To solve the housing crisis, we need to fix our broken land economy

Image: Images money, CC BY 2.0

The UK, along with many other advanced economies, is facing a major housing affordability crisis. Average house prices are now on average nearly eight times that of incomes across England and Wales, and up to 39 times in parts of central London.

A whole generation finds itself priced out of the market, struggling to make ends meet in the face of eye-watering rents. Over the past 15 years’ levels of home ownership have been falling sharply, particularly among young people. Homelessness is rising fast.

How did we get here? A popular explanation is ‘we’re not building enough homes’. While this is part of the answer, it is far from the whole story. At the root of the problem lies something that has for a long time been overlooked: the role of land in the economy.

But the issue of land goes far beyond the housing shortage. It lies right at the heart of many of the key challenges facing modern economies, from mounting inequality and financial instability, to intergenerational conflict and poor prospects for sustainable development.

To understand land properly, we must take a cross-disciplinary approach – we need a bit of history, a bit of economics and a bit about power and the law.

Theft and freedom: the paradox of property

Land is essential for all activity to take place, and indeed for life itself. Nobody ‘created’ land, it just exists. And we can’t create any more land, even if we wanted to. Land is not simply soil, and its economic uses are not simply agricultural. In economic terms, land is better understood as a set of legal rights over physical space.

Land first began to be treated as tradable, private property in the 16th century, triggering the birth of modern capitalism. But this transformation gave rise to a tension. On the one hand, landed property empowered people by providing physical and economic security, including collateral to leverage credit, which helped drive economic growth and technological advancement. But at the same time, private property in land was inherently exclusionary: by its very nature, granting some people exclusive rights over what was previously a common resource involves taking away the rights of others. Millions of people were driven off the land, often violently. Those who were allowed to stay found themselves having to pay rent to landlords to access what had previously been available for free. Landowners became the gatekeepers to an essential resource, a role which meant they were able to absorb much of the value that was being created in the economy in the form of higher rents.

The introduction of private property therefore brought economic power to some and dispossession to others – a paradox that was perhaps best summed up by the anarchist Pierre-Joseph Proudhon, who said that property was both “theft” and “freedom”.

Fast forward to the 21st century and this paradox is alive and well, it just manifests itself in different way: this time through the housing market.

Land in the Twenty-First Century

Today the value of the UK housing stock stands at £5.5 trillion – around 60% of the entire net wealth of the UK. This has increased from just over £1 trillion only twenty years ago.

As the Office for National Statistics acknowledges, this rapid increase is largely the result of soaring house prices:

“The increase in the value of dwellings was largely due to increases in house prices rather than a change in the volume of dwellings.”

But the price of a property is made up of two distinct components: the price of the building itself, and the price of the land that the structure is built upon. We don’t know the exact breakdown between these two components (bizarrely, there is currently no reliable public dataset on the land market in the UK) but the available data implies that land under homes is currently worth around £3.7 trillion – nearly 70% of the total value of the housing stock. This makes residential land the UK’s most valuable asset, even in today’s high-tech economy.

So why is land so valuable? And why have land values, and thus house prices, increased so much relative to incomes in recent decades?

Land values increase naturally over time as economic growth and a rising population increases demand for a resource that is inherently fixed in supply. Public and private investment in infrastructure and amenities also increases the value of land, making some locations much more valuable than others. For example, new transport links or being in the catchment area of a good school can dramatically increase the market value of nearby land. As a young Winston Churchill said in a famous speech to Parliament in 1909:

“Roads are made, streets are made, services are improved, electric light turns night into day, water is brought from reservoirs a hundred miles off in the mountains – and all the while the landlord sits still. Every one of those improvements is effected by the labour and cost of other people and the taxpayers. To not one of those improvements does the land monopolist, as a land monopolist, contribute, and yet by every one of them the value of his land is enhanced.”

There is also good evidence that as economies mature, the demand for land relative to other consumer goods increases. Land is a ‘positional good’, the desire for which is related to one’s social status. In economics jargon, land has a ‘high income-elasticity of demand’ – people will stretch their incomes to consume it. This goes some way to explaining why the rise of information technology and globalisation has not meant ‘the end of distance’ as some predicted, but has driven the economic pre-eminence of a few cities that are best connected to the global economy and offer the best amenities.

But this is only part of the story. The land economy is most decisively shaped by the laws and regulations that govern the ownership, trade and use of land. In other words, the rules of the game matter. But these rules have very little to do with economics, and much more to do with politics and power. They have varied immensely over time reflecting the evolution of power and class relations in society.

From a place to call home, to a financialised asset

After the end of the Second World War, council housing provision, tight mortgage regulation and taxes on property kept supply up and house prices (land prices) under control. The Labour government’s 1947 Town and Country Planning Act 1947 kept land in private hands, but nationalised the right to develop it – meaning that landowners and developers had to apply to their local authority for planning permission to build new property. Strong compulsory purchase powers enabled land to be acquired at low cost for housing development. This system was perhaps most successfully embodied in the New Towns programme which began in 1946.

For each New Town, a public development corporation was established which purchased land compulsorily at agricultural prices, drew up a comprehensive masterplan for the town, and then built the necessary infrastructure using money borrowed from the Treasury. They granted planning permission on the sites they owned and sold them to private house builders, using the uplift in the value of the land to repay the loans. This combination of low-cost land acquisition, strong plan-making and the power to determine planning applications proved to be a powerful means of delivering affordable housing.

But beginning in the 1960s this began to change. Taxes on property were removed, beginning in 1963 when the ‘Schedule A’ income tax, a tax on imputed rental income, was abolished. When capital gains tax was introduced in 1965 an exemption was made for primary residencies. Subsidies for buyers were also introduced: in 1969, the government introduced mortgage interest relief at source (MIRAS) which provided tax relief for interest payments on mortgages. Court judgments on compensation (particularly the Myers case of 1969) reinstated the principle that landowners should be able to claim ‘hope value’ on any land compulsorily purchased. This increased the price of land and ended the ability of public authorities to capture land value uplifts to fund new development – the model which had so successfully been used to build the New Towns.

With the arrival of Margaret Thatcher, the government withdrew from large scale house building, and councils were forced to sell their housing stock through ‘Right to Buy’, and prevented from building more. There was a shift away from supply side subsidies of ‘bricks and mortar’ towards demand-side subsidies of paying housing benefit to boost households’ incomes to enable them to access accommodation. Whereas in 1975 more than 80% of housing subsidies were supply-side subsidies intended to promote the construction of social homes, by 2000 more than 85% of housing subsidies were on the demand side aimed at helping individual tenants pay the required rent. Today the UK government spends an eye watering £25 billion on housing benefit.

Perhaps the most significant changes came with the liberalisation of the mortgage lending market. Before the 1970s, mortgage lending was mostly carried out by building societies. But beginning with the Competition and Credit Control Act of 1971, restrictions on lending were removed, and banks were incentivised to become active players in the mortgage lending market. This unleashed a flood of new mortgage lending into the economy, which increased from 20% of GDP in the early 1980s to over 70% before the financial crisis. An ever increasing supply of credit interacted with a fixed supply of land, fuelling a house price boom. In turn, households were forced to take out ever larger mortgage loans to get on the housing ladder. Thus, a feedback loop emerged between mortgage lending, house prices and ever increasing levels of household debt. The changes in credit supply conditions have been described as the ‘elephant in the room’ when it comes to understanding the behaviour of house prices, land prices and consumption in advanced economies.

The normalisation of double digit house price growth, combined with the expectation that house prices will continually increase, fuelled demand for houses as financial assets. Whereas fifty years ago houses were mostly regarded as simply somewhere to live, today homeownership is viewed as a means of accumulating wealth and long-term security in the face of stagnating wages and dwindling pensions. Although attempts to widen access to the benefits of homeownership succeeded for a while, eventually a tipping point was reached: prices are now so high that a whole generation finds completely itself priced out of the market, and levels of homeownership have been falling for 15 years.

The Great Divide

In recent years there has been a growing public debate about the causes and consequences of the widening gap between rich and poor, and the impact it has on our societies. In his bestseller ‘Capital in the Twenty-First Century’, Thomas Piketty argues that the rising inequality observed in recent decades is explained by a tendency for the rate of return to wealth to exceed the economic growth rate, causing a growing accumulation of wealth among those who already have it (a relationship he describes as r > g in notational form). When the return on wealth significantly exceeds the growth rate of the economy, Piketty states that inherited wealth grows faster than output and income.

Seen in the context of the UK, this explanation would appear to carry some weight. In recent decades growing economic inequality has been accompanied by a rapid increase in the amount of wealth relative to national income (the so-called ‘wealth-to-income’ ratio). Following a significant decline in the first part of the twentieth century, the ratio began to rise the 1950s and saw a marked increase after 1970. The return on wealth has significantly exceeded the growth rate of the economy for many decades now.

However, on closer inspection Piketty’s dataset indicates that much of the increase in the wealth-to-income ratio observed since 1970 is the result of capital gains from housing – or more accurately, from rising land values. Once the effects of housing are removed, the underlying wealth-to-income ratio has actually fallen significantly in the UK since 1970.

The implications of this are vital for understanding the dynamics of growing inequality in recent decades. It means that the increase in the wealth-to-income ratio observed in Piketty’s data, which has underpinned the rise in inequality, has been driven not by skills or technological advancement, but rather by increasing residential land values which have manifested themselves through rising house prices.

Some economists defend rising inequality on the basis that some people getting richer is not a bad thing, so long as nobody else is being made poorer. But in Britain this is not what has been happening, because housing wealth is fundamentally different to other forms of wealth.

When the value of land under a house goes up, the total productive capacity of the economy is unchanged or diminished because nothing new has been produced: it merely constitutes an increase in the price of the asset. For those who own property, rising land prices generate an unearned windfall gain which increases net wealth. This provides immense benefits to homeowners – housing equity can be converted into income via home equity withdrawal, increasing spending power for a new car or holiday, or it can be used to leverage up further, perhaps buying a second-home, or entering the Buy to Let market.

But rising land prices also has a corresponding cost: those who don’t own property see their rents increase, or have to save more for a deposit. This cost is not captured in wealth data such as that compiled by Piketty, because under current national accounting frameworks only the capital gain feeds through to measures of wealth; the present discounted value of the decreased flow of resources to those who don’t own property is not captured.

The reality is that the housing ladder is rather like a zero sum game. Much of the wealth that has been accumulated in recent decades has come at the expense of current and future generations who do not own property, who will see more of their incomes eaten up by higher rents and mortgage payments. The key dividing line running through society today is not wealth accumulation from entrepreneurialism or hard work, but ownership of property and the ability to capture unearned windfalls from rising land values. The paradox of property is back with a vengeance, and it is driving society apart.

As spiralling house prices render homeownership increasingly unaffordable for much of the population, this divide is set to grow larger. In some lucky cases, people will be rescued by Mum and Dad as housing wealth is passed onto some of the next generation via inheritance. Already the ‘Bank of Mum and Dad’ has become the ninth biggest mortgage lender in the UK. But many others will miss out.

Not only is this not particularly fair, it’s also not particularly efficient. Rising land values suck purchasing power and demand out of the economy, reducing spending and investment. The availability of comparatively higher returns from relatively tax free real estate investment crowds out productive investment, both by the banking system itself and non-bank investors. This may help us explain – at least in part – the great ‘productivity puzzle’.

The forgotten factor

The early pioneers of political economy – Adam Smith, David Ricardo and John Stuart Mill –acknowledged that land had unique qualities, distinct from capital and labour. They recognised that land was a free gift of nature, and considered returns earned from the ownership of land to be unearned – referring to these windfalls as ‘economic rent’. They believed that the ability to extract economic rent was so powerful that landowners could effectively absorb much of the value created in an economy. It was feared that this could undermine the political legitimacy of the private property system itself, and so they sought to limit the extent to which landowners could make unearned windfall gains at the expense of the rest of society.

Since then, the concept of economic rent has been expanded to cover any excess returns derived purely from the possession of a scarce or exclusive resource, unrelated to the costs of bringing it into production. Today a good deal of economic regulation exists to limit economic rents that arise from monopoly power, for example in the water, energy and rail sectors, because it is recognised that these rents are both inefficient and unjust. Strangely, however, the original and largest source of economic rent – that arising from land – gets a free ride.

Over the past hundred years land has been increasingly marginalised from economic discourse in the developed-world. Today’s economics textbooks mostly neglect land as a distinct factor of production, instead conflating it with capital in the still dominant ‘two factors of production’ models. Meanwhile, theories of distribution still follow the tenets of ‘marginal productivity theory’ which states that ‘income’ is understood narrowly as a reward for one’s contribution to production, whilst wealth is understood as ‘savings’ from deferred consumption.

Although presented as an objective theory of distribution, marginal productivity theory has a strong normative element. It paints a picture of a world where, so long as there is sufficient competition and ‘free’ markets, all will receive their just reward in relation to their true contribution to society. But marginal productivity says nothing about the rules around the ownership of factors of production – not least land – which are essentially political variables. For economists who see their discipline as a ‘value free’ science which is separate from politics, this is uncomfortable territory. The result is that unearned windfalls resulting from land ownership – the largest source of economic rent – are overlooked.

