Reclaim the commons
A New Route to Social Equity: Henry George and the
Science of Geonomics
Caspar
Davis
Throughout the modern era there has been a near-constant
struggle between the principles of social justice expressed by eighteenth
century writers like Tom Paine and even Adam Smith, and the desire of the rich
to monopolize both wealth and power. Paine and the French Physiocrats observed
that land and natural resources were provided by God or nature for the use of
all, and that nothing could be made or grown without access to them. They argued
that because the land and natural resources were provided by Providence and not
by any human act, equity demanded that their fruits be shared by all. To be
sure, work and tools were required to grow crops or mine ore, and those who
provide them should receive fair compensation. But the value provided by nature
should not accrue to any individual.
Socialists focus on control of the means of production,
but without access to land and its resources wealth and machinery would be
worthless. No one can exist, let alone produce anything without a place to do
it, and both materials and, increasingly, energy are needed for any serious
production. Because of its unique character, the Classical economists (unlike
their “neo-classical” counterparts) recognized Land (including all
natural
resources) as a distinct factor of
production,
together with Labour and Capital.
Henry George
Henry George (1839-1897), was the last of the great
Classical economists. His first book, Progress and Poverty (1879), was the
best-selling book in English to that date, save only the Bible. George wrote
several other popular but substantial books, and also had an international
reputation as a lecturer, speaking throughout the English-speaking world, from
Australia to England. He greatly influenced philosophers and politicians from
Leo Tolstoy and G. B. Shaw to Clarence Darrow, Sun Yat Sen and Winston
Churchill, among many others.
Like Tom Paine, George drew a sharp distinction between
land and capital. Capital, he said, was a subset of wealth, i.e. that part of
wealth which is devoted to economic activity; to production, transportation,
sales, or services provided for profit. Like labour, capital represents human
effort and deserves fair recompense. Land, however, is another matter. It is
produced by no person, and whoever uses it prevents others from doing so.
Moreover, most of the economic value of land is created by society as a whole,
not by the “owner”.
Population
growth creates demand for land and for resources, and population, together with
public roads, pipelines, and utilities cause the value of land to rise even if
the owner does nothing with it. Since the economic value of raw land and its
natural resources results entirely from social action, that value should be
shared by all and not accrue to any single “owner”. George said that
this
result could easily be accomplished by taxing away all or most of the
“economic rent”— i.e. the rent that raw land or its resources
would bring
on the open market.
George added that society should collect the rent not only
from land and natural resources, but also that accruing from special privileges
such as patents and licenses like taxi licenses, radio and TV licenses,
satellite orbits etc. which enable a few to profit from monopolies Everything
beyond a fair return for the inventor or license holder’s time and
ingenuity
should accrue to society as a whole.
Neo-Classical Economics and the Appropriation of the
Commons
George’s ideas were ridiculed by the new breed of
academic “Neo-Classical” economists, who asserted that land and
natural
resources were merely subsets of capital, not qualitatively different from tools
and factories. This doctrine represents a radical departure from Classical
economics, and lies at the heart of “modern” or Neo-Classical economic
theory. The private sequestration of land and other natural resources has become
a fundamental dogma of the Neo-Classical faith.
Of course land holding is nothing new, nor was it in
George’s day; but even now real estate is treated quite differently from
other
property.
It has its own
terminology and is governed by a discrete body of law.
Even in England, the term “landowner” did not come into use until the
1600’s. The prior term was “landholder”. Unlike manufactured
goods which
are made by people and sold to others, so that their provenance can be traced to
the maker, land tenure is rooted either in long habitation or more usually in
violent theft—called conquest. The principal thief (‘king’ or
‘conqueror’) granted pieces of land to his followers who held
‘title’ to
it from the thief-in-chief, the king.
Unlike Labour, which is actual individual effort, or Capital,
the title to which is rooted in the labour which gave it its form, title to Land
is rooted in the private appropriation of a common resource, usually by force.
