Georgism is a political/economic school of thought originated by Henry George. Its main tenet is that economic success and political freedom go hand in hand with government being the landlord and renting out the land to private citizens, with the rent then being equally distributed among the people. It purports to be a free-market school of thought: Georgists prize freedom of trade and contract. It can even be reconciled with anarcho-capitalism: The government can be substituted for a competing network of courts in which class action lawsuits against a land holder claim rent that should have been paid to the people but wasn’t. My six main critiques of Georgism are based on pollution, sovereignty, monopolization, speculation, value, and immigration/emigration.
A Georgist land holder is the top bidder for a piece of land. Land rent is paid in as close to a continuous manner as possible. In Hong Kong, land is held for a period of fifty years before its lease must be bid on again, with payment of rent at the beginning of the holding period. Georgism takes this idea to the extreme. Land is held for the shortest possible period before its lease may be bid on again. One can imagine a daily payment of rent, with a daily chance to unseat a land holder by outbidding him.
So, what incentive does this give to the land holder? The land holder is paying the market rent of the land. So, if the worth of the land can be driven down without the land holders’ profits decreasing, the land holder saves money. One can imagine a factory with several hundred acres of land. In a Georgism, it is in the interest of the factory to pollute the land, since this drives the worth of the land and its market rent down. If the factory owned the land, then the factory would have an incentive to maintain the value of the land, for any company’s goal is to own valuable assets.
Also, a lawsuit against a polluter is a nonsensical notion in a Georgism. In a system of land ownership, pollution onto someone’s land that causes a decrease in the worth of the land is offset by a lawsuit against the polluter for the amount of financial harm i.e. the decreased worth of the land. In Georgism, however, there is not financial harm when someone’s land worth decreases: There is financial gain, because it results in the land holder paying less rent. This incentive problem might be solved through regulation, but if there is to be widespread regulation of an individual’s activities on the land he holds, then Georgism ceases to be a theory in harmony with free market ideals.
Moving on to the problem of sovereignty. If Georgism is a theory in keeping with libertarianism, then government should be as local as possible. But let’s examine a sovereign political entity in a Georgist world. A group of people hold a piece of land in common, distributing the rent amongst themselves. But if they deny others outside of their group a share of the rent, they are no different than a homeowner’s association who refuses to pay its rent to the government. If land owner sovereignty is done away with, then political sovereignty must be done away with as well. Just like a land holder can be evicted for failing to pay his taxes, a town could be invaded by a larger empire on the Georgist grounds that it was refusing to pay tribute to the people at large for the natural resources it held.
Now on to the issue of monopolization. If there is a large financial entity, it can easily conquer whole territories in a Georgist system. It can simply outbid the land holders of a town, and then pay the land value tax to itself. Across the world, governments have forcibly relocated villages so that wealthy people and industrial interests can claim the land. Georgism would provide these governments with the perfect excuse: The poor villagers would simply be outbid, and then when they are forced to move hundreds of miles away into an overcrowded city, they will not receive the land rent, since land rent is collected at a municipal level.
Speculation is another important thorn in the Georgist theory. When a region is developing, not all the land should immediately be put to use: It should be conserved for later, more important uses. For instance, one can imagine a burgeoning Georgist city that, in keeping with the Georgist economic theory, did not have land speculators. Cemetaries would have to be constantly be dug up, since more of them were built then was prudent, for the land was cheaper than it would be with land speculators in the early stages of the city’s development. Green space would likely be far lower, since conservancy purchases (by private or state groups) are by definition purchases of speculators’ lands or speculation itself. Regulation and central planning could be used, but no free marketer would agree they are more effective in determining growth trends than the market, and, of course, free market thought is inherently opposed to such policies in the first place.
Another failure of Georgism is the failure to differentiate between value and price. Value is inherently subjective whenever trade is concerned: If I value your tie more than my shirt, and you value my shirt more than your tie, then we trade. But the Georgist “land value” is an objective number set by the highest bidder. A farmer might value the family farm far more than what some corporation will bid for it. A congregation might value its church far higher than McDonalds does. A person might value their home far more than their neighbor does, but it is not land value that determines land holding in Georgism, despite the Georgist use of the term: It is simply an auction.
In a free world, people are not dogs kept in their master’s cage: One is free to leave and to enter any country he wants. But examine the incentives under Georgism: The financial incentive to allow immigrants in is smashed. In a region with a large amount of natural resources, the dividend from these resources paid to the people would directly go down as more immigrants entered. Furthermore, there would be an enhanced incentive to move to these resource-rich regions, and a democratic government would have all the more incentive to restrict their entry. People do not tend to vote their own money away, and combined with the naturally xenophobic tendencies of people, human migration would be severely limited.
Georgism proclaims to be a free market theory, but it simply isn’t. Georgism promotes pollution, regulation, invasion, monopoly, resource squandering, central planning, an eradication of family and religious traditions tied to the land, and an end to the free movement of peoples on this earth. A system of land ownership is the only system wherein free market ideals can flourish.