Liberals everywhere are struggling, not least because of their image as unambitious defenders of the status quo. Could the radical politics of land and the ideas of Henry George offer a route out of the political wilderness?
Despite rarely appearing in economics textbooks today, Henry George was probably the world’s best known political economist in the late nineteenth and early twentieth century. His first book, Progress and Poverty, sold several million copies – somewhat remarkable for a treatise on economics. In it he set out to understand how there could be such terrible poverty in a country so rich as his native United States.
His solution was simple: governments must levy a tax on the value of land. This built on David Ricardo’s insight that landowners monopolise economic value at the expense of capitalists and workers, ‘socialising’ the unearned gains that accrue to landowners through no work of their own.
It is difficult to overstate the influence of George’s ideas at the time. Einstein thought every line of Progress and Poverty was “written as if for our generation” and by 1933 philosopher John Dewey estimated that the book had “a wider distribution than almost all other books on political economy put together”. Even the board game Monopoly, originally called The Landlord’s Game, was inspired by its creator Lizzie Magie’s interest in George’s ideas. Sadly, those ideas fell out of fashion later in the twentieth century, in part due to economics increasingly viewing land as a factor of production not worth studying.
But after a decades-long hiatus Georgian political economy is back. The Liberal Democrats this summer announced a thorough plan for a land value tax and the Labour Party nodded to its introduction last year in its manifesto. These developments are to be much welcomed. Despite being forged well over a century ago, a land value tax is an idea of great relevance to the UK today.
Take the housing crisis. A dysfunctional land market lies at its root and a land value tax could begin to address this by bringing down land prices. It could also deter ‘land banking’, the practice by which developers acquire planning permission for a plot of land but fail to build on it. Any political force getting a grip on this should expect significant electoral gains and begin to regain favour amongst the young – those most affected by today’s housing shortage.
It could also help reset our broken tax system. By creating a new revenue stream for the Exchequer, and a potentially significant one at that, its introduction could allow for widespread tax cuts for those most in-need of an income boost. What’s more, a land value tax raises revenue without discouraging productive economic behaviour because land prices are rarely a reflection of the actions of landowners.
A land value tax could also provide the foundations for a much more radical overhaul of society, as University of Chicago academics Eric Posner and Glen Weyl set out in their book, Radical Markets. They argue that a tax levied not just on land but other assets too could ‘socialise’ almost all private property, in process generating an enormous level of taxation necessary for funding a generous basic income.
Whilst this argument has its flaws – not least that subjecting most personal property to taxation appears a gross invasion of privacy – it demonstrates the radical potential of a political economy of land. New approaches such as these will be required for liberals to shake off their stale, pale image. A land value tax is an essential first step on that journey.