But these windfalls play an enormous role in a country like Britain, where much of the wealth accumulated in recent decades has come from housing. The classical economists would have viewed this as the accumulation of unearned economic rent; a transfer of wealth from the rest of society towards land and property owners. But in Britain, these windfalls are celebrated — house price inflation is hailed by economists and the media alike as a sign of economic strength. The cost this imposes on the rest of society is ignored. As John Stuart Mill wrote back in 1848:

“If some of us grow rich in our sleep, where do we think this wealth is coming from?  It doesn’t materialize out of thin air. It doesn’t come without costing someone, another human being. It comes from the fruits of others’ labours, which they don’t receive.”

Putting land back into economics and policy

How then to deal with these challenges? Firstly, the teaching of economics and related disciplines needs to be reformed to reaffirm the role of land. Practitioners across the field should seek to highlight land’s role as a distinct factor of production separate from capital, and a set of legal rights over the use of economic space. The role of economic rent should be placed squarely into theories of distribution and taxation, and the interaction between the value of land and the macroeconomy must be taken more seriously.

When it comes to policy, there is no quick fix. Because legal frameworks are essential for land to become property at all, any analysis of the land problem that starts from the premise of minimising state involvement cannot succeed. There can never be an entirely free market in landed property. Instead, policymakers need to start getting their hands dirty.

Compulsory purchase laws should be changed to enable public authorities to purchase land at agricultural prices, enabling the planning and development uplift to be captured for public benefit once again. A new National Land Bank should be established and made responsible for developing and leasing land, acquiring idle and vacant land for resale, and developing more New Towns. Planning authorities should be given more resources and stronger powers of plan making or zoning so that planning can be a ‘market maker’ rather than a market stifler.

Housing policy should seek to level the playing field between tenures, in terms of taxation and subsidies, so that people are not incentivised to invest in property over more productive assets. The stock of non-market housing, like social housing and community-led schemes, should be expanded in order to lessen dependence on the volatile market in land and homes. Taxation should be used to capture the unearned windfalls landowners currently pocket at the expense of society at large. This could be achieved by replacing council tax with a tax on the unimproved value of land.

Bold steps should be taken to break the positive feedback cycle between the financial system, land values and the wider economy. This should involve wide ranging changes to the regulation, ownership and structure of the banking sector to direct lending away from property and towards the productive real economy.

The long term-aim must be to return to a society where houses are viewed as somewhere to live, not as vehicles for accumulating wealth. This can’t happen overnight, and it won’t be easy. The task involves taking on the unholy alliance of private developers, banks and – most difficult of all – ordinary homeowners, many of whom now view ever rising house prices as normal and just.

This may seem ambitious. But the alternative is growing polarisation in society, ever increasing levels of household debt and bleak economic prospects. If we are to create a fairer and more sustainable economy, then we must start taking land a lot more seriously.

‘Rethinking the Economics of Land and Housing’ (Zed Books) by Josh Ryan-Collins, Toby Lloyd and Laurie Macfarlane is available at Zed Books and Amazon.

  • ANGRY_MODERATE

    The removal of property speculation and extortion of moneys from renters would make the UK a much fairer and better place. You can be sure that Theresa May and her far right money-grubbing supporters will oppose such a policy to the death.

    • BryanKavanagh

      Great piece, Laurie! And you’re correct, Angry Moderate, but as long as people fail to see that inflating land prices isn’t creating real wealth, who’s going to call Theresa May to account? There’s such vast ignorance on the damage real estate speculation inflicts upon people and the economy that one wonders what’s happening in our education system that this void in knowledge remains unfilled. These days, 99.99% of economists seem to know nothing about how the excessive taxing of wages and industry, and the under-taxing of land values, generates land price bubbles, even though 138 years ago the American Henry George showed that wages and profits rose and fell inversely to privatised land rent and, of course, privatised land rent is capitalised into these ever-increasing land prices that come at the expense of productivity and prosperity. The taxing of land values and un-taxing of wages would bring us out of this death spiral but, unlike Laurie, few have the wit to see this. 🙁

      • ANGRY_MODERATE

        One of my many long-standing complaints about economics (I used to lecture this subject in UK unis) is that the generic models given to first year students do talk about the importance of costs of the “factors of production” — of which land is primary — yet all more sophisticated economic models ignore this. Even comparative economics (a seriously neglected subject) tends to gloss over land/property prices.

        I believe that this problem in economics derives from three sources. The first is simply ideological: the dominance since the late 1970s of neoliberal thinking, and the determination not to subject this ideology to real-world scrutiny. The second is the massive influence in the profession of literature and theories from the USA — a country where land is plentiful and its economy has totally different charactistics from the rest of the world. Yet it is taken as a paradigm… The third is the ideological determination of the profession to over-value quantitative theoretical work and undervalue (actually outlaw) other theoretical approaches and genuine empirical testing of theory. All three of these problems are collated and magnified by the corrupt US system of refereed journals, which simply replicate US ideological beliefs and maintain the absurd pretence that economics is a science like physics.

        IN this context, Brexit represents a massive error where the UK aligns itself with US ideological nonsense and eschews any European independent thinking. May and her band of merry morons are very happy with it: the UK should be very scared indeed, for the future.

        • Alasdair Macdonald

          The Green MSP, Andy Wightman, has written several books on this, the best known being “The Poor had no Lawyers”, and has devoted a lot of time to uncovering the tactics used over the years by landowners to obfuscate who actually owns land and to promote land reform. He has been so successful in this that a landowners organisation has issued an action against him. Mr Wightman has confidence that the case against him is ridiculous and will be rejected. Even if this is the case his personal costs in defending himself would be such that he would be bankrupted and thus disqualified to continue as an MSP. An appeal for crowdfunding has met his initial target. However, further funding might be needed.

          This is indicative of the sheer nastiness of the forces ranged against land reform. Mrs Samantha Cameron’s family is one of the main actors in the opposition to land reform in Scotland.

          Although the history and the law in England are different, the essential principles are very similar.

          My wife and I bought the flat in which we still reside in 1975. We were buying a place to live, not an asset to be used in the Ponzi scheme of ‘climbing the housing ladder’. It cost around £5 000, which was a little over twice our joint annual income at the time. At that time more than 60% of Glasgow’s citizens lived in Council housing, and Council houses were still being built. However, we were not likely to become eligible for council housing – there was a pretty sophisticated ‘points system’ to allocate housing on an equitable basis, based mainly on ‘need’. We had no wish to rent from private property owners, so decided to purchase.

          As I said, we live in the same flat, we raised our family there and had adequate space, and are now back to the situation where it is only both of us. Going by current market prices in our area, the flat would sell for £250 000, which is a little over three times our joint income.

          However, this increase in value is illusory. If we were to sell, we would have to obtain somewhere else to live. There is no Council housing. Housing Associations, rightly, still operate a ‘fair’ allocation system. The unfurnished rental section has all but disappeared because furnished rented properties are more profitable for owners, despite the Scottish Government attempting to make the balance between tenants and owners more equal. So, if we sold, we would probably have to buy and, it is unlikely that we would have a wad of profit to invest.

          So the idea of property has to be demythologised and exposed for the Ponzi scheme it is. More than anything else it was property speculation and property debt which triggered the crash of 2008 and which will trigger another some time soon.

          New Labour under the egregious Brown and Darling were as culpable as the preceding Thatcherites and many of their acolytes occupy Labour seats in Westminster and plot continuously to overthrown the Corbynites.

          Unexpectedly, Labour in Scotland, a pretty venal brain-dead organisation, supports land reform, but prefers attacking the SNP and joining with the Tories and LibDems in that.

          In England there is some genuinely radical thinking emerging from Labour and community groups, who are tackling the issue of housing. So, there is some hope. They really ought to ignore Labour in Scotland.

        • George Carty

          The United States is effectively two countries as far as its housing market is concerned, corresponding closely with the 2016 electoral map.

          In the states where Donald Trump won (except Florida), land values are low because urban build densities are low: in the Rust Belt and the plains states because cities have lost population due to economic decline, and in the South because almost all the urban growth took place after the coming of mass car ownership (because these regions were unattractive prior to the introduction of affordable air conditioning).

          In Florida and the states where Hillary Clinton won, urban build densities (and therefore land values) are higher and the housing market behaves much more like it does in the UK.

  • Ben Jamin’

    Housing affordabilty issues/excessive inequalities are only caused when land values are capitaised into private rental incomes and selling prices. Thus when that capitalisation is ended by a 100% tax on the rental value of land those issues are ended instantly and permanently.

    This would also allow the market to rationalise our existing housing stock and allow future additions to be efficiently allocated.

    Blaming these issues on a lack of supply of housing is like blaming the cause of a headache on a lack of supply of aspirin.

  • Hologrammar

    “Because legal frameworks are essential for land to become property at all, any analysis of the land problem that starts from the premise of minimising state involvement cannot succeed. There can never be an entirely free market in landed property.”

    That is a painfully cringeworthy, self-refuting, false statement. Translation: “The law created this mess; therefore, we need lots more laws to fix it.”

    The first part is correct: The State created this mess. The State enforces the myth of private, freehold property in land. That’s exactly why the second part is false: A free market in land titles is perfectly capable of existing. That can happen in one of two ways: Minimize the State by getting it out of the business of evicting people from land with guns; or, come up with a legal framework that approximates the economic result that would occur if you did remove the State from the equation.

    Here’s a tutorial on how a free market in land titles would work:

    https://twitter.com/urbanlandrights/status/893776164426100736

    • ANGRY_MODERATE

      Neoliberal propaganda and nonsense. Please go away.

      • BryanKavanagh

        I’d say that offers solutions, and is anything but ‘neoliberalism’, Angry!

        • Alasdair Macdonald

          BryanKavanagh, I think you are right that it offers solutions.

          The issue of landownership and the various matters which surround it has become increasingly removed from most of us, and the rentiers, with their control of much of the state have caused the instruments by which we could get knowledge of these things to become outdated and deliberately uninformative. Additionally, so much of the language of ‘property rights’ has become ‘hegemonic’, that we fail to grasp that it is a human creation and not a law of nature. It can be changed if we want it to change.

          Like many, I struggle with some of the ideas simply because they are so different to what I have grown accustomed to over many years. Often it has felt as if I am listening to an obscure foreign language or that it is a language in which I can understand most words, but cannot comprehend what they connote altogether!

          It is not helped by the tone and debating style people like Hologrammar use. It comes across as bombastic and arrogant and that is why Angry Moderate is replying as he did. I know that to bring about change you often have to be challenging and contrarian, but that is only a start. Having got some people thinking, the proponent of the change has to begin to explain, elaborate and to show patience and respect to those who are trying to learn. So, a bit of humility, please, Hologrammar!

          • BryanKavanagh

            Yes, if we really want to change, Alasdair, and not concede that “it’s too hard!” http://thedepression.org.au/changing-the-world/

          • Alasdair Macdonald

            Thanks for the link, Mr Kavanagh. When the paradigm is shifted, the perspective shifts, too.

          • ANGRY_MODERATE

            I most certainly agree that unearned income [rents] should be taxed as a priority before earned income, and even company profits. Of course, the reason for this anomaly is the political dimension of home ownership in the UK, onto which has been tagged in recent decades the phenomenon of multiple home ownership used almost as a business. Of course, there has always been commercial property speculation, and onto this now has been tagged rented housing — resulting in massive rents plus property price inflation. The latter is taxed — although probably not highly enough — with capital gains tax.

            The thing with all of this [non-existing] debate is that it centres on the concept of the State. what are its functions, and how it should be financed. This debate has been controlled by the New Right neoliberal ideology since the 1970s, and is still dominated by this free market obsession. We are actually short of alternative models, primarily because nobody in a position of influence wants to challenge the neoliberal paradigm. Even the Labour Party under Corbyn is short of ideas…

          • BryanKavanagh

            Yes, as world economies falter and political leaders flounder, the Australian situation characterises the basic issue. We’ve become the rent-seeker’s paradise down here – you don’t have to work – because we’re all going to become property millionaires! And economists wonder why wages are falling. Hey, guys: it’s simply a matter of land prices escalating, therefore wages and (non-bank & real estate) profits must decline. Any politician, anywhere, up for the challenge? No? OK. 🙁

          • Alasdair Macdonald

            Angry Moderate, you are right to raise the issue of the State and the attack on it as a concept by the Right and this explains your understandable reaction to Hologrammar’s broad brush statement. Your reaction was my initial visceral one.

            It is right that we debate what the State should do, and the principal one for me is about mediating relations between the ‘powerful’ and the rest of us. When Hologrammar proposes the changes he claims will eventually reduce the predominance of land through a ‘free’ market. How is this to be enacted and mediated other than by the action of a State with strong consensual support from the majority.

            What the ‘free marketeers’ seem to have convinced themselves of is that the free market is like the water cycle, the nitrogen cycle or any other of those natural processes which have produced and sustain life on Earth. It is a creation of humans and can be changed by humans. It is a concept that has become hegemonic for many, but the paradigm can be changed.

