Harry,
Thanks for this. Too long for an essay and too short for a book, this must
have taken a lot of time in writing. But it was very interesting and I
found little in it with which to disagree.
I'm sorry to have delayed in relying. It was, in fact, your more recent
message which reminded me of this one which I'd forgotten to return to.
Keith
At 13:09 26/09/2010 -0700, you wrote:
Keith,
One of the bits I do with a new class of adults is to ask them to tell me
what is needed to build a house. They tell me bricks and mortar,
carpenters, architects, and so on. All too often they do not mention land.
It is so obvious, they don't think of it.
Yet, nothing can be done without land. Henry George likened the Earth to a
ship sailing through space. To get anything we need, all we need do is
open a hatch and take it. He then pointed out the importance of those who
are sitting on the hatches. In every country, there are relatively few
sitting on the hatches, charging the rest of us when we want to reach in.
But you know that. As you put it in an earlier post you "hadn't realised
that ownership was so excessively lopsided" after checking Cahill' s "Who
Owns Britain".
In any event, the monopolization of land affects everything we do
constantly draining from us much of our production. If you think about it,
when we buy, or rent, land -- what do we get in return? Certainly not the
land _ thats been there since the dawn of time. What we are renting or
buying is the right to work, the right to make a living -- the right to
build a home.
You suggest that the fourth factor of production -- to join Land, Labor,
and Capital -- is Innovation. Yet, this is covered by Labor. One of the
problems with modern economics is its tendency unnecessarily to analyze
ever more minutely. This is supposed to show scholarship, and perhaps it
does, but it confuses clear relationships with torrents of words.
The Science of Political Economy deals with the Nature, Production, and
Distribution, of Wealth. Distribution concerns itself with how the Wealth
is divided among the Factors of Production.
Innovation, invention, industry, intelligence, all affect the mental and
physical exertion that classically is labeled Labor. In the study of
Political Economy one need not chop human effort into segments. If one
does, the study has changed to an analysis of people, which is fine but
not particularly important to the production of Wealth.
I have capped Land, Labor, Capital, Wealth, Rent, Wages, and Interest to
emphasize that these are scientific terms. I will stop doing that but I
will still use them as precise terms.
Medieval rents may not have been noticed by economists at that time, but
they existed as a share of the crop. Even now, across the Third World
landlords still take half the crop -- or more is very fertile areas (in
the incredibly fertile areas of the Mekong in Vietnam, rents reached 90%
of the crop)!
You might also remember that back then nobles paid the King armed soldiers
as rent for their lands (also keeping a place for the King's mistresses
was apparently a rent as well as a good deal). So Rent in various forms
has been with us probably since the beginning of agriculture.
As time went by, wages were paid with money which led to the infamous
Statute of Labourers which put a cap on wages. This imposed severe
penalties on employers who paid too much to their workers.
Then came what has been called the "Golden Age of English Labour". This
occured at the end of the 15th century when labor was still not plentiful
after the Black Death. The weather was extraordinarily good and farmers
enjoyed a series of bumper harvests. They all needed extra labor. Wages
rose in spite of the Statute. Prof Thorold Rogers, going to original
documents, found many instances where actual wages were scratched out and
replaced with lower Statute wages to avoid penalties.
During this time, according to Rogers, a common laborer could earn enough
food for a year for his large family with 15 weeks work. An artisan
(blacksmith, thatcher) could do the same with 10 weeks work. We might
compare that with today, half a millennium later! The Feds estimate that
the food for the modern poor family takes half their income.
Then the great harvests ended and wages went back to their poverty levels.
Capital is important -- indeed very important -- but it is the product of
land and labor.
While the relationships were easier to see perhaps in Henry George's time,
they still continue.
In fact, the history of landownership in the United States is a story of
force, theft, and fraud.
As for location, the strongest remark in real estate is "The three most
important characteristics of land are location, location, and location."
Without doubt, fertility and the assets below ground are important.
However, overwhelmingly, modern populations live in cities and urban area
rents that attach to location can be an enormous.
Urban rents are the consequence of the surrounding community their number
and their well-being. A well-to-do population will produce higher rents
than a poor community. The rent of a location is a measure of the
advantage given to the location by the presence and access of the community.
Commercial rents are the easiest to understand. The rent that attaches to
high street locations is directly related to the customers that throng
there. A store that might sell 20 pairs of shoes a week in a small village
location could (with the same application of labor and capital) perhaps
sell 200 pairs a week in a larger community. The difference is rent.
The moral argument for collecting rent (land-value taxation) is that as
this value is created by the community, it would be just for them to
collect it for revenue purposes. Then various other taxes that burden
production could be abolished.
Taxes are a bit silly. In fact, they are mad. We like people to build nice
homes, so we tax them when they do. We like people to work to provide us
with the things we need, so we tax them when they do. The modern economic
mantra is that we need demand, demand, demand. Yet when people do demand,
we tax them.
In Henry George's day he thought that rent collection could take the place
of all other taxes, hence the Single Tax. Not much likelihood of a Single
Tax in today's incredible network of taxes on taxes on taxes (with a
threat of VAT coming to the US)!
