Has Georgism Been Hijacked by Special Interests
[A presentation at the annual conference of the Council of Georgist
Organizations, held in Bridgeport, Connecticut, 19 July, 2003.
Ideas have consequences. There is a tendency to infer that the
largest and best ideas have the greatest consequences. But this
assumption is not borne out by history, and the reasons should be
fairly obvious once one thinks about it.
For one thing, ideas don't exist in a vacuum. They are put forth
in the context of a world composed of vested interests. Each
interest, and even each pre-existing idea, has a specific gravity of
its own. This gravitational pull affects the trajectory of new ideas
introduced into the system.
The biggest ideas are those that affect the vested interests most
strongly. For this very reason the vested interests either pull
these big new ideas into their own sphere, or seek to repel them
much as a lion would repel a powerful rogue outsider from coming
into the pride. Matters are further complicated by the fact that
ideas are themselves immaterial. They must be introduced into the
world on a vehicle, and this vehicle in the first instance is a
person, in the second instance an institutional context - a context
composed of newspapers and journals, books and their reviews,
universities and their status systems, lobbying institutions and the
politicians they influence, and finally lawyers and policy makers or
even religious leaders and their doctrines in the case of the
highest and most powerful ideas.
Each of these vehicles, from individuals to institutional
structures, comes with a more or less idiosyncratic and often
accidental set of characteristics that influence the ideas much as a
clarinet or other musical instrument introduces overtones into the
notes being played. Nowhere are these worldly and material
dimensions to the history of ideas more clearly expressed than in
theories of land rent and other forms of economic rent. One hardly
would expect matters to be otherwise in view of the fact that rent
has been the major economic phenomenon throughout history. It has
been the major path to wealth, and once obtained it has been the
major way of maintaining wealth and social status. In this respect
the economy and even society is all about rent - and its associated
land pricing and land tenure, as well as the value of mineral
rights, monopoly rights and other rent-yielding resources.
A great economist said these things. And we all know his name:
Ideas about rent and its taxation are ideas about how society
should organize and dispose of its economic surplus. Because these
ideas are political, one would expect all the forms of individualism
and idiosyncrasy that have been found with reformers throughout
From the Ricardians came the criticism of rent from the vantage
point of bankers and industrialists seeking to channel rent revenue
into capital formation, and using it as the tax base so that profits
would not be taxed, or the spending and income of workers whose
expenses would be added to the minimum wage cost of industrial
employers. From the Socialists came the criticism that rent was
unearned, and that land was simply one of those pressure points
where owners could act as economic toll-takers and demand a rental
fee for access to what was a precondition to production - land sites
- but did not in itself entail outlays to produce and hence did not
add value. The Socialists agreed with the Ricardians (and for that
matter with the Physiocrats and with the fiscal systems of classical
Greece and Rome) that groundrent should be the basis for taxation.
Kindred to this position was that of the American tax reformer Henry
George, describing how land ownership had been appropriated from the
public domain, often by insider dealing within the public sector,
(as he had seen most flagrantly in his country's vast land grants
given to the railroads.)
Yet despite the fact that they were united by a similar analysis
of groundrent, George, the Socialists and the Classical Economists
moved in opposite directions politically. For generations to come,
this divergence in directions shaped the coloration of rent theory
and the fiscal policy that it implied.
The explanation is to be found in the positioning of rent theory
within its holders' overall view of society - how society functioned
and how it ideally should function. In this respect the social
destiny of the idea of land rent became a function not so much of
the theory of rent itself as of broader theories of overall society.
This broad context shaped the sonorities and overtones of rent
theory - ultimately, ironically, in a way that led to its being
almost entirely removed from social, political, economic and
academic consciousness altogether. The history of rent theory thus
becomes of sociological interest precisely because it is a seemingly
"big idea" whose effect has shrunken steadily since it was
expounded two centuries ago. Today it is more likely to elicit a
response of cognitive dissonance than a reverberation of recognition
in the minds of most people.
