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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 • Or is it
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? 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
capital can be seen as a catch-all term that has different shadings in different contexts. securing its control over resources and workers? What can stop the juggernaut of "capitalism. they make the world go ‘round — capitalists can’t get enough of ‘em. to God or humanity. two things that are constantly identified with capitalism are the free market and competition. This unambiguous definition allows us to understand what payments go to this factor of production. This is the logic that led Marx to conclude that an inevitable historical dynamic is at work. Intangible assets like “goodwill” and “name recognition” are assigned value and counted up as capital. the rent-seekers can go ahead and seek all the rent they can seek. People seek to satisfy their desires with the least exertion. Capital is wealth. the definition of capital is precise. This can include a whole smorgasbord of stuff. in the context of “maximizing the labor input. capital is a term for anything people own that makes them a profit. bonds. and the just society. While entrepreneurs praise the theory and principle of the free market. but not eat. The term “human capital” is often mentioned. real estate. or monopoly income generally) is the easiest of all.things subject to ownership. clearly measurable matter of kind. who do no work. Wonderful processes." 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. will sumptuously dine. in their own businesses they strive to limit competition as much as they possibly can. or wealth in the course of exchange”. most of the world. Entrepreneurs seek to gain the most profit from the least labor and risk. and exclusive licences. stocks. Capital is “wealth used to produce more wealth. but an eternally certain. produced by human labor.” making things even more confusing. most of the time. Or: the country’s stock of “human capital” is weakened by poor public schools. From these different definitions come our different conceptions of what capitalism really is. Why would capitalists want competition? The more competition they face. Is there anything offensive." save a worldwide workers' revolution. that satisfy human desires and have exchange value. entrepreneurs will seek to capture rent whenever they can. or allowing it: whatever you do to the least of these. but generally means assets. If we make sure that the community . In current economic parlance this is known as “rent-seeking behavior” and it is pervasive in “free-market” economies. you do to Christ himself. George showed that the community's just share of social wealth is not an endlessly-debatable matter of amount. the lower their profit will be. and coveting the good of one's neighbor. doesn’t define capital as Henry George did. right? Wrong. 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. or lucky. Competition always tends to bring prices down to the lowest that the seller can get and still stay in business. and find some — but not at the workers' expense. So: was Jesus a capitalist? Sure! His Father's Word forbade stealing. while some. If not. Income from other people’s labor (such as land rent. 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. then many will work. Generally. What will stop the process of big business getting bigger. and belongs to it. material things. such as plant & equipment. first: that is. If we collect that value for public revenue. in a system that recognizes the legitimate right of the producer to the wealth produced? Henry George. and expected to yield an income. Occasionally they might be very clever. Apologists for "capitalism" assert that there is no place in either the theory or the practice of economics for "values. For the classical economists and Henry George. Nor by perpetrating it. In mainstream parlance. 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. For example. As in: a business is said to be “undercapitalized” if it lacks enough savings to weather a period of slow sales." 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. Unfortunately. Thus. The value of natural opportunities is created by the community.
They already have their reward. In the stages of moral development identified by psychologist Lawrence Kohlberg. However. George W. he said. 2005 by Lindy Davies Those are two words that we use so often that we tend to take their meanings for granted. that conception of justice -. — Lindy Davies Land and Justice A speech given at the Chautauqua Institution in August. He set much greater store by good deeds done without thought of reward: "whatever you do to the least . They would have to make an honest living. even.in which one does good. capital”ists” would be unable to capital”ize” on privilege.is actually an immature one. in his scorn for the loudly-praying pharisees on the street corners. Bush vowed to bring the 9-11 terrorists to justice. Maturity comes in the "post-conventional" stage. Jesus was hip to that. It might be helpful to stop and think about what they truly mean. or. this is called the "conventional" stage.collects its rightful share of the social wealth. We say "justice was done" when a criminal is sent to jail. in order to avoid the consequences of not doing good -. when we come to value doing good so as to contribute to our community. Justice is often seen as the fair retribution for something done wrong. doing good for its own sake.