Title to Land is almost invariably founded on the most recent theft to be
legitimized by the local legal system.
It is not practical in modern society for most resources
to be held in common. In practice, this usually leads to bureaucratic management
which often benefits no one very much. True commons tend to suffer ‘The
Tragedy of the Commons.’ Overuse or abuse benefits an abuser much more
than it
harms any individual user, so there is much more incentive to abuse than to
prevent abuse, until it is too late. For example, if I put one more sheep on the
common than it will adequately maintain, each person’s sheep will only be
slightly less well nourished but I will have an extra sheep. This encourages
others to also run more sheep, and soon the grass is gone.
Beginning with the Norman Conquest, much of England’s
land was enclosed by those who rendered service to the king. Later on, those
with the wealth and political power began to pass legislation legalizing their
appropriation of the remaining commons (the ‘Enclosure’ movement).
Nor did
appropriation stop with the land. One after another, farmland, timber,
hydrocarbons, minerals, fish, pollution and carbon sinks (such as air and
water), plant and animal species and now even DNA sequences have been
sequestered for private profit. Today, corporate scouts roam the planet looking
for genetic material which might have commercial value, in order to patent it.
The privatization of public resources has been justified
and applauded by the Neo-Classical economic priesthood, who claim that it
creates a rising tide of prosperity that elevates all boats. This claim is
repeated constantly, not only by economists and the business elite, but also by
journalists and politicians. But no matter how large the crowds that admire the
emperor’s fictional clothes, it does not change the fact that he is naked.
According to the Centre For Social Justice’s Growing Gap
Report by Armine Yalnizyan, a Toronto Economist:, “The role of the transfer
system (income supports from government) and tax system... provided remarkable
stability in the distribution of incomes over the last generation. This
stability is [now] deteriorating dramatically and rapidly: since 1994, the ratio
of after-tax income between richest and poorest families has escalated to the
highest point since 1973. The fastest change has been in the last year for which
we have data, between 1995 and 1996... Governments have told us we can
“grow
our way to equity,” that the market will produce results that make everyone
better off, but it’s becoming evident that inequality is growing in Canada
despite economic growth.”
The inequity of ownership resulting from private
sequestration of land is palpable in the statistics of land ownership, as is
shown below:
|
Location
|
Concentration
of ownership
|
|
|
Brazil
|
2% of landowners
control
|
60%
of the arable land (as of 1985)
|
|
El Salvador
|
2% of the
population owns
|
60%
of the land
|
|
Great Britain
|
2% of the
population owns
|
74%
of the land
|
|
Pakistan
|
3% of the
population owns
|
80%
of the land
|
|
USA
p;
|
3% of population
owns
|
95%
of privately held land (as of 1979)
|
|
Florida
p;
|
1% of the
population owns
|
77%
of the land
|
In Arizona, California, Maine, Nevada, New Mexico and
Oregon, one percent of the population owns over two-thirds of the land.
(Data compiled by Alanna Hartzok)
Nevertheless, there are real benefits to having a personal
or family interest in land. How then can we reap the benefits of private use and
enjoyment while maintaining the equity and sense of respect inherent in common
ownership?
The Geonomic Solution
Henry George suggested that society should collect rent
for the Land (as broadly defined) from those who command exclusive use of this
common heritage. He recommended that the rent be used to replace existing taxes,
which in those days were mainly tariffs and excise taxes, both of which tended
to inhibit economic activity. Today, the principal taxes are income tax, payroll
taxes and sales taxes, all of which impinge negatively on employment and
economic activity, and which also tend to impact most heavily on people with
lower incomes. They are also very hard to administer, requiring an army of
accountants and tax collectors, and relatively easy to avoid or evade, creating
an array of loopholes and exceptions, and a large “underground
economy.”
A Georgist or Geonomic tax code, based on the taxation of
land and natural resources, but not of improvements to the land, has the
following effects, among others:
1.
It
reconciles common land and resource rights with private tenure, enabling society
to collect the value accruing from its actions yet preserving the benefits of
private ownership.
