The Law of Rent and the Economics of War and Peace
Alanna Hartzok
[Alanna Hartzok, Co-Director of Earth Rights Institute and United
Nations Non-Governmental Organizations (UN NGO) Representative made
the following presentation at the February 23, 2007 Economists for
Peace and Security Session of the Eastern Economic Association
Conference. Reprinted from
GroundSwell, November-December 2007]
Part 1
The land, the earth God gave to man for his home,
sustenance, and support, should never be the possession of any man,
corporation, society, or unfriendly government, any more than the
air or water.... An individual, company, or enterprise should hold
no more than is required for their home and sustenance. All that is
not used should be held for the free use of every family to make
homesteads, and to hold them as long as they are so occupied. -
Abraham Lincoln
Graph 1 illustrates A Peaceful Flow of Goods and states: "In a
naturally just and harmonious society everyone has fair access to the
gifts of nature -- land and natural resources -- in order to procure
their livelihood."
CHART NOT AVAILABLE
This graph represents a simple economy based on equitable direct
access to the gifts of nature. In such societies wealth is fairly
distributed and there are often rules and ceremonies to ensure that
no one group or family accumulates wealth while others lack the
basic necessities. There is no hoarding while others go hungry.
There are no homeless as all have access to raw materials to build
shelter. There are no prisons in cultures that protect and enforce
the access to land for all, as the severest form of punishment is
usually banishment from the group. Designated wise ones or elders
mediate conflicts.
Jeffersonian democracy envisioned broad ownership of land worked
by independent family farmers. Early American society was in large
part Jeffersonian in character. The frontier image of the log cabin
and the highly self-sufficient homestead was a reality for many.
Wage labor was looked down upon as lacking in individual freedom.
Thomas had a firm understanding that political democracy must be
based on fundamental economic democracy. He said, "The earth is
given as a common stock for men to labor and live on."
Abraham Lincoln clearly articulated this perspective when he said
"The land, the earth God gave to man for his home, sustenance,
and support, should never be the possession of any man, corporation,
society, or unfriendly government, any more than the air or water,
if as much. An individual, company, or enterprise should hold no
more than is required for their home and sustenance. All that is not
used should be held for the free use of every family to make
homesteads, and to hold them as long as they are so occupied."
The burning issue of the Reconstruction period immediately after
the Civil War was that of land reform of the southern plantations.
Thaddeus Stevens and other Reconstructionists pushed to distribute
the lands of the former plantations to those newly freed from
slavery as well as to poor white landless people, all of whom they
thought should receive forty acres and a mule. Northern
industrialists, fearing a loss of their labor pool if northern
workers were also to assert their right to land, rejected this
proposal. Millions of African Americans as well as white people have
suffered the vicissitudes of poverty ever since.
The US economy became ever more complex, urbanized and
centralized over the ensuing years. Yet the allure of "the
simple life" of rural homesteading emerged once again in the
twentieth century, especially during the Depression and periods of
war. Scott Nearing, an economist and college professor who had lost
his academic position because of his pacifist beliefs and anti-war
activism, and his musician wife Helen became well known from their
books about their homesteading experiences which spanned more than
five decades. They produced most of their own food, shelter and
energy while living a lifestyle balancing manual and intellectual or
creative work and play.
Bob Swan, Chuck Matthei, Ralph Borsodi and Mildred Loomis
launched the community land trust movement in the 1940s and were
leading voices urging thousands to try homesteading through the
publications and activities of the Institute for Community Economics
and the School of Living which continues to this day. The Federation
of Equalitarian Communities, the E.F. Schumacher Society, and the
Global Ecovillage Network share the same inspiration. Students of
newly-formed Gaia University can obtain bachelors and masters
degrees in earth-based community development.
Harvey Baumgartner, a self-described "sixty-year-old
subsistence farmer from Wisconsin" tells us in a recent issue
of Mother Earth News how he built a fully functioning homestead in
just a few years after leaving his structured employment. He began
by planting a large garden and building a simple home of logs, sod,
cob, and hay bales, then added a chicken coop, root cellar, clay
oven, barn for his goats and horse, and a sauna. He loves this way
of living and greatly enjoys visits from his grandchildren. Harvey
says:
"I am interested in reviving strong rural
communities... Bringing back the way we used to interact and rely on
each other seems like something worth working toward. With my
neighbors, it has been easy to start the process by exchanging items
we need.... Each new day is an adventure here on my hilltop
homestead. I eat fresher foods now and always have plenty. No longer
is my focus on making money. I now concentrate my energy on the
quality of my life, and I'm discovering true wealth.... I live in
harmony with the natural world and its cycles...Until recently, I
felt I was a steward of this land but since I've been living here
I've come to feel that I am only a guest. I am just here as one of
many participants, and my aim is not to dominate the land, but to
live in harmony with it. And so I treat this land with the reverence
and love it deserves."
Harvey did not have much money when he started his homestead. But
he had come to own a twelve acre hayfield. His is a very personal
story that reminds us that human beings can live joyous and
meaningful lives of self-reliance and cooperation beginning with the
most basic of all needs - access to land.
