Georgism

From Wikipedia, the free encyclopedia

Georgist Single Tax poster published in "The Public" a Chicago newspaper (circa 1910-1914)

 

Georgist campaign button from the 1890s. The cat on the badge refers to a slogan "Do you see the cat?" to draw analogy to the land question

 

Georgism, also called geoism and single tax (archaic), is an economic philosophy holding that, while people should own the value they produce themselves, economic value derived from land (often including natural resources and natural opportunities) should belong equally to all members of society. Developed from the writings of the economist and social reformer Henry George, the Georgist paradigm seeks solutions to social and ecological problems, based on principles of land rights and public finance which attempt to integrate economic efficiency with social justice.

Georgism is concerned with the distribution of economic rent caused by natural monopolies, pollution, and the control of commons, including title of ownership for natural resources and other contrived privileges (e.g., intellectual property). Any natural resource which is inherently limited in supply can generate economic rent, but the classical and most significant example of 'land monopoly' involves the extraction of common ground rent from valuable urban locations. Georgists argue that taxing economic rent is efficient, fair, and equitable. The main Georgist policy recommendation is a tax assessed on land value. Georgists argue that revenues from a land value tax (LVT) can be used to reduce or eliminate existing taxes (for example, on income, trade, or purchases) that are unfair and inefficient. Some Georgists also advocate for the return of surplus public revenue back to the people by means of a basic income or citizen's dividend.

Economists since Adam Smith and David Ricardo have observed that, unlike other taxes, a public levy on land value does not cause economic inefficiency. A land value tax also has progressive tax effects, in that it is paid primarily by the wealthy (the landowners), and it cannot be passed on to tenants, workers, or users of land. Advocates of land value taxes argue that it would reduce economic inequality, increase economic efficiency, remove incentives to under-utilize urban land, and reduce property speculation. The philosophical basis of Georgism dates back to several early thinkers such as John Locke, Baruch Spinoza, and Thomas Paine, but the concept of gaining public revenues mainly from land and natural resource privileges was widely popularized by Henry George and his first book, Progress and Poverty (1879).

Georgist ideas were popular and influential during the late 19th and early 20th century. Political parties, institutions and communities were founded based on Georgist principles during that time. Early devotees of Henry George's economic philosophy were often termed Single Taxers for their political goal of raising public revenue mainly from a land value tax, although Georgists endorsed multiple forms of rent capture (e.g., seigniorage) as legitimate. The term Georgism was invented later, and some prefer the term geoism to distinguish their beliefs from those of Henry George.

Main tenets

A supply and demand diagram showing the effects of land value taxation. Note that the burden of the tax is entirely on the land owner, the rental price of land does not change, and there is no deadweight loss.

Henry George is best known for popularizing the argument that government should be funded by a tax on land rent rather than taxes on labor. George believed that although scientific experiments could not be performed in political economy, theories could be tested by comparing different societies with different conditions and by thought experiments about the effects of various factors. Applying this method, he concluded that many of the problems that beset society, such as poverty, inequality, and economic booms and busts, could be attributed to the private ownership of the necessary resource, land. In his most celebrated book, Progress and Poverty, George argues that the appropriation of land for private use contributes to persistent poverty in spite of technological progress, and causes economies to exhibit a tendency toward boom and bust cycles. According to George, people justly own what they create, but that natural opportunities and land belong equally to all.

The tax upon land values is, therefore, the most just and equal of all taxes. It falls only upon those who receive from society a peculiar and valuable benefit, and upon them in proportion to the benefit they receive. It is the taking by the community, for the use of the community, of that value which is the creation of the community. It is the application of the common property to common uses. When all rent is taken by taxation for the needs of the community, then will the equality ordained by Nature be attained. No citizen will have an advantage over any other citizen save as is given by his industry, skill, and intelligence; and each will obtain what he fairly earns. Then, but not till then, will labor get its full reward, and capital its natural return.

— Henry George, Progress and Poverty, Book VIII, Chapter 3

George believed there was an important distinction between common and collective property. Although equal rights to land might be achieved by nationalizing land and then leasing it to private users, George preferred taxing unimproved land value and leaving the control of land mostly in private hands. George's reasoning for leaving land in private control and slowly shifting to land value tax was that it would not penalize existing owners who had improved land and would also be less disruptive and controversial in a country where land titles have already been granted.

Georgists have observed that privately created wealth is socialized via the tax system (e.g., through income and sales tax), while socially created wealth in land values are privatized in the price of land titles and bank mortgages. The opposite would be the case if land rents replaced taxes on labor as the main source of public revenue; socially created wealth would become available for use by the community, while the fruits of labor would remain private. According to Georgists, a land value tax can be considered a user fee instead of a tax, since it is related to the market value of socially created locational advantage, the privilege to exclude others from locations. Assets consisting of commodified privilege can be considered as wealth since they have exchange value, similar to taxi medallions. A land value tax, charging fees for exclusive use of land, as a means of raising public revenue is also a progressive tax tending to reduce economic inequality, since it applies entirely to ownership of valuable land, which is correlated with income, and there is generally no means by which landlords can shift the tax burden onto tenants or laborers.

Economic properties

Standard economic theory suggests that a land value tax would be extremely efficient – unlike other taxes, it does not reduce economic productivity. Milton Friedman described Henry George's tax on unimproved value of land as the "least bad tax", since unlike other taxes, it would not impose an excess burden on economic activity (leading to zero or even negative "deadweight loss"); hence, a replacement of other more distortionary taxes with a land value tax would improve economic welfare. As land value tax can improve the use of land and redirect investment toward productive, non-rentseeking activities, it could even have a negative deadweight loss that boosts productivity. Because land value tax would apply to foreign land speculators, the Australian Treasury estimated that land value tax was unique in having a negative marginal excess burden, meaning that it would increase long-run living standards.

