Embrace Unity
Edward Miller
[Reprinted from an online post; 8 August, 2011]
The real solution has nothing to do with techno-utopianism, monetary
reform, austerity, or any of the other ideological cul-de-sacs
currently being promoted.
The world is a complex place, or so we are told here in the USA.
The pundits and journalists will tell you that there are no simple
remedies to our problems, with an air of authority reserved only for
those serious few with the courage to offer up this sober dose of
reality. Besides, even if there were a simple solution, we can't agree
on the most basic of things anyways, since we are so polarized, or so
the narrative goes.
So instead of actually solving problems, the best we can hope for is
a series of convoluted band-aid solutions to fix whatever crisis is at
hand.
Is unemployment soaring? Let's produce a pathetic stimulus package
that mixes the worst of both Keynesian and supply-side ideology.
Plagued by deficits? Let's spend all our political energies on
bickering about whether the top tax bracket should be 35% or 39.6%.
Of course we mustn't forget to provide generous amounts of
corporatism to the already-privileged.
So if the climate is in crisis, let's give tradable pollution
licenses based on how much one has been polluting historically, and
give it a cute name like Cap and Trade.
And if prices in our cartelized healthcare sector are skyrocketing,
just force everyone to buy private health insurance and label that "progressive."
Everyone seems to agree there is something seriously wrong with the
modern American political discourse. Some blame the Left, some blame
the Right, and a fair number are now blaming the Center. There is
plenty of blame to go around, and I would contend that we have a
failure of critical thinking on the part of our intellectuals of all
stripes.
It is undoubtedly the case that our establishment intellectuals are
not chosen on the basis of their merit, but mostly on their
compatibility with the interests of the privileged classes. Yet, I'm
not just blaming the establishment figures; I'm blaming all
politically-minded citizens who buy into their oh-so serious
arguments and false political divisions.
What if I told you there was a solution which transcends political
divisions? Which is consistent with the ideals of our Founding
Fathers? Which can be implemented anywhere on the local, state, or
federal level? Which can increase our overall prosperity, reduce
inequality, promote peace, and improve the environment all at the
same time? Which can do all this without any major restructuring of
our institutions?
Assuming such a remedy even exists, surely it would be
controversial, right? Something which all the various political
ideologies could never agree on? Well the remedy does exist, and it
has been supported by principled people of nearly every political
persuasion, including some of the greatest minds in history.
The answer has nothing to do with techno-utopianism, monetary
reform, austerity, or any of the other ideological cul-de-sacs
commonly promoted
Remedy, you say? That's preposterous.
It goes by the unassuming moniker of the Land Value Tax (LVT),
which was most famously promoted by the American political economist
Henry George. It is based on the notion that people ought to own
what they produce, but since land is not a fruit of labor, private
land ownership has no basis in natural rights and is thus the ideal
source of government revenue. The Land Value Tax preserves the land
title system, but simply makes it expensive to hoard land in
unproductive ways.
Unlike common property taxes, the LVT does not count improvements
to the land, such as buildings. Buildings are man-made, but land
isn't. When you tax buildings, you discourage people from building.
Yet, when you tax land, the amount of land doesn't decrease. The
supply is fixed
The Land Value Tax is an idea that has united in support people who
would generally be considered political rivals: William F Buckley
and Ralph Nader, Joseph Stiglitz and Milton Friedman, Aldous Huxley
and Henry Ford, Clarence Darrow and William Jennings Bryan, Winston
Churchill and David Lloyd George, the list goes on.
By untaxing labor and shifting as much taxation as possible onto
land values, we enhance the incentives for production as desired by
fiscal conservatives. Yet, it provides a huge source of natural and
community-generated wealth to tap into, which is the ideal funding
mechanism for virtually any infrastructure project or social program
desired by those on the Left.
Those of a more "geo-libertarian" bent would prefer that
revenue be distributed as a Citizen's Dividend, rather than used to
fund bureaucracy. Yet, if the funding of bureaucracy is to come from
somewhere, they would strongly prefer it come from land values.
Milton Friedman called it the "least bad tax" for this
reason, but really it is far more profound than that.
The LVT strikes at the heart of the land monopoly. In a powerful
speech, Winston Churchill said, "Land monopoly is not the only
monopoly, but it is by far the greatest of monopolies; it is a
perpetual monopoly, and it is the mother of all other forms of
monopoly." It is the essence of feudalism and for all of our
supposed social progress we've yet to be free from it. Unless and
until the land monopoly is destroyed, the positive effects of
virtually all economic reforms and even philanthropy is largely
nullified.
Profits that are above those necessary for the production process
are called economic rents. One of the primary sources of rents is
monopolization, and one of the greatest tools for achieving
monopolization is actually government intervention on behalf of the
monopolists. Historically, every major monopoly has been the
beneficiary of enormous state-granted privilege. Whether it's AT&T,
Microsoft, or Standard Oil, the root of their power can invariably
be traced to particular political privileges.
