A name has been absent strikingly from the discussion of our current financial woes, that of the most famous 19th century American writer on political economy, and that of a man who almost elected mayor of NYC in 1886, in what was probably the most interesting mayoral race in the city’s history. The name is Henry George, the author of Progress and Poverty (1879), in which he famously advocated for the single tax, in which he advocated a confiscatory 100% tax on the rental value of land. Landownership, George argued, is a monopoly possession of a limited resource, and the owner of land, and does nothing except passively benefit from the industriousness of others. The landowner’s profit is merely a tax on the truly productive factors of production, labor, and capital. A single tax on profit from land owning, George argued, and all other taxes could be eliminated, and would usher in a new age of productivity and wealth.
Okay. This clearly has its limitations as a cure-all for all economic ills. But the belief that the landowner’s profit is the root of all evil, and the pitfalls of turning the necessity of shelter in a ragingly speculative commodity, is a lesson, that, if it needs to be modified from George’s original Single Tax, is one we need to take to heart. A crisis of falling land and home prices, because of its size and scope, and its ability to affect and infect persons of every income strata, is different by several orders of magnitude from the garden variety of financial crisis that we have experienced in recent years, such as the dot-com bust or the failure of Enron. But when we have carted off the last of the cadavers from this immediate crisis, we should spend some time thinking about how to eliminate much of the speculative frenzy that has haunted our real estate markets, become reacquainted with old remedies such as limited equity cooperatives, and explore new ones.
Let me quote Michael Kinsley (perhaps not thought of often as a George-ite, but the author of an 1989 essay on George in his collection Big Babies, my bathroom reading in recent months, and the inspiration for this post) . “Above all, perhaps, George would observe how the developed world has been suffering in recent years from real estate sickness . At times when the reward for happening to own a middle class house has been greater than the reward for middle class labor, this disease has twisted values, sucked away productivity, and redistributed wealth at random. And if, as many believe, the process is now going into reverse will be just as severe.”
Kinsley’s comments on America on the cusp of the S & L crisis remains just as pertinent and prescient to an America falling down the rabbit hole of the sub-prime mortgage disaster. George celebrated the somewhat mythical producer’s republic of the 19th century, but this is vastly more preferable, in every way, to the blithely celebrated “ownership society,” which reduced the meaning of America to life liberty and the purchase of real estate. Rather than revising the city charter in a backroom deal to extend the mayoralty of Michael Bloomberg, New Yorkers could do worse than summoning up the spirit of a modern Henry George to lead us through the current crisis.