I WOULD LIKE to return to a question I raised at the beginning of this section: How might a humane and sustainable culture re-invent the "ownership" connection between people and the land? In attempting to answer this my goal is to develop a system that harmonizes the full range of legitimate interests discussed in the first article – the interests of the immediate user, the local community, the planetary community, future generations, and all of life.
We have already seen some of the ways that our present approach to ownership falls short of this goal. We have explored land trusts as a possible step in the right direction, but it seems to me that in their present state they also do not provide a full answer. This is in part because they must exist within the current system, but I suspect it is also because they do not yet have a vision that integrates them into the large whole of a new culture.
What follows is an attempt to work toward that larger vision. We will begin by looking for an ideal (yet realistically possible) future system and ignore, for the moment, how we might get from here to there. The starting point will be our legal and economic relationship to the land, but as you might expect, real culture is too interconnected to treat such an important relationship in isolation. Our exploration will carry us into considerations of other basic legal patterns that shape our economic lives, as well as their relationship to new educational patterns, etc. It is more of a "grand vision" exercise than I usually indulge in, but it feels like the time has come to draw together the emerging possibilities for land with a number of the threads that have emerged in previous issues of IN CONTEXT.
Some Fundamental Choices We need to start from a deep foundation, and perhaps the most basic political/economic fact about land rights is that nature is generous. Land, the ecosystems on the land, and the natural resources within the land are not the products of human labor, yet they provide immense value to humankind. Even when human labor is mixed in as part, as in farming or extracting oil, we should be humble enough to realize that much of the value in what is produced has still come from nature and is thus an unearned benefit. A fundamental question that any political/ economic system must answer is, how are these unearned benefits going to be distributed? The answer to this will say a great deal about the fundamental beliefs of that society – its view of human life, justice, and our relationship to nature – and it will also powerfully shape the economic and social systems of that society.
Closely related to this is the question, on what basis is the land to be distributed (allocated) to people? Historically, there have been three main ways that land has been allocated. Tribal societies did it primarily on the basis of the ability to use the land. In the complex web of these cultures, custom and politics entered in as well as ability, but in general there was no shortage of land or advantage to "having" more than you could directly use, so land distribution was not a divisive issue. With the coming of civilization, land use became more complex and the power issues around it became more important. These more complex societies have used two major approaches to land allocation: political considerations (as in feudal Europe or the USSR), or ability to pay (as in the industrial West), both of these being attempts to answer what is the best use, who is the best user, and who should make these decisions. Both have had their drawbacks in practice, but of the two, it is my sense (or perhaps my bias) that the marketplace is potentially more efficient and more effective at decentralizing power and decision-making (with, however, some qualifications that will be discussed below). Thus the first choice I’m making is to explore alternatives that give the marketplace a central role in allocating who gets what land.
Choosing the marketplace to allocate the land also answers (up to a point) the question of who gets the unearned benefits. Standard economics (Ricardo’s theory of rent) shows that in a market system the unearned benefits go either to the government via taxes or to the owner. Indeed, in a true market economy all economic surplus eventually winds up in one of these two places because the coercive power of government and the fixed supply of land enable these two to always out compete all the other players. The owners "collect" these benefits either through rents or increases in selling price (if others use the land) or by avoiding rent (if they use it directly).
The most dramatic recent example of this is the rise in the price of oil, although the steady increase in land prices during the past 20 years has been economically at least as significant. The net effect has been to suck economic surpluses out of the general society and concentrate them in the hands of a relative few with major land and natural resource holdings.
Thus in our present system, the unearned benefits derivable from land are unevenly spread throughout the population because land ownership is so unevenly spread. Remember, 75% of the private land in the U.S. is owned by only 5% of the land owners. Is this just? Is this what we would want in a humane sustainable culture? Does this mean that a marketplace approach can’t meet our original goal?
Fortunately, there are alternatives. Even though a marketplace system requires that the unearned benefits go essentially to the "owner," this does not say anything about who the "owner" is or how ownership rights might be divided. To broaden our sense of the possible, let’s consider some marketplace systems in which the unearned benefits are shared equally throughout the population.
