LT Essays #3:

Capitalism
s capitalism the last best hope for wordwide peace and prosperity?
Or is capitalism inherently exploitative, dehumanizing, and inimical to the preservation of our
world for future generations? Here is an argument that has raged unchecked in the hearts and minds of society for centuries.
Indeed, it is said that a twenty-one year old who is not a liberal has no heart, and a forty year old who is not a conservative
has no mind. But is it possible to unite heart with mind, justice with freedom, equity with efficiency in a single argument —
or a single economic system?
These questions will remain impenetrable until we are able to properly define our terms. The word “capitalism” is used in
two distinct senses. The two senses of this very loaded word may or may not be incompatible, but they are certainly different.
Is capitalism
• an economy which preserves the power relationships of the status quo, reducing workers to mere automatons denied
both the value and the dignity of their work, and which seeks growth, of markets and profits, above all else?
Or is it
• an economy which respects the rights of workers to the fruits of their labor, and uses the natural benefits of the free
market to allocate goods and services in the most efficient way?
True Believers of either the right or the left may not think so, but the difference between those two statements is more than
rhetorical. They reveal different conceptions of what capital is. If capital is the rightful property of the person who produces
it, then the increase that comes from that capital’s use in production also belongs to the producer. How then can capital be an
instrument of exploitation?
It is more important to our present discussion, though, to note that the two opposing views contain different underlying
assumptions about economic behavior itself. Can we trust ourselves to cooperate? Or are human beings doomed to foul up
their communities and their environment, if left to their own greedy devices?
Markets, after all, spring up spontaneously wherever people gather. None of the essential features of a market economy —
trade, specialization, entrepreneurship, monetary systems, etc. — require any special or conscious direction; they just happen.
This central fact is what Adam Smith called the “invisible hand,” and Henry George dubbed the “body economic” — which
exists prior to the “body politic”, and out of which political systems come into being. These inexorable tendencies toward
greater specialization and more intricate forms of trade, fueled by our universal impulse to satisfy our desires with the least
exertion, will eventually lead to a market in which workers sell their labor power. Because of specialization, trade, and
efficiencies of scale, workers will find exchanging their labor for pay to be a better deal. This will entail, of course, such
things as entrepreneurship, and private ownership of capital, driven by the promise of profits. These developments are quite
predictable and natural — an insight which led Marx to see an unavoidable “historical materialism” at work in human
economic relations.
If the power relationships of the status quo have arisen out of the private ownership of capital, which came from the
collection of surplus value by capitalists, then capitalism can’t be just. Furthermore, if these evils of capitalism arise out of
natural and unavoidable historical processes, then eventually the capitalist system must become intolerable!
Obviously, these two views lead us toward very different strategies for fixing our economic and social problems.
Before we can sort out what capitalism is as an “ism,” we have to recognize that there is quite a lot of confusion over
what capital is. There are two competing definitions, both perfectly appropriate for the uses to which they are put — but, as
we will see, they don’t mix.
Mainstream economic thought (as well as the daily business page) conceives of capital, generally, as assets — that is, of
things subject to ownership, and expected to yield an income. This can include a whole smorgasbord of stuff, such as plant
& equipment, bonds, stocks, real estate, and exclusive licences. The term “human capital” is often mentioned, in the context
of “maximizing the labor input,” making things even more confusing. Intangible assets like “goodwill” and “name
recognition” are assigned value and counted up as capital. In mainstream parlance, capital can be seen as a catch-all term
that has different shadings in different contexts, but generally means assets. As in: a business is said to be
“undercapitalized” if it lacks enough savings to weather a period of slow sales. Or: the country’s stock of “human capital” is
weakened by poor public schools.
For the classical economists and Henry George, the definition of capital is precise. Capital is “wealth used to produce more
wealth, or wealth in the course of exchange”. Capital is wealth, first: that is, material things, produced by human labor, that
satisfy human desires and have exchange value. This unambiguous definition allows us to understand what payments go to
this factor of production.
From these different definitions come our different conceptions of what capitalism really is.
So: was Jesus a capitalist? Sure! His Father's Word forbade stealing, and coveting the good of one's neighbor. Is there
anything offensive, to God or humanity, in a system that recognizes the legitimate right of the producer to the wealth
produced? Henry George, for his part, would hasten to remind us that the people's right to the wealth they produce depends
on the concomitant right of society to the value of natural opportunities. If not, then many will work, but not eat, while
some, who do no work, will sumptuously dine.
Unfortunately, most of the world, most of the time, doesn’t define capital as Henry George did. Generally, capital is a term
for anything people own that makes them a profit. A 'capitalist system" allows people to own anything they want —
anything the world's laws allow them to own — and "those with the gold make the laws."
So was Jesus a capitalist? No way! A big part of the Good News He brought to the poor was that salvation was not gained
by enduring injustice. Nor by perpetrating it, or allowing it: whatever you do to the least of these, you do to Christ himself.
Apologists for "capitalism" assert that there is no place in either the theory or the practice of economics for "values." They
proclaim that economics should be a "value-free science" and that (despite the best of intentions) no good can come from
restricting the freedom of the market's "invisible hand" to create efficiencies. For example, two things that are constantly
identified with capitalism are the free market and competition. Wonderful processes; they make the world go ‘round —
capitalists can’t get enough of ‘em, right?
Wrong. Why would capitalists want competition? The more competition they face, the lower their profit will be.
Competition always tends to bring prices down to the lowest that the seller can get and still stay in business. While
entrepreneurs praise the theory and principle of the free market, in their own businesses they strive to limit competition as
much as they possibly can.
People seek to satisfy their desires with the least exertion. Entrepreneurs seek to gain the most profit from the least labor
and risk. Income from other people’s labor (such as land rent, or monopoly income generally) is the easiest of all. Thus,
entrepreneurs will seek to capture rent whenever they can. In current economic parlance this is known as “rent-seeking
behavior” and it is pervasive in “free-market” economies.
This is the logic that led Marx to conclude that an inevitable historical dynamic is at work. What will stop the process of big
business getting bigger, securing its control over resources and workers? What can stop the juggernaut of "capitalism," save
a worldwide workers' revolution, to seize the means of production and banish competition?