It was Adam Smith who first noted the efficiency and distributional properties of a land value tax in his book, The Wealth of Nations:

Ground-rents are a still more proper subject of taxation than the rent of houses. A tax upon ground-rents would not raise the rents of houses. It would fall altogether upon the owner of the ground-rent, who acts always as a monopolist, and exacts the greatest rent which can be got for the use of his ground. More or less can be got for it according as the competitors happen to be richer or poorer, or can afford to gratify their fancy for a particular spot of ground at a greater or smaller expense. In every country the greatest number of rich competitors is in the capital, and it is there accordingly that the highest ground-rents are always to be found. As the wealth of those competitors would in no respect be increased by a tax upon ground-rents, they would not probably be disposed to pay more for the use of the ground. Whether the tax was to be advanced by the inhabitant, or by the owner of the ground, would be of little importance. The more the inhabitant was obliged to pay for the tax, the less he would incline to pay for the ground; so that the final payment of the tax would fall altogether upon the owner of the ground-rent.

Both ground-rents and the ordinary rent of land are a species of revenue which the owner, in many cases, enjoys without any care or attention of his own. Though a part of this revenue should be taken from him in order to defray the expenses of the state, no discouragement will thereby be given to any sort of industry. The annual produce of the land and labour of the society, the real wealth and revenue of the great body of the people, might be the same after such a tax as before. Ground-rents and the ordinary rent of land are, therefore, perhaps, the species of revenue which can best bear to have a peculiar tax imposed upon them. ... Nothing can be more reasonable than that a fund which owes its existence to the good government of the state should be taxed peculiarly, or should contribute something more than the greater part of other funds, towards the support of that government.

Benjamin Franklin and Winston Churchill made similar distributional and efficient arguments for taxing land rents. They noted that the costs of taxes and the benefits of public spending always eventually apply to and enrich, respectively, the owners of land. Therefore, they believed it would be best to defray public costs and recapture value of public spending by applying public charges directly to owners of land titles, rather than harming public welfare with taxes assessed against beneficial activities such as trade and labor.

Henry George wrote that his plan for a high land value tax would cause people "to contribute to the public, not in proportion to what they produce ... but in proportion to the value of natural [common] opportunities that they hold [monopolize]". He went on to explain that "by taking for public use that value which attaches to land by reason of the growth and improvement of the community", it would, "make the holding of land unprofitable to the mere owner, and profitable only to the user". 

A high land value tax would discourage speculators from holding valuable natural opportunities (like urban real estate) unused or only partially used. Henry George claimed this would have many benefits, including the reduction or elimination of tax burdens from poorer neighborhoods and agricultural districts; the elimination of a multiplicity of taxes and expensive obsolete government institutions; the elimination of corruption, fraud, and evasion with respect to the collection of taxes; the enablement of true free trade; the destruction of monopolies; the elevation of wages to the full value of labor; the transformation of labor saving inventions into blessings for all; and the equitable distribution of comfort, leisure, and other advantages that are made possible by an advancing civilization. In this way, the vulnerability that market economies have to credit bubbles and property manias would be reduced.

Sources of economic rent and related policy interventions

Income flow resulting from payments for restricted access to natural opportunities or for contrived privileges over geographic regions is termed economic rent. Georgists argue that economic rent of land, legal privileges, and natural monopolies should accrue to the community, rather than private owners. In economics, "land" is everything that exists in nature independent of human activity. George explicitly included climate, soil, waterways, mineral deposits, laws/forces of nature, public ways, forests, oceans, air, and solar energy in the category of land. While the philosophy of Georgism does not say anything definitive about specific policy interventions needed to address problems posed by various sources of economic rent, the common goal among modern Georgists is to capture and share (or reduce) rent from all sources of natural monopoly and legal privilege.

 

Henry George shared the goal of modern Georgists to socialize or dismantle rent from all forms of land monopoly and legal privilege. However, George emphasized mainly his preferred policy known as land value tax, which targeted a particular form of unearned income known as ground rent. George emphasized ground-rent because basic locations were more valuable than other monopolies and everybody needed locations to survive, which he contrasted with the less significant streetcar and telegraph monopolies, which George also criticized. George likened the problem to a laborer traveling home who is waylaid by a series of highway robbers along the way, each who demand a small portion of the traveler's wages, and finally at the very end of the road waits a robber who demands all that the traveler has left. George reasoned that it made little difference to challenge the series of small robbers when the final robber remained to demand all that the common laborer had left. George predicted that over time technological advancements would increase the frequency and importance of lesser monopolies, yet he expected that ground rent would remain dominant. George even predicted that ground-rents would rise faster than wages and income to capital, a prediction that modern analysis has shown to be plausible, since the supply of land is fixed.

Common ground rent is still the primary emphasis of Georgists because of its large value and the known diseconomies of misused land. However, there are other sources of rent that are theoretically analogous to ground-rent and are debated topics of Georgists. The following are some sources of economic rent.

• Extractable resources (minerals and hydrocarbons)
• Severables (forests and stocks of fish)
• Extraterrestrial domains (geosynchronous orbits and airway corridor use)
• Legal privileges that apply to specific location (taxi medallions, billboard and development permits, or the monopoly of electromagnetic frequencies)
• Restrictions/taxes of pollution or severance (tradable emission permits and fishing quotas)
• Right-of-way (transportation) used by railroads, utilities, and internet service providers
• Issuance of legal tender
• Privileges that are less location dependent but that still exclude others from natural opportunities (patents)

Where free competition is impossible, such as telegraphs, water, gas, and transportation, George wrote, "[S]uch business becomes a proper social function, which should be controlled and managed by and for the whole people concerned." Georgists were divided by this question of natural monopolies and often favored public ownership only of the rents from common rights-of-way, rather than public ownership of utility companies themselves.

Georgism and environmental economics

The early conservationism of the Progressive Era was inspired partly by Henry George and his influence extended for decades afterward. Some ecological economists still support the Georgist policy of land value tax as a means of freeing or rewilding unused land and conserving nature by reducing urban sprawl.

Pollution degrades the value of what Georgists consider to be commons. Because pollution is a negative contribution, a taking from the commons or a cost imposed on others, its value is economic rent, even when the polluter is not receiving an explicit income. Therefore, to the extent that society determines pollution to be harmful, most Georgists propose to limit pollution with taxation or quotas that capture the resulting rents for public use, restoration, or a citizen's dividend.

