Rent-Seeking Drives Inequality

In 2010, the world’s 62 richest billionaires collectively held $1.1 trillion in wealth. At the same time, the poorest half of the world’s population held wealth amounting to $2.6 trillion. Just six years later, in 2016, those 62 billionaires had amassed a further $660 billion, and the poorest half had been stripped of the equivalent of more than $800 billion.

This should be the dying breath of trickle-down economics. Ahead of the World Economic Forum earlier this year, Oxfam Great Britain chief executive Mark Goldring said that “it is no longer good enough for the richest to pretend that their wealth benefits the rest of us when the facts show that the recent explosion in the wealth of the super-rich has come at the expense of the poorest.”

Oxfam senior economist and former special adviser to President Obama Didier Jacobs published a discussion paper in November 2015, called Extreme Wealth is Not Merited, in which he detailed the “six rungs” of the rent-seeking ladder: crime, cronyism, inheritance, monopoly, globalization, and technology.

He argues that few, if any, of these rungs allow a person to become extremely wealthy based on merit, and that “meritocracy calls for talented people to be rich, but not extremely so”. In an analysis of the wealth portfolios of the Forbes list of billionaires, Jacobs offers insight into the relative importance of each rung:

“Fifty percent of the world’s billionaire wealth is found to be non-meritocratic owing to either inheritance or a high presumption of cronyism. Another 15 percent is not meritocratic owing to presumption of monopoly. All of it is non-meritocratic owing to globalization.”

 

Photo: Ravi_Shah 168/366 – Classic via photopin (license)

According to Jacobs, for the world’s richest, wealth begets wealth, and clearly the most prosperous avenues to enormous wealth are through currying favor with politicians or simply receiving a fortune as a hereditary right. All billionaires have benefited from globalization, population, and economic growth. Jacobs suggests that the world will inevitably see its first trillionaire in coming decades, and it will be the result not of some extraordinary talent but of continued growth in the global economy.

In a February 2016 interview with Inequality.org, Jacobs compared modern wealth with the merit of Johan Gutenberg. “He invented the printing press in 1439. Most of us would agree, I think, that the printing press amounts to an invention as least as important as Google. Yet Gutenberg did not become a billionaire…because the world economy in the fifteenth century was simply too small and too fragmented to support any billionaire fortunes.”

Jacobs says the idea of meritocracy makes sense for the middle class, and “an outstanding nurse is likely to make more money than an average one and would deserve that extra income”. But the kind of extreme inequality of wealth we see today cannot be justified by the same concepts of meritocracy, as these fortunes are so dependent on collective resources.

Henry George’s definition of land was actually very broad, encompassing “all natural forces and opportunities”. In this way, we can see applications of his principle of shared utility to not just land and natural resources, but to intellectual property, and the forces of globalization and ongoing economic growth. That we should begin to see the existence of trillionaires while so many still struggle to live on wages and are taxed on their labor is a great injustice.

George promoted the idea of the Land Value Tax as a way to fairly distribute economic rent, what would otherwise be unearned wealth, concentrated in the hands of the mega-rich. He also advocated a guaranteed basic income or citizens’ dividend, and a policy of this nature should be funded by taxing the economic rent from land. This way, when public initiatives and global systems create added value for businesses and the rich, that value will be returned to the public instead of being lost to further private stockpiling.

Jacobs says that today, every single billionaire’s wealth “depends on having access to a large population that’s linked through a globalized economy”. Those massive increases in wealth are crystallized in high land values, especially in ritzy locations in major global cities like New York and London. The rich can’t take their land with them to the Switzerland or the Cayman islands.

“The more this global economy grows, the richer our billionaires get. This growth happens independently from any one individual’s effort and talent, so we can’t say that billionaires deserve the profits that go hand in hand with economic growth.” Much of what appears on the balance sheets as profits for productive activities is really land holdings in global hubs. By simply taxing the value of land, we could capture that surplus, without taxing any earned wealth or reducing productive incentives. There would be enough to fund all healthcare, schools, transportation systems, etc without any taxes on normal people. We could have all of the wealth creation of a purely capitalist system while realizing the noble dreams of socialism.

 

Featured photo: FraVal Imaging Malaga muelle uno via photopin (license)

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Is The American Dream Dead in Northern California?

In 1931, historian James Truslow Adams said the American dream mandates that “life should be better and richer and fuller for everyone, with opportunity for each according to ability or achievement”, regardless of social class or circumstances of birth. But what does that actually mean?

For some, the vagueness of the American dream concept makes it difficult to quantify. Identifying a more specific metric of focus would offer a clearer picture of American opportunity for prosperity and success, and an upward social mobility for all people.

TechCrunch.com journalist Kim-Mai Cutler delivered a presentation at Earthsharing.org’s BIL Oakland 2016: Recession Generation event on July 9, in which she focused on the intersection between opportunity, technology, and land. To address this intersection, she referenced the research of Stanford University economist Raj Chetty.

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Figure 1

Chetty analyzed the family income records of 40 million children over the past 20 years and calculated the likelihood of a child born into the poorest 20 percent (lowest quintile) of society reaching a higher quintile in income. Isolating geography as a determining factor, Chetty found that, for example, the city of San Jose provides the best opportunities for a poor child to reach the 80th percentile in income distribution, compared to all other cities across the country. This is shown in Figure 1.

