Full Employment Through Total Tax Reform
[This paper was presented in Melbourne, Australia in 1993.
GroundSwell, November 2011]
PART I: Raising our Sights
It is a great honor to suggest keynotes for our conference. I have
eight: think big; think positive; think modern and future; think
synthesis; think relevant; think mutual support; and think doable.
Thats seven. The eighth is, with all your thinking, act.
First, Think Big
William Bradford, Governor and historian of the Plymouth colony, knew
that his story dealt only with a desperate few exiles, remote from
power and culture. In that isolation and weakness he had the spirit
and the foresight to claim this:
As one small candle may light a thousand, so the light here
kindled hath shone to many
About a million Americans now claim descent from Bradford, but
millions more have received and passed on his light, and social
institutions he pioneered and recorded. The Pilgrims were few, but
they thought big because they were organizing a total society.
We, too, are thinking for a total society. Dare to think big, or
relapse into mediocrity and forget it. Faint heart neer won fair
shares. We are custodians of an Ark bearing a great covenant for
better forging the social compact a covenant with a good deal
of Bradford in it, at that (and in Bradford was a good deal of Moses).
We may seem to be few, heretics and dissidents in the dark and cold,
far from flames of power and influence. Yet our candles, too, may each
light thousands more. Full employment and total tax reform sound
ambitious, but are we not so? Small issues play to small houses: we
are cut out for greater things.
We have little competition at this time. The public wants light and
answers; the reigning seers have none to offer. They are in black
holes, reduced to oxymorons like jobless prosperity, and recovery
is here, but it is slow; tautologies like the solution to
unemployment is more jobs; and nonsense like it is
puzzling that so many are out of work, in spite of the recession
having ended. It reminds one of 1931 when mainstream economists,
conditioned only to rationalize the system, had no stronger term for
what they observed around them than a period of slack business.
There is a lesson in last weeks Polish vote. Poles struggled
heroically under Lech Walesa to overthrow Communist oppression. After
four years of IMF direction, with imported standard-brand economists
from Oxford and Harvard, they went to the polls, repudiated Walesa,
and freely voted back the Communist party. The year before, it was
Lithuania; next month, maybe Greece; next year, maybe Russia.
To the Sydney Morning-Herald, the Polish voters seemed ungrateful.
Freedom had brought them prosperity, yet labor was discontent just
because of fancy this! - lower real wages, higher
unemployment, and higher taxes. The Herald did not define prosperity,
but apparently labor is not part of it. What, to the Herald, measures
the general good? Unearned rent-taking?
On the right wing, the American Paul Craig Roberts states the only
way to stanch our deficit is to raise payroll taxes. On the left,
Professor David M. Gordon writes we must raise deficits and force our
central bank (the Federal Reserve) to lower interest rates. With rival
gurus riding off in all directions, Georgists have no coherent,
organized competition. Therefore, be immodest. Step forward boldly
with your lighted candle. Millions are seeking light, and finding
Second, Think Positive
This July (1993) in Los Angeles the American Council of Georgist
Organizations (CGO) had a wonderful time at our annual conference
reveling in current success stories. We also reported candidly on
setbacks and backslidings, but did not give way to gloom and
self-hatred therefor. Sniffling over bad news and berating stupidity
lowers morale and gets you nowhere. Rather, we tried to learn from our
losses. Meantime, we raised our spirits by looking at advances, From
Albany to Albania. (I wish it might have been from Aarhus to
Zanzibar, but we rejoiced in what we had won, which included Cape
Town, and what we had kept, here and in Denmark, Pennsylvania, Taiwan,
Singapore, Hong Kong, Johannesburg, Nairobi, British Columbia, and
elsewhere.) We glowed over the energy and activity of our missionaries
to Russia, Estonia, the Ukraine, and other nations in flux. We found
live local politicians at work to raise ground rents charged for use
of our public grazing lands; others to raise money by charging for
radio spectrum assignments, previously given away; another to raise
charges on aircraft that tie up precious landing and take-off airslots
at the Los Angeles International Airport; another working to raise
revenues from meting permits to take scarce waters from our streams
and aquifers; others to raise public revenues from boat moorings in
coastal cities. All these good things are happening here and now.
Living, breathing applied Georgism is being newly discovered and
advanced every day by people who dont even know they are
Georgists. It is for us to find, notice, praise, and support them. In
the process we may also inform them, but hear them that they may
listen. Third, Think Modern and Future We talk a lot about the
enclosure of commons in 16th Century England, and squatters in 19th
Century Australia, but how about the enclosures going on around us
right now? Fisheries, water, the public highways, perhaps the public
schools, even the air. The air? you object. Be
serious! Yes, really, the air. In the U.S.A. currently they are
creating and giving away property rights to pollute air,
based on past histories of pollution.
