Henry George's Economics of Abundance: Replacing Dismal Choices
With Practical Resolutions and Synergies
Mason Gaffney
[A paper delivered at the Eastern Economics Association meeting held
in New York City, 27 February through 1 March, 2009. Reprinted from
GroundSwell, March-April 2009]
Introduction: Resolutions vs. Trade-offs
It is part of George's genius that his proposals solve one problem by
resolving it with another, turning two problems into one solution. It
is something like tuning up the orchestra for a concert, turning
dissonance into harmony, and keeping the beat together, turning
cacaphony into rhythm. It is the mark of good solutions that they
reconcile and resolve, rather than simply "trade-off."
That is what George means when he writes that "the laws of the
universe are harmonious." That is what Founding Fathers like
Washington, Jefferson and Franklin meant by a "natural order."
Like them, George is a deist in spirit, a believer in the consistency
of the universe. The concept that some things are more "natural"
than others is not arbitrary. The clue that one has found the "natural"
law is that it makes forces harmonize and team together instead of
clashing, and neutralizing each other. The principle of constructive
synthesis - a touch of Hegel - is another way of perceiving the value
of turning cacophony into harmony.
Economists today offer us mainly "trade-offs" and hard
choices. For every good thing we must give up another, so net gains
are just marginal. That is the approved posture:
it makes one seem hard-headed, worldly, and practical.
Too much positive thinking sounds suspiciously optimistic, and
invites rebellious cynical muttering that "there ain't no free
lunch." It goes back at least to Malthus, who offered mankind
the hard choice of food vs. sex. That sort of thinking is what made
people call economics "the dismal science."
A true resolution is much more to be desired. To get one good thing
we get a second one as well. It is remarkable how many "hard
choices" are turned into benign resolutions in George's program.
He is a genius at finding the essential harmony of interests now
concealed beneath confused thinking. Instead of a dismal trade-off,
there is a "free lunch," or "synergy": the whole
is greater than the sum of its parts. Such grand resolutions, when
possible, deserve to be called "true win-win solutions."
The most obvious such true win-win solution is putting the unemployed
to work. Recognizing this truth is no monopoly of George: Keynesian
economists long insisted that there is no social cost in putting the
unemployed to work. It is a measure of the bankruptcy and myopia of
many economists today that even those voices are muted, and that
obvious gain is denied: working is called a "sacrifice of
leisure," just another trade-off. Unemployment has become "job-searching."
It is more likely a sacrifice of burglary, vandalism, drug-use, jail
time, loitering, looting, collecting welfare, and sullen misery.
Trading such bad time for the gratification, pride, on-the-job
learning, and moral uplift of working is not a trade-off, but a double
gain. It is a true "free lunch," if you will.
Many economists today react to such ideas with reflexive disbelief.
They put down optimistic claims by calling them "panaceas,"
too good to be true. TAANSTAAFL is their slogan; cynicism their
preferred posture. However, false pessimism is just as false and
damaging as false optimism. A truer slogan is TITSTAAFL: "There
Is Too Such a Thing As A Free Lunch." It's rather a question of
WIGGI?: "Who Is Going to Get It?". Many dismal alleged
trade-offs are just someone's mental blocks that stand athwart the
path to abundance, or, worse, ways to control and exploit us. Often,
in fact, "we can have it all." Is it too good to be true?
Let us itemize the many resolutions of alleged trade-offs and
standoffs that George's program will achieve.
Two of George's resolutions are to reconcile efficiency and equity,
and to square taxes and incentives. That is a good start, and a
compelling vision. What more can a reasonable person ask of economic
policy than to resolve these ancient basic standoffs that have
confused and divided us, blocked understanding, deadlocked
constructive action, and seized up the polity for generations? It is
an achievement on a par with resolving Evolution and Creation, except
George's program is something we can do something about and put to
use. As we proceed, however, we will see sixteen such resolutions in
George's program.
