Introduction
Mother Earth is not a stock market. Treating her as such creates a real-life game of Monopoly, with exaggerated income inequality, barely livable minimum wages, and ever-increasing rents. This can be seen in cities like San Francisco, where homeless masses eke out an existence alongside billionaires and their mansions. The crisis was predicted over a hundred and forty years ago:
If there is less deep poverty in San Fran Francisco than in New York, is it not because San Francisco is yet behind new York in all that both cities are striving for? When San Francisco reaches the point where New York now is, who can doubt that there will also be ragged and barefooted children on her streets?
Henry George, Progress and Poverty
In the late 1800s, an economist named Henry George noticed issues of poverty in industrial societies, and set out to find the cause and solution. His work would inspire a woman named Lizzie Magie to create a board game, to teach his theories to the wider public. That board game would later be plagiarized as Monopoly. Monopoly still illustrates some of the problems Henry George was trying to solve. Unlike Lizzie Magie’s “The Landlord’s Game®,” however, it doesn’t reveal his solution.
Would you like to see his solution?
Nature Holds The Key
Natural resources are natural precisely because they were not created by human beings. Land is one of the most important of all natural resources. One of the most important aspects of any land, besides its physical resources, is its location.
The economic value of natural resources does not belong to any particular person, because no person created those resources. The value of a land’s location is exponentially increased by the people on and around it. Land under or near a thriving city or community will be much more valuable than land in the middle of an empty field. Since the value of a location is increased by the community, the community, not any one individual, should benefit from that value.
Note that even if one individual heavily sponsored infrastructure, such as a subway station, that endeavor would not increase land values if there weren’t a community to use said infrastructure.
Land vs Labor
It’s important to distinguish land (Which no one created) from buildings and products, which were created and are maintained by human beings. Land was created by no one, so its value belongs to no one (Or everyone). The fruits of labor, however, belong to the laborer.
This is a common issue; look at income tax for example. Income taxes extract value from people’s labor. Privatized land rent extracts land value from labor, and puts it in the hands of a privileged few landowners. Most peoples’ labors are therefore extracted from twice, and it is up to the whims of their governments and landlords to return any of that value to them.
The Value of Land
If land value belongs to the community, what determines that value? A land’s base value is determined by the opportunities it affords. For example, a fertile field can produce more crops than a barren field, and is therefore more valuable. A plot of land in a major city provides more access to opportunities than a plot of land in an empty desert.
As valuable lands are claimed, people must seek out increasingly less valuable lands to work and live on. If all or most valuable lands are claimed, people are forced to pay the owners of those lands rent in order to access them, or take their chances on suboptimal land.
Land vs Property
Remember to separate the value of land (Which no one created), from the value of buildings and infrastructure. A very common mistake when learning about land values, is to conflate them with property values. Properties include buildings and infrastructure, which are the products of labor. Land is not the same thing as property, although an undeveloped property might only contain land.
The Law of Rent
What determines the rent of land? Rent is determined by the law of rent. Once you understand the law of rent, everything will fall into perspective.
An example will be given below. Imagine three plots on an island. When labored upon, plot A can generate $10,000 per month, plot B can generate $5,000 per month, and plot C can generate $1,000 per month. These are the values of the raw land; buildings can increase this productive capacity, but do not fundamentally change the law of rent. This is because buildings can ultimately be built on any piece of land, but the land’s fundamental properties, such as its location, cannot be changed.
Here’s an easy question: If given a choice between the three plots, which one would most people choose?
Obviously, most would pick the most valuable lot. Let’s say that the most valuable plot is now claimed, and a second person comes to the island to work.
They can work on land B and earn $5,000 per month, or they can work on land A and pay rent. If the rent of land A brings their earnings below $5,000, any reasonable person will just move to land B instead and keep all their income.
This brings us to the law of rent:
Land Rent = Land Value – The Most Valuable Unclaimed Land Value
In this case, the land value is $10,000, and the most valuable unclaimed land’s value is $5,000. So the land rent is: 10,000 – 5,000 = $5,000.