Henry George was remarkably perceptive about the danger of
Marxian socialism leading to dictatorships of the bureaucracy. And
the Socialists for their part were short-sighted in not seeing that
the only kind of socialism that would work was one that retained
market reference points. Every successful economy in history has
been a mixed economy, in which the private and public sectors relate
to each other through a system of mutual checks and balances. This
is how Sumer and Babylonia were organized, and industrial Britain at
its takeoff, and America in its rise to industrial power after its
But today, both sides have polarized between the one-sided
anti-government politics of libertarianism and the shreds of
post-Stalinist socialist theory. What has been missed is the fact
that government does have a legitimate role in collecting economic
rent - unearned income created by and rightly belonging to the
community, as Henry George advocated - and in using this revenue as
the basis for public finance of public services and inherently
rent-generating infrastructure and other public enterprise.
Even today, many socialists view Henry George as one of
themselves because of his eloquent writing along these lines. Yet
the institutions ostensibly endowed to promote his ideas have
ignored the largest potential pool of his supporters, to focus on
groups whose antipathy to government prejudices them against a full
collection of land rent and other forms of economic rent, and leads
them to advocate privatization rather than public collection of
How did this state of affairs come about? Why has land-rent
taxation failed so disastrously in the political arena, if it is so
good? The idea of basing the entire tax base on a rent tax rather
than taxing profits or wages would make society much richer and be
much fairer than the existing system. Most people believe in
fairness and economic justice. Why then hasn't the taxation of
economic rent (and land rent in particular) attracted more
I believe (1) that the movement to tax economic rent has been
trivialized, and (2) that this is the result of its having been
hijacked by a group of people whose ideology is basically averse to
the ideas of Henry George. But first, let me give you some
background on why I think this is so.
I think that the failure of Georgism is attributable to the fact
that it pulls its punches so seriously as to cripple its basic
message - the message of economic justice that made Progress and
Poverty so successful as a vehicle to advocate the taxing of land
Henry George helped establish the principle that land rent was
the major form of economic surplus in any economy - and to make
matters worse, it was unearned. The private appropriation of rent
diverted this surplus income from being invested in capital
formation to increase the productive powers of labor, and hence the
flow of output that was supposed to increase living standards over
time. Progress was subverted to an impoverishing dynamic.
Politically, George was an individualist and opposed the
centralized government advocated by Marx and the Socialists.
However, many people found a problem with George's idea, and these
people included many of his own followers. The enormous magnitude of
land rent meant that a land-tax would swell rather than shrink
government tax revenue.
How would this translate into government spending, and hence the
economic activism and political power of government? Does a full
land-rent tax mean Big Taxation, and if so, does this mean Big
Government? And as an individualist, didn't George oppose Big
Government? I will get into this problem later in my talk. I would
like to ask this audience a number of questions.
First, what do you believe in more? Would you rather (1) cut
taxes, or (2) raise the property tax to the land's full rental
Many advocates of the two-rate tax (buildings will be untaxed, a
small part of the land rent will be taxed, with no increase in
overall real estate tax revenues) present Pennsylvania as a Georgist
pilot project. Yet the state's property tax is only 1% of the land
price - or rather, I should say, the APPRAISED land price.
Appraisals indicate only a fraction of the actual market price, as
they notoriously lag behind market sales prices.
From the outset, leading advocates of untaxing buildings have
insisted on two things. First is the "revenue neutrality"
of property taxes, so that the overall tax take should not rise. Yet
the essence of George's tax philosophy is that the land's full
economic rent should be taxed. If it were, this would result in an
approximate ten-fold increase in Pennsylvania's overall tax rate. In
view of this "revenue neutrality" as a condition for
getting support from local mayors (and hence, from their major
campaign contributors, the financial and real estate industries), I
do not see how such a tax program can be viewed as a step toward a
land-rent tax. It seems instead to be an alternative.
A second condition of the two-rate tax program as presented to
Pennsylvania mayors is the promise that there will be no general
re-appraisal of property. Yet if land is to be taxed rather than
buildings, it is economically impossible to do this without creating
a land-rent map. This kind of map is needed to smooth out the
arbitrary variations that result from site-by-site appraisals at
different periods of time, based on sales or transfers at different
points of time.
My statistical research shows that a full tax on the land's rent
(not buildings, just the site's rental valuation) would be about 10
percent of the property's market price, in contrast to
Pennsylvania's 1%. This would multiply the existing property tax
So, I would like to re-ask my question. How many of you are in
favor a full land-rent tax (LRT)? How many of you believe that this
could be done without creating serious economic problems? I have
heard the argument from many Georgists that there would be no
overall economic problem because what the government collects in
land-rent tax will be matched by a corresponding un-taxing of labor
If the economy were a single-celled organism, an amoeba or other
shapeless protozoan, this would be the case. But we live in a
multilayered economy. It is true that overall functions could un-tax
labor and capital and make up the difference with a land tax. This
is what George said, and it is what I believe and support.
