Wealth and Want
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Concentration of Wealth

Our primary social adjustment is a denial of justice. In allowing one man to own the land on which and from which other men must live, we have made them his bondsmen in a degree which increases as material progress goes on. This is the subtile alchemy that in ways they do not realize is extracting from the masses in every civilized country the fruits of their weary toil; that is instituting a harder and more hopeless slavery in place of that which has been destroyed; that is bringing political despotism out of political freedom, and must soon transmute democratic institutions into anarchy. — Henry George, Progress & Poverty (below)

Adams quote -- our generation ... next generation ... that our grandchildren ... - was that meant for everyone, or only the aristocracy, the landed gentry?

Henry George: The Increasing Importance of Social Questions (Chapter 1 of Social Problems, 1883)

[16] These dangers, which menace not one country alone, but modern civilization itself, do but show that a higher civilization is struggling to be born — that the needs and the aspirations of men have outgrown conditions and institutions that before sufficed.

[17] A civilization which tends to concentrate wealth and power in the hands of a fortunate few, and to make of others mere human machines, must inevitably evolve anarchy and bring destruction. But a civilization is possible in which the poorest could have all the comforts and conveniences now enjoyed by the rich; in which prisons and almshouses would be needless, and charitable societies unthought of. Such a civilization waits only for the social intelligence that will adapt means to ends. Powers that might give plenty to all are already in our hands. Though there is poverty and want, there is, yet, seeming embarrassment from the very excess of wealth-producing forces. "Give us but a market," say manufacturers, "and we will supply goods without end!" "Give us but work!" cry idle men.

[18] The evils that begin to appear spring from the fact that the application of intelligence to social affairs has not kept pace with the application of intelligence to individual needs and material ends. Natural science strides forward, but political science lags. With all our progress in the arts which produce wealth, we have made no progress in securing its equitable distribution. Knowledge has vastly increased; industry and commerce have been revolutionized; but whether free trade or protection is best for a nation we are not yet agreed. We have brought machinery to a pitch of perfection that, fifty years ago, could not have been imagined; but, in the presence of political corruption, we seem as helpless as idiots. The East River bridge is a crowning triumph of mechanical skill; but to get it built a leading citizen of Brooklyn had to carry to New York sixty thousand dollars in a carpet bag to bribe New York aldermen. The human soul that thought out the great bridge is prisoned in a crazed and broken body that lies bedfast, and could watch it grow only by peering through a telescope. Nevertheless, the weight of the immense mass is estimated and adjusted for every inch. But the skill of the engineer could not prevent condemned wire being smuggled into the cable.

[19] The progress of civilization requires that more and more intelligence be devoted to social affairs, and this not the intelligence of the few, but that of the many. We cannot safely leave politics to politicians, or political economy to college professors. The people themselves must think, because the people alone can act.

[20] In a "journal of civilization" a professed teacher declares the saving word for society to be that each shall mind his own business. This is the gospel of selfishness, soothing as soft flutes to those who, having fared well themselves, think everybody should be satisfied. But the salvation of society, the hope for the free, full development of humanity, is in the gospel of brotherhood — the gospel of Christ. Social progress makes the well-being of all more and more the business of each; it binds all closer and closer together in bonds from which none can escape. He who observes the law and the proprieties, and cares for his family, yet takes no interest in the general weal, and gives no thought to those who are trodden under foot, save now and then to bestow aims, is not a true Christian. Nor is he a good citizen. The duty of the citizen is more and harder than this.

[21] The intelligence required for the solving of social problems is not a thing of the mere intellect. It must be animated with the religious sentiment and warm with sympathy for human suffering. It must stretch out beyond self-interest, whether it be the self-interest of the few or of the many. It must seek justice. For at the bottom of every social problem we will find a social wrong. ... read the entire essay

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

[06] Liberty is natural. Primitive perceptions are of the equal rights of the citizen, and political organization always starts from this base. It is as social development goes on that we find power concentrating, in institutions based upon the equality of rights passing into institutions which make the many the slaves of the few. How this is we may see. In all institutions which involve the lodgment of governing power there is, with social growth, a tendency to the exaltation of their function and the centralization of their power, and in the stronger of these institutions a tendency to the absorption of the powers of the rest. Thus the tendency of social growth is to make government the business of a special class. And as numbers increase and the power and importance of each become less and less as compared with that of all, so, for this reason, does government tend to pass beyond the scrutiny and control of the masses. The leader of a handful of warriors, or head man of a little village, can command or govern only by common consent, and anyone aggrieved can readily appeal to his fellows. But when a tribe becomes a nation and the village expands to a populous country, the powers of the chieftain, without formal addition, become practically much greater. For with increase of numbers scrutiny of his acts becomes more difficult, it is harder and harder successfully to appeal from them, and the aggregate power which he directs becomes irresistible as against individuals. And gradually, as power thus concentrates, primitive ideas are lost, and the habit of thought grows up which regards the masses as born but for the service of their rulers.

[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.

... read the entire essay

Henry George: The Common Sense of Taxation (1881 article)

To consider the nature of property of this kind is again to see a clear distinction. That distinction is not, as the lawyers have it, between movables and immovables, between personal property and real estate. The true distinction is between property which is, and property which is not, the result of human labor; or, to use the terms of political economy, between land and wealth. For, in any precise use of the term, land is not wealth, any more than labor is wealth. Land and labor are the factors of production. Wealth is such result of their union as retains the capacity of ministering to human desire. A lot and the house which stands upon it are alike property, alike have a tangible value, and are alike classed as real estate. But there are between them the most essential differences. The one is the free gift of Nature, the other the result of human exertion; the one exists from generation to generation, while men come and go; the other is constantly tending to decay, and can only be preserved by continual exertion. To the one, the right of exclusive possession, which makes it individual property, can, like the right of property in slaves, be traced to nothing but municipal law; to the other, the right of exclusive property springs clearly from those natural relations which are among the primary perceptions of the human mind. Nor are these mere abstract distinctions. They are distinctions of the first importance in determining what should and what should not be taxed.

For, keeping in mind the fact that all wealth is the result of human exertion, it is clearly seen that, having in view the promotion of the general prosperity, it is the height of absurdity to tax wealth for purposes of revenue while there remains, unexhausted by taxation, any value attaching to land. We may tax land values as much as we please, without in the slightest degree lessening the amount of land, or the capabilities of land, or the inducement to use land. But we cannot tax wealth without lessening the inducement to the production of wealth, and decreasing the amount of wealth. We might take the whole value of land in taxation, so as to make the ownership of land worth nothing, and the land would still remain, and be as useful as before. The effect would be to throw land open to users free of price, and thus to increase its capabilities, which are brought out by increased population. But impose anything like such taxation upon wealth, and the inducement to the production of wealth would be gone. Movable wealth would be hidden or carried off, immovable wealth would be suffered to go to decay, and where was prosperity would soon be the silence of desolation.

And the reason of this difference is clear. The possession of wealth is the inducement to the exertion necessary to the production and maintenance of wealth. Men do not work for the pleasure of working, but to get the things their work will give them. And to tax the things that are produced by exertion is to lessen the inducement to exertion. But over and above the benefit to the possessor, which is the stimulating motive to the production of wealth, there is a benefit to the community, for no matter how selfish he may be, it is utterly impossible for any one to entirely keep to himself the benefit of any desirable thing he may possess. These diffused benefits when localized give value to land, and this may be taxed without in any wise diminishing the incentive to production. ...

So with railroads everywhere. And so not alone with railroads, but with all industrial enterprises. So long as we consider that community most prosperous which increases most rapidly in wealth, so long is it the height of absurdity for us to tax wealth in any of its beneficial forms. We should tax what we want to repress, not what we want to encourage. We should tax that which results from the general prosperity, not that which conduces to it. It is the increase of population, the extension of cultivation, the manufacture of goods, the building of houses and ships and railroads, the accumulation of capital, and the growth of commerce that add to the value of land — not the increase in the value of land that induces the increase of population and increase of wealth. It is not that the land of Manhattan Island is now worth hundreds of millions where, in the time of the early Dutch settlers, it was only worth dollars, that there are on it now so many more people, and so much more wealth. It is because of the increase of population and the increase of wealth that the value of the land has so much increased. Increase of land values tends of itself to repel population and prevent improvement. And thus the taxation of land values, unlike taxation of other property, does not tend to prevent the increase of wealth, but rather to stimulate it. It is the taking of the golden egg, not the choking of the goose that lays it.

Every consideration of policy and ethics squares with this conclusion. The tax upon land values is the most economically perfect of all taxes. It does not raise prices; it maybe collected at least cost, and with the utmost ease and certainty; it leaves in full strength all the springs of production; and, above all, it consorts with the truest equality and the highest justice. For, to take for the common purposes of the community that value which results from the growth of the community, and to free industry and enterprise and thrift from burden and restraint, is to leave to each that which he fairly earns, and to assert the first and most comprehensive of equal rights — the equal right of all to the land on which, and from which, all must live.

Thus it is that the scheme of taxation which conduces to the greatest production is also that which conduces to the fairest distribution, and that in the proper adjustment of taxation lies not merely the possibility of enormously increasing the general wealth, but the solution of these pressing social and political problems which spring from unnatural inequality in the distribution of wealth.

"There is," says M. de Laveleye, in concluding that work in which he shows that the first perceptions of mankind have everywhere recognized a most vital distinction between property in land and property which results from labor, — "there is in human affairs one system which is the best; it is not that system which always exists, otherwise why should we desire to change it; but it is that system which should exist for the greatest good of humanity. God knows it, and wills it; man's duty it is to discover and establish it." ... read the whole article

Louis Post: Outlines of Louis F. Post's Lectures, with Illustrative Notes and Charts (1894)

d. Effect of Confiscating Rent to Private Use.

By giving Rent to individuals society ignores this most just law, 99 thereby creating social disorder and inviting social disease. Upon society alone, therefore, and not upon divine Providence which has provided bountifully, nor upon the disinherited poor, rests the responsibility for poverty and fear of poverty.

99. "Whatever dispute arouses the passions of men, the conflict is sure to rage, not so much as to the question 'Is it wise?' as to the question 'Is it right?'

"This tendency of popular discussions to take an ethical form has a cause. It springs from a law of the human mind; it rests upon a vague and instinctive recognition of what is probably the deepest truth we can grasp. That alone is wise which is just; that alone is enduring which is right. In the narrow scale of individual actions and individual life this truth may be often obscured, but in the wider field of national life it everywhere stands out.

"I bow to this arbitrament, and accept this test." — Progress and Poverty, book vii, ch. i.

The reader who has been deceived into believing that Mr. George's proposition is in any respect unjust, will find profit in a perusal of the entire chapter from which the foregoing extract is taken.

Let us try to trace the connection by means of a chart, beginning with the white spaces on page 68. As before, the first-comers take possession of the best land. But instead of leaving for others what they do not themselves need for use, as in the previous illustrations, they appropriate the whole space, using only part, but claiming ownership of the rest. We may distinguish the used part with red color, and that which is appropriated without use with blue. Thus: [chart]

But what motive is there for appropriating more of the space than is used? Simply that the appropriators may secure the pecuniary benefit of future social growth. What will enable them to secure that? Our system of confiscating Rent from the community that earns it, and giving it to land-owners who, as such, earn nothing.100

100. It is reported from Iowa that a few years ago a workman in that State saw a meteorite fall, and. securing possession of it after much digging, he was offered $105 by a college for his "find." But the owner of the land on which the meteorite fell claimed the money, and the two went to law about it. After an appeal to the highest court of the State, it was finally decided that neither by right of discovery, nor by right of labor, could the workman have the money, because the title to the meteorite was in the man who owned the land upon which it fell.

Observe the effect now upon Rent and Wages. When other men come, instead of finding half of the best land still common and free, as in the corresponding chart on page 68, they find all of it owned, and are obliged either to go upon poorer land or to buy or rent from owners of the best. How much will they pay for the best? Not more than 1, if they want it for use and not to hold for a higher price in the future, for that represents the full difference between its productiveness and the productiveness of the next best. But if the first-comers, reasoning that the next best land will soon be scarce and theirs will then rise in value, refuse to sell or to rent at that valuation, the newcomers must resort to land of the second grade, though the best be as yet only partly used. Consequently land of the first grade commands Rent before it otherwise would.

As the sellers' price, under these circumstances, is arbitrary it cannot be stated in the chart; but the buyers' price is limited by the superiority of the best land over that which can be had for nothing, and the chart may be made to show it: [chart]

And now, owing to the success of the appropriators of the best land in securing more than their fellows for the same expenditure of labor force, a rush is made for unappropriated land. It is not to use it that it is wanted, but to enable its appropriators to put Rent into their own pockets as soon as growing demand for land makes it valuable.101 We may, for illustration, suppose that all the remainder of the second space and the whole of the third are thus appropriated, and note the effect: [chart]

At this point Rent does not increase nor Wages fall, because there is no increased demand for land for use. The holding of inferior land for higher prices, when demand for use is at a standstill, is like owning lots in the moon — entertaining, perhaps, but not profitable. But let more land be needed for use, and matters promptly assume a different appearance. The new labor must either go to the space that yields but 1, or buy or rent from owners of better grades, or hire out. The effect would be the same in any case. Nobody for the given expenditure of labor force would get more than 1; the surplus of products would go to landowners as Rent, either directly in rent payments, or indirectly through lower Wages. Thus: [chart]

101. The text speaks of Rent only as a periodical or continuous payment — what would be called "ground rent." But actual or potential Rent may always be, and frequently is, capitalized for the purpose of selling the right to enjoy it, and it is to selling value that we usually refer when dealing in land.

Land which has the power of yielding Rent to its owner will have a selling value, whether it be used or not, and whether Rent is actually derived from it or not. This selling value will be the capitalization of its present or prospective power of producing Rent. In fact, much the larger proportion of laud that has a selling value is wholly or partly unused, producing no Rent at all, or less than it would if fully used. This condition is expressed in the chart by the blue color.

"The capitalized value of land is the actuarial 'discounted' value of all the net incomes which it is likely to afford, allowance being made on the one hand for all incidental expenses, including those of collecting the rents, and on the other for its mineral wealth, its capabilities of development for any kind of business, and its advantages, material, social, and aesthetic, for the purposes of residence." — Marshall's Prin., book vi, ch. ix, sec. 9.

"The value of land is commonly expressed as a certain number of times the current money rental, or in other words, a certain 'number of years' purchase' of that rental; and other things being equal, it will be the higher the more important these direct gratifications are, as well as the greater the chance that they and the money income afforded by the land will rise." — Id., note.

"Value . . . means not utility, not any quality inhering in the thing itself, but a quality which gives to the possession of a thing the power of obtaining other things, in return for it or for its use. . . Value in this sense — the usual sense — is purely relative. It exists from and is measured by the power of obtaining things for things by exchanging them. . . Utility is necessary to value, for nothing can be valuable unless it has the quality of gratifying some physical or mental desire of man, though it be but a fancy or whim. But utility of itself does not give value. . . If we ask ourselves the reason of . . . variations in . . . value . . . we see that things having some form of utility or desirability, are valuable or not valuable, as they are hard or easy to get. And if we ask further, we may see that with most of the things that have value this difficulty or ease of getting them, which determines value, depends on the amount of labor which must be expended in producing them ; i.e., bringing them into the place, form and condition in which they are desired. . . Value is simply an expression of the labor required for the production of such a thing. But there are some things as to which this is not so clear. Land is not produced by labor, yet land, irrespective of any improvements that labor has made on it, often has value. . . Yet a little examination will show that such facts are but exemplifications of the general principle, just as the rise of a balloon and the fall of a stone both exemplify the universal law of gravitation. . . The value of everything produced by labor, from a pound of chalk or a paper of pins to the elaborate structure and appurtenances of a first-class ocean steamer, is resolvable on analysis into an equivalent of the labor required to produce such a thing in form and place; while the value of things not produced by labor, but nevertheless susceptible of ownership, is in the same way resolvable into an equivalent of the labor which the ownership of such a thing enables the owner to obtain or save." — Perplexed Philosopher, ch. v.

The figure 1 in parenthesis, as an item of Rent, indicates potential Rent. Labor would give that much for the privilege of using the space, but the owners hold out for better terms; therefore neither Rent nor Wages is actually produced, though but for this both might be.

In this chart, notwithstanding that but little space is used, indicated with red, Wages are reduced to the same low point by the mere appropriation of space, indicated with blue, that they would reach if all the space above the poorest were fully used. It thereby appears that under a system which confiscates Rent to private uses, the demand for land for speculative purposes becomes so great that Wages fall to a minimum long before they would if land were appropriated only for use.

In illustrating the effect of confiscating Rent to private use we have as yet ignored the element of social growth. Let us now assume as before (page 73), that social growth increases the productive power of the given expenditure of labor force to 100 when applied to the best land, 50 when applied to the next best, 10 to the next, 3 to the next, and 1 to the poorest. Labor would not be benefited now, as it appeared to be when on page 73 we illustrated the appropriation of land for use only, although much less land is actually used. The prizes which expectation of future social growth dangles before men as the rewards of owning land, would raise demand so as to make it more than ever difficult to get land. All of the fourth grade would be taken up in expectation of future demand; and "surplus labor" would be crowded out to the open space that originally yielded nothing, but which in consequence of increased labor power now yields as much as the poorest closed space originally yielded, namely, 1 to the given expenditure of labor force.102 Wages would then be reduced to the present productiveness of the open space. Thus: [chart]

102. The paradise to which the youth of our country have so long been directed in the advice, "Go West, young man, go West," is truthfully described in "Progress and Poverty," book iv, ch. iv, as follows :

"The man who sets out from the eastern seaboard in search of the margin of cultivation, where he may obtain land without paying rent, must, like the man who swam the river to get a drink, pass for long distances through half-titled farms, and traverse vast areas of virgin soil, before he reaches the point where land can be had free of rent — i.e., by homestead entry or preemption."

If we assume that 1 for the given expenditure of labor force is the least that labor can take while exerting the same force, the downward movement of Wages will be here held in equilibrium. They cannot fall below 1; but neither can they rise above it, no matter how much productive power may increase, so long as it pays to hold land for higher values. Some laborers would continually be pushed back to land which increased productive power would have brought up in productiveness from 0 to 1, and by perpetual competition for work would so regulate the labor market that the given expenditure of labor force, however much it produced, could nowhere secure more than 1 in Wages.103 And this tendency would persist until some labor was forced upon land which, despite increase in productive power, would not yield the accustomed living without increase of labor force. Competition for work would then compel all laborers to increase their expenditure of labor force, and to do it over and over again as progress went on and lower and lower grades of land were monopolized, until human endurance could go no further.104 Either that, or they would be obliged to adapt themselves to a lower scale of living.105

103. Henry Fawcett, in his work on "Political Economy," book ii, ch. iii, observes with reference to improvements in agricultural implements which diminish the expense of cultivation, that they do not increase the profits of the farmer or the wages of his laborers, but that "the landlord will receive in addition to the rent already paid to him, all that is saved in the expense of cultivation." This is true not alone of improvements in agriculture, but also of improvements in all other branches of industry.

104. "The cause which limits speculation in commodities, the tendency of increasing price to draw forth additional supplies, cannot limit the speculative advance in land values, as land is a fixed quantity, which human agency can neither increase nor diminish; but there is nevertheless a limit to the price of land, in the minimum required by labor and capital as the condition of engaging in production. If it were possible to continuously reduce wages until zero were reached, it would be possible to continuously increase rent until it swallowed up the whole produce. But as wages cannot be permanently reduced below the point at which laborers will consent to work and reproduce, nor interest below the point at which capital will be devoted to production, there is a limit which restrains the speculative advance of rent. Hence, speculation cannot have the same scope to advance rent in countries where wages and interest are already near the minimum, as in countries where they are considerably above it. Yet that there is in all progressive countries a constant tendency in the speculative advance of rent to overpass the limit where production would cease, is, I think, shown by recurring seasons of industrial paralysis." — Progress and Poverty, book iv, ch. iv.

105. As Puck once put it, "the man who makes two blades of grass to grow where but one grew before, must not be surprised when ordered to 'keep off the grass.' "

They in fact do both, and the incidental disturbances of general readjustment are what we call "hard times." 106 These culminate in forcing unused land into the market, thereby reducing Rent and reviving industry. Thus increase of labor force, a lowering of the scale of living, and depression of Rent, co-operate to bring on what we call "good times." But no sooner do "good times" return than renewed demands for land set in, Rent rises again, Wages fall again, and "hard times" duly reappear. The end of every period of "hard times" finds Rent higher and Wages lower than at the end of the previous period.107

106. "That a speculative advance in rent or land values invariably precedes each of these seasons of industrial depression is everywhere clear. That they bear to each other the relation of cause and effect, is obvious to whoever considers the necessary relation between land and labor." — Progress and Poverty, book v, ch. i.

107. What are called "good times" reach a point at which an upward land market sets in. From that point there is a downward tendency of wages (or a rise in the cost of living, which is the same thing) in all departments of labor and with all grades of laborers. This tendency continues until the fictitious values of land give way. So long as the tendency is felt only by that class which is hired for wages, it is poverty merely; when the same tendency is felt by the class of labor that is distinguished as "the business interests of the country," it is "hard times." And "hard times" are periodical because land values, by falling, allow "good times" to set it, and by rising with "good times" bring "hard times" on again. The effect of "hard times" may be overcome, without much, if any, fall in land values, by sufficient increase in productive power to overtake the fictitious value of land.

The dishonest and disorderly system under which society confiscates Rent from common to individual uses, produces this result. That maladjustment is the fundamental cause of poverty. And progress, so long as the maladjustment continues, instead of tending to remove poverty as naturally it should, actually generates and intensifies it. Poverty persists with increase of productive power because land values, when Rent is privately appropriated, tend to even greater increase. There can be but one outcome if this continues: for individuals suffering and degradation, and for society destruction. ...

Q41. Why does land tend to concentrate in the hands of the few?
A. Because material progress tends to increase its value, and under existing conditions valuable things tend to concentrate in the hands of the few. ... read the book

John Dewey: Steps to Economic Recovery

I do not claim that George's remedy is a panacea that will cure by itself all our ailments. But I do claim that we cannot get rid of our basic troubles without it. I would make exactly the same concession and same claim that Henry George himself made:

"I do not say that in the recognition of the equal and unalienable right of each human being to the natural elements from which life must be supported and wants satisfied, lies the solution of all social problems. I fully recognize that even after we do this, much will remain to do. We might recognize the equal right to land, and yet tyranny and spoilation be continued. But whatever else we do, as along as we fail to recognize the equal right to the elements of nature, nothing will avail to remedy that unnatural inequality in the distribution of wealth which is fraught with so much evil and danger. Reform as we may, until we make this fundamental reform, our material progress can but tend to differentiate our people into the monstrously rich and frightfully poor. Whatever be the increase of wealth, the masses will still be ground toward the point of bare subsistence — we must still have our great criminal classes, our paupers and our tramps, men and women driven to degradation and desperation from inability to make an honest living." ... read the whole speech

H.G. Brown: Significant Paragraphs from Henry George's Progress & Poverty, Chapter 4: Land Speculation Causes Reduced Wages

Whether we formulate it as an extension of the margin of production, or as a carrying of the rent line beyond the margin of production, the influence of speculation in land in increasing rent is a great fact which cannot be ignored in any complete theory of the distribution of wealth in progressive countries. It is the force, evolved by material progress, which tends constantly to increase rent in a greater ratio than progress increases production, and thus constantly tends, as material progress goes on and productive power increases, to reduce wages, not merely relatively, but absolutely. ... read the whole chapter

In all our long investigation we have been advancing to this simple truth: That as land is necessary to the exertion of labor in the production of wealth, to command the land which is necessary to labor, is to command all the fruits of labor save enough to enable labor to exist. ...