liberty and the pursuit of happiness. we do more.. and thus a potential object of wars -.but in terms of cost per cubic foot.and transport. (That's why we drink the beer here). We think of dropping out of the plastic modern world to go "back to the land". To do justice.by leaps and bounds. papers. people's inalienable rights: life. It leads us to think.. that perhaps land used to be absolutely vital to human life. clothing and shelter have to come from somewhere -. between tree and paper. clothing and shelter. There's nothing worthwhile about it. we have material needs. would resent my presuming to know exactly how their problem ought to be handled. I'm not sure why. We deal with hamburgers. the rainforest. where we are freed from earthly suffering. Technology has continually reduced the amount of land that each person needs to survive. without thinking about the many layers of processing between hayfield and burger.. cold though they might be. Now. Somewhere amid all the passionate concern about the special cases of the very beginning. gimcracks.. more valuable than all the others combined -.. aches and pains. not even close.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. The most basic of those rights is life. or the very end of life -. a matter of great political import -.. the untamed savannah.. why rebel in heaven? But. the mighty river.and human society has continually demanded more land for all the stuff that people produce: all the knickknacks. though.. in this positive sense? If I do something nice for the least of my brothers and sisters. it will yield no gems or minerals. its soil is full of toxins. and what its basic requirements are: food. in Thomas Jefferson's words.... what do you mean by "land"? The land." And... of course.. (In this day and age. . Our most valuable natural resource is land whose natural fertility is utterly depleted. anyway.. I've always thought he was a bit of a nut. the good earth. not so terribly high. back in some halcyon.. and in fact. from all material needs. This romantic conception of land can lead to some dangerously fuzzy thinking..but by no means the most valuable... Our food. underpopulated past -. along similar lines. widgets and thingamabobs.. It takes a whole bunch of land to produce -. Justice must have to do with freedom. have I done justice? If I send them a handmade quilt? I think the least of my brothers and sisters. between flush and water table. Perhaps they'd rather make their own quilt. one does not need to work for a living. what is "doing justice". yet.is urban land. or build a fireplace. In heaven.but modern technology has long since taken care of that. economically. but I suspect it has to do with how seldom modern people actually come into contact with the stuff of the earth itself. in this day and age. for example. strategic or precious minerals? Nope. and merchandise -. than merely survive -.. We tend to have a romantic conception of land. Oil? Well. according to the prophet Micah. I mean.. there is no beer. toilets.of my brothers and sisters. or move to a warmer place.all that stuff. diamonds. it's highly important to industrial civilization. Or has it? Let's think about a question: what is our most valuable natural resource? Is it • • • gold. Our most valuable natural resource -. then. Heaven is usually seen as an entirely spiritual place. to each his own. it usually brings to mind scenes of nature's bounty: fields of whispering wheat. God wants us to "Do justice and love mercy. of course. you to do me also. And in heaven.and so the question of justice inevitably leads to the question of land. (That's why I could never understand Satan. often. Water? Now we're getting closer: necessary for life... even that is controversial." So.) Here on earth. "The land" is where we go on camping trips. to be sure. But. except for one vital attribute: where it is. is to secure.
by instituting an economic system that rewards production and prohibits extortion.land is also necessary for all production. in a nutshell. of course. not from production itself -. it's easy to be scared of the seemingly unavoidable damage we are doing to the earth. consider the surprising re-emergence of the ivorybilled woodpecker -. they will wait.which. The grossly huge ecological footprint of many communities (the United States. we must remove unjust privilege. granted by governments.but rather gains strength as a society reaches a certain level of prosperity. up. then manufacturers will make more of them. unhealthy place it was in the nineteenth century.but from privileges. That is why millions upon millions of people who are willing and able to work cannot find work. you name it) are held idle. farm land. I think. the wealth footprint (the resources needed to make the stuff we want. It's all about treating the land as an "asset". If customers are willing to buy more of them. and. The supply of land cannot be increased. If we just look at the "ecological footprint". only one thing can happen: its price will go up. industrial land. Compare today's London with the foul.and no more land.widgets. and to create more of the things we want -. they will only put their land to use if they have an immediate need for the cash. say. the demand for land goes up. is the key to the problem of poverty.while cutting back on the output of illth.these things are made by human beings. even while millions upon millions of acres of useable land (city land. because they expect the land's value to increase with time. I believe it's true that the world cannot long support current levels of pollution. crime. the illth footprint ("illth" is a very useful term coined by ecologist and social philosopher Ralph Borsodi. and as the production of wealth gets more and more efficient. That. So. preventable disease and malnutrition) It is indeed possible to provide for the subsistence of more people. and illth -.things that we can correct. waste and habitat destruction -.makes it clear that the fact of persistent global poverty is by no means inevitable. the land factories start cranking out more land! Wait! They can't DO that.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. can they? Wealth -. To solve the problem of land and justice.but these problems spring.subsistence. thingamabobs -. If the demand for land increases. as I said. or a certain region. 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. The owners of land see population and production go up. up -. the subsistence footprint (resources we must have to stay alive -. But human beings can't make land.one of many threatened species whose habitats have returned in the United States.and certainly not from trade. tends to shrink with human progress) 2. to individuals and corporations -. waste. it appears that environmental protection does not come at the expense of development -.goodness gracious. weapons. So. if we separate it into its three distinct components: 1. Or. itself -. Indeed. It's all about the land: not only is land necessary for all life -. If they can afford to wait. as human population increases. if we choose to. over and above what we actually need) 3. for example) leads to hand-wringing about overpopulation -. But seeing "the footprint" in terms of its components -. wealth. It refers to the resources that are squandered on things we neither want nor need: pollution. .
