Henry George proposed that society achieve a just, prosperous and sustainable economy by implementing this remedy: abolishing all taxes on labor, production and commerce, and collecting the full rental value of all land and natural opportunities, for public revenue. Stated that way in economic terms, the remedy sounds just duller than dishwater, but it has profound and, indeed, thrilling implications. (The search is on for a sexier way to say it; please feel free to add your suggestion!)
There is a lesson toward the end of this course called "Effects of the Remedy" which, unfortunately, many students have trouble fully grasping. The reason for this is easy to understand. Having heard about this tremendous method for raising wages and eliminating poverty, students naturally want to know where in the world it has been tried. They want evidence. Teachers, eager to give them what they want, offer the only real- world examples they currently have: cases of incremental property-tax reform in which taxes on buildings are lowered and taxes on land values are raised.
"Great!" the students reply, "At least somebody is trying it! Does it work?" The teachers are forced to answer that, well, yes, the reform is working... to the extent to which it is applied... given all the forces working against it... and that, of course, immediately opens a very complex set of questions, worthy of a $multi-million think-tank study. Yes, two-rate property tax reform does tend to stimulate development in the downtown areas where development is useful, relieving pressure on the clean- and-green surrounding countryside. But does it raise wages? Nahh.
The difficulty that students have with this lesson is clearly their teachers' fault. Eager to show tangible signs of progress, we have offered examples of two-rate property tax reform. But we have often forgotten to explain that two-rate property tax reform is only the tip of a toe gingerly dipped in the great pool of the Georgist remedy. It's all well and good for two-rate reformers, making their case to skeptical officials, to advocate gently raising the tax on land values and lowering the tax on buildings. But come on now -- if it's fundamental justice we're after, why allow any taxes on buildings at all? Get rid of 'em! And why do we allow private landlords to collect any unearned income at all? Collect the rent that's due the community! If we do that, will it raise wages? Yes, indeed it will, and that's what our students need to focus on.
You see, despite what we are told by politicians, pundits, sitcoms, op-eds and think-tanks, the wages of working people can never be raised by making workers more productive. Workers have been steadily more productive ever since the start of the industrial revolution, and real wages have decreased. (There have, of course, been upward blips for short periods, or for contained populations -- but the global trend has been inexorably downward.) Wages can never be raised by educating workers, or making them more sober, thrifty or responsible. No, there is only one way to do it, and that is by improving the bargaining power of the lowest-paid workers in the economy.
That is where Henry George's remedy comes in. George looked around him in 1879 -- and we look around us today -- to see immensely valuable sites, resources and opportunities hoarded, held out of use, by owners waiting on greater gains in the future. Meanwhile people who do use their labor and their stored- up wealth to create goods and services are penalized -- as if they were criminals -- for adding to the general welfare! George's remedy would reverse those forces and all their multifarious, disastrous consequences. That is what we need to begin imagining when we start thinking about "The Effects of the Remedy".
Specifically, George asserts that the remedy would raise wages by making good land available for use by workers who had no better opportunity. Would enough land become available for this to make a meaningful difference? Yes it would -- because at the same time, the wasted potential of cities would be utilized, by skilled workers and capitalists eager to make use of valuable urban sites. Denied the fat of rent-collection, and unpenalized on their economic contributions, urban entrepreneurs would eagerly employ skilled workers, and urban builders would avidly compete to build housing for them. Here's a model of how that would come about.
But what would happen at the frontier? Would there actually be a frontier, like in the old wild-west days, where people could go to find opportunities? No -- not like the old days, but far better and more comfortable than that.
What makes me so sure? Well, I happen to live in a place that is quite like a "frontier", in terms, anyway, of the retarded economy of today: rural Maine. The air is clear, the cost of living is (relatively) very low. Job opportunities are scarce, but land is (relatively) plentiful and cheap. Because of these features, there are many people in this area who engage in some form of "marginal" or "cottage" industry: gardening, woodcutting, crafts, etc. Such people have a very low overall cash flow. Their major impediments to making a comfortable living are the cost of buying a home, and the bite of taxation on property, income and sales.
