is not merely positively, but negatively, that great aggregations of wealth, whether individual or corporate, tend to corrupt government and take it out of the control of the masses of the people. "Nothing is more timorous than a million dollars — except two million dollars." Great wealth always supports the party in power, no matter how corrupt it may be. It never exerts itself for reform, for it instinctively fears change. It never struggles against misgovernment. When threatened by the holders of political power it does not agitate, nor appeal to the people; it buys them off. It is in this way, no less than by its direct interference, that aggregated wealth corrupts government, and helps to make politics a trade. Our organized lobbies, both legislative and Congressional, rely as much upon the fears as upon the hopes of moneyed interests. When "business" is dull, their resource is to get up a bill which some moneyed interest will pay them to beat. So, too, these large moneyed interests will subscribe to political funds, on the principle of keeping on the right side of those in power, just as the railroad companies deadhead President Arthur when he goes to Florida to fish.

[10] The more corrupt a government the easier wealth can use it. Where legislation is to be bought, the rich make the laws; where justice is to be purchased, the rich have the ear of the courts. And if, for this reason, great wealth does not absolutely prefer corrupt government to pure government, it becomes none the less a corrupting influence.
A community composed of very rich and very poor falls an easy prey to whoever can seize power. The very poor have not spirit and intelligence enough to resist; the very rich have too much at stake.

[15] We are steadily differentiating a governing class, or rather a class of Pretorians, who make a business of gaining political power and then selling it. The type of the rising party leader is not the orator or statesman of an earlier day, but the shrewd manager, who knows how to handle the workers, how to combine pecuniary interests, how to obtain money and to spend it, how to gather to himself followers and to secure their allegiance. One party machine is becoming complementary to the other party machine, the politicians, like the railroad managers, having discovered that combination pays better than competition. So rings are made impregnable and great pecuniary interests secure their ends no matter how elections go. There are sovereign States so completely in the hands of rings and corporations that it seems as if nothing short of a revolutionary uprising of the people could dispossess them. Indeed, whether the General Government has not already passed beyond popular control may be doubted. Certain it is that possession of the General Government has for some time past secured possession. And for one term, at least, the Presidential chair has been occupied by a man not elected to it. This, of course, was largely due to the crookedness of the man who was elected, and to the lack of principle in his supporters. Nevertheless, it occurred.

[16] As for the great railroad managers, they may well say, "The people be d--d!" When they want the power of the people they buy the people's masters. The map of the United States is colored to show States and Territories. A map of real political powers would ignore State lines. Here would be a big patch representing the domains of Vanderbilt; there Jay Gould's dominions would be brightly marked. In another place would be set off the empire of Stanford and Huntington; in another the newer empire of Henry Villard. The States and parts of States that own the sway of the Pennsylvania Central would be distinguished from those ruled by the Baltimore and Ohio; and so on. In our National Senate, sovereign members of the Union are supposed to be represented; but what are more truly represented are railroad kings and great moneyed interests, though occasionally a jobber from Nevada or Colorado, not inimical to the ruling powers, is suffered to buy himself a seat for glory. And the Bench as well as the Senate is being filled with corporation henchmen. A railroad king makes his attorney a judge of last resort, as the great lord used to make his chaplain a bishop. ... read the entire essay

Henry George: The Single Tax: What It Is and Why We Urge It (1890)

To show briefly why we urge this change, let me treat (1) of its expediency, and (2) of its justice.

From the Single Tax we may expect these advantages:

1. It would dispense with a whole army of tax gatherers and other officials which present taxes require, and place in the treasury a much larger portion of what is taken from people, while by making government simpler and cheaper, it would tend to make it purer. It would get rid of taxes which necessarily promote fraud, perjury, bribery, and corruption, which lead men into temptation, and which tax what the nation can least afford to spare — honesty and conscience. Since land lies out-of-doors and cannot be removed, and its value is the most readily ascertained of all values, the tax to which we would resort can be collected with the minimum of cost and the least strain on public morals.

2. It would enormously increase the production of wealth — ... read the whole article

Henry George: Concentrations of Wealth Harm America (excerpt from Social Problems)  (1883)

Sources of Great Wealth

An acquaintance of mine died in San Francisco recently, leaving $4,000,000, which will go to heirs to be looked up in England. I have known many men more industrious, more skilful, more temperate than he -- men who did not or who will not leave a cent. This man did not get his wealth by his industry, skill or temperance. He no more produced it than did those lucky relations in England who may now do nothing for the rest of their lives. He became rich by getting hold of a piece of land in the early days, which, as San Francisco grew, became very valuable. His wealth represented not what he had earned, but what the monopoly of this bit of the earth's surface enabled him to appropriate of the earnings of others.

A man died in Pittsburgh, the other day, leaving $3,000,000. He may or may not have been particularly industrious, skilful and economical, but it was not by virtue of these qualities that he got so rich. It was because he went to Washington and helped lobby through a bill which, by way of "protecting American workmen against the pauper labor of Europe," gave him the advantage of a 66% tariff. To the day of his death he was a stanch protectionist, and said free trade would ruin our "infant industries." Evidently the $3,000,000 which he was enabled to lay by from his own little cherub of an "infant industry" did not represent what he had added to production. It was the advantage given him by the tariff that enabled him to scoop it up from other people's earnings.

"Beneath all political problems lies the social problem of the distribution of wealth."

This element of monopoly, of appropriation and spoliation will, when we come to analyze them, be found largely to account for all great fortunes....

Take the great Vanderbilt fortune. The first Vanderbilt was a boatman who earned money by hard work and saved it. But it was not working and saving that enabled him to leave such an enormous fortune. It was spoliation and monopoly. As soon as he got money enough he used it as a club to extort from others their earnings. He ran off opposition lines and monopolized routes of steamboat travel. Then he went into railroads, pursuing the same tactics. The Vanderbilt fortune no more comes from working and saving than did the fortune that Captain Kidd buried.

Or take the great Gould fortune. Mr. Gould might have got his first little start by superior industry and superior self-denial. But it is not that which has made him the master of a hundred millions. It was by wrecking railroads, buying judges, corrupting legislatures, getting up rings and pools and combinations to raise or depress stock values and transportation rates.

So, like wise, of the great fortunes which the Pacific railroads have created. They have been made by lobbying through profligate donations of lands, bonds and subsidies, by the operations of Credit Mobilier and Contract and Finance Companies, by monopolizing and gouging. And so of fortunes made by such combinations as the Standard Oil Company, the Bessemer Steel Ring, the Whisky Tax Ring, the Lucifer Match Ring, and the various rings for the "protection of the American workman from the pauper labor of Europe."

Or take the fortunes made out of successful patents. Like that element in so many fortunes that comes from the increased value of land, these result from monopoly, pure and simple. And though I am not now discussing the expediency of patent laws, it may be observed, in passing, that in the vast majority of cases the men who make fortunes out of patents are not the men who make the inventions.

Through all great fortunes, and, in fact, through nearly all acquisitions that in these days can fairly be termed fortunes, these elements of monopoly, of spoliation, of gambling run. The head of one of the largest manufacturing firms in the United States said to me recently, "It is not on our ordinary business that we make our money; it is where we can get a monopoly." And this, I think, is generally true.

 The Evils of Monopolists
Consider the important part in building up fortunes which the increase of land values has had, and is having, in the United States. This is, of course, monopoly, pure and simple. When land increases in value it does not mean that its owner has added to the general wealth. The owner may never have seen the land or done aught to improve it. He may, and often does, live in a distant city or in another country. Increase of land values simply means that the owners, by virtue of their appropriation of something that existed before man was, have the power of taking a larger share of the wealth produced by other people's labor. Consider how much the monopolies created and the advantages given to the unscrupulous by the tariff and by our system of internal taxation -- how much the railroad (a business in its nature a monopoly), telegraph, gas, water and other similar monopolies, have done to concentrate wealth; how special rates, pools, combinations, corners, stock-watering and stock-gambling, the destructive use of wealth in driving off or buying off opposition which the public must finally pay for, and many other things which these will suggest, have operated to build up large fortunes, and it will at least appear that the unequal distribution of wealth is due in great measure to sheer spoliation; that the reason why those who work hard get so little, while so many who work little get so much, is, in very large measure, that the earnings of the one class are, in one way or another, filched away from them to swell the incomes of the other.

That individuals are constantly making their way from the ranks of those who get less than their earnings to the ranks of those who get more than their earnings, no more proves this state of things right than the fact that merchant sailors were constantly becoming pirates and participating in the profits of piracy, would prove that piracy was right and that no effort should be made to suppress it.

I am not denouncing the rich, nor seeking, by speaking of these things, to excite envy and hatred; but if we would get a clear understanding of social problems, we must recognize the fact that it is due to monopolies which we permit and create, to advantages which we give one man over another, to methods of extortion sanctioned by law and by public opinion, that some men are enabled to get so enormously rich while others remain so miserably poor. If we look around us and note the elements of monopoly, extortion and spoliation which go to the building up of all, or nearly all, fortunes, we see on the one hand now disingenuous are those who preach to us that there is nothing wrong in social relations and that the inequalities in the distribution of wealth spring from the inequalities of human nature; and on the other hand, we see how wild are those who talk as though capital were a public enemy, and propose plans for arbitrarily restricting the acquisition of wealth. Capital is a good; the capitalist is a helper, if he is not also a monopolist. We can safely let any one get as rich as he can if he will not despoil others in doing so.

