LVTFan's Blog

The Earth-for-All Calendar: November 20 -- Isaiah

They shall build houses and inhabit them; and they shall plant vineyards and eat the fruit of them. They shall not build and another inhabit; they shall not plant and another eat.

— Isaiah, LXV., 21-2.

Individual Account Retirement Plans: An Analysis of the 2010 Survey of Consumer Finances | EBRI

Note: this has some statistics you might want to know, but it is primarily a post on public policy.

Individual Account Retirement Plans: An Analysis of the 2010 Survey of Consumer Finances | EBRI.

... many Americans are facing the likelihood of not having sufficient income in retirement unless they increase their savings, work longer, or significantly decrease their expenditures in retirement if they hope to make ends meet.

The Employee Benefits Research Institute recently published an analysis of 2010 Survey of Consumer Finances data.  It demonstrates how few people have the traditional defined-benefit retirement plans, and the account balances people of various demographics have in their individually-directed retirement accounts.

Here are some statistics worth considering as we think about the effects of a system which permits a few of us to capture a large share of the nation's net worth and a large share of its income, and to unduly influence our elections with advertising which works to conceal and reinforce the structures of that system:

• 38% of all families -- of all ages -- had a family member with a retirement plan. [Figure 2]
  • of those 38%, 18% had only a defined benefit plan; 61% had only a defined contribution plan; 21% had both.  82% had a 401(k) type plan, and of that 82%, 22% also had a defined benefit plan
  • Among those families whose head was 55-64, 43% had a member with a retirement plan; among those 45-54, 53% did.
  • Interestingly, the top 75% of the net worth spectrum all had rates in the 41% to 46% range; in the bottom 25%, only 21%.
• Among families whose head was under 65 and working, 52% had a member participating in a retirement plan [Figure 3].  
  • Among households with income abov e $100,000, 76% had retirement plans; in the $50,000 to $100,000 income range, 64%; in the lower income groups, the rate ranged from 44% down to 9% 
  • In the 55-64 age group, 59% had a retirement plan; in the 45-54 group, 61%. 
  • Within this working-age universe, similar trends held: the top 50% had roughly 61-67% availability of employment-related retirement plans; for the next 25%, only 53%; for the bottom 25% of working families, only 29%.   
• IRAs and Keogh plans: 28% had one or both; median value, $40,000 (up from $34,574 in 2007). Among those 55-64, 41% had one or both; median value $60,000 (down from $68,101); among those 45-54, 29% had one or both; median value $40,000, up from $37,717. [Figure 5]
  • Even among those in the top 10% of the net worth spectrum, only 77% had IRA or Keogh accounts, median value $200,,000, up from $142,487 in 2007; in the next 15% of the net worth spectrum, median value was $60,000.  
• Of all families, 64% had some sort of retirement account from a current or previous employer (down from 66% in 2007) 
• Retirement assets in Defined Contribution plans and IRAs typically [that is, at the median] represent 61% to 66% of total financial assets, which is to say that most have less in mutual funds, stocks, checking and other accounts than they do in their retirement accounts. [Figure 8]
• Only in the top 10% do retirement assets represent less than half of financial assets.
• As is typical of median/average ratios, average holdings are considerably higher -- that is, the holdings of the top few are huge, and most of us are below average.  The average balance is $173,232; in the top 10% of the net worth spectrum, average balances are $519,034.  For the next 15% of us, the average balance is 147,061 -- well below the average of all of us! [Figure 9]  Recall from Figure 6 that 64% of us have such a plan; the other 36% have no balance at all (and likely a significant percentage have very small account balances).
• For those in the 65-74 age group, the average balance is $324,199; for those in the 55-64 group, the average balance is $297,903.
• For those in the top 10%, average account balance is $519,034.  One might reasonably guess that the top 5% have the lion's share of this.
• It might be worth noting that a 70 year old must withdraw at least 1/27 of his IRA per year.  Based on that 65-74 age group average balance, that's $12,000 per year.  (Another rule of thumb says that if one only withdraws 3% per year, one's account should last forever. That would be $9,725 per year, for that "average" -- not median -- family in the 65-74 age group. 

 Enough said.  Time to circle back to the study's conclusion:

... many Americans are facing the likelihood of not having sufficient income in retirement unless they increase their savings, work longer, or significantly decrease their expenditures in retirement if they hope to make ends meet.

What public policy reforms might one suggest based on these data points?

• Find a way to raise wages for ordinary workers
• Find a way to lower the cost of living for ordinary workers and retirees
• Find a way to reduce the sum of the taxes we pay and the costs of housing without reducing the public goods which those taxes provide (unless it is by reducing the demand for social safety net 

If you have other suggestions, I'd like to hear them.

But the reason for this blog is that I believe I have found the public policy reform which would accomplish these goals, in collecting the lion's share of the annual rental value of our land, and in collecting for the commons certain other kinds of natural public revenue which our current system permits to accrue to individuals and corporations.  I didn't invent it.  Henry George is the clearest exponent of it, but not the first or last.  Is it perfect?  No, but it is vastly superior to what we've got now, and I believe it is consistent with the ideals to which Americans pay the most honor.

One's "Fair Share"

The post below this one, "Mitt Romney's 'Fair Share' " refers to his fair share of the costs of providing public goods.

But perhaps an equally important question is the nature of one's fair share of the output of our economy and the output of the earth.  Some of the former output is the result of individual efforts, and one ought to be able to keep that portion. But at the same time we must recognize how much comes from the division of labor, from drawing down on the non-infinite supply of non-renewable natural resources on which all of us today must depend and on which future generations of human beings must rely. Those who draw down more than their legitimate share owe something to the rest of the community.  Our wealthiest tend, we suspect, to use many, many times their legitimate share, and the median American likely draws far more than their share, when one considers the planet as a whole.   

Perhaps "legitimate" is not the right word here.  It refers to what is permissible under current law.  (The word gets misused a lot -- see the discussion on "legitimate rape," which seemed to be about the circumstances under which a woman has a right to make a specific very personal, decision, and when it is considered by some to not be left to her and is the province of government, legislators or others.)

What is one's "fair share" of natural resources?  America is using a hugely disproportionate share of the world's resources.  Are we entitled to it because we're somehow "exceptional"?  Because "our" God is somehow better than other nation's Gods?   Or do we genuinely believe that all people are created equal, and intend to live our lives accordingly?

Our output of greenhouse gases exceeds our share of the world's population.  This is not without consequences for the world, and for peace on earth.

We ought to be re-examining our incentives so that they move us in the direction we ought to be going, which is, to my mind, using less.  We can build transportation infrastructure which will permit many more of us to move around with less impact on the environment.  We can fund that through collecting the increases in land value that infrastructure creates.  We can correct the incentives which cause us to use today's inferior technologies to extract natural resources from the earth in ways which damage the environment, as if ours was the final generation, or the only one worth serious consideration.

Better incentives could reduce, eliminate, even reverse urban sprawl.  I refer specifically to land value taxation as a replacement for the existing property tax, particularly in places where assessments are for one reason or another not consistent with current property values -- e.g., California and Florida, parts of Delaware and Pennsylvania which currently use assessments from the 1970s, and many other places where assessments are simply out of whack with current reality!)  We should be replacing sales taxes, wage taxes, building taxes with taxes on land value and on natural resources.  Most of that value is flowing generously into private or corporate pockets, to our detriment.  It concentrates wealth, income, and, of course, political power. 

Collecting the rent, instead of leaving the lion's share of it to be pocketed by the rent-seekers, would go a long way to making our society and our economy healthier.  Eliminating the privilege of privatizing that which in a wisely designed society would be our common treasure would make our society a better place in which to live, a place in which all could thrive and prosper without victimizing their fellow human beings. 

The Earth-for-All Calendar: September 2 -- Gerrit Smith and Thomas Paine

The vacant land belongs to the landless.  The simple fact that the one is vacant and the other landless is of itself the highest proof that they should be allowed to come together.  Alas, what a crime against nature that they should be kept apart.

— GERRIT SMITH, Smith's Speeches in the U. S. Congress, p. 247 (1854). 

The earth in its natural uncultivated state was, and ever would have continued to be, the common property of the human race.

—THOMAS PAINE, Agrarian Justice (1797),  Paine's Writings, Vol. III,, p. 329.

A Right-to-Life Platform -- 125 years old

As I listen to the 2012 party platforms, I am reminded of what they ought to be focused on, embodied pretty well in this platform from 1886-87. 

PLATFORM OF THE UNITED PARTY.
Adopted at Syracuse August 19, 1887.

We, the delegates of the united labor party of New York, in state convention assembled, hereby reassert, as the fundamental platform of the party, and the basis on which we ask the co-operation of citizens of other states, the following declaration or principles adopted on September 23, 1886, by the convention of trade and labor associations of the city of New York, that resulted in the formation of the united labor party.   

"Holding that the corruptions of government and the impoverishment of labor result from neglect of the self-evident truths proclaimed by the founders of this republic that all men are created equal and are endowed by their Creator with unalienable rights, we aim at the abolition of a system which compels men to pay their fellow creatures for the use of God’s gifts to all, and permits monopolizers to deprive labor of natural opportunities for employment, thus filling the land with tramps and paupers and bringing about an unnatural competition which tends to reduce wages to starvation rates and to make the wealth producer the industrial slave of those who grow rich by his toil.

'“Holding, moreover, that the advantages arising from social growth and improvement belong to society at large, we aim at the abolition of the system which makes such beneficent inventions as the railroad and telegraph a means for the oppression of the people and the aggrandizement of an aristocracy of wealth and power. We declare the true purpose of government to be the maintenance of that sacred right of property which gives to every one opportunity to employ his labor, and security that he shall enjoy its fruits; to prevent the strong from oppressing the weak, and the unscrupulous from robbing the honest; and to do for the equal benefit of all such things as can be better done by organized society than by individuals; and we aim at the abolition of all laws which give to any class of citizens advantages, either judicial, financial, industrial or political, that are not equally shared by all others."

We call upon all who seek the emancipation of labor, and who would make the American union and its component states democratic commonwealths of really free and independent citizens, to ignore all minor differences and join with us in organizing a great national party on this broad platform of natural rights and equal justice. We do not aim at securing any forced equality in the distribution of wealth. We do not propose that the state shall attempt to control production, conduct distribution, or in any wise interfere with the freedom of the individual to use his labor or capital in any way that may seem proper to him and that will not interfere with the equal rights of others. Nor do we propose that the state shall take possession of land and either work it or rent it out. What we propose is not the disturbing of any man in his holding or title, but by abolishing all taxes on industry or its products, to leave to the producer the full fruits of his exertion and by the taxation of land values, exclusive or improvements, to devote to the common use and benefit those values, which, arising not from the exertion of the individual, but from the growth of society, belong justly to the community as a whole. This increased taxation of land, not according to its area, but according to its value, must, while relieving the working farmer and small homestead owner of the undue burdens now imposed upon them, make it unprofitable to hold land for speculation, and thus throw open abundant opportunities for the employment of labor and the building up of homes.

While thus simplifying government by doing away with the horde of officials required by the present system of taxation and with its incentives to fraud and corruption, we would further promote the common weal and further secure the equal rights of all, by placing under public control such agencies as are in their nature monopolies: We would have our municipalities supply their inhabitants with water, light and heat; we would have the general government issue all money, without the intervention of banks; we would add a postal telegraph system and postal savings banks to the postal service, and would assume public control and ownership of those iron roads which have become the highways of modern commerce.

While declaring the foregoing to be the fundamental principles and aims of the united labor party, and while conscious that no reform can give effectual and permanent relief to labor that does not involve the legal recognition of equal rights, to natural opportunities, we nevertheless, as measures of relief from some of the evil effects of ignoring those rights, favor such legislation as may tend to reduce the hours of labor, to prevent the employment of children of tender years, to avoid the competition of convict labor with honest industry, to secure the sanitary inspection of tenements, factories and mines, and to put an end to the abuse of conspiracy laws.

We desire also to so simplify the procedure of our courts and diminish the expense of legal proceedings, that the poor may be placed on an equality with the rich and the long delays winch now result in scandalous miscarriages of justice may be prevented.

And since the ballot is the only means by which in our Republic the redress of political and social grievances is to besought, we especially and emphatically declare for the adoption of what is known as the “Australian system of voting,” an order that the effectual secrecy of the ballot and the relief of candidates for public office from the heavy expenses now imposed upon them, may prevent bribery and intimidation, do away with practical discriminations in favor of the rich and unscrupulous, and lessen the pernicious influence of money in politics.

In support or these aims we solicit the co-operation of all patriotic citizens who, sick of the degradation of politics, desire by constitutional methods to establish justice, to preserve liberty, to extend the spirit of fraternity, and to elevate humanity.

The Earth-for-All Calendar: April 1: Queen Elizabeth's Prayerbook

Thou, O Lord, providest enough for all men with Thy most liberal and bountiful hand, but whereas Thy gifts are, in respect of Thy goodness and free favour, made common to all men, we (through our naughtiness, niggardship and distrust), do make them private and peculiar. Correct Thou the thing which our inequity hath put out of order, and let Thy goodness supply that which our niggardliness hath plucked away.

— A Prayer for Them That Be in Poverty, from Queen Elizabeth's Private Prayer Book (1578).

The Earth-for-All Calendar: March 11 - Pope Gregory the Great

Those who make private property of the gift of God pretend in vain to be innocent. For in thus retaining the subsistence of the poor they are the murderers of those who die every day for want of it.

— POPE GREGORY THE GREAT, Cura Pastoralis,

Sweet's Early English text Society, Vol. II., p. 334.

Downton Abbey: The Landed Gentry

I had the pleasure of watching part of a marathon of the second season of Downton Abbey yesterday, knowing that I'd missed a few shows -- and want to watch them all in sequence.

The setting of the show raises some questions one might want to think about.

1. What sort of wages do all the "downstairs" employees receive?

2. What employment alternatives are available to them?

3. How does the owner of Downton Abbey afford to pay for the services of all those workers, in addition to the non-wage costs of maintaining the castle and the surrounding land, which is an overwhelming job -- and passion -- for him?

4. Is there a middle class in that town?  On what are their fortunes dependent?  How are they different from the staff at Downton Abbey?

5. What are the opportunities for the children of the house staff at Downton Abbey to have a different life from their parents?

6. Can others prosper?

7. What sorts of ideas, particularly on public policy, maintain the status quo?

8. Why is having the property pass intact to one person so important?  What would happen if it were divided among several heirs?

9. Do you think there are small holdings in the same area, where individual families can live, work and prosper, or a series of large holdings like DA?

10. Are people unemployed or underemployed? Are their opportunities limited by the system, particularly if they care about staying close to family?

This is off the top of my head.  I'm charmed by the series, and at the same time, am puzzled by how much I enjoy watching it.  (Good writing, of course.)

The Land Questions #18 -- Gambling

18.  Why do we give special privileges to certified Native American tribes: e.g., the right to run casinos, sell cigarettes without collecting taxes, etc.

A. Because some Native American communities are poor, or have good lobbyists.  Gambling creates jobs for some and great riches for some, while preying on others.

B. Because "our" ancestors took away something absolutely vital from their ancestors (even if many of our ancestors arrived well after the event): land.

C. Because a significant minority of Americans realize they can't get rich through honest labor and think they have better chances at the gambling table.

D. Because states collect some portion of the casino revenue (in Connecticut, 25%).

D. Your suggestions

Shalom and Taxation

This quote came across my inbox today, and I thought it worth sharing:

“We operate from the concept of ‘shalom,’” Forrister said when he reported on that meeting to The Huntsville Times. “’Shalom’ means more than the absence of war, it means the well-being of all. Ezekiel said to seek the ‘shalom’ of the city you’re in – and he was writing to people in exile in Babylon. We’re to seek the good of the whole community, of all of society.”

I came very slowly to the point of view that the nature of the ways we fund our common spending is at least as important as the spending side of the budget.  That taxation can be destructive or constructive.  That it can be used to create vital healthy communities or ones in which wealth and power concentrate into a few hands.

I grew up with the benefit of grandparents who understood this, and I still didn't "get it" until well after they were gone.  Certainly my college education didn't provide me any glimpses of it, despite being concentrated in fields in and around it.  I hope that others who are seekers after peace -- after Shalom -- will investigate what Henry George's "Remedy" -- land value taxation -- has to offer for their community and their country.

And here's the final paragraph from the email that the first quote came from:

Taking care of each other is simple kindness, not something sinister, said Forrister, who was trained as a Church of Christ minister.

“Thinking about looking out for the common good is not socialism,” Forrister said. “Capitalism has to be tempered by social policy that responds to human needs that capitalism won’t respond to.”

Our current form of capitalism is, among other things, land monopoly capitalism.  Were we to remove the land monopoly aspect, through land value taxation, we would have a purer capitalism, one which I think would better serve the ideals we claim to hold dear.

Is inequality an inevitable byproduct of growth?

Recession Crimped Incomes of the Richest Americans - NYTimes.com.

Pointing to the recent declines at the top, Mr. Kaplan argues the Occupy protesters have accused the wrong villain by focusing on inequality, which he called an inevitable byproduct of growth. “If you want to reduce inequality, all you need to do is put the economy in a recession,” he said. “If you want the economy to do well, as all of us do, then you’ll get more inequality.”

Well, maybe at the University of Chicago, that is what is taught, but is it true? 

It may be inevitable under our current structures, but if one gets outside that box, and looks deeper, one finds other answers.

I would suggest that Mr. Kaplan, who teaches economics at the Graduate School of Business at the U of C, look  beyond the interests of the university's and b-school's founders and big donors and alumni and current students, and consider that we're all in this together, and that when we permit a few to monopolize and privatize things which rightly are our common treasure, inequality is the inevitable byproduct.

Mr. Kaplan might start by exploring the ideas of Henry George.  They were in his freshman economics texts, but most likely his instructor didn't lecture on them, or include them in exams (most likely because his own instructors hadn't!)

Read what those textbooks have to say, and then think about whether it is in Mr. Kaplan's personal career interests to speak of an idea that could rock the yachts of alumni and donors and others who like our current structures just fine, thank you!  The privileged like their privileges, and would prefer that we not notice that they are privileges, or, if we do notice, think that THEIR privileges are somehow in OUR best interests.

An impolite fiction!

Taxing work does not create ...

Inspired by the energy, rhythm and tune of Kristin Andreassen’s Crayola Doesn’t Make the Color of your Eyes or another version from Prairie Home Companion, my friend Joe Johnston wrote this song.  Watch one of the videos first!  The tune is infectious, and Joe's words communicate the message clearly.

Taxing work does not create....

I went to see the wise one
our town was such a mess
the longest lines to get in
were at the DSS

He said, I cannot cure your town
But here’s something you can do
write a list and flesh it out
Of why your town is in a stew

Well, we build roads; we run the bus,
We try to control crooks.
We build the parks and sidewalks
We give our streets good looks

To do these things, we need some wealth
And so we tax the things we see
We tax the buildings and what you earn
We tax merchants and sellers with a fee.

(refrain)
I guess I realized,
shoulda come as no surprise
that Taxes on work don’t create
a good environment.
What we tax, that we reduce
let’s not kill our jobs,
Taxes on work do not create
a good environment.

We tax the land, that helps ensure
that land is not a wager
It lowers the cost to those who use it
to create more jobs per acre

Collecting land rents means
That the things we as community do
are benefiting everyone and
go to all, not to the few.

And if a person wants to work
she reaps the results of her labor
The benefits of what she does,
Not the out-of-town land speculator

(refrain)
I guess I  realized,
shoulda come as no surprise
that Taxes on work don’t create
a good environment.
What we tax, that we reduce
let’s not kill our jobs,
Taxes on work do not create
a good environment.

So maybe we’ll shift the taxes off
The labor you and I do, you see
And put it on the land so none
can squeeze the blood from you and me.

That way they’ll be  more jobs for those
who put their backs and brains to work
We wouldn’t have to work so long,
To put a roof and walls on God’s good dirt.

We wouldn’t need two jobs to feed
The mouths that we beget,
To house and clothe them and ourselves
And where we need to go, we’d get.

(refrain)
I guess I  realized,
shoulda come as no surprise
that Taxes on work don’t create
a good environment.
What we tax, that we reduce
let’s not kill our jobs,
Taxes on work do not create
a good environment.

A compact town means we could walk around
to get, to shops, to meet, to work for gain
And even walk to parks nearby
where quiet, joy, and beauty reign.

We wouldn’t need a big back yard,
or front ones with their lawns to mow.
We’d have a share in common land,
Where our souls, spirits, and bodies grow.

I think we’ve solved the problem of unemployment lines
of barely earning what we need.
We may not have the harvest yet,
But we have sown the seed.