Here is why Henry George's ideas are so crucial to the whole discussion of liberation, and the just society. George showed
that the community's just share of social wealth is not an endlessly-debatable matter of amount, but an eternally certain,
clearly measurable matter of kind. The value of natural opportunities is created by the community, and belongs to it. If we
collect that value for public revenue, the rent-seekers can go ahead and seek all the rent they can seek. Occasionally they
might be very clever, or lucky, and find some — but not at the workers' expense. If we make sure that the community
collects its rightful share of the social wealth, capital”ists” would be unable to capital”ize” on privilege. They would have to
make an honest living.
— Lindy Davies

Land and Justice

A speech given at the Chautauqua Institution in August, 2005 by Lindy Davies
Those are two words that we use so often that we tend to take their meanings for granted. It might be helpful to
stop and think about what they truly mean.
Justice is often seen as the fair retribution for something done wrong. We say "justice was done" when a criminal
is sent to jail. George W. Bush vowed to bring the 9-11 terrorists to justice.
However, that conception of justice -- in which one does good, in order to avoid the consequences of not doing
good -- is actually an immature one. In the stages of moral development identified by psychologist Lawrence Kohlberg,
this is called the "conventional" stage. Maturity comes in the "post-conventional" stage, when we come to value doing
good so as to contribute to our community, or, even, doing good for its own sake.
Jesus was hip to that, in his scorn for the loudly-praying pharisees on the street corners. They already have their
reward, he said. He set much greater store by good deeds done without thought of reward: "whatever you do to the least
of my brothers and sisters, you to do me also." And, along similar lines, according to the prophet Micah, God wants us
to "Do justice and love mercy."
So, what is "doing justice", in this positive sense? If I do something nice for the least of my brothers and sisters,
have I done justice? If I send them a handmade quilt?
I think the least of my brothers and sisters, cold though they might be, would resent my presuming to know exactly
how their problem ought to be handled. Perhaps they'd rather make their own quilt, or build a fireplace, or move to a
warmer place.
Justice must have to do with freedom. To do justice, then, is to secure, in Thomas Jefferson's words, people's
inalienable rights: life, liberty and the pursuit of happiness.
The most basic of those rights is life. (In this day and age, though, even that is controversial... Somewhere amid all
the passionate concern about the special cases of the very beginning, or the very end of life -- I wish we'd pay more
attention to every single human being's right to live!)
Be that as it may: we all understand basically what human life is, and what its basic requirements are: food,
clothing and shelter.
In heaven, there is no beer... And in heaven, one does not need to work for a living. Heaven is usually seen as an
entirely spiritual place, where we are freed from earthly suffering, aches and pains, and in fact, from all material needs.
(That's why I could never understand Satan. I've always thought he was a bit of a nut. I mean, why rebel in
heaven? But, to each his own.)
Here on earth, anyway, we have material needs. (That's why we drink the beer here). Our food, clothing and
shelter have to come from somewhere -- and so the question of justice inevitably leads to the question of land.
Now, what do you mean by "land"? The land... it usually brings to mind scenes of nature's bounty: fields of
whispering wheat... the mighty river... the rainforest... the good earth... the untamed savannah...
We tend to have a romantic conception of land, in this day and age. I'm not sure why, but I suspect it has to do
with how seldom modern people actually come into contact with the stuff of the earth itself. We deal with hamburgers...
papers... toilets... without thinking about the many layers of processing between hayfield and burger, between tree and
paper, between flush and water table. We think of dropping out of the plastic modern world to go "back to the land".
"The land" is where we go on camping trips.
This romantic conception of land can lead to some dangerously fuzzy thinking. It leads us to think, for example,
that perhaps land used to be absolutely vital to human life, back in some halcyon, underpopulated past -- but modern
technology has long since taken care of that.
Or has it? Let's think about a question: what is our most valuable natural resource? Is it
• gold, diamonds, strategic or precious minerals? Nope, not even close.
• Oil? Well, it's highly important to industrial civilization, of course, a matter of great political
import -- but by no means the most valuable.
• Water? Now we're getting closer: necessary for life, to be sure, and thus a potential object of
wars -- but in terms of cost per cubic foot, not so terribly high, yet.
Our most valuable natural resource is land whose natural fertility is utterly depleted, it will yield no
gems or minerals; often, its soil is full of toxins. Our most valuable natural resource -- by leaps and
bounds, more valuable than all the others combined -- is urban land. There's nothing worthwhile about
it, except for one vital attribute: where it is.
Technology has continually reduced the amount of land that each person needs to survive. But, of
course, we do more, economically, than merely survive -- and human society has continually demanded
more land for all the stuff that people produce: all the knickknacks, gimcracks, widgets and
thingamabobs...
It takes a whole bunch of land to produce -- and transport, and merchandise -- all that stuff.
Nowadays we hear a lot about the concept of the ecological footprint: the overall area of land and
resources needed to support a certain industry, say, or a certain region. The grossly huge ecological
footprint of many communities (the United States, for example) leads to hand-wringing about
overpopulation -- goodness gracious, what if all the people in China and India start wanting to consume
as much as we do!
We can understand the ecological footprint a bit better, I think, if we separate it into its three
distinct components:
1. the subsistence footprint (resources we must have to stay alive -- which, as I said, tends to
shrink with human progress)
2. the wealth footprint (the resources needed to make the stuff we want, over and above what we
actually need)
3. the illth footprint ("illth" is a very useful term coined by ecologist and social philosopher Ralph
Borsodi. It refers to the resources that are squandered on things we neither want nor need:
pollution, waste, weapons, crime, preventable disease and malnutrition)
It is indeed possible to provide for the subsistence of more people, and to create more of the
things we want -- while cutting back on the output of illth. Compare today's London with the foul,
unhealthy place it was in the nineteenth century. Or, consider the surprising re-emergence of the ivory-
billed woodpecker -- one of many threatened species whose habitats have returned in the United
States. Indeed, it appears that environmental protection does not come at the expense of development
-- but rather gains strength as a society reaches a certain level of prosperity.
