LVTFan's Blog

George Bernard Shaw: 1885 speech on private property and privilege

Interesting comments on a number of things, including doctors, slaves, soldiers, income inequality, sobriety, thrift, poverty,  

Some excerpts:

Bad as we are, I believe that if we all understood how we are living, and what we are doing daily, we should make a revolution before the end of the week. But as we do not know; and as many of us, forseeing unpleasant revelations, do not want to know; I can only assure you that I am in perfect concord with standard economists when I state that competition is the force that makes our industrial system self-acting. It produces the effects which I have described without the conscious contrivance or interference of either master on the one hand, or slave on the other. It may be described as a seesaw, or lever of the first order, having the fulcrum between the power and the weight.

and

The so-called right of private property is a convention that every man should enjoy the product of his own labour, either to consume it or exchange it for the equivalent product of his fellow labourer. But the landlord and capitalist enjoy the product of the labour of others, which they consume to the value of many millions sterling every year without even a pretence of producing an equivalent. They daily violate the right to which they appeal when the socialist attacks them. Nor is their inconsistency so obvious as might be expected. If you violate a workman's right daily for centuries, and daily respect the landlord's right, the workman's right will at last be forgotten, whilst the landlord's right will appear more sacred as successive years add to its antiquity. In this way the most illogical distinctions come to be accepted as natural and inevitable. One man enters a farmhouse secretly, helps himself to a share of the farm produce, and leaves without giving the farmer an equivalent. We call him a burglar, and send him to penal servitude. Another man does precisely the same thing openly, has the impudence even to send a note to say when he is coming, and repeats his foray twice a year, breaking forcibly into the premises if his demand is not complied with. We call him a landlord, respect him, and, if his freebooting extends over a large district, make him deputy-lieutenant of the country or send him to Parliament, to make laws to license his predatory habits.

 

MR. G. BERNARD SHAW ON SOCIALISM.

The Earth-for-All Calendar: October 2 -- Jefferies

That any human being should dare to apply to another the epithet "pauper" is, to me, the greatest, the vilest, the most unpardonable crime that could be committed.  Each human being by mere birth has a birthright in this earth and all its productions; and if they do not receive it, then it is they who are injured, and it is not the "pauper," oh, inexpressibly wicked word! — it is the well-to-do who are the criminal classes.

— RICHARD JEFFERIES, The Story of My Heart, Chap. X., p. 122.

The Earth-for-All Calendar: March 30 -- Emperor Joseph II

Land, which nature has destined to man's sustenance, is the only source from which everything comes, and to which everything flows back, and the existence of which constantly remains in spite of all changes. From this unmistakable truth it results that land alone can furnish the wants of the state, and that in natural fairness no distinctions can be made in this.

— EMPEROR JOSEPH II., in Oestreichische Geschichte fur das Volk, Vol. XIV. (Vienna, 1867).

The Earth-for-All Calendar: March 27 -- Paine and Penn

Every proprietor, therefore, of cultivated land owes to the community a ground rent (for I know of no better term to express the idea) for the land which he holds.

— THOMAS PAINE, Agrarian Justice, Paine's Writings, Vol. III., p. 329 (1795-6).

If all men were so far tenants to the public that the superfluities of gain and expense were applied to the exigencies thereof, it would put an end to taxes, leave never a beggar and make the greatest bank for national trade in Europe.

— WILLIAM PENN, Reflections and Maxims, Sec. 222, Works V., pp. 190-1.

The Earth-for-All Calendar: March 26 - Spinoza

Let the fields and all the soil, and, if possible, even the houses, belong to the state, that is, to him which is the depositary of the right of the state, so that he may let them out for an annual rent to the inhabitants of the cities and the cultivators. This will exempt all citizens from extraordinary taxes in time of peace.

— SPINOZA, Tractatus Politicus, Chap. VI., On Monarchy, Sec. 12.

Another motto: Save the Rent for Society

Save the rent for Society.

That's short and sweet.  I came across it in The Single Tax Year Book for 1917, in a chapter about the Single Tax in Germany.

Are We Socialists?

"ARE WE SOCIALISTS?"
Thomas B. Preston, in the Arena, December, 1899

It is socialistic to make the revenues of the government a burden on industry. Revenues there must be, but they should not bear upon industry. In fact, the taxation of any product of labor is simply taking from the laborer part of his earnings. To such an extent we are socialists. Any other form of taxation than that on the value of land is essentially socialistic because any other tax is passed on from the seller to the consumer, and takes part of the latter's earnings without compensation, for use by the community. Any tax on earnings is socialistic, although it may not go so far as to take all a man earns. The substitution for our present system of a single tax amounting to the full rental value of land would sound the death-knell of socialism.

While we sin so deeply in our present bungling, socialistic way by forcing individuals to give up part of the proceeds of their labor, by fining a man who builds a house more than if he were maintaining a public nuisance, by tariffs which hinder trade with foreign countries, and add millions to private fortunes at the expense of the people, and by a thousand indirect taxes which make life harder for men without their being able easily to see the reason, on the other hand we foolishly leave to individuals those great agencies which are the outcome of social growth — the product of the inventive genius of a few men, if you like, but which after a time grow so powerful as to become the very arbiters of life and death. Prominent among such agencies are the railroad and the telegraph. They can crush communities out of existence and enrich the owners at the expense of their fellow men. They have already become the chief source of corruption in government. The ownership of these agencies by the community becomes a necessity for the continuance of social progress. Otherwise these monopolies can go on increasing and concentrating until a few persons are enabled, through them, to appropriate the wealth of a community. In so far as socialism demands the state ownership of agencies of this nature, it is proceeding in the right direction. There are many other agencies besides the railroad and the telegraph, such as the supply of water, gas, light, heat, telephones and means of transit and communication, in which the American idea of free competition is a fallacy. Here we are too individualistic. The right to make war and peace was long ago taken from individuals and vested in the community. So at a later stage was the carriage of letters. National quarantines, boards of health, public schools, are all examples of applied socialism in its legitimate sense. But why should we stop here? The existence of such great monopolies as the railroad and the telegraph is a standing menace to the life of the Republic. Let us munificently reward the inventors or appliances which shall add to the comfort and convenience of the community, but allow these agencies to be owned perpetually by individuals never!

We are socialistic where we should respect the rights of the individual, and we are individualistic when individualism is a crime against the Commonwealth. And so we go blundering on. When our stupid and oppressive system leads men to cry out against it, and riot and murder follow, we hang a few anarchists. When monopolists, grown bold through long years of immunity, attempt to rob a little more openly, by pools and combinations or by direct bribery, we create interstate commissions to watch them, or we send a few to prison, allowing others to escape to Canada; repressing a little here those who complain too loudly, where we should rather rectify their grievances, and lopping off a little there the enormous unearned profits, which we should abolish altogether. Meanwhile our two classes of tramps are increasing — those who travel around the world in flowing palaces, living upon the toil of others, without using their capital in any legitimate enterprise and those who go afoot, pilfering from cornfields and hen roosts — both classes an unjust burden on a hard working, long suffering community. We have arrived at a critical period of our history, where we must meet the demands of social progress, or our civilization will perish as surely as did the fallen empires of former ages. Already the mutterings of revolt are growing louder and louder, while upstart monopoly was never so insolent and imperious as it is today. Let us be warned in time, and, discarding all half measures, face the issue like men, and not go on trusting to luck, foolishly dreaming that somehow, at some time, existing wrongs will right themselves.

What Tolstoy Taught: Human Rights

In a recent column in the NYT entitled "Description is Prescription", David Brooks made references to Tolstoy, and it sent me looking to see whether a book I remembered was available via Google Books.  The book was written in 1905 by Bolton Hall, and it is entitled "What Tolstoy Taught."  Its final chapter, "Human Rights," follows:

(Tolstoy proclaimed the law of love as enunciated by Christ; the political rights as enunciated by Thomas Jefferson; the economic rights as announced by Henry George: the two latter as amplifications of the first; all being essential to man's earthly welfare. Tolstoy's philosophy was progressive. At first he saw that the law of love was necessary; then he recognized the necessity of equal political rights; next he recognized that without economic justice these remedies were futile, and he accordingly embraced the philosophy of Henry George, as evidenced by the following article addressed to the Russian people.— Ed.)

A number of suggestions have been made as to how to divide, in the most just manner, all land among the workers, but of all these only the one made by the late Henry George appears to me to be practicable.

The property right, Henry George wrote in his book about the single tax, is founded not on human laws, but on the laws of God. It is undeniable and absolute, and everyone who violates It, be it an individual or a nation, commits a theft.

A man who catches a fish, who plants a tree, builds a house, constructs a machine, sews a dress or paints a picture, thereby becomes the owner of the results of his own efforts — he has the right to give them away, to sell them or to leave them to his heirs. As the land has not been created by us, and only serves as the temporary residence of changing generations of human beings, it is clear that nobody can own the exclusive right to possess land, and that the rights of all men to it are equal and inalienable.

The right to own land is limited by the equal rights of all others, and this imposes upon the temporary possessor of land the duty to remunerate society for the valuable privilege given him to use the land in his possession.

When we impose a tax upon houses, crops, or money in any form, we take from members of society something which by right belongs to them, we violate the property right and commit a theft in the name of the law; while when we impose a tax upon land we take from members of society something which does not belong to them, but to society, and which cannot be given to them except at a detriment to others. We thus violate the laws of justice when we place a tax on labor or the results of labor, and we also violate them if we do not levy a tax on land.

Let us, therefore, decide to stop levying all taxes except the tax on the value of land, regardless of the buildings erected or the improvements made on it, but only on the value which natural or social conditions give to it.

If we place this single tax on land the results will be these:

1. The tax will relieve us of the whole army of officials necessary to collect the present taxes, which will diminish the cost of government, at the same time making it more honest. It will rid us of all the taxes which lead to lying, to perjury, to frauds of all kinds. All land is visible, and cannot be hidden, and its value is fixed easier than that of any other property, and the single tax can be determined at less expense and less danger to public morals.

2. It will to a great extent increase the production of wealth, doing away with the discouraging tax upon labor and thrift, and it will make the land more accessible to those who want to work or improve, as the proprietors, who do not work themselves, but speculate in its increasing value, will find it difficult to keep up such expensive property. The tax on labor, on the other hand, leads to the accumulation of immense fortunes in a few hands, and the increasing poverty of the masses. This unjust division of wealth on one side leads to the creation of one class of people who are idle and corrupt, because they are too rich, and the creation of another class of people who are too poor, and thus doubly delays the production of wealth. This unjust division of wealth creates on one side terrible millionaires, and on the other side vagrants, beggars, thieves, gamblers and social parasites of various kinds, and necessitates an enormous expense for officials to watch these — policemen, judges, prisons and other means which society uses in self-defense.

The single tax is a remedy for all these evils.

I do not mean to say that this tax will transform human nature, for that is not within the power of man, but it will create conditions under which human nature will grow better instead of worse, as under the present conditions. It will make possible an increase of wealth, of which it is hardly possible to form an idea. It will make undeserved poverty impossible. It will do away with the demoralizing struggle for a living. It will make it possible for men to be honest, just, reasonable and noble, if they desire to be so. It will prepare the soil for the coming of the epoch of justice, abundance, peace and happiness, which Christ told His disciples of.

Let us suppose that in a certain place all land belongs to two owners — one very rich, who lives far away, and another, not rich, living and working at home — and to a hundred of small peasants owning a few acres each. Besides these, there live on that place some scores of people who own no land — mechanics, merchants, and officials.

Now let us suppose that the people of that community, having arrived at the conclusion that the land is common property, decide to dispose of the land according to their new conviction.

What would they do? Take all the land away from those who own it, and give everybody the right to take the land he desires? That could not be done, because there would be several people who would want the same ground, and this would lead to endless quarrels. To form one society and work all things in common would be difficult, because some have carts, wagons, horses and cattle, while others have none, and, besides, some people do not know how to till the soil, or are not strong enough.

To divide all the land in equal parts, according to its value, and allow one part to each is very difficult, and this would, besides, be impracticable, because the lazy and poor would lease their property to the rich for money, and these would soon again be in possession of it all.

The inhabitants of the community, therefore, decide to leave the land in the possession of those who own it, and to order each owner to pay into the common treasury money representing the revenue which had been decided on after appraising the value of the land, not according to the work or the improvements made on it, but to its quality and situation, and this money was to be divided equally among all.

But as it was difficult first to take this money from all those who held the land, and then divide it equally among all the members of the community, and as these members, besides, paid money toward the public needs — schools, fire departments, roads, etc.— and as this money was always needed, they decided to use all the money derived from those who had the use of the land, for public needs.

Having made this arrangement, the members of the community levied the tax for the use of land on the two large owners, and also on the small peasants, but no tax at all was imposed on those who held no land.

This caused the one landowner who lived far away, and who derived little income from his property, to realize that it did not pay to hold on to land thus taxed, and he gave it up. The other large owner gave up part of his land, and kept only that part which produced more than the amount of his tax. Those of the peasants who held small properties, and who had plenty of men, and not enough land, as well as some of those who held no land at all, but who desired to make a living by working the land, took up the land surrendered by its former owners.

After that all the members of the community could live on the land and make a living from it, and all land passed into the hands of or remained with those who loved to work it, and who made it produce the most. The public institutions flourished and the wealth of the community increased, for there was more money than before for public needs; and the most important fact was that this change in the ownership of land took place without any discussions, quarrels, or discord, by the voluntary surrender of the land by those who did not derive any profit from it.

This is the project of Henry George, which, if tried here, would make Russia wealthy and happy, and which is practicable all over the world.

 

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.

How to End the Great Recession

Where have all the economic gains gone? Mostly to the top. The economists Emmanuel Saez and Thomas Piketty examined tax returns from 1913 to 2008. They discovered an interesting pattern. In the late 1970s, the richest 1 percent of American families took in about 9 percent of the nation’s total income; by 2007, the top 1 percent took in 23.5 percent of total income.

It’s no coincidence that the last time income was this concentrated was in 1928. I do not mean to suggest that such astonishing consolidations of income at the top directly cause sharp economic declines. The connection is more subtle.

The rich spend a much smaller proportion of their incomes than the rest of us. So when they get a disproportionate share of total income, the economy is robbed of the demand it needs to keep growing and creating jobs.

What’s more, the rich don’t necessarily invest their earnings and savings in the American economy; they send them anywhere around the globe where they’ll summon the highest returns — sometimes that’s here, but often it’s the Cayman Islands, China or elsewhere. The rich also put their money into assets most likely to attract other big investors (commodities, stocks, dot-coms or real estate), which can become wildly inflated as a result.

Meanwhile, as the economy grows, the vast majority in the middle naturally want to live better. Their consequent spending fuels continued growth and creates enough jobs for almost everyone, at least for a time. But because this situation can’t be sustained, at some point — 1929 and 2008 offer ready examples — the bill comes due.

This time around, policymakers had knowledge their counterparts didn’t have in 1929; they knew they could avoid immediate financial calamity by flooding the economy with money. But, paradoxically, averting another Great Depression-like calamity removed political pressure for more fundamental reform. We’re left instead with a long and seemingly endless Great Jobs Recession.