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Figure 2

Despite this, Figure 2 shows a trend reflected statewide and across the United States wherein median wages are increasing, but poverty is also on the rise, and homeownership is falling.

This trend in Santa Clara County flies in the face of conventional thinking, whereby poverty should decrease as incomes and opportunities multiply. If people are making more money, yet are less able purchase a home, the home price must be rising faster than the wage.

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Figure 3

Similarly, apartment rent is skyrocketing. There is a lot of job growth, which would tend to indicate that labor is more in demand and that incomes will be higher, but most of the new jobs do not pay well – most make less than 50 percent of the average median income (AMI), as seen in Figure 3.

To add insult to injury, Figure 4 shows that many lower-wage workers fall well short of average asking rents, and are therefore unable to work and live in the same area. These people must either cohabitate or commute long distances in order to secure housing that they can afford.

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Figure 4

These are direct consequences of Proposition 13, which greatly limits property taxation in the state of California. Proposition 13 defines what a parcel of real estate can be taxed, how much that tax can grow annually, and when the parcel’s value can be reassessed. Over time, this has created severe market distortions, as developers have no incentive to build additional housing that is affordable. This ultimately limits housing supply, forces workers to commute further from the urban centers, and leads to additional sprawl.

How does this all affect upward mobility? For starters, family commute times correlate with a child’s future success and earnings. Figure 5, from Chetty’s study, shows that a transit time of 15 minutes or less significantly correlates with a child’s upward mobility.

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Figure 5

If the American dream is precipitated by upward mobility from one income quintile to the next, it is becoming an unattainable dream for an increasing percentage of the population. Without significant policy change, it will become impossible for many families to escape wage slavery.

Remedies do exist – some to resolve the problem altogether, and others to mitigate it. Metro San Francisco has seen a significant growth of working professionals choosing cohabitation, as well as the tiny house movement of 100-400 square-foot spaces. Unfortunately, these behaviors do not address the structural inequities and land misuse created by the current policy environment and Proposition 13.

With this in mind, it would be sensible for new housing construction in the Bay area to occur where economic activity is most concentrated, namely downtown San Francisco. Downtown areas tend to have the greatest land values, but traditional strategies for construction in the city center tend to be very expensive, politically treacherous, or otherwise ineffective. While cohabitation and tiny houses might make the area more affordable for a few, government must incentivize urban development in high-demand areas to effectively turn the tide of this crisis. To this end, the city and state must consider a Land Value Tax.

The economist Henry George documented this phenomenon of market exclusion 137 years ago in his seminal work Progress and Poverty. George demonstrated how rent increases faster than wages, and to expedite new construction, he recommended eliminating taxes on work and consumption and shifting the source of revenue to Land Value Taxation. His idea was to encourage landowners and developers to increase residential and commercial space in order to pay the Land Value Tax, while generating a respectable return and providing value to others. Land Value Taxation naturally becomes even more effective wherever land values are higher, like the urban core of cities. Implemented in cities, Land Value Taxation leads to a substantial increase in both living and working space.

California faces a unique challenge due to the limits imposed by Proposition 13, and overcoming this would require a difficult voter-approved constitutional amendment to completely overhaul the property tax system. State legislators and regional and city planners would be remiss not to consider a Land Value Tax, which has had demonstrated success in increasing residential space in the United States and abroad.

 

Watch Kim-Mai Cutler’s presentation below:

 

Images: Keynote presentation by Kim-Mai Cutler at BIL Oakland: Recession Generation 2016

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Origins of the Silicon Valley Housing Crisis and How to Fix it

Most of the wealth being generated in Silicon Valley is the result of advanced engineering, risky venture capital and cut-throat business acumen in the face of rapidly-evolving competition. Visa, HP, Intel, Adobe, Ebay, Apple, Google, Facebook – the concentration of multi-billion-dollar enterprises in this tiny pocket of Santa Clara Valley is staggering.

But not everyone making big money in Silicon Valley had to major in a STEM field or produce any real wealth to do so. For those who have speculated on rising land values, the last 40 years has been a gamble that keeps paying off. In the 1960s, when the land in Santa Clara Valley was producing prunes instead of circuits, John Arrillaga Sr. and Richard Peery could see the wheels of a new boom beginning to turn. These young entrepreneurs spent the next decade building the corridor through which much of Silicon Valley’s world-changing innovation would pass.

By constructing custom and cost-effective office units quickly for emerging tech companies, Arrillaga and Peery dominated the region and became its go-to developers. Their signature, low-slung concrete buildings called tilt-ups made for cheap and quick construction early on. The pair was also among the first to build before tenants were confirmed, in the hopes that immediate availability would be attractive to businesses. The land they had bought up as young men began to generate formidable returns, and the speed of technological progress coupled with an apparently insatiable demand for more space created today’s Silicon Valley, synonymous with skyrocketing land values. While this new value injected into Santa Clara Valley draws people to the area and creates prosperity for those in innovative industries, it also attracts speculation where it is possible to capture significant wealth simply by owning land.

