The Power In The Land. Fred Harrison
But he then proceeded to intimidate future generations of lawmakers in Congress by attacking as a ‘wicked project’ any attempt at an ‘equal division of property’.7 By failing to specify how to deal with the most serious problem in civil society — ‘the unequal distribution of property’—he immediately preached against a philosophy that might have produced a fiscal policy to neutralise the consequences. And so the New World, populated by refugees on the run from the old tyrannies that were built on the enclosure of common lands, began to recreate those very conditions that had led to the exodus from Europe (see Chapter 10).
What of the canons of taxation provided by Adam Smith? These are generally regarded as profound, and are still cited by free market economists as the guidelines for fiscal policy. But as we shall see in Chapter 2, Adam Smith suffered from the shortcoming that led him to a set of prescriptions which prove, to the present author’s satisfaction at least, that he lacked that ‘most exact impartiality’ which Madison considered to be crucial to the making of tax laws. What, then, do we propose as a third alternative to the limited choice at present on offer from right-wing Conservatives and their opponents, the Marxists ?
The major reform that we prescribe is a 100% tax on the annual rental value of all land and a simultaneous reduction in other forms of taxation. In other words, we advocate the ‘socialisation’ of all ground rents to remove private gain therefrom, but would give free reign to private enterprise within what would now be a free market system. This proposal is not original: in its full-blooded form, it was propounded by Henry George in Progress and Poverty (1879).8 Is it eccentric to suggest that a single tax advocated over a hundred years ago contains the solution to contemporary problems? Readers will judge once they have acquainted themselves with the evidence. Suffice, for the present, to note the seminal importance of this book, which has become economics’ leading best-seller.9 Paradoxically, today few readers will be familiar with the book, yet it continues to wield influence in the councils of power. We can see this, for example, from the strictures on taxation expressed by President Reagan’s economic guru, Dr. Arthur Laffer. The Californian professor promoted the ‘supply side’ economics that were at the heart of the Republican presidential campaign in 1980.
The Laffer Curve, as it became known, is based upon the principle that savings and investment are most likely to accrue to expand productivity when the government is not taxing the people down to the last penny that can be squeezed out of the private sector. Dr. Laffer’s authority on fiscal policy is Henry George, whose canons on taxation were ‘the essence of what we are talking about’, according to this presidential mentor.10
Henry George’s analysis culminated in a condemnation of land speculation. He advocated a single tax to capture all economic rent for the community’s benefit, and the simultaneous elimination of taxes on labour and capital. President Reagan was not ideologically disposed to carry out the full Georgist fiscal programme, however: he had made a million himself out of Californian land deals!
Henry George was called The Prophet of San Francisco. The label was appropriate. He was a fine orator, and his book was written with an unmistakable passion which fired the imaginations of people around the world who sought a practical philosophy which would enable them to both preserve individual liberty and yet restore that primitive cohesion which is vital to a healthy society. The message in Progress and Poverty was a simple one. Natural resources have no cost of production, they are God-given, and so they legitimately belong to everyone. The most efficient way of securing a fair distribution of resources is through a tax on land values. Every citizen has a stake in the revenue which then flows into and out of the exchequer coffers. If the government levies that tax and spends the money on socially-necessary projects, there is no need to interfere with the liberties, economic activities or property of anyone; people know what they want and are capable of securing these for themselves provided that there is no monopoly of land.
Henry George thus advanced, in addition to his moral theory of property, the hypothesis that a free enterprise economy could operate efficiently only if economic rent was completely taxed out of the arena of private enterprise. The statistical data was not available to enable him to test his theory empirically. He had to rely on impressionist evidence. Even today we are not much better off, for while statisticians spend a great deal of time and money in collating data on capital and labour, they all but ignore the land. This encourages economists to neglect George’s macro-economics. For example, Professor Samuelson — in one of the most widely read student textbooks on economics published in the postwar years — reduces Henry George’s problematic to an ethical one. The case against private land ownership ‘must be attacked or defended in terms of ethical value judgments concerning the proper FOR WHOM resolutions in society’.11 The economic case against the present land tenure system is side-stepped.
Here we shall try to ignore the ethical arguments (not always successfully, as some of the language will reveal). Our purpose is to explore the scientific proposition that land monopoly, and not the free market, must accept the blame for the poverty and human degradation in industrial society.
The enquiry necessarily begins with the ‘bible’ of the free market, Adam Smith’s The Wealth of Nations. This was the book that provided the captains of industry and the politicians in Westminster (a body largely composed of landowners) with the theoretical framework and moral justification for the new mode of production. What we discover is that the advocates of capitalism failed to elaborate a scheme that would enable them to attain capitalism’s full potential. So for two hundred years the entrepreneurs and their employees have laboured within the framework of an impure model.
This has served the Marxist critics well, for they have been able to attack the laissez faire ideal by marshalling evidence derived from a seriously malfunctioning system. That they were pointing to a crippled capitalism has not been an argument used in defence of the free market.
We, in defending the need to establish laissez faire, maintain that land monopoly is not one of its intrinsic characteristics. The private appropriation of the value of land (as opposed to secure individual possession and use of specific sites) is not a necessary condition for the capitalist mode of production. Capitalism entails the accumulation of wealth based on the provision of goods and services to consumers. It is a two-way exchange: consumers produce wealth in order to exchange it with others — to consume. Land monopoly undermines this creative process because it is a one-way relationship. The monopolist secures legal title to the resources of nature, and then claims a portion of the wealth created by others in return for nothing more than the permission to use land. This is the economics of the bandit sanctified by law. The monopolist per se does not contribute to production; he is, therefore, an anomalous feature within an otherwise efficient system.
Unfortunately for the free market, even its champions have not served it well. Now, with the eclipse of Keynesianism, we are back in the philosophical vacuum that has regularly afflicted Western society. The political dangers, as we pass through a recession that equals the one of the 1930s, are well known. We do not believe that it was a coincidence that the Japanese government’s White Paper in 1981 contained repeated calls for greater ‘patriotism’, or that in 1982 Japan began to sanitise her military history as the sun rapidly set on the miracle economy.12
In the desperate search for explanations and solutions, liberal economists have sought refuge in the theory of a Soviet economist, Nikolai Kondratieff. In 1925, he postulated that capitalist economies rise and decline in ‘long waves’ of about 50 years duration.13 The global economy is supposed to be in the trough of the latest such cycle. This view has produced exercises in exhaustive statistical compilation, some of them scholarly,