The Danish-American Georgist
Frank F. Bille
[A paper presented at the International Georgist
Conference, New York,
New York, 30 August to 5 September, 1964]
HENRY GEORGE'S AGREEMENT WITH JAKOB E. LANGE
The Great Landlord and his Tenants, my unpublished book which
has circulated in a few hundred copies as. a manuscript edition, I
have'expounded theories which, to me, are beyond dispute because in
Danish Georgism they are taken for granted. Yet to the American
Georgist these theories sound like heresy. I am referring to certain
fundamental economic facts upon which the Danish Georgists have built
their theory of how to accomplish the complete transition from
taxation to rent-collection.
To begin with, it must be said that the theory of transition has
emerged in Denmark as a result of seventy-five years, of conscious
efforts of Danish Georgists to meet the one overwhelmingly important
requirement: A transition, whether it be gradual or spontaneous, must
restore justice to all citizens without inflicting undue
hardship on any particular class or group; it must be easy to
understand, and practical in application.
To accomplish this, a succession of very able men have analyzed the
problems and produced detailed plans which from time to time have been
published and discussed in the journals of the Danish Justice Party
and the Danish Henry George Association, and even in the ordinary
On the other hand, the American Georgists have not, to the best of my
knowledge, worked out any such plan for America.
For me to see, there is a difference in the understanding of basic
economic facts which accounts for the American idea that all we have
to do is start collecting the economic rent of land for public
purposes, and all will be well. This idea is strongly entrenched
because it is what Henry George himself says, in his books.
However, Henry George had a second thought which was not, to my
knowledge, published in America. I quote from Oluf Pedersen's book "Fuld
Grundskyld i Danmark", published 1948 in Copenhagen: ( Oluf
Pedersen is a member of the Justice Party; seated in the Danish
Parliament (Folketinget) until 1960; a cabinet member of the
tripartite coalition government 1957-60 in which this Justice Party
(Retsforbundet) seated three of its members in coalition with Liberals
(Radikale) and Social Demokrats (Socialdemokrater).
Chapter IV, page 39:
THE PRACTICAL REALIZATION OF FULL GROUND DUTY
Following the publication of Henry George's
Progress and Poverty, many individuals had gained an entirely
new understanding of how a society ought to be organized, and his
thoughts found militant friends like the fiery Sophus Berthelsen and
the more realistic Jakob E. Lange.
It came as a quite natural development that also the question of
incorporating these ideas into Danish Law was raised. From the very
beginning, Jakob E. Lange was convinced that the problem of
indebtedness, especially the mortgage debts, must be solved when the
full Land Rent, or Ground Duty (in Danish "Grundskyld") were
to be collected for a public revenue.
When in 1889 Henry George was on a speaking tour in England, Jakob E.
Lange made use of the opportunity and went to England to meet him and
to discuss the problem with him. The memoirs of Jakob E. Lange relate
that Henry George completely accepted his standpoint; an eventual full
Ground Rent which were to exceed the present property taxes ought to
be proportioned between the title owner and the mortgage holder. This
agreement between Henry George and Jacob E. Lange is also found
expressed in the later correspondance between the two.
This consensus .notwithstanding, Henry George was strongly against
the idea of paying a compensation, since this would weaken the results
of the reform.
There was, however, much resistance against a proportionment of the
full ground rent within the group of people who promoted the ground
rent ideas. They tended to prefer a gradual transition.
When the Justice Party (Danmarks Retsforbund) :was founded, the
concept of full.ground rent was made the fundamental principle of the
"State of Justice" ("Retsstaten"), and to further
its inception and for an amortisation of the public debt it was
proposed that a duty of 25% of all net wealth be levied once and for
Also other parties have taken up the question of an equalization of
the burden of full ground rent. The liberal Party (Radikale) whose
program advocates the rights of the society to take the value created
by the society,
had established a commission; on :the subject.