In principle, there are two ways to do this. The seemingly simplest way is to make everyone a user/owner, to divide up the land itself so that each person has an equal valued plot. (This is a "barter consciousness" approach to the problem.) This type of land reform has often been tried in Third World countries with generally disappointing results. The practical problems of getting truly equal valued plots are great, the resulting land break-up doesn’t necessarily lead to the best or most efficient land use, and perhaps most important, the result is unstable. In almost no time, the more assertive farmers (or the old landlords) are buying up land from their less fortunate neighbors and the old inequalities soon return. So this approach fails because it only temporarily changes who owns what while leaving the basic rules of ownership unchanged.
The other alternative is to make every user a renter (or rather a leaseholder) and then to make all of us, collectively, the landlord (as, on a small scale, a community land trust does). Land use can then be as unevenly distributed as we like (with who gets to use what determined by the marketplace), but the users will pay their full share for the unearned benefits the land provides them and the economic value of this benefit can then be shared equally by the whole population.
This alternative (as an idea) has a long history, having been suggested in various forms by William Penn (1693), Tom Paine (1797), John Stuart Mill (1848), and others. The idea is most closely associated, however, with Henry George, a San Franciscan who explored it in detail about 100 years ago. The general idea still has much to recommend it. What George suggested was:
- Changing the property tax so that it was based solely on the value of the land, and not on the value of buildings or other improvements to the land.
- Raising the land tax up to 100% of the full rent value of the land only.
- Distributing the value from these taxes through government services "for the common good."
George claimed that this land tax would be sufficient to pay for all the costs of government, and he advocated eliminating all other taxes. His ideas thus became known as the "single tax theory." The book in which he explained all this, Progress And Poverty (published in 1879) became a best seller, but his ideas never found a political home. Conservatives attacked him as a socialist and Marx described his ideas as "the capitalist’s last ditch." Brief partial experiments in places like Australia and pre-communist China showed some success, but the full idea has never been tried.
Could it work? On at least one count the answer appears to be yes. The income available from a 100% land tax in the U.S. was estimated to be approximately $1 trillion in 1982, or twice the total of all local, state, and federal income. Even with current high levels of government expenditures, this tax would provide an embarrassment of riches.
From the perspective of the late 20th century, there are, however, two main drawbacks to his proposals. The most obvious is the idea that the government is the expression of the common good. We can now see that (even with the best intentions) governments function as special interest groups with certain monopoly powers, and that the benefits from government programs are generally unevenly spread. Unfortunately, guaranteeing such a large source of revenue to the government would probably increase its power and decrease its responsiveness without significantly improving its service to the public.
Equally important, from an ecological perspective, we can see that any new system of "ownership" needs to recognize that the earth is the common heritage of all life, not just humankind.
We can put George’s basic idea into a form that incorporates these concerns by combining them with ideas from the land trust movement. One form of this could be as follows:
- Split all land ownership rights into a stewardship bundle (for immediate users) and a trusteeship bundle (to be held, for example, by a community land trust publicly governed but separate from normal government the way school districts are now).
- Charge all land users full rent value for their lease fee.
- Set aside some percentage of this income for the support of wilderness areas, soil conservation, and other activities supportive of all life.
- Distribute the rest of the income directly to people as a Common Heritage Dividend. (This CHD would amount to about $4,000 income per person per year in the United States.)
The Common Heritage Dividend would function in some ways like a "guaranteed income" or universal social security, but its basis is very different. It is not a welfare program and its level would not be set by government fiat. It is rather a recognition of the right that each person has to share in the unearned bounty that nature provides to us all. Its level would be set by the marketplace in a way that would make it both nonpolitical and self-regulating. A society that was putting excessive effort into the market economy would produce a large economic surplus and so bid up rents. This would raise the CHD and encourage people to turn their attention to non-economic parts of life. On the other hand, if too little energy was going into normal economic activities, rents and the CHD would fall, moving more people back into the marketplace. We would thus democratically choose, through many small personal choices, the appropriate level of economic activity for our society.