THE Great Depression and its aftermath demonstrate that there is only one way back to full recovery: through more widely shared prosperity.

via www.nytimes.com

I think Robert Reich sees part of the problem, but he doesn't see the solution.   How do we achieve more widely shared prosperity?  By a variation on Alaska's theme.  In Alaska, a significant share of the value of the state's natural resources is used to fund state government, and another significant share is placed each year into the Alaska Permanent Fund, which is invested in a broadly diversified portfolio and pays an annual dividend of $1000 to $2000 to every permanent resident of Alaska, of all ages.  [See http://www.nytimes.com/2010/09/04/us/politics/04alaska.html for an article mentioning this, and the Alaska Permanent Fund link, at the left of this page.]   Alaska has it half right: they collect a decent share of the value of the natural resources, but they don't tax their land value much.

How do we share the prosperity beyond the top 10%?  By shifting our incentives so that those who currently grow wealthy in their sleep by collecting economic rent find themselves sharing that rent with the rest of us.  Untax wages, starting with incomes under the median.  Untax sales.  Untax buildings.  Tax land value.  Tax the value of those things which the classical economists would have recognized as land -- water rights, "rights" to pollute, airport landing rights at congested airports, geosynchronous orbits (which prevent satellites from bumping into each other), electromagnetic spectrum (those airwaves which most people would say "belong to the American people" but which we have permitted corporations -- public and private -- to privatize), natural resources such as oil, natural gas, copper, coal, lithium, etc..   All these things are going into corporate portfolios (here and abroad -- and some of those corporations are families in power, despite attempts at nation-building), week in and week out, and their value accrues to the shareholders of the corporations.  Stock ownership is quite concentrated, and these benefits flow into the pockets of a relative few, who, as Reich rightly points out, may or may not spend or invest in America's products.  When they do invest, they often acquire our best land and resources, buying thereby the labor of thousands of Americans.  When an acre in Manhattan can be worth $400 million, the seller of that land didn't make it valuable.  WE did!  So why should an individual, or a corporation, or a trust, or a university, or a pension fund -- or any private entity -- get to pocket that value as if they did?   (The kindest thing I can say is that we have a bad habit!  Something like chattel slavery -- and look at how long it took us to end that.)

Pocketing that value has two sorts of effects: when they sell, they pocket that so-called "capital" gain.  It isn't capital!  It is land value!  Capital depreciates; what rises in value is land, and it rises for reasons which have nothing at all to do with the "fellow" who owns it.  

But even when they buy and hold, there are important effects of permitting that privatization.  The rich don't need to put the land to its highest and best use, because they can get by with something less while they wait for the community to cause it to grow.  (See The Taxpayer at 72nd and Madison.  Notice all the surface parking lots in Manhattan, Philadelphia, Hartford and many other cities.  See the 4.3 acre "hole in the ground" in Stamford, CT, right near the city's 100% location, vacant since the early 1980s.) They're patient!  They can afford to be.  The top 10% of us hold 71.5% of the chips, according to the 2007 Survey of Consumer Finances.)   Not using the land well reduces the supply of housing close to the center of things (adding to sprawl) and/or of jobs (which we say we want) and contributes to a wide range of our most serious social, economic, environmental and justice problems.

If we collected more of the annual rental value of our urban land, the holders of that land would turn into active users or sell it to someone who would put it to good use.  Good use creates jobs, and homes and other things that the market wants.  But when the market can't afford them, it does without.  People are priced out of housing in the places they'd prefer to live.  They lack jobs or are underemployed, and the rich keep getting richer.

Reich advocates extending the EITC, exempting the first $20,000 of wages from payroll taxes, improving and extending early childhood education, making public universities free in return for 10% of the first 10 years of full-time earnings, creating "earnings insurance."  He concludes,

Policies that generate more widely shared prosperity lead to stronger and more sustainable economic growth — and that’s good for everyone. The rich are better off with a smaller percentage of a fast-growing economy than a larger share of an economy that’s barely moving. That’s the Labor Day lesson we learned decades ago; until we remember it again, we’ll be stuck in the Great Recession.

Well, 130 years ago, Henry George spoke to some of the kinds of measures that have been proposed over the years for reducing poverty and promoting widely shared prosperity.  See "Part VI -- The Remedy" and particularly "Ineffective Remedies" and "The True Remedy"

"Ineffective Remedies" begins,

OUR CONCLUSIONS point to a solution. It is so radical that it will not be considered if we believe less drastic measures might work. Yet it is so simple that its effectiveness will be discounted until more elaborate measures are evaluated. Let us review current proposals to relieve social distress. For convenience, we may group them into six categories:

1. More efficient government
2. Better education and work habits
3. Unions or associations
4. Cooperation
5. Government regulation
6. Redistribution of land

That 10% of us who hold 71.5% of the net worth also received 41.3% of the current income. [Note that these percentages are understated, since the SCF purposely omits the Fortune 400 families.  They hold about 1% of the nation's net worth.] 

Picketty & Saez provide annual updates on income concentration.  For 2008, they report that the top 10% of us (sorted by income, not net worth) received 45.60% of the income when capital gains are excluded and 48.23% of income including capital gains.   (For 1988, the corresponding figures are 38.63% and 40.63%; in 1958, 32.11% and 33.56%.   Do we notice a trend here?  Do we like it or think it a healthy trend?)

We have permitted and supported a structure which funnels wealth and income into relatively few pockets.   We have to reform this structure, and we have to recognize that the current beneficiaries are not likely to be keen on reform -- conservatives have a lot to conserve for themselves -- and those who are dependent for their salaries on being popular with those beneficiaries are not likely to be particularly interested in looking at the underpinnings of the structure with an eye to removing some of the ladders (escalators!!) or  gentling the chutes.

Those who get to privatize the value of what ought to be common assets grow wealthy in their sleep.  Until enough of us understand the mechanism to constitute a majority, we aren't likely to correct it.

 

It is a bit disheartening to think how many well-regarded economists live in California, the land of Proposition 13, and haven't lifted a finger or opened their mouths to suggest that it is not in the best interests of California's people.   Milton Friedman acknowledged many times that the tax on land values was the "least bad" tax -- and didn't have anything to say about Proposition 13, which was the antithesis of what a wise person or society would do with that information.    So I guess I shouldn't be surprised that today's California economists, with very few exceptions, aren't all that concerned with the economic wellbeing of ordinary people any more than economists elsewhere are.  Or maybe, as my late mother would have expressed it, their educations have simply been neglected.  (At which point she would proceed to fill in my newly-identified knowledge gap.)    Economists can start with the links in this post, and then explore from there.

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.

America's Biggest Jobs Program -- The U.S. Military | TPMCafe

America's Biggest Jobs Program -- The U.S. Military | TPMCafe.

America's biggest -- and only major -- jobs program is the U.S. military.

Over 1,400,000 Americans are now on active duty; another 833,000 are in the reserves, many full time. Another 1,600,000 Americans work in companies that supply the military with everything from weapons to utensils. (I'm not even including all the foreign contractors employing non-US citizens.)

If we didn't have this giant military jobs program, the U.S. unemployment rate would be over 11.5 percent today instead of 9.5 percent.

And without our military jobs program personal incomes would be dropping faster. The Commerce Department reported Monday the only major metro areas where both net earnings and personal incomes rose last year were San Antonio, Texas, Virginia Beach, Virginia, and Washington, D.C. -- because all three have high concentrations of military and federal jobs.

This isn't an argument for more military spending. Just the opposite. Having a giant undercover military jobs program is an insane way to keep Americans employed. It creates jobs we don't need but we keep anyway because there's no honest alternative. We don't have an overt jobs program based on what's really needed.  . . .

The Pentagon's budget -- and its giant undercover jobs program -- keeps expanding. The President has asked Congress to hike total defense spending next year 2.2 percent, to $708 billion. That's 6.1 percent higher than peak defense spending during the Bush administration.

This sum doesn't even include Homeland Security, Veterans Affairs, nuclear weapons management, and intelligence. Add these, and next year's national security budget totals about $950 billion.

That's a major chunk of the entire federal budget. But most deficit hawks don't dare cut it. National security is sacrosanct.

Yet what's really sacrosanct is the giant jobs program that's justified by national security. National security is a cover for job security.

This is nuts.

Wouldn't it be better to have a jobs program that created things we really need -- like light-rail trains, better school facilities, public parks, water and sewer systems, and non-carbon energy sources -- than things we don't, like obsolete weapons systems?

Historically some of America's biggest jobs programs that were critical to the nation's future have been justified by national defense, although they've borne almost no relation to it. The National Defense Education Act of the late 1950s trained a generation of math and science teachers. The National Defense Highway Act created millions of construction jobs turning the nation's two-lane highways into four- and six-lane Interstates.

Maybe this is the way to convince Republicans and blue-dog Democrats to spend more federal dollars putting Americans back, and working on things we genuinely need: Call it the National Defense Full Employment Act.

Suppose, just suppose, that we shifted our federal spending to create those things we really need -- nation building, if you will --  like light-rail trains, better school facilities, public parks, water and sewer systems, and non-carbon energy sources  -- but instead of letting the land value that such investment creates be privatized by whoever owns the land they serve, we collected the value WE created, and used it to fund next year's investment in public goods and services?

Sounds like a virtuous circle to me.

And one which we could recommend to the voters in resource-rich countries.

And collecting that value would have a lot of other highly desirable effects, including reversing urban and suburban sprawl, reducing the price of housing, increasing wages, reducing the concentrations of wealth and income, stabilizing our economy.   Pick one of those that you don't think would be good for America.

And it isn't pork if it creates value which is then recycled for public purposes.  It is pork when we permit it to be privatized

Public Wealth and Private Wealth

I'm taking the liberty of posting a few paragraphs from Keith Gardner's blog post, which popped up on a Google alert today.  He titles the post, Answering Criticism from Anarcho-Socialists « Liberty Revival.

Public wealth is unearned wealth, found wealth, wealth earned by the public rather than by an individual, or wealth held in common or shared by the public. Public wealth includes rent, monetary expansion, often necessary to prevent deflation caused by population growth or economic growth, and interest charged on rent or monetary expansion. Rent includes wealth found through land value and through the extraction and sale of natural resources. Land value destroyed through the extraction and consumption of non-renewable natural resources or waste disposal can also be considered negative rent.

Private wealth is wealth earned by an individual, either through labor, through the production and use of capital, such as tools, organization, technology, or education, or through interest charged through risking and loaning private wealth to another individual.

This struck me as a short and clear delineation between what is rightly our common treasure and what is rightly the private property of individuals and corporations.

It seems clear what we ought to be taxing -- collecting -- to fund education, to fund infrastructure, to fund all the services which are best funded by all of us.  Tax public wealth to the extent that policies give individuals and corporations title to it.  Stop taxing private wealth, until we have collected all the public wealth sitting in private pockets.  End that free lunch, that windfall.

Which Georgist first called LVT the "least bad" tax?

Most Georgists reading this will respond that it was Milton Friedman who called LVT the "least bad" tax -- at least twice, first in 1978 and then again in a newspaper interview in 2006, a few weeks before he died.  And they'll add, "but he wasn't a Georgist" -- he never pursued the importance or implications of that observation.

But the answer to the question, I submit, is Lowell Harriss!  I had occasion to read a report dated November 9, 1966 by Weld Carter (my grandfather) reporting to a foundation he worked for [the Robert Schalkenbach Foundation] about a symposium of the Tax Institute of America which had occurred the previous week.   He does not report where it took place, but mentions that the program chairman was Dr. Alfred Buehler, who pointed out that (the quotes here refer to Carter's report):  "this was the first time since 1939 that the Tax Institute had selected the property tax for its annual symposium.  Of the present panelists, he, [Lowell] Harriss and [Harold] Groves had all been on the 1939 program.  He praised Dick Netzer's book as being the most important since the work of Jensen in the early '30's, calling attention to Netzer's suggested alternatives to the general property tax."

"Ken Back presided over the opening session.  He cited the way in which scholars had sought in the past to bury the property tax.  For his part, he showed its present importance and vitality, pleading that it should be brought up to date.  He called attention to three 'myths':  (1) that the property tax has limits; (2) that its administration is so poor as to condemn it; and (3) that it is unsound in principle.

The report goes on to say,

"Harold Groves could not appear, but he sent his paper on "Property Tax -- Effects and Limitations."  This was read by a former student, Leonard Kust, vice president and tax counsel for Westinghouse Electric.  The paper wound up with a plea for better administration and the prevention of the continuing erosion of the property tax base, followed by an endorsement of the taxation of economic rent, with the recommendation that it be collected at the state level and returned to the local communities.  He appended the observation that this tax conserves the base.

"Lowell Harriss, had problems, which Miss [Dr. Mabel Walker]Walker explained later.  When Dr. Groves had his heart attack, he (Groves) had already been scheduled to do a paper on "Growing Property Tax Burden: Effects and Upper Limits."  After the attack, Lowell Harriss had kindly consented to substitute for Groves.  But at the last minute, Groves sent in a paper, so Miss Walker had to change the title of Groves' paper and, I gues, get Harriss to modify his presentation somewhat accordingly.  The Harriss paper was good.  He spoke of the expanding potential of the property tax, saying that generally it should be able to meet advancing needs without increasing rates.  He objected to the notion of "limits," point out that as services were expanded, land values would grow continuously higher.  He called attention to the fixed quantity of land.  He called attention to the effects of differential rates on land: higher rates forcing more intensive rates and lower rates tending to take the pressure off owners.  He then spoke of some of the unfavorable effects of taxation on improvements, with their tendency to increase slums.  He pointed out that there was no hitherto undiscovered alternative to the property tax, saying that the question is the comparison of more intensive use of other tax modes.  Speaking negatively, he said, "The least bad tax I can imagine is a tax on land values.  It will score better than any other tax."  On the favorable side, he spoke of land value taxation as enhancing local autonomy, as providing equity, as aiding optimum resource allocation, as providing good competition between communities.  At one point he also alluded to the fact that a lowering of the tax rate on land value would be of no benefit to prospective newcomers because any remission of such tax would only be capitalized into higher prices for land."

Congressman Curtis opened his luncheon address on "The Property Tax in the Perspective of our National Tax System" with the statement that the property tax is the cinderella of taxes, who, in shabby clothes, must  stay home while her far less attractive sisters go to the ball.  ..."

A Google search on "least bad tax" and "Lowell Harriss" yielded a newspaper article, appearing originally in the Adrian Daily Telegraph, and picked up by the Nevada Daily Mail of April 5, 1976 -- two years before Milton Friedman's statement:

Looking Forward to Paying Taxes

Most college students will pay taxes equal to more than 40 per cent of what they earn throughout their lives.

Those who are especially successful or live in localities with above average government spending may pay more than half of their lifetime incomes in direct and indirect taxes.

"All of us have a vital interest in making the tax system as 'least bad' as possible."  This food for thought was served by Prof. C. Lowell Harriss at Hillsdale College, to students in the Constructive Alternatives Program.

"And taxes affect our lives in many kinds of ways other than extracting dollars," he added.

Prof. Harriss pointed out that government spending per capita in 1975 was $9,409 for a family of four, up, in today's dollars, from $1,130 just over 20 years ago.  That's an increase during the lifetime of today's college student averaging $244 a year.  Students should ask whether they are getting their money's worth, he suggested.