Given the option of a secure place to be on this planet, no doubt
multi-millions of people who now live miserable lives of degrading
poverty, hunger, and exploitation would chose this simple way of
life in harmony with nature over that of the daily grind and
struggle required to pay rent to live in our towns and cities. With
secure and sufficient access to land and other natural resources,
most all human beings everywhere on earth can acquire the skills to
provide for their own basic needs.
Part 2
We have reached the deplorable circumstance where in
large measure a very powerful few are in possession of the earth's
resources, the land and all its riches, and all the franchises and
other privileges that yield a return. These monopolistic positions
are kept by a handful of men who are maintained virtually without
taxation . . . we are yielding up sovereignty. - Agnes de Mille
(1905-1993)
Graph 2 indicates that structural violence -- the wealth gap and
conditions of economic injustice -- begins at the point where a few
gain control of most of the land and natural resources of the earth,
thus excluding others from the gifts of nature. As the economy
develops and land values increase, a Privilege Fund grows as a
result of the private capture of land rent. Privilege Funders'
excessive accumulation of this unearned income gives them a great
capacity to make loans to others, thereby capturing enormous amounts
of interest as well as other types of economic rent (the excess of
price over necessary cost of production). The gun images situated
above the terms "rent" and "interest" indicate
that these are initial points of structural injustice.
CHART NOT AVAILABLE
THE CLASSICALS AND THE LAW OF RENT
Let us now define our terms as enunciated by Adam Smith and other
classical economists. Land, Labor and Capital are the three primary
economic factors of production in the analysis of classical
economists, who described their field of focus as the study of "the
production and distribution of wealth." The term Land indicates
all nature given resources. The term Capital means "wealth used
to produce more wealth" and refers to tangible items of tools
and machinery, not financial instruments. By "distribution"
the classicals did not mean carting apples off to sell in markets
but rather how the overall wealth pie was divided between the three
factors. The return to Land they termed Rent; the return to Labor is
the usual meaning of Wages; and the term used to describe the return
to Capital was Interest.
The Graph 2 illustration requires explanation of one of the most
fundamental laws of political economics -- the Law of Rent. "Rent"
is the term used by the classical economists to define the payment
which must be made for access to "Land" (natural
resources). "Rent" is unearned by the landholder, who has
the privilege of holding title to "Land." John Stuart Mill
and other 19th-century economists called land rent and land price
gain the "unearned increment." Classical economist David
Ricardo refined the Law of Rent in his Principles of Political
Economy and Taxation (1817). He explained that "without a
knowledge of [the theory of rent], it is impossible to understand
the effect of the progress of wealth on profits and wages, or to
trace satisfactorily the influence of taxation on different classes
of the community."
The Law of Rent is among the most important and firmly
established principles of economics. The Law of Rent states that the
rent of a land site is equal to the economic advantage obtained by
using the site in its most productive use, relative to the advantage
obtained by using marginal (i.e., the best rent-free) land for the
same purpose, given the same inputs of labor and capital. This law
has a number of important implications, perhaps the most important
being its implication for wages. The Law of Rent implies that wages
bear no systematic relationship to the productivity of labor and are
instead determined solely by the productivity of labor on marginal
land.
Surface land and extractive resources have no production costs,
having been produced by nature. The value of surface land sites
increases as the community grows and develops. Surface land values
are highest in the cities - the centers of production and exchange
of wealth. Cities grew in locations of some natural advantage, such
as a harbor or the confluence of rivers, or at the foot of trails
through mountain passes. As settlements grew and had need for public
infrastructure and services, systems of taxation were established to
pay for schools, libraries, transportation systems, water and
irrigation systems, etc. These public amenities further increase the
desirability of these locations which results in an increase of the
land values of serviced sites. Land value is thus a reflection of
the labor and activities of the entire community of people. No one
individual creates land value. Similarly the market value of finite
extractive resources increases as there is more demand for the
utilization of such resources.
The classical economists who turned their attention to the
problem of poverty and questions concerning root causes of the
rich/poor gap came to the realization that Land Rent represents a
social surplus and belongs by rights to the community as a whole and
thus should not be privately appropriately by land title holders. A
fair economy would capture rent for the benefit of the entire
community. (Further explanation of this is the focus of Graph 4 in
this series.)
Unfortunately, the truths brought forth by the classical
economists have been obfuscated (see The Corruption of Economics by
Mason Gaffney). The reality of our present neoclassical economic
system is that most people must pay increasing amounts of "rent"
for access to land either to other title holders or to banks in the
form of mortgage payments. Thus begins the exploitation (note the
gun images on the graph) of those who have only their labor to bring
to the process of wealth creation. Because of the "rent leak"
most people cannot secure capital (homes included) without borrowing
from the "Privilege Fund lending system" and paying
interest. As the privilege fund grows, so does the wealth gap
between the super rich and the rest of us.
Under our current property-in-land laws, land is treated as a
market commodity. Whoever holds title to valuable natural resources
and desirable land sites reaps the land rent as individual profit.
Land speculation adds fuel to the fire of increasing land values. We
are all familiar with the phrase "to make a killing in real
estate."
