Every day, poverty kills more than 50,000 innocent people – 18 million every year (UN Stats). Considering such immense inequality, it is no surprise that there exists so much war and conflict globally. Most problems in the world really do aggregate upon poverty. Thus, poverty should be the central focus of our efforts to make the world a better place.
Not only should we do this out of compassion for those who suffer, but for those of us living affluent life styles as well. How can we expect to reach our full potential for technological sophistication, our full potential for scientific understanding, and our full potential for happiness and wellbeing if we do not include the minds of the billions who are suffering and unable to contribute to our collective progress? What kind of world will we leave our children and grand children given so much desperation, extremism, and the self perpetuating chaos this ignites?
This essay is an introduction to the remedy for poverty. For the sake of relating a perspicuous message, many other positive implications have been omitted. If you fail to understand what I have written or have other questions or concerns, I will gladly take personal responsibility for helping you to understand. The fate of the world is depending upon it.
The system I am about to tell you about has a long history. It drives at the heart of why poverty, and by extension most other social problems exist. Most importantly, it offers the remedy to the problem – the only remedy. Proponents of the essential position, that the best way to generate public revenue is by collecting the unearned income of land (explained later), include eight Nobel Prize winning economists as well as Albert Einstein, Adam Smith, David Ricardo, John Stuart Mill, Thomas Paine, Leo Tolstoy, Helen Keller, Mark Twain, and even Mathew Bellamy (Muse), among others. It also has united in support figures who would generally be considered political rivals: Winston Churchill and David Lloyd George, Joseph Stiglitz and Milton Friedman, William F Buckley and Ralph Nader, Clarence Darrow and William Jennings Bryan, Aldous Huxley and Henry Ford, and many others.There are many case studies documenting the immensely positive effects of this system. However, due to the fact that it drives at the heart of the problem, it also has the power to disrupt the true source of unearned privilege of an immensely powerful elite class.
The remedy has been effectively erased from public awareness, considering its popularity in the late 19th and early 20th centuries after being expressed in Henry George’s classic book Progress and Poverty (1879), the bestseller of its time second only to the Bible. It even inspired the popular board game Monopoly. Despite the waning of the message, it is not yet lost. The gravity and urgency of this message fills those who understand it with an immense sense of duty. The internet affords us an opportunity to reinvigorate this timeless message and to eventually attain true social justice. We stand to end poverty, if only enough people become aware. If what I am saying sounds too good to be true, suspend your disbelief in the five minutes it takes to read this, and first earnestly consider what I have to say.
From here forward, the term “rent” means money paid by a tenant to a landlord on a regular basis. This is not the political economy definition, but is used instead so that readers unfamiliar with political economy will understand the core forces driving poverty. However, understanding this term is critical to understanding political economy, and all readers are greatly encouraged to take the time to learn about it.
Community-generated wealth is funneled into the pockets of landlords.
Think about an empty piece of land, any land, a prairie, a desert, it does not matter. One person comes and appropriates one unit of this land. The owner holds the land speculatively, i.e. doing nothing with the unit. Then, other people take the surrounding units. These newcomers construct buildings on their units that act as homes and places of business, among other uses. As a result of such construction and productive activity, these people have to pay much higher taxes than those who do not improve their units. To note, this is more or less the tax system across nearly the entire surface of the earth.
Coming back to the example, what happens now to the original unit owner’s land? This unit has obviously increased in value. It has done so as a result of the surrounding owners efforts, value created when they used their units for productive purposes. The original landlord did nothing to improve the value of their land; it was the community that should be accredited with the appreciation.
If it was the community that caused the land to appreciate, then who does that added value belong to? It rightfully belongs to the community, not the landlord. Not only did the speculative landlord not add any value to the land, they held down the other surrounding land values by continually neglecting and withholding their vacant lot from productive use. Who wants to live or work next to an empty lot with trash strewn about?