Georgism is related to the school of ecological economics, since both propose market based restrictions for pollution. The schools are compatible in that they advocate using similar tools as part of a conservation strategy, but they emphasize different aspects. Conservation is the central issue of ecology, whereas economic rent is the central issue of geoism. Ecological economists might price pollution fines more conservatively to prevent inherently unquantifiable damage to the environment, whereas Georgists might emphasize mediation between conflicting interests and human rights. Geolibertarianism, a market oriented branch of geoism, tends to take a direct stance against what it perceives as burdensome regulation and would like to see auctioned pollution quotas or taxes replace most command and control regulation.

Since ecologists are primarily concerned with conservation, they tend to emphasize less the issue of equitably distributing scarcity/pollution rents, whereas Georgists insist that unearned income not accrue to those who hold title to natural assets and pollution privilege. To the extent that geoists recognize the effect of pollution or share conservationist values, they will agree with ecological economists about the need to limit pollution, but geoists will also insist that pollution rents generated from those conservation efforts do not accrue to polluters and are instead used for public purposes or to compensate those who suffer the negative effects of pollution. Ecological economists advocate similar pollution restrictions but, emphasizing conservation first, might be willing to grant private polluters the privilege to capture pollution rents. To the extent that ecological economists share the geoist view of social justice, they would advocate auctioning pollution quotas instead of giving them away for free. This distinction can be seen in the difference between basic cap and trade and the geoist variation, cap and share, a proposal to auction temporary pollution permits, with rents going to the public, instead of giving pollution privilege away for free to existing polluters or selling perpetual permits.

Revenue uses

The revenue can allow the reduction or elimination of taxes, greater public investment/spending, or the direct distribution of funds to citizens as a pension or basic income/citizen's dividend.

In practice, the elimination of all other taxes implies a very great land value tax, greater than any currently existing land tax. Introducing a land value tax greater than the value of existing taxes would, at an uncertain point, inevitably cause the price of all land titles to decrease. George did not believe landowners should be compensated, and described the issue as being analogous to compensation for former slave owners. Other geoists disagree on the question of compensation; some advocate complete compensation while others endorse only enough compensation required to achieve Georgist reforms. Geoists have also long differed from George as to the degree of rent capture needed. Historically, those who advocated for public rent tax only great enough to replace other taxes were known as endorsers of single tax limited.

Synonyms and variants

Most early advocacy groups described themselves as Single Taxers, and George reluctantly accepted "single tax" as an accurate name for his main political goal—the repeal of all unjust or inefficient taxes, to be replaced with a land value tax (LVT).

Some modern proponents are dissatisfied with the name Georgist. While Henry George was well known throughout his life, he has been largely forgotten by the public and the idea of a single tax of land predates him. Some now prefer the term geoism, with the meaning of geo (from Greek γῆ gē "earth, land", as incidentally is in Greek the first compound of the name George (whence Georgism) < (Gr.) Geōrgios < geōrgos "farmer" or geōrgia "agriculture, farming" < gē + ergon "work") deliberately ambiguous. The terms Earth Sharing, geonomics, and geolibertarianism (see Libertarianism) are also used by some Georgists. These terms represent a difference of emphasis, and sometimes real differences about how land rent should be spent (citizen's dividend or just replacing other taxes); but all agree that land rent should be recovered from its private recipients.

Compulsory fines and fees related to land rents are the most common Georgist policies, but some geoists prefer voluntary value capture systems that rely on methods such as non-compulsory or self-assessed location value fees, community land trusts, and purchasing land value covenants.

Some geoists believe that partially compensating landowners is a politically expedient compromise necessary for achieving reform. For similar reasons, others propose capturing only future land value increases, instead of all land rent.

Though Georgism has historically been considered as a radically progressive or socialist ideology, some libertarians and minarchists take the position that limited social spending should be financed using Georgist concepts of rent value capture, but that not all land rent should be captured. Today, this relatively conservative adaptation is usually considered incompatible with true geolibertarianism, which requires that excess rents be gathered and then distributed back to residents. During Henry George's time, this restrained Georgist philosophy was known as "single tax limited", as opposed to "single tax unlimited". Henry George disagreed with the limited interpretation but accepted its adherents (e.g., Thomas Shearman) as legitimate "single-taxers" [Georgists].

Influence

Henry George, whose writings and advocacy form the basis for Georgism.

Georgist ideas heavily influenced the politics of the early 20th century. Political parties that were formed based on Georgist ideas include the United States Commonwealth Land Party, the Henry George Justice Party, the Single Tax League, and Denmark's Justice Party. 

In the UK during 1909, the Liberal Government included a land tax as part of several taxes in the People's Budget intended to redistribute wealth (including a progressively graded income tax and an increase of inheritance tax). This caused a crisis which resulted indirectly in reform of the House of Lords. The budget was passed eventually—but without the land tax. In 1931, the minority Labour Government passed a land value tax as part III of the 1931 Finance act. However, this was repealed in 1934 by the National Government before it could be implemented. 

In Denmark, the Georgist Justice Party has previously been represented in Folketinget. It formed part of a centre-left government 1957–60 and was also represented in the European Parliament 1978–79. The influence of Henry George has waned over time, but Georgist ideas still occasionally emerge in politics. In the United States 2004 Presidential campaign, Ralph Nader mentioned Henry George in his policy statements.

Economists still generally favor a land value tax. Milton Friedman publicly endorsed the Georgist land value tax as the "least bad tax". Joseph Stiglitz stated that: "Not only was Henry George correct that a tax on land is non-distortionary, but in an equilibrium society … tax on land raises just enough revenue to finance the (optimally chosen) level of government expenditure." He dubbed this proposition the Henry George theorem.