Our Western form of land tenure has deep historical roots. The
land of Europe was once held as a commons. There were
well-established community rules of use rights to the forests,
fields, and streams. However, after several hundred years of the
enclosure or privatization of the common lands in Europe, which
began with the Statute of Merton of 1235, most of the people were
mired in poverty and abhorrent living conditions. Some of those who
managed to make a living for themselves in the emerging cash economy
gradually were able to acquire land once again, this time by
purchase. Land then became a market commodity with a sale price. All
three factors of production -- land, labor, and capital -- could now
be bought and sold.
Fast forwarding to our own times we see that those who once had
access to common lands, the common people, now are viewed by
Privilege Funders to reside in a "labor pool." Most of us
commoners sans commons are currently drowning in a sea of debt. The
reality of burgeoning numbers of people in prison in the United
States today shows a similar result to how the economy was
structured during times of the debtors' prisons of the Middle Ages.
Most of us of social concern are quite aware that people of color
and poor white people, those who had no previous capacity to stake
claim to land and natural resources, disproportionately populate our
prisons. As of December 31, 2005:
- 2,193,798 prisoners were held in Federal or State prisons or in
local jails -- an increase of 2.7% from yearend 2004, less than
the average annual growth of 3.3% since yearend 1995.
- There were an estimated 491 prison inmates per 100,000 U.S.
residents -- up from 411 at yearend 1995.
- The number of women under the jurisdiction of State or Federal
prison authorities increased 2.6% from yearend 2004, reaching
107,518 and the number of men rose 1.9%, totaling 1,418,406.
- At yearend 2005 there were 3,145 black male sentenced prison
inmates per 100,000 black males in the United States, compared to
1,244 Hispanic male inmates per 100,000 Hispanic males and 471
white male inmates per 100,000 white males.
WEALTH CONCENTRATION AND THE BOOM/BUST HOUSING MARKET
Everywhere in the world where land is treated as a market
commodity land prices are inexorably and relentlessly increasing.
People are working longer and harder to make payments for land
access, either as apartment rentals or mortgage payments. With
improved technology and enhanced productive capacity, wealth
increases as development proceeds. However, land prices, and thus
housing costs for example, increase more rapidly than the wages of
those who work for a living. This reality -- that housing costs
increasing more rapidly than wages -- is one example of the workings
of the Law of Rent.
Shelter is a basic necessity of life. Lifelong renters pay as
much as ten times the cost of their rental unit in the course of
their lifetime. Others do everything they can to find a way to
purchase a home. Since wages do not keep up with the ever increasing
price of land and thus the cost of a house, those who work for a
living must borrow if they wish to own a home. An ever greater
amount of their wages are then taken from them via mortgage interest
payments. Not long ago a one income family could afford home
purchase. Today, two income families are struggling to make the
mortgage payments.
If suddenly a new continent were to be discovered and people
could flee to it to gain free access to land, the rent of land in
the "old continent" would decrease and the wages of
workers in the "old continent" would increase as a
proportion of total wealth produced. Those who could directly work
the land on the new continent could keep all of what they produced
with no need to pay either land rent or mortgage interest. However,
if the property rights laws of the new continent were essentially
the same as that of the old, the Law of Rent would gradually take
effect and the people of the new continent would eventually be
ground down to economic insecurity and poverty as had happened
previously on the old continent. This is what is happening now to
increasing numbers of the people of the United States. They are
being ground down to subsistence levels and below. And there are no
new continents to discover.
"The burden of housing costs in nearly every part of the
country grew sharply from 2000 - 2005, according to new Census
Bureau data.... The numbers vividly illustrate the impact, often
distributed unevenly, of the crushing combination of escalating real
estate prices and largely stagnant incomes." Thus began an
October 3, 2006 New York Times article, Across Nation, Housing
Costs Rise as Burden by Janny Scott and Randal C. Archibold who
also tell us that:
- Housing prices have been rising faster than household incomes
and in many parts of the country, real estate prices have
escalated sharply in recent years. In New York City, more than
half of all renters spend at least 30 percent of their gross
income on housing, a percentage figure commonly seen as a limit of
affordability.
- The places with the highest overall percentages of people
carrying a heavy housing burden were in fast-growing areas of
California, Colorado and Texas. Boulder, Colorado and College
Station, Texas had the highest number of renters spending nearly
50 percent of their income on housing.
- The percentage of mortgage holders spending at least 50
percent of their income on housing rose as well. For instance, in
Clifton, New Jersey, 12 percent of mortgage holders spent at least
50% of their income on housing in 2000, rising to 27 percent by
2005.
- Poorer communities well located to employment opportunities
and close to public transportation had the highest overall
percentages of homeowners spending 30 percent or more of their
income on mortgage payments.
Stephen Ohlemacher, in an AP story out of Washington on October 3,
2006, tells a similar story headlined More Americans Find
Themselves House Poor. Among the Census Bureau statistics that
Ohlemacher highlights is that California has the most expensive
housing costs among the states. "We are really reaching the
outer edge of the envelope of what people can manage," said
Cynthia Kroll, senior regional economist at the University of
California at Berkeley.
Note that California has the sixth largest economy in the world.