a great deal more land in New York. That means that New York's vacant land could house another 956. with open sewage running in unpaved streets. Now. The more money we have to pay for land. Now. Yet. New York City has about 80 people per acre of residential land. 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 -. This gives too much power to the banks. the more power we give to the banks. Let's say a peasant family has a goat and a garden. of course. and they have to live in a miserable shack. it brings urban blight and suburban sprawl. of course. It's all about treating the land as a private asset. but to think in terms of enjoying its increase in value over time.and they have to go to the city. With all these roads. using far more land than is necessary. 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. and waste energy and resources. they must somehow buy their food and every other necessity out of that $10. Sen contends that the true measure of economic welfare -. 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. is vacant. Meanwhile. The foreign exchange thus gained goes for debt service. burning subsidized fuel. can grow enough to feed itself. 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. and ask yourself how far two bucks will go toward satisfying them. which disrupt communities.but because it doesn't make any sense. carrying imported merchandise to all the big-box stores and franchise restaurants of suburbia. to land-baron cronies of corrupt regimes -. public transportation systems become less popular and harder to finance. without even starting to use its vast stock of under-used land. as in every other city. let's imagine that the family loses their land -. seeking nonexistent jobs. who run huge plantations to grow crops for export. people want to move away from the high prices and high crime rates they often find there -.5% of its land. That statistic bugs me -. and all these cars. second.Development as Freedom. maybe even books.who hold land idle for the specific reason of not allowing peasants to use it. This chokes the cities with even more traffic. their income has increased by $500%. 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 -.so development leapfrogs.and therefore of development in any meaningful sense -. thus making sure they have no place to go. the overall net equity of American home "owners" is only 18%. That's buildable land. All this sprawl creates more and more need for roads -provided by tax dollars. but let's say it brings in an average of two dollars a day.6 square miles.not because I want to deny the terrible extent of poverty in our world -. Two dollars a day? Consider your own basic needs. not parks or streets.000 people at current density levels. in terms of development numbers. In the United States. making them even less desirable places to be. And.so that local farms are no longer viable. With thrift. enough for school clothes. yielding an income of $10 per day.there isn't much of that. We have even . Meanwhile. everywhere. Although 66% of American families own their homes. Economic freedom for the world's poorest people is unquestionably all about the land. which allows the ruling regime to keep playing by the IMF's rules.a sensible thing to do -not to use it now if they don't need to.the decay of communities and the rise of the corporate big box. and stay in power. for land is by far the greatest source of collateral for loans. to multinational corporations. is used somewhat. and.perhaps an injury or some other disaster makes it impossible to keep farming it -. all these subsidized highways are just great for the big trucks. 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. working carefully.This leads to no end of problems. Occasionally a good harvest will yield some surplus which can be sold -. Even though downtowns are underbuilt. where they manage to find a combination of odd jobs. and end up in shantytowns that lack clean water and sewers. jacking up the price of farmland near the city -. and are willing to work for subsistence wages -or. 7.can't be a matter of GDP and other conventional measures of "growth". but far less than the local economy would support. We are told that two billion people live on less than two dollars a day. the peasants gravitate to the cities. or 18. Nobody can survive on just the buying power of two dollars a day.
inapplicable to the complexities of our time -. the quote on the American Liberty Bell. The 3 stages were: • The Sabbath. a guaranteed flow from the labors of one into the coffers of another. chapter 25. It has been plain. The Jubilee. while one's neighbors did not. The 7th commandment sums up both principles in 4 words: Thou shalt not steal. since very earliest days of civil society. since at least the time of the Book of Leviticus. of land -. "beneath their vine and fig tree".which was why the Sabbath was a very big deal: one of the ten commandments. calling them quaint." It was a reference to the Jubilee.never for more than a single generation. for the land is Mine. 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 -.and which threaten to pull down all the advances of civilization into a dark age -. In that book were recorded the words "The land shall not be sold for ever. we were told in Sunday school that this was all about going to church. • • Now it is interesting to note that the economic vision presented in the Bible is not a precursor of communism. Indeed. Every seventh year. but.good heavens. every 50th year). And. Modern society has looked away from these principles. The Sabbatical. in the sabbatical year. was a direct reference to these principles: "Proclaim liberty throughout the land and to all the people thereof. folks were still allowed to weed the garden and stuff. Kids who try to get out of. Even seven times seven years (actually. (Incidentally. The canceling of debts in the seventh year was designed to ensure that nobody got too far ahead.thus recognizing the right of the earth itself to be protected against depletion and misuse. the fields were to lie fallow -. debts were to be forgiven. one could become wealthier. Under biblical law. as so often happens. envisioned a community in which every family is secure in its own home and property." This ideal was codified into a remarkable three-stage program for economic justice and social harmony: the land laws of Leviticus. or heritage. it can only come by way of solving the problem of land .even if it had been sold in the meantime. Now. at their expense -. financial implosion or ecological collapse. and the freedom it provided was from debt and servitude. land could not be sold for ever -.won't the poor always be with us? Not necessarily. modern society finds itself mired in chronic economic and social problems for which it can find no solutions -. which Jesus said he "came not to destroy but to fulfill". A debt that could not be paid off after six years was well on the way to becoming a usurious burden. What the Sabbath did was to force people to focus on things that had meaning beyond striving and striving to get ahead.identified that as the key to the problem of poverty. from Leviticus. The prophets consistently railed against landlords and rulers who robbed the people of the fruits of their labor. But people were not to own the things that were made by God. Every seventh day was the Lord's day.) The division is clear: there is to be a sacred right of private property in the things that are made by people. And. people were enjoined to keep it holy and refrain from work. The Bible's economic laws. each family could return to its original allotment. or too far behind. then. if one did work on the Sabbath. Two of the ten commandments explicitly support the institution of private property.occasioned by some combination of war. we have had a pretty good idea of what to do about it.yet. But -. for ye are strangers and sojourners with me. that the private ownership of land leads to exploitation and great extremes of wealth and poverty. If there is any way out of this dark future. say. naive. taking out the garbage on the Sabbath realized that the prohibition was really against gainful work. our teachers missed the deeper significance.