If we just look at the "ecological footprint", it's easy to be scared of the seemingly unavoidable
damage we are doing to the earth. But seeing "the footprint" in terms of its components -- subsistence,
wealth, and illth -- makes it clear that the fact of persistent global poverty is by no means inevitable. I
believe it's true that the world cannot long support current levels of pollution, waste and habitat
destruction -- but these problems spring, not from production itself -- and certainly not from trade, itself
-- but from privileges, granted by governments, to individuals and corporations -- things that we can
correct, if we choose to.
To solve the problem of land and justice, we must remove unjust privilege, by instituting an
economic system that rewards production and prohibits extortion.
It's all about the land: not only is land necessary for all life -- land is also necessary for all
production. So, as human population increases, and as the production of wealth gets more and more
efficient, the demand for land goes up, and, of course, the land factories start cranking out more land!
Wait! They can't DO that, can they? Wealth -- widgets, thingamabobs -- these things are made by
human beings. If customers are willing to buy more of them, then manufacturers will make more of
them. But human beings can't make land. The supply of land cannot be increased. If the demand for
land increases, only one thing can happen: its price will go up.
The owners of land see population and production go up, up, up -- and no more land. So, they will
only put their land to use if they have an immediate need for the cash. If they can afford to wait, they
will wait, because they expect the land's value to increase with time. That, in a nutshell, is the key to
the problem of poverty. That is why millions upon millions of people who are willing and able to work
cannot find work, even while millions upon millions of acres of useable land (city land, industrial land,
farm land, you name it) are held idle. It's all about treating the land as an "asset".
 This leads to no end of problems. In the United States, it brings urban blight and suburban sprawl, which disrupt
communities, and waste energy and resources. You don't think under-use of land is that big a deal? Consider the fact
that in the five boroughs of New York City, 7.5% of its land, or 18.6 square miles, is vacant. That's buildable land, not
parks or streets. And, of course, a great deal more land in New York, as in every other city, is used somewhat, but far
less than the local economy would support. New York City has about 80 people per acre of residential land. That means
that New York's vacant land could house another 956,000 people at current density levels, without even starting to use
its vast stock of under-used land.
Even though downtowns are underbuilt, people want to move away from the high prices and high crime rates they
often find there -- so development leapfrogs, using far more land than is necessary, jacking up the price of farmland
near the city -- so that local farms are no longer viable. All this sprawl creates more and more need for roads --
provided by tax dollars, of course. With all these roads, and all these cars, public transportation systems become less
popular and harder to finance. This chokes the cities with even more traffic, making them even less desirable places to
be. Meanwhile, all these subsidized highways are just great for the big trucks, burning subsidized fuel, carrying
imported merchandise to all the big-box stores and franchise restaurants of suburbia. In other words: land speculation is
at the root of two of the hugest problems that progressives in the United States are trying to address -- the decay of
communities and the rise of the corporate big box. It's all about treating the land as a private asset. This gives too much
power to the banks, for land is by far the greatest source of collateral for loans, everywhere. The more money we have
to pay for land, the more power we give to the banks. Although 66% of American families own their homes, the overall
net equity of American home "owners" is only 18%.
In "developing countries" the question of land and justice leads to a terrible vicious circle: peasants lose their land
to one of two groups: first, to land-baron cronies of corrupt regimes -- who hold land idle for the specific reason of not
allowing peasants to use it, thus making sure they have no place to go, and are willing to work for subsistence wages --
or, second, to multinational corporations, who run huge plantations to grow crops for export. The foreign exchange thus
gained goes for debt service, which allows the ruling regime to keep playing by the IMF's rules, and stay in power.
Meanwhile, the peasants gravitate to the cities, seeking nonexistent jobs, and end up in shantytowns that lack clean
water and sewers.
We are told that two billion people live on less than two dollars a day. That statistic bugs me -- not because I want
to deny the terrible extent of poverty in our world -- but because it doesn't make any sense. Two dollars a day?
Consider your own basic needs, and ask yourself how far two bucks will go toward satisfying them. Nobody can
survive on just the buying power of two dollars a day. Why haven't those two billion people just keeled over by now?
This sort of paradox led the Nobel prize-winning economist Amartya Sen to the studies described in his
book,Development as Freedom. Sen contends that the true measure of economic welfare -- and therefore of
development in any meaningful sense -- can't be a matter of GDP and other conventional measures of "growth". Any
true measure of economic welfare must have to do with freedom: with the degree to which each person can set and
achieve his or her own economic goals.
Economic freedom for the world's poorest people is unquestionably all about the land. Let's say a peasant family
has a goat and a garden, and, working carefully, can grow enough to feed itself. Occasionally a good harvest will yield
some surplus which can be sold -- there isn't much of that, but let's say it brings in an average of two dollars a day. With
thrift, enough for school clothes, maybe even books.
Now, let's imagine that the family loses their land -- perhaps an injury or some other disaster makes it impossible
to keep farming it -- and they have to go to the city, where they manage to find a combination of odd jobs, yielding an
income of $10 per day. Now, they must somehow buy their food and every other necessity out of that $10, and they
have to live in a miserable shack, with open sewage running in unpaved streets.
Yet, in terms of development numbers, their income has increased by $500%. In which case did the family have
more freedom? Which scenario is more conducive to development?
We have been talking about the tendency for landowners to use land as an investment -- a sensible thing to do --
not to use it now if they don't need to, but to think in terms of enjoying its increase in value over time. We have even
identified that as the key to the problem of poverty. But -- good heavens, what can we do about that? Isn't that just how
the economy works? Isn't the private ownership of land a basic part of a modern economy? How can we do without
such an important institution? Or in other words -- won't the poor always be with us?
Not necessarily. It has been plain, since very earliest days of civil society, that the private ownership of land leads
to exploitation and great extremes of wealth and poverty.
And, since at least the time of the Book of Leviticus, we have had a pretty good idea of what to do about it. In that
book were recorded the words "The land shall not be sold for ever, for the land is Mine, for ye are strangers and
sojourners with me."
