Thanks to Matt Leichter from the LVT Facebook group for sharing this story. Stiglitz explains that savings is not the real source of growing inequality in the world, the untaxed rising value of land is.
“There’s some debate about this, but I think most readers of Thomas Piketty’s book (Capital in the Twenty-First Century) get the impression that the accumulation of wealth — savings —is responsible for the rise in inequality and that there is, therefore, in a way,a link between the growth of the economy — the accumulation of capital— on the one hand and inequality and wealth. My paper begins with the observation that in fact, you cannot explain what has happened to the wealth/income ratio by that analysis. A closer look at what has gone on suggests that a large fraction of the increase in wealth is an increase in the value of land, not in the amount of capital goods.”
Thanks to Wyn Achenbaum for sending this article to the Georgist News. It details the enduring effect Henry George had on Ireland. There is also an interesting discussion of how Joseph Fels improved employment opportunities for Dubliners with his campaign to use vacant lots for urban farming. We think you’ll find it thorough and informative.
Tim Worstall, a senior fellow at the Adam Smith Institute, has been warming up to the Georgist paradigm.
“Optimal taxation theory tells us that we should therefore eliminate capital and corporate taxation and move to a progressive consumption tax and perhaps a land value tax.”
Adam Smith and the Physiocrats “knew perfectly well where inequality came from. It was simply a fact of life that most land and other natural resources belonged to a small hereditary nobility. In England, some 2% of the population owned most of the land. This nobility, or their ancestors, gained their estates by force, favoritism, or fraud: that is, conquest, gifts from the king, or bribes to magistrates.”
Polly Cleveland in this two part article outlines what later economists thought about future poverty and inequality. Here’s a summary:
- Malthus: Higher wages → higher population → outstriping available resouces/ starvation wages
- Ricardo: Only improved technology and trade can stave off Malthusian catastrophe.
- Marx: Growing inequality→ collapse of the capitalist system → new socialist society→ equality
- George: Economy grows→ landlords amass surplus→ collapse →repeats (sans intervention)
- Clark: Inequality is a result of differences in labor and capital contribution.
- Pareto: Inequality follows natural law, the 80:20 rule (prime example land)→ nothing to fix
- Solow: Richer economies grow slower than poor ones → rising equality
- Piketty: less growth + no change in investment → capital investment exceeds growth → growing inequality
Part 1: http://dollarsandsense.org/blog/2014/07/pikettys-model-inequality-growth-historical-contxt-1.html
Part 2: http://dollarsandsense.org/blog/2014/07/pikettys-model-inequality-growth-historical-context-2.html
“…the nation with the rich world’s greatest concentration of land ownership remains as inequitable as ever… You begin to grasp the problem when you try to discover who owns them. Fifty per cent of the private land in Scotland is in the hands of 432 people.”
“What’s that? Never heard of George or his treatise on the causes of inequality? It sold 3 million copies. Perhaps you missed “Progress and Poverty’s” anniversary while perusing this year’s equally improbable bestseller, “Capital in the Twenty-First Century” by French economist Thomas Piketty.”- Charles Lane, Washington Post
Tech companies continue to pour into the San Francisco bay area, pushing up housing prices. This has sparked many aggressive protests. Noah Smith, an assistant professor of finance at Stony Brook University, understands how LVT would accommodate existing residents and the wave of incoming entrepreneurs alike.
“What San Francisco needs now is a Henry George Tax. The policy would bring rents down, and thus encourage tech companies and their brilliant employees to keep moving into the city, to keep interacting and mixing and generating the ideas that make the tech world go. At the same time, it would raise the money the city needs to build better trains, run more bus lines, and build more public housing that will benefit the poor and middle class of San Francisco. And it would do it all in a way that seems much more fair than other kinds of taxation.”
Harvard professor Edward Glaeser has written an article praising New York City Mayor Bill de Blasio for implementing a higher tax on vacant land. Glaeser also discusses the significance of Henry George.
Jesse Myerson makes the case for five reforms that young people should be fighting for. His description of land value taxation was among the top five reforms and was quite well done.
“The most mainstream way of flipping the script is a simple land-value tax. By targeting wealthy real estate owners and their free rides, we can fight inequality and poverty directly, make disastrous asset price bubbles impossible and curb Wall Street’s hideous bloat. There are cooler ideas out there, too: Municipalities themselves can be big-time landowners, and groups can even create large-scale community land trusts so that the land is held in common. In any case, we have to stop letting rich people pretend they privately own what nature provided everyone.”
Little to say, the article went viral when Charles Cooke of the National Review tweeted the article, inspiring a slew of vitriol. This was a case in which negative attention for Myerson may have been positive attention for Georgists. Feel free to judge the other reforms for yourself.
How Much Money Could a Land Value Tax Raise?
By Ashok Rao
Ashok Rao, a student at the University of Pennsylvania, concludes that a significant portion if not all public revenue could be generated via the land value tax. He cites fellow Georgist Steve Cord’s paper in The American Journal of Economics and Sociology, entitled “How Much Revenue Would a Full Land Value Tax Yield.”
Link to Rao’s article: http://slate.me/1eujV0q