Arrillaga is worth more than $2.5 billion, a fortune earned in part from unparalleled skills as a developer, but also because he was able to extract a great deal of unearned wealth. The contribution of pioneering land developers to economic growth is undeniable, but unfortunately, taxation structures have not kept pace with the rapid transformation of unproductive land into a cybercity of millionaires and billionaires. The wealth that has been obtained from constructing buildings is hard earned, but the enormous increase in rental income resulting from rapidly-increasing land values has not been earned. It’s not as if aging structures have grown more valuable, it’s the land underneath them that has skyrocketed in this hub of innovation, land values created by an aggregation of economic activity not attributable to any one person, developer, or tech company. The value of this land is indeed a socially-created value.

Today, the success of entrepreneurs starting tech companies has made Silicon Valley the most expensive place to live in the United States. As these tech giants grow, the reach of their impact on the housing market spreads, and migrant employees move with their money to suburbs farther and farther out from where they work. In so doing, they shape land values and make other lasting changes to the urban environment. The gains generated by developers like Arrillaga and captured by speculators can ripple out into the wider community and inflate the cost of living.

By Unsplash via Pixabay.

The incredible wealth now being generated by high-tech industries in Silicon Valley has put a premium on all surrounding land, both commercial and residential. Working-class residents can only hold on to rent-controlled accommodation for so long before the profit motives of private developers see them evicted, and their housing demolished. According to the Guardian:

Between 2000 and 2013, the number of low-income households in the Bay Area increased by 10 percent, but the region lost 50 percent of units defined affordable for this population, according to researchers at the University of Berkeley, California, who have closely studied gentrification and displacement.

The proliferation of wealth in our communities is a wonderful thing; the only reason it causes such polarization is because systemic inequalities go unaddressed.

We can have the best of both worlds. For men like Arrillaga and Peery to have the opportunity to create these cash cow business parks and bring thousands of talented professionals to Silicon Valley is incredible, it should be celebrated.

As people have come together to produce a great deal of wealth in the tech industry, land values have boomed. Those who were able to get on the property ladder before an oncoming swell in land values simply sell or rent for huge windfall gains, unearned wealth, while prior tenants are displaced. Incoming renters are squeezed or turned away entirely by the high rent.

The problem is not the tech companies or their workers, and it is not the vulnerable tenants; it’s not even the landlords who benefit from, perhaps unconsciously, playing the working class renters and the angry anarchists off the techies. It’s our system of property taxation. The best and simplest way to correct the imbalance, to give justice to everyone, is to implement a system of Land Value Taxation while reducing taxes that harm the poor and the production of new wealth.

From the developer’s’ perspective, a Land Value Tax would in no way detract from the incentive to build in the first place, as the taxes on buildings would be eliminated, after sales and wage taxes. Furthermore, the incentive to build on unused, centrally-located land would increase. They would have an even greater incentive to build immediately because owning the land without having tenants would leave them in the red after paying their Land Value Tax bill each month. The site would not be a speculative asset, but one that only yields a positive return if a developer uses it well to meet people’s needs.

For Arrillaga and Peery, the taxes due on their development portfolio would have grown with the unprecedented business success of their tenants, from dirt cheap taxes on empty lots to large tax bills on lucrative land accommodating high-end office buildings. This would have generated a massive amount of public revenue without harming incentives toward innovation. The seeds of gentrification are nurtured by insufficient housing supply, but Land Value Tax would mean that centrally-located land would be developed to accommodate increasingly more people at comfortable densities.

By lauramba via Pixabay.

This policy encourages landowners to maximize the revenue they can generate by constructing and maintaining buildings of the highest caliber to attract tenants. As opportunity brings more people to an area for work, demand for housing pushes land values even higher, which increases revenue from the Land Value Tax even more. A landowner can then create more housing, often vertically, to cover the larger tax, or if they are unable or unwilling, sell to a developer who will. This applies not just to Silicon Valley, but to any in-demand area where the concentration of jobs forces living costs higher than many can afford.

Land Value Tax can be used as a source of revenue to fund great social programs, even while reducing wage and sales taxes -from health vouchers to housing for mentally ill homeless people, or even a universal basic income. Without a Land Value Tax, however, the benefits these social programs create will simply be captured by landlords through higher rent charges. Thus, the positive effects of these social policies would nearly be wiped out, funneled into the pockets of landlords as rent hikes. For example, if everyone was given a $10,000 basic income each year, all else being equal, what would happen to the cost of rent? It would go up by a comparable amount, and largely cancel out the benefits of basic income to the most vulnerable people. However, with Land Value Tax, incentives to increase housing supply would result in people being able to protect their basic income from rent hikes.

Governments will not be able to subsidize their way out of this housing crisis with palliative measures. Creating a system of incentives in which the market is enabled to correct itself is the most sustainable way forward, and offers the best hope of ensuring affordability for all while simultaneously giving a boost to incredible growth in future industries.

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Julia Bossmann: Challenges Of A Post-Work Society

BIL: Oakland 2016 Recession Generation was an Earthsharing.org conference in Oakland, California on July 9th. Foresight Institute president Julia Bossmann presented an argument for moving toward a post-work society, and the changes both economic and social that would be required to achieve this.

