Why the Georgist movement has not succeeded: a speculative memorandum - Symposium on Henry George and his Legacy

American Journal of Economics and Sociology, The,  July, 2003  by Warren J. Samuels

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For a number of reasons one would have expected the so called single tax movement to have been a great success. Actually, Georgism enjoyed considerable success until around 1920, evidenced by the relative growth of property taxation compared to other taxes, by the increase in the land component of property taxes due to improved assessment practices, and by early efforts to exempt labor income from the income tax. Efforts to create effluent charges are based, at least in part, on the Georgist premise that the environment is common property.

While Georgist ideas have influenced policies around the world, the level of success, compared to what one might have expected, has been so miniscule as to border on, if not constitute, failure. The question arises: Why has this happened? The answers--the many factors and forces combined (each of which is capable of being stressed by different interpreters)--tend to center on ideology, interest, and policy, but are laden with irony and subtlety.

Of two reasons why one would have foreseen success, one is a matter of logic applied to experience and the other is a matter of ideology.

As a matter of logic the singular position of the economic rent of (unimproved) land and its suitability for relatively intensive taxation, if not capture, is unshakeable, The value and thus economic rent of land, which is permanently inelastic in supply, is governed by the growth in demand for land for purposes of food production and housing, which in turn is driven by population growth. The increasing value and rent is, in the Ricardo-George context, entirely due to the growth of population; accordingly, the rent arises in such a way that the taxation of unimproved land will have no adverse effects on incentives. (Part of the process of the formation of rent is that of bidding land away from alternative uses. This does not negate the basic Ricardo-George theory.)

As a matter of ideology, the foregoing logic is eminently consistent with the dominant ideology. This ideology lauds hard work and productivity, and legitimizes the income and property that derive therefrom. Inasmuch as land value is not a matter of the landowner's hard work and productivity, and economic rent is a transfer, as it were, from the incomes of those who are productive, one would expect intensive taxation to appeal to devotees of this ideology.

The increase in land values is due not solely to some aggregate force called 'population.' It is also due to public expenditures and infrastructure policies that make land more (or less) valuable. Differential fertility is influenced (for example) by government expenditures on agricultural research and land and water conservation and reclamation; and differential location is influenced by the government's highway expenditures and by the government-subsidized transport system. The increase in productivity is often governmental and social, not entirely individual, in origin.

Both bases have failed, however, in part because people strongly tend to identify income as productivity regardless of source-what is mine I have earned--entirely disregarding the social and not individual basis of land values and rent.

Georgist ideas were seen as radical for the following reason. If one assumes that one's legitimate income both belongs to one and is due to one's own productivity, then the intensive taxation of unimproved land conflicts with the dominant ideology of property. Although that ideology stresses productivity, it is amenable to the ipso facto identification of income with productivity. Henry George was in most if not all other major respects conservative, advancing his single tax as a means of reinforcing incentives to productivity and limiting income to productivity. This fact clashed with and was overwhelmed by the identification of income as due to productivity, period.

This identification of income as productivity-even though cleverness in acquiring land that in time appreciated in value faster than other land is not productivity-was reinforced by a number of other ideological and self-interested beliefs.

First, given the belief that one's income and property value was due to one's productivity, and that one's property was one's own to do with as one would, owners preferred to pass it on through unimpeded inheritance, and any taxation related to land value and inheritance value was deemed an intrusion upon their property rights. The single tax was, to this mentality, socialism, and constituted the nationalization of a form of private property. Property was thus a matter of selective perception.

Second, land-value taxation conflicts with two groups whose immediate interests are at stake: the owners of large amounts of land and the real estate and development interests, all of whom would gain from unimpeded private capitalization of socially generated land rent.

Third, speculation has had, in a continuation of Puritan beliefs and values, a negative reputation. But given the identification of income with productivity (and attendant rationalizations), a felt attack on land value as an object of speculation was seen to be not only bad in and of itself but also a threat to other values of a speculative sort, such as equity securities. Some economists went out of their way to endorse the "economic function" of speculation.