(refrain)
I guess I  realized,
shoulda come as no surprise
that Taxes on work don’t create
a good environment.
What we tax, that we reduce
let’s not kill our jobs,
Taxes on work do not create
a good environment.

James Love's paragraph summary of Progress and Poverty

I had the pleasure of stumbling across a piece of writing from about 100 years ago.  It is in one of quite a large number of books written by enthusiastic admirers of the ideas of Henry George, put online by Google Books.  This is from a book by one James Love (written under a pseudonym).  I've reformatted it a bit to make it easier to read here.   It is a good summary of "Progress and Poverty," still the best book I know on political economy and economic justice -- why we suffer from wealth concentration, income concentration, poverty, sprawl, and a number of our other most serious social and environmental problems.   Here's the excerpt; read it slowly and consider its implications!

This man, who I believe to be the completest in thought and language that the world has seen, and his book the most precious ever given by man to men, concludes

• that the world (even more necessary to our existence than our own bodies are) is intended for all men of all generations, and not for some men alone.
• That every human being born into the world has a natural right in it equal to that of every other human being born into it.
• That as man by his nature seeks to gain his ends in the easiest way, some parts of the earth on which he can accomplish much become more desirable than other parts on which he can accomplish less.
• That this varying desirability, causing competition for the use of certain lands, shows itself in "rent," which is thus a communal product, and as clearly belongs to communities as the remainder of the produced wealth belongs to the individual producers.
• That it is as impolitic and unjust to take from the individual for the use of the community what has been produced by the individual as it is impolitic and unjust not to take for the use of all, or of the community, that which is produced in common by the community.
• That, in short, "rent" is the natural, God-intended fund for general public use. And
• that in denying this moral law of equal rights to land there is brought about a pitiful inequality of true wealth, and a sordid struggle for existence, destructive of human freedom and eventually bringing progress to a halt.
• And that we are at last learning that in setting up "vested rights" — based whether on ancient force or ancient law — developed into modern custom — and denying this equality, we rob men and deny the truly sacred right of every man to the product of his labor; deny the sacred right of property in "wealth."
• And that in treating private property in land as sacred (worse than treating property in man as sacred) "there never was a more degrading abasement of the human mind before a fetich."
• But that, on the contrary, "by conforming our institutions to this divine law of justice we will bring about conditions in which human nature can develop its best;
  
  • will permit such enormous production of wealth as we can now hardly conceive;
  • will secure an equitable distribution;
  • will solve the labor problem and dispel the darkening clouds now gathering over the horizon of European civilization.
  • We will make undeserved poverty an unknown thing;
  • will check the soul-destroying greed of gain, and
  • will enable men to be at least as honest, as true, as considerate and highminded as they would like to be.
  • We will open to all, even the poorest, the comforts and refinements and opportunities of an advanced civilization; and
  • we will thus, so we reverently believe, clear the way for the coming of that kingdom of right and justice, and consequently of abundance and peace and happiness, for which the Master told his disciples to pray and work."*

* "The strength of ' Progress and Poverty' is not that it restated fundamental truths which others had before stated. It is that it related these truths to all other truths. That it shattered the elaborate structure that under the name of 'Political Economy' had been built up to hide them, and restoring what had, indeed, been a dismal science to its own proper symmetry, made it the science of hope and of faith." —Reply to charge of plagiarism.—Henry George.

Thy Kingdom Come!

I sang this hymn this morning, and the fourth and fifth verses made me wonder whether it might have been inspired by the ideas of Henry George. 

1 "Thy kingdom come!" on bended knee the passing ages pray; and faithful souls have yearned to see on earth that kingdom's day.

2 But the slow watches of the night not less to God belong; and for the everlasting right the silent stars are strong.

3 And lo, already on the hills the flags of dawn appear; gird up your loins, ye prophet souls, proclaim the day is near:

4 The day to whose clear shining light all wrong shall stand revealed, when justice shall be throned in might, and every heart be healed;

5 When knowledge, hand in hand with peace, shall walk the earth abroad; the day of perfect righteousness, the promised day of God.

Words: Frederick Lucian Hosmer, 1891       Music: Irish, St. Flavian

I also found a second related hymn Hosmer wrote in 1905, here: 

1 Thy Kingdom come, O Lord, Wide circling as the sun; Fulfill of old Thy Word And make the nations one.

2 One in the bond of peace, The service glad and free Of truth and righteousness, Of love and equity.

3 Speed, speed the longed for time Foretold by raptured seers— The prophecy sublime, The hope of all the years.

4 Till rise at last, to span Its firm foundations broad, The commonwealth of man, The city of our God.

Henry George delivered a sermon entitled "Thy Kingdom Come," in 1889 in Glasgow, Scotland.  Most likely he gave that speech many more times in other places.   It includes these paragraphs:

Nothing is clearer than that if we are all children of the universal Father, we are all entitled to the use of His bounty. No one dare deny that proposition. But the people who set their faces against its carrying out say, virtually: “Oh, yes! that is true; but it is impracticable to carry it into effect!” Just think of what this means. This is God’s world, and yet such people say that it is a world in which God’s justice, God’s will, cannot be carried into effect. What a monstrous absurdity, what a monstrous blasphemy!

If the loving God does reign, if His laws are the laws not merely of the physical, but of the moral universe, there must be a way of carrying His will into effect, there must be a way of doing equal justice to all of His creatures.

There is. The people who deny that there is any practical way of carrying into effect the perception that all human beings are equally children of the Creator shut their eyes to the plain and obvious way. It is, of course, impossible in a civilization like this of ours to divide land up into equal pieces. Such a system might have done in a primitive state of society. We have progressed in civilization beyond such rude devices, but we have not, nor can we, progress beyond God’s providence.

There is a way of securing the equal rights of all, not by dividing land up into equal pieces, but by taking for the use of all that value which attaches to land, not as the result of individual labor upon it, but as the result of the increase in population, and the improvement of society. In that way everyone would be equally interested in the land of one’s native country. Here is the simple way. It is a way that impresses the person who really sees its beauty with a more vivid idea of the beneficence of the providence of the All-Father than, it seems to me, does anything else.

One cannot look, it seems to me, through nature — whether one looks at the stars through a telescope, or have the microscope reveal to one those worlds that we find in drops of water. Whether one considers the human frame, the adjustments of the animal kingdom, or any department of physical nature, one must see that there has been a contriver and adjuster, that there has been an intent. So strong is that feeling, so natural is it to our minds, that even people who deny the Creative Intelligence are forced, in spite of themselves, to talk of intent; the claws on one animal were intended, we say, to climb with, the fins of another to propel it through the water.

Yet, while in looking through the laws of physical nature, we find intelligence we do not so clearly find
beneficence. But in the great social fact that as population increases, and improvements are made, and men progress in civilization, the one thing that rises everywhere in value is land, and in this we may see a proof of the beneficence of the Creator.

Why, consider what it means! It means that the social laws are adapted to progressive humanity! In a rude state of society where there is no need for common expenditure, there is no value attaching to land. The only value which attaches there is to things produced by labor. But as civilization goes on, as a division of labor takes place, as people come into centers, so do the common wants increase, and so does the necessity for public revenue arise. And so in that value which attaches to land, not by reason of anything the individual does, but by reason of the growth of the community, is a provision intended — we may safely say intended — to meet that social want.

Just as society grows, so do the common needs grow, and so grows this value attaching to land — the provided fund from which they can be supplied. Here is a value that may be taken, without impairing the right of property, without taking anything from the producer, without lessening the natural rewards of industry and thrift. Nay, here is a value that must be taken if we would prevent the most monstrous of all monopolies. What does all this mean? It means that in the creative plan, the natural advance in civilization is an advance to a greater and greater equality instead of to a more and more monstrous inequality.

“Thy kingdom come!” It may be that we shall never see it. But to those people who realise that it may come, to those who realize that it is given to them to work for the coming of God’s kingdom on earth, there is for them, though they never see that kingdom here, an exceedingly great reward — the reward of feeling that they, little and insignificant though they may be, are doing something to help the coming of that kingdom, doing something on the side of that Good Power that shows all through the universe, doing something to tear this world from the devil’s grasp and make it the kingdom of righteousness.

Aye, and though it should never come, yet those who struggle for it know in the depths of their hearts that it must exist somewhere — they know that, somewhere, sometime, those who strive their best for the coming of the kingdom will be welcomed into the kingdom, and that to them, even to them, sometime, somewhere, the King shall say: “Well done, thou good and faithful servant, enter thou into the joy of thy Lord.”

I wonder if Henry George's words helped inspired Frederick Hosmer's hymn.  I commend the entire sermon to your attention; parts of it will make you smile.

Additional thoughts on Norton and Ariely's paper

Much has been written in various circles about Mike Norton and Dan Ariely's recent paper about American's thoughts about the distribution of wealth in America.  This is the paper which showed the actual distribution of wealth, by wealth quintile (Line 1, below), and contrasted it with the estimates (odd-numbered columns) which Americans of various demographics made of the actual distribution of wealth, and then their ideal  distribution of wealth (even-numbered columns).  Here are the data, read from some unlabeled bar charts:

		Top 20%			2nd 20%			Middle 20%			4th 20%			Bottom 20%
1	Actual	84%			11%			4%			0.2%			0.1%
	demographic group:	Est'd (1)	Ideal (2)		Est'd (3)	Ideal (4)		Est'd (5)	Ideal (6)		Est'd (7)	Ideal (8)		Est'd (9)	Ideal (10)
2	<$50K income	58%	30%		20%	22%		12%	22%		7%	15%		3%	12%
3	$50-100K income	59%	33%		20%	23%		12%	22%		7%	13%		3%	10%
4	>$100K income	61%	40%		23%	23%		12%	19%		6%	11%		3%	8%
5	Bush Voters	56%	35%		21%	23%		13%	20%		6%	13%		3%	9%
6	Kerry Voters	62%	30%		19%	22%		12%	21%		5%	15%		3%	12%
7	Women	57%	29%		22%	21%		12%	22%		6%	15%		3%	13%
8	Men	60%	35%		20%	22%		10%	21%		6%	13%		3%	9%
9	point range	6	11		4	2		3	3		2	4		0	5
	Underscore represents the highest datum in the column; italics the lowest.  Sample size: 5522 respondents.  Results read from unlabeled bar graph.

Observations:

• The top 20% of wealth holders have 84% of the wealth (line 1, first column).  The demographic making the highest estimate, Kerry voters, estimated their share at 62% (line 6, column 1), and their ideal was 30% (line 6, column 2); the demographic making the lowest estimate, Bush voters, thought the top 20% held 56% (l5, c1), and their ideal was 35% (l5, c2).  Those with incomes over $100,000 had the highest average for "ideal share," at 40% (l4, c2) -- less than half the actual 84%!
• The second 20% of wealth holders have 11% of the wealth (line 1, second column).  Estimates ranged rather narrowly, from 19% to 23% (column 3), and ideals ranged from 21% to 23% (column 4)!
• The remaining 60% of us actually have less than 5% of the wealth (line 1, third, fourth and fifth columns).  Estimates of the combined wealth of these 3 quintiles ranged from 19% to 22%.  And across demographic groups, the ideal for the bottom 60% of us ranged from 38% (among those with $100,000 or more in income) to 50% (among women).

 

The abstract says it pretty clearly:

Disagreements about the optimal level of wealth inequality underlie policy debates ranging from taxation to welfare. We attempt to insert the desires of “regular” Americans into these debates, by asking a nationally representative online panel to estimate the current distribution of wealth in the United States and to “build a better America” by constructing distributions with their ideal level of inequality.

• First, respondents dramatically underestimated the current level of wealth inequality.
• Second, respondents constructed ideal wealth distributions that were far more equitable than even their erroneously low estimates of the actual distribution.
• Most important from a policy perspective, we observed a surprising level of consensus: All demographic groups -– even those not usually associated with wealth redistribution such as Republicans and the wealthy -– desired a more equal distribution of wealth than the status quo.

Here's their final paragraph (omitting references and reformatted a bit for legibility):

Given the consensus among disparate groups on the gap between an ideal distribution of wealth and the actual level of wealth inequality, why don’t more Americans -– especially those with low income -– advocate for greater redistribution of wealth?

• First, our results demonstrate that Americans appear to drastically underestimate the current level of wealth inequality, suggesting they may simply be unaware of the gap.
• Second, just as people have erroneous beliefs about the actual level of wealth inequality, they may also hold overly optimistic beliefs about opportunities for social mobility in the United States beliefs which in turn may drive support for unequal distributions of wealth.
• Third, despite the fact that conservatives and liberals in our sample agree that the current level of inequality far from ideal, public disagreements about the causes of that inequality may drown out this consensus. 
• Finally, and more broadly, Americans exhibit a general disconnect between their attitudes towards economic inequality and their self-interest and public policy preferences, suggesting that even given increased awareness of the gap between ideal and actual wealth distributions, Americans may remain unlikely to advocate for policies that would narrow this gap.

 

It cheers me that professors at Harvard Business School and Duke University took on this subject.  Clearly some of the largest donors to their institutions have reason to like the current structure just fine, thank you, and this analysis might not endear them to such donors.  I hope the conversation they're suggesting will continue.

Those who want data on wealth distribution can explore the 3-part series in the "Pages" section at left.

And those who want to understand the structures that funnel our wealth into a relative few pockets, at the expense of the rest of us, can explore this blog, and particularly the pages on wealth concentration, income concentration, privilege (see links in the category "cloud" at left).

Do tax structures affect aggregate economic growth?

Do tax structures affect aggregate economic growth? Empirical evidence from a panel of OECD countries.

Do tax structures affect aggregate economic growth?  Empirical evidence from a panel of OECD countries 

This paper examines the relationship between tax structures and economic growth by entering indicators of the tax structure into a set of panel growth regressions for 21 OECD countries, in which both the accumulation of physical and human capital are taken into account. 

The results of the analysis suggest that income taxes are generally associated with lower economic growth than taxes on consumption and property.  More precisely, the findings allow the establishment of a ranking of tax instruments with respect to their relationship to economic growth.  Property taxes, and particularly recurrent taxes on immovable property, seem to be the most growth-friendly, followed by consumption taxes and then by personal income taxes.  Corporate income taxes appear to have the most negative effect on GDP per capita. 

These findings suggest that a revenue-neutral growth-oriented tax reform would be to shift part of the revenue base towards recurrent property and consumption taxes and away from income taxes, especially corporate taxes.  There is also evidence of a negative relationship between the progressivity of personal income taxes and growth. 

All of the results are robust to a number of different specifications, including controlling for other determinants of economic growth and instrumenting tax indicators.

The full study, 28 pages, is at http://www.oecd.org/officialdocuments/displaydocumentpdf?cote=eco/wkp%282008%2951&doclanguage=en

Readers of this blog will know that I favor shifting to a tax on land value, and eliminating the portion of the conventional property tax which falls on buildings and other improvements to land.    But I'm fascinated that their analysis shows that even taxing buildings and other improvements to land, along with land value, is superior to taxing consumption or personal income or corporate income, in terms of the effects on economic growth.

So I'll leave you with this question: if we know that income taxes and consumption taxes discourage growth more than the conventional property tax does, in whose interest is it that we not rely heavily on the property tax?   Cui bono?

Go to the root of the problem.  Recognize who benefits from the status quo.  They like the current system just fine, and will fund heavily efforts to conserve it.

And when California (Proposition 13 forces reliance on wage and sales taxes to "protect" property owners) and other states, including soon Indiana, start complaining about a lack of economic growth, and when New York State's new Governor Cuomo starts talking about "property tax relief," understand that this is code for "we'll take care of our friends who own the choice urban sites, the ordinary man be damned!"   This is called conservatism.  Like Aleve, it works for them.  Does "landed gentry" still resonate?

Notice that this study has been around for two years now.  How many times have you heard about it? (It was news to me.)  Even the "FairTax" (23%+ consumption tax) folks haven't mentioned it, as far as I know.

<p><a title="Do tax structures affect aggregate economic growth? Empirical evidence from a panel of OECD countries" href="http://www.oecd.org/LongAbstract/0,3425,en_2649_34325_41487020_119684_1_1_37443,00.html">Do tax structures affect aggregate economic growth? Empirical evidence from a panel of OECD countries</a>.</p>
<blockquote cite="http://www.oecd.org/LongAbstract/0,3425,en_2649_34325_41487020_119684_1_1_37443,00.html"><strong>Do tax structures affect aggregate economic growth?&nbsp; Empirical evidence from a panel of OECD countries&nbsp;</strong></blockquote>
<blockquote cite="http://www.oecd.org/LongAbstract/0,3425,en_2649_34325_41487020_119684_1_1_37443,00.html">This  paper examines the relationship between tax structures and economic  growth by entering indicators of the tax structure into a set of panel  growth regressions for 21 OECD countries, in which both the accumulation  of physical and human capital are taken into account.&nbsp;</blockquote>
<blockquote cite="http://www.oecd.org/LongAbstract/0,3425,en_2649_34325_41487020_119684_1_1_37443,00.html">The results of the analysis suggest that income taxes are generally associated with lower economic growth than taxes on consumption and property.&nbsp;  More precisely, the findings allow the establishment of a ranking of  tax instruments with respect to their relationship to economic growth.&nbsp;   Property taxes, and particularly recurrent taxes on immovable property,  seem to be the most growth-friendly, followed by consumption taxes and  then by personal income taxes.&nbsp; Corporate income taxes appear to have the most negative effect on GDP per capita.&nbsp;</blockquote>
<blockquote cite="http://www.oecd.org/LongAbstract/0,3425,en_2649_34325_41487020_119684_1_1_37443,00.html">These  findings suggest that a revenue-neutral growth-oriented tax reform  would be to shift part of the revenue base towards recurrent property  and consumption taxes and away from income taxes, especially corporate  taxes.&nbsp; There is also evidence of a negative relationship between the  progressivity of personal income taxes and growth.&nbsp;</blockquote>
<p style="padding-left: 30px;">All  of the results are robust to a number of different specifications,  including controlling for other determinants of economic growth and  instrumenting tax indicators.</p>
<p>The full study, 28 pages, is at <a href="http://www.oecd.org/officialdocuments/displaydocumentpdf?cote=eco/wkp%282008%2951&amp;doclanguage=en">http://www.oecd.org/officialdocuments/displaydocumentpdf?cote=eco/wkp%282008%2951&amp;doclanguage=en</a></p>
<p>Readers of this blog will know that I favor shifting to a tax on land value, and eliminating the portion of the conventional property tax which falls on buildings and other improvements to land.&nbsp;&nbsp;&nbsp; But I'm fascinated that their analysis shows that even taxing buildings and other improvements to land, along with land value, is superior to taxing consumption or personal income or corporate income, in terms of the effects on economic growth.<br /> <br />So I'll leave you with this question: <strong>if we know that income taxes and consumption taxes discourage growth more than the conventional property tax does, in whose interest is it that we <em>not rely heavily on the property tax?</em>&nbsp;&nbsp; Cui bono?</strong></p>
<p>Go  to the root of the problem.&nbsp; Recognize who benefits from the status   quo.&nbsp; They like the current system just fine, and will fund heavily   efforts to conserve it.</p>
<p>And when California (Proposition 13 forces reliance on wage and sales taxes to "protect" property owners) and other states, including soon Indiana, start complaining about a lack of economic growth, and when New York State's new Governor Cuomo starts talking about "property tax relief," understand that this is code for "we'll take care of our friends who own the choice urban sites, the ordinary man be damned!"&nbsp;&nbsp; This is called conservatism.&nbsp; Like Aleve, it works for them.&nbsp; Does "landed gentry" still resonate?</p>
<p>Notice that this study has been around for two years now.&nbsp; How many times have <em>you </em>heard about it? (It was news to me.)&nbsp; Even the "FairTax" (23%+ consumption tax) folks haven't mentioned it, as far as I know.</p>

The November U.S. Senate Elections

Every election year, 1/3 of the seats in the U.S. Senate are up for election.  This year as you vote, consider the content and goals of the television commercials you've been subjected to, from all sorts of directions (beyond the candidates themselves), and remember that a significant portion of the commercials have been enabled by the recent Citizens United decision issued by a Supreme Court dominated by "conservative" justices.  (I commend the article at that link to your attention.  In fact, I'll copy the essay, Corporations, Democracy, and the U. S. Supreme Court, by Mason Gaffney, in below the fold.)

Consider that it is the senators we elect who vote on the Supreme Court nominees presented by the president we elect, and think about who it is that YOU want voting on the next nominee.  Justices can serve for many decades, far beyond the time the average senator is in office.