It’s not hard to think of examples: High-priced basketball shoes These days. Land in cities would be used efficiently. to achieve justice. there exists a plan for that: The Single Tax. even while inflation went down! But the best benefits of all would be in the developing world. Yet I have to believe that eventually the obvious truth will start to dawn on us. Production and employment would be released from the burden of taxation that currently hobbles it.one of the reform's many prominent supporters -. then they would let go of most of it. There would no longer be an incentive to haul heads of lettuce across the continent." True enough. like other public services. could be provided free. by Lindy Davies 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. Access to good farmland would be restored. The resulting vitality would bring these poor nations new sources of domestic economic strength -. The banking system would be freed from its unhealthy dependence on land for collateral.and although I do accept that many things in my children's world will probably get worse before they get better -. Combining these benefits with the newly-efficient use of urban infrastructure. because it applies a definition of the relationship between the individual and the society that is consistent with both economic efficiency and moral law.and justice. regulation of land use would still be in their power. and to acknowledge that the value of land is created not by its "owners". People in this world are not often logical. but by the entire community. If the land-baron cronies and the multinationals were charged the market rental value of the land they hold. What would happen. The unnatural pressure on farm land near cities would be eliminated.and collect the full rental value of land and natural resources for public revenue. It calls for us to respect the right of labor to create and to save wealth. Cities need not become over-crowded. Eventually we will have tried everything else. Public transportation. as it is now. and organize itself as it must. . and the disastrous migration of peasants to illequipped poor cities would be reversed. 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. Eventually. if we did this? Let's consider the great problems we were discussing earlier. so fundamental. as development proceeded to "infill". products and sales -. we will abolish all taxes on income. I believe that human society will adopt the biblical and georgist wisdom. funded out of the value of locational advantages that it created. But urban blight and decay would be banished.I am optimistic about our long-term prospects. they will buy things that aren’t good for them. unemployment could be cut or even eliminated. He said this: "The 'single tax' is so simple. Therefore. Despite the current flood of bad news on just about every conceivable topic -. The plan takes the shape of a "fiscal reform". efficiency and sustainability.saw things. That's how Clarence Darrow -. Fortunately.no longer would they have to grovel to maintain foreign credit.
However. The GDP is the total value of all finished goods and services in the economy — pet rocks. 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. the things people used to do for and with one another turn into things they have to buy. That may be true — but accidents happen. Day care adds more than $4 billion to the GDP.. Save enough on your mass-produced chicken parts to buy the antibacterial soap you need to wash off the salmonella they contain. you name it — everything purchased by consumers. Fancy movie-spinoff toys.. communities and churches — such decisions are far too subjective to make sense as matters of law. because car accidents don’t improve life for anyone.crafted in sweatshops. visits on the porch become psychiatry and VCRs. it tends also to add to the pile of crap offered to the poor consumer. David Cassidy records. the watchful eyes of neighbors become alarm systems and police officers. fitted with air conditioners and high-end sound systems. And yet: look at the sickening tide of crap to which consumers are subjected! Wouldn’t we all be better off without it? . has devised an index that they call the GPI — Genuine Progress Indicator.” But that is too vague a yardstick for public policy. 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. And since free trade adds to the GDP. the Gross Domestic Product. 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. or shifting functions from the traditional realm of household and community to the realm of the monetized economy. military hardware. Evidently many of the “goods” being offered for sale aren’t good. and anyone who has seen the bashed-up.. Enter a card number. the standard measure of a society’s overall output.. What qualifies someone to decide what is worth buying — or counting? Some argue. Others are sold to fix the damage created by other “goods”. saying “I know it when I see it.and additiveladen junk food. and quietly gamble away your savings. car alarms. prisons. because alcoholics use them to make daiquiris. Surely the reader can think of many more. hawked with flashy music and video.. some are actually quite bad. we all need to be saved from ourselves from time to time. a progressive think-tank. VCRs and kindred entertainment gear add almost $60 billion. Redefining Progress.* People tend to identify “pathological production” by a process similar to that which Supreme Court Justice Potter Stewart famously defined pornography. smokespewing heaps driven around any third-world city can see the correlation between car maintenance and general prosperity. for example. given away free with smiley-snacks. Fat. And. Actual military vehicles. fails to take any of this into account. borrowing resources from the future. But. that money spent on fixing crashed cars should not be counted as part of economic well-being. Probably. the kitchen table becomes McDonald’s — up and down the line. most of us see that as a matter for families. One of its main objectives is to help separate what is truly progress from what is just more junk: Parenting becomes child care.