In the commission's report it was stated that four of its five members
were in favor of an expanded ground duty with the mortgage debt taken
into account. (1928)
The Social Democrats
proposed that the ground rent be taken
for a public revenue through full ground duty
against bonds to
the title holders; the bonds to carry a 3-1/2% interest and to be
amortized in 60 years, ... a very timid proposal, but in S. Vang's
dissenting report which was simultaneously submitted, the possibility
of a levy on all tangible net wealth was mentioned, and with that we
approach the same principle as that of the Justice Party proposal
which, unlike the Liberal, and the Social, Democratic proposals, has
been worked out as a legislative bill.
The Justice Party has founded its economic policy on Ground Duty and
Free Trade in connection with a reduction of the powers of the State.
The recent proposals are founded on an equalization of the losses
sustained by the landlords on appropriation by the public of all land
values. Also the proposals set forth by the author of this book are
built on the principle that all investments in real property, title
ownership as well as mortgage ownership, must take the loss on public
appropriation of the land values, while other investments must pay a
corresponding duty for elimination of the public debt.
The first legislative bill on this line was introduced, on July.26,
1934, and the latest one was "Proposal for Law concerning Orderly
Public Economy." It was introduced in the "Folketing"
August 24th, 1945, with a view on the then present situation, for a
solution of the problems which are just as acute today.
All land values are proposed to be appropriated by the public through
the medium of full ground duty. The first year's assessment is 4-1/2
per cent of the land value in addition to the already existing ground
duty on real estate. The following years a full ground duty should be
assessed according to a special valuation.
The valuation is to be done every year by the public assessors. The
ground duty to be assessed so high that land will become available
On the other hand, no parcel must be assessed so heavily as to
prohibit transfer to other owner against full payment for privately
made improvements) landscaping and buildings.
The land remains privately owned, but its value is to be appropriated
by the public. On appropriation, the titleholder will suffer a loss
equal to the value of the land exclusive of improvements.
The question is, WHO OUGHT TO TAKE THIS LOSS?
It is not the land itself that is appropriated; the titleholder still
owns it. It is the land value that is taken, but who owns the land
This was the problem which Jacob E. Lange talked over with Henry
George in 1889. Lange maintained that the mortgage holder ought to
partake in a new ground duty. Henry George acclaimed this viewpoint,
and it seems to me quite self-evident.
The question is then, how can such an equalization be carried out in
From this account it is evident that Henry George himself had seen
the necessity of an equaliziation of the losses between title holders
and mortgage holders, and that among leading Georgists in Denmark this
viewpoint is so clear as to seem self-evident, insomuch that it is not
even deemed necessary to explain the scientific facts which make it
It is, therefore, my obligation towards my American readers to
clarify the theory of transition which in The Great Landlord and
his Tenants has been treated "only briefly and summarily.
I do this in response to a number of letters received from friends
who generally express approval or at least are neutral on everything
in the book except this controversial transition plan.
It is possible that most of the misunderstanding is due to the
interpretation of the terms used. Almost all of the letter-writers
have the impression that the term "equalization of losses"
necessarily must be of the same effect as the term "compensation".
Before I attempt to explain the difference, the term "False
Capital" must be clarified, because the whole theory of
transition is a theory on "how to eliminate False Capital and
prevent new formation of the same. "
"False Capital", as distinct from "True Capital",
is defined as: The capitalized value of/monopolized special privileges",
or as in my booklet UNTAX, "The capitalized value of a population
enslaved under the monopolies and the powers of government." In
UNTAX there is a specification of this "False Capital" which
I will repeat, with one correction:
- 1. The Purchase Price of Land, exclusive of all improvements,
is a false capital.
- 2. The Purchase Price of Chattel Slaves, if slavery were
allowed, would be a false capital.
- 3. Money and Bank Credit in the possession of the Banking
System is a false capital to the extent it represents the
capitalized value of the banks' incredible privilege of creating
credit. Money and Bank Credit in the hands of others cannot be,
termed "false capital". Since money is the "evidence
of a credit given and a promise received" it can be
classified as an extension of the businessman's accounts
receivable which is a part of his "liquid capital assets".
