Chapter 24. Adjusting Residual-Feudal Exclusive Property Rights, as per Henry George, Produces a Modern Land Commons
This is a chapter from the book, Economic Democracy; The Political Struggle for the 21st Century. Visit that link for more information about the book.
Internal Trade: Economic Rights for all People
24. Adjusting Residual-Feudal Exclusive Property Rights, as per Henry George, Produces a Modern Land Commons
Before the advent of title to social wealth through industrial capital and finance capital all sustenance for life, and thus all wealth, was processed directly from land. Finance capital is the money symbol for industrial and distribution capital and these factories and distribution systems are only extremely efficient tools to process and distribute products from the land. So the subtle monopolization of finance capital and/or industrial capital is only an extension of the subtle monopolization of land. When wealth began to be produced by capital as well as land, powerful people undertook to lay claim to these instruments for the production of wealth just as historically they had laid claim to land.
The process of usurping rights through monopoly title to society’s wealth takes many generations and leads to great wealth for a relative few and dispossession and poverty for many. This has a long way to go in the United States but the well-documented trend suggests that fewer and fewer own more and more. With the right to vote, and within the framework of America’s ever-flexible Constitution, these rights can be reclaimed through restructuring law and custom to reclaim rights to the commons while protecting private ownership. To eliminate subtle monopolization and establishing a productive society, a modern land commons must be established through society collecting the landrent.
Land is subtly monopolized by the total tax structure of a nation. Before going on to their greater reward, almost every economist of high standing will say that Henry George’s Progress and Poverty, describing the simplicity, efficiency, and justice of society collecting the landrent, outlines the most efficient and just tax structure.
Although this tax structure has been proposed by various highly respected people for 300 years, America’s preeminent Henry George is undoubtedly the leading economic philosopher on the subject. This chapter is his 1889 primary work—Progress and Poverty—condensed and simplified.1
The subtle monopolization of social wealth started centuries ago as the powerful structured superior rights into ownership of land. As British Prime Minister Winston Churchill said, land is “‘by far the greatest of monopolies—it is a perpetual monopoly, and it is the mother of all other forms of monopoly.’”2 If you feel threatened by such a simple solution, keep in mind that when society collects its full due in landrent all private property use-rights will be retained. Ownership of land for homes, businesses, and production will be both easier and cheaper. Removal of subtle monopolization would not only increase your right to land and the profits from its productive use, it would ensure those rights.
Land is Social Wealth
If a person were born with fully developed intelligence, physical ability, and judgment—but without social conditioning—one of the first confusing realities he or she would face is that all land belongs to someone else. Before one could legally stand, sit, lie down, or sleep, he or she would have to pay whoever owned that piece of land. This can be shown to be absurd by reflecting on the obvious: land, air, and water nurture all life and each living thing requires, and is surely entitled to, living space on this earth. No person produced any part of it, it was here when each was born, and its bounty is everybody’s common right.
By observing title claims in action, earlier economic philosophers were able to deduce that the essential factor in accumulation of wealth was the appropriation of a useful part of nature by claiming exclusive private title to land and alienating all others from its use unless they pay him landrent:
The first man who, having enclosed a piece of ground, bethought himself as saying “this is mine,” and found people simple enough to believe him, was the real founder of civil society. From how many crimes, wars, and murders, from how many horrors and misfortunes might not any one have saved mankind, by pulling up the stakes, or filling up the ditch, and crying to his fellows: “Beware of listening to this impostor; you are undone if you once forget that the fruits of the earth belong to us all, and the earth itself to nobody.”3
Jean Jacques Rousseau, in A Discourse on the Origins of Inequality, was outlining the injustice of one person having unrestricted ownership of another’s living space. This practice is only customary. It is part of social conditioning (social-control paradigms or beliefs, “frameworks of orientation”) that all receive while growing up. Being thoroughly conditioned, and having never experienced or imagined anything else, few ever realize that under exclusive private ownership of land they do not have all their rights. Instead, the possibility of eventually owning one’s piece of land is viewed as full rights. Being conscious of the not-so-distant past when common people did not have even this right, citizen’s view and celebrate these limited rights as full rights.
Mark Twain recognized that appropriation of nature’s gifts in unrestricted private title by one person means alienation and loss of rights for others. His article, “Archimedes,” in Henry George’s paper The Standard, July 27, 1889, describes how, if he owned the entire world, all the wealth of the world would be his and all the world’s citizens would be his slaves.4
While one’s lack of full rights is difficult to visualize when a person is accustomed to exclusive ownership to what nature provided free for all to use, it is easy to see if one uses a gift of nature, such as air, that has not yet been alienated from the commons. Air is one of nature’s gifts and if a group could claim title to it (when windmills were invented, such efforts were made to claim title to the wind), each person would have to pay for the right to breathe just as now they have to pay for the right for a place to live.
One notes that water was still free long after land was fully claimed. As population density increased and water became scarce, it became profitable to claim exclusive title to water. Whenever those claims of ownership are encoded in law, water sources will develop high capitalized values and society will become accustomed to paying dearly for its drinking water. As one analyzes the primary monopolies of land, technology, money, and communications, it becomes apparent that residual-feudal exclusive title to a gift of nature creates unnecessary social costs. Instead of society paying non-producing monopolists, a proper share of nature’s bounty should be distributed to all a nation’s citizens through the land tax structure, patent structure, or financial structure within a modern commons.
Pride in Ownership must be maintained
Land is, unquestionably, social wealth. However, the right to one’s space on this earth, the pride it returns to its owner, and the care normally given to one’s personal property, are compelling reasons to keep most land under a conditional form of private ownership. If equal rights for all to a share of the production of land are acknowledged through society collecting the landrent, private ownership is socially efficient and fully justifiable. What is unjust is the unrestricted subtle monopolization of what nature freely produces on, above, and under, this land. It is necessary to keep private ownership of land and its benefits while eliminating subtle land monopolization and its unavoidable inequities.
The Feudal Origins of Land Titles
Societies have battled for title to land for millennia. One society’s violent claim to land is another society’s violent loss. Today’s landowners are the descendants of the winners of the latest clashes of cultures.5 After the collapse of the Roman Empire at the hands of the Germanic tribes, the common people regained their rights to the land, and the use of nature’s wealth in common again developed a powerful following.6 Their belief in freedom and natural rights resembles our belief in these principles today.