There are deep wrongs in the present constitution of society, but they are not wrongs inherent in the constitution of man nor in those social laws which are as truly the laws of the Creator as are the laws of the physical universe.  They are wrongs resulting from bad adjustments which it is within our power to amend. The ideal social state is not that in which each gets an equal amount of wealth, but in which each gets in proportion to his contribution to the general stock. And in such a social state there would not be less incentive to exertion than now; there would be far more incentive. Men will be more industrious and more moral, better workmen and better citizens, if each takes his earnings and carries them home to his family, than where they put their earnings in a "pot" and gamble for them until some have far more than they could have earned, and others have little or nothing.  ...   Read the entire article

Rev. A. C. Auchmuty: Gems from George, a themed collection of excerpts from the writings of Henry George (with links to sources)

Power of Thought

THE power of a special interest, though inimical to the general interest, so to influence common thought as to make fallacies pass as truths, is a great fact, without which neither the political history of our own time and people, nor that of other times and peoples, can be understood. A comparatively small number of individuals brought into virtual though not necessarily formal agreement of thought and action by something that makes them individually wealthy without adding to the general wealth, may exert an influence out of all proportion to their numbers. A special interest of this kind is, to the general interests of society, as a standing army is to an unorganized mob. It gains intensity and energy in its specialization, and in the wealth it takes from the general stock finds power to mold opinion. Leisure and culture and the circumstances and conditions that command respect accompany wealth, and intellectual ability is attracted by it. On the other hand, those who suffer from the injustice that takes from the many to enrich the few, are in that very thing deprived of the leisure to think, and the opportunities, education, and graces necessary to give their thought acceptable expression. They are necessarily the "unlettered," the "ignorant," the "vulgar," prone in their consciousness of weakness to look up for leadership and guidance to those who have the advantages that the possession of wealth can give. — The Science of Political Economy — Book II, Chapter 2, The Nature of Wealth: Causes of Confusion as to the Meaning of Wealth unabridgedabridged

WE may be wise to distrust our knowledge; and, unless we have tested them, to distrust what we may call our reasonings; but never to distrust reason itself. . . . That the powers with which the human reason must work are limited and are subject to faults and failures, our reason itself teaches us as soon as it begins to examine what we find around us and to endeavor to look in upon our own consciousness. But human reason is the only reason that men can have, and to assume that in so far as it can see clearly it does not see truly, is in the man who does it not only to assume the possession of a superior to human reason, but it is to deny the validity of all thought and to reduce the mental world to chaos. — The Science of Political Economy — Book III, Chapter 5, The Production of Wealth: Of Space and Time (unabridged)

SOCIAL reform is not to be secured by noise and shouting; by complaints and denunciation; by the formation of parties, or the making of revolutions; but by the awakening of thought and the progress of ideas. Until there be correct thought, there cannot be right action; and when there is correct thought, right action will follow. Power is always in the hands of the masses of men. What oppresses the masses is their own ignorance, their own short-sighted selfishness. — Social Problems — Chapter 22: Conclusion

LET no one imagine that he has no influence. Whoever he may be, and wherever he may be placed, the man who thinks becomes a light and a power. — Social Problems — Chapter 22: Conclusion ... go to "Gems from George"

William Ogilvie: An Essay on the Right of Property in Land (Scotland, 1782)

That nation is greatly deceived and misled which bestows any encouragement on manufactures for exportation, or for any purpose but the necessary internal supply, until the great manufactures of grain and pasturage are carried to their utmost extent -- it can never be in the interest of the community; it may be in that of the landholders, who desire indeed to be considered as the nation itself, or at least as being representatives of the nation, and having the same interest with the whole body of the people.

(When mention is made in political reasonings of the interest of any nation, and those circumstances, by which it is supposed to be injured or promoted, are canvassed, it is generally the interest of the landholders that is kept in view.)

In fact, however, their interest is, in some most important respects, directly opposite to that of the great body of the community, over whom they exercise an ill-regulated jurisdiction, together with an oppressive monopoly in the commerce of land to be hired for cultivation.

Property in Land, as at present established, is a monopoly of the most pernicious kind. The interest of landholders is substituted for that of the community; it ought to be the same, but it is not. The landholders of a nation levy the most oppressive of all taxes; they receive the most unmerited of all pensions: if tithes are oppressive to industry, rents capable of being raised from time to time are much more so.... Read the entire essay
D. C. MacDonald: Preface (1891?) to Ogilvie's Essay (circa 1782)
Professor Ogilvie, who came after Locke, devotes himself in this treatise to one subject - Birthright in land, it may be called. And the Author may be justly styled - The Euclid of Land Law Reform. He has left little or nothing unsolved in connection with the Land Question. He has given us a true base line -- man’s equal right to the raw material of the earth, to the air, to the water, to the rays of the sun, and all natural products -- from which we can work out any problem, and by which we can test the “title and measure” of every man’s property. Resting on this baseline -- man’s natural rights -- he represents to us the perpendicular line of man's right to labour, “with security of reaping its full produce and just reward.” Here we have the question in a nutshell. Take away the base line, and you have no right to labour, and no produce or reward, except what may be meted out by the usurper of your natural rights. You have to beg for leave to toil! We thus see clearly how the robbery of labour may be prevented, and how impossible it is to put a stop to such robbery while the industrial classes neglect to claim and exercise their natural right -- their right to an equal share in the earth, and all its natural products.

Strikes against low wages, high rents, unjust taxation, absurd conflicts between capital and labour, rebellions against this or that form of government, are futile skirmishes, and very frequently are of the suicidal cock-fighting order, at which the real enemy, elevated on a grand stand, simply laugh. To contend successfully with these evils, society must learn to begin at the source thereof. While labourers are content to remain deprived of their natural rights, they must pay whatever ransom the brigands who have seized these rights choose to demand. Not only is industry robbed, taxed, and crippled, but the brigand, as dog-in-the-manger, very often puts an entire stop to it, and thus the happiness and comfort of millions of mankind, who are willing to work, are curtailed or wholly sacrificed, and misery and starvation reign instead. I am somewhat afraid to say hard things against brigandage. An institution that is still propped up by Law and Order, and supported (or winked at) on almost every hand by the avowed servants of Jesus Christ, must be touched with a “gentle hand.” William Ogilvie has done so in the Essay now before us. Although a landlord himself, he did not disregard the truth, and it will be found that his pen was guided by an impartial and benevolent spirit.   ...   Read the entire preface

Henry George: Concentrations of Wealth Harm America (excerpt from Social Problems)  (1883)
There is a suggestive fact that must impress any one who thinks over the history of past eras and preceding civilizations. The great, wealthy and powerful nations have always lost their freedom; it is only in small, poor and isolated communities that Liberty has been maintained. So true is this that the poets have always sung that Liberty loves the rocks and tile mountains; that she shrinks from wealth and power and splendor, from the crowded city and the busy mart....

The mere growth of society involves danger of the gradual conversion of government into something independent of and beyond the people, and the gradual seizure of its powers by a ruling class -- though not necessarily a class marked off by personal titles and a hereditary status, for, as history shows, personal titles and hereditary status do not accompany the concentration of power, but follow it. The same methods which, in a little town where each knows his neighbor and matters of common interest are under the common eye, enable the citizens freely to govern themselves, may, in a great city, as we have in many cases seen, enable an organized ring of plunderers to gain and hold the government. So, too, as we see in Congress, and even in our State legislatures, the growth of the country and the greater number of interests make the proportion of the votes of a representative, of which his constituents know or care to know, less and less. And so, too, the executive and judicial departments tend constantly to pass beyond the scrutiny of the people.

But to the changes produced by growth are, with us, added the changes brought about by improved industrial methods. The tendency of steam and of machinery is to the division of labor, to the concentration of wealth and power. Workmen are becoming massed by hundreds and thousands in the employ of single individuals and firms; small storekeepers and merchants are becoming the clerks and salesmen of great business houses; we have already corporations whose revenues and pay rolls belittle those of the greatest States. And with this concentration grows the facility of combination among these great business interests. How readily the railroad companies, the coal operators, the steel producers, even the match manufacturers, combine, either to regulate prices or to use the powers of government! The tendency in all branches of industry is to the formation of rings against which the individual is helpless, and which exert their power upon government whenever their interests may thus be served.

It is not merely positively, but negatively, that great aggregations of wealth, whether individual or corporate, tend to corrupt government and take it out of the control of the masses of the people. "Nothing is more timorous than a million dollars -- except two million dollars." Great wealth always supports the party in power, no matter how corrupt it may be. It never exerts itself for reform, for it instinctively fears change. It never struggles against misgovemment. When threatened by the holders of political power it does not agitate, nor appeal to the people; it buys them off. It is in this way, no less than by its direct interference, that aggregated wealth corrupts government, and helps to make politics a trade. Our organized lobbies, both legislative and Congressional, rely as much upon the fears as upon the hopes of moneyed interests. When "business" is dull, their resource is to get up a bill which some moneyed interest will pay them to beat. So, too, these large moneyed interests will subscribe to political funds, on the principle of keeping on the right side of those in power, just as the railroad companies deadhead [transport for free] President [Chester A.] Arthur when he goes to Florida to fish. ...

As for the great railroad managers, they may well say, "The people be d-d!" When they want the power of the people they buy the people's masters. The map of the United States is colored to show States and Territories. A map of real political powers would ignore State lines. Here would be a big patch representing the domains of Vanderbilt; there Jay Gould's dominions would be brightly marked. In another place would be set off the empire of Stanford and Huntington; in another the newer empire of Henry Villard. The States and parts of States that own the sway of the Pennsylvania Central would be distinguished from those ruled by the Baltimore and Ohio; and so on. In our National Senate, sovereign members of the Union are supposed to be represented; but what are more truly represented are railroad longs and great moneyed interests, though occasionally a mine jobber from Nevada or Colorado, not inimical to the ruling powers, is suffered to buy himself a seat for glory. And the Bench as well as the Senate is being filled with corporation henchmen. A railroad king makes his attorney a judge of last resort, as the great lord used to make his chaplain a bishop....    Read the entire article

Henry George — The Study of Political Economy

In the first place, the very importance of the subjects with which political economy deals raises obstacles in its way. The discoveries of other sciences may challenge pernicious ideas, but the conclusions of political economy involve pecuniary interests, and thus thrill directly the sensitive pocket-nerve. For, as no social adjustment can exist without interesting a larger or smaller class in its maintenance, political economy at every point is apt to come in contact with some interest or other which regards it as the silversmiths of Ephesus did those who taught the uselessness of presenting shrines to Diana. Macaulay has well said that, if any large pecuniary interest were concerned in denying the attraction of gravitation, that most obvious of physical facts would not lack disputers. This is just the difficulty that has beset and still besets the progress of political economy. The man who is, or who imagines that he is, interested in the maintenance of a protective tariff, may accept all your professors choose to tell him about the composition of the sun or the evolution of species, but, no matter how clearly you demonstrate the wasteful inutility of hampering commerce, he will not be convinced. And so, to the man who expects to make money out of a railroad-subsidy, you will in vain try to prove that such devices to change the natural direction of labour and capital must cause more loss than gain. What, then, must be the opposition which inevitably meets a science that deals with tariffs and subsidies, with banking interests and bonded debts, with trades-unions and combinations of capital, with taxes and licenses and land tenures! It is not ignorance alone that offers opposition, but ignorance backed by interest, and made fierce by passions.