- 4. Outstanding Loans of Banks, to the extent they represent
monetization of Debt, are false capital. (a) Government Bonds; (b)
All other financing.
- 5. Mortgages, bonds and shares, to the extent they represent
the capitalized value of .land, are false capital.
There may be several other forms of "False Capital", but
these are the ones which can be identified by their sources, Land
Monopoly and Money Monopoly.
Most Georgists, both in Denmark and in the U.S. are unfamiliar with
monetary theory and have consistently taken the stand not to become
involved in the controversy aroused by the "money alarmists".
They usually fend off with the old familiar glib retort, "If I
had all the LAND in the world and you had all the MONEY, what would
you do when I said GET OFF MY LAND OR PAY! ..."
It is not possible to solve the land question without solving the
money question, for "the land monopoly and the money monopoly are
two sides of the same counterfeit coin." False capital arising
out of both monopolies is interchangeable, and false capital is
interchangeable with true capital, and with money and credit. The
title ownership in land is exchanged against a check and a mortgage.
The check is drawn against a bank deposit which originated in bank
credit, which the bank just created. The mortgage holder receives
payments from the title holder and is thus, in effect, getting a big
share of the land rent which the title holder is collecting from the
tenants. Maybe the mortgage holder is a bank. In that case the bank
had paid off the former title holder with fictitious bank credit
created on basis of the mortgage which is-accepted on basis of the
land value. Thus land value caused a debt to be made, and the debt
caused money to be created. This is monetization of debt, and
inflation of; the money supply.
Now suppose that, miraculously, we persuaded the nation to accept our
sound philosophy of land value taxation to its full extent as
supposedly taught by Henry George. The full economic rent of the land
would have to be paid by the title holders, and the taxation of
production and income would cease; the banking system would be as
before; outstanding loans and mortgages based on land values would
remain intact and enforceable; the public debt would not be repudiated
but paid off (or so it is hoped); government activity to be curtailed,
Suppose that a certain property yields an annual land rent of $1,000
which has become capitalized as a land value of $20,000, and there is
a building on it worth $40,000, for a total of $60,000, which is what
the present owner paid for it recently. His own investment is $40,000,
and the bank has financed the $20,000 mortgage. It can truly be said
that the $1,000 annual land rent caused the land value of $20,000,
caused the debt of $20,000, and caused the false capital of $20,000 in
the form of the .mortgagee held by the bank. As a matter of fact, the
title holder's payments to the bank exceed by a rather large amount
the $1,000 which he actually reaps himself as land rent, for the
payments are for both interest and amortisation.
Now, according to the new "single tax" arrangement, he must
pay the $1,000 land rent to the public treasury in spite of the fact
that not he, but the bank, is the actual recipient of the benefits.
Since he does not have any un-earned net income, the $1,000 land rent
to the public must come out of his WAGES, which was exactly what we
wanted to avoid. The supposed "land rent" he pays is nothing
but another form of INCOME TAX. And the mortgage holder who actually
still receives the benefits of the land rent may now keep all of it,
for he is not required to pay anything. The title holder pays twice,
and the mortgage holder has an unearned income that is not taxed at
all. We are back in the mess we came from! Thank God, the nation has
not bought the idea!
To restore JUSTICE it is necessary to identify and eliminate the big
false capital in all the different manifestations, of which the actual
land value is only the primary farm from which all the others evolve.
The false capital has two sides, a positive and a negative. The
positive side is the side of the "creditor - owner" who
possesses an "asset", though it is a false and fictitious
asset. The negative side is the side of the "debtor" who in
order to obtain title to land has entered into "liabilities"
or "debt", though they are false and fictitious liabilities.
To eliminate only some of the false "assets" and none of
the false "liabilities" would not only be bloody injustice,
it would be disastrous to the Georgist philosophy and might
permanently destroy even our own faith in the good cause.