The person you elect to the Senate will serve for 6 years -- 2 in Obama's first term, and 4 in the term of whomever the American people elect in 2012, aided in their decision-making by the well-crafted and well-funded advertising made possible by the Citizens United decision -- and will likely be voting to fill at least one Supreme Court seat.

Whose interests should they -- the Senators and the Supreme Court nominees -- have at heart?

Do we want people who will seek to promote the concentration of wealth, income, privilege and power -- more and more, to fewer and fewer -- or to promote the interests and prosperity of ordinary Americans?  Be sure you know; your options may not be wonderful, but at least your criteria should be thought out.

 

I commend this to your attention --

Corporations, Democracy, and the U. S. Supreme Court
Mason Gaffney, February 24, 2010

On Jan 21 2010 our High Court shocked Americans by ruling in Citizens United v. Federal Elections Commission that a corporation may contribute unlimited funds advertising its views for and against political candidates of its choice – in practice, the choice of its CEO or Directors. The ideas behind this are that a corporation is a “legal person”, with all the rights (if not all the duties) of a human being; that as such it has a right of free speech; and that donating money is a form of speech. Already K&L Gates, a top Washington lobbying firm, is advising its clients how to funnel money through lobbying groups or “trade associations”. This culminates a long series of actions and reactions (decisions, legislative acts, and electoral results) that bit by bit have raised the power of corporations in American economic and public life. Herein I will take the fall of the corporate income tax as a simple metric of the power of corporations. Nothing about corporations is that simple, however, so I must also touch on other aspects of power.

Some critics react apocalyptically, calling Citizens United a death blow to democracy; some cynically, calling this merely making de jure what is already de facto; some legalistically, saying the Court ruled more broadly than justified by the case brought before it. Supporters, naturally, take this contentedly as righting an injustice of long standing. Some economists would applaud this as a step toward sunsetting the corporate income tax, by electing more candidates beholden to corporate money. Many of them – not all – have been seeking this end for years in their learned journals and op-eds. Even the late Wm Vickrey, otherwise an egalitarian, gave high priority to this change.

This writer does not applaud either sunsetting the tax, or this step. I agree with Joseph Stiglitz that the corporate income tax is mainly a tax on economic rent. That means that a high tax rate does not destroy the tax base. Martin Feldstein, an economist who is as conservative as Stiglitz is liberal, also sees the corporate income tax as a tax on economic rent (JPE 85(2); April 1977, p. 357). It is not the ideal form of such a tax, but it beats any tax on work, or sales of the necessities of the poor, or value-added, or gross sales. Both Vickrey and Stiglitz rate high in the profession and garnered Nobels, so we cannot simply appeal to “authorities”. To prepare our minds, let us review some milestones in the history of corporations, especially in America.

Earned Income: Public and Private

I came across a pamphlet published in 1949 by a foundation on whose board I sit, and while there are some things that I might emphasize differently 70 years later, I thought it worth sharing.   It speaks to a category I've just added to the "cloud" at left: Natural Public Revenue.

Today we see some additional privileges which corporations (and individuals) are taking advantage of -- the privilege of polluting the world's finite supply of air and water beyond its carrying capacity and ability to heal itself; the privilege of claiming as their own the supply of various other natural resources: e.g., oil, natural gas, lithium, copper.   The privatization by corporations of what ought to be revenue sources for common spending should not go unremarked.   And trivializing monopoly, as I think the author does, seems odd in light of what we've seen in the intervening years.

Earned Income: Public and Private
by Joseph S. Thompson
President, Pacific Electric Manufacturing Corp.

THE FATES of America and Europe are inextricably one. A depression here could ruin us and would ruin Europe. We dread a depression; yet we have done nothing salient or radical to prevent it. The Soviet Politburo eagerly predicts and awaits it.

The basic reason why there are depressions and why prosperity is not normal, general, and constant is that we do not distinguish between TRIBUTE TO PRIVILEGE and RECOMPENSE TO SERVICE, and are indifferent to their diametrically opposite effects.

The fault is not in our political system, the freest and best yet devised. It is not in our industrial system which, based on service, saved the world from German domination and will continue to serve us well unless stifled by "Planned Economy," as planned economy has stifled industry elsewhere.

But when we study our taxation system we find a cancerous growth, developed in the last few years, that threatens to destroy all that makes America great, fostering privilege and hampering industry and service. We take for granted the principles underlying our present taxation system; yet adherence to those principles means national disaster.

The full breadth and importance of Chief Justice Marshall's statement that "The power to tax is the power to destroy" seems never to have been wholly grasped or emphatically enough expressed. Taxation destroys good things as well as bad. The power to tax is the power to control a destructive force and, when used, becomes equivalent to a fine. A fine represses, and a tax represses. Simple reasoning develops the fact that a tax is automatically and undeniably a fine. It is an arbitrary seizure of private earnings or acquirements, based on arbitrary opinion, and the fact that the money is used for public purposes does not justify its imposition.

But since money is required for public purposes, how else is it to be provided? The answer is simple: through earned public income.

We are all familiar with earned private income, earned through labor, service, or investment, but few have inquired as to whether there might be a true, just earned public income -- an income that we all, as the public, create and earn jointly as a common wealth just as the individual creates and earns his income as private wealth -- an income that can be measured by fact and not by opinion, forming the basis for, and fixing the limit of, responsible public budgeting -- A PUBLIC INCOME PUBLICLY EARNED AND TO PUBLICLY COLLECTED.

Those who have inquired have been answered by the Physiocrats, by Thomas Carlyle, by Patrick Dove, by Herbert Spencer, by John Stuart Mill, and, in full and complete analysis, by Henry George in his great book, Progress and Poverty. These men have shown that the public income is closely measured by, and reflected in, and therefore should logically, justly, and intelligently be, the rental value of the land.

The rental value of the land, which is the amount that individuals will pay for its exclusive use, if collected or "taxed" by the public, would provide and define the rightful earned income of the public, to which the budget should conform.

Land costs nothing in human effort or creativeness and gets its value only from the presence of people; so, land rental value might better be called location value; and since location value means land in a desirable place among people, land value and location value are really people value. The landlord's title to the land is a legally created privilege. It represents no contribution on his part but gives him an unearned tribute (and it is unearned even though it was bought with money that was earned). Solely by their presence the people create this value, and it is theirs. The people should collect it and nothing else. Arbitrary assessment might have to be resorted to in time of emergency, but, as it is now understood and imposed, taxation should be reserved as a regulative or repressive curb on acts counter to the public interest.

It sounds like quibbling to speak of abolishing taxes while advocating the public collection of land rent; and, since the assessor would define and impose it, and the tax collector would collect it, it does look like a tax on land. But it is not a tax on land. It is payment for the privilege of an advantageous location among people.

It is easy to "capitalize" such an amount. Figure the capital that would earn interest equal to the rent offered. The value of the land is thus set by the rent. Assess it at that value, tax it at the current interest rate, and the public would then collect the value it creates. Taxes would no longer raise the cost of living.

The public collection of land rental simply means a charge by the public for a choice location in the midst of the public. The parking meter is a perfect example of this principle. If you want to use a desirable part of a public street, you pay the current value into a public fund. The parking meter principle should apply to all land. The simple mechanism to correct our revenue system would use present methods, equipment, and personnel, arriving by the test of the market at the desirability of all parcels and periodically adjusting appraisal and taxation to absorb the rent offered by the occupants. There is nothing of arbitrary opinion in this, nor would the rent be created by enactment. It would be a straight business matter, and little change would be needed in our laws.

Our failure to discern the difference between PRIVILEGE and SERVICE is stupid enough in its direct impact on our revenue policy, but it also creates a by-product, land speculation, which terribly hinders our progress and security. There is nothing spectacular about the land speculator. Quietly and conservatively he comes into possession of the title deed to a location, an area, for the purpose of (1) using it, (2) charging someone else for its use, or (3) selling his title at an increased price. If he uses it, he retains a public revenue. If he charges others for its use, he collects a public revenue. IN NEITHER CASE IS HIS MONEY USEFULLY INVESTED, and in both he hopes that the third purpose will be served. He hopes that more people will need the land, increasing its rental value.

When he buys it for the third purpose, straight speculation, to sell it later at a higher price, he becomes an obstructionist. He serves no good purpose. He does nothing useful. He is a legalized holdup man. He makes building, living, and working more expensive.

He could say to himself and to the community, "Someone will need this location in the near future; the growing population will make it more and more desirable; so, since the people will not collect what they create here, I will. I will get in this someone's way and prevent him from using this place until he pays me to get out of his way. I will not have to perform any service for him; the people will do that. He will not even get 'value received' from me because as soon as he begins to use the place, the people will fine him with 'taxes' for improving it. They fine anyone who builds a home or brings a business or service to their community. But they will not fine me; they are already letting me usurp a part of their wealth. I levy a tribute on progress. I capitalize other men's energies. The more they fine those who produce or render service, the more unearned value I gain." This is the unconscious soliloquy of the land speculator.

You may question this sweeping and positive singling out of land rents. What about Corporations? Monopolies? Bonds and Stocks? Capital?

Corporations are formed to perform service or to exploit through privilege, or frequently, to combine the two. To the extent that they perform service, they should retain their earnings, however great. To the extent that they exploit through privilege, they should not be supported by the law.

Monopolies, other than land, are simply opportunities for someone to get a little more than he deserves for what he gives, until competition or buyer resistance checks him.

Bonds and stocks are simply evidence of ownership in corporations that may be good and useful or evil and leechlike. Remove privilege, and they will adjust with the change.

Capital is a tool, and the man who creates it should retain what he earns from its use. The difference which sharply and cleanly separates land rental from payment for the use of buildings, tools, stocks in trade -- in short, from capital -- is that land costs nothing in human effort. Everything else is humanly produced. Money invested in the privilege of exacting tribute in the form of land rent is not capital. It is not usefully invested. "Capital is wealth used to create more wealth."

Resentment against big corporations is purely habit or label thinking. Most corporations spend fabulous sums in research seeking new products, processes, and economies, and you buy from them, not because you have to, but because you want their product. You can buy something else or do without. But you DO HAVE to have a little space on earth. That is a monopoly you cannot escape.

It would seem to be beyond dispute that the threat of depression would be remotely distant if the imbalance of our stupid taxation and the stifling barrier to our progress, land speculation, were both removed by recognition of this simple fact: THE RENTAL WHICH USERS WILL PAY FOR LAND IS THE TRUE EARNED PUBLIC INCOME. IT IS A VALUE CREATED BY THE PUBLIC. TAXATION OF INDUSTRY AND THE HOME IS UNJUST, ARBITRARY, AND DESTRUCTIVE. IT SEIZES PRIVATE PROPERTY.

When we learn this and adopt it for ourselves, we will be fitted to lead the world to prosperous peace.

A Neuroscientist, Nature and Nurture, and America's Children in Financial Distress

A Neuroscientist Uncovers A Dark Secret : NPR.

This is a fascinating story, and I commend it to your attention. The link takes you to the transcript and the option to listen to the story.  It describes a university neuroscientist who looks into his own family history and, with the cooperation of family members, brainscans and DNA of a number of others descended from the same line:

About four years ago, Fallon made a startling discovery. It happened during a conversation with his then 88-year-old mother, Jenny, at a family barbecue.

"I said, 'Jim, why don't you find out about your father's relatives?' " Jenny Fallon recalls. "I think there were some cuckoos back there."

Fallon investigated.

"There's a whole lineage of very violent people — killers," he says.

One of his direct great-grandfathers, Thomas Cornell, was hanged in 1667 for murdering his mother. That line of Cornells produced seven other alleged murderers, including Lizzy Borden. "Cousin Lizzy," as Fallon wryly calls her, was accused (and controversially acquitted) of killing her father and stepmother with an ax in Fall River, Mass., in 1882.

A little spooked by his ancestry, Fallon set out to see whether anyone in his family possesses the brain of a serial killer. Because he has studied the brains of dozens of psychopaths, he knew precisely what to look for. To demonstrate, he opened his laptop and called up an image of a brain on his computer screen.

The story is fascinating.  I'm sharing it here because of the final lines.  First, a bit more of the story:

After learning his violent family history, he examined the images and compared them with the brains of psychopaths. His wife's scan was normal. His mother: normal. His siblings: normal. His children: normal.

"And I took a look at my own PET scan and saw something disturbing that I did not talk about," he says.

What he didn't want to reveal was that his orbital cortex looks inactive.

"If you look at the PET scan, I look just like one of those killers."

Skipping ahead:

Still, he says the evidence is accumulating that some people's brains predispose them toward violence and that psychopathic tendencies may be passed down from one generation to another.

The Three Ingredients

And that brings us to the next part of Jim Fallon's family experiment. Along with brain scans, Fallon also tested each family member's DNA for genes that are associated with violence. He looked at 12 genes related to aggression and violence and zeroed in on the MAO-A gene (monoamine oxidase A). This gene, which has been the target of considerable research, is also known as the "warrior gene" because it regulates serotonin in the brain. Serotonin affects your mood — think Prozac — and many scientists believe that if you have a certain version of the warrior gene, your brain won't respond to the calming effects of serotonin.

Fallon calls up another slide on his computer. It has a list of family members' names, and next to them, the results of the genotyping. Everyone in his family has the low-aggression variant of the MAO-A gene, except for one person.

"You see that? I'm 100 percent. I have the pattern, the risky pattern," he says, then pauses. "In a sense, I'm a born killer."

Fallon was prompted to study his brain after his mother, Jenny, told him his ancestry was full of alleged murderers.

Fallon's being tongue-in-cheek — sort of. He doesn't believe his fate or anyone else's is entirely determined by genes. They merely tip you in one direction or another.

And yet: "When I put the two together, it was frankly a little disturbing," Fallon says with a laugh. "You start to look at yourself and you say, 'I may be a sociopath.' I don't think I am, but this looks exactly like [the brains of] the psychopaths, the sociopaths, that I've seen before."

I asked his wife, Diane, what she thought of the result.

"I wasn't too concerned," she says, laughing. "I mean, I've known him since I was 12."

Diane probably does not need to worry, according to scientists who study this area. They believe that brain patterns and genetic makeup are not enough to make anyone a psychopath. You need a third ingredient: abuse or violence in one's childhood.

That's why I'm sharing this one here.  35% to 40% of America's children live in families where the household income is insufficient to meet the most modestly defined needs of a family of that size and configuration in that location.  (See "Self-Sufficiency Standard" for more information.)   How many more live in families which have below-average income, little financial security, little in savings, shaky housing situations, unemployment or underemployment?

Our nation's concentration of income and concentration of wealth mean that about 80% of us are below average.  Every time you see a report about average wealth, or average income, please recognize that we live in Lake Wobegon in Reverse.  Most of our children live in families that are below average, particularly those who were born to young parents, to less educated parents, to single parents, or who made unfortunate choices of who their parents would be, or what pressures their parents' marriages would come under, particularly financial pressures.

We have a poverty machine.  The rich keep getting richer, and the rest -- including the families of a very large proportion of our children -- are struggling to keep their heads above water.

How do we fix this poverty machine?  How do we transform it into a rising prosperity-for-all machine?  For that, you'll have to do some reading.  Start with the works of Henry George --

• a speech or two at www.wealthandwant.com -- say, The Crime of Poverty, or Thou Shalt Not Steal;
• a reading of Progress and Poverty at progressandpoverty.org;
• your choice of chapters from Social Problems at wealthandwant.

Then, you might read Bob Andelson's Henry George and the Reconstruction of Capitalism at wealthandwant.

How do we reduce the chances that conditions in a child's life will cause them to become people who victimize others as adults?   By assuring that all get what they need as children, and are protected from victimization by adults and by other children.

Just a thought.

The Landlord's Prayer -- Archer's version

THE LANDLORD'S PRAYER OFFERING IN THE TEMPLE

O God, I thank Thee that I am not as other men. Thou art very wonderful and very kind — for Thou hast made me Thine own selected one!

All Thy works praise Thee — and yield their tribute to me! The earth, created Thou it — and gavest it to me!

The sea also is Thine, but Thou hast given me its bed for a long distance out from the shore — so that none may ride upon its waters without paying toll to me.

The firmament of the Heavens is Thine, and Thou hast set the sun therein to give light and warmth by day, likewise the moon and the stars whereby to radiate through the gloom and the darkness of the night, and these also enrich my exchequer.

Thou ridest Thy chariots in the clouds and causeth the winds to blow, and dost thereby still further increase my plenteousness.

Thou hast decreed that the non-elect of mankind shall live by labour, and hast conferred on me the power to make them hand over annual tribute to me and mine for the opportunity of so doing.

Thou hast ordained that the earth which Thou gavest me shall rise in value through the operation of natural laws and social factors, and hast appointed me to collect these enhanced values and to use them for myself and my house.

In further manifestation of Thy concern for me and mine, Thou hast commanded that the non-elect shall forge weapons for defending that which Thou hast given to me; that they — the non-elect — shall provide forces to use these weapons on my behalf, that they shall pay the capital costs thereof, and that they shall further provide out of their own common labors such funds as may be needed for feeding and clothing themselves and their dependents, and of providing compensation for the dependents of those who fall or are maimed and bruised whilst engaged in safeguarding Thy gifts to myself, in order that no toll shall be made upon Thy goodness to my house. Yea, Lord, I thank Thee that I am Thine own elect, and that Thy wonderful goodness is made plain in the tribute which Thy created handiwork brings to me and to my house. Amen, Amen, and yet again Amen.

—john Archer

This version was printed in Land and Freedom in 1917.

In another version, the final paragraphs read slightly differently:

47 percent

That figure has been in the news and opinion columns a great deal in the past couple of weeks.  It is the percentage of Americans who pay nothing in federal income taxes (as distinct from federal withholding for social insurance).

Some of the articles and related comments have focused on the concept that everyone should be paying something, so that they "have some skin in the game" so that there is an incentive not to vote for spending that others will have to pay for.  Some have approached the 47% as "freeloaders."

It is funny that in our largest state, where, for 30+ years, Proposition 13 has put a ceiling on property taxes, so that landholders, who are the primary beneficiary of the effects of state and local spending (and federal funding of state and local projects) can expect their tenants to contribute mightily to the projects they vote for -- and no one has made an impression by pointing this out. 

And none of the articles I've seen about the 47% figure -- which went viral after an article by Bob Williams in the WaPo -- have spent much time exploring the policy decisions behind this.

I am reminded that according to our official Federal Poverty Guideline, about 13% of us live "in poverty."  And that even the Census Bureau, which collects and reports the data on who lives below the Federal Poverty Threshold (a retrospective figure which relates closely to the FPG) willingly recognizes that the Federal Poverty threshold and guideline are merely a statistical yardstick, with no particular logical relationship to the cost of living anywhere in America.

I am reminded that for the states for which a Self-Sufficiency Standard Study has been published (about 35 in all), the bare-bones cost of living for a young working family typically runs from 180% of the Federal Poverty Guideline -- in the least expensive counties (where very few people live) to perhaps 210% in the major cities of our smaller states to 300% or 400% in the major cities in our larger states.

Should the incomes -- mostly wages -- of our working people whose incomes are insufficient or barely sufficient to meet their own and their families' most modestly defined needs, be taxed?

I am reminded of the Overlooked and Undercounted studies, which typically follow a Self-Sufficiency Standard Study, and seek to quantify the number and percentage of working-age families whose incomes are insufficient to cover their bare-bones cost of living.  Significant percentages of these families are at these income levels.  30% to 35% sticks in my mind -- and a larger percentage of America's children.

I am reminded that a large percentage of today's seniors are hugely reliant on their income from Social Security, and that the level of Social Security income is established upon retirement and thereafter only rises to keep up with the CPI-U; our oldest retirees are receiving Social Security incomes which are a function of their wages 30 years ago -- roughly as logical as California property taxes for long-time owners being based on the selling price of California housing 30 years ago!

I am reminded that many people get to deduct their mortgage interest and real estate taxes from their taxable income (they're typically in the coastal states; in the heartland states, the standard deduction often turns out to be higher, since taxes and interest payments tend to be lower ... which may correlate to the percentage of children who attend 4 year colleges).

And I am reminded that state and local taxes fall more heavily on low-income people than they do on high income people. (See "Who Pays?  A Distributional Analysis of the Tax Systems in All 50 States", particularly the "Averages for All States" table on page 124 of 130), which shows that, on average, the bottom quintile of us pay 10.9% of our income in state and taxes, while the fourth quintile pays 8.5% and the top 1% pays just 5.2%, on average.

