So Georgism won’t help tenants directly. It would help the economy, by redirecting taxes from inefficient sources. It would help governments raise revenues and hence provide services without distorting the economy. But it would not lower rents. In fact, if it makes the area more economically viable and a better place to live, it will end up raising rents, because the demand will rise.
I assume you are implicitly bracketing out all of the slower and more indirect benefits like switching NIMBYism to YIMBYism, deadweight loss, compounding growth and so on, but even so, there are immediate, direct benefits to renters: the revenue must be spent, and it cannot be transferred to the landlord class because that would just constitute a second rent to tax away again; so it must be spent on renters (there is no one else it could be spent on since a human either owns or rents) - such as by a ‘citizen’s dividend’ or by lowering or eliminating taxes like income/sales/excise/capital gains taxes. That’s one of the most appealing features: since the tax of landrent must be paid to someone, why pay it to private rentiers who simply consume it for private pleasure and idleness, rather than to the government to do useful government things or at least reduce the burden of how much it taxes to do those things?
I was putting all those under “It would help the economy, by redirecting taxes from inefficient sources. It would help governments raise revenues and hence provide services without distorting the economy.”.
And we have to be careful about a citizen’s dividend; with everyone richer, they can afford higher rents, so rents will rise. Not by the same amount, but it’s not as simple as “everyone is X richer”.
So I would argue that when Stuart says Georgism wouldn’t lower rents, he’s missing the differing effect on the urban core and the urban margins around that core. Georgism should raise the desirability (and hence rental value) of core regions by putting land there to its highest and best use. This means apartments/etc (and one of my geo-economist friends should have an article coming out in the future partially dealing with how Georgism incentivizes YIMBY and other removals of restrictions on highest and best use). But on the other hand, this also means that development won’t be pushed out in the form of sprawl bc of vacant lots and severely underutilized land in the core. People and capital will be able to migrate to better lands in the core instead of being forced onto worse marginal (or even submarginal) land. This would mean that the rental value of existing marginal areas would actually fall as demand lowered.
This dynamic was fundamental to how Henry George argued that Georgism would enable true full employment. It would essentially recreate the frontier (except better, much more sustainable, and not dependent on ethnic cleansing). Theoretically, marginal land right around the core would be so much less in demand as to have a rental value of 0. This would mean that people would be able to eke out a decent living there free of rent and taxes. No man would feel the need to wage-labor under a boss for less than they could get in being self-employed at the margin. This would be a boon to the average unskilled worker currently subject to the “law of wages” that drives wages downwards. Employers would be competing for workers instead of the other way around, just like what happened in the early days of the historical frontier.
The problem with our current system is that the land right around the productive urban core is taken up by sprawl. It still commands rent and it’s still taxed. This means that people have to travel very far to extremely crappy land if they want to find land that’s cheap and “rentless”. This land in turn is so far away and isolated that it’s too crappy to viably self-employ on.
There is an interesting paper from 1978 called “Sectoral Shift in Antebellum Massachusetts: A Reconsideration” which seems to agree with Henry George’s view. It argues that in the early days of settlement, the American frontier worked as advertised. Land was readily available to the average person a short distance away and employees had a viable alternative to working for an employer (as founding fathers like Benjamin Franklin pointed out). But as the land was gobbled up by speculators/etc, the frontier as a whole moved westwards, continually increasing the transportation/settlement costs/risks. This meant that there was a growing amount of poor people in the East due to imperfect labor mobility.
In terms of how this would function in the modern day, it might be instructive to compare the situation in the early 20th century when improvements in transportation briefly opened up a pseudo-frontier of cheap but still decent land around urban centers:
“Another example Ward provides is Walter Southgate, a former street corner agitator and founding member of the Labour Party. Southgate first built himself a carpenter’s bench, and then constructed an 8-by-16 ft. two-room hut, finally hiring a Model-T to move it in sections to the concrete foundation he and his wife had laid on their 2.5 acre site. They taught themselves brickwork in the process of building the chimney. They bought the land after the First World War, began construction during the General Strike of 1926, and completed the home in 1928. During the almost thirty years the Southgates lived in their home, they “produced every kind of fruit and vegetable, kept poultry, rabbits and geese, grew a variety of trees including a coppice of 650 saplings and in fact made their holding more productive than any farmer could.”
Ward considered the Southgates typical of dozens of people he investigated who, “with no capital and no access to mortgage loans, had changed their lives for the better.” For example Fred Nichols, who bought a 40-by-100 ft. plot of land for ten pounds in 1934, and—starting from a tent where his family was housed on weekends—”gradually accumulated tools, timber and glass which he brought to the site strapped to his back as he cycled down from London.” He sank his own well in the garden. Elizabeth Granger and her husband, who bought two adjoining 20-by-150 ft. plots for ten pounds (borrowing a pound to pay the deposit); like Nichols, they stayed in a tent there on days off, gradually building a bungalow with second-hand bricks. They raised chickens, geese and goats.1
Ward quotes Anthony King, in The Bungalow, on conditions in the first half of the twentieth century:
“A combination of cheap land and transport, pre-fabricated materials, and the owner’s labour and skills had given back to the ordinary people of the land, the opportunity denied to them for over two hundred years, an opportunity which, at the time, was still available to almost half of the world’s non-industrialized populations: the freedom for a man to build his own house. It was a freedom that was to be very short-lived.2″” -Kevin Carson, Organization Theory http://www.mutualist.org/sitebuildercontent/sitebuilderfiles/otkc11.pdf
I assume you are implicitly bracketing out all of the slower and more indirect benefits like switching NIMBYism to YIMBYism, deadweight loss, compounding growth and so on, but even so, there are immediate, direct benefits to renters: the revenue must be spent, and it cannot be transferred to the landlord class because that would just constitute a second rent to tax away again; so it must be spent on renters (there is no one else it could be spent on since a human either owns or rents) - such as by a ‘citizen’s dividend’ or by lowering or eliminating taxes like income/sales/excise/capital gains taxes. That’s one of the most appealing features: since the tax of landrent must be paid to someone, why pay it to private rentiers who simply consume it for private pleasure and idleness, rather than to the government to do useful government things or at least reduce the burden of how much it taxes to do those things?