People create their own conditions and the framework within which they are free to use their capacities.  If this freedom is "collectivised" by big governemnt to get all the "services" people want, do they really get them?

Certainly there has been some improvement accompanying the growth of big government, in some cases a lot of it.  But would private deployment of, say, half of the increased tax burden have produced more of what the people want?  "This question," said Prof. Harriss, "I leave with you as a challenge."

Lowell Harriss is a professor of economics, Columbia University.

This talk was given at Hillsdale College, which is libertarian in orientation.  In July, 2006, in Hillsdale's publication Imprimis, Friedman had this to say.  (The interview took place in May, 2006, at an event honoring the 25th anniversary of "Free to Choose: A Personal Statement.")   He failed to see that there can be a difference between common property and government property.  (Too few pixels in the picture, one might say.)  But despite his language -- praising as "privatization" that which Georgists would consider the socialization -- he recognizes

LA: Let me ask you about demographic trends. Columnist Mark Steyn writes that in ten years, 40 percent of young men in the world are going to be living in oppressed Muslim countries. What do you think the effect of that is going to be?

MF: What happens will depend on whether we succeed in bringing some element of greater economic freedom to those Muslim countries. Just as India in 1955 had great but unrealized potential, I think the Middle East is in a similar situation today. In part this is because of the curse of oil. Oil has been a blessing from one point of view, but a curse from another. Almost every country in the Middle East that is rich in oil is a despotism.

LA: Why do you think that is so?

MF: One reason, and one reason only — the oil is owned by the governments in question. If that oil were privately owned and thus someone's private property, the political outcome would be freedom rather than tyranny. This is why I believe the first step following the 2003 invasion of Iraq should have been the privatization of the oil fields. If the government had given every individual over 21 years of age equal shares in a corporation that had the right and responsibility to make appropriate arrangements with foreign oil companies for the purpose of discovering and developing Iraq's oil reserves, the oil income would have flowed in the form of dividends to the people — the shareholders — rather than into government coffers. This would have provided an income to the whole people of Iraq and thereby prevented the current disputes over oil between the Sunnis, Shiites and Kurds, because oil income would have been distributed on an individual rather than a group basis.

LA: Many Middle Eastern societies have a kind of tribal or theocratic basis and long-held habits of despotic rule that make it difficult to establish a system of contract between strangers. Is it your view that the introduction of free markets in such places could overcome those obstacles?

MF: Eventually, yes. I think that nothing is so important for freedom as recognizing in the law each individual's natural right to property, and giving individuals a sense that they own something that they're responsible for, that they have control over, and that they can dispose of.

Those "shares" would be better implemented as a guaranteed share of the income, not shares which could be sold to others (say, as an alternative to a payday loan).   And "natural right to property" obfuscates the distinction between (a) that which nature provides or the community creates (to which all of us have an equal right), and (b) that which individuals or corporations create (to which individuals and corporations should have an unfettered right, subject to (a)!

The Alaska Permanent Fund does something similar: some of the royalty revenue Alaska collects on oil extracted within the state is used to fund Alaska's services, and some goes to the Alaska Permanent Fund, which invests the proceeds in a broadly diversified portfolio and pays an annual income to every adult and child who is a permanent resident of Alaska.  See http://lvtfan.typepad.com/lvtfans_blog/2008/09/pbss-now----8108-alaska-governor-palin-and-oil-resources----who-do-they-belong-to.html

Anyway, even if Lowell Harriss was not the first to apply the term "least bad tax" to land value taxation, he said it well before Milton Friedman said it.

If you're not a regular reader here, you might want to know that there are a few other posts about Lowell, who died in December, 2009, at the age of 97. 

• http://lvtfan.typepad.com/lvtfans_blog/2010/01/farewell-to-c-lowell-harriss-professor-of-economics---dec-29-2009.html
• http://lvtfan.typepad.com/lvtfans_blog/2010/01/reading-lowell-harriss.html which explores some of Lowell's writings on the property tax, and how we might best reform it.

To circle back to Milton Friedman, it is worth noting that he and his wife Rose were both at the University of Chicago in the early 1930s for economics PhDs.  I don't know how large that program was, but I can only assume that students in it were aware of the research of others in the program. In 1933, Homer Hoyt's dissertation was entitled "100 Years of Land Values in Chicago."  It was an analysis of 5 boom-bust cycles.  I encourage you to read a couple of things which reference this book:

• Mason Gaffney's The Great Crash of 2008, at http://www.masongaffney.org/essays/Great_Crash_of_2008.pdf
• Weld Carter's "A Clarion Call to Sanity, to Honesty, to Justice,"  at http://www.wealthandwant.com/docs/Carter_Clarion.html

One might reasonably wonder why Milton Friedman didn't apply his knowledge to reducing poverty.  Perhaps other concerns topped that one.  I wonder what they were.

Boston Globe article on Little Neck, the Feoffees and the tenants

Little Neck trustees, homeowners seek to change 17th-century will to allow sale of Ipswich land - The Boston Globe.

The article seems like a pretty good summary, other than that it bends over backwards to suggest that the tenants somehow have reason to think they should either (1) be able to buy this property at a bargain price or (2) continue to pay bargain rents.

The photo suggests more 2-story cottages with porches than I've observed in the photos I've seen of individual homes; this may be a variation relating to the terrain in that particular spot.

I was heartened to read that a law school property law expert thought the 1650 will would still hold:

But a probate judge must first decide if Paine’s will should be changed. And despite being more than three centuries old, the Colonial-era document could still pass legal muster, one legal scholar said.

“Judges are very reluctant to set aside, or change, the words of a will,’’ said David Seipp, a professor of English legal history and property law at Boston University School of Law. “It has always been a bedrock principle of common law, that instructions about what is to be done with property at the time of a death . . . our wishes are obeyed.’’

A judge also will be most concerned about how the change would impact the Ipswich schools, as the beneficiary of Paine’s will. “A court will look out for the future generations of schoolchildren in Ipswich,’’ Seipp said. “They would not take into consideration the economic relations of the renters.’’

The math in the article was a little weak: 

Since 2006, the two sides have been locked in a legal tussle over rents, leases, and even threats of eviction. The Feoffees proposed more than doubling rents, from $5,000 to $9,700 per year for seasonal residents. For the 24 year-round residents, rent would increase from $5,500 each year, to $10,800. Most tenants balked at the increase, and sued the Feoffees in Essex Superior Court.

That represents slightly less than a doubling of rents.  And capitalized at 5%, would represent a value of $32,926,000.  But this is still far less than the sellers of cottages are valuing the land at. 

Cottages assessed at $64,200 to $88,400 carry asking prices of $175,000 to $620,000!  These cottages range from 800 to 1779 square feet, and were built between 1910 and 1940.  Most have 2 bedrooms, 1 bath, no heat.

The difference between the assessed value of the cottages and the asking price is capitalized land value, over and above the current rents of $9,700 to $10,800.

Are the building assessments too low? I doubt it; assessors tend to overassess buldings and underassess land.  It is tough to justify a, say, $80,000 assessment for a non-winterized 900 square foot cottage: that's $88 per square foot.  Check construction costs today for a modest cottage, and then depreciate that (1.5% per year for 75 years).  Even in suburban Boston. 

Here are some recent listings of cottages on Little Neck.  Keep in mind that all the tenants currently own is the buildings.  Yet their asking prices are many times the assessed value of those buildings.

 

		Assessment		Ask as % of  bldg assessment			Asking minus Bldg Assessment	Bldg Assessment Per Square Foot
	Asking Price	Bldg	Land		Sq ft	Built
	(1)	(3)	(3)	(4)	(5)	(6)	(7)	(8)
River Rd	$620,000	$84,500	$347,800	734%	1779	1910	$535,500	$48
Hilltop Rd	579,900	88,400	195,800	656%	not given	1935	$491,500	N/A
Baycrest Rd	339,900	82,200	195,800	413%	926	1935	$257,700	$89
Bay Rd	259,900	64,200	222,800	405%	800	1910	$195,700	$80
Cove Rd	175,000	78,200	195,800	223%	924	1930	$96,800	$85

 

So how much should rents be to meet the Grantor's requirement of "Market Rents?"  Quick and dirty, enough to bring Column 1 down to roughly Column 2.  How do we calculate that?  Quick and dirty, use a capitalization rate of 5% -- known sometimes as "20 years' purchase" -- and multiply it by Column 7.  Add that to the current rents of $9,700 for seasonal cottages and $10,800 for year-round cottages.    Yes, it will vary by location within Little Neck.  Great views, waterfront, proximity to positive amenities, distance from any negative amenities, and, of course, lot size will all play a role -- just like anywhere else (location, location, location!) and, of course, year-round rights are worth far more than $1,100 per year ($22,000 capitalized at 5%).  I'm guessing that the first two listings above might be year-round.

I recommend that the Feoffees announce that they will raise rents on a 5 year schedule to bring rents in 2015 up to what they ought to have been in 2010, and by 2018, raise them to what they should have been in 2015.  Then they should watch the price of the houses, which should sell for no more than their depreciated value. 

They will have continued to provide a bargain to the existing tenants (via a 5- and then 2-year lag), but by announcing and sticking to the schedule, they will begin to collect something approaching what they were charged to collect.   Cottage selling prices will come down to earth (as soon as the market believes the Feoffees will stick to the schedule), and the schools of Ipswich will have a solid income, as William Paine intended.

Yes, some tenants will lose a windfall they'd been counting on.  But the Feoffees will not be taking from them anything which the tenants created other than their dreams of the windfall.  And they will be living up to what William Paine's trust requires of them.  If the current team of Feoffees aren't the men and women for the job, I'm sure Ipswich can find good people who will take it on and live up to the terms, for the benefit of the schools now and forever.

This blog has more observations and history on this story.  See them collected at  http://lvtfan.typepad.com/lvtfans_blog/feoffees-land/.

A thought about Glenn Beck, churches and social justice

Glenn Beck, a cable TV personality, urged Christians to leave their churches if the words "social justice" were used.  He is quoted as saying,

I'm begging you, your right to religion and freedom to exercise religion and read all of the passages of the Bible as you want to read them and as your church wants to preach them . . . are going to come under the ropes in the next year. If it lasts that long it will be the next year. I beg you, look for the words 'social justice' or 'economic justice' on your church Web site. If you find it, run as fast as you can. Social justice and economic justice, they are code words. Now, am I advising people to leave their church? Yes.

This makes me think about some of what went on in Alabama a few years ago -- the notion that churches should be dispensers of charity, and that they should not be campaigning for social justice because if there were social justice, there would be no need for charity! 

As I read some of the comments on a NYT blog, 

"Lord, when was it that we saw you hungry and gave you food, or thirsty and gave you something to drink? And when was it that we saw you a stranger and welcomed you, or naked and gave you clothing? And when was it that we saw you sick or in prison and visited you?' And the king will answer them, 'Truly I tell you, just as you did it to one of the least of these who are members of my family, you did it to me." (Matthew 25)

I am led to wonder whether people understand the difference between charity and justice.  To me, Matthew 25 merely describes charity.  Helping an individual in difficult circumstances, without seeking to correct the structures which put him into those circumstances and will put the next person in those circumstances.  If he is hungry because he has no job and no skills, feeding him will keep him alive another day, and training him will aid him if a job is available -- but if there is no available land for him to labor on, you've not moved a step toward justice. Welcome, and clothing, and visits are all wonderful -- but they don't change the structure which makes it impossible for some people to provide for their own needs and the needs of their families.

Susan Pace Hamill, the University of Alabama law professor who has made extensive studies of Alabama's tax system and the federal tax system and is now running for the state legislature in Alabama, said of the churches a few years ago -- I'm paraphrasing -- that even if they deserve an "A" for charity, if they earn an "F" in justice, that does not come out to a "C"; it is failure.   If I recall correctly, the Alabama chapter of the Christian Coalition was opposed to tax reform (reducing sales taxes on groceries, raising the state income tax threshold to approximately the poverty line -- no one was even talking about reforming the perversely low property tax) on the basis that churches would no longer have as many objects for their charity if Alabama moved in the direction of economic justice.   They'd be depriving the churches of poor people to serve!

I wonder whether Mr. Beck considers our current society to already be perfectly socially just and economically just, and, if not, what entity(s) he considers should seek to move us in that direction if he specifically excludes the Christian churches from having a concern for these issues.

To me, social justice and economic justice start with treating that which nature -- God, if you prefer -- provides, and that which the community creates -- as our common treasure, and treating that which individuals and organizations create as their private treasure.  Glenn Beck, Dick Armey and Grover Norquist may be very focused on that second portion, but if they fail to get the first half right -- first! -- they will not create a stable -- or just -- economy or society.

How Is The Distribution Of Wealth Determined In The United States?

One of my standing google alerts brought me to a page where this question was posed.  I jumped in to answer it, and thought I'd share my answer here:

Answer #1: It is determined by what we tax and what we don't; what we permit to be privatized, and what we socialize.  When we permit the privatization of natural resources and the economic value of land, by collecting only small royalties and low taxes on land value, we permit individuals and corporate shareholders to privatize value which all of us create.  Corporate stock ownership is quite concentrated, even though lots of people own a little each.

When we place taxes on buildings, and the sales of goods and sometimes services, we tax that which individuals and corporations create.  Many would argue that this is unfair, and most economists would agree that we discourage production, innovation and job creation.

When we place taxes on wages, we socialize a part of that which individuals create.  At the very highest income levels, where a significant portion of "wages" might actually be natural resource values, or urban land rent, or other kinds of privilege, we are -- somewhat clumsily -- collecting via an income tax that which ought to have been collected via taxes on land values and natural resource values.  But it is a clumsy tool.

When we tax the very largest estates (we currently tax the estates of fewer than 1% of the people who die each year), we are collecting, once per generation, a percentage of the appreciation of land and natural resources (which hasn't been taxed yet)  -- which is better than never collecting it at all but far inferior to collecting it annually --  but we are also collecting some things which are genuinely the fruits of someone's labor or brilliance.

Huge fortunes may be built on good ideas, but frequently they are built on urban land values, on natural resources (Jed Clampett) -- or on privilege or monopoly of some kind.  "Capital" doesn't appreciate.  As every homeowner knows, buildings depreciate, even with good maintenance.  As every car owner knows, cars and other machinery depreciate, even with good maintenance.  What appreciates is what is scarce or in finite supply: choice urban lots and nonrenewable natural resources that meet a consumer need.  When we permit some of us to say "THIS IS MINE!"  we determine wealth distribution.  The rest of us pay the privileged folks for that upon which we rely to live.   What a deal!  Every young person must either pay rent or buy a piece of land on which to live, and much of our housing payment is for the location, not the structure; and on top of that we must pay interest.  (Guess who benefits? Shareholders of lenders.)

You might be interested in the fact that the board game Monopoly is based on a game which was developed in the early 1900s to teach these ideas.  It was called The Landlord's Game, and it came with two sets of rules.  One set was called the Prosperity rules, and it made for a rather dull game: no big winners, no abject losers.  Not an exciting game, but a model for sustainable living, in which all could prosper.  Needless to say, the board game Monopoly is based on the other set of rules.

Should life be based on Monopoly rules, or Prosperity rules?