1. Equity, Efficiency, and Incentives
a. Equity and efficiency
George refutes the commonplace idea that we must choose between
equity and efficiency. This idea is premised on identifying "equity"
with price and rent controls designed to help the poor against the
rich; or with counter-incentive progressive income taxation, with its
warping, suppressive effects. George rejects both price controls and
progressive income taxation, and identifies a different tax policy
that brings us both equity and efficiency together. He would untax
productive activity, and instead base taxes on land, in proportion to
its value. This combines the magic of justice with the magic of
incentive.
George's land tax promotes equity toward the landless in at least
four ways.
One, it relieves them of taxes, to the extent that
landowners pay more;
Two, it makes jobs by removing all tax penalties from hiring
workers, and also because the land tax, a fixed charge, spurs
landowners to use land to earn cash to pay the taxes.
Three, while jobs are generating new money incomes, new production
supplies more goods and services. Those give substance to the money
incomes, precluding inflation such as poisoned the springs of
Keynesian "fiscal stimulus";
Four, it offers the landless new chances to acquire land
themselves, as old owners release surplus lands to the market.
b. Reconciling progressivity and motivation.
A land tax abates concentration of wealth and power without limiting
ambition or enterprise. It taxes wealth while sparing both capital and
income. It puts no cap on ambition and enterprise, except to redirect
those useful traits into creation, production, hiring, and capital
formation, and away from the zero-sum game of land-grabbing.
It requires no incentive-warping progressive rate: all land is taxed
at the same rate, in proportion to value. The tax achieves
progressivity by using the observed reality that wealth rises with
income, faster than income; and landholdings rise with wealth, faster
than wealth. Otherwise put, the land tax offsets concentration because
ownership of wealth is more concentrated than income; and ownership of
land is more concentrated than other forms of wealth. As George said,
"The great cause of the concentration of wealth is concentration
of the ownership of land."
At the state or local level, George's program is the answer to
California Governor Pete Wilson's dilemma, and every governor's
dilemma: it untaxes and attracts capital, and encourages capital
formation, without giving away the store, or untaxing the rich, or
starving the schools and police. It raises state revenues from the
richest people while attracting business and wealth with the very same
stroke. The unique, remarkable quality of a property tax based on land
ex buildings is that you may raise the rate with no fear of driving
away business, construction, people, jobs, or capital! You certainly
will not drive away the land, however high the tax rate. Not one
square foot will walk out of town. The only bad thing to say about
this tax's incentive effects is that it stimulates revitalization, and
makes jobs. If some people think that is bad, maybe they are the
problem.
So George's simple program not only reconciles efficiency and equity,
it squares taxes and incentives.
2. Reconciling demand side and supply side economics
a. Aggregate. Consumption and production
George's tax program stimulates both the demand side and the supply
side. Here is the gist of why it works where other methods fail. A
land tax spurs landowners to use land to earn cash to pay the taxes. A
land tax creates pressure on owners to hire and produce more; other
taxes create pressures to hire and produce less. That works because it
is a fixed charge: it cannot be avoided by underusing land, and it is
not increased by using it. It applies leverage to landowners, just as
would a fixed debt service. Leverage means that a landowner, by
raising gross output 20%, for example, may raise his net income by
100%.
On the demand side, to repeat, it makes jobs by removing tax
penalties from hiring workers and creating capital. Second, a land tax
creates pressure on owners to hire more; other taxes create pressures
to hire less. Third, untaxing capital and its income raises the
incentive to invest, answering those who still dispute Say's Law.
Fourth, tax revenues are spent locally (whereas rents paid to absentee
owners are spent distantly).
The program operates at the same time on supply. Unlike the travesty
of supply-side stimulus offered from Washington these last several
years, this is supply-side economics with a real kick. It works
through tax transformation rather than tax reduction. This is "true
fiscal stimulus." A land tax creates pressure on owners to
produce more; other taxes create "fiscal drag," i.e.
pressures to produce less. We can raise taxes (if desired), and
stimulate supply in the same stroke: there is no hard choice to make
between them. The increase of supply gives substance to the rise of
demand: there is a flow of new goods to meet the flow of new demand.