Bossmann recounts the incredible advances in artificial intelligence we are witnessing, whereby computers are writing original imitations of Shakespeare, dispensing effective legal advice and piloting cars through traffic. Bossmann believes that innovative scientific research will be next on the list of A.I. accomplishments.

Photo: FritzchensFritz AMD@14nm@GCN_4th_gen@Polaris_10@Radeon_RX_470@1622_M60J5.0A_215-0876204___Stack-DSC07208-DSC07236_-_ZS-PMax via photopin (license)
Photo: FritzchensFritz AMD@14nm Radeon_RX_470 via photopin (license)

“They have theoretically unlimited memory, they have a way faster speed of reading, they can find insights and facts from all across and then draw connections and find patterns. So now that we may have reached the limit in medical research – that one human mind may not be enough to figure it all out – having a machine mind may open the floodgates to finding out much more.”

Bossmann’s scenario of a post-work society presents significant economic challenges, with a disruption of millions of jobs across the professional spectrum. Truck drivers could be an early casualty, but many others earning an income by selling their time and labor stand to lose their current employment due to automation.

“How would a human even compete with someone who can drive for thousands of hours at no end and not ask for a salary?”, Bossmann says.

Photo: jurvetson Your Uber Otto has arrived via photopin (license)
Photo: jurvetson Your Uber Otto has arrived via photopin (license)

In general, a person’s income is derived either from time, or from ownership of assets like land and other property. Bossmann states that “once the time goes away, the only thing left is ownership. And we all know that ownership is not distributed in a way that all of us could just live on that alone; in fact, most of us need to sell our time to live”. A radical shift in how we think about ownership is required if society is to remain prosperous, Bossmann says.

As artificial intelligence progresses, those who own the valuable sites where A.I. research takes place, especially in Silicon Valley, will continue to become more disproportionately wealthy vis a vis the appreciating value of their land: rents they can charge, prices for which they can sell, etc. They will become wealthier not by doing the research and development themselves, but simply by owning valuable space in areas doing R&D. Regardless of Bossman’s predictions about the rate of A.I. progress and its replacement of human labor, a greater proportion of the wealth created will continue to go to owners of prime land.

Those who own prime locations already have a large advantage over wage earners, simply by their ever-appreciating real estate values. We have seen a huge explosion in labor-saving devices, wealth production, and wealth inequality in the last two centuries. These gains disproportionately go to the owners of property. So, there is already a need to share the returns from owning natural resources like land.

This need to redistribute the benefits of land ownership become even more obvious in Bossmann’s prediction of the future – where she assumes a lack of A.I. winters/ceilings, no comparable human intelligence augmentation, and where the Law of Comparative Advantage (between humans and robots) no longer holds. In such a scenario, obedient robots would simply produce enormous amounts of wealth, and this wealth would all go to those humans who own the natural resource inputs needed for A.I. The people who did not own land, or receive a dividend/basic income of some kind, would simply have no income.

Henry George, a prominent political economist and author from the late 19th century, argued that gains derived merely from the ownership of land and other natural resources should be considered the property of everyone, not just the title-holders. A system of land value taxation would be a pragmatic way of shifting the burden of raising public revenue from workers to landowners. It would be the obvious choice for funding a basic income that would protect people from unemployment now, and facilitate any kind of post-work society.

“Once we have figured out this dilemma, and we have machines that will do most of the work on the planet… we will look back and think that it was barbaric that people had to sell most of their living time on this planet, doing things they didn’t want to do,” Bossmann says. But reaching an economic consensus is not all that is required to reach a prosperous post-work society.

“Many of us define ourselves by our jobs, what we do for a living, how much money we make, all these things are important to so many of us. Are we willing to give up this kind of thinking for something better?”

Julia Bossmann is president of Foresight Institute, a think tank promoting transformative future technologies, and founder of Synthetic, a startup building A.I. of its own. Bossmann is a McKinsey Fellow, Singularity University GSP graduate and master of science in neuroscience and psychology. She lectures on Artificial Intelligence, hard technology, innovation, the future, and technology transforming society.

 

Photo: Tej3478 <a>Artificial Intelligence</a>. Licensed under Creative Commons.

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Robin Hanson On Life With Replicable Robots

BIL: Oakland 2016 Recession Generation was an Earthsharing.org event which took place on July 9th, 2016 in Oakland, California. Keynote speaker, Robin Hanson, shared a fascinating vision of the future in which cheap, replicable robots are able to do most human work, and the implications of such a possibility.

Hanson presents an idea divergent from what he says are the two most prevalent in the world of artificial intelligence, those being either slow, ongoing developments in AI research over the coming decades, or some “grand new theory” that hasn’t been discovered.

“The third scenario is where we port the software that’s already in the human brain,” Hanson says.

“If we have good enough models for how each of the cell types work, we have a good enough scan of a particular brain, we have enough cheap, fast computers, then we can make a model of that particular person’s brain on those computers; and if it’s cheap enough, you could run that simulation cheaper than you could rent the human, that changes everything.”

He thinks this means “humans retire” and become completely replaced in the labor market by these emulated brains. However, he says humans “start out owning everything” and “their investments double as fast as the economy, i.e. every month.” So he thinks this means that humans who have access to wealth, and he mentions real estate in particular, will profit tremendously. He implies that those who don’t have wealth will suffer.

