Discovering the Problem

It's said we have a great solution to a problem no-one knows exists. So, I'll repeat my favorite quote - Einstein's "Solutions are easy. The difficulty lies in discovering the problem". Here's how I put our case - fairly succinctly - without once mentioning any solution.

The erosion of wages associated with "downsizing" and "globalization" is not about corporation ethics - it's about the weakness of the individual laborer. However, our tendency is to concentrate on the effects of the problem in all their gory fascination We should really be wondering why it is so.

Ricardo at the turn of the 18th-19th century suggested that as we forced to use poorer and poorer land, so the return would diminish. As this represented the wages that could be earned, there was an inevitable and constant pressure downward on wages. New inventions, innovation, advanced techniques could make the poor land more productive, pushing wages back up. But, the downward pressure would continue.

Ricardo's thesis - in which he was joined, from a different point of view by Malthus, would lead to the situation we have now - incredible progress in the arts of production, accompanied by an underclass living at the edge of subsistence. His argument was called "The Iron Law of Wages".

Both Ricardo and Malthus assumed that all appropriate land would be used up by the inevitable increase in population. These ideas hang on among the ZeePoppers and similar organizations. In fact, I understand that the focus at the moment for many environmental bodies is overpopulation.

Almost 50 years after the two dismal scientists, Henry George threw a cat among the pigeons. He suggested the real problem was unused (and underused) land. "No land left" really meant that land was held out of use -- away from the needs of labor and capital -- for speculative purposes.

The trouble is that land acts like a collectible and its market is a collectible market. The free market pulls production to market -- first to market to satisfy a demand means the highest return. This is one of the great things about the free market. It's efficient -- far more so than any command economy.

However, the one who enjoys the greatest return in a collectible market is the one who sells last. Its characteristic is holders of collectibles trying to be the last to sell. Well, that doesn't matter with Constables, and Renoirs, or antiques, or baseball card sets. It matters very much with land.

Just as holding other collectibles raises their price -- so does holding land raise its price. And nothing can be done without land. Houses, factories, farms, offices, stores -- all of them need somewhere to perch.

With escalating land prices affordable anything becomes difficult. Yet according to George, there is plenty of land -- poorly used.

To come full circle -- as land rents and land prices soar, the way to keep people working is to lower wages. So Ricardian pressure continues, no matter what political means are used to counteract it (union activity, minimum wage legislation, low wage subsidies, etc).

A situation, alas, that encourages a laborer to bow one's head and bite one's tongue.

Harry Pollard - February 26, 1997

Henry George School of Los Angeles
Tujunga, CA 91042

Here's what folks have been saying:

isn't the pie getting bigger slices crumbs etc may not b isn't hg's remedy the only way a (market) economy can satisfy everyone's needs without destroying the planet
where's our counter
- Thursday, February 27, 1997 at 16:20:42 (EST)

I understand the fact that land is different from other commodities. However, the solution to shift taxes to the accessed value of land as opposed to regular property taxes confuses me. I live in a rural part of Maryland that under a lot of pressure from develoers. Wouldn't a tax shift on land make the taxes on the vanishing farm land even go higher. I appreciate any guidance that you can give me on this issue. Thank you.
Jack Law <[email protected]>
Walkersville, MD USA - Monday, March 03, 1997 at 16:45:50 (EST)
We have a very intersting course that will answer that fully, Jack! (hint, hint...)

But the short answer is that a major cause of this price pressure on farmland is the sprawl created by grossly underused urban land that is held for speculation. The goal of collecting land rent for public revenue would be to curb that.

Initially, however, if farmland values were artificially high due to suburban sprawl, the effect could be contained through regulation (zoning) or some temporary consideration in the tax rates. But land speculation is the main culprit!
Lindy Davies <[email protected]>
- Monday, March 03, 1997 at 18:25:29 (EST)

Saw your ad in the Washington Monthly. I've always admired Henry George. If you've got a mailing list, please put me on it. Thanks. Chris Powell
Chris Powell <[email protected]>
Manchester, CT 06043-7541 USA - Sunday, March 09, 1997 at 20:06:27 (EST)
I have been a believer if not of all at least a large portion of Henry George´s theory as stated in "Progress and Poverty". I live in a country whith a very old land problem that goes back to the begining of the XX century, a time at which almost all the land of Paraguay (95% of it at the time belonged to the state) was privatized. This process which I believe was utterly neccesary was carried out with too many mistakes, that ended leaving too many people without any land or living in someone else land. Whole towns were sold to foreingners investors buying by square miles, large chunk of land. Most of this land was hold in speculation almost completely unproductive, even to this day.

As H. George explains the price of the land increases mostly with the increase of the population, and Paraguay, even though it is a very poor country, has ono of the largest population growth in America: from 2,6% to 3,0%, which explains the high rate of valorization of the land and the interest of the speculator. For many it is much more convenient to hold the land without producing it than making it produce in agriculture or cattle raising. Today some studies estimates that there are some 100.000 families without land, families that makes a living from working at the land. This coming week some 50.000 farmers or "campesinos" (landless or "sintierra") will march to the Capital city of Asuncion to protest for the lack of attention of the goverment to the land problem.

To me, the main problem of this "campesinos" is unemployment. Every day is becoming harder to find a job at the country side, where almost 50% of the paraguayan population lives. And the main reason for this is that most of the land is mainteined unproductive or with very little production by the owners mostly interested in speculation. To this it should be added that a vicious circle has been set in the fields of Paraguay since the coup of ´89 that restored democracy after 35 years of dictatorship. With democracy, demagogery came and many politicians offered the "campesinos" free land by expropiation of all latifundia, and even included this "land reform" principles at the new Constitution in 1992. But the politicians forgot all the impossible promises once they were in power. The campesinos started invading a occupying private land, financed by leftist radical organizations and also by wood processing plants, that obtained newly cuted logs from the campesinos as soon as the invasion of the land begins. Only wooded or virgin land is occupied for the need of quick source of cash that is obtained by selling the logs. The very little protection there is for the private property of land has resulted in the very quick falling of investment and consequently the growth of unemployment and misery for the campesinos. The solution to this old problem in Paraguay I have given in many articles at a newspaper (I work as editorialist and op.ed. columnist at the main newspaper in Paraguay "Diario ABC Color")was the need to increase the tax on the real land value (not on the improvements) so that as H. George explained the benefits of the speculation will fall sharply, making it neccesary for the landowners to use their land productively or to rent or sell to those that will do it. Will this be a solution? Land tax at present is very light and convenient for the speculative bussines. I do not agree with georgist that private property in land should be eliminated by confiscating land rent with the land tax.

I believe private property is the foundation of freedom and progress even in land. But I also believe that a tragical mechanism operates with land speculation in very poor countries like Paraguay with a very high portion of rural population and mostly agricultural production. Please gime me your comments and ideas. I have learned H. George from my father some 30 years ago and since then up to today I have never heard from the georgists again. I saw the H. George Institute advertisement (web place) at The Economist. Excuse me for the extension. Yours in liberty. Porfirio.
Porfirio Cristaldo <[email protected]>
Asuncion, Paraguay - Sunday, March 16, 1997 at 22:13:36 (EST)

I think all of you peaple need to get off your butts and find out how the working peaple of the world live.
Orville decker <>
Marion, oh USA - Sunday, March 16, 1997 at 23:41:22 (EST)