Because a man has robbed me in the past, is that any reason to
grant him a perpetual right to continue robbing me? Once society
answers yes, (as it did with surface rights to land), no
sequel is too absurd. Now, because a man has suffocated me in the
past, we are giving him a right to suffocate me in the future. He
joins the Order of Ancient and Honourable Polluters. These rights
(called offset rights) are given out pro rata to past
emissions. In effect, they are bounties granted for having abused ones
neighbors. The U.S.A. is doing it through its Federal Environmental
Protection Administration (EPA), and local agencies like Californias
South Coast Air Quality Management District (AQMD). Could anything be
more patently wrong? Could anything present a more useful object
lesson to explain and demand a Georgist solution? It is happening now,
1993, and can be a great rallying cry.
Thinking future also means enlisting youth. Georgism is a
young persons cause: its the young who will have to buy
their way in to the overpriced land market. They should be panting to
take over this movement: lets receive them graciously, groom
them quickly, and give them some reins of authority and leadership
before they reach mandatory retirement age.
Fourth, Think Synthesis
I mean that in an Hegelian sense, the sense of Richard Noyes in his
recent Now the Synthesis. A synthesis is a reconciliation and
resolution, a harmonious blending of the best of what appear to others
to be clashing forces. It is part of Georges genius that his
proposals do just that, they solve one problem by resolving it with
what ordinary minds had perceived as another problem. They turn two
problems into one solution. That is what George means when he,
observing this marvel, insists so often that the laws of the
universe are harmonious. Good ideas and good policies support
and reinforce each other, like dovetailed corners.
Ill itemize, anon, several of Georges resolutions.
Resolving conflicts, turning clashing forces into supportive forces,
is so valuable and productive I suggest calling it are you
ready for this? a PANACEA! What? Shhh!
hear, Dont use the P-word. Its what our critics
accuse us of!
Of course our critics accuse us: they do it to intimidate and silence
us, dont you see? They want us to run for cover, disclaiming all
pretension. Thats how they condition and control us to be
modest, sound reasonable, and sit quietly in the back while they trot
out their panaceas, controlling the agenda.
Right now its privatization. Ten years back, it was
supply-side and the Laffer Curve. Ten more years ago it
was fiscal and/or monetary policy. Before that it was
income taxation, and national planning. Before that, at least in the
States under Herbert Hoover, it was Associationism:
business councils, cartels, and the corporate state.
All of those, and more besides, were treated like panaceas in their
time. The public was game, if not always wise, to give each its day.
So lets not be scared by a bogey coined by artful detractors. If
any policy deserves to be called a panacea, it is ours. Lets
Think Immodestly. Ours is not a modest proposal; it will not be made
manifest by pastel protagonism.
Lets also bring our immodesty down to earth. I use panacea
in the limited sense of a synthesis and resolution. It is trendy to
insist that all choices are trade-offs: to get more B, you
must give up some A. You cant have it all, they say. (Its
why others call economics the dismal science.) A
resolution is when you can have it all: you get more of both A and B.
Instead of a dismal trade-off, there is a free lunch by
grace of synergy: an effect making the whole greater than
the sum of its parts. Such grand resolutions are worth more than net
gains from marginal trade-offs (valuable though those may be).
That is what the voters think. Why was Keynes popular? Orthodox
economists were saying, to escape from depression you must first
suffer dismally: cut wages, consume less. Its like a hangover,
you must repent of the good times you had in the roaring twenties. To
that, Keynes said Baloney! You can have it all: raise wages,
consume more, enjoy more public services, and in result find people
saving more and working more! People who followed his ideas won
elections for years. They only lost when people learned from hard
experience that his policies led to stagflation.
Keynesians promised the best of both worlds, but delivered the worst.
In the 1970s Keynes heirs fell back on a dismal trade-off, the Phillips
curve. The public must grow up and choose, they
moralized with some condescension. You may choose either
inflation or unemployment. Whichever you take, dont blame us for
the other: we told you so. Like Malthus, they made economics a
science of choice where all the choices are dismal, and the public was
born with original sin. They forgot the voters had not elected
Keynesians to preach austerity. Soon the voters came up with a third
choice: they retired these new dismal scientists.
Next it was Ronald Reagan. He tossed out the Phillips Curve for the
Laffer Curve. Laffer said you can have it all: lower tax rates and
higher tax revenues, more defense and a lower deficit. Talk about
panaceas! The voters bought it all, until they slowly realized it wasnt
Now it is the privatizers peddling their panacea. They have learned
to sell the product by soft-pedaling trade-offs. Instead,
they talk about win-win solutions, and the public is
falling for it. It will continue to fall until people realize that
many of these are really win-win-lose solutions, with them
as the losers.
Before all those panaceas there was Henry George. He, like other
inspirational leaders, was anything but dismal. He, too, said we
can have it all. It made him immensely popular. We are often
told that Georgism never really made it, but that is warped history.
Pure Georgism never took over whole hog, but modified
Georgism, melded into the Progressive Movement, ran the U.S.A. for 17
years, 1902-19, working through both major political parties. Both
property taxation and income taxation were modified on Georgist lines.
Real concessions were made.