This ideal was codified into a remarkable three-stage program for economic justice and social harmony: the land
laws of Leviticus. The 3 stages were:
• The Sabbath. Every seventh day was the Lord's day; people were enjoined to keep it holy and
refrain from work. Now, we were told in Sunday school that this was all about going to church,
but, as so often happens, our teachers missed the deeper significance. Kids who try to get out of,
say, taking out the garbage on the Sabbath realized that the prohibition was really against
gainful work; folks were still allowed to weed the garden and stuff. What the Sabbath did was to
force people to focus on things that had meaning beyond striving and striving to get ahead.
Indeed, if one did work on the Sabbath, while one's neighbors did not, one could become
wealthier, at their expense -- which was why the Sabbath was a very big deal: one of the ten
commandments.
• The Sabbatical. Every seventh year, the fields were to lie fallow -- thus recognizing the right of
the earth itself to be protected against depletion and misuse. And, in the sabbatical year, debts
were to be forgiven. A debt that could not be paid off after six years was well on the way to
becoming a usurious burden, a guaranteed flow from the labors of one into the coffers of
another. The canceling of debts in the seventh year was designed to ensure that nobody got too
far ahead, or too far behind.
• The Jubilee. Even seven times seven years (actually, every 50th year), each family could return
to its original allotment, or heritage, of land -- even if it had been sold in the meantime. Under
biblical law, then, land could not be sold for ever -- never for more than a single generation.
Now it is interesting to note that the economic vision presented in the Bible is not a precursor of
communism. Two of the ten commandments explicitly support the institution of private property. The
prophets consistently railed against landlords and rulers who robbed the people of the fruits of their
labor. The Bible's economic laws, which Jesus said he "came not to destroy but to fulfill", envisioned a
community in which every family is secure in its own home and property, "beneath their vine and fig
tree". (Incidentally, the quote on the American Liberty Bell, from Leviticus, chapter 25, was a direct
reference to these principles: "Proclaim liberty throughout the land and to all the people thereof." It was
a reference to the Jubilee, and the freedom it provided was from debt and servitude.)
The division is clear: there is to be a sacred right of private property in the things that are made by
people. But people were not to own the things that were made by God. The 7th commandment sums up
both principles in 4 words: Thou shalt not steal.
Modern society has looked away from these principles, calling them quaint, naive, inapplicable to
the complexities of our time -- yet, modern society finds itself mired in chronic economic and social
problems for which it can find no solutions -- and which threaten to pull down all the advances of
civilization into a dark age -- occasioned by some combination of war, financial implosion or ecological
collapse.
If there is any way out of this dark future, it can only come by way of solving the problem of land
and justice. Fortunately, there exists a plan for that: The Single Tax.
The plan takes the shape of a "fiscal reform", because it applies a definition of the relationship
between the individual and the society that is consistent with both economic efficiency and moral law.
It calls for us to respect the right of labor to create and to save wealth, and to acknowledge that
the value of land is created not by its "owners", but by the entire community. Therefore, we will abolish
all taxes on income, products and sales -- and collect the full rental value of land and natural resources
for public revenue.
What would happen, if we did this? Let's consider the great problems we were discussing earlier.
Land in cities would be used efficiently. Cities need not become over-crowded; regulation of land
use would still be in their power, as it is now. But urban blight and decay would be banished. Public
transportation, like other public services, could be provided free, funded out of the value of locational
advantages that it created.
The unnatural pressure on farm land near cities would be eliminated, as development proceeded
to "infill". There would no longer be an incentive to haul heads of lettuce across the continent.
Production and employment would be released from the burden of taxation that currently hobbles
it. The banking system would be freed from its unhealthy dependence on land for collateral. Combining
these benefits with the newly-efficient use of urban infrastructure, unemployment could be cut or even
eliminated, even while inflation went down!
But the best benefits of all would be in the developing world. If the land-baron cronies and the
multinationals were charged the market rental value of the land they hold, then they would let go of
most of it. Access to good farmland would be restored, and the disastrous migration of peasants to ill-
equipped poor cities would be reversed. The resulting vitality would bring these poor nations new
sources of domestic economic strength -- no longer would they have to grovel to maintain foreign
credit.
Despite the current flood of bad news on just about every conceivable topic -- and although I do
accept that many things in my children's world will probably get worse before they get better -- I am
optimistic about our long-term prospects. Eventually, I believe that human society will adopt the biblical
and georgist wisdom, and organize itself as it must, to achieve justice, efficiency and sustainability.
Eventually we will have tried everything else.
That's how Clarence Darrow -- one of the reform's many prominent supporters -- saw things. He
said this: "The 'single tax' is so simple, so fundamental, and so easy to carry into effect that I have no
doubt that it will be about the last reform the world will ever get. People in this world are not often
logical."
True enough. Yet I have to believe that eventually the obvious truth will start to dawn on us.

by Lindy Davies
These days,
a novel item has been added to the traditional
menu of objections to free trade: the notion that if consumers are presented with an open market, they will
buy things that aren’t good for them. It’s not hard to think of examples: High-priced basketball shoes
crafted in sweatshops. Fancy movie-spinoff toys, given away free with smiley-snacks. Fat- and additive-
laden junk food, hawked with flashy music and video. Actual military vehicles, fitted with air conditioners
and high-end sound systems. Save enough on your mass-produced chicken parts to buy the antibacterial
soap you need to wash off the salmonella they contain. Enter a card number, and quietly gamble away
your savings. Surely the reader can think of many more.