This precludes inflation, the fatal flaw in Keynesian "fiscal
stimulus" (which is all on the demand side).
Georgist fiscal stimulus achieves full employment not only without
inflation, but also without deficits. The stimulus works through the
motivational effect of the tax on landowners. Unlike other taxes,
stimulus rises with the rate of taxation. We may run surpluses and
retire debt, pumping capital into the private sector, while still
providing fiscal stimulus from government. That rise of land taxes
will not lower, but raise the MRORAT (discussed next).
b. Investing and Saving
Untaxing new investing raises MRORAT (the marginal rate of return
after taxes). This is what Keynes called the "marginal efficiency
of capital," which he identified as "the inducement to
invest." To demand-siders, it is the motor that drives the
macro-economy, raises national income via the multiplier effect, and
offsets the propensity to save.
Georgist tax policy raises MRORAT in at least three ways. First is
the obvious lowering of direct taxes on capital and its income. Second
is the lower payroll tax, part of which is borne by investors when
they hire workers. Lowering this tax raises returns to investors,
especially to those who invest in labor-using operations. Third is the
higher pressure on landowners to attract capital and hire labor. A
fourth way is cumulative: any policy that has basic stimulative
effects raises aggregate demand, which in turn raises investor "animal
spirits" in a benign upward spiral.
Untaxing buildings obviously draws in outside capital, which is good
locally, but is not capital formation to the whole economy. In
Keynesian models, higher income leads to higher saving, and does
create new capital. Supply-siders today worry more about raising the
rate of saving from any given income. In supply-side models it is more
important to increase the rate of saving, without depending entirely
on the Keynesian effect, where higher income raises saving. Also, from
the nationalist viewpoint, it is better to supply investable funds
from domestic savings, to minimize foreign ownership.
Land taxation helps here, too. Land taxation, if heavy enough to
count, lowers the investment value of land, through "tax
capitalization". There is a diminishing marginal utility of
savings to any wealth-holder, meaning the more you have, the less you
need more. With land devalued, those needing wealth seek substitute
assets to replace land in their portfolios. To acquire those
additional assets they must save more, and invest the savings in real
new capital, rather than land.
Thus, Georgist taxation meets the proper goals of supply-side
economics: raising output, and raising saving. It reconciles
supply-side economics with taxation by providing a mode of taxation
that stimulates instead of dragging down production and employment.
3. Micro "structural" reform coupled with macro reform
A weakness of Keynesian policy is its scorn for structural reform,
e.g. combating monopolies and sticky markets. It relies solely on
Federal fiscal policy. Its focus is so narrow that even monetary
policy, which seems so closely allied in spirit, is regarded as rival
rather than complementary. Thus, when inflation pricked the Keynesian
bubble, there was little left to offer except the dismal Phillips
Curve trade-off.
Georgist policy improves the structure of the economy in at least
five ways.
a. It erases the "wedge effect" of indirect
taxes, while maintaining tax revenues. This might be called a "True
Laffer Curve effect" - what Laffer and Reagan promised in 1980,
but Reagan could not deliver. The wedge effect is both warping, and,
in the aggregate, anti-incentive.
b. It actually lubricates the land market in the very process of
extracting more tax revenues from it. It is better than "neutral"
(lacking in wedge effects). It subjects landowners to a cash drain
that is more potent than mere "opportunity cost" in
prompting landowners to put land to its "highest and best use,"
i.e. to allocate it optimally in the manner prescribed by economic
theory. The writer has developed this point elsewhere.
c. It combats monopoly restriction of output by making it costlier
to withhold land from use. Likewise, it combats monopsonistic
exploitation of workers.
d. It unlocks urban land markets that are frozen up by the tendency
of firms to buy and hold land for possible future expansion. This is
a form of vertical integration which, like all withholding actions,
is self-reinforcing and self-validating, hence cumulative in its
impact. That is, if A and B are tying up surplus land for their
possible future needs, that forces C, D, and E to do the same
because they cannot rely on the open market to supply the land when
and if needed. A fortiori, speculative preemptors who hold
key parcels to profit from others attempts to assemble buildable
parcels, or to compete in key markets, force others to do likewise
in self-defense. The pooling function of the free market is
impaired. Conversely, the gains from correcting such market failures
are also self-reinforcing and cumulative, providing us with many "free
lunches."
