SA26. The Economic Philosophy of Georgism, by Emma Crosby

The Economic Philosophy of Georgism, and Decreasing the Gap Between Rich and Poor

Today, the gap between the rich and poor is wider than it has ever been, and while there are certainly a number of causes of inequality in general, it is hard to ignore the role that how we distribute, ’own’ and view the simple dirt under our feet has a large role to play in this problem. The problem itself of course, is not necessarily anything new by any means. There has always been a division between wealthier and poorer elements of society for as long as history has been recorded. However, as new ideas and moral guidelines were introduced by the British Empiricists, John Locke in particular, new modes of thought began to form, and ways in which society could be made a fairer place for all, while perhaps a pipe dream, were actively pursued. Henry George, a economic philosopher of the late 19th Century, was one such thinker, and proposed a system that he believed would make for a much fairer way of approaching, and taxing, land in general.

Modern Day Facts

Inequality is on the rise, and has been for a number of years. Although painted as the cure for the poorer communities of the world, globalisation has in fact deepened the problem to record extents, and not just in developing countries. If we take a brief look at the US for example, the facts are both surprising and shocking. To begin with, the US actually has some of the worst disparity between rich and poor out of all the developed, or ‘First World’ countries. As figures from the Pew Research Centre show, the US is in fact second only to Chile, alongside Israel for having the worst levels of inequality in the world. Additionally, and a point we will return to later, is the fact that the research showed that:

‘U.S tax and spending policy does relatively little, compared with its peers in the developed world, to reduce inequality.’

While the concept of globalisation was to introduce new opportunities to developing countries, providing jobs and labour, what we have actually seen is, in essence, merely a way for large multinationals to increase profits. Cheap labour available in developing countries for example, where workers will happily accept a fraction of the wage that a UK might, merely serves as a way to maximise margins while offering the kind of wage that would be illegal in most developed countries. For those in extreme financial hardship, there is often no choice, and so a cheap workforce is almost guaranteed in a developing country. As economist  Pandora Beads UK Sale the negative effects are not just limited to overseas. In the US, he says,

‘employment opportunities and incomes are high, and rising, for the highly educated people at the upper end of the tradable sector of the US economy, but they are diminishing at the lower end. And there is every reason to believe these trends will continue.’

Essentially then, what we are seeing is a top heavy society, where all the wealth, ownership, and opportunities are concentrated. The concern is that even though we are using the US as an example here, this is a very present problem in most countries around the world.

Taxation, Georgism, and Land

How then, can we even begin to address this disparity between rich and poor? First of all, it is important to acknowledge that due to the centralisation of power and wealth, doing so is no small task. Landowners, corporations, and the super wealthy are generally not interested in making the system fairer, because it is this very system that has allowed them to achieve their wealth in the first place. However, since the economic crisis, there has been increased awareness, and importance, placed on this problem, with more and more people globally choosing not to accept the current situation. However, as we have noted previously, this is not a new problem, and there have been a number of attempts by previous thinkers to solve this problem. Firstly, we need to try and identify the main causes of this widening gap. Some economists, such as Henry George, thought a solution, or path to one, lay in the fair taxation of common land. Considering that a the very concept of Defense Pandora Beads UK Sale r which is somewhat questionable (can we really ‘own’ a natural resource such as land or water?), the introduction of a common land tax was proposed by George as a solution to covering both government costs, and making a fairer taxations system. Despite little to no major criticisms, this approach has never fully been adopted. Some academics attribute this to the perception of Georgist supporters, rather than the validity of the approach itself. Could land tax potentially help to reduce the generation of debt? Possibly, because it is argued that the amount generated from common land tax could cover government spending, which would eliminate the need for loans from, for example, the Treasury in the UK, or Federal Reserve in the US. This creation of debt is another major factor in furthering the widening gap between rich or poor, and is ingrained in the global financial system, as the recent economic collapse clearly demonstrated. Of course, the debt problem is still very much an issue. Despite the recent warnings, and reforms in many countries, such as the regulatory steps and fines put in place by the UK, loans are still easy to come by for almost everyone, with maximum loan amounts in the region of £250,000 ‘but you may be able to borrow more than this by applying for a secured loan’, advise money.co.uk. This of course, means property, and in essence, land, as this is what really drives the value of property.

Counters to Georgism

While there are very few economic criticisms for a Georgist paradigm, there are certainly ideological ones. Marx for example, was a very vocal critic of this approach, and simply equated it to a last ditch attempt by capitalism to appear more socialist. The approach has also of course, attracted much criticism since its inception from a number of land owners and reformers, both from the late 19th Century and beyond. The fact remains however, that a single tax alternative is a very viable one, which could effectively close the gap between the wealthy, and less so, in any society which adopted it. In other Signed Articles and Topic Papers in this series, it is explained why a different sytem of taxation would do much to xclose the gap between rich and poor.