... For land is the habitation of man, the storehouse upon which he must draw for all his needs, the material to which his labor must be applied for the supply of all his desires; for even the products of the sea cannot be taken, the light of the sun enjoyed, or any of the forces of nature utilized, without the use of land or its products. On the land we are born, from it we live, to it we return again — children of the soil as truly as is the blade of grass or the flower of the field. Take away from man all that belongs to land, and he is but a disembodied spirit. Material progress cannot rid us of our dependence upon land; it can but add to the power of producing wealth from land; and hence, when land is monopolized, it might go on to infinity without increasing wages or improving the condition of those who have but their labor. It can but add to the value of land and the power which its possession gives. Everywhere, in all times, among all peoples, the possession of land is the base of aristocracy, the foundation of great fortunes, the source of power. ... read the whole chapter

But great as they thus appear, the advantages of a transference of all public burdens to a tax upon the value of land cannot be fully appreciated until we consider the effect upon the distribution of wealth.

Tracing out the cause of the unequal distribution of wealth which appears in all civilized countries, with a constant tendency to greater and greater inequality as material progress goes on, we have found it in the fact that, as civilization advances, the ownership of land, now in private hands, gives a greater and greater power of appropriating the wealth produced by labor and capital.

Thus, to relieve labor and capital from all taxation, direct and indirect, and to throw the burden upon rent, would be, as far as it went, to counteract this tendency to inequality, and, if it went so far as to take in taxation the whole of rent, the cause of inequality would be totally destroyed. Rent, instead of causing inequality, as now, would then promote equality. Labor and capital would then receive the whole produce, minus that portion taken by the state in the taxation of land values, which, being applied to public purposes, would be equally distributed in public benefits.

That is to say, the wealth produced in every community would be divided into two portions.

  • One part would be distributed in wages and interest between individual producers, according to the part each had taken in the work of production;

  • the other part would go to the community as a whole, to be distributed in public benefits to all its members.

In this all would share equally — the weak with the strong, young children and decrepit old men, the maimed, the halt, and the blind, as well as the vigorous. And justly so — for while one part represents the result of individual effort in production, the other represents the increased power with which the community as a whole aids the individual.

Thus, as material progress tends to increase rent, were rent taken by the community for common purposes the very cause which now tends to produce inequality as material progress goes on would then tend to produce greater and greater equality. ... read the whole chapter

When it is first proposed to put all taxes upon the value of land, all landholders are likely to take the alarm, and there will not be wanting appeals to the fears of small farm and homestead owners, who will be told that this is a proposition to rob them of their hard-earned property. But a moment's reflection will show that this proposition should commend itself to all whose interests as landholders do not largely exceed their interests as laborers or capitalists, or both. And further consideration will show that though the large landholders may lose relatively, yet even in their case there will be an absolute gain. For, the increase in production will be so great that labor and capital will gain very much more than will be lost to private landownership, while in these gains, and in the greater ones involved in a more healthy social condition, the whole community, including the landowners themselves, will share.
  • It is manifest, of course, that the change I propose will greatly benefit all those who live by wages, whether of hand or of head -- laborers, operatives, mechanics, clerks, professional men of all sorts.
  • It is manifest, also, that it will benefit all those who live partly by wages and partly by the earnings of their capital -- storekeepers, merchants, manufacturers, employing or undertaking producers and exchangers of all sorts from the peddler or drayman to the railroad or steamship owner -- and
  • it is likewise manifest that it will increase the incomes of those whose incomes are drawn from the earnings of capital.
Take, now, the case of the homestead owner -- the mechanic, storekeeper, or professional man who has secured himself a house and lot, where he lives, and which he contemplates with satisfaction as a place from which his family cannot be ejected in case of his death. He will not be injured; on the contrary, he will be the gainer. ...
... In short, the working farmer is both a laborer and a capitalist, as well as a landowner, and it is by his labor and capital that his living is made. His loss would be nominal; his gain would be real and great. In varying degrees is this true of all landholders. Many landholders are laborers of one sort or another. This measure would make no one poorer but such as could be made a great deal poorer without being really hurt. It would cut down great fortunes, but it would impoverish no one.
Wealth would not only be enormously increased; it would be equally distributed. I do not mean that each individual would get the same amount of wealth. That would not be equal distribution, so long as different individuals have different powers and different desires. But I mean that wealth would be distributed in accordance with the degree in which the industry, skill, knowledge, or prudence of each contributed to the common stock. The great cause which concentrates wealth in the hands of those who do not produce, and takes it from the hands of those who do, would be gone. The inequalities that continued to exist would be those of nature, not the artificial inequalities produced by the denial of natural law. The nonproducer would no longer roll in luxury while the producer got but the barest necessities of animal existence. ... read the whole chapter
To remove want and the fear of want, to give to all classes leisure, and comfort, and independence, the decencies and refinements of life, the opportunities of mental and moral development, would be like turning water into a desert. The sterile waste would clothe itself with verdure, and the barren places where life seemed banned would ere long be dappled with the shade of trees and musical with the song of birds. Talents now hidden, virtues unsuspected, would come forth to make human life richer, fuller, happier, nobler. For
  • in these round men who are stuck into three-cornered holes, and three-cornered men who are jammed into round holes;
  • in these men who are wasting their energies in the scramble to be rich;
  • in these who in factories are turned into machines, or are chained by necessity to bench or plow;
  • in these children who are growing up in squalor, and vice, and ignorance, are powers of the highest order, talents the most splendid.
They need but the opportunity to bring them forth.
Consider the possibilities of a state of society that gave that opportunity to all. Let imagination fill out the picture; its colors grow too bright for words to paint.
  • Consider the moral elevation, the intellectual activity, the social life.
  • Consider how by a thousand actions and interactions the members of every community are linked together, and how in the present condition of things even the fortunate few who stand upon the apex of the social pyramid must suffer, though they know it not, from the want, ignorance, and degradation that are underneath.
  • Consider these things and then say whether the change I propose would not be for the benefit of every one — even the greatest landholder? ... read the whole chapter

The truth to which we were led in the politico-economic branch of our inquiry is as clearly apparent in the rise and fall of nations and the growth and decay of civilizations, and it accords with those deep-seated recognitions of relation and sequence that we denominate moral perceptions. Thus are given to our conclusions the greatest certitude and highest sanction.

This truth involves both a menace and a promise. It shows that the evils arising from the unjust and unequal distribution of wealth, which are becoming more and more apparent as modern civilization goes on, are not incidents of progress, but tendencies which must bring progress to a halt; that they will not cure themselves, but, on the contrary, must, unless their cause is removed, grow greater and greater, until they sweep us back into barbarism by the road every previous civilization has trod. But it also shows that these evils are not imposed by natural laws; that they spring solely from social maladjustments which ignore natural laws, and that in removing their cause we shall be giving an enormous impetus to progress.

The poverty which in the midst of abundance pinches and embrutes men, and all the manifold evils which flow from it, spring from a denial of justice. In permitting the monopolization of the opportunities which nature freely offers to all, we have ignored the fundamental law of justice — for, so far as we can see, when we view things upon a large scale, justice seems to be the supreme law of the universe. But by sweeping away this injustice and asserting the rights of all men to natural opportunities, we shall conform ourselves to the law —

  • we shall remove the great cause of unnatural inequality in the distribution of wealth and power;
  • we shall abolish poverty;
  • tame the ruthless passions of greed;
  • dry up the springs of vice and misery;
  • light in dark places the lamp of knowledge;
  • give new vigor to invention and a fresh impulse to discovery;
  • substitute political strength for political weakness; and
  • make tyranny and anarchy impossible.

The reform I have proposed accords with all that is politically, socially, or morally desirable. It has the qualities of a true reform, for it will make all other reforms easier. What is it but the carrying out in letter and spirit of the truth enunciated in the Declaration of Independence — the "self-evident" truth that is the heart and soul of the Declaration —"That all men are created equal; that they are endowed by their Creator with certain inalienable rights; that among these are life, liberty, and the pursuit of happiness!"

These rights are denied when the equal right to land — on which and by which men alone can live — is denied. Equality of political rights will not compensate for the denial of the equal right to the bounty of nature. Political liberty, when the equal right to land is denied, becomes, as population increases and invention goes on, merely the liberty to compete for employment at starvation wages. This is the truth that we have ignored. And so

  • there come beggars in our streets and tramps on our roads; and
  • poverty enslaves men who we boast are political sovereigns; and
  • want breeds ignorance that our schools cannot enlighten; and
  • citizens vote as their masters dictate; and
  • the demagogue usurps the part of the statesman; and
  • gold weighs in the scales of justice; and
  • in high places sit those who do not pay to civic virtue even the compliment of hypocrisy; and
  • the pillars of the republic that we thought so strong already bend under an increasing strain.

We honor Liberty in name and in form. We set up her statues and sound her praises. But we have not fully trusted her. And with our growth so grow her demands. She will have no half service!

Liberty! it is a word to conjure with, not to vex the ear in empty boastings. For Liberty means Justice, and Justice is the natural law — the law of health and symmetry and strength, of fraternity and co-operation.

They who look upon Liberty as having accomplished her mission when she has abolished hereditary privileges and given men the ballot, who think of her as having no further relations to the everyday affairs of life, have not seen her real grandeur — to them the poets who have sung of her must seem rhapsodists, and her martyrs fools! As the sun is the lord of life, as well as of light; as his beams not merely pierce the clouds, but support all growth, supply all motion, and call forth from what would otherwise be a cold and inert mass all the infinite diversities of being and beauty, so is liberty to mankind. It is not for an abstraction that men have toiled and died; that in every age the witnesses of Liberty have stood forth, and the martyrs of Liberty have suffered.

We speak of Liberty as one thing, and of virtue, wealth, knowledge, invention, national strength, and national independence as other things. But, of all these, Liberty is the source, the mother, the necessary condition. ...

Only in broken gleams and partial light has the sun of Liberty yet beamed among men, but all progress hath she called forth. ...

Shall we not trust her?

In our time, as in times before, creep on the insidious forces that, producing inequality, destroy Liberty. On the horizon the clouds begin to lower. Liberty calls to us again. We must follow her further; we must trust her fully. Either we must wholly accept her or she will not stay. It is not enough that men should vote; it is not enough that they should be theoretically equal before the law. They must have liberty to avail themselves of the opportunities and means of life; they must stand on equal terms with reference to the bounty of nature. Either this, or Liberty withdraws her light! Either this, or darkness comes on, and the very forces that progress has evolved turn to powers that work destruction. This is the universal law. This is the lesson of the centuries. Unless its foundations be laid in justice the social structure cannot stand.

Our primary social adjustment is a denial of justice. In allowing one man to own the land on which and from which other men must live, we have made them his bondsmen in a degree which increases as material progress goes on. This is the subtile alchemy that in ways they do not realize is extracting from the masses in every civilized country the fruits of their weary toil; that is instituting a harder and more hopeless slavery in place of that which has been destroyed; that is bringing political despotism out of political freedom, and must soon transmute democratic institutions into anarchy.

It is this that turns the blessings of material progress into a curse. It is this that crowds human beings into noisome cellars and squalid tenement houses; that fills prisons and brothels; that goads men with want and consumes them with greed; that robs women of the grace and beauty of perfect womanhood; that takes from little children the joy and innocence of life's morning.

Civilization so based cannot continue. The eternal laws of the universe forbid it. Ruins of dead empires testify, and the witness that is in every soul answers, that it cannot be. It is something grander than Benevolence, something more august than Charity — it is Justice herself that demands of us to right this wrong. Justice that will not be denied; that cannot be put off — Justice that with the scales carries the sword. Shall we ward the stroke with liturgies and prayers? Shall we avert the decrees of immutable law by raising churches when hungry infants moan and weary mothers weep?

Though it may take the language of prayer, it is blasphemy that attributes to the inscrutable decrees of Providence the suffering and brutishness that come of poverty; that turns with folded hands to the All-Father and lays on Him the responsibility for the want and crime of our great cities. We degrade the Everlasting. We slander the Just One. A merciful man would have better ordered the world; a just man would crush with his foot such an ulcerous ant-hill! It is not the Almighty, but we who are responsible for the vice and misery that fester amid our civilization. The Creator showers upon us his gifts — more than enough for all. But like swine scrambling for food, we tread them in the mire — tread them in the mire, while we tear and rend each other!

In the very centers of our civilization today are want and suffering enough to make sick at heart whoever does not close his eyes and steel his nerves. Dare we turn to the Creator and ask Him to relieve it? Supposing the prayer were heard, and at the behest with which the universe sprang into being there should glow in the sun a greater power; new virtue fill the air; fresh vigor the soil; that for every blade of grass that now grows two should spring up, and the seed that now increases fiftyfold should increase a hundredfold! Would poverty be abated or want relieved? Manifestly no! Whatever benefit would accrue would be but temporary. The new powers streaming through the material universe could be utilized only through land.

This is not merely a deduction of political economy; it is a fact of experience. We know it because we have seen it. Within our own times, under our very eyes, that Power which is above all, and in all, and through all; that Power of which the whole universe is but the manifestation; that Power which maketh all things, and without which is not anything made that is made, has increased the bounty which men may enjoy, as truly as though the fertility of nature had been increased.

  • Into the mind of one came the thought that harnessed steam for the service of mankind.
  • To the inner ear of another was whispered the secret that compels the lightning to bear a message round the globe.
  • In every direction have the laws of matter been revealed;
  • in every department of industry have arisen arms of iron and fingers of steel, whose effect upon the production of wealth has been precisely the same as an increase in the fertility of nature.

What has been the result? Simply that landowners get all the gain.

Can it be that the gifts of the Creator may be thus misappropriated with impunity? Is it a light thing that labor should be robbed of its earnings while greed rolls in wealth — that the many should want while the few are surfeited? Turn to history, and on every page may be read the lesson that such wrong never goes unpunished; that the Nemesis that follows injustice never falters nor sleeps! Look around today. Can this state of things continue? May we even say, "After us the deluge!" Nay; the pillars of the State are trembling even now, and the very foundations of society begin to quiver with pent-up forces that glow underneath. The struggle that must either revivify, or convulse in ruin, is near at hand, if it be not already begun.

The fiat has gone forth! With steam and electricity, and the new powers born of progress, forces have entered the world that will either compel us to a higher plane or overwhelm us, as nation after nation, as civilization after civilization, have been overwhelmed before. ...

  • We cannot go on permitting men to vote and forcing them to tramp.
  • We cannot go on educating boys and girls in our public schools and then refusing them the right to earn an honest living.
  • We cannot go on prating of the inalienable rights of man and then denying the inalienable right to the bounty of the Creator.

Even now, in old bottles the new wine begins to ferment, and elemental forces gather for the strife!

But if, while there is yet time, we turn to Justice and obey her, if we trust Liberty and follow her, the dangers that now threaten must disappear, the forces that now menace will turn to agencies of elevation. Think of the powers now wasted; of the infinite fields of knowledge yet to be explored; of the possibilities of which the wondrous inventions of this century give us but a hint.

  • With want destroyed;
  • with greed changed to noble passions;
  • with the fraternity that is born of equality taking the place of the jealousy and fear that now array men against each other;
  • with mental power loosed by conditions that give to the humblest comfort and leisure; and
  • who shall measure the heights to which our civilization may soar?

Words fail the thought! It is the Golden Age of which poets have sung and high-raised seers have told in metaphor! It is the glorious vision which has always haunted man with gleams of fitful splendor. It is what he saw whose eyes at Patmos were closed in a trance. It is the culmination of Christianity — the City of God on earth, with its walls of jasper and its gates of pearl! It is the reign of the Prince of Peace! ... read the whole chapter

Henry George: Thy Kingdom Come (1889 speech)

If Adam, when he got out of Eden, had sat down and commenced to pray, he might have prayed till this time without getting anything to eat unless he went to work for it. Yet food is God’s bounty. He does not bring meat and vegetables all prepared. What He gives are the opportunities of producing these things — of bringing them forth by labour. His mandate is — it is written in the Holy Word, it is graven on every fact in nature — that by labour we shall bring forth these things. Nature gives to labour and to nothing else.

What God gives are the natural elements that are indispensable to labour. He gives them, not to one, not to some, not to one generation, but to all. They are His gifts, His bounty to the whole human race. And yet in all our civilised countries what do we see? That a few people have appropriated these bounties, claiming them as theirs alone, while the great majority have no legal right to apply their labour to the reservoirs of Nature and draw from the Creator’s bounty.

Thus it happens that all over the civilised world that class that is called peculiarly ‘the labouring class’ is the poor class, and that people who do no labour, who pride themselves on never having done honest labour, and on being descended from fathers and grandfathers who never did a stroke of honest labour in their lives, revel in a superabundance of the things that labour brings forth.  ... Read the whole speech

Henry George:  The Land Question (1881)

IMAGINE an island girt with ocean; imagine a little world swimming in space. Put on it, in imagination, human beings. Let them divide the land, share and share alike, as individual property. At first, while population is sparse and industrial processes rude and primitive, this will work well enough.

Turn away the eyes of the mind for a moment, let time pass, and look again. Some families will have died out, some have greatly multiplied; on the whole, population will have largely increased, and even supposing there have been no important inventions or improvements in the productive arts, the increase in population, by causing the division of labor, will have made industry more complex. During this time some of these people will have been careless, generous, improvident; some will have been thrifty and grasping. Some of them will have devoted much of their powers to thinking of how they themselves and the things they see around them came to be, to inquiries and speculations as to what there is in the universe beyond their little island or their little world, to making poems, painting pictures, or writing books; to noting the differences in rocks and trees and shrubs and grasses; to classifying beasts and birds and fishes and insects – to the doing, in short, of all the many things which add so largely to the sum of human knowledge and human happiness, without much or any gain of wealth to the doer. Others again will have devoted all their energies to the extending of their possessions. What, then, shall we see, land having been all this time treated as private property? Clearly, we shall see that the primitive equality has given way to inequality. Some will have very much more than one of the original shares into which the land was divided; very many will have no land at all. Suppose that, in all things save this, our little island or our little world is Utopia – that there are no wars or robberies; that the government is absolutely pure and taxes nominal; suppose, if you want to, any sort of a currency; imagine, if you can imagine such a world or island, that interest is utterly abolished; yet inequality in the ownership of land will have produced poverty and virtual slavery.

For the people we have supposed are human beings – that is to say, in their physical natures at least, they are animals who can live only on land and by the aid of the products of land. They may make machines which will enable them to float on the sea, or perhaps to fly in the air, but to build and equip these machines they must have land and the products of land, and must constantly come back to land. Therefore those who own the land must be the masters of the rest. Thus, if one man has come to own all the land, he is their absolute master even to life or death. If they can live on the land only on his terms, then they can live only on his terms, for without land they cannot live. They are his absolute slaves, and so long as his ownership is acknowledged, if they want to live, they must do in everything as he wills.

If, however, the concentration of landownership has not gone so far as to make one or a very few men the owners of all the land – if there are still so many landowners that there is competition between them as well as between those who have only their labor – then the terms on which these non-landholders can live will seem more like free contract. But it will not be free contract. Land can yield no wealth without the application of labor; labor can produce no wealth without land. These are the two equally necessary factors of production. Yet, to say that they are equally necessary factors of production is not to say that, in the making of contracts as to how the results of production are divided, the possessors of these two meet on equal terms. For the nature of these two factors is very different. Land is a natural element; the human being must have his stomach filled every few hours. Land can exist without labor, but labor cannot exist without land. If I own a piece of land, I can let it lie idle for a year or for years, and it will eat nothing. But the laborer must eat every day, and his family must eat. And so, in the making of terms between them, the landowner has an immense advantage over the laborer. It is on the side of the laborer that the intense pressure of competition comes, for in his case it is competition urged by hunger. And, further than this: As population increases, as the competition for the use of land becomes more and more intense, so are the owners of land enabled to get for the use of their land a larger and larger part of the wealth which labor exerted upon it produces. That is to say, the value of land steadily rises. Now, this steady rise in the value of land brings about a confident expectation of future increase of value, which produces among landowners all the effects of a combination to hold for higher prices. Thus there is a constant tendency to force mere laborers to take less and less or to give more and more (put it which way you please, it amounts to the same thing) of the products of their work for the opportunity to work. And thus, in the very nature of things, we should see on our little island or our little world that, after a time had passed, some of the people would be able to take and enjoy a superabundance of all the fruits of labor without doing any labor at all, while others would be forced to work the livelong day for a pitiful living.

But let us introduce another element into the supposition. Let us suppose great discoveries and inventions – such as the steam-engine, the power-loom, the Bessemer process, the reaping-machine, and the thousand and one labor-saving devices that are such a marked feature of our era. What would be the result?

Manifestly, the effect of all such discoveries and inventions is to increase the power of labor in producing wealth – to enable the same amount of wealth to be produced by less labor, or a greater amount with the same labor. But none of them lessen, or can lessen the necessity for land. Until we can discover some way of making something out of nothing – and that is so far beyond our powers as to be absolutely unthinkable – there is no possible discovery or invention which can lessen the dependence of labor upon land. And, this being the case, the effect of these labor-saving devices, land being the private property of some, would simply be to increase the proportion of the wealth produced that landowners could demand for the use of their land. The ultimate effect of these discoveries and inventions would be not to benefit the laborer, but to make him more dependent.

And, since we are imagining conditions, imagine laborsaving inventions to go to the farthest imaginable point, that is to say, to perfection. What then? Why then, the necessity for labor being done away with, all the wealth that the land could produce would go entire to the landowners. None of it whatever could be claimed by any one else. For the laborers there would be no use at all. If they continued to exist, it would be merely as paupers on the bounty of the landowners! ... read the whole article

Henry George:  The Land Question (1881)

I doubt not that whichever way a man may turn to inquire of Nature, he will come upon adjustments which will arouse not merely his wonder, but his gratitude. Yet what has most impressed me with the feeling that the laws of Nature are the laws of beneficent intelligence is what I see of the social possibilities involved in the law of rent. Rent (4) springs from natural causes. It arises, as society develops, from the differences in natural opportunities and the differences in the distribution of population. It increases with the division of labor, with the advance of the arts, with the progress of invention. And thus, by virtue of a law impressed upon the very nature of things, has the Creator provided that the natural advance of mankind shall be an advance toward equality, an advance toward cooperation, an advance toward a social state in which not even the weakest need be crowded to the wall, in which even for the unfortunate and the cripple there may be ample provision. For this revenue, which arises from the common property, which represents not the creation of value by the individual, but the creation by the community as a whole, which increases just as society develops, affords a common fund, which, properly used, tends constantly to equalize conditions, to open the largest opportunities for all, and utterly to banish want or the fear of want.
(4) I, of course, use the word in its economic, not in its common sense, meaning by it what is commonly called ground-rent.

The squalid poverty that festers in the heart of our civilization, the vice and crime and degradation and ravening greed that flow from it, are the results of a treatment of land that ignores the simple law of justice, a law so clear and plain that it is universally recognized by the veriest savages. What is by nature the common birthright of all, we have made the exclusive property of individuals; what is by natural law the common fund, from which common wants should be met, we give to a few that they may lord it over their fellows. And so some are gorged while some go hungry, and more is wasted than would suffice to keep all in luxury. ...

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: What the Railroad Will Bring Us [Californians, and particularly San Franciscans]  (1868)

The truth is, that the completion of the railroad and the consequent great increase of business and population, will not be a benefit to all of us, but only to a portion. As a general rule (liable of course to exceptions) those who have it will make wealthier; for those who have not, it will make it more difficult to get. Those who have lands, mines, established businesses, special abilities of certain kinds, will become richer for it and find increased opportunities; those who have only their own labor will be come poorer, and find it harder to get ahead -- first, because it will take more capital to buy land or to get into business; and second, because as competition reduces the wages of labor, this capital will be harder for them to obtain.