Answer #2: If your question was "how do we measure the distribution of wealth" then perhaps the best answer is via the Federal Reserve Board's triennial Survey of Consumer Finances, last conducted in 2007.  They survey households in great detail, and then report how wealth in total and of various kinds, and debt, are distributed.  However, since their sample omits the Fortune 400, they under-report the concentration of wealth.   See http://lvtfan.typepad.com/lvtfans_blog/2010/02/the-house-of-tranquillity-a-middle-class-agenda.html for a bit about wealth concentration, and look on that same page for more about the Survey of Consumer Finances (SCF). 

Paring the Deficit, by Selling Part of the Radio Spectrum

Economic View - Paring the Deficit, by Selling Part of the Radio Spectrum - NYTimes.com.

I'd missed the article when it was published a week ago, but an LTE brought it to my attention.  The author is Richard Thaler, a professor of economics and behavioral science at the newly re-named business school at the University of Chicago (forever to be recalled as GSB by some, despite stern orders in the alumni rag).

He proposes auctioning off "The Buried Treasure in Your TV Dial."  But he isn't suggesting leasing it for some finite period of time, with a new auction at the end of, say, 5 or 10 or 15 years, but selling it forever.   As one of the LTE's says,

Re “The Buried Treasure in Your TV Dial” (Economic View, Feb. 28), in which Richard H. Thaler cites an estimate that the government could reap $100 billion by auctioning the portion of the radio spectrum used for over-the-air television:

How long would such a sum last, however, in an era of military adventures and over 700 foreign military bases? What would be permanent is the loss of both choice and the free reception of radio and television programming. Ownership of electronic media, and access to the privatized airwaves, would be as concentrated as cable and satellite systems are today.

The column says that such an auction would have many national benefits. But virtually all them, like faster broadband connections for schools, could be obtained by federal policy, not a fire sale.

Those airwaves belong to the American people, and the American people ought to be collecting full rent on them -- year in, year out -- not giving away licenses and then permitting corporations to make a business in re-selling or leasing out what they choose not to use.

Here's Thaler's article.  I look forward to his next suggestions; he has the germ of a good idea, but gets a very important aspect of it wrong.  Don't sell our common asset to anyone.  AUCTION OFF LEASES.  Wait 5 years.  Repeat.

HERE’S a list of national domestic priorities, in no particular order: Stimulate the economy, improve health care, offer fast Internet connections to all of our schools, foster development of advanced technology. Oh, and let’s not forget, we’d better do something about the budget deficit.

Now, suppose that there were a way to deal effectively with all of those things at once, without hurting anyone. And suppose that it would make everyone’s smartphone work better, too. (I’ll explain that benefit shortly.)

I know that this sounds like the second coming of voodoo economics, but bear with me. This proposal involves no magical thinking, just good common sense: By simply reallocating the way we use the radio spectrum now devoted to over-the-air television broadcasting, we can create a bonanza for the government, stimulate the economy and advance all of the other goals listed above. Really.

The reason for this golden opportunity may be in your purse or pocket: that smartphone to which you could well be addicted. The iPhone, the BlackBerry and competing devices are already amazing technologies. But precisely because of the nifty features they offer, like the ability to text photos, stream video and provide GPS directions, the radio spectrum is looking as crowded as Times Square on New Year’s Eve. Demand for spectrum is growing rapidly — a trend that will surely continue.

The problem is that the usable radio spectrum is limited and used inefficiently. Think of it as a 100-lane highway with various lanes set aside for particular uses, including AM and FM radio, TV and wireless computer technology. The government — specifically, the Federal Communications Commission — is in charge of deciding which devices use which lanes.

Because we can’t create additional spectrum, we must make better use of the existing space. And the target that looks most promising in this regard is the spectrum used for over-the-air television broadcasts.

These frequencies are very attractive on technological grounds. People in the industry refer to them as “beachfront property” because these low-frequency radio waves have desirable properties: they travel long distances and permeate walls. We have already allocated parts of this spectrum for mobile wireless, and the F.C.C. recently auctioned other parts for $19 billion. That has left 49 channels for over-the-air television.

Why is the current use of this spectrum so inefficient? First, because of the need to prevent interference among stations, only 17 percent of it is actually allocated by the F.C.C. for full-power television stations. (The so-called white space among stations is used for some limited short-range applications like wireless microphones.)

Second, over-the-air broadcasts are becoming a nearly obsolete technology. Already, 91 percent of American households get their television via cable or satellite. So we are using all of this beachfront property to serve a small and shrinking segment of the population.

Suppose we put this spectrum up for sale. (The local stations do not “own” this spectrum. They have licenses granted by the Federal Communications Commission.) Although the details of how to conduct this auction are important, they don’t make compelling reading on a Sunday morning. Interested readers should examine a detailed proposal made to the F.C.C. by Thomas W. Hazlett, a professor at the George Mason University School of Law who was formerly the F.C.C.’s chief economist.

Professor Hazlett estimates that selling off this spectrum could raise at least $100 billion for the government and, more important, create roughly $1 trillion worth of value to users of the resulting services. Those services would include ultrahigh-speed wireless Internet access (including access for schools, of course) much improved cellphone coverage and fewer ugly cell towers. And they would include other new things we can’t imagine any more than we could have imagined an iPhone just 10 years ago.

But some compelling technology that could use these frequencies already exists, like wireless health monitoring — to check diabetics’ blood sugar regularly, for example — and remote robotic surgery that can give a patient in Idaho a treatment like that available in New York or Chicago.

Who would oppose this plan? Local broadcasters are likely to contend that they are providing a vital community service in return for free use of the spectrum that was put in their hands decades ago. Whether the local news or other programs are vital services is up for debate, but their value isn’t the issue, because they can be made available via cable, satellite and other technologies, including improved broadband.

Say there are 10 million households that still get their television over the air, including those that can’t afford cable or satellite and some that generally just don’t care for what’s on TV. (Yes, there are people who don’t like “American Idol.”) But about 99 percent of these households have cable running near their homes, and virtually all the others, in rural areas, could be reached by satellite services. The F.C.C. could require cable and satellite providers to offer a low-cost service that carries only local channels, and to give vouchers for connecting to that service to any households that haven’t subscribed to cable or satellite for, say, two years.

Professor Hazlett estimates that $300 per household should do it: that amounts to $3 billion at most. Compared with the gains from selling off the spectrum, it’s a drop in the bucket. Or, as an interim step, we could reduce the number of channels available in a community from 49 to, say, 5.

I KNOW that this proposal sounds too good to be true, but I think the opportunity is real. And unlike some gimmicks from state and local governments, like selling off proceeds from the state lottery to a private company, this doesn’t solve current problems simply by borrowing from future generations. Instead, by allowing scarce resources to be devoted to more productive uses, we can create real value for the economy.

Economists are fond of saying that there is no such thing as a free lunch. Here we have an idea that is even better than a free lunch: being paid to eat lunch. More paid-lunch ideas will be coming in future columns.

The classical economists might never have heard a radio or seen a television, but they'd immediately recognize broadcast spectrum as "land" -- a gift of nature, finite and scarce -- and would have regarded it as our common treasure.  Unfortunately, Professor Thaler is not a classical economist.  He is a neoclassical economist, and his training in economics probably glossed over the truths the classical economists saw.  And quite likely, that's how he teaches the subject, too.

We can concentrate more wealth in the hands of a few corporations, or we can collect the economic rent on this scarce and valuable resource.  (See also Alaska Permanent Fund, in the topic cloud at left.)

I hope we'll do the latter.

Airport Landing Rights as our COMMON treasure

According to CNN, JFK's airport's busiest runway will close today for four months for reconstruction. "Officials are reducing the number of arrivals and departures at the airport from about 1,300 a day to 1,050."  Given the softness in the economy, this is a fine time to do the necessary work. (I wonder whether this is being paid for in part by stimulus dollars.)

1300 takeoffs and landings a day.  48 million passengers per year. One of two international gateways to -- and from -- NYC metro area.

Finite.  There is no suggestion in the article that this project is going to increase capacity.  The goal is to widen the runway by 1/3, and add taxiways, to ease air traffic congestion.  The results should, I hope, include reducing fuel use by delayed flights, both on the ground and waiting to land; reduce time-wasting backups produced at other airports around the US caused by JFK delays.  This will be good for the airlines, for air quality, for efficiency, productivity and stress levels of passengers.  Its effects should reverberate through many other airports, here and abroad.

The project will cost $376 million.  Quick and dirty, if there are 48 million passengers per year, a $1 surcharge on every ticket for the next 8 years would pay for the work.

So how should this be financed?

We ought to be treating landing rights at JFK (etc.) as our common treasure, not the property of the airlines. Auction them off, 5 years at a time. Lease them to the highest bidder at the price bid by the second highest bidder. Use the revenue to finance airport improvements. This is one the Bush administration's FAA director got right, but she was shot down by what I assume were corporate interests or their very good friends.

Time to review that one, and get it right.

What the airlines are paying now is far below the amount they'd be willing to pay if we required them to bid for their slots.  As I understand it, airlines own their slots, treat them as assets, and can sell them to the highest bidder, with no revenue going to we-the-people or to those who maintain the airports!  

Airport landing rights might not have been known at the time of the classical economists, but they would immediately recognize them as "land" and thus rightly part of the commons, to be treated as our common asset rather than anyone's private property.  Permitting the privatization of that economic value is a mistake.

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.

Krugman: How Did Economists Get It So Wrong?

Paul Krugman's article, in this Sunday's NYT Magazine -- is How Did Economists Get It So Wrong?

Well, perhaps the answer to Professor Krugman's question is that very few of the current crop of economists -- saltwater or freshwater (read the article!) -- ever were guided into reading the work of one of the foremost writers on political economy.  

And perhaps the few who did read it were too embarrassed to challenge their brethren.

But even a look at the textbooks from which most of the college and university economics professors teach their students would demonstrate that Henry George got it right, and that his ideas, while eclipsed by economists who know where their own bread is buttered, and which ideas they ought not to embrace while seeking tenure (during which they forget the little they ever did learn about this wise man's thought and observations) still shine and still explain what we see around us better than the neoclassical economists who are embraced by most teaching and government economists and economics pundits.

I commend to their attention Henry George's books, all of which are available online and all of which can be purchased in hardcopy from http://www.schalkenbach.org/:

• Progress and Poverty -- the best sellling book on political economy* ever -- modern thought-by-thought updating, abridged, is at http://www.progressandpoverty.org/ and http://www.hgchicago.org/audio.  The unabridged is at http://www.schalkenbach.org/
• Social Problems, a book of essays, is at http://www.wealthandwant.com/
• so is  The Land Question
• Protection or Free Trade)
• The Science of Political Economy (published posthumously)

* Political economy is the science which deals with the natural laws governing the production and distribution of wealth and services. Seems like something most of us have a vital interest in understanding ourselves and promoting widespread understanding.

Some of George's speeches are also available at http://www.wealthandwant.com (the URL comes from the subtitle to Progress & Poverty).

Henry George, along with the other CLASSICAL economists (as opposed to the NEO-classical economists from whom most of today's students learn their economics) recognized that there were three factors of production: land, labor and capital.  The Neo-classicals seem to consider the distinction between land and capital too much nuance for their taste, and gloss lightly over it, as if land and natural resources were no longer worth talking about in 20th or 21st century America -- or the rest of the world.  While the classical economists weren't familiar with electromagnetic spectrum, or geosynchronous orbits, or rush-hour landing rights at LaGuardia Airport, or water rights, or pollution rights, or oil as a major energy source, or parking spaces for cars in congested cities, they would immediately recognize each of these things as "LAND," and they would likely agree with Henry George that we are all equally entitled to them, and that permitting some to privatize their value, and forcing others to pay them just as if they'd created them is a poor idea.

We fail to measure the value of these important assets, or we measure them only poorly, or we ignore the implications of valuing these rightly-common assets.  Or we ignore the work of those who do measure them.  Do you think that land value and natural resource value mattering is just a quaint agrarian idea, in the context of the 21st century?

• Remind me again what it is that we and others go to war over.
• Remind me how much of the typical family's budget is going to the FIRE sector (finance, insurance, real estate -- including the sellers from whom homeowners in coastal states bought their homes, who reaped what they did not sow). 
• Remind me how much the typical family is paying for energy and other non-renewable natural resources.
• Remind me which direction the average worker's wages are going, and how difficult it is to find work, despite there being so many unsatisfied needs and wants in the world
• Remind me how concentrated our nation's and the global income and wealth is -- and why.
• Remind me again of the havoc that our boom-bust cycles create in the lives of Americans and our neighbors around the world. 
• Remind me again of what sprawl costs us; of what too little exercise costs us; of what long commutes cost us; of what children growing up in families with insufficient income to meet their most modestly defined needs costs us.  (These are very closely related, and can be traced to a single underlying fallacy in how we structure our economy.  And they can be ameliorated by recognizing and correcting that fallacy.)

Then tell me again that LAND and natural resources don't matter in the 21st century.

How did economists get it so wrong?  To use my mother's phrase, their education was neglected.  Even Paul Krugman's as best I can tell.

Where to start?  Mason Gaffney's website -- http//www.masongaffney.org -- and Fred Foldvary's -- http://foldvary.net/

See also Quotable Nobels and Quotable Notables and you'll see some others who "got it" -- and got it RIGHT!

The Landed Gentry ... this time, in Pakistan

but Pakistan is just an example.  A standing google alert brought an article at http://www.defence.pk/forums/national-political-issues/31924-who-rules-pakistan.html which includes this paragraph:

The democracy in Pakistan is fledgling at best. There are powerful vested interests such as the landed aristocracy. A vast majority of the members of the Assemblies are landed gentry; they do not pass any legislation that hurts big landlords, nor do they allow any taxes on themselves. Then there is the military; the government survives at the mercy of the army chief.

What is so special about the landed gentry?  Here's what Henry George said:

It is a well-provisioned ship, this on which we sail through space. If the bread and beef above decks seem to grow scarce, we but open a hatch and there is a new supply, of which before we never dreamed. And very great command over the services of others comes to those who as the hatches are opened are permitted to say, "This is mine!"

and

What largely keeps men from realizing the robbery involved in private property in land is that in the most striking cases the robbery is not of individuals, but of the community. For, as I have before explained, it is impossible for rent in the economic sense — that value which attaches to land by reason of social growth and improvement — to go to the user. It can go only to the owner or to the community. Thus those who pay enormous rents for the use of land in such centers as London or New York are not individually injured. Individually they get a return for what they pay, and must feel that they have no better right to the use of such peculiarly advantageous localities without paying for it than have thousands of others. And so, not thinking or not caring for the interests of the community, they make no objection to the system.

It recently came to light in New York that a man having no title whatever had been for years collecting rents on a piece of land that the growth of the city had made very valuable. Those who paid these rents had never stopped to ask whether he had any right to them. They felt that they had no right to land that so many others would like to have, without paying for it, and did not think of, or did not care for, the rights of all. .

See also http://www.wealthandwant.com/themes/underpop/landed_gentry.htm and http://www.wealthandwant.com/themes/underpop/landlordism.htm

Nothing particularly special about Pakistan in this regard.  But perhaps it might lead us to think about America's most landed gentry, and the windfall we grant them, at the expense of the commons and the ordinary working person.

So is the Woodstock Generation going to fix America's most serious problems?