I am reminded of our concentration of income:

• 10% of us receive 47.19% of the before-tax income
• 20% of us receive 60.96% of the before-tax income
• 40% of us receive 79.14% of the before-tax income
• 60% of us receive 90.37% of the before-tax income [see middle-class agenda, on the next page of this blog]

So the bottom 40% of us receive less than 10% of the before-tax income.  And those who think they don't pay enough in taxes would like them to pay more into the system than they already do?   The problem is one of low wages, unemployment and underemployment.  The best solution to these problems I've come across lies in the ideas of Henry George.  The law of wages is something like the law of gravity: we operate in ignorance at our own risk.

Bits and Pieces from a 1914 Bi-Monthly

The bi-monthly to which I refer is The Single Tax Review, whose 1914 volume Google Books has digitized.   Here are some of the goodies I appreciate on this reading:

In fact, if a nation spends great sums in improving roads and canals and bettering the public services, these heavy expenditures increase the value of the nation's land, and this increase is taken by the landlords. If artisans, tradesmen, producers of all kinds concentrate in a locality, the money they spend on building, on the costs of living, their activity and even their presence is sure to increase the well-being of the inhabitants of this locality, a result translated into an increase of land values which the landowners pocket. If a manufacturer builds a factory in an uninhabited spot and constructs dwellings for his workmen it may result in ruin for him if he has not carefully calculated his chances, but in the meantime he will have increased the value of the surrounding land and enriched the landlords.

And this: 

Now here are a few propositions, and a question:

(1) The area of the world's surface is fixed beyond the possibility of adding thereto.

(2) The population of the world is increasing.

(3) The two preceding facts make it inevitable that particular tracts and sites of land will be increasingly more desirable than others.

(4) All of the land is for all of the people; therefore those who wish to occupy the more valuable tracts and sites, should pay the value thereof into a common fund for the use of all the people.

(5) Every man has a natural right to the products of his labor.

(6) Confiscation by the State of any man's labor is a clear violation of a natural right; therefore our present system of taxation is fundamentally wrong. (And the fact that taxes under the present system cannot possibly be, nor have ever been, equitably assessed, is only a logical sequence of violation of verified truth.)

(7) Taxes on any commodity made by individual labor is a tax on individual labor.

(8) Taxes on that which no man has made, which no man can make and -which, therefore, no man has earned, is not a tax on labor.

(9) When the wealth which is created by population is used for public purposes and not for up-building of private fortunes, and when public revenues no longer represent confiscation of the rewards of labor, we shall have taken the road which leads towards pure democracy, and not before.

The foregoing are Single Tax propositions. The Question is: In whose pages, other than those of Henry George, can our friends, the professional economists, find a body of principles of greater "scientific value" than the above propositions? If not in the pages of Henry George, where will they find ideas of greater "scientific value" than those which are directly deducible from self-evident truths?

Elizabeth Warren: Behind Consumer Agency Idea, a Fiery Advocate

Behind Consumer Agency Idea, a Fiery Advocate - NYTimes.com.

Don't miss this wonderful article about Elizabeth Warren, law professor at Harvard Law who first came to my attention when she and her daughter wrote a book called "The Two-Income Trap: Why Middle-Class Mothers and Fathers Are Going Broke" (2003).  I read some of her material at TPMCafe, and watched her appearance on Bill Moyers program, which gave me a sense of the human being behind some important writing and research.   Later, she co-authored the study which connected a large share of personal bankruptcies with lack of effective health insurance.

And I share the enthusiasm of the readers' comments there.

She advocates for the middle class, which is a fine idea, and for the consumer, which is also a fine idea.  I am led to wonder, however, whether she is familiar with the statistics about middle class income and middle class wealth.  

If we define the "middle class" as the middle 60% of the income distribution, our "middle class" has

• less than 26% of the aggregate net worth, and
• about 36% of the pretax income. 

If we define the "middle class" as the middle 50% of the net worth distribution, our middle class has

• less than 14% of the aggregate net worth, and
• less than 34% of the pretax income. [data source: 2007 Survey of Consumer Finances Chartbook]

Another recent article about Warren, includes this quote:

"She truly believes that markets can work, but she knows that participants in the market have strong incentives to rig things in their favor," says Adam Levitin, a former student of Warren's who specializes in bankruptcy law at Georgetown University. "If participants have a sweet deal, they'll be upset at anyone who wants to level the playing field."

While Warren sees some of that level playing field clearly -- and definitely has a gift for communicating what she sees -- IMHO, she doesn't yet see most of the land-related aspect of it.   She senses it, in the chapters of Two-Income Trap which deal with middle-income couples bidding up the price of housing in good school districts, but she doesn't see the half of it yet.

I hope that she might buy (or download -- see the next link) a copy of the modern abridgment of Henry George's landmark book on political economy, "Progress and Poverty" for some airplane reading.  (Political economy is the science which deals with the natural laws governing the production and distribution of wealth and services.)  One can also read the book online or download MP3s.

Most people don't see the "sweet deal" which has produced the income and wealth distributions described above.  But George explains it very clearly.

Union College Admits That It’s in Schenectady, NY

Union College Admits That It’s in Schenectady, N.Y. - NYTimes.com.

My brother (an alum) called this one to my attention.  My husband and I are alumni, too, and some years ago, when it came time to look at colleges, our son refused to seriously consider Union because he had seen Schenectady on various visits to campus over the years, and simply couldn't imagine living there for four years.  He made a great choice for a college, but I've often mulled over what the article is discussing: that the problems of Schenectady, like much of upstate New York, make it an unhappy place, one where many people would not choose to live, given other options.  Its economy is hurting -- and for reasons that can be easily corrected.

Union always had a well-regarded economics department, and being as close to the state capital at Albany, some students did internships in various legislature offices.

So why on earth haven't Union's Economics and Political Science departments applied their sciences -- and talents -- to the problems of Schenectady, and proposed solutions? 

Part of the answer might be that for several generations, neither of these sciences have put much thought into the problem that underlies Schenectady's troubles.  It hasn't been fashionable to talk about, and many haven't even had the vocabulary.  Most of today's economics professors learned their economics at the feet of neoclassical economists.  They have a lot to fit into a trimester, and they're not likely to teach that which their own instructors chose to omit.  But they're missing something important and relevant.  The classical economists had a lot to tell us which points to the root of some of today's most serious problems.

Or perhaps those seeking a better future for Schenectady might turn to the History department, or to American Studies.  Students of the last half of the 19th century might be able to tell them about an American philosopher and economist named Henry George (b. 1839, Philadelphia; d. 1897, NYC), who was the best known (due in part to his bestselling book on political economy, Progress and Poverty, which was familiar to anyone who read at all during the last 20 years of that century; it sold about 6 million copies and was widely serialized and translated) of a long continuum of people who called attention to the importance of land and natural resources in our economy, and to the distortions that result when we permit the privatization of their economic value -- or about the movement which followed in the early years of the 20th century.  George proposed a simple and just remedy, and I'll bet that not 10 of this year's Union graduates have even heard of it.  (That doesn't set Union apart from many other highly regarded colleges, but it is clearly a shame: that these students have spent 3 or 4 years in Schenectady, and not gotten close to some answers about why there is such poverty and underdevelopment in the state of New York, from which many of Union's students come.  They come from much richer parts, in general.)

The small cities of upstate New York, like many other places in America, are suffering from the use of the wrong taxes.  Schenectady is perhaps an extreme example.  When we tax both land value and buildings at the same millage rate, we discourage the sort of development which we claim to want.  The answer, of course, is to reduce or even eliminate the tax which falls on buildings, and increase the millage rate on land value. 

Union's economics and political science departments owe it to their hometown to take on this topic.  First, the faculty must educate themselves.  And then they must involve their students, particularly those who come from New York State.  They can become a force for good, a force for reform of some miserable policies, and for a shift to superior ones.

They may find themselves coming up against the "real estate interests" -- including alumni, perhaps -- who think that this might not be in their own best interests (and therefore discourage the exploration).  (Governor Spitzer, the son of a real estate magnate, would not have been enthusiastic about this, for instance.  He convened a panel to try to offer "Property Tax Relief" as an answer to some question -- but it was probably not primarily for homeowners.  Remember Leona's wisdom about taxes.)  Will Union's best and brightest be able to push through the interested parties' incentives, or will they be derailed by pressure not to study this matter? They have tenure, many of them, and most live in or close to Schenectady.  

The political scientists might start with a couple of Google books, such as "Natural Taxation" (by one of the founding partners of Shearman & Sterling) or "The ABC of Taxation."  They're available via Google books, and will soon be online in other forms.  (Stay tuned here for updates.)

The economists might start with "The Principles of Natural Taxation" (also on Google books) or Progress & Poverty (unabridged, or in a modern abridgment), or an essay called "That We All Might Be Rich".

The History department might start with some of Henry George's speeches, such as "The Crime of Poverty" or "Thou Shalt Not Steal," or with Winston Churchill's 1909 Speeches called The People's Land.

The American studies department might start with a book of essays entitled "Social Problems" or with Mark Twain's essay, Archimedes, or with Bengough's Primer.

The English department might appreciate some poetry by Luke North, inspired by this same movement.

And all might appreciate the writings of Bill Batt, an Albany-based thinker on a lot of important issues which could be of great help to Schenectady.

And if any of them think this might simply be a quaint agrarian idea, I encourage them to read this page, and consider which of these issues don't affect Schenectady or their own futures.

People as diverse as Henry Ford, Theodore Roosevelt, Aldous Huxley, Clarence Darrow, Bernard Shaw, and Leo Tolstoy have embraced these ideas, as have a wide range of wise people from earlier centuries, and contemporaries as diverse as Bill Buckley and Michael Kinsley.  They are a fine example of thinking globally and acting locally, and represent a "third way."

Will Union College act -- and in the process, teach its students some important truths -- or simply nibble at the leaves of Schenectady's problems?  Go to the root!

Post Script: Union's faculty, and others who care about Schenectady, have an opportunity to get to know these ideas this summer.  There will be a conference in Albany, July 12-16, of the umbrella group for North American Georgists.   Some of the sessions will be of great interest to those who care about Schenectady, but I mention it here primarily because it will be an opportunity to interact with people who know George's ideas well and are persuaded that they can make an important difference in the world.  (This post didn't start out to be a promotion for the conference, but I was glad to find that the conference schedule is now available online.  It ends: "The Law of Rent never changes, but our schedule may - without notice.")

Looking Forward

Looking for the phrase "I am for men" (see an earlier post, below) I came across a 1906 book by August Cirkel (circa 1870-1946), of Chicago, entitled "Looking Forward."  His prefatory note is as follows:

An apology is, peradventure, due the memory of Edward Bellamy for the semi-plagiarism in the title of this book.  It is true that "Looking Backward" suggested the name I have given it. The ideally happy condition of all the people, that Mr. Bellamy pictured as resulting from socialism, I look forward to as a result of a higher development of individualism.

The variety of topics considered may make the work seem presumptuous.  But though the subjects are various, the same strain runs through all.   Like the Irishman with his shillalah at the county fair, wherever I have seen a monopoly head, I have taken a whack at it.  If there are any sore pates or broken craniums on account of my impartial and promiscuous blows, I shall know that I have not labored in vain.

A.C.

A passage in the middle of "Looking Forward" caught my eye, and I added the preceding ones for setting the scene.  In this age of "too big to fail" and 10% of our households having over 70% of the aggregate net worth, a lot still rings true after 100 years:

We have one concern controlling far more than half the oil, another more than half the iron, another half the coal, another forming to control much more than half the copper, a few combinations working towards ownership of all the railroads and steamship lines; another, meat; in our large cities, the public service corporations are one by one being gobbled up by the same group of capitalists who control these other companies. It is probably safe to say that the so-called trust crowd now controls at least forty percent of the business and wealth of the country; moreover, the portion so controlled is organized on such a basis that the profits exacted each year reach the public with almost the directness of a tax. Without exception each one of these gigantic monopolies makes millions in the way of earnings disbursed to pay interest on bonds and dividends on stocks.

The profits of the Standard Oil Company have averaged forty percent per annum for many years; others of these companies are nearly as successful. In ordinary business only the very few after a period of twenty or thirty years can show a larger capital than they had at starting, and many fall by the wayside; but each, and every one, of these giant corporations makes tremendous gains. The public seems to have acquiesced in their right to fix the tribute that they will levy each year, and has grown so accustomed to their demands as not to analyze this right.

A few years ago Henry George tried to stir the people to a realization of the wrongs contained in the private ownership of land; but excepting the few Single-tax Leaguers who still try to keep alive the fires he kindled, few have given serious consideration to this matter, and many think him to be a vain dreamer of impossible conditions.

His theory as to the manner of applying a remedy has doubtless estranged many who accede to the correctness of his views as to existing wrongs. His argument as to the natural right of all mankind to the earth, the air, and the waters on the earth or underneath it, cannot well be refuted.

Let us suppose ten families occupy an island, and that this island constitutes all the land on the earth. Now, assume that they organize a regular government, the rights of each and all being fully considered and agreed to by every one, and, further, that every individual is perfectly satisfied that justice has been done him. Suppose that they agree to divide the island into ten equal parts, giving each family an equal portion, for which a patent is issued by the government, each soul on the island being satisfied that the division is fair and also satisfied with his allotment. There being no one on earth except the ten families, and as they are all content and happy, at first blush it might appear that they had a right to make this apportionment, and that there is no element of wrong concealed anywhere in the transaction. In doing this they certainly would be doing no more than has been done by nearly every people in history, and on a much more equitable basis. They overlooked, however, the changes to be wrought by time. After the apportionment, let us say that the islanders, being ordinary human men and women, went about their vocations in the usual manner, and led their lives as humankind generally does; let us say that there existed among them the same differences in capacity and temperament and habit of life that commonly prevail among people — some being thrifty and industrious, others improvident and idle, as men have been, are now, and perhaps always will be. What would probably happen? In a short space of time possibly fifty percent of the population would sell their share in the island to the provident class, and in the course of time twenty-five percent might come to hold absolute title to all the land. In consequence, the children born of the families that sold their holdings would have no land. The children born to the twenty-five percent would own it all.

If the laws of the island were based on the same principles as now obtain in the laws of the United States, it would be perfectly lawful for the twenty-five percent to say to the seventy-five percent that they might work the land on shares, giving the landlords half of the product of their labor. As there would be no possibility of procuring a livelihood otherwise, this offer would have to be accepted, if the laws were obeyed.

Normally, it is hard enough for a laborer to gain his living by the sweat of his brow, though he gets the full product of his labor. How much more difficult the situation when half of all he produces must be handed to another! In Ireland the situation was parallel to this; the poor Irish tenants tilled the soil of their native land, but instead of getting the full product of their labor, a large portion was pitilessly exacted by alien landlords. In lesser degree in nearly every country on earth the situation is comparable to this, the burden being disguised in various ways.

We, then, have seventy-five percent of the islanders giving up to the twenty-five percent one half of the product of their labor. Assuming that the original ten families that organized the government and apportioned the island have all died, by what God-given principle should the seventy-five percent of the population be required to give half of the fruits of their efforts to the twenty-five percent? Yet under our own laws would this not be possible, yea, natural? Without doing anything whatever, the twenty-five percent would be getting a revenue one and a half times as great as they could produce if working on an equal basis with the others. Because their fathers had got possession of the island, these few without toil get half again as much as they could produce if toiling, while the rest, though constantly laboring, get only half of the results of their labor. There are doubtless those who will say that the thrift of the original provident islanders should entitle them to transmit their gain to their children. Very good, but how about the thrift of the seventy-five percent now? The twenty-five percent may be compared with the original spendthrifts, as they squander without toiling, and by a just continuance of the rule, the children of the thrifty toilers should get back the island. On the face of the proposition this would manifestly be impossible. Let us go a step farther. Suppose the twenty-five percent, grown haughty with power, exercise it so arbitrarily that the others object, would it not be possible under laws like the laws of the United States, for the minority to refuse the majority employment except on the terms of the minority? What must be the consequence? Either submission to slavery by the seventy-five percent or starvation, if the laws are obeyed, or revolution and rebellion, if they are not. It cannot be an answer to the argument to hold that the ordinary principles of morality would restrain the minority in their exactions. History has not demonstrated that those who grow great with power never grow greedy. Then, if there is no justice in requiring the seventy-five percent to give up half their labor, is there justice in a situation or in laws which compel this result?

In the United States we have not even been as fair as the islanders, no equal division ever having been made, nor has every person been satisfied that his share is just; yet most of the land has been passed to the possession of private owners by patent from the government, and the average man has always thought, and the average man now thinks, that as a general proposition this was just, although knowing and admitting the possibility of minor wrongs. People have had the notion of private ownership of land so thoroughly grounded by long custom, that it seems the natural, rather than the artificial, manner of holding. Community of interest is repugnant to most minds. Socialism is believed to be a theory that might answer the requirements of angels, but finds small space for application among the wingless crowd on earth. Yet if the principle of private ownership is wrong as applied to the island, is it not equally wrong with us?

A few years back, owing to financial stress in the business world, vast numbers of men were idle from inability to find employment. Coxey gathered together a tatterdemalion army of the riffraff, tramps, and bums of the country, and marched them to Washington to emphasize to Congress the hardship of the situation, and to beg relief. He was derided and jeered at every hand. The public looked upon the idea as one of a crank, laughed at it, and dismissed it from their minds. Yet out of this army of thousands, how many possibly were sincerely desirous of a chance to earn an honest livelihood? The country at that time was infested with tramps, but since times improved the majority of them have gone to work again, and Coxey is forgotten. But way down deep, unperceived by the casual thinker and busy every-day man, some elemental principle had been violated, and in consequence the deplorable condition resulted. These men had a right to live. They had a right to labor. They had as good a right as any one of us to use God's soil, and to breathe God's air, and pity for them on our part by no means fulfilled our duty towards them. Somehow, little they knew how; somewhere, little they knew where; some time, little they knew when,— they had been cheated of the rights that are due to every human being that comes upon this earth.

The Declaration of Independence holds it to be a self-evident truth, that all men are entitled to life, liberty, and the pursuit of happiness. What a grim sardonic joke this would be, if read some Fourth of July to a ragged army of a hundred thousand starving men, women, and children, willing to labor, but with naught to lay their hands to! Hollow, indeed, would it sound, and the mockery would be so apparent to the multitude that I doubt not they would feel that somehow a terrible injustice had been done them.

When the ten families divided the island they allotted what belonged to God, and not to themselves, except as a blessing flowing from Him. They had no right to alienate the title from the whole community. The island belongs to every child who is born upon it, and each has as good a right to its benefits as every other. The ten families deeded away what they had no right to. Posterity was not considered, but the child then unborn owed no duty to the agreements made adverse to his interests by incompetent, reckless, luckless, or improvident ancestors, who bartered away his birthright. It was not theirs to give.

We must all, high and low, rich and poor, young and old, somehow or other, directly or indirectly, get our living from the earth. Necessity compels every one to eat to live. How fulfill this necessity except by application to Nature? What right has any government so to shape its laws that one single human being is debarred from his God-given right to labor in order to sustain his life? Organize society as you will, if provision is not fully made to protect the unborn souls to come, an injury is done, a seed is planted that will grow and bear suffering.

Henry George's theory is correct. The land belongs to all, the air and the water belong to all. If we are on earth for a purpose, and the God of chance is not ruling our destiny, as no man who thinks deeply can believe, it behooves us to conform to Nature's laws. The rules of conduct prescribed by people hundreds of years ago should have no binding force upon us today against our reason. Because people have always divided the land, it is not proof positive that their methods have been correct. Humanity has not reached the acme of advancement by any means. Some things are done vastly better today than ever before in history. It seems as if progress is being made. The world seems to be growing better. Yet how would this be possible but by the correction of previous wrong conceptions? Progress can never be made contrary to Nature's law; the decay of the nations of history proves the inexorableness of her workings. Conformity to her decrees, through principles of justice, of liberty, of equality, has ever led to advancement at a tremendous pace; but selfish interests have always injected into the laws of the nations the virus of destruction; decay ensues, the people become enfeebled, corruption reigns, and dissolution follows through the onslaughts of vigorous, lusty races that have grown strong through meting out the justice which the older nations had forgotten.

No government is good that does not give the greatest consideration to its lowliest citizens.

Let's talk about "our lowliest citizens."  Recall that 10% of us have title to 71.5% of the aggregate net worth. The bottom 75% of us have an amazing 12.7% of the aggregate net worth.  A slightly different 10% of us receive 47.2% of the before-tax income, and 20% of us get 61.0% of the pre-tax income.  The bottom 60% of us share --  are you ready? -- 20.9% of the pretax income -- and most economists agree that we're paying 15% of that in social insurance taxes on our wages, plus federal and state income taxes, sales taxes, taxes on our buildings and on our land (if we own any).  (Remember Leona Helmsley's observation about who pays taxes.)