However, the incidence of taxation would affect various classes
differently. Labor and (physical) capital would benefit. Good. But
the landlords would not come out even. They would find the rent of
their land sites taxed. How would they pay? The statistics I began
to publish for the Henry George School back in 1995 show that the
problem they face is that they already have pledged this rent to the
banks. Real estate speculators - who I believe are the betes noires
of most people of the people here today - are not all that
interested in rent. WHAT THEY WANT ARE THE CAPITAL GAINS. They seek
these gains by borrowing as much credit as they can from the banks,
pledging the property's rental income to pay the interest. WHAT THEY
SEEK IS LEVERAGE. In the process of getting this, they load down
property with debt, and they pledge its rent to the mortgage
lenders. This turns the rent into the backing for the economy's
private-sector savings, making it unavailable for taxation.
The government would tax this rental income if it collected all
the land rent. Therefore, collection of this rent would lead to
widespread defaults on mortgage debts of landlords. The banks would
be in trouble. And when banks are in trouble, so are the savers who
deposit their money with banks. They would turn to the federal
government to bail them out, as they did when the most reckless S&Ls
went broke in the late 1980s. Claims by depositors led to the Moral
Hazard of the FSLIC bailing them out. (Moral Hazard occurs when
people expect the government to bail the banks, other financial
institutions and savers in general from their losses. These bailouts
create debts that will be carried by increasing taxes. The tax
increase would fall mainly on labor in today's fiscal environment.)
The FSLIC went bankrupt, and the government had to go into debt
estimated variously at between $300 and $500 billion, when all
future interest charges are taken into account.
For this reason, a land-rent tax would create a financial crisis.
And it would add to the tax burden, at a time when land is being
untaxed and labor is being taxed more heavily.
The government also would collect the capital gains that
speculators aim for, for these gains represent the capitalized value
of the rent flow that the government refrains from taxing.
Now I should say that despite this problem, I believe in the LRT.
I am willing to see such a crisis, and in fact I think it would be
purgative. One of the main arguments for a LRT is that it would
refocus our financial system away from lending against real estate
for speculative purposes, and shift lending to finance fixed capital
But how many of you are willing to see this occur? When we speak
of being fiscally "revenue neutral," we must remember that
government exists both at the national and state and local levels.
The property tax is local; the taxes that George believed should be
cancelled are those that fall on labor and capital.
Today, these are primarily the federal income tax and tariffs,
collected at the national level. Hence, local government tax
receipts would benefit at the expense of federal receipts - UNLESS
the tax laws are changed to make the real estate tax a federal tax.
I believe that this is what Henry George wanted to see. He was
not supportive of starting locally by creating rent enclaves.
Although he thought that the guiding idea of local experiments such
as New Hope, Alabama was correct, he saw the local avenue of rent
reform as a Sisyphusian task, at best merely a demonstration
project. Rather than withdrawing from the fight for nation-wide
reform, he sought to make land-rent taxation a national effort. I
believe that this is the only political way to tax the land's rent.
How many of you agree? Are you willing to see land be taxed at the
federal level, or are you localists?
Now I have another set of questions.
One of the major arguments of the two-raters is that it spurs
construction. They point especially to the promised effect of "developing"
all those low-rise parking lots. I assume that one-story "taxpayers"
also will be developed.
I'll leave aside for a moment the question of whether this really
is a philosophy that many people will devote their lives to
promoting. If you are not a building contractor, is building up
parking lots really the most important thing that you can do to
promote economic justice? Henry George approached every issue from
the vantage point of economic justice. I hardly can imagine him
working as a lobby for the construction industry today. Let me only
discuss the practical matters here. What do you believe has more of
an effect on spurring construction (assuming that to be the single
most important measure of social well-being, your ticket to moral
heaven, so to speak): cutting property taxes on buildings and
shifting them to land, or shifting the interest rate? Remember, the
two-rate tax is "revenue neutral." Given a maximum rate of
1%, this means that the shift for most properties is only a fraction
of a percent. Yet in recent years we have seen mortgage interest
rates shift by four percentage points. The norm for long-term
interest rates is to fluctuate by about one percentage point each
Isn't this variation in construction costs larger than the effect
that a two-rate tax would have? Where then is the great impetus to
new construction to come from? I now would like to ask a set of
questions having to do with political strategy.