Henry George — Progress and Poverty, abridged, Chapter 6: Population and Subsistence

Poverty Alleged to be Inevitable

Now, as it did then, the Malthusian theory parries the demand for reform, and shelters selfishness from question and from conscience by the interposition of an inevitable necessity. For poverty, want and starvation are by this theory not chargeable either to individual greed or to social maladjustments - they are the inevitable results of universal laws with which if it were not impious it were as hopeless to quarrel as with the law of gravitation. And thus reforms which would interfere with the interests of any powerful class are discouraged as hopeless. Since the moral law forbids any forestalling of the methods by which the natural law gets rid of surplus population and thus holds in check a tendency to increase potent enough to pack the surface of the globe with human beings as sardines are packed in a box, nothing can really be done either by individual or by combined effort to extirpate poverty, save to trust to the efficacy of education and preach the necessity of prudence. ... Read the entire chapter

Fred E. Foldvary — The Ultimate Tax Reform: Public Revenue from Land Rent

There will always be critics who concoct a huge cost in getting assessments correct down to the last penny, or claim, without any evidence, that real estate is a trivial portion of the economy. Such critics date back to the days of Henry George, when the landed interests felt threatened by his ideas. Those opponents have been thoroughly rebutted in the book, Critics of Henry George (the latest edition edited in 2004 by Robert Andelson). The reasons for such attempts to falsify and trivialize rent-based public finance, and even to eliminate the land factor from economics, are chronicled and analyzed in The Corruption of Economics, especially in the chapter by Mason Gaffney, “Neo-classical Economics as a Stratagem against Henry George.” This negative viewpoint is perpetuated by academics who learn of land value taxation from misleading secondary sources, not bothering to dig any further. ...

The obstacles to land value taxation are political. The current system benefits certain vested interests that will resist reform. But since the public at large will benefit from a shift to land value taxation, and since they greatly outnumber those obtaining privileges from the current system, the greater reason why this tax reform has not taken place is that the public has not been informed. Once citizens, taxpayers, consumers, and voters understand the option of obtaining public revenue from land value or rent, then the logic of getting both greater efficiency and greater justice may well prevail. ... read the whole document

Joseph Stiglitz: October, 2002, interview

Q: What are the greatest political obstacles confronting developing countries to the extraction of economic "rent" for public purposes? Is it simply a matter of "vested interests?"

JES: Yes, it's not very complicated. You know, in the Clinton Administration, we tried to reform the disposition of natural resources — mineral rights — by saying the US Government should not be giving this away to a few wealthy people. But the mining interests were adamant in opposing this reform. ... read the entire interview

Charles T. Root — Not a Single Tax! (1925)

Under the normal system which this article advocates, the user of land would pay substantially the same economic rent as now, for the reason that economic rent is fixed by the payer and not by the payee; but it would be paid to the credit of the community instead of for the benefit of the individual landowner. And the economic rent is all the land user would have to pay; no taxes on industry or personal product and no other forced contribution for governmental purposes. ...

Let us roughly restate the proposition: All members of the community having a joint right to the income which the social advantages of the land will command, they are all partners in this income.

Therefore, when one of their number wishes to take for his private use a parcel of this land, he should buy out his partners, i.e., the rest of the community, by paying regularly into the common treasury the economic rent of that parcel, instead of paying, as at present, the purchase price, i.e., the right to collect the economic rent, in a lump, to some other individual who has no more original right to it than himself.

But before this time the reader, unless he has given previous attention to the subject, is full of objections to the above doctrine: "How about the law?" he is asking. "Hasn't a man the right to buy a piece of land as cheaply as he can, to do what he pleases with it, and hold on to it till he gets ready to sell?" The answer is that at present he certainly has this statutory right, which has been so long and so universally recognized that most people suppose it to be not only a legal, but a real or equitable right. A shrewd man, foreseeing the direction of growth of population in a city, for example, can buy a well-located block at a moderate figure from some less far-seeing owner, can let it grow up to weeds, fence it off against all comers and give it no further attention except to pay the very small tax usually imposed upon vacant land.

Meantime the increasing community builds up all around it with homes, banks, stores, churches, schools, paving and lighting the streets, giving police and fire protection, etc., and at last comes to need this block so urgently that the owner is fairly begged to sell it, at three or ten or fifty times what it cost him. Quite often the purchaser at this enormous advance is the very community which has through its presence and the expenditure of its taxes created practically the whole value of the land in question!

It was said above that an individual has a statutory right to pursue this very common course. That was an error. The statement should have been that he has a statutory wrong; for no disinterested person can follow the course of land speculation as almost universally practiced, without feeling its rank injustice.

How did so evident a wrong become so firmly established? ...

The landlords, being also the lawmakers, have seen to it that their tenure of this easy money should not be disturbed, but on the contrary have so buttressed it with centuries of legislation, precedents, and judicial decisions, that any proposition to hark back to the terms of the original bargain, whereby the owners of the land agreed to pay the expenses of the government, is now denounced as anarchy and sacrilege.

Lapse of time, however, never can transform wrong into right, nor can a buyer acquire any better title than the seller possessed. The economic rent belongs to the community, which can and will begin to reclaim it as soon as the voters thoroughly awake to the facts and the right and wrong of the matter, which are not hard to grasp when the subject is presented in its simplest form.

An illustration has already been given of the case of a piece of farm land. Let us take an example in a large city. Let us take a corner lot centrally located in New York City, the title to which lot is held by, say, Mr. John William Rhinelastor. This lot was a part of an old Dutch farm, and is an heirloom. It did not cost the present owner anything, nor his father nor his grandfather. There is a little old building on it, which has always been rented at a figure ten times as large as the taxes imposed, so that the owner has been handsomely subsidized each year for storing his title-deeds during a period of the city's growth in which the increase in population and the expenditure of public money in that neighborhood have raised the value of this corner location to, say, two hundred times its early value.

About now, Mr. Rhinelastor decides that he will go abroad to live, and can't be bothered with this piece of property. But knowing that the pressure of population is sure to increase and that the expenditure of public money to the benefit of this land must continue, he will not sell it. So he gives a twenty-one year lease to the corner for, say, $20,000 a year net, with a privilege to the lessee of renewals at advancing figures. The lessee agrees to pay all taxes.

Now what is this net $20,000 a year, which will be regularly remitted to Mr. Rhinelastor, in Europe or wherever he may be, given in payment for? Not for the old building — the first thing the lessee does is to pull it down. Not for the land itself — it is all rock, which has got to be blasted out as part of its improvement.

Clearly it is paid for a location or site value, which the community, and the community only, has built up and paid for. In other words, the present $20,000 rental, and the larger one which that location will command in later years, is strictly a community product, and as such belongs to the community and not to Mr. Rhinelastor.

That the latter has no good right to it is at once evident when we remember that "When one man gets something for nothing somebody else has got to give something for nothing." Here are $20,000 that some men and women have got to work to earn every year to hand over to a man who does not render, and does not feel any obligation to render, one dollar's worth of public or private service in return. Such is the wild travesty of justice which we call law. It is not comical only because it is frankly tragic in its social results.

Now suppose this $20,000 and all the rest of this same community product — i.e., the site or location rent of its ground — were paid every year to its rightful owner, the treasurer of New York City, what would become of taxation, with its inseparable retinue, Fraud, Evasion, Perjury, Inequality, and an all-pervading public sense of injustice? ... read the whole article

Michael Hudson: The Lies of the Land: How and why land gets undervalued

Turning land-value gains into capital gains
Hiding the free lunch
Two appraisal methods
How land gets a negative value!
Where did all the land value go?
A curious asymmetry
Site values as the economy's "credit sink"
Immortally aging buildings
Real estate industry's priorities
    * Its cost to citizens
    * Its cost to the economy

YOU MAY THINK the largest category of assets in this countrly is industrial plant and machinery. In fact the US Federal Reserve Board's annual balance sheet shows real estate to be the economy's largest asset, two-thirds of America's wealth and more than 60 percent of that in land, depending on the assessment method.

Most capital gains are land-value gains. The big players do not want their profits in rent, which is taxed as ordinary income, but in capital gains, taxed at a lower rate. To benefit as much as possible from today's real estate bubble of fast rising land values they pledge a property's rent income to pay interest on the debt for as much property as they can buy with as little of their own money as possible. After paying off the mortgage lender they sell the property and get to keep the "capital gain."

This price appreciation is actually a "land gain," that is, it's not from providing start-up capital for new enterprises, but from sitting on a rising asset already in place, the land. Its value rises because neighbourhoods are upgraded, mortgage money is ample, and rezoning is favorable from farmland on the outskirts of cities to gentrification of the core to create high-income residential developments. The potential capital gain can be huge. That's why developers are willing to pay their mortgage lenders so much of their rent income, often all of it.

Of course, investing most surplus income and wealth in land has been going on ever since antiquity, and also pledging one's land for debt ("mortgaging the homestead") that often led to its forfeiture to creditors or to forced sale under distress conditions. Today borrowing against land is a path to getting rich -- before the land bubble bursts. As economies have grown richer, most of their surplus is still being spent acquiring real property, both for prestige and because its flow of rental income grows as society's prosperity grows. That's why lenders find real estate to be the collateral of choice.

Most new entries into the Forbes or Fortune lists of the richest men consist of real estate billionaires, or individuals coming from the fuels and minerals industries or natural monopolies. Those who have not inherited family fortunes have gained their wealth by borrowing money to buy assets that have soared in value. Land may not be a factor of production, but it enables its owners to assert claims of ownership and obligation, i.e., rentier income in the forms of rent and interest.

Over the past 40 years I have specialised in the study of the factors that raise or lower the nation's overall real estate prices -- rising income and savings levels, shifting interest rates and the financial sector's supply of mortgage credit, as well as changes in the tax laws and related market-shaping rules. This work for Wall Street banks and institutional investors was burdened by the absence of reliable data on the value of land and buildings. The official nationwide real estate statistics do suggest that a politically motivated asymmetry is at work in the economy, benefiting real estate, which I shall now attempt to identify. ...

Two appraisal methods

PROPERTY IS APPRAISED in two ways. Both start by estimating its market value.

  • The land-residual approach ... 
  • The building-residual approach...
If it is agreed that any explanation of land/building relations should be symmetrical through boom and bust periods alike, then the same appraisal methodology should be able to explain the decline of property values as well as their rise. The methodology should be as uniform and homogeneous as possible. By that, I mean that similar land should be valued at a homogeneous price, and buildings of equivalent worth should be valued accordingly.

If these two criteria are accepted, then I believe that economists would treat buildings as the residual, not the land. Yet just the opposite usually is done.

THE DRIVING FORCE behind the anomalies is the political lobbying eager to depict real estate gains simply as "protecting capital from inflation." In reality, it helps land owners and their creditors get a free ride out of land asset-price inflation -- that is, The Bubble. ...

Immortally aging buildings

INCOME TAX LIABILITY may be minimized in two ways.