Looking forward ... to more of the same?  To a society which doesn't automatically enrich a small segment of us at the expense of the rest, who, most of us would agree, work equally hard, even if we're not in privileged categories of the real estate, finance, insurance or natural resources sectors, or otherwise endowed with a monopoly which feeds them so abundantly at the expense of others.

In many fast examinations of the Gilded Age, Edward Bellamy's book on socialism, "Looking Backward" is mentioned in the same sentence with Henry George's book best-selling "Progress & Poverty."  The former book seems to be more widely assigned reading, in courses which bring in original sources.  This is a shame.

The House of Tranquillity: A "Middle Class Agenda"

Op-Ed Columnist - The House of Tranquillity - NYTimes.com. Finally, Biden was asked to come up with a middle-class agenda. This is a surprisingly difficult job because many of these programs — credits for college affordability and child care — fairly reek of Clintonism. This is an administration that is staffed by Clintonites but does not want to appear Clintonian in any way.

Let's talk about America's middle class.  How should we define the middle class?  If we define it in terms of income, we find that the middle quintile of households in 2007 had median net worth of $88,100.  That is, of the middle 20% of us, half had household net worth of less than $88,100, and half had more.  That's not a whole lot of money to fall back on, particularly when one considers that much of that is home equity.

The same middle-income quintile had a median before-tax family income of $47,300.  That is, half had more, half had less.

That middle income quintile accounted for 10.9%  -- no!  that was the the 1989 figure.  By 2007, it was 7.54% -- of America's net worth in 2007. 

Here's how the net worth was distributed across the income quantiles in 2007:

• 	Top income decile:	59.45% of the net worth
  	Second income decile:	10.92% of the net worth
  Top income quintile:		70.37% of the net worth
  Second highest income quintile:		13.48% of the net worth
  Middle income quintile:		7.54% of the net worth
  Fourth highest income quintile:		4.84% of the net worth
  Bottom income quintile:		3.77% of the net worth

    [source: SCF chartbook, p. 43, and my calculations]

If we define the middle class more broadly -- as the middle 60% of the income distribution -- our "middle class" has 25.86% of the net worth.

And here's how the before-tax income was distributed across the same income quantiles:

	Top income decile:	47.19% of the before-tax income
	Second income decile:	13.77% of the before-tax income
Top income quintile:		60.96% of the before-tax income
Second highest income quintile:		18.18% of the before-tax income
Middle income quintile:		11.23% of the before-tax income
Fourth highest income quintile:		6.72% of the before-tax income
Bottom income quintile:		2.92% of the before-tax income
[Source: SCF Chartbook, page 7 and my calculations]

Using the broader definition of middle class -- again, the middle 60% of the income distribution -- our "middle class" has 36.13% of the before-tax income.

(Think of this quantile data as you read Bob Herbert's recent column "The Worst of the Pain.")

Alternatively, if we define the middle class in terms of net worth -- erase the above income-based definitions from your mind for the moment! -- here's the corresponding data:

The median household arranged according to net worth had net worth of $120,600 [source: SCF Chartbook, p. 39]  That doesn't sound so bad, does it?

Let's look at the net worth quantiles:

	Top net worth decile:	71.46% of aggregate net worth
	Second 15% of net worth holders:	15.83% of aggregate net worth
Top net worth quartile:		87.29% of aggregate net worth
Second highest net worth quartile:		10.21% of aggregate net worth
Third highest net worth quartile:		2.60% of aggregate net worth
Bottom net worth quartile:		-0.10% of aggregate net worth
[Source: SCF Chartbook, 2007, page 73]

The middle 50% of us, arranged according to net worth have 12.81% of the net worth.

If you define our middle class as those between the 50th and 85th percentiles of the net worth distribution, our middle class owns 26.04% of the net worth.

How is the income distributed across those same net worth quantiles?

	Top net worth decile:	41.25% of before-tax income
	Second 15% of net worth holders:	16.56% of before-tax income
Top net worth quartile:		57.81% of before-tax income
Second highest net worth quartile:		19.76% of before-tax income
Third highest net worth quartile:		13.80% of before-tax income
Bottom net worth quartile:		8.63% of before-tax income

The middle 50% of us, arranged according to net worth, have 33.56% of before-tax income

If you want to define our middle class as those between the 50th and 85th percentiles of the net worth distribution, our middle class is getting 36.32% of the before-tax income.  35% of us getting 36% of the income.  That's middle, I guess.

If you've gotten this far, I'll bet that you will think that we might want to tax income more heavily at the upper end of the income spectrum, or tax large estates more heavily.

I'm going to propose something different.  Something which digs deeper, and seeks the source, the cause of the problem, rather than trying to redistribute the income or net worth after the fact.

Henry David Thoreau, in Walden, wrote this:

There are a thousand hacking at the branches of evil to one who is striking at the root, and it may be that he who bestows the largest amount of time and money on the needy is doing the most by his mode of life to produce that misery which he strives in vain to relieve. It is the pious slave-breeder devoting the proceeds of every tenth slave to buy a Sunday's liberty for the rest. Some show their kindness to the poor by employing them in their kitchens. Would they not be kinder if they employed themselves there? You boast of spending a tenth part of your income in charity; maybe you should spend the nine tenths so, and done with it. Society recovers only a tenth part of the property then. Is this owing to the generosity of him in whose possession it is found, or to the remissness of the officers of justice?

Henry George wrote this, in the opening chapter ("The Problem") of Progress & Poverty (1879), describing the first 100 years of America's existence as a nation:

It is true that wealth has been greatly increased, and that the average of comfort, leisure, and refinement has been raised; but these gains are not general. In them the lowest class do not share. I do not mean that the condition of the lowest class has nowhere nor in anything been improved; but that there is nowhere any improvement which can be credited to increased productive power. I mean that the tendency of what we call material progress is in no wise to improve the condition of the lowest class in the essentials of healthy, happy human life. Nay, more, that it is to still further depress the condition of the lowest class. The new forces, elevating in their nature though they be, do not act upon the social fabric from underneath, as was for a long time hoped and believed, but strike it at a point intermediate between top and bottom. It is as though an immense wedge were being forced, not underneath society, but through society. Those who are above the point of separation are elevated, but those who are below are crushed down.

Now go back and look at the distributions of income and of net worth in America in 2007.  I've not provided the trend data here, but the 2007 snapshot tells the story well enough.

Do We Really Have to Create Man-made Misery to Supplement What Nature Provides?

As I read and listen to and watch the news -- earthquake, ice storms -- and think about the past year -- floods, fires, mudslides, hurricanes, nor'easters, more earthquakes -- it seems to me that nature provides us plenty of opportunities to exercise our compassion and charity, individually and as a nation, and plenty of spending opportunities for maintaining necessary infrastructure.

We don't need to maintain economic structures which create additional human misery.  There is enough without them.

We can't control nature. But we CAN correct man-made structures which victimize our fellow human beings.

We don't need poverty in the world.  We could manage just fine without it.

It is time to delve into those structures, and get to the root of them.

When we get to the root, we'll recognize it and know what to do about it. 

When we've done that, our safety nets will be there for those who have health problems, or accidents, or are victims of nature's whims.  We'll be able to devote our energies and funds to things which can't be avoided -- acts of nature -- instead of trying to patch up the victims of our economic system.

Here and abroad.

Go to the root of the problem.

Where do you start?  Read Henry George.  Start with the speeches linked from the front page of http://www.wealthandwant.com/, and then, if something in his thought resonates, move on to Social Problems (ditto) and then "Progress & Poverty, at http://www.progressandpoverty.org

The good news is that economics need not be a dismal science.  When viewed through the lenses of the classical economists, a lot more things look a lot more fixable.

Poverty is a structural problem.  Nothing we try to do for or with individuals is going to make the least bit of difference in the structures which are producing poverty.   While I applaud the hearts and efforts of those who seek to improve the lives of individuals afflicted with poverty through charity, through education, through aid, even through job creation, none of these things is going to end poverty until we correct the structures which take for some that which others create.  You might move one person from being a sower to being a reaper, but you aren't going to reduce the problem of some being permitted to reap what others sow until you attack the structures which permit it!

And isn't it government's job to create and promote structures which protect all of us from exploitation by others?

Prosper California Tax Reform Initiative

Prosper California Tax Reform Initiative

This is an exciting website which shows promise of digging California out of the hole into which it has dug itself.

The only downside I see for the rest of us is that it will make all the taxes which California residents pay deductible on their federal tax returns, and therefore, perhaps, reduce the tax revenue the federal government receives from this huge state, at least in the short run.

But the upside is exciting: California could be the first state to eliminate the dumb taxes which weigh on any economy: sales taxes and the portion of the wage tax which falls on the first $150,000 of personal income.

This is smart taxation.  Read about it at http://www.prospercalifornia.com/

"The End of Poverty? Think Again"

The new film, "The End of Poverty? Think Again" had its NYC premier back in November, and is now back for a second round.

I commend it to your attention.  It is beautifully filmed, and, while it doesn't provide clear answers, it raises a lot of important questions -- different questions from the ones commonly being discussed -- and considers them in light not only of economic justice, but also the sustainability of our planet.

You can watch a number of clips on YouTube ... start at http://www.youtube.com/user/CinemaLibre2 and you'll see links to many excerpts and some outtakes, interviews with the director, and a review.

The title is a direct challenge to Jeffrey Sachs' 2005 book "The End of Poverty." The film looks for the roots of global poverty, and who benefits from the current structure.  It provides a lot to think about.

Here are three websites I encourage you to explore

• the film company's website, http://theendofpoverty.com  This will tell you where you can find the film and provides some additional clips.

• A Georgist Perspective on the film "The End of Poverty?", http://povertythinkagain.com/
• A companion book for the film, "Why Global Poverty?" http://whyglobalpoverty.com/  available at the online bookstore at http://www.schalkenbach.org/

The solutions to poverty that most people are talking about -- microcredit, vaccines, drinking water improvements, etc. -- are not going to put a major dent in the problem.  None of them, and no combination of them, goes to the ROOT of the problem, the underlying cause.

I'm actually not altogether sure that the filmmaker himself fully understands the root of the problem -- but it seems to me that he is at least on the right track.   And I think his film has the potential to get the conversation going, which is a lot better than where we've been.

When I think about the other proposals that are being made to end poverty, I think of a passage from Henry George, the beginning of a chapter called "The Robber That Takes All That is Left:"

Labor may be likened to a man who as he carries home his earnings is waylaid by a series of robbers. One demands this much, and another that much, but last of all stands one who demands all that is left, save just enough to enable the victim to maintain life and come forth next day to work. So long as this last robber remains, what will it benefit such a man to drive off any or all of the other robbers?

I'm not saying that disabling or disposing of some of these other robbers isn't noble work.  But we ought not to fool ourselves that it is sufficient.  And we're operating in the dark if most people don't even realize the existence of that other robber, who also robs them, day in and day out.   

Remember that in America, which has, most of us think, solved most of the problems these people set out to solve, has tremendous concentration of wealth:

10% of us hold 71.5% of the aggregate net worth.  The next 10% have 13.5%.

That doesn't leave a whole lot for the bottom 80% of us.  And recent developments, including the Supreme Court decision in Citizens United, lead some of us to expect that wealth will concentrate further in America.

The other Davos website

I came across an interesting website the other day ... http://www.we-forum.org/en/events/AnnualMeeting2010/index.shtml.

Unfortunately, the link to the Stiglitz interview doesn't work ... but here is a short one from the same interview.  It is an excerpt from the Philippe Diaz film, The End of Poverty?  Think Again.   Once you see that one, you'll also see links to other excerpts from the film and to trailers and other information.

The Davos website is not what it appears to be, but I encourage you to explore it anyway.   Some of the videos are priceless.

The link under "initiatives" for "Sane Tax Initiative" strikes me as directionally correct:

Sane Tax Initiative

The cancellation of taxes on labor and basic consumption, the creation of a 2% worldwide tax on property ownership (except basic habitation for the poor), and the implementation of a global 0.5% flat tax on all financial transactions with a total prohibition of speculation on food products.

Until the beginning of the 19th century, taxes were largely used as a means of reducing inequalities, and fell mainly on property ownership.

Neoliberal policies of the 20th century slowly shifted the tax burden away from the rich to the poor by taxing labor and consumption—making the poor responsible for financing our economic system while giving the rich most of the benefit. And we all know what became of trickle-down theory.

Taxes must be shifted away from basic necessities and consumption, and back to profit-making operations, and the ownership of natural resources and other industrial properties. A tax must also be levied on financial transactions.

I would differentiate between property in land, which I strongly believe ought to be taxed, with the revenue applied to public purposes, and property in buildings and other owner-created structures and improvements to land, which I do not believe ought to be taxed.

Further, I do not think that "operations" ought to be taxed because they are profitable or buildings because they are "industrial."  But I do agree that the ownership of natural resources ought not to enrich private individuals, or corporations, or any entity other than the public at large.  (Alaska has taken important steps in this direction, with good results, over the past 30 or so years.)

I'm not sure what I think of taxing financial transactions, but I'm certainly in favor of measures which would end the speculation which we've been seeing and which has contributed to awesomely large fortunes created by hedge funds and other traders.  Those fortunes don't come out of thin air, and the traders aren't growing the wealth pie or adding to the stability of our economy; when some reap what they didn't sow, others who sowed are not getting to reap.  And that's wrong. 

I'll post separately about the film, "The End of Poverty?  Think Again," which is currently showing in NYC.

Why I Bother

The reader might wonder why there are several hundred posts on this blog, and rather few comments.  Why do I keep on writing?

This blog comes out of an experience which Georgists -- people who are persuaded that Henry George (b. 1839, Philadelphia; d. 1897, NYC) largely got it right -- call "seeing the cat."  The phrase refers to an AHA!!! moment once described as follows:

I was one day walking along Kearney Street in San Francisco when I noticed a crowd in front of the show window of a store. They were looking at something inside. I took a glance myself, but saw only a poor picture of an uninteresting landscape. As I was turning away my eye caught these words underneath the picture: "Do you see the cat?" I looked again and more closely, but I saw no cat. Then I spoke to the crowd. "Gentlemen," I said, "I do not see a cat in that picture; is there a cat there?" Some one in the crowd replied: "Naw, there ain't no cat there. Here's a crank who says he sees a cat in it, but none of the rest of us can." Then the crank spoke up. "I tell you," he said, "there is a cat there. The picture is all cat. What you fellows take for a landscape is nothing more than a cat's outlines. And you needn't call a man a crank either because he can see more with his eyes than you can with yours."

Well, I looked again very closely at the picture, and then I said to the man they were calling a crank, "Really, sir, I cannot make out a cat in that picture. I can see nothing but a poor drawing of a commonplace landscape." "Why, Judge," the crank exclaimed, "just you look at that bird in the air. That's the cat's ear." I looked but was obliged to say: "I am sorry to be so stupid but I really cannot make a cat's ear of that bird. It's a poor bird, but not a cat's ear." "Well, then," the crank persisted, "look at that twig twirled around in a circle; that's the cat's eye." But I couldn't make out an eye. "Oh, well," returned the crank a bit impatiently, "look at those sprouts at the foot of the tree, and the grass; they make the cat's claws." After a rather deliberate examination, I reported that they did look a little like claws, but I couldn't connect them with a cat. Once more the crank came back at me as cranks will. "Don't you see that limb off there? and that other limb just under it? and that white space between?" he asked. "Well, that white space is the cat's tail." I looked again and was just on the point of replying that there was no cat's tail there that I could see, when suddenly the whole cat stood out before me.

There it was, sure enough, just as the crank had said; and the only reason the rest of us couldn't see it was that we hadn't got the right angle of view. but now that I saw the cat, I could see nothing else in the picture. The poor landscape had disappeared and a fine looking cat had taken its place. And do you know, I was never afterwards able, upon looking at that picture, to see anything in it *but* the cat.

To which Nic Tideman added, "In my view, 'the cat' is the possibility of a world without privilege."

The goal of this website is to help others see what Georgists see.  We look around and see dozens -- hundreds -- thousands -- of social problems which ultimately, if you go to the root, are offshoots of our -- America's, the world's -- failure to recognize that the value of land, non-renewable natural resources and other like things (that which the classical economists would recognize as "land" even if they never saw an airplane [prime landing rights at LaGuardia] or heard a radio or TV [electromagnetic spectrum] or imagined a satellite in geosynchronous orbit, or lived in a place where water wasn't in seemingly infinite supply, or a time when clean air wasn't a given) ought to be socialized -- treated as our common treasure through taxation -- while things which individuals and corporations create ought to be privatized (not taxed).

There!  I've written a sentence of a length that only a few can parse.  But perhaps it will give you a sense of the Georgist vision and reform.

I write this blog in the hope that a curious journalist, or legislative aide, or reformer, or foundation board member, or simply another person who thinks that there has to be another, better way than what we are currently doing, will find this body of posts, and explore it long enough to start to see the cat, too, and then share it with others who are willing to work for a better country and better world. 

I'll close with a quote from Henry George's book, Social Problems, in an essay called "What We Must Do."

"I do not say that in the recognition of the equal and unalienable right of each human being to the natural elements from which life must be supported and wants satisfied, lies the solution of all social problems. I fully recognize that even after we do this, much will remain to do. We might recognize the equal right to land, and yet tyranny and spoilation be continued.

But whatever else we do, as along as we fail to recognize the equal right to the elements of nature, nothing will avail to remedy that unnatural inequality in the distribution of wealth which is fraught with so much evil and danger. Reform as we may, until we make this fundamental reform, our material progress can but tend to differentiate our people into the monstrously rich and frightfully poor. Whatever be the increase of wealth, the masses will still be ground toward the point of bare subsistence — we must still have our great criminal classes, our paupers and our tramps, men and women driven to degradation and desperation from inability to make an honest living."

Ben Stein's Farewell to C. Lowell Harriss, professor of economics - Dec. 29, 2009

Farewell to C. Lowell Harriss, professor of economics - Dec. 29, 2009.

I finally got the time to sit down and read through some of the obituaries and tributes to Lowell Harriss, who died in late December (just after Paul Samuelson).  His name was one I grew up with; he was a younger and much respected colleague of my late Georgist grandfather, and participated in the Committee on Taxation, Resources and Economic Development in the 1970s, and, likely, beyond.

The tribute I'm reading right now is interesting in light of data I've reported here recently, and in light of yesterday's Supreme Court decision on corporate free speech.  The data I report has only been gathered in its current form since the 1980s, and I have no idea what the earlier data sources on the subject might have been.

The tribute comes from Ben Stein, who young people know from "Win Ben Stein's Money,"  and a film or two, and those who watch the nightly news sponsored by the pharmaceutical companies may recognize from Visine commercials.  He is the son of two economists, and writes for Fortune Magazine.  He was a student of Lowell's at Columbia University in the mid 1960s.  He wrote, in tribute to Lowell,

But when Professor Harriss started talking about how corporations manage their affairs, he said, "Now assume that the stockholders of the corporation, the owners and beneficiaries of the corporation, are all widows and orphans."

This was an eye-opener indeed. And it made total sense. Of course, except in the rarest of cases in those days, then, and even now, the biggest companies are owned by legions of pension funds, mutual funds, (now, also ETFs and index funds). They are not owned by the Rockefellers or the Astors, as Professor Harriss used to say. They are owned by our parents and by us. The corporations are the people every bit as much as the workers are the people.

This insight, seemingly rarely taught in today's universities, has enabled me to ask -- for example -- why we as a nation would be angry at the oil companies, when we as a nation and as families own the oil companies, when the oil companies employ our fellow Americans at a decent wage, and when the oil companies pay us Americans as savers and retirees oil company dividends. Why would we hate any company without understanding that -- generally speaking, definitely not always -- its managers are simply trying to do the best for the widows and orphans and retirees who own the company? The companies are not a cancer on the society: they are the society.

Let's look closely at that second paragraph in light of the Survey of Consumer Finances data (2007, the newest available).

The SCF doesn't report pension fund assets.*  Others do -- see Ed Wolff's work.  But it is widely understood that a small and diminishing portion of the workforce today has a defined benefit pension -- that which we think of as a pension.  Some of today's workers still have some pension assets, either from a current employer who is no longer contributing to the pension fund, or from a previous employer.

The SCF reports several relevant categories, all mutually exclusive, and then an aggregate called "EQUITY."  The individual categories which might include stock or mutual funds are STOCKS; the category NMMF -- non-money-market mutual funds -- which represents holdings of mutual funds (which includes bonds as well as equities) outside of retirement assets; and RETQLIQ represents total holdings of such retirement assets as IRAs, 401(k) accounts, and other similar individually controlled retirement funds, which likely includes stocks, bonds and mutual funds.   The SCF also reports an aggregate called EQUITY.  Here are the ownership rates, and the distribution of holdings for 2007:

Table 1: Ownership Rates (2007)
	Stocks		Mutual Funds		Retirement Assets		Equity
			[NMMF]		[RETQLIQ]
Total:	17.9%		11.4%		52.6%		51.1%
Bottom 50%	7.2%		2.3%		33.6%		29.7%
Next 40%	22.7%		15.0%		68.3%		68.2%
Next 5%	43.7%		36.5%		83.3%		86.9%
Next 4%	59.5%		47.6%		85.3%		92.0%
Top 1%	65.4%		52.7%		87.8%		92.8%
Table 2: Share of Holdings (2007)
Total:	100.0%		100.0%		100.0%		100.0%
Bottom 50%	0.6%		0.4%		3.8%		1.5%
Next 40%	9.0%		11.6%		36.7%		19.6%
Next 5%	8.0%		10.3%		16.9%		12.4%
Next 4%	30.5%		30.9%		28.0%		30.5%
Top 1%	51.9%		46.7%		14.5%		36.0%

So while it might have been true that the young people sitting in Lowell's classes were likely to be beneficiaries of the corporations as shareholders, I think it is safe to say that the larger society was not, unless the distribution of stock holdings has concentrated even more precipitously than I suspect it has between 1964 and today.  The widows and orphans were far more likely to be in the bottom half of the wealth distribution, which, as of 2007 shared 1.5% of the EQUITY value.   

Today, it is clear that many corporations are not being managed even for the long-term benefit of their shareholders.  It is the top tier of employees whose interests are being served.

But perhaps one other piece of data ought to be considered: the distribution of the owners of holdings. This is the sort of figure which corporate advertising refers to when they talk about stock ownership being broad.  The "Total" line matches the first distribution; the others add to that total.

Table 3: Distribution of Holders of Assets (2007)
	Stocks		Mutual Funds		Retirement Assets		Equity
			[NMMF]		[RETQLIQ]
Total:	17.9%		11.4%		52.6%		51.1%
Bottom 50%	3.6%		1.2%		16.8%		14.9%
Next 40%	9.1%		6.0%		27.3%		27.3%
Next 5%	2.2%		1.8%		4.2%		4.3%
Next 4%	2.4%		1.9%		3.4%		3.7%
Top 1%	0.7%		0.5%		0.9%		0.9%

   

Do you feel better now?  The top 1% folks represent less than 2% of those who own EQUITY!  What's the big deal?  Look how many more of EQUITY owners are from the bottom 50%!  Isn't America wonderful?  Does Ben Stein's memory of Lowell's classroom statement sound right now?

One more table.  This one looks at the relative holdings across the holders in each wealth quantile.  It divides the dollar holdings for each group by the percentage in Table 3.  Data is comparable both across columns and up and down each column.

Table 4: Average Dollar Holdings per 1% of Households Who Hold
	Stocks		Mutual Funds		Retirement Assets		Equity
			[NMMF]		[RETQLIQ]
Average:	221		309		146		231
Bottom 50%	7		11		17		12
Next 40%	39		68		103		85
Next 5%	145		200		312		337
Next 4%	508		573		629		977
Top 1%	3,142		3,127		1,271		4,577

Notice what percentage of us are "below average."  Compare each figure to the average in its column.

Let me throw in one other set of figures:   The Table 4 data for BUS -- equity in privately held companies.  Average: 1,069.  Bottom 50%: 24   Next 40%: 137; Next 5%: 443; Next 4%: 1,507; Top 1%: 10,960.  (That's what the Astors and Rockefellers of today own.  And much of it is land value and the value of other natural resources, value which we permit them to privatize.)  We call much of it "small business" and permit the owners to style themselves as self-made successes.

To return to Ben Stein's questions:

This insight, seemingly rarely taught in today's universities, has enabled me to ask -- for example -- why we as a nation would be angry at the oil companies, when we as a nation and as families own the oil companies, when the oil companies employ our fellow Americans at a decent wage, and when the oil companies pay us Americans as savers and retirees oil company dividends. Why would we hate any company without understanding that -- generally speaking, definitely not always -- its managers are simply trying to do the best for the widows and orphans and retirees who own the company? The companies are not a cancer on the society: they are the society.

The nonrenewable natural resources belong to the people, not exclusively to those who extract them from the soil, or their shareholders, even if 100% of us were shareholders in name.  Until our system collects the royalties on those natural resources from those who we currently permit to privatize our COMMON asset, Stein is just plain wrong.  Fortune Magazine's subscribers may appreciate his assertions, but the rest of us ought to be very very skeptical.   

*  Postscript, 1/30/2010:

I came across some data about stock ownership which showed where pension funds fit in the picture, at least in the 1990s.  See Pension Fund Capitalism, by G. William Domhoff, at http://sociology.ucsc.edu/whorulesamerica/power/pension_fund_capitalism.html, Table 1, which shows that Corporate Pension Funds held 18% of Corporate Stock, and Public Pension Funds held 8% in 1994, compared to Households, which held 48% and Mutual Funds which held 12%.  He sources the data to Margaret M. Blair, Ownership and Control, 1995)

I hate to disagree with Chip Case, but I must

1732_952_LLA100103.pdf (application/pdf Object).  "Housing, Land and the Economic Crisis" and it appears in "Land Lines." 

The Lincoln Institute of Land Policy, an organization founded back in the 1940s by an industrialist enthusiastic about the ideas of Henry George, who intended that his wealth be used to promote those ideas, publishes a newsletter, the link to which arrived in my inbox last week.  One of the articles was by Chip Case, recently retired from Wellesley, and half of Case-Shiller.  The article is titled, "Housing, Land and the Economic Crisis" and it appears in "Land Lines." 

What I take issue with is this statement:

The expansionary monetary policy pursued during this short period reduced the cost of buying a home by almost a third.

It might be correct to say that monetary policy reduced the cost of borrowing a particular amount of money by almost a third, and I suspect that is what Chip meant to say.    But the reality is that instead of a potential buyer being able to purchase a particular house for 1/3 less monthly outlay for mortgage costs, he was able to borrow 50% more for the same monthly outlay -- and indeed, if he wanted to buy that particular house, he was competing for it with other people who WOULD be willing to borrow 50% more, so he would have to.   And he needed to accept an adjustable rate mortgage, with all the downside that leads to.

This drove up the transaction prices, and produced the appearance of home equity against which a larger percentage of non-sellers were able to borrow.  The spending -- on credit -- has led to profits for retailers and manufacturers, and most certainly for bankers (and thus to greater concentration of our wealth and income) and, as it had to, to a bust of large magnitude and widespread pain.

Have we learned, or are we going to do this again?

The article is titled, "Housing, Land and the Economic Crisis" and it appears in "Land Lines."    But the word "land" appears only twice in the article:

1. second paragraph:  "Between 2000 and 2005, the value of residential land and buildings increased from about $14 trillion to $24 trillion. About half of this increase reflected new construction, and half was due to rising land values, primarily on the coasts (Case 2007). But in late 2006 prices began to decline, and by mid-2009 they had fallen roughly 30 percent.
2. antepenultimate paragraph (I knew I'd have a use for that word someday!):  "California represents about 25 percent of all the land value in the United States, and events there have major implications for the rest of the country. The good news is that for the last three months, the indexes for San Francisco, San Diego, and Los Angeles have led the nation in price appreciation. The California Association of Realtors reports substantial increases in home sales volumes except in the Central Valley.

I'm disappointed that neither Case nor Lincoln saw fit to connect the dots.

(And I'll note parenthetically that California and Florida's steeply rising land prices were in part due to their limitations on the property tax under Proposition 13 and "Save Our Homes" respectively.   Many of California's problems would get better if they would simply fund their public spending from a tax on their land value, rather than suppressing that tax and relying on taxes on sales and wages, both of which depress any economy.)

To connect the dots, I'll ask that you read Mason Gaffney: The Great Crash of 2008, at http://www.masongaffney.org/ and his new book, After the Crash: Designing a Depression-free Economy, available at http://www.schalkenbach.org/store.php?crn=78&rn=610&action=show_detail

Lenders ought not to be lending on speculative land values. Localities ought to be collecting more of the economic rent on the land within their borders, lowering the selling price of land without reducing its value in use -- and arguably increasing it!  Localities and states ought to be lowering their taxes on buildings, on wages, on sales, and substitute the revenue from collecting economic rent.  See also Mason Gaffney: How to Thaw Credit, Now and Forever, online at his website (above).

 

Income Concentration

I stumbled across a webpage, created by William Domhoff of UCSC, which contains some fascinating data on income distribution and wealth distribution, or, if you prefer, income concentration and wealth concentration.

I've posted the wealth concentration data separately; here, I'll focus on the concentration of income.  Table 6 draws on work of Edward Wolff, of NYU, not yet published. 

Income Distribution, 1982 and 2006
	1982	2006	Change
Top 1%:	12.8%	21.3%	+8.5 points
Next 19%:	39.1%	40.1%	+1.0 points
Bottom 80%:	48.1%	38.6%	-9.5 points

Turning to Capital Income -- by which I assume they mean income derived not from wages but from other sources, which includes that which the classical economists called land, and which the neoclassical economists subsume under "capital" as if they were identical:

		1979		2003
Top  1%		37.8%		57.5%		+19.7 percentage points
Next 4%		20.1%		15.7%		-4.4 percentage points
Next 5%		8.8%		6.2%		-2.6 percentage points
Next 10%		10.2%		8.0%		-2.2 percentage points
Bottom 80%		23.1%		12.6%		-10.5 percentage points

Is this something we're proud of, or think we ought to be exporting to other countries?  Is it consistent with our ideals, about life, liberty and the pursuit of happiness being the right of every American, of every person on earth?

We're permitting the privatization of things which rightly belong to the commons -- to all of us.  What things?  The value of natural resources flows into whose pockets?  The annual value of urban land flows into whose pockets?  The value of water rights flows into whose pockets?  The value of the airwaves flows into whose pockets? (Hint: look at the distribution of capital income!)  The value of 8am landing rights at LaGuardia flows into whose pockets?  The value of geosynchronous orbits so necessary to certain businesses and systems flows into whose pockets?   The bottom 80% of us?  The next 19% of us?  The top 1%?  The owners of so-called "small" businesses?

These are privileges.  Structures which divert to individuals and corporations things which all of us create.  They reap what we together sow, and then we are led to respect them as "self-made men" and success stories.

They are not eternal.  They are not immutable.  Each can be reformed, and each can provide a significant revenue source to meet our communities' need for revenue for common purposes.  Collecting this revenue this way will not damage our economy as our current tax structure does.  It will, however, lighten the portfolios of some who are used to considering themselves blessed by our current way of doing things -- those born on 3rd base who think they hit a home run.  And create some opportunities for those who want to works, and for those who want to be compensated for their work with wages which begin to line up better to the cost of living.

There IS enough to go around. Not enough for all of us to live like the top 1%, perhaps, but certainly enough for many more of us to live at the sort of level we call middle class, and even at the, say, 70th percentile -- without despoiling the earth.

Income and Poverty Among Older Americans in 2008

The Congressional Research Service has recently published "Income and Poverty Among Older Americans in 2008"  which I found at http://benefitslink.com/articles/guests/RL32697_Oct_2009.pdf.

It contains some sobering statistics, ones which ought to get most of us thinking about whether the way we've structured our economy and our society is serving the common good, or is designed to meet some other objective.

Many studies find that older people have far more in assets than younger people, and to some extent, that makes a lot of sense; they've worked for a long time to accumulate what they've got, and we might accept that as a sign that hard work is rewarded, and that savings are rewarded.  If the older people have a huge amount of assets, and our younger people must mortgage themselves to purchase from their elders a place to live, perhaps this is not so good.

Here are some of the highlights of the CRS study:

1. In 2008, Social Security paid benefits to 86% of individuals aged 65 and older and to 89% of households in which the householder or the householder’s spouse was 65 or older.

2. Social Security is the largest single source of income among the aged.

• Sixty-nine percent of Social Security beneficiaries aged 65 or older received more than half of their income from Social Security in 2008.
• For 41% of elderly recipients and 28% of elderly households, Social Security accounted for more than 90% of total income in 2008.

3. Of the 37.8 million Americans aged 65 and older who were living in households in 2008, 20.4 million (54%) received income from assets, such as interest, dividends, rent, and royalties. Most received small amounts of income from the assets they owned.

4. Among individuals aged 65 and older who received income from assets in 2008, half received less than $1,054.

5. Of households with a householder or spouse aged 65 or older, 59% received income from assets in 2008. Among these households, median income from assets in 2008 was $1,542.

6. Median income for individuals over 65 varied by age:

• 65 to 69 . . . $22,057
• 70 to 79 . . . $17,573
• 80+  . . . . . . $16,491

That means that half of each age group receives more, half less.  And that takes into account income from all sources.

7. Asset income for individuals over 65:

• 65 to 69:  55.2% have asset income; half of them have less than $1,015 
• 70 to 79:  54.2% have asset income; half of them have less than $1,069
• 80+:         52.3% have asset income; half of them have less than $1,150 in 2008.

8. At the household level among households whose head is over 65:

• 65 to 69: 60.4% have asset income; half have less than $1,500 (and the average is $10,020 per household)
• 70 to 79: 58.6% have asset income; half have less than $1,600 (and the average is $10,217 " ")
• 80+:        57.55 have asset income; half have less than $1,500 (and the average is  $8,236 " ") 

9.  Median and Mean Social Security income are not all that different from each other, for elderly individuals:

• 65 to 69: mean $13,010; median $12,480
• 70 to 79: mean $12,786; median $12,113
• 80+         mean $12,818; median $12,557

The proposed $250 one-time payment would be about the equivalent of an extra week's worth of Social Security.

10. At the household level, Median and Mean Social Security income are further apart

• 65 to 69: mean $17,314; median $15,804
• 70 to 79: mean $18,256; median $16,229
• 80+         mean $16,589; median $14,400

And clearly, more than half of these households are "below average" -- so when you hear about "the average household" recognize that only a minority are above average.  Lake Wobegon in reverse.

Are we structuring ourselves appropriately?  I don't think so.  I think Henry George pretty much got it right.  We have permitted the creation of a machine which concentrates wealth in a small percentage of our population, leaving the rest to scramble and try to cope -- and blame themselves for not being in the top few percent, above the wedge George called attention to.

NRDC: Ranking States’ Oil Vulnerability and Solutions for Change

Ranking States’ Oil Vulnerability and Solutions for Change
http://www.nrdc.org/energy/states/files/states.pdf

A few lifts from an interesting paper.  It speaks only to oil usage related to cars, putting aside heating oil and other uses of oil.

What it misses is the fact that our incentives are aligned to create sprawl, and that until we realign them, we aren't going to get smart growth.  Readers of this blog know that the first realignment -- necessary, if not sufficient -- is a reform of the conventional property tax, shifting taxation off buildings and onto land value, followed by a shifting of more of the tax burden off sales and wages and onto land value.  When we tax land value heavily, only good things happen --

• from the point of view of the environment,
• from the point of view of efficiency,
• from the point of view of the economy,
• from the point of view of encouraging smart growth,
• from the point of view of job creation and affordable housing,
• from the point of view of dense cities and walkable cities and effective public transit which people want to use and are willing and able to rely on, day in and day out.

The NRDC is not going to achieve its goals without the tool of land value taxation.   "Targets" and "funding" are all well and good, but they don't counteract the current disincentives that our system of taxation creates.  I'd be happy to provide the NRDC folks with material which will help them understand the needed change.

Good public transit systems can be fully funded by the increased land value they create.

From their paper:

America’s dependence on oil is problematic in several ways, including the following:

• The United States has less than 2 percent of the world’s oil supplies but is responsible for about one-quarter of the world’s oil consumption.2 We import almost two-thirds of our crude oil supply from foreign countries, and more and more of the world’s future supply will come from regions that are either politically unstable or unfriendly to U.S. interests.3
• Our unstable supply of oil threatens our national economy, particularly since about 96 percent of our transportation system relies on oil.4
• Oil consumption is a leading contributor to the greenhouse gas (GHG) emissions that cause global warming. In the United States, the oil-based transportation system is responsible for roughly one-third of our global warming pollution

...

Smart growth and public transit. States can reduce oil dependence by integrating land use and transportation policies and designing them to reduce vehicle-miles traveled and promote alternatives to driving. Nineteen states, including Hawaii, Georgia, Tennessee, and Maine, have adopted smart growth measures intended to curb sprawl and reduce the associated traffic and vehicle-miles traveled. Fourteen states have created an agency or other mechanism to develop and coordinate land use policies. Six states have set targets for reducing vehicle-miles traveled. In addition, some states — led this year by New York, New Jersey, and Washington — have prioritized the funding of public transit through the allocation of state funds and/or by transferring portions of their federal highway dollars.

...

• Nineteen states have growth management acts. Among the most comprehensive ways of promoting smart growth is growth management legislation, such as Washington’s Growth Management Act (GMA). This GMA affects 29 counties (95 percent of Washington’s population) and requires, among other things, policies covering sprawl reduction, affordable housing, open space and recreation, environmental protection, natural resource industries, permit processing, concentrated urban growth, regional transportation, historic lands and buildings, and public facilities and services.13 Despite Florida Governor Crist’s weakening of his state’s growth management laws this year, growth management legislation was still one of the areas of greatest improvement from last year, when only 12 states had such laws.
• Only six states have set targets for reducing vehicle-miles traveled. For instance, the state of Washington amended its GMA to make it even more effective at lowering oil consumption, calling for reductions in per capita vehicle-miles traveled (VMT) of 18 percent by 2020, 30 percent by 2025, and 50 percent by 2050.14
• Fourteen states have an agency or other mechanism to coordinate development. Many states have recognized that several different state entities influence development, sometimes in potentially contradictory ways, and have created mechanisms to coordinate public investment that supports development. In 2003, Massachusetts established a powerful Executive Office of Commonwealth Development.15 Such coordination is a vital first step toward smart development, enabling a state to take into account the wide range of relevant influences. We encourage states to use coordinating mechanisms to promote smart growth.
• Some states have prioritized the funding of public transit. Public transit systems, such as bus, commuter rail, subway, and light rail programs, are important components in state efforts to promote smart growth and reduce oil dependence. By creating or expanding reliable and accessible public transit programs, states can reduce the number of single-passenger cars on the road, consequently lowering average VMT. And strong public transit provides a critical transportation alternative as gas prices rise. A case in point: Americans drove 1.4 billion fewer highway miles in April 2008 than in April 2007 because of soaring fuel prices; many took trains or buses instead, leading to a surge in transit ridership.16 In 2008, public transportation saw its highest level of ridership in 52 years.17

States have the ability to “flex” certain federal funds that ordinarily would be spent on highway projects and use them to pay for public transit programs. States that choose not to transfer federal funds to transit programs are not necessarily neglecting transit funding, however, as they may be spending more state dollars on transit. The best way to understand state transit prioritization is to compare the amount of total state spending (including flexed federal funds) on mass transit with the total spent on highway programs, as shown in the far right column of Table 3. By this measure, the top five states prioritizing public transit spending are New York, New Jersey, Washington, Massachusetts, and Utah.

Opportunities, Privilege, Rent -- and a better way to fund our common spending

THE PUZZLED FISHERMEN.
For The Public.

We had packed the 500 trout in a large box with ice and cool wet moss, and as we were eating our last supper under the big pine before breaking up camp, the painter started the trouble.

"I'll bet ten dollars that this lake will be owned in five years," said he.

"I'll take that bet," said the plumber. "Why, the public wouldn't stand it. Here's a lake of five square miles, chuck full of trout, only 20 miles out of Kamloops, and the government put in a road costing $1,500 just to accommodate the public; and d'ye think it would be fair to let any one man own it? No sir!"

"What did Lusk charge you for the horse's pasture?" asked the printer of Jimmey, the stable boy.

"Four dollars, sir; dollar each for two days' pasture."

"That's a blamed outrage," said the tailor. "When I was out here last year we just picketed our horses out at the foot of the lake, and they did flne."

"Yes, but you didn't have to look after them," said the carpenter. "I had to change the pickets twice a day, and I'd much rather pay my share of the four dollars for the pasture, and be free to fish. Besides, Lusk has built a lot of fencing to make that pasture."

Getting By in Oregon: How Much Does It Take?

Getting By in Oregon: How Much Does It Take?