e. It makes landownership more available to small business, and new
businesses, by lowering the market price of land. It substitutes a
deferred annual charge for a high price up front. This has the same
effect as extending credit to all market agents on identical terms,
thus offsetting the otherwise overpowering bias of credit rationing
and discrimination in lending. Large surpluses of land are released
to the market as the tax cost of withholding land forces it to be
sold.
It should be apparent that each of those effects helps markets work
the way competitive theory says they should. Their aggregate effect is
overwhelming. Some Georgists have made their case on structural
grounds alone. We have seen, however, that these are in addition to
the macro effects.
4. Local, state, and national applications
Georgist policy can be applied at any level: local, state, or
national. To some extent it is even applied at a world level, through
the U.N., with its concept of "common heritage" applied to
oceanic resources of the deep seabeds.
Georgist tax policy can also be applied at any tax rate, low or high.
A low rate does a little good; a high rate does a lot of good.
In this Century, strenuous efforts have been made to box the property
tax into the local level, where local particularism tends to cap the
rate. In England, this policy is identified with the half-brothers,
Austen and Neville Chamberlain. Neville was so successful that in 1938
he was forced to face Adolf Hitler without any armed support, with the
disaster at Munich. In America the Federal government last taxed land
in the Georgist manner during the Civil War. After 1913 it taxed the
income from land, but in recent years the income tax has degenerated
into a payroll tax primarily. In tandem with the other payroll tax it
has become a primary cause of our depressed labor market.
In 1920, about half of all state revenues (not counting local) came
from state property taxes. These tended to focus on land, rather than
capital, much more than now. Both the state and Federal governments
could tax land again, any time the voters send that message.
5. Relieving labor without burdening capital
Georgist tax policy would downtax labor without uptaxing capital, and
without lowering public revenues. That is possible because the
economic world is not dualistic. There is a third factor, land, which
George would tax instead. The taxable capacity of land is surprisingly
high. It has been concealed conceptually by many sophisms inherent in
modern economic theory, and concealed statistically by rolling land
rent into other categories. A good deal of potential rent has also
been aborted by the counterproductive tax methods used on buildings
and labor. This is a big topic, treated in "The taxable capacity
of land," and "How to revive a dying city," and "Adequacy
of land as a tax base," and "The synergistic city," on
reserve.
A great deal of latent rent would be generated by new, full
development. It is not just the individual sites that matter here, but
the synergistic community effects of active renewal and full, timely
development. The positive neighborhood effects of replacing old
buildings with new are irresistible and contagious, raising land
prices all around. The converse is also true: the negative
neighborhood effects of letting old junkers stand without replacement
are depressive. Thus, when you take the tax off new buildings, and put
it on the land under old tumbledowns, you kick off a general process
of revitalization that turns gloom into hope into optimism: optimism
that boosts land prices and the land tax base.
New development likes to anchor onto healthy neighborhoods. Richard
Hurd, father of urban studies in America, taught us in 1902 that land
values are marked by continuity in space. It's still so. Fashions and
technology change, but principles endure.
Even Heinrich von Thuenen, father of location theory, approached
cities in an arid, antiseptic way that left out most of the sperm and
egg, enzyme and ferment that today we call urban linkages and synergy.
George was a mensch, like Holly Whyte or Jane Jacobs, seeing cities in
intensely human, interactive terms. George saw cities as foci of
communication, cooperation, socialization and exchange, and these as
the basis of civilization. He saw cities as the new frontier, an
endless series of new frontiers because the city as a whole enjoys
increasing returns: the presence of people with good mutual access,
associating on equal terms, expedites cooperation and specialization
through the market. Multivariate interactions in cities are
synergistic. Indeed, while each part - each parcel of land - is
developed in the stage of decreasing returns, the composite city is
generally in a stage of increasing returns, thanks to synergy: the
whole is greater than the sum of its parts, and increases to the whole
yield more than the sum of increases to the parts.