What, for instance, does the rise in land mean? Several things, but certainly and prominently this: that it will be harder in future for a poor man to get a farm or a homestead lot. In some sections of the State, land which twelve months ago could have been had for a dollar an acre, cannot now be had for less than fifteen dollars. In other words, the settler who last year might have had at once a farm of his own, must now either go to work on wages for some one else, pay rent or buy on time; in either case being compelled to give to the capitalist a large proportion of the earnings which, had he arrived a year ago, he might have had all for of himself. And as proprietorship is thus rendered more difficult and less profitable to the poor, more are forced into the labor market to compete with each other, and cut down the rate of wages -- that is, to make the division of their joint production between labor and capital more in favor of capital and less in favor of labor.

And so in San Francisco the rise in building lots means, that it will be harder for a poor man to get a house and lot for himself, and if he has none that he will have to use more of his earnings for rent; means a crowding of the poorer classes together; signifies courts, slums, tenement-houses, squalor and vice.

San Francisco has one great advantage -- there is probably a larger proportion of her population owning homesteads and homestead lots than in any other city of the United States. The product of the rise of real estate will thus be more evenly distributed, and the great social and political advantages of this diffused proprietorship cannot be over-estimated. Nor can it be too much regretted that the princely domain which San Francisco inherited as the successor of the pueblo was not appropriated to furnishing free, or almost free, homesteads to actual settlers, instead of being allowed to pass into the hands of a few, to make more millionaires. Had the matter been taken up in time and in a proper spirit, this disposition might easily have been secured, and the great city of the future would have had a population bound to her by the strongest ties-a population better, freer, more virtuous, independent and public spirited than any great city the world has ever had.

To say that "Power is constantly stealing from the many to the few," is only to state in another form the law that wealth tends to concentration. In the new era into which the world has entered since the application of steam, this law is more potent than ever; in the new era into which California is entering, its operations will be more marked here than ever before. The locomotive is a great centralizer. It kills towns and builds up great cities, and in the same way kills little businesses and builds up great ones. We have had comparatively but few rich men; no very rich ones, in the meaning "very rich" has in these times. But the process is going on. The great city that is to be will have its Astors, Vanderbilts, Stewarts and Spragues, and he who looks a few years ahead may even now read their names as he passes along Montgomery, California or Front streets.  With the protection which property gets in modern times -- with stocks, bonds, burglar-proof safes and policemen; with the railroad and the telegraph, after a man gets a certain amount of money it is plain sailing, and he need take no risks. Astor said that to get his first thousand dollars was his toughest struggle; but when one gets a million, if he has ordinary prudence, how much he will have is only a question of life. Nor can we rely on the absence of laws of primogeniture and entail to dissipate these large fortunes so menacing to the general weal. Any large fortune will, of course, become dissipated in time, even in spite of laws of primogeniture and entail; but every aggregation of wealth implies and necessitates others, and so that the aggregations remain, it matters little in what particular hands. Stewart, in the natural course of things, will die before long, and being childless, his wealth will be dissipated, or at least go out of the dry goods business. But will this avail the smaller dealers whom he has crushed or is crushing out? Not at all. Some one else will step in, take his place in the trade, and run the great money-making machine which he has organized, or some other similar one. Stewart and other great houses have concentrated the business, and it will remain concentrated.

Nor is it worth while to shut our eyes to the effects of this concentration of wealth. One millionaire involves the little existence of just so many proletarians. It is the great tree and the saplings over again. We need not look far from the palace to find the hovel.

When people can charter special steamboats to take them to watering places, pay four thousand dollars for the summer rental of a cottage, build marble stables for their horses, and give dinner parties which cost by the thousand dollars a head, we may know that there are poor girls on the streets pondering between starvation and dishonor. 

When liveries appear, look out for bare-footed children. A few liveries are now to be seen on our streets; we think their appearance coincides in date with the establishment of the almshouse. They are few, plain and modest now; they will grow more numerous and gaudy -- and then we will not wait long for the children -- their corollaries.

But there is another side: we are to become a great, populous, wealthy community. And in such a community many good things are possible that are not possible in a community such as ours has been. There have been artists, scholars, and men of special knowledge and ability among us, who could and some of whom have since won distinction and wealth in older and larger cities, but who here could only make a living by digging sand, peddling vegetables, or washing dishes in restaurants. It will not be so in the San Francisco of the future. We shall keep such men with us, and reward them, instead of driving them away. We shall have our noble charities, great museums, libraries and universities; a class of men who have leisure for thought and culture; magnificent theatres and opera houses; parks and pleasure gardens. ...

The same law of concentration will work in other businesses in the same way. The railroads may benefit Sacramento and Stockton by making of them workshops, but no one will stop there to buy goods when he can go to San Francisco, make his choice from larger stocks, and return the same day. ...

That we can look forward to any political improvement is, to say the least, doubtful. There is nothing in the changes which are coming that of itself promises that. There will be a more permanent population, more who will look on California as their home; but we would not aver that there will be a larger proportion of the population who will take an intelligent interest in public affairs. In San Francisco the political future is full of danger. As surely as San Francisco is destined to become as large as New York, as certain is it that her political condition is destined to become as bad as that of New York, unless her citizens are aroused in time to the necessity of preventive or rather palliative measures. And in the growth of large corporations and other special interests is an element of great danger. Of these great corporations and interests we shall have many. Look, for instance, at the Central Pacific Railroad Company, as it will be, with a line running to Salt Lake, controlling more capital and employing more men than any of the great eastern railroads who manage legislatures as they manage their workshops, and name governors, senators and judges almost as they name their own engineers clerks! Can we rely upon sufficient intelligence, independence and virtue among the many to resist the political effects of the concentration of great wealth in the hands of a few?

And this in general is the tendency of the time, and of the new era opening before us: to the great development of wealth; to concentration; to the differentiation of classes; to less personal independence among the many and the greater power of the few. We shall lose much which gave a charm to California life; much that was valuable in the character of our people, while we will also wear off defects, and gain some things that we lacked. ...

And as California becomes populous rich, let us not forget that the character of a people counts for more than their numbers; that the distribution of wealth is even a more important matter than its production. Let us not imagine ourselves in a fools' paradise, where the golden apples will drop into our mouths; let us not think that after the stormy seas and head gales of all the ages, our ship has at last struck the trade winds of time. The future of our State, of our nation, of our race, looks fair and bright; perhaps the future looked so to the philosophers who once sat in the porches of Athens -- to the unremembered men who raised the cities whose ruins lie south of us. Our modern civilization strikes broad and deep and looks high. So did the tower which men once built almost unto heaven. ... read the whole article

Henry George: Moses, Apostle of Freedom  (1878 speech)
We boast of equality before the law; yet notoriously justice is deaf to the call of those who have no gold and blind to the sin of those who have.

We pride ourselves upon our common schools; yet after our boys and girls are educated we vainly ask: "What shall we do with them?" And about our colleges children are growing up in vice and crime, because from their homes poverty has driven all refining influences. We pin our faith to universal suffrage; yet with all power in the hands of the people, the control of public affairs is passing into the hands of a class of professional politicians, and our governments are, in many cases, becoming but a means for robbery of the people.

We have prohibited hereditary distinctions, we have forbidden titles of nobility; yet there is growing up an aristocracy of wealth as powerful and merciless as any that ever held sway. ... read the whole speech
Henry George: Thou Shalt Not Steal  (1887 speech)
Not work enough! Why, what is work? Productive work is simply the application of human labor to land, it is simply the transforming, into shapes adapted to gratify human desires, of the raw material that the Creator has placed here. Is there not opportunity enough for work in this country? Supposing that, when thousands of men are unemployed and there are hard times everywhere, we could send a committee up to the high court of heaven to represent the misery and the poverty of the people here, consequent on their not being able to find employment.

What answer would we get?
  • "Are your lands all in use?
  • Are your mines all worked out?
  • Are there no natural opportunities for the employment of labor?"
What could we ask the Creator to furnish us with that is not already here in abundance? He has given us the globe amply stocked with raw materials for our needs. He has given us the power of working up this raw material.

If there seems scarcity, if there is want, if there are people starving in the midst of plenty, is it not simply because what the Creator intended for all has been made the property of the few? And in moving against this giant wrong, which denies to labor access to the natural opportunities for the employment of labor, we move against the cause of poverty. ...  read the whole article

Henry George: The Wages of Labor
We see that the law of justice, the law of the Golden Rule, is not a mere counsel of perfection, but indeed the law of social life. We see that, if we were only to observe it, there would be work for ail, leisure for all, abundance for all; and that civilisation would tend to give to the poorest not only necessaries, but all reasonable comforts and luxuries.

We see that Christ was not a mere dreamer when He told men that if they would seek the kingdom of God and its right doing they might no more worry about material things that do the lilies of the field about their raiment; but that He was only declaring what political economy in the light of modern discovery shows to be a sober truth.

There are many who, feeling bitterly the monstrous wrongs of the present distribution of wealth, are animated only by a blind hatred of the rich and fierce desire to destroy existing social adjustments. This class is indeed only less dangerous than those who proclaim that no social improvement is needed or is possible. ...

The organisation of man is such, his relations to the world in which he is placed are such – that is to say, the immutable laws of God are such that it is beyond the power of human ingenuity to devise any way by which the evils born of the injustice that robs men of their birthright can be removed otherwise than by opening to all the bounty that God has provided for all!

Since man can live only on land and from land since land is the reservoir of matter and force from which man’s body itself is taken, and on which he must draw for all that he can produce – does it not irresistibly follow that to give the land in ownership to some men and to deny to others all right to it is to divide mankind into the rich and the poor, the privileged and the helpless?

Does it not follow that those who have no rights to the use of land can live only by selling their labor to those who own, the land?

Does it not follow that what the Socialists call “the iron law of wages,” what the political economists term “the tendency of wages to a minimum,” must take from the landless mass of mere laborers – who of themselves have no power to use their labor – the benefits of any advance or improvement that does not alter this unjust division of land?

Having no Power to employ themselves, they must, either as labor-sellers or land-renters, compete with one another for permission to labor; and this competition with one another of men shut out from God’s inexhaustible storehouse, must ultimately force wages to their lowest point, the point at which life can just be maintained. ...

It is assumed that there are in the natural order two classes, the rich and the poor, and that laborers naturally belong to the poor. It is true that there are differences in capacity, in diligence, in health and in strength, that may produce differences in fortune. These, however, are not the differences that divide men into rich and poor. The natural differences in powers and aptitudes are certainly not greater than are natural differences in stature. But while it is only by selecting giants and dwarfs that we can find men twice as tall as others, yet in the difference between rich and poor that exists today we find some men richer than others by the thousand-fold and the million-fold!

Nowhere do these differences between wealth and poverty coincide with differences in individual powers and aptitudes. The real difference between rich and poor is the difference between those who hold the toll gates and those who pay toll; between tribute receivers and tribute yielders.

To assume that laborers, even ordinary manual laborers, are naturally poor is to ignore the fact that labor is the producer of wealth, and to attribute to the Natural Law of the Creator an injustice that comes from man’s impious violation of His benevolent intention.

In the rudest stage of the arts it is possible, where justice prevails, for all well men to earn a living. With the labor-saving appliances of our time, it should be possible for all to earn much more. And so, to say that poverty is no disgrace, is to convey an unreasonable implication; since, in a condition of social justice, it would, except where sought from religious motives or imposed by unavoidable misfortune, imply recklessness or laziness.  ...  read the whole article

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

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. ...
2. It would enormously increase the production of wealth--
(a) By the removal of the burdens that now weigh upon industry and thrift. ...
(b) On the contrary, the taxation of land values has the effect of making land more easily available by industry, since it makes it more difficult for owners of valuable land which they themselves do not care to use to hold it idle for a large future price.  ...

(c) The taxation of the processes and products of labor on one hand, and the insufficient taxation of land values on the other, produce an unjust distribution of wealth which is building up in the hands of a few, fortunes more monstrous than the world has ever before seen, while the masses of our people are steadily becoming relatively poorer. These taxes necessarily fall on the poor more heavily than on the rich; by increasing prices, they necessitate a larger capital in all businesses, and consequently give an advantage to large capitals; and they give, and in some cases are designed to give, special advantage and monopolies to combinations and trusts. On the other hand, the insufficient taxation of land values enables men to make large fortunes by land speculation and the increase of ground values -- fortunes which do not represent any addition by them to the general wealth of the community, but merely the appropriation by some of what the labor of others creates.

This unjust distribution of wealth develops on the one hand a class idle and wasteful because they are too rich, and on the other hand a class idle and wasteful because they are too poor. It deprives men of capital and opportunities which would make them more efficient producers. It thus greatly diminishes production.

(d) The unjust distribution which is giving us the hundred-fold millionaire on the one side and the tramp and pauper on the other, generates thieves, gamblers, and social parasites of all kinds, and requires large expenditure of money and energy in watchmen, policemen, courts, prisons, and other means of defense and repression. It kindles a greed of gain and a worship of wealth, and produces a bitter struggle for existence which fosters drunkenness, increases insanity, and causes men whose energies ought to be devoted to honest production to spend their time and strength in cheating and grabbing from each other. Besides the moral loss, all this involves an enormous economic loss which the Single Tax would save.

(e) The taxes we would abolish fall most heavily on the poorer agricultural districts, and tend to drive population and wealth from them to the great cities.  ...  read the whole article

Henry George: Progress & Poverty: Introductory: The Problem

It is true that wealth has been greatly increased, and that the average of comfort, leisure, and refinement has been raised; but these gains are not general. In them the lowest class do not share.* I do not mean that the condition of the lowest class has nowhere nor in anything been improved; but that there is nowhere any improvement which can be credited to increased productive power. I mean that the tendency of what we call material progress is in no wise to improve the condition of the lowest class in the essentials of healthy, happy human life. Nay, more, that it is to still further depress the condition of the lowest class. The new forces, elevating in their nature though they be, do not act upon the social fabric from underneath, as was for a long time hoped and believed, but strike it at a point intermediate between top and bottom. It is as though an immense wedge were being forced, not underneath society, but through society. Those who are above the point of separation are elevated, but those who are below are crushed down. ...
So long as all the increased wealth which modern progress brings goes but to build up great fortunes, to increase luxury and make sharper the contrast between the House of Have and the House of Want, progress is not real and cannot be permanent. The reaction must come. The tower leans from its foundations, and every new story but hastens the final catastrophe. To educate men who must be condemned to poverty, is but to make them restive; to base on a state of most glaring social inequality political institutions under which men are not fully equal, is to stand a pyramid on its apex. ...
I propose in the following pages to attempt to solve by the methods of political economy the great problem I have outlined. I propose to seek the law which associates poverty with progress, and increases want with advancing wealth; and I believe that in the explanation of this paradox we shall find the explanation of those recurring seasons of industrial and commercial paralysis which, viewed independent of their relations to more general phenomena, seem so inexplicable. Properly commenced and carefully pursued, such an investigation must yield a conclusion that will stand every test, and as truth will correlate with all other truth. For in the sequence of phenomena there is no accident. Every effect has a cause, and every fact implies a preceding fact.
That political economy, as at present taught, does not explain the persistence of poverty amid advancing wealth in a manner which accords with the deep-seated perceptions of men;
  • that the unquestionable truths which it does teach are unrelated and disjointed;
  • that it has failed to make the progress in popular thought that truth, even when unpleasant, must make;
  • that, on the contrary, after a century of cultivation, during which it has engrossed the attention some of the most subtle and powerful intellects, it should be spurned by the statesman, scouted by the masses, relegated in the opinion of many educated and thinking men to the rank of a pseudo-science in which nothing fixed or can be fixed--must, it seems to me, be due not to any inability of the science when properly pursued, but some false step in its premises, or overlooked factor in its estimates. And as such mistakes are generally concealed the respect paid to authority, I propose in this inquiry take nothing for granted, but to bring even accepted theories to the test of first principles, and should they not stand the test, to freshly interrogate facts in the endeavor to discover their law.
I propose to beg no question, to shrink from no conclusion, but to follow truth wherever it may lead. Upon us the responsibility of seeking the law, for in the very heart of our civilization to-day women faint and little children moan. But what that law may prove to be is not our affair. If the conclusions that we reach run counter to our prejudices, let us not flinch; if they challenge institutions that have long been deemed wise and natural, let us not turn back. ... read the entire chapter

Henry George: The Condition of Labor — An Open Letter to Pope Leo XIII in response to Rerum Novarum (1891)

Or, to state the same thing in another way: Land being necessary to life and labor, its owners will be able, in return for permission to use it, to obtain from mere laborers all that labor can produce, save enough to enable such of them to maintain life as are wanted by the landowners and their dependents.

Thus, where private property in land has divided society into a landowning class and a landless class, there is no possible invention or improvement, whether it be industrial, social or moral, which, so long as it does not affect the ownership of land, can prevent poverty or relieve the general conditions of mere laborers. For whether the effect of any invention or improvement be to increase what labor can produce or to decrease what is required to support the laborer, it can, so soon as it becomes general, result only in increasing the income of the owners of land, without at all benefiting the mere laborers. In no event can those possessed of the mere ordinary power to labor, a power utterly useless without the means necessary to labor, keep more of their earnings than enough to enable them to live. ...

You assume that the labor question is a question between wage-workers and their employers. But working for wages is not the primary or exclusive occupation of labor. Primarily men work for themselves without the intervention of an employer. And the primary source of wages is in the earnings of labor, the man who works for himself and consumes his own products receiving his wages in the fruits of his labor. Are not fishermen, boatmen, cab-drivers, peddlers, working farmers — all, in short, of the many workers who get their wages directly by the sale of their services or products without the medium of an employer, as much laborers as those who work for the specific wages of an employer? In your consideration of remedies you do not seem even to have thought of them. Yet in reality the laborers who work for themselves are the first to be considered, since what men will be willing to accept from employers depends manifestly on what they can get by working for themselves.

You assume that all employers are rich men, who might raise wages much higher were they not so grasping. But is it not the fact that the great majority of employers are in reality as much pressed by competition as their workmen, many of them constantly on the verge of failure? Such employers could not possibly raise the wages they pay, however they might wish to, unless all others were compelled to do so.

You assume that there are in the natural order two classes, the rich and the poor, and that laborers naturally belong to the poor.

It is true as you say that there are differences in capacity, in diligence, in health and in strength, that may produce differences in fortune. These, however, are not the differences that divide men into rich and poor. The natural differences in powers and aptitudes are certainly not greater than are natural differences in stature. But while it is only by selecting giants and dwarfs that we can find men twice as tall as others, yet in the difference between rich and poor that exists today we find some men richer than other men by the thousandfold and the millionfold.

Nowhere do these differences between wealth and poverty coincide with differences in individual powers and aptitudes. The real difference between rich and poor is the difference between those who hold the tollgates and those who pay toll; between tribute-receivers and tribute-yielders. ... read the whole letter

Upton Sinclair: The Consequences of Land Speculation are Tenantry and Debt on the Farms, and Slums and Luxury in the Cities

I know of a woman — I have never had the pleasure of making her acquaintance, because she lives in a lunatic asylum, which does not happen to be on my visiting list. This woman has been mentally incompetent from birth. She is well taken care of, because her father left her when he died the income of a large farm on the outskirts of a city. The city has since grown and the land is now worth, at conservative estimate, about twenty million dollars. It is covered with office buildings, and the greater part of the income, which cannot be spent by the woman, is piling up at compound interest. The woman enjoys good health, so she may be worth a hundred million dollars before she dies.

I choose this case because it is one about which there can be no disputing; this woman has never been able to do anything to earn that twenty million dollars. And if a visitor from Mars should come down to study the situation, which would he think was most insane, the unfortunate woman, or the society which compels thousands of people to wear themselves to death in order to pay her the income of twenty million dollars?

The fact that this woman is insane makes it easy to see that she is not entitled to the "unearned increment" of the land she owns. But how about all the other people who have bought up and are holding for speculation the most desirable land? The value of this land increases, not because of anything these owners do — not because of any useful service they render to the community — but purely because the community as a whole is crowding into that neighborhood and must have use of the land.

The speculator who bought this land thinks that he deserves the increase, because he guessed the fact that the city was going to grow that way. But it seems clear enough that his skill in guessing which way the community was going to grow, however useful that skill may be to himself, is not in any way useful to the community. The man may have planted trees, or built roads, and put in sidewalks and sewers; all that is useful work, and for that he should be paid. But should he be paid for guessing what the rest of us were going to need?

Before you answer, consider the consequences of this guessing game. The consequences of land speculation are tenantry and debt on the farms, and slums and luxury in the cities. A great part of the necessary land is held out of use, and so the value of all land continually increases, until the poor man can no longer own a home. The value of farm land also increases; so year by year more independent farmers are dispossessed, because they cannot pay interest on their mortgages. So the land becomes a place of serfdom, that land described by the poet, "where wealth accumulates and men decay." The great cities fill up with festering slums, and a small class of idle parasites are provided with enormous fortunes, which they do not have to earn, and which they cannot intelligently spend. ...

In Philadelphia, as in all our great cities, are enormously wealthy families, living on hereditary incomes derived from crowded slums. Here and there among these rich men is one who realizes that he has not earned what he is consuming, and that it has not brought him happiness, and is bringing still less to his children. Such men are casting about for ways to invest their money without breeding idleness and parasitism. Some of them might be grateful to learn about this enclave plan, and to visit the lovely village of Arden, and see what its people are doing to make possible a peaceful and joyous life, even in this land of bootleggers and jazz orchestras. ... read the whole 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. ...

As new inventions and more efficient ways of producing goods are discovered, people's economic well-being is not improved, because they have lost access to land and must pay both rent and taxes. (5) Instead of rent being used to provide community services, capital and wages must be depleted, which obstructs private enterprise. 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.

Studies have been produced that demonstrate that communities prosper and succeed in proportion to the percentage of the land rent that they collect. The first communities that decide to collect all of the ground rent will have an enormous competitive advantage over all other communities. They will be able to reduce or eliminate regressive taxes on labor and capital. They will attract new business and industry and become prosperous.

To determine how much land rent the community should collect let's consider the alternatives. Whatever is not collected will be capitalized into market value by land owners. Buying land at inflated market prices is a block to new industry. Land owners sell the capitalized land rent (known as land value) which is uncollected by the community even though it is unearned income. This causes a disparity between landowners and non-landowners. In the United States 5% of the population, which does not include many homeowners or farmers, own 70% of the total national land and natural resource values.

People will come to a well run community because they will be better off than living by themselves or in an impoverished locale. A city must secure revenue in order to provide good quality services.

This revenue can best be procured when the community recaptures the value of the benefits and services that it provides. This is done by collecting the rental revenue from land that reflects the value of the services and facilities provided in that community. The land rent belongs equally to all people that live in the locale who helped to produce that value. In a well run community, there is sufficient land rent to provide adequate funding for the social purposes requested of, and provided by, the local city government

Cities which choose to collect land rent as their primary source of revenue have the advantage of not requiring burdensome taxes to be paid by workers, businesspeople, entrepreneurs or citizens. Individuals who work to create wealth should be allowed to keep what they produce. When labor is not taxed, greater production and consumption occurs. Investment capital is formed which is used to produce more wealth. New jobs are created and economic diversity results.

Each person has a right to keep what he or she produces, but no one has the right to waste what belongs to all people, the land which includes the natural environment. Each person should have an opportunity to use the best land for his business or personal needs, as long as they are willing to pay the land rent that other land users are willing to pay.  ... Read the whole article

Kris Feder: Progress and Poverty Today
Most economists deem it their business to evaluate the efficiency of policy choices, but, claiming no special knowledge of ethics, they leave it to philosophers and the political process to evaluate questions of justice. Can it be true that society's arrangements to provide for common needs must always confront a divisive choice between equity and efficiency - between what is fair and what is feasible?

Henry George not only denied it; he asserted the reverse: Full recognition of economic rights and responsibilities would reveal the goals of equity and efficiency to be mutually reinforcing. Neither social justice nor a well-functioning free market system can long be enjoyed without the other. "The laws of the universe are harmonious," George proclaimed. His analysis showed that the root cause of widening inequality lies not in the laws of nature, but in social maladjustments which ignore them. Moreover, the breach of justice which underlies the problem of poverty is not merely incidental to economic development; it impedes development, leading to wider and wider inequality.

