Land Value Tax in the 21st Century

Georgism (breaking the power of last remnant of feudalism, the landlords) presents the most important point of contact and agreement between far left, far right, and centrist liberals throughout the world. Such agreement is key during transition to a new world economic system.


H.G. Wells, in The Shape of Things to Come, appears to have been correct (if off by a number of decades) when it comes to predicting Land Value Taxation becoming a fundamental cornerstone of a saner future world system. Whether the landlords are private or public in the form of a government, the unearned rents they collect will be redistributed to all living on the land. This allows most private corporations and individual capitalists to: 


1) Redirect increasing anger against them onto a relatively small number of individuals (buying time).


2) Buy off the poor without incurring too much personal cost (buying time).


3) Eliminate critical inefficiencies remaining from the dark ages and allocate capital more effectively in a world where capital accumulation has been slowing down/stagnating for decades (buying more time).


4) Push governments (that they always indirectly control when not being fused with them) of key great powers in the northern hemisphere to reinvent themselves. This allows the European continent to take the torch from United States in becoming a fortress of safety for capital via even better high tech welfare states (buying time once again by providing livable stipends to elderly and those displaced by machines).

Although it is popular to focus on either financial cartels or inefficiencies of the public sector these days, the sheer absurdity, inefficiency, and tyranny of landlords is often overlooked. It is too much part of background scenery. However, landlordism must be tackled first and directly since it is an older structural problem from a pre-capitalist world system. As we approach an end of a global debt supercycle (with governments of key military powers having to reconstruct social order to continue to function), landlordism should be emphasized as having been the primary cause of the crisis. This would create a convenient (and very necessary!) scapegoat and allow many corporations, oligarchs, unions, and governments to save face during transition to a new world system. Obviously it is one of many causes but singling it out has critically important benefits for humanity in terms of saving political energy expanded this century.


A few words about the global transition. It will either be orderly (Bretton Woods 2.0) or disorderly (trade disruptions and corresponding hunger related political violence primarily in the southern hemisphere). 


For it to be more orderly, the states will need resources. Resources will be scarce (factories shutting down, balance sheets of governments and corporations in disarray, etc). Tapping private landowners the world over and forcing them to pay rent will free up resources to minimize these conditions of chaos. Since new land can't be created readily, since it can't be hidden, and since private landlords control most of the surface of the earth, it will be easy to find what/who we need and redirect the rent these people normally collect towards infrastructure/welfare of a new world system. 


Although not all landlords have the same parasitic pull, the argument of "what about mom and pop landlords" is much like the 19th century argument about "mom and pop slave owners" who just had 1-3 slaves rather than the hundreds of the large plantations (large corporation equivalent of the day). Having said  that, the small landlords of course will not be physically touched and will become beneficiaries of the new system that they now help provide for. Some countries already implement a partial Land Value Tax system to great benefit. Taiwan is best example today. Future merger of China and Taiwan will hopefully "infect" a large planetary role model with a more futuristic tax code.

Problem of governments as landowners


Writing in 1976, Arthur Selwyn Miller in The Modern Corporate State, articulated the rise and decay of FDRist Social Democratic arrangement in United States from 1937 onwards. What started out as a roughly coequal coalition of large unions, large corporations, large universities, and large welfare government (with emphasis on job creating benefits of the military) has deteriorated. 40 years after the book was written, we are left with large military, large corporations (private governments), large universities subordinate to these private governments, and hollowed out central "public" government subordinate to these private governments. Combined with ever present institutionalized landlordism, this heady brew can only be described as neo-feudalism (especially with the 20th century decay/stagnation of newer dynamic progressive industrial capitalist system). 


Richard Nixon, the last strong relatively-autonomous American president, tried to prevent this and wanted to develop some executive government led (as first among equals) developmental authoritarianism. Franco's Spain in the 1950s springs to mind. Nixon was shown a lesson and now we have a major problem on our hands. How do we prevent the current, mostly privately led neo-feudal arrangement from transitioning to a mostly publicly led neo-feudal arrangement? How do we go forward towards new rather than backwards (only now with a glossier high tech patina).