  • The most general -- and also the most economically pernicious -- is through the tax deductibility of interest. The working assumption is that interest charges are a truly inherent business expense, not simply the result of a business decision taken by investors to leverage their equity. For interest to be an inherent business expense, interest-bearing debt would have to be a factor of production, which it is not. Properties would yield their rent regardless of how they are financed. Investors choose to rely on debt rather than equity financing because the tax laws favor it, thanks to the political lobbying of institutional creditors ("the debt lobby"). Homeowners too deduct interest payments, which encourages borrowing.
  • The second way to minimize tax liability, is to depreciation the building, that is, annually deduct from taxable income part of the purchase price until it's all deducted and the building is "written off" It's the most unique tax advantage enjoyed by the real estate industry. Investors are able to depreciate their buildings based on their assessed acquisition price, regardless of the actual building costs involved or the level of economy-wide land-price inflation. Investors depreciate buildings at rising prices even when prior owners already have depreciated these structures once or even many times. For real estate owned by households and partnerships (the latter being the preferred legal instrument for holding residential apartment buildings and office buildings), the Fed has estimated much higher proportions of land to buildings, but these estimates also overvalue buildings relative to land. Every time a property changes hands at a higher price, building assessments are raised proportionally - and begin to be re-depreciated for these higher valuations, regardless of how often the buildings already have been written off! There is no limit as to how often a building can be re-depreciated. What matters is simply how often the property changes nominal hands.

This fiscal privilege has created a phantom real estate economy. Buildings acquire death-defying lives, metamorphosing time and again for the purpose of enabling their owners to avoid paying income taxes. For commercial real estate investors as a whole, the repeated depreciation of buildings has made commercial real estate investment largely exempt from the income tax. Homeowners are not permitted to charge depreciation on their own residences, but only on buildings that they rent out.

The tax laws governing depreciation thus turn largely on how much value is assigned to buildings relative to the land, which is not depreciable. Like manufacturers, real estate owners are permitted to count part of the revenue over and above their current expenses as a return of their capital investment, as distinct from taxable earnings on capital. No income taxes are levied on this part of their revenue. That is only fair, because an investor who buys a $100 bond only pays tax on the interest, not on the original $100 principal. Likewise, industrialists can recover their initial investment in plant and equipment without being taxed. Their "sunk cost" gets reimbursed, so that they get their capital back by the time the equipment wears out or becomes obsolete.

For real estate, however, the economics are unique. Machinery rarely can be re-depreciated, but this is not true of buildings as long as they are kept in proper repair. Maintenance and repairs typically consume about 10 percent of the rental value. For business owners, the explicit purpose of this expenditure is to maintain the building's value intact, so that it can survive year after year and avoid obsolescence while its site value rises. If a building is sold at a higher price, its assessment usually is raised. Suppose a property is sold for twice the $1 milliuon the owner paid for it. The local appraiser is likely to say; "I see you've sold your building for $2 million. Under my rule of thumb, I appraise the land as half this value, and the building as half, so that gives you a $1 million dollar building." Under this rule, the building that was formerly priced at $500,000 can be re-depreciated at a price that builds in this $500,000 gain. In this way a substantial portion of the rise in site value of non-depreciable land is treated as depreciable building value.

Real estate industry's priorities

REAL ESTATE LOBBIES recognize that what is not seen is less likely to be taxed. What is not quantified for public policy-makers to see clearly may avoid taxes, leaving property owners with a larger after-tax return. They prefer land-residual's capital gains statistics at the national level, even as individual investors seek site-value gains at the local level.

This explains the seeming irony that investors in an industry dealing primarily with the development of land sites have campaigned to minimize the statistical treatment of land. Relegating land to merely secondary status enables the real estate industry to depict its "capital" gains as resulting from cost inflation and hence the reproduction costs of buildings -- whose value is allowed to be depreciated and re-depreciated at rising values over time. The free lunch of land-price gains is unseen as attention is diverted from the real estate bubble and land-price inflation to building costs. These fiscal considerations help to explain why it has been so hard to get Washington to produce national land value statistics.

The 2001 Nobel Prize was awarded to economists who recognized the unevenness of market knowledge. It would seem that this asymmetry exists especially in the real industry. Investors and developers know that the name of the game is capital gains. They use one set of statistics to calculate their Total Returns, but get government statisticians and Congressional authors of the nation's tax laws.to support a different logic for their tax returns.

Tax favouritism for real estate was defended in Congress on the ground that it was in the public interest to provide a special inducement to the real estate industry to build more homes and office buildings. But as Adam Smith observed, every industry represents itself as serving the public interest. Can one really say that investors borrowing 70 percent of private-sector loans to ride the wave of asset-price inflation are more in the national economic interest than favoring direct investors to build new plant and businesses that employ labor rather than pricing homes, office buildings and industrial sites further and further out of reach of those who must earn their income by increasing society's productive powers?...

For hundreds of years property's value has been calculated by discounting its flow of rental income at the going rate of interest. The lower the interest rate, the higher the price a given rental stream will justify -- or as property owners express it, the more years' rent a property will bring. What is so striking about land values today is that they are rising for reasons independent of their earnings stream. The major new consideration is their prospect for future "capital" (that is, land-price) gains. In sum, the ultimate aim of real estate investors no longer is so much to seek income -- most of which is pledged to their bankers as interest payments on the property they acquire -- as much as to seek property gains. Politically opportunites abound. Merely changing zoning in New York City in the 1980s to allow using commercial loft spaces for residential purposes had the effect of multiplying asset values five or tenfold.

Whether the gains come from selling the property or from borrowing more money against it, the essential phenomenon is the rapid growth in asset values and real estate's uniquely favored tax treatment. That's why investors choose real estate instead of bonds or stocks, and much of the strategy underlying corporate takeovers has followed the strategies they developed over the past half century.

Nationwide the capital-gains dimension needs to be incorporated into the rental revenue statistics to measure real estate's total returns. This sector's nearly complete success in escaping the tax collector has placed an enormous tax burden on everyone else. read the entire article

Ted Gwartney:  Estimating Land Values

Not only is land rent a potentially important source of public revenue, the tax on land is a means of limiting excessive speculation in land prices. This would ensure that the equal opportunity to be productive would be available to all citizens. With limited money to invest, people could invest in productive equipment and wages, rather than in high land prices which produce no additional tangible wealth. ...

What are the factors that cause land to have market value and to whom does this market revenue advantage properly belong? Land has market value for three reasons:
the limited supply and "natural" productivity of the soil and natural resources,
the publicly provided services, including planning, improvements that increase the market value of land and
the growth of communities and peoples' competitive demand for the exclusive use of prime locations.

Land rent is the price that people and businesses are willing to pay for the exclusive right to possess and use a good land site for a period of time. For example, people prefer to use sites of good location because it gives them an advantage of spending less time in travel by being near what they choose to do and where they work. A businessman can sell more goods at a site where many people pass each day, compared to a site where only a few people would pass.

The collection of land rent should be used as revenue, by the community for supplying public needs. This returns the advantage an individual land possessor receives from the exclusive use of a land site, to the balance of the people who live within the community and have allowed the land possessor the exclusive use of the land site for the period of time.

It is the responsibility of the local communities to insure that the market rent of land is collected for public purposes. When a major part of land rent is not collected, which is the case in most of the world today, land title holders obtain rights to sell the value of the public improvements which were made by the whole community. The community added to the market value to land by making improvements which increases demand and rent for the land. The longer the possessors hold the land out of use the greater will be the bonus they obtain.

By prohibiting people from using good land, the possessors force the premature use of other less desirable land, which is more distant from the city. This raises the cost of community improvements and the rental value of the unused, but better located, land. This precipitates the degradation of the rural environment by using city land inefficiently -- and creates huge unnecessary pressures on the natural environment.

Any moves to enact good government principles without collecting the full market rent of the land may result in a failure. People are guided by the profit motive. When people can make a larger profit by doing nothing, but keeping the land they possess out of use for a long period of time, they will do so. When the community collects the full market rent of land, they eliminate the motive for keeping land out of efficient use, because the unearned profit has been collected as public revenue. ...

When the rent of land is taken for public purposes production and distribution are not held back. This is because the same amount of rent would otherwise have been taken by some private individual. The rent would be the same, the difference is how it is utilized. There is evidence that communities who raise their revenue from land, rather than from labor and capital, are more prosperous, many increasing productivity by more than 25%.

In order to preserve the environment, it is necessary and possible to better utilize our communities. If the producers of the land market value (nature, government and people) don't utilize land rent, someone else will. This is why efficient land use fails under contemporary land systems in most countries. All countries collect some of the land rent, perhaps 10%, 20% or 30%, but none yet, collect all of the market rent of land. ... Read the whole article

Bill Batt: The Merits of Site Value Taxation

Debate about the influence of various tax designs on social and economic behavior is nowhere clearer than in attempts to describe and define the concept of tax expenditures.45 Some taxes are more evil than others, and Milton Friedman once said that a tax on land value is the "least worst" tax.6
Tax expenditures are special provisions in the tax code, any tax code, that forgo the collection of certain revenues with the intent that their retention by taxpayers will foster public purposes better than through programs financed directly through the budgetary process. ...  Taxes have generally come to be regarded as a necessary evil, but not all taxes are equally evil.
To the extent that taxing powers of government are used to implement social policies beyond the collection of revenue, they take on a complexity and a political tenor that involve a number of counterproductive elements. The acceptance of tax expenditures as a means of effectuating public policy in the tax code has led increasingly legislators' vulnerability to the crude blandishments of a host of special pleaders. Such considerations deserve attention and should be kept in mind when the designs of tax structures are discussed. Most often they are ignored.  ... Read the whole piece

Bill Batt: Stemming Sprawl: The Fiscal Approach

Zoning becomes captive of parochial interests — home owners, speculators, the highway industry, and building contractors — who naturally either resist or exploit the inexorable and evolutionary patterns of change. The political Right criticizes zoning for interfering with individual choice and rational land use,[22] and the Progressive Center criticizes it for being outdated and rigid at best, unresponsive and destructive at worst. Alan Ehrenhalt, columnist for Governing Magazine, said,

The postwar zoning codes discouraged the old pedestrian-scale Main Street corridors that had flourished before World War II, and encouraged their replacement with strip-mall-like businesses that provided large amounts of parking. They took the idea of segregated uses and pressed it much further than the original versions had dared go. The more distance they could create between residential, commercial and industrial uses, planners reasoned, the easier it would be to dissuade residents from escaping to greener pastures.[23] ... read the whole article

Bill Batt: How Our Towns Got That Way   (1996 speech)
As recently as a century ago classical economic thought still regarded land for the most part as the common heritage of mankind. From Adam Smith, through Thomas Malthus, David Ricardo, and finally with John Stuart Mill economic productivity was regarded as a function of three interacting factors: land, labor, and capital. John Locke also accepted these premises. To achieve optimal economic productivity, one had to exact the appropriate price from each of those factors. The price of labor was in wages; the price of capital was interest; and the price of land, particularly following the thinking of David Ricardo, was rent. Rent in its classical sense means payment for the use of something in fixed supply, or, more generally, payments above the costs incurred for its creation. Disequilibriums and inefficiencies in economic development resulted if the appropriate prices were not paid for each factor. But, as we shall see, there were powerful interests in this country, bent on not seeing any rent extracted from land use, that persuaded the nascent economics profession at the end of the 19th century no longer to regard land as a separate factor and to redefine the terms of production instead in two-factor theory. This was concurrent with the inclusion of land as property, since called "real property."

As land came to be transferred to other nobility and usurped under title in fee simple rather than in usufruct, it came to be regarded as a private financial asset. Earlier it was regarded as part of nature, much like air, water, wind and weather. Accounting practices now listed land as an asset "owned" in fee simple, and as a liability on the other side of balance sheets in money "owed" to banks. This tendency has been extended today so that we have privatized much of our air, water, wind, and even sunlight. Land came to be simply one kind of capital, nothing special, nothing requiring further treatment. Ricardo's Law of Rent became an artifact of intellectual history. The conflation of land into capital to create two-factor economics is one of the greatest paradigm shifts in the evolution of social philosophy. How the premises and terms of economic discourse have been changed has been documented for the first time in a new book by a California professor of economics, Mason Gaffney. The account is put forth in fascinating detail entitled, The Corruption of Economics. It was indeed a corruption of a discipline, a deliberate putsch by powerful economic forces with an interest in seeing such definitions changed, and we have all been paying the price since that time. This revealing thesis is what I really want to relate to you, and to explain the dire consequences it has had for us in our contemporary world. I have come to believe it; it makes sense to me, both historically and in contemporary analysis, from several perspectives.

The Corruption of Economics
As I explained, classical economics emerged from a school of thinkers known as the Scottish moralists in the latter part of the 18th century. There ultimately evolved three major schools of economic thought a century later, one the continuing tradition of Adam Smith through J.S. Mill, a second being the aggressive and emerging school of Marxism, and the third a proposal for two-factor economics being pressed largely by interests in America. Marxism was never a major force in United States; the primary challenge to the classical tradition came from what has since come to be known as neo-classical economics.

Professor Gaffney has for the first time shown how powerful economic interests in American society essentially bought the leading figures of the newly- established American Economics Association with all the blandishments that can be used to influence academicians. Leading scholars were induced to change definitions of terms so that special interests would be advantaged. What were those interests? Primarily the railroad industry, which at the time was probably the most powerful political force in America. By changing definitions and conflating the land factor into capital, it was no longer essential for land rent to be paid in taxes, and the railroads, holders of some of the most valuable land in the nation, were thereby able to escape their full duty. This is an astonishing story, one never fully spelled out until now, and it explains both how the academic community was beholden to powerful interests and how many of the social problems we see today could have been avoided.

The classical tradition of economic thought was ably synthesized and represented by one dominant figure of the age: Henry George. All but forgotten today, perhaps in good part due to the assiduous disparagement of his economic foes, one should note that he was more widely known in his time in America than anyone except Thomas Edison. His 1879 book, Progress and Poverty, sold more copies throughout the world than any book till that time except the Bible. Born in Philadelphia the son of a publisher of religious books, he traveled to California as a young man to make his fortune as a journalist. But what he saw in land speculation and the exploitation of labor soon led him to study the classical economists and to write his ideas down. Upon publication of his book he shortly became known throughout the world, and traveled and lectured widely as a social reformer for the rest of his life. By the time he died he had become so famous that he almost won the mayoralty of the city of New York. He ran twice, losing to Tammany Hall the first time in what was probably a corrupt election (but beating the third-place finisher, Theodore Roosevelt) in 1886, and died four days before a second election he might have won in 1897. As a spellbinding orator and lucid writer, he captivated the world with his vision of societies made more just by a proper understanding of economics. Gaffney shows that it was George, not Marx, that was the primary threat to dominant interests in end-of-century United States. He had to be stopped, and he was.

In classical economics, the definition of capital grew out of labor mixed with earlier capital. Land, by conventional definition, was not capital, nor was it a component of wealth. Rather land was its own category. Conflating land into capital allowed land rent to be hidden and diluted in ways so that the unearned increment arising from social improvements fell to speculators rather than being returned to society in rent. The failure of society to recapture the appropriate level of land rent from titleholders led also to depression of labor wages at the margin, creating poverty and artificial scarcity of labor where otherwise it could be relieved. Hence the title of George's book, Progress and Poverty. George recognized that the value of any land parcel arose out of its social activity, not from anything which a titleholder might have done to it. He recognized that many, perhaps most, titleholders in land were speculators, reaping the benefit of others' investments, and selling out at last when their price was met. Hence it made sense that society had a right to a return on what it had brought about, as well as from the fact that those titles could never be other than leaseholds. That land rent, shortly confused by use of the words "single tax," was, to George, the rightful return to society.

The railroad barons of the 19th century were not just coincidentally the land barons. They also had strong holds on the founding and growth of the major American universities of the period, some of which carry their names. Johns Hopkins, Andrew Dickson White, Daniel Gilman, John D. Rockefeller, George Leland Stanford, Nicholas Murray Butler were all as attached to various universities in the country as they were to powerful railroad interests. They were able, through their control of universities either as actual presidents or as benefactors, to influence the dominant figures responsible for establishing the American Economic Association in 1885. The actual intrigue is too complex to be recounted here: who got appointed and promoted, who was funded in research, which were given endowed chairs, who got stock options, and so on. The preoccupation with defeating Henry George, Gaffney shows, was a paramount preoccupation of all of these figures. The central figures were:

  • Francis Walker, first president of the AEA, then President of MIT and Director of the Census Bureau.
  • Richard Ely, also founder of the AEA, and professor of economics at University of Wisconsin and later Northwestern, there granted his own Institute with railroad money.
  • John Bates Clark, Professor of Economics at Columbia University, and whose patron was Julius Seelye, President of Amherst College and then Smith College.
  • E.R.A. Seligman, Chairman of the Economics Department at Columbia University and scion of a wealthy banking family.

These figures are even today the honored founders of an esteemed profession. So great was their victory over rival schools of thought that they are a century later seen as paragons of clear thinking and virtue. The intrigue and the inside deals are long forgotten. The lineage to contemporary scholarship continues in a "chain unbroken from Seelye to Clark to Johnson to Knight to Stigler, Friedman, Harberger and now thousands of Chicago-oriented economists." Indeed, when Henry George ran for mayor of New York in 1897, it was against the wealthy patrician Seth Low, President of Columbia University, who had recently recruited Clark to come to Columbia. To really understand the academic tension of the period, one must look at the published papers, the speeches and debates, the newspaper articles, and the citations at the end of those articles. These, even more than the interlocking directorates of faculty appointments, explain how much George was opposed, perhaps more feared. Was it for the falsity of his views? Clearly not, as few critics then or since then have managed to strike a knock-out blow against his theories. Rather, it was the threat George represented to powerful interests that required him to be defeated, and in doing so they succeeded but only in the short run, as they were within decades victims of their very successes. Today we see that the railroads have failed in this country for lack of traffic. It will soon be evident why.

There were many arguments to be made for the classical tradition, the result of which would be to rely upon payment of rent of land according to its value to society. George recognized that land value is largely a function of how society has elected to invest in any general neighborhood; there is no argument for any one titleholder to reap the reward of what others have invested. Gaffney points out that, from the standpoint of economic theory, the framework had the following virtues:

  • It reconciled common land rights with private tenure, free markets and modern capitalism, a growing and persistent problem as the industrial society took hold.
  • It enabled the lowering of taxes on labor without raising taxes on capital.
  • It reconciled equity and efficiency. It constituted a progressive tax because land is concentrated so much among the wealthy and because the tax cannot be shifted. It was efficient because it is neutral among different land-use options.
  • It constituted no disincentive to business location or population settlement. In this way it encouraged the most efficient land use and discouraged sprawl.
  • It created jobs without inflation, and raised government revenue without any penalty upon its base.
  • It strengthened public revenues and at the same time promotes economy in government.

Those economists who today still persistently hold to the view that there is something special about land that make it unwise to treat as a form of capital are known as Georgists. They represent a small minority of the economics profession, but, little known as they are, they are among its most esteemed members.

Two-factor economics, however, had advantages to influential individuals and special interests. Land speculators who were positioned to profit from knowing where locational values would increase, or were in a position to cause those increases, could quickly and easily reap a private gain. Simply by holding title to parcels of real property, without doing anything at all to increase their value, one could quickly turn a profit. This is because the increment of unearned increases resulting from social investments were left for owners to reap rather than recovered by society. In three-factor economics, land rent reverted to society in an automatic and efficient manner. When a railroad magnate like George Leland Stanford extended the Southern Pacific track to the east of Los Angeles on land that he was granted by the government, all he then needed to do was to sit back and wait for the land sales to give him a return on that which was made more valuable by his investment in the line. All across America, land speculators learned that capturing monopoly titles to tracts of land allowed them to quickly and easily turn a "profit" on their investment yet hardly raising a finger.... read the whole article

Bill Batt: Fallacies of the Slippery Slope Argument

Some explanations reflect downright corruption. The earliest cars manufactured in this country and in Europe were electric; streetcars also were largely electric powered until a conspiracy of the automobile and petroleum industry exerted its force to ensure that fossil fuel powered motor vehicles would dominate our transportation and land use patterns.15 Our motor-vehicle-dependent and urban sprawl configurations can be explained by powerful interests continually pressing for policies to make us so. One might even conclude that the decision to drive on the right side of the road was equally as much a defining moment.
 15 This is an untold story. A trial was held in a Chicago federal court in 1949, resulting in an indictment of GM, Firestone, Standard Oil, Phillips Petroleum, and Mack Trucks among others. Their crime was in forming a holding company called National City Lines which proceeded in the preceding decade to buy up the public transportation services in dozens of US cities, and then scrapping them so that people would then become more automobile dependent. The corporations were fined $5,000 each, and the CEOs of each one $1. See United States Senate, Committee on the Judiciary, 93rd Congress, 2nd Session, “American Ground Transport: A Proposal for Restructuring the Automobile, Truck, Bus, and Rail Industries,” by Bradford C. Snell, February 26, 1974 (Washington: US Government Printing Office, 1974); and Jonathan Kwitney, “The Great Transportation Conspiracy,” Harper’s Magazine, February, 1981.