I was a rising senior in high school when Woodstock took place. A fellow waitress in the local deli in which I worked -- Max for Snacks, in King of Prussia, PA -- took off for Woodstock, and the rest of us dreamed of doing so. 

We thought we could change the world.  Many had a vision of a society in which all could prosper, all could succeed.  We sang, we danced, we applauded, we protested.  Gradually we worked our way up.  We educated ourselves, we bought homes, we had children -- not always in that order -- and we became part of the establishment.  We bent the establishment, a bit, perhaps, to our advantage.

But we didn't correct the problems, and arguably, we let them grow worse.  We watched as the benefits of public investment -- local, muncipal, county, state, federal -- accrued not to all of us but to those who own our land and claim title to our natural resources.  We permitted corporations and individuals to lay claim to our common resources, we who grew up hearing about Jed Clampett being somehow entitled to the oil revenue, to the exclusion of the rest of us.

We're so used to the way this aspect of the world was handed to us that few of us think to question it.  And yet the privatization of the economic value of urban land and the privilege of collecting the revenue on non-renewable natural resources on which all of us are dependent together produce some of our most serious social, economic, environmental, poverty and justice problems.  Most wars are fought over these two things.

And until we come to recognize this, all we can do is put bandaids on those problems -- locally, nationally and globally.

These two things are what someone wisely referred to as "Natural Public Revenue" sources.  Yet we largely ignore them, and use taxes which set up perverse incentives -- and wonder why we can't seem to solve any of our biggest problems.

The Ethics of Sharecropping, Taxation ... and Theft

Another "find" in "The Public" from November 14, 1903:

A PROBLEM IN ETHICS.

Jones—Neighbor Smith. I am out of a job; how am I to make a living?

Smith—I have a proposition to make to you. Provide yourself with tackles and go to fishing, and I will give you half you catch.

Jones—I'll do that; thank you; you are very kind, indeed.

And the people laugh at Jones' foolishness and ask: "If he provides his own tackles, what claim has Smith on the fish he takes? Ought not all the fish belong to the man who catches them?"

We think so. But while about it, suppose you tell us the difference between this proposition and the one that Brown made to Wilson when he said: "Get your teams and plows and go to work raising potatoes, and I will give you half the potatoes you raise."

Now, don't answer this question until you have thought over it just a little.  — Living Issues.

Should we tax wages?  Should indivdual (or corporate) landholders be permitted to pocket the land rent?

It seems to me that we as a society have a right to tax wages only after we've collected virtually all the land rent, and then only if we agree that the resulting revenue is insufficient to fund the legitimate purposes of government.  (Reasonable people can differ about what ought to be done by the public sector; that's a separate conversation.)

Land rent here includes not only the rent on unimproved land values (that is, the value of each site before accounting for the improvements its owner has put on it himself or bought from someone else who did) but also on things like electromagnetic spectrum (the "airwaves"), primetime landing rights at congested airports, geosynchronous orbits, on-street parking in congested downtowns, the use of water where it is scarce, rights to pollute air and water, the withdrawal of scarce natural resources, etc.

What You Get for... $465,000 - NYTimes.com

Property Values - What You Get for... $465,000 - NYTimes.com.

The three homes listed today are very different from each other:

• a 4 bedroom house in Shelburne Falls, MA, on 2 acres (built 1860);
• a 1 bedroom apartment in San Francisco (1921/1950); and
• a 4 bedroom house on 7 acres in Richmond, KY (unstated). 

Interestingly, the taxes on each are fairly similar: $4,853, $5,208 and $4,650.

What does one get for one's money?  It varies.  In the two small towns, a significant portion of the purchase price is likely to be for the structure, even with the large sites involved.  In San Francisco, the bulk of one's purchase money is not for the structure, which is both small and modest, but for the location -- the proximity to jobs, to transportation, to all the amenities -- both publicly and privately provided -- of city life.

• a 4 bedroom house in Shelburne Falls, MA, on 2 acres -- 2,741 square feet 
• a 1 bedroom apartment in San Francisco  -- 641 square feet
• a 4 bedroom house on 7 acres in Richmond, KY -- 3,233 square feet. 

Quick and dirty, these homes are each probably worth $100 per square foot.  The remainder of the value is locational value.

• a 4 bedroom house in Shelburne Falls, MA, on 2 acres -- 2,741 square feet -> $274,000 house and $181,000 land  (60/40)
  
• a 1 bedroom apartment in San Francisco  -- 641 square feet -> $64,000 house and $385,000 land (14/86)
• a 4 bedroom house on 7 acres in Richmond, KY -- 3,233 square feet. -> $323,000 house and $142,000 land  (69/31)

In the small towns, one is paying the seller mostly for value he (or a previous owner) created.  In cities, one is paying the seller mostly for value he didn't create.

In each situation, property taxes are, more or less, 1% of the asking price.  Assuming that the buyers put down 20% of the $465,000 ($93,000) and finance the remaining 80% ($372,000) with a mortgage at 6% for 30 years, they'll be paying $27,000 per year on the mortgage and $5,000 to their community in the first year.   85% of their carrying cost goes to the lender, 15% to the community.

Viewed another way, if we looked at this as if all the purchase money was borrowed, about 87% of the carrying cost goes to the lender and 13% to the community.   And of that 87%, only 17% is principle; 83% is interest.  That interest all leaves town.  It isn't available for meeting the needs of the community, or of the borrower's family. It doesn't get recycled locally.

And, on top of that, the buyer continues to pay taxes on both the land and the building, and on their purchases and on their wages and most of their other income.

Can you picture how it would be if, instead of paying taxes based on one's wages and purchases and the house one occupies, one's taxes were primarily a function of the value of the land one occupied?

• The buyer of the Shelburne Falls property would be paying on the basis of his $181,000 worth of land
• the buyer of the SF property would be paying based on his $385,000 of land; and
• the buyer of the Richmond property would be paying based on his $142,000 worth of land.

Why is that tiny plot in San Francisco worth so much more? 

1. taxpayer-provided Infrastructure and services: transportation, water, sewage, streetcleaning, emergency, public health, etc.
2. high paying jobs in a vibrant economy, including very specialized jobs
3. proximity to community, culture, etc.

Were we to based our taxes on land value, the seller of the tiny San Francisco apartment would receive, say, $64,000 for his structure.  And the buyer would not be taxed on that value by his community.  Rather, he would be taxed on the value of the land he bought, paying, say, 5% of that value in the form of a tax on his land value: 5% of $385,000 is $19,250 per year.  His mortgage payment on the $64,000 purchase would be $4,650 per year.  And he wouldn't owe any other taxes.

Wouldn't that be a more just system?  He pays San Francisco and California for the right to occupy that choice site.  They recycle those funds locally to provide the services and infrastructure which make that site worth ~$20,000 per year, and send some on to the federal government.

This leaves the mortgage lender out of the loop.  The homebuyer doesn't need to borrow $450,000; he only needs to borrow $64,000.  The other funds are available for more productive purposes: financing businesses.  Creating jobs.  Maybe financing cars or other purchases.

Land and Freedom

That was the name of a bi-monthly magazine published from 1926 to 1940, successor to The Single Tax Review.  I want to share its premise with you.  It turns out that it was expressed a bit differently from one issue to the next.  These come from the 1940 volumes.

WHAT LAND AND FREEDOM STANDS FOR

Taking the full rent of land for public purposes insures the fullest and best use of all land. In cities this would mean more homes and more places to do business and therefore lower rents. In rural communities it would mean the freedom of the farmer from land mortgages and would guarantee him full possession of his entire product at a small land rental to the government without the payment of any taxes. It would prevent the holding of mines idle for the purpose of monopoly and would immensely increase the production and therefore greatly lower the price of mine products.

Land can be used only by the employment of labor. Putting land to its fullest and best use would create an unlimited demand for labor. With an unlimited demand for labor, the job would seek the man, not the man seek the job, and labor would receive its full share of the product.

The freeing from taxation of all buildings, machinery, implements and improvements on land, all industry, thrift and enterprise, all wages, salaries, incomes and every product of labor and intellect, will encourage men to build and to produce, will reward them for their efforts to improve the land, to produce wealth and to render the services that the people need, instead of penalizing them for these efforts as taxation does now.

It will put an end to legalized robbery by the government which now pries into men's private affairs and exacts fines and penalties in the shape of tolls and taxes on every evidence of man's industry and thrift.

All labor and industry depend basically on land, and only in the measure that land is attainable can labor and industry be prosperous. The taking of the full Rent of Land for public purposes would put and keep all land forever in use to the fullest extent of the people's needs, and so would insure real and permanent prosperity for all.

Pretty short and sweet, isn't it?  It might look out of date in this computer age -- though I would argue that it is not, even and especially in our most dense and developed cities -- but if you don't see its importance in the developed world, can you see that for the other 80%, including many places where American lives are at stake and our dollars being spent, it has huge relevance?

And as a means of ending poverty for the billions who do not get to reap the harvest of their own labor, it is of prime importance.

From the March/April issue:

WHAT LAND AND FREEDOM STANDS FOR

We declare:

• That the earth is the birthright of all Mankind and that all have an equal and unalienable right to its use.
• That man's need for the land is expressed by the Rent of Land; that this Rent results from the presence and activities of the people; that it arises as the result of Natural Law, and that it therefore should be taken to defray public expenses.
• That as a result of permitting land owners to take for private purposes the Rent of Land it becomes necessary to impose the burdens of taxation on the products of labor and industry, which are the rightful property of individuals, and to which the government has no moral right.
• That the diversion of the Rent of Land into private pockets and away from public use is a violation of Natural Law, and that the evils arising out of our unjust economic system are the penalties that follow such violation, as effect follows cause.

We therefore demand:

That the full Rent of Land be collected by the government in place of all direct and indirect taxes, and that buildings, machinery, implements and improvements on land, all industry, thrift and enterprise, all wages, salaries and incomes, and every product of labor and intellect be entirely exempt from taxation.

ARGUMENT

Taking the full Rent of Land for public purposes would insure the fullest and best use of all land. Putting land to its fullest and best use would create an unlimited demand for labor. Thus the job would seek the man, not the man the job, and labor would receive its full share of the product.

The freeing from taxation of every product of labor would encourage men to build and to produce. It would put an end to legalized robbery by the government.

The public collection of the Rent of Land, by putting and keeping all land forever in use to the full extent of the people's needs, would insure real and permanent prosperity for all.

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.

Council of Georgist Organizations Conference: Cleveland 2009

Council of Georgist Organizations Conference: Cleveland 2009.

The schedule for the annual gathering of Georgists (that is, people who are persuaded that the economist and social philosopher Henry George (b. 1839, Philadelphia; d.1897, NYC), author of "Progress & Poverty" and a book of essays entitled "Social Problems," among others, pretty much had it right) is now online.  It is in downtown Cleveland in early August.

Looking over the schedule, I see a lot of familiar names -- people I've come to know since I attended my first CGO meeting in 2001 -- and some people I've not yet met face to face but know online.  I'm happy that we have few sessions running side by side, because virtually all of the programs are of interest to me.

My last visit to Cleveland was with 600 delightful women, and included a great and noisy party at the Rock 'n' Roll Hall of Fame. (I just had the pleasure of being on the host committee for the same group's 2009 Annual Meeting!)  At that time, I didn't know the significance of the larger-than-life statue nearby of Cleveland mayor Tom L. Johnson.  The book he holds in his hand is P&P.

• If you would like to see an end to poverty, come join us.
• If sprawl and its concomitants concern you, come join us; we know how to slow it and reverse it and channel it into reusing the land already well served by taxpayer-provided infrastructure. 
• If long commutes -- and the fuel, pollution, spending and time loss involved -- worry you, come join us.  
• If you would like to see a more stable economy, without the booms and busts which cause such widespread pain and ruin, we have answers. 
• If you would like to see healthier cities and a more vibrant economy, come listen to what some of these people have to offer. 
• If unaffordable housing troubles you, come talk to us. 
• If the extreme concentrations of income and wealth -- particularly of natural resource wealth -- trouble you, we know how to correct it gently and justly.
• If you hate the income tax and recognize that sales and consumption taxes damage the economy, but still believe that there are some things government can do better than the private sector, we know how to finance that spending justly.

We come from all over the political spectrum, and share little except a major commitment to creating a better and more sustainable world and society and economy for all. (That's a lot actually!)  It is a joy to spend a few days with people so passionate about social and economic justice and with a clear vision of how to get there.

If you're curious about Henry George, you might start where I started, with four of his speeches.  I found these as pamphlets in the files of my late grandparents when I took possession of their library and file cabinets and some sentimental treasures.  My first pass was for genealogical information.  Shortly after that, I started reading a speech entitled "Thou Shalt Not Steal," and it clicked. My paternal grandparents (three of them, actually: my own grandparents, and my step-grandmother, whose first husband was a dear family friend, too, in the 1940s and 50s) were all Georgists.  For every landmark occasion in my young life, their gifts included a lovingly inscribed copy of Progress & Poverty (just in case I'd misplaced the previous ones!)  But I'd not done more than thumb through it.   When I first did get around to reading it, I was in my late 40s; my grandparents were quicker studies, and devoted the second half of their lives to promoting these ideas.  My first read of P&P was a slow slog; a friend shocked me when she said she found it a page-turner, a mystery whose solution she was anxious to get to.  Now I admit I read it for, and with, pleasure.

Another piece you might read is my grandfather's "An Introduction to Henry George" or my grandmother's more humorous article, "My Introduction to Henry George;" she went on to write delightful short stories for Ladies Home Journal, Colliers, the Saturday Evening Post and many other magazines in the 40s.  Things have come full circle -- I'm on the board of two Georgist foundations, including the one my grandfather worked for and with for over 30 years, the Robert Schalkenbach Foundation.  And following in the example of my late stepgrandmother, who tried to write an activist letter every day, I try to post comments on either my blog or other blogs or articles online every day.  I mostly succeed, though in the past month or two, I've fallen short.   And I've created a website to make Henry George's ideas accessible to people coming from a wide range of interests and points of view: http://www.wealthandwant.com/

People's Budget Day: the Centennial

A friend in the UK gave me permission to share his post here.  You might explore Winston Churchill's writings on the subject, entitled "The People's Land" at wealthandwant.com/docs/Churchill_TPL.html.  I'm on the fly today, and didn't copy in Jock's links.  You might want to go to his original to pursue them!

http://jockcoats.me/peoples_budget_day

People's Budget Day
tagged with:  * Land Value Tax    * 1909    * common birthright   * economic liberalism    * geo-libertarian   * Henry George
* house of lords   * liberalism   * lloyd-george  * Revolutionary Liberalism  * tax   * welfare state

Just a brief post to recall that today, 29th April, is the hundredth anniversary of David Lloyd-George's 1909 "People's Budget". Thanks to the wonders of the interwebs you can now read the whole budget online.

He ended (the main section - in the "Balance Sheet" section) with these words which have stood for a century accusing his successors of all parties for not having solved the problems he set out on the road to do:

"This, Mr. Emmott [in the chair of the Ways and Means Committee to which the budget was addressed], is a War Budget. It is for raising money to wage implacable warfare against poverty and squalidness. I cannot help hoping and believing that before this generation has passed away we shall have advanced a great step towards that good time when poverty and wretchedness and human degradation which always follow in its camp will be as remote to the people of this country as the wolves which once infested its forests."