Georges ideas were carried worldwide by such towering figures
as David Lloyd George in England, Alexandr Kerensky in Russia, Sun
Yat-sen in China, hundreds of local and state, and a few powerful
national politicians in both Canada and the U.S.A., Billy Hughes in
Australia, Rolland ORegan in New Zealand, Chaim Weizmann in
Palestine, Francisco Madero in Mexico, and many others in Denmark,
South Africa, and around the world. In England, Lloyd Georges
budget speech of 1909 reads in part as though written by Henry George
himself. Some of Winston Churchills speeches were written by
Georges ideas fell not from failure to deliver, but to the
Great Red Scare that has dominated much of the world from 1919 to
1989. This panic marshalled and energized rent-takers everywhere; by
confusion, its victims included Georgism. It made Georgists pull in
their horns until their message lost its vigor and excitement
its panacea qualities and became just a minor local tax reform.
Now, with the fall of the Berlin Wall, is a good time to pick up where
the Progressive Movement was aborted.
Fifth, Think Relevant
Leave the quibbling and nitpicking to theorists, its how they
lose students and emasculate themselves. We can easily tie in with hot
current issues that are stirring people, they are all around us. You
can also find a philosopher, John Dewey, who said that is the best way
to think anyway, to solve real problems that arise in a social
context. That is where the great economists got their inspiration:
Quesnay trying to save French finances, Adam Smith and David Ricardo
fighting tariffs, J.S. Mill fighting for domestic reforms, Leon Walras
exiled from France for combating both socialism and landlordism, Henry
George fighting poverty, Knut Wicksell jailed for his reformist
campaigns, J.M. Keynes fighting unemployment.
Talk to active politicians, and more, have them talk to you.
Politicians love to talk, they only need a reference group,
an audience, which you can supply. Just select issues with some
Georgist content. At the July conference in Los Angeles we had
Councilwoman Ruth Galanter explain how and why she got the Council to
raise rents on airlines using L.A. airspace. We had former State
Senator Al Rodda explain how he got an LVT bill before the State
Senate. (Rodda, a real live land tax man, was Chair of the Senate
Finance Committee for years and years.) We had Assemblyman Steve Clute
explain how Kaiser Steel had taken 45 years of iron ore supply from
public lands in Riverside County for token fees, and what he was doing
about it. We had Larry Berg of the local Air Quality Management
District explain why he opposed his colleagues idea of giving
away pollution rights to dirty industries. We had State
Lands Commissioner Charles Warren explain that water belongs to the
State, and his proposal for a charge on those who withdraw this water.
Every one of those politicians is a Georgist, they just dont
know it yet. They are self-made, beginning from direct observation and
experience. Ruth Galanter is so perceptive and smart that if we burned
all the books ever written on site duties, and wiped us all out today,
she would rediscover it all in a few years. Truth struck to earth will
rise again, and does every time someone like her sinks her teeth in a
current issue involving resource rents.
Sixth, Think Mutual Support
We lose when Georgists fall out, especially over trifles and in
public. Georgism is a broad tent: every winning party is a coalition,
thats how you win. Some are libertarians, like Albert J. Nock
and Frank Chodorov; some are self-styled socialists, like Upton
Sinclair and Norman Thomas and Daniel Hoan (Mayor of Milwaukee when it
was Americas model city). Some are Republicans, like Robert
Ingersoll once, Bill Filante recently, and Richard Noyes today; some
are Democrats, like Al Rodda and Steve Clute. Some are pacifists, like
Bill Vickrey and Nic Tideman; some are military men, like Admiral
Raymond Spruance and Colonel Edward C. Harwood. Some are
pro-Palestinian, like Alanna Hartzok; some defend Israel, like Rabbi
Benjamin Herson. To succeed we must make Georgism our priority so it
bonds us and keeps other issues from dividing us.
If that is true of those big differences, it is even truer of
stylistic differences like should we call it a tax or a site duty. The
world knows that A rose by any other name would smell as sweet.
George Bush evoked only scorn when, to avoid the dreaded t-word,
he called for revenue enhancement. People really arent
that thick, and resent it when you bandy words to patronize them.
Seventh, Think Doable
There is a danger in thinking Georgism has to be whole hog or none (Sydney
or the bush, as you say here). The Georgist Utopia is not
another state of being, in another world. It is practical and applied,
here and now, and it consists of little parts and pieces. Georgism is
an accumulation of social institutions and attitudes, many of which we
already have. Our missionaries to Russia are discovering, one by one,
the need for land registry, land valuation, training valuers, a
market, a viable polity, recording of sales, public disclosure of
data, some basic honesty and dedication to public service, and so on
We are lucky, we have inherited much of that apparatus from our
applied-Georgist forebears, but keeping those gains takes more than
luck. You have rights, which are lost if not used. An elderly lady
asked me what she, with limited contacts, and modest of her abilities,
might do to help. The answer is, assert and use your rights! Your
right is everyones right, thats what a right is. Using
them, you keep them alive for everyone. True radicalism includes
defending many existing institutions. Elements of true radicalism are
already built conservatively into our system, thanks to the work of
past radicals like Henry George and his supporters. Practical land
valuation has been developed into a respected professional skill by
valuers and writers like your John F.N. Murray, Johannesburgs
John McCulloch, and our own John Zangerle, Walter Pollock and Karl
Scholz, Lawson Purdy, William Somers, Frederick Babcock, James
Bonbright, Irene Hickman, and Ted Gwartney (who has served in British
Beyond that, almost every public issue has some Georgist content, and
gives us a toehold. If you want to join the party, the door of public
service is open. Study up a little, pay your dues by
proving yourself on some local commission, and before long youre
looking at things from the inside. The first time a reporter asks your
views, youre in the public dialogue, as Richard
Noyes calls it and as he is himself.