George emphasized that unequal distribution is itself wasteful of wealth.

Unemployment and underemployment of labor mean that energy and intelligence go untapped. For those who find work, he said, high wages stimulate creativity, invention, and improvement, while low wages encourage carelessness. Inadequate education of the poor multiplies the loss. There are the damages done by poverty-related vice and crime, and the substantial costs of protecting society against them. There is the burden upon the wealthy of providing welfare support for the very poor - or risking social upheaval if they do not. Moreover, said George, social institutions by which some prosper at others' expense cause talent and resources to be diverted from productive enterprise to unproductive conflict, as individuals find that competing for political advantage can be more lucrative than competing for market success.

In short, an unjust system of privileges and entitlements tends to cause misallocation of resources, macroeconomic instability and stagnation, political corruption, and social conflict that ultimately may threaten whole civilizations.

George's central contribution was to show that the distinction between individual property and common property forms a rational basis for distinguishing the domain of public activity from that of the private. This distinction leads him to a theory of public finance that reconciles the competing insights of socialism and laissez-faire capitalism. By a simple fiscal device, the revenue arising from common property can be captured for the public treasury and applied to the common benefit, so that government may assume needed general functions without interfering with individual incentives.

  • The benefits of sustained economic development would be widely shared.
  • The limited resources of the earth would be managed for the benefit of all, including future generations.
  • Government would become, not a repressive power, but "the administration of a great cooperative society.
  • It would become merely the agency by which the common property was administered for the common benefit."

Georgist (or "geoclassical") economic analysis

  • bears directly upon the current difficulties of Russia and other nations emerging from communism, upon the international debt crisis, and upon the world-wide pressure on environmental and natural resources.
  • It is relevant to the common experience of chronic budget deficits, both municipal and federal.
  • It can be applied to the problems of corruption in government, and of the concentration of political power associated with concentration of wealth.
  • It provides an ideal framework for the analysis of environmental pollution and the design of environmental policy.
  • Indeed, readers will notice that the modern environmental movement in certain respects seems to be grappling toward a rediscovery of Georgist proposals. Read the whole article
Henry George: Concentrations of Wealth Harm America (excerpt from Social Problems)  (1883)
A civilization which tends to concentrate wealth and power in the hands of a fortunate few, and to make of others mere human machines, must inevitably evolve anarchy and bring destruction. But a civilization is possible in which the poorest could have all the comforts and conveniences now enjoyed by the rich; in which prisons and almshouses would be needless, and charitable societies unthought of. Such a civilization waits only for the social intelligence that will adapt means to ends. Powers that might give plenty to all are already in our hands. Though there is poverty and want, there is, yet, seeming embarrassment from the very excess of wealth-producing forces. "Give us but a market," say manufacturers, "and we will supply goods without end!" "Give us but work!" cry idle men....

The progress of civilization requires that more and more intelligence be devoted to social affairs, and this not the intelligence of the few, but that of the many. We cannot safely leave politics to politicians, or political economy to college professors. The people themselves must think, because the people alone can act.

In a "journal of civilization" a professed teacher declares the saving word for society to be that each shall mind his own business. This is the gospel of selfishness, soothing as soft flutes to those who, having fared well themselves, think everybody should be satisfied. But the salvation of society, the hope for the free, full development of humanity, is in the gospel of brotherhood -- the gospel of Christ. Social progress makes the well-being of all more and more the business of each; it 'binds all closer and closer together in bonds from which none can escape. He who observes the law and the proprieties, and cares for his family, yet takes no interest in the general weal, and gives no thought to those who are trodden under foot, save now and then to bestow alms, is not a true Christian. Nor is he a good citizen. The duty of the citizen is more and harder than this. . . .

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.  ...

But to the changes produced by growth are, with us, added the changes brought about by improved industrial methods. ...

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.

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.
Developments in America
The rise in the United States of monstrous fortunes, the aggregation of enormous wealth in the hands of corporations, necessarily implies, the loss by the people of governmental control. Democratic forms may be maintained, but there can be as much tyranny and misgovemment under democratic forms as any other -- in fact, they lend themselves most readily to tyranny and misgovernment. Forms count for little. The Romans expelled their kings, and continued to abhor the very name of king. But under the name of Caesars and Imperators, that at first meant no more than our "Boss," they crouched before tyrants more absolute than kings. We have already, under the popular name of "bosses," developed political Caesars in municipalities and states. If this development continues, in time there will come a national boss. We are young; but we are growing. The day may arrive when the "Boss of America" will be to the modem world what Caesar was to the Roman world. This, at least, is certain: Democratic government in more than name can exist only where wealth is distributed with something like equality-where the great mass of citizens are personally free and independent, neither fettered by their poverty nor made subject by their wealth. There is, after all, some sense in a property qualification. The man who is dependent on a master for his living is not a free man. To give the suffrage to slaves is only to give votes to their owners. That universal suffrage may add to, instead of decreasing, the political power of wealth we see when mill-owners and mine operators vote their hands. The freedom to earn, without fear or favor, a comfortable living, ought to go with the freedom to vote. Thus alone can a sound basis for republican institutions be secured. How can a man be said to have a country where he has no right to a square inch of soil; where he has nothing but his hands, and, urged by starvation, must bid against his fellows for the privilege of using them? When it comes to voting tramps, some principle has been carried to a ridiculous and dangerous extreme. I have known elections to be decided by the carting of paupers from the almshouse to the polls. But such decisions can scarcely be in the interest of good government.

Beneath all political problems lies the social problem of the distribution of wealth. This our people do not generally recognize, and they listen to quacks who propose to cure the symptoms without touching the disease. "Let us elect good men to office," say the quacks. Yes; let us catch little birds by sprinkling salt on their tails!

It behooves us to look facts in the face. The experiment of popular government in the United States is clearly a failure. Not that it is a failure everywhere and in everything. An experiment of this kind does not have to be fully worked out to be proved a failure. But speaking generally of the whole country, from the Atlantic to the Pacific, and from the Lakes to the Gulf, our government by the people has in large degree become, is in larger degree becoming, government by the strong and unscrupulous. ...

That he who produces should have, that he who saves should enjoy, is consistent with human reason and with the natural order. But existing inequalities of wealth cannot be justified on this ground. As a matter of fact, how many great fortunes can be truthfully said to have been fairly earned? How many of them represent wealth produced by their possessors or those from whom their present possessors derived them? Did there not go to the formation of all of them something more than superior industry and skill? Such qualities may give the first start, but when fortunes begin to roll up into millions there will always be found some element of monopoly, some appropriation of wealth produced by others. Often mere is a total absence of superior industry, skill or self-denial, and merely better luck or greater unscrupulousness. ...

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 sixty-per-cent, 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.

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

Albert Jay Nock — Henry George: Unorthodox American

Somehow he did manage to live. By one means or another he got over the peak of his greatest distress, and four years later, in the winter of 1868, he came from California to New York on an errand for a newspaper. He was then not quite thirty years old, and did not even yet have a dollar in his pocket that he could call his own. New York showed him something brand-new in his experience. Up to this time he had not been in a position to see any great show of inequality in the distribution of wealth. Life was simple in the Philadelphia of his boyhood days, and in the rough and new California of his youth one person lived much like another. But now, in the New York of 1868, he saw our western Palmyra in all the shoddy glory of its post-war period, and by all accounts it must have been a most dreadful sight, as repulsive as the pens of Dickens and George William Curtis pictured it. Shoddy riches, shoddy show, shoddy ideals and taste, shoddy people — and on the other hand, whole populations of troglodyte slum-dwellers living at an almost inconceivable depth of wretchedness and degradation.
Years afterward George said that here “I saw and recognized for the first time the shocking contrast between monstrous wealth and debasing want.” What was the cause of it? Again, nobody seemed to know. Like depressions and plagues, it was taken as part of the regular order of nature. It had always existed in large commercial and industrial centers, apparently it was bound always to exist, and it seemed to be just another one of the things that had to be put up with. There was no cure for it, so far as anybody knew. All that could be done was to take some of the curse off it by charity of one sort or another, and this was being done; in fact, it was beginning to be organized on a large scale, more lavishly perhaps than in any other country.
Nevertheless, George reasoned with himself, the thing had to have a cause, for nothing in nature ever happens without a cause. If that cause could be found, a cure might be found; but trying to deal with an effect without knowing anything about its cause would be mere fumbling in the dark. Here, then, was a second question, to which George pledged his lifetime for an answer. The first question was, what is the cause — not any superficial and apparent cause, but the true fundamental cause — of recurrent industrial depressions? The second question was, what is the true fundamental cause of the enormous inequality in the distribution of wealth?
George succeeded in answering these two questions to his own satisfaction while he was still a comparatively young man. This was the only success he ever had in his life; whatever else he touched failed. His one success, however, such as it was, led him through one of the strangest and most remarkable careers ever achieved in America, or for that matter, in the world. ...
Progress and Poverty is the first and only thorough, complete, scientific inquiry ever made into the fundamental cause of industrial depressions and involuntary poverty. The ablest minds of the century attacked and condemned it — Professor Huxley, the Duke of Argyll, Goldwin Smith, Leo XIII, Frederic Harrison, John Bright, Joseph Chamberlain. Nevertheless, in a preface to the definitive edition, George said what very few authors of a technical work have ever been able to say, that he had not met with a single criticism or objection that was not fully anticipated and answered in the book itself. For years he debated its basic positions with any one who cared to try, and was never worsted.
... Much more important, however, is the question whether George’s faith in the common man’s collective judgment was justified; whether such faith is ever justified. Does the common man possess the force of intellect to apprehend the processes of reason correctly, or the force of character to follow them disinterestedly? The whole future of eighteenth-century political doctrine, the doctrine on which our republic was nominally established, hangs on this question — the question, in short, whether republicanism has not put a burden on the common man which is greater than he can bear.
George never had a moment’s doubt of the answer. Yet, seeing what sort of political leadership the common man invariably chose to follow, and the kind of issue that invariably attracted him, he ended the argument of Progress and Poverty with a clear warning, too long to be quoted here, against the wholesale corruption of the common man by the government which the common man himself sets up. It is well worth reading now, whether one finds the root of this corruption in the common man’s weakness of mind and character, or whether one finds it, as George did, in the unequal distribution of wealth. Whatever one may think about that, there is no possible doubt that George’s warning has the interest of absolutely accurate prophecy. ...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

Henry George: The Condition of Labor — An Open Letter to Pope Leo XIII in response to Rerum Novarum (1891)

Your use, in so many passages of your Encyclical, of the inclusive term “property” or “private” property, of which in morals nothing can be either affirmed or denied, makes your meaning, if we take isolated sentences, in many places ambiguous. But reading it as a whole, there can be no doubt of your intention that private property in land shall be understood when you speak merely of private property. With this interpretation, I find that the reasons you urge for private property in land are eight. Let us consider them in order of presentation. You urge:

1. That what is bought with rightful property is rightful property. (RN, paragraph 5) ...
2. That private property in land proceeds from man’s gift of reason. (RN, paragraphs 6-7.) ...
3. That private property in land deprives no one of the use of land. (RN, paragraph 8.) ...
4. That Industry expended on land gives ownership in the land itself. (RN, paragraphs 9-10.) ...
5. That private property in land has the support of the common opinion of mankind, and has conduced to peace and tranquillity, and that it is sanctioned by Divine Law. (RN, paragraph 11.) ...
6. That fathers should provide for their children and that private property in land is necessary to enable them to do so. (RN, paragraphs 14-17.) ...
7. That the private ownership of land stimulates industry, increases wealth, and attaches men to the soil and to their country. (RN, paragraph 51.) ...
8. That the right to possess private property in land is from nature, not from man; that the state has no right to abolish it, and that to take the value of landownership in taxation would be unjust and cruel to the private owner. (RN, paragraph 51.)

1. That what is bought with rightful property is rightful property.

Clearly, purchase and sale cannot give, but can only transfer ownership. Property that in itself has no moral sanction does not obtain moral sanction by passing from seller to buyer.

If right reason does not make the slave the property of the slave-hunter it does not make him the property of the slave-buyer. Yet your reasoning as to private property in land would as well justify property in slaves. To show this it is only needful to change in your argument the word land to the word slave. It would then read:

It is surely undeniable that, when a man engages in remunerative labor, the very reason and motive of his work is to obtain property, and to hold it as his own private possession.

If one man hires out to another his strength or his industry, he does this for the purpose of receiving in return what is necessary for food and living; he thereby expressly proposes to acquire a full and legal right, not only to the remuneration, but also to the disposal of that remuneration as he pleases.

Thus, if he lives sparingly, saves money, and invests his savings, for greater security, in a slave, the slave in such a case is only his wages in another form; and consequently, a working-man’s slave thus purchased should be as completely at his own disposal as the wages he receives for his labor.

Nor in turning your argument for private property in land into an argument for private property in men am I doing a new thing. In my own country, in my own time, this very argument, that purchase gave ownership, was the common defense of slavery. It was made by statesmen, by jurists, by clergymen, by bishops; it was accepted over the whole country by the great mass of the people. By it was justified the separation of wives from husbands, of children from parents, the compelling of labor, the appropriation of its fruits, the buying and selling of Christians by Christians. In language almost identical with yours it was asked, “Here is a poor man who has worked hard, lived sparingly, and invested his savings in a few slaves. Would you rob him of his earnings by liberating those slaves?” Or it was said: “Here is a poor widow; all her husband has been able to leave her is a few negroes, the earnings of his hard toil. Would you rob the widow and the orphan by freeing these negroes?” And because of this perversion of reason, this confounding of unjust property rights with just property rights, this acceptance of man’s law as though it were God’s law, there came on our nation a judgment of fire and blood.

The error of our people in thinking that what in itself was not rightfully property could become rightful property by purchase and sale is the same error into which your Holiness falls. It is not merely formally the same; it is essentially the same. Private property in land, no less than private property in slaves, is a violation of the true rights of property. They are different forms of the same robbery; twin devices by which the perverted ingenuity of man has sought to enable the strong and the cunning to escape God’s requirement of labor by forcing it on others.

What difference does it make whether I merely own the land on which another man must live or own the man himself? Am I not in the one case as much his master as in the other? Can I not compel him to work for me? Can I not take to myself as much of the fruits of his labor; as fully dictate his actions? Have I not over him the power of life and death?

For to deprive a man of land is as certainly to kill him as to deprive him of blood by opening his veins, or of air by tightening a halter around his neck.

The essence of slavery is in empowering one man to obtain the labor of another without recompense. Private property in land does this as fully as chattel slavery. The slave-owner must leave to the slave enough of his earnings to enable him to live. Are there not in so-called free countries great bodies of working-men who get no more? How much more of the fruits of their toil do the agricultural laborers of Italy and England get than did the slaves of our Southern States? Did not private property in land permit the landowner of Europe in ruder times to demand the jus primae noctis? Does not the same last outrage exist today in diffused form in the immorality born of monstrous wealth on the one hand and ghastly poverty on the other?

In what did the slavery of Russia consist but in giving to the master land on which the serf was forced to live? When an Ivan or a Catherine enriched their favorites with the labor of others they did not give men, they gave land. And when the appropriation of land has gone so far that no free land remains to which the landless man may turn, then without further violence the more insidious form of labor robbery involved in private property in land takes the place of chattel slavery, because more economical and convenient. For under it the slave does not have to be caught or held, or to be fed when not needed. He comes of himself, begging the privilege of serving, and when no longer wanted can be discharged. The lash is unnecessary; hunger is as efficacious. This is why the Norman conquerors of England and the English conquerors of Ireland did not divide up the people, but divided the land. This is why European slave-ships took their cargoes to the New World, not to Europe.

Slavery is not yet abolished. Though in all Christian countries its ruder form has now gone, it still exists in the heart of our civilization in more insidious form, and is increasing. There is work to be done for the glory of God and the liberty of man by other soldiers of the cross than those warrior monks whom, with the blessing of your Holiness, Cardinal Lavigerie is sending into the Sahara. Yet, your Encyclical employs in defense of one form of slavery the same fallacies that the apologists for chattel slavery used in defense of the other!

The Arabs are not wanting in acumen. Your Encyclical reaches far. What shall your warrior monks say, if when at the muzzle of their rifles they demand of some Arab slave-merchant his miserable caravan, he shall declare that he bought them with his savings, and producing a copy of your Encyclical, shall prove by your reasoning that his slaves are consequently “only his wages in another form,” and ask if they who bear your blessing and own your authority propose to “deprive him of the liberty of disposing of his wages and thus of all hope and possibility of increasing his stock and bettering his condition in life”? ... read the whole letter

Alanna Hartzok: Earth Rights Democracy: Public Finance based on Early Christian Teachings

The wealth gap is increasing in the US. According to the latest Federal Reserve data, the top 1% of the population has $2 trillion more wealth than the bottom 90 percent.

Perceptions of the causal factors of these statistics and the suffering of so many who lack basic necessities in this wealthy country are most often simplistic explanations - these people lack money and they lack money because they lack jobs or their wages are too low, or housing costs are too high. For those concerned about the growing wealth gap in America and worldwide, and the resultant poverty, homelessness, hunger and food insecurity, the dilemma usually bogs down into supply or demand side efforts to find solutions. But the root cause is a deeper injustice.

The primary cause of the enormous and growing wealth gap is that the land and natural resources of the earth are treated as if they are mere market commodities from which a few are allowed to reap massive private profits or hold land and resources out of use in anticipation of future profits. Henry George, the great 19th century American political economist and social philosopher, proposed a solution to a problem that too few understood at the time and too few understand today. Early Christian teachings drew upon deep wisdom teachings of the Jubilee justice tradition when they addressed this problem. The problem is the Land Problem.

The Land Problem takes two primary forms: land price escalation and concentrated land ownership.
  • As our system of economic development proceeds, land values rise faster than wages increase, until inevitably the price paid for access to land consumes increasing amounts of a worker's wages. In classical economics, this dilemma is called the "law of rent" and has been mostly ignored by mainstream economists. The predictability of the "law of rent" - that land values will continually rise - fuels frenzies of land speculation and the inevitable bust that follows the boom. A recent Fortune cover story informs us that there are big gains and huge risks in housing speculation in about 30 predominantly coastal markets that encompass 100 million people. Since 2000, home prices in New York, Washington, and Boston have surged 56% to 61%. Prices jumped 58% in Miami and Los Angeles and 76% in San Diego where the median home price county-wide is $582,000. The gap between home prices and fundamentals like job growth and incomes is greater than ever.[7]
  • The second form of the Land Problem is the fact that in most countries, including the United States, a small minority of people own and control a disproportionately large amount of land and natural resources. Data suggests that about 3% of the population owns 95% of the privately held land in the US. Less than 600 companies control 22% of our private land, a land mass the size of Spain. Those same companies land interests worldwide comprise a total area larger than that of Europe - almost 2 billion acres.[8]
In order to show that there was NO NEED for land reform in Central America because our land in the US is even more concentrated in ownership than Central America, Senator Jesse Helms read these facts into the Congressional Record in 1981:
  • In Florida, 1% owns 77% of the land.
  • Other states where the top 1% own over two-thirds of the land are Maine, Arizona, California, Nevada, New Mexico, and Oregon.
A United Nations study of 83 countries showed that less than 5% of rural landowners control three-quarters of the land. Other studies on land ownership report these facts:
  • In Brazil, 2% of landowners hold 60% of the arable land while close to 70% of rural households have little or none. Just 342 farm properties in Brazil cover 183,397 square miles - an area larger than California.
  • In Venezuela, 77% of the farmland is owned by 3% of the people. In Spain, 70 per cent of the land is owned by 0.2 per cent of the people.
  • In Britain, 69 per cent of the land is owned by 0.6 per cent of the population. Just 158,000 families own 41 million acres of land while 24 million families live on four million acres.
The basic human need for food and shelter requires access of labor to land. With access to land people can produce the basic requirements of life. Access to land provides an enabling environment for life itself and thus meets the minimum requirement of love, meaning fairness in human relations based on the fundamental equal right to exist. The Land Problem in its two forms - the inequitable ownership and control of land and natural resources and the treatment of land as a market commodity - is the root cause of the great amount of human deprivation and suffering from lack of the basic necessities of life. And yet the human right to the earth is missing from the Bill of Rights, the Universal Declaration of Human Rights, and the Covenant on Economic, Social and Cultural Human Rights.

Democratic governance has not yet concerned itself with a "first principle" question. This question concerns property rights in land - property rights in the earth itself. The question is, "Who Should Own the Earth?" The question of "Who Should Own the Earth?" is a fundamental question. In venues when this question is asked, the answer is always the same. The answer is, "everyone should own the earth and on an equal basis as a birthright."

The right to the earth has yet to be pronounced in human rights covenants. Democracy is unclear, ethically weak, and on shaky ground when it comes to the question of the right to the land and resources of the earth. Democracy as presently constituted lacks this most fundamental and basic human right - the equal right to earth. The right to the earth is the great undiscovered revolution in both American and global politics. ...  read the whole article
Nic Tideman: The Shape of a World Inspired by Henry George
How would the world look if its political institutions were shaped by the conception of social justice advanced by Henry George?
Mason Gaffney: Property Tax: Biases and Reforms
Priority #1. Safeguarding the property tax
Priority #2: Enforce Good Laws
  • Reassess Land Frequently
  • Use the Building-Residual Method of Allocating Value
  • Federal Income Taxes
  •  Priority #3. De-Balkanize Tax Enclaves
  • A. Rich and Poor
  • B. Timber and Timberland
  • The Role of Timber and Timberland
  • Two More Areas Deserving Attention
  • Offshore Oil
  • Tax All Natural Resources Uniformly and Comprehensively
  • Priority #4. What Tax to Fight First?
    Priority #5: Make Landowners Pay Their Taxes

    Throughout history - and even today - wealth and privilege has been based upon ownership of land and monopoly. Economics, unchecked and in ignorance of the land and rent question, remains "the caveman's law, the law of the sharpest tooth, the angriest brow and the greediest maw." (so said Al Smith, Governor of New York and presidential candidate during the 1920s)

    But we know there is a better way. The recognition that "territoriality" may be necessary as the law of survival for lower species is not borne out for mankind; for humanity there is a higher order. The human condition, the dignity of man and the aspiring benevolence that are made material by way of man's free association and the free exchange of labor and its handmaiden - capital. 

    Land rent is socially created, it is the fruit of the loins of unfettered labor and capital. Monopoly and privilege are the highwaymen who rob us of the means to end poverty, slums and depression. This is the promise of LVT. This is the big idea. The hope. Something to believe in - its time surely has come. Read the whole article

    Mason Gaffney: The Taxable Capacity of Land

     Another attractive feature of land taxation is its interesting positive effect on the economic base of a city. It strengthens it by its tendency to hit absentee owners harder than resident owners. The land fraction in real estate is generally highest in the CBD of any city, so that is a favorite place for absentees to buy and hold. They like the steady income, and the "trophy" quality. The surplus in real estate is what attracts outside buyers, and land is what yields the surplus. About 2/3 of downtown Los Angeles is owned by non-resident aliens, for example. In a more workaday city, Milwaukee, the absentee owners consist of former residents, or their heirs, who grew too rich to abide the harsh winters.