Meanwhile, people who did use their lots for productive purposes were saddled with taxes on the construction of the buildings, as well as regular taxes on the existence of the buildings. Furthermore, they were taxed on all the productive activity going on in the buildings via for example payroll taxes and sales taxes. Of course, the speculative landlords did nothing with their land. So, they did not have to pay any of these taxes. They were rewarded for doing the wrong thing and the entrepreneurial people were punished for doing the right thing.
How Land Hoarding Causes Poverty
Instead of imagining just any land, now imagine an island. You travel to this island on your sailing ship and stake out the best plot of land on this island for yourself. For whatever reason, your plot has the greatest potential for return on hard work. Let us say that you can pick more coconuts there than anywhere else, all else being equal.
Fast forward, another settler comes to the island. This settler has two options. The first option, (s)he can live on and/or work for you on your land. The down side to this option, from their perspective, is that they have to pay you rent, a portion of the coconuts, or the monetary return thereof. The second option for the newcomer is to go to the next best land, to become a settler themselves. Even though (s)he can not produce/ pick quite as many coconuts on this land, this person does not need to pay rent to any landlord.
According to the Law of Rent, what landlords are able to charge tenants, will be determined by the other land options the newcomers have. If they have good options, places that yield lots of coconuts, the landlord can not charge them as much rent, and their wages will be higher (wages by definition are what is left after paying rent). This is because tenants and/or workers will simply go to the next best land options, if the rents are too high. So really, the amount of rent charged, will be the difference between what the wages will be on the already owned land, again wages are what is left after paying rent, and what could be earned by going to the next best land that is rent-free (not owned). If very low quality land is the next best option after working for the landlord, say land where not many coconuts could be picked if one went there, the amount of rent that can be charged on the better qualities of land will increase because people who do not own land have no other option but to pay more or leave. They will pay more because their relative options become worse and worse, they become desperate.
Knowing this, we can say that the wages of all the non-landlords on the island, living and working on all qualities of land, will be determined not by the quality of land that they cultivate, but overwhelmingly by the difference between some land they work on and the next best quality land that is rent free. Of course, the second lowest quality of land’s rent will be determined by the rent-free land of the lowest quality, and the third lowest quality of land’s rent will be determined by the second’s rent, and so on and so forth. This continues, increasing rent on the highest quality as well, and the general level of wages on all land on the island will be same as the lowest quality of land available for use rent free.
Now, we can make a very profound connection! If landlords under-use or hold out of use higher quality lands, for the reasons stated at the beginning of this essay, this will mean that the best lands will not be available for use after they are appropriated by landlords, and the next best quality of land will be held out of use much faster also. As this occurs, the next best land qualities become poorer and poorer. If this happens, as we established in the previous paragraph, then landlords on the better land can charge ever higher rents as poorer land becomes the next best option. Now we can clearly see why it is not only unfair for the landlord to absorb all the increased land values that others created, but also because these landlords, by withholding their land from use, decrease the quality of the next best options. Landlords can charge ever higher rents simply because of this cumulative effect, not only because more people demand their land, but also because the next best options get worse and worse as they hog space that they under-use or often do not use at all. Wouldn’t it be good if more underused and unused space was made available on the best quality lands so that wages would increase, especially considering that wages are earned and rent is not?
A major implication of this is that new technologies and any other means for increasing the productivity of labor will not translate into higher wages, but why? Remember that rent is the difference between the land in question and what can be produced on the best rent free land. If all the coconut pickers are more producitve because they use a long metal stick to knock off the coconuts (the technology), the difference between the qualities of land will be the same, even if all the land is of higher quality. The difference between five and ten coconuts is the same difference as that between 15 and 20 coconuts. Basically, if tenants have higher wages, landlords will simply raise the rents. Landlords can do so precisely because the landless are backed into a corner, they’re alternatives become worse and worse and again this causes rent to rise and wages to fall.