of course — rich folks with selfdestructive habits — but in political economy our business is societal trends. Activist campaigns in many communities have established ordinances blocking Wal-Mart from locating there. In fact. which creates an irresistable temptation for private owners to hold land for speculation. it is painfully obvious that the benefits of economic growth are not distributed fairly. They undersell and drive out local businesses.. Individual counter-examples can be cited. many Wal-Mart employees depend on various forms of public assistance. or the Mc-Greasy drive-thrus? In fact. Accounting for Nature One other aspect of “free trade” that has come in for bitter condemnation in recent years has been the . in many cases. And in every measure of social welfare and civic health. the more consumers depend on stores that offer goods at the lowest prices. Also. “big box” stores often enjot various kinds of public subsidies. They are offered. To cite a negative example: states raise great sums from taxes on cigarettes — a product whose consumers are preponderantly poor. durable toys. year by year. however. we must ask: why have so many of these campaigns failed? The answer. The perverse tendencies attributed to “growth” are not due to growth at all. People lament the demise of “Main Street” and the high-quality stuff available there: organic food. and there were less unemployment. they have no shortage of applicants. would people still flock to the big-box stores. homey mainstreet shops that are being driven out by the big-boxes! As the market for such high-quality goods and services shrinks. but rather to unfair and destructive patterns of ownership. The rise of Wal-Mart has come along with a long-term decline of real wages. They sell merchandise produced in sweatshops. However. What does? Less unemployment. many communities actively compete to convince stores such as Wal-Mart to locate there.. they tend to make fewer unwise decisions. and pave the way for more sprawl and big-boxes. and more free time in which to spend it. Such “sin taxes” are popular. in those nice. they can help bring traffic into a community..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. This injustice drives a wedge ever deeper between the rich and the poor.. if Wal-Mart is so bad for communities. in nominally prosperous communities. But: they sell for less — and as bad as it might be to work there. land values tend to increase faster than overall economic growth. a third of the world’s people live in abject poverty and lack any meaningful economic opportunity — while many more. This overheats land values beyond what labor and capital can pay.. artisan-crafted furniture. higher taxes do very little to discourage smoking. As Henry George's analysis shows. They pay. of course. Because such “big box” establishments draw customers from a wide area. All of these things are still available. we see that the greatest freedom yields the best results. The two processes are not unrelated. growth cannot be sustained even if society ignores the wealth/poverty gap. their prices go up still further — and the big-box alternative looks more and more attractive. fascinating. Because of this. is that the more wages fall. see their living standards erode.. wages that are actually below subsistence. and brings on a recession. and higher incomes. of course. not individual peccadilloes. medical care from kindly local doctors. wages were higher. But it turns out that the demand for cigarettes is inelastic. And yet. at prices that working people cannot afford. when people do have more to spend. If. as society’s productivity increases. under these patterns of ownership. because they seem to help “protect” people from harming themselves by smoking.
” The market value of land — natural opportunities — is created not by the land’s “owner.” but by the activity of the entire community. though. Many see “economic growth” as a process that just cannot be sustained without ruining the Earth. of course. If we were to remove every other “intervention”.tendency to weaken environmental standards. landowners are apt to cite the “takings clause” of the Fifth Amendment of the US Constituion. 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. they are not held accountable for everyone’s equal right to them. real estate values are correspondingly low. 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. The value of “ecosystem services” is a component of the overall value of land. That basic. though. or even be aware of it: if the community decides that the existence of that tree frog is valuable. because although it is widely understood that much of land’s market value is attributable to the benefits provided to it by the community. people would not be willing to buy land — and in places where such laws are haphazardly enforced. as far as it goes — but in such arguments it is often forgotten that the community plays a crucial. that is none of his affair. underlying distortion is what makes our economy seem so perverse and unfriendly. as “true free trade”. for a fee — in which case. However. it would only serve to reveal the basic. but rather because the ecological niche occupied by a certain species of tree frog. if the government did not legally guarantee private property in land. say. underlying system of coercion. in Protection or Free Trade. Private landowners take great care to assess — and maximize — the ecosystem services to which they have title. say. these considerations are also open to charges of subjectivity. Unfortunately. That is true. . (He might end up profiting from it. if he’s smart. That seems like a good thing. protects the habitat of an endangered species. often decisive. consider the fact that many tropical species exist in extremely small ranges — not because their habitat has been shrunk by human invasion. which prohibits the taking of private property for public use. role in whether — and how much — people are willing to pay for things. for its normal state is that of subsidy (for landowners) and penalty (on productive workers). he’ll offer tourists a chance to glimpse the rare frog in the wild. But. few landowners have offered to compensate the community for these “regulatory givings. The private landholder doesn’t have to approve of the community’s activity. and the pollution-abating properties of forests and wetlands — be included in our estimations of economic progress and growth. When the market price of a piece of land is adversely affected by a regulation that. 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. fertility. George points out that the economy we know is fundamentally unfree. both to people and to the earth. In essence. happens to be only one mile in diameter. For example. but that we allow the wrong people to do it. How do we set an objective. For example: few would argue that biodiversity is not important and worthwhile.** This is ironic. To counteract our tendency to burn. This is precisely that Henry George refers to. dig and spew our planet to ruin. “ecological economists” demand that the value of “ecosystem services” — such as biodiversity.