Evidently many of the “goods” being offered for sale aren’t good; some are actually quite bad. Others are
sold to fix the damage created by other “goods”. However, the standard measure of a society’s overall
output, the Gross Domestic Product, fails to take any of this into account. The GDP is the total value of all
finished goods and services in the economy — pet rocks, car alarms, prisons, military hardware, David
Cassidy records, you name it — everything purchased by consumers. And since free trade adds to the
GDP, it tends also to add to the pile of crap offered to the poor consumer. This has led progressive-minded
folk to seek an alternative index of economic growth — one that will only count as “good” the things that
truly are. Redefining Progress, a progressive think-tank, has devised an index that they call the GPI —
Genuine Progress Indicator. One of its main objectives is to help separate what is truly progress from what
is just more junk:
Parenting becomes child care, visits on the porch become psychiatry and VCRs, the watchful eyes of
neighbors become alarm systems and police officers, the kitchen table becomes McDonald’s — up and
down the line, the things people used to do for and with one another turn into things they have to buy. Day
care adds more than $4 billion to the GDP; VCRs and kindred entertainment gear add almost $60
billion.... The GPI reveals that much of what we now call growth of GDP is really just one of three things
in disguise: fixing blunders and social decay from the past, borrowing resources from the future, or
shifting functions from the traditional realm of household and community to the realm of the monetized
economy.*
People tend to identify “pathological production” by a process
similar to that which Supreme Court Justice Potter Stewart
famously defined pornography, saying “I know it when I see it.”
But that is too vague a yardstick for public policy. What qualifies
someone to decide what is worth buying — or counting? Some
argue, for example, that money spent on fixing crashed cars should
not be counted as part of economic well-being, because car
accidents don’t improve life for anyone. That may be true — but
accidents happen, and anyone who has seen the bashed-up, smoke-
spewing heaps driven around any third-world city can see the
correlation between car maintenance and general prosperity. And,
undoubtedly, VCRs are used to unwholesomely pacify children — but does that mean their value
shouldn’t be counted among economic goods? I guess blenders aren’t good either, because alcoholics use
them to make daiquiris...
Probably, we all need to be saved from ourselves from time to time. But, most of us see that as a matter
for families, communities and churches — such decisions are far too subjective to make sense as matters
of law. And yet: look at the sickening tide of crap to which consumers are subjected! Wouldn’t we all be
better off without it?
The juggernaut of Wal-Mart — the world’s largest retailer — has become for many people an emblem of
what’s wrong with today’s “globalized” economy. They sell merchandise produced in sweatshops. They
undersell and drive out local businesses; and pave the way for more sprawl and big-boxes. They pay, in
many cases, wages that are actually below subsistence; many Wal-Mart employees depend on various
forms of public assistance. But: they sell for less — and as bad as it might be to work there, they have no
shortage of applicants. Activist campaigns in many communities have established ordinances blocking
Wal-Mart from locating there. And yet, if Wal-Mart is so bad for communities, we must ask: why have so
many of these campaigns failed? The answer, of course, is that the more wages fall, the more consumers
depend on stores that offer goods at the lowest prices. Also, many communities actively compete to
convince stores such as Wal-Mart to locate there. Because such “big box” establishments draw customers
from a wide area, they can help bring traffic into a community. Because of this, “big box” stores often
enjot various kinds of public subsidies.
The rise of Wal-Mart has come along with a long-term decline of real wages. The two processes are not
unrelated. People lament the demise of “Main Street” and the high-quality stuff available there: organic
food... medical care from kindly local doctors... artisan-crafted furniture... fascinating, durable toys. All of
these things are still available, of course. They are offered, at prices that working people cannot afford, in
those nice, homey mainstreet shops that are being driven out by the big-boxes! As the market for such
high-quality goods and services shrinks, their prices go up still further — and the big-box alternative looks
more and more attractive. If, however, wages were higher, and there were less unemployment, would
people still flock to the big-box stores, or the Mc-Greasy drive-thrus?
In fact, when people do have more to spend, and more free time in which to spend it, they tend to make
fewer unwise decisions. Individual counter-examples can be cited, of course — rich folks with self-
destructive habits — but in political economy our business is societal trends, not individual peccadilloes.
And in every measure of social welfare and civic health, we see that the greatest freedom yields the best
results. To cite a negative example: states raise great sums from taxes on cigarettes — a product whose
consumers are preponderantly poor. Such “sin taxes” are popular, because they seem to help “protect”
people from harming themselves by smoking. But it turns out that the demand for cigarettes is inelastic;
higher taxes do very little to discourage smoking. What does? Less unemployment, and higher incomes.
However, it is painfully obvious that the benefits of economic growth are not distributed fairly; a third of
the world’s people live in abject poverty and lack any meaningful economic opportunity — while many
more, in nominally prosperous communities, see their living standards erode, year by year. This injustice
drives a wedge ever deeper between the rich and the poor, as society’s productivity increases. The
perverse tendencies attributed to “growth” are not due to growth at all, but rather to unfair and destructive
patterns of ownership. In fact, under these patterns of ownership, growth cannot be sustained even if
society ignores the wealth/poverty gap. As Henry George's analysis shows, land values tend to increase
faster than overall economic growth, which creates an irresistable temptation for private owners to hold
land for speculation. This overheats land values beyond what labor and capital can pay, and brings on a
recession.
Accounting for Nature
One other aspect of “free trade” that has come in for bitter condemnation in recent years has been the
tendency to weaken environmental standards. Many see “economic growth” as a process that just cannot
be sustained without ruining the Earth. To counteract our tendency to burn, dig and spew our planet to
ruin, “ecological economists” demand that the value of “ecosystem services” — such as biodiversity,
fertility, and the pollution-abating properties of forests and wetlands — be included in our estimations of
economic progress and growth.
That seems like a good thing. However, these considerations are also open to charges of subjectivity. For
example: few would argue that biodiversity is not important and worthwhile. But, consider the fact that
many tropical species exist in extremely small ranges — not because their habitat has been shrunk by
human invasion, but rather because the ecological niche occupied by a certain species of tree frog, say,
happens to be only one mile in diameter. How do we set an objective, economic value on preserving that
species?
Some hard-core believers in the “free market” would argue that preserving that species of frog has no
value whatever until people are willing to pay for it. That is true, of course, as far as it goes — but in such
arguments it is often forgotten that the community plays a crucial, often decisive, role in whether — and
how much — people are willing to pay for things. For example, if the government did not legally
guarantee private property in land, people would not be willing to buy land — and in places where such
laws are haphazardly enforced, real estate values are correspondingly low.