Urban blight is cumulative and self-reinforcing: blighted buildings
cast a pall on land around them, discourage upkeep and stifle renewal.
Whatever slows renewal of one site therefore slows the neighborhood,
which reflects back blight to the first, a vicious downward spiral.
Conversely, new buildings help stimulate renewal around them. The
rule is that new buildings draw tenants from old and weaken other
Defenders so other owners have to renew, too. When they do, where
better than next to the newest, hottest building? So renewal is
cumulative, just like blight, only upwards in a benign spiral. A
benign spiral is a "free lunch," the kind that cynics say "there
ain't no such thing as." These matters are treated in the works
cited above.
When a city untaxes buildings its land prices, the new tax base, are
pushed up. Competition for sites raises the tax base - not buildings,
now, but land prices derived from ground rents. Using the higher base
the city can improve public services, if needed, but without taxing
any building, without scaring away any generators of fiscal surpluses.
In this scenario, buildings raise the tax base indirectly, by raising
the value of land around them. So do productive people, when their
wages are not taxed away.
Land prices are raised just by the expectation of new buildings'
being tax free. The mere expectation will immediately boost the value
of land, even before the new buildings go up.
6. Urban renewal without subsidizing evictions
Georgist tax policy helps renew cities, without subsidizing or
administering teardowns and "clearance" of old buildings and
neighborhoods. Georgist policy does not speed renewal by penalizing
old buildings, but by encouraging new ones. It does not subsidize new
ones, it just stops penalizing them. Teardown is never an end in
itself; it only comes when incidental to releasing land for new
buildings of greater capacity. This matter is covered in "How to
renew a dying city."
7. Contains urban sprawl, improves urban linkages among
complementary land uses, without overriding market choices.
a. Taxing land sharpens market incentives via the leverage effect
noted earlier.
Thus it makes the land market work better, and follow its natural
infilling, centralizing tendency. Curbing urban sprawl does not
overrule the land market; it is a byproduct of making the market work
better. Richard Hurd, as cited above, noted that land values are
marked by continuity in space. That means the market is telling owners
to develop land contiguously; to anchor new building to established
strength. Sprawl, then, is not market driven, but market-defying. It
is the product of market failure. Georgist taxation makes the market
work better.
b. Fosters resident ownership, civic participation
Riverside, CA built itself a lovely downtown pedestrian mall, back
when that was in vogue, and has been sorry ever since. Nothing worked
out, retailers deserted, and half the stores are empty. Recently I
asked the developer of Tyler Galleria, a success, why he thought
downtown failed, and got the answer in two words: "absentee
ownership". I should have known, I've preached it for years.
An agricultural adviser in Fresno once told an impressionable boy "The
best dressing for soil is the owner's shadow, applied daily". In
town they say "Who's keeping the store?" Absentees aren't
the only negligent owners, nor are they all bad. Torpid owners are the
problem and they come in many forms. Basically, to make a city go you
want to be rid of owners who see real estate mainly as a cash cow for
their retirement, and replace them with owners who see it as a vehicle
for their enterprise, who "apply their shadows" daily. Those
shadows will also follow them into local civic clubs, and enterprising
downtown and neighborhood associations for making joint improvements.
8. Reconciles common rights to land with private tenure
Georgist policy harmonizes collectivism and individualism; government
and the market; common rights and private tenure. It has been called "commons
without tragedy," because it lets common-access resources like
fisheries and open ranges be closed off, without destroying common
rights. The principle is simple and basic. Common lands, with open
access, become overcrowded. Optimal management calls for restricting
entry and usage. Entry is limited by issuing licenses (or leases,
permits, concessions, possessory interests, etc.). However, instead of
giving these away gratis, as is the current practice, they are leased
out annually to the highest bidder. Thus, those excluded are
compensated, while those included get only what they pay for.