          • ANGRY_MODERATE

            To be honest, I didn’t even bother clicking on the link. Having done so now (as you two are positive about the content) my reaction is that this would possibly result in some improvements. But I have serious doubts about (a) the consistency of this small change with existing legal structures and axioms (in other words, would the courts overturn the principles?); and (b) the overall effectiveness of the change proposed. To my mind, it is nowhere near radical enough — but perhaps I am missing something here. Anyone: please clarify how this is going to undo the mess we are already in.

          • Alasdair Macdonald

            Angry Moderate, I am not wholly convinced of the practicality of bringing about the change, but, I think that the argument presented, and that in Mr Kavanagh’s link, begin to show that a different paradigm is possible.

            Changing attitudes is necessary to bringing about change. And, one of the things about change is that it’s outcomes are often unpredictable. Despite my Calvinist upbringing, I do not think that unpredicted outcomes are necessarily bad. The ‘perfectionist fallacy’ is one of the ways by which we make ourselves feart of change: the only thing we have to fear us fear itself, as Franklin Roosevelt, or his speechwriter said.

          • No, you’re not missing anything, Angry Moderate; it is indeed nowhere near radical enough, as you say. Like Land Value Taxation (which it seems to be first cousin to), it treats our relationship with land as essentially economic, and it doesn’t address the fundamental problem that the law doesn’t recognise us as having any natural right to occupy sufficient land to sustain life. If anything, it compounds it.

            To my mind, the proposal that the holder of any piece of land would have to match the winning bid in an annual auction is ludicrous. It would destroy one of the principal benefits of the current system – the ability to secure personal tenancy of a plot of land, regardless of (uncertain) future income streams – and would lock us all into the monetary economy, whether we like it or not.

            As a means of tackling inequality, it has the same flaw that LVT has: if you introduce measures to make land cheaper, but continue to treat it as a commodity, the rich will be able to consume more of it – effectively preventing the cost from dropping significantly. It might shift control of land to a ‘better’ (i.e. more entrepreneurial) class of owner, but it’s a poor substitute for giving people a proper right to land.

            It also has the problem, as LVT does, that it relies on a process of regularly distinguishing the value of improvements from the underlying value of the land (annually, apparently, in the case of this proposal!). Sure, it can be done – but can we rely on it being done with integrity when it is at the heart of the economy? It seems to me it would create huge scope for corruption. This proposal might be better than LVT in that it doesn’t propose a tax for the politicians to argue over (‘what should the tax rate be this year?’) but they’ll have plenty of scope for arguing that the grace period should be longer and auctions should be less freequent. (Why do reformers so often complain about incompetent/corrupt political environments but then propose reforms which rely on political integrity?)

            As far as I’m concerned, proper land reform would start by re-asserting the principle that freehold ownership involves a significant element of trusteeship (its roots, after all, lie in administrative rights that landlords had as local rulers). In that case, any transfer of ownership, either by bequest or sale, would be the exercise of a trustee’s responsibility and would be open to challenge if it didn’t respect the interests of society at large. It would be a big step politically, but a reform like that would be very simple legislatively and would transform the dynamics of landownership without changing anything directly.

            A subsequent (more complex) step would be to de-couple the market in land from the broader market in man-made goods and services by establishing a fixed-quantity land-credit system, which would eventually allow everyone to inherit a fair share of land-market-value.

            But, of course, effective land reform is unlikely to happen at all as long as we cling to inadequate political systems. That’s why I now tend to focus more on political reform, but I’m beginning to think that’s only going to happen through divine intervention.

          • Alasdair Macdonald

            MalcolmRamsay, thank you for the comment and for the link relating to land reform. There is much with which I agree.

            I hope that the pessimism of your final sentence does not indicate defeatism. I am sure it does not.

            We do need a change in how politics is done, which is one of the reasons I would like Scotland to be an independent country and, within that to devolve, further, powers to increasingly more local levels.

            Things DO change. Politicians – and lawyers and journalists – are people like ourselves. As individuals they can, and do, change and the actual personnel can change, too.

            The political, the social, the economic fields interlock and overlap. Introducing change in one usually, over time, brings change in others. So, while it is good to propose various alternatives and to be critical of other alternatives, we must be wary of our caution drifting into inaction and, in some cases, because of ego involvement, acting spitefully towards others seeking change.

            It is always good to have some idea of where we would like to go. The old saw about, ‘if you want to go there, I would not start from here’, while witty is a counsel of despair. We are where we are and we have to move forward from here. So, if, for example, LVT can be implemented in some degree and delivers a shock to the system then it is worth pursuing rather than waiting for something better.

            Or are we to stand by while Theresa May or her ilk, intone, condescendingly, “Now is not the time”.

          • Thanks, Alasdair. you’re right that my last sentence doesn’t indicate defeatism, though I can see why you might think it did. My perspective (which stems, in part, from a reluctance to believe that our ancestors were the fools that many people in the modern world regard them as) is that ‘the gods’ withdrew from us a long time ago to give us space to develop and, despite appearances to the contrary, we have now, as a race, reached a level of maturity where we could cope with meeting them again. So my comment on ‘divine intervention’ is far from pessimism – though I’m quite prepared for it to manifest as nothing more than an unexpected shift in the collective unconscious!

            As you say, things do change. But they only change when people are prepared to make change happen. I am – and I’ve spent several years trying – but I’ve concluded that there aren’t enough others for it to happen through conventional means, unless there’s a major shift on some other level. However, the time I’ve spent trying and the frustration of not getting anywhere have led me to develop a fairly clear idea of how a healthy system of government would operate, so I don’t regard any of it as wasted.

            “Introducing change in one [field] usually, over time, brings change in others.”

            That’s true up to a point but, precisely because the different fields overlap and interlock, incoherent piecemeal reform can actually be a barrier to real progress. Unless people have envisaged how a healthy system might work as a whole, it’s easy to waste energy pushing reforms designed to mitigate the dysfunctional effects of other parts of the system – which in fact helps entrench the underlying problems.

            “if, for example, LVT can be implemented in some degree and delivers a shock to the system then it is worth pursuing rather than waiting for something better.”

            Is it worth pursuing if it diverts energy away from something better which is also, in fact, more achievable?

            People have been advocating LVT for well over a century and the places where it has been implemented ‘in some degree’ don’t seem to have been roaring successes. So the argument that it’s a worthwhile partial reform seems a bit thin to me, as does the suggestion that it would deliver a shock to the system.

            With most proposals for reform, there’s usually a fairly large body of not-totally-committed supporters, who are open to hearing about its flaws, along with a core of zealots who push it blindly as the solution to all our problems. LVT seems to be a good example of that, but I’m afraid I regard it as a half-baked idea which would make more fundamental reform harder.

          • Alasdair Macdonald

            Malcolm, thanks for the extended response and the reassurance that you are still optimistic!

            It is difficult to make change and many decent people are too busy trying to deal with day-to-day matters to spend too much time on the nuances of constitutional change. Nevertheless, things can change as we saw with the EU referendum. It was not the outcome I voted for and I felt that the arguments deployed were cynically mendacious. (The arguments deployed by REMAIN were pretty mediocre, too). However, it demonstrates that significant change can be brought about. Clearly Westminster and Whitehall are hugely ill-prepared for what the change might connote. Partly the vote was a vote of no confidence in Westminster/Whitehall.

            The inadequate Mrs May, with her vacuous ‘Brexit means Brexit’ and he hubris in calling a general election has further destabilised things and we are in a period of real uncertainty. Personally, I think things will collapse because of things in Ireland, but there are other strains which are opening cracks. The Scottish referendum in 2014 most certainly did NOT settle things for a generation. The arrogant and authoritarian approach to the devolved administrations has certainly aroused Labour in Wales to begin to question the union arrangements. Whatever, one thinks about Mr Corbyn, he has certainly encouraged young people to become involved in politics. Having spent my entire working life working in education our young people are better educated than I was when I was their age. The media and others continually roll out ‘horror stories’ and quote data like PISA, but it is essentially a ruse to restrict the curriculum for the majority of the population and to return to the wasteful selective system prior to 1970.

            Areas of England like ‘The North’ – although that can be further divided into greater Manchester, the North East and, the sleeping giant of ‘Yorkshire’, The south east and London (outwith ‘the City’ and the ‘socially cleansed’ more affluent boroughs). London has the greatest inequality in the entire United Kingdom and, like all great cities, has always been a dynamic creative place, and not ‘the dynamic creativity of the financial sector that we hear about on the BBC.

            So, things are in flux – the old order is dying but the new one is struggling to be born.

            I am glad that people like you are continuing to develop the arguments about land reform. While ‘THE BIG PICTURE” is important, we must also be open to opportunities such as, for example, have been shown by the community ‘buy-outs’ in South Uist and on Eigg, in Scotland’s Western Isles. If we can get community ‘buy-outs’ in parts of Glasgow, Edinburgh or Dundee then we can begin to make change that will affect far more people.

          • Thanks, Alasdair. It’s refreshing to have a good-natured exchange that doesn’t fizzle out as soon as there’s broad agreement.

            “many decent people are too busy trying to deal with day-to-day matters to spend too much time on the nuances of constitutional change”

            I’m less sympathetic to this than I used to be. Saying “We don’t have time to worry about the foundations because the carpets will be ruined if we don’t concentrate on fixing all these drips from the roof” is fine up to a point. But if what happens, once the roof is patched, is that the residents simply go back to wringing their hands about the servants having to bed-share in the damp basement, then the foundations never ever get looked at, the subsidence continues and, pretty soon, the roof needs repairing again.

            Ultimately, in a democracy, it’s the electorate who are responsible for the integrity of the system and, currently, most voters are wilfully neglecting that responsibility. The constitution isn’t an add-on that we can deal with once we’ve got everything else sorted out, it’s at the heart of all our problems. The glaring flaws in our political processes are the reason we elect inadequate politicians, and the reason none of us feel we are properly in control of our own lives. The system that has evolved over the last few centuries has many merits (and it wouldn’t in fact take huge changes to transform it into something fit for a genuine democracy) but until ordinary people recognise that it’s up to them to put right its faults, we will be stuck with a society that works against the interests of the majority.

            At the beginning of this year, I drafted a manifesto for a constitutional reform party but there was so little interest in it that I’ve pretty much given up on the idea. As you might have seen on the page I linked to, land reform isn’t even part of that manifesto. It’s something which would probably happen automatically as a result of one of my manifesto proposals (a requirement that laws must be consistent, where possible, with uncontroversial principles such as equality of opportunity) but it’s the kind of thing that a properly functioning system would do automatically, without requiring the general public to agitate about it.

            Being open to opportunities like community buy-outs is certainly a good thing but, as I see it, those kinds of reform are part of what keeps the current system going – two or three steps forward is followed by two or three steps back. Sometimes the overall picture is progress, sometimes (like now) it’s regression. A constant surface trickle of reform allows the beneficiaries of the current skewed system to reassure everybody that things are getting better but, overall, those improvements do little more than balance the steady underground flows in the opposite direction. How long are we going to fool ourselves that this is how things must be?

          • Alasdair Macdonald

            Malcolm, undoubtedly, in a democracy, each one of us has to take responsibility to deal with the issues which affect the community – local or wider. It is easier said than done because, although, as you say, things have improved, participative democracy has not taken root to any great extent in the United Kingdom. Partly, this because every scrap of power we have got has had to be wrung from the ‘aristocracy’, who have usually brought about difficulties to frighten people from exercising powers. Secondly, because it is such a tortuous process, not many of us have been able to build up the expertise in how to use the powers and how to arrive at decisions. Trade unions did give people such opportunities as well as providing ‘solidarity’ in withstanding the ‘aristocracy’. But, they have been weakened and, like any organisation, including churches, friendly societies, etc. there is always a tendency to corruption. I recall an occasion at the opening of some pretty good quality Council housing (when Councils were allowed to build such things) the Lord Provost of Glasgow saying, ‘you don’t need to bother too much about this democracy, because we know what you need’. Thirdly, councils have been progressively disempowered, while at the same time being reduced in number. These things have severely diluted any powers which they retain.

            Since the re-establishment of the Scottish Parliament, despite the continual cavilling by the media, I feel that we have more access to government, despite the shackles around its powers. It is, albeit slowly, dealing with land reform. It is still too centralist and really has to much more active in devolving powers including revenue raising to Councils and requiring councils to devolve further to local communities.

            One of the exciting aspects of the campaign in 2013/14 was the many local, pro independence groups which came into being. There was creativity, there was excitement and there was a sense that things could be better or at least different. We did far better in the referendum than I expected, although I was deeply disappointed in the result.

            Since then, the proUnion side has waged an incessant campaign against increased powers, with Labour being at least as venal as the Conservatives and LibDems. I am not, historically, an SNP supporter and not a party member and I recognise errors it has made, not least in the last GE. However, it and the Greens and various ‘grass roots’ groups represent the vehicles currently able to bring about change.

            I sense that in parts of England, not least in London, an awareness that things can be different is awakening. Of course, from the days of the Peasants Revolt, there have been many such awakenings, which have been met with naked cruelty in suppression. But, there have also been times when lasting change has taken place.

            This is where people like you who have thought through revolutionary ideas have an important role. Carpe firm!