And I hope that you will forgive me for mentioning another great conspiracy in American history, the subject of my Torch presentation about four years ago. That story recounted how the American railroad industry, in collusion with the banks, induced the founders of the American economics profession to change definitions and formulas so that they would be relieved of taxation on their land holdings and speculation would be rewarded.16 This dividing line between classical and neoclassical economics is responsible I believe for many of our economic problems today — economic cycles, an inequitable tax structure, poverty and unemployment, urban sprawl and the gutting of urban centers. Only now is this economic ideology, almost sacrosanct for a century, falling apart and seen for what it is. ... read the whole article

Bill Batt: How the Railroads Got Us On the Wrong Economic Track
Professor Gaffney has for the first time shown how powerful economic interests in American society essentially bought the leading figures of the newly-established American Economics Association with all the blandishments that can be used to influence academicians. Leading scholars were induced to change definitions of terms so that special interests would be advantaged. What were those interests? Primarily the railroad industry, which at the time was probably the most powerful political force in America. By changing definitions and conflating the land factor into capital, it was no longer essential for land rent to be paid in taxes, and the railroads, holders of some of the most valuable land in the nation, were thereby able to escape their full duty. This is an astonishing story, one never fully spelled out until now, and it explains both how the academic community was beholden to powerful interests and how many of the social problems we see today could have been avoided.

The classical tradition of economic thought was ably synthesized and represented by one dominant figure of the age: Henry George. All but forgotten today, perhaps in good part due to the assiduous disparagement of his economic foes, one should note that he was more widely known in his time in America than anyone except Thomas Edison. His 1879 book, Progress and Poverty, sold more copies throughout the world than any book till that time except the Bible. Born in Philadelphia the son of a publisher of religious books, he travelled to California as a young man to make his fortune as a journalist. But what he saw in land speculation and the exploitation of labor soon led him to study the classical economists and to write his ideas down. Upon publication of his book he shortly became known throughout the world, and travelled and lectured widely as a social reformer for the rest of his life. By the time he died he had become so famous that he almost won the mayoralty of the city of New York. He ran twice, losing to Tammany Hall the first time in what was probably a corrupt election (but beating the third-place finisher, Theodore Roosevelt) in 1886, and died four days before a second election he might have won in 1897. As a spellbinding orator and lucid writer, he captivated the world with his vision of societies made more just by a proper understanding of economics. Gaffney shows that it was George, not Marx, that was the primary threat to dominant interests in end-of-century United States. He had to be stopped, and he was. ... read the whole article

Mason Gaffney: Property Tax: Biases and Reforms
Residents of timber counties are typically scattered and poorly organized. Timber companies are huge, rich, few and tightly organized. In Mendocino County, Georgia Pacific and Louisiana Pacific, absentee owners, together own the best 500,000 acres - 58 percent of the County's timberland - and Georgia-Pacific owns Louisiana-Pacific. They control state forestry schools, paying professors as consultants. They support research in forest economics at think tanks like Resources for the Future in Washington, which has never criticized their tax preferences but trained its big guns on public agencies, the Forest Service and the Bureau of Land Management. "The industry" controls tax laws in 50 states, and sloughs tax burdens onto others. It will continue to do so until other taxpayers in the timber counties wake up and organize to control state timber tax laws.... Read the whole article

Alanna Hartzok: In the History of Thought: Henry George's "Single Tax"

    One day, while riding horseback in the Oakland hills, merchant seaman and journalist Henry George had a startling epiphany. He realized that speculation and private profiteering in the gifts of nature were the root causes of the unjust distribution of wealth. The insights presented in Progress and Poverty, George's masterwork, launched him to fame. His policy approach was known at that time as the "single tax" - meaning that taxation should be shifted off of labor and onto the socially created surplus value of land and other natural resources. His message reached as far as the great Russian Leo Tolstoy, who was so taken with the idea that he frequently referred to George and "Georgism" in his novel Resurrection.

    During the last 20 years of the 19th century George built an impressive populist movement bent on solving the problem of the wealth gap, and he died in 1897 while campaigning to be New York's mayor. The "Georgists" were determined to free labor and all productive effort from the burden of taxation. Land and natural resources were gifts of nature to be fairly shared by all. The role of government would be to secure democratic rights to the earth for all people via the collection of resource rents, the surplus value accruing to natural wealth, which would be distributed in social goods, services or by direct citizen dividends.

    But just as this solution to the rich/poor gap was gaining momentum, the Georgist movement was stopped in its tracks. Wealthy individuals poured their money into leading schools of economics to encourage the writing of treatises against George and the movements he had spawned. The ethical perspective that land is a common heritage and the policy approach of land value taxation were subsequently eliminated from the field of economics. The newly dominant theory focused on only two primary factors -- labor and capital -- with capital having the upper hand as "employing labor." "Labor," of course, is quite capable of self-employment given access to land. This is what the elites and the plutocrats feared most - that labor would gain full power to directly produce capital given conditions of equal rights to the resources of the earth. ... read the whole article

Weld Carter: A Clarion Call to Sanity, to Honesty, to Justice  (1982)

Back in the early days of this century, Winston Churchill saw and recorded an example of this. There had been a ferry fare over the river Thames for the common laborers who lived on the wrong side of the river to pay in order to get to work. A spirit of nobility prompted the absorption of this fare by the City, and almost immediately rents in the working class area were increased by the same amount as the fare had been. When this thing was done, the guys who got the benefit were not the poor working class people, but the owners of the homes in which they lived, or, more accurately and more critically, the owners of the land on which those homes stood. The laborers were thus charged a higher rent, and that rent diverted the benefit from the seemingly intended beneficiary (i.e., the public) to landowners in the affected area.

This occurs every day in this country. A new road is built, or a superhighway is constructed, which makes access to a particular site much easier. We tell ourselves that we justify this as an expenditure of public funds by the benefits that accrue to the traveling public; but the benefits go, in the form of higher land prices and rents, to the owners of the sites that are served by this new road. If you doubt this, consider the jockeying for the insider information or for influence over the selection.

Robert Caro, in his biography of Robert Moses, recalls the time in the early 1920s that Moses suggested to the authorities the building of a causeway from the Long Island mainland over to Jones Island. This proposal was rejected outright by the Long Island Park Commission. Some months later, Moses presented them with a drawing showing precisely where this causeway would run, and, after a suitable period of during which these public employees could buy up the land along the proposed highway, he resubmitted his proposal. This time, they officially approved the suggested construction.

In the town of Antioch, Illinois, there were two developments underway almost simultaneously. In the one, roads were provided, together with water and sewer lines, but no sidewalks; in the other, just across a main road from the first, the mayor of the city had storm sewers, curbs and sidewalks installed at public expense, for which of course, any prospective buyer or tenant would gladly pay for use of that land the higher price these added benefits provided. Any reader will recognize this chain of events and set of economic relationships as being the course of everyday life and business at the local, state and national level. The cynic would say that a primary motivation for entering local or even national politics would be the opportunity for personal gain offered daily by publicly financed improvements. ...

... Thus, the benefits of a tax-supported public work accrued once more not to the benefit of the public at large, but to that of a very limited and narrowly defined class, those who were rich enough to own land in that location.
There are undoubtedly many other problems to be resolved before the ills of our society are cured; but what many do not recognize and understand is the primacy of the adoption of land value taxation over all these other corrections. The reason for that can be very simply stated: If any of these other measures already adopted have no merit and have only added to the burden of our problems, then they are disqualified at the outset. On the other hand, if they are of themselves beneficial, any benefit from them will be immediately capitalized into land values and will therefore exacerbate the very problems which otherwise might be helped toward a cure. Thus it is that our first step toward any possible remedy for the awesome plight into which we have been led increasingly over the recent years must be the adoption of land value taxation. ... read the whole essay

Mason Gaffney: Interview: Is There a Conspiracy in the Teaching of Economics and History within the American Education System?

The Progress Report - For an economics professor, you're said to be quite an expert on the environment, what's the connection?

MG - Economic analysis, properly used, can serve the cause of environmentalism. The neo-classical economists abused both economics and the environment badly, as a byproduct of their drive to discredit classical political economy, and Henry George. John Bates Clark wrote that land is not scarce, that mankind can convert capital into land without limit, and create as much as we please. He wrote that natural resources have no value to mankind until and unless they are privatized; that privatization itself is what creates value. Our universities churn out thousands of new economists yearly, imbued with such attitudes. When Rachel Carson kicked off the new environmentalism in 1962 with her "Silent Spring," most economists trashed or disdained her: they 'd been trained that way.

Faced with the obvious growth of environmental sentiment, economists dealt with it as they have with other problems: they absorbed it in the discipline, then marginalized it. Now they can say it is part of economics, while they proceed to ignore or trivialize it in their major policy pronouncements, wherein endless territorial expansion continues to be not just a goal, but a necessity to make the system work.

The legitimate goals of environmentalists, they coopt and distort. Here are two examples.

  • They'll tell you that it's not OK to promote oil conservation by taxing withdrawals, but it is OK to do so by monopolizing the industry - monopolists are our best friends.
  • They'll tell you it's not OK to check polluters by taxing their effluents, but it is OK to give them property rights to pollute, based on past emissions, and then buy those rights back from them at their price. You think I'm just making that up? I wish I were! The EPA is actually applying that idea around the country.

Thank you, John B. Clark; thank you, neo-classical economics. It all follows from Clark's efforts to avoid any recognition that natural resources are common property: in this case, the air itself is turned into private property. Your very right to breathe, you have to buy from major owners of the air. And how did they establish that ownership? By their track records of dumping their crud in the air in the past. It beggars belief, but there it is: it shows what the war against Henry George has made of the discipline of economics.  ... read the whole article

Mason Gaffney:  Full Employment, Growth And Progress On A Small Planet: Relieving Poverty While Healing The Earth
The servitude of intellectual leaders. Academic economists are mostly kept by landowners, or their bankers, or other special interests, obediently to rationalize the system of which they are the high priests. (Gaffney, 1997). (Today we would include thinktank intellectuals, media pundits, and hate-radio commentators and talk-show hosts among the high priests.) Read the whole article

Mason Gaffney:  Who Owns Southern California?

These same interests wield special influence on private and public higher education, working behind the scenes. They stand in well with the press: in fact, the Chandler family of the Times-Mirror Company is one of them, owning the vast Tejon Ranch. Scott Newhall was once editor of the San Francisco Chronicle. (It is alleged by Stanley Sapiro that "the Newhall ranch was assembled by the owners of the San Francisco Chronicle." ) They dominate Chambers of Commerce. They generally dominate the Metropolitan Water District of Southern California (MWDSC), the regional water supply agency, which has long overtaxed the City of Los Angeles to subsidize expansion to outlying areas.