This parallels a lot of the discussions we usually have at EarthSharing about the need to fairly share the fruits of nature, so that we can all benefit from technological progress. Even these far-future forecasts aren’t, ultimately, so different from ages past. In the Guilded Age, we had industrialists profiting enormously off resource wealth and land during a time of rapid technological growth.

What this discussion shows is that no amount of technology can be relied upon for solving the problems of political economy. Poverty, in particular, cannot be solved without economic justice.

 

Robin Hanson is associate professor of economics at George Mason University and a research associate at the Future of Humanity Institute of Oxford University. He is known as an expert on idea futures and markets, and he was involved in the creation of the Foresight Institute Foresight Exchange and DARPA FutureMAP project. He invented market scoring rules like LMSR (Logarithmic Market Scoring Rule) used by prediction markets such as Consensus Point (where Hanson is Chief Scientist), and has conducted research on signalling.

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The Norwegian Model: Managing Resource Wealth for the Common Good

Natural resources play a foundational role in a country’s economic development. As natural commons, they provide economic assets via space, raw materials, and energy that can be used to create other assets and opportunities in the form of industry and wealth. But because these commons are finite, their mismanagement often leads to a boom and bust pattern of economic development. Norway, however, has set a solid example for how to properly manage natural resources, including one of the most sought after – fossil fuels.

In the 1950’s, European countries began to speculate that vast oil and natural gas deposits lay under the North Sea. This theory was confirmed in 1959, when the largest natural gas field in Europe was discovered in the Netherlands. Excitement grew around potential future discoveries, particularly in the area of Norway’s continental shelf. Anticipating the discovery of reserves, the Norwegian government passed legislation in 1963 stating that the State owns all natural resources. The legislation also stated that the government is the only authority that can grant licenses for exploration and production. This legislation put Norway’s natural commons firmly into the hands of its citizens.

This turned out to be smart planning. In 1969, oil was discovered in Norway’s continental shelf. Oftentimes, nations turn to free-market economics, an approach that consistently fails to allocate the wealth derived from natural resources efficiently. Instead, Norway sought a different strategy to ensure that this natural commons provided long-term wealth to the entire country.

Initially, the Norwegian government gave private energy companies limited licenses to explore and tap Norway’s reserves. These companies can be credited with developing the country’s first oil and gas fields. However, in an effort to maximize national revenue, in 1972, the government moved quickly to create a government-owned petroleum company called Statoil. From that point forward, any foreign energy company granted a license was required to split 50% of the work with Statoil.

photo credit: L.C.Nøttaasen Yme platform via photopin (license)
photo credit: L.C.Nøttaasen Yme platform via photopin (license)

Norway’s fast action prevented the privatization of its natural commons and secured its oil wealth for its citizens. The government credits oil wealth with the creation and sustainability of their welfare state and support of macroeconomic development during downturns in the petroleum industry.

In the 1990’s, the government created the Government Pension Fund – Global (GPFG), informally known as the Norwegian Oil Fund, as a place to deposit all excess oil profits. The value of the fund stands at a staggering $850bn, and officials estimate that sum will surpass $1 trillion by the end of 2019.

So what has Norway been doing with all this money? Well, not much. And that is the point. The government capped annual withdrawals at 4% in order to prevent hyperinflation and to secure a surplus of money to survive in a looming post-fossil fuel world. This decision has proven wise recently as a drop in oil prices has moved Norway to declare its petroleum industry in crisis.

Norway’s natural commons management is a shining example of the prosperity that results when revenue from national resources is shared by all citizens. Norway has used this wealth to create social and economic programs that help each citizen. This wealth has also built a massive pension fund that can support the country during periods of economic hardship. It is a powerful equalizing tool not often seen in nations rich in oil and other natural resources.

photo credit: Jean-Paul Navarro The Grand Harbor via photopin (license)
photo credit: Jean-Paul Navarro The Grand Harbor via photopin (license)

Some economic scholars draw comparisons between Norway’s approach to natural commons (referred to as “petro populism”) and the theories of Henry George. Henry George, an American economist and political theorist from the 19th century, postulated that land is social commons, and that the profits drawn from land should be shared by all citizens via the use of land value taxation (LVT). In the case of Norway, they have taxed the revenue drawn from oil rich land at the very high rate of 78% and both redistributed and saved that revenue. In addition, they have carried over such sustainable thinking towards other natural resources, such as lumber and fisheries, and seen the same successes as with petroleum.

Resource-rich nations should take lessons from Norway on how to fully profit from and intelligently invest revenues from the utilization of our natural commons. The discovery of lucrative resources can inevitably lead to a boom and bust economy. Avoiding that requires managing those resources appropriately and wisely, as the Norwegians have, by using wealth derived from them to create an equitable and healthy society for all.

But all nations, whether “resource-rich” or not, have at least one socially-created resource of enormous value which can be tapped: the rental value of land.

Audio podcast on Norway and it’s oil management system. Courtesy of NPR online.