Taxing such privilege causes no disincentive for production because
rents have nothing to do with production, they are a result of
imbalances in power and imperfections in the market. Land, and the
fruits of nature generally, is necessary for all production and even
life itself. Therefore, when access to it is concentrated into the
hands of a few, the rest have essentially no bargaining power.
Who owns the Earth?
"If you owned all the money in the world. And I owned all the
land. How much do you think I'd charge you for the first night's rent?"
If all land on Earth is owned by a subset of the population, then the
landless attain a status akin to that of trespassers on the Earth. If
"as our moral instincts inform us" we all have a birthright
to access the Earth, then this realization must be reflected in our
political institutions. A Land Value Tax system recognizes that land
titles are a practical way of allocating land use rights, but that the
proceeds from such monopolization over locations on the Earth must be
returned to their rightful owners, the community as a whole.
Really it isn't a tax at all, in the usual sense of confiscating that
which one produces. On the contrary, by allowing eternal sovereignties
over our common inheritance without any repayment to society, one has
essentially granted a subsidy to the landlords. Whenever anyone in the
community does anything to improve the region, the land values rise.
This occurs no matter what the intentions were. If a do-gooder builds
a community center in an impoverished area, the land values and rents
increase. Instead of helping the poor tenants in the region, the
do-gooder may have just helped them right out of a home. Whilst the
landlord could have been sleeping through the whole thing, and in the
end see his land values rise.
Invent something to improve harvests? Excellent, more rent for the
landlords and the exact same wages for labor. The same story could be
said of welfare programs, basic income guarantees, and the like. If
activists fight hard and turn the region into a bastion of civil
liberty which attracts people from all around, it doesn't matter if
the landlords were sleeping or actively opposing the activists, they
will see their land values rise, and the tenants will see their rents
go up. The same is true again of government infrastructure projects,
and anything else which makes a region attractive.
Back when I was a run-of-the-mill progressive, I would often echo
progressive sentiments about how awful it is that people are forced
into dangerous and low-wage jobs. This would provoke respectful but
spirited debates with those who call themselves "libertarians."
They would say that nobody is forcing them to work. They were
voluntarily agreeing to work.
Such debates were common around the Enlightenment. Thomas Malthus
reacted to the Enlightenment notions about freedom leading to a
golden age of prosperity. He claimed that natural resource
scarcities and breeding patterns inevitably cause markets to reduce
wages down to subsistence. He called this the Iron Law of Wages. He
was certainly correct that something about the market system of his
day (and our day), tends to drive wages down to a bare minimum. Yet,
his emphasis on natural scarcities and overpopulation was unfounded.
David Ricardo responded forcefully to Malthus, and argued that
actually the trends being witnessed were the result of what became
known as the Law of Rent. Ricardo's analysis of rent proved that
once all freely available land is claimed, then as production
increases, rent will eat up virtually all of the increase in
production. This explains why all of the amazing technological
improvements of the day were doing nothing to improve the conditions
for the large masses of landless paupers.
This is why technology alone can't save us; we need systemic
reform. If you're aware of the problems in the biotech industry
regarding the patenting of life, you should recognize that is very
much like another form of land monopoly, as it creates private
sovereignties over the fruits of nature which should belong to all.
Yet, biotech also increases the rent of real estate simply by
improving crop yields or indeed whenever it does anything of value
at all.
Same with any other advanced technology. We can't rely on the
super-rich to build us all nano-fabricated housing projects out of
the goodness of their hearts, we need to reign in the privilege
bestowed by the state upon private entities. I'm confident that the
day they figure out how to upload minds into computers, they'll
still find a way to make you pay rent.
Ideology doesn't matter; we're in this together.
While not everyone bases their political views on principles, I am
confident that most do. In the case of LVT, it isn't Right vs Left,
but the principled vs the corrupt. Any serious political view, short
of misanthropy, has every reason to support it.
If you are an
environmentalist, you should support Land Value Taxation in
order to spark more efficient use of land. We'd still require all the
usual mechanisms to internalize externalities, but the LVT alone would
encourage all the more sensible agricultural practices promoted by
environmentalists, such as permaculture and vertical farming.
Industrial monoculture and factory farming is highly land-intensive.
If holding land becomes expensive, then the markets would more
accurately reflect the social costs of such massive landholding.
If you are a humanitarian, you should support Land Value
Taxation primarily because until the land monopoly has been defeated,
no amount of philanthropy can possibly stop the trend of wages tending
towards subsistence.
If you are a serious technocrat, you should support LVT in
order to reduce unemployment, increase wages, and promote peace. On a
local scale there is evidence of all of this, including reduced crime
rates. I have no doubt that if countries follow this model, we will
see many former enemies become prosperous interdependent trading
partners.