One of my standing Google Alerts brought me this item.  It is a paper, just published, showing how wages in Oregon compare to a barebones cost of living for families of various configurations.  It uses the Self-Sufficiency Standard methodology, which I respect.

Its first table shows the Federal Poverty Guideline for various configurations of family, and then, for each Oregon County, the median household income and the Self-Sufficiency Standard (SSS) necessary for each family configuration.  That is, the amount a family needs to meet its own most simply defined needs -- housing at the HUD Fair Market Rent; home-cooked food at the USDA Low-Cost Food Plan level (about $2 per person per meal); health care; transportation (a paid-off car for each adult); childcare suitable to the ages of the children, plus an allowance of 10% more for all other expenses, plus the taxes which would be due locally to net out to that income.  Table 1 shows how widely the median incomes and costs of living vary across Oregon.

In Baker County: 

• a single adult can live frugally but adequately on $15,927
• an adult with an infant and a preschooler needs $29,255
• two adults with an infant and a preschooler need $37,530
• the median household income is $38,524

In Washington County, a similar lifestyle costs more:

• a single adult can live frugally but adequately on $22,646
• an adult with an infant and a preschooler needs $58,915
• two adults with an infant and a preschooler need $67,074
• the median household income is $57,561

Thou shalt not suffer thyself or anybody else to be stolen from

"Thou shalt not steal." That means, of course, that we ourselves must not steal. But does it not also mean that we must not suffer anybody else to steal if we can help it? "Thou shalt not steal." Does it not also mean, "Thou shalt not suffer thyself or anybody else to be stolen from?"

If it does, then we, all of us, rich and poor alike, are responsible for this social crime that produces poverty. Not merely the men who monopolize land — they are not to blame above any one else, but we who permit them to monopolize land are also parties to the theft. The Christianity that ignores this social responsibility has really forgotten the teachings of Christ. Where He in the gospels speaks of the judgment, the question which is put to men is never, "Did you praise me?" "Did you pray to me?" "Did you believe this or did you believe that?" It is only this: "What did you do to relieve distress ; to abolish poverty ?" To those who are condemned, the judge is represented as saying: "I was ahungered and ye gave me not meat, I was athirst and ye gave me not drink, I was sick and in prison and ye visited me not." Then they say, "Lord, Lord, when did we fail to do these things to you?" The answer is, "Inasmuch as ye failed to do it to the least of these, so also did you fail to do it unto me; depart into the place prepared for the devil and his angels." On the other hand, what is said to the blessed is, "I was ahungered and ye gave me meat, I was thirsty and ye gave me drink,'I was naked and ye clothed me, I was sick and in prison and ye visited me." And when they say, "Lord, Lord, when did we do these things to thee ?" the answer is, "Inasmuch as ye have done it unto the least of these ye have done it unto me."

Here is the essential spirit of Christianity. The essence of its teaching is not, "Provide for your own body and save your own soul!" but, "Do what you can to make this a better world for all!" It was a protest against the doctrine of "each for himself and devil take the hindermost I" It was the proclamation of a common fatherhood of God and a common brotherhood of men. This was why the rich and the powerful, the high priests and the rulers, persecuted Christianity with fire and sword. It was not what in so many of our churches to-day is called religion that pagan Rome sought to tear out — it was what in too many of the churches of to-day is called "socialism and communism," the doctrine of the equality of human rights!

Now imagine when we men and women of today go before that awful bar that there we should behold the spirits of those who in our time under this accursed social system were driven into crime, of those who were starved in body and mind, of those little children that in this city of New York are being sent out of the world by thousands when they have scarcely entered it — because they did not get food enough, nor air enough, nor light enough, because they are crowded together in these tenement districts under conditions in which all diseases rage and destroy. Supposing we are confronted with those souls, what will it avail us to say that we individually were not responsible for their earthly conditions? What, in the spirit of the parable of Matthew, would be the reply from the judgment seat? Would it not be, "I provided for them all. The earth that I made was broad enough to give them room. The materials that are placed in it were abundant enough for all their needs. Did you or did you not lift up your voice against the wrong that robbed them of their fair share in what I provided for all?"

"Thou shalt not steal!" It is theft, it is robbery that is producing poverty and disease and vice and crime among us. It is by virtue of laws that we uphold; and he who does not raise his voice against that crime, he is an accessory. The standard has now been raised, the cross of the new crusade at last is lifted. Some of us, aye, many of us, have sworn in our hearts that we will never rest so long as we have life and strength until we expose and abolish that wrong. We have declared war upon it. Those who are not with us, let us count them against us. For us there will be no faltering, no compromise, no turning back until the end.

There is no need for poverty in this world, and in our civilization. There is a provision made by the laws of the Creator which would secure to the helpless all that they require, which would give enough and more than enough for all social purposes. These little children that are dying in our crowded districts for want of room and fresh air, they are the disinherited heirs of a great estate.

Did you ever consider the full meaning of the significant fact that as progress goes on, as population increases and civilization develops, the one thing that ever increases in value is land ? Speculators all over the country appreciate that. Wherever there is a chance for population coming; wherever railroads meet or a great city seems destined to grow; wherever some new evidence of the bounty of the Creator is discovered, in a rich coal or iron mine, or an oil well, or a gas deposit, there the speculator jumps in, land rises in value and a great boom takes place, and men find themselves enormously rich without ever having done a single thing to produce wealth.

Now, it is by virtue of a natural law that land steadily increases in value, that population adds to it, that invention adds to it; that the discovery of every fresh evidence of the Creator's goodness in the stores that He has implanted in the earth for our use adds to the value of land, not to the value of anything else. This natural fact is by virtue of a natural law — a law that is as much a law of the Creator as the law of gravitation. What is the intent of this law ? Is there not in it a provision for social needs ? That land values grow greater and greater as the community grows and common needs increase, is there not a manifest provision for social needs — a fund belonging to society as a whole, with which we may take care of the widow and the orphan and those who fall by the wayside — with which we may provide for public education, meet public expenses, and do all the things that an advancing civilization makes more and more necessary for society to do on behalf of its members?

Today the value of the land in New York City is over a hundred millions annually. Who has created that value? Is it because a few landowners are here that that land is worth a hundred millions a year? Is it not because the whole population of New York is here? Is it not because this great city is the center of exchanges for a large portion of the continent? Does not every child that is born, everyone that comes to settle in New York, does he not add to the value of this land? Ought he not, therefore, to get some portion of the benefit? And is he not wronged when, instead of being used for that purpose, certain favored individuals are allowed to appropriate it?

We might take this vast fund for common needs, we might with it make a city here such as the world has never seen before — a city spacious, clean, wholesome, beautiful —a city that should be full of parks; a city without tenement houses; a city that should own its own means of communication, railways that should carry people thirty or forty miles from the city hall in a half hour, and that could be run free, just as are the elevators in our large buildings; a city with great museums, and public libraries, and gymnasiums, and public halls, paid for out of this common fund, and not from the donations of rich citizens. We could out of this vast fund provide as a matter of right for the widow and the orphan, and assure to every citizen of this great city that if he happened to die his wife and his children should not come to want, should not be degraded with charity, but as a matter of right, as citizens of a rich community, as coheirs to a vast estate, should have enough to live on. And we could do all this, not merely without imposing any tax upon production; not merely without interfering with the just rights of property, but while at the same time securing far better than they are now the rights of property and abolishing the taxes that now weigh on production. We have but to throw off our taxes upon things of human production; to cease to fine a man that puts up a house or makes anything that adds to the wealth of the community; to cease collecting taxes from people who bring goods from abroad or make goods at home, and put all our taxes upon the value of land — to collect that enormous revenue due to the growth of the community for the benefit of the community that produced it.

LVTfan here.  That was an excerpt from one of my favorite speeches, by Henry George (entitled "Thou Shalt Not Steal.")

Now consider the newest evidence from the Federal Reserve Board's 2007 Survey of Consumer Finances, as reported in a too little noted paper issued a few months ago entitled "Ponds and Streams: Wealth and Income in the U.S., 1989 to 2007"

• 1% of our households hold over 1/3 of America's wealth. 
• 10% of our households possess over 70% of America's wealth.
• The other 90% get to split the remaining 28.5%
• The bottom 50% of us have only 2.5% of that net worth.

Ranked by income:

• 1% of our households receive 21.4% of the income
• 10% of our households receive 47.2% of the income
• The other 90% of our households get to split 52.8% of the income
• The bottom 50% of our households have only 14.6% of that income.

Coheirs to a vast estate.  Hmmm.  In America?

We could out of this vast fund provide as a matter of right for the widow and the orphan, and assure to every citizen of this great city that if he happened to die his wife and his children should not come to want, should not be degraded with charity, but as a matter of right, as citizens of a rich community, as coheirs to a vast estate, should have enough to live on. And we could do all this, not merely without imposing any tax upon production; not merely without interfering with the just rights of property, but while at the same time securing far better than they are now the rights of property and abolishing the taxes that now weigh on production.

Thou shalt not steal, yes.  But also "Thou shalt not suffer thyself or anybody else to be stolen from."  

The first step is to understand the nature of the theft that is structural, legal, even respected and treated as reflective of personal or corporate virtue.  Shine a light on it.  A Mount-Rushmore-at-night illumination. 

Carpe Diem! Remembering Bob Drake, of Chicago

I received word this morning that Bob Drake died yesterday.  He was about my age ... that is to say, much too young.  He held a job which about 50 years ago at about the same age, my grandfather held, as director of education at the Henry George School in Chicago.  When I first met Bob, at my second CGO conference in London, Ontario, in 2002, he told me about the project he was working on, to update Henry George's classic book, Progress & Poverty, into contemporary language -- I think he described it as the language of Time Magazine.  I was excited and intrigued ... at that point I don't think I had yet made it all the way through the original, which I would describe as being in the language of the pre-1928 Episcopal Book of Common Prayer ... magnificent writing, but not necessarily an easy read.  (As I've noted in some posts below, I now read it for pleasure -- but it wasn't P&P that first brought me to Henry George's ideas; rather it was some later speeches.)

Bob did a thought-by-thought updating, and then abridged the resulting book.  But the flow is similar to the original, and those who have read the original will find it ringing in their ears.   There is a cross-referenced table of contents at http://www.wealthandwant.com/HG/PP/toc.htm so that if you wished, you could read the original and Bob's updating side by side.  Bob's is accessible, and is estimated to be about 7 hours of reading  -- perhaps the best use to which you could put 7 hours if you want to know why we have poverty and what we need to do to end it.  (Jeffrey Sachs and his book "The End of Poverty" notwithstanding.  Sachs and his fans could benefit from reading this.  So could Jim Wallis, and John Edwards, and Bono, and Peter Singer and Susan Pace Hamill and the Gates Foundation and others who speak about wanting to end poverty.  If you haven't read and absorbed Henry George's treatise, you are uneducated on the subject of poverty's cause, and, I will assert, nothing you do is going to make a large-scale difference.)

Here are the opening passages of, first, Henry George's original (1879):

The Problem

[01] The present century has been marked by a prodigious increase in wealth-producing power. The utilization of steam and electricity, the introduction of improved processes and laborsaving machinery, the greater subdivision and grander scale of production, the wonderful facilitation of exchanges, have multiplied enormously the effectiveness of labor.

[02] At the beginning of this marvelous era it was natural to expect, and it was expected, that laborsaving inventions would lighten the toil and improve the condition of the laborer; that the enormous increase in the power of producing wealth would make real poverty a thing of the past. Could a man of the last century -- a Franklin or a Priestly -- have seen, in a vision of the future, the steamship taking the place of the sailing vessel, the railroad train of the wagon, the reaping machine of the scythe, the threshing machine of the flail; could he have heard the throb of the engines that in obedience to human will, and for the satisfaction of human desire, exert a power greater than that of all the men and all the beasts of burden of the earth combined; could he have seen the forest tree transformed into finished lumber -- into doors, sashes, blinds, boxes or barrels, with hardly the touch of a human hand; the great workshops where boots and shoes are turned out by the case with less labor than the old-fashioned cobbler could have put on a sole; the factories where, under the eye of a girl, cotton becomes cloth faster than hundreds of stalwart weavers could have turned it out with their hand looms; could he have seen steam hammers shaping mammoth shafts and mighty anchors, and delicate machinery making tiny watches; the diamond drill cutting through the heart of the rocks, and coal oil sparing the whale; could he have realized the enormous saving of labor resulting from improved facilities of exchange and communication -- sheep killed in Australia eaten fresh in England, and the order given by the London banker in the afternoon executed in San Francisco in the morning of the same day; could he have conceived of the hundred thousand improvements which these only suggest, what would he have inferred as to the social condition of mankind?

[03] It would not have seemed like an inference; further than the vision went it would have seemed as though he saw; and his heart would have leaped and his nerves would have thrilled, as one who from a height beholds just ahead of the thirst-stricken caravan the living gleam of rustling woods and the glint of laughing waters. Plainly, in the sight of the imagination, he would have beheld these new forces elevating society from its very foundations, lifting the very poorest above the possibility of want, exempting the very lowest from anxiety for the material needs of life; he would have seen these slaves of the lamp of knowledge taking on themselves the traditional curse, these muscles of iron and sinews of steel making the poorest laborer's life a holiday, in which every high quality and noble impulse could have scope to grow.

[04] And out of these bounteous material conditions he would have seen arising, as necessary sequences, moral conditions realizing the golden age of which mankind have always dreamed. Youth no longer stunted and starved; age no longer harried by avarice; the child at play with the tiger; the man with the muck rake drinking in the glory of the stars. Foul things fled, fierce things tame; discord turned to harmony! For how could there be greed where all had enough? How could the vice, the crime, the ignorance, the brutality, that spring from poverty and the fear of poverty, exist where poverty had vanished? Who should crouch where all were freemen; who oppress where all were peers?

And here is Bob's entire opening chapter:

The Problem of Poverty Amid Progress

THE NINETEENTH CENTURY saw an enormous increase in the ability to produce wealth. Steam and electricity, mechanization, specialization, and new business methods greatly increased the power of labor.

Who could have foreseen the steamship, the railroad, the tractor? Or factories weaving cloth faster than hundreds of weavers? Who could have heard the throb of engines more powerful than all the beasts of burden combined? Or envisioned the immense effort saved by improvements in transportation, communication, and commerce?

Surely, these new powers would elevate society from its foundations, lifting the poorest above worry for the material needs of life. Imagine these new machines relieving human toil, muscles of iron making the poorest worker's life a holiday, giving our nobler impulses room to grow. Given such bountiful material conditions, surely we could anticipate the golden age long dreamed of. How could there be greed when everyone had enough? How could things that arise from poverty -- crime, ignorance, brutality -- exist when poverty had vanished? Such were the dreams born of this wonderful century of progress.

True, there were disappointments. Discovery upon discovery, invention after invention still did not lessen the toil of those who most need relief or bring plenty to the poor. But it seemed there were so many things that could be blamed for this failure that our faith has hardly weakened. Surely we would overcome these difficulties in time.

Yet we must now face facts we cannot mistake. All over the world, we hear complaints of industrial depression: labor condemned to involuntary idleness; capital going to waste; fear and hardship haunting workers. All this dull, deadening pain, this keen, maddening anguish, is summed up in the familiar phrase "hard times."

This situation can hardly be accounted for by local causes. It is common to communities with widely differing circumstances, political institutions, financial systems, population densities, and social organization. There is economic distress under tyrannies, but also where power is in the hands of the people. Distress where protective tariffs hamper trade, but also where trade is nearly free. Distress in countries with paper money, and in countries with gold and silver currencies.

Beneath all this, we can infer a common cause. It is either what we call material progress, or something closely connected with it. What we call an industrial depression is merely an intensification of phenomena that always accompany material progress. They show themselves more clearly and more strongly as progress goes on.

Where do we find the deepest poverty, the hardest struggle for existence, the greatest enforced idleness? Why, wherever material progress is most advanced. That is to say, where population is densest, wealth greatest, and production and exchange most highly developed. In older countries, destitution is found amid the greatest abundance.

Conversely, workers emigrate to newer countries seeking higher wages. Capital also flows there seeking higher interest. They go where material progress is still in earlier stages. The older countries, where material progress has reached its later stages, is where poverty occurs.

Go to a new community where the race of progress is just beginning, where production and exchange are still rude and inefficient. The best house may be only a log cabin; the richest person must work every day. There is not enough wealth to enable any class to live in ease and luxury. No one makes an easy living, or even a very good one -- yet everyone can make a living. While you won't find wealth and all its effects, neither will you find beggars. No one willing and able to work lives in fear of want. Though there is no luxury, there is no poverty.

But just when they start to achieve the conditions civilized communities strive for, poverty takes a darker turn. This occurs as savings in production and exchange are made possible by denser settlement, closer connection with the rest of the world, and labor-saving machinery. It occurs just as wealth consequently increases. (And wealth increases not only in the aggregate, but in proportion to population.)

Now, some will find living better and easier -- but others will find it hard to get a living at all. Beggars and prisons are the mark of progress as surely as elegant mansions, bulging warehouses, and magnificent churches.

Unpleasant as it may be to admit, it is at last becoming evident that progress has no tendency to reduce poverty. The great fact is, poverty, with all its ills, appears whenever progress reaches a certain stage. Poverty is, in some way, produced by progress itself.

Progress simply widens the gulf between rich and poor. It makes the struggle for existence more intense. Wherever these forces are at work, large classes are maintained on charity.

Yes, in certain ways, the poorest now enjoy what the richest could not a century ago. But this does not demonstrate an improvement -- not so long as the ability to obtain the necessities of life has not increased. A beggar in the city may enjoy many things that a backwoods farmer cannot. But the condition of the beggar is not better than that of an independent farmer. What we call progress does not improve the condition of the lowest class in the essentials of healthy, happy human life. In fact, it tends to depress their condition even more.

These new forces do not act on society from underneath. Rather, it is as though an immense wedge is being driven through the middle. Those above it are elevated, but those below are crushed.

Where the poor have long existed, this effect is no longer obvious. When the lowest class can barely live, it is impossible to get any lower: the next step is out of existence altogether. This has been the case for a long time in many parts of Europe. But where new settlements advance to the condition of older ones, we see that material progress not only fails to relieve poverty, it actually produces it.

In the United States, it is obvious that squalor and misery increase as villages grow into cities. Poverty is most apparent in older and richer regions. If poverty is less deep in San Francisco than New York, is it not because it lags behind? Who can doubt that when it reaches the point where New York is now, there will also be ragged children in the streets?

So long as the increased wealth that progress brings goes to building great fortunes and increasing luxury, progress is not real. When the contrast between the haves and have-nots grows ever sharper, progress cannot be permanent. To educate people condemned to poverty only makes them restless. To base a state with glaring social inequalities on political institutions where people are supposed to be equal is to stand a pyramid on its head. Eventually, it will fall.

This relation of poverty to progress is the great question of our time. It is the riddle that the Sphinx* of Fate puts to us. If we do not answer correctly, we will be destroyed.

As important as this question is, we have no answer that accounts for the facts or provides a cure.

Experts break into an anarchy of opinion, and people accept misguided ideas. They are led to believe that there is a necessary conflict between capital and labor; that machinery is an evil; that competition must be restrained; or that it is the duty of government to provide capital or furnish work. Such ideas are fraught with danger, for they allow charlatans and demagogues to control the masses.

But these ideas cannot be successfully challenged until political economy gives some answer to the great question.

Political economy is not a set of dogmas. It is the explanation of a certain set of facts and their mutual relationships. Its deductions follow from premises we all recognize. In fact, we base the reasoning and actions of everyday life on them. These premises can be reduced to an expression as simple and basic as the physical law that says: motion follows the line of least resistance.

Political economy proceeds from the following simple axiom:

People seek to satisfy their desires with the least exertion.

The process then consists simply of identification and separation. In this sense it is as exact a science as geometry. Its conclusions, when valid, should be just as apparent.

Now, in political economy we cannot test theories by artificially producing combinations or conditions, as other sciences can. Yet we can apply tests that are no less conclusive. This can be done by comparing societies in which different conditions exist. Or, we can test various theories in our imagination -- by separating, combining, adding, or eliminating forces or factors of known direction.

Properly done, such an investigation should yield a conclusion that will correlate with every other truth. Every effect has a cause; every fact implies a preceding fact.

In the following pages, I will use these methods to discover what law connects poverty with progress. I believe this law will also explain the recurring cycles of industrial and commercial depression, which now seem so unexplainable.

Current political economy cannot explain why poverty persists in the midst of increasing wealth. It teaches only unrelated and disjointed theories. It seems to me, this is not due to any inability of the science. Rather, there must be some false step in its premises, or some overlooked factor in its estimates.

