What I would like to see happen during this century to make the world a better place
Although land is generally treated as if it were capital, it was not created by Man. In particular, our land is a gift of nature (if not of a Higher Authority) and we have it on trust. Before very many people lived on this land it was almost worthless. Its value grew with the population increase (due to amount of public money necessarily invested in the surroundings), and their benefit on our national economy.
As towns grew, the areas of land that they occupy became more valuable. This was anticipated by speculators in the land-value, who purchased sites on the peripheries. Unfortunately this opened the door to corruption, due to the speculator’s need to know where the next development would take place. He gladly bribed the town planners for this useful information, or “persuaded” the new neighborhood to be built on his site. Even after all the 2007 trouble with the bursting of the bubble in land prices, the resulting land trading is encouraged by the banks today, who still find that lending money for this purpose is more profitable than other kinds of investment. Land-value speculation also occurs in the center of town, where certain sites are held unused or partly used whilst their value grows. Then the outskirts of the towns will need more public money to be spent in their development, whilst the previous large public investments in the town centers are not properly used.
The value of the land is expressed by its ground-rent. It depends on the relative utility of the site in question, compared to one on which it is scarcely worthwhile to work. For a marginal site of this kind, far from town, no rent is created and the site itself has no value. However on better land the same expenditure of labor and capital can result in a greater amount of produce. When expressed in terms of money, this advantage is actually equal to the ground-rent. The same argument applies to land that is used for residence, except that the utility criterion becomes the comfort, beauty and ease of living in the better neighborhoods. Also on such a site where planned development is known to occur shortly, speculation in its future use will cause the site to have more value. Particularly in town-centers, a very high degree of organization and specialization in work is possible—that is to say, there are greater opportunities for earning a living. There the greater productivity generates huge ground-rents and astronomical land-values—so it is no wonder that’s where the tall buildings are to be found.
Thus the basic advantage due to the land providing an opportunity for labor or for residence (and also when the site is gaining and having greater value), this advantage justly belongs to the people. This is particularly significant when public money as local taxes have been invested in the development of the surroundings and infra-structure. These benefits should not be treated as bounty for exclusive use by the monopolistic owners of the land. However, this is what our current system of land tenure allows. Our land should not be used as an item of durable capital for hire, trade and speculation. It is a national asset not a bargaining medium.
Where there is land-value speculation, the land is often held out of use and the price of the available surrounding land becomes raised due to the scarcity and competition for it. These effects are of general benefit the land-owners who do not sell. Then the ground-rents are raised, and this adds to the production costs. The outlaying sites also become more expensive due to this kind of speculation. Today our system of land ownership and tenure seriously limits the opportunities for entrepreneurs. This is due to the greater costs of production associated with the reduced availability of useful sites. The result is in the diminished demand for consumer goods, unemployment and poverty.
A past method of opposing land-value speculation was by the land betterment tax. This was paid by new land owners when during its sale the original price of the land was raised. However, this tax was not successful in stopping this speculation because money could be passed “under the table” before the seller will agree to signing the contract for purchase. Instead, order to stop the speculation, a significant part of its ground-rent should be collected by the government as revenue. Then it will no longer be worth-while for the speculator’s to hold land unused. The money collected from the ground-rent (which in any case justly belongs to the people, see above), will allow the burden of other kinds of taxation to be eased. Many of these present forms of taxation adversely affect the process of the production and distribution of goods. Consequently it is proposed to tax land-values instead of other things.
There are many advantage and few disadvantage in the gradual introduction and adoption of this kind of tax reform. The ground-rent revenue is easy to determine after the land-value has been estimated fairly and professionally and it can be frequently updated. With proper legislation the land tax is difficult to avoid, unlike the legal loop-holes used by business-men at present, when taxation is based on the current regimes, such as capital gains. Far fewer tax collectors will be needed and their salaries will be less of a drain on the national budget.
Due to the incentive effect of the land-value tax, proper use will be made of the land, and its value-speculation will cease. Initially the land prices will fall due to less fierce competition for the previously unused sites, and there will be greater opportunities for entrepreneurs, due to the lower production costs and greater demand for consumer goods as well as less money being taxed from the workers/consumers. These trends will greatly reduce degree of unemployment and poverty. The ethics of the change of greater social justice will raise our moral standards, resulting in less cynicism and frustration and this will lead to a better life-style.
Greater efficiency in the use of urban land will result and our cities being less spread-out, easing the journeying and communicating needs of their commuters and businesses respectively. There will be less public expenditure on the fringe-developments. Since most of the nation’s land will be privately owned, access to it will be more restricted and there will be less pollution from the dumping of waste products on “empty” sites. This means a greater need for the re-cycling. Land prices will stabilize and the “business-cycle” (which comes from land-value speculation and its price collapse) will disappear.
There will be more new investment from private savings, the earners of which will be less burdened by income tax etc. More of them will be able to operate their own businesses too. Thus the general public will have more control of industry, whilst the capitalists and land monopolists will have smaller incomes and less power. This will modify the structure of the macro-economy by the wider spreading of the investment in industry and by the encouragement of competition without slowing national growth. In fact economic progress will increase due to the smaller amount of restraint on the use of our land and by the better use of what has already been invested in our national infra-structure etc.
full name: David Harold Chester
I am a teacher and writer on ethical and economic subjects (undergraduate college level), no particular school.