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Land Reform


Joseph Stiglitz: October, 2002, interview

Q: I want to follow-up on what you had said some months ago about land reform:

JES: "The main, underlying idea of Henry George is the taxation of land and other natural resources. At the time, people thought, "not really that too," but what was underlying his ideas is rent associated with things that are inelastically supplied, which are land and natural resources. And using natural resource extraction and using land rents as the basis of taxation is an argument that I think makes an awful lot of sense because it is a non-distortionary source of income and wealth.

Q: In Globalization and its Discontents, you write (p. 81): "But land reform represents a fundamental change in the structure of society, one that those in the elite that populates the finance ministries, those with whom the international financial institutions interact, do not necessarily like."

JES: Yes. Let me try to approach the question a little more systematically. Once you take the perspective I just gave, that means the management should be done in such a way that it maximizes the amount of money available to the US government from natural resources because they are within its domain and control. So, looking at the United States, one of the implications of this is that a foundation such as yours [the Robert Schalkenbach Foundation, created to promote the ideas of Henry George, as expressed in Progress & Poverty] ought to be very much against the policies of the US government of giving away our natural resources. Here is a case where we not only are not taxing it much, we're actually giving it away.

Q: I assume you're speaking in particular of oil and mineral rights, but would not Broadband Spectrum rights also be included in that category?

JES: Yes, Broadband Spectrum rights as well. Now, giving away rights such as those would be anathema to the spirit of Henry George. And the second part is that when you sell them, you want to do so in such a way as to maximize the revenues. And whether you decide to sell it or whether you decide to rent it, would be the question of what is the way that maximizes the extraction of public revenues.

Q: And those revenues go to the people. Not to private concerns.

JES: Exactly. So you're trying to say, from the perspective of public management, how can we take this inelastic supply of public resources and maximize the rents that we can extract from it, consistent with other public objectives? That is a very deep philosophical approach, and requires a re-thinking of how we manage all aspects of those public resources. However, much of what we do is inconsistent with that. Now, the issue of land reform is a little bit different. There, it's a two-step analysis. My concern that I expressed about land is that in many developing countries, you have most land owned by a few rich people, and the land is relatively little taxed. But the land is worked in a system of sharecropping in which workers have to pay the landlord 50% of their output. In a way, you can look at that 50% as a tax. The sharecroppers are paying a 50% tax to the landlord. But it's worse than a tax. Because it's not a land tax, it's a tax on their labor. And it's a tax that goes to the landlord rather than to society. So the notion is that land reform could take a variety of different forms. For instance, the government could take over the land and rent it to the people. Or give it to the people and have a land tax that would not have the distortionary effect of land reform. So, in a way, these systems of share-cropping are worse even than anything that Henry George was worried about in terms of misuse of land. ...

Q: Has President Mugabe of Zimbabwe's misuse of government power to return land to its so-called "rightful owners" given land reform a bad name?

JES: That's true, but it doesn't have to be done that way. Now, one of the things that is again in the spirit of Henry George is that, if you have land taxes, then the market value of land goes down. What you're willing to pay for land is the difference between what you pay and what you get to keep after paying your land taxes. So, in a Henry George world, the amount of compensation would be very low. So one could argue that moving toward a land tax would facilitate that reform. Once we raise rates on land taxes, the market value will have to go down. The government can buy the land and redistribute it to the workers, and they then would be able to keep the fruits of their labor. They will continue to pay the land tax, but the product of their own efforts — their labor — will be their own, as opposed to sharing fifty percent with the landlord.

Q: Do you think land reform could possibly find a way onto the political agenda in the United States?

JES: No. Land reform is not a big issue in the United States because we don't have a lot of sharecropping. There's some, but it's very limited.

Q: What countries do you regard as the most politically open to tax reform as a means of achieving meaningful land reform?

JES: I think some countries in South America are moving in that direction. They're beginning to do this form of taxation because they want the land to be utilized. Some people own land but make no use of it.

Q: You mentioned the World Bank's program titled "Market-Based Land Reform." Is that the only international forum in which there is a chance of gaining politically-effective support for "land value taxation" as an instrument for land reform?

JES: There's not a lot [of] discussion going on in those circles about land reform. The World Bank is still talking about it, as in the program I was talking about. And certain countries are continuing to talk about it within themselves. But the IMF is not, and I don't know of any NGO (nongovernmental organization) that is. ...

Q: In your opinion, would it be more effective to attempt to achieve support from economists about the need for such reform, or to bypass them in seeking to build popular support independently from them, in that the views of mainstream economists on the topic of land reform might fairly be characterized as an "intransigent"?

JES: There are some economists who are interested in this. I think most economists would like the idea, and would support it. But, economists spend their time on things that they think have marketability. So it isn't that they don't think it's a good idea; they don't think there's any resonance in it. President Bush is still talking about the inheritance tax, and income tax, and they want to get involved in what other people are talking about. It's a social phenomenon, I think. So, if you get a lot of other people talking about it, then they'll join the fray.

Q: You are aware that Henry George was a critic of the moral foundations of our economic institutions. What do you think of reform efforts toward land value taxation based on an appeal to morality?

JES: What it fits into is that there is a wide view today that we should tax environmental "bads" such as pollution and the like. And switch from taxing good things like labor. So, in a way, that's where it comes in: let's stop taxing good things like labor, and tax things that are resources. So the argument is, "why tax things that are contributing to society?" ... read the entire interview



Joseph Stiglitz, from Globalization and Its Discontents

Stabilization is on the agenda; job creation is off. Taxation, and its adverse effects, are on the agenda; land reform is off. There is money to bail out banks but not to pay for improved education and health services, let alone to bail out workers who are thrown out of their jobs as a result of the IMF's macroeconomic mismanagement. ...

The sharecropping system weakens incentives—where they share equally with the landowners, the effects are the same as a 50 percent tax on poor farmers. The IMF rails against high tax rates that are imposed against the rich, pointing out how they destroy incentives, but nary a word is spoken about these hidden taxes.... Land reform represents a fundamental change in the structure of society, one that those in the elite that populates the finance ministries, those with whom the international finance institutions interact, do not necessarily like.

from an interview with Greg Palast (online at http://www.gregpalast.com/the-globalizer-who-came-in-from-the-cold):

So then I turned on Stiglitz. OK, Mr Smart-Guy Professor, how would you help developing nations? Stiglitz proposed radical land reform, an attack at the heart of “landlordism,” on the usurious rents charged by the propertied oligarchies worldwide, typically 50% of a tenant’s crops. So I had to ask the professor: as you were top economist at the World Bank, why didn’t the Bank follow your advice?

“If you challenge [land ownership], that would be a change in the power of the elites. That’s not high on their agenda.” Apparently not. ...

I took away from my talks with the professor that the solution to world poverty and crisis is simple: remove the bloodsuckers.



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