     Consider the effect on your balance of payments. When you get more tax money from absentees, money that used to flow to Tehran, Zurich, or Palm Beach now flows into your local treasury to pay your local teachers and city workers, and relieve your builders and building managers. In this way taxing land actually acts to undergird the value of its own base.  ...   Read the whole article

    Mason Gaffney:  George's Economics of Abundance: Replacing dismal choices with practical resolutions and synergies

    Introduction: Resolutions vs. trade-offs
    1. Equity, Efficiency, and Incentives
    a. Equity and efficiency
    b. Reconciling progressivity and motivation.
    2. Reconciling demand side and supply side economics
    a. Aggregate. Consumption and production
    b. Investing and Saving
    3. Micro "structural" reform coupled with macro reform
    4. Local, state, and national applications
    5. Relieving labor without burdening capital
    6. Urban renewal without subsidizing evictions
    7. Contains urban sprawl, improves urban linkages among complementary land uses, without overriding market choices.
    a. Taxing land sharpens market incentives via the leverage effect noted earlier.
    b. Fosters resident ownership, civic participation
    8. Reconciles common rights to land with private tenure
    9. Paying the debt while also making jobs
    10. Making labor cheaper to hire without lowering wage rates
    11. Adding people and capital w/o diluting resource base
    12. Fostering economy in government in the very process of raising revenue
    13. Enhance evironment and conserve resources while making jobs
    A summary of reconciliations
    1. Couples equity with efficiency.
    2. Couples progressivity with motivation. Abates concentration of wealth and power while widening the scope of productive ambition and enterprise.
    3. Makes more jobs without inflation. Raises demand-side and supply-side together, "leveling them upwards."
    4. Raises both inducement to invest and inducement to save, at any income level. Also raises saving by raising income level.
    5. Couples structural reform and macro reform.
    6. May be applied at local, state, and national levels, together or jointly, in small degrees or large.
    7. Relieves labor of taxation without burdening capital, and vice versa.
    8. Renews cities without subsidizing evictions.
    9. Contains urban sprawl, infills and coordinates cities without superimposing planning on the market.
    10. Fosters resident ownership and civic participation without laws against absentee ownership, or other use of compulsion, but in the very process of lubricating land markets.
    11. Asserts common rights to land while strengthening private tenure. Permits of privatizing without giveaway.
    12. Allows paying off public debts while fostering full employment through (true) fiscal stimulus.
    13. Makes labor cheaper to hire while raising real wage rates (take-home pay, disposable income). Thus makes jobs without lowering wage rates or "making work."
    14. Lets regions, nations, and the world add population and capital without diluting their resource bases.
    15. Fosters economy in government in the process of raising revenue.
    16. Saves the environment in the process of intensifying land use.
    17. Smoothes business cycles without depending solely on contra-cyclical fiscal or monetary policy. Stabilizes and secures financial institutions with only minimal regulation.
    18. Effects land reform and redistribution abroad and at home, urban as well as rural, without government expense, and without acreage limitations, working through free markets.
    19. Equalizes credit ratings for land buyers without any controls over lenders.

    Dismal trade-offs, deadlocks, and standoffs are just mental blocks and smokescreens. Henry George began with a quest for justice in sharing the rent surplus. He found that justice and efficiency are not at odds, we can have both. This trade-off that many economists expound is a stall, a put-off to enervate and unman us so we won't do anything. It may ease the conscience to think justice must be sacrificed for efficiency, and schools starved and libraries closed to free up incentives, so nothing, really, can ever be done. We all feel compassion by nature but, to survive and stay whole in this world of beggars and bandits, learn to harden our hearts and cork it in. We learn to screen out evidence of suffering and injustice, and rationalize what we cannot deny. This mindset, while understandable, is unaffordable in a period of dangerous national decline, and growing division between haves and have-nots.

    What we have shown here is not just that we can have both justice and efficiency, but more, we cannot have either one without the other. If we don't share rents efficiently, in the Georgist manner, social and political pressures will continue to cause inefficient sharing and eventual dissipation.

    Economic discourse is afflicted with pessimists who firmly cling to mutually inconsistent positions at the same time, each posing an insoluble problem. Some, for example, believe the world is racing to starvation, and favor limiting demand through birth control, while in another context they deplore "overproduction," or "underconsumption," and favor choking off farm production to keep farmers from losing money. George, of course, would see demand as the answer to supply, and land as the field on which the twain may meet and satisfy each other, leveling them upwards.

    Again, some favor cheap power and good roads for rural areas, regardless of cost, and then favor low-density zoning to keep people out. George, of course, would favor infilling to make full use of short interior lines at high capacity, and lower cost per customer.

    Epilogue: how the public demonstrates its preference for resolutions over dismal choices

    A land tax abates concentration of wealth and power without limiting ambition or enterprise. It taxes wealth while sparing both capital and income. It puts no cap on ambition and enterprise, except to redirect those useful traits into creation, production, hiring, and capital formation, and away from the zero-sum game of land-grabbing.

    It requires no incentive-warping progressive rate: all land is taxed at the same rate, in proportion to value. The tax achieves progressivity by using the observed reality that wealth rises with income, faster than income; and landholdings rise with wealth, faster than wealth. Otherwise put, the land tax offsets concentration because ownership of wealth is more concentrated than income; and ownership of land is more concentrated than other forms of wealth. As George said, "The great cause of the concentration of wealth is concentration of the ownership of land."

    At the state or local level, George's program is the answer to California Governor Pete Wilson' dilemma, and every governor's dilemma:

    • it untaxes and attracts capital, and encourages capital formation, without giving away the store, or untaxing the rich, or starving the schools and police.
    • It raises state revenues from the richest people while attracting business and wealth with the very same stroke.
    The unique, remarkable quality of a property tax based on land ex buildings is that you may raise the rate with no fear of driving away business, construction, people, jobs, or capital! You certainly will not drive away the land, however high the tax rate. Not one square foot will walk out of town. The only bad thing to say about this tax's incentive effects is that it stimulates revitalization, and makes jobs. If some people think that is bad, maybe they are the problem.  So George's simple program not only reconciles efficiency and equity, it squares taxes and incentives.  Read the whole article

    Mason Gaffney:   Privatizing Land Without Giveaway (1990)
    Credit follows collateral. In periods of high and rising land prices, borrowers get used to pledging land to secure loans, and lenders get used to demanding it. Socializing land rent, as proposed herein, lowers or eliminates the value of land as loan collateral.

    On the good side, this lack of land collateral would stop lenders' discriminating in favor of landowners, as they do now. It would remove a major cause of the concentration of economic power and control, that is the clustering of credit around original nuclei of large, superior landholdings. The credit is often used to buy still more land, to reserve for possible future use and at the same time to withhold from competitors. Such concentration and market control form the ugly side of extant Western "capitalism," when enterprise degenerates into greed and acquisitions supplant innovations.... read the whole article

    Mason Gaffney: The Property Tax is a Progressive Tax
    Property Ownership Is More Concentrated Than Income
    To begin, a large share of the adult population -- half, as a rough measure -- are renters and own no meaningful value of taxable property at all. Most of these essentially propertyless adults do earn taxable wage income. (We consider later whether property taxes are shifted onto them.)

    Savings rise with income, faster than income. With savings one acquires property, and we would naturally expect therefore higher income groups to own property in proportion to their greater saving, which is a disproportionately high share of their high incomes. And we would also expect a high share of high incomes to come from property.

    Musgrave et al. support this. They rank 1948 U.S. "Spending Units" by income and group them, using Treasury sources of data. The highest class got 23% of the income, but 78% of dividend income and 45% of rental income, and only 12% of the wage and salary income.(14) Other sources might be cited, too.

    Musgrave et al. omitted capital gains. These are probably the most concentrated source of income, and of course property-derived. Realized gains swell from virtually nothing at the $10,000 income level to about half of income at the million dollar level.(15) Unrealized accrued gains, which we should include in a proper Haig-Simons income concept, are probably larger yet, and more concentrated. There are no easy data on this, but several a priori and indirect reasons to think them concentrated. The rich have a comparative advantage in waiting for deferred cash. They are known to favor growth stocks, undistributed profits, speculative landholdings and unripe minerals, major sources of unrealized accruals.

    Among those who do own material amounts of property, concentration is high relative to that of income. The top 10% of income receivers, as income is usually defined and reported, get about 30% of all income. Every study of property owners shows figures in another ballpark altogether. Table I summarizes what several such studies show about the top group. Note that most of these figures show only concentration among those who own enough property to be counted, thus understating concentration among the whole population.  ...

    Corporate shares are not taxable property, but of course corporate income is mostly derived from taxable property.(18) Some will object that corporations have many owners and should not be treated as single units. That is true, but again, it smacks of regression fallacy. Wealthy owners also have many corporations, and in general corporate shares are the most concentrated kind of asset.

    Ownership of large property gives one control of other assets. Property is borrowing power and credit rating: all studies show interest rates to be very regressive with size and quality of collateral, and terms easier. But simple borrowing is only the beginning. With great wealth one goes into banking and exerts multiple leverage. The story has been told many times, if not as well, since Brandeis' Other Peoples' Money: collateral, leverage, conglomerates, interlocking directorates, mergers, lender suasion, industrial leadership, pyramiding, the Wallenberg Grip, subcontracting market power, control of dealerships, . . . . Control is power and status (psychic income), and control is a source of additional income, as revealed by the premium prices of shares during battles for control.

    Data in Table I probably understate concentration, for four general reasons: omitting the unpropertied, accepting and reporting regressive assessments, accepting the bias in partial inventories, and accepting and reporting straw owners as separate owners.

    1. Omitting the unpropertied. ...
    2. Accepting regressive assessments as fact.  ...
    3. The bias in partial inventories ...

    As to housing, it is the rich who have second homes, hobby farms, summer resorts, tax shelters, ski houses, Caribbean hideaways, lake frontage, and advance sites for future building. Yet studies of income and housing, from which some would damn the property tax, compare a full statement of income (at least wage income) with housing narrowly defined. Walter Morton (p. 143) goes so far as to judge the entire property tax on the basis of housing alone. He not only omitted second homes, but other property comprising half the total: commerce, industry, rental, vacant, farm, forest, mineral, water, and miscellaneous. Again, ownership of these is concentrated among those ranking high in the housing scale.

    4. Accepting straw owners as separate owners ...

    Here is an outline rationale for the property tax.

    1. "Ability-to-pay" derives from wealth as well as current income. James Tobin, Arnold Zellner, Taylor and Houthakker, Harold Somers, and others have stressed this lately. The old cliche that "taxes are paid out of income" is as empty as the one that we consume "out of income." We spend money, and it is not labelled.

    2. The property tax asserts a public equity in land which was won and is defended by joint efforts, and whose value derives from public works and spillovers, not from the owners' efforts. It exempts human effort, thus rewarding service to the community and denying the state any equity in the bodies of its citizens whose freedom and dignity is thus enhanced in their capacity as human beings, as distinct from owners of wealth.

    3. Property taxes reduce the differential effect of inherited wealth on the current generation. They strike directly at concentration of economic and other power based on wealth, promoting competition and equal opportunity. Property as collateral is a source of invisible income (credit rating). Taxing property reduces the differential advantage of the rich in credit rationing.

    4. Property income of a given dollar value places the receiver on a higher welfare plane than labor income, because he needn't work for it. $10,000 a year received by dint of working long hours in a coal mine with black lung disease is not the same as $10,000 plus a life of ease.

    5. The property tax is needed to plug loopholes in the income tax, which is inexorably devolving into a payroll tax.   Read the whole article

    Mason Gaffney: Land as a Distinctive Factor of Production
    The origin of property in land is not economic
    a. Politics guides the original distribution.
    The initial distribution of land -- the origin of property in land -- is military, legal, and political, not economic.  The prime business of nations throughout history has been gaining and defending land.  What was won by force has no higher sanction than lex fortioris, and must be kept and defended by force.
    After land is appropriated by a nation the original distribution is political.  The nature of societies, cultures and economies for centuries afterwards are molded by that initial distribution, exemplified by the differences between Costa Rica (equal partition) and El Salvador with its fabled "Fourteen Families" (Las Catorce), or between Canada and Argentina.

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

    i)      The right to sell was won by force, is not universally honored, and must be kept by continuous use of force.

    ii)     In practice, selling for cash up front reserves most land for a few with front-money advantage, inside information, good contacts, corrupt aides, etc.  The history of disposal of US public domain leaves no doubt about this -- and it is still going on with air rights, water, spectrum, landing rights, fishing licenses, etc.  Choices being made currently are just as tainted as those of 19th century history (with never a peep from Chicago, but heavy applause).

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

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

    Ownership and tenure rights derive only from appropriation, not saving, investment or production.  Capital, by contrast, is owned by those who formed it. Only after that does capital bear much resemblance to land in that they coexist.  Standard micro‑economics obscures the differences because it deals mainly with relations of coexistence, ignoring the continual formation and destruction of capital, ignoring time and relations of sequence.  Thus it excludes from its purview the differences between land and capital.  Micro deals mainly with how existing resources are allocated at a moment in time, not how they originate, grow, flourish, reproduce, age, senesce and die.

    b.      Inertia takes over after the original distribution, perpetuating and aggravating it.

    Inertia, both financial and political, transmitted through generations by inheritance, is a major control over the distribution of wealth and income.  How else can one explain their exceedingly distorted distributions, in contrast with the normal distribution of most human abilities?  Inertia extends the original pattern for generations.  More, the advantages given by controlling discretionary funds (those not needed for subsistence) magnify the original political result. ...

    The corollary of high land price is high carrying cost relative to cash flow.
    Carrying cost is interest on the price of land.  It varies with one's internal interest rate (IIR).  For those with high IIRs, the carrying cost of land normally exceeds cash flow.  Otherwise put, cash flow from land seldom covers carrying cost, while cash flow from depreciable capital covers more than its carrying cost because it normally has to be priced low enough for cash flow to cover both interest and depreciation.  As to inventories of rising assets like steers or timber, they are like zero-coupon bonds: there is no cash flow before sale, but the famine leads to a feast of total recovery.

    Since land lasts forever while demands for land grow, the normal expectation over long periods is that ground rents will rise.  Present land value includes the discounted values of expected higher future rents.  This makes current land values very high relative to current cash flows, which are less than expected future flows.  In stock market terms, the Price/Earnings ratio of land is high, like that of a growth stock.  This is more than an analogy, since a large share of the assets of corporations consist of land.  In the USA, corporations are the major landholders. ...

    Few people can invest heavily in an asset of high price and deferred yields.  Those who can do so have a field with fewer competitors than most, and tend to expand widely.  As Loyd Fisher, a rustic Nebraska land economist twanged to me and others 30 years ago, "When a rancher buys these days it ain't the quarters roundin' out, it's the sections gobblin' the quarters."

    Those with existing cores of rent-yielding land -- “existing nuclei” -- enjoy a continual flow of discretionary funds they can use to buy more land.  The advantage of a head start snowballs over time.

    Buying with equity funds is only the beginning.  Land is the basis for extending credit.  The "sections" go to the banks for accommodation to buy the "quarters."  As Rainer Schikele wrote, "The basis of credit is not marginal productivity, but collateral security." A major factor giving one a good credit rating is the prior ownership of land.

    Thus, owning land is not just dominated by, but also dominates access to long-term credit.  Here is a positive feedback loop: it takes good credit to buy land, and prior ownership of land gives one good credit. Those already owning land have access to more land at a lower carrying cost than those trying to enter the market from poverty.  The result is a tendency for land to agglomerate in the hands of the financially strong (cf.  B-8).  ...

    It follows that landownership is highly concentrated.
    Land is a major basis, probably the major basis of the concentration of wealth.  Political distribution, if egalitarian, may stave this off for a considerable time.  There is also evidence that heavy land taxation, where that is applied, motivates subdivision.  However, experience is that, in the absence of heavy taxation, the surplus of rent attracts absentee investors, and large concentrations reconstitute themselves inexorably.  The writer and others have documented such concentration elsewhere.

    What concentration means for bargaining power has been foreshadowed in B-3.  What it means for market power is treated in B-11. ...

    Amassing land is always done, can only be done, by shrinking the holdings of others.  To expand is to preempt.  If A is to have more then B, C, D et al. must have less, there is no other way.  A can amass more capital by saving, creating new capital, leaving B, C, D et al. with as much as before.  A can increase his labor income by working longer, or harder, or smarter, producing more, leaving others with as much as before.  He and she together can also spawn more children: labor, like capital, is reproducible, and indefinitely augmentable.  Possessing land, however, means just one thing: bumping others.

    In the region of the mind, the thing possessed may be shared by all with no diminution to anyone.  No one's pleasure In Shakespeare, or Beethoven, or understanding physics is any less because at the same time millions of others have the same pleasure.  Art, letters and science are the common property of mankind, open to all who care to acquire them.  The creative producer's pleasure is in proportion to the number with whom he shares.  The gratification is from sharing, not excluding.  The contrast with landholding is nearly total.

    Amassing claims on wealth by creating and producing is not, therefore, a threat to others.  Amassing capital through saving does not weaken or impoverish others.  Producing goods does not interfere with others' doing the same.  One producer may drive another from a particular limited market, but glutting one market increases real demand for the products of other markets, and raises the real value of others' incomes by lowering prices.  Amassing land, however, has to deprive others, both relatively and absolutely.  Concentrated holding and control of land, therefore, have always been threats to the well-being of those left out.

    Conversely, the only way the landless, e.g. in South Africa, can get land is from those who now have it.  "Growth" is often advanced as the solution to maldistribution, injustice and poverty, but that is mere temporizing because land does not grow.  When production and demand grow, land rents rise.  Of land it is starkly true, "the problem is not production, but distribution".  There is no production; only distribution.

    Massed control of land is the most natural base for monopolizing markets because land is limited.  Buying land always does double duty: when A expands he ipso facto preempts opportunities from B. For example, a chain of service stations with most of the best comers in a town has market power, the more so if it also holds a large share of oil sources, of refinery sites, of "offset rights" to pollute air, transmission rights of way, harbor sites, and other such limited lands.

    Preemption is not always just a by-product of expansion; it may be the main point.  For example, in 1993 Builders' Emporium, a large chain of California hardware stores with large parking lots in good locations, closed down and sold out.  The sites were bought up by the largest grocery chain in southern California, Vons Company.  According to news reports, this is "a shut-out strategy against competitors."  Vons will convert 6-8 Emporium stores to Vons' markets, and "hold onto the others until commercial rents rebound -- then market them to non-rivals."

    Salomon Bros. analyst Jonathan Ziegler, far from being shocked, praises this as "ingenious."  "You're controlling who's in your market area."  Ralphs, another grocery chain, had been looking for sites and is now shut out.  The stores remain empty today; the land idle.  Read the whole article

    Mason Gaffney:  Oil and Gas Leasing: a Study in Pseudo-Socialism

    Who buys to hold these vast reserves for distant future use? They are of investment grade only for those with waiting power. Unripe lands and resources are probably the most closely held assets there are. Poor people and small businessmen need busy capital right now. Only a few of the wealthiest people have the deep pockets and slack money to buy far ahead, to maintain high reserve/output ratios. These markets in far future values are their special preserve.

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

    The bonus system originated on private uplands. It was a way for big oil firms to dazzle various rustics, pressed for cash, by tempting them with front money for their mineral rights. The companies had the cash, the connections, and intimidating expertise; they wrote the rules their way. The rules included a cap of 12.5% on the long-term "royalty," the only means by which lessors participated over the long pull, and retained a share in gushers and bonanzas that proved in excess of original estimates - estimates much better known to the bidders than the lessors. When the companies moved onto public lands they brought the same system with them. It was by then an industry standard.

    The only "bid variable" in this system is the bonus. With the royalty capped, there are large potential surpluses to attract bonus bids. The Physiocratic rule of compensation applies: a low royalty translates into a high leasehold value. The advantage of this to "the industry" - meaning the largest firms that are its most visible spokesmen and exemplars - is that it screens out many bidders, those pressed for front money. It reserves the field for a much smaller number of players, increasing their bargaining power.

    All that may sound familiar to students of 19th Century American history, and the privatization of the vast Federal domain. It is a long story of conflict between cash sales and more democratic means of placing lands. Those with cash and bank connections naturally favored cash sales. President Jefferson saw the merit in credit sales, so from 1801-20, sales were on credit. The system was badly administered, but so were all other systems of land disposal tried in that era. Collections became a problem, yet landownership was democratized. It enabled Andrew Jackson to proclaim on Thanksgiving Day, 1835, "We thank Thee for the absence of unemployment which in the King-ridden countries of the world is causing widespread suffering among the toiling masses and has led to riots ... (and that) there will be none to freeze, starve, or be beset by the fear of want this winter or the winters yet to come." Read the entire article

    Mason Gaffney: Rising Inequality and Falling Property Tax Rates
    Vanishing Farmers and Unaffordable Farms
    The Vanishing Middle Class;  Gini Ratio
    The Rise of Land Quality in Vast Farms
    Rising Land Share and Rising Ratio of Price to Cash Flow
    National Data
    Concentration of irrigated land
    Land Concentration for Farms Ranked by Sales
    Lack of buildings on latifundia
    Lack of family labor on latifundia
    Comparisons Among States
    Lesser Improvement of Land in States with Larger Farms
    Urban Influence
    Association of Property Taxation and Land Improvement

    It is a common belief that property tax relief is "good for farmers." It certainly raises the private share of economic rent. That in turn raises the investment grade of farmland and encourages its purchase as a store of value, a place to park slack money. This may be at odds, however, with using it as a vehicle for enterprise and an outlet for workmanship. Lower farm property taxes are associated with lower ratios of capital to land, and labor to land, both over time and among states. They are also associated with bigger mean farm size and less equal distribution of farm sizes.

    In the sections that follow, I first document the rise of inequality in the distribution of farmland that followed a sharp drop in farm property tax rates after 1930. Then I show, by cross-sectional analysis, a positive relationship between higher property tax rates and more intensive use of farmland, which in turn is associated with more equal distribution of farmland. Conversely, I find property tax relief associated with underuse and underimprovement of land.

    A priori, a tax on buildings works to suppress building and to penalize smaller farmers, whose building to land ratio is higher than that of bigger farmers. The findings seem to show, therefore, a stronger countereffect, proincentive and pro-subdivision, of the other part of the property tax, the part based on land value.
    Now, however, 34 percent of all irrigated land is in the top bracket, farms of 2,000 acres and over. (10) Control of irrigated land means control over water. Control of water gives control over arid lands roundabout. Ownership and control based on water have become highly concentrated. For farms with irrigated land, GR = .82, (11) substantially higher than the GR of .76 for all farms. ...

    To sum up,
    • rising acreages mean there are fewer farms overall.
    • Rising labor prices per farm mean aspiring farmers who lack prior wealth can no longer buy in.
    • Rising Gini Ratios mean acreage is less equally shared among a given number of farms.
    • Rising Gamma factors mean the higher quality land is moving into bigger farms.
    • The Gamma data are confirmed by rising shares of cropland and irrigated land in vast farms.
    • Rising P/C ratios reflect a higher LSREV, and they mean it is harder for a newcomer to acquire any farm acres.

    The combination means the agricultural ladder has been pulled up. Entry is nearly impossible for farmers lacking outside finance; exit and latifundiazation proceed apace. These changes accompanied and followed a 40 percent drop in farm property tax rates.  ...


    A result of rising concentration is the separation of land from capital. With some exaggeration, American latifundia are now lands without buildings, but buildings cluster on smaller farms, many without enough land. This implies at least three points.

    • First, building wealth is more equally distributed than land wealth.
    • Second, the property tax would be more progressive if changed to a pure land tax, exempting buildings.
    • Third, many latifundia are not being used to their potential, while capital on some small farms is undercomplemented with land. I support the case first using national data, and then by comparing states.
    It is awkward that the 1987 Census of Agriculture defines "farm size," and ranks farms, only by acres rather than value.  ...

    Concentration of irrigated land

    The yield per acre of most crops stays level or rises with harvested acres per farm. At the same time, sales per dollar of real estate fall somewhat. (21) The most likely reason is that the quality of harvested land rises with quantity. There is, to be sure, a trade-off between quality and quantity, but there is also a bond. Whoever can afford more can afford better. Which effect is stronger? The question must be resolved by data.  ...