suppose one of the parents got a better job. The important thing for economic policy is that people have free and equitable access to the resources that enable them to satisfy their desires. This is one clear example of how bilateral trade agreements such as NAFTA provide an easier time for foreign investors than for domestic ones. Under NAFTA regulations. many partial devaluations due to regulation do require compensation. Why Is America Down?” by Clifford Cobb. Societies that lack it are dysfunctional and declining. Considerations such as this show that the GDP. the family ends up satisfying more of their desires. a phenomenon that defies measurement? Yes. The goal of all economic behavior is the satisfaction of human desires — and therefore. Ted Halstead. in the end. Furthermore. So. Atlantic Monthly. suppose a family had been paying for child care services because of the need to work long hours to earn a living. They are not. The conditions that leads to economic growth are well-known. 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. in terms of whether a partial taking of land value amounts to an unconstitutional taking of private property. or satisfies the same desires with less exertion. isn’t sufficient as a measure of economic growth. Doesn’t this imply that economic growth is. economic growth can only be something that allows greater satisfaction of desires. however. and the privilege to consume and pollute the global commons without penalty. however. with no physical existence — and such desires become relatively more important as people’s material needs become more regularly and fully satisfied. October 1995 **This “regulatory takings” issue remains controversial in US law. Perverse. Moreover. but their desire was to spend time with the kids. to be clear about what is included in the category of “human desires”. | Protection or Free Trade | Back to Lessons | Site map | . destructive patterns of production are often blamed on “economic growth” — but their true causes are gross inequities in the distribution of wealth. *”If the GDP Is Up. all manner of “market distortions” will get smoothed out. it does — but that is less of a problem than it might appear. We must be careful.Economic Growth The very fact that many people are suspicious of “economic growth” is a sign of confusion. of course. Economic growth is integral to human community. there’s no requirement that human desires must be assigned a monetary value in order to “count”. and Jonathan Rowe. For example. Then. Many of the most important human desires are intellectual or spiritual. although a useful economic indicator. restricted to material things. When true free trade prevails. desires which are subjective — possibly different for every person. They could still have afforded child care. enabling the other parent to stay home with the kids. even while spending less money. these underlying distortions are the main reason why our economic indicators often give us confusing readings.
The reason is simple: capital is a product of labor. they can produce capital.is causing suffering and havoc around the world. Until we solve that problem. Technological progress. If people have access to natural resources. But in truth: when abundant labor is compelled to seek scarce employment. Perhaps he was wrong.all these things are products of human labor. very persuasively. 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" -. but it is at the root of all the others: Poverty. hope for the best. and it cannot be. In fact poverty has never been caused by a lack of capital. anyway. Until we solve the problem of poverty. 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. amid the shouting over the Next Big Calamity. should we? Let's briefly examine what Georgist theory says about the fundamental cause of poverty. to have identified the root cause of poverty. if not actually a free market -.arrested development and debt crises). But if he was right? Then we shouldn't waste another minute.only to wind up poorer and deeper in debt. The "liberal mixed economy" under various guises of "social democracy" aided by "labor unions" has led to today's "race to the bottom. including recessions. there will always be a race to the bottom. seeds. But is there a solution? Various programs have been tried. we can only place band-aids over ever-deepening wounds and. Henry George claimed. free trade and improved education simply steepen the slope. That's what we're told. somehow. all the other ones will keep getting worse. The solution of a planned economy which would banish competition failed.The Earth Imperative Human civilization finds itself at a terrifying crossroads. The list of dangers is appallingly long. and the fundamental solution.a market free of regulation. They always have. information processors -." The ideology of "laissez faire" -. spectacularly. machines. If poverty were caused by a lack of capital. Tools. 1) What's number one? We might forget it sometimes. Standard Explanations for Poverty Henry George begins by evaluating the standard explanations for the persistence of poverty amid increasing progress and plenty. why should there still be hunger and homelessness in advanced economies that are awash in sophisticated capital? Poverty cannot be .
