Wealth and Want
... because democracy alone is not enough to produce widely shared prosperity.
Home Essential Documents Themes All Documents Authors Glossary Links Contact Us



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

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

Environmental Concerns

What about the relevance of Georgist ideas to current concerns with environmental quality and ecological sustainability? Here too there is a strong claim to consider. Interest in Georgism has been reinvigorated in recent years by the need to develop public policies that reflect the nature of land as a finite natural resource. From a ‘green’ perspective, land tax is a useful tool in discouraging the excessive and wasteful use of land. That is, the prospect of paying a high rate of land tax can be expected to discourage people from purchasing more land than they need directly for their own purposes. It accords with the principle that people should be taxed according to their use of scarce environmental assets.

This ‘ecological take’ on Georgism is particularly powerful at a time of intensifying global environmental problems and recognition of the need for remedial policy responses. It requires creative extension of Georgist principles because the limitation of George’s own analysis in this context is its primary focus on land. A range of other natural resources needs to be considered, linking up with the broader concerns of modern environmentalists such as Herman Daly (see, for example, Daly and Cobb, 1990). Hence, land tax should be seen as an adjunct to taxes on the use of other scarce environmental assets, including mineral, forestry and fishing stocks, and also bandwidth for radio and telecommunications, for example (Stilwell, 2002: 316-317). It should also be seen as a corollary to other taxes that discourage environmental damage, including resource rental taxes, carbon taxes and fuel excises.

The case for these environmental taxes need not necessarily rest on Georgist principles, of course, but Georgism can claim to provide a unifying analytical framework. A common feature of ‘environmental taxes’ is that they are all targeted, like land tax, at reducing the scope for profiting from the private appropriation of natural resources, and thereby restricting the profligate use of those resources.

A tension remains, reflecting the Georgist orientation towards taxes rather than more directly regulatory interventions. Whether the use of the price mechanism in this ‘environmental fine tuning’ is sufficient for dealing with pervasive environment threats is a moot point. The nature and severity of environmental stresses is such that more directly proscriptive environmental policies are commonly needed to protect natural resources. The creation and maintenance of national parks, for example, constitutes a necessary direct regulation of land-use: the market, even when modified by taxes, cannot absolutely guarantee the conservation of such crucial assets. In other words, protection of ‘natural capital’ may commonly require regulation as well as taxation. ... read the whole article

Jeff Smith and Kris Nelson: Giving Life to the Property Tax Shift (PTS)

John Muir is right. "Tug on any one thing and find it connected to everything else in the universe." Tug on the property tax and find it connected to urban slums, farmland loss, political favoritism, and unearned equity with disrupted neighborhood tenure. Echoing Thoreau, the more familiar reforms have failed to address this many-headed hydra at its root. To think that the root could be chopped by a mere shift in the property tax base -- from buildings to land -- must seem like the epitome of unfounded faith. Yet the evidence shows that state and local tax activists do have a powerful, if subtle, tool at their disposal. The "stick" spurring efficient use of land is a higher tax rate upon land, up to even the site's full annual value. The "carrot" rewarding efficient use of land is a lower or zero tax rate upon improvements. ...

Good for the economy, the PTS is also good for the eco-system. Were land levied, the owners of the most valuable sites would feel most pressure to develop; their sites tend to be closer to the city center. Hence those owners draw any needed development, infilling cities, sparing suburbs further encroachment. Other highly valued sites are those rich in natural resources. Again, using them more intensely frees up sites of lesser natural endowment. Thus, besides conserving sites, the PTS also conserves resources.

Higher efficiency makes feasible the goal of sustainability. Going sustainable must radically alter five basic strands in an economy:
  • agriculture,
  • home building,
  • resource extraction,
  • energy, and
  • transportation.
The segment of the economy wasting the most resources is probably transportation. Sprawl exacerbates the need for mobility while infilling reduces it. Presently, cars claim 50% of urban surface. Land dues would motivate owners to put their asphalt devoted to cars to higher and better uses, ones that serve humans. A higher human density provides mass transit with more riders so that the system could expand and automobile dependency contract, letting both city and suburb blossom.

Another resource-consumptive segment of the economy is construction. ...

A big problem needs a big solution which in turn needs a matching shift of our prevailing paradigm. Geonomics -- advocating that we share the social value of sites and natural resources and untax earnings -- does just that.  Read the whole article

Bill Batt: How Our Towns Got That Way   (1996 speech)
Because our society is characterized by suburban sprawl and is therefore motor vehicle dependent, community is destroyed. George Kennan expresses this well in the book cited earlier, but it is more empirically documented in a recent article entitled "Bowling Alone", which David Broder of the Washington Post considered the most important academic article of 1995. The author of that piece, Harvard Professor Bob Putnam, shows that our communal relationships are declining, and that an ever smaller proportion of the population is involved in social activities of a cooperative and communal nature. As Tocqueville noted, this used to be the unique strength of American society; we're now losing it. Suburban sprawl and the automobile play a large part in this. And the reason we have these land-use configurations is in good part, to my way of thinking, due to our property tax policies and our subsidies to motor vehicle transportation.