    Comparing different crops, high values of GR go with crops that are mostly irrigated. For example, 85 percent of tomato acres and 14 percent of silage corn are irrigated. For tomatoes, GR = .91; for silage corn, GR = .52. (26)
    (26) Those who find GR index numbers too abstract will find more meaning in these raw data. For tomatoes, the top acreage bracket contains 1.1 percent of the farms, 45 percent of the harvested acres, and 52 percent of the irrigated acres in tomatoes. For silage corn, the top bracket contains 1.0 percent of the farms, 11.3 percent of the harvested acres, and 26 percent of the irrigated acres in silage corn. ...
    Lack of buildings on latifundia

    The 1940 Census of Agriculture was the last to separate $L from $B, overall. In 1940 the building share of real estate value ($B/[$L+B], or BSREV) was .69 in the lowest acreage bracket, .31 for all farms, and .12 for farms of 1,000 acres and over.

    AELOS (1988) gives no comparable comprehensive data, but it does give two series that test the point and have the advantage of disaggregation. One is for "owner-operators" and one for "landlords with debt." For the owner-operators, ranked by acres per farm, BSREV was .63 for farms under 10 acres; .29 for all farms; and .12 for farms of 2,000 acres and over. (37) Building values are much more equally distributed among these farms than land values. ...
    The inverse relationship between PTR and GR is particularly consistent and noteworthy.  ...


    One may at least firmly conclude that large farm units are less improved and less peopled than small and medium-sized farms. There are two possible interpretations. One is that big farms are more efficient, getting more from less, but that is refuted by their getting less output per $L. The other is that Veblen was right, many of them are oversized stores of value, held first to park slack money and only secondly to produce food and fiber, and complement the owner's workmanship. The Florida 9 [the high LSREV states] may represent a home grown rural "third world" of large, underutilized landholdings that preempt the best land and force median farmers onto small farms on low-grade land.

    The issue cannot be settled in a few words, but the implications for tax policy are the same either way. If large units are more efficient, they can bear heavier taxes. If they are less efficient, heavier PTRs will induce them to release surplus land for others, which will tend at the margins to equalize factor proportions, moving more states from the Florida toward the Wisconsin model. Read the whole article

    Walt Rybeck: Have We Forgotten The Foundation?

    The land ethic and land practices, which served our economy and cities so well, sadly fell into disrepair. Here are five of the more important reasons:

    • One: By 1900 the frontier was gone. The country was virtually all fenced in. Historian Frederick Jackson Turner in the 1890s underscored the frontier's importance. Its free or cheap land had been a safety valve for labor. Workers who felt exploited could go West--strike out on their own.
    • Two: Prodigious concentrations of wealth materially altered the economic landscape. Some of these were based on railway land giveaways. Most were tied to natural resource monopolies -- of coal, timber, oil, cattle lands and so forth -- whose owners found ways to fend off land taxes.
    • Three: A shift from local to federal power occurred in the political arena. The national government had to grow to save the Union and execute the Civil War. It also expanded to combat abuses of giant combines and trusts. To underwrite this growth, Congress turned primarily to tax-ing production and incomes.
    • Four: At the urging of land monopolists who practically owned many state legislatures in the late 1800s, state governments discarded property taxes, replacing them with income and sales taxes. Local governments also gradually began to decrease their reliance on property taxes.
    • Five: The property tax itself was transformed. It became less a tax on land values, increasingly a tax on improvements--that is, on houses, stores, offices and other edifices on the land. These factors gave rise to slums, to panics (as depressions were then called), and a widening gap between the haves and have-nots. As a corrective, Henry George in his 1879 masterwork, Progress and Poverty, urged Americans to address the land problem. He inspired a large popular following, but many academics, politicians, economists and captains of industry asked scornfully, "What land problem?"
    It calls to mind the routine where Jimmy Durante got caught steeling an elephant from a circus. A cop says, "Hey, where 'ya going with that elephant?" And Durante replies, "What elephant?" A century later, few question that we have an elephantine land problem.
    • Ecologists know it.
    • Sprawl and crawl people know it.
    • Many elected officials, homebuyers, and people trying to start a farm or a business know it.
    However, too few have a clue about how to deal with land issues, or any notion that archeological digs into our history might provide useful answers. Instead, consider what's happening:
    • Habitat volunteers build houses for the poor, making recipients and its volunteers feel real good. This is a fine example of charity combined with self-help, and it spreads awareness of a great social ill. But more housing is being abandoned and demolished than Habitat is able to build.
    • This same treadmill effect undermines federal efforts. HUD has spent billions on public housing, urban renewal and enterprise zones. Some of these programs have retarded urban decline but their strongest advocates would not claim they have come close to stopping or reversing it.
    • Cities offer tax abatements to revive decaying business districts. Yet after new buildings are established, the cities hit owners with the same tax burden that helped cause decay in the first place.
    • Some builders turn to what I call "designer sprawl." They mimic old towns and are clearly less wasteful of land than unplanned sprawl. Yet they often invade wheat fields and wood lots far from the job centers, transit lines and cultural institutions that comprise real communities -- while large quantities of usable sites that are well served by infrastructure lie fallow in those real cities and towns. These stumbling efforts recall an architectural parallel -- when people first tried rather pathetically to restore old neighborhoods with false storefronts, tarpaper bricks and Permastone.
    Urbanologists and the public need to be awakened to the central role played by taxation. They need to see that loss of our historic land tax has made speculation our top national sport -- a treacherous one at that.  Read the entire article
    Mason Gaffney: The Red and the Blue
    It is not just average incomes per capita that define the economic position of most people in a state or city.  The distribution of income and wealth makes a lot of difference.  But wait again: IRS data, and other data derived from IRS sources, vastly misstate the concentration of real income because they omit the imputed income of owner-occupied housing.  Thus, a salary-earner paying high rent in the Gold Coast of Chicago has the same reported income as one on the same salary on the same Gold Coast who owns his own million dollar house or coop or condo, and pays no rent. More: the renter’s income is actually reported as higher, because the owner gets to deduct the costs of ownership, interest and property taxes.  It’s the renters who turn Chicago blue - along with most big cities. ...

    The difference between tenants and owners is stark and obvious.  There are also differences among owners.  In poorer cities, the “skew” of home values is much less than in richer cities.  “Skew” means inequality, and is measured in many ways.  An easy way is the ratio of the mean home value to the median value: the higher the ratio, the greater the skew.  In southern California, as we move from the red interior to the blue coast, the skew rises a lot, meaning the top values rise faster than the other values.  Thus, in the blue counties the homeowners are less equal to each other. Here, too, there is a greater gap between tenants and homeowners; and there are more tenants.

    The blue counties report higher incomes per person than the red inland counties.  You might think this would compensate for their higher home values, but you’d be wrong.  Moving from red to blue, home values rise faster than incomes.  The National Association of Realtors (NAR) and its state affiliates report “Affordability Indexes” for different cities.  These indexes show what fraction of the residents can afford to buy the median-priced home.  The higher the median income, the lower the Affordability Index. Counter-intuitive?  Again, that is because home values rise faster than incomes.  The blue counties are those with lower affordability indexes.

    The same pattern prevails nationwide. Median income ranges from a low of $36.3K in El Paso to a high of $91.5K in Washington, D.C., a ratio of 2.5/1.  Median home values range from a low of $87K in Buffalo/Niagara Falls to a high of $531K in the San Francisco Bay area, a ratio of 6.1/1.  This is a general pattern: incomes vary a little among places; home prices vary a lot.  Blue states and blue counties are generally those where land is out of reach of a high fraction of the people.

    What that means for social psychology and voting patterns I leave to you. One thing is clear: “income” is a catchword that has obscured analysis for Willkie’s fifty years, and more.  To solve the red-blue voting puzzle, we must study land values. Read the whole article
    Mason Gaffney:  Who Owns Southern California?
    These notes on concentration of landholdings were originally compiled in 1988 and have been updated from time to time since then. The most recent revisions were made in 1997.

    Several million persons, perhaps half the resident adult population, hold titles to land in southern California. With so many holders, the median holding is perforce small, although well above the national median. But the mean holding is well above the median, indicating a skewed distribution.

    All wealth distributions are skewed; so, to a lesser degree, are income distributions. Landholding, however, is more skewed than other distributions. In 1985 the Internal Revenue Service released a Report based on a study of 1983 estate tax returns. According to the Report, "More than one half of his (the mean top wealth-holder's) wealth was held as real estate and corporate stock, with real estate surpassing corporate stock as the most prominent asset in the top wealth-holder's portfolio." (AP dispatch by Jim Luther, Riverside Press Enterprise, 8 March 1985, p. A3.) This Report warrants careful study. ...

    1. HOLDINGS BY ALIENS  ... Non-resident aliens own about 75% of the "major" buildings in the L.A. CBD west of Broadway ...
    2. AMERICANS FROM OTHER STATES ... A second kind of holder is the out-of-state American, individual or corporate.
    3. CALIFORNIANS Many of our largest landholders also live in California. This is partly because the lands are here, but moreso because certain places in California are good places to live. One of the advantages of receiving property as opposed to labor income is it lets one choose his residence. California ranks after New York in the number of rich Americans (using Forbes' list) who reside here.

    Also included here are California-based corporations. A corporation's "base" refers simply to the site of its headquarters: its shareholders are scattered around the world, and the major shareholders, who exercise control, are effectively screened behind layers of trusts and financial institutions, so they are impossible to identify with certainty.
    Institutions acquire land for their operations and then it tends to stick to them for various reasons. It is tax free, for one, so long as they retain it (and do not use it commercially). They are not subject to corporate raids. Thus there is no mechanism whereby the current opportunity cost of land is felt by management. It never appears in their budgets; they never need compete for or justify it. College Boards are not accountable to any public body, a precedent set by Marshall's U.S. Supreme Court in Dartmouth College v. Woodward, 1819.
    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. ...

    Eventho' almost everyone would worry about paying more tax, the PTS is inherently progressive. Studies of the towns in Pennsylvania that have shifted some tax from buildings to land show that about 75% come out ahead (nearly the entire bottom four quintiles of income earners), 20% break even and 5% pay more (together a bit larger than the top quintile of income recipients), who are usually absentee owners.

    Without coercion or remote planning, the PTS improves our settlement patterns. Regulations and zoning, some assume, might be vitiated or obviated, become obsolete. Instead, the PTS makes it easier for regulations and zoning to do their job. Since the land tax lowers land price, buying land for parks and reserves is more easily afforded. The loss in revenue from removing the newly public lands from the tax rolls would be offset somewhat by the corresponding rise in value of sites near the protected open space. Creating green spaces raises the density of already developed land, and thus its value. Furthermore, land dues reduce the profit from land development, making it a less attractive investment, and land use decisions of less economic consequence. After a while, people with deep pockets would turn to investments that, post-shift, would be untaxed. Reserving land for recreational or natural uses becomes less contentious; people could more easily determine an optimum proportion of green space to developed space. ...

    Might the PTS fall heavily on low-income land holders and elderly homeowners? The land-rich, money-poor old widow could suffer if society were to levy sites. Eventho' the vast majority of poor people would come out ahead, there probably will be the rare exception. To deal with "the widow on a valuable lot", the new policy could include deferments.

    Just as some poor could pay more, some rich could pay less, such as the owners of a skyscraper that'd be the highest (literally) and best use of a site. While a PTS could be a tax break for a few, the intent of the shift is not so much to whittle away fortunes as it is to promote prosperity, equity, and sustainability. Were society to attain such goals, letting some fortunes escape unscathed is a small price to pay. Also, putting a site to best use, while profitable, also benefits the community by providing convenient employment, bringing money into the local economy, and by precluding less efficient development, such as sprawl.

    Since the shift is progressive, then the rich are footing the bill for everyone else. To answer this charge that one group will pay more (those who can afford it), proponents could note that the amount one pays is scaled according to the value of what one takes -- a parcel of nature. The payment is for exclusive use to our common heritage. Those who exclude the rest from the best must expect to pay the most. ...

    In the final analysis, can those who would redefine progress and other social reformers avoid the issue of what to do with the immensity of Earth's worth? No. The present policy of low land taxes and the movement to abolish all taxes on landed property assume that Earth is ours for the exploiting. It is a mindset that must be contradicted and laid to rest -- as was the justification for slavery -- if environmental and planetary values are ever to ascend to the same level as property rights. The profit from speculation or over-extraction withers away when land dues are put in place. ...

    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

    Jeff Smith Share Rent, Transform Society
    If society decided to share among its members all the annual value of society's sites and resources and air space, what would happen?

    What other social relations might change? Increase land ownership participation in community and it benefits community, with town hall meetings and block parties. Those kinds of communities have less crime. Read the whole article
    Jeff Smith: What the Left Must Do: Share the Surplus
    What would you do if you could work two days and take five off? Write? Play soccer? Tend to the community garden? Time off is an option made increasingly viable by our relentlessly rising rate of productivity. French Marxist and media critic Jean Baudrillard, while still advancing the interests of labor, implores the Left to move on from seeing humans as workers to seeing workers as human beings, with more needs than merely the material. Enabling people to live their lives more fully is an issue made to order for rescuing the Left from the doldrums that descended when “history ended”.

    What would single mothers do with enough income to stay home? What would minorities do with the wherewithal to begin their own businesses? What would communities do if they did not leak resources up to an upper class and out to a distant lender or tax collector? What would the elite do without our commonwealth? The means to these ends is an extra income apart from labor or capital (savings), that is, a “social salary” from society’s surplus, a “Citizens Dividend” from all the rents, natural and governmental, that people pay for land and to the privileged, redirected to everyone equally.  Merely demanding a fair sharing of the bounty from nature and modern society would raise people’s self-esteem, a key component for political involvement. Actually receiving an income supplement would transform our lives and restructure society.

    Unless humanity needs militarism, corporate welfare, and debt service, it’s fair to say most public revenue gets wasted. Demanding a dividend – similar to Alaska paying residents a share from oil royalties – forces a new dialog on spending priorities. Beyond arguing “bread not bombs”, a dividend replaces expenditures by politicians (necessarily influenced by donors) with spending by citizens, the people who generate the surplus in the first place. With a dividend, citizens get to see themselves as direct beneficiaries from reigning in the wild spending spree on imperial aggression, disloyal multinationals, and on “borrowing” money that never existed until “lent” by the Federal Reserve. ...

    The Left requests and the Right promises jobs – the Left for the income, the Right in order to keep people in their place. Workers want to be paid for going along with the program. Bosses want to accommodate them, albeit not fully; maintaining some unemployment spooks workers and keeps wages down. Since jobs are the knee-jerk cure of everyone, they can not be the signature issue of the Left. Nor can they lift our sights. The call for jobs does not come from a place of respect but from a willingness to accept the status quo, with prevailing hierarchy left intact.

    To deliver a bigger pie, the Right touts efficiency and growth; to better distribute the pie, the Left urges equity and jobs. Yet jobs are less for distributing, more for producing – if that. As automation and globalisation expand the pie, they contract the workforce. Even when, or especially when, people take time off to go to war, output increases, proving we’re well over over-capacity. Juliet Schor in her Overworked American notes this rise in productivity does not bless us with leisure but curses us with unemployment.

    Demanding jobs rather than a fair share of society’s surplus implies that there is no commonwealth or that expropriating it by a few is OK. Neither is true. Rents are real, and they are ours. There is a free lunch (just ask the privileged), as those downing it do get money for nothing. And since society, not lone owners, generates these values, that flow of funds belongs to everyone.


    The value of a parcel of land is initially based on the natural endowments of the location (“location, location, location”), created not by an owner but by whatever created all of us. Next, land value rises with the presence of society, and grows with the population of society. It’s highest where society is densest, in the city centers, typically 2000 times more valuable than sites in the boondocks. Land values as economic values disappear whenever society quits respecting one’s claim, as in a war zone; there, real estate offices nimbly shut down. And while land titles may be the holy grail of wannabe homeowners, they’re also the ticket to pocket unearned rent by absentee landlords, such as Donald Trump.

    Making land public does not guarantee that the public end up with the rent. The public’s steward, the state, often lets public resources at “fire-sale” prices, unduly enriching Chevron, Arco, Kerr-McGee, Weyerhauser, etc. The state gifts enormously valuable licenses for TV, radio, and cell phones to GE, Disney, Time Warner, and Clear Channel. The metaphor, “field of knowledge”, lets us see patents and copyrights as flags; by excluding innovative outsiders, they not only skew techno-progress (thus addicting civilization to oil) but also enrich those few who can afford to corral them: GM, DuPont, and Microsoft. Similarly, a utility franchise lets AT&T pay investors, and Enron insiders, handsomely.  ...

    Buying a land title – the granddaddy of all privileges – typically requires a mortgage, which disguises rent as “interest”. Pierre Joseph Proudhon (1809-1865), French journalist/anarchist, noted: "As long as land monopoly is maintained, the few can take possession of what Nature free of charge has granted to everyone, and usury will penetrate the whole society, and we will have banks, which instead of being servants for the exchange of goods will become powerful extorters." He called this one; today’s banks do bleed the economy.

    What does the central bank, the private consortium dubbed the Federal Reserve, lend to the US? Nothing. Given the power to create money by Congress (which the Constitution had given to Congress), from no savings at all but merely from legal standing, it manufactures credit, which the US borrows, at interest. The US exempts this interest from its income tax; people who hold US bonds – mainly the wealthy – keep this income tax-free.

    The much and justifiably criticized corporation is in essence its corporate charter, given value by limiting the liability of managers, directors, and investors. It’s worth at least the cost of the insurance payments not made by the corporation, which would equal the costs imposed upon worker, customer, and nature. As the “need” arises, legislatures extend limited liability even further: Congress legally lowered the greater risk of nuclear power to benefit Westinghouse, of the Valdez oil transport spill for Exxon, and the Y2K software design bug for Microsoft. Politicians define legally “safe” amounts of polluted air and water for GM and Monsanto, keeping safe the wealth of those responsible.

    Not to be outdone by any legislature, the Supreme Court has ruled in favour of compensating landowners for environmental “takings”, but has remained silent about landowners compensating the public for any “givings”, as when site values skyrocket near a new light rail stop. Molly Ivins wrote,
    "Henry George must be in his grave spinning' like a cyclotron. We, the people at large, make the land more desirable; and then the landowners want us to pay them because we won't allow them to poison the air or to pollute the rivers." (1995 March)
    That’s how great fortunes are made: by sloughing off private costs (which become “negative externalities”) while soaking up public benefits (some “positive externalities”). Land titles, corporate charters, and other privileges – mere pieces of paper – are worth trillions each year. The corporations – from the Federal Reserve to Exxon (both founded by the “oiligarchy”) – that receive these privileges make their owners rich or richer. Their wealth is not compensation for the exertions of either labor or capital, not profit in the market from output, but rent from present lobbying of legislatures or past conquest of others’ lands. Thus laws (“privilege” means “private law”) funnel multi-trillions of dollars each year from the many to the few. Read the whole article
    Jeff Smith: How Sharing Earth Brought Peace

    Besides rent from land titles, resource leases, broadcast licenses, and standards waivers, revenue could be raised, too, from monopoly patents, utility franchises, and corporate charters. Charging full market value for these pieces of papers, we'd rake in trillions each year from the privileged elite. We'd still be the envy of the world but no longer the master of the world. The terrorist crisis would make America better; it'd get us to do what we should have been doing all along. ...

    Early last century, Gifford Pinchot, first head of the US Forest Service, said: "The earth belongs of right to all its people and not to a minority, insignificant in numbers but tremendous in wealth and power. The people shall get their fair share of the benefit which comes from the development of the country which belongs to us all with equal opportunity for all and special privileges for none." A man in a Republican administration could say that then. We need to hear it again now.   Read the whole article
    Jeff Smith: Sharing Natural Rents to Sustain Human Society
    To get rich, or more likely to stay rich, some of us can develop land, especially sprawling shopping centers, and extract resources, especially oil. While sprawl and oil depletion are not necessary, they are more profitable than a car-free functionally integrated city. Under the current rules of doing business, waste returns more than efficiency. We let a few privatize rent -- ground rent and resource rent -- although rent is a social surplus. As if rent were not profit enough, winners of rent have also won further state favors -- tax breaks, liability limits, subsidies, and a host of others designed to impel growth (20 major ones follow herein).

    If we are to sustain our selves, our civilization, and our eco-system, we must make some hard choices about property. What we decide to do with rent, whether we let it reward our exploiting or our attaining eco-librium, matters. Imagine society waking up to the public nature of rent. Then it would collect and share its surplus that manifests as the market value of sites, resources, the spectrum, and government-granted privileges. Then we could forego taxing labor and capital. On such a level playing field, this freed market would favor efficiency - the compact city - not waste - the mall and automobile. ...

    Hudson: Lies of the Land

    Michael Hudson and Kris Feder: Real Estate and the Capital Gains Debate

    Capital gains taxation has been a divisive issue in Congress at least since the debates surrounding the Tax Reform Act of 1986, which, aiming to eliminate tax loopholes and shelters and preferences, repealed preferentially low tax rates for long-term gains.1 To bring effective capital gains tax rates back down again was President Bush’s “top priority in tax policy.“2 In 1989, Senate Democrats blocked a determined drive to reduce effective tax rates on the part of Bush, Republican Senators Packwood, Dole and others, and a few Democratic allies.3 The administration argued that the tax cuts would stimulate economic growth and induce asset sales, thereby actually increasing federal tax revenues; Congressional Democrats countered that the plan benefited mainly the wealthy, and that tax revenues would in fact decline.4 The Joint Committee on Taxation projected that budget shortfalls beginning in 1991 would sum to about $24 billion by 1994 --  and that most of the direct benefits would go to individuals with over $200,000 in taxable income. House Speaker Thomas S. Foley said that a third of the savings would be enjoyed by those with gross incomes over one million dollars. ...

    The most frequently heard arguments for reducing capital gains taxes are:

    (1) to reduce the “lock-in” effect, by which high tax rates at realization deter asset sales;14
    (2) to relieve a disproportionate burden on homeowners;
    (3) to compensate for the erosion of capital gains by inflation, as an alternative to indexing;15
    (4) to end alleged double taxation of both capital stocks and income flows;
    (5) to spur productive enterprise and investment; and
    (6) to generate more tax revenue from the consequent growth in asset sales and productivity.

    This report calls attention to a neglected aspect of the capital gains issue --  one which bears importantly on the fifth- and sixth-named consequences.

    Much of the capital gains debate today focuses on the stock market. Business recipients of capital gains are characterized as small innovative firms making initial public offerings (IPOs). In recent years such firms have been responsible for a disproportionate share of new hiring. It is hoped that corporations will be able to raise money to employ more labor and invest in more plant and equipment if buyers of their stocks can sell these securities with less of a tax bite. Stock market gains thus are held to stimulate new direct investment, employment, and output.

    Typical of the campaign to reduce capital gains taxes is a Wall Street Journal editorial, “Capital Gains: Lift the Burden.” Author W. Kurt Hauser argues that when the capital gains tax rate was increased from 20 percent to 28 percent in 1989, the effect was to deter asset sales, causing a decline in the capital gains to be reaped and taxed. He refers, however, only to stock market gains, and specifically, to equity in small businesses. Citing the example of yacht producers, he suggests that taxing capital gains on stocks issued by these businesses “locks in” capital asset sales, thereby deterring new investment and hiring, and reducing the supply of yachts.

    Others contend that new productive investment is relatively insensitive to capital gains tax rates, arguing, for example, that most of the money placed in venture-capital funds come from tax-exempt pension funds, endowments, and foundations.

    What is missing from the discussion is a sense of proportion as to how capital gains are made. Data that is available from the Department of Commerce, the IRS, and the Federal Reserve Board indicate that roughly two thirds of the economy's capital gains are taken, not in the stock market -- much less in new offerings -- but in real estate. ...

    No capital gains duties are levied on estates passing to heirs. Indeed, inheritors of real estate may begin re-depreciating their income-yielding buildings afresh at the new (typically higher) transfer price. The estates bequeathed by the richest one percent of the population (over $600,000 in value) are now taxed at a 55 percent rate if not sheltered, but of course these are the estates most likely to shelter inheritance and gift bequests. For instance, assets given as gifts are taxed only at the time they come to be sold. If the capital gains tax were reduced or abolished, the deferral would become permanent.