Use common sense: ask people to do what they can do, not everything
at once. Dont irritate the head of state by abruptly telling her
to impose local rates nationally. She lacks the authority, or thinks
she does, or perhaps just wants to think she does. Whichever, that
will be her first reaction, and you are dismissed. Anticipate that
reaction, and chart the path from where she is now to where you want
her. Failing that, ask her to do something within her customary power,
like raising lease rates on national lands. Proceed in doable
increments one thing leads to another.
Eighth, Think Action, and Act
Note, I do not say not to act until you finish thinking, for that
time never comes. Besides, thinking without action suffers from want
of raw material, and is apt to wander from what is relevant and
useful. Neither do I say act first and think later, like a memoirist
lamenting his follies. Thinking and acting feed each other: do both,
Follow those rules and youll have no trouble getting a hearing
for your views, making friends, and gaining allies. Candor compels me
to add, youll also have no trouble making enemies. You must
expect that, but be glad, its a mark of progress. Pray for your
enemies not to win, but to prove you are a force by disputing
you. Until you stir up some enemies, you are not doing much. When they
rise to refute you, you have set the agenda, they are helping
publicize your cause.
Just be sure you make the right enemies; dont shoot your
friends. Voltaire also prayed for his enemies, saying Lord, make
my enemies ridiculous! Nature takes care of that in part: the
enemies of Georgism are inherently ridiculous, as I have tried to
show. Make them face and refute you in public, where their errors and
ignorance will expose themselves. Also, come with enough friends to
insist on fair play, and put up a fight. A fight is action; action
gets press. All of a sudden it puts you in the public dialogue.
Part II: Unemployment and its Remedies
though custom has dulled us to it, wrote Henry
George, it is a strange and unnatural thing that men who wish to
labor, in order to satisfy their wants, cannot find the opportunity
it is not work that is short while want continues;
Your aborigenes and Pacific Islanders suffered many privations before
Europeans came, but not unemployment. Neither did our American
Indians, the native Africans, or most aboriginals before they met
European private land tenure. That is because each one had access to
land, which they held in common.
Tom Paine wrote The life of an Indian is a perpetual holiday
compared with the poor of Europe. It was because each Indian had
access to land. Paine anticipated George by recommending a land tax to
elevate the poor of America to the happy condition enjoyed by the
Ordinary economic theorists often claim that today we live in a
monetary economy, so access to land no longer matters. Such a claim is
ahistorical: it ignores the actual sequence of history.
During the worst Satanic mills period of the early 19th
Century, much of English labor was paid on the pre-monetary truck
system. Workers were not paid money, but in kind, with goods
from the company store: not exactly a monetary economy, although it
was the most advanced commercial-industrial one in the world.
300 years before that pre-monetary era there was already severe
unemployment in 16th Century England. Sturdy yeomen were converted
into sturdy beggars by the basic expedient of taking their land. The
enclosure movement, which did that, began around 1536. Landlords who
had once sought to tie men to the land, now sought laws to speed their
departure. They replaced them with sheep, whose land-using,
labor-sparing needs and habits Diggers know well. To the extent money
was involved it was not to pay workers, it was to buy wool exports,
and was inversely related to job creation. Money demand for raw wool
exports actually destroyed jobs, by shifting land from men to sheep.
Land-use, not money demand, is the critical matter.
How would Georges full-employment policy work out in a modern
monetary economy? Latent supply and unfilled demand must meet and
satisfy each other, said George. He would do it by activating land. He
would do so by applying True Fiscal Stimulus, which moves
the demand and supply sides both at once.
Fiscal stimulus, in the modern usage, is a shallow
euphemism for running a deficit, often financing it with new money.
Calling it stimulus is a verbal trick that begs the
questions of what it is, and whether it will work. In the U.S.A. we
had entirely too much of that because it was the sole reliance of
Keynesian economists when they tended the fires of demand management.
It turned to ashes in the crucible of double-digit inflation in the
1970s. You only hear of it again now because its successor policies
have failed so badly, too. I surmise from the plummeting Aussie dollar
that your statesmen are still enamored of it, but this, too, will
pass, as it did with us.
True fiscal stimulus, on the other hand, is a fixed charge on land,
paid by landowners pro rata the value of land they own. To meet such
fixed charges they must hire people and pay wages. The new wages raise
effective demand in the same stroke that makes jobs directly. At the
same time, raising more taxes from land allows lowering taxes on
payrolls, lowering or removing the big tax wedge between
employer and employee. This makes it more profitable to pay wages, and
leaves wage-earners with more spending money after taxes. Raising more
taxes from land also allows lowering taxes on capital, and on the
income from capital. This raises rates of return on new investing, so
income that is saved is turned immediately to investing. That is a lot
of demand-side stimulus.