When the market price of a piece of land is adversely affected by a regulation that, say, protects the habitat
of an endangered species, landowners are apt to cite the “takings clause” of the Fifth Amendment of the
US Constituion, which prohibits the taking of private property for public use.** This is ironic, though,
because although it is widely understood that much of land’s market value is attributable to the benefits
provided to it by the community, few landowners have offered to compensate the community for these
“regulatory givings.” The market value of land — natural opportunities — is created not by the land’s
“owner,” but by the activity of the entire community. The private landholder doesn’t have to approve of
the community’s activity, or even be aware of it: if the community decides that the existence of that tree
frog is valuable, that is none of his affair. (He might end up profiting from it, though; if he’s smart, he’ll
offer tourists a chance to glimpse the rare frog in the wild, for a fee — in which case, the regulation
protection the frog has conferred a high market value on what was a nondescript tract of forest!)
The problem with the assessment of ecosystem services is not that it isn’t done, but that we allow the
wrong people to do it. Private landowners take great care to assess — and maximize — the ecosystem
services to which they have title. Unfortunately, they are not held accountable for everyone’s equal right
to them. The value of “ecosystem services” is a component of the overall value of land.
This means that in order for there to be a truly free market — and in order for ecosystem services to be
fairly valued — the community must collect the rental value of land and natural opportunities. This is
precisely that Henry George refers to, in Protection or Free Trade, as “true free trade”. In essence, George
points out that the economy we know is fundamentally unfree, for its normal state is that of subsidy (for
landowners) and penalty (on productive workers). If we were to remove every other “intervention”, it
would only serve to reveal the basic, underlying system of coercion.
That basic, underlying distortion is what makes our economy seem so perverse and unfriendly, both to
people and to the earth.
Economic Growth
The very fact that many people are suspicious of “economic growth” is a sign of confusion. The goal of all
economic behavior is the satisfaction of human desires — and therefore, economic growth can only be
something that allows greater satisfaction of desires, or satisfies the same desires with less exertion. We
must be careful, however, to be clear about what is included in the category of “human desires”. They are
not, of course, restricted to material things. Many of the most important human desires are intellectual or
spiritual, with no physical existence — and such desires become relatively more important as people’s
material needs become more regularly and fully satisfied. Furthermore, there’s no requirement that human
desires must be assigned a monetary value in order to “count”. For example, suppose a family had been
paying for child care services because of the need to work long hours to earn a living. Then, suppose one
of the parents got a better job, enabling the other parent to stay home with the kids. They could still have
afforded child care, but their desire was to spend time with the kids. So, the family ends up satisfying
more of their desires, even while spending less money. Considerations such as this show that the GDP,
although a useful economic indicator, isn’t sufficient as a measure of economic growth. It is not difficult
to tally up the total of final transactions — but economic growth must include all things that increase the
satisfaction of human desires, desires which are subjective — possibly different for every person.
Doesn’t this imply that economic growth is, in the end, a phenomenon that defies measurement? Yes, it
does — but that is less of a problem than it might appear. The conditions that leads to economic growth
are well-known. The important thing for economic policy is that people have free and equitable access to
the resources that enable them to satisfy their desires.
Economic growth is integral to human community. Societies that lack it are dysfunctional and declining.
Perverse, destructive patterns of production are often blamed on “economic growth” — but their true
causes are gross inequities in the distribution of wealth, and the privilege to consume and pollute the
global commons without penalty. Moreover, these underlying distortions are the main reason why our
economic indicators often give us confusing readings. When true free trade prevails, all manner of
“market distortions” will get smoothed out.

*”If the GDP Is Up, Why Is America Down?” by Clifford Cobb, Ted Halstead, and Jonathan Rowe. Atlantic Monthly, October 1995
**This “regulatory takings” issue remains controversial in US law, in terms of whether a partial taking of land value amounts to an
unconstitutional taking of private property. Under NAFTA regulations, however, many partial devaluations due to regulation do require
compensation. This is one clear example of how bilateral trade agreements such as NAFTA provide an easier time for foreign investors than for
domestic ones.
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 The Earth Imperative
Human civilization finds itself at a terrifying crossroads. The list of dangers is appallingly long. Would it make things a little
less scary to group our challenges into main categories?
3) Environmental Crisis (including the ideas of "overpopulation and necessary "limits to growth")
2) Economic Stagnation (a chronic problem that takes many forms, including recessions,arrested development and debt
crises).
1) What's number one? We might forget it sometimes, amid the shouting over the Next Big Calamity, but it is at the root
of all the others: Poverty.
Until we solve that problem, all the other ones will keep getting worse. Until we solve the problem of poverty, we can only
place band-aids over ever-deepening wounds and, somehow, hope for the best.
But is there a solution? Various programs have been tried. The solution of a planned economy which would banish
competition failed, spectacularly. The "liberal mixed economy" under various guises of "social democracy" aided by "labor
unions" has led to today's "race to the bottom." The ideology of "laissez faire" -- a market free of regulation, if not actually a
free market -- is causing suffering and havoc around the world. That's what we're told, anyway. But in truth: when abundant
labor is compelled to seek scarce employment, there will always be a race to the bottom. Technological progress, free trade
and improved education simply steepen the slope.
Henry George claimed, very persuasively, to have identified the root cause of poverty, and the fundamental solution.
Perhaps he was wrong. But if he was right? Then we shouldn't waste another minute, should we? Let's briefly examine what
Georgist theory says about the fundamental cause of poverty.
Standard Explanations for Poverty
Henry George begins by evaluating the standard explanations for the persistence of poverty amid increasing progress and
plenty. Could it be a lack of capital? Does the need to pay wages cut into our ability to store up the tools and equipment we
need to move the economy forward? This is a pressing question for development policy: nation after nation has gone into
unpayable debt in the attempt to "build a manufacturing base" and "develop export industries" -- only to wind up poorer and
deeper in debt.
In fact poverty has never been caused by a lack of capital, and it cannot be. The reason is simple: capital is a product of labor.