However, this reversion to social wealth in public ownership came under attack by powerful clans. Petr Kropotkin, that unique historian, describes the repression of these rights as the origin of the modern state: “Only wholesale massacres by the thousand could put a stop to this widely spread popular movement, and it was by the sword, the fire, and the rack that the young states secured their first and decisive victory over the masses of the people.”7 Those people were struggling against imposition of a legal structure which protected exclusive private title to land previously owned, and used, by all in common.
As described by Kropotkin, the medieval roots of our culture grimly parallel the massive slaughter in many developing world countries today. People in these countries are fighting to retain, or reclaim, their right to a fair share of the earth’s resources—resources now owned by the cultural descendants of earlier violent thefts of land. The resemblance here is not a coincidence; current struggles are a continuation of that medieval battle over who shall have rights to nature’s wealth and, as we have stated and will be demonstrating further, today’s land titles still have remnants of feudal exclusive property rights in them. However unjust, if a legal title to land or any other gift of nature can be established, those with unrestricted title can lay claim to the wealth produced by others.
In the 14th-Century, the sharing of social wealth in common was still practiced by local communities. But, tragically, that Century saw the beginning of a 300-year-effort by the aristocracy of Europe to erase all trace of communal rights. Kropotkin explains:
The village communities were bereft of their folkmotes [community meetings], their courts and independent administration; their lands were confiscated. The guilds were spoilated of their possessions and liberties, and placed under the control, the fancy, and the bribery of the State’s official. The cities were divested of their sovereignty, and the very springs of their inner life—the folkmote, the elected justices and administration, the sovereign parish and the sovereign guild—were annihilated; the State’s functionary took possession of every link of what formerly was an organic whole. Under that fatal policy and the wars it engendered, whole regions, once populous and wealthy, were laid bare; rich cities became insignificant boroughs; the very roads which connected them with other cities became impracticable. Industry, art, and knowledge fell into decay.8
The efforts to alienate the individual from common use of the natural wealth of the land are documented in Britain by the nearly 4,000 enclosure acts passed between 1760 and 1844 that effectively gave legal sanction to this theft.9 For the powerful to protect their title further, it was necessary to erase from social memory all traces of the earlier custom of social ownership of social wealth. Kropotkin points out that, “It was taught in the universities and from the pulpit that the institutions in which men formerly used to embody their needs of mutual support could not be tolerated in a properly organized State.”10 We hear those words yet today. A social-control-paradigm to protect a power-structure had been designed, put into law, is the legal structure we live under, and all is protected by a constantly parroted belief system.
The classic descriptions of the evolution of capitalism explain how trade and industrial capital usurped the preeminent position of nobility with their historical title to all land. Yet in parts of Europe an elite social class still owns large tracts of land. As late as 1961, the Duke of Bedford, the Duke of Westminster, and the British Crown owned the most valuable sections of London, and large estates still abound throughout the countryside. In fact, at the turn of the 20th-Century,
the English upper class consisted … of around ten thousand people drawn almost entirely from a core of 1,500 families…. The aristocracy owned great estates and houses and works of art—but, above all, they owned land. Well over ninety percent of the acreage of Britain was theirs.11
Today’s neo-liberal philosophies are ongoing efforts to prevent a rekindling of mutual support beliefs and social wealth held in common. Today we are taught, by those who parrot the original disinformation that, in an efficient economy, virtually all property should be privately owned with each individual a “free” bargaining agent. Henry George’s and our disagreement with this social-control paradigm is that title to land, or any other gift of nature, should be conditional since no person built land and all are entitled to their share of nature’s wealth. Exclusive title as opposed to conditional title is that remnant of feudal law which is the primary cause of today’s inefficient economies creating a wealthy few and an impoverished many.
Private Ownership of Social Wealth moves to America
The powerful structured land ownership in America under the same rules as in Europe. The origins of “the manorial lords of the Hudson Valley” were huge landed estates “where the barons controlled completely the lives of their tenants.” There were also huge estates in Virginia; one covered over 5-million acres and embraced 21 counties.12 Such excessive greed contributed to the widespread dissatisfactions that fueled the American Revolution:
Under Governor Benjamin Fletcher, three-quarters of the land in New York was granted to about thirty people. He gave a friend a half million acres for a token annual payment of 30 shillings. Under Lord Cornbury in the early 1700s one grant to a group of speculators was for two million acres…. In 1689, many of the grievances of the poor were mixed up in the farmers’ revolt of Jacob Leisler and his group. Leisler was hanged, and the parceling out of huge estates continued.13 [B]y 1698, New York had given thousands of acres to the Philipses, Van Cortlands, Van Rensselaers, Schuylers, Livingstons and Bayards; by 1754, Virginia had given almost three million acres to the Carters, Beverleys, and Pages—an early example of government “aid” to business men.14
Despite the egalitarian rhetoric of the American Revolution and an attempt to place a proclamation in the Constitution for a “common right of the whole nation to the whole of the land,” the powerful looked out for their own interests by changing the wording of Locke’s insightful phrase: “All men are entitled to life, liberty and land.” This powerful statement that all could understand coming from a highly respected philosopher was a threat to those who subtly monopolized the land, so they restructured those words to “life, liberty and [the meaningless phrase] pursuit of happiness.” The substitution in America’s Constitution of phrases which would protect every person’s rights to nature’s wealth for phrases that protect only the residual-feudal exclusive rights of a few should alert one to check the meaning and purpose of all laws of all societies carefully.
