Georgism
Georgism is an economic theory developed by Henry George in the late nineteenth century, centering on the belief that land should be publicly owned and that its value should be taxed to fund government and public services. George proposed a "Single Tax" on land values, arguing that this would replace all other taxes and help alleviate poverty by ensuring that landowners contribute to the community from which their wealth derives. He contended that land is a finite resource, and its value arises from societal factors rather than individual effort, leading to unearned income for landowners. This perspective challenges traditional notions of property ownership, suggesting that land is more a communal resource than an individual asset. Proponents of Georgism assert that taxing land value, rather than improvements or structures, would stimulate economic growth, reduce inequality, and make land accessible for productive use. Despite its appeal, particularly among social reformers, Georgism has been met with skepticism from mainstream economists, who argue about the potential negative impacts on land use and production. Nonetheless, the concepts derived from Georgism, particularly land value taxation (LVT), continue to influence discussions on land use and economic policy today.
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Georgism
Georgism is an economic theory developed during the late nineteenth century by Henry George. George held a number of occupations during his lifetime, including typesetter and editor, but was not a trained economist. Nevertheless, his treatise on economic theory, Progress and Poverty, became wildly popular. He lectured on his ideas and wrote numerous articles. Most trained economists, however, dismissed his theory.
George’s theory is based in part on ancient ideas about land. Many cultures view land as something that is passed from generation to generation, without an individual owning it in the traditional sense. Ownership is viewed as temporary, a rental of the land. The value of land is based on what takes place on it, and this value is reflected in the wealth of the landowner. This view is reflected in modern municipal tax assessments, which include separate values for the land and for any structures on it.
Background
Henry George was born in Philadelphia, Pennsylvania, on September 2, 1839. He attended school until he was thirteen years old, when he went to work as a clerk for an importer. Two years later, he sailed to Australia and India. He returned to Philadelphia in 1856 and learned typesetting. The following year, he set sail again, working on a lighthouse tender ship, the Shubruck, as a steward. He went ashore in San Francisco and was caught up in the gold rush, but his timing was off. He arrived in Canada as gold fever declined.
He returned to California in 1858 and remained there for some time. He worked for newspapers as a typesetter and editor and was involved in politics, supporting the Democratic Party. He gained knowledge and experience, but earned little financially. He and two partners founded the San Francisco Daily Evening Post in 1871, but shuttered the paper four years later due to funding problems.
George’s political efforts yielded little success, but in 1876 he gained a minor political appointment. His position as a state gas-meter inspector gave him a steady income and time to write. He became concerned during the economic depression of 1873–1878, and in 1879 published Progress and Poverty: An Inquiry into the Cause of Industrial Depressions and of Increase of Want with Increase of Wealth: The Remedy, which became widely read and was translated into many languages. George also wrote pamphlets and magazine articles, and embarked on lecture tours in the United States and United Kingdom.
George’s writings and lectures focused on the wealth gap. He saw American wealth increasing during the depression, but he also noted the growth of poverty. He likened material progress to a wedge shoved through society, raising some and flattening others.
With the planning and construction of the transcontinental railroad, George saw land prices in California rising. He believed he saw the explanation for the wealth gap in action. English economist David Ricardo was known for the doctrine of rent. To land exclusively he applied the law of diminishing returns and the concept of margin of productivity. The Ricardian doctrine argues that economic growth and land scarcity are linked; as the economy grows, available land shrinks. The landowner, he said, gained more and more while labor and capital diminished. Ricardo described this as unearned economic rent, which he believed the state should tax. George believed that if this single tax was large enough it would fund public works expansion, which would help the poor. His ideas were largely applauded for their religious appeal, but trained economists generally dismissed George’s theories. They pointed out that taxes on site values can influence their use. A landowner might choose not to allow use of a property, which would eliminate production and labor associated with the land.
In 1880 George moved to New York City. Six years later he again ran for public office, this time as a reform candidate for the United Labor Party. He campaigned for city mayor, coming in a close second to the Democratic candidate, Abram Stevens Hewitt, and well ahead of Theodore Roosevelt, the Republican candidate. George, who wrote several other books and continued to travel and lecture, died in New York City on October 29, 1897. He was in the midst of a second campaign for the office of mayor of New York. His final book was published posthumously in 1898.
Overview
Henry George proposed a single tax on land values to replace all other taxes to fund the government. Those who supported this idea did so because of its simplicity, their belief that it would stimulate construction and economic growth by eliminating taxes on structures, and the idea that land, as a fixed resource, should be taxed to benefit society and fund government.
Georgist philosophy is both a social philosophy and an economic theory. Georgists believe that the gifts that nature provides should benefit all of society, and social problems should not be addressed by focusing on symptoms, but should rather be tracked to their cause and dealt with on that level to eliminate the problems in the future.
According to George, wealth is produced by land, labor, and capital. The distribution of these sources must therefore be at the root of poverty. Land is in fixed supply and is required for all life and production, yet those who own land earn money by allowing others to use it, without the property owner contributing to production. Landowners may also refuse to allow their land to be used productively. When good land is withheld from use, labor must use less-productive land. When rents go up, wages and productive investment suffer. This leads to unemployment and cycles of wealth and poverty. George proposed that land rent should be used to benefit society. This would ensure that good land was available for use, which would lower prices and rents. Labor would keep more of the results of their work. This abolishment of all other taxes in favor of a land value user fee became known as the Single Tax.
Modern proponents of the Single Tax advocate for land value taxation (LVT). LVT assesses property taxes on the value of the land, including improvements made to it, but does not tax any structures on the land. It is often favored in regions where primary land use is agricultural. Economists who advocate for LVT note that valuation of structures is often less stable than land value. Land value is primarily influenced by what the land is used for and what happens nearby—for example, the value of an acre of land in an agricultural area does not change much based on nearby development, but a plot of land the same size in an urban setting might be valued based on where it is, if for example the city experiences demand for usable retail space in that neighborhood.
Bibliography
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Bryson, P. The Economics of Henry George: History’s Rehabilitation of America’s Greatest Early Economist. Springer, 2011.
“An Introduction to Georgist Philosophy & Activity.” Council of Georgist Organizations, cgocouncil.org/cwho.html. Accessed 18 Dec. 2019.
E.S.L. “Why Henry George Had a Point.” The Economist, 2 Apr. 2015, www.economist.com/free-exchange/2015/04/01/why-henry-george-had-a-point. Accessed 18 Dec. 2019.
“Henry George 1839–1837.” The Library of Economics and Liberty, www.econlib.org/library/Enc/bios/George.html. Accessed 18 Dec. 2019.
Kagan, Julia. “Land Value Tax (LVT).” Investopedia, 1 Dec. 2019, www.investopedia.com/terms/l/land-value-tax.asp. Accessed 18 Dec. 2019.
Kinsley, Michael. “The Obscure Economist Silicon Valley Billionaires Should Dump Ayn Rand for.” Vanity Fair, Oct. 2017, www.vanityfair.com/news/2017/09/the-obscure-economist-henry-george-ayn-rand. Accessed 18 Dec. 2019.
Neklason, Annika. “The 140-year-old Dream of ‘Government Without Taxation.’” The Atlantic, 15 Apr. 2019, www.theatlantic.com/national/archive/2019/04/henry-georges-single-tax-could-combat-inequality/587197/. Accessed 18 Dec. 2019.