Tapping and tackling only private landlordism will concentrate so many resources in the hands of the state that potential for mismanagement and confusion (see Soviet and modern Chinese examples) becomes all but a certainty. It will still be a better, saner, and more comfortable social order but one that would rapidly decay unless people in public governments are also viewed as much a (potentially parasitic) landlords as private landholders. This is especially important to keep in mind considering that most states in the world are effectively fused with large corporations to different degrees. Decreasing potential for corruption should be correlated to increasing complexity of civilization since preventing social unrest is difficult as is in such a densely populated world.

taxing land monopolies has no inefficiencies since supply of land is perfectly inelastic

The more proactively humane solution will only be in a legal rabidly institutionalized framework that ties the productive resource benefits derived from the land to each individual homo sapien living on the land directly. This means that governments can no longer serve as self aggrandizing “representatives” with final authority on how to allocate the stipends in the 21st century. This means structurally and legally binding governments, these entities with monopoly on violence in a given area, to only act as middlemen service providers and enforcers of justice. For instance, individuals in a private cooperatively owned and democratically managed private corporation in the future will pay legally mandated “rent” (whether money, electrical energy, resources, etc) to a public government land"lord" (people actually owning the land via planes, guns, and missiles) who will in turn be legally bound to transfer these resources to all people on the land. With cutting edge communication and transportation infrastructure, the line between decentralized and centralized governance will increasingly be blurred.

Sounds straightforward and surprisingly libertarian in the American sense? Yes, this brings us to a prior article on Left-Libertarianism in United States as a “glue” for the opposition. North America will be the hardest hit by the global transition since the people on that continent have utilized cutting edge technology to exhaust the current system first. This also means that most cutting edge and novel experiments in creating a new social order will happen there first. Land Value Tax provides a seemingly sensible yet ridiculously radical point of agreement towards a foundational platform of political coalitions of the future.

The planetary transition (whether orderly or disorderly) to a new international social order will span a number of decades and at first the leadership in constructing and developing it will pass to elites in the eastern hemisphere (Berlin-Moscow-Beijing-Tokyo-etc). However, once US begins to (hopefully) economically recover in the late 2020s and becomes role model for South America again (continent with the worst landlordism problem in the world), leadership should swing back to the land where both hope and world crisis began.

Landlords Are Feudal Parasites

Promotion of Georgist Land Value Tax, housing cooperatives, and abolishing of medieval parasites

 


It is remarkable how the last key remnant of pre-capitalist feudalism (private land ownership) persists to this day. What is even more surprising is that a solution to deal with the oppressive problem has been around for over a hundred years in the form of Henry George's Land Value Tax. A Georgist system would eliminate income and sales tax and just tax the previously parasitic do nothing feudal landlords who live off their often hereditary privilege. In essence it was assumed under the LVT scheme that since the American government is the one protecting them and conquering new land for them, the landlords should be paying rent to the government based on the value of their property.

As I have written in the Story of Joe the Land Baron, land ownership is the worst monopoly in terms of potential for abuse and exploitation on micro to macro scales. Those who would immediately say that it'd be even worse and more dangerous for the government to be the final singular landowner should reevaluate the moral justifications, allowances, and slippery slope arguments for taxes on income, product sales, and the like.

Sydney, Taiwan, and Singapore (a more pro-capitalist society than USA for those scared of government as your landlord) have had great success in improving economic efficiencies through Land Value Tax. That is because the tax does not produce deadweight loss the way property or income tax does. And yes it only applies to land and not any improvements on it since land was not produced by anybody and there is a finite supply of it (thus supply cannot be cut as in case of say, tax on luxuries).

Henry George was immensely popular back during Laissez Faire America since early capitalists (unlike their aristocratic descendants in the present day who have congress in their pocket) were still resentful of nobility and its wealth by default. In his own words,

"Like a flash it came over me that there was the reason of advancing poverty with advancing wealth. With the growth of population, land grows in value, and the men who work it must pay more for the privilege"

Indeed, there is a reason why a tiny city state of Singapore is one of the first to adopt this taxation scheme that broad range of thinkers (from the American founding fathers to Karl Marx) have an agreement on. Henry George really wanted to make America safe for capitalism by finishing a long struggle against landed feudalism that began in 1789.