          • As you say, Alasdair, taking responsibility isn’t at all easy, especially when it’s a collective responsibility that we can only embrace individually. But, to my mind, that makes it all the more important that we don’t avoid it or make it more difficult.

            Everything you say about the establishment’s resistance to change may be true but it doesn’t alter the fact that the public has the power to re-make the whole system – and isn’t using it. You point out that every scrap of power we have got has had to be wrung from the ‘aristocracy’ – but what is stopping us from wringing the rest from them? Partly what stops us, as I see it, is that, when we focus on blaming others for our situation, we unconsciously cede power to them; ‘they broke it, so it’s up to them to fix it’. But that doesn’t work; if we wait for the powers-that-be to put the system right, we’ll wait forever.

            (And, actually, I’d say it’s unreasonable to expect the people who we elect in order to govern within the system to understand how to re-make it. Transformation is very different to administration and they generally call for different mindsets. For that reason, the reform party I envisaged setting up was going to be required, by its own constitution, to dissolve itself once a set of specific reforms had been achieved.)

            Another problem is that sometimes we allocate blame unfairly. You’re obviously very engaged with the issue of over-centralised power (as am I – my provisional name for a new party is ‘Local Sovereignty’) but I wonder if you appreciate how it came about? My understanding is that the doctrine of parliamentary sovereignty – which is what gives Westminster unfettered authority over other elected bodies – developed at a time when members of the House of Lords were local rulers. They were the ‘local authorities’ of their time, and that was a cornerstone of the doctrine: Parliament was the place where the different vectors of power converged, and that was what made it the most appropriate place to determine which matters were essentially local and which needed to be decided centrally.

            The transfer of power from individual local rulers to elected local authorities effectively destroyed that integration between different levels of government – and, simultaneously, undermined the legitimacy of Parliament by removing the reason that the members of the upper house were there. But that didn’t happen because of venal national politicians deliberately grabbing power; it happened as a side-effect of legitimate and necessary reforms, aimed at making local government accountable. Our national politicians are guilty, at most, of being loth to let power go.

            Most reformers treat Lords reform and devolution as two different issues. But, as I see it, they’re actually two sides of a single problem: some mechanism is needed to determine (and regularly review) what lies in the domain of which level of government. From that perspective, the UK’s relationship with Europe, the relationships between the four nations, and the relationship between Westminster and local authorities throughout the country can all be seen as part of a single issue.

            But, unless people recognise that a coherent constitution is central to good governance, it’s all too easy to treat them as entirely separate issues. And that makes different reformers into competitors rather than allies. As long as we’re all fighting to be heard, all the public hears is clamour. We need to recognise that a whole lot of necessary reforms will only happen when we stop pushing for them in isolation and push for all of them, all at once.

          • Alasdair Macdonald

            Malcolm,

            Thanks for the extended and informative response.

            The ‘blaming’ culture is pretty widespread and is present in organisations and relationships from families to international governance. I agree that the ‘blamer’ is actually ceding power to the person being blamed.

            I recall a ‘vox pop’ during one of the elections in the 1980s in which an elderly woman was unrelievedly scathing about the damage wrought on the country by Mrs Thatcher and her governments. When asked how she intended to vote, she replied, “Conservative, of course …. they broke things so they had better put them right!”

            When I was working I was deployed on several occasions to bring about change in some organisations. As a result of my experiences I agree with your view that the people who have been administering the system find it very difficult to bring about the changes need. I have a fair bit of agreement with the “theory of exogenous shock” as a way of bringing about change. The “exogenous shocks” are often what Harold MacMillan called ‘events, dear boy, events’.

            Thank you for the thumbnail on ‘local sovereignty’ and the evolution of ‘parliamentary sovereignty’. The latter is pretty much a Westminster paradigm. Governance in Scotland rests on a concept of the people as being sovereign. It dates back to the Declaration of Arbroath c1300. Although for most of the subsequent period, the definition of ‘the people’ was fairly restricted, it nevertheless is still a live concept. In the Supreme Court case raised by Ms Gina Miller and others demanding that Parliament (i e Westminster decide on Brexit), the Scottish Government also submitted an argument based on the pre 1707 Scottish Parliament’s legitimacy resting on the sovereignty of the people and not on the English concept of ‘the Crown in Parliament’, through which Mrs My was seeking to have King Henry VIII powers. Of course Henry VIII was never King of Scots, although he made several ‘rough wooing’ attempts, so, to invoke such powers is invoking powers which never applied to Scotland.

            Unfortunately, the Supreme Court did not rule on this, basing its judgment on another principal which it deemed had greater precedence.

            This raises the question, “what are we (i e those of us who live in Scotland) going to do about it? I think that is what we are doing now, in this uncertain and chaotic ‘Brexit period’, especially as the EU vote in Scotland was 62/38 for Remain.

            In Northern Ireland the Remain vote was 55/45 and immediately the issue of the border and possible reunification has arisen. And, of course, we look back at the bloody and brutal history of Ireland and its relationship with England …..

            There are other tensions beginning to tear at the (unwritten) ‘constitution’ of the UK. I agree with you that it really ought to be dealt with as a whole rather than as has so often happened in a piecemeal way – devolution to Scotland and Wales, a Good Friday agreement in Ireland, restricting the voting rights of hereditary peers in the Lords, elected mayors in English cities, etc. And, can we shine a light on shadowy bodies like ‘The Privy Council’ and ‘The City of London Corporation’?

            I think land reform will have a place in all that!!!

          • Thanks for the information about the Declaration of Arbroath, Alasdair. I was vaguely aware of it, and of the fact that the Scottish Government had brought it up in the Miller case, but I’d never given it much thought (Scotland seems a long way from Lincolnshire). I’ve recognised that the tensions between the devolved administrations and Westminster might be a catalyst for deeper reform but, for the most part, I’ve never seen how my own arguments might help bring that about. (I did try engaging on Andy Wightman’s blog a couple of years ago, in the hope that he would be interested in fundamental land reform, but he seemed to be firmly committed to LVT.)

            The Miller case always seemed a bit irrelevant to me; it was obvious that Parliament would give Theresa May the authorisation she wanted and I felt (as I believe the dissenting members of the Supreme Court did too) that it wasn’t really a matter for the courts: within the current constitution, Parliament was perfectly capable of asserting its own rights if it wanted to and, if it chose not to, that was its own business.

            I think the more interesting question is whether Theresa May’s March notification to the EU really is consistent with our own constitution, as Article 50 requires. Most people take it for granted that it is, but I think there are good reasons for doubting it. I did write to the European Commission, in late May, pointing out that a future British administration might be able to successfully repudiate it, and suggesting that, if they wanted to pre-empt that possibility, they could ask the European Court of Justice for confirmation that it was valid – which would most likely have triggered a proper constitutional debate within the UK.

            They preferred not to do that – they replied that our constitutional requirements are purely a matter for us to decide (which will make it hard for them to object if we do repudiate it) – but you’ve now got me wondering if the Scottish Government might want to challenge it, if someone alerts them to the possibility. If you’re interested in the reasoning, I’ve put my letter to the EU online. If you can think of anyone who might want to pursue that challenge, feel free to pass the link on.

            My reasoning rests on the argument that Members of Parliament have a duty of care that they have violated and MSPs might be reluctant to set a precedent that constrains their own ability to make arbitrary laws (my letter also mentions other reforms,such as recall motions, which
            would show a genuine commitment to respecting the ‘will of the people’). But it’s always better to presume that people will act with integrity, so it might be worth trying to interest one of them in the possibility.

            Failing that … well, I’ve thought for a long time that a dispute over land might be a trigger for a Lawful Rebellion which would wake the wider public to the need for fundamental reform.

          • Alasdair Macdonald

            Malcolm,

            I think the Miller case was important in that it brought a pause to the triumphalism of the LEAVERS immediately after the result. They had in effect brought off a coup of sorts and were interpreting the narrow majority as a mandate to do whatever they wanted. And by ‘they’ I mean the pretty affluent clique which Farage was fronting. The inflammatory rhetoric at the time – ‘Traitors’ etc – was indicative of the attitude. Thye would do what they wanted – ‘Brexit means Brexit’ means we will do whatever we want to maximise the gains of our clique. What Mrs Miller did was say, ‘hold on, take time to think’.

            Mrs May is by nature and inclination pretty authoritarian and not particularly democratic – she is right because she is right. The Henry VII clauses are indicative of this mindset. Indeed, at the time various polling organisations like YouGov were actually asking questions like ‘Do we need Parliament?’, ‘Shouldn’t we just let the government do what is needed?’ etc.

            Of course, it was likely that the thinking of the justices was as you suggest and that it was clear that much of Labour was going to support the Tories (minus Ken Clark).

            Fortunately the GE dealt for Mrs May’s hubris. However, the bulk of us are not out of the woods yet.

            Undoubtedly, the Scottish Parliament and the Welsh Assembly can vote to block Brexit, but the Supreme Court made a ruling on the Sewel Convention, which, in effect said Westminster can override decisions by Scotland and Wales. If Northern Ireland had a sitting Assembly just now, it, too, would probably vote against Brexit, but the DUP would probably use one of the conventions to stop this as it has done with say same-sex marriages.

            Nevertheless, The Scottish Government has appointed several pretty well-informed people to develop ideas. Some of them have been presented to Westminster and have simply been ignored. But, ideas are evolving and I am sure some of the things you have indicated about the legality of the Article 50 process, as it was enacted.

            Whether things get as far as your ‘lawful rebellion’ remains to be seen. Scotland voted 62/38 to remain, there is a majority of pro-independence MPs amongst the Scottish contingent at Westminster (and Mrs Thatcher said that this would be enough for independence), there is a majority of MSPs in the Scottish Parliament, which has also passed a motion demanding another referendum, The SNP and Greens have between them almost a majority of Councillors in Scotland. Apart from the Conservatives in the Scottish Parliament, the other four parties are all in favour of the single market and customs union. Prior to the EU referendum the Scottish Tories with literally 2/3 outriders supported REMAIN.

            In Northern Ireland the unionist bloc is no longer the monolith it was and despite their loyalist rhetoric, they have advised their supporters to exercise their right to Irish passports. Ireland is no stranger to rebellion, but I hope that democracy will prevail.

            To return to the main point of the thread – housing and land reform – apart from the Tories in the Scottish Parliament the other parties are in varying degrees in favour of land reform. There are variations in the strength of attachment, and, quite frankly, I think there is genuine ignorance about the complexities of land issues, because they have been pushed out of sight for decades. I do not mean ‘ignorance’ in a pejorative sense, and frankly admit to big gaps in my own knowledge. I am trying to learn and so are most of the MSPs.

            Housing is such a vital issue that its shortages and the baleful effects property speculation is having o the global economy will provoke the crisis which, I feel will inevitably bring the issues of land ownership to the forefront.

          • Dan Sullivan

            There is really no problem separating land value from improvement value. Even where land and improvements are taxed at the same rate, it is normal to assess them separately to get better comparables. That is, your land should have a value similar to the land around you, and your structure should have a value similar to similar structures elsewhere.

            A land value tax coupled with a per capita dividend or universal basic income guarantees that everyone can have equal access to land. That is, it becomes your choice whether to hold the land and pay as much rent as your dividend provides, or to just rent from someone and keep the dividend.

          • “There is really no problem separating land value from improvement value”

            There may not be any technical problem but, as I pointed out above, it creates significant scope for corruption.

            “A land value tax coupled with a per capita dividend or universal basic income guarantees that everyone can have equal access to land”

            No it doesn’t – not unless you also introduce reforms to ensure that everyone starts off with more-or-less equal amounts. That means reforming inheritance law to ensure that everyone inherits a fair share of land-market-value (which is a core part of my own proposal). If we did that, LVT would only have marginal benefits, capturing externally-generated uplifts in value (which is only relevant in periods of rapid development), and it probably wouldn’t be worth the trouble.

            In one of your replies to Macrocompassion you say that “land value tax has the effect of making [land] less expensive”. As I pointed out, in my first reply here, ‘if you introduce measures to make land cheaper, but continue to treat it as a commodity, the rich will be able to consume more of it – effectively preventing the cost from dropping significantly’. That ensures that people who inherit land have a significant advantage over those who inherit none.

            To my mind, taxation exists to match the contributions that society can reasonably expect from its individual members to the costs of running the state. Resource allocation, on the other hand, is concerned with ensuring a) that all individuals have access to the natural resources they need to survive and thrive, and b) that the community’s natural resources are used effectively and respectfully. Taxation and resource allocation are two distinct functions; the fact that relatively undeveloped societies integrated them doesn’t make it sensible.

          • Dan Sullivan

            “There may not be any technical problem but, as I pointed out above, it creates significant scope for corruption.”

            No, it reduces the scope for corruption. Land value tax is the only tax that is based entirely on public information. You frankly have no idea how much corruption is involved in government officials looking the other way when sales and income taxes are evaded, and even the property tax on buildings involves confidential information about the interiors of the buildings. And if you don’t limit your idea of corruption to public officials, you will find massive corruption in people not charging sales tax if the person pays cash. (The buyer avoids the sales tax and the seller avoids the income tax.) Then there is the corruption of declaring bogus deductions or hiding other forms of income. More than that, there is the avoidance that comes from shifting from domestic production to foreign production or to buying non-productive assets.

