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OpEdNews Op Eds    H2'ed 6/29/09

Geonomics and the true cost of poverty

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Why are there so many poor people when the world seems so much wealthier as a whole?  By wealthier, I mean there is more food, more housing (and bigger, better housing too), more of everything, in fact.  I'll get to the obvious misdistribution and the true remedy in a moment, but would point out here that this question is not new; in fact, it was asked, and brilliantly answered by Henry George, a Political Philosopher who wrote the answer - and debunked all the others - in his earth-shattering book, Progress and Poverty, written in 1879, which sold 2 million copies in its first year (1879!) and remains the best-selling economics book of all time (it is still very much in print, as are George's other 8 books).

It is no coincidence the poor are often forced to live on marginal, polluted land.  In fact, Henry George - really, the father of the Geonomics school of thought - predicted it.  It's easy to see why: if someone owns the best land - and this ownership is backed up by legal and physical means (i.e. police, the justice system etc.), then other people will have no choice but to either agree to work on that land (and by 'land' I, and George, mean any natural resources - oil, water, land itself etc.), or to try to eke out a living on marginal, less productive land. 

The injustice springs from the fact that neither party actually created the land, nature did.  The land 'owner' should pay rent (in the form of land value taxes) to work the land, profiting from actual improvements, but paying the value of the raw resource back to the community, who rightfully owns the resource to begin with.

If you think of all the billions and billions made by speculators in oil, water, actual land, commodities, and all the other products of nature - none of which had to do with any actual production (as we speak, supertankers are moored off the coast of Africa, rented by Goldman Sachs and Morgan Stanley, just waiting with their cargoes full of oil, until the price goes up again - this is the playbook they employed last summer, and which is now fully legal thanks to deregulation begun under Clinton and embraced warmly under Bush II).  Exxon made tens of billions in profit chiefly because of the price of oil, not because they suddenly discovered how to refine superior oil and gas.  Exxon could, and should, still be able to make a profit - even after the true (and considerable) cost of pollution and land use and abuse was factored in as well - but it wouldn't be anywhere near the obscene levels guaranteed by oil that spiked at $147/barrel last summer (in percentage terms, Goldman and Morgan Stanley made much more, and they didn't refine a drop of oil).
As for the poor, they are poor chiefly because the monopolizers control the world's resources, leaving nothing for the poor to labor upon.  True wealth (not the funny stuff that goes across Wall Street screens) is created by Labor + Land + (optionally and usually) Capital.  You can create wealth without capital, but it's a heck of a lot harder; I could build a bridge across a river with just trees, stones, and mud (that is, natural resources, or 'Land') and my (considerable) labor, but it would sure go a lot easier if I had access to a tractor and a crane or two (this is true capital; money is NOT capital, it is only a medium of exchange). 

Neither labor nor capital would be taxed under a Geonomic system.  You can see pretty quickly what kinds of work opportunities this would free up.  Imagine if you could take a $40,000/year job, and not pay taxes on your wages.  Wouldn't that be a lot more attractive than taking a $40,000/year job, which nets to only $30,000 after wage taxes are figured in?  Of course, you would be paying more in resource taxes - from gas to land, if you owned your own home, but you have to pay most of that anyway, and the really large amounts of resource taxes would fall on those individuals and businesses that owned the most resources, encouraging them to utilize those resources, or sell them off to someone who could.

The myth that has been perpetuated by Milton Friedman, the Chicago School, and adherents of former President, Ronald Reagan, is that capital (including their misidentified 'money' or 'debt' as capital) somehow creates wealth by employing labor.  As I just showed in my bridge-building example, labor comes first. We labor to satisfy our desires (for food, clothing, shelter, etc.).  The 'money' we are paid is just a convenient means to obtain that which satisfies our desires (e.g. it's easier to find someone willing to accept money in exchange for food than to accept my labor as a bridge-builder).

All the capital in the world won't build a bridge if labor is unable or unwilling to work.

Now, knowing that, and knowing that there is so much work to be done (e.g. we have many bridges to be built, and not just in Minnesota, either), why is it that labor is being idled at such a fast rate?  Why are people willing and able to work unable to find employment?  The Supply-Side/Chicago School answer is that there is not enough money, or it is due to government waste.  This is false.  The money is, and always has been, siphoned off by the monopolists - lately that has included monopolists of money itself (created out of debt/thin air), in return for...well, nothing, really.  Are more people in homes because of all the subprime mortgages made by the money-monopolizers over the last few years? Well, maybe in the short-term, but in the long-term, roughly two thirds of Americans will own homes, after all the foreclosures have settled in, just as they have for the last couple of decades - except their equity will be much, much, smaller, and the banks will essentially own most of the equity.  Heads they win, tails, you lose.

That we don't have enough 'money' is a complete lie. That pure capitalists (that is, the owners of tractors, trucks, cranes, etc.) are the problem is also a lie.  The problem lies with monopolists who make money while putting their feet up on the porch, earning money simply for owning land.

The solution, as George correctly realized in his 650 page opus, Progress and Poverty, is to collect taxes on natural resources, but not to collect taxes on the fruits of production - i.e. wages and capital.  this would:
A.  Spur innovation and productivity
B.  End speculation by taking away the 'fuel' for it
C.  Eliminate most poverty by freeing up natural resources now lying idle and 'owned' by speculators just waiting for the price to go up
D.  Eliminate urban sprawl (see C. above)
E.  Reduce squandering of scarce natural resources by taxing them at their true, market-determined, value (we have a whole army of land and resource 'assessors' whose job it is to determine the raw value of land, oil, water, copper etc. and if that doesn't work, we can just hold an auction).
F.  Reduce (greatly) pollution by treating clean air, clean water, clean land, as a natural, and finite resource, and not as something nature provides for 'free' or as an externality that business does not have to account for in their balance sheet.  Whether pollution is accounted for or not in a business balance sheet is irrelevant to the cost, because someone pays -right now, that is the taxpayer, or perhaps in the case of people living in Appalachia, or Tennessee, the people living near coal mining companies, for example.
G.  End most forms of debt, which are really based on speculators cashing in due to (unrightful) ownership of land.  After all, J.P. Morgan or Wells Fargo did not create the land, did they?  Why should they profit from writing a mortgage upon it?  Sure, you can borrow to build a home, but that cost is typically much, much smaller than the cost of the underlying land.  Think of it this way: imagine a brand new home being built in central Kansas, where land is cheap.  What would the cost of that be for just the home, taking out the cost of land? Maybe $40,000.  Now, imagine the cost of building that home in midtown Manhattan - it's actually the same cost.  You might be saying that no one could afford to build a home like that in midtown Manhattan, but that is because of the high cost of land, not the home itself.  Where people are concentrated, as George recognized, the cost of land goes up.

If you agree with me, take a look at my Geonomics petition to get resource intensive industries to pay their fair share at: Click Here

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Scott Baker is a Managing Editor & The Economics Editor at Opednews, and a former blogger for Huffington Post, Daily Kos, and Global Economic Intersection.

His anthology of updated Opednews articles "America is Not Broke" was published by Tayen Lane Publishing (March, 2015) and may be found here:

Scott is a former and current President of Common Ground-NY (, a Geoist/Georgist activist group. He has written dozens of (more...)

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