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. the factors must be clearly defined and mutually exclusive.but can we meet the ever-increasing energy demand? What is all this "production" doing to our planet.? If we go on the way we're going. terrorism. Labor. Money is not wealth. it just stands to reason: global warming. using only modest improvements of existing technology. produces wealth. there was an "urban sustainability crisis. For example: land is not wealth. Since then. To be classed as wealth in political economy. Sheer human numbers can't be blamed for the persistence of poverty. But we must put to rest the excuse that the earth's resources are insufficient: it simply isn't so. nonpolluting sources by 2050. history shows us that one thing we cannot do. In the days of Malthus the earth groaned under the weight of less than one billion people. Labor and Capital. If we're going to talk about the distribution of wealth. (The UN Food and Agricultural Organization estimates that with current farming methods the world can feed more than 30 billion people. 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. This unambiguous definition allows us to explore questions of wealth distribution. 2) are a product of human labor. all naturally-occurring forces and opportunities. common-sense observations: 1) No production can happen without access to some land. is extrapolate from current trends! When virtually every tree in the Eastern half of North America had been cut down for firewood. indeed. derive two-thirds of its entire consumption of energy from renewable. Our energy and environmental problems are solvable. Every dismal prediction is based on extrapolating current trends. fail to solve them. because it is a medium of exchange. Labor -. with any reliability at all. every prediction of the plateau population level has been revised downward.all human exertion. except for human beings and their products. hurricanes. Society creates a certain amount of wealth." Right now there is a "peak oil crisis. Significant public investment would be required. what then? Poverty must be a problem with the distribution of wealth. 2) People seek to satisfy their desires with the least exertion. We may. They are defined as follows: Land -. there is a clear. working on land and using capital. whether physical or mental. What is wealth? It is the set of things that 1) are material.products of labor which are used in the process of production. we can deduce the basic laws of wealth distribution from two basic. 4) have exchange value. underlying principles that can guide us? This line of thought led Henry George (like the other classical economists) to seek the Laws of Distribution.yet.) In fact. a thing must satisfy all four criteria. Using these definitions. another form of Malthuisianism is taking hold: maybe we can grow enough food. Among what distinguishable groups is the wealth divided? These groups are called the factors of production. we're done for! These dire outcomes are not entirely unlikely but they are by no means inevitable. current predictions call for a leveling-off at somewhere between 9 and 12 billion. The Laws of Distribution If we cannot blame poverty on insufficient resources. this is a "no-brainer" -. Supposedly "overpopulated" Ireland and India exported food throughout their years of famine. In the January. 2008 issue of Scientific American. there was a "firewood sustainability crisis. In some ways." But we don't have to burn oil forever. nor on an inability to produce capital. nuclear proliferation. . our only home? Surely something's about to kill us all. Capital -. if money is destroyed. three solar-power experts explained how the United States could. However. in the production of wealth.the entire material universe.. wars over dwindling fossil-fuel resources. Nowadays.. Items that have sentimental value are not wealth if no one is willing to give something valuable in exchange for them." When people were dying of black lung disease in coal-burning London and New York.explained by any lack of capital. 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. yes: approximately half the cost of the war in Iraq. 3) satisfy human desires. robust correlation between increasing prosperity and declining fertility: it's called the "demographic shift" and is thoroughly documented. floods. the sum total of wealth does not change. after all -. because it is not made by human labor. where does it lead us? Is the distribution of wealth in society merely a political arrangement? Are there any eternal.
or people fishing off of docks.or the work they can find pays them no more than mere subsistence. What's the marginal cost of a laborer? You guessed it: subsistence. working for themselves on land that is free. Indeed. Now. or altruistic. to get something we want more. is land that offers no mineral riches. Natural resources are egregiously wasted. or ascetic. Competition among laborers bids down the price of labor -. Meanwhile.or crops for export. This endless variety of human desires is what makes trade such a powerful economic force. but that is certainly not the case. "Wages" is the term for the price of labor. then. If each partner in the trade were not better off. later. As an economy grows -.The second is a bit like Adam Smith's principle of selfishness. But we're getting ahead of ourselves. all around the world. if the prospects of the jobs offered. People can have selfish. in a perfectly competitive market. if they lack any special skill or other advantage? Bare subsistence. Whatever it is that people want. they wouldn't agree to trade in the first place. George does not presume to know what people's desires are. by far. Their alternative is starvation. But. Agribusiness receives payments to hold fields out of use to "stabilize" food prices. or athletic desires -. say. In microeconomic terms. if we could show that all the available land were being efficiently used.no better than bare subsistence -. the huge demand for resources that lie beneath it. . but in good years one could store up a bit of surplus. millions go hungry while giant farms grow feed for animals -. by industrial society are so poor -. we recognize that unemployment exists -. just for fun. But where is the free land today? Is there any? You might find street vendors setting up shop on sidewalks. which would make life a little easier. some compute large prime numbers. if any viable self-employment opportunity presents itself. The market for unskilled labor is the only one that exhibits the properties of what economists call "perfect competition. there's no shortage of it. A permanent glut of labor supply. so does the value of land. the person we're exchanging with does the same thing! Each is better off. but: no.to the lowest level that workers will accept for doing that kind of work. Whenever we give up something. The alternative is starvation. The alternative to subsistence wages. What's the lowest level that workers will accept. Poverty can be understood. There will never be any more of it. How does this work? The supply of land is fixed. too! Some people run marathons for pleasure. There's no free land. Why does poverty deepen as material progress advances? What can be done about it? The Market for Labor When we talk about poverty. 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. our most valuable natural resource. provides no game animals. You could stake a claim to acreage on the moon (some have done this) or in the middle of the desert. but they cannot find work -. Free Land? Where? We said that wages. 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.no matter.in other words.why don't workers find ways to employ themselves? Indeed. they will.no viable alternative for self-employment. There is a built-in incentive in our system to hold land for speculation. that a relatively abundant supply of workers competes for a relatively scarce supply of jobs. as their owners wait for higher prices in the future. We were searching for "Laws of Distribution" that would give us insight into the fundamental problem of poverty. depend on what ordinary workers can gain.if there is some. Does that mean the earth has run out of room? It would. price is equal to marginal cost. large areas of valuable land lie idle. 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. pocketing its increased value. as a problem in the market for labor. but there is a crucial difference. Of course. at the base. they try to get it with a minimum of irksome toil. And what constitutes irksome toil? That's different for everyone. In modern economies the value of choice sites is astronomical. And land is needed for all production. is free land -. then. As the community grows." The product is interchangeable. There's no free land today -. labor and capital must pay to use any land that's better than the free land. and will yield no crops: the world's most valuable natural resource is urban land. Investors discover that producing wealth is far less profitable than simply holding onto valuable real estate and. In the wealthiest cities.becomes more productive.the wage -. we're talking about a state of affairs in which people are willing and able to work for their living.