The economic argument for collecting rent is that a direct charge of
locations would pressure landholders into using the land or turning over
to someone who would. One would expect a lot of land to come onto the
market that person is either unused or underused. Land prices would fall
and construction, which fuels about a quarter of the economy, would boom.
The emptiness in our cities is huge. Back in the 50s, the Regional
Planning Association of New York found in the metropolitan area of New
York City -- a large area perhaps the most densely populated in the US --
79% of the usable land (86% of the gross) was unimproved for urban use.
Streets, lanes, parks, and suchlike, were considered improved as were the
slums and other blighted buildings. That is a long time ago, but I wonder
how much has changed other than that the buildings are 50 years older.
Certainly, in downtown Los Angeles there are empty buildings with boarded
windows simply occupying space as do unnecessary parking lots intended to
pay property taxes while waiting for the big sale. Waitingmeans decades od
non-use.
Certainly, the poor land use caused by land speculation has led to
American city's sprawling out to the boondocks. Unable to find affordable
housing where they would like to live, Americans go out to the suburbs and
beyond the suburbs to where builders build because the land is cheaper. In
due course, freeways are built to service these suburbanites. The
freeways, in turn, make possible construction still further out. We used
to call these the exurbs -- maybe still do!
There is a monopoly market for land in which land rents and prices move up
with every advance of the economy exacting more and more from the
producers. The top exaction occurs when any further rise would stop
production. This leads to vacant and under-improved lots and pressure to
sprawl as people look for affordable places to live.
Certainly, America had lots of land. It also collected most of its revenue
from property taxes which back then was mostly land taxation. This kept
land moving in the marketplace. De Tocqueville found no beggars in America
though in completely monopolized European land they were part of the landscape.
I recall during lunch with a Senator in the Senate building in Ottawa, he
told me that the property tax was a major reason why land in North America
kept moving through the market. I must confess that I took that with a
grain of salt, but now I realize he was right.
Dont knock the principal characteristic of land location. The right or
wrong location can provide profits, or bankruptcy. When Trump paid more
than $100 million an acre for his Park Avenue site in New York, it was
because he needed that location to sell the apartments he built.
I suppose I'm getting suspicious in my old age. When London's Battersea
Power Station 32 acre site was sold in 2007 for £400 million pounds (it
was bought for £10 million in 1993) my thought was 'what do they know that
we don't'. Well, now we all know.
In both cases, the intention is to provide jobs to everyone from
architects to laborers plus considerable business to factories producing
the furniture that fills the buildings, but before any building occurs, an
exaction must be paid for the right to begin work. Yet as Churchill said:
It is not the individual I attack, it is the system. It is not the man
who is bad, it is the law which is bad. It is
not the man who is blameworthy for doing what the law allows
and what other men do; it is the State which would be
blameworthy were it not to endeavour to reform the law and
correct the practice. We do not want to punish the landlord.
We want to alter the law.
A final thought there is much discussion about the failure of the market
system. In fact, the free market system is by far the most efficient and
practical way to allocate goods and services. Its also untainted by
political or corporate corruption.
Yet, it cannot be effective when a most important Factor of production is
a monopoly that is not controlled by the price mechanism and is subject to
the deleterious of speculation. The most important economic consequence of
the land-value tax is to prevent land speculation even as it returns land
to the control of the price mechanism. Then the market system can do its job.
However, people unaware of this problem criticize the failure of the
market system perhaps yet another example of our educational failure.
Harry
********************************
Henry George School of Los Angeles
Box 655
Tujunga CA 9104
818 352-4141
********************************
From: Keith Hudson [mailto:[email protected]]
Sent: Thursday, September 09, 2010 6:07 PM
To: RE-DESIGNING WORK, INCOME DISTRIBUTION, EDUCATION
Cc: Harry Pollard
Subject: Re: [Futurework] FW: paper on technology manias and gullibility
Harry,
You and I have been writing and arguing with each other ever since the
beginning of Futurework. Try as I might, I have never been able to
understand quite why land has to be so overwhelmingly important. Yes, it's
important -- even very important -- and I think the taxing of (visible)
land value rather than (the declared, but sometimes invisible) income
would be a great step forward.
At 20:02 06/09/2010 -0700, you wrote:
Chris,
We cannot survive without access to land -- one of the three Factors of
Production.
Land, Labour and Capital. Granted, but this still ignores a fourth factor
of production -- innovation -- which you and I have argued about before.
In Henry George's time innovation was going on at such a cracking pace
that it was hardly noticed as particularly important phenomenon. It was
"natural", just like the air we breath. If there'd been economists writing
in the Medieval period they wouldn't have considered land to be "a factor
of production" because it was too obvious. It had no monetary value, it
was not bought or sold, the idea of "renting" land was totally unknown to
them. Labour, too, wouldn't have been considered either because there were
no wages in those days. The Domesday Book of 1086 didn't compute the
wealth of England in terms of money but only acreages, numbers of beasts
and numbers of serfs (slaves) that had been granted to various favourites
of William the Conqueror. Gold, silver and copper were, it's true, losing
their status-only value and becoming currency as a handy form of
exchanging small items (as they were previously in Roman times). But
economists in those days would only have considered Capital -- Wealth and
Power -- as the only factor worth talking about when considering the
"economic system". Land and labour, improtant thought they were, were
merely only ancillaries.
I think the reason why Land loomed so large in Henry George's thinking is
that he as living in a huge continent that was filling up so rapidly with
massive immigration that the struggle between Land and Labour was very
obvious.
The principal characteristic of all land is location. Locations are by their
nature monopolies.
And in Henry George's time, location was important because railways were
being built. But two more characteristics of land turn out to be even more
important than location per se -- though Henry George didn't realize it.
One is the fertility of the top-soil and the other is the resources
underneath the soil. These can't necessarily be assessed for many years
and their original location is not important -- the roads and railways can
be built to them later.
Necessary to the efficient operation of the market price mechanism is no
restriction on the production of goods, and no restriction on movement of
goods. Yet, no more land can be produced -- as said Will Rogers "They ain't
making no more dirt." Also land cannot be moved. We cannot move some Mojave
desert land into downtown Los Angeles to compete with high priced sites.
So the market cannot control land prices as it does with eggs and bacon and
other goods.
But there surely is a market in land just as there is with eggs and bacon.
It is very high in cities because that's where work is to be found, where
young people go in order to find partners, where specialists and
innovators can meet together.
Further land is all taken up. If you found a little bit of
apparently useless land and decided to put up the cabin it is likely that
before long someone would come running up waving a piece of paper.
Behind my previous house in Bath there was a patch of ground -- about 10
acres of forest on a steep hillside -- that no-one owned and no-one wanted
to own because of high costs of maintaining the trees (which could, and
did, sometimes fall on houses below). One chap lived there under a
tarpaulin sheet for a number of years. Few people ever saw him and, if he
was spoken to, he wouldn't reply. He repaired and maintained footpaths
that led through the woods. However, I've just mentioned that just for
interest. It doesn't refute your point.
When land rents and prices rise, the market price mechanism cannot bring
them down by drawing land to the market so the prices keep rising. They
continue to rise until they can go no further. This occurs when any further
increase would leave a wage too small for Labor's survival. At that point,
according to classical theory, the wages of those at the bottom of the wage
pyramid have descended to subsistence level.
Further, as a society progresses and the economy advances, rents and prices
rise to absorb the advance. This is why the poor are always with us.
As land prices move upward year by year, landowners frequently do not bother
to sell or rent out their land. The increase in land value receives better
tax treatment then income and if capital gains taxes can be ended, the
income is not taxed to all.
(The capital gains tax does not really tax capital, it taxes land value but
that is a further discussion.)
This leads to a situation where land cost makes production difficult. It
also leads to empty areas in cities that cause sprawl into the boondocks. It
also deters slum clearance. Landholders with blighted buildings on valuable
land spend as little as possible on them because it would be wasted if they
can make a land sale killing.
The economy moves merrily along, but in fact it is in a continual state of
tension, waiting for a trigger to send it over the brink. Anything might be
a trigger which is why there are so many "causes" of depression.
There is an argument that the land crash occurs every 18 years or so. I do
not altogether agree with it.
The particular problems with the banks are all based on land values. If you
are interested, I will be happy to say a little more about it. Also, how the
fatcats (or your Predators) cash in on it.
I would agree with most of what you have written above. But apart from
implying "greed" (which, I suggest, everyone suffers from, each in his own
way) you haven't really put your finger on it. The real reason is that
because governments got away with printing money so readily in times of
borrowing for warfare then the banks followed suit by departing from
traditional limits of fractional reserves when lending (100% in
Renaissance times and in the earliest "country banks" of early industrial
times) to lesser and lesser reserves -- down to about 2% at the time of
the beginning of the credit-crunch. At any one time a considerable part of
the 98% of the credit money was swimming around as banknotes and digital
currency and very much at the mercy of those who specialized in finance
rather than those engaged in value-adding occupations.
Keith
Harry
********************************
Henry George School of Los Angeles
Box 655
Tujunga CA 9104
818 352-4141
********************************
-----Original Message-----
From: [email protected]
[<mailto:[email protected]>mailto:[email protected]]
On Behalf Of Christoph Reuss
Sent: Monday, August 16, 2010 2:05 PM
To: [email protected]
Subject: Re: [Futurework] FW: paper on technology manias and gullibility
Harry Pollard wrote:
> The crash wasn't a contrivance of your Predators - whomsoever they may be.
> It was an inevitability, apparently happening every 18 years or so.
Within a boom-bust cycle system, the crash may be "an inevitability" (and
even a cyclic one). But the boom-bust cycle system is not inevitable at all
-- it is made and perpetuated by those who gain from it in every cycle.
Key components of that system are growth bubbles, fiat money and compound
interest.
> About the only policy that would help is to allow land prices to crash.
No. The boom-bust cycle system must be abolished, with its key components.
> There are so many government policies ranging from the potty to the
> disastrous that one cannot easily grasp their damaging consequences.
Depends on one's intelligence...
Chris
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Keith Hudson, Saltford, England
Keith Hudson, Saltford, England
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