            “No it [a citizen’s dividend] doesn’t [ensure that everyone has access to land] – not unless you also introduce reforms to ensure that everyone starts off with more-or-less equal amounts.”

            The effect of land value tax is to encourage large landholders to let go of land they are not using, because the tax on unused and underused land becomes more and more burdensome as the shift continues.

            ” ‘if you introduce measures to make land cheaper, but continue to treat
            it as a commodity, the rich will be able to consume more of it”

            No, there is no such thing as consuming land. (Resource extraction is another matter, and it should be taxed through extraction royalties.) You *hold* land, and the reason the tax makes land cheaper for ordinary people to hold is that it forces rich people to let go of unused and underused land. If the tax on the rental value is high enough, the price falls to zero. At that point it is available to everyone on equal terms. Even smaller shifts to land value tax make landholding less concentrated.

            “That ensures that people who inherit land have a significant advantage over those who inherit none.”

            Those who inherit land inherit the tax, which reduces the advantage you are talking about.

            “To my mind, taxation exists to match the contributions that society can
            reasonably expect from its individual members to the costs of running
            the state.”

            To my mind, people should be taxed on the benefits society and the state give them. The value of land is entirely a social product. All individual members of society either own or rent land, and a land value tax falls on them in proportion to the benefits they receive.

            “Taxation and resource allocation are two distinct functions; the fact
            that relatively undeveloped societies integrated them doesn’t make it
            sensible.”

            Well, virtually all the classical liberals and at least 11 Nobel Laureates in Economics disagree with you. I suspect you haven’t read their reasons for their positions. I suggest you start with Tom Paine, who pinpoints land monopoly as the reason for the disparity of wealth in the first place.

            “The life of an Indian is a continual holiday, compared with the poor of Europe; and, on the other hand it appears to be abject when compared to the rich. Civilization, therefore, or that which is so-called, has operated two ways: to make one part of society more affluent, and the other more wretched, than would have been the lot of either in a natural state….

            “But the fact is that the condition of millions, in every country in Europe, is far worse than if they had been born before civilization begin, had been born among the Indians of North America at the present. I will show how this fact has happened.

            “It is a position not to be controverted that the earth, in its natural, cultivated state was, and ever would have continued to be, the common property of the human race. In that state every man would have been born to property. He would have been a joint life proprietor with rest in the property of the soil, and in all its natural productions, vegetable and animal….

            “But the earth in its natural state, as before said, is capable of supporting but a small number of inhabitants compared with what it is capable of doing in a cultivated state. And as it is impossible to separate the improvement made by cultivation from the earth itself, upon which that improvement is made, the idea of landed property arose from that parable connection; but it is nevertheless true, that it is the value of the improvement, only, and not the earth itself, that is individual property.

            “Every proprietor, therefore, of cultivated lands, owes to the community a ground-rent (for I know of no better term to express the idea) for the land which he holds; and it is from this ground-rent that the fund proposed in this plan is to issue….

            “Cultivation is at least one of the greatest natural improvements ever made by human invention. It has given to created earth a tenfold value. But the landed monopoly that began with it has produced the greatest evil. It has dispossessed more than half the inhabitants of every nation of their natural inheritance, without providing for them, as ought to have been done, an indemnification for that loss, and has thereby created a species of poverty and wretchedness that did not exist before.

            “In advocating the case of the persons thus dispossessed, it is a right, and not a charity, that I am pleading for….

            “Having thus in a few words, opened the merits of the case, I shall now proceed to the plan I have to propose, which is,

            “To create a national fund, out of which there shall be paid to every person, when arrived at the age of twenty-one years, the sum of fifteen pounds sterling, as a compensation in part, for the loss of his or her natural inheritance, by the introduction of the system of landed property:

            “And also, the sum of ten pounds per annum, during life, to every person now living, of the age of fifty years, and to all others as they shall arrive at that age.”

            http://geolib.com/essays/paine.tom/agjst.html

            Jefferson also advocated real estate taxes, not to raise revenue, but to prevent the monopolization of private land. Note that this is not about rural land, either. A square yard of prime Manhattan land is worth more than an acre of typical NY State farmland.

          • If you’re going to engage with someone who disagrees with you, Dan, you shouldn’t assume that they start from the same position you do.

            “You frankly have no idea how much corruption is involved in government officials looking the other way when sales and income taxes are evaded”

            I’m not interested in how much corruption there is in existing societies – because I can see that existing societies are fundamentally flawed. What I’m interested in is how a healthy society would govern itself. From that perspective, I don’t see Land Value Taxation as a sensible method either of resource allocation or of paying for government. Nor do I see it as a worthwhile transitional reform because I can’t see how adopting it would help us move towards laws which would be healthy.

            LVT involves the state taking from individuals value they should never have been granted in the first place, but which they think of as rightfully theirs. I see that (combined with the level of ‘disinterested’ assessment it would involve) as likely to foster corruption. The fact that current methods of raising government revenue also have scope for corruption is irrelevant, particularly if LVT were introduced alongside those other methods. In any case, my concern here is primarily about unequal access to land, which is what the original article is about, rather than tax.

            “there is no such thing as consuming land”

            Not in the narrow sense of using it up but, in the broader sense, of course there is. Someone with a large house consumes more land than someone with a small one. Someone with a house and a factory consumes more land than someone who only has a house.

            ” the tax […] forces rich people to let go of unused and underused land”

            No, it forces them to either let go of it or make use of it themselves. If your goal is to ensure that no land is allowed to lie ‘idle’, then LVT might well achieve it. But what I’m primarily concerned with is social justice and, from that perspective, I regard LVT as hopelessly inadequate – as I said in my initial comment, “It might shift control of land to a ‘better’ (i.e. more entrepreneurial) class of owner, but it’s a poor substitute for giving people a proper right to land”.

            “If the tax on the rental value is high enough, the price falls to zero. At that point it is available to everyone on equal terms”

            I don’t think the price will ever fall below its utility value, which would only be zero on land that isn’t much use to anybody. As for being available to everyone on equal terms, of course it’s not: if one person inherits large amounts of land while another inherits none, they are clearly not starting from a position of equality, because the person who inherits can choose to use it rather than give it up.

            And, in practice, the level the tax should be levied at is going to be a hotly-contested political football. In the absence of a profound political transformation, there’s very little chance of it rising to the point where owning land ceases to be attractive to the rentier class – and still less of it staying at that level.

            “Those who inherit land inherit the tax, which reduces the advantage”

            Sure, it reduces it. But, as I pointed out above, it doesn’t come close to making things equal.

            “The value of land is entirely a social product”

            The primary value of land lies in the fact that we can’t live without it. Its relative price derives from the fact that people compete for it; their competition might be based on social factors but isn’t invariably and certainly wasn’t originally. As I said in my initial comment, “Land Value Taxation […] treats our relationship with land as essentially economic, and it doesn’t address the fundamental problem that the law doesn’t recognise us as having any natural right to occupy sufficient land to sustain life”. You regard access to land as a benefit society confers on its members, I regard it as an absolute right which needs to be administered.

            From my perspective, what you’re doing, with LVT, is advocating a clumsy device to mitigate the ill-effects of fundamental flaws in the way natural resources are allocated – a device which even you recognise won’t work properly without also implementing a citizen’s dividend. As far as I’m concerned, to build a healthy society we need to fix the underlying flaws, and that means having sensible ownership laws.

            “virtually all the classical liberals and at least 11 Nobel Laureates in Economics disagree with you. I suspect you haven’t read their reasons for their positions. I suggest you start with Tom Paine, who pinpoints land monopoly as the reason for the disparity of wealth in the first place”

            I don’t generally get my opinions from reading other people’s, Dan. I’m also not at all worried by the fact that others disagree with me; I’ve read enough, over the last forty years or so, to know that many respected thinkers haven’t thought any more deeply than I have, and often start from assumptions I think are unjustified.

            Given the fact that I described LVT as a flawed method of tackling inequality and a poor substitute for giving people a proper right to land, it’s odd you assume I’m unaware of the role of land monopoly as the reason for the disparity of wealth. I assure you I have understood that for many years.

          • Dan Sullivan

            I didn’t assume anything about the position you start from. I responded to your statements, which are factually and logically ad odds with a general economic consensus.

            Your first statement was that LVT “creates significant scope for corruption.” That is simply false, as it reduces the scope for corruption.

            Your statement that LVT would allow the rich to consume more land is also simply false, and your error goes way beyond the semantic argument over the word consume. It absolutely forces them to let go of land they are not using. Your later argument that they could put it to use instead of letting shows an ignorance of just how much land they are holding, and how inefficient they they are at putting land to use.

            Perhaps you are unclear that this is not just a tax on unused land, but a tax on the value of all land, with an untaxing of the various uses. Those who can do more on less land have a competitive advantage over those who simply profit because they have a great deal of land. This was documented in the realm of farming by economist Mason Gaffney, who showed that small full-time family farms in the US have higher proceeds per dollar value of land than larger corporate farms as well as hobby farms that rich urbanites work on the weekends, with a hired hand helping them during the week. The same is true with regard to retail, where it gives neighborhood businesses a competitive advantage over WalMarts and Home Depots, family restaurants an advantage over chain restaurants, and so on.

            “Land Value Taxation […] treats our relationship with land as
            essentially economic, and it doesn’t address the fundamental problem
            that the law doesn’t recognise us as having any natural right to occupy
            sufficient land to sustain life”.

            That is also false. Land value tax was proposed over and over again as a way to insure that everyone has a natural right to, actually, a per capita share of land, which is far more than what is necessary to sustain life. That was John Locke’s argument in “On Property” from his *Second Treatise*, Adam Smith’s argument in “On the Rent of Land,” from *Wealth of Nations*, Thomas Jefferson’s argument when he wrote to James Madison, saying, “Another means
            of silently lessening the inequality of property is to exempt
            all from taxation below a certain point, and to tax the
            higher portions of property in geometrical progression as
            they rise. Whenever there is in any country, uncultivated
            lands and unemployed poor, it is clear that the laws of
            property have been so far extended as to violate natural
            right,” and Tom Paine’s exact proposal in “Agrarian Justice,” where he wrote, “Men did not make the earth. It is the value of the improvement only that is individual property. Every owner of cultivated land owes the community a ground rent for the land which he holds.”

            The fact that we make economic arguments to those who are concerned about the economics does not make this a merely economic proposal.

            “I don’t think the price will ever fall below its utility value, which would only be zero on land that isn’t much use to anybody.”

            That is also false. The margin of production is only pushed down to subsistence land when better land is held out of use. When people hold only the land they are using and all the other land becomes available, the margin is pulled up to the point where land with plenty of utility has not only a zero purchase price, but a zero rent.

            ” it’s odd you assume I’m unaware of the role of land monopoly as the reason for the disparity of wealth.”

            I made no such assumption, but it is becoming increasingly clear that you are unaware of the economic dynamics underlying that monopoly. Of course your opinions could be right, and the opinions of those eleven Nobel economists, of hundreds of renowned philosophers and reformers from across the political spectrum could all be wrong. However, as you have offered no analysis, but only empty assertions, I can only say that it is not everyone else’s job to convince you. Rather, it is your job to make some kind of case to support your opinions. I have not seen anything that stands up to scrutiny.

          • “it is your job to make some kind of case to support your opinions”

            That’s a novel approach. Generally the onus is on the seller to convince people what he’s selling is worth buying; there’s not usually an obligation on others to justify why they don’t think it is.

            I’m not trying to convince you of anything, Dan. I’ve crossed words with enough committed advocates of LVT to know that I can’t expect them to look critically at how their proposals compare to more radical reforms – they only ever make the case that it would be better than the status quo (which might well be true). In my comments here, I’m merely stating why I think the proposal is inadequate as a solution to inequality, for the benefit of anyone else who might stumble across this 4-month old thread in this relatively obscure, UK-centred online publication. They can judge for themselves what value our arguments have.

            “Land value tax was proposed over and over again as a way to insure that everyone has a natural right to, actually, a per capita share of land”

            Unfortunately, the good intentions of would-be legislators don’t count for much if the laws they propose don’t have the effect they desire. The reforms you advocate will not, in themselves, give people an equal right to land; they’re simply designed to mitigate, through the invisible hand of the market, the ill-effects of more fundamental laws of ownership (laws which have become detached from their own roots and are blatantly incompatible with generally-accepted, uncontroversial principles). As far as I can see, LVT can only lead to reasonable equality if a) other measures (citizens’ dividend and scrapping of other taxes) are also introduced, and maintained through all the centuries to come, and b) your understanding of how markets will operate, in the changed conditions you are proposing, is both correct and complete. I don’t think we can count on either of those conditions being the case.

            My attitude is that adding layers of mitigating law on top of blatantly flawed foundations is not a sensible way for a mature society to govern itself. At some point, we need to examine those fundamental laws and re-draft them in ways that do genuinely give everyone a right to a fair share of their nation’s natural resources. When we do that, I think it’s very unlikely that there will be any need for Land Value Taxation.