Only portions of the huge estates described below were confiscated, and “speculation in western lands was one of the leading activities of capitalists in those days:”15
Companies were formed in Europe and America to deal in Virginia lands, which were bought up in large tracts at the trifling cost of two cents per acre. This wholesale engrossment soon consumed practically all the most desirable lands and forced the home seeker to purchase from speculators or to settle as a squatter. [Moreover, observes Beard], as the settler sought to escape the speculator by moving westward, the frontier line of speculation advanced.16
Some of America’s famous leaders were deeply involved:
In the Ohio Valley a number of rich Virginia planter families, amongst whom were counted both the Lees and the Washingtons, had formed a land company and this, the Ohio Company, founded in 1748, was given a crown grant of half a million acres.17 [And with] every member of the Georgia legislature but one [having] acquired a personal interest in the speculation schemes, [they sold thirty-five] “million acres to three … land speculating companies for a total payment of less than $210,000.18 [That is six-tenths of a cent per acre. Thus,] as the frontier was pushed back during the first half of the nineteenth century, land speculators working with banks [and corrupt legislators] stayed just ahead of new immigrants, buying up land cheap and then reselling it at high profits.19
Those who participated in these later land grabs knew well that the route to wealth lay in claiming exclusive title to land so that those who followed would have to buy it from them. Whether rented, or sold at high capitalized values, a share of the wealth produced would be siphoned to the owners without expenditure of their labor.
Individuals, such as the butcher’s son John Jacob Astor who had title to Manhattan Island, became immensely wealthy. Matthew Josephson, in Robber Barons, and Peter Lyon, in To Hell in a Day Coach, document the greatest land grab in history when the railroads, through control of state and federal governments, obtained unrestricted title to 183-million acres of land (9.3% of the land in the United States). By the turn of the century this included “more than one-third of Florida, one-fourth of North Dakota, Minnesota, and Washington and substantial chunks of 25 other states.”20
The state of Texas was the most generous of all: at one point they had actually given away about eight million more acres than they had in their power to bestow; as it finally turned out, they forked over to twelve railroad companies more than thirty-two million acres, which is more real estate than can be fitted inside the boundaries of the state of New York.21
Those to whom this land was parceled out had taken care to buy Congress and codify their exclusive title in legal statutes (inequality structured in law). The arrival of the railroads provided easy access to these lands and, as Henry George taught us, made them valuable. Instead of immigrants being allowed to choose land on a first-come-first-served basis and using its rental value to develop social infrastructure, the land-hungry poor were forced to buy the land from these profiteers. Land sales by speculators were contracts that siphoned a part of the future labor of those who bought the land to the speculator.
America’s celebrated Homestead Act of 1862 came after most of the choice land had already been claimed by speculators. Some 600,000 pioneers received 80-million acres under this act, but this was less than half that allotted to the railroad barons, who were only the latest in a long line of profiteers. These new lords of the land thoroughly understood the legal mechanics of siphoning wealth produced by others to themselves. They knew that all the surplus land had to be owned before their land could have significant value, thus the Homestead Act was vital to their plans of attaining great wealth.
Saleable Land Titles permitted the Mobilization of Capital
Once land had been confiscated from the masses in the Middle Ages, it belonged permanently to the lord of that land and could only be lost through war. When English law changed to permit the sale of land, this created the foundation for modern capitalism. When an entrepreneur wished to speculate by building a factory or ship, land could be mortgaged for that venture. This provided a broader base of wealth to loan against than loaning against potential profits from monopoly trade rights issued to favored friends by royalty.
The privatization of land and resultant mobilization of capital was a key stage in the development of capitalism that expanded rights to more people. However, full rights were not attained for all. Left in place were subtle forms of land, technology, capital, and finance capital monopolizations continually siphoning a large share of the wealth to those who escaped labor through residual-feudal exclusive title to what is properly social wealth (land, technology and money [money is a social technique]) and, through monopoly profits, title to what is properly the wealth of those whose labor produced it.
Slave labor has been a historic method to accumulate capital and pockets of slavery remain today. Export platforms in the developing world that avoid taxes and pollution laws and pay 13-cents to 43-cents an hour for workers to produce items for sale in the developed world, where workers with the same qualifications are paid $6 to $10 an hour, is a simple capital accumulation scheme akin to slavery.
The forced acceptance of opium sales to China a century ago and the turn-a-round sales of drugs to the developed world today accumulates capital. Japan’s and China’s government accumulate capital through monopolization of a milder drug, cigarettes. Charging Japan’s well-paid citizens triple the price for Japanese manufactures or food as the same item would cost in Europe or America was also little more than a capital accumulation scheme.
The “Robber Barons” of the late 19th and early 20th-Century accumulated capital at an unnecessarily great cost to America. That enormous cost was neither visible nor acknowledged because, even with massive destruction of natural wealth (timber, topsoil), the remaining vast resources could still provide a good living for the relatively small population. (The timber burned to clear the land could have provided a fine set of hardwood furniture for every family on earth.)
Through hard work, frugality and/or good fortune, a family owns a valuable piece of land. When the breadwinner’s buying power decreases or ceases due to death, tracts of the land are sold off piecemeal to maintain the accustomed standard of living. All money from sales deposited within the banking system as savings become part of the nation’s finance capital. Eventually all the tracts of land are sold, some of the money becomes accumulated capital, and the part spent to maintain the family, that also could have been accumulated capital if that person had worked for his or her living, becomes consumed capital.
Those smaller tracts of land that were sold off continue to gain in value and continue to be split into smaller tracts. Each time those tracts are sold or mortgaged, capital is either accumulated or consumed. John Jacob Astor’s exclusive title to, and piecemeal sale of, Manhattan Island is probably America’s leading example of wealth accumulation through continued land monopolization as tracts of land become smaller and smaller and their use-value rises higher and higher. The enormous values (potential capital) lying untouched and capital wasted through high living of heirs tells us there are better ways to accumulate capital.
Once a society is developed it requires only a simple adjustment in the law to attain full rights, freedom, and justice for all; society collecting the landrent. All other monopolies will fall once the principle of full rights, requiring everyone having equal rights to nature’s wealth, is universally recognized and the “mother of all monopolies” (the private taxation of land) is eliminated. Once attaining full freedom and rights through society collecting landrent as per Henry George, each member of society will have attained their rights to land and their share of the wealth produced by land.
Profound Thinkers Who Believed in Society Collecting the Landrent
The French Physiocrats were the originators of laissez faire—the philosophy of little government interference. They held as a cornerstone of their philosophy (appropriated from the work of John Locke, William Penn, Baruch Spinoza, and Richard Cantillon 50-to-100 years earlier) that society should collect the landrent. One of their most respected members, Mirabeau the Elder, held that this would increase social efficiency equal to the inventions of writing or money.