Communities

Several communities were also initiated with Georgist principles during the height of the philosophy's popularity. Two such communities that still exist are Arden, Delaware, which was founded in 1900 by Frank Stephens and Will Price, and Fairhope, Alabama, which was founded in 1894 by the auspices of the Fairhope Single Tax Corporation. Some established communities in the United States also adopted Georgist tax policies. A Georgist in Houston, Texas, Joseph Jay "J.J." Pastoriza, promoted a Georgist club in that city established in 1890. Years later, in his capacity as a city alderman, he was selected to serve as Houston Tax Commissioner, and promulgated a "Houston Plan of Taxation" in 1912. Improvements to land and merchants' inventories were taxed at 25 percent of appraised value, unimproved land was taxed at 70 percent of appraisal, and personal property was exempt. This Georgist tax continued until 1915, when two courts struck it down as violating the Texas Constitution in 1915. This quashed efforts in several other Texas cities which took steps towards implementing the Houston Plan in 1915: Beaumont, Corpus Christi, Galveston, San Antonio, and Waco.

The German protectorate of the Kiautschou Bay concession in Jiaozhou Bay, China fully implemented Georgist policy. Its sole source of government revenue was the land value tax of six percent which it levied in its territory. The German government had previously had economic problems with its African colonies caused by land speculation. One of the main reasons for using the land value tax in Jiaozhou Bay was to eliminate such speculation, which the policy achieved. The colony existed as a German protectorate from 1898 until 1914, when seized by Japanese and British troops. In 1922 the territory was returned to China. 

Henry George School of Social Science in New York

Georgist ideas were also adopted to some degree in Australia, Hong Kong, Singapore, South Africa, South Korea, and Taiwan. In these countries, governments still levy some type of land value tax, albeit with exemptions. Many municipal governments of the US depend on real property tax as their main source of revenue, although such taxes are not Georgist as they generally include the value of buildings and other improvements. One exception is the town of Altoona, Pennsylvania, which for a time in the 21st century only taxed land value, phasing in the tax in 2002, relying on it entirely for tax revenue from 2011, and ending it 2017; the Financial Times noted that "Altoona is using LVT in a city where neither land nor buildings have much value".

Institutes and organizations

Various organizations still exist that continue to promote the ideas of Henry George. According to The American Journal of Economics and Sociology, the periodical Land&Liberty, established in 1894, is "the longest-lived Georgist project in history". Founded during the Great Depression in 1932, the Henry George School of Social Science in New York offers courses, sponsors seminars, and publishes research in the Georgist paradigm. Also in the US, the Lincoln Institute of Land Policy was established in 1974 based on the writings of Henry George. It "seeks to improve the dialogue about urban development, the built environment, and tax policy in the United States and abroad".

The Henry George Foundation continues to promote the ideas of Henry George in the UK. The IU is an international umbrella organization that brings together organizations worldwide that seek land value tax reform.

Reception

The economist Alfred Marshall believed that George's views in Progress and Poverty were dangerous, even predicting wars, terror, and economic destruction. Specifically, Marshall was upset about the idea of rapid change and the unfairness of not compensating existing landowners. In his lectures on Progress and Poverty, Marshall opposed George's position on compensation while fully endorsing his ultimate remedy. So far as land value tax moderately replaced other taxes and did not cause the price of land to fall, Marshall supported land value taxation on economic and moral grounds, suggesting that a three or four percent tax on land values would fit this condition. After implementing land taxes, governments would purchase future land values at discounted prices and take ownership after 100 years. Marshall asserted that this plan, which he strongly supported, would end the need for a tax collection department of government. For newly formed countries where land was not already private, Marshall advocated implementing George's economic proposal immediately.

Karl Marx considered the Single Tax platform as a regression from the transition to communism and referred to Georgism as "Capitalism’s last ditch". Marx argued that, "The whole thing is ... simply an attempt, decked out with socialism, to save capitalist domination and indeed to establish it afresh on an even wider basis than its present one." Marx also criticized the way land value tax theory emphasizes the value of land, arguing that, "His fundamental dogma is that everything would be all right if ground rent were paid to the state." Georgists such as Fred Harrison (2003) replied to these Marxist objections.

Richard T. Ely, known as the "Father of Land Economics", agreed with the economic arguments for Georgism but believed that correcting the problem the way Henry George wanted (without compensation) was unjust to existing landowners. In explaining his position, Ely wrote that "If we have all made a mistake, should one party to the transaction alone bear the cost of the common blunder?"

John R. Commons supported Georgist economics, but opposed what he perceived as an environmentally and politically reckless tendency for advocates to rely on a one-size-fits-all approach to tax reform, specifically, the "single tax" framing. Commons concluded The Distribution of Wealth, with an estimate that "perhaps 95% of the total values represented by these millionnaire [sic] fortunes is due to those investments classed as land values and natural monopolies and to competitive industries aided by such monopolies", and that "tax reform should seek to remove all burdens from capital and labour and impose them on monopolies". However, he criticized Georgists for failing to see that Henry George's anti-monopoly ideas must be implemented with a variety of policy tools. He wrote, "Trees do not grow into the sky—they would perish in a high wind; and a single truth, like a single tax, ends in its own destruction." Commons uses the natural soil fertility and value of forests as an example of this destruction, arguing that a tax on the in situ value of those depletable natural resources can result in overuse or over-extraction. Instead, Commons recommends an income tax based approach to forests similar to a modern Georgist severance tax.

Other contemporaries such as Austrian economist Frank Fetter and neoclassical economist John Bates Clark argued that it was impractical to maintain the traditional distinction between land and capital, and used this as a basis to attack Georgism. Mark Blaug, a specialist in the history of economic thought, credits Fetter and Clark with influencing mainstream economists to abandon the idea "that land is a unique factor of production and hence that there is any special need for a special theory of ground rent" claiming that "this is in fact the basis of all the attacks on Henry George by contemporary economists and certainly the fundamental reason why professional economists increasingly ignored him".

Robert Solow endorsed the theory of Georgism, but is wary of the perceived injustice of expropriation. Solow stated that taxing away expected land rents "would have no semblance of fairness"; however, Georgism would be good to introduce where location values were not already privatized or if the transition could be phased in slowly.