Tools, machines, seeds, information processors -- all these things are products of human labor. If people have access to
natural resources, they can produce capital. They always have. If poverty were caused by a lack of capital, why should there
still be hunger and homelessness in advanced economies that are awash in sophisticated capital? Poverty cannot be
explained by any lack of capital.
Could the root cause of poverty be our earth's incapacity to cope with increasing human numbers?
It's interesting that overpopulation has been claimed to cause poverty for over two hundred years. In the days of Malthus the
earth groaned under the weight of less than one billion people, and yet many believed something urgently had to be done! In
the 1960s and 70s the "population bomb" scare predicted huge die-offs after world population reached fifty billion or more.
Since then, every prediction of the plateau population level has been revised downward; current predictions call for a
leveling-off at somewhere between 9 and 12 billion. (The UN Food and Agricultural Organization estimates that with current
farming methods the world can feed more than 30 billion people.) In fact, there is a clear, robust correlation between
increasing prosperity and declining fertility: it's called the "demographic shift" and is thoroughly documented.
Sheer human numbers can't be blamed for the persistence of poverty. Supposedly "overpopulated" Ireland and
India exported food throughout their years of famine.
Nowadays, another form of Malthuisianism is taking hold: maybe we can grow enough food, after all -- but can we meet the
ever-increasing energy demand? What is all this "production" doing to our planet, our only home? Surely something's about
to kill us all; it just stands to reason: global warming, hurricanes, floods, wars over dwindling fossil-fuel resources, nuclear
proliferation, terrorism...? If we go on the way we're going, we're done for!
These dire outcomes are not entirely unlikely but they are by no means inevitable. Every dismal prediction is based on
extrapolating current trends. However, history shows us that one thing we cannot do, with any reliability at all, is extrapolate
from current trends! When virtually every tree in the Eastern half of North America had been cut down for firewood, there
was a "firewood sustainability crisis." When people were dying of black lung disease in coal-burning London and New York,
there was an "urban sustainability crisis." Right now there is a "peak oil crisis."
But we don't have to burn oil forever. In the January, 2008 issue of Scientific American, three solar-power
experts explained how the United States could, using only modest improvements of existing technology, derive two-thirds of
its entire consumption of energy from renewable, nonpolluting sources by 2050. Significant public investment would be
required, yes: approximately half the cost of the war in Iraq. Our energy and environmental problems are solvable. We may,
indeed, fail to solve them. But we must put to rest the excuse that the earth's resources are insufficient: it simply isn't so.
The Laws of Distribution
If we cannot blame poverty on insufficient resources, nor on an inability to produce capital, what then? Poverty must be a
problem with the distribution of wealth. In some ways, this is a "no-brainer" -- yet, where does it lead us? Is the distribution
of wealth in society merely a political arrangement? Are there any eternal, underlying principles that can guide us?
This line of thought led Henry George (like the other classical economists) to seek the Laws of Distribution. Society creates a
certain amount of wealth. Among what distinguishable groups is the wealth divided? These groups are called the factors of
production. If we're going to talk about the distribution of wealth, the factors must be clearly defined and mutually exclusive.
How else could we tell what part goes to each? Up until the Great Obfuscationist Movement of the early 20th century
(otherwise known as Neoclassical economics) three factors were universally recognized: Land, Labor and Capital. They are
defined as follows:
Land -- the entire material universe, except for human beings and their products; all naturally-occurring forces and
opportunities.
Labor -- all human exertion, whether physical or mental, in the production of wealth.
Capital -- products of labor which are used in the process of production.
Labor, working on land and using capital, produces wealth. What is wealth? It is the set of things that 1) are material; 2) are
a product of human labor; 3) satisfy human desires; 4) have exchange value. To be classed as wealth in political economy, a
thing must satisfy all four criteria. For example: land is not wealth, because it is not made by human labor. Money is not
wealth, because it is a medium of exchange; if money is destroyed, the sum total of wealth does not change. Items that have
sentimental value are not wealth if no one is willing to give something valuable in exchange for them. This unambiguous
definition allows us to explore questions of wealth distribution.
Using these definitions, we can deduce the basic laws of wealth distribution from two basic, common-sense observations: 1)
No production can happen without access to some land; 2) People seek to satisfy their desires with the least exertion.
The second is a bit like Adam Smith's principle of selfishness, but there is a crucial difference. George does not presume to
know what people's desires are. People can have selfish, or altruistic, or ascetic, or athletic desires -- no matter. Whatever it
is that people want, they try to get it with a minimum of irksome toil. And what constitutes irksome toil? That's different for
everyone, too! Some people run marathons for pleasure; some compute large prime numbers, just for fun.
This endless variety of human desires is what makes trade such a powerful economic force. Whenever we give up something,
to get something we want more, the person we're exchanging with does the same thing! Each is better off. If each partner in
the trade were not better off, they wouldn't agree to trade in the first place.
But we're getting ahead of ourselves. We were searching for "Laws of Distribution" that would give us insight into the
fundamental problem of poverty. Why does poverty deepen as material progress advances? What can be done about it?
The Market for Labor
When we talk about poverty, we're talking about a state of affairs in which people are willing and able to work for their
living, but they cannot find work -- or the work they can find pays them no more than mere subsistence. Poverty can be
understood, then, as a problem in the market for labor.
"Wages" is the term for the price of labor. Now, we recognize that unemployment exists -- in other words, that a relatively
abundant supply of workers competes for a relatively scarce supply of jobs. Competition among laborers bids down the price
of labor -- the wage -- to the lowest level that workers will accept for doing that kind of work. What's the lowest level that
workers will accept, if they lack any special skill or other advantage? Bare subsistence. Their alternative is starvation.
But, if the prospects of the jobs offered, say, by industrial society are so poor -- no better than bare subsistence -- why don't
workers find ways to employ themselves? Indeed, they will, if any viable self-employment opportunity presents itself. What's
the minimum requirement for a better opportunity? How about a small farmstead of one's own? It wouldn't be an easy
living, but in good years one could store up a bit of surplus, which would make life a little easier.