I was putting all those under “It would help the economy, by redirecting taxes from inefficient sources. It would help governments raise revenues and hence provide services without distorting the economy.”.
And we have to be careful about a citizen’s dividend; with everyone richer, they can afford higher rents, so rents will rise. Not by the same amount, but it’s not as simple as “everyone is X richer”.
Which higher rent will then get taxed away, and which too then must be spent.
So I would argue that when Stuart says Georgism wouldn’t lower rents, he’s missing the differing effect on the urban core and the urban margins around that core. Georgism should raise the desirability (and hence rental value) of core regions by putting land there to its highest and best use. This means apartments/etc (and one of my geo-economist friends should have an article coming out in the future partially dealing with how Georgism incentivizes YIMBY and other removals of restrictions on highest and best use). But on the other hand, this also means that development won’t be pushed out in the form of sprawl bc of vacant lots and severely underutilized land in the core. People and capital will be able to migrate to better lands in the core instead of being forced onto worse marginal (or even submarginal) land. This would mean that the rental value of existing marginal areas would actually fall as demand lowered.
This dynamic was fundamental to how Henry George argued that Georgism would enable true full employment. It would essentially recreate the frontier (except better, much more sustainable, and not dependent on ethnic cleansing). Theoretically, marginal land right around the core would be so much less in demand as to have a rental value of 0. This would mean that people would be able to eke out a decent living there free of rent and taxes. No man would feel the need to wage-labor under a boss for less than they could get in being self-employed at the margin. This would be a boon to the average unskilled worker currently subject to the “law of wages” that drives wages downwards. Employers would be competing for workers instead of the other way around, just like what happened in the early days of the historical frontier.
The problem with our current system is that the land right around the productive urban core is taken up by sprawl. It still commands rent and it’s still taxed. This means that people have to travel very far to extremely crappy land if they want to find land that’s cheap and “rentless”. This land in turn is so far away and isolated that it’s too crappy to viably self-employ on.
There is an interesting paper from 1978 called “Sectoral Shift in Antebellum Massachusetts: A Reconsideration” which seems to agree with Henry George’s view. It argues that in the early days of settlement, the American frontier worked as advertised. Land was readily available to the average person a short distance away and employees had a viable alternative to working for an employer (as founding fathers like Benjamin Franklin pointed out). But as the land was gobbled up by speculators/etc, the frontier as a whole moved westwards, continually increasing the transportation/settlement costs/risks. This meant that there was a growing amount of poor people in the East due to imperfect labor mobility.
In terms of how this would function in the modern day, it might be instructive to compare the situation in the early 20th century when improvements in transportation briefly opened up a pseudo-frontier of cheap but still decent land around urban centers:
“Another example Ward provides is Walter Southgate, a former street corner agitator and founding member of the Labour Party. Southgate first built himself a carpenter’s bench, and then constructed an 8-by-16 ft. two-room hut, finally hiring a Model-T to move it in sections to the concrete foundation he and his wife had laid on their 2.5 acre site. They taught themselves brickwork in the process of building the chimney. They bought the land after the First World War, began construction during the General Strike of 1926, and completed the home in 1928. During the almost thirty years the Southgates lived in their home, they “produced every kind of fruit and vegetable, kept poultry, rabbits and geese, grew a variety of trees including a coppice of 650 saplings and in fact made their holding more productive than any farmer could.”
Ward considered the Southgates typical of dozens of people he investigated who, “with no capital and no access to mortgage loans, had changed their lives for the better.” For example Fred Nichols, who bought a 40-by-100 ft. plot of land for ten pounds in 1934, and—starting from a tent where his family was housed on weekends—”gradually accumulated tools, timber and glass which he brought to the site strapped to his back as he cycled down from London.” He sank his own well in the garden. Elizabeth Granger and her husband, who bought two adjoining 20-by-150 ft. plots for ten pounds (borrowing a pound to pay the deposit); like Nichols, they stayed in a tent there on days off, gradually building a bungalow with second-hand bricks. They raised chickens, geese and goats.1
Ward quotes Anthony King, in The Bungalow, on conditions in the first half of the twentieth century:
“A combination of cheap land and transport, pre-fabricated materials, and the owner’s labour and skills had given back to the ordinary people of the land, the opportunity denied to them for over two hundred years, an opportunity which, at the time, was still available to almost half of the world’s non-industrialized populations: the freedom for a man to build his own house. It was a freedom that was to be very short-lived.2″” -Kevin Carson, Organization Theory http://www.mutualist.org/sitebuildercontent/sitebuilderfiles/otkc11.pdf