With a gross state product (GSP) of about $1.4 trillion, its economy
is surpassed only by the economies of the United States, Japan,
Germany, the United Kingdom and France. But the average worker's
paycheck has been shrinking compared to the increases in apartment
rents and mortgage costs increase.
The above examples illustrate the workings of the Law of Rent,
namely, (1) land prices and hence housing costs rise faster than
wages; (2) land with locational advantages such as proximity to
employment and transportation generate the highest land rents; (3)
higher wages that might be generated in these areas are more than
offset by the higher rents and mortgage payments extracted from
workers who live there, (4) over time, no matter the degree of
progress and development, workers gradually lose their stakes in the
economic game as wealth concentrates in the hands of the few who are
positioned to capture rent and interest.
Privilege Funders invest the rent and interest they receive in
the development of large scale capital industries -- corporations --
which they control and monopolize. Wages are further driven down
when machines replace people. Tools become labor enslaving rather
than labor saving. Asset prices soar for real estate, stocks and
bonds. Wages and living standards decrease.
Since the 1980s, mortgage lenders and the financial sector in
general have backed real estate interests in lobbying to shift taxes
off property. Along with the Federal Reserve's easy-credit policy
lowering short-term interest rates from 20 percent in 1980 to just 1
percent in 2004, tax cuts for property have spurred asset-price
inflation. Former Federal Reserve Chairman Alan Greenspan has
characterized this policy approach as promoting "wealth
creation" but others call it "debt creation" because
bank credit has fueled the rise in real estate (read "land rent")
and other assets. Most families have gone deep into debt to afford
housing leaving many workers "one paycheck away from
homelessness" as the popular phrase puts it. If one of the
two-wage earners of the typical American middle income family looses
their job, there is a high likelihood that they will miss their
mortgage payment. As Michael Hudson and others have pointed out, due
to heavy mortgage debt workers are afraid they might miss their
mortgage payment and lose their homes if they strike or even to
stand up against being forced to work overtime without pay.
A Center on Budget and Policy Priorities analysis of Census
Bureau data discovered that between 2001 and 2005 the median income
for non-elderly households -- working US families -- fell 3.7
percent, or $2000. Tax cuts for the wealthy and for businesses
combined with low-interest-rate policies yielded booming real estate
markets. But with the boom comes the bust and now housing prices are
falling. Many wage earners who bought homes, lured by lower mortgage
interest rates the past few years, will be paying for an asset which
will be worth less than it cost. If one of the two wage earners is
faced with a unemployment in a time of recession, many will lose
their homes and equity.
Many families in the United States and other developed countries
have made more money in recent years from the rising price of their
homes than from their salaries. But to realize this price gain, they
have to borrow against it. This means that as their major asset --
their home -- has risen in price, so has their debt. Figures
compiled by US mortgage behemoth Freddie Mac show that Americans
have withdrawn $727.4 billion in equity from their homes during the
past five years (2000 - 2005).
"This borrowing has pushed the savings rate into negative
territory for the first time since the beginning if the Great
Depression. As a result of this massive borrowing, the ratio of
mortgage debt to home values has never been higher. With home prices
falling, millions of homeowners will soon lose the ability to borrow
against their homes. This will force people to curtail their
consumption. Tens of millions of families bought homes at bubble
prices and now face the prospect of seeing their life savings
disappear in the housing crash. In many cases, it will cause people
to lose their homes, as they will not be able to maintain their
mortgage payments." -- Dean Baker (After the Housing Bubble
Bursts, Truthout/Perspective, October 24, 2006)
Meanwhile, the concentration of wealth in the hands of the few is
proceeding at an alarming pace. As of year 2006, the wealthiest 20
percent of households were earning 50.4 percent of the nation's
gross income; the poorest 20 percent were earning just 3.4 percent.
Total wealth accumulated is significantly more concentrated than
income. The top one percent of the US population now has more than
one trillion dollars more wealth than the bottom 90 percent or
viewed as a percentage, the top one percent holds 38% of all wealth.
"The bottom 20 percent basically have zero wealth. They
either have no assets, or their debt equals or exceeds their assets.
The bottom 20 percent has typically accumulated no savings,"
said wealth gap expert Edward Wolff in a recent Multinational
Monitor interview on The Wealth Divide -- The Growing Gap in the
US Between the Rich and the Rest.
Wolff's analysis tells us that the top one percent of families
hold half of all non-home wealth. While the major assets of the
middle class are their home, checking and savings accounts,
certificates of deposits, money market funds and pension accounts,
in other words, labor income derived assets, the richest 10 percent
of families own about 85 percent of all stocks and financial
securities, 90 percent of all business assets. These financial
assets and business equity are even more concentrated than total
wealth.
"The United States has rising levels of poverty and
inequality not found in other rich democracies. It also has less
mobility out of poverty," says Holly Sklar in Growing Gulf
Between Rich and Rest of US.
Since 2000, America's billionaire club has gained 76 more members
while the typical household has lost income and the poverty count
has grown by more than 5 million people.
The extant of poverty and inequality in the United States is
seldom seen or reported on television. "The infant mortality
rate in the United States compares with that in Malaysia -- a
country with a quarter the income," according to the 2005 Human
Development Report. "Infant death rates are higher for [black]
children in Washington, D.C., than for children in Kerala, India."