"Furthermore, on a visit to New York City, he was struck by the apparent paradox that the poor in that long-established city were much worse off than the poor in less developed California. These observations supplied the theme and title for his 1879 book Progress and Poverty, which was a great success, selling over 3 million copies. In it George made the argument that a sizeable portion of the wealth created by social and technological advances in a free market economy is possessed by land owners and monopolists via economic rents, and that this concentration of unearned wealth is the main cause of poverty. George considered it a great injustice that private profit was being earned from restricting access to natural resources while productive activity was burdened with heavy taxes, and indicated that such a system was equivalent to slavery"

What often makes a large landlord the ultimate parasite and monopolist is the additional fact of him renting out rooms within land improvements to capitalists (who then use them as offices to run their wage slavery business out of). This makes the actual land baron a slave master to the second power and a real sturdy power center through pressure on company tenants. Obviously poor people who own a few acres of land and don't collect rents are not the focus of attack here (plus they would pay very little LVT due to lower social value of their land). Those people and corporate entities who own prime acres throughout large cities like London, NYC, and Moscow are the real problem. This feudalism and the poverty that it causes is a lot more noticeable when it's a large plantation in 1880s with poor people toiling on it. It is a lot less noticeable and allows the parasites to get away with it when it's a chain of apartment or office buildings.

Yeah but installing LVT is politically a very long and difficult road!! What can be done in the meantime?

Thanks for asking. In the meantime, the most obvious thing to do is mass social and political promotion of housing cooperatives. The cooperative corporation is a legal landlord entity that is collectively owned by the renters. Each person owns stock in this "landlord corporation" but the overhead is tiny since most of the "profits" are given back to renters in the form of lower rent (rather than maximized to go to non-tenant shareholders or some aristocrat's new jet plane). The feudal entity thus becomes decentralized among the people and controlled by them democratically.

People in cooperative housing pay a much lower rent than say their neighbors who depend on temporary contractual agreements with their often erratic master. It makes sense for a group to overcome the middleman land owner by collectively becoming the owner and splitting the money. It is already done in numerous areas of the world and United States and should be promoted on a mass scale at the expense of the landed oligarchy. In middle ages, the peasants often wanted to split and/or collectively own the master's farmland land they work on but do not own. Once Americans find out how much less they can be paying if they just force out the middleman, the same desire and motive will reignite itself. Only this time in urban jungles where most people now live.

It is good to close with a quote from presidential candidate Eugene Debs' anti-war speech that sent him to prison during WW1.

"And now among other things they are urging you to “cultivate” war gardens, while at the same time a government war report just issued shows that practically 52 percent of the arable, tillable soil is held out of use by the landlords, speculators and profiteers. They themselves do not cultivate the soil. They could not if they would. Nor do they allow others to cultivate it. They keep it idle to enrich themselves, to pocket the millions of dollars of unearned increment. Who is it that makes this land valuable while it is fenced in and kept out of use? It is the people. Who pockets this tremendous accumulation of value? The landlords. And these landlords who toil not and spin not are supreme among American “patriots.”  


In passing I suggest that we stop a moment to think about the term “landlord.” “LANDLORD!” Lord of the Land! The lord of the land is indeed a superpatriot. This lord who practically owns the earth tells you that we are fighting this war to make the world safe for democracy—he who shuts out all humanity from his private domain; he who profiteers at the expense of the people who have been slain and mutilated by multiplied thousands, under pretense of being the great American patriot. It is he, this identical patriot who is in fact the archenemy of the people; it is he that you need to wipe from power. It is he who is a far greater menace to your liberty and your well-being than the Prussian Junkers on the other side of the Atlantic ocean."

Land Value Tax for Major Cities

How New York City can leap ahead in upcoming urban competition (Or Story of Joe the Land Baron)






Recent elections in Iceland have punished conservatives who brought the beautiful country to the brink of economic ruin. The new Social-Democratic/Green-Left coalition's leader is determined to integrate Iceland into European Union. The process might take time but the small country will be better protected from international economic shocks with continental currency. Reykjavik would then be the closest European Capital to the New York/Boston axis, even closer than Dublin. A brand new investment opportunity awaits American Northeast as well as a closer point of contact with Europe's economy.