From the financing of the newly created Old Age Pension and Disability insurance to the funding of the preparations for real war in the form of spending on Dreadnought battleships there was much for Lloyd-George to find in his budget. He didn't miss a trick, and more or less anything that could conceivably be taxed was, in many cases for the first time, taxed.

But for many of us it is for what ended up not being taxed that this budget is most remembered. The debate surrounding this budget, with speeches up and down the country by Lloyd-George himself and more notably perhaps Winston Churchill, must be one of the best documented in history, for it was a first attempt to implement some permanent form of Land Value Taxation. A tax shift that Churchill described as:

"the new attitude of the State towards wealth. Formerly the only question of the tax-gatherer was, "How much have you got?" We ask that question still, and there is a general feeling, recognised as just by all parties, that the rate of taxation should be greater for large incomes than for small. As to how much greater, parties are no doubt in dispute. But now a new question has arisen. We do not only ask today, "How much have you got?" we also ask, "How did you get it?

• Did you earn it by yourself, or has it just been left you by others?
• Was it gained by processes which are in themselves beneficial to the community in general, or was it gained by processes which have done no good to any one, but only harm?
• Was it gained by the enterprise and capacity necessary to found a business, or merely by squeezing and bleeding the owner and founder of the business?
• Was it gained by supplying the capital which industry needs, or by denying, except at an extortionate price, the land which industry requires?
• Was it derived from active reproductive processes, or merely by squatting on some piece of necessary land till enterprise and labour, and national interests and municipal interests, had to buy you out at fifty times the agricultural value?
• Was it gained from opening new minerals to the service of man, or by drawing a mining royalty from the toil and adventure of others? 
• Was it gained by the curious process of using political influence to convert an annual licence into a practical freehold and thereby pocketing a monopoly value which properly belongs to the State — how did you get it?"
  

That is the new question which has been postulated and which is vibrating in penetrating repetition through the land."

Currents & Undercurrents, Rolling Tides, and Ponds & Streams

In 2003, Arthur Kennickell wrote a paper entitled A Rolling Tide: Changes in the Distribution of Wealth in the U.S., 1989-2001, summarizing the 2001 Survey of Consumer Finances.

The 2006 study, of 2004 data, was entitled Currents and Undercurrents: Changes in the Distribution of Wealth, 1989-2004.  Aggregated tables adapted from that study are at http://www.wealthandwant.com/issues/wealth/90-9-1_Tables.html and more detailed tables are at  http://www.wealthandwant.com/issues/wealth/50-40-5-4-1.htm.

I awaited the newest study with curiosity both for what it would show and how AK would title it. 

The 2009 study, of 2007 data, is entitled Ponds and Streams: Wealth and Income in the U.S., 1989 to 2007.

The title is well chosen: it recognizes that wealth is a stock, and income a flow.  The study doesn't find large changes in wealth distribution since 2004, but it goes more deeply into the interconnections of wealth and income.

The studies are based on the Survey of Consumer Finances, conducted every third year since 1989 by the Federal Reserve Board.

Here are some highlights:

• In 2007, the wealthiest 1 percent of families owned 33.8 percent of total family wealth, the next wealthiest 9 percent owned 37.7 percent, and the rest owned 28.5 percent.
• The Gini coefficient for income was 0.575 in the 2007 survey, about 30 percent smaller than the corresponding value for wealth.  (The Gini coefficient is a measure of concentration of ownership, and ranges from 0.00 to 1.00; a Gini of 1.00 indicates that 1% of the population owns 100% of the asset.) 
• Over the 1989–2007 period, capital gains rose more markedly than mean income, which rose about 28 percent in real terms. As an indication of the size of the capital gains, house prices, according to the OFHEO House Price Index adjusted simply using the CPI-U-RS, rose 46 percent over this time, and publicly traded shares, according to the correspondingly adjusted Wilshire 5000 Index, rose 179 percent.
• The strongest signal ...  is a 3.9 percentage point decline in the share of total wealth held by the group between the 50th and 90th percentiles of the wealth distribution, with the top 5 percent of the distribution approximately absorbing the shift.

Reviewing the extremely detailed tables, I want to share a few highlights from the 2007 data, first on net worth, from Table A3a:

• The bottom 50% of us had 2.5% of the net worth.  The next 40% of us had 26.0% of the net worth.  That left 71.5% to be shared among the top 10%, of which the aforementioned top 1% held 33.8%. [Table A3a] 
• The bottom 50% of us had 6.1% of the assets.  The next 40% had 29.0%, and the top 10% held 64.9%; the top 1% held 29.6% of assets.
• Debt is distributed differently: The bottom 50% of us had 26.7% of the debt; the next 40% had 46.6%, leaving only 26.7% for the top 10%, of which 5.3% is held by the top 1%.
• 68.6% of us owned homes; 48.7% had mortgage debt against those homes.  (The comparable figures from the 2004 SCF were 69.1% and 47.9%; the former difference is significant; the latter may not be.)
• Looking at households ranked by net worth:

1. the bottom 50% of households, which had 2.5% of the net worth, received 22.4% of the income 
2. the next 40% of households, who had 26.0% of the net worth, received 36.3% of the income
3. The next 5% of households, with 11.1% of the net worth, received 8.3% of income
4. The next 4% of households, with 26.6% of the net worth, received 16.6% of the income
5. The top 1% of households ranked by net worth, with 33.8% of the net worth, received 16.4% of the income.  

Turning to the data on households ranked by income [Table A4a and A4b]:

• The bottom 50% of us received 14.6% of the income.  The next 40% received 38.2% of the income.  That left 47.2% for the top 10%, of which 21.4% went to the top 1%.  (In 2004, the bottom 50% received 15.8% of the income, then next 40% received 41.4%, leaving 42.7% for the top 10%, of which 17.2% went to the top 1%.)

About Land Value Taxation

If you spend some time reading this blog, you might come away thinking that I believe that land value taxation is a cure-all, a panacea. (See the "topic cloud" in the left sidebar.)  But that isn't the case. 

However, I have come around to the point of view that many of our most serious social, environmental, economic and justice problems are not going to be solved -- cannot be solved! -- without the enactment of land value taxation.

That sounds extreme, particularly to those who have never heard of LVT or who have read little about it.  

So many of our most serious problems ultimately find their root in the privatization of the natural creation -- that which the classical economists called land, including things that the classical economists would have known nothing about, but would immediately recognize: electromagnetic spectrum, geosynchronous orbits, landing rights at LaGuardia (particularly at rush hour), etc..

Let me be more specific.  It isn't the privatization of land, or oil resources, or minerals, or geosynchronous orbits, or water rights themselves that is the problem.  Secure title is necessary and important.  Rather, the problem is that the economic value of these common resources is currently treated as private treasure rather than as our common asset.   But we need revenue for public purposes, so we then tax sales and wages and interest.  But those who need land pay others for it (unless they inherited the rights to it) either in the form of rent or in the form of a lump sum, and then are burdened with the sorts of taxes which depress the economy and steal from them that which they produced (in addition to the significant costs of servicing the debt related to that lump sum payment).

Land, in all its forms, is not of human creation.  We can't create more of it in response to an increase in demand.  In particular, we can't create more land downtown, where it is served by awesomely important infrastructure that took decades and millions or billions to build.  We can't create more water, or more frequencies on FM or AM radio. Yet we permit the privatization of the economic value of these and other like vital and fabulously valuable common assets.

Were we to shift our taxes off productive effort, off sales, off buildings, and onto all these things called "land value," we would be on our way to solving many of our environmental problems, our social problems, our economic problems, urban sprawl and its concommitants, and many of our justice problems. We'd have a more efficient economy, a more vibrant one, without the excess burden (deadweight loss) our current system creates.  We'd have opportunity, jobs, a growing pie, and lose the boom-bust cycle which plagues us.

Just What is Home Equity?

What is home equity, and how does it relate to the American Dream?

Sometimes we hear about "building home equity" as if it were some sort of muscular activity.  There are two ways to "build home equity."  The first, the old-fashioned way, is by paying down the mortgage.  This happens fairly slowly.  On a 30 year mortgage, and making no extra payments, here is the payoff schedule for several mortgage rates:

Cumulative Mortgage Payoff Schedule for 30-year Mortgage
	Mortgage Interest Rate
Year	4%	5%	6%	7%	8%
1	1.7%	1.4%	1.2%	1.0%	0.8%
2	3.5%	3.0%	2.5%	2.0%	1.7%
5	9.4%	8.0%	6.7%	5.7%	4.7%
10	20.8%	18.1%	15.7%	13.6%	11.7%
15	34.6%	31.1%	27.8%	24.7%	21.8%
20	51.5%	48.7%	43.9%	40.3%	36.8%
25	73.0%	68.8%	65.5%	62.2%	58.9%
28	86.4%	84.2%	81.9%	79.4%	76.8%
30	100.0%	100.0%	100.0%	100.0%	100.0%

The other -- and much faster -- part of home equity, of course, is the appreciation we have come to expect.  What few people realize is that houses do not appreciate; they are never worth more than what it costs to build them, less depreciation, to account for deterioration, obsolescence of systems, etc.  A Federal Reserve Board Study (May, 2006) pegged annual depreciation of single family home stock at 1.5%.

So when housing was rising in value by 5% or 10% per year, what was rising was the price of the land under the houses, not the houses themselves.  

What causes land to rise in value?  Not individual activity.  Not the landholder himself.   There is no muscular activity on the part of the landholder here!  (Yes, the owner who does a gut renovation adds to his property's total value, though not always as much as the project costs.  Most studies suggest that adding a second bathroom to a home which has only one actually adds more to the value of the property than the project itself costs; some say that adding a deck also pays back more than the project costs.   Few other projects pay back fully, so while home equity may rise, it is through individual investment, and the owner's net assets do not increase as a result.)

Land rises in value for reasons which have little or nothing to do with the landholder himself:

1. Local taxpayers invest in goods and services which people value: good schools; well-paved streets; well-equipped fire trucks and ambulances; police trained in CPR and equipped with defibulators; parks; courts, jails; sewers and city water replacing septic and wells; libraries; community colleges; letc.
2. State and federal taxpayers invest in goods and services which people value: electricity; good transportation systems; infrastructure; "pork";  broadband; public colleges and universities; etc.
3. Private sector investments: good hospitals; cultural amenities; an active and vibrant local economy; a healthy downtown; private universities; charities; etc.
4. Technological advancements: elevators (urban land); air conditioning (southern states); earth moving equipment -- advances from WWII equipment (making difficult sites easier to develop); fiberglass boats (waterfront properties); maglev trains; etc.
5. Population increases: natural fertility increases; assisted fertility; fewer wars or auto or industrial accidents; better outcomes after such events; reduced infant mortality; better health resulting in longer lifespans; people having larger families because of religious beliefs or greater prosperity; local amenities which attract population to the school district or metro area; immigration from other countries; lower cost of living drawing more people;

So if all those things were happening, why did we just experience a crash in land values?   

Well, what we experienced was a crash in land prices.  Land prices got well ahead of land values in many places.  This is known as land speculation.  People were "investing" in land, buying homes for outlandish prices, thinking that prices would continue to rise forever.   Mortgage lending standard went from 20% down to 10% down to 5% down to 1% down to 105% financing.  Private Mortgage Insurance became the norm for first-time buyers.  Debt to income ratios rose from 28% to the high 30's, or weren't even discussed.  Mortage rates dropped, particularly for Adjustable Rate Mortgages.  Interest-only mortgages became available, and negative amortization mortgages were a possibility. 

How could we be so stupid? 

Did someone yell "FIRE?"  (as in the FIRE sector of the economy: Finance, Insurance, Real Estate)    The FIRE sector was making money from this.  Home builders.  Land sellers -- including farmers, land speculators, mom-and-pop subdividers, and many others.  Builders.  Real estate brokers.  Mortgage brokers. Mortgage insurance sellers.  Title insurance sellers.   Homeowners' insurance sellers. 

We considered this private enterprise and pronounced it good. 

Go back to the five items listed above, and tell me why a smallish -- or even a largish -- portion of the private sector ought to reap all the benefits for all those things, in proportion to the size and quality of their landholders.

But only the Georgists were aware of what was really happening.  What was happening was that we attempted to increase the homeownership rate from the low 60's to the high 60s, under the guise or illusion that by doing so we'd be extending the "American Dream" to an additional 10% of our fellow residents of this country.    But of course the homes they could afford were not in the places where land was appreciating, and their attempts to "catch the brass ring" which would, they hoped, make them part of the "rising tide."  (Okay, too many metaphors ... but haven't we heard all of them in this context?)

What did the Georgists know?  That land value which our system permits landholders to privatize ought to be socialized.  Small landholders ... most of the residential owners, that is ... get to privatize some small land value ... a bone to shut them up, while the big landholders -- individuals, family trusts, corporations, REITS, philanthropies, universities, churches and other tax exempts, individual foreign investors, pension funds, private equity funds, foreign sovereign funds, etc. -- get to privatize the BIG land value in our cities.    Even in our small cities and medium-sized towns, the businesses which are their own landlords are, on average, far more profitable than those which are tenants, and landlords take a significant share of their tenants' production -- a non-agricultural version of sharecropping, which we honor as if the landlord was actually a producer of some sort.

John Stuart Mill, one of the classical economists, told it this way: Landlords grow rich in their sleep.

So back to the initial question: what is home equity, and how does it relate to the American Dream?  Home equity is a sop, thrown to keep the puppies quiet and calm, while the big dogs enjoy the contents of the manger.

We'd be far better off if the vast majority of us -- and our elected officials -- understood and talked openly about what Henry George was telling us, in his landmark book on political economy entitled Progress and Poverty -- subtitled: An inquiry into the cause of industrial depressions and of increase of want with increase of wealth ... The Remedy: that we permit the privatization of the economic value of our natural and other rightly-common resources, including urban land value, at our extreme peril. 

We turn the American Dream into our common nightmare.  Increasing home equity holdings is not the answer to our problems; it is, at bottom, a symptom or sidelight of the problem itself!   

We can fix this through a simple and just tax reform.

Oh -- you might be interested in how Henry George dedicated his book, Progress & Poverty:

to those who, seeing the vice and misery that spring from the unequal distribution of wealth and privilege, feel the possibility of a higher social state and would strive for its attainment.

Should Landlords Share in their Tenants' Profits? Should our Urban Landlords be Society's Big Winners?

NYT 2/1/09: Recession Has Landlords of Retail Tenants Extending Discounts of Their Own

As you read this, think about what contributions each landlord mentioned -- or any other you know -- has made to society, in his role as landlord, during his ownership of his building and land, be it 3 years, or 30, or even 300 years.  Think about how we have our incentives set up.

a few lifts to provide the flavor:

That area is now one of the city’s liveliest late-night strips, which made it particularly painful for Ms. Gillis to receive an eviction notice last month because she owed $13,556.26 in back real estate taxes. But in a sudden change of heart, her landlord recently offered to let Ms. Gillis stay for two more years, and even proposed paying part of her future real estate taxes — which retail tenants normally pay. ...

Just a year ago, the owners of New York’s most coveted retail and restaurant spaces held almost unassailable power to dictate the terms of their leases. But the recession is changing that equation, as rapidly rising vacancy rates and bankruptcies are making it hard to find new tenants.