The Metropolitan Water District of Southern California is run by a Board of 50 Directors, representing 27 cities and districts that it serves. Those from cities are elected on the basis of "one-person-one-vote." Those from several outlying districts are elected by "one-acre-one-vote." Representatives from landowner-run districts remain the same from election to election, thus gaining seniority to dominate the 50-person Board.

Thus a handful of speculative landowners have as many votes as millions of city residents. ...  Accordingly, MWDSC preaches water conservation in the cities while it keeps annexing new speculations at its fringes. It is probably no accident that its current President represents the Western Municipal Water District of Riverside County, an area dominated by land speculators. Many economists have criticized its persistent refusal to consider any kind of economically rational, cost-justified rate structure.  Read the whole article

Mason Gaffney: Nonpoint Pollution: Tractable Solutions to Intractable Problems
Market failure, public programs and perverse incentives in the land market create a gross bias towards spreading out too much.  This aggravates otherwise fairly tractable runoff problems.  The more Tierra Desnuda, the more runoff.   

This perversion does not occur by accident.  Spread and sprawl in forestry, cities and agriculture are common results of the dominant force driving American politics, the quest for unearned increments to land value.   

Thorstein Veblen in his final testament, Absentee Ownership, noted that American farmers  
...have always, ... wanted something more than their ... share of the soil; not because they were driven by a felt need of doing more than their fair share of work ..., but with a view to ... getting a little something for nothing in allowing their holdings to be turned to account (Veblen, pp. 138-40).  

To enhance those values they will now invoke any complaisant higher power, and since God already did His bit by donating the Earth, they turn to Government.   

But the profile of land values is like a volcanic island.  To raise the top and the slopes and the shores we must also raise the shallows above sea level, where they shed the waters and come into use.   

Rising population is one factor pushing up the profile of values, but not the strongest one.  Increased demand per capita is the main factor.  These demands include all the spurious demands described above, like the demand of government for land to "bank" and hold idle, and the demand of speculators "with a view to getting a little something for nothing."   

Veblen went on to say that farm technology adapts to the Procrustean bed of absentee ownership: rather than leading, technology lags changes wrought by the ownership pattern.  Thus it is not "society" or "efficiency" alone that mandate inorganic monocultural chemical farming, but also the peculiar needs of absentee owners holding more land than they can work themselves or with their families.  Logic of, by and for this minority is set up as logic for all.   

If this be true, or (more likely) partly true, it must be admitted that most academics go along and get along with this dominant minority.  Organic farming, biological controls, appropriate technology, IPM, and other countervailing logics had to come from screwballs outside the system, plus a few martyrs and kamikazes inside it, dominated as it is by accommodating "regular fellows," "good old boys," noncontroversial administrators who "understand local needs" and "work with community leaders," and complaisant faculty who enjoy "credibility."  Are we part of the problem?  Let everyone debate that with his own conscience, and be fair enough to lose a few points.   
The solution is land stewardship, a new‑old ethic to supplant the cowboy ethic in which western man has wallowed over several centuries of territorial expansion.   

To reprise from the section on forestry, we must synthesize two concepts of land stewardship.  Concept A says "save for the future"; Concept B says put land to full use right now, to serve and employ people.  Concept AB says do both, but each in the right place.  Use the good land, use it well and fully, employ the workers, serve everyone's needs.  Congregate and cooperate on central, low, flat, fertile ground, as efficient markets and efficient public policies would dictate anyway.  Leave the marginal land in peace.   

But as we tiptoe into this new era let us not sell stewardship by making it too easy and trivial, lest we repeat the sorry history of SCS.  We are all trained to be trivial, to make few ripples and no waves.  We are conditioned by higher education, and disciplined by employers to accept and believe the basic premises of the system and contribute our mite, if any, only to reinforce or patch or adorn it.  Hence the fascination of schemes like effluent charges and their analogues like excise taxes on surrogates.  If those ripples look like waves to us, it shows how much we have to grow to deserve our ancestors.   

Excise taxes have their place, true, but the problems at hand are much vaster and deeper than little measures reach.  Solutions call for basic reconstruction and reorientation more drastic than most of us dare contemplate.  But let's try: it might even be fun.  Dan Hoan had fun making Milwaukee work; he is as good a model as we need.   ...    Read the whole article

Mason Gaffney: Canada's System of Revenue Sharing

The federal aid in Canada goes to provinces, whereas in the United States it goes to specific cities, The U.S. Congressman likes to have his fingerprint, as they say, on every dollar that goes from Washington. The Canadian provinces are much larger and stronger, and fewer than the American States. There is much more horizontal balancing among provinces in Canada than there is among States in the United States. The Maritimes for instance get about 50% of their provincial revenues from equalisation entitlements. Fifty percent. Nothing in the United States matches that. In fact, if you look at the U.S. Constitution, it's quite specifically planned to prevent that sort of thing. Equalisation is not what the Founding Fathers had in mind. On the contrary, there is a provision which you may be familiar with which says that direct taxes will be apportioned among the States according to their respective populations. So in the States the idea has been: Tax the States according to their population and then give the money back according to political power. In the United States Senate it means that the smallest State has just as much clout as the biggest State or would have if their senators weren't so merchantable. (I mean, in California when we need something we just look to Nevada or one of those places for a Senator who is having difficulty raising funds for his next election. But that's another story.)... read the whole article

Alanna Hartzok: Who Would Jesus Tax?  The Saga of Susan Pace Hamill's Alabama Tax Crusade

A University of Alabama School of Law Professor has asked God's forgiveness for the years she lived in the sin of ignorance about tax injustice. Susan Pace Hamill, a tax expert, business consultant, and dedicated United Methodist church goer, thought there was a misprint when she first read that personal incomes as low as $4,600 for a family of four were being taxed by the state, while timber owners holding 71% of the land of Alabama were paying less than $1 per acre in property taxes. Two hours later she found out there had been no mistake and that Alabama has the most regressive tax code in the country. Her righteous rage spawned a tax crusade that has reverberated onto the national scene.

"As somebody who knows a lot about taxes, I could not have imagined a design of a tax structure this bad," she said in a Tuscaloosa News story last February. "The state's tax code is really horribly unjust and has no moral, ethical leg to stand on. Period."

Alabamians with incomes under $13,000 pay 10.9 percent of their incomes in state and local taxes while those who make over $229,000 pay just 4.1 percent. Commercial property owners pay more than 50 percent of property taxes, with homes approaching one-third. Alabama's sales taxes are among the highest in the nation, up to 10 percent in some areas, and do not exempt even the most basic necessities such as food. The state's 1901 constitution was written primarily by large landholders to secure their economic interests, consequently property taxes are extremely light on their holdings. ...

"Alabama's tax system is most abusive because it taxes items like milk, yet offers tax breaks for certain farm products," she said in a Huntsville Times (3/26/03) interview. "It's also unfair to allow timberland (which Hamill found out accounts for 71 percent of Alabama land) to generate only two percent of all state property taxes."

While resoundingly condemning the current system (she uses words like "horrific" and "monstrous injustice") Hamill clearly articulates a tax reform approach which shifts taxes off of low wage earners and onto large land owners. Through a combination of her own reasoning, caring heart, and inherent sense of justice and a thorough investigation of Judeo-Christian ethics, Hamill arrived at a tax policy approach which bears remarkable similarities to the economic justice crusades of 19th century reformer, Henry George.

Her appeal is to the 93 percent of Alabama residents who call themselves Christians. Hamill challenges them to put their faith into practice. Her message fell on many already listening ears. The state's two largest denominations, United Methodists and Southern Baptists, had passed resolutions favoring tax reform in 2000. In 2001 the state's Episcopalians, Presbyterians and Catholics approved similar calls. The Public Affairs Research Council of Alabama and the Business Council of Alabama had long clamored for tax change. In fact, tax reform is now supported by most of the state's religious organizations, according to Charles Durham, pastor of the First Presbyterian Church in Tuscaloosa.

What makes Hamill's work so compelling is her deep grasp of the Alabama tax code combined with her thorough documentation of the scriptural bases for economic justice. She quotes chapters and verses which proclaim that the poor should not be oppressed and that society should create conditions for their advance. Among her favorites are Jesus' words in Matthew 25:45: "Whatever you did not do for one of the least of these, you did not do for me." Luke 16:19-31 is a parable of a rich man sent to hell because of his indifference to the disadvantaged and in Jeremiah 22:15-16, "He defended the cause of the poor and needy, and so all went well." ...

Riley's tax plan, inspired in large measure by Hamill's prophetic tax justice ministry, would bring in an additional $1.2 billion in revenue while raising the income threshold at which families of four start paying taxes from the current $4,600 a year to more than $17,000, scrapping the federal income tax deduction, and increasing exemptions for dependent children. It would give property tax breaks to small family farms, while costing millions to the state's 500 or so farms and timber tracts with more than 2,000 acres each, which includes companies like Weyerhaeuser and Boise Cascade, which own hundreds of thousands of acres.

"I've spent a lot of time studying the New Testament and it has three philosophies: love God, love each other, and take care of the least among you," said Riley (New York Times, 6/10/03, "What Would Jesus Do? Sock It to Alabama's Corporate Landowners")

Unfortunately, Alabama voters overwhelmingly voted against the plan on September 9, 2003. Some said that the poor did not trust the Republican tax relief plan and the rich had solidly organized against it. Opponents made hay out of the proposed sales tax increase on cigarettes, cars and lawn mowers and services like car repairs in a state where sales taxes already reach 11% in some areas. ...  read the whole article

Henry George:  The Irish Land Question (1881)

The galleys that carried Caesar to Britain, the accoutrements of his legionaries, the baggage that they carried, the arms that they bore, the buildings that they erected; the scythed chariots of the ancient Britons, the horses that drew them, their wicker boats and wattled houses–where are they now? But the land for which Roman and Briton fought, there it is still. That British soil is yet as fresh and as new as it was in the days of the Romans. Generation after generation has lived on it since, and generation after generation will live on it yet. Now, here is a very great difference. The right to possess and to pass on the ownership of things that in their nature decay and soon cease to be is a very different thing from the right to possess and to pass on the ownership of that which does not decay, but from which each successive generation must live.

To show how this difference between land and such other species of property as are properly styled wealth bears upon the argument for the vested rights of landholders, let me illustrate again.