David Ricardo formulated the law of rent, which supports the logic of Mirabeau’s statement. Put in simple terms, Ricardo’s law of rent means that all income above that necessary to sustain labor will be claimed by the owners of the land without the expenditure of their labor. A subtle land monopolist retains ownership of land until some innovative entrepreneur sees its potential for more productive use. The high price demanded effectively siphons a part of the wealth produced by that entrepreneur and society’s labor to the previous owner, now the holder of that mortgage and sales contract.
It was Henry George who most clearly understood how Ricardo’s law of rent siphoned society’s surplus wealth to the owners of land and how that monopoly maintained itself through the ever-rising price of land. He outlined how wealth came directly from land and accrued to the owner; how all wealth above the survival needs of the hard-working people flowed to those with title to the land without expenditure of their labor; how these profits capitalized land values ever higher, perpetuating the flow of newly produced wealth to titleholders; how commercial successes were dependent on location and those profits too went largely to owners riding its value up to ever higher levels.
Adam Smith’s statement that “every improvement in the circumstances of society raises rent” tells us he knew that title to land claims much of the wealth produced by the increased efficiencies of society.22 The respected economist John Kenneth Galbraith, although questioning changing tax policy at this late date, accepted the justice of society collecting the landrent. In 1978, the conservative economist Milton Friedman stated, “In my opinion the least bad tax is the property tax on the unimproved value of land.” 23
Earlier philosophers who believed in the free enterprise philosophy of the Physiocrats—“society collecting the landrent”—include Thomas Paine, who is credited with proposing much of the Bill of Rights; William Penn, the founder of Pennsylvania; Herbert Spencer, the noted philosopher in his classic Social Statics; Thomas Sperry of the Newcastle Philosophical Society; and philosopher John Stuart Mill. These early economists were not radicals. They all “believed in the sacredness of private property, particularly land.”24
The Robert Schalkenbach Foundation lists over 100 famous thinkers—including Confucius, Moses, Thomas Jefferson, Mark Twain, Henry Ford, John Maynard Keynes, Albert Einstein, President Eisenhower, and several popes—who recognized the principle that the natural product of the land belongs to all citizens, and lists various places in the modern world where these policies have been, at least in part, implemented.25 In the late years of the 19th-Century and the early years of the 20th-Century, Henry George’s policies had substantial influence and candidates for public office were being advised to take a stand for society collecting the landrent.26
But those who owed their fortunes to the structure of property rights and taxes were too well entrenched to be dislodged. Their fear of Henry George’s philosophy motivated the funding of neo-liberal economics professors and politicians to prevent governments from adopting those policies, silenced the democratic dialogue begun by Henry George, and protected their vested monopoly interests.27
Just as corporations today fund professors and universities to produce studies that support their products or causes (the pay is good, both in money and identity, and one can find professors to produce studies to back up any cause), those who opposed Henry George’s vision paid scholars to bend the truth and thus prevented people from insisting on their democratic rights.
Those corrupt scholars accomplished this feat by distorting economic language and later academics unwittingly continue to teach that elite-protective philosophy. Classical economics clearly points out finance capital combines three elements of production—resources (land), labor, and industrial capital—to produce a nation’s wealth. Biased neo-liberal economists combined land with industrial capital and left only industrial capital and labor as elements of production. Those redefined terms created an economic jargon, confused the public debate, and prevented the spreading of Henry George’s concepts.28
Mason Gaffney’s and Fred Harrison’s analysis of the working papers of these professors leaves no doubt that they were specifically designing their philosophy to eliminate the threat of Henry George. This is a replay of Kropotkin’s statement, “It was taught in the universities and from the pulpit that the institutions in which men formerly used to embody their needs of mutual support could not be tolerated in a properly organized State.”29
Visualize a trade in a primitive society with someone standing by collecting tribute for trading on a particular piece of ground. The landowner does no productive labor—he only monopolizes that land. Of course, to avoid paying tribute, that early trader only needed to move to another piece of land. Today that nearby land would also be claimed.
As Henry George taught us, the closer one approaches the center of commerce, the higher the price of land. Every transit line from the suburbs to a commercial district will raise commercial land values a calculable amount. This high value represents the cheapness and the quantity of trades within any population center and that saving (efficiency of trades) is recognized by the price business is willing to pay for that land.
Because rent lays claim to a large share of the wealth produced by commerce, the land values are very high in large population centers. Land values gradually lower as the distance from the center of population becomes greater and the trades become less frequent and more expensive. In a matter of minutes on that acre there would be millions of dollars’ worth of trades in grain, diamonds, stocks, land, finance capital, or consumer products. A share of each trade is remitted to the landowner as rent: thus the high value of land within population centers.
It is not unusual for commercial land to be valued at 3, 4, or even 10-times the value of the buildings placed upon it.30 Probably the highest priced acre in the world was in the center of Tokyo, valued, before values dropped over 75%, at $1.5-billion. The space of one footprint in Tokyo was valued at $8,000. The land area of the 23 wards of Tokyo was equal in monetary value to the entire land area of the United States. The land upon which the emperor’s palace sat was valued at the price of all the land in California. All the land in tiny Japan was worth four-times as much as all the land in the huge United States. “In fact, the real estate value of Tokyo [in 1989] at $7.7-trillion [was] so high that, once collateralized and borrowed against (at 80% of [the then] current value), it could buy all the land in the United States for $3.7-trillion, and all the companies on the New York Stock Exchange, NASDAQ and several other exchanges for $2.6-trillion.” Japanese business leaders “announced [in error] on American Television that a square meter of the Ginza [a part of Tokyo] was worth more than Seattle.”31
To their disadvantage, businesses join subtle land monopolists in battling against increases in landrent taxes. If unnecessary government expenses were eliminated and collection of landrent were balanced to pay all government expenses, the cost of wages paid by business would lower by whatever amount of taxes were once paid by labor. Even more, there would be the additional savings of not having to keep track of sales, excise, and income taxes currently paid by both business and labor. Appropriate landrent would roughly equal current interest or rent paid (or received) from land values and the current taxes paid on land.