The CHD would also go a long way toward alleviating the two main drawbacks of market economies that I described in issue #2: their systematic bias towards those with more wealth to spend, and their difficulty in directly supporting socially valuable activities, like child raising, whose benefits are long-term or diffuse. The people who are hurt most by the bias toward wealth are, of course, those with no spending money at all who become, in effect, economic non-persons. The CHD would eliminate this possibility, making sure that everyone had at least some "vote" within the marketplace. It would likewise provide significant support for all kinds of socially valuable activities motivated by caring and commitment rather than economic gain.
There are some interesting, but not insurmountable, questions about just how the Common Heritage Dividend should be distributed. Should it be spread equally around the globe, or should localities and regions retain some of the value generated within them? To answer this, it is helpful to recognize that the rent value of land is made up of primarily two factors: the natural qualities of the site (soil fertility, natural resources, views, climate, etc.) and the desirability of the location (which is often influenced by human development activities in the surroundings). Two opposite extremes are represented by desert land that is valuable because of the oil under it and a lot in a city whose value is all due to its location. To properly acknowledge both of these factors, some of the rent value in a community should be retained by that community. This would also give immediate positive feedback that could encourage people to improve the desirability of their communities.
There are many ways this could be done. For example, Alfred Andersen, in Updating The Early American Dream, suggests a 50/50 regional/global division as well as adjustments for the length of time lived in the locality. Alternatively, it might be appropriate to have a number of levels – local, regional, national, global – over which the CHD was averaged. The exact design needs to combine both justice and systems theory, and I won’t try to pursue the details any further here.
What would such a system accomplish?
- Land would no longer be a purchasable commodity, which would among other things end all land speculation.
- As part of this, it would no longer be profitable to hold vacant land out of use for speculative purposes. More land would be available to those who could put it to good use and urban development in particular would be denser and more efficient.
- Land would be more accessible to potential users with personal energy but little capital such as young families wanting to farm. They would only have to come up with rent and not a purchase down payment — plus credit, and their Common Heritage Dividend would guarantee that they had at least some income to meet the rent.
- The Common Heritage Dividend would reconnect the market economy with the non-market (household, volunteer, natural, etc.) economies. As I discussed in issue #2 of IN CONTEXT, the market economy now benefits from the others without making an adequate return. Since a significant portion of the land use rents would come from businesses and other institutions, the CHD would provide the needed missing link from these back to all the people. With this link established, it is quite likely that we could reduce the wasteful pace of our present economy while improving the quality of life throughout the society.
- It would eliminate the unearned economic advantages that now come with ownership, and thus eliminate one of the root causes of social conflict. Were such a system established on a global scale, it would eliminate much of the economic cause of oppression, revolution, and war.
- The need for many government programs – from the Department of Defense to unemployment compensation – would be greatly reduced.
- Perhaps most importantly, we would experience a great healing with each other and with the land. We would be returned to our birthright, no longer treated as a conquered people in our own land.
Justice And Economic Distribution This looks promising, but before jumping to any conclusions, we had best consider how it might integrate into a total economic and cultural system for a humane sustainable culture. What we have done so far, through the Common Heritage Dividend, has been to emphasize the value of equality in economic distribution. Arthur and Shaw in their survey of economic philosophies identify three major criteria that have each been claimed to be the basis for just economic distribution: equality, need, and effort. Sticking to only one of these, however, is not my intent (and has generally been a disaster in practice). What I would like to propose instead is not a competition between these three but a recognition that they each have their place.
The moral idea behind the Common Heritage Dividend is that no one has a justifiable claim to an extra portion of the unearned benefits provided by nature, and thus the only fair way to distribute these is equally. This in no way contradicts the idea that each person is entitled to the economic value they create through their own efforts. The challenge for any political/economic system is to neither over- nor undercompensate these efforts.
For example, Shann Turnbull, the innovative Australian economic writer, points out that there is no economic justification to granting perpetual ownership rights to venture capitalists. All investments are expected to pay for themselves in a finite number of years, and income benefits after that time are in effect an unearned bonus that could be eliminated by creating what Turnbull calls "ownership transfer corporations." In these, the ownership of a company gradually transfers (over 10 to 20 years or so) from the original owners/risk-takers to the employees. Thus the original effort of those who start the company is compensated, but so is the effort of those whose labor has made it a continuing success.