As to land already in private tenure, taxation asserts common rights
to the income of that land, without impairing private tenure rights.
Indeed, private tenure is strengthened when the owner can truly say "This
is my land, I pay the taxes on it." Squatters, trespassers, and
vandals may be evicted with a clear conscience: their common rights
have been protected otherwise, through the tax system. Thus, the
policy reconciles common rights and heavy taxation with the free
market and strong private tenure rights.
In addition, taking tax revenues from land lets capital and labor go
untaxed. Private property in labor - the basic right of a person to
himself, as posited by John Locke - and private property in capital,
the right of a person to the full value of what he saves, are
strengthened.
9. Paying the debt while also making jobs
President Clinton adopted a policy based on the premise that
Keynesian "fiscal stimulus" is really "crowding out,"
so paying the debt can stimulate the private sector via "reverse
crowding-out." The problem here is that it is based entirely on
pushing more investable funds into the private sector, with nothing to
raise the demand for those funds.
Georgist taxation lets the debt be paid, while at the same time
raising investing opportunities in the private sector, as shown above.
10. Making labor cheaper to hire without lowering wage rates
Georgist policy removes the many big tax wedges between worker and
employer, and employer and customer, and worker and consumable goods.
Thus labor can cost the employer less, while the worker gets more
disposable income after-tax. Many economists inveigh against the
minimum wage, claiming it overprices labor. It is a matter of
suspicion that they are then silent on the deadly effects of the
payroll tax, which affects workers at all levels. Sales taxes, too,
cut into real wages, yet many of these same economists would raise
sales taxes and introduce VAT. President and Mrs. Clinton spoke
seriously of raising payroll taxes even more, to finance the new
health plan.
There is a high elasticity of demand for labor. This may be observed
in farming, for example, where landowners have avoided union wage
rates simply by shifting their land from fresh fruits and vegetables
to labor - sparing uses like small grains or cotton. Conversely,
removing the payroll tax burden will move owners to shift land back
into labor-using enterprises.
11. Adding people and capital without diluting resource base
Georgist policy lets a region, nation, or the world add population
and/or capital without diluting its resource base. It is as though
rescuers pulled drowning people into a lifeboat, and their presence
made the boat expand instead of sink! Call it "The Accommodating
Lifeboat Theorem." It sounds like the Miracle of the Loaves and
Fishes, but it is a different kind of miracle: synergy. It comes from
the power of enlarging the market, as described by George in his
chapter on the effects of increased population, and Adam Smith in his
aphorism, "the division of labor is limited by the extent of the
market." An indication of it is that bigger cities around the
world have more land value per head than small ones, as documented by
William Alonso.
We must temper this claim. Bigger cities are often located on better
land, so size isn't all that accounts for Alonso's finding. However,
more than sheer size, and more than good natural location, is the
internal circulation of a city. Georgist policies are essential to
financing good circulation, containing sprawl, and inducing private
land development complementary to the circulatory system.
12. Fostering economy in government in the very process of
raising revenue
Anti-governmentalists often identify any tax policy with public
extravagance. Georgist tax policies, on the contrary, help save public
funds in at least two general ways.
a. Putting the unemployed to work saves many public costs, like
welfare, obviously, crime-fighting, and, ultimately, putting down
civil disturbances and insurrections.
b. Putting the unemployed to work also raises demand and, by so
doing, helps make plain to all the desirability of unleashing supply.
Now, supply in some industries is deliberately held down to support
prices. U.S. agriculture is a good example: supply restraints are
transparent because they are matters of public law. The U.S.D.A. pays
landowners to fallow some 60 million acres each year, to raise food
and clothing prices. Under Georgist policy those acres would go to
work producing food and paying taxes, both.
c. Georgist policies obviate subeconomic extensions of public works,
which now are pushed by the powerful combination of land speculators
seeking increments, the jobless seeking work, and the homeless seeking
shelter. Georgist policies open up the naturally better land to
settlement, thus relieving the pressure to invade flood plains, steep
erosive slopes, flammable brushlands, wetlands, and other places that
soak up heavy public funds to reach, develop, service, and protect.
