The Mounting Tidal Wave of Inflation

James L. Busey

[Originally published in the Winter 1969-70 Equal Rights.
Reprinted in the Henry George News, May, 1970]

INFLATION is self-propelling and self-accelerating. Once the inflationary cycle begins, increasing costs of production expand the costs of living. Higher costs of living require increases in wages in order that labor can survive the inflationary spiral. Interest rates must be pushed upward so that the returns on capital investment are proportionate to costs of production. Increases in interest and wages, in turn, have their inevitable effects in raising further the costs of materials and production, thus accelerating the inflationary spiral.

In this chaotic scene, with each segment of the economy competing to raise its own income, the rising demands of labor are inevitable. Strikes become endemic, with predictable results in terms of the slowing of production. Thus, in Brazil for example, I witnessed strikes undertaken every few months by almost every sector of organized labor, accompanied by demands for a 100 percent increase in wages, and contracts renegotiate in four months!

Whatever its causes, once the inflationary spiral has begun, a major factor in its increase is the speculative price that is placed on land. Land speculators anticipate further inflation, and so raise their demands against labor and capital in a manner that is quite out of proportion even to current inflationary trends.

In order to function at all, labor and capital must depend upon access to land. Inflated land-costs must be paid out of productive labor and capital, with the inevitable effect of depressing their capability for production, increasing general costs, and adding further fuel to the whole inflationary fire.

It is doubtless true that if national inflation is to be brought under control, excessive expenditures by government must be curbed. It is equally true that a shifting of taxes from productive labor and capital to non-productive landholders could help greatly to slow down the acceleration of prices.

In an inflationary situation, an approach to the single-tax goal would act as a two-edged sword. First, it would reduce the ill-gotten returns of land speculators, thus dampening their incentive to increase their impositions against productive labor and capital. Second, by removing the terrible burden of multitudinous taxation which presently rests upon labor and capital, it would serve as a powerful incentive to production.

Reduction or elimination of land speculation, and enhancement of production, could well reverse most contemporary inflationary pressures. The single tax on land values, or something approaching that ideal, can make a powerful contribution to that end.