            “It absolutely forces them to let go of land they are not using”

            The conversation with your own landlord, that you quoted below, shows that isn’t the case. He bought vacant lots, in the full knowledge that he would pay tax on them until such time as he builds on them. It’s a price he thinks is worth paying in order to achieve a future gain. Others will also hold on to land they have no immediate need for, as long as they don’t find the cost unacceptable, in anticipation of using it in the future.

            “Your later argument that they could put it to use instead of letting shows an ignorance of just how much land they are holding, and how inefficient they they are at putting land to use.”

            I’ve been well aware just how much land rich people hold ever since I read Kevin Cahill’s book, ‘Who Owns Britain?’, fifteen years ago – and his estimate that 70% was owned by less than 1% of the population did not come as a surprise to me.

            As to how inefficient ‘they’ are at putting land to use, that’s hard to judge when owners are under no pressure to use it efficiently. I recognised, in my comment 4 months ago, that LVT “might shift control of land to a ‘better’ (i.e. more entrepreneurial) class of owner” but it’s quite likely it would also galvanise existing owners to use it more effectively. Without other measures to ensure that active owners don’t benefit unfairly, I don’t see it being much help in reducing inequality.

            “Perhaps you are unclear that this is not just a tax on unused land, but a tax on the value of all land, with an untaxing of the various uses.”

            No, I do understand that it is a tax on all land, and that your intention is that it will replace other taxes (I assume that’s what you’re referring to with the phrase ‘untaxing of the various uses’ but please do explain it if you meant something else). However, I’ve no confidence that it wouldn’t simply be treated as an additional tax, nor that it would be levied at a high enough rate to significantly reduce rentier profits. Nor am I convinced that it will have much effect beyond bringing idle land into use, because I don’t see how any process for attributing a rental value to land being used by its owner would work without distorting values and/or disadvantaging unusual uses.

            “Those who can do more on less land have a competitive advantage over those who simply profit because they have a great deal of land.”

            Yes, as I said “It might shift control of land to a ‘better’ (i.e. more entrepreneurial) class of owner”. But, since those people will also have a competitive edge over people who are less efficient at using land (or have different ideas of what constitutes good use), it’s hard to see how it will lead to equal access unless there are also significant constraints on individuals’ ability to use land indirectly. Your plan would have to include banning corporations from owning land, otherwise those who are able to squeeze the most economic value out of it will be able to expand the amount they hold, at the expense of those who are less economically efficient.

            In my book, that doesn’t constitute giving everybody a fair share. Basically, rentier profits don’t come through holding land out of use, they come through having control of how it’s used. I don’t see any anything in LVT that would prevent a relatively small proportion of the population from controlling a majority of the stock of land. Their dominance of the socio-economic landscape might be less extreme than it is currently, but it will still be a major source of inequality.

            What exactly is your objection to tackling the roots of the problem by introducing sensible ownership laws?

          • Dan Sullivan

            You made empty assertions in that you have offered no basis for those assertions. Now you are taking my quotes out of context to pretend they said something other than what they said. The context for your last cherry-picked quote is that it was a response to your own claim that “Land Value Taxation […] treats our relationship with land as essentially economic, and it doesn’t address the fundamental problem that the law doesn’t recognise us as having any natural right to occupy sufficient land to sustain life.”

            I documented several sources to show how that statement was false. Once you admit that your statement was false, and that land value tax was proposed from the outset to give people a right of access to land, we can proceed further. However, it seems that your strategy is to glide past one false objection by making another one. Such a tactic could take us around in circles forever.

          • My statement isn’t about the motivations of campaigners, Dan, it’s about the nature of the laws they’re advocating. I’m well aware that the people proposing Land Value Taxation are well-intentioned and believe everyone has a right to a fair share of land, and I recognise that was their goal when they proposed it – which is why I referred to ‘good intentions’ in my last response. I’m simply pointing out that the proposal fails to remedy a fundamental legal flaw. British laws governing ownership of land do not currently recognise individual citizens as having any natural right to occupy sufficient land to sustain life. LVT makes no attempt to give people an explicit legal right to land, it merely imposes an economic burden on those who do own it, in the hope that market forces will lead to everyone having a fair share.

            Since it would be perfectly feasible to institute laws that explicitly allow everyone to inherit a fair share of the land market, I see no sense in a reform aiming to do it in a roundabout way – a way that might not even work, and might have undesirable consequences. Why exactly do you prefer a roundabout method of trying to achieve a fair distribution, rather than tackling the roots of the problem?

          • Dan Sullivan

            There is no law that would do such a thing better than land value tax coupled with a citizens dividend. Anyone with a share of the rent can exchange that rent for a share of the land, because there would be plenty of land on the market when people can’t afford the taxes on holding it idle.

            This is not a roundabout way, and it is a way that clearly works. There is nothing more direct than, “replace other taxes with a tax on the value of land.”

            If it would be “perfectly feasible to institute laws” that do it your way, whatever that might be, why don’t you give us a concrete proposal. I have seen many such proposals, and all of them suffered from unintended consequences. My proposal, stated above, is ten words, which is pretty simple and straightforward. Yours can be much longer if it is an actual proposal, but it should be concrete and specific.

          • “why don’t you give us a concrete proposal”

            If you look again at my original comment from four months ago, Dan – the one you responded to, drawing me back into the thread – you’ll find that I outlined the first two steps there, with a link to my website where I discuss it in a bit more detail.

          • Dan Sullivan

            Well, I just wasted a significant amount of time re-reading your messages and following your links, and links from your links, and I found nothing but glittering abstractions, with no mechanics as to how these abstractions would be manifested.

            You say,

            “The law shall provide, as far as is practicable, for everyone to:

            “*claim all or part of their birthright;

            “*leave all or part of it unclaimed, in the stewardship of others;

            “*dispose of all or part of it, temporarily or permanently, by
            contract or gift, once they have reached an age and condition of full
            discretion.”

            But HOW does the law provide for that? How, for example, what in CONCRETE terms does it mean to say “All
            holders of agricultural land in excess of their own fair share shall be deemed to hold it as trustees for those who have left their shares unclaimed.” In our system, such trustees compensate those without land directly. In yours, they are just “deemed trustees.”

            Well, you go on, “Trustees shall give due regard to the principle that nobody should be deprived of means of subsistence.” So, how do you enforce “due regard” concretely? If you are holding my share of land, wouldn’t “due regard” obligate you to pay me rent, the same as anyone who holds land today that legally belongs to someone else? If not, what is the exact mechanism by which their “due regard” is manifested?

            Like I said, you have no concrete proposal. When you try to actually build a model to enforce your glittering generalities, you will run into all manner of problems that dwarf the things you are complaining about here.

          • Thanks for looking at my land reform pages, Dan. I take it you’re not very familiar with the way the law works – if you were, you wouldn’t see these proposals as abstractions.

            Primary legislation (the statutes enacted by sovereign legislatures, such as the British Parliament) provides a framework which is complemented by secondary law, in the form of rules drafted by government agencies and court rulings which establish legal precedents. The best primary legislation does no more than establish an overall purpose, along with constraints on the ability of secondary law to violate that purpose, without dictating exactly how it should be achieved. Primary legislation is very much harder to change than secondary law and when it’s too specific it nearly always causes problems.

            You don’t seem to have taken in that the clauses I drafted in my inheritance page are only a first step; their purpose is to change the dynamics of how the system works without imposing immediate substantive change (which would be highly disruptive). As such, they’re designed to be as flexible as possible and broad enough to allow current ownership patterns to be challenged, without immediately putting them outside the law. That first step would merely remove an existing obstacle to fair distribution of land ownership; the second step (which I outline in my Land Currency pages) would put in place a process that would allow people to claim their fair share.

            ‘But HOW does the law provide for that?’

            Those clauses you quoted provide for it by a) altering the way the courts (and lawyers drafting contracts) will interpret existing law; b) instructing government bodies to act in ways consistent with those aims (while giving them considerable flexibility in deciding how best to meet them); and c) giving members of the public the power to mount a legal challenge if they are denied any one of those options.

            The phrase ‘as far as is practicable’ (along with the possibility of people leaving their birthright unclaimed) would make the new law compatible with the existing situation and, in principle, allow it to continue indefinitely. However, the near certainty that members of the public will demand a way of claiming their birthright will ensure that the government does work out a way for it to operate. The system I outline in my Land Currency page is a practical way of doing that but it might not be the only way, and I see no reason why primary legislation should impose it.

            ‘what in CONCRETE terms does it mean to say “All holders of agricultural land in excess of their own fair share shall be deemed to hold it as trustees for those who have left their shares unclaimed.” ‘

            One thing it means, in concrete terms, is that if a holder of agricultural land sells that land for non-agricultural use, they can’t take the whole proceeds of the sale for their own private benefit. It doesn’t specify exactly what should happen with the part they can’t take but that’s something which can emerge, through trustees developing their own solutions (or through case law when trustees’ solutions are challenged) or through government-initiated secondary legislation, as the new ownership framework beds in.

            Another thing it means, in concrete terms, is that the decision to sell could be challenged in court. So, if a farmer agreed to sell a large tract of land on the edge of a village to a property developer, against the wishes of the villagers, they would be able to challenge the sale as a violation of the farmer’s trust. Currently, they wouldn’t be able to.

            When it’s sold as agricultural land, the trusteeship will simply be transferred to the buyer, who will knowingly be taking on a responsibility which had not previously been recognised. In practice, therefore, the price will reflect that – so a reduction in the price of agricultural land will be another concrete effect.

            Those are three fairly obvious examples. There are probably many more situations where the possibility of a legal challenge would affect what an owner decides to do but it’s very difficult to envisage them all. That’s why primary legislation tends to be very general.

            ‘Well, you go on, “Trustees shall give due regard to the principle that nobody should be deprived of means of subsistence.” ‘

            You’ve cut that sentence short there, Dan. As I wrote it, it’s concerned with the specific circumstance of a trustee ‘considering whether to hold or relinquish their trusteeship’. I’m not very happy with the current wording but what that clause will do is constrain a farmer’s right to refuse to sell land to someone who doesn’t have any. What constitutes ‘due regard’ is something that will emerge through case law; there are likely to be many circumstances where it would be reasonable for a farmer to refuse to sell and many where it would not. That’s exactly the sort of situation where too specific primary legislation causes far more problems than it solves.

            One of the ways trustees might protect themselves from being forced to sell would be for them to enter into explicit relationships with non-farmers, either individually or in groups. Such relationships might be based on rent payments or profit-sharing or, in more compact communities, they might be based on the kind of arrangement that Community Supported Agriculture schemes already use, where it’s the produce that’s distributed.

            There’s a variety of ways in which it might operate including, no doubt, many which I’m not in a position to envisage. With my Land Currency page, I’ve outlined a process that would allow everyone to inherit a fair share of land-market-value. What I’ve aimed to do with that is show that there is at least one way in which a fair distribution of rights could be achieved, without unnecessarily compromising the flexibility of the market, but all it does is provide a framework in which processes that are well-established in the current system would deliver a fair outcome.

            “When you try to actually build a model to enforce your glittering generalities, you will run into all manner of problems that dwarf the things you are complaining about here”

            I don’t need to build any such model because there’s already one in place: a legal system which is well accustomed to interpreting general laws and applying them in all the multitude of specific circumstances that legislators could not hope to properly anticipate.

            We’re aiming for a transition from a centuries-old system of landowner privilege to one of fair distribution and that’s a hugely complex task. That’s precisely why the route should not be specified in too much detail. The reforms I’ve outlined require the public to actively claim their rights but it provides a legal framework clear enough and flexible enough to allow the transition to happen relatively smoothly.

            ‘In our system, such trustees compensate those without land directly. In yours, they are just “deemed trustees.”‘

            As I said, you’re overlooking the fact that the clauses you’ve quoted are merely a first step, which is specifically designed to allow a relatively smooth transition. That makes your comparison invalid: you’re comparing the anticipated result of a first step reform in my system with how you anticipate your own proposals working once they are all in place.

            If you have any more questions about how my proposals would work, I’ll be happy to answer them. But please understand that I’ll find it very hard to take you seriously as long as you continue to ignore the criticisms I’ve made of LVT – particularly the points about it being a perennial political football, and rentier profits deriving primarily from control over the use of land rather than simple possession of it.

    • roylangston

      There are a number of reasons why you are factually incorrect, Hologrammar. First, the fact that the premise of minimizing state involvement cannot succeed does not mean we need more laws, it means that land administration is inherently a state function, and the public services and infrastructure that create land’s rental value are mostly examples of market failure that have never been, and cannot be, provided efficiently by the private sector. Second, your proposed solution solves neither the problem of funding desirable public services and infrastructure out of the land rent they create (meaning that taxes will have to be levied by force to pay for them instead — not a free market solution) nor the removal, by exclusive private land tenure, of people’s rights to liberty and their conversion into the private property of landowners. A market in which people’s rights to liberty are traded by others as their private property is not a free market. It is a slave market.