Imagine: we can lower taxes on labor without raising taxes on
capital, and vice versa. We can even lower them both, without cutting
public services. No other program dares promise anything like that,
let alone deliver it. If we cant sell a product like that, we
couldnt sell ice in Arabia. Yet, it is the magic that follows
directly from flagging the difference of land and capital.
True fiscal stimulus works on the supply side, too. To pay the fixed
charge on land, and to pay wages, and to pay interest on money
invested in improving land, its owners must produce wares and services
(including housing), and vend them. Thus higher demand is answered
with higher supplies. Demand and supply are levelled upwards, without
inflation. True fiscal stimulus, it turns out, is also True Supply
Side policy: a nice combination, incorporating and reconciling the
legitimate claims of both sides, accomplishing together what neither
side could accomplish alone.
Supply-side was the catchword of Presidents Reagan and
Bush, dominating 12 years of history. Unfortunately that is all it
ever was to them, a catchword. In practice, they worsened the tax
treatment of new investing. They raised the tax wedge between employer
and employee by raising payroll taxes. They lowered the tax rate on
corporate income, much of which is land rent.
George Bush then wasted his four years, and lost his political
credibility, by maneuvering obsessively, single-mindedly, to lower the
tax rate on capital gains, much of which come from
unearned increments to land value. The rationale, if any, seemed to be
that high land values are good for everyone because they help
landowners borrow money. We ended up with the highest real estate and
stock market prices in history, together with the lowest wage rates
and highest unemployment rate in 20 years. As Henry George wrote in
the introduction to Progress and Poverty, a great wedge was driven
through society, crushing those underneath.
Suppose we enacted True Supply Side economic policy, as defined
above, would it work? Early Keynesians scorned it: to many of them,
overproduction was already a problem. Forcing more land into use, they
told me, would only dump more wares on glutted markets. Monopoly didnt
bother them: it even helped, by choking off production. Keynes
tolerated monopoly with equanimity. Keynesians, during their heyday in
power, shunted anti-monopoly policy aside in a little subcompartment,
structural reform, which they patronized as a quaint
anachronism. More spending was their panacea, their answer to all
questions. Little wonder they led us down the garden path to
inflation. Little wonder they evoked a reaction and antidote labelled
supply-side that the voters chose over demand-side.
The pity is, the public wasnt then given what it voted for.
I have already shown how raising land-charges serves to raise demand,
but demand-siders would still worry about oversaving. In
their worldview, the economic motor is spending, but the circular flow
of spending is constantly leaking away into saving, viewed
as a bottomless pit (infinite liquidity trap is their
phrase). Oversaving is what keeps supply from creating its own demand,
a concept they belittle. There are at least four answers to the
- decades of inflation indicate that supply has long been
creating more than its own demand;
- the U.S., and many nations, are undersaving, as shown by
long years of capital imports;
- saving is or can be offset by true investing; Georgist
policies raise the marginal rate of return after taxes, which is
the inducement to invest;
- raising the marginal rate of return on true investing
raises interest rates, which in turn raises the cost of holding
land idle. This redoubles the pressure on landowners to put land
to good use, which in turn raises marginal rates of return on new
investing, in a benign, self-reinforcing spiral.
Now, however, we face a new bogey: overinvestment. The
world is full of anti-Pollyannas, who will give you six
reasons before breakfast why anything you propose cannot work. Talk
about downtaxing capital, and here is what you hear now: Look at
those empty office buildings. They built too many because of their tax
What about that? Its a fair challenge for us to answer. Those
empty buildings are the product of three anti-Georgist elements in tax
policy. First, Congress gave special breaks to this kind of capital,
instead of balanced breaks to all capital. Second, Congress raised
taxes on those who hire labor, thus forcing too much substitution of
capital for labor, and taxing the jobs needed to fill the empty
buildings. Third, Congress fostered a boom in land prices. On the
upswing, a land boom seduces and forces builders into leading
the market by overimproving land when they do build on it. The
wild swings of land prices warp investment incentives.
What we need is balanced, total tax reform. Untax both capital and
labor, but labor first. Untaxing labor encourages investing, because
true investing means employing labor. Henry George favored untaxing
capital because he identified capital with labor, and in his day there
was no tax on payrolls. He thought by untaxing capital he was untaxing
labor. Today we can untax labor directly.
Under President Bill Clinton, Americans now face yet another concept
of fiscal stimulus. Clinton has proposed reverse crowding-out.
Crowding-out, if you have not seen the term, is when
government borrowing takes up available loanable funds. The powerful
U.S. Treasury borrower crowds private borrowers out of the market. Reverse
crowding is when government pays off its debt, pushing loanable
funds into the private market. Dr. Alan Greenspan, powerful head of
the Fed, has given lip-service to this.
This Reverse Crowding creates capital via government saving, in
effect. It is feasible, and precedented. It requires, however, that
the private sector find uses for the capital pumped into it, and that
these uses employ the labor released from government jobs. Otherwise,
the newly uncrowded capital will just go to work bidding
up the prices of land, and other old assets. It requires, therefore,
that the tax system not dampen private incentives to invest in forming
new capital, especially working capital to meet payrolls
in high turnover, labor-using operations.