And so some small businesses are finding a silver lining in the recessionary clouds: they suddenly have leverage with their landlords.

Six months ago, for instance, the landlord of the Holland Bar in Hell’s Kitchen terminated the lease because he was confident of finding a higher-paying tenant or developing luxury condos. But when he found no takers, he offered the space back to the bar, at a 20 percent increase in rent. The Holland reopened last week.  ...

That does not mean that all of the city’s landlords, whether in upscale Manhattan districts or shopping strips in Brooklyn and Queens, are cutting their tenants a break; many shops are still facing sharply rising rents as leases come due.

Indeed, many landlords find themselves in a bind because they paid stiff prices for property in recent years and need to cover hefty mortgage payments. On average, Manhattan landlords paid $3,348 per square foot for retail properties in 2008, compared with $538 per square foot in 2004, according to the brokerage Cushman & Wakefield.

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?)

Let Us Now Praise the Back Roads of Alabama

Let Us Now Praise the Back Roads of Alabama - washingtonpost.com.

There's a nice article in Saturday's Washington Post about Fairhope, Alabama, a town founded just over 100 years ago to put into action the ideas of Henry George.  It sits on Mobile Bay.

Founded in 1894 as a utopian community based on the fair-tax theories of economist Henry George, the town has long been a magnet for intellectuals, Southern or otherwise; Sherwood Anderson, Upton Sinclair and Clarence Darrow all spent time there. Even today, long since subsumed into the greater Mobile metropolitan area, it remains a popular place for writers, painters and craftspeople to set up shop.

Arden, Delaware, just outside Wilmington, does something similar, and it, too, is a lovely place to live.

The rest of Alabama might learn from Fairhope's fine example.  (There are places in Alabama where sales taxes are as high as 10% ... not quite as bad as Chicago's, but awful nonetheless.)  In most of Alabama, property taxes are quite low (see Susan Pace Hamill's work), and that underlies the state's problems.  In Fairhope, the Single Tax Corporation, which owns a significant chunk of the land, doesn't tax the buildings, but charges each property owner in proportion to the value of the land each occupies.

Upton Sinclair wrote a good article called "The Consequences of Land Speculation are Tenantry and Debt on the Farms, and Slums and Luxury in the Cities."  It begins:

I know of a woman — I have never had the pleasure of making her acquaintance, because she lives in a lunatic asylum, which does not happen to be on my visiting list. This woman has been mentally incompetent from birth. She is well taken care of, because her father left her when he died the income of a large farm on the outskirts of a city. The city has since grown and the land is now worth, at conservative estimate, about twenty million dollars. It is covered with office buildings, and the greater part of the income, which cannot be spent by the woman, is piling up at compound interest. The woman enjoys good health, so she may be worth a hundred million dollars before she dies.

I choose this case because it is one about which there can be no disputing; this woman has never been able to do anything to earn that twenty million dollars. And if a visitor from Mars should come down to study the situation, which would he think was most insane, the unfortunate woman, or the society which compels thousands of people to wear themselves to death in order to pay her the income of twenty million dollars?

The fact that this woman is insane makes it easy to see that she is not entitled to the "unearned increment" of the land she owns. But how about all the other people who have bought up and are holding for speculation the most desirable land? The value of this land increases, not because of anything these owners do — not because of any useful service they render to the community — but purely because the community as a whole is crowding into that neighborhood and must have use of the land.

The speculator who bought this land thinks that he deserves the increase, because he guessed the fact that the city was going to grow that way. But it seems clear enough that his skill in guessing which way the community was going to grow, however useful that skill may be to himself, is not in any way useful to the community. The man may have planted trees, or built roads, and put in sidewalks and sewers; all that is useful work, and for that he should be paid. But should he be paid for guessing what the rest of us were going to need?

Clarence Darrow wrote at least two excellent things I'd like to share:

• How to Abolish Unfair Taxation  which ends with "The "single tax" is so simple, so fundamental, and so easy to carry into effect that I have no doubt it will be about the last reform the world will ever get. People in this world are not often logical; in fact, there is never any considerable number of them that are logical. I am pretty sure the people will never get started in the right direction; they will go a long way around."
• The Land Belongs to the People which includes this: "This earth is a little raft moving in the endless sea of space, and the mass of its human inhabitants are hanging on as best they can. It is as if some raft filled with shipwrecked sailors should be floating on the ocean, and a few of the strongest and most powerful would take all the raft they could get and leave the most of the people, especially the ones who did the work, hanging to the edges by their eyebrows. These men who have taken possession of this raft, this little planet in this endless space, are not even content with taking all there is and leaving the rest barely enough to hold onto, but they think so much of themselves and their brief day that while they live they must make rules and laws and regulations that parcel out the earth for thousands of years after they are dead and, gone, so that their descendants and others of their kind may do in the tenth generation exactly what they are doing today — keeping the earth and all the good things of the earth and compelling the great mass of mankind to toil for them."

and

"Now the theory of Henry George and of those who really believe in the common ownership of land is that the public should take not alone taxation from the land, but the public should take to itself the whole value of the land that has been created by the public — should take it all. It should be a part of the public wealth, should be used for public improvements, for pensions, and belong to the people who create the wealth — which is a strange doctrine in these strange times. It can be done simply and easily; it can be done by taxation. All the wealth created by the public could be taken back by the public and then poverty would disappear, most of it at least. The method is so simple, and so legal even — sometimes a thing is legal if it is simple — that it is the easiest substantial reform for men to accomplish, and when it is done this great problem of poverty, the problem of the ages, will be almost solved. We may need go farther."

And you might be interested in a fine talk given by Ed Lawrence, a current resident of Fairhope, entitled Henry George: The Relevance of His Philosophy Today.

Susan Pace Hamill: The Vast Injustice Perpetuated by State and Local Tax Policy

Hamill-HofstraSubmission.pdf (application/pdf Object). or http://ssrn.com/abstract=1272155

Susan Pace Hamill, one of my heroes, has published a new paper in the Hofstra Law Review, and while I share her concern for the poor and for economic justice, and I respect her scholarship, I think she's missing the most important questions!

Here's the abstract; the emphasis is mine:

State and local tax policy is one of the most important areas of public policy affecting the lives of the most powerless and vulnerable segments of the population – children from low income families. Focusing on the funding of primary and secondary education, especially in high poverty school districts, and the scheme for allocating the tax burden, this article empirically proves that all fifty states have unjust state and local tax policy, with thirty-one states inflicting an extreme level of injustice on poor children and their families. This article argues that the people in most states, as well as their political leaders, are compelled to reform state and local tax policy because they claim to practice Christianity or Judaism, and, in addition to being unjust under secular-based ethical models, their state and local tax policy also violates the moral principles of Judeo-Christian ethics. This article also argues that the moral context of a faith-based appeal offers the best chance to inspire people to support tax policy, requiring greater levels of sacrifice from wealthier Americans, a group that must be part of the reform effort in order to change the state and local tax picture from a vast sea of injustice to a tool of justice protecting our most vulnerable and powerless citizens.

I would counter that our tax policies should not require "greater levels of sacrifice" from anyone.  But Professor Hamill, like 99% of the rest of the people who think about public finance and economic justice, seem to be stuck in a box, and it is the wrong box!

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.

Auditing Madoff's investors

As I listen to the fallout from Bernard Madoff's Ponzie scheme, it occurs to me that the trickle-down effects on other federal income tax payers are going to be fairly substantial.

Each Madoff investor will be able to deduct some portion of their losses.  Who is going to report what their losses are?  What paperwork will be trustworthy? 

And what is considered a loss?  The difference between the current value and the value that each accountholder assumed he had, based on, say, June 30, 2008?   The difference between the amount a Madoff investor put in and its current value?  The difference between the amount the investor put in, minus some accounting for fees paid to intermediaries ... like the hedge fund that collected 1% for its efforts as middlemen?

As David Cay Johnston has so ably reported, the percentage of IRS auditors assigned to pay attention to the income tax returns of our highest-income brethren is far lower than their proportion of the income, and dropping.

Will the tax lawyers and CPAs who earn high fees for their talents and opinion letters be the beneficiaries of this mess, and those who pay income taxes on their wages the losers, once again?

The landowner and the taxpayer

I stumbled across a quote, in someone's sigfile on a forum I hadn't previously been to.  It expresses the effect of permitting the privatization of the economic value of land, and the socialization of our wages through income and wage taxes and taxes on what we produce.  It is, perhaps, a bit stronger than how I'd express it, but I have to agree that Roy has it right:

The landowner effectively owns part shares in millions of part-time slaves called, "taxpayers." -Roy L

We can make our system far more just by shifting our taxes onto land value, and off workers.  The owners of fabulously valuable land are collecting from the rest of us value which they didn't create and we did.  It does not come out of thin air; it comes out of someone's labor.  Yours and mine, even if we've never set foot on that land or even passed within 10 miles of it.  (Would it be any better somehow if it came out of someone else's labor, but NOT ours?)

Dying of Consumption - NYT

Dying of Consumption - NYTimes.com.

The chairman of Morgan Stanley Asia has an op-ed piece in the NYT which calls for measures which will increase savings by the American people, and promote less consumption:

The United States needs a very different set of policies to cope with its post-bubble economy. It would be a serious mistake to enact tax cuts aimed at increasing already excessive consumption. Americans need to save. They don’t need another flat-screen TV made in China.

The Obama administration needs to encourage the sort of saving that will put consumers on sounder financial footing and free up resources that could be directed at long overdue investments in transportation infrastructure, alternative energy, education, worker training and the like. This strategy would not only create jobs but would also cut America’s dependence on foreign saving and imports. That would help reduce the current account deficit and the heavy foreign borrowing such an imbalance entails.

It is difficult, though, to ask people whose income is being eaten up by fixed costs to save.  (See Warren & Tyagi's The Two Income Trap.)  Many of these fixed costs relate to housing, and, for young families, childcare -- and, I might add, this is a vicious circle: many need the childcare because of the high housing costs

Couple this with the fact that taxes weigh heavily on lower-income and middle-income people, and one might be led to seek a better way. 

As we do things now, if one buys a home, one makes a down payment of some size, and finances the rest.  For most of us in urban areas, with the possible exception of those who are buying newly built homes, over half of what we are paying is not for the house (or condo) itself, but for the location, the site.  The seller didn't create the land value, even if he and his ancestors have owned that property for generations.  The community created that land value.  But as we currently do things, the hapless buyer must pay the seller for it.  And then, to add insult to injury, he must pay property taxes on the house itself and on the land value, and taxes on many of his purchases (in Chicago, the sales tax is now over 10%, surpassed only by a few counties in Alabama), and taxes on his wages.

Change Needed to End Boom-Bust Cycles

John Fisher wrote an excellent Letter to the Editor, published in the Chatham Daily News, which I think worth sharing:

Sir:
Re: Boom and Bust Cycles.

No matter how many billion-dollar crutches (bailouts, stimulus) are thrown at the current economic downturn, up-and-down cycles will continue until the "experts" get back to Economics 101.

Adam Smith, David Ricardo, Henry George and other classical economists correctly defined land (free gift of nature), labour and capital as the three factors of production. Land or nature, not being created by labour, is not capital. Unlike privately created wealth, nature only gets value from the presence and activity of the community as a whole.

The economy is often compared to a house or a ship, but usually without reference to the lot or water upon which they absolutely depend. All the good things the experts now suggest to improve the house or ship will ultimately determine the value of the underlying natural base, depending of course on human pollution, over and restricted use, etc.

Giving nature a value like we do now for land and then capturing it for the social good would reduce urban sprawl and waste of resources, while rewarding quality and quantity in the production process.

Many classical economists, including Henry George, would shift taxes from private wealth (the house) to public wealth (the land). In other words, pay for what you take from nature and not what you make privately. With little cost to government, this simple tax shift would remove unearned income from resource speculation and enable tax reductions on wages and business.

Until economic justice and reason prevail with a major tax shift from production (jobs, houses, trade) to resource values (raw land, water, oil) the world will continue to suffer from monopolies of nature and economic turmoil.

If you'd like to know more about these subjects, from a Georgist point of view, you might explore these pages:

boom-bust cycles  | Adam Smith |  David Ricardo  |  Henry George | classical economists  | land  | labor |  capital | factors of production | well-provisioned ship  |  all benefits go to the landholder | growing rich in one's sleep  | technological progress | population growth  |  he who produces | pollution  |  pay for what you take |  unearned increment | land speculation  | privatization  | commons  |  enclosure  | sprawl

John packed a lot into a single letter, and I'm glad the editor had the sense to print it.  Now, if only more of us understood what John does.

Wealth Concentration, Income Concentration, and Ups & Downs in Consumer Spending

It occurs to me that if more of us had more money in our pockets and our portfolios, consumer spending might not be so seriously affected when the economy catches a cold.

But then again, if we shared justly among ourselves that which ought to be shared among all of us, the economy might not catch cold so much and would be pretty well inoculated against pneumonia.

Fareed Zakaria: How to Spread Democracy

Zakaria: How to Spread Democracy -- Newsweek.com

I just came across this piece, from the September 29th issue of Newsweek, and want to applaud:

How Not to Save the World

Valiant efforts are being made every day to end hunger, reduce poverty, save lives. But if we truly want to solve the world's problems, here are five things we need to do.

Democracy: If You Want to Free Your Country, First Liberate Its Land
By Fareed Zakaria | NEWSWEEK

So you want to spread democracy. By now, it's pretty obvious that this is easier said than done. George W. Bush's stirring rhetoric about freedom has suggested a too-simple path: just rid the country of its tyrant and the people will be free. Bush often asserts that people in every country and culture yearn for democracy and are capable of it. To argue otherwise represents cultural condescension. It's not that President Bush is wrong at the abstract level — if Nazi Germany and fascist Japan could become democratic, it can happen most anywhere — but the argument holds at such an elevated plane that it becomes meaningless when applied on the ground. ...

Spreading the "wealth" -- this time, let's talk about income

The people who are offended by the concept of "spreading the wealth" are offended at the idea that income they might receive might be "redistributed" downwards, and assume that they would be the logical targets, the folks from whom income would be taken in order to provide more income to people below them on the income spectrum -- people they suspect do not work as hard as they do, or display virtues they feel they excel in.  But I suspect that most of those who boo on cue are not in the top 1%, or even the top 10%, who receive a significant share of the wage income and in fact all kinds of income. 

Let's look at income distribution.  The data come from Piketty and Saez's annual spreadsheet, at http://emlab.berkeley.edu/users/saez/TabFig2006.xls.

1. Wages (P&S, Table B2):

2006
Top 1%: 12.00% of wages    Next 9%: 23.82% of wages      Bottom 90%: 64.18% of wages

For comparison, we might look at 1968:
Top 1%: 5.24% of wages     Next 9%: 20.36%                     Bottom 90%: 74.40%

1953:

Top 1%: 5.61% of wages     Next 9%: 18.52%                     Bottom 90%: 75.87%

1928:
Top 1%: 8.87% of wages     Next 9%: 20.24%                     Bottom 90%: 70.89%

2. Income excluding Capital Gains* (P&S, Table A1):

2006:
Top 1%: 18.24% of income excl capgains   Next 9%: 27.04% of income excl capgains  Bottom 90%: 54.70% of income excl capgains

1968:
Top 1%: 8.35% of income excl capgains     Next 9%: 23.63% of income excl capgains  Bottom 90%: 68.02% of income excl capgains

1953:
Top 1%: 9.08% of income excl capgains     Next 9%: 22.30% of income excl capgains   Bottom 90%: 68.62% of income excl capgains

1928:
Top 1%: 19.60% of income excl capgains    Next 9%: 26.49% of income excl capgains  Bottom 90%: 53.91% of income excl capgains
* Note: Capital gains are excluded both from the income and from the rankings.  That is, one can't compare directly the top 1% ranked by income excluding capital gains and the top 1% ranked by income including capital gains.

