The first United Nations Sustainable Development Goal is to ‘End poverty in all its forms everywhere’, and yet regardless of whether there is a left wing, right wing or centrist government in power, the gap between rich and poor continues to increase, suggesting some common cause that is being overlooked.
Nelson Mandela maintained in his 2005 Trafalgar Square address that ‘Like slavery and apartheid, poverty is not natural. It is man-made and it can be overcome and eradicated by the actions of human beings’. He went on to say that ‘Overcoming poverty is not a task of charity, it is an act of justice.’
In Poverty is not Natural George Curtis, for many years a trade union organiser, looks to Henry George whose famous book, Progress and Poverty, probed the question of why it was that, as the Industrial Revolution increased wealth enormously poverty was not lessened.
More recently Nobel Laureate, Joseph Stiglitz, debated the cause of inequality with other ‘Celebrity Economists’ at an event organised by the Institute for New Economic Thinking in Paris in 2015. He concluded his remarks with:
‘There are actually a lot of policies one should think about, but one has always to think about issues of shifting so that, for instance, just a tax on capital might be shifted, and a lot of the models have shown this would happen, but a tax on land, rents, would actually address some of the underlying problems. This is the idea that Henry George had more than a hundred years ago, but this analysis that I have done, goes one step beyond Henry George. He argued that a land tax was non-distortionary, but this analysis says that a land tax actually improves productivity of the economy because you encourage people to invest in productive capital rather than into rent generating. Well, the result of the shift in the composition of the savings towards more productive investment leads to a more productive economy, and in the end leads to a more equal society.’
To read the introduction and first chapter click here.
Over the last year or so there have been a number of articles broaching the subject of land-value taxation in the national press. The Economist (9th August) even suggested ‘The time may be right for land-value taxes’, but
there is also much misunderstanding about that a land-value tax (LVT) is.
In the first place it is not a tax. A tax was defined by Hugh Dalton, later Chancellor of the Exchequer, in his Principles of Public Finance as “a compulsory contribution imposed by a public authority, irrespective of the amount of service rendered in return”. An example will illustrate: the Jubilee Line extension to the London Underground system cost the taxpayer £3.5 billion. Millions of taxpayers who contributed to its cost will never use it. Those who use it for their daily commute or to go shopping pay for its use through their fares, but the big beneficiaries are the land owners along the route. They will have contributed to the cost as all other taxpayers, but the huge uplift in value of their land within a 100 metre radius of the 11 stations along the line was estimated to have been £13.5 billion. Properties beyond the 100 metre radius would also have benefited, but progressively less the further they were from the stations. The cost was born by all taxpayers but the ‘service rendered’ was not reaped in proportion to ‘contribution’. This is the nature of a tax.
With a Land-Value Tax (it is more accurate to regard it as an annual ground rent) there would be an equivalence between ‘contribution’ and ‘service rendered’ – the greater the services received, the higher the
contribution. The ground rent is a market estimation of the value of the services rendered. For example, the existence of a good school in a neighbourhood will increase property prices in exactly the same way as proximity to a station. It is not an arbitrary amount decided by government. LVT is therefore unlike a tax.
LVT differs from taxes in another respect. It does not distort economic activity. Some taxes, the so-called ‘sin taxes’ on tobacco, spirits and petrol, are introduced with the deliberate intent of discouraging certain behaviour by making it more expensive, but all taxes have this negative effect. They reduce economic activity. For example Stamp Duty discourages people from downsizing and affects adversely labour mobility. VAT makes goods 20% more expensive, thus reducing sales and affecting the viability of small businesses.read more
Further Reading: Public Revenue Without Taxation by Ronald Burgess Land-Value Taxation by Kenneth C. Wenzer By Dr Peter Bowman The market mechanism provides the most efficient way of allocating the resources of an economy. Yet public services, which can count for...read more
By John Symons: People debate endlessly whether or not Churchill would have supported Brexit. But what of the great man whom Churchill recommended to the King in 1942 as Archbishop of Canterbury? Which side would William Temple, perhaps the greatest Archbishop in the last century, have supported?read more
In Progress and Poverty Henry George sought the ‘cause of industrial depressions and the increase of want with the increase of wealth’ and offered a ‘remedy’ which remains as relevant to the problems of poverty and inequality we face today, as when he first wrote, but it also opens a new way of dealing with environmental pollution.read more
“You can become wealthy by creating wealth or by appropriating the wealth created by other people. When the appropriation of the wealth is illegal it is called theft or fraud. When it is legal economists call it rent-seeking”
John Kay, Financial Times 27th Dec 2009
“If a free society cannot help the many who are poor, they cannot save the few who are rich.”
John F Kennedy, Inaugural Speech, Jan 1961
“If science is defined by its ability to forecast the future, the failure of much of the economics profession to see the crisis coming should be a cause for great concern”
“Today we live in a world that is divided. A world in which we have made great progress and advances in science and technology. But it is also a world where millions of children die because they have no access to medicines… It is a world of great promise and hope. It is also a world of despair, disease and hunger”
How Our Economy Really Works
– Why are so many trapped in poverty, when others are grossly well-off?
– Why are house prices continuously rising faster than inflation?
– Why do people so often find themselves in jobs that give them little sense of fulfilment?
– Why is a multi-national coffee shop franchise not actually making its money from coffee?
These questions have confronted the UK economy for decades without resolution by governments of the right or left. It is the failure of economics, the author argues.
ISBN 9780856835292 | Price: £9.95