David Ricardo makes the rather simple observation that the value of land will be lower as the quality lowers. (The quality of commercial land depends on population and accessibility for customers. The quality of farmland depends on rainfall, growing season, fertility, and accessibility to markets.) Once the quality has lowered to where one can earn only the wages expended in production or distribution (at the margins), the land’s value reaches zero. The economist’s term “at the margins,” then, represents the economic edge of profits. It also measures the edge of monopolies.
There is enough land in the United States to feed many times its current population. By exporting food to countries that—if their lands, resources, and trade were not subtly monopolized—could just as well feed themselves, by converting grain into high-priced fat, and by farming the public treasury, agriculture in the United States has made handsome profits and evaded Ricardo’s law of rent. Unearned income (rent) from the subtle monopoly created by those laws is capitalized into, and maintains the value of, land. Under Ricardo’s law of rent, but without sales to countries able to feed themselves or government supports (in America $31.2-billion average per year 1985-9632), the price of land would be almost zero while the use-value of the world’s farmland would, because it would be feeding more people better, be greater than ever.
In smaller cities of America, a typical $120,000 house will be on a $30,000 lot. In major population centers, it is not uncommon for a house to cost double, triple, or even 10-times that price. In Honolulu and parts of California, a comparable home would be $400,000 and in Washington, DC, it would be $800,000. As the labor and material prices of each of these homes are relatively equal, the price differential is the cost of land functioning under Ricardo’s law of rent. The price of land accurately measures the landrent paid by producers of wealth to the subtle-monopoly landowners who did no work.
The powerbrokers took from the Physiocrats’ free enterprise philosophy (or any other philosophy) only that which protected and further extended their wealth and power. As historically most members of legislative bodies were large landholders, naturally they did not accept that society should collect the landrent. If that were to happen, everyone would have immediate rights to their share of nature’s wealth. The “divine rights” of private ownership of social wealth, which siphoned large amounts of wealth from those who produced to those who did not, would be converted to “conditional rights” where only those who produce are paid. The use-value of land is distributed instantly and without cost to all citizens through society collecting landrent to fund governments, education, roads, et. al. .
Take homes for an example: real estate taxes are currently levied mostly on the improvements and only in small part on the land. This tax structure is the key to subtle land monopolization. At 7% interest, the previously described $30,000 lot, if sold, would return $2,100 per year. The taxes on this typical home would also be $2,100. Removing all taxes on the house and placing them on the land (for a total of $4,200) and collecting the same tax ($2,100) on all equally-valued unused lots, would convert the current taxes to landrent. That $2,100 in landrent paid to society instead of the absentee landlord reduces the price of house lots to zero.
There would be no increase in costs for homeowners. The amount once paid annually in interest would now be paid annually in landrent. Even though the monetized value of the land disappears, its use-value actually increases. As land speculation would be eliminated, the purchase price would be only the value of labor and material that built the house. The initial capital required to purchase a home would drop to the cost of building the house or the depreciated value of an older home but the annual cost of owning that home would be only moderately less than under current monopoly rules. The former interest costs of land of a mortgaged home will have been converted to landrent which society would use to pay for essential social services.
With essential social services paid from landrent, all other taxes and the accounting and collection costs incurred can be eliminated, providing great savings to most individuals and society. Occasionally a city council person will become aware of the social efficiency of taxing unused land within their jurisdiction (if idle land is properly taxed it will quickly be put to use). But these alert local officials quickly find that the powerbrokers, frightened by Henry George’s exposure of their centuries-old land monopolization scheme, have inserted restrictions into state constitutions and laws on local communities’ ability to tax land.
Land held in unrestricted private ownership creates high capitalized land values. True free enterprise requires breaking that subtle monopoly through exclusive ownership; society should collect the rent. Distribution of land by capitalized value (price) would then be replaced by distribution of land by rental value paid to society. The net cost to the homeowner would be slightly lower (much lower if Mason Gaffney and Fred Harrison’s estimation of 35% of national income being landrent is correct33) but there would be no subtle monopoly intercepting others’ labor through private collection of rent on what nature provided.
Whoever is the better producer and is willing to work the land can easily outbid the incompetent, lazy, or absentee landowners and, with tax advantages eliminated, can also outbid corporate agriculture. Thus those who use land for production or distribution will, almost universally, have secure ownership of their land. The landrent would go to society to replace all other taxes and cover the costs of public services while the interest would go to the owners of capital (improvements, machinery, livestock, or inventory), and wages would go to the farmer, business owner, or entrepreneur.
Oil, copper, iron ore, and the like, while still in the ground, are land and can very properly be privately owned so long as society is paid the landrent. The world has adequate reserves of most of these minerals. It is only richer deposits and cheaper labor in the developing world which make their minerals more available. Under Adam Smith unequal free market philosophy, the developed world’s more expensive deposits are not mined until the undeveloped world’s cheap deposits are exhausted.
Developing land—clearing, drainage projects, shaping the land, irrigation dams, canals, and so forth—involving capital expenditures and labor requires special consideration. As development is one of the most productive uses of land and labor, anyone who invests in such improvements should be well paid. However, unconditional title to land development becomes exclusive title to the land. Once the investor is well reimbursed, the value of land improvements (not buildings) should be incorporated into the landrent.
The market has measured the rent value of that land. The landrent collected by society should equal that which is now collected both publicly (taxes) and privately (interest). The price spread between the choice sites and lower-valued sites should still be maintained through the landrent tax imposed. To accomplish this, the current private land tax (interest or rent) would be converted to landrent that would be slightly lower than the former combination of taxes and land payments. With social costs covered by society collecting the landrent and with the former subtle land monopolists now working productively for their living, all other taxes could be eliminated.
If Society Collected the Landrent, all other Taxes could be eliminated
Except for schools and governing bodies, most public services authorized by law should not be supported by taxes. Directly provided services and their costs should be paid for through a user fee (tax) on gas, airplane tickets, harbor fees, and other use charges, thus ensuring that equal labor is exchanged for providing those services. In this sense, a gas tax to cover highway costs is really a user’s fee for the labor required to build and maintain roads. This principal is recognized and accepted in gas taxes and in water, electricity, natural gas, garbage, airport, and postal charges.