    Most capital gains reaped by business partnerships accrue to real estate firms, which shelter personal income by avoiding incorporation. IRS statistics ranking capital gains in terms of how long the assets were held show that many of these gains represent quick “flips." Often these are land that has been rezoned from a low-value to a high-value use. Retaining the capital gains tax would have little effect on deterring such speculation.

    Properties held for longer periods of time by these partnerships typically are sold or swapped after having been fully depreciated. Swaps’ have long been permitted to the real, many almost perpetually free of income taxation. The logic for this loophole seems at first glance to be much like that for personal homeowners’ exemptions in selling a home to move somewhere else, without having to pay a capital gain tax in the process; but the analogy is specious. Homeowners cannot take a depreciation tax credit unless their property generates rental income, and most do not generate any income against which to claim CCAs31. In contrast, the capital gains which commercial real estate investors record for income-tax purposes are calculated, not merely on the gain in the property’s market price (as with owner-occupied homes), but on the excess of selling price over depreciated book value.

    31 Homeowners do receive imputed rental income, which is not subject to the income tax.
    Major commercial real estate investors such as pension funds, insurance companies and other large institutions are exempt from capital gains taxes, as are foreign investors. In addition to playing a dominant role in real estate, these institutional investors own nearly half of all U.S. equities. ...

    Reported capital gains in real estate were understated as a result of exclusions. On the other hand, much direct investment included the cost of land, commercial buildings, and plant and equipment. Taking this into account, we estimate that roughly 70 percent of the capital gains calculated by the IRS for 1985 probably represent real estate. Even this estimate may understate the role of land and real estate. In 1985, anticipating the planned 1986 tax reform which would raise the capital gains tax rate from 20 to 28 percent, many investors sold their securities that had registered the largest advances. Some 40 percent of the capital gains reaped by selling these stocks probably represented real estate gains. A major spur to the LBO movement driving up the stock market was an awareness that real estate gains were not being reflected in book values and share prices;36 as land prices leapt upward-funded in part by looser regulatory restrictions on S&L lending against land -- raiders bought publicly traded companies and sold off their assets, including real estate, to pay off their junk-bond backers. In effect, not only were rental income and profits being converted into a flow of interest payments; so also were capital gains. ...

    The Political Context of Real Estate Taxation
    Much of the public discussion of capital gains policy has been conducted with little reference to empirical research as to their actual character and composition in the US economy. Capital gains, and savings in general, are defended on the assumption that they are automatically transformed into new direct investment. Yet the more layers has the debt pyramid, the smaller is the proportion of savings used to finance direct investment. Moreover, our investigation suggests that a large and expanding share of the economy's capital gains -- as they are defined, measured and taxed -- has little discernible impact on net investment or employment.

    IRS estimates of capital gains measure only the small proportion that individuals are obliged to declare after all the exemptions and exclusions have been utilized. There is no estimate of the volume of capital gains generated each year, and no adequate breakdown as to where these gains occur. This statistical lacuna means that the economic cost of assorted tax loopholes is not being calculated. There is no sound statistical basis for calculating the total returns being taken by investors, or the proportion of those returns paid in taxes.

    When statistics are lacking, it often is because some interest groups are benefiting in ways they prefer not to see quantified and publicized. If land assessments lag behind actual increases in market value, for instance, land speculators, as well as homeowners, will pay less than their legislated tax share. Also -- and of direct relevance to our thesis -- the failure to distinguish statistics on land values and other real estate gains from non-real-estate capital gains in industry and finance makes it easier for the real estate industry to get its own taxes reduced along with industries in which capital gains tax cuts do indeed tend to spur productivity.

    Academic economists likewise have been remarkably slow to address this shift away from earned income to capital gains. It is true that nineteenth-century land reformers such as John Stuart Mill and Leon Wahas defined land-value gains as an “unearned increment,” and urged that they be collected by the community at large, whose economic activity was, after all, responsible for creating these gains. Ever since Henry George brought matters to a head in Progress and Poverty (1879), however, economics has largely dropped the analysis of land-value gains, and indeed, of land itself.

    Wealthy investors have won congressional support for real estate exemptions in large part by mobilizing the economic ambitions of homeowners. Most families’ major asset, after all, is their home. Two Federal Reserve studies trace the rise in gross house value from 26 percent of household wealth in 1962 to 30.1 percent in 1983 (falling back to 28.5 percent in 1989). Household real estate assets substantially exceeded holdings of stocks, bonds and trust funds (20.5 percent in 1989), liquid assets (17 percent) and total debt (14 percent). The giveaway to real estate interests is thus presented ostensibly as a popular middle class measure. The real estate industry (and the financial sector riding on its shoulders) have found that the middle classes are willing to cut taxes on the wealthy considerably, as long as their own taxes are cut even lightly. It is no surprise that President Clinton’s first major concession to the pressure for cutting capital gains taxation is directed at homeowners, despite the fact that preferences for home ownership cannot be justified as a boost to entrepreneurial investment. Such is the foreshortened economic perspective of our times.

    The LBO movement epitomizes the real estate industry‘s strategy, applying the developer’s traditional debt-pyramiding techniques to the buying and selling of manufacturing companies. Raiders emulated developers who borrowed money to buy or construct buildings and make related capital improvements, agreeing to pay interest to their mortgage bankers or other lenders, putting down as little equity of their own as possible. Having set things in motion, the landlord uses the rental income to carry the interest, principal, taxes and maintenance charges while he waits for a capital gain to accrue. The idea is to amortize the loan as slowly as possible so as to minimize annual carrying charges, while paying them out of the CCA.

    For many decades securities analysts have pored over corporate balance sheets in search of undervalued real estate whose book value does not reflect gains in market value. From the merger and acquisition movement of the 1960s through the takeover wave of the 1980s, the raider’s strategy has been to borrow money to buy the target company’s stock, and then sell off its real estate and other assets to repay the creditors, hoping that something will be left for himself after settling the debts incurred in the process. For the bankers and other creditors, LBOs were a way to put savings to work earning higher rates of interest.  The ensuing junk bond commotion pushed interest rates over 15 percent for high-risk securities, whose major risk was that quick capital gains and the cash flow available from re-depreciating properties would not cover the interest payments to the institutional investors rounded up by Drexel Burnham and the other investment bankers who underwrote the takeovers.

    The object of building, like buying and selling companies, is thus by no means only to earn rental income. Most cash flow is pledged to lenders as debt service in any case. In a world of income taxation subject to loopholes, sophisticated investors aim not so much to make profits as to reap capital gains -not only in the stock and bond markets, but also in real estate, other natural resources, and the monopoly privileges that have come to underlie much of the pricing of securities today.

    As developers borrow money to finance real estate purchases, lenders, for their part, use the real estate sector as a market to absorb and service the economy's mounting stock of savings, applying most of the rental cash flow to pay interest to savers. The end result is that most total returns are taken by the wealthiest ten percent responsible for nearly all the economy's net saving. Viewing US economic statistics from this perspective shows that not to calculate capital gains in the national income accounts alongside directly “earned” income helps foster the illusion that more equality exists among Americans than actually is the case. The fact is that earned income is more equally distributed than unearned gains.

    This distinction between real estate (and by extension, other natural resource industries and monopolies) and the rest of the economy helps explain the familiar economic rule that inequalities of wealth tend historically to exceed inequalities of income. The reason is that the wealthiest layers of society control even more of the economy's assets -- and the capital gains on these assets -- than they do its income. They also obtain a larger proportion of cash flow and other non-taxable income than they do of taxable “earned” income.

    This phenomenon has long been known, but not well explained. Edward Wolff has shown that wealth is more unequally distributed than income, but he leaves capital gains out of account in explaining how the American economy has grown more top-heavy.45 It is unequal wealth that is primarily responsible for generating inequality of incomes. The more the returns to wealth can avoid taxation by being categorized as capital gains, the faster this inequality will polarize society.

    43 Wolff (1995), p. 27. “The top one percent of wealth holders has typically held in excess of one-quarter of total household wealth, in comparison to the 8 or 9 percent share of income received by the top percentile of the income distribution.”

    Given the current US depreciation laws and related institutions, to lower the capital gains tax rate across the board is to steer capital and entrepreneurial resources into a search for unearned rather than earned income. It rewards real estate speculators and corporate raiders as it shifts the burden of taxation to people whose primary source of income is their labor. The budget crisis aggravated by such a policy also ends up forcing public resources to be sold off to meet current expenses -- sold to the very wealth-holders being freed from taxation. In this way wealth consolidates its economic power relative to the rest of society, and translates it into political power so as to shit? the tax burden onto the shoulders of others. The first element of this strategy has been to defer revenue into channels that are taxed only later, as capital gains. The second has been to tax these gains at a lower rate than earned income -- a  fight that has broken out in earnest following the 1996 presidential elections. 

    Taxation of capital gains is widely attacked as a “soak the rich” scheme, a program of wealth redistribution that will adversely affect growth in productivity and efficiency. Kurt Hauser’s Wall Street Journal editorial counters this with the observation that over half of all taxpayers reporting capital gains have adjusted gross incomes of under $50,000, implying that a tax cut would not preferentially benefit the wealthy. He neglects to observe, however, that the poorer half of taxpayers account for less than ten percent of the total dollar value of capital gains46 -- or that the capital gains tax is virtually the only remaining federal levy on real estate income.Low capital gains tax rates and the tax deductibility of mortgage interest have contributed to the polarization of wealth distribution. A further reduction in the capital gains rate would worsen this maldistribution by making real estate virtually tax-free except for local property taxes, which fell from 10 percent to just 7.4 percent of all taxes at all levels of government between 1955 and 1989.47
    46 Hauser (1995); Wolff (1995).
    47 Rosen (1992), p. 22.

    Time columnist John Rothschild recently accused opponents of a capital gains tax cut of resisting “any reform, no matter how it may benefit society in general,” simply “so that the rich cannot benefit."48The point, however, is that the tax code encourages the wealthy to enrich themselves in ways that are detrimental to the economy at large. The presumed trade-off between equity and efficiency is mythical, at least with respect to real estate under the current federal tax code. The implication is that any resulting growth in income inequality is the price a free society must pay for an efficient system of economic incentives. Indeed, it would be difficult to oppose widely shared progress simply because the rich are gaining faster than the rest of society.

    An inordinate focus on stock market gains -- especially the selection of small industrial companies such as a yacht producer just making his first stock offering -- diverts attention from the extent to which a low capital gains tax benefits real estate investors preferentially. The irony of casting the issue in terms of the stock market rather than real estate investment is that financial investors have already devised an array of strategies to evade taxation on stock gains. Institutional investors already are exempt from capital gains taxes on securities, as they are on their real estate holdings. Wealthy individual investors can arrange fictitious “short” sales (“sales against the box”), obtaining the proceeds of their stocks without having to actually sell them, by collateralizing them with a bank and borrowing an amount of money equal to the value of the stocks. This is the equivalent of a sale, for it provides immediate proceeds -- but without incurring taxes on the securities’ rise in value. Bankers find this a lucrative business, while the Treasury foregoes revenue at the expense of less affluent taxpayers. To abolish capital gains taxes would enable these fictitious “against the box” maneuverings finally to be liquidated without having paid any taxes. Also freed would be the accumulated over-depreciation of buildings that has sheltered past real estate income.

    If the intention is to provide an incentive for new direct investment, employment, and industrial modernization, then an across-the-board capital gains tax cut is at best a blunt policy instrument. We have examined several reasons to doubt that further cuts in capital gains taxes will have a pronounced incentive effect on new direct investment.49 Capital gains tend to reward accumulation of old assets more than production of new wealth. The stock market is mostly a second-hand market, but we do not lean too hard on this point because the (discounted) anticipation of future capital gains may boost the demand for new stock issues, making it somewhat easier for corporations to finance new investment. The main point is that most taxable capital gains represent appreciation of non-produced land and of structures built years ago. In the current institutional setting, real estate gains are artificially inflated by generous depreciation rules, which apply not only to newly constructed buildings but also to second-hand buildings and even, effectively, to land, which neither depreciates nor is replaced. As long as these and other rules are in place, an across-the-board capital gains tax cut will preferentially benefit real estate and financial speculation at the expense of industrial production. It will also increase the federal budget deficit, ultimately at the expense of lower- and middle-income taxpayers.

    49 A capital gains tax cut may relieve a lock-in effect caused by taxing capital gains upon realization instead of accrual. However, Gaffney (199 l), p. 50, writes that “the locked-in effect results mainly from stepup at death, rather than from a high rate per se.”

    One reason often cited for taxing capital gains at lower rates than ordinary income is to exempt “phantom income” arising from inflation. The logic of indexing is that if prices rise by, say, 50 percent between the time of purchase and the time of sale, then this amount should not be taxed; to do so would be to tax investors just for “staying in place.” However, inflation erodes all monetary assets, not just capital gains,50 and may erode the purchasing power of labor income, as has occurred for most wage-earners in recent years. Equity in the face of inflation is thus a poor argument for preferential capital gains tax rates.
    ... Read the whole article

    Henry George: How to Help the Unemployed   (1894)

    ... For the question of the unemployed is but a more than usually acute phase of the great labor question -- a question of the distribution of wealth.  Now, given any wrong, no matter what, that affects the distribution of wealth, and it follows that the leading class must be averse to any examination or question of it. For, since wealth is power, the leading class is necessarily dominated by those who profit or imagine they profit by injustice in the distribution of wealth. Hence, the very indisposition to ask the cause of evils so great as to arouse and startle the whole community is but proof that they spring from some wide and deep injustice.

    What that injustice is may be seen by whoever will really look. We have only to ask to find. ...

    "Scarcity of employment" is a comparatively new complaint in the United States. In our earlier times it was never heard of or thought of. There was "scarcity of employment " in Europe, but on this side of the Atlantic the trouble -- so it was deemed by a certain class -- was "scarcity of labor." It was because of this "scarcity of labor " that negroes were imported from Africa and indentured apprentices from the Old Country, that men who could not pay their passage sold their labor for a term of years to get here, and that that great stream of immigration from the Old World that has done so much to settle this continent set in. Now, why was there "scarcity of employment" on one side of the Atlantic and "scarcity of labor" on the other? What was the cause of this difference, of which all other social and political differences were but consequences? Adam Smith saw it, and in his "Wealth of Nations" states it, but it did not need an Adam Smith for that, as everyone who knew anything of the two countries knew it. It was, that in this country land was cheap and easy to get, while in Europe land was dear and hard to get. Land has been steadily growing dear in the United States, and as a consequence we hear no longer of "scarcity of labor." We hear now of "scarcity of employment."

    In the first quarter of this century an educated and thoughtful Englishman, Edward Gibbon Wakefield, visited this country. He saw its great resources, and noted the differences between the English-speaking society growing up here and that to which he had been used. Viewing everything from the standpoint of a class accustomed to look on the rest of mankind as created for their benefit, 'what he deemed the great social and economic disadvantage of the United States was "the scarcity of labor." It was to this he traced the rudeness of even what he styled the upper class, its want of those refinements, enjoyments, and delicacies of life common to the aristocracy of England. How could an English gentleman emigrate to a country where labor was so dear that he might actually have to black his own boots; so dear that even the capitalist might have to work, and no one could count on a constant supply ready to accept as a boon any opportunity to perform the most menial, degrading, and repulsive services? Mr. Wakefield was not a man to note facts without seeking their connection. He saw that this "scarcity of labor" came from the cheapness of land where the vast area of the public domain was open for settlement at nominal prices. A man of his class and time, without the slightest question that land was made to be owned by landlords, and laborers were made to furnish a supply of labor for the upper classes, he was yet a man of imagination. He saw the future before the English-speaking race in building up new nations in what were yet the waste spaces of the earth. But he wished those new nations to be socially, politically, and economically newer Englands; not to be settled as the United States had been, from the "lower classes" alone, but to contain from the first a proper proportion of the "upper classes" as well. He saw that "scarcity of employment" would in time succeed "scarcity of labor" even in countries like the United States by the growth of speculation in land; but he did not want to wait for that in the newer Britains which his imagination pictured. He proposed at once to produce such salutary "scarcity of employment " in new colonies as would give cheap and abundant labor, by a governmental refusal to sell public land, save at a price so high as to prevent the poorer from getting land, thus compelling them to offer their labor for hire.

    This was the essential part of what was once well known as the Wakefield plan of colonization. It is founded on a correct theory. In any country, however new and vast, it would be possible to change "scarcity of labor" into "scarcity of employment" by increasing the price put on the use of land. If three families settled a virgin continent, one family could command the services of the others as laborers for hire just as fully as though they were its chattel slaves, if it was accorded the ownership of the land and could put its own price on its use. Wakefield proposed only that land should be held at what he called "a sufficient price" -- that is, a price high enough to keep wages in new colonies only a little higher than wages in the mother-country, and to produce not actual inability to get employment on the part of laborers, but only such difficulty as would keep them tractable, and ready to accept what from his standpoint were reasonable wages. Yet it is evident that it would only require a somewhat greater increase in the price of land to go beyond this point and to bring about in the midst of abundant natural opportunities for the employment of labor, the phenomena of laborers vainly seeking employment. Now, in the United States we have not attempted to create "scarcity of employment" by Wakefield's plan. But we have made haste by sale and gift to put the public domain in the hands of private owners, and thus allowed speculation to bring about more quickly and effectually than he could have anticipated, more than Wakefield aimed at. The public domain is now practically gone; land is rising to European prices, and we are at last face to face with social difficulties which in the youth of men of my time we were wont to associate with "the effete monarchies of the Old World." Today, as the last census reports show, the majority of American farmers are rack-rented tenants, or hold under mortgage, the first form of tenancy; and the great majority of our people are landless men, without right to employ their own labor and without stake in the land they still foolishly speak of as their country. This is the reason why the army of the unemployed has appeared among us, why by pauperism has already become chronic, and why in the tramp we have in more dangerous type the proletarian of ancient Rome.

    These recurring spasms of business stagnation; these long-drawn periods of industrial depression, common to the civilized world, do not come from our treatment of money; are not caused and are not to be cured by changes of tariffs. Protection is a robbery of labor, and what is called free trade would give some temporary relief, but speculation in land would only set in the stronger, and at last labor and capital would again resist, by partial cessation, the blackmail demanded for their employment in production, and the same round would be run again. There is but one remedy, and that is what is now known as the single-tax -- the abolition of all taxes upon labor and capital, and of all taxes upon their processes and products, and the taking of economic rent, the unearned increment which now goes to the mere appropriator, for the payment of public expenses. Charity can merely demoralize and pauperize, while that indirect form of charity, the attempt to artificially "make work" by increasing public expenses and by charity woodyards and sewing-rooms, is still more dangerous. If, in this sense, work is to be made, it can be made more quickly by dynamite and kerosene.

    But there is no need for charity; no need for "making work." All that is needed is to remove the restrictions that prevent the natural demand for the products of work from availing itself of the natural supply. Remove them today, and every unemployed man in the country could find for himself employment tomorrow, and his "effective demand" for the things he desires would infuse new life into every subdivision of business and industry, even that of the dentist, the preacher, the magazine writer, or the actor.

    The country is suffering from "scarcity of employment." But let anyone to-day attempt to employ his own labor or that of others, whether in making two blades of grass grow where one grew before, or in erecting a factory, and he will at once meet the speculator to demand of him an unnatural price for the land he must use, and the tax-gatherer to fine him for his act in employing labor as if he had committed a crime. The common-sense way to cure "scarcity of employment" is to take taxes off the products and processes of employment and to impose in their stead the tax that would end speculation in land.

    But, it will be said, this is not quick enough. On the contrary, it is quicker than anything else. Even the public recognition of its need, by but a part of the intelligence and influence that is now devoted to charity appeals and schemes, would have such an effect upon the speculative price of land as to at once set labor and capital to work.  Read the entire article

    Henry George: Justice the Object -- Taxation the Means (1890)

    Now see, take it in its lowest aspect — take it as a mere fiscal change, and see how in accord with every dictate of expediency, with every principle of justice, is the Single Tax. We have invented and invented, improved and improved, yet the great fact is, that today we have not wealth enough. There are in the United States some few men richer than it is wholesome for men to be. But the great masses of our people are not so rich as civilised Americans at the close of the nineteenth century ought to be. The great mass of our people only manage by hard work to live. The great mass of our people don't get the comforts, the refinements, the luxuries that in the present age of the world everyone ought to have. All over this country there is a fierce struggle for existence. ...

    This is the shore of the Pacific. This is the Golden Gate. The westward march of our race is terminated by the ocean, which has the ancient East on its farther shore; no farther can we go. And yet here, in this new country, in this golden State, there are men ready to work, anxious to work, and yet who, for longer or shorter periods, cannot get the opportunity to work. The farther east you go, the worse it grows. To the man from San Francisco, who has never realised it before, there are sights in New York that are appalling. Cross the ocean to the greater city — the metropolis of the civilised world — and there poverty is deeper and darker yet. What is the reason? If there is more wealth wanted, why don't they get more?

    We cannot cure this evil of poverty by dividing up wealth, monstrous as are some of the fortunes that have arisen — and fortunes are concentrating in this country faster than ever before in the history of the world. But divide them and still there would not be enough.  Read the entire article
    Henry George: The Great Debate: Single Tax vs Social Democracy  (1889)
    Capital does not come first. Land and labour are the only two absolutely necessary factors to the production of wealth. (Hear, hear.) Capital is the child of labour exerted upon land. (Cheers.) Give labour access to land and it will produce capital. Give labour access to land and the power of the capitalists to grind the masses must disappear. (Hear, hear.) What does that power came from? Merely from the fact that men are unable to employ themselves upon the land. It is the poverty of the labourers, not the wealth of the capitalist, that is the evil to be removed.  ...

    What we want is full competition. (Hear, hear.) What we want to do is to abolish monopolies, and it is to these monopolies, and not to the earnings of capital, that the great fortunes to which my opponent has alluded are due.

    What are the causes of these big fortunes? In the United States, go wherever you please, you find that the real element is land ownership. It is a great mistake to think that the only landlords are those which pose as such. today, who are the great owners of the Irish estates? Not so much the Irish landlords as the English banks and insurance societies. (Hear, hear.) Take our, Jay Gould, the most conspicuous example of a great fortune made outside the rise of land values. He made his first stride by getting hold of a piece of land and taking advantage of its rise in value, and he is today the owner of millions of acres. He made his money in what? In a public franchise, that we would abolish. ... Read the entire article

    Bill Batt: The Compatibility of Georgist Economics and Ecological Economics
    The heart of George’s economics was, in a way, Biblical. As the son of a religious book publisher born in Philadelphia, he had adequate opportunity to witness the early growth of the American republic in a unique way. On his own in San Francisco and responsible for a wife and child at a young age, his first effort at resolving the puzzles of injustice were a manuscript printed in 1871. But only after additional exposure to Ricardian rent theory was he able to refine his ideas such that they could form the basis of his Progress and Poverty eight years later. His Christian roots led him to a deep commitment to the basic moral equality of all people; his challenge was to find a way to ensure that this equality was manifest in economic fairness.

    As noted earlier, the starting point of Georgist philosophy is that nature belongs to owners only in usufruct and not in freehold. Because any monetary wealth that accrued to that nature stemmed directly from the physical presence of people and was therefore social in character, the resulting added increment of value that constituted rent belonged in turn to the community that created it. Nature would have no economic price without people. Hence rent was the community’s entitlement and not that of individuals, and the land rent that accrued to parcels as a result of social investment should be returned to — recaptured by — the community. It was obvious to George that the wealthiest people in the nation usually owed their fortune not to the sweat of their brow or the inventiveness of their minds. Rather their position was due to their success as land speculators, to an increase in rent on land they had captured title to, land rightfully belonging to all. The earth and all its product, he argued, was the common heritage of humanity, a birthright of all people.