I am convinced that in a Georgist economy, as defined above, the land that I live on here in Waldo County, Maine would have no market value at all -- and if I chose to live here and build my own house (as I am doing), I could do so with zero taxation!
Now, one might ask: if public services and infrastructure are to be provided, in a Georgist economy, by the rent of land, and land in your area is rent-free, will there then be no services there? Will you have to home-school your children and pave your own roads?
No. And it's this kind of subtle twist that makes "The Effects of the Remedy" such a fascinating lesson, if it's done right! There would be strong incentives for the rent fund to spread back out to provide services to areas whose market value had been sucked out by the newly-efficient allocation of land. (In fact, considerable federal dollars go out even now to such areas, to fix highways, shore up schools and employ people to make useless military hardware; lots of state dollars also get pork-farmed out to poor areas to operate prisons.) But in a Georgist economy, it would benefit everyone to ensure that opportunities at the frontier were as attractive as they could be.
Why? Because wages throughout the economy depend on wages at the margin! The more attractive a place the rent-free, tax-free frontier is, the higher everyone else's wages will be, in toward the population centers. Not only that: a great deal of public infrastructure would have been built back in the days when land in those areas did have market value; it would make no sense to let it decay now.
It's fascinating: the value of locations, sites, natural resources and opportunities, is enhanced by the presence (and the economic contributions) of everyone in the entire community, no matter how far away. That fact is obscured by the screwy reality of our land-tenure and tax systems. It seems, today, that a certain segment of the population is just chronically helpless and useless: no jobs, no future for them; they mill about in slums while sociologists wring their hands. But look right across the street from the wasted people, and see the wasted places! A remedy has been proposed for this insanity, and its implications are exciting! Let's understand them.
-- Lindy Davies, October 18, 2000
What Folks Have Been Saying
The Agrarian <Bvd98@yahoo.com>
- Tuesday, October 24, 2000 at 01:37:47 (EDT)
It kind've does, at first glance -- but it isn't. What I'm suggesting here is that the Single Tax would render land valueless in plenty of settled, functioning communities -- places that already have infrastructure. People would still want to live in these places -- especially if continuity of public services were provided. It would make sense for the rent fund to be diverted out to these communities, because the overall rent fund would benefit from the existence of a desirable place to live and work at the margin. By contrast, the overall rent fund does not benefit from suburban sprawl, which is a drain on resources in many big ways.
In a "Geocracy", many of the people we would expect to move out to the margin would be those who are now "marginalized" in the big cities. People who are unemployed, homeless, or engaged in crime are (in brutal macroeconomic terms) a drag on the efficiency and prosperity of the community. For them to move out to the country where they could make their own living is by no means an example of "sprawl", because it would actually contribute to effective urban land allocation -- and since they'd be working for their own living, it could hardly be called subsidy.
Finally, to answer your first point: you would not raise land values at the margin unless you moved the margin further in! Remember, land only has value in comparison with the best available free land. We can make the free land more desirable and productive without raising its market value at all!
I am a displaced fisherman and logger disenfranchised from access to the land and ocean due to government licencing policies. As a fisherman I saw governments privatize, and concentrate ownership of individual transfferable quotas into the hands of the already wealthy who now simply rent those quotas and invest their "earnings" into the stock market and offshore holdings. As a small scale salvage logger I'm disenfranchised from the land by a tenure system that allocates vast humungous tracts of land to vast humungous multi-national corporations. Of course native land claims add a layer or three of complexity to life but I live next to a reserve and can appreciate why. I now try to make a living on the meager funds the government allocates to restoration of those watersheds and salmon streams damaged by past industrial strength logging practices. It gets these funds from the resource rents it extracts from "our" common natural resources and its pathetically obvious they would really rather spend that money on something else and probably soon will. The way things are going I think I will probably end up a "poacher" in the quest to sustain my family. What else do you do in a dog eat dog world where thou shall be solvent or else? By the way I like what you're doing here and I think I'll be back with a few ideas of my own on the subject.