Social Security, Railroad Retirement, Federal Employees Retirement, unemployment insurance, Medicare, and Medicaid, are—at this time—all improperly labeled as government expenses; they are actually paid-for insurance funds separate from expenses of running governments.34 This is an accounting trick; President Lyndon Johnson added the retirement trust funds to the general budget to make the cost of the Vietnam War look smaller. According to Gore Vidal:
In 1986 the gross revenue of the government was $794 billion. Of that amount, $294 billion was Social Security contributions, which should be subtracted from the National Security State. This leaves $500 billion. Of the $500 billion $286 billion went to defense; $12 billion to foreign arms to our client states; $8 billion to $9 billion to energy, which means, largely, nuclear weapons; $27 billion to veterans’ benefits, the sad and constant reminder of the ongoing empire’s recklessness; and finally, $142 billion to loans that were spent, over the past forty years, to keep the National Security State at war, hot or cold. So, of 1986’s $500 billion in revenue, $475 billion was spent on National Security business…. Other Federal spending, incidentally, came to $177 billion … which is about the size of the deficit, since only $358 billion was collected in taxes.35
Landrent will not sustain government waste and corporations feeding at the federal trough but will easily finance proper government services. In 1929, federal government expenditures were 1% of GNP—at the peak of the Cold War, they were approximately 24%.36 David Stockman, a member of President Reagan’s cabinet, calculated that after deducting bureaucratic waste and payments to
law firms and lobbyists and trade associations in rows of shining office buildings along K Street in Washington; the consulting firms and contractors; the constituencies of special interests, from schoolteachers to construction workers, to failing businesses and multinational giants, all of whom came to Washington for money and legal protection against the perils of free competition … that leaves seventeen cents for everything else that Washington does. The FBI and national parks, the county agents and the Foreign Service and the Weather Bureau—all the traditional operations of government—consumed only nine cents of each dollar. The remaining eight cents provided all the grants to state and local governments, for aiding handicapped children or building highways.37
The value of all land in the United States in 1990 was $3.7-trillion.38 The current private tax (interest) at 6% converted to landrent would bring in $222-billion. Former Budget Director David Stockman’s calculation of only 9% of federal expenditure being for legitimate government business, applied to Gore Vidal’s $500-billion in 1986 quoted above, leaves a proper cost of $45-billion to have run the federal government that year. Allowing $50-billion for a rational defense budget and pointing all those feeding at the government trough back towards the free market that they claim is their ideal, leaves $127-billion plus the property taxes already being collected to run state governments. Serious Georgist scholars have calculated that in both the United States and Britain “the share of rent in the modern society, if the current system of taxation were abolished, would be [22-to-25%] of national income.”39 That is enough to fund local, state, and federal governments.
The payment of that landrent is, at first look, only slightly less costly than purchasing that land under current law. But a second look takes into consideration the elimination of all other taxes which, on balance, returns the cost of owning land to zero. Landrent has replaced all other taxes and all now have access to land. Landrent cannot be evaded and full rights to that part of the modern commons will have been regained.
The accounting and collection costs of landrent would be but a tiny percentage of the cost of collecting sales and income taxes. As all are paying landrent through the price of products, it will fall on each equally according to that individual’s standard of living.
When necessary to regulate commerce, other taxes are proper but those funds should be returned to society through social services. For example, ecological taxes can support pollution-free energy development and resource conservation. The proper level of sin taxes (alcohol, tobacco, et al.) will lower disease through lowering consumption and the funds collected would offset health care costs incurred from such habits.
All farmers and business people know that machinery and inventory are relatively easy to obtain; it is the price of land that restricts ownership of farms and businesses. While land prices would drop to zero, use-values would remain the same. Actually it would increase. Commerce would flourish as businesspeople, farmers, and other entrepreneurs—all true producers—would be able to start business with only the capital necessary to buy buildings, machinery, and inventory.
Landrent being paid to society out of cash flow means only hardworking and talented people would own farms and businesses. The mechanism whereby excessive rights of absentee or incompetent landowners intercept the labor of others through unrestricted title to land would be replaced by society receiving the earnings from that social wealth. Labor costs to industries and businesses would be reduced by whatever taxes labor previously paid. The elimination of sales taxes, income taxes, and a large share of accounting costs would make replacing all taxes with society collection of landrent a bargain for any business.
Although society would be enormously richer, the land would not have monetized (capitalized) value. Society collecting the landrent would create a modern land commons in which the wealth produced would be distributed relatively equally while retaining the efficiencies of private ownership. Society, not the landowners, put that value there by increased population, roads, water, electricity, and sewers. The wealth collected through landrent should then be returned to the people through social services—schools, parks, other public facilities, and government. It must be emphasized that the landowner would retain all rights to his or her land except the right to retain unearned landrent.
An Opportunity to Restructure With Society Collecting the Landrent
China uses these tax principles extensively and continually updated literature from the Schalkenbach Foundation and various Henry George groups lists regions around the world where this tax reform is being studied and instituted.40 Only a Henry George listserve or Internet search can keep up with those changes (Alanna Hartzok firstname.lastname@example.org.).
In spite of the many highly successful experiments around the world, the political barriers to this approach are normally unassailable—landowners have too much power in legislatures. But, just as Social Security, unemployment insurance, Railroad Retirement, and banking reforms were all enacted into law under crisis, there will be an opportunity to restructure if the world economy should again collapse. Land values would return to zero, and the search for answers will be paramount.
In a depression, characterized by inadequate income and collapsing values, ownership of bankrupt farms, homes, and businesses is normally relinquished to the counties in lieu of taxes. Almost all deposits and many loans are guaranteed by the U.S. government. In a collapse, the public will own the loan institutions and through them much of the land and capital. Even now, taxes diverted to support unnecessary agricultural production are all that keep the value of farmland from collapsing.
There are many poor producers in farming and business who are there only through inheritances, economic windfalls, or having bought land at depressed prices and having its value increase as society (not those landowners) increases in efficiency. With society collecting the landrent, those who produce from the land (be it farm, home, industry, or business) would be the owners. Interest income would go to capital (the owners of the buildings, machinery, livestock, or inventory), wages would go to those who worked (the farmer, industrialist, or businessperson), and landrent would go to society.