Milton Friedman agreed that "the Henry George argument" is "the least bad" means of raising needed public revenue. However, Friedman viewed Georgism as partially immoral, due to a difference of opinion about the validity of vested property rights in land. Georgists agree with Friedman that land titles should remain private, however they believe that the private capture of unimproved land-rents is inherently unjust, drawing comparisons to slavery.

George has also been accused of exaggerating the importance of his "all-devouring rent thesis" in claiming that it is the primary cause of poverty and injustice in society. George argued that the rent of land increased faster than wages for labor because the supply of land is fixed. Modern economists, including Ottmar Edenhofer have demonstrated that George's assertion is plausible but was more likely to be true during George's time than now.

An early criticism of Georgism was that it would generate too much public revenue and result in unwanted growth of government, but later critics argued that it would not generate enough income to cover government spending. Joseph Schumpeter concluded his analysis of Georgism by stating that, "It is not economically unsound, except that it involves an unwarranted optimism concerning the yield of such a tax." Economists who study land conclude that Schumpeter's criticism is unwarranted because the rental yield from land is likely much greater than what modern critics such as Paul Krugman suppose. Krugman agrees that land value taxation is the best means of raising public revenue but asserts that increased spending has rendered land rent insufficient to fully fund government. Georgists have responded by citing studies and analyses implying that land values of nations like the US, UK, and Australia are more than sufficient to fund all levels of government.

Anarcho-capitalist political philosopher and economist Murray Rothbard criticized Georgism in Man, Economy, and State as being philosophically incongruent with subjective value theory, and further stating that land is irrelevant in the factors of production, trade, and price systems, but this critique is seen by some, including other opponents of Georgism, as relying on false assumptions and flawed reasoning.

Austrian economist Friedrich Hayek credited early enthusiasm for Henry George with developing his interest in economics. Later, Hayek said that the theory of Georgism would be very strong if assessment challenges did not result in unfair outcomes, but he believed that they would.

After studying Progress and Poverty, Tyler Cowen concluded, "George had some good economic arguments, but [. . .] was politically naive. At the margin we should move in George’s direction, but ultimately landowners have to be part of the building coalitions rather than pure victims."

Eco-capitalism

From Wikipedia, the free encyclopedia

Eco-capitalism, also known as environmental capitalism or green capitalism, is the view that capital exists in nature as "natural capital" (ecosystems that have ecological yield) on which all wealth depends, and therefore, market-based government policy instruments (such as a carbon tax) should be used to resolve environmental problems.

 

The term "Blue Greens" is often applied to those who espouse eco-capitalism. It is considered as the right-wing equivalent to Red Greens.

History

The roots of eco-capitalism can be traced back to the late 1960s. The "Tragedy of the Commons", an essay published in 1968 in Science by Garrett Hardin, claimed the inevitability of malthusian catastrophe due to liberal or democratic government's policies to leave family size matters to the family, and enabling the welfare state to willingly care for potential human overpopulation. Hardin argued that if families were given freedom of choice in the matter, but were removed from a welfare state, parents choosing to overbear would not have the resources to provide for their "litter", thus solving the problem of overpopulation. This represents an early argument made from an eco-capitalist standpoint: overpopulation would technically be solved by a free market. John Baden, a collaborator with Garrett Hardin on other works including Managing the Commons, founded the Political Economy Research Center (now called the Property and Environment Research Center ) in 1982. As one of the first eco-capitalist organizations created, PERC's ongoing mission is "improving environmental quality through property rights and markets". The most popular eco-capitalist idea was emissions trading, or more commonly, cap and trade. Emissions trading, a market-based approach that allows polluting entities to purchase or be allocated permits, began being researched in the late 1960s. International emissions trading was significantly popularized in the 1990s when the United Nations adopted the Kyoto Protocol in 1997.

Eco-capitalist theorists

• Terry L. Anderson is a graduate of the University of Montana, and received his Ph.D from Washington University. Anderson is currently serving as the co-chair of the Hoover Institution's Property Rights, Freedom and Prosperity task force. Anderson advocates that free markets can be both economically beneficial and environmentally protective. Anderson specializes in how markets impact Native American communities and their economies.
• Bruce Yandle, a graduate of Mercer University, attended Georgia State University where he earned a MBA and PhD. Yandle is currently serving as dean emeritus of Clemson University's college of business. Yandle is prominent in the field of eco-capitalism for his story of the "Bootlegger and the Baptist". Yandle's theory of the Bootlegger and the Baptist posits that ethical groups, religious institutions and business captains can align their organizations in the interest of regulation and economic growth.
• Paul Hawken decided at a young age to dedicate his life to making business eco-friendlier. Hawken's is the architect of the United States first natural foods company, Erewhon Trading Company where all products were organically composed. Hawken's continued to make an impact on the business world by founding the research organization, Natural Capital Institute, and developed, Wiser Earth, a program focused on providing a platform for all to communicate about the environment. Not only has Paul Hawken set a good example for how to transform economy into eco-capitalism, but also has authored hundreds of publications, including four best selling books. In his writings, Hawken stresses that many smart ecological options are out there for businesses that will help save the environment, while also continuing to bring economic profit. One idea discussed in his book, Natural Capitalism: Creating the Next Industrial Revolution, is the possibility of developing lightweight, electricity-powered cars as an alternative to our current transportation issue. Hawken attributes the hesitancy of adopting these options to lack of knowledge of these alternatives and high initial costs. Paul Hawken is now the head of OneSun, Inc., an energy corporation concentrated on low-cost solar.
• Lester Brown began his career as a tomato farmer in New Jersey, until earning his degree at Rutgers University and traveling to a rural India for a six-month study of the country's food and population crisis. From this point on, Brown's focus was mostly on finding alternatives that would solve the world’s population and resources problem. With financial support from Rockefeller Brothers Fund, Brown created the Worldwatch Institute, the first dedicated to researching global environmental problems. In 2001, Brown found the Earth Policy Institute, an organization that outlined a vision for creating an environmentally sustainable economy. Over the course of his career, Lester Brown has authored over 50 books and received 25 honorary degrees. In his publications, Brown discusses how the key to an eco-friendly economy is an honest market and replacing harmful aspects of the environment, like fossil fuels with renewable energy. On June 2015, Lester Brown retired from Earth Policy and closed the institute.