Featured Image: photo credit: arbyreed  via photopin

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EarthSharing.org on Stanford Radio KZSU 90.1 FM Promoting the Recession Generation Event

WKZSU 90.1 FM Stanford University Radio Interviews EarthSharing.org

 

July 5th, 2016, Edward Miller and Jacob Shwartz-Lucas were invited onto Stanford University Radio to discuss an event they would organize in Oakland a few days later. The event was titled BIL Oakland 2016: The Recession Generation.

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The discussion revolved around the event’s aim of helping young adults to navigate the challenges of living in our harsh economic climate and rapid technological disruption.

Jacob and Edward discussed their motivations for putting on the conference. This included explaining their backgrounds, and what changes they want to see in the world.

photo credit: Jane Says via photopin (license)
photo credit: Jane Says via photopin (license)
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Marie Howland, 19th Century Gender Equality Pioneer

Young girls ironing laundry

Howard H. Aiken, a pioneer in computer engineering, famously urged others to “[not] worry about people stealing [your] idea. If it’s original, you will have to ram it down their throats.”

This reminder is useful when considering the reasons that groundbreaking ideas often do not make it into mainstream culture or history textbooks. Marie Howland, a passionate advocate for women’s economic independence in the nineteenth century, is an apt exemplar of Aiken’s claim. A woman of revolutionary ideas, she is hardly a household name. Howland, a white working-class woman, was among the first of both her class and gender to publish a novel in America and to participate in the women’s rights movement by challenging fundamental social conventions that limited the influence of women to the household and domestic sphere. Like other authors such as Jane Austen, Howland was deeply troubled by the way social conventions served to reinforce women’s systemic economic dependence on men. This has hardly been resolved; “equal pay for equal work,” one of the cornerstones of Hillary Clinton’s current presidential campaign, is merely one example of the issues that remain to be addressed towards Howland’s goal of achieving economic equality among genders. What is most compelling about Howland, then, is how relevant her ideas for the economic equality of women continue to be today.

A concise statement of Howard’s philosophy is that she wished to see opportunities for women to achieve financial independence. This idea necessarily challenged traditional boundaries separating the domestic and public spheres. Whereas a man might have various opportunities for wage-earning work outside of the household, a woman’s work was typically constrained to the household and its value not so easily quantified. Early on, this distinction led Howland to embrace the writings of French intellectual Charles Fourier. She admired Fourier’s suggestion that women be empowered to select their work – primarily in a communal setting (phalanx) with other women – and be materially compensated. It is important to distinguish here that while many women in working-class families were, in fact, compensated for employment outside of the household, Howland recognized that this did not absolve them of traditional household duties. Women, in many cases, worked a “second shift” on the homefront, remaining trapped by this economic and social model. As Cliff Cobb states in his introduction to a special issue on Marie Howland in The American Journal of Economics and Sociology, “[T]he only way to let women out of [their domestic] prison[s] was to knock down the walls that have separated the oikos (household) from the polis (public arena), the domestic and the non-domestic spheres.”

 

Woman working at Texaco Refinery
Port Arthur refinery, The Texas Company via photopin (license)

 

The Fourierist model, which remains obscure relative to other alternatives to Capitalism such as Marxism, might best be characterized as a combination of the communal elements of Socialism, with a view of humanity as an evolving entity striving towards a state of universal harmony in accordance to God’s will. Fourier understood the Divine model for social evolution as requiring a move toward communal living, reducing the inefficiencies of individual households by consolidating and redistributing the work required by the community. Notably, domestic work such as cooking, cleaning, and childcare was included in this model. By normalizing domestic work within the community marketplace, Fourier’s plan for communal living also implies a redistribution of the power dynamics that have traditionally separated the genders, privileging white males above everyone else. It was Fourier’s hope that altering domestic work and power in this way would facilitate the sharing of power in other spheres.

Late in life, Howland resided in the Georgist community of Fairhope, Alabama, which was based on the ideas of American political economist Henry George, favoring land value taxation rather than taxation on improvements or property. These ideas, implemented both in the United States as well as abroad, have yielded enormous economic gains. Not surprisingly, Howland found these ideas compelling and even necessary for realizing a more egalitarian world.

 

Fairhope, Albama.
Fairhope, Albama. By Stratosphere (Own work), via Wikimedia Commons

 

To be clear, none of this demonstrates that the core of Howland’s vision for economic liberation of women could not be better adopted by our contemporary society. If Aiken’s words are to be believed, we might argue that Howland’s ideas continue to pose challenges so significant that they are resisted by mainstream culture. The virtues of Howland’s ideas lay principally within the uncomfortable questions they pose. It is interesting, for example, to consider the widespread negative perceptions that persist regarding “feminism” as a disruptive – rather than restorative – social influence. The myth of an America offering equal opportunity to all regardless of gender, race, and other minority identifications persists. Which groups stand to lose ground should continuing inequality be recognized, and what type of social and economic justice, as envisioned by Howland, ought to be pursued? The economic theory of great disparity as a necessary evil (social Darwinism) remains so deeply ingrained in our national narrative that it is often revered as unassailable, forestalling conversations that might otherwise pose promising alternatives but that have the potential to alter our current economic paradigms.