Actually, the big false capital has become so completely diffused and
mixed up with true capital that any attempt to single out and
eliminate the false capital in specific instances would lead to new
serious imbalances and endless rescue operations. The Danish Georgists
have seen this, and the much disputed Equalization Schedule in The
Great Landlord And His Tenants is inspired by the Danish plan.
The procedure is to eliminate the false capital created by the twin
monopolies, the land monopoly and the money monopoly, by taking away
the unearned land rent and the unconstitutional and immoral private
monetization of debt and restore the revenues from these two sources
to the public treasury to which they rightfully belong. By letting
every owner of true and false capital specify his assets and his
liabilities as per one certain day, the amounts and the proportions of
true and false capital are determined in each individual case, and the
natio nal to ta1s and proportions are determined by adding up all the
individual statements. The national proportion of false capital as a
percentage of total net worth is then used for equalisation of the
losses sustained by the owners of land and government bonds which no
longer have any value. If for instance the national average is 40%,
any man whose loss exceeds 40% of his net worth will receive
compensation for the excess, and any man whose loss is less than 40%
will have to contribute to the compensation. If a man's loss is
exactly 40% he will neither receive compensation nor contribute
The transactions are facilitated by means of a special bond issue
which is matched, dollar for dollar, by a special issue of
obligations. The man who must contribute can do this by signing
obligations in the amount owed, and the bonds issued on basis of the
obligations are then paid to those who are to receive compensation. As
the obligations are paid off, the funds received are used for retiring
It must be realized that the losses are only losses on the paper, and
even though a man may have to fulfill obligations which exceed his
total liquid assets, he has the freedom of choice whether to pay his
obligations off slowly with interest on unpaid balance, or liquidate
some of his capital assets and pay off at once. Besides, the complete
absence of taxes will in most cases more than make up for the
temporary burden of obligations.
The transition with equalization will, therefore, not necessitate
forced sale of property and will not cause any disturbance of
business. The great day on which all the changes take place is only a
common, national deadline for re-shuffling of the cards, and the rest
is nothing but bookkeeping which can be done by modern electronic
The debtor with great liabilities and high land values will be the
recipient of rather large amounts of bonds because his net worth is
low. However, the bonds will go through Escrow and be applied to his
debt which will be reduced by the amount of the bonds.
The equalization will not affect those citizens who do not own any
wealth above a certain minimum. Personal belongings are exempt for a
certain amount per person, in my example it is set at $600 per person
which means that a family of two adults and four children would be
exempt from partaking in the equalization for the first $3,600 worth
of wealth which the family owns.
Of course, it is impossible for me to cover all the aspects of this
transition plan which, if put into effect, would mean nothing less
than an economic revolution of gigantic proportions. I hope that these
few pages have made it clear enough that I do hot propose to
compensate the landowners - or anybody else - for the loss of land
values, but I do propose to equalize that loss in such a manner that
nobody in particular will be punished for our economic sins. In so
doing I believe that I am contributing to the formation of a Georgist
philosophy that will be more acceptable to the public because it is
The main argument which my friends and correspondents bring up
against the equalization plan is that it is an unnecessary
complication, unnecessary because nobody any longer adheres to the
idea of a sudden transition from taxation to land rent collection.
Since the transition necessarily must be gradual, so they argue, the
ill effects which I have predicted will not occur, at least not to a
degree worth our concern, "After all, you can't make an omelet
without breaking some eggs", says one; "By the time the
people have become convinced of the truth and vote for land value
taxation most of the speculative water will have been squeezed out,
and the anticipated reduction of prices, will begin to take place long
before actual effectuation of the reform", says another. I wish I
could agree, but things are not that simple.
In the first place, Henry George's philosophy was more than just
fiscal reform, it was RESTORATION OF JUSTICE. The very thought of
restoring justice by peacemea1 application during a period of one or
two generations is repugnant.
The complete transition with equalization of losses described in the
foregoing is actually gradual in its effects. It begins with a
comprehensive survey and a complete fixation of all the economic facts
as they relate to each and every individual and every economic unit.