Absentee ownership of land (but not capital) would disappear. Production is the basis of all wealth and there would be only productive, well-paid people producing on that land. This is the efficiency gain equaling the invention of money or writing that the French Physiocrats recognized was possible if society collected the landrent. Virtually every citizen would own, and be receiving, a share of the use-value of the nation’s land although that land would now have no monetary value.
Instant Restructuring to Social Collection of Landrent through Bonds
If a severe crisis transferred power from monopolists to the majority (a true democracy as we are outlining) laws for society collecting the landrent could be quickly passed. Landowners invested their money sincerely and should not in the process lose their equity. Homeowners and businesses would be instantly compensated through the efficiency increases and elimination of all other taxes. Farmers, large landowners, and landlords are only partially so compensated. Bonds can be issued to make up all the remaining loss on land productively used but only a part of the loss on unused, speculative, land. Land not productively used and held for pure speculation has no annual earnings and its value if all were to sell at one time would be very close to its proper price, zero.
Retirement payments and minimum wage laws would have to be adjusted to compensate retirees and the low-paid.
The most important aspect of regaining rights to a modern land commons under democratic-cooperative–(superefficient)-capitalism is that private ownership of land is retained, yet subtle land monopolists disappear, and the wealth created by land (not that created by labor and capital [stored labor]) is—through working less for a higher standard of living—instantly distributed to all without cost.
Private property rights, individualism, and competition are each strengthened through this relatively small change in the legal structure of property rights.
At every point in gain of rights there was no opportunity to reclaim common rights to the land. All powerful people had a stake in property retaining residual-feudal unconditional titles. With today’s highly educated population those full rights can be reclaimed. All it takes is enough people to understand it.
Note: Michael Hudson and Baruch A. Levine (Privatization in the Ancient Near East and Classical World) trace the 5,000 year history of privatization of nature’s wealth. Henry George’s concept of restructuring those exclusive titles to conditional titles (as applied in this and the next three chapters) has, in one stroke, retained the claimed efficiencies of privatization (private property, individualism, competition) even as it restores (in modern form) the commons that was the original economic structure for every people on earth. .
- Notes All works of Henry George and many authors writing on him are available from the Robert Schalkenbach Foundation, 41 East 72nd St., NY, NY 10021 (212-988-1680), established for the purpose of keeping Henry George’s philosophy alive. Back to text
- Mason Gaffney and Fred Harrison, The Corruption of Economics, (London: Shepheard-Walwyn, 1994), pp. 13, 193. Back to text
- Michael Parenti, Power and the Powerless (New York: St. Martin’s Press 1978), pp. 184-85, quoting Jean Jacques Rousseau, “A Discourse on the Origins of Inequality,” in The Social Contract and Discourses (New York: Dutton, 1950), pp. 234-85. Back to text
- Henry George School (New York) website: gopher://echonyc.com:70/11s/Cul/HGS. Back to text
- Henry George, Progress and Poverty (New York: Robert Schalkenbach Foundation, 1981), p. 342. Back to text
- Petr Kropotkin, Mutual Aid (Boston: Porter Sargent, 1914), p. 225. Back to text
- Ibid. Back to text
- Ibid., p. 226. Back to text
- Ibid., pp. 234-35. Back to text
- Ibid., p. 226. Read also George Renard’s Guilds in the Middle Ages (New York: Augustus M. Kelley, 1968), Chapters 7, 8. Back to text
- Lewis Mumford, The City in History (New York: Harcourt Brace Jovanovich, 1961), p. 264; Angela Lambert, Unquiet Souls (New York: Harper and Row, 1984), p. 6. Back to text
- Charles A. Beard, Economic Interpretation of the Constitution (New York: Macmillan, 1941), p. 28; Howard Zinn, A People’s History of the United States (New York: Harper Colophon Books, 1980), p. 48. Back to text
- Zinn, People’s History, p. 48. See also Howard Zinn, The Politics of History (Chicago: University of Chicago Press, 1990), pp. 61-68. Back to text
- Herbert Aptheker, The Colonial Era (New York: International Publishers, 1966), pp. 37-38. Back to text
- Zinn, People’s History, p. 83; Herbert Aptheker, The American Revolution (New York: International Publishers, 1985), p. 264, quoted in Beard, Economic Interpretation, p. 23; Petr Kropotkin, The Great French Revolution (New York: Black Rose Books, 1989), p. 143. Back to text
- Beard, Economic Interpretation, pp. 23, 27-28, quoting C.H. Ambler. Back to text
Olwen Hufton, Europe
: Privilege and Protest (Ithaca, NY: Cornell University Press, 1980), p. 113. Back to text
- Herbert Aptheker, Early Years of the Republic (New York: International Publishers, 1976), p. 125; Abraham Bishop, Georgia Speculation Unveiled (Readex Microprint Corporation, 1966), in forward. Back to text
- James Wessel, Mort Hartman, Trading the Future (San Francisco: Institute for Food and Development Policy, 1983), p. 14. Back to text
- Quoted by Peter Lyon, To Hell in a Day Coach (New York: J.B. Lippincott, 1968), p. 6. See also Edward Winslow Martin, History of the Grange Movement (New York: Burt Franklin, 1967); Joe E. Feagin, Urban Real Estate Game (Engelwood Cliffs, NJ: Prentice-Hall, Inc., 1983), pp. 57-58; speech by U.S. Representative Byron Dorgan, North Dakota, the statistics researched by his staff and quoted in The North Dakota REC (May 1984). Back to text
- Lyon, To Hell in a Day Coach, p. 6. Back to text