Now, some people may say that this only applies to farmers, “we live in the age of computers”.However, we still exist in a physical reality. We depend on products and services that require land. Even computers require, for the most part, the internet to be utilized fully as economically productive devices, and we all know how annoying and how much of a hindrance it can be to getting our work done when we are in an area with slow or no internet. Cities have more opportunities, generally speaking, for jobs and for selling products and services than rural areas do. Some coastlines and docs have access to better fisheries than others. Some land has greater mineral value than others. Some places are more in demand than others and have higher returns to labor than others. Indeed, as long as physical spaces are of different qualities, as long as all land is not uniform in every imaginable sense, the law of rent will be the primary force determining the general level of wages, and it will determine who is rich and who is poor. Unless we combat the tendency of wages to fall as lower qualities of land become labor’s alternative, we will not end poverty.
Landless Labor Subsidizes Landlords’ Unearned Income
Both rich and poor, as well as “skilled” labor and “unskilled” labor alike pay taxes on their productive activity via pay-roll taxes, sales taxes, building taxes, etc. This money goes towards paying for public infrastructure. This infrastructure increases land values, and these land value increases are pocketed by landlords only. How is this fair, that hard working people pay most of the bill for a new bridge, better roads, new street lights, etc and yet landlords are able to pocket all of the increases in land values? Everyone should benefit in proportion to what they contribute. What could be more fair than that? Why should unproductive activity be rewarded and productive activity punished? Why should the lazy be rich and the hard working be poor?
Not only do the landless make landlords rich by paying for the public works that increase the landlord’s land values, they also do so via subsides on this unearned income. In the distinct cases where some people are solely involved in owning and “managing” land for their income, a powerful dynamic is illustrated. Landlord’s incomes from land receive huge tax breaks, for instance when they sell their land, while those people that actually perform real work are granted no such tax breaks to their income, for example the capital gains tax break in the United States. Instead, these working people, including everyone from doctors and lawyers to janitors and construction workers, pay taxes levied on their reward for hard work, and this money increases land values. In other words, working people in effect pay landlords via the tax system for doing nothing but being the first to plant their flag in the ground. Landlords need not perform any real work in order to become rich while most working people must struggle to make ends meet, and a great many others must become homeless because rents are so high. Of course many laborers are also landlords, but this does not negate the point that unearned income is subsidized and earned income is taxed. Productive activity is punished and laziness is rewarded. The landless laborers make the landlords rich, while the landless become poor.
The Big Picture
Think of all the tax dollars that are wasted on public infrastructure (plumbing, roads, electricity, etc) driven out ever further by speculative land prices, land that sits idle throughout a city because of the low public revenue collection on land and the high taxes on buildings. These empty and underused lots have a cumulative effect of sprawling people and public infrastructure over great distances (longer piping, roads, etc), and thus wasting a great deal of public revenue as well as increasing transport costs and environmental degradation, both by disturbing natural areas with this infrastructure as well as wasting more natural resources to connect these far of places.
The fact that land is not only used inefficiently, but often not at all, even when others would like to use it, may not seem like that big of a deal, but add together all the times this happens throughout a block, a city, a state or province, a country, and indeed all over the world. Add up all the unused and inefficiently used land that could have been used to employ more people, produce more goods and services, and thus lower the prices of these much needed products and services. Add up all the communally created wealth that is sequestered, out of circulation in the hands of landlords. These landlords don’t make productive use of that land, and thus don’t contribute anything to sustaining the economic activity of the community.
Again, think about all that wasted land and wasted opportunity that the poorest people could have made use of. Instead of having access to the city where all the jobs are, they must pay high transport fees in order to go to and from the city center each day in commute from the outskirts of the city. Paradoxically, the cost for continuous access to the city center, where the greatest opportunity for employment and relatively high salaries exists, falls hardest on those least able to afford it. Consider that all the extra land being held out of productive use could be employed immediately to allow poor entrepreneurs to run productive businesses and safely house their families. These businesses could employ the poor and increase competition in the market, leading to lower prices for consumers the least able to pay for vital products and services. All the empty and unused land in prime locations could be used to the fullest potential, and as a result, more buildings would be devoted to housing, such that the supply of housing would increase, and this would also lower the cost of rent. Consider this every time you see an empty lot, an unused or crumbling building, or a ground level parking lot among tall buildings; this fact is highly indicative of higher levels of poverty.