Transition to eco-capitalism

The ideology of eco-capitalism was adopted to satisfy two competing needs:

1. the desire for generating profit by businesses in a capitalist society and
2. the urgency for proper actions to address a struggling environment negatively impacted by human activity.

Under the doctrine of eco-capitalism, businesses commodify the act of addressing environmental issues.

The following are common principles in the transition to eco-capitalism.

Externalities: Correcting of a free market failure

A central part of eco-capitalism is to correct for the market failure seen in the externalization of pollution. By treating the issue of pollution as an externality it has allowed the market to minimize the degree of accountability. To correct for this market failure eco-capitalism would have to internalize this cost. A prime example of this shift towards internalizing externalities is seen in the adoption of a system for carbon trading. In a system like this people are forced to factor the pollution cost into their expenses. This system as well as other systems of internalization function on large and small scales(often times both are tightly connected). On a corporate scale, the government can regulate carbon emissions and other polluting factors in business practices forcing companies to either reduce their pollution levels, externalize these costs onto their consumers by raising the cost of their goods/services, and/or a combination of the two. These kinds of systems can also be effective in indirectly creating a more environmentally conscious consumer base. As the companies who are creating the most pollution face falling profit levels and rising prices their consumers and investors are inclined to take their business elsewhere. This migration of investment and revenue would then be expected to make its way to business who have already incorporated the minimization of pollution into their business model thus allowing them to provide lower prices and higher profit margins attracting the migrating consumers and investors.

Green consumption

At the conception of the ideology, major theorists of eco-capitalism, Paul Hawken, Lester Brown, and Francis Cairncross, saw an opportunity to establish a different approach to environmentalism in a capitalist society. These theorists thought that not only producers but also consumers could shoulder the social responsibility of environmental restoration if "green technology, green taxes, green labeling, and eco-conscious shopping" existed. The resulting "shopping our way to sustainability" mentality encouraged the development of organic farming, renewable energy, green certifications as well as other eco-friendly practices.

A 2015 report from Nielsen lends credence to this theory. According to the report, consumers have more brand loyalty and are willing to pay higher prices for a product that is perceived as being sustainable. This is especially true among Millenials and Generation Z. These generations currently make up 48% of the global marketplace and still haven't hit their peak spending levels. As these generations' preferences continue to shape how businesses operate and market themselves, they could drive a continued shift toward green consumption.

According to the Annual Review of Environmental Resources, "the focus of policy makers, businesses, and researchers has mostly been on the latter (consuming differently), with relatively little attention paid to consuming less". A review of how to encourage sustainable consumption from the University of Surrey shows that, "Government policies send important signals to consumers about institutional goals and national priorities." Governments can pull a variety of levers to signal this including product, trading, building, media, and marketing standards.

Carbon trading

Creating perhaps the first major eco-capitalist endorsement, many political and economic institutions support a system of pollution credits. Such a system, which assigns property rights to emissions, is considered to be the most "efficient and effective" way for regulating greenhouse gas emissions in the current neoliberal global economy. Especially in the case of tradable pollution credits, the resulting market-based system of emissions regulation is believed to motivate businesses to invest in technology that reduce greenhouse gas emissions using positive reinforcement (i.e. ability to trade unused credits) and punishment (i.e. the need to buy more credits).

Full cost accounting

Environmental full-cost accounting explains corporate actions on the basis of the triple bottom line, which is best summarized as "people, planet, and profit". As a concept of corporate social responsibility, full cost accounting not only considers social and economic costs and benefits but also the environmental implications of specific corporate actions.

A breakdown of accounting methodologies by what they include.

While there has been progress in measuring the cost of harm to the health of individuals and the environment, the interaction of environmental, social, and health effects makes measurement difficult. Measurement attempts can be broadly categorized as either behavioral in nature, like hedonic pricing, or dose-response which looks at indirect effects. A standardized measurement of these costs has yet to emerge. This should not be confused with the full-cost method used by organizations searching for oil and gas that "does not differentiate between operating expenses associated with successful and unsuccessful exploration projects".

Genuine progress indicator

The current standard of using the gross domestic product (GDP) as an indicator of welfare is criticized for being inaccurate. An alternative to GDP, the genuine progress indicator compensates for the shortcomings of the GDP as a welfare indicator by accounting for environmental harms as well as other factors that affect consumption, such as crime and income inequality.

Criticisms

Majority of the criticism from traditionally unregulated capitalism is due to eco-capitalism's increased regulation. Pollution credits (as a means for regulating greenhouse gas emissions) is traditionally at odds with economically conservative ideologies. Elements of unregulated capitalism prefer environmental issues to be addressed by individuals who may allocate their own income and wealth, oppose the commodification of by-products like carbon emissions, and emphasize positive incentives to maintain resources through free-market competition and entrepreneurship. 

Proponents of eco-capitalism view environmental reform like pollution credits as a more transformative and progressive system. According to these Proponents, since free market capitalism as inherently expansionist in tendency, ignoring environmental responsibility is a danger to the environment. Approximately 36% of Americans are deeply concerned about climate issues. Proponents of Eco Capitalism typically favor political environmentalism, which emphasizes negative incentives like regulation and taxes to encourage the conservation of resources and prevent environmental harm.

Political theorist, Antonio Gramsci, cites theories of common sense, which suggests that, in general, free market capitalism absent of environmental reform, is ingrained in the minds of its members as the only viable and successful form of economic organization through cultural hegemony. Therefore, the proposal of any alternate economic system, like eco-capitalism, must overcome the predominant common sense and economic status quo in order to develop opposing theories. Nonetheless, movements in the United States and abroad have continued to push for reforms to protect the environment in current capitalistic systems.