via taxation. This creates an irresistible incentive to hold land out of use. and saw a solution. today?) then we must pay for our own right to life." eh? Let's consider an example of the problem of public goods. The reform is doubly efficient -. Georgists look at the tortured logic of "broad-based taxation" and cry. New York was in a fiscal crisis. It's a gift to landowners. excise taxes. states and cities have codes of their own. and everyone needs land to live. at the start of the 20th century. schools. etc. and the more land is held out of use! This further restricts the supply of land. It can be said that all New Yorkers benefited from the subway system. "Away with them all!" There is one fair and efficient source of public revenue. the taxpayers paid for it. The more the economy grows. or some sort of "redistribution" must be used to rectify the injustice. This perennial wrangle became the classic "left-wing/rightwing" debate. whenever the total economy grows. as a species. lotteries. It's no accident that our ability to destroy all life on earth has coincided. estate taxes. in turn. broken-down relic (which still. The "dismal science. So. sales. By the 1970s. import duties. acceptable way to pay for them. this paradox. carried New York's workers to their jobs).are paid for with wealth that has been confiscated. Fares were kept low.until labor and capital can no longer afford to pay it! When this happens. and we're in the bust phase of the boom-bust cycle. But even more that that: the reform makes it possible for us to make sense of our relationship. Just like all public services and infrastructure: a gift. public safety. the greater the expectation of future growth in land value. Financing was often a problem. The US federal tax code is thousands of pages long and changes every year. from productive workers and taxpayers. so workers could afford to ride. taxes on real and moveable property. derived great profits from the subway. how to pay for these things. Far on the right. to the rich getting richer and the poor getting left out. Like many great cities. in a single generation. Far on the left. And. a huge public/private partnership built the subway system. New York City found itself. Today's conventional wisdom advocates "broad-based" tax systems. By collecting the rent of land for public revenue. however. It was carrying some half a million riders per day. fragile oasis in a . And by eliminating the incentive to hold land for speculation. The Role of Government Even a modestly advanced economy needs some public goods.as technology and trade allow greater yield from the same effort -. Everyone has a right to life. It must be held in trust for all people. even before the advent of the automobile -.the value of land? Had New York City paid for its subway system out of land rents. If we must pay private "owners" for access to land (and where is this not the case. But. it removes great waste and inefficiency in our use of natural resources. This means that the share of wealth taken by landowners gets bigger. it develops a greater need for public goods. and its supply stays the same. and the subway system had become a dingy. those who used it paid for it. Income. Even though it's obvious that society stands to benefit from such things. Henry George looked at this mess. But. just exercise essential "traffic cop" functions. with our home. Radical . Proximity to transportation is a prime determinant of land value. to rent-collecting landowners. That brings us full circle. it removes the burden of taxation from production.and it proved a tremendous engine of city growth. brought great vitality to the city. As society grows more complex.for it simultaneously removes two great injustices. and increases the price -.and Essential This reform is doubly just -.so to spread the burden around (and incur the least resistance) we should tax as many different sources as we can. they burden people and slow the economy -. either there will be a violent revolution.for it simultaneously removes two great inefficiencies. The government should do as little as possible. right back to where we started. production starts to decline. public goods -. and all life. from its producers. in desperate need of modern public transportation. One group. and the value of land must be taken for public revenue. people have always struggled to find some sensible. The earth is not owned by anyone. they tell us that self-interested private ownership is the fairest and most efficient way to assign resources. As societies grow. and scarcely paid for it at all.which benefit landowners -. Also. without overburdening producers? Why not return to the community what the community itself has created -.the demand for land increases. nevertheless. there is an ever-greater need for streets. they protest that the "free market" can only lead to consolidation of giant corporate concerns. with our awareness of our home as a single. All taxes must be done away with. it could have done away with fares (and the cost of collecting them) and would have had ample funds to support a system which. We're told that all taxes are bad. sin taxes.
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