Don’t confine your imagination to speculation to just cities alone, or just to particular forms of production either like coconuts. Speculation’s ability to create sprawl globally is just as strong.The inefficient use of natural resources locally forces industries to leapfrog to entirely different continents. This causes them to have to pay vastly higher transport fees than if the locally existing resources were available at a reasonable cost. It also causes a host of other problems.
How Low Income Countries Are Exploited Under the Guise of “Development”
Many people living in low income post-colonial countries were not always living in a state of poverty as they are now. It was only since they were dispossessed of their land and their means of subsistence that they started to suffer to the degree they do now. They were forcibly removed from the best land. Now, as if to rectify this injustice, their lands are being “developed” by outsiders through infrastructural contracts. However, in order to receive such infrastructure, the country is saddled with debt, and this debt becomes leverage in all kinds of future negotiations over the country’s natural resources. The real catch however, is that “development” mostly serves to increase land values, not to lift people out of poverty as is speciously implied by the word “development”. This in turn allows landlords to charge vastly higher rent. Remember that rent is determined by the difference between the quality of the land in question and the next best alternative. If the best land is of higher value, but the next best alternative does not increase in value, then this will only serve to increase rent on the higher quality land, thus forcing poor tenants off the best land. “The rich get richer and the poor get poorer” as the saying goes. To be more specific though, the landlords get richer through increased rent, and the landless get poorer. Often, the only place the poor can take refuge from the higher rents are the slums.
Even when aid is free from fraud, collusion, and embezzlement, it is made a much less effective tool, if not a completely ineffective tool, for alleviating poverty because of the land monopoly. As the landless’ costs of living decrease, and by default they have more money, rents rise simply because landlords can raise them. There are no alternative rent free lands where the poor can go unless they live homeless or in rent free slums. Think back to why rent rises when productivity rises. It is the same principle; when the landless have more money, landlords can charge more for the right to use land.
Thinking back to using debt as leverage for natural resources, consider the phenomenon that many resource rich countries are still not very well off, yet intuitively we would think they would be due to their ability to sell their natural resources. What happens, more often than not in resource rich countries, is that corporations extract natural resources without properly remunerating the citizens of those countries for the right to do so. The ability to monopolize these natural resources is truly dependent on land tenure. After all, land, via the surface, is where most of the natural resources are anyway. Thus, if we establish a fair system of land tenure, then we establish a fair system of payment for natural resource use as well.
In the preamble to the constitution of South Africa, for instance, it is written that “South Africa belongs to all who live in it, united in our diversity.” What could be more straightforward and reasonable to say other than Brazil belongs to Brazilians, Russia belongs to Russians, the United States belongs to Americans, and all lands for that matter belong to the people who live in, work hard in, and/or participate in free enterprise as well as contribute to the collective good in their communities? Likewise, should it not be that when foreign entities come to take natural resources in a given country, that they should owe a reasonable amount of money to the people of the nation from which the entity took these natural resources just as they would have to in rich countries? What system would allow for fair land tenure, and by extension fair natural resource tenure, while simultaneously creating a stronger free market economy?
The Silver Bullet, 3 Parts (click “up next” for each part)
Now, what if there was a way to remunerate people for the use of their common resource, the land and the natural resources constituting it, to give those in need access to this unused land, or their fair share of the fruits thereof, and increase everyone’s wealth and wages beyond what even the richest have now? Is there a way to stop rent from increasing so greatly, as to deprive people from their hard work via the tax system, and robbing their earnings via the monopolization of land as stipulated by the law of rent? Can we do this even without ending fundamental human problems like corruption and greed? In short, yes and the remedy is very simple. All we would need to do is levy a land ownership fee in proportion to given land values, and remove all taxes on production like income taxes and sales taxes.
To be very clear, we do not support the redistribution of land by any other means than the free market. We do not support violence. More specifically, we do not support the forced removal of persons with legal title to their land, providing that they pay the appropriate owner-fees as is already required in every country of the world where property taxes are paid.