Reverse crowding could be a good idea, but only if done in tandem
with pro-incentive Georgist tax policy. Whichever way Presidents and
Prime Ministers may writhe and wriggle, no macro policy will make jobs
without the help of Georgist tax reform. Almost any macro policy will
make jobs with the help of Georgist tax reform. Its enough to
make a person think perhaps Georgist tax reform holds the greater
truth. Speak out immodestly, O Georgists, you bear a great charge.
Bonuses from Benign Resolutions
Now we have the elements of a Georgist program in place, and have
seen how it relates to ordinary approaches to unemployment, let us
take the next step. Lets take credit for the bonus benefits (free
lunches) our program will generate. These are part of what make
it so attractive, and thereby make it work better in all respects
(e.g., generating enough revenue). Doing this, we can see what a truly
comprehensive reform it is, and how it upgrades the total system. Dont
fret if our program ends up looking like the dreaded Panacea-monster.
We have seen not to run for cover from that.
TANSTAAFL stands for There Aint No Such Thing
As A Free Lunch. It is stylish among crabbed economists to
grumble this shibboleth regularly, to screen out optimists who might
bear glad tidings. Realistically, however, Pollyanna was often right.
When the unemployed find useful, rewarding work there must be net
social gains. It is only a question of what form they will take, and
who will get them.
Taxation to lower public spending!?
Anti-governmentalists often identify any tax policy with public
extravagance. Georgist tax policy, on the contrary, saves public funds
in many ways. By making jobs it lowers welfare costs, unemployment
compensation, doles, aid to families with dependent children, and all
that. It lowers jail and police costs, and all the enormous private
expenditures, precautions, and deprivations now taken to guard against
theft and other crime. Idle hands are not just wasted, they steal and
Ultimately, Georgist policy saves the cost of civil disturbances and
insurrections, and/or the cost of putting them down. In 1992 large
parts of Los Angeles were torched, for the second time in a
generation, pretty much as foreboded by Henry George in Progress
and Poverty, Book X. Forestalling such colossal waste and
barbarism is more than merely a free lunch; it may be saving
Our program will effect other, less obvious savings in government. It
will obviate much of the huge public costs now undertaken to reach,
develop, and safeguard lands that should be submarginal. Today, people
occupy flood plains and require levees, flood control dams, and
periodic rescue and recovery spending. Others scatter their homes
through highly flammable steep brushlands calling for expensive
fire-fighting equipment and personnel, and raising everyones
fire insurance premiums. Others build on fault lines; still others in
the deserts, calling for expensive water imports. Generically, people
now scatter their homes and industries over hundreds of square miles
in the exurbs, or urban sprawl areas, imposing huge public
costs for linking the scattered pieces with the center, and with each
This wasteful, extravagant territorial overexpansion results from two
pressures working togther. One force is that of land speculators
manipulating politics seeking public funds to upgrade their low-grade
lands so they may peddle them at higher prices. The other force is
that of landless people seeking land for homes, and jobs, and public
funds for make-work projects. Both these forces will
disappear when we tax land value and downtax wages and capital. This
will move good land into full use, meeting the demand for land by
using land that is good by Nature, without such high costs. It will
also make legitimate jobs, abating the pressure for make-work
spending. It will also take the private profit out of upvaluing
marginal land at public cost.
Putting the unemployed to work also raises demand and, by so doing,
helps make plain to all the desirability of unleashing supply. Now,
supply in some industries is deliberately held down to support prices.
The U.S. Department of Agriculture pays farm landowners billions of
dollars in rent each year to fallow some 60 million acres,
to uphold food and clothing prices. Under Georgist policy those
payments would cease; those acres would go to work producing food,
paying workers, and paying taxes. There are supply-side, demand-side,
and fiscal economic policies, all three in one simple stroke.
In the longer run it seems reasonable that more genuine productive
job opportunities at home would reduce the pressures for military
spending, at least those portions which are strictly boondoggling of a
Ballooning public debt is an onrushing catastrophe of our times,
threatening to overwhelm us and lead to national bankruptcy. Nothing
else has made a dent in it. A tax that raises revenue at the same time
it lowers public spending, ipso facto lowers the deficit. Vigorously
applied, it even turns deficit into surplus. Thus, it lowers interest
payments on the public debt, adding to surplus, in a benign spiral of
positive feedback, leading back to national solvency. In the face of
that, anyone who fans fears that Georgist taxation might lead to
public extravagance is holding up a warped carnival mirror showing us
our ruin in our interest, and our interest in our ruin.
Full employment to enhance the environment!?
Georgist tax policy protects and saves the environment. As noted
above, Georgist policy aborts subeconomic extensions of roads,
utilities, and public works. Saving public funds and saving wildlands
and waters are nearly perfect complements.