We've seen that the so called Celtic Tiger of Ireland was a paper tiger just like Iceland and Merrill Lynch. Lax regulation, borrowing, and land speculation have lifted the Irish only to knock them down again all the much harder. They've learned along with the rest of the world that living space for citizens is not a stock market to gamble with. They've learned, like many Americans, that you can't buy a house, renovate it a little bit, and resell it for 30% more. That extra addition inside a land improvement is just not that valuable. Reykjavik will not make the same mistake and New York City is too economically important and rent dependent to have housing bubbles seen elsewhere. So how does all of this play into helping New York and our Bostonian brethren to attract the most talent and win the economic hub wars?

The key obstacle to overcome and sharpen New York economy is the land baron.

You say, "Land barons!? Are you mad!? Those haven't been around since Alexandre Dumas' time! Talk about the 21st century now!"

Unfortunately this feudalistic remnant still exists and this faction is stronger than ever. We forget that private land ownership is not only a pre-capitalistic concept but also a non-capitalistic concept. The capitalist does not mix his creative mind, energy, and money to create a field or a chunk of rock in lower Manhattan. No, that rock was already there and taken with the help of a state government using violence, money, or trickery to take it from others. Then the government used men with guns to protect the chunk of land from armed men loyal to other governments. The capitalist is just allowed to play around on the land and build things like factories. However, many people who sit on parts of the land have convinced everybody that they have inalienable right to it since they either got there first, built something useful on it for others, or are renting the use of land to the efficient capitalist so it becomes useful. They passionately make a point that they are not like those other land owners in the world who used their tribe to violently seize it from others or used lies (that's true since then they'd be governments themselves or the Vatican).

At first glance, the argument seems right and fair especially since many "land barons" are rugged good old descendants of frontier men who settled America. Surely the great-great-grandson of a man (who was allowed by Union forces to settle on land after it was ethnically cleansed), is not a land baron if he runs a humble ice cream shop? He is, but not significant to the discussion of helping to increase trade between New York and Europe if he's outside those areas. Let this man run and sell his ice cream to his heart's content in the Midwest for now.

If one looks more carefully at the fine print of land baron arguments, one sees that sometimes a legal squatter on the land just rents the space to the more efficient capitalists. Lets look at a hypothetical example. The land baron (lets call him Joe), might have descended from another back in the day or he could be one from Japan or United Arab Emirates who decides to buy a few square acres in Manhattan. He buys the acres from another baron when local economy is damaged and land is a bit cheaper or when he sees economy growing in the future. He hires a wonderful construction company to build a shiny skyscraper office building. Then he waits for the capitalist to come in and give him rent money to run a business out of the building. Those barons who have land near say, Wall Street, can jack up their rent pretty far and just worry about other barons building taller buildings and offering cheaper rent.

Sounds great for development you say? Well, a shovel also sounds like a great way to dig a ditch in the absence of a bulldozer. However the bulldozer equivalent of directing development does exist and has shown remarkable results in such little gems like Hong Kong and Singapore. But more on that in a minute. Lets return to Joe now. Joe has found that he can create a de facto monopoly sometimes. Maybe Joe buys a couple of pieces of land with airports on them next to a city. Then he charges capitalists (who own airlines), rent to have their facilities and airplanes there.

Joe, trembling with excitement, cried out, "Lets jack up the rent a bit shall we what are they going to do!? Lose out to their competitors by not flying their planes here? Are they going to buy land next to my airports and build their own airports which will take years and lots of money and pressure on local governments? Hah! Let them and then I'll lower the rent again!"

He goes hogwild buying up land with oil fields, mountains full of copper and gold in them, and parts of coastal areas on poor islands to build entire tourist resort chains with casinos on them. Sometimes, in the heady days, organized crime wanted a bit of the cut or offered help but Joe grows too powerful and stops being seen as a person. After a while the local government stops being dazzled by Joe's success, wealth, power, and shiny structures in their communities. They approach Joe and say that perhaps owning all the airports drains too much money from the people by making the capitalists jack up prices. They cautiously warn that perhaps owning the only rail hub through town is detrimental a bit. Making capitalist railroad owners pay more for transit hurts development and progress and raises price of goods for the residents.