- Adam Smith, The Wealth of Nations (New York: Modern Library Edition, Random House, 1965), pp. 247, 647, 773-98. Back to text
- 101 Famous Thinkers on Owning Earth (New York: Robert Schalkenbach Foundation); Durand Echeverria, The Maupeou Revolution (Baton Rouge: Louisiana University Press, 1985), p. 182; Guy Routh, The Origin of Economic Ideas (Dobbs Ferry, NY: Sheridan House, 1989), p. 62; John Kenneth Galbraith, Economics in Perspective (New York: Houghton Mifflin, 1987), Chapter 5, especially pp. 55, 168; Mark Blaug, Great American Economists Before Keynes (Atlantic Highlands, NJ: Humanities Press International, 1986), p. 86. Back to text
- Herbert Spencer, Social Statics (New York: Robert Schalkenbach Foundation, 1995 unabridged edition); Dan Nadudere, The Political Economy of Imperialism (London: Zed Books, 1977), p. 186; Phil Grant, The Wonderful Wealth Machine (New York: Devon-Adair, 1953), pp. 416, 434-38; Hufton, Privilege and Protest, p. 113 (emphasis added). Back to text
- 101 Famous Thinkers. Back to text
- Eugene M. Tobin, Organize or Perish (New York: Greenwood Press, 1986), pp. 14, 21, 56. Back to text
- Gaffney and Harrison, Corruption of Economics. Back to text
- Ibid. Back to text
- Kropotkin, Mutual Aid, p. 226. Read also George Renard’s Guilds in the Middle Ages (New York: Augustus M. Kelley, 1968), Chapters 7, 8. Back to text
- Grant, Wonderful Wealth Machine, pp. 389-95. Back to text
- Paul Zane Pilzer, Unlimited Wealth (New York: Crown, 1990), p. 169; CBS, 60 Minutes, October 25, 1987, World Monitor, July 17, 1990; Jim Impoco, Jack Egan, Douglas Pasternak, “The Tokyo Tidal Wave,” U.S. News and World Report, September 17, 1990: p. 43; R. Taggart Murphy, Weight of the Yen (New York: WW Norton, 1996), pp. 195-200, 206, 212, 214, 218-19, 231, 244, 259; Chalmers Johnson, Blowback: The Cost and Consequences of American Empire (New York: Henry Holt & Company, 2000), p. 203; Edward W. Desmond, “Japan’s Trillion-Dollar Hole,” Time, April 8, 1996: p. 46; Edward W. Desmond, “The Failed Miracle,” Time, April 22, 1996: pp. 60-64. For a look at how these inflated land and stock prices intercept a nation’s wealth read Kevin Phillips, Politics of Rich and Poor, pp. xii, 118, 122, 144, 150, 118. There are other estimates of total values in the United States; The Statistical Abstract of the U.S., 1990, pp. 463, 734 (charts 752, 1295) claims $21 trillion in reproducible value. To that would have to be added capitalized values and land values. Including land, economist Robert Samuelson claims just under $29 trillion (Robert Samuelson, “The Great Global Debtor,” Newsweek, July 22, 1991: p. 40). Back to text
- Government Accounting Office, Letter Report, October, 30, 1997: GAO/NSIAD-97-260. Back to text
- Gaffney and Harrison, Corruption of Economics, p. 183. Back to text
- Edward Boorstein, What’s Ahead?…The U.S. Economy (New York: International Publishers, 1984), pp. 33-34. Back to text
- Gore Vidal, “The National Security State: How To Take Back Our Country,” The Nation, June 4, 1988 , p. 782. Back to text
- E.K. Hunt, Howard J. Sherman, Economics (New York: Harper and Row, 1990), p. 511. Back to text
- William Greider, The Education of David Stockman and Other Americans (New York: New American Library, 1986), pp. 6, 17. Back to text
- Samuelson, “ Great Global Debtor,” p. 40. Back to text
- Gaffney and Harrison, Corruption of Economics, p. 183. Back to text
- Geonomy Society, 30401 Navarro Ridge Road, Albion ,CA 95410. See also the Henry George Foundation of America, 2000 Century Plaza, #238, Columbia, MD 21004; and the Robert Schalkenbach Foundation, 41 E. 72nd street, New York, NY 10021. Back to text
- Full Table of Contents
- Chapter 1. The Secret of Free Enterprise Capital Accumulation
- Chapter 2. The Violent Accumulation of Capital is Rooted in History
- Chapter 3. The Unwitting hand Their Wealth to the Cunning
- Chapter 4. The Historical Struggle for Dominance in World Trade
- Chapter 5. World Wars: Battles over Who Decides the Rules of Unequal Trade
- Chapter 6. Suppressing Freedom of Thought in a Democracy
- Chapter 7. The World Breaking Free frightened the Security Councils of every Western Nation
- Chapter 8. Suppressing the World’s break for Economic Freedom
- Chapter 9. “Frameworks of Orientation”: Creating Enemies for the Masses
- Chapter 10: The Enforcers of Unequal Trades
- Chapter 11. Emerging Corporate Imperialism
- Chapter 12. Impoverishing Labor and eventually Capital
- Chapter 13. Unequal Trades in Agriculture
- Chapter 14. Developing World Loans, Capital Flight, Debt Traps, and Unjust Debt
- Chapter 15. The Economic Multiplier, Accumulating Capital through Capitalizing Values of Externally Produced Wealth
- Chapter 16. Japan’s Post-World War II Defensive, Mercantilist, Economic Warfare Plan
- Chapter 17. Southeast Asian Development, an Accident of History
- Chapter 18. Capital Destroying Capital
- Chapter 19. A New Hope for the World
- Chapter 20. The Earth’s Capacity to Sustain Developed Economies
- Chapter 21. The Political Structure of Sustainable World Development
- Chapter 22. Equal Free Trade as opposed to Unequal Free Trade
- Chapter 23. A Grand Strategy for World Peace and Prosperity
- Chapter 24. Adjusting Residual-Feudal Exclusive Property Rights, as per Henry George, Produces a Modern Land Commons
- Chapter 25. Restructuring Residual-Feudal Exclusive Patent Laws Produces a Modern Technology Commons
- Chapter 26. A Modern Money Commons
- Chapter 27. A Modern Information Commons
- Chapter 28. Wi-Fi Empowering the Powerless
- Conclusion: Guidelines for Sustainable World Development
- Appendix I. Expansion and Contraction of Cultures
- Appendix II: A Practical Approach for Developing Poor Nations and Regions
This is a chapter from the book, Economic Democracy; The Political Struggle for the 21st Century. Visit that link for more information about the book.