      • Hologrammar

        Taxes are not necessary to collect the rent; landowners will bid the rent to hold their exclusive titles. (And if they won’t, they don’t get to hold the title.) The “market failure” is the fact that we treat land titles as freehold property — rent stolen by landowners — instead of leasehold property, with the rent passed through landowners into the public purse. So it’s not really a “market failure”; it’s the complete absence of a market in favor of a monopoly.

        Regarding the problem of funding goods and services, of course a leasehold market solves that: Use the publicly collected rent to fund those things. What’s left over after funding those things can then go to the Dividend.

        I’m not sure what you mean by the second point, either, since a system of leasehold land titles rented from the public by definition ends the system of exclusive private land tenure you abhor (as do I). The only way to more throughly end it is to abolish exclusive land titles altogether …

        • roylangston

          There seems to be some confusion about terms, here. The current problem with the market in freehold land titles is not market failure, but the fact that it is a market in privilege, like a slave market, not a free market. Privilege markets can function well enough, if we ignore the initial crime that removes people’s rights (which is the actual gravamen of the Coase Theorem).

          The market failure occurs in provision of desirable services and infrastructure (usually by government), whose value ends up as land rent. There is no way to structure such markets to be efficient with private investors funding the expenditures, so the best solution is to pay for these things by recovering the land rent they create through the public land tenure administration system — in effect, a leasehold market much as you propose. The long-term security of tenure needed to support private investment in long-lived fixed improvements could be provided through a system of premiums, a sort of rent-increase insurance.

          However, the leasehold system does not end exclusive private tenure, it just removes the landholder’s privilege of pocketing the rent. The leaseholder still gets exclusive tenure, he just has to pay the community for it. That solves one half of the problem, but not the other half: people’s liberty rights have still been removed without just compensation. They would still have to pay for exercising their rights to access economic opportunity to sustain themselves; they’d just be paying the community instead of a private landowner. The best way to solve this problem is through a universal individual exemption (UIE) from location subsidy repayment (LSR, i.e., the lease payment) sufficient to provide everyone with free, secure tenure on enough of the available advantageous land of their choice to have access to economic opportunity.

        • Dan Sullivan

          The advantage of land value tax over the state assuming title and leasing the land is that the latter gives government officials a great deal of arbitrary power over who gets what land and over the terms of the lease, including what the lessee may or may not do with the land. Today that is regulated by zoning, and most people agree that there is too much zoning.

    • Lily

      Agree with your views.

  • Macrocompassion

    An Alternative Policy to Land Value Taxation (LVT), or How We Could Get on Good Terms with the Landlords by Introducing Progressive Land Nationalization( PLN)

    It is obvious that our favorite subject of so-called land value taxation LVT, (about which we have chosen to rant on and on all the time), is very unpopular with the landlords. This is not surprising, because they are the main targets of the resulting worsening and subjective changes. Indeed, even by our use of the word “tax”, there is a big enough effect to neglect this idea, since every politician would prefer not to have to include this (dirty) word in his/her policies, and to suggest the need to introduce new taxes is completely taboo!

    In the following proposal, these two negative aspects of LVT have been deliberately avoided with a degree of compromise, and the writer believes that consequently by taking this modified approach, there is a far better chance that our aims of a more ethical society would finally gather greater political acceptance.

    Consider the present-day situation of the land.Much of the central city land is being properly used, but there are also sites being left bare or being only partly used, in what we regard as a wasteful manner. These sites are owned by land value speculators, The proper use of and these sites makes them our main targets. In the surrounding (development) regions of the city, improvements are continuously taking place and there the speculators in land values are also active, firstly by determining where the next development is to take place (sometimes by bribery ahead of the official announcement). Their attempts to buy up these sites immediately cause the price for all of them to rise. This is associated with the completion for catching this opportunity to make a killing, whilst at the same time the subsequent development changes slow-down the rate of this progress, due to the smaller amount of land that the developers can initially afford. These two adverse aspects of land tenure under our present regime (non-use and speculation) can be eliminated by Progressive Land Nationalization or PLN.

    PLN is applicable whenever a site is freely offered for sale. Instead of another landlord snapping up the opportunity, the government steps-in and buys the land with an offer associated with the competitive price, but with slightly easier
    terms of payment, registration, taxation (like stamp-duty), etc. This means that in most cases the site will become nationalized and immediately be available for use. The economic or ground-rent is subsequently paid regularly to the government, by a user/entrepreneur acting as a tenant, on lease-held terms for a relatively long period of time. (Any buildings on the land still belong to the previous property owner unless it is sold at this time. The negotiations for exchange
    or hire of these buildings would be the same as for any other item of durable capital goods, preferably with the cooperation of the new tenant and not the government.)

    This land leasing agreement with the new tenant should include the possibility for changes to the regular sum being paid, according to the general macro-economic climate, to the development of the surroundings, to changes in the associated land value, and to the average rate of interest on other forms of investment that imply the need for money borrowing.

    Gradually over many years more and more land is taken-up by the government in this way and more and more income from it goes into the public purse. The government needs a source of money for purchasing in this way and it can come from only three different places in the macro-economy. It can come from taxation, if and when there is a budgetary surplus, or from deliberate printing of currency (which if done with caution will not be a serious loss to the effective purchasing-power of savers—a common situation already), or from borrowing from banks and savers through the banks. In common with regular national bonds (which are related to the national deficit), the government should issue specifically named land-bonds, which are payable at a similar but slightly adjustable rate compared to the normal kinds of bonds, the rates being varied according to whether much land is being transacted in this way and on how much more is being planned.

    The rate of interest being returned from both kinds of bonds and on average from other investments in the stock-market etc., will certainly not exceed the rate coming from the ground-rent, based on the land’s value. Consequently the government will make a regular gain of its income, due to this growing revenue regime and it may even be able to reduce other kinds of taxation in degrees. In particular it can encourage the nationalization of the land in this way, by making small tax concessions to its tenants and possibly small subsidies to those landlords, who agree to sell their land according to a schedule prescribed by the government. Due to the need for not making big disturbances to the progress of the national economy, this process of PLN should begin in a small-scale way, and then be allowed to gather momentum, as the increased national debt is slowly repaid from the difference in incoming ground-rent and outgoing interest on land-bonds. It is envisaged that to nationalize nearly all of the land by this technique, would probably take 40 years or more, when the greatest benefits to the community would be felt towards the end of the process, after most of the land value speculation
    and the poverty from its associated wasted opportunities have been eliminated.

    Such a policy will not be adverse to the landlords, who are ready to sell their land, even if it is at a somewhat less speculative price. It will provide growing opportunities for proper use of the newly available sites (with previous unused
    sites now providing more opportunities for employment and some greater national income to boot) and will replace the rent previously paid by tenants with equal amounts of the land revenue from the leasing of all the nationalized sites. No taxation policy change is involved, unless it is by a small reduction in stamp-duty, probably at the start.

    We need to research proper simulation of the dynamics of these kinds of changes, using a model of the whole macro-economy, such as I have recently prescribed in my new book: “Consequential Macroeconomics—Rationalizing About How Our Social System Works”.

    • Dan Sullivan

      It appears that Macrocompassion is lacking in compassion for anyone who disagrees with him, calling them ranters. He exudes misguided compassion for landlords however, to the extent that he is blinded to the fact that all taxes reduce the rents landlords can collect, and that replacing other taxes with land value tax is generally beneficial to landlords as a whole. Economists call this principle ATCOR, for All Taxes Come Out of Rent. This principle was first espoused by John Locke:

      “It is in vain in a Country whose
      great Fund is Land, to hope to lay the publick charge of the
      Government on any thing else; there at last it will terminate. The
      Merchant (do what you can) will not bear it, the Labourer cannot, and
      therefore the Landholder must: And whether he were best do it, by
      laying it directly, where it will at last settle, or by letting it
      come to him by the sinking of his Rents, which when they are once
      fallen every one knows are not easily raised again, let him consider.”

      We see evidence of ATCOR all the time in the United States, where most taxes are local. The more people’s productivity is taxed in one municipality, the faster the more productive people move away to another. This drives down both rents and the tax base itself in the high-productivity-tax municipality. Philadelphia’s wage tax is over 4% for both people who live there and people who work there, while most of the suburban communities only charge 1%. As a result, both high-income residents and high-volume businesses continue to move out of the city. Even the city’s largest newspaper, the Philadelphia Inquirer, is no longer produced in Philadelphia. The situation has become so bad there that the Philadelphia Association of Realtors ran paid advertisements in city newspapers urging people to support a shift from wage taxes to land value tax. Does Macrocompassion believe that the Association of Realtors would advocate something that is “very unpopular with the landlords”? Of course, it is unpopular with a few people holding prime land out of circulation, such as the landholder who, for decades, sat on a large parking lot the in most valuable location in the city – across the street from Philadelphia City Hall. He and a few people like him are the targeted beneficiaries of Macrocompassion’s very micro compassion, while the flight of workers and businesses continues to depress city land values overall.

      Just across the border from Philadelphia is the tiny borough of Milbourne. Milbourne was a terribly depressed municipality until it began to gradually replace all of its building taxes with taxes on land value. Things began to turn around, slowly at first, until Philadelphia came to Milbourne’s rescue. Afraid of its worst land speculators and desperate for money, Philadelphia council decided to discourage smoking by levying a heavy local tax on tobacco. Since then, four tobaccos shops opened in Milbourne, and about the same number closed in Philadelphia neighborhoods near Milbourne. Then Philadelphia decided to tax sugary soft drinks, and two large discount beverage shops opened in Milbourne.

      Macrocompassion, what do you suppose the Philadelphia landlords who lost their beverage and tobacco-shop tenants think about land value tax as an alternative to these taxes? And do you suppose people smoke less and drink fewer sugary beverages when they travel to Milbourne and buy their cigarettes by the carton and their sodas by the case?

      And why do something complicated and involved when replacing other taxes with land value tax is so simple and straightforward? Shall we ask Macrocompassion that question? I think not. The great Clarence Darrow has already answered it:

      “Now, there are some methods of getting access to the earth which are
      easier than others. The easiest, perhaps, that has been contrived is by
      means of taxation of the land values and land values alone; and I need
      only say a little upon that question. One trouble with it which makes
      it almost impossible to achieve, is that it is so simple and easy. You
      cannot get people to do anything that is simple; they want it complex
      so they can be fooled.”

      http://savingcommunities.org/docs/darrow.clarence/landtopeople.html

      • Macrocompassion

        Dan, You seem to have failed to understand the implications of the introduction of some nationalized land leasing laws, as distinct from the original proposal for LVT. This alternative method for the collection of the nation’s revenues through leasing (and the elimination of other forms of taxation) works out to be no different to LVT itself. It is practiced with success in such places as Hong Kong, Singapore and in particular Estonia, where it has recently broken all records in their national rates for economic progress compared to the rest of Europe.

        The reason for the name change and the land purchases by the government, is to get the landlords on our side. Their powers for lobbying against LVT have always been too strong for any serious change in our proposed system of the Georgist ethical means, for obtaining our national income. However, once these greedy speculators have gained the value of their sites they will no longer treat them as being a capital investment and find they can gain by restraining the opportunities of the land right of access. More sites will become available, which will ease the opportunities that entrepreneurs have to provide jobs and consumer goods. This will reduce and eventually eliminate the incoming rents from land value speculation in the growing land values, which themselves are created by the taxes we pay today, being partly used for the necessarily improving of the infrastructure.

        For a government to borrow and print sufficient money to be able to buy up all the land will take many years, but as soon as it begins to do so it will have more income from leasing, to more easily continue this process, and other kinds of taxation can be gradually reduced. This will have the effect of slowly redistributing national income tax and placing it onto leasing revenues. Landlords may even be inclined to invest their returning sums into “Land Bonds” by the government for further investment, because now the amount of uncertainty is reduced for a steady income in a more stable national economy .

        • Dan Sullivan

          You seem to be under the delusion that landlords are not already on our side. A large number of them are, including some who pay more under the proposal. (That’s already a minority of landlords.) My own commercial landlord talked to me at my office, asking me what I do.

          I said, “You might not like it. I advocate land value tax.”

          He said, “That’s the best thing that ever happened to this city!”

          “You do know that you pay more, right? I mean, this building saves, but you own vacant lots in the Strip District that pay a lot more.”

          “Yes, but I got a very good price on them because the previous landowner didn’t want to pay the tax. I intend to build on those lots, and when I do, my taxes will be lower.”

          And again, the Philadelphia Association of Realtors not only endorsed land value tax, but spent money campaigning for it.

          I don’t know how many landlords you have talked to about this, but I expect it isn’t many. When we advocate for land value tax, we make a point of talking to those who would pay more. It is not so much to win their support as to weaken their opposition. Some of them see the benefits and support us, and others just acquiesce. The few who remain vocal opponents are then isolated in their opposition.

          Landlords value stability, and the states that relied most heavily on real estate taxes had the fewest foreclosures in the last crash, while the states that had exceptionally low real estate taxes (particularly California and Nevada) were the hardest hit.

          AS for your plan, as soon as government becomes a force on the demand side of the real estate market, land prices will rise because of it. Your program has the market effect of making land more expensive, while land value tax has the effect of making it less expensive. Then, when government has to give up on this wild scheme, land prices will collapse.