Another political theorist, Daniel Tanuro, explains, in his book "Green Capitalism: Why it Can't Work", that for green capitalism to be successful, it would have to replace current mainstream capitalism with Eco-socialist methods, while defying corporate interests:

If by ‘green capitalism’ we understand a system in which the qualitative, social and ecological parameters are taken in account by the numerous competing capitals, that is to say even within economic activity as an endogenous mechanism, then we are completely deluded. In fact, we would be talking about a form of capitalism in which the law of value was no longer in operation, which is a contradiction in terms

However, Tanuro adds that social and economical change to the current capitalist systems is necessary, because technology will invariably increase emissions as manufacturing processes and distribution systems progress. Tanuro argues for changes in three areas:

1. Use of transportation methods
2. Agriculture and dietary changes
3. Overall consumer lifestyle and market spending

Despite this argument, critics still claim that green consumption, sustainable behavior on the part of the consumer, is not enough to be instituted as a socio-environmental solution. In accordance with hegemony, capitalism agrees that the government has little control over market and buyers, sellers, and consumers ultimately drive the market. In contrast, in green capitalism, the government would have more control therefore; consumers do not have direct power over the market, and should not be held accountable. Thus, going against the established monetary system of capitalism in the U.S. and spread throughout the globally. 

Environmental Scholar Bill McKibben proposes "full scale climate mobilization" to address environmental decay. During World War II, vehicle manufacturers and general goods manufacturers shifted to producing weapons, military vehicles and war time goods. McKibben argues that, to combat environmental change, the American Military Industrial Complex and other national arms producers could shift to producing solar panels, wind turbines and other environmental products in an Eco-Capitalist system. 

Scholar Elliot Sperber counters McKibben's argument, citing that industrial environmental mobilization favoring eco-capitalism would exacerbate socioeconomic stratification. Sperber counters the notion that "full scale climate mobilization" and the production it implies is the best immediate solution for addressing climate change. Because Eco Capitalism is still capitalistic, it relies on production of goods. Sperber argues for the production of fewer goods (i.e. fewer plastics, fewer vehicles) to minimize carbon footprints. 

Apparent criticisms have risen concerns and need for social and economical transformation on both ends of the political and theoretical divide. Nonetheless, they have shaped the way the majority public has viewed and contributed to capitalism and continue to both actively change the innate structure of the economic system and enhance it for further economic stability.

Appeal of renewable energy in the capitalist market

Tom Randall, a correspondent specializing in renewable energy for Bloomberg, calls to attention that wind and solar (energy sources) are "outperforming" fossil fuels. In terms of investments, clean energy outperforms both gas and coal by a 2-1 margin. This positive margin may be attributed to the consistently falling price of renewable energy production. Renewable energy sources hold assertive advantages over fossil fuels because they exist as technologies, not fuels. As time proceeds, renewable energy becomes inevitably more efficient as technology adapts. Technologies for extracting fuels may change, but the fuels remain as constants. Both the solar and wind industries have proven growth over time: Over the last 15 years, the solar industry has doubled seven times and the wind industry has doubled four times. In contrast, the fossil fuel industry has declined over the last 15 years. America's coal industry has lost 75 percent of its value within the past few years.

Renewable energy sources also gain advantages over the fossil fuel industry through international governmental support. Globally, governments implement subsidies to boost the renewable energy industry. Concurrently, various global efforts fight against fossil fuel production and use. The demand for renewable energy sources has skyrocketed in the last 15 years, while fossil fuels have drastically fallen in demand (in capitalist societies).

The worldwide concern of climate change (also known as global warming) is notably the largest contributor to the green energy industry's rapid acceleration, just as it is largely responsible for the decline of the fossil fuel industry. The overwhelming scientific consensus of climate change's reality and its potential catastrophic effects have caused a large part of the world's population to respond with panic and immediate action. While the world's response has been strong, environmentalists and climate scientists do not believe the response has been strong enough to counter climate change's effects, and that the transition from fossil fuels to renewable energy sources is moving far too slowly.

The global efforts and concerns of both governments and individuals to take action regarding implementing and transforming a society's energy sources from fossil fuels to renewable energy sources show the enormous potential of the green energy market. This potential is seen in the countless renewable energy projects under way. Currently, there are over 4,000 major solar projects being implemented. These, and all renewable energy projects, set goals of long-term economic benefit.

The Global Apollo Programme, set up by both economists and scientists, has a goal of creating a solar capability that can stand as a cheaper alternative to coal-fueled power plants by 2025. In capitalist markets, solar energy has the very real potential of becoming a direct competitor to coal plants in less than a decade.

Barriers to transition

While there can be many barriers to the transition to a eco-capitalist system, one of the most daunting and forgotten is the systemic barrier that can be created by former models. Dimitri Zenghelis explores the idea of path dependence and the how continuing to build infrastructure without foresight seriously impedes the implementation and benefits of future innovations. Zenghelis uses the term “locked-in” to describe situations where the full implementation of a new innovation cannot be seen because an earlier infrastructure prevents it from functioning well. This barrier is exemplified in older cities like Los Angeles, San Francisco and New York where the infrastructure was designed around urban sprawl to accommodate private vehicles. The sprawl has been researched with the results returning that the moving forward mega-cities need to be constructed as eco-cities if the hope of curving emission levels down is going to have any hope.

Green economy

From Wikipedia, the free encyclopedia

 

The green economy is defined as an economy that aims at reducing environmental risks and ecological scarcities, and that aims for sustainable development without degrading the environment. It is closely related with ecological economics, but has a more politically applied focus. The 2011 UNEP Green Economy Report argues "that to be green, an economy must not only be efficient, but also fair. Fairness implies recognising global and country level equity dimensions, particularly in assuring a just transition to an economy that is low-carbon, resource efficient, and socially inclusive."

A feature distinguishing it from prior economic regimes is the direct valuation of natural capital and ecological services as having economic value (see The Economics of Ecosystems and Biodiversity and Bank of Natural Capital) and a full cost accounting regime in which costs externalized onto society via ecosystems are reliably traced back to, and accounted for as liabilities of, the entity that does the harm or neglects an asset.

Green Sticker and ecolabel practices have emerged as consumer facing measurements of friendliness to the environment and sustainable development. Many industries are starting to adopt these standards as a viable way to promote their greening practices in a globalizing economy.