Who do you believe was more radical: Karl Marx, or Henry George?
Perhaps I should point out that most of the labor and related
social reforms that Marxian socialists advocated back in his day,
the late 19th century, were actually adopted by the 1930s in most
But one reform was not adopted, and it was the very first item
mentioned in the Communist Manifesto. That was the nationalization
of land. I need hardly point out to this audience that in his day,
Henry George was viewed as just as much of a threat as was Marx.
Already in Marx's 1846 critique of Proudhon, in The Poverty of
Philosophy, written a generation before George published Progress
and Poverty, he pointed to the fact that although industrialists
wanted to base the tax on land rent rather than on themselves or on
the labor they employed, when push came to shove they would defend
the principle of exempting property from taxation.
In view of the fact that the major asset in every economy even in
today's world is land, not industrial plant and machinery, one must
come to a striking conclusion: The theory of rent and its
implications for land taxation is more radical than Marx's labor
theory of value.
The reason is simple enough to anyone who looks at the national
economic statistics for any economy. When economic theory is at
issue, the motto of the investigator should be the same as that of
any good investigative reporter: Follow the money.
The largest asset in any economy, even in today's industrial and
post-industrial age, is land and other rent-yielding assets: mineral
rights, the electromagnetic radio spectrum, and the sectors that
recently have been privatized throughout the world as governments
have sold them off in an attempt to carry their public debts.
It has been easier for the wealthy classes in every nation to
support social democratic programs than to accept land taxation, for
a much larger economic return accrues to land ownership in the form
of economic rent than can be made as profit by employing wage-labor.
A century ago, socialists recognized this, and embraced Henry
George as one of their own. But George rejected their appreciation
as he ran for mayor of New York City in 1886-87. Seeking the support
of capital rather than labor, he expelled the followers of Daniel de
Leon and insisted on rewriting the fusion-party program that had
nominated him so as to exclude its labor planks, and put forth land
taxation as a cure-all.
This led to a break between his followers and those of the
socialists. More and more intellectuals shifted to the socialists,
because they had a broader view of economic reform that encompassed
land taxation but did not exclude labor and housing reform and
related reforms that subsequently became mainstream in character,
most notably during the New Deal decade under Franklin Roosevelt in
the United States.
An indication of how thoroughly socialists had absorbed the land
taxers is apparent from the fact that the major books of
investigative journalism documenting the railroad land grants and
other appropriations of land were published by none other than
Marx's own American publisher, the Chicago firm of Charles H. Kerr.
Kerr was the only publisher who would print books by George's
followers and many investigative journalists inspired by him from
the 1890s through the early 1900s.
In Australia, the European publishers of Marx's Capital, Swan
Sonnenschein, published major tracts by one-time George
collaborators such as Michael Flurscheim. By the first decade of the
20th century, the economic program of land taxation that George had
excited so many people about had passed to the socialists. In
Britain, George Bernard Shaw and his fellow Fabians whose political
activity had been inspired largely by Henry George had moved into
the socialist camp. The same was true in country after country.
As I noted above, the political problem faced by Georgism had
been expressed clearly by Marx already in 1847, the year before he
wrote the Communist Manifesto with Frederick Engels. Criticizing the
socialists who found in Ricardo and Proudhon the idea that to tax
land rent represented the most important political reform, Marx
wrote: We understand such economists as Mill, Cherbuliez, Hilditch
and others demanding that rent should be handed over to the state to
serve in place of taxes. That is a frank expression of the hatred
the industrial capitalist bears towards the landed proprietor, who
seems to him a useless thing, an excrescence upon the general body
of bourgeois production.
The problem, however, was that rent was after all the major
return to property. Marx warned that when push came to shove,
property owners would hold onto rent most tenaciously of all.
