Where the Georgists, the Greens
and the Indians Meet
Ian T.G. Lambert
David Ricardo referred to rent as the return "for the use of the
original and indestructible powers of the soil". The reason he
used the term "soil" was because Ricardo, like the
Physiocrats, viewed agricultural land as the main source of rent. In
terms of the Britain of his day, empirically he may have been correct.
Henry George took Ricardo's definition and modified it only slightly.
Effectively, he substituted the term "site" for "soil".
He rightly saw that land could be put to all sorts of productive uses
other than agriculture. In an industrialised society this is easier to
see. The superstore makes very little use of the soil on which it
stands. It is the site, or location, which is so valuable.
But just as George had to extend Ricardo's concept, so must we now
extend George's. Georgists should be very cautious in doing so, but
not afraid to do so; for as Nietzsche said: "one rewards a
teacher badly if one remains only a pupil".
Ricardo and George lived and wrote at a time when methods of wealth
production must have seemed indefinitely renewable. George died before
the advent of the internal combustion engine. Man used horses for
transport and production. For as long as horses and men continued to
breed, a system of agriculture which used horses and labourers was
perpetually renewable. George specifically cited man's ability to
harness and use the reproductive forces of nature in his refutation of
Malthus* theory of over population. Every new child born brought into
the world not merely another mouth to feed but hands and feet with
which to feed itself, by sowing and reaping. Man was not reliant on
nature merely to supply apples that happened to fall from trees, but
could cultivate great groves of apple trees.
However, in the twentieth century we have learnt the awful truth that
natural resources of many kinds are not renewable, or at least cannot
be renewed at the rate they are being consumed. Coal and oil are just
two examples. It is not true that the soil or the site has nothing but
"original and indestructible powers".
Henry George believed passionately that the earth morally belonged to
all mankind, present and future generations. Thomas Jefferson referred
to the current generation merely as tenants for a day. The American
Indians believed and still do believe that the Great Spirit gave them
their land for the use of present and future generations. (Indeed,
many Indian nations believed this so strongly that they did not
believe it possible for them to agree to give their lands to the
European settlers. All that could be achieved was for individual
Indians to agree to give up their individual rights, but that could
not prevent future generations from asserting their rights, which were
inalienable except by their own act or by voluntary consent.)
Consistent with these ideas, many nations had a horror, the magnitude
of which we find difficult to comprehend, of extractive industry.
Extraction was seen as theft from future generations. They did believe
in agriculture, provided the agricultural use did not impair the
utility of the land for future generations -- in modern parlance, we
would say provided it was not over intensive.
When Georgists propose land value taxation, or site value rating as
it might more accurately be termed, they are demanding that all of the
community should, economically, benefit equally from existing land
use. This may prevent the industrial mining entrepreneur from "stealing"
minerals from the present community, but it does not prevent the
present community from stealing from future generations.
This point is best understood by means of an example. Suppose an oil
company takes oil from the ground. "Ah," say the community, "that
oil really belongs to us; you must compensate us for it."
Accordingly, the company makes a compensation payment. The oil is
burnt and consumed. Along comes a future generation. "Where is
the oil?" they say, "for we need it badly". "Don't
worry" say their parents' generation, "we may not have the
oil, but we have all this money instead". the seemingly
ungrateful reaction of the new generation will be to throw the money
back in their parents' faces -- just as the Indians threw the white
man's money back at him:
"Our land is more valuable than your money. It will
last forever. It will not even perish by the flames of fire. As long
as the sun shines and the waters flow, this land will be here to
give life to men and animals. We cannot sell the lives of men and
animals; therefore we cannot sell this land. It was put here for us
by the Great Spirit and we cannot sell it because it does not belong
to us. You can count your money and burn it within the nod of a
buffalo's head, but only the Great Spirit can count the grains of
sand and the blades of grass of these plains." -- a chief of
one of the principal bands of the Northern Blackfeet.
All money can be represented by a debt (e.g. a bank deposit), but
debts do not enter into the aggregate wealth of a community because,
as George pointed out, for every creditor who has an asset there must
be a debtor who has a liability of corresponding amount; so the effect
when aggregated is zero. Simply put, the new generation say "You
have used our oil and we don't have anything to show for it".
Now, all Georgists know that one of the great benefits of land value
taxation is that it penalises under use of land and promotes
economically more efficient use of land. "But", cry the
Greens in horror, "what you are advocating can only lead to over
use of land, with an explosion in development and extraction".
Georgists usually reject this idea out of hand, in my view unwisely;
for the cry of anguish from, the Greens is the cry of future
generations not to dissipate their inheritance.
This is where the Georgists and the Greens meet, on either side of a
wall called conservation; it is our task to demolish this wall that
separates us. The Greens do not seem to have any credible solutions to
the economic problems; so it is we, the Georgists, who must try from
The arch enemy, of Georgists is the land speculator -- the speculator
in "raw" land, not buildings or improvements. Georgists,
quite rightly, look on speculators in commodities as providing a
service to the community. They buy goods when they are cheap (not much
needed) and sell goods when they are dear (more needed).
The question has frequently been raised why oil producers do not cut
back production more when the price falls. For all sorts of reasons
they do not. In recent years, Texan oil barons have bought up cheap
North Sea oil, which they intend to sell in the future, when it is a
more scarce commodity. Such people make not only a profit for
themselves but also provide a service to the community, in preserving
for future use a commodity which is growing ever more scarce.
Now, observe carefully:
A first oil baron buys up North Sea oil and stores it in great
containers on his land. Is this oil land or wealth? The Georgist has
no difficulty in answering wealth.