If you believe in natural rights, you should support Land
Value Taxation in order to end the confiscation of honest income and
interest, and return that which belongs in the commons. The concept of
the LVT really has its roots in the writings of people like Adam
Smith, Thomas Paine, and others who passionately believed that labor
is the sovereign property of the individual, but that the Earth is our
common inheritance.
Especially you, Progressives
It hardly seems possible that a concept which was supported by many
of the original free market capitalist ideologues could be a
progressive one. Yet, if you are a progressive, you absolutely
should support Land Value Taxation, not as a small footnote of a
larger platform, but as a central tenet.
The ideas of Henry George and the Single Tax Movement were one of
the original inspirations of the Progressive Movement in the early
20th Century. Progressives like John Dewey were awestruck by the
power of the arguments of Henry George in his masterpiece Progress
and Poverty.
Of Henry George, Dewey wrote, "No man, no graduate of a higher
educational institution, has a right to regard himself as an
educated man in social thought unless he has some first-hand
acquaintance with the theoretical contribution of this great
American thinker." To this day, some of the most principled
progressives like Dennis Kucinich and Ralph Nader have drawn
inspiration from him.
When you look at any vast fortune, you will virtually always find
the heavy hand of government as part of the essential underpinning.
Whether it is through regulatory capture, patents, state-sponsored
licensing cartels, corporate personhood, or any other sort of
government-granted privilege. Yet, as long as the mother of all
monopolies remains, it would make no difference how many of those
other privileges were struck down. The land monopoly would absorb
all the of the difference that the elimination of privilege might
otherwise have made.
It is true that even under our land monopoly there are a small
subset of progressive reforms that improve conditions of the lower
classes, though often in an imprecise or inefficient manner. Yet,
the only way one can even know what those are is though an
understanding of the land monopoly. The reforms I am speaking of are
very much like the previously mentioned artificial scarcities which
favor big business. I am speaking of artificial labor scarcities.
The Fair Labor Standards Act of 1938 is a perfect example of this.
By banning child labor and establishing the Eight Hour Day via
overtime legislation, the FLSA restricted the supply of labor,
increased leisure, and reduced the number of unemployed. Most think
of it as the law which established the first federal minimum wage,
but actually that was more like an afterthought meant to encourage
automation in light of the artificial labor scarcity. The post-war
economic boom and creation of the middle class was a result of such
labor scarcities.
Unfortunately it is difficult to enforce overtime laws, and
nowadays businesses have become so proficient at evading this
regulation that it is practically non-existent for most. As with the
income tax, overtime laws are not that difficult for people to
evade. Even if it were a good idea, the government simply can't be
very efficient at sticking its nose into every business deal.
Land, however, cannot be hidden. It would therefore be much harder
for individuals to evade. Thus, compared to many other economic
reforms, it is fair, efficient, and straightforward. Our current
system of real estate assessment would not even need to change
drastically, and it could obsolete certain agencies like the IRS.
Income taxes cannot be truly progressive, by their nature, no
matter what sorts of brackets are in place. Taxing income does not
change the fundamental market power of individuals, and as such the
burden of taxes are just passed around until the income distribution
reflects market power. Again, it wasn't income taxes that created
the modicum of equality after WW2, it was merely labor scarcities,
and those can only do so much.
Additionally, we are suffering under the volatility of speculative
land bubbles, like the recent mortgage crisis, which are a byproduct
of the land monopoly. People like to point to all sorts of things
like CDOs, derivatives, credit default swaps, and so on, yet they
ignore that each of these are predicated on the ability to speculate
on land. The LVT would change all that in a truly progressive
manner, and end the volatile land bubbles. It would reshuffle market
power in favor of productive activity and away from unproductive
hoarding of land. Most importantly, it would allow us to actually
benefit from other sorts of reforms, and as such must be the top
priority. Until then we're merely reshuffling deckchairs on the
Titanic.
There is hope. The hope lies not in austerity, monetary policy,
deficit spending, or even technology. That last one was a hard pill
I had to swallow, but the sooner we all accept that the better.
The beauty of this simple reform is almost surreal. It solves so
much, yet asks so little. Instead of increasing bureaucracy, it
would reduce it. Instead of weakening incentives for production, it
would actually create them. Instead of encouraging waste and urban
sprawl, it would promote efficient use of land.
The LVT has been experimented with in many times and places, and it
has always succeeded to the extent that it was tried. It holds the
potential for uniting principled minds of every persuasion, if only
we can break free of the ignorance espoused by the talking heads who
tell us that the only remedies available are painful and complex.
Let's show those bastards that they're wrong. A better way is
possible, and through it we can finally reach that golden age we're
always dreaming of.
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