Captain Kidd was a pirate. He made a business of sailing the seas, capturing merchantmen, making their crews walk the plank, and appropriating their cargoes. In this way he accumulated much wealth, which he is thought to have buried. But let us suppose, for the sake of the illustration, that he did not bury his wealth, but left it to his legal heirs, and they to their heirs and so on, until at the present day this wealth or a part of it has come to a great-great-grandson of Captain Kidd. Now, let us suppose that some one – say a great-great-grandson of one of the shipmasters whom Captain Kidd plundered, makes complaint, and says: "This man's great-great-grandfather plundered my great-great-grandfather of certain things or certain sums, which have been transmitted to him, whereas but for this wrongful act they would have been transmitted to me; therefore, I demand that he be made to restore them." What would society answer?

Society, speaking by its proper tribunals, and in accordance with principles recognized among all civilized nations, would say: "We cannot entertain such a demand. It may be true that Mr. Kidd's great-great-grandfather robbed your great-great-grandfather, and that as the result of this wrong he has got things that otherwise might have come to you. But we cannot inquire into occurrences that happened so long ago. Each generation has enough to do to attend to its own affairs. If we go to righting the wrongs and reopening the controversies of our great-great-grandfathers, there will be endless disputes and pretexts for dispute. What you say may be true, but somewhere we must draw the line, and have an end to strife. Though this man's great-great-grandfather may have robbed your great-great-grandfather, he has not robbed you. He came into possession of these things peacefully, and has held them peacefully, and we must take this peaceful possession, when it has been continued for a certain time, as absolute evidence of just title; for, were we not to do that, there would be no end to dispute and no secure possession of anything."

Now, it is this common-sense principle that is expressed in the statute of limitations – in the doctrine of vested rights. This is the reason why it is held – and as to most things held justly   – that peaceable possession for a certain time cures all defects of title.

But let us pursue the illustration a little further:

Let us suppose that Captain Kidd, having established a large and profitable piratical business, left it to his son, and he to his son, and so on, until the great-great-grandson, who now pursues it, has come to consider it the most natural thing in the world that his ships should roam the sea, capturing peaceful merchantmen, making their crews walk the plank, and bringing home to him much plunder, whereby he is enabled, though he does no work at all, to live in very great luxury, and look down with contempt upon people who have to work. But at last, let us suppose, the merchants get tired of having their ships sunk and their goods taken, and sailors get tired of trembling for their lives every time a sail lifts above the horizon, and they demand of society that piracy be stopped.

Now, what should society say if Mr. Kidd got indignant, appealed to the doctrine of vested rights, and asserted that society was bound to prevent any interference with the business that he had inherited, and that, if it wanted him to stop, it must buy him out, paying him all that his business was worth–that is to say, at least as much as he could make in twenty years' successful pirating, so that if he stopped pirating he could still continue to live in luxury off of the profits of the merchants and the earnings of the sailors?

What ought society to say to such a claim as this? There will be but one answer. We will all say that society should tell Mr. Kidd that his was a business to which the statute of limitations and the doctrine of vested rights did not apply; that because his father, and his grandfather, and his great- and great-great-grandfather pursued the business of capturing ships and making their crews walk the plank, was no reason why lie should be permitted to pursue it. Society, we will all agree, ought to say he would have to stop piracy and stop it at once, and that without getting a cent for stopping.

Or supposing it had happened that Mr. Kidd had sold out his piratical business to Smith, Jones, or Robinson, we will all agree that society ought to say that their purchase of the business gave them no greater right than Mr. Kidd had.

We will all agree that that is what society ought to say. Observe, I do not ask what society would say.

For, ridiculous and preposterous as it may appear, I am satisfied that, under the circumstances I have supposed, society would not for a long time say what we have agreed it ought to say. Not only would all the Kidds loudly claim that to make them give up their business without full recompense would be a wicked interference with vested rights, but the justice of this claim would at first be assumed as a matter of course by all or nearly all the influential classes–the great lawyers, the able journalists, the writers for the magazines, the eloquent clergymen, and the principal professors in the principal universities. Nay, even the merchants and sailors, when they first began to complain, would be so tyrannized and browbeaten by this public opinion that they would hardly think of more than of buying out the Kidds, and, wherever here and there any one dared to raise his voice in favor of stopping piracy at once and without compensation, he would only do so under penalty of being stigmatized as a reckless disturber and wicked foe of social order.

If any one denies this, if any one says mankind are not such fools, then I appeal to universal history to bear me witness. I appeal to the facts of to-day.

Show me a wrong, no matter how monstrous, that ever yet, among any people, became ingrafted in the social system, and I will prove to you the truth of what I say. ...

What is the slave-trade but piracy of the worst kind? Yet it is not long since the slave-trade was looked upon as a perfectly respectable business, affording as legitimate an opening for the investment of capital and the display of enterprise as any other. The proposition to prohibit it was first looked upon as ridiculous, then as fanatical, then as wicked. It was only slowly and by hard fighting that the truth in regard to it gained ground. Does not our very Constitution bear witness to what I say? Does not the fundamental law of the nation, adopted twelve years after the enunciation of the Declaration of Independence, declare that for twenty years the slave-trade shall not be prohibited nor restricted? Such dominion had the idea of vested interests over the minds of those who had already proclaimed the inalienable right of man to life, liberty, and the pursuit of happiness! ... 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

Peter Barnes: Capitalism 3.0 — Chapter 3: The Limits of Government (pages 33-48)

The idea of regulation is that, while markets should ideally be as free as possible, there are times when an external actor, not driven by profit maximization, must impose some rules for the common good. When it comes to nature, government has many ways to regulate.

    • It may require timely disclosure of toxic releases.
    • It may grant, sell, or deny rights to use public resources.
    • It may ban some pollutants altogether, limit others, or tell polluters what technologies to use.
    • It may divide the landscape into zones and specify what kinds of activities can take place in each zone.
    • It may tax certain activities and subsidize others.

This wide array of tools — plus the power to prosecute rulebreakers — seemingly creates in government a formidable counterweight to corporations. Yet history has shown that government isn’t the regulatory tiger it appears to be. It faces fierce corporate resistance whenever it tries to exercise its powers. And time after time, its regulatory agencies have been captured by the industries they were intended to regulate.

The process of regulatory capture has been described by many scholars. Details vary, but the plot is always the same. A new agency is created to regulate an industry that’s harming the public. At first the agency acts boldly, but over time its zeal wanes. Reformers who originally staffed the agency are replaced by people who either worked in the industry earlier, or hope to do so after a stint in government. Industry-packed “advisory committees” multiply, while industry-funded “think tanks” add a veneer of legitimacy to profit-driven proposals. Lobbyists meet constantly with agency staffers. The public, meanwhile, has no clue about what’s going on.

This process has reached extreme proportions in recent years. As I write, the head of public lands in the Interior Department is a former mining industry lobbyist, the head of the air division at the EPA is a former utility lobbyist, the second in command at EPA is an ex-Monsanto lobbyist, and the head of Superfund cleanups at EPA (which makes industry clean up its toxic wastes) formerly advised companies on how to evade Superfund. Although today’s pro-industry bias may be more egregious than usual, the absence of outrage or resistance suggests it’s not far from the norm.

And it’s not just regulatory agencies that have been captured. Congress itself, which oversees the agencies and writes their controlling laws, has been badly infected. According to the Center for Public Integrity, the “influence industry” in Washington now spends $6 billion a year and employs more than thirty-five thousand lobbyists, some two hundred of whom are former Congress members who enjoy easy access to their erstwhile colleagues.

A glimpse at the corporate lobbying game shows just how rewarding it is. MBNA, the nation’s largest credit card bank, spent over $17 million on lobbying between 1999 and 2004. This is pin money compared to the sums it will reap from an industry-drafted bankruptcy overhaul, passed in 2005, which precludes all but the very poor from wiping out their debts and starting anew. (The great majority of Americans who file for bankruptcy are middle-class victims of job loss, huge medical bills, or family breakup.) A New York Times reporter described this scene as the bill was being marked up: “Lawyers and lobbyists jammed Congressional hearing rooms to overflowing. . . . During breaks, there was a common, almost comical pattern. The pinstriped lobbyists ran into the hallway, grabbed tiny cell phones from their pockets or briefcases, and reported back to their clients, almost always with the news they wanted to hear.” ... read the whole chapter

Peter Barnes: Capitalism 3.0 — Chapter 4: The Limits of Privatization (pages 49-63)

It’s tempting to believe that private owners, by pursuing their own self-interest, can preserve shared inheritances. No one likes being told what to do, and words like statism conjure fears of bureaucracy at best and tyranny at worst. By contrast, privatism connotes freedom.

In this chapter, we look at Garrett Hardin’s second alternative for saving the commons: privatism, or privatization. I argue that private corporations, operating in unconstrained markets, can allocate resources efficiently but can’t preserve them. The latter task requires setting aside some supplies for future generations — something neither markets nor corporations, when left to their own devices, will do. The reason lies in the algorithms and starting conditions of our current operating system.

The Algorithms of Capitalism 2.0

If you’ve ever used a computer spreadsheet, you know what an algorithm is. Each cell in the spreadsheet contains a set of instructions: take data from other cells, manipulate the data according to a formula, and display the result. The instructions within each cell are algorithms.

If you think of the economy as a huge spreadsheet, with each cell representing a producer, consumer, or property owner, you can see that the behavior of the whole is driven by the algorithms in the cells. Our current operating system is dominated by three algorithms and one starting condition. The algorithms are:
(1) maximize return to capital,
(2) distribute property income on a per-share basis, and
(3) the price of nature equals zero.
The starting condition is that the top 5 percent of the people own more property shares than the remaining 95 percent.

The first algorithm is what drives corporations. It tells them to sell as much as they can, pay as little as possible for labor, resources, and waste disposal, and make shareholders happy every quarter. It focuses the minds of managers every day. If they work in marketing, they wake up thinking about how to sell more; if there’s no demand for their product, they must create some. If they work in finance, they worry about margins and leverage. If they’re in labor relations, they bargain hard, replace long-term employees with temps, and shift jobs to places where wages are lower. All the while, the CEO feeds sweet numbers to Wall Street.

The second and third algorithms then mesh with the first. It’s the combination of these algorithms that causes the wheels of capitalism to devour nature and widen inequality among humans. At the same time, nothing in the algorithms requires or encourages corporations, either individually or collectively, to preserve anything.

This doesn’t mean people inside corporations don’t think about protecting nature, raising their workers’ pay, or giving something back to society. Often, they do. It does mean their room for actually doing such things is too narrow to make a difference. Nor does it mean that, from time to time, some brave mavericks don’t briefly flout the corporate algorithm. They do that, too. What I’m saying is that, in the great majority of cases, the corporate algorithm and its brethren are obeyed. For all practical purposes, the publicly traded corporation is a slave to its algorithm.


... read the whole chapter






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Wealth and Want
... because democracy alone hasn't yet led to a society in which all can prosper