Most relevant to the present discussion is the degree to which
Marx's notes drafted in the early 1860s for his posthumously
published Theories of Surplus Value anticipated George's Single Tax
as an expression of class conflict over what form of revenue to tax
- rent, profit, or interest:
Landed property is a means for grabbing a part of the
surplus-value produced by industrial capital. ... The abolition of
landed property in the Ricardian sense, that is, its conversion into
State property so that rent is paid to the State instead of to the
landlord, is the ideal, the heart's desire, which springs from the
deepest, in most essence of capital. Capital cannot abolish landed
property. But by converting it into rent [which is paid to the
State] the capitalists as a class appropriate it and use it to
defray their State expenses, thus appropriating in a roundabout way
what cannot be retained directly. In this passage Marx made explicit
the fiscal policy crisis implicit in classical economics and its
rent theory. By making this conflict so visible between industrial
capital and society's landlords on the one hand and labor on the
other, Marx showed his radicalism to be simply the logical
conclusion of classical political economy. In this respect the
subsequent reaction against Marx, and even against George, was
inherently against the logic of classical economic thought itself.
One must conclude that the advocacy of rent taxation was the most
radical economic reform proposed by the 19th century. Yet today it
has been trivialized into a merely marginal reform, as if
manipulating a tax of less 1% of the land's market value can
transform economies - and also as if land taxation would not
transform the entire economic system.
So land taxers are forced to confront the problem of just how
radical George's idea really was. How are they to handle this
problem? A radical idea cannot succeed without recasting people's
view of how the overall economy operates, and indeed of the
direction in which economic history is moving.
The socialists have placed their reforms in this big-picture
perspective. Yet the followers of George have let rent theory be
marginalized into the academic sub-discipline of "land
economics" and "real estate studies," departments
that invariably cater to the real estate interests.
Needless to say, that discipline has been appropriated primarily
by the landlord classes and the construction industry as a
how-to-do-it study of the ways to get rich through land speculation
and property ownership. I venture to say that nobody knows the
principles of land taxation and land rent better than Donald Trump.
What is remarkable is that the topic almost has disappeared from the
agenda of economic reformers today.
The result is that land taxers are coming to look much like
QWERTY reformers of the typewriter keyboard. A shift to a non-QWERTY
layout may indeed succeed in higher typing speeds, but is this
really an ideal that people are willing to devote their lives to
achieving? Or are there other economic reforms more pressing?
By the 1920s the followers of Henry George (still called Single
Taxers, not yet "Georgists") had become known mainly for
becoming anti-Bolsheviks. They moved to the right wing of the
political spectrum, supporting free trade and even "hard money."
Whereas George's earlier followers had addressed the debt issue
along with the land issue, the heads of the land-tax parade came
just in time to be hard-money advocates.
If there is a single theme of my explanation, it is that the
Henry George movement has been taken over by a group of people whose
main concern is to oppose government. I refer especially to the
followers of Ludwig von Mises and Frederick Hayek, and to the
hard-money advocates that have played so important a role in the
major Henry-George institutions, along with the supporters of Ayn
Rand. What makes their support of the land-rent tax so problematic
is that if it were collected, it would amount to some 40% of
national income. On its face, this would seem to imply big
government. Indeed, this is what H.G. Wells complained of in his
discussion of George. (Almost nobody before Jeff Smith suggested a
citizen's dividend, except of course for the Athenians 2500 years
To resolve this problem, the anti-government individualists have
decided that they really do not want to collect the land's ENTIRE
rent, but only a small part of it, while abolishing other taxes (or
at least, taxes on capital.
The upshot has been a shift in the focus of George's followers
into areas that are basically antithetical to the philosophy he put
forth in Progress and Poverty. These "Georgists" have
become apostles of property ownership, not of labor or even of
industrial capital, but finance capital.
With these observations in mind, I would like to ask a few more
If full taxation of economic rent is indeed so important that it
should be the mother of all reforms, how can its effects be
described without explaining how they will be felt throughout the
entire economy? How can rent theory be put forth as a distinct area
of study, without being an economy-wide theory?
If a macroeconomic approach is needed, then obviously finance
needs to be incorporated. After all, my statistics have shown that
the land's rental income has been pledged to mortgage lenders in
order for property owners to borrow the money to buy real estate
that is rising in price - rising at a more rapid rate, I should
point out, than the rate of interest, in most periods. This explains
its allure to investors. The exception occurs in periods where the
inevitable financial and real estate bubble bursts. Yet rent theory
has been amputated from financial analysis. The economic and
political reality is that a full land-rent tax would indeed
transform the economy. For one thing, it would re-focus the banking
sector away from mortgage lending that finances the bidding up of
prices for properties already in place. If the government fully
taxed the rent and land-price gains, banks would find their market
in lending to finance actual fixed capital formation.
How is it that the land-value tax has no theory of how the
economy as a whole works? How is it that for an entire century this
proposed reform has not been given a sense of proportion by the
publishing of annual statistics - or any statistics whatsoever, at
any point in time - to estimate just how much rent actually exists
to be collected? The result of this neglect has been that most
economic writers have been able to trivialize discussions of land
taxation by estimating that it is only about 2% of national income.
This trivial 2% number comes from a misreading of America's national
income and product accounts (NIPA) and its line for "rent."
This line refers solely to the imputed rent of owner-occupants, as
if they paid rent to themselves for the homes that they have bought.
It does not relate to commercial rents or the rent of corporately
owned property. This rental income can be found under "profit,"
a word which traditionally has been associated with the return to
capital, not to land or other property rights.
The failure to explain just how large a magnitude rental income
is - and how large a magnitude "capital gains" are, gains
which are composed primarily of land-price gains - has enabled most
economic observers to construct models of the economy that leave
land and its rent out of account, subsuming land into "capital."
The question that really needs to be asked now is, how has public
attention and that of economists and policy makers been so
thoroughly diverted away from the magnitude and importance of land
rent? The answer must involve acknowledgement of how politically and
intellectually self-defeating the land-tax movement has been for
more than a century.
Rent theory has been amputated from financial analysis by our own
Georgist organizations. This seemingly has been done as a result of
the infiltration by a minority of highly ideological individuals who
have taken over the major grant-giving organizations of the land-tax
movement: the Lincoln Institute in Arizona and its Cambridge
offspring, the Lincoln Land Institute; the Henry George School of
Social Science in New York, and the Robert Schalkenbach Foundation
also in New York, as well as a few smaller foundations in
Pennsylvania and other institutes whose major focus has become the
promotion of the marginalizing two-rate tax policy which appeals to
local real estate developers.
Inadvertently, or on purpose? These funding institutions have
diverted the land-tax discussion away from economy-wide issues, and
hence from the kind of topic that is able to mobilize most peoples'
economic idealism, toward the more marginal QWERTY-type logic of a
two-rate property tax that would help build up all those
underutilized parking lots, much to the glee of the construction
Yet as I pointed out above, one of the strongest arguments for
taxing the land rather than profits and wages is that this is a
precondition for shifting the banking system away from inflating
real estate and stock-market bubbles that are based on "rent-collecting"
sectors of the economy.
I and others have been told by many Georgists that inasmuch as
the land tax is locally imposed in the United States, we should work
locally through the mayor's office. The problem with this is that
mayoral campaigns are financed largely by the real estate and
banking sectors. And the last thing that these campaign contributors
want to hear about is a land tax.
Except for the two-rate tax, that is. Given the existing
appraisal techniques, the market value of high-rise buildings is
attributed mainly to capital structures (at today's reproduction
costs), not the land. The effect of the two-rate tax in large cities
- New York City and most others where the bulk of U.S. property
values are concentrated - would be to untax tall, absentee-owned
commercial buildings. To be "revenue neutral," this tax
would be shifted to low-rise, residential structures. In this
respect the tax burden would be shifted from property owners onto
labor. Is this what Henry George wanted? This phenomenon is
instantly apparent to anyone who "follows the money trail"
and starts off by looking at the statistics. In my many years of
relationship with the Henry George School and the Robert
Schalkenbach Foundation, this seems to be the reason why the
publication of land-rent statistics has been opposed. The
real-estate and construction-industry advocates, anti-tax
protestors, property and "hard money" advocates that
dominate their boards have little interest in explaining how their
own particular theoretical beliefs lead to anti-labor, pro-landlord
policies in practice.
Henry George sought to put forth an alternative to socialism and
big government. But did he intend a libertarianism based on
self-interest, on the idea that without economic "incentives"
and payment people would not behave fairly?
Did George believe that tax revenue was bad and should be
reduced? Or did he want to tax the land fully? The guiding principle
here should be just what Henry George insisted on: the principle of
economic justice. He sought to create a level playing field - within
the context of freedom and capitalism.
There is a general awakening today that what is blocking a level
playing field is the financial system. Specifically, the economy is
being loaded down with debt. And about 70% of bank loans in America
and Britain consist of mortgage loans attached to property,
absorbing its economic rent.
Most people who look at new proposals and theories that are new
to them want a theory that can explain the economy as a whole. And
as most of you here already know, rent is the most important flow in
any economy, past or present. But this message can't be got across
to people without putting rent in proportion to profits, interest,
wages and taxes.
Why isn't this being done? Or I should say, why is it only being
done by Donald Trump and by the real estate industry, not by
followers of Henry George? Why is rent being calculated by bankers
to see how much money they can loan against it, but not by tax
George did not want the socialist state advocated by Marx. But he
did believe in justice. Yet today, the discussion of justice has
been monopolized by the Marxists, along with left-wing churches in
Europe. Also monopolized by Marxists has been the study of economic
history and the history of economic thought.
Yet economic history could well be written as the history of how
the land was taxed and how landowners shed this tax by shifting it
onto other classes. This is how George himself began Progress and
Poverty, with his discussion of the history of property as described
by Laveleye and other French socialists. Why is it that George's
followers have given up the task?
George certainly would not have wanted government statistics to
hide the magnitude of rent. But this is what is being done. Why are
these national statistics not re-cast in a way that would show the
actual magnitude of rent and compare it to industrial profits and
labor's wage income over and above basic break-even needs?
How are we to get to the level playing field in today's economic
climate that favors landowners by supplying them with credit and tax
The statistics are there. But they are not published, and not
interpreted and charted. Without statistics, how can advocates of
land taxation convince people as to how important it is, and how
radically it would transform society?
For decades the Henry George School and Schalkenbach have been
building up their financial capital but withholding it while the
intellectual capital of the land-tax movement has been depleted.
Potential sympathizers and legitimate academics have been driven
away, and the credentials of the boards of directors of these
institutions has been degraded.
I know many prestigious academics who support land-rent taxation.
They have been driven away. I have met many financial managers who
believe that the financial system should be re-directed by shifting
fiscal policy toward land taxation rather than the present-day
fiscal favoritism for land speculation (most notably the recent tax
giveaways by the Bush tax plan that cut land-price "capital"
gains and abolished the inheritance tax, which fell largely on
inherited landed property) but they have not been made to feel
comfortable in the company of those who consider themselves to be
So it seems to me that the land-tax movement has been hijacked by
those whose agenda is not compatible with that of full
land-taxation, but have another ideology in mind. I have seen a fear
of reaching out to socialists, yet from the very outset they have
been the most active supporters of George and his belief that the
land belongs in the public domain. They are willing to accept the
land-tax idea, all the more so as it now seems to be a major way to
cope with the form of perverse globalization that is occurring by
privatizing the public domain to pay off public debts in many
Another group of potential supporters lies in the environmental
movement, the anti-IMF and World Bank reform movement, and
anti-globalization movement. Yet all these groups have been shunned
by the main organizations that are supposed to be committed to
promoting the land-rent tax. Today the economy is leading to a New
Enclosure Movement. The public domain - the domain whose revenues
Henry George believed should be taxed - is being appropriated. This
is occurring not by military force, but by financial insider dealing
under pressure of debts that are crippling governments.
The last thing that Georgists want is a new feudalism - one with
Donald Trump as king, and his bankers sitting behind him collecting
what he and other rent-takers appropriate from the economy.
Opposing such takeovers is a winning message. But to get it
across, we must follow the money trail, publish the statistics and
show the magnitude of what is happening - and demand accountability
from the institutions that are supposed to promote the ideas of
economic justice that Henry George popularized so successfully in
his day. At this point you may begin to wonder why I was invited
Nobody likes to make an audience feel uncomfortable or to be the
bearer of bad news. I'm well aware that the dominant mentality
through the ages has been to "shoot the messenger." So why
have I been invited?
I assume that the reason is that I'm willing to say what I think.
Others who think as I do have simply been told (as I have been told)
to go away and leave the Georgist movement alone. Many of my friends
have done just that. They've been told (as I've been told) that
there is no room for social reformers in the land-tax movement, that
the way to succeed is not to frighten people but to go step by step,
incrementally and marginally. This is not the way to go.
Dr. Michael Hudson is the author of "Debt and
Economic Renewal in the Ancient Near East," "Privatization
in the Ancient Near East and Classical Antiquity," "Urbanization
and Land Ownership in the Ancient Near East," and is an author
in "A Philosophy for a Fair Society".