A second oil baron buys up North Sea oil and stores it by pumping it
down into a nearly exhausted oil reservoir. Is this oil land or
wealth? There seems to be no logical basis for distinguishing between
storage on the surface and storage below ground. So this too must be
A third oil baron buys up North Sea oil. He is a long term
speculator. He stores the oil by pumping it down into an old
reservoir. But he has no use for the capital and dismantles the oil
well and machinery and sells it. All that remains is a full oil
reservoir with no well. Is this oil land or wealth? Hmn;, let's move
A fourth oil baron has two oil wells. He pumps up oil from one, for
sale. However, having pumped it up he decides to store it. He decides
to store it underground in the second oil well. He pumps it down
there. He dismantles the capital and sells it. What remains is a full
oil reservoir with no well. Is this oil land or wealth? (Surely the
answer is no different from the third example.)
A fifth oil baron is about to drill a well and pumps out oil from an
existing (natural) reservoir. But the markets change. He decides not
to exploit this resource, for the time being. He leaves the oil in the
reservoir, in the hope that it will be a more valuable resource in the
future. Is this oil land or wealth? Most Georgists have no doubt that
this is land. But at what stage did wealth become land, or vice-versa?
Now, if the oil speculator plays a proper role in the economy, how is
he to be rewarded under a political system which has land value
taxation. Can it be right that the fifth oil baron should be taxed
less if he pumps the oil up from underground and stores it in
containers on the surface, like the first oil baron, than if he stores
the oil in the ground? This must be wrong. The first and fifth oil
barons must be taxed on the same basis.
(In practice, this must mean that we need a system in which the oil
in the fifth example can be viewed as wealth, for it is the different
classifications in the two examples that creates the problem.)
Now let us return to our original problem, the idea of rent being the
return for the use of the original and indestructible powers of the
soil or the site. Is the fifth oil baron, who does not use his oil, to
pay the same rent as a sixth oil baron who does? If, after a year, the
site passes to another owner, the fifth oil baron is passing on a site
much more valuable than the sixth, should the new owner pay the same
rent in taxes (or taxes in rent) in both cases? The truth is that the
sixth oil baron has been afforded more than the use of the original
and indestructible powers of the site; he has used the destructible
powers of the site as well. The fifth oil baron "uses" the
oil, in the sense that he has current enjoyment of it, but when he has
finished "using" it, it will remain unchanged. On the other
hand, the sixth oil baron is not "using it" so much as "consuming"
it, and this must call for a different treatment.
Let us return to the ethical basis for land value taxation. It is
that the land belongs to the community. The user of land must
compensate the rest of the community for his exclusive occupation and
use of his land. Effectively, he must buy from the community the right
to exclusive occupation and use of the land. Because that right is a
right for a specified period, land value taxation must be levied on a
time basis. Typically it is levied on an annual basis, on the annual "rent",
but this is mere convention; there is no reason why it should not be a
shorter or longer period. Annual land value taxes are the community's
way of selling the right to the use of land.
But the right to consume a natural resource is not so limited in
time. Once the resource is consumed, it cannot be consumed or used
again. Thus, the "tax" on oil must be a once-and-for-all
payment to the community -- effectively, a "severance"
payment. The community is simply selling the oil.
Here, then, is our solution. In relation to a site, land value
taxation must be levied in relation to the original and indestructible
powers of the site. So, for example, if the site has a valuable
(natural) oil reservoir, the value of that does not enter into its
assessable rental value. However, coupled with the obligation to pay
such rent in taxation to the community must also be the condition that
none of the resources is consumed. The right to consume the resources
is something that must be bought from the community.
In our examples, then, the first and fifth oil barons pay the same
land value taxation based on rent assessed by ignoring the oil. The
first oil baron bought the (produced) oil from another party. It is
wealth and he is free to consume it as he pleases, or to pass it on.
The fifth oil baron has a choice. He can buy the (natural) oil - more
correctly the right to consume it - from the community, in which case
it then becomes wealth, whether or not stored underground.
Alternatively, he can simply use the site, pay his land value taxes,
and leave the oil with the community as, part of the land.
This is how the speculator in commodities is rewarded. The speculator
may believe that oil is currently under valued, that future
generations will value it more. If so, he will buy from the community
the right to consume the oil, at its current value, and will leave it
underground. He will withhold the oil from consumption in the hope
that it will prove more valuable in the future. But he may be wrong.
New forms of energy may emerge that will render the oil worthless.
Such are the risks that any speculator takes.
I am convinced that it is here where the Georgists, the Greens and
the Indians meet. I do not pretend that there are not associated
problems. There are many. For example, how does one assess the amount
of such severance payments? The assessed value of a site may be wrong,
but it can always be adjusted. The community may have lost revenue but
it is not prejudiced for the future. Not so with severance payments;
they are once-and-for-all. Are the rights to use and enjoy land, on
the one hand, and to consume natural resources, on the other hand, to
be capable of different ownership, or must one go with the other? What
is to happen if one person occupies a site and does not consume the
resources, but pays full rent and another person comes along willing
to pay the community for the right to consume the land? Is the first
person to be allowed to exclude the second, when the second and the
community may both be losers? Is the answer to allow the first to
continue to occupy the land at the current rent but on condition that
he now buy the right to consume the oil? If he wishes to withhold the
oil from use must he not compensate the community for that privilege?
I do not pretend to have all the answers. All I ask is that Georgists
recognise that land value taxation needs to be adapted to deal
adequately with extractive industry and that it is here that the
Georgists, the Greens and the Indians will find themselves on truly