Keynesians gave economics a bad name in the rising environmental
movement. Keynes sometimes called himself a waste
economist. His disdain for land conservation and the environment
may be inferred from his famous saying that it is better to have men
digging holes in the ground and filling them up again, than to remain
unemployed. That, of course, could be hard on the ground, its flora
and fauna. He tossed off the future, saying In the long run we
are all dead. Urban sprawl did not bother him or his followers:
unused land in cities simply created more investment
opportunities for extending infrastructure to bring outlying
land within the urban ambit. Natural resources per se were effectively
unlimited: the need for exploring and drilling just opened new
investment outlets. Effective demand was all that
mattered. It was the end-all and be-all of Keynesian economics, its
When agitated environmentalists faced down Keynesian Walter Heller
around 1970, his answer was to subsume their concerns under his system
as an afterthought. The really important thing, he said, is that first
we uphold demand through fiscal stimulus; then (throwing them a bone)
we will have money to clean the environment. Fiscal stimulus
includes building sub-economic public works to invade wildlands, the
very problem exercising environmentalists.
That set the pattern for Keynesians, and sealed their doom. They had
grown too smug and dogmatic really to hear the critics, to adapt, to
weave the critics concerns into the fabric of Keynesian thought.
The environmentalists had to look elsewhere for comfort. They did so,
and out Keynes went, his time spent. Sierra, the Sierra Club house
organ, has six million (sic) subscribers. Patronize them at your
Jobs vs. the environment is the dismal trade-off offered
by darkened counsel, from Marxist to Chicagoan, today. Marxists
traditionally have overreacted to Malthusianism to the extent of
denying the reality of resource scarcity, the need to conserve and
economize on land, and hence to control pollution. The wrecked Soviet
environments bear witness. A Georgist economy, on the other hand,
guards the environment and saves resources in the very process of
making jobs. It saves resources by focusing human activities on good
lands, the lands that should support people, leaving and releasing
marginal lands for wildlife, recreation, wetlands, watershed
Taking timber as an example, John Baden sums it up brilliantly in a
few apt words: timber should be grown on lands that are flat, warm,
wet, and near markets. Georgist tax pressure applied to those Site
I lands will promote exactly that, leaving the steep, arid
slopes (Site VII lands) for scenery, watershed, and
recreation. These Site VII lands that are bad
for timber are often good, maybe the best, for scenery, recreation,
wildlife, and watershed protection.
There was once a tendency for environmentalists to oppose human use
of land wherever and whenever the issue arose. They opposed urban
sprawl not because good land was left vacant, but because other land
was not. Now, to their credit, most of them are looking at the whole
human system. The Sierra Club is supporting urban infilling, seeing
that demands not met on good land are bound to pop up on bad land. In
cities, here are some sources of non-point pollution that
sprawl maximizes or worsens: the number of car-miles for any given
level of urban linkage, with smog generated in proportion; paved
areas, with salt and roadside litter both spread in proportion;
grading and denuding new lands, generally upstream and more sloping;
number of homes not sewered; diversion of sewer funds from treating
sewage to collecting it; larger lots and lawns, longer driveways;
inhabited areas without good fire protection, with more grass and
brush exposed to humans; settlement and industry beyond gutters and
storm drains; longer, wider utility rights-of-way, with higher voltage
and pressure and hazard; filling wetlands.
Automobile dependency creates its own treadmill effect (positive
feedback). The car itself is the major consumer of urban space,
space which must in turn be traversed, using still more car-miles.
Then there is sudden death or injury. Pedestrians and cyclers are
maimed and frightened until they, too, become motorists. Mass transit
withers away. The market does not lead us to optimal outcomes in such
a world. Georgist tax policy, combating sprawl, at the same time helps
minimize non-point pollution which is basically the product of
scattering bits of cities over too much area.
Auto dependency is also energy dependency. Georgist policy combating
sprawl obviously at the same time saves energy: lowering the demand
for refineries that pollute air and water, tankers that spill oil, oil
wells that invade wilderness and pollute their environs, etc.
Congress allows generous tax loopholes for activities related to
finding, holding, drilling for, extracting, and transporting raw
petroleum and gas. Public funds are allocated to military activities
designed to foster and protect imperialistic expansion of U.S. firms
in oil-bearing regions. As soon as the raw land-product leaves the
ground, tanker, or pipeline, however, value-added thenceforth on its
way to the consumer is subject to the full fury of the tax laws.
Congress imposes heavy fines on refining, storing, processing,
distributing, upgrading, and conserving the product en route to the
consumer, using labor and capital. Consumers who raise their taxable
income by conserving fuel are subject to higher income taxes, along
with property taxes on the equipment required, and payroll taxes on
Georgist tax and spending policy would reverse that bias. The idea
would be to lower taxes on downstream value-added, like
processing, storing, distributing, saving, substituting, and
conserving; and raise taxes on (and lower subsidies to) upstream
activities like finding, preempting, holding, and exploiting Natures
black gold. It would result in what Amory Lovins, an energy economist,
has summarized as Negawatts for Megawatts.