Joe replied, "What are you going to do!?! Tax me!? I'll just sell my land to another Baron who will in turn pass on the taxes to others by jacking up the prices even more. Maybe then I'll move out of this state or country and just do this again somewhere else. I hear Cuba's Batista wouldn't do this to me. Why don't I go there build more Casinos? Are you going to forcefully take away my land?? See how that works out for you, get some political capital for that, and then call the guy I sell the land to."

At that, the government officials shook their heads and smiled nervously. They soothingly spoke to Joe, "No, no, no we don't mean it like that. All we want is to form a partnership with you to get a cut of your profits. This way you can be a member of our community and benefit from it as well as be protected by our influence. Let's just iron out an agreement on jacking up prices and we'll even help you out with tax breaks here and there and some lax regulation. We want votes from the people and you are important to us to achieve that goal. Join us in a partnership. You can still sell the land and we'll continue the partnership with somebody else if you want."

Joe thought for a bit and then smiled widely. "What a good reasonable idea! I always felt connected to this city anyway!" he exclaimed as he shook the government's hand.

Sometimes however, the government just acquired key transportation and large assets by buying them and running it themselves. Not being profit driven they, of course, could not compete as effectively and often passed the costs to the tax payer. Sure, a government monopoly (like Port Authority of New York and New Jersey) on airports and subways could artificially keep the prices low so capitalists and their airlines are not too pressured. That however required either higher taxes and fees from ordinary people or required cutting corners here and there.

And thus the infrastructure rotted and got dingier (although the shiny new planes sure were kinda modern). And the price for the capitalists using this government owned land didn't really come down that much at all.

What to do, what to do?

The first step is elimination of taxation on land improvements while jacking up tax on land through equal Land Value Tax for all land owners in New York City. LVT is the only tax with no deadweight loss since amount of land is fixed. Singapore and Taiwan have utilized it effectively and beautiful cities like Sydney achieved wonderful efficiencies in infrastructural improvement. Land Value Tax has been proposed in America and New York City many times (for an example, see this NYT article from 1899 explaining that those barons living next to new subway lines will help pay for the economic benefits that the new line brings).

The land barons or as they're now called landlords (what other profession has a lord in the title?) have killed the idea in the United States. However, now that educated are migrating to the cities it's time to milk those who own the new apartment buildings. No, buying an apartment inside somebody else's building is not wealth. Reselling it to somebody else (and fueling the bubble) just makes the apartment owner the baron's stooge who bought a seat on somebody else's car. The artificial overvaluing like this and the bubble that it creates is a massive transfer of wealth to a parasitic non-capitalist feudal class of middlemen. All land owners should pay a tax (rent) to the government that protects their property with tax payer paid thermonuclear weaponry. Lets not contribute further to failed sub-urban economic structure by making it cheaper for people to live in suburbs through low (compared to tax on improvements) land taxes currently. Lets free the capitalists having to deal with land barons from dealing with middlemen and lets make those capitalists who are also land barons more efficient.

The second step is to sell off land on which subway, bus, and railroad infrastructure sits to private companies.

The third step is using 21st century trust-busting to make sure all the private owners are competing and not joining forces. Teddy Roosevelt knew what was right for America and really contributed to making capitalism better, more efficient, and less in cahoots with feudal parasites. Let's do one better than a republican 100 years ago. Lets save capitalism by letting capitalists using the land breathe freer and by allowing them to really use their creative energies in competition. Let the real landlord, the New York City government, get the fat checks and make the city more attractive to trade. Ice cream owners in Midwest and other competing urban hubs like Los Angeles can follow or do their own thing. Lets make New York City an ever better connector to the economy of Europe and a source/receiver of talent and investment. Lets make Joe the Baron into Joe the Capitalist

For more information:

http://en.wikipedia.org/wiki/Land_value_tax