It doesn't take much reflection to realize that the practices which we are following are unsustainable. This is true not only environmentally but also economically and socially. Author James Howard Kunstler recently has described in his book Home from Nowhere how our cities are becoming not only ugly but unlivable. The irony is also that, by having followed the legacy of classical economics, we could easily have provided for all our government services through taxes based on land value.... read the whole article

Bill Batt: The Compatibility of Georgist Economics and Ecological Economics
Not only are human beings co-equal with other living beings of the earth, so also are beings yet born entitled to an existence. The Iroquois Indians of New York State are often quoted to the effect that “In our every deliberation, we should consider the impact of our decisions on the next seven generations.” 101 Several contemporary environmental organizations have adopted the Iroquois “Great Law of Peace” so that it has become the vernacular equivalent of the Brundtland Report’s definition of sustainability. Sustainable economics, or 7th generation planning, also requires Daly’s “steady state” economy, 102 where (as if natural resources constitute “capital”) one lives only on interest and not principle. Daly contrasts two notions of economic practice: growth and development. The former may momentarily increase economic productivity and wealth, but is in the long term a fatal course of policy. It increases quantity but not quality. Development, rather, is what should be aspired to, an increase in quality, efficiency, and fulfillment through minimal uses of energy and material resources. For development, the value-added dimension comes from treading lightly on the earth, from the use of mental capital rather than physical capital.103 Daly in still another article talks about three parameters of sustainability: “allocation, distribution, and scale,” which will lead to an economy which is “efficient, just and sustainable.” 104... read the whole article

Peter Barnes: Capitalism 3.0 — Chapter 6: Trusteeship of Creation (pages 79-100)

By contrast, if pollution rights are assigned to trusts representing pollutees and future generations, and if these trusts then sell these rights to polluters, the trusts rather than the polluters will capture the commons rent. If the trusts split this money between per capita dividends and expenditures on public goods, everyone benefits.

At this moment, based on pollution rights allocated so far, polluting corporations are getting most of the commons rent. But the case for trusts getting the rent in the future is compelling. If this is done, consumers will pay commons rent not to corporations or government, but to themselves as beneficiaries of commons trusts. Each citizen’s dividend will be the same, but his payments will depend on his purchases of pollution-laden products. The more he pollutes, the more rent he’ll pay. High polluters will get back less than they put in, while low polluters will get back more. The microeconomic incentives, in other words, will be perfect. (See figure 6.1.)

What’s equally significant, though less obvious, is that the macroeconomic incentives will be perfect too. That is, it will be in everyone’s interest to reduce the total level of pollution. Remember how rent for scarce things works: the lower the supply, the higher the rent. Now, imagine you’re a trustee of an ecosystem, and leaving aside (for the sake of argument) your responsibility to preserve the asset for future generations, you want to increase dividends. Do you raise the number of pollution permits you sell, or lower it? The correct, if counterintuitive answer is: you lower the number of permits.

This macroeconomic phenomenon — that less pollution yields more income for citizens — is the ultimate knockout punch for commons trusts. It aligns the interests of future generations with, rather than against, those of living citizens. By so doing, it lets us chart a transition to sustainability in which the political pressure is for faster pollution reduction rather than slower.

There’s one further argument for recycling commons rent through trusts. As rent is recycled from overusers of the commons to underusers, income is shifted from rich to poor. That’s because rich households, on average, use the commons more than poor households. They drive SUVs, fly in jets, and have large homes to heat and cool — thus they dump more waste into the biosphere. Studies by Congress and independent economists have shown that only a rent recycling system like the one just described can protect the poor. Absent such a system, the poor will pay commons rent and get nothing back. In other words, they’ll get poorer.

As always, there are a few caveats.

    • First, to the extent commons rent is used for public goods rather than per capita dividends, the income recycling effects are diminished. This is offset, however, by the fact that public goods benefit everyone.
    • Second, the less-pollution-equals-more-dividends formula doesn’t work indefinitely. At some point after less polluting technologies have been widely deployed, the demand for pollution absorption will become elastic. Then, lowering the number of pollution permits sold will decrease income to citizens. But that time is far in the future, and when it comes, the world will be a healthier place. And even then, trustees won’t be able to increase the number of pollution permits without violating their responsibility to future generations. ... read the whole chapter


To share this page with a friend: right click, choose "send," and add your comments.

Red links have not been visited; .
Green links are pages you've seen

Essential Documents pertinent to this theme:

Top of page
Essential Documents
to email this page to a friend: right click, choose "send"
Wealth and Want
... because democracy alone hasn't yet led to a society in which all can prosper