From that point of fixation, the actual transition progresses in an
orderly and planned fashion. The period of transition lasts from the
day of fixation till the time when all the special "Jubilee
Obligations" have become amortized and all the "Jubilee
Bonds" redeemed in the process. Meanwhile, all taxation of
production and income will have ceased, and the assessments of land
rent will have been revised annually upwards until the full benefit of
liberty from taxation has found full expression in the land rent.
Government will have been reduced to its proper function; monetization
of debt by banks will have ceased, and the rightful and constitutional
monetization o if the Nation's credit, will add new revenue to the
Nation's treasury. These gigantic changes will take time, but the
transition will progress by the free will actions of all the
individual's acting together according to law, and sooner or later the
whole economy will be completely adjusted to the fact that the FALSE
CAPITAL was eliminated.
Georgists have refrained from advocating this "radical"
approach and have adopted the view that the transition can be done by
a gradual application of a higher and higher rate of taxation upon the
land values without regard to the debt incurred by the landowners. The
question in my mind is whether this procedure is not a deception
adhered to because of the awesome magnitude of the problems and the
urge to find a compromise. Gradual adoption of land value taxation has
some very obvious, fundamental weaknesses. In the first place, the
land value must be capitalized before it can be the object of
taxation. Next, this capitalized value will, more often than not, be
mortgaged or, if not directly mortgaged, cause a debt to be created.
Third, this creation of a debt will cause the creation of additional
bank credit and higher deposits on checking accounts. Fourth, the
false capital will therefore not reside with the title owner alone but
will have become dissipated through the whole financial community.
Fifth, if land value taxation is levied on the title owner alone and
the proceeds used for diminishing the taxation of income from other
sources, we will have accomplished very little in the direction of
justice; Indeed, we will be taxing the true wages and interest
accruing to the title owner while at the same time un taxing the land
rent accruing to the mortgage owners and the banks. That is no way for
us to make friends and influence people for the Georgist philosophy!
Only the practically extinct tribe of landowners without debt will
seem to fit the traditional Georgist theory, and since it is a fact
that the land monopoly and the money monopoly together have managed to
load us with a debt at least equal to the total land values, I for my
part cannot help but have my reservations concerning the lopsided
gradual application of land value taxation with careful preservation
of FALSE CAPITAL.
I present these thoughts without being able to fully comprehend all
the pros and cons, but the development in Denmark seems to indicate
rising indebtedness and continued inflation in spite of the expanded
land value taxation. The Danish Georgist Knud Tholstrup, for 12 years
representing the Justice Party in the "Folketing", has
published a booklet "Inflation can be stopped" which
concludes as follows, "The only way to stop inflation is to stop
the formation of false capital, or false buying power." Mr.
Tholstrup knows the false capital represented by mortgages but seems
unaware of the phenomenon called monetization of debt which is the
very act of inflating the money supply by the creation of bank credit.
Therefore, his own logic compels him to define money ac being "all
evidences of ownership" which, of course, falls a little short of
being an exact definition. The book is available from the Henry George
School of New York.
The Danish Justice Party, in order to get action on lard value
taxation, was forced to accept compromises such as the surtax levied
on the seller of valuable land, whereby he must remit to the State any
excess profit above a certain assessment. This procedure is faulty
because it applies only in case of sale, and the fact that the State
receives part of the money does not alter the fact that the title
owner must make mortgage debt just the same.
Had the Danish Georgists been influential enough to effectuate the
well balanced plan of transition as developed by their finest men from
Jacob E. Lange and Henry George to Oluf Pedersen and Viggo Starcke,
that small nation would have put a large looming milestone on the
pages of world history, and the turning point in world economics would
have been as significant as the Declaration of Independence and the
advent of the United States of America.
Maybe that was the reason why hidden reactionary forces combined
their resources in an all out effort to misrepresent and slander the
Justice Party before the election in I960. With no daily paper to
represent its views, the Justice Party was defenseless against, the
outrageous distortions, and the party lost all its seats in the "Folketing".
But in departing they said, WE SHALL RETURN.