The alternative to subsistence wages, then, is free land -- if there is some. That leads us to the basic principle of wealth
distribution: the Law of Wages (derived from David Ricardo's long-recognized Law of Rent): wages depend on what labor
can enjoy on the best land that's available for free.
Of course, labor and capital must pay to use any land that's better than the free land. In modern economies the value of
choice sites is astronomical. Indeed, our most valuable natural resource, by far, is land that offers no mineral riches,
provides no game animals, and will yield no crops: the world's most valuable natural resource is urban land.
What gives value to land? The community that surrounds it! The people that live nearby and who travel past it; the public
infrastructure that makes advanced production possible on it; the huge demand for resources that lie beneath it. As
the community grows, so does the value of land.
Free Land? Where?
We said that wages, at the base, depend on what ordinary workers can gain, working for themselves on land that is free. But
where is the free land today? Is there any? You might find street vendors setting up shop on sidewalks, or people fishing off
of docks. You could stake a claim to acreage on the moon (some have done this) or in the middle of the desert, but: no.
There's no free land today -- no viable alternative for self-employment. A permanent glut of labor supply.
The market for unskilled labor is the only one that exhibits the properties of what economists call "perfect competition." The
product is interchangeable; there's no shortage of it. In microeconomic terms, in a perfectly competitive market, price is
equal to marginal cost. What's the marginal cost of a laborer? You guessed it: subsistence. The alternative is starvation.
There's no free land. Does that mean the earth has run out of room? It would, if we could show that all the available land
were being efficiently used, but that is certainly not the case. Natural resources are egregiously wasted, all around the world.
In the wealthiest cities, large areas of valuable land lie idle, as their owners wait for higher prices in the future. Meanwhile,
millions go hungry while giant farms grow feed for animals -- or crops for export. Agribusiness receives payments to hold
fields out of use to "stabilize" food prices. Investors discover that producing wealth is far less profitable than simply holding
onto valuable real estate and, later, pocketing its increased value.
There is a built-in incentive in our system to hold land for speculation. How does this work? The supply of land is fixed.
There will never be any more of it. And land is needed for all production. As an economy grows -- becomes more productive,
as technology and trade allow greater yield from the same effort -- the demand for land increases, and its supply stays the
same. This means that the share of wealth taken by landowners gets bigger, whenever the total economy grows. This creates
an irresistible incentive to hold land out of use.
The more the economy grows, the greater the expectation of future growth in land value, and the more land is held out of
use! This further restricts the supply of land, and increases the price -- until labor and capital can no longer afford to pay it!
When this happens, production starts to decline, and we're in the bust phase of the boom-bust cycle.
The Role of Government
Even a modestly advanced economy needs some public goods. As societies grow, there is an ever-greater need for streets,
schools, public safety, etc. Even though it's obvious that society stands to benefit from such things, people have always
struggled to find some sensible, acceptable way to pay for them. This perennial wrangle became the classic "left-wing/right-
wing" debate. Far on the right, they tell us that self-interested private ownership is the fairest and most efficient way to
assign resources. The government should do as little as possible, just exercise essential "traffic cop" functions. Far on the
left, they protest that the "free market" can only lead to consolidation of giant corporate concerns, to the rich getting richer
and the poor getting left out; either there will be a violent revolution, or some sort of "redistribution" must be used to rectify
the injustice.
That brings us full circle, right back to where we started. The "dismal science," eh?
Let's consider an example of the problem of public goods. Like many great cities, New York City found itself, at the start of
the 20th century, in desperate need of modern public transportation. So, a huge public/private partnership built the subway
system. It was carrying some half a million riders per day, even before the advent of the automobile -- and it proved a
tremendous engine of city growth. Fares were kept low, so workers could afford to ride. Financing was often a problem. By
the 1970s, New York was in a fiscal crisis, and the subway system had become a dingy, broken-down relic (which still,
nevertheless, carried New York's workers to their jobs). It can be said that all New Yorkers benefited from the subway
system. But, those who used it paid for it. And, the taxpayers paid for it. One group, however, derived great profits from the
subway, and scarcely paid for it at all. Proximity to transportation is a prime determinant of land value. It's a gift to
landowners. Just like all public services and infrastructure: a gift, from productive workers and taxpayers, to rent-collecting
landowners.
Henry George looked at this mess, this paradox, and saw a solution. As society grows more complex, it develops a greater
need for public goods. But, how to pay for these things, without overburdening producers? Why not return to the community
what the community itself has created -- the value of land? Had New York City paid for its subway system out of land rents,
it could have done away with fares (and the cost of collecting them) and would have had ample funds to support a system
which, in turn, brought great vitality to the city.
Today's conventional wisdom advocates "broad-based" tax systems. We're told that all taxes are bad; they burden people and
slow the economy -- so to spread the burden around (and incur the least resistance) we should tax as many different sources
as we can. Income, sales, excise taxes, lotteries, sin taxes, import duties, estate taxes, taxes on real and moveable property.
The US federal tax code is thousands of pages long and changes every year; states and cities have codes of their own.
Georgists look at the tortured logic of "broad-based taxation" and cry, "Away with them all!" There is one fair and efficient
source of public revenue. All taxes must be done away with, and the value of land must be taken for public revenue.
Radical - and Essential
This reform is doubly just -- for it simultaneously removes two great injustices. Everyone has a right to life, and everyone
needs land to live. If we must pay private "owners" for access to land (and where is this not the case, today?) then we must
pay for our own right to life. Also, public goods -- which benefit landowners -- are paid for with wealth that has been
confiscated, via taxation, from its producers.
The reform is doubly efficient -- for it simultaneously removes two great inefficiencies. By collecting the rent of land for
public revenue, it removes the burden of taxation from production. And by eliminating the incentive to hold land for
speculation, it removes great waste and inefficiency in our use of natural resources.
But even more that that: the reform makes it possible for us to make sense of our relationship, as a species, with our home.
The earth is not owned by anyone. It must be held in trust for all people, and all life. It's no accident that our ability to
destroy all life on earth has coincided, in a single generation, with our awareness of our home as a single, fragile oasis in a
huge, cold universe.
Getting there won't be easy. But it's our only hope.