If there is anything we can learn from Howland’s ideas, it’s that just work relations cannot be achieved within the Capitalist system, in its current form, nor can they be achieved by simply redistributing property. To secure a just system for women, Howland argues that the caretaking duties that women are often burdened with also need to be redistributed.

-Elizabeth Smith

Cover Image: Ironing Day- vintage stereoscope card via photopin (license)

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Housing Advocates in New Orleans Take on Short-Term Rentals

Eleven years after the federal levee failures following Hurricane Katrina ravaged New Orleans, the city’s tourism industry has rebounded to pre-storm levels. In 2014, 9.52 million people visited New Orleans and spent a total of $6.81 billion, the highest recorded tourism spending in the city’s history. But while the revenue from increasing tourism has been a boon to the city’s economy, the market for affordable housing has been strained as property owners and investors increasingly convert residential properties into short-term rentals.

Short-term rentals are furnished homes rented to tourists as an alternative to hotels. Although they have existed for some time, websites like Airbnb and VRBO, which make it easy for homeowners to connect with those seeking accommodations, have led to a rapid proliferation of short-term rental units over housing for the city’s workers. While they benefit property owners with a source of additional revenue and are often less expensive for tourists than a hotel, these short-term rentals are decried for straining the housing market in cities with limited housing stock.

This trend suggests that homeowners, despite the city’s economic resurgence, are finding it necessary to generate additional income. This may result partially from a lack of economic opportunity in other sectors, forcing property owners to venture into the short-term rental market. New Orleans renters have also suffered displacement as investors and landlords, seeing bigger dollar signs in reach, convert entire properties to short-term rentals, often evicting long-term tenants.

 

New Orleans my love via photopin (license)
New Orleans my love via photopin (license)

 

Housing advocates across the country, particularly in San Francisco and New York City, have rallied against this practice, citing increasing rents and a trend of landlords removing properties from the residential rental market to use them solely as short-term rentals. In New Orleans in particular, where rents have increased 20% over the past 14 months, shrinking housing inventory is squeezing out the lower-income renters and prospective homeowners who are already struggling to find affordable housing.

Such short-term rentals, though prevalent, are illegal in New Orleans. Local ordinances state that an entire home may not be rented for a period of less than 30 days, and citations can result in financial penalties in the amount of $500 or more. However, the city lacks the resources and personnel to enforce these laws. Of an estimated 2,000 to 4,000 illegal short-term rentals, only 72 properties received citations in 2015.

New Orleans housing advocates, concerned about the effect of these rentals on housing stock and rising rents, have issued recommendations for how the city should manage these properties. They recommend that legal short-term rentals, defined as the rental of a room within a home versus the entire home, be subject to taxes, the revenue from which would be used to construct low-income housing. This would be equivalent to introducing a new sale/income tax hybrid for homeowners seeking to create the value or income that some need to make ends meet. For illegal short-term rentals, housing advocates are requesting assistance from sites such as Airbnb in identifying them and recommend that fines be increased from the current $500.

 

Hard Rock on Bourbon Street via photopin (license) The tourism industry in New Orleans is driven by the culture created by the permenant residents.
Hard Rock on Bourbon Street via photopin (license) The tourism industry in New Orleans is driven by the culture created by the permanent residents.

 

With rents rapidly inflating, New Orleans must take immediate and drastic action to ensure that housing remains affordable for its citizens. The proliferation of short-term rentals–and its negative effects–stems from the rising popularity of New Orleans as a tourist destination, the lack of alternative income-generating opportunities, and the lack of any incentive system for landowners to build the necessary structures to increase in the city’s housing capacity.

The current rise in land values, a socially-created product of the city’s diverse population, manifests as increasing rent, which is a major draw for landlords. This means that this increased value, created by the community, is being captured by landlords rather than the community itself.

The government must enact policies that re-invest the rising value of land (created by city’s permanent residents) back into the city for the people. The best approach would be to implement a sufficiently high land value tax (LVT) as originally proposed by American political economist Henry George. George recognized that land obtains its value from the government granting legal privilege to exclude others from a portion of our common inheritance, the Earth. It is thus necessary for those benefitting from this exclusive use to compensate those they exclude.

 

Street musicians in New Orleans
Dancing in the streets via photopin (license) Local street musicians are a major draw for tourists in New Orleans.

 

In comparison with the ubiquitous property tax (which includes a tax on buildings) common in the United States, LVT has been shown to actually lower speculation of both residential and commercial space by preventing the privatization of socially-created land values by landlords. A sufficiently high LVT makes the ownership of underdeveloped land expensive, which then makes it necessary for landowners to develop rental space to generate revenue to cover the higher land value tax–especially when the land is most valuable, as in any city. By contrast, the portion of the traditional property tax which falls on improvements has the opposite effect, penalizing construction of residential and commercial space by increasing the amount of one’s property taxes via the higher tax on improvements.
Without the developmental incentives of land value taxation, the success of New Orleans’ expanding tourism industry will continue crowding its underdeveloped housing market. The cruelest aspect of this is that travel and tourism workers, who are the backbone of the entire industry and often musicians and artists, often find themselves priced out of their own neighborhoods as the tourism industry that depends on their labor booms. Efforts to enhance the affordable housing supply, therefore, are essential to maintaining the stock of service workers, artists, and musicians who entice tourists to love, and go spend their money in, New Orleans.