This points in the direction of an economic system in which entrepreneurs are encouraged to start businesses, thereby contributing their vigor and innovation, but as these businesses become established they develop into worker- ownership. The Mondragon Cooperatives (see issue #2) provide useful models for how this can be done. It also suggests structuring the tax system so that workers are able to retain a fair proportion of the income the marketplace provides. Such a system would be comfortable with economic inequality and diversity, like a healthy ecosystem. Its core requirement would simply be that inequalities must be based on differences in effort and contribution, not on special privileges.
With this combination of equality for the unearned bounty of nature and proportionality for earned income, most ordinary needs can be met. That leaves only the extraordinary needs, such as major illnesses and other catastrophes, and these can be handled by the familiar old tool of insurance. This is not to say that there are not many important issues to be looked at about how that insurance is funded, what constitutes real need, and how to reduce the costs of such things as health care. These are important refinements, but it seems to me that the basic concept of insurance is practical, consistent with the values we have been pursuing, and not needing to be replaced.
What might be the objections to such a system? There are two major ones that I’d like to address here – that it deprives current owners of their rights and that it would encourage sloth in the general public. There is no question that such a system would end the current (and long established) privilege of owners to retain for themselves all the unearned benefit from their land. The question is, is this a privilege that has any place in a humane sustainable culture? If we search out the roots of this privilege, we find they go back to the beginning of civilization when conquest and the power of the sword first created the concept of land ownership. Ever since then, the spoils of conquest have always included the claim to exclusive control over the conquered land and all it produced. Our property laws and ideas are a direct inheritance from the privileges of the conqueror (in both the East and the West) and they sustain the logic of war. It seems to me that it would be self-defeating for us to attempt to build a just and peaceful world while still retaining this major "might justifies special privileges" principle. This may be a hard value shift for some people to make, for as Voltaire wryly noted, "Nothing is as honorable as an ancient abuse," but it seems to me that we need to have the courage to affirm that the "conqueror’s privileges" are as out of place in our world as the "rights of slaveholders."
The question of sloth has been much debated (and even empirically studied) in connection with various proposals for a "guaranteed income" or "negative income tax." There isn’t full agreement across the political spectrum, but the general conclusion seems to be that this would not be a major problem. It is certainly true that people who feel financially secure do different things from those who feel that their survival is daily at stake, but generally they still keep doing. Whether these things are as "socially useful" depends a great deal on who the doers are and who is judging what is socially useful. Without fully plunging into that debate, let me note that a culture that educated its youth through the kind of learner-directed approach described in IN CONTEXT #6 would probably produce adults who made much more creative and socially useful use of their "free time" than our present culture does.
How might we move from our present system to this alternative? I don’t have any simple answers. Obviously such a change would deeply threaten the most powerful vested interests in the world as well as challenging deeply held cultural beliefs and values. I don’t think it is a change our culture is ready for yet, but I can’t help but feel that it is an idea whose time is coming. In the meantime, we can prepare the way by doing all that can be done to strengthen the land trust movement, encourage socially responsible entrepreneuring, develop more Mondragon-type worker- owned companies, and raise our own level of understanding about the deep issues involved in land ownership.
Andersen, Alfred, Updating The Early American Dream (Tom Paine Institute, 1155 South Dora Street, Ukiah, CA 95482, 1984, $10).
Arthur, John, And Shaw, William H., Justice And Economic Distribution (Englewood Cliffs, NJ: Prentice Hall, 1978).
George, Henry, Progress And Poverty (New York: Random House, 1880).
Grant, Phil, The Wonderful Wealth Machine (New York: Devin-Adair, 1953).
Harrison, Fred, The Power In The Land (London: Shepheard- Walwyn Ltd, 1983).
Institute For Community Economics, The Community Land Trust Handbook (Emmaus, PA: Rodale Press, 1982).
King, Russell, Land Reform: A World Survey (London: G Bell & Sons, Ltd, 1977).
Strong, Ann L., Land Banking: European Reality, American Prospect (Baltimore, Johns Hopkins Univ Press, 1979).
Turnbull, Shann, New Money Sources And Profit Motives (Sydney: Company Directors Assoc. Of Australia Limited, 1975).