At the same time, these policies deflate the "rent-seeking"
motivations of land speculators to sue for state and federal aid.
Under George's scheme, the unearned increments secured by "rent-seeking"
lobbying for public works would be taxed away.
In the longer run it seems reasonable to expect that more genuine
productive job opportunities at home would reduce the pressures for
military spending, at least those portions which are strictly
boondoggling of a make-jobs nature.
13. Enhance the environment and conserve resources while making
jobs
Georgist tax policy acts to abort subeconomic extensions of public
works, as noted just above. Not only does this save public funds, it
protects the environment. Saving public funds and saving wildlands and
waters are perfect complements.
"Jobs vs. the environment" is the dismal trade-off offered
by confused thinking. A Georgist economy is resource-saving as well as
job-making. It saves resources by focusing human activities
intensively on the lands that are used, leaving or releasing marginal
lands for wildlife, recreation, wetlands, watershed protection, etc.
There was once a tendency for environmentalists to oppose human use
of land wherever and whenever they could. Now, most of them are
looking at the whole human system. The Sierra Club is supporting urban
infilling, seeing that demands that are not met here are bound to pop
up there. John Baden, a Pacific Northwest forest economist, sums it up
in a few words: timber should be grown on lands that are flat, warm,
wet, and near markets. Georgist tax pressure applied to those "Site
I" lands will promote exactly that, leaving the steep, arid
slopes for scenery, watershed, and recreation
Summary
Dismal trade-offs, deadlocks, and standoffs are just mental blocks
and smokescreens. Henry George began with a quest for justice in
sharing the rent surplus. He found that justice and efficiency are not
at odds, we can have both. This trade-off that many economists expound
is a stall, a put-off to enervate and unman us so we won't do
anything. It may ease the conscience to think justice must be
sacrificed for efficiency, and schools starved and libraries closed to
free up incentives, so nothing, really, can ever be done. We all feel
compassion by nature but, to survive and stay whole in this world of
beggars and bandits, learn to harden our hearts and cork it in. We
learn to screen out evidence of suffering and injustice, and
rationalize what we cannot deny. This mindset, while understandable,
is unaffordable in a period of dangerous national decline, and growing
division between haves and have-nots.
What we have shown here is not just that we can have both justice and
efficiency, but more, we cannot have either one without the other. If
we don't share rents efficiently, in the Georgist manner, social and
political pressures will continue to cause inefficient sharing and
eventual dissipation.
Economic discourse is afflicted with pessimists who firmly cling to
mutually inconsistent positions at the same time, each posing an
insoluble problem. Some, for example, believe the world is racing to
starvation, and favor limiting demand through birth control, while in
another context they deplore "overproduction," or "underconsumption,"
and favor choking off farm production to keep farmers from losing
money.
George, of course, would see demand as the answer to supply, and land
as the field on which the twain may meet and satisfy each other,
leveling them upwards.
Again, some favor cheap power and good roads for rural areas,
regardless of cost, and then favor low-density zoning to keep people
out. George, of course, would favor infilling to make full use of
short interior lines at high capacity, and lower cost per customer.
A summary of reconciliations
Herewith is a summary of reconciliations that Georgist tax policy
achieves.
- Couples equity with efficiency.
- Couples progressivity with motivation. Abates concentration of
wealth and power while widening the scope of productive ambition
and enterprise.
- Makes more jobs without inflation. Raises demand-side and
supply-side together, "leveling them upwards."
- Raises both inducement to invest and inducement to save, at any
income level. Also raises saving by raising income level.
- Couples structural reform and macro reform.
- May be applied at local, state, and national levels, together
or jointly, in small degrees or large.
- Relieves labor of taxation without burdening capital, and vice
versa.
- Renews cities without subsidizing evictions.
- Contains urban sprawl, infills and coordinates cities without
superimposing planning on the market.