Such mistakes are generally concealed by respect paid to authority. Therefore, I will take nothing for granted. Accepted theories will be tested; established facts will be freshly questioned. I will not shrink from any conclusion, but promise to follow the truth wherever it may lead.

What the outcome proves to be is not our affair. If the conclusions we reach run counter to our prejudices, let us not flinch. If they challenge institutions that have long been regarded as wise and natural, let us not turn back.

continue to Chapter 1

Bob's abridgment was published in 2006.  Last fall, he completed another step in this project: he recorded an audio version of his book.  It is available online at http://www.hgchicago.org/audio.  Download it to your iPod or MP3 player, and listen while you commute or exercise.  (And in a Georgist world, realize that cities would be more walkable, and fewer of us would need to commute! We would be able to afford housing closer to our work or to the other amenities that great and small cities offer, if we wanted it.)

Hardcopy is available from Amazon, Schalkenbach (with a study guide and a complementary copy of "Henry George and the Reconstruction of Capitalism), and the Henry George Institute (with an online course).

Bob Drake died suddenly, much too young, and he will be missed.  My sympathy goes out to his wonderful wife, Spider Saloff, a talented jazz singer.  I'm grateful for his contribution to sharing Henry George's ideas with a 21st century audience, and will miss his sense of humor and his presence.  Carpe Diem!

An Hour with the BBC World Service

20 years ago, one of the (many) pleasures of a visit to Bermuda was the opportunity to listen on ordinary radios to the BBC World Service. 

Even in the New York metro area, the only way we could listen at home was via shortwave radio.  And that involved keeping track of what time it was according to Greenwich Mean Time, and consulting a chart to determine on which, if any, frequency the BBC could be heard locally at that time of day.  I imagined English-speaking people all over the world listening via similar radios.

Now my local NPR affiliate carries the BBC during the night. And by day, I can listen to it on XM satellite radio at my desk and in my car.  Most of my listening is during the night; when I can't sleep, I put on headphones and listen.

As I listened for an hour this morning, I was led to wonder how many -- if any -- BBC reporters stationed around the world have encountered the ideas of Henry George, and how the experience would alter their reporting of so many stories.

So many of the stories of poverty, of strife, of terrorism are ultimately, at bottom, about access to land, access to natural resources, and how a people treats the natural resource revenues, including the revenue from urban land value.

Where all have access to land on an equal basis, by paying rent to the community, there need be no poverty or unemployment.  Where some claim as their own privilege the right to collect that rent for their own portfolios, there is poverty, and there are people -- often the vast majority -- robbed of their birthright.  They may not know the exact nature of the problem, but they clearly know that they're being wronged, day in and day out.  Some cope.  Some become terrorists.  Some figure suicide can't be any worse than what they're dealing with.

When natural resources revenues are used to fund government spending, to provide the infrastructure which makes a city a better place to live, and the excess refunded to the community in the form of individual Citizens' Dividends, life tends to be pretty good for most people.  When natural resources accrue to royalty, or to a plutocracy, or to foreign corporations' shareholders and management, and are not reinvested in the community, not surprisingly, we get human misery and inferior infrastructure and schools.

And it would seem quite rational for people living in such situations, particularly young men, to rebel against such a thing.  Not knowing precisely what the problem is, they do not seek to solve it, only to avenge their loss.

The BBC's website says this:

There is a relatively small number of things which BBC must not do. For example, it must not carry advertising, neither can it express its own editorial opinion about current affairs or matters of public policy, other than broadcasting. That is not to say, of course, that controversial programmes are never broadcast, but great care is taken to ensure that arguments are well balanced.

Balance!  Ah!  Let's balance the privileges of those who claim the world's natural resources as their own entitlement, with the birthright of all the people of each country to those natural resources.  We all learned in elementary school what each country and region of the world produces and exports.  What we didn't talk about was who in each country (or beyond its borders) is considered to be entitled to the natural resources revenue, or how public spending there would be financed when the natural revenue source was diverted into private pockets, or what the privatization of these resources does to a country's economy and wealth distribution.  That is political economy.

Report the news.  Don't talk about what underlays it.  Wouldn't want to rock that boat, would we?

Where do they do this?  Try Alaska, for starters.  Just a starter, but no state in the US has less income inequality -- despite their high cost of living.  

For a look at what happens when this is ignored, look for the upcoming film The End of Poverty? from Cinema Libre Studio. (It premiered at Cannes last year, and will be in theaters this fall.)

And to explore the ideas of Henry George, start with some of his speeches, at wealthandwant.com followed by his landmark best-selling book, Progress & Poverty.

The UK Rich List -- some additional thoughts -- with reference to America, as well

I spent some more time going through the 2000 or so entries on the UK "Rich List," which starts at http://business.timesonline.co.uk/tol/business/specials/rich_list/rich_list_search/.  (See the blog entry below for further comments.)

The top 25 entries, whose 2009 holdings range from £10,800m down to £1,400m, include 16 which came from

• oil
• steel
• property
• mines
• metals
• water
• diamonds and
• mining.

The combined value of the top 25 fortunes is £73.88 billion.  At 5% per year, that produces £3.7 billion in income -- quite a sizable amount to be shared among 25 families!  (£1,400m is $2.1 billion US; £3,700m is $5.6 billion US.)

Notice that each of these fortunes is fundamentally from natural resources.  Yes, there is capital involved, and labor.  But under the laws of most countries, natural resource holdings and extractions are taxed lightly if at all, and labor is taxed heavily.

The 2007 Survey of Consumer Finances: Are we going to complain, or are we going to create the conditions which will improve things?

I'll be writing about the first published report from the 2007 Survey of Consumer Finances, which is online at http://www.federalreserve.gov/pubs/bulletin/2009/pdf/scf09.pdf but I thought I'd share something I posted in response to some comments on another blog about Paul Krugman's observation that "families are poorer now than they were in 2001.":

So are we going to complain about it, or are we going to correct it?

Yes, this can be corrected.  No, even most university-educated economics majors aren't familiar with how.  Their economics texts spend a few pages on it, but in the context of a 10-week trimester or a 15-week semester, most economics professors can't talk about everything in a 700-page text books, and naturally they'll skip what their own instructors skipped. 

That doesn't mean the answers don't exist.

The answers come from an earlier and better paradigm in economics.  What students learn today is neoclassical economics, which much better suits some of the special interest folks who have over the years given generously to our colleges and universities.  If you wanted tenure, what would you choose to teach?

What we need to know is from classical economics.  John Stuart Mill, David Ricardo, Henry George ... these are the authors you'll want to get to know.

For a bit on Mill, see http://www.wealthandwant.com/themes/Mill.html

For a bit on Ricardo, see http://www.wealthandwant.com/themes/Ricardo.html

To get to know Henry George, start with the four speeches of his linked on the front page at http://www.wealthandwant.com/ You might also read Weld Carter's Introduction to Henry George, at http://www.wealthandwant.com/docs/CarterW_intro.html  and your choice of essays from HG's excellent book Social Problems, linked from the same website.

These ideas provide a way to fix some of our most serious -- and otherwise intractable -- social, economic, environmental and justice problems.

Or we can keep doing the same thing and hoping for a different outcome.

A Price for Existence

This comes from The Public, October 13, 1906, and gives witness to, among other things, Leona Helmsley's much-quoted observation that "We don't pay taxes.  The little people pay taxes."

A Price for Existence.

"After the rent has been paid and food has been bought the very poor have but little left for anything else." This is the unpleasantly significant observation of S. E. Forman in his report in the Bulletin of Labor for last May on conditions of living among the poor. His report is based upon the household accounts of nineteen families of the District of Columbia. They were not pauper families. They were intelligent enough to keep household accounts correctly and honestly; and they were sober, industrious and moral people. Yet they were people to whom the loss of a day's wages would have caused embarrassment, and the loss of a week's a serious discomfort. That they were thrifty is evident from the figures, which cover a period of five weeks.

The item of food varied from $2.14 to $3.24 per week for the family of lowest expenditure, up to as much as $6.00 and even $8.60 for families of highest expenditure, the number of persons to a family varying from 4 to 10. For rent per month, the lowest for all the 19 families was $4.00 and the highest $14.00, the aggregate being more than $160.00 a month, or $1,920 a year. This annual payment is more than half the total assessed value of the houses in which those people live, and almost a third of the assessed value of the entire property, land and buildings both included. Of course assessed values are under-values. In these cases they are only about two-thirds of market value. But even on market values the rents were 20 per cent of the total value of the property — a pretty extortionate figure.

But that is not the worst. The actual market value of the houses is about $5,000. Now, an exceedingly liberal allowance for house taxes, repairs, etc., would be 15 per cent, or $750; and this would leave, out of the annual rentals of $1,920, the sum of $1,170 annually, merely for the occupancy of a little site upon the earth's surface, the value of which is annually maintained by annual taxation toward which these very people contribute a lion's share. And yet, when their meager food has been bought (a dollar a week or thereabouts for each person), and "after the rent is paid," they have little left. It takes all they earn to keep body and soul together. And the biggest item is the landlord's exaction; not for houses, but for the land on which the houses stand. Is the extortion only accidental, or is it an inevitable feature of our boasted civilization?

Time to simplify ... and then end ... the federal income tax

And I do not advocate replacing the federal income tax with a tax on sales, which is what most people who object to the income tax seem to see as our only (and therefore their best) option.  (They call it the "FairTax" but I can't figure out who it is fair to.  It is certainly favorable to our highest income people, but I don't think it is fair to anyone -- or good for our economy.)

Who among you fills out his or her own income tax forms with simply pencil and paper and calculator?  Who among you does a relative's tax filing that way?

When people who are completely able -- and very motivated! -- to hire the very best tax accountants cannot manage to file a complete and accurate tax return, it is clearly time to simplify our tax code.  That is the right first step, and ought to happen rather quickly, with the understanding that the replacement will be a temporary one.

There is a far better tax base available to us, and we ought to be moving rapidly to adopting it.  No, not the so-called FairTax -- that's the last thing the bottom 95% of us, or our economy, need.  

What ought we to tax?  Let's eliminate the things we ought not to tax.  When we tax something created by humans, we get less of it.  That's the law of supply and demand at work.

We shouldn't tax labor.  We shouldn't tax activities which create jobs.  We shouldn't tax buildings.  We shouldn't tax sales.  We shouldn't, for that matter, place the costs of healthcare on employers.  What's the line ... no good deed will go unpunished?

Adam Smith provided us wise guidelines in how to judge a tax.  How many of our legislators know them?  (How many legislators think that the more important guideline is what best suits their largest contributors?)  How many of our taxpayers, even those who were economics majors -- or government or political science members, for that matter -- know them?  His guidelines were known as the Canons of Taxation.  You can read about them at http://www.wealthandwant.com/themes/Canons.html

We ought not to be discussing tax policy without a full discussion of each option in light of this perspective.

.

Cashing in on urban land value ... who is entitled to it?

A couple of articles caught my eye today.  First, a university which owns choice land on the Upper West Side of Manhattan:

Fordham Seeks to Build on Manhattan Campus 
For more than a decade, Fordham University officials have been trying to figure out how to address overcrowding at their Manhattan campus and fill the coffers of their relatively small endowment. They thought the answers to both could be found in one of their most valuable assets: their Manhattan real estate.

So for four years, Fordham officials have been trying to win support from community groups and city officials for plans to turn their four-building site into a far denser 12-building campus in the same space between Amsterdam and Columbus Avenues and 60th and 62nd Streets. Fordham uses the site for various graduate programs and has a larger campus in the Bronx.

The completed campus next to Lincoln Center would have three million square feet of classrooms, libraries and dormitories. It would also include two lots that Fordham would sell to luxury apartment developers, using the profits to bolster the endowment.  ...

Neighbors, zoning experts and community board members who spoke at the hearing expressed concerns that the buildings would be too tall and dense for the neighborhood. Howard Goldman, a land-use lawyer representing a residents’ group, Fordham Neighbors United, said that at three million square feet, the campus would be larger than the Time Warner Center nearby (2.2 million square feet) or the Empire State Building (2.8 million square feet).

Deirdre A. Carson, a lawyer representing Fordham, said the towers would not be as overbearing as critics contend. Some of the towers would be would be 650 feet high, she acknowledged, but they would be spread out over a larger area. She added that the Time Warner site was half the size of the proposed Fordham campus and that the Empire State site was one-third as large. ...

Mr. Goldfischer said that more than 1,100 residents were removed from the neighborhood to build Fordham, which he said complemented Moses’ original plan, as did Lincoln Center, nearby. (Lincoln Center has not commented on the proposal.)

“That land was for public trust,” he said over applause from the crowd. “It’s immoral, illegal and unethical to do something like that.”

Ms. Carson acknowledged that terms of the 1958 purchase included a requirement that the property be used for educational purposes but said the obligation expired in 2006.

and a foreign airline which owns a VERY choice block in midtown Manhattan is realizing that they have a major cash cow which can bear them an awesome amount of milk, forever:

The President advised the government to also consider developing the Roosevelt hotel property in New York owned by the PIA as a source of permanent income without actually selling the property and retaining PIA’s ownership of it.

He said that the government may revisit the earlier decision to place the Roosevelt hotel under the Privatization Commission so as to examine the possibility of developing the property for regular income.

How choice?  The NY Post estimated the selling value of this one-acre whole-block property at $400 million to $1.2 billion as a teardown last summer.  That's $20 million to $60 million per year in land rent.  See these previous LVTfan entries to this blog.

• That block in Manhattan ...
• Hotel Roosevelt For Sale at $1 Billion

And then there was a 3rd article, whose mechanics I don't begin to understand, but which I suspect are similar ... and a bit hedge-fundish:  The New York Times, which in 2007 built a new building between 40th and 41st Street on the west side, is now negotiating a transaction which, by definition, must benefit both sides... I'm led to wonder how much it will cost taxpayers if both sides benefit:

Times Co. Is in Talks to Sell Part of Building
The New York Times Company is in advanced negotiations to sell a substantial portion of its 52-story headquarters building on Eighth Avenue in Midtown Manhattan to W. P. Carey & Company, an investment and management firm that specializes in so-called sale-leaseback transactions, the newspaper company confirmed on Thursday.

Under the deal, the Times Company would sell the 19 floors it currently uses in the building but not the 6 floors it leases to other tenants. The Times Company would continue to occupy and manage its floors and would have the right to buy back the space at a predetermined price when a 10-year lease expires. Designed by the architect Renzo Piano, the building stretches from 40th to 41st Street. It was completed in 2007.

A spokeswoman for the Times Company, Catherine J. Mathis, declined to say how much W. P. Carey would pay for the space, what it would cost to repurchase it or what the rent would be. The Times Company previously said that it was pursuing a sale-leaseback arrangement for up to $225 million and would use the proceeds to repay some of the company’s long-term debt.

“Because we are in continuing discussions, we cannot comment on the status of the sale-leaseback,” Ms. Mathis said Thursday. Guy B. Lawrence, a spokesman for W. P. Carey, declined comment on the discussions.

The Times Company owns 58 percent of the 1.5-million-square-foot tower. The developer Forest City Ratner owns the rest of the building. Forest City’s portion will not be included in the sale.

In a sale-leaseback transaction, the seller maintains control over its space and the responsibility for paying taxes, maintenance and utility costs. W. P. Carey’s investors would be guaranteed a specific return for the life of the lease.

Addendum .... see http://seekingalpha.com/article/115827-inside-the-new-york-times-billionaire-bailout

The question, of course, for all three stories, is WHO IS ENTITLED TO THE LAND RENT?  Land rent is the annual value of an undeveloped piece of land.  It is created by the community, by public spending, by our presence .... and we permit -- even honor* -- its privatization by whoever owns the land.  We take it for granted.  They take it for granted. 

* We call those who acquire choice land and collect land rent from us "self-made men."  We tax labor heavily, and sales, but we  tax landlords but lightly, through local taxes, through federal income taxes, or through estate taxes with loopholes.   We are so nice, so generous! ... and we wonder why things are SNAFUed.  (The good news, though, is that we aren't dealing with FUBAR.  This CAN be remedied simply, elegantly and justly.  LAND VALUE TAXATION)   Leona Helmsley described the situation this way: "We don't pay taxes, only the little people pay taxes."  And Fred Harrison lays it out on YouTube.

This is stupid on our part.   (How's that for understatement?)

Eisenhower's roads to prosperity

Eisenhower's roads to prosperity - Los Angeles Times.

Tom Lewis describes some of the history of Eisenhower's huge infrastructure initiative, the Interstate Highway system, in the context of Barack Obama's plans to use infrastructure as a job-creation tool.

What most people don't seem to realize is that investments in infrastructure do more than create jobs in the process of the development of the infrastructure and in its maintenance: they also create something else of much larger importance, which we as a society have chosen to pretend is of little or no significance, to our detriment.  (How's that for understatement?)

What is it?  Every worthwhile infrastructure project creates more land value than the project costs.

I'll repeat that.  Every worthwhile infrastructure project creates more land value than the project costs!    Therein lies one of the most important keys to solving many of our most serious problems.

The Foldvarium: How to Extirpate Poverty

The Foldvarium: How to Extirpate Poverty.

I'm going to take the liberty of posting Fred Foldvary's entire post.  It is relevant to a lot of things I've been thinking about a lot recently.  I've added links to some pages at wealthandwant.com which expand on some of Fred's concepts.   I'm intrigued with his definition of extirpate -- it is the one I associate with "eradicate" -- to remove by the root.  Google definitions suggests that extirpate has the sense of having been made locally extinct but still in existence elsewhere.  Here's the Latin root: [Latin exstirpare to root out] -- likely related to "stirpes" -- as in "per stirpes" -- [Latin, By roots or stocks; by representation.]

How to Extirpate Poverty

To “extirpate” means to complete eliminate, from the Latin word meaning to pull out by stem and root. To extirpate poverty means to eliminate its cause, so that it does not come back. Fundamentally, poverty comes from a low wage level, so we need to examine what makes a wage level low.

The wage level of an economy can be thought of as the wages paid to unskilled people. Those with greater skill and talent get higher wages, so some think that the solution to poverty is better education. But a stagnant economy also depresses the return to human capital, the extra wage for those who are more productive. In a thriving productive economy, even those with few skills are better off than skilled labor in a depressed economy. Indeed, in an unproductive economy, those with skills often find little market for their human capital.

The wage level of an economy is set by marginal labor, those who work at the least productive land in use. The classical “law of wages” says that when workers are mobile, the wage at the margin of production will set the wage level for the rest of the economy.

Change.gov

The new administration is seeking comments.   I'd like to believe they'll be read.  Here's what I posted at http://change.gov/ under "economy":

We need to shift taxes OFF productive effort and ONTO land value and natural resources.    Doing so will have a wide range of benefits.

Time to Tackle US Poverty?

I'm going to take the liberty of sharing a blog post I came across at a blog called "View From Outside."  It is written in fine English, and from the structural blog stuff and the title, I suspect the author lives overseas.  Here's what he has to say:

It is being suggested that President-Elect Obama should appoint a "Poverty Czar". But the root cause of poverty is lack of access to land. Those who do not have it are forced to pay rent and work for wages. Rents rise to the maximum that people can afford and it is only the exceptional individuals who can get out of that trap. If everyone is educated or works harder, the effect is merely to raise the levels of rent. It is as simple as that. The Law of Rent is an iron law of economics. It was described by, amongst others, David Ricardo, whose name it bears. Unfortunately, modern economic theory ignores the role of land and rent, with the result that the cause of poverty is nearly always thought to be something else, and the problem is never solved.

Where land has been freely available, there is no poverty, since people have the option of working their own land. This was the situation on the western side of the USA in the mid nineteenth century. This was noted by a San Francisco man, Henry George, who developed a new theory of economics to account for it. But when he had finished his work he found that he had only re-stated the ideas formulated a century before by the French Physiocrats, though in an updated form. George also gave the most convincing explanation to date of the land-based cyclic boombusts such as the one we are currently experiencing. You can read his book online here.

Although a poverty czar (or perhaps czarina!) in itself will achieve nothing, the situation is not hopeless. The solution is to read George's book and apply the proposed remedy. But since it will take political courage to face-down vested interests, the czar(ina) will need to be strong.

I have nothing to add, except perhaps some links to some additional pages which expand on a few of the ideas it contains.

• poverty's cause
• rents
• Ricardo
• law of rent
• free land
• Henry George
• Physiocrats
• boom-bust cycles
• Progress and Poverty
• the remedy
• special interests
• privilege
• wealth from land appreciation
• wealth concentration
• land concentration
• land includes
• natural resources
• poverty
• abolishing poverty

And  two other posts from the same blogger also intrigue me ...