    Any failure to pay back that increment to society, or of government to recapture it in the form of taxes, constituted not only an injustice to the poor but a distortion of economic equilibrium. He witnessed first hand the perverted configurations of land use that today we know as sprawl development— even in his time it was apparent that urban, high value land parcels were being held off the market for speculative gain by meretricious interests. He witnessed also the boom and bust cycles of the land markets on account of such speculation, effects which spread far wider than just land prices. These inevitable cycles would dislocate labor and capital supply, giving impetus to the impoverishment and suffering which he himself had experienced. He understood that holding the most strategically valuable landsites out of circulation constituted a burden on the economy. He understood that financial resources spent to pay exorbitant land prices had a depressing effect on capital and labor. And because government was taxing labor and capital instead of recovering land rent, it was further restricting the job market and the growth of capital. He realized that people who captured monopoly control of strategically valuable landsites could do so because they were privy to information prior to its public release. It was not by any means his insight alone; it was captured also by George Washington Plunkett writing at the same time:
    There’s an honest graft, and I’m an example of how it works. I might sum up the whole thing by sayin’: “I seen my opportunities and I took ‘em.”

    Just let me explain by examples. My party’s in power in the city, and it’s goin’ to undertake a lot of public improvements. Well, I’m tipped off, say, that they’re going to lay out a new park in a certain place.

    I see my opportunity and I take it. I go to that place and I buy up all the land I can in the neighborhood. Then the board of this or that makes its plan public, and there is a rush to get my land, which nobody cared particularly for before.

    Ain’t it perfectly honest to charge a good price and make a profit on my investment and foresight? Of course, it is. Well, that’s honest graft. 32

    32William L. Riordan, Plunkett of Tammany Hall. New York: Dutton, 1963, p. 3.
    All society needed to do was to collect the economic rent from landholders as its rightful due, a solution that became part of the subtitle of his book, “the remedy.” Taxing the land (or, alternatively, collecting the economic rent) was something common citizens could understand.

    They knew well the enormous disparity in fortune between the landed and the landless. They knew also that there was in fact land enough for all, except for a system of ownership that made no distinction between the right of land use and the right of land gain. George had no doubt read Frenchman P. J. Proudhon’s more strident pamphlet that “property is theft.” 33 He knew that there was a long tradition of land taxation, well articulated by a French school of philosophers known as the Physiocrats. It was a natural and comprehensible solution for him to advocate the adoption of the “single tax” on land, according to its market value, to collect the economic rent. ... read the whole article
    Weld Carter: A Clarion Call to Sanity, to Honesty, to Justice  (1982)

    Let us begin this study of the likely causes of our troubles by asking two questions:

    • Are we over-populated?
    • Are the earth's resources inadequate for this population?
    Our stage, of course, for making this study will be this world of ours, for it is upon this world that the drama of human living is played out, with all its joys and all its sorrows, with all its great achievements and all its failures, with all its nobilities and all its wickedness.

    Regardless of its size relative to other planets, with its circumference of about twenty-five thousand miles, to any mere mortal who must walk to the station and back each day, it is huge. Roughly ninety-six million miles separate the sun from the earth on the latter's eliptical journey around the sun. At this distance, the earth makes its annual journey in its elliptical curve and it spins on its own canted axis. Because of this cant, the sun's rays are distributed far more evenly, thus minimizing their damage and maximizing their benefits.

    Consider the complementarity of nature in the case of the two forms of life we call vegetable and animal, in their respective uses of the two gases, oxygen and carbon dioxide, the waste product of each serving as the life-giving force of the other. Any increase in the one will encourage a like response in the other.

    Marvel at the manner in which nature, with no help from man or beast, delivers pure water to the highest lands, increasing it as to their elevation, thus affording us a free ride downstream and free power as we desire it. Look with awe at the variety and quantity of minerals with which this world is blessed, and finally at the fecundity nature has bestowed so lavishly throughout both animal and vegetable life: Take note of the number of corn kernels from a single stalk that can be grown next year from a single kernel of this year's crop; then think of the vastly greater yields from a single cherry pit or the seeds of a single apple, or grape or watermelon; or, turning to the animal world, consider the hen who averages almost an egg a day and the spawning fish as examples of the prolificacy that is evident throughout the whole of the animal world, including mankind.

    If this marvelous earth is as rich in resources as portrayed in the foregoing paragraph, then the problem must be one of distribution:

    • how is the land distributed among the earth's inhabitants, and
    • how are its products in turn distributed?
    Land is universally treated as either public property or private property. Wars are fought over land. Nowhere is it treated as common property.

    George has described this world as a "well-provisioned ship" and when one considers the increasingly huge daily withdrawals of such provisions as coal and petroleum as have occurred say over the past one hundred years, one must but agree with this writer. But this is only a static view. Consider the suggestion of some ten years ago that it would require the conversion of less than 20% the of the current annual growth of wood into alcohol to fuel all the motors then being fueled by the then-conventional means. The dynamic picture of the future is indeed awesome, and there is every indication that that characteristic has the potential of endless expansion. So how is it that on so richly endowed a Garden of Eden as this world of ours we have only been able to make of it a hell on earth for vast numbers of people?

    The answers are simple: we have permitted, nay we have even more than that, encouraged, the gross misallocation of resources and a viciously wicked distribution of wealth, and we choose to be governed by those whom we, in our ignorance, have elected.  ...

    In our economy, land is a ready object of speculation, and its value is constantly reflecting this evil. What happens in a rising market, the up side of a business cycle, is that investors see rising prices in land as indicative of a boom. Thereupon, they try to increase their holdings in such land, only to discover that their present returns will not pay for the present costs of land; the current price of land is not based on what the yield of that land is today, but on what it is projected to be two or three years from now. The difference tends to increase until a point is reached where the imarginal buyer of land suddenly finds himself unable to meet the rising costs to which he has subjected himself. With bankruptcy threatening him or having already been forced upon him, the land passes from his hands, and the market temporarily becomes overpriced. The bankruptcies increase, and ultimately land values are brought back to levels which represent current productivity, at which point the new boom will have started. ...

    The wringing out of land speculation from the dynamics of economics will remove that unacknowledged offence which has so labored the economic profession and the public at large. As Henry George discovered and as Homer Hoyt so brilliantly depicted speculative land prices as the cause of this bitter cycle, so will its removal rid society of this hitherto hidden defect. It will put the land market on a current value basis and eliminate the terrible risks to which that market has always been subject in the past.

    The reason for such speculation under the present practices is obvious. All products of labor are subject to increases or decreases depending on supply and demand. When an oversupply of any commodity begins to rear its ugly head, prices tend downward and production is thereby lessened until there is a contrary swing upward. Land, on the other hand, is of fixed supply. Nothing man does can increase or decrease the amount of land, and therefore that brake that operates in the field of production does not apply to land values and prices.

    Just think of the social benefits that would accrue to a society that could, at a stroke, rid itself of the potential hazards to which all prior societies have been so subject. Production will then occur on a steadily rising level, demand increases as the well-being of society improves, new techniques develop, new inventions are made, and all these will be benefits to the community as a whole, and not just to the land-owners as in the past.

    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: The Taxable Capacity of Land
     "Hold on once more," I hear, "not so fast, how about the mansions of rich people?" Another fair question: how, indeed, can you justify exempting them from taxation? The answer may astonish you. Here are some data from British Columbia that speak to the point. They are from the area around Vancouver (The "Lower Mainland") and the southern part of Vancouver Island, around Victoria, where over half the people in the province live. B.C. practices high quality professional assessment; data from its rolls are quite reliable, as such things go.
     Cities and districts around Vancouver and Victoria are ranked, in Table 1, according to the land value per property (single-family residences). These range from nearly $700,000 each in the "University Endowment Lands" district (very posh), to around $40,000 each in the "Victoria Rural" district (more modest). The last column, LSREV (Land Share of Real Estate Value), shows the land value (L) as a share of the total value (B+L). 
    TABLE 1: Land Values (LV) per Residential Property, Building Values per Residential Property, and Land as Share of Total Real Estate Value (LSREV)
    Data from British Columbia, Lower Mainland and Victoria regions, 1992
    Land Value per property ($K)
    Building Value per property ($K)
    Land as Share of Total Real Estate Value (LSREV)





































































































































     These shares range from a high of 80% on the University Endowment Lands (UEL) down to 38% in Colwood (the lowest), and 39% in Victoria Rural (next to lowest). In between, the numbers follow the trend closely. The dearer the land parcels, the higher is the "land fraction" (the fraction of total real estate value that is land value). From such data, one might formulate a rule along the lines that "the lot value increases with the square of the house value." It is hard to be so precise, and not necessary. The relevant rule we need here is just that people's house values are more alike than their lot values. It is lot value, more than house value, that divides the rich from the poor.

    •  The average house (ex land) in the posh UEL jurisdiction is worth 2.8 times the average in the Victoria Rural jurisdiction ($173.1/$61.9).
    • The average land parcel (ex building) in the UEL is worth 17.5 times the average in the Victoria Rural jurisdiction ($692.5/$39.6).
     Now do us both a favor, please. Pause and savor that comparison. Let it linger, as though you were testing a slow sip of wine from Fredonia's famous grapes. Roll it on your tongue, mull sensually over its aroma and bouquet, and, getting back to business, mull cerebrally over its full import. The house that shelters the very rich family is worth 2.8 times the house of the modest family; but the land under the house of the very rich is worth 17.5 times the land of the modest. Seventeen and one half times as much! Again, it is lot value, more than building value, that divides the rich from the poor. Seldom will you find an economic rule more strongly supported by data. It's just a matter of presenting the data so as to test and bring out the rule.
    An American counterpart of Vancouver's "University Endowment Lands" is Beverly Hills, California, where land value composes some 80% of residential values, and the mean parcel is worth something like a million dollars. Beverly Hills, with its great wealth and mansions, is known as "Tear-down City." Every year many a grand old palace that once sheltered some renowned matinee idol, and rang to scandalous parties, is torn down to salvage its site for the next, grander one. In a land boom, such as crested in 1989, half the city goes to the brink of demolition and replacement.
     What do those data tell us? The rich as a rule do not live next to the poor. Rather, they cluster in neighborhoods with much higher lot values. The poor seek shelter first, and go where it is affordable. The rich put a high premium on location, neighborhood, views, and grounds, resulting in higher land fractions in their real estate. Mansions are visible evidences of wealth, impressing viewers powerfully; land values are invisible. The perceptual bias is to underrate the invisible, if you are not regularly in the real estate market. In the numbers, however, land and buildings are equally visible, and their message is clear. It is land value more than house value that divides the rich from the poor. Ergo, a tax shift from buildings to land is a shift from the poor to the rich, even though the houses of the rich are exempted. It makes the property tax more progressive.
     To be sure, those data are grouped by separate municipalities, not neighborhoods within municipalities. The poor of Colwood cannot tax the rich in the UEL, except through a higher level of government. However, what is true among municipalities is also true among neighborhoods within municipalities. Indeed, if we divided Vancouver into neighborhoods, the contrasts might be sharper than those shown. The UEL, for example, is really just a neighborhood in Vancouver that, for historical reasons, happens to be reported on separately. Harold Brodsky has done neighborhood comparisons in Washington, D.C.; Margaret Reid in Chicago; Richard Muth in various cities. They tell the same story. If we are very lucky, some Institute or Foundation concerned with land policy will see the importance of this question, and support teams of researchers and graduate students testing the point in a dozen American cities. San Francisco, with its scores of well-defined neighborhoods, would be a natural. Compare exclusive St. Francis Woods (top of the line) with the crowded Richmond District, and both with Visitacion Valley (the pits). I surmise the findings would reinforce those presented above. Meantime, nothing stops you from checking things out in your own town.  ...   Read the whole article

    Nic Tideman: The Constitutional Conflict Between Protecting Expectations and Moral Evolution

    Power, Population and Process

    There are two other difficulties that are more serious.

    • First, the existing distribution of recognized exclusive rights to natural opportunities (land, mineral resources, fishing rights, water rights, etc.) is the outcome of a game of power, and those who have won at this game have great power are loathe to part with their winnings.
    • Second, Malthusian analysis has led people to expect that if the value of exclusive use of natural opportunities were distributed equally, population would expand until everyone was at a subsistence level.

    There is a solution to the second problem, contained in the idea that all persons have equal rights to the use of natural opportunities. If the crowding effects of additional persons outweigh the beneficial effects of greater economies of scale, then any region that has an above-average population growth rate is appropriating more than its share of the scarce natural opportunity to be a parent. The costs that this region thereby imposes on other regions can justly be subtracted from what would otherwise be its claim on the value of using natural opportunities. Each region could then decide for itself whether to pass those costs on to individual couples who decide to conceive children.

    Similarly, when a region imposes costs on others through interregional pollution, the costs so imposed should be subtracted from the region's claim to the value of exclusive use of natural opportunities. The great challenge is to overcome the entrenched power that benefits from continued blindness to moral necessity. The mechanism must not be force of arms, for that entails too great a risk of installing a new power elite who would be as unprincipled as the first. Nor should the mechanism be the power of majorities, through legislation and referenda, for these processes can also be used for the selfish aggrandizement of those who control them. It is good that constitutions prohibit the taking of property without just compensation. It is to be hoped that courts will interpret such restricitons as prohibiting taxes that take all of the value of things currently regarded as property.

    When respect for a newly understood moral truth requires the dissappointment of previously protected expectations, those who would push their fellow citizens to incorporate that truth into the governmental process should be obliged to have their ideas reviewed in a constitutional amnedment process that will ensure that they will be adopted only if a broad consensus on them is achieved. When people are ready to see a new moral truth, that truth can overcome such a hurdle. ... read the whole article

    Nic Tideman: The Case for Site Value Rating

    In primitive societies, land is generally regarded as not ownable. No one made the land, so how can anyone own it? Ownership generally originates in conquest. In England, titles to land originated in the claim of William the Conqueror to own all the land because he was king. He granted to dukes, earls, etc. the right to collect rent from designated territories in exchange for their promises to fulfill various obligations to him. In the seventeenth century the nobility succeeded in removing all of their obligations to the crown, but they retained their rights to land. A substantial part of the great inequality in wealth in the United Kingdom can be traced to ancient patents of nobility that granted rights to collect rent.

    One highly visible consequence of allowing land rents to be privately appropriated is that young people find it nearly impossible to buy houses. The price of a "house," in the Southeast of Britain at least, is primarily the price of land. If the rent of land were collected publicly, the price of land would be inconsequential, and the price of a house would be the cost of the materials and labour that went into building it. It should be recognized that if the site value of land were taxed, the payment of such taxes would make it more expensive to live in large cities than in small towns, but young people would be better able to afford it because other taxes would be reduced, and the mortgages to which people would need to commit themselves would not be nearly as great.

    The justice of collecting the rent of land can be generalized to the justice of collecting a fee for any privilege that governments grant to some individuals and not others. ... read the whole article

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

    Georgist analysis strongly emphasises landownership as a principal source of inequality. Because land is a strictly limited resource, its private ownership necessarily excludes large sections of the community from its benefits. A landowning class thereby gains political economic power. In George’s own time the social identity and power of this landowning class was distinctive. Those who could not afford to buy land were forced to pay rent to the wealthier few who could. By taxing the value of land, George posited that publicly created wealth could be recouped from the private landowners and redistributed throughout the community more equitably in order to address social goals.

    Are George’s arguments about land ownership and wealth inequality relevant today? Australia provides an interesting example, because land is the single largest item in national wealth. Laurie Aarons outlines the concentration of farming land in particular in the hands of a few very wealthy corporations and individuals – what he refers to as ‘corporate squattocracy’ (Aarons, 1999: 23). The relentless increase in urban land values in recent years has also produced dramatic redistributions of wealth. In the State of New South Wales, for example, land values increased by about $361 billion over the period 1993 – 2003. The existing land-based taxes clawed back only $44 billion in government revenues, comprising only about 12% of the land-related economic surplus. So 88% was retained as ‘unearned income’ by landowners (Stilwell and Jordan, forthcoming). A higher rate of land tax with fewer exemptions could have substantially reduced this private wealth appropriation. Thus is not necessarily to posit the desirability of recouping 100% through land tax, because that would certainly raise major problems of people’s ability to pay, given that much of the increased wealth resulting from land price inflation has not been realised as current income. But it is indicative of the current imbalance between private and public appropriations of the surplus arising from increases in land-based wealth.

    However, it is also pertinent to note that land ownership today is significantly less concentrated than in George’s time, with around 70% of Australians being home-owners (including those in the process of purchasing their homes with mortgage finance). According to the recent Household, Income and Labour Dynamics in Australia (HILDA) Survey, home-ownership is unevenly distributed between income groups, with 56% of households in the lowest income quintile owning their own homes, compared to 85% of those in the highest quintile (Kohler et al, 2004: 10). But this distributional inequality is significantly less marked than the ownership of other assets, such as shares for example. Of course, most land ownership for residential purposes involves very small tracts, typically only about one-sixth of an acre in the suburban areas of the major cities. Flat-owners, growing annually as a proportion of the population, usually own less land and do so more indirectly through strata property titles. So the form of land tax (that is, whether flat rate or on a progressive scale, whether applying to all land or only that above a ‘threshold’ value, or exempting owner-occupied property) becomes crucial to its effectiveness as a mechanism for tackling distributional inequality. It is also crucial to the political acceptability of land tax reform.

    In addition, it is apparent in modern economies that not all socioeconomic inequalities stem from the unequal capture of the economic surplus associated with land. Inequalities are also generated by unequal access to capital, educational and employment opportunities. These inequalities are imperfectly correlated with wealth deriving from land ownership. Hence, additional means of redress are needed, as J. K. Galbraith and other institutional economists have consistently argued (e.g. see Galbraith, 1992; 2002: chapter 3). For example, ‘floors,’ such as minimum wage requirements and ‘social security’ payments, must be provided to guarantee a minimum income to all members of society, including those excluded from the production process. A strong, albeit unfashionable, case can also be made for ‘ceilings’ to limit excessive salaries, such as those of some top corporate executives, which far outweigh their productive contributions to society. The average executive remuneration levels in major Australian companies increased from 22 times average weekly earnings to 74 times average weekly earnings in the period 1992-2002 (Shields et al, 2003: iii). It may be, as George argued, that ‘the increase of land values is always at the expense of the value of labour’ (George, 1966: 224) but the complex distributions of income received by capital and labour are not readily explicable in terms of an analysis focusing exclusively on land. ... read the whole article

    Peter Barnes: Capitalism 3.0 — Chapter 2: A Short History of Capitalism (pages 15-32)

    Most Europeans who settled North America hoped to leave feudal inequities behind. They envisioned a competitive meritocracy rather than a permanent aristocracy. Unfortunately, it was not to be. Slavery was the first anomaly; it took a civil war to end that. Then came the epic grabs of land and robber barons, neither of which we’ve undone.

    Fast-forward to my generation’s watch. If ever there was a time when a rising tide should have lifted all boats, this was it. After World War II, America went on an almost uninterrupted growth binge. Per capita economic output, adjusted for inflation, tripled between 1950 and the end of the century. The stock market rose about fortyfold. Mutual funds and tax-sheltered retirement accounts spread stock ownership to the masses. In the 1960s, the federal government launched an all-out War on Poverty. And yet, at the end of the century, the distribution of private wealth was more unequal than it had been in 1950. In cold numbers, the top 5 percent owned more than the bottom 95 percent (see figure 2.3).

    Why did this happen? There are many explanations. One is that welfare kept the poor poor; this was argued by Charles Murray in his 1984 book Losing Ground.Welfare, he contended, encouraged single mothers to remain unmarried, increased the incidence of out-of-wedlock births, and created a parasitic underclass. In other words, Murray (and others) blamed victims or particular policies for perpetuating poverty, but paid scant attention to why poverty exists in the first place.

    There are, of course, many roots, but my own hypothesis is this: much of what we label private wealth is taken from, or coproduced with, the commons. However, these takings from the commons are far from equal. To put it bluntly, the rich are rich because (through corporations) they get the lion’s share of common wealth; the poor are poor because they get very little.

    Another way to say this is that, just as water flows downhill to the sea, so money flows uphill to property. Capitalism by its very design maximizes returns to existing wealth owners. It benefits, in particular, those who own stock when a successful company is young; they can receive hundreds, even thousands of times their initial investments when the company matures. Moreover, once such stockholders accumulate wealth, they can increase it through reinvestment, pass it on to their heirs, and use their inevitable influence over politicians to gain extra advantages — witness the steady lowering of taxes on capital gains, dividends, and inheritances. On top of this, in the last few decades, has been the phenomenon called globalization. The whole point of globalization is to increase the return to capital by enabling its owners to find the lowest costs on the planet. Hence the stagnation at the bottom alongside the surging wealth at the top.

    A critical piece of this analysis is that very few new shares of corporate stock are issued. As author Marjorie Kelly has pointed out, most established corporations finance growth through retained earnings and debt. They’re just as likely to buy back outstanding shares as to issue new ones. Consequently, old wealth is rarely diluted. When new money flows into the stock market, its main effect is to increase the wealth of existing stockholders and their fortunate heirs. Thus, of the total gain in marketable wealth that occurred in the United States between 1983 and 1998, more than half went to the top 1 percent.

    The companies that do issue new stock are the young ones — the Microsofts, Apples, and Googles. Entertainers and athletes aside, most new multimillionaires are early stockholders in corporations like these. In these cases, however, the distribution of gains is so tilted in favor of these early stockholders that the skewed pattern of wealth distribution is replicated. New wealth joins old wealth, but the concentration remains the same. There’s no mechanism for dispensing wealth — even new wealth — more evenhandedly. ... 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

    Peter Barnes: Capitalism 3.0 — Chapter 5: Reinventing the Commons (pages 65-78)

    Everyone knows what private wealth is, even if they don’t have much of it. It’s the property we inherit or accumulate individually, including fractional claims on corporations and mutual funds. In the United States in 2005, this private wealth (minus mortgages and other liabilities) totaled $48.5 trillion. As previously noted, the top 5 percent of Americans owns more of this treasure than the bottom 95 percent.

    But there’s another trove of wealth that’s not so well-known: our common wealth. Each of us is the joint recipient of a vast inheritance. This shared inheritance includes air and water, habitats and ecosystems, languages and cultures, science and technologies, social and political systems, and quite a bit more. ... read the whole chapter

    Peter Barnes: Capitalism 3.0 — Chapter 7: Universal Birthrights (pages 101-116)

    Universality is also what distinguishes the commons sector from the corporate sector. The starting condition for the corporate sector, as we’ve seen, is that the top 5 percent owns more shares than everyone else. The starting condition for the commons sector, by contrast, is one person, one share.

    The standard argument against third wave universal birthrights is that, while they might be nice in theory, in practice they are too expensive. They impose an unbearable burden on “the economy” — that is, on the winners in unfettered markets. Much better, therefore, to let everyone — including poor children and the sick — fend for themselves. In fact, the opposite is often true: universal birthrights, as we’ll see, can be cheaper and more efficient than individual acquisition. Moreover, they are always fairer.

    How far we might go down the path of extending universal birthrights is anyone’s guess, but we’re now at the point where, economically speaking, we can afford to go farther. Without great difficulty, we could add three birthrights to our economic operating system: one would pay everyone a regular dividend, the second would give every child a start-up stake, and the third would reduce and share medical costs. Whether we add these birthrights or not isn’t a matter of economic ability, but of attitude and politics.

    Why attitude? Americans suffer from a number of confusions. We think it’s “wrong” to give people “something for nothing,” despite the fact that corporations take common wealth for nothing all the time. We believe the poor are poor and the rich are rich because they deserve to be, but don’t consider that millions of Americans work two or three jobs and still can’t make ends meet. Plus, we think tinkering with the “natural” distribution of income is “socialism,” or “big government,” or some other manifestation of evil, despite the fact that our current distribution of income isn’t “natural” at all, but rigged from the get-go by maldistributed property. ... 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