2.
It
enables the reduction or elimination of payroll taxes and taxes on labour and
capital, by shifting the burden to land and natural resources.
3.
It
reconciles equity and efficiency, which Neo-Classical economists and
institutions like the IMF and the WTO claim must be traded off against one
another. Land is immobile and it cannot be hidden.
Surprisingly, the value of residential lots tends to vary
more than the value of the buildings on them. Open assessment records would
ensure fairness. Resource taxes would help to assign their true value to
dwindling natural resources which are often sold for far less than their
replacement would cost, and in many cases (due to subsidies) for less even than
the true cost of recovering them. Even radical Neo-Conservatives like Milton
Friedman, who is opposed to all taxes, has acknowledged that the land tax is the
least harmful tax.
4.
It
can finance generous public services without driving away business or population
and without stifling useful employment or taxing investment in real capital.
Neither land nor resources are mobile.
Those who would live or do business in a jurisdiction must
use land to do so. At present, those who use land, whether to extract resources
or build houses or business facilities, are often heavily subsidized. A land tax
which recovered most of the economic rent would recover for the community the
value created by the community.
5.
It
contains urban sprawl by encouraging the intensive development of urban land and
by making the developers and owners of suburban land pay more of the true costs
of providing them with roads and utilities, which are now heavily subsidized by
the rest of the community. It is much less costly to provide public utilities to
developments in or near the urban core than in outlying districts. Most North
American cities have very low population density. Since World War II the
tendency has been to abandon urban cores for car-dependent suburbs, whose wide
streets and large lots serve little purpose other than to keep neighbours apart.
The preference for them is based more on habit than convenience or reason.
Higher densities can actually make neighbourhoods safer and more vibrant. Narrow
streets and front porches encourage social contact and promote safety. Greater
density makes neighbourhood coffee shops, stores and mini parks—as well as
public transit— economically and socially viable. Lack of sprawl preserves
the
surrounding countryside for agriculture, green space, and parks.
6.
It
creates jobs without inflation or deficits. It is the only tax of any serious
revenue potential that does not bear down on and suppress production and
exchange. Unlike income and payroll taxes, it does not penalize work and
employment. Unlike sales tax and GST it does not penalize production and trade.
But it does assign their true value to natural resources and thereby offers a
powerful incentive to husband and preserve them.
Geonomics meshes very comfortably with other tax shifting
measures being advocated by many progressive economists and environmentalists.
The general idea of green and equitable
tax shifting
is to stop taxing
“goods” like employment, initiative, and economic activity and start
taxing
“bads” like carbon emissions and other pollutants, traffic congestion,
speculative holding of vacant urban lots, and reckless use of common goods like
fish, old growth forests, and water. An essential corollary is to stop the
subsidizing of “bads” which is all too prevalent in modern society.
Jeffery Smith, the Portland-based founder of
Geonomics
,
suggests that land taxes could not only fund necessary public services but also
provide a “Geo-dividend,” a
basic income for everyone
, as the Alaskan state
oil royalty does for Alaskans.
The stated purpose of economic progress has always been to
provide more goods with less effort, to provide greater leisure for people to
pursue the arts and personal development. Today we have incalculably more total
wealth and more efficient production than ever before, but we also have less
balance. A few are immensely wealthy. But most working people work harder than
ever just to stay afloat. Forty years ago, most families had only one member
working outside the home. Today it usually takes two or more people working just
to provide the basic necessities.
Millions
are unable to find even minimum wage work, and almost every day we hear of more
mass layoffs and more deep wage cuts.
As Henry George said long ago, whoever is able to deny
people access to the land is able to wring from them all but the barest means of
subsistence. He can force them to work like slaves for less than the cost of
maintaining slaves. Actual access to land is no longer practical for many
people, but Geonomic taxes could recover the value of the land and other common
resources for the good of all.
This article appeared earlier at the
Prosper Australia
web site.