Kerala is a relatively poor state where basic needs are nonetheless
being met due to a significantly higher degree of fairness in wealth
distribution then can be found in other states and countries.
Forbes magazine has been publishing an annual list of
America's 400 richest people since 1982. That first year Forbes
found that 13 of these people were billionaires. Year 2006 Forbes
finds all 400 of the richest people in America are billionaires.
Their total net worth is $1.25 trillion. In 2004, the most current
year with stats available, the 56 million American families who make
up the poorer half of America's wealth distribution had a total
combined net worth of just $1.29 trillion, as reported in the weekly
e-newsletter Too Much, 9/25/06.
Taking a global look, Forbes finds that the income of the
world's 500 richest people exceeds that of the poorest 416 million.
The Human Development Report finds that the average income
of the top 20 percent of the world's population is 50 times the
average income of the bottom 20 percent. Addressing the situation of
dire inequality with which we are now confronted, newly elected
Senator Jim Webb had this to say in his Class Struggle
article published in the November 15 (2006) edition of The Wall
Street Journal:
"The most important--and unfortunately the least
debated--issue in politics today is our society's steady drift
toward a class-based system, the likes of which we have not seen
since the 19th century. America's top tier has grown infinitely
richer and more removed over the past 25 years. It is not unfair to
say that they are literally living in a different country. Few among
them send their children to public schools; fewer still send their
loved ones to fight our wars.... Trickle down economics didn't
happen.
"A troubling arrogance is in the air among the nation's most
fortunate. Some shrug off large-scale economic and social
dislocations as the inevitable byproducts of the "rough road of
capitalism." Others claim that it's the fault of the worker or
the public education system, that the average American is simply not
up to the international challenge, that our education system fails
us, or that our workers have become spoiled by old notions of
corporate paternalism.... Most Americans reject such notions. But
the true challenge is for everyone to understand that the current
economic divisions in society are harmful to our future. It should
be the first order of business for the new Congress to begin
addressing these divisions, and to work to bring true fairness back
to economic life.... Our government leaders have no greater duty
than to confront the growing unfairness in this age of
globalization."
HOMELESSNESS AND HUNGER IN THE UNITED STATES
"Much of the homeless problem can be attributed
to increases in the number of the poor in the 1980s and declines or
rough constancy in the number of low-rent rental units; the number
of homeless has grown since 1983, despite economic recovery, with
the number of homeless families growing especially rapidly" .--
Permanent homelessness in America? Richard B. Freeman and
Brian Hall.
The National Low Income Housing Coalition 2006 Out of Reach
report on housing affordability tells us that the cost of affordable
rental housing continues to grow, outpacing the wages of those who
need it most. The NLIHC national two-bedroom Housing Wage -- defined
as the hourly wage a full time worker must earn in order to afford a
two-bedroom rental unit -- climbed to $16.31 for 2006, up from
$15.78 from 2005. Yet in 2005, the most recent year for which data
on median hourly wage are available, the median hourly wage for all
workers was $14 and the estimated average renter wage was $12.64.
The report found that the problem is particularly stark for the
lowest wage earners, including those who earn just the minimum wage,
even in states that have higher minimum wages than the federal
minimum wage, which has been stalled at $5.15 since 1997.
"Minimum wage earners are unable to afford even a
one-bedroom home anywhere in the country, and 88 percent of renters
in cities live in areas where the FMR (Fair Market Rent) for a
two-bedroom rental is not affordable even with two minimum wage
jobs," state the authors of Out of Reach.
The Urban Institute reports (year 2000) that even in a booming
economy, at least 2.3 million adults and children, or nearly one
percent of the U.S. population, are likely to experience a period of
homelessness at least once during a year. For people living in
poverty, the likelihood grows to 6.4 percent. For recent years
surveyed the estimates of the number of people likely to be homeless
at least once in a given year is between 2.3 and 3.5 million.
Children are nearly 25% to nearly 40% of those who are homeless and
using homeless services.
"Housing costs are on the rise in metropolitan areas, while
extreme poverty and other vulnerabilities are facts of life for
millions of people, homeless and otherwise. Preventing homelessness
in a booming economy is an ongoing challenge," says Urban
Institute researcher Martha Burt.
The U.S. Conference of Mayors and Sodexho, Inc. 2006 Hunger and
Homelessness Survey says that during the previous year, requests for
emergency shelter increased in the survey cities by an average of
nine percent. Requests for shelter by homeless families alone
increased by five percent. An average of 23 percent of the requests
for emergency shelter by homeless people overall and 29 percent of
the requests by homeless families alone are estimated to have gone
unmet during the last year with emergency shelters in most of the
survey cities having to turn away homeless families due to lack of
resources. Survey cities reported that over the last year, people
remained homeless an average of eight months.
A Second Harvest survey found that while 89 percent of U.S.
households were food secure throughout the entire year of 2005, the
remaining households -- 11% or 35 million people, including 12.4
million children -- were not. In the category of very low food
security were at 3.9 percent of households -- 4.4 million
people. Overall, households with children had nearly twice the rate
of food insecurity as those without children. In households with
very low food security, eating patterns of one or more household
members were disrupted and their food intake was reduced at times
during the year because the household lacked money and other
resources for food.