Anyone who receives a reward for providing others with a useful product or service, rich and poor, “skilled” and “unskilled” alike deserve what they earn. Instead of punishing people for having jobs they should be rewarded completely with untaxed wages. Again, levy an ownership fee on land values, and get rid of all taxes. This system has profoundly positive implications because people under it are incentivized to only take as much land as they need in order to run productive enterprises, thus freeing up more space for productive use, creating more wealth per unit area, and increasing wages. This would free unused land for production and lower rent because laborers better alternatives. Furthermore, given un-taxed wages and exchanges, people would have more in their pocket to exchange, and each transaction would be less expensive.
This collection would actually promote productive behavior because if one did not use their land effectively to meet consumer demand (which could be their own demand in the case of their residence), they would likely be unable to pay for the increases in land value without selling to someone who would be faced with the same incentive. This would thus yield land to those who would use it for a worthwhile purpose. However, there would be no authoritarian rule, like in planned economies, that says the site must be used for a particular purpose. It really does not even stipulate that it must be used at all as long as the land owner pays the effective fee for the land. In addition to the disincentive for not using land efficiently, the system provides a handsome, in fact an infinite reward for production. This is because after taking back the increasing land value, the land owner would keep all the wealth they produced.
Sure the poor would have to pay the owner fee, but only if they owned land. Furthermore, the land that the poor most often own and occupy are of much lower value than what the rich own. Just to be clear, the user fee would be smaller the lower the land value, hence the name often given to this system is Land Value Taxation. Land use would condense upon the highest quality land as people would be unwilling to hold land in high value areas out of use because of the fees attached to such land titles.
With less speculative buyers in the market, the price to buy land would drop drastically, fostering a fluid and entrepreneurial environment.. However, the price to hold land would be in proportion to its true holding value. This would actually lower most peoples total money paid into the public purse, as they would take only the necessary space needed. Without taxes on hard work and exchange, most people would pay vastly lower taxes, or none at all if they did not own land. The market would be greatly strengthened, and poverty would be eradicated as wages rose and rents fell.
What is so special about land and other natural resources though? Sure, we need a physical place to live and work, but we also need food, and medical care is also vital to life. The difference between these things and land is that land is fixed in supply. If we discount usually very slow geological processes, then we can say that we don’t simply have access to more land when we demand it. It would be comical to watch someone at present stand by the shore and will the ocean to recede permanently right then and there. Likewise, taxing land does not banish it from existence. However, more people demanding a certain type of medicine or food, will cause the price to increase and producers to supply more of the product or service being demanded. This will eventually mean that the prices will fall. However, taxing food and medicine, as we do now, actually causes less food and medicine to be produced; more people remain sick and more people go hungry. This is a reason on its own for not to tax things other than land. There is a fixed supply of land. Taxing land does not reduce its supply, and we have also shown that taxing it actually makes it less expensive and more efficiently divided, as to meet demand.
We can not just allow some people to hoard land or other natural resources, to make the rest of us pay a ransom for the right to life. The products of one’s hard work should belong solely to them, but the earth and all that the things that do not exist as a result of someone’s hard work should not belong them.
To learn more about this system and why it would work to do other things like fund all public expenditure, drastically reduce the funds needed to support institutions like the IRS and social welfare programs, do away with economic boom and bust cycles, and do so without taxing people’s wages or productive activity, then check out other articles and videos on howtoendpoverty.info. You may also email any of us with your questions and concerns.
This is not just some pie in the sky idea, everywhere it has been approximately applied it has had overwhelmingly positive effects in terms of improving people’s lives. This is simply undeniable upon examination of the facts. Imagine if you never had to pay taxes again, given that you did not own land. Even if you did and you were productive, you would likely pay even less taxes. Think of how much more money you would have to spend, and economic activity you could participate in to the direct benefit of yourself and the community.
Indeed, we could come furthest the fastest to making life decent for everyone, simply by ceasing to tax returns on honest work, and instead collecting unearned income on land. This would give advantage only to those that could provide society with the utilitarian benefit of their plot in return for their right to responsibly share, based on their merit and not their privilege, in the bountiful fruits of nature.