          • Macrocompassion

            Dan. Just because a few landlords have shown you some sympathy for the Georgist cause, it does not mean that the majority will agree. Many of them are paying more income tax that its replacement by LVT which would be to their advantage. But this is not generally the case, even if this is true for some. This is what you imply, but to my way of thinking the material gains from land monopolization and the speculation in its growing value due to national investment of tax-payer’s money, are far more powerful motives and of much greater significant and these things are most likely to motivate them to lobby against us.

            However where my land sales and leasing plan were to apply, many of them would rather live greedily for today, and are willing to sell. What they fail to appreciate in the way we do, is that land ownership is the most powerful means for controlling national progress.

            My plan will continue to support the way that competition for the cheapest leasing of sites naturally works. It will encourage more business activity, and not the reverse as you seem to think. With more sites available the competitive pressure for them will fall as initially will their lease values. Can you please explain why you make a bald statement to the opposite effect?

          • Dan Sullivan

            You are grasping at straws here. The Philadelphia Association of Realtors is not “a few landlords.” Most of the major landlords of Philadelphia belong to it, and strenuous objections from even a minority of them would have prevented the association’s campaign.

            You have always been an opponent of land value tax, and you have always pontificated out of ignorance. I am speaking as someone who has been directly involved in political campaigns to get land value tax passed, and has worked directly with landlords on this issue. Your statements, as usual, border between ignorance and dishonesty, for stating things as fact when you have no evidence is dishonest.

          • Macrocompassion

            Having subscribed financially and literally to our Georgist cause for more than the last 50 years, and having studied macroeconomics both within and outside of Georgist circles, your claims about me are unfounded, ridiculous and insulting.

            Unlike your foolish claims, my statements have not been to oppose LVT but to offer something better, that is likely to be more acceptable to many landlords in other parts of the world, as well as in your precious Philadelphia, the state of brotherly love. I know that Georgist efforts there have been made to introduce the “two rate” system of property tax, but from the way your news is presented it would appear that your Association of Realtors have not done sufficient to eliminate the taxation of buildings (or durable capital goods) and this must be due to the opposition (as evidence which you deny) about which I claim still exists and can be avoided by the introduction of my proposal.

            You have failed to reply to the last point I made in my previous comment, it is my impression that you fail to appreciate its significance. So to summarize, your grasp of the actual situation and of my suggestions is abysmal and it seems to be too much for your addled mind to get down to properly understand. So as a smoke-screen, you deny and ridicule what I claim. And worse–in order to hide your state of misunderstanding you add unnecessary insulting personal remarks.

          • Dan Sullivan

            Perhaps you could list your string of accomplishments over those 50 years. I have been at this for just under 40 years, and have personally lend campaigns that shifted more than a billion dollars off of productivity taxes and onto land. The two people I work with have led campaigns that shifted another 3 billion.

            There are lots of people who have something hypothetical that they insist is better, even though it is more convoluted, is full of unintended consequences, and, in the final analysis, cowardly. To use a phrase that Henry George coined, it is like “trying to get on the good side of God without angering the Devil.” But, whenever you actually have a success that dwarfs what we have done, get back to me.

            My comments are neither ridiculous nor unfounded, but they are appropriately insulting. Those three adjectives are not synonyms.

          • Macrocompassion

            This discussion is not for purposes of proving each other’s achievements nor our ability to exchange accusations, but for our proper understanding of how George’s earlier claims for LVT are unsatisfactory, where this lays and that this problem can be solved.

          • Dan Sullivan

            The purpose of mentioning the achievements was to respond to your empty assertions. I submit that you have not interacted with landlords enough to know how they would respond. What I have done on this issue is not a matter of comparing achievements, but of my knowing whereof I speak. It’s easy to declare from some ivory tower of isolation what landlords *will do*, but I am declaring from 40 years in the trenches what landlords *have done*.

            By avoiding the class-warfare approach, and focusing on how to make this a win-win for most landlords, we have won enough landlords over to our side to show that our approach is viable. If you have your own approach, show us where it has ever been viable. Show us where government’s buying up land and putting itself in debt to do so has been better or more popular than just shifting taxes and not adding to that debt. Show us where government’s buying up land by meeting the seller’s price has not driven up the price of land, or where their simply taking the land through eminent domain at the government’s own price has not incited more opposition from landowners than a revenue-neutral tax shift.

          • Macrocompassion

            Dan, As well of being so proud of your achievements, you might wish to open your eyes to other ways of collecting evidence of different kinds, and then logically thinking about it. During the time I have been associated with our fellow Georgists, there has been virtually no progress in convincing the governments of the UK nor the US to modify the taxation structure so that instead of the taxation being taken from wages, purchases and capital gains (and a number of other related sources too), it is significantly replaced by a tax on land values. This lack of progress is very disappointing and my father among others left our movement when he appreciated how little progress was being made. This is my example of no progress, which applies more generally than your local achievement. The other counter-example applies when you choose to examine those few countries and provinces with the equivalent of LVT such as Estonia, Singapore and Hong Kong, where their relative rate of progress has been high, and the system that they use is close to the one I have suggested, which is an improvement on actually taxing the landlords directly. These 3 places have national ownership of their land and they collect the revenue (not tax) that is due from people and organizations that occupy it and are registered to so do. Were these governments also controlling the use of the land their progress would be akin to a socialist state, with a lot of corruption where everybody tries to get a piece of the action. Land nationalization is not necessarily land-use control, although, as I remember quite well when this was briefly discussed during Georgist courses, the attitude was that it was unacceptable to us because the use was specified, but this is not necessarily so. It is very easy having got into a rut, not to think a bit further outside the box to mix a metaphor!

          • Dan Sullivan

            If you have any actual evidence at all, why don’t you just cite that evidence instead of analyzing how proud I am? I never bring up my achievements unless someone makes statements of fact that are completely wrong, which is what you have done here, and my experience provides counter-evidence. My opinions are shaped by facts, while your “facts” seem to be shaped by your opinions.

            Your assertions here are dishonest. Estonia’s lease system is a leftover from communism, and it now has a land value tax that it levied after being visited by Georgists who advocated exactly what you said would not pass.

            Hong Kong levies a 16% land value tax, qua land value tax, based on a periodic reassessment of of the land’s rental value. Hong Kong’s lease system was not a “reform” as you mischaracterize it. It is a holdover from Britain’s settlement with China, whereby they leased the land as a nation, with a concession to turn over that land after the specified period of time. The lease charges are problematic, as a lease negotiated 70 years ago pays a trivial rent compared to a lease negotiated more recently, and even when considering two leases of the same age, disparities arise because some land has gained far more value than other land. In short, the Hong Kong reform that you tout was not a reform, and the results of that dysfunctional compared to their land value tax, which actually was a reform.

            Singapore’s lease system is also very old and has nothing to do with Georgist reforms. The earliest lease issued in Singapore was
            999 years
            . No
            such 999 years tenure was issued after 1831.
            99 years
            leases were granted since 1838.
            Freehold
            titles were issued from 1845 for agricultural land
            outside the town but were not issued since 1886.
            In 1886, a series of ordinances were passed. Crown Lands
            Ordinance created
            “Statutory Land Grant”
            which was a
            grant in perpetuity, subject to conditions and
            covenants. Statutory Land Grants have not been issued since 1919. The present land tenure situation in Singapore comprises a mishmash of rreehold leases
            – mostly residential and commercial; 999-year leases, mostly residential and commercial;
            99 years leases
            – mostly residential and commercial; 30 or 60 years leases
            – industrial, and15 or 30 years leases
            – recreational. Again, these leases have fixed rents negotiated at the beginnings of the leases, and one can imagine how inegalitarian it is to provide public services to all on lease rates that were negotiated for some over 200 years ago, for others quite recently, and for others still who own their land outright. Singapore does levy a substantial real estate tax, but it is on both land and buildings.

            So, all three of your examples are false, and the examples of Hong Kong and Singapore are also irrelevant, because neither country is substantially democratic. The only country you mentioned that is substantially democratic is Estonia, and the only pertinent reform they adopted since they became democratic was to levy a land value tax.

            So, please, quit blowing smoke.

  • John St.

    Good article. I think the most important thing is getting the word out that the housing bubble (or crisis or whatever you want to label it) is deliberate government and central bank policy, and it doesn’t have to be this way. The Tory (and the Blair) government like you to believe there is not much that can be done because it is just the free market behaving as a free market. This is nonsense of course because every aspect of housing is controlled by the government including planning, borrowing and taxation. The young (and now not so young) people of today should not put up with it. They need to realise this system is designed to benefit the older property-owning generations that are running the country at their expense.

    • Alasdair Macdonald

      John St, interestingly, there is an article in the Scottish daily the ‘National’ today, in which the writer describes a conversation he had at a dinner with Lord MacPherson, who was the former head of the Treasury and, being retired, he could be ‘waggish’, as the writer describes him, he made the point about property prices and also commented on the ‘financial’ heroin that QE has become.

  • George C.A. Talbot

    Having repeatedly criticised the reforms introduced by Margaret Thatcher from 1979 and Edward Heath in 1971, From a place to call home, to a financialised asset well explains how council housing was similarly reformed. But why are savings ignored? Copious global savings deposited in banks created credit that funded mortgages that inflated house prices The historic prohibition of usury and periodic forgiveness of debts blame saving. Islam still judges usury evil and Christianity did so up to the encyclical of Pope Benedict XIV in 1745. And Moses required a release after seven years but prohibited usury only for Jews.

    Postwar reforms were intended to avoid repetition of the conditions that led to Soviet communism and fascism by ensuring wages tracked productivity, current accounts balanced, bank credit was limited and governments could manage their economies. Paradoxically, Keynes hoped the Soviet Union would join his Clearing Union.

    • Prior to Heath’s reforms, banks had to hold a third of deposits as limited base money but afterwards required only a tenth of good quality assets. This enabled them to create almost limitless credit. By the way, in Between Debt and the Devil, Adair Turner describes how in 1948, Milton Friedman concluded fractional reserve banks were so inherently dangerous they should be abolished: See p. 10.

    • Capital controls had enabled governments to set exchange rates to balance their current accounts so avoiding the build up of dangerous international debts.

    • A moral prices and incomes policy ideally ensured that workers received a fair share of the increase in aggregate national productivity so avoiding the excess profits achieved by some companies that create intractable debts. And

    • William Beveridge’s reforms not only funded occasional unemployment but also pensions for relatively short retirements.

    These policies were never ideal. Our high wage businesses were never going to ensure all trade remained in balance when low wage nations exported good quality goods at much lower prices. But it is neoliberal deregulation that has made housing unaffordable albeit with the land problems described by Laurie Macfarlane.

    However, the state of the planet and the development of ever cleverer artificial intelligence suggest more fundamental reforms are needed to enable us all to live in harmony with ourselves, each other and the planet.

    • Alasdair Macdonald

      George, thank you for that long perspective. Prices and Incomes Policy/Sir Frank Figgures, etc.
      Then came the tornado of propaganda about ‘free markets’ and ‘the bonfire of controls’ etc. which is now consuming its own child and possibly the rest of us and the planet, too.
      Not being a pessimist by nature, I appreciate your upbeat final paragraph!

      • Dan Sullivan

        To the classical liberals, “free market” meant a market free of privileges. Although the modern right wing invokes these classical liberals, their idea of a free market is one free of fetters on privileges. John Locke, William Penn, Francois “laissez faire” Quesnay, Thomas Jefferson, Tom Paine, William Cobbett, William Godwin and John Stuart Mill all advocated taxes on the value of land.

        • Macrocompassion

          In the days when these classical thinking economists supported LVT, they seemed not to have thought through how much opposition the landlords would provide. Had these greater thinker taken Geoirge’s proposal further, they would have realized that national land leasing would achieve the same thing without the landlords having any serious objections.

          • Dan Sullivan

            Perhaps you should read these classical economists and see how well they described how much opposition the landlords would provide. And no, your proposal doesn’t even come close to describing the same thing. You only want to nationalize land that is up for sale. However, that land normally gets put to use anyhow, so you are nationalizing land that would get put to use in order that it gets put to use, and you are making a very simple proposal extraordinarily complicated in the process.

          • Dan Sullivan

            Incidentally, the Marxists called for nationalization and leasing. They are not the same at all. Leasing gives government discretionary powers that land value taxation does not give it, and so the later classical liberals who were around during Marx, and the early progressives explicitly opposed government holding the titles and leasing the land.

          • Macrocompassion

            You may be correct Dan about Marx and what he said about leasing, but what I am suggesting is that the government does not control how the land is used any more than it does already (and that is often too much). I suggest only that the government leases the land and that this income replaces other taxes, so effectively we have LVT plus more money available for investment (which would no longer require the bank’s apparently independent freedom to create more).

          • Dan Sullivan

            That might be a rational proposal if you were God or King and could give government the power to do something and then prevent them from actually doing it. However, you are proposing to give them a mechanism to do something that you state you don’t want them to do. Do you not see the folly in that?

        • Alasdair Macdonald

          Dan, I like your succinct distinction between the interpretations of the term ‘free market’.

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