"Green" economists and economics

"Green economics" is loosely defined as any theory of economics by which an economy is considered to be component of the ecosystem in which it resides (after Lynn Margulis). A holistic approach to the subject is typical, such that economic ideas are commingled with any number of other subjects, depending on the particular theorist. Proponents of feminism, postmodernism, the environmental movement, peace movement, Green politics, green anarchism and anti-globalization movement have used the term to describe very different ideas, all external to mainstream economics.

The use of the term is further ambiguated by the political distinction of Green parties which are formally organized and claim the capital-G "Green" term as a unique and distinguishing mark. It is thus preferable to refer to a loose school of "'green economists"' who generally advocate shifts towards a green economy, biomimicry and a fuller accounting for biodiversity. (see The Economics of Ecosystems and Biodiversity especially for current authoritative international work towards these goals and Bank of Natural Capital for a layperson's presentation of these.)

Some economists view green economics as a branch or subfield of more established schools. For instance, it is regarded as classical economics where the traditional land is generalized to natural capital and has some attributes in common with labor and physical capital (since natural capital assets like rivers directly substitute for man-made ones such as canals). Or, it is viewed as Marxist economics with nature represented as a form of Lumpenproletariat, an exploited base of non-human workers providing surplus value to the human economy, or as a branch of neoclassical economics in which the price of life for developing vs. developed nations is held steady at a ratio reflecting a balance of power and that of non-human life is very low.

An increasing commitment by the UNEP (and national governments such as the UK) to the ideas of natural capital and full cost accounting under the banner 'green economy' could blur distinctions between the schools and redefine them all as variations of "green economics". As of 2010 the Bretton Woods institutions (notably the World Bank and International Monetary Fund (via its "Green Fund" initiative) responsible for global monetary policy have stated a clear intention to move towards biodiversity valuation and a more official and universal biodiversity finance. Taking these into account targeting not less but radically zero emission and waste is what is promoted by the Zero Emissions Research and Initiatives. The UNEP 2011 Green Economy Report informs that "based on existing studies, the annual financing demand to green the global economy was estimated to be in the range US$ 1.05 to US$ 2.59 trillion. To place this demand in perspective, it is about one-tenth of total global investment per year, as measured by global Gross Capital Formation." 

Definition

Karl Burkart defines a green economy as based on six main sectors:

• Renewable energy
• Green buildings
• Sustainable transport
• Water management
• Waste management
• Land management

The three pillars of sustainability.

The International Chamber of Commerce (ICC) representing global business defines green economy as “an economy in which economic growth and environmental responsibility work together in a mutually reinforcing fashion while supporting progress on social development”.

In 2012, the ICC published the Green Economy Roadmap, containing contributions from experts from around the globe brought together in a two-year consultation process. The Roadmap represents a comprehensive and multidisciplinary effort to clarify and frame the concept of “green economy”. It highlights the essential role of business in bringing solutions to common global challenges. It sets out the following 10 conditions which relate to business/intra-industry and collaborative action for a transition towards a green economy:

• Open and competitive markets
• Metrics, accounting, and reporting
• Finance and investment
• Awareness
• Life cycle approach
• Resource efficiency and decoupling
• Employment
• Education and skills
• Governance and partnership
• Integrated policy and decision-making

Ecological measurements

Measuring economic output and progress is done through the use of economic index indicators. Green indices emerged from the need to measure human ecological impact, efficiency sectors like transport, energy, buildings and tourism, as well as the investment flows targeted to areas like renewable energy and cleantech innovation.

1. 2010 - 2018 Global Green Economy Index™ (GGEI), published by consultancy Dual Citizen LLC is in its 6th edition. It measures the green economic performance and perceptions of it in 130 countries along four main dimensions of leadership & climate change, efficiency sectors, markets & investment and the environment.
2. 2009 - 2012 Green City Index  A global study commissioned by Siemens
3. 2009 - 2013 Circles of Sustainability project scored 5 cities in 5 separate countries.

Ecological footprint measurements are a way to gauge anthropogenic impact and are another standard used by municipal governments.

Green energy issues

Green economies require green energy generation based on renewable energy to replace fossil fuels as well as energy conservation and efficient energy use.

There is justification for market failure to respond to environmental protection and climate protection needs with the excuse that high external costs and high initial costs for research, development, and marketing of green energy sources and green products prevents firms from voluntarily reducing their ecological footprints. The green economy may need government subsidies as market incentives to motivate firms to invest and produce green products and services. The German Renewable Energy Act, legislations of many other member states of the European Union and the American Recovery and Reinvestment Act of 2009, all provide such market incentives. However, other experts argue that green strategies can be highly profitable for corporations that understand the business case for sustainability and can market green products and services beyond the traditional green consumer.

Criticisms

A number of organisations and individuals have criticised aspects of the 'Green Economy', particularly the mainstream conceptions of it based on using price mechanisms to protect nature, arguing that this will extend corporate control into new areas from forestry to water. The research organisation ETC Group argues that the corporate emphasis on bio-economy "will spur even greater convergence of corporate power and unleash the most massive resource grab in more than 500 years." Venezuelan professor Edgardo Lander says that the UNEP's report, Towards a Green Economy, while well-intentioned "ignores the fact that the capacity of existing political systems to establish regulations and restrictions to the free operation of the markets – even when a large majority of the population call for them – is seriously limited by the political and financial power of the corporations." Ulrich Hoffmann, in a paper for UNCTAD also says that the focus on Green Economy and "green growth" in particular, "based on an evolutionary (and often reductionist) approach will not be sufficient to cope with the complexities of climate change" and "may rather give much false hope and excuses to do nothing really fundamental that can bring about a U-turn of global greenhouse gas emissions. Clive Spash, an ecological economist, has criticised the use of economic growth to address environmental losses, and argued that the Green Economy, as advocated by the UN, is not a new approach at all and is actually a diversion from the real drivers of environmental crisis. He has also criticised the UN's project on the economics of ecosystems and biodiversity (TEEB), and the basis for valuing ecosystems services in monetary terms.