That rent represents the bounty of nature (Which no one created), transformed by the labor of another. The land owner pockets as much as they are able to, as determined by the law of rent.
Let’s say that land B is now claimed:
Land C, valued at $1,000 per month, is now the most valuable unclaimed land. The rent for land A is now: 10,000 – 1,000 = $9,000.
Wait a minute! Rent for land A just went up, but the owner of Land A didn’t do anything. The more land is claimed, the higher rents become. The owners of the lands don’t have to do anything to claim this increase in value. This example is small in scale, but it applies just as much to a huge city like New York as it does to a three-plot island.
Let’s push the example to its final stage, where all lands have been claimed (Or, in other words, have been monopolized):
Since there are no more unclaimed lands, the rent value for the lands is now: Land Value – 0 = Land Rent.
That means that the rents for the lands are now their full earning potential. No sane person will give all of their wages away, however. Therefore, when all (or most) lands are claimed, rents increase until people are pushed to the lowest wages they will tolerate. That value is the minimum wage.
This is why raising minimum wages never seems to eliminate poverty. Raising minimum wages addresses a symptom, not the core issue, which is the privatization of land value.
Progress Makes Rent More Expensive
Progress makes land more valuable, and therefore, makes rent more expensive. It’s gentrification on a societal scale. This is why, in spite of incredible population growth and technological advancement, poverty remains a persistent issue.
Technological advancement only temporarily addresses the problem, because it allows previously worthless lands to be used. For example, with the advent of cars, people were able to live further away from the city (In suburbs, for example), and still work there via commute. With the advent of the internet, people could work remotely in out-of-the-way locations.
Once newly valuable lands are snatched up, the problem rears its ugly head again. Relying on constant technological innovation alone to fix our broken society is ill advised.
Fixing The Problem
Fixing the problem requires giving the value of land (which no one created) back to society (Which is responsible for its increased value). There are three mechanisms by which this can be done: The Land Value Tax, The Land Windfall Tax, and The Citizens’ Dividend.
The Land Value Tax
The land value tax (LVT) requires the rental value of land (Determined by the law of rent) to be paid on a recurring basis to society. This is often thought of as payments to government, but it could also go to the local community. This is an alternative to income tax, not an extra tax on top of it. Income tax extracts the value of peoples’ labor. Land value taxes reclaim the value of land, which no one created.
Imagine if, instead of paying income tax to the government, and rent to a private landlord, rent and taxes were one and the same. That’s the end goal of the land value tax.
Landlords can’t pass the tax on to tenants, for two important reasons:
- Land rent is subject to the law of rent, whether it’s going to a private landlord, or to society. Charging more than the amount determined by the law of rent will cause people to move in either case. The difference is that without an LVT, the landlord can just sit on the land. With an LVT, they are now responsible for paying for the land whether they have tenants or not, forcing them to sell it to people who will actually use it.
- Land is not created or destroyed. Therefore, landlords can’t reduce the supply of land in order to make it more expensive. If they try to artificially restrict the supply by claiming more land than necessary, they will be subject to the LVT for that land, which will quickly become a losing proposition.
The Land Windfall Tax
The Land Windfall Tax is a slower, but more politically expedient way of returning land values to society. The land windfall tax calculates the increased value of land upon its sale. As stated before, land value is not the same thing as property value. Here is a simplified formula:
Land Windfall Tax = Sale Price of Land – Purchase Price of Land (Adjusted for inflation)
The Land Windfall Tax is politically expedient because it requires no payments. People simply sell land for the same price they bought it for, with any profits going to society. This will ultimately stabilize land prices.
In order to fully distribute land values to society, a full LVT is necessary. The LWT is a step in the right direction, however. To use an analogy: The LWT freezes the downwards spiral in place, the LVT reverses it.