Earth, Solar System Milky Way - Wednesday, October 25, 2000 at 01:43:09 (EDT)
I'll be eager to see them. Welcome, Eyeball!
Lindy Davies <email@example.com>
- Wednesday, October 25, 2000 at 10:20:07 (EDT)
I would just like to say, in case anyone is wondering, that this Rant of mine was written before I saw the debate published in the Autumn, 2000 issue of Land and Liberty magazine. It expresses my personal view, based on my experience as a georgist educator.
Lindy Davies <firstname.lastname@example.org>
- Monday, October 30, 2000 at 12:02:34 (EST)
I'm still confused. I thought that the information at this site indicated that any community improvement raised the value of the land closest to it. What would the difference be between the movement of people out to the services in the countryside and the movement into the countryside encouraged by stringing out subsidized water lines, roads, etc., which I assume is sprawl? And, if the community is paying for infrastructure, yet getting no taxes to pay for the infrastructure from the landholders who benefit, what's the difference between that and letting Sprawlmart do the same? Sprawlmart is also "working for a living," so I suppose its not paying rent is not really a subsidy, by thisw logic. Please enlighten me, Lindy.
The Agrarian <Bvd98@yahoo.com>
- Friday, November 03, 2000 at 00:36:11 (EST)
I hate to sound like a broken record, Agrarian, but -- this is where it would help to actually take the course! But let's take this from the top, and I hope I will be able to answer your questions along the way. Yes, it's true that community improvements tend to raise the value of nearby sites. However, it is also true that some sites could be improved, and be near to community improvements, yet still not have a value.
How can such a thing be? Well, land per se does not have any value. It doesn't have value simply because it is improved, or even because it is next to things. Land only acquires value when land of equal quality is no longer freely available. The best land that can be had for free is termed the "margin of production".
Does that sound like a hopelessly archaic concept, today, when there's no free land to be had anywhere outside of the Sahara or the Arctic tundra? Not so. For as we can plainly see, a tremendous amount of land is held unused, or grossly underused, in every city, town and nation in which "fee simple private ownership of land" exists. And remember that the value of land, and its capacity to support economic activity, goes up prodigiously as we get closer to population centers.
Now, what we were envisioning here was the effects of Henry George's remedy. George's remedy, by publicly collecting the rent of land, would render land-hoarding unprofitable. Development would move in toward the center. Instead of sprawling, it would condense. The net effect of this would be to raise the margin of production (the place where land can be had for free) -- up into areas where people actually could make a living, areas that are now fully provisioned with public infrastructure.
It would not be "sprawl" to merely continue using existing roads, schools, power lines, etc. In fact, it would mean the refurbishing of existing infrastructure rather than constucting new stuff at a huge cost to habitat and open space! Nor would we expect "Sprawlmart" to come in and dysrupt such a community. The people wouldn't be desperate for jobs, for one thing. And because the general level of wages were higher, they wouldn't be so attracted by the cheap, stamped-out products available there. There would be more of a market for quality. One would even expect local farmers' markets to thrive! "Big boxes" in general would become one of those odd fads of yesteryear, like drive-in movies. They might even become "retro".
Here's another way to look at it: right now, society pays a huge cost to "maintain" its economically expendable underclass. Tax dollars pay for shoddy public housing, welfare, food stamps, crime, prisons, drug- and smoking-related health problems attributable to poverty, etc. It would cost only a small fraction of that to simply maintain public infrastructure out at the frontier, where that "underclass" would no longer be expendable but would be productively employed. And everybody would benefit -- because the more attractive an opportunity existed at the free land, the higher wages would be for all workers!
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