Ninety-five percent of city officials included in the Sodexho
report expect that requests for emergency food assistance by
families with children will increase during 2007. Seventy-five
percent expect that requests by homeless families will increase
during 2007. Along with unemployment and other employment related
problems city officials cite other causes of hunger, in order of
frequency, include high housing costs, poverty or lack of income,
medical or health costs, substance abuse, utility costs,
transportation costs, and the lack of education.
The U.S. government has been returning less rather than more of
received tax funds back to the people during the past several
decades. Although neoliberalism pushes for the reduction of state
intervention in other parts of the world, in the U.S. taxes have
steadily been reduced for the higher income levels but raised for
the majority of the population. Most of these funds have been spent
as subsidies to the agricultural, military, aerospace and biomedical
sectors. Thus, the income of those at the top increases to the
detriment of everyone else.
Sodexho USA Chief Operating Officer Richard Macedonia, said "...
it is disheartening and disturbing to learn that so many of our
fellow Americans are in desperate need of shelter, food, clothing
and the other basic necessities of life -- and that in nearly every
major US city, the problem of hunger and homelessness is steadily
growing."
These statements were made by others during the press conference
when the Sodexho Survey was released:
As mayors of cities in the richest and most powerful
nation in the world, we cannot simply stand by as our residents -
families with children - continue to suffer. -- Douglas H. Palmer,
U.S. Conference of Mayors President and Mayor of Trenton.
The results of this report shed light on a very real challenge
facing this nation. All of us, as Americans should ask ourselves,
are we willing to confront the difficult issues of hunger and
homelessness and identify the causes? -- Des Moines Mayor T.M.
Franklin Cownie, Co-Chair of the U.S. Conference of Mayors Task
Force on Hunger and Homelessness.
Hunger and homelessness are not simply part of the 'natural order
of things'. They represent inexcusable failures of political will
and human imagination. All of us - at all levels of government and
throughout society - must rededicate ourselves to addressing the
needs of ALL Americans. --Congressman Jim McGovern.
MIDDLE CLASS STRESS
In the United States, not only are the poor people becoming
poorer, sicker, and hungrier each year, the middle class is also
increasingly stressed and distressed. In The Middle Class on the
Precipice: Rising financial risks for American families,
Elizabeth Warren tells us that middle-class families are being "threatened
on every front.... Even with two paychecks, family finances are
stretched so tightly that a very small misstep can leave them in
crisis.... Incomes are less dependable today. Layoffs, outsourcing
and other workplace changes have trebled the odds of a significant
interruption in a single generation."
Warren's analysis leads her to conclude that the security of
middle-class American families has vanished. "The new reality
is millions of families whose grip on the good life can be shaken
loose in an instant." Economic pressures have caused more
middle-class families to turn to credit cards and mortgage
refinancing just to make ends meet. Debt is now greater than
savings. Yet as previously noted, mortgage refinancing is becoming
less of an option for many.
THE HIGHER DEBT OF HIGHER EDUCATION
The heading of a USA Today (2/22/06) story by Sandra Block --
Students Suffocate under Tens of Thousands in Loans --
paints a glum picture of the price of higher education. The average
college graduate owes $19,000 but many undergrads have debt
exceeding $40,000. "The weight of debt is forcing many to put
off savings for retirement, getting married, buying homes and
putting aside money for their own children's educations," says
Block. "It's a real crisis," says Diana Cantor, director
of the Virginia College Savings Plan. "You're strapped before
you get started."
Block goes on to report that the average debt for a college
graduate has risen 50% in the past decade, after inflation. Tuition
has soared much faster than pay for the kinds of low-wage jobs that
students tend to hold, thus it is difficult to avoid going into debt
to pay for college. The option to extend their payment periods for
up to 30 years sharply boosts the interest to pay. For example, a
borrower who takes 30 years to pay off a $20,000 loan at 6.8% will
pay about $27,000 in interest. That compares with $7,619 on a loan
paid off in 10 years.
If many people will be 55 or 60 years old before their student
loans are paid off, how will they be able to help pay for their own
children's college education?
HEALTH INSURANCE AND DRUG PROFITS
Rather than caring about anyone's health, insurance companies are
in it for the money. Jim Hightower tells us (Insurance Giants
Take Stock in Tobacco) that a number of insurance companies are
doing a good bit more than providing insurance. "The four major
insurance companies now own Health Maintenance Organizations and are
major owners of tobacco companies," he says. "These are
what I call Full-Service companies: they profit by selling you
health insurance, then profit by selling you cigarettes to give you
diseases, then profit again by selling you medical service for your
diseases," says Hightower.
Uninsured people file for bankruptcy every year because they
cannot pay their medical bills. Others cannot afford the high cost
of prescription medicine or simply cannot get health insurance. Yet
in 2004, the 13 largest drug companies netted profits of $62
billion, and U.S. hospitals posted $26.3 billion in profits. While
46 million Americans -- including 8 million children -- go without
health insurance, the top 12 HMO executives earned $222.6 million
this year.