Citizens’ Dividend
Instead of all land value revenues going to a centralized authority (Government), which spends it on peoples’ behalf, a portion of land value revenues are divided evenly between all citizens. The citizens’ dividend is beautifully egalitarian:
- The source of the dividend is land (Which no one created), so it’s not taking from one man’s labor to give to another.
- Each citizen receives the same amount, so there is no special treatment.
For a billionaire, a few extra hundred dollars a month won’t mean much. For someone who’s homeless, however, it’s life changing. The citizens’ dividend can literally erase starvation, and it doesn’t steal from anyone to do so. The earth gives freely to all in need.
Implementing The Solutions
In order to smoothly transition to a better system, it sometimes needs to be implemented slowly. People need to be given time to adjust. This can be done via a top-down approach, or a grassroots approach. A combination of the two will probably be the most realistic way forward.
The Top-Down Approach
- To start with, a land windfall tax could be implemented to stabilize house prices. The land windfall tax could be applied fully, or in increments over time.
- Once housing prices have stabilized, an LVT could be implemented in increments over time. Applying a cumulative 1% LVT each year still achieves a 100% LVT in a century. Results will be noticeable in just a few years.
- Many Geoists do not believe a 100% LVT to be feasible (As it can be tricky to calculate land values); most have settled on 80% as a reasonable target. This leaves more than enough margin of error.
- Throughout the whole process, land revenues would slowly replace other tax revenues, ideally replacing them entirely.
- Citizens’ Dividends would steadily increase along the way, distributing wealth more evenly across society.
The Grassroots Approach
The grassroots approach is fun, because it can be feasibly implemented by a small group of passionate people. It involves the creation and expansion of a Community Land Trust (CLT).
The Community Land Trust
Community Land Trusts are non-profits that lease land, and sell the buildings and infrastructure on that land. So, people buy and own buildings, but they pay rent on the land. That land rent then goes to the Community Land Trust (Instead of to a private individual or corporation), which distributes it back to the community.
There are five important components to the distribution of CLT land rents back to the community:
- Administration and Assessment Costs – This refers to the cost of running the CLT, and of assessing land values (at least once per year).
- Land Fund – This fund is used to purchase new land, expanding the CLT.
- Amenities – Amenities refers to community benefits like public transportation and parks.
- Rebates – Rebates are refunds for taxes on labor and sales, offsetting the problems caused by those taxes.
- Dividends – Dividends are given equally to all members of the CLT.
The exact distribution of these funds depends on the political leanings of the CLT. A very libertarian CLT might want to put most of the funds into rebates and dividends. A more socialist CLT might put most of the funds into amenities and public projects. Either way, land values go back to the community.
Using the land fund, the CLT can slowly expand to encompass huge territories, even entire countries given enough time. In the beginning, though, they can start with just a handful of properties. To see more details on how to construct a community land trust, check out this video. It’s an hour and a half long, but full of priceless information.
LVT In The Bible
The early Christian church actually implemented something very close to a LVT, which is recorded in Acts. It’s interesting to note, whatever your beliefs, that this is one of only two times that God personally kills people in the New Testament … and it’s for dodging a tax on land!
It also describes the society that resulted from sharing the value of land:
There were no needy persons among them. For from time to time those who owned land or houses sold them, brought the money from the sales and put it at the apostles’ feet, and it was distributed to anyone who had need.
Acts 4:34-35 (Emphasis Added)
Isn’t that a society worth creating?
Resources
Videos
- An amazing video synopsis of Georgism. It’s short and entertaining enough to be shared with family and friends:
- A longer video (About one and a half hours) going into detail about Community Land Trusts. It’s full of priceless information and fascinating historical insights:
Books
- The book that inspired the movement:
- A contemporary exploration of Geoist ideas, easily accessible to the modern reader:
Articles
- An excellent series of well-researched summaries on Georgism:
Games
- The Landlord’s Game, an educational game meant to teach Georgism to ages 10 and up:
- Playing the Landlord’s Game with a regular Monopoly set (Includes a Python simulation):
Organizations
- The directory of Georgist activism:
Community
- The Humano Ludens Discord community: