How to Divide up the Economic Rent

Oscar B. Johannsen

[Reprinted from The Gargoyle, January, 1962]

One of the important questions which will arise if any society collects full economic rent is to determine how it shall be distributed among the people.

Henry George said in Progress & Poverty, "This revenue … could be applied to the common benefit … we could establish public baths, museums, libraries, gardens, lecture rooms, music and dancing halls, theatres, universities, technical schools, shooting galleries, play grounds, gymnasiums, etc."

Probably, as the result of George's influence, the usual attitude has been that the economic rent should be expended for roads, police protection, costs of collecting the rent, as well as the cost of running the government, plus whatever other things the people decided they wanted.

But is this wise? Probably not enough thought has been given to this aspect of the problem. However, it may well be that the way in which the rent is distributed may have a very important effect on whether the efficacious results of the commual collection of rent are achieved or not.

Socialists have made the error of considering primarily what they consider to be a just distribution of the wealth without considering how that distribution will affect production of wealth. Had they done that they might not have come up with such absurd formalae as "To each man according to his need, from each man according to his ability".

Georgists should not fall into a similar error by assuming that the distribution of the rent fund will have no effect on the ends which are desired.

If the funds are dispersed as George stated what would it mean? First, it would mean the creation of a vast bureaucracy to carry out all these functions. Second, it would lead to all kinds of squabbles as to how much should go to one function and how much to another, not to mention the fact that people would be constantly suggesting more and more functions which should be carried on by means of the rent fund. Third it would mean that the distribution of the fund would not be equitable to all for some people, would make little little or no use of many of the functions, although part of their share of the rent would be applied to them. Fourth, with this fund at the disposal of the various bureaucracies, they would be in a position to give out important contracts, with all the dangers of corruption involved.

The result would appear to be that there would be grave danger that socialism might creep in through the back door. While at first, when such functions as libraries are conducted by means of the rent fund, there would be little harm done. Yet with the proliferation of functions, the danger would increase tremendously. Ultimately, the rent fund would not be big enough, and the result would be the taxation of wealth.

In other words, the State would become bigger and bigger, and realising it socialism would become the order of the day. Once that occurs, loss of freedom will eventuate.

Let us face the facts squarely. Socialism is the ownership, control and operation of land and wealth by the State. Therefore, when the State owns controls and operates the roads, it is, socialistic. When it owns, controls and operates schools, it is socialistic.

Since socialism is inimical to the individual, it follows that for the State to undertake any of these functions is detrimental to the individual.

Theoretically, it is assumed the State has at most two functions -- one is the collection of economic rent, the other is the protection of life and property. (It may well be that even the police function should be conducted by private organizations, but under present conditions of knowledge as well as the state of the world, this is probably not practical.)

At any rate, it should be obvious that the State should not perform any of these functions which George mentions, as establishing libraries, universities arid the like. Since this would be socialism, the functions would hot be conducted as efficiently and in fact, the danger of putting educational institutions under the control of the Government is that these schools and colleges would lose their independence and become mere propaganda organisations praising the State. Even the roads should be operated by private organisations, much as the old turnpikes were.

Well, how should the rent be distributed? This writer believes it should be distributed on a per capita basis. Whatever the rent fund is on say the first of January should be divided up equally among all those alive on that day -- men, women and children. This would be absolutely equitable as then the people could do with the money as they chose. They could use it to become members of private libraries, to pay for their schooling at private schools. They could use it to pay the annual fee to use particular private roads in their neighborhood if the businesses operating them set up such an arrangement. They could squander it if they wished.

There would be certain mechanical problems of determining just who is entitled in a particular area, but no greater than the problems in determining who is eligible to vote. If a man died, his estate would get it that year. The rent belonging to immature children would go to their parents.

But no powerful State would arise from it for there would be no bureaucracy to do for the people things which they could do better themselves. The only bureaucracy would be the one collecting and dispensing the rent fund. If this was done on the local level, just above the family, it could be controlled as it would be under the eyes of the people themselves.

In the last analysis, the solution to this problem must answer two questions. Is it wise? Is it just? It seems to the writer that it is wise for it makes the collection and disbursement of the rent fund as simple as possible and with the creation of the smallest amount of government to administer it. That it is just is obvious, for each person is entitled to his share equal to every one else's. By each one receiving the same amount, there is no question that some one is getting more than another, such as would arise if the rent fund is used to produce particular things, as theatres.

It must always be remembered that man seeks to satisfy his desires with the least effort. Therefore, we must be careful that any machinery set up to collect and disperse the rent fund must be such that it eliminates to the greatest degree possible, the opportunity of some men utilizing it to serve their own ends. Distributing the rent fund via special functions makes it too easy for the Government to grow, makes it too easy for ambitious men to use it to gain power over their fellow men.