In 2004, the 13 largest drug companies netted profits of $62
billion and U.S. hospitals posted $26.3 billion in profits. While 46
million Americans - including 8 million children -- went without
health insurance, the top 12 HMO executives earned $222.6 million
this year.
Inequality has broad societal consequences and effects physical
health as well. Despite varying degrees of health care and
expenditure, research and analysis of the past several years reveals
that countries with the greatest economic inequality have the most
people suffering from poor health. Thus in addition to eliminating
poverty we must solve this problem of the vast gap between the
super-rich and the rest if we are improve overall physical and
mental health.
WORLDWIDE WEALTH GAP
Inequality is widening worldwide. The World Institute for
Development Economics Research of the United Nations University
reported in 2000 that the top 1% of the world's population -- some
37 million adults with a net worth of at least $515,000 -- accounted
for about 40% of the world's total net worth. The bottom half of the
population owned merely 1.1% of the globe's wealth. The net worth of
the world's typical person -- whose wealth was above that of half
the world's population and below that of the other half -- was under
$2,200.
"Developed countries have pulled ahead of the rest of the
world," said Edward N. Wolff, a professor of economics at New
York University who is a co-author of the new study. "With the
notable exception of China and India, the third world has drifted
behind."
The U.S. accounted for 4.7% of the world's population but 32.6%
of the world's wealth. Nearly 4 out of every 10 people in the
wealthiest 1% of the global population were American. The average
American had a net worth of nearly $144,000, losing only to the
average Japanese, who had $180,000, at market exchange rates; the
average person in Luxembourg, who had $183,000; and the average
Swiss, who had $171,000. By contrast, in 2000 the average Chinese
had a net worth of roughly $2,600, at the official exchange rate.
China, home to more than a fifth of the world's population, had only
2.6% of the world's wealth. And India, with 16.8% of the world's
people, accounted for only 0.9% of the world's wealth.
When discussing and studying inequality it is important to make a
clear distinction between inequality of income and inequality of
wealth. A recent study by Emmanuel Saez of the University of
California, Berkeley, and Thomas Piketty of the École Normale
Supérieure in Paris, found that in 2004 the top 1% of
Americans earned a higher share of the nation's income than at any
time since the 1920s. Still, that share was only 16%. But even as
income inequality has reached near record levels in many countries,
the distribution of the world's wealth -- things like stocks, bonds
or physical assets like land -- has become even more narrowly
concentrated than income.
Among Americans, wealth is distributed about as unequally as it
is around the globe. The study cited data from the Federal Reserve's
Survey of Consumer Finances, which found that the richest 1% of
Americans held 32% of the nation's wealth in 2001. This tops the
inequality in every country but Switzerland among the 20 nations
that measure these wealth disparities and are cited in the report.
Wealth inequality vastly outstrips the inequality in the
distribution of income.
The Human Development Report for 2005 tells us that the ration of
the poorest 10% of the population to the richest 10% for the world
as a whole is 1 to 103. Absolute income inequality between rich and
poor countries is increasing. The incomes of the richest 20% of the
world's people are approximately 140 times those of the poorest 20%.
As one example, in 1990 the average American was 38 times richer
than the average Tanzanian. Today the average American is 61 times
richer, according to the most recent HDR.
However, "average" is a relative concept. As discussed
previously, the wealth is fast flowing to the top in the United
States. What is crystal clear is that both "developed" and
"developing" countries share the same very serious problem
-- the growing wealth divide, with the wealth of the world now
concentrated in the hands of a very few.
Here is what one capitalist publication tells us about this state
of affairs: "The three richest people in the world have more
money than the poorest 48 nations combined," reported Thomas
Kostigen in MarketWatch (December 12, 2006). Another way to view the
situation was reported by David Korten in his article The Limits of
the Earth (The Nation, July 15/22, 1996): The world now has more
than 350 billionaires whose combined net worth equals the annual
income of the poorest 45% of the world's population.
As the director of the Public Policy Program at John Hopkins
University, Vincent Navarro, so clearly states in his article on
The Worldwide Class Struggle: "The primary conflict in
today's world is not between North and South but between an alliance
of the dominant classes of North and South against dominated classes
of North and South."
Susan George thinks that this conflict might have something to do
with "the land problem." She says, "The most pressing
cause of the abject poverty which millions of people in the world
endure is that a mere 2.5% of landowners with more than 100 hectares
control nearly three-quarters of all the land in the world, with the
top 0.23% controlling over half." (Susan George, How the
Other Half Dies, Penguin Books, 1976, p. 24.)
THE LAND PROBLEM
In understanding the land and land rent problem we come to grasp
how it is that despite doctrines of human rights and democratic
governance we live on a planet where a few hundred
multi-billionaires now have accumulated as much wealth as that of
half of the world's population of six billion people. The fact of
the matter is that the land problem is a worldwide problem, and the
"law of rent" functions universally and currently for the
benefit of the few and to the detriment of the many. A New York
Times article by Anne Christendom (September 12, 1992) about
Bangladesh, the poorest country in the world, described how the root
of the problem of persistent malnutrition in the midst of relative
plenty is the unequal distribution of land ownership in Bangladesh.