 

Jim Fairchild of New Orleans Steamcog Orchestra
Photo by Michelle Gomez. Jim Fairchild of New Orleans Steamcog Orchestra
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Marie Howland, 19th Century Gender Equality Pioneer

Howard H Aiken, a pioneer in computer engineering, has famously urged others to “[not] worry about people stealing [your] idea. If it’s original, you will have to ram it down their throats.”

Such reminders are especially useful when considering the various reasons that groundbreaking ideas don’t always achieve notoriety in history textbooks or mainstream culture. Marie Howland, a passionate advocate of women’s economic independence in the nineteenth century, is an apt exemplar of Aiken’s claim, for although she was a woman of revolutionary ideas, she is hardly a household name. As a white working-class woman, Howland was among the first of her class and gender to publish a novel in America and to participate in the women’s rights movement, challenging fundamental social conventions that limited the influence of women to domestic sphere. In alignment with authors like Jane Austen, Howland was deeply troubled by the way social conventions served to reinforce the systemic economic dependence of women on men. This has hardly been resolved: “equal pay for equal work,” one of the cornerstones of Hillary Clinton’s current presidential campaign, is merely one example of the work that remains to be done towards Howland’s goal of achieving economic equality among genders. What is most compelling about Howland, then, is how relevant her ideas for the economic equality of women continue to be today.

A concise summation of Howard’s worldview would be to say that she wished to see opportunities for women to achieve financial independence; this idea, however, necessarily challenged traditional boundaries separating the domestic and public spheres. Whereas a man might have many opportunities for different kinds of paid work outside of the household, a woman’s work was restrained to the household, where economic value was not so easily quantified. It was this distinction that, early on, led Howland to embrace the writings of French intellectual Charles Fourier. She admired Fourier’s idea that women ought to be empowered to select their work – primarily in a communal setting (phalanx) with other women – and be materially compensated. It is important to distinguish here that while many women in working-class families were, in fact, compensated for employment outside of the household, Howland recognized that this did not absolve them of traditional household duties; women, in many cases, worked a “second shift” on the home front and remained relatively imprisoned by this economic and social model. As Cliff Cobb states in his introduction to a special issue on Marie Howland in The American Journal of Economics and Sociology, “The only way to let women out of [their domestic] prison[s] was to knock down the walls that have separated the oikos (household) from the polis (public arena), the domestic and the non-domestic spheres” (74.5, 859).

 

Woman @orking at Texaco Refinery
Port Arthur refinery, The Texas Company via photopin (license)

 

The Fourierist model remains relatively obscure when compared to other alternatives to capitalism, such as Marxism, and might best be characterized as the combination of the communal elements of socialism with a view of humanity as an evolving subject striving towards a state of universal harmony in accordance to God’s will. Fourier believed that the divine model for social evolution required a move toward communal living, reducing the inefficiencies of individual households by consolidating and redistributing the work required by the community. Notably, domestic work such as cooking, cleaning, and childcare was included in this model. By normalizing domestic work within the community marketplace, Fourier’s plan for community living also implies a redistribution of power that has traditionally separated the genders, privileging white males above everyone else. It was Fourier’s hope that, by altering domestic work and power in this way, it would facilitate the sharing of power in other spheres.

Late in life, Howland would reside in the Georgist community of Fairhope, Alabama, which was founded on the ideas of American political economist Henry George. These ideas, implemented both in the United States as well as abroad, have yielded enormous economic opportunities. Not surprisingly, Howland found these ideas compelling and even necessary for realizing a more egalitarian world.

 

Fairhope, Albama.
Fairhope, Albama. By Stratosphere (Own work) [GFDL (http://www.gnu.org/copyleft/fdl.html) or CC BY-SA 4.0-3.0-2.5-2.0-1.0 (http://creativecommons.org/licenses/by-sa/4.0-3.0-2.5-2.0-1.0)], via Wikimedia Commons

To be clear, none of this demonstrates that the core of Howland’s vision regarding the economic liberation of women cannot be better adopted by our contemporary society. If Aiken’s words are to be believed, we might argue that Howland’s ideas continue to pose challenges so significant that they are resisted by mainstream culture. The virtues of Howland’s ideas lay principally within the uncomfortable questions they pose. It is interesting, for example, to consider the widespread negative perceptions that persist regarding “feminism” as a disruptive – rather than restorative – social influence. The myth of an America offering equal opportunity to all regardless of gender, race, and other disadvantaged identities persists. Should continuing inequality be recognized, which groups stand to lose ground, and what type of social and economic justice, as envisioned by Howland, ought to be pursued? The idea of great disparity as a necessary evil (social Darwinism) remains an economic theory so deeply ingrained in our national narrative that it is often revered as unassailable, forestalling conversations that might otherwise pose promising alternatives but that have the potential to revise our current economic paradigms.

If there is anything we can learn from Howland’s ideas, it’s that justice in work relations cannot be achieved within the current capitalist system, nor can they be achieved by simply redistributing property. To secure a just system for women, said Howland said, the caretaking duties that women are often burdened with also need to be redistributed.

Cover Image: Ironing Day- vintage stereoscope card via photopin (license)

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