The overall idea is to hire labor to make better use of the lands and
resources we already have, rather than spill out over more. We lessen
our demands on Nature, which is limited, and substitute labor and
capital formation, which are augmentable, and human ingenuity, which
is infinite. Around 1900, such thinking called forth the English
movement for Internal Colonization. Even imperialists and
social Darwinists like Halford Mackinder and Leo Amery argued for it,
because imperialistic expansion was exhausted. Kipling produced his
contrite Recessional. In 1906, Sir Henry
Campbell-Bannerman formed a Liberal government, saying We wish
to make the land less of a pleasure-ground for the rich, and more of a
treasure-house for the nation.
The Golden Age of applied Georgism, 1902-19, was also the age of the
Conservation Movement in the U.S.A. Georgism and Conservation were two
key elements of Progressivism, the ism of Teddy Roosevelt
and Woodrow Wilson and even (if reluctantly) William Howard Taft.
Listen for the Georgist overtones in Roosevelt, speaking on
Conservation in 1916:
If it was published
that all the works of Rembrandt had
been burned there would be a perfect outcry.
It is possible
that humanity will produce a new Rembrandt; but it is impossible to
produce a new Passenger Pigeon.
This was also the Golden Age of American cities, an age of infilling,
mass transit, electrification, sanitation, public health, civic pride
and revival. A close analysis of Chicago building, for example, shows
that the boom of 1908-15 occurred mainly inside the city limits, in
contrast to the previous boom that peaked in 1891, and the later one
in 1927. The same study shows that this 1908-15 building boom evoked
no boom and bust in land prices, in contrast to the ones before and
after. It produced no boom and bust in banking, either. Those were the
days! How much good the world has forgotten since then. Lets
help people remember, and reenact.
Reconciling other polar positions
We have seen in some detail how Georgist policy reconciles and
synthesizes certain supposedly irreconcilable antinomies, where
ordinary mainstream economists offer at best dismal
tradeoffs. We have just seen that taxing rent reconciles heavy
taxation with economy in government; and reconciles full employment
and the environment. Earlier we saw it reconcile heavy taxation with
private incentives; lower taxes on labor with lower taxes on capital;
supply-side economics with demand-side economics; investment
incentives with saving incentives; and fiscal surplus with fiscal
stimulus. Now I will summarize and itemize, without detail, these and
many other reconciliations inherent in Georgist policy.
Georgist tax policy achieves the following. It:
1. Couples equity with efficiency.
2. Couples progressivity with motivation. Abates concentration of
wealth and power while widening the scope of productive ambition and
3. Makes more jobs without inflation. Raises demand-side and
supply-side together, leveling them upwards.
4. Raises both inducement to invest and inducement to save, at any
income level. Also raises saving by raising income level.
5. Couples structural reform and macro reform.
6. May be applied at local, state, and national levels, together or
jointly, in small degrees or large.
7. Relieves labor of taxation without burdening capital, and vice
8. Renews cities without subsidizing evictions.
9. Contains urban sprawl, infills and coordinates cities without
superimposing planning on the market. (Does the same for rural sprawl,
timber sprawl, mining sprawl, recreational sprawl, water-source
10. Fosters resident ownership and civic participation without laws
against absentee ownership, or other use of compulsion, but in the
very process of lubricating land markets.
11. Asserts common rights to land while strengthening private tenure.
Permits of privatizing without giveaway.
12. Allows paying off public debts while fostering full employment
through (true) fiscal stimulus.
13. Makes labor cheaper to hire while raising real wage rates
(take-home pay, disposable income). Thus makes jobs without lowering
wage rates or making work.
14. Lets regions, nations, and the world add population and capital
without diluting their resource bases.
15. Fosters economy in government in the process of raising revenue.
16. Saves the environment in the process of intensifying land use.
17. Smoothes business cycles without depending solely on
contra-cyclical fiscal or monetary policy. Stabilizes and secures
financial institutions with only minimal regulation.
18. Effects land reform and redistribution abroad and at home, urban
as well as rural, without government expense, and without acreage
limitations, working through free markets.
19. Equalizes credit ratings for land buyers without any controls
Economic discourse is afflicted with cynics, spoilers, and pessimists
who cling to mutually inconsistent positions at the same time, each
posing an insoluble problem. Dismal trade-offs, deadlocks, and
standoffs are just mental blocks and smokescreens. Henry George began
with a quest for justice in sharing the rent surplus. He found that
justice and efficiency are not at odds, we can have both. This
trade-off that many economists expound is a stall, a put-off to
enervate and unman us so we wont do anything. It may ease the
conscience to think justice must be sacrificed for efficiency, and
schools starved and libraries closed to free up incentives, so
nothing, really, can ever be done. This mindset is unaffordable in a
period of dangerous national decline, and growing division between
haves and have-nots.
We have shown here that major social-economic goals are not at odds,
they are mutually supportive. More: many are mutually requisite.
Efficiency supports justice, full employment supports stable prices,
macro reform supports structural reform, urban containment needs a
free land market, secure private tenure needs common rights, national
credit needs full employment, economy in government needs heavy taxes
on land, free markets need assertion of common rights to land by
taxing it, pristine wildlands need intensive land use, and land reform
needs free markets. When you think synthesis you think
big: the pieces come together. With such a message, can we not again
stir the world?
(GrounndSwell does not have room to publish footnotes, but they are
available from Dr. Gaffney.)