She reports that:
"The wealthiest 16% of the rural population had come to
control two thirds of the land while almost 60% of the population
had less than one acre. Bangladesh is classed as a democracy but
great numbers of children die of hunger and malnutrition. Not
surprisingly the government is dominated by landowners. Even when
Bangladesh shows high economic growth this is due primarily to
exports on the world market. The extensive poverty of the majority
is untouched." An example of this primary structural injustice
from an earlier time was what happened in Ireland, whose elite
landowners were profiting from exporting food while millions starved
during the "potato famine." With land concentrated in the
hands of a few and while huge amounts of food was being exported as
cash crops to England, between 1841 and 1851 at least 2.5 million
people died of starvation, about one quarter of the population
Addressing now the root cause of the concentration of the world's
wealth and the persistence of poverty amidst abundance, let us look
at some bottom line (which is the earth) numbers:
- "At best, a generous interpretation would suggest that
about 3% of the population owns 95% of the privately held land in
the USA (Peter Meyer, " Land Rush - A Survey of America's
Land - Who Owns It, Who Controls It, How much is Left" in
Harpers Magazine, Jan. 1979).
- 568 companies control 22% of private land in the USA, a land
mass the size of Spain. Those same companies land interests
worldwide comprise a total area larger than that of Europe --
almost 2 billion acres.
In order to show that there was NO NEED for land reform in Central
America because our land in the USA is even more concentrated in
ownership than Central America, Senator Jesse Helms read these facts
into the Congressional Record in 1981:
- In Florida, 1% owns 77% of the land. Other states where the top
1% own over two-thirds of the land are Maine, Arizona, California,
Nevada, New Mexico, and Oregon.
A United Nations study of 83 countries showed that less than 5% of
rural landowners control three-quarters of the land.
In specific countries we see these numbers:
- 86% of South Africa is still owned by the white minority
population
- 60% of El Salvador is owned by the richest 2% of the population
- 80% of Pakistan is owned by the richest 3% of the population
- 74% of Great Britain is owned by the richest 2% of the
population
- 84% of Scotland is owned by the richest 7% of the population
- In Venezuela, 77% of the farmland is owned by 3% of the people.
- According to a 1985 government report, 2% of landowners hold
60% of the arable land in Brazil while close to 70% of rural
households have little or none. Just 342 farm properties in Brazil
cover 183,397 square miles -- an area larger than California
(Worldwatch, Oct. 1988)
- In Spain, 70 per cent of the land is owned by 0.2 per cent of
the people.
- In Britain, 69 per cent of the land is owned by 0.6 per cent of
the population. Just 158,000 families own 41 million acres of land
while 24 million families live on four million acres.
(For these and other statistics go to Geodata section of
Earthrights)
With so few people owning and controlling so much of the land of
the planet, including the prime locations, it is easy to understand
how these same few are in position to capture land rent, deposit
most of this unearned income into their banks, then receive interest
payments from the funds they loan. Some researchers estimate that at
least as much as one third of most countries GDP is rent.
Further exacerbating the problem, the FIRE sector - finance,
insurance and real estate - channels much of their profits (about 70
percent in the United States and Britain) into real estate,
according to economist and former Wall Street analyst Michael
Hudson. "Most of the remaining credit is extended to
institutional speculators in the stock and bond markets - whose
greatest gains are in the public-sector assets being sold at such
low prices that great capital gains are guaranteed," says
Hudson. "Unprecedented underwriting fees to investment bankers
have been supplemented by more fees for mergers and acquisitions,
enriching the financial sector at the expense of the rest of the
economy. So we are brought back to the fact that what is being
planned by today's wave of privatizations is the creation of power
elites whose families are likely to dominate their societies for
centuries to come, much as feudal European conquerors shaped
subsequent development."
At the other end of the extreme is the reality that members of
poor families are being captured, forced or sold into slavery. After
journeying across five continents to investigate the issue, David
Batstone reports in his book Not for Sale: The Return of the Global
Slave Trade and How We Can Stop It, that human trafficking generates
$31 billion annually and enslaves 27 million people around the
globe, half of them children under the age of eighteen. Batstone
profiles the new generation of abolitionists who are leading the
struggle to end this appalling epidemic.
Joseph E. Stiglitz, former Chief Economist with the World Bank
and one of three winners of the 2001 Nobel Prize in economics,
shared his insights on the land problem in an interview with Greg
Palast, a writer for The Observer (London). Stiglitz
described in detail the four-step plan used by the international
banking institutions to extract wealth from around the world. In his
view the process leads to financial barbarism, pillage and plunder
and has resulted in immense suffering, starvation and destruction. "It
has condemned people to death," Stiglitz said bluntly in the
interview.
When Palast asked Stiglitz what he would do to help developing
nations, Stiglitz proposed radical land reform and an attack at the
heart of "landlordism," including excessive rents charged
by the propertied oligarchies worldwide. When Palast asked why the
World Bank didn't follow his advice, Stiglitz answered, "If you
challenged it (property rights in land), that would be a change in
the power of the elites. That's not high on their agenda."
***
(GroundSwell does not have space in this issue for Parts 3 and
4 of Alanna Hartzok's paper, but they are posted on the Economists
for Peace and Security website.