3. Income including Capital Gains

2006:
Top 1%: 22.90% of income incl capgains   Next 9%: 26.79% of income incl capgains   Bottom 90%: 50.34% of income incl capgains

1968:
Top 1%: 11.21% of income incl capgains   Next 9%: 23.63% of income incl capgains   Bottom 90%: 65.15% of income incl capgains

1953:
Top 1%: 9.90% of income incl capgains    Next 9%: 22.41% of income incl capgains   Bottom 90%: 67.69% of income incl capgains

1928:
Top 1%: 23.94% of income incl capgains   Next 9%: 25.35% of income incl capgains   Bottom 90%: 50.71% of income incl capgains

4. Capital Gains income as a percentage of income excluding capital gains: (calculated from Table A0)

2006:   9.38%
2000: 10.76%
1986: 13.49%
1968:   6.61%
1953:   1.74%
1928:   8.94%

5. Capital Gains Income as a percent of total income, by income fractile, 2006 (P&S, Table A8, panel B -- including capital gains income in defining the fractiles):

• 90th to 100th percentile: 17.3% of income is from capital gains [income above $104,696] -- 10% of us, who get 49.66% of the aggregate income
• 90th to 95th percentile: 3.9% of income is from capital gains [income $104,696 to $148,423]  -- 5% of us, who get 11.27% of the aggregate income
• 95th to 99th percentile: 8.6% of income is from capital gains [income $148,423 to $382,593] -- 4% of us, who get 15.51% of the aggregate income
• 99th to 100th percentile: 29.3% of income is from capital gains [income above $382,593]   -- 1% of us, who get 22.90% of the aggregate income

Looking at that top 1% more closely, we can break it into its bottom half, next 40%, next 9% and top 1%:

• 99th to 99.5th percentile: 12.9% of income is from capital gains [income $382,593 to $597,584] -- 0.5% of us, who get 4.29% of the aggregate income
• 99.5th to 99.9th percentile: 20.9% of income is from capital gains [income $597,584 to $1,898,200] -- 0.4% of us, who get 7.05% of the aggregate income
• 99.9th to 99.99th percentile: 32.9% of income is from capital gains [income $1,898,200 to $10,659,283] -- 0.09% of us, who get 6.13% of the aggregate income
• 99.99th to 100th percentile: 49.6% of income is from capital gains [income above $10,659,283]  -- 0.01% of us, who get 5.46% of the aggregate income

[The income thresholds come from Piketty and Saez's Table A6; the percentages of aggregate income are from Table A3.  Notice that the 17.3% of income in the top decile coming from capital gains does not relate directly to the 9.38% figure for 2006 shown in Section 4, above.  The corresponding figure would be 9.38/109.38, or 8.56%]

Somewhere I read that the one party's derisive references of "spread the wealth" is intended to conjure up thoughts of "welfare queens."  They've found a way to divide working people.  But the unemployed and the working poor and our lower- and middle- middle classes are not the problem here.  Rather, the problem is a system that funnels such a large share of our production into the pockets of so few of us.  We've created a poverty machine.

How do we retool that machine?  Henry George has some good analysis and advice for us.

For more about "spreading the wealth," see also http://lvtfan.typepad.com/lvtfans_blog/2008/10/spreading-the-wealth.html   and http://lvtfan.typepad.com/lvtfans_blog/2008/10/spreading-the-wealth-some-kinds-of-wealth-ought-to-be-spread.html

Spreading the Wealth

When we listen to one party complaining that the other's candidates want to "spread the wealth," it behooves us to pay attention to how concentrated wealth is.  In 2004, it looked like this:

• Top  1% of wealthholders:     33.38% of the net worth
• Next 9% of wealthholders:     36.12% of the net worth
• Other 90% of wealthholders: 30.50% of the net worth [source]

I'll venture the guess that most of those who turn out at the campaign rallies and boo when the words "spread the wealth" are said fall into the bottom 90%. We can split out the bottom 50% and the next 40%:

• Bottom 50% of wealthholders: 2.54% of the net worth
• Next  40% of wealthholders:  27.95% of the net worth [source]

We can look at income for the same groups (note that this is different from looking at a ranking of households by income level)

• Top 1% of wealthholders:      13.62% of the income
• Next 9% of wealthholders:     22.56% of the income
• Other 90% of wealthholders: 63.83% of the income

We can split out the bottom 50% and the next 40%:

• Bottom 50% of wealthholders: 23.80% of the income
• Next 40% of wealthholders:     40.03% of the income

The preceding data come from the Federal Reserve Board's triennial Survey of Consumer Finances. That study suggests that the concentration of wealth may actually be understated in their data.

You might look at the line in the tables (line 19) which reports "business equity," which represents privately held companies and what we fondly refer to as "small businesses." (it represents about 20% of aggregate net worth.)

• Bottom 50% of wealthholders: 0.3% of the business equity
• Next 40% of wealthholders:     9.2% of the business equity
• Next 5% of wealthholders:       5.7% of the business equity
• Next 4% of wealthholders:     22.4% of the business equity
• Top 1% of wealthholders:      62.3% of the business equity

The forces which have concentrated that wealth so narrowly are not the benign workings of free market capitalism, and those who turn out to loudly boo on cue the concept of spreading the wealth are not net beneficiaries of our current system. Wages are low, and most of us struggle.

It need not be this way, and I don't think that the party talking about spreading the wealth knows how to do it justly or well, and that the party deriding the idea has serious concern for the interests of the bottom 95% of us.  What wonders me is that so few of us and so few of our talking heads seem to know or care.

A bit of reading and study of Henry George's ideas about what is rightly private property and what is rightly the common property of the community as a whole would do wonders: start with Progress and Poverty or Social Problems.  Or explore wealthandwant.com.  We can have the society we say we are.

See also: Spreading the Wealth: Some kinds of wealth OUGHT to be spread!

Progress, and Poverty -- how do they relate?

I suspect that many people relate these two words, without quite knowing why.  A google alert on the two words brings me 4 to 6 items a day which mention the two words fairly close together.  In many the context is "We're making progress against poverty."  In others, the context is more like "we're making progress in many areas, but little progress against poverty." 

Putting those two words into the search field at Amazon yields these books:

• The Poverty of Progress: Latin America in the Nineteenth Century by E. Bradford Burns (1983)
• Progress, Poverty and Exclusion: An Economic History of Latin America in the Twentieth Century (Inter-American Development Bank) by Rosemary Thorp (1998)
• Poverty and Progress: Social Mobility in a Nineteenth Century City (Joint Center for Urban Studies) by Stephan Thernstrom (1981)
• Poverty, Progress, and Population by E. A. Wrigley (2004)
• Poverty and Economic Issues (Africa: Progress & Problems) by Tunde Obadina (2006)
• Progress and Poverty: An Economic and Social History of Britain 1700-1850 by Martin Daunton (1995)
• The Other Bostonians: Poverty and Progress in the American Metropolis, 1880-1970 by Harvard University Press (1999)
• Poverty and social progress, by Maurice Parmelee (1926)
• Poverty and Progress (Down to Earth) by Fred Martin and Aubrey Whittle (1990)
• Poverty and Progress in the Caribbean, 1800-1960 (Studies in Economic & Social History) by J.R. Ward (1985)
• Progress, Poverty and Population: Re-reading Condorcet, Godwin and Malthus by John Avery (1997)
• The Time Has Come: To Confront the Tragedy of World Poverty Through Centers of Village Progress by James Mayfield (2006)
• Poverty and Progress in the U.S. South since 1920 (European Contributions to American Studies) by Suzanne W. Jones and Mark Newman (2006)
• Profits, Progress and Poverty by Richard N. Farmer (1985)
• Poverty and progress;: An ecological perspective on economic development by Richard G Wilkinson (1973)
• Poverty Reduction and the World Bank: Progress in Operationalizing the Wdr 2000/2001 by World Bank (2002)
• The Developing Nations Poverty and Progress (Volume 41, Number 1) by Irwin (Editor) Isenberg (1969)
• Poverty and Progress in New Zealand by W. B. Sutch (1969)

All of these books together can not have come close to the sales of Henry George's 1879 book, Progress and Poverty: An inquiry into the cause of industrial depressions and of increase of want with increase of wealth; the remedy.  By the turn of the century, over 6 million copies had been sold, it had been translated into 30 or so languages, serialized in newspapers in a number of countries. [6 million copies would be a large number today ... think of it in 1885!] Today, there are at least two foundations, created by industrialists of another era (using identical language), whose missions are to share Henry George's ideas, as expressed in Progress & Poverty -- the Robert Schalkenbach Foundation (based in NYC) and the Lincoln Foundation (with offices in Cambridge, MA), founded, respectively, by a printer and an electric utility magnate.  Joseph Fels, of the Fels Naptha soap company (and brother of the endower of the Fels Planetarium at Philadelphia's Franklin Institute) also devoted much of his mature years to promoting these ideas. 

George's Progress & Poverty was the #2 best seller of its decade, second only to the Bible, and the "progress" in its title helped inspire the Progressive movement.  Anyone in English-speaking countries who read at all was likely to be familiar with its ideas, and George was an effective speaker who traveled widely.  In NYC, he ran twice for mayor; the first time, he lost to Abram Hewitt (the Tammany Hall candidate) in 1886, but beat out the 29-year-old Theodore Roosevelt (whose Bull Moose Party platform about 25 years later looked remarkably Georgist; it is said TR learned his George at San Juan Hill, from a hero who died there); the second time, he died a few days before election day in 1897.  His funeral was among the largest ever in NYC.  (Search the NYT's free archives for articles.)

So what sets Henry George's Progress & Poverty apart from the other books which mention those two words in their titles?  Why did he choose that title?  What is the relationship between these two aspects of our society?  Is it a necessary relationship, ordained by immutable natural forces or laws of economics, or is it something created by human structures, and therefore something we can alter?

George saw clearly something that others had seen through a glass darkly.  He laid it out clearly in Progress & Poverty.  Extend your education by reading this book.  It will probably change your mind and your vision forever, and if enough of us understand the workings of the poverty machine, we will be able to retool it, and leave our children a better world, and a country which genuinely lives up to its ideals.

Progress and Poverty.  You might also want to go read the first essay in George's second book, Social Problems.  It is very timely.

I'm not thrilled with our choices in November

I hate the idea of voting for the lesser of two evils because the other candidate scares me more.  I like the rhetoric of one party better than that of the other, but I don't regard either one of the parties or the presidential slates as being good choices. 

I am unable to vote for the libertarian candidate because they pandered to the people who think they should be able to insert themselves into the relationship and decision-making between a woman and her doctor.  They aren't serious about what they claim to stand for.

When I cast my vote, it will because of the sort of Supreme Court nominations I think each is likely to make.   It will be because one candidate seems less likely to fly off the handle than the other.  It will be because I am far more comfortable with one VP nominee than the other, and with the sort of judgment that went into the choice.  It will be because I think one candidate is likely to be consulting people who mean somewhat better for the ordinary American's interests than does the other party, despite both being largely ignorant about how things actually work and how we might intervene to make things more just and more efficient.  It will be because one presidential candidate is a high-stakes gambler, a man who called his wife names he acknowledges are offensive (google "trollope" with his name for more detail), a man with little foresight or depth.  It will be because I prefer a president with a grasp of and respect for constitutional law, particularly after one who abused us with his signing statements.  It will be because one candidate may have some serious health problems which to date he has not considered the business of the voters.  It will be because I care about how the other 95% of the world regards us. It will because I think one slate is more likely to be reality-based than the other, even if neither of them have really good lenses through which to understand reality.

Can I suggest lenses that will clarify their understanding of reality?

Absolutely.  Start with some of Henry George's speeches ... The Crime of Poverty, Thou Shalt Not Steal and Thy Kingdom Come.   Move next to Bob Andelson's essay, "Henry George and the Reconstruction of Capitalism."  Then read Progress and Poverty and Social Problems, a collection of essays.

Am I sufficiently indifferent between the two major party candidates that I will write in the sort of candidate I want?  No.  For me there is enough difference that I must vote for one of them, and continue working to promote my best understanding of how we can transform America into the country we say it is and is meant to be.    

Democracy is not enough to produce widely-shared prosperity.  And our current form of capitalism, which might reasonably be termed land monopoly capitalism, is a poverty machine, a wealth concentration machine -- but a machine which can be very easily transformed into a machine to produce broadly shared prosperity.  All we need is an understanding of the mechanics of that machine, and we'll be on our way to retooling it.  We need to understand which sorts of wealth ought to be socialized, and which ought to be privatized, and then to act on that understanding.

Bob Herbert: A Fool’s Paradise

A Fool’s Paradise - NYTimes.com.

The article describes the fact that wages have stagnated for most of us, and that a series of events, including the entrance of wives and mothers into the workplace, and the increasing tolerance for debt, have been what has kept the bottom three quarters of the income spectrum afloat.  It ends,

The economy won’t be saved by bailing out Wall Street and waiting for that day that never comes when the benefits trickle down to ordinary Americans. It won’t be saved until we get serious about putting vast numbers of Americans back to work in jobs that are reasonably secure and pay a sustaining wage.

And that won’t begin to happen until we roll up our sleeves and begin the immensely hard and expensive work of rebuilding a nation that unconscionably was allowed to slip into a precipitous state of decline. We’ll end up spending trillions for the wars in Iraq and Afghanistan and another trillion, at least, to clean up after the madmen on Wall Street.

Now we need to find the money and the will to put Americans to work rebuilding the nation’s deteriorating infrastructure, revitalizing its public school system, creating a new dawn of energy self-sufficiency and rethinking our approach to an economy that remains tilted wildly in favor of the rich.

So how do we do that?   Herbert's answer is "That's what the presidential campaign should be about."

But I'll submit that neither of the major party candidates, and, likely, none of the third party candidates, have the answer.   That isn't to say there isn't an answer.  We just haven't heard anything about it yet from any of these candidates.

I think the answer lies in the observations of Henry George, and that the Remedy he laid out in his landmark book, Progress and Poverty (1879).  The subtitle to that book, An inquiry into the cause of industrial depressions and of increase of want with increase of wealth ... The Remedy," seems pretty timely.

Spreading the Wealth: Some kinds of wealth OUGHT to be spread!

One candidate speaks of spreading the wealth.  The other derides the notion as socialism.  But I suspect that neither of them have read, or thought deeply, or discussed in any context what sorts of wealth OUGHT to be spread around, and what sorts OUGHT NOT to be spread?

Not all wealth is the same.  We can divide it first into that which is created by individual or corporate human effort and that which is provided by nature or by the workings of the community as a whole. The former can rightly be privatized.  The latter must not be.