- Fosters resident ownership and civic participation without laws
against absentee ownership, or other use of compulsion, but in the
very process of lubricating land markets.
- Asserts common rights to land while strengthening private
tenure. Permits of privatizing without giveaway.
- Allows paying off public debts while fostering full employment
through (true) fiscal stimulus.
- Makes labor cheaper to hire while raising real wage rates
(take-home pay, disposable income). Thus makes jobs without
lowering wage rates or "making work."
- Lets regions, nations, and the world add population and capital
without diluting their resource bases.
- Fosters economy in government in the process of raising
revenue.
- Saves the environment in the process of intensifying land use.
- Smoothes business cycles without depending solely on
contra-cyclical fiscal or monetary policy. Stabilizes and secures
financial institutions with only minimal regulation.
- <.li>Effects land reform and redistribution abroad and at
home, urban as well as rural, without government expense, and
without acreage limitations, working through free markets.
- Equalizes credit ratings for land buyers without any controls
over lenders.
Epilogue: how the public demonstrates its preference for
resolutions over dismal choices
Preaching hard trade-offs is not popular. Voters see through it as a
confession of cluelessness. We hear a lot about voter apathy, but
voters have responded positively at various times to candidates with
positive resolutions, or apparent ones.
Remember the "Phillips Curve" of the late 1970s? "The
public has to grow up and choose," the gurus said with some
condescension. It's either inflation or unemployment. Soon the voters
came up with a third choice, they retired those unavailing later
Keynesians.
Next it was Reagan and Laffer, who said you can have lower tax rates
and higher tax revenues, more defense and a lower deficit. Talk about
panaceas! This one proved to be a fraud, but the voters loved it until
they slowly realized the promise couldn't possibly be delivered.
Now it is the privatizers. They have learned to sell the product by
soft-pedaling "trade-offs." Instead, they talk about "win-win"
solutions, a new euphemism for trade-offs that camouflages them as
resolutions, and hides the sneaky truth that much of the wins come
from privatizing public property without compensation. The public will
stop falling for it as they finally realize that most of these are
really "win-win-lose" solutions, with the public as the
loser.
30 years ago, it was "demand-side economics" (as it was
later called). It was mostly Keynesian "fiscal policy," with
some monetary policy, also demand-sided, as its Tweedledum rival.
Keynes became popular because orthodox economists, unavailing, had
reduced themselves to posing a hard choice. To escape from depression,
they said, you must first suffer dismally: cut wages, consume less.
It's like a hangover, you must repent of the good times you had in the
roaring twenties. The voters rejected that preaching thumpingly.
Keynes had better news. He said you can have it all: raise wages,
consume more, enjoy more public services, and in result find people
saving more and working more! People who followed his ideas won
elections for years. With all its faults and charlatanism, Keynesian
economics was at least optimistic and hopeful. It lasted until his
successors fell into the dismal trade-off mode of the Phillips Curve.
Before that it was the New Deal panacea: national planning. Before
that, at least in the States under Herbert Hoover, it was business "Associationism":
cartels plus peace pacts, red-baiting, debt retirement, the corporate
state, two chickens in every pot and a car in every garage, and "prosperity
is just around the corner." We know where that led.
Before those panaceas there was Henry George. He, like popular
figures after him, was anything but dismal. He, too, said "we can
have it all." It made his ideas very popular. We are often told
that Georgism never really made it, but that is warped history. It
never "took over" lock, stock and barrel, but it won
substantial minorities, to whom real concessions were made. His ideas
were at their political crest roughly from 1901-20. They were
incorporated into The Progressive Movement.
Unlike the other panaceas cited, George's never failed. It would be
fairer to say it fell to the loss of young leaders in World War I, and
the marathon Red Scare that dominated much of the world from 1919 to
1989. The Red Scare energized property defenders everywhere; by
confusion, its victims included Georgism. It made Georgists pull in
their horns until their message lost its vigor and excitement: its
resolving qualities, which were derided as "panaceas." Now,
with the fall of the Soviet Empire, is a good time to pick up where
the Progressive Movement was aborted.
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