Getting It Together in Bangladesh

Bangladesh has been in the news lately, mainly because of the Rohingya refugees that have been pouring into it from Myanmar – close to a million of them. We can be pretty sure that the treatment of the Rohingya in Myanmar has been very, very bad– if for no other reason than the fact of where they’ve been going — Bangladesh has nothing even close to sumptuous accommodations for them.

I had been wondering about conditions in Bangladesh, because of its geographic status as a place certain to get hit very hard indeed by the many forces of climate change. It is low-lying, full of rivers and deltas which are being massively swelled by accelerating glacier melt from the Himalayas. Additionally, India diverts large amounts of water to irrigation during growing seasons — and then releases it Bangladesh’s way during rainy ones, exacerbating flooding. If you can think of any one nation that would be getting slammed by climate change, Bangladesh would be the one.

And yet, a bit of cursory Googling reveals heartening surprises about how things are going these days in Bangladesh. Despite the many geographic, demographic and geopolitical challenges this nation faces, in a number of key measures, it is doing much better than nations that seem to face far fewer challenges. Bangladesh’s economy grew by 7.1% in 2016, and it grew by at least 6% for each of the previous six years. It’s middle class is expanding much more quickly than comparable developing nations – it is said to be closing in on the “middle range” societies, those that are developing an appreciably influential middle class. Life expectancies and infant-mortality numbers have improved significantly. It cannot be doubted that there’s some good stuff going on in Bangladesh.

A Scientific American article about the horrific effects of climate change in Bangladesh nevertheless offered these facts:

Fazle Karim Chowdhury, a Member of Parliament, who explained, with a measure of pride, “once there was a shortage of food, now we export food.” Bangladesh once led the world in child mortality. No longer. Due to better health care, life expectancy rose by 10 years, from 59 to 69 between 1990 and 2010. Providing free birth control empowered women and reduced the fertility rate from seven children per woman to three, which is substantially lowering population growth rates. Universal primary education is helping to create a more skilled workforce. Perhaps most impressive, the poverty rate declined from 57 percent to 25 percent between 1990 and 2014.

A widely-publicized terror attack 2016 hit the popular Holey Artisan Bakery in the capital city of Dhaka – and some suicide bombings followed. However, these had been the first Islamist terror attacks in Bangladesh since before 2005. On balance, Bangladesh has seen very little terrorist activity. ISIS has declared a desire to open up some form of Islamic state front in Bangladesh, due to its strategic location – but, there seems to be little indication that such efforts are gaining traction.

The big news: the Rohingya

As has been widely reported, the Rohingya Muslims of Myanmar have been fleeing unspeakably horrible conditions of ethnic cleansing, and the vast majority of them have gone to the closest place they could reach, across the border from Myanmar’s Rakhine State, to the Cox’s Bazaar region in Bangladesh. Nearly 1,000,000 of them have settled in makeshift refugee camps in Cox’s Bazaar. Seven other Muslim countries have absorbed about 750,000 Rohingya refugees. Ill-equipped Bangladesh has borne the greatest burden, by far. A group of NGOs and foundations have announced a goal to raise $434 million to aid the Rohingya; it’s not yet clear how much of that will be delivered.

There are some indications that this massive influx of suffering and needy refugees has engendered some political controversy in Bangladesh. There are some reports of “increased authoritarian tendencies,” but in general, the political upshot of this seems to be rather slight. Indications are that Bangladesh is simply doing its best to make do in a difficult situation, providing what meager sanitation, water and food supplies they can in the gigantic Cox’s Bazaar refugee camps. Though it may seem callous to say so, one gets the impression that Bangladesh’s Rohingya situation is just one more thing on the list of difficult challenges that the country is dealing with. Last fall, a proposal was floated in the parliament to relocate a couple of hundred thousand of the Rohingya to a small, entirely inadequate and indeed sinking island in the Bay of Bengal – but fortunately the proposal seems to have been shelved.

Dhaka: the megacity’s megacity

Bangladesh’s capital city, Dhaka, is by all accounts an astoundingly busy place. Its current population is estimated at 18 million, and it is growing by some 400,000 people every year. It is the world’s fastest-growing city. The incentives for such explosive growth aren’t hard to identify: things like the stresses to the countryside caused by sea-level rise, severe cyclones and those melting Himalayan glaciers. And, as chaotic as the capital city might seem, it promises attractive economic opportunities, compared to the profound stresses faced by subsistence farmers (despite the fact that Bangladesh’s delta-enriched soils have traditionally been some of the most fertile in the entire world). There are old sections of Dhaka that boast architectural treasures, but, of course, huge tracts of the city now amount to little more than shantytowns, informal settlements such as are seen in any number of developing-country megacities. Yet one gets the distinct impression that in Dhaka, all of these processes are intensified – not just those that lead to chaos, but also those that lead to prosperity. Of course, like most of Bangladesh, Dhaka is quite close to sea level. Surrounded by great rivers whose flows have become increasingly unpredictable in recent years, Dhaka is estimated to be the worst-situated urban area in the world. Flooding is endemic. Local transportation is often provided by rickshaw drivers, who can frequently be seen pedaling through streets with two feet of water in them. These guys have to have the strongest quadriceps in all of Asia!

And yet, somehow, most of those hordes of people pouring into Dhaka are managing to make a living. Dhaka is by no means a wealthy city; average family income there is currently about $170 per month – but that is up. A recent World Bank report showed that income for the poorest 40% of Bangladeshis grew by half a percentage point during that period during the last six years of strong growth; in India, that trend was precisely the reverse. Yale economist Ahmed Mushfiq, quoted in Quartz Media, said, “Bangladesh’s recent success can be attributed to two major factors: the flourishing garment manufacturing industry and the country’s robust NGO sector.”

What we mostly recall in the West about the Bangladeshi garment industry is the horrible 2013 collapse of the eight-story Rana Plaza building outside Dhaka, in which 1,100 workers were killed. It would be an exaggeration to say that working conditions in Bangladesh’s garment industry have been transformed; the labor market is still very competitive – but the profits to be gained in the industry have created incentives for far more hospitable working conditions. Today’s factories tend to be clean and efficiently run. In 2015 Bangladesh exported over $26 billion worth of clothing, second only to China.

Demographics have played a fortuitous role as well. Eighty percent of workers in the garment industry are women, and it is clear that economic empowerment of women tends to have an outsized influence over economic development generally. Among Muslim countries, Bangladesh has long enjoyed a reputation for religious tolerance. There has been some unrest and inter-religious violence in recent years — but far less than has been seen in, say, Pakistan. Most encouragingly, economic and health indicators for women in Bangladesh have improved across the board since the early 2000s. The broader demographic picture is favorable as well: unlike many developing countries, some 40% of Bangladesh’s population is now in its most-productive age range: 25-54 years.

In a country starting from as low an economic level as Bangladesh has, what these trends lead to is the rise of a middle class. “Middle-class” can be defined in various ways. Business interests looking for marketing opportunities in Bangladesh seem to be defining it as a household income of $5,000 a year or more, a level of income that tends to allow Bangladeshis to buy “luxury items” such as air-conditioners, refrigerators, or automobiles – all of which are beginning to sell well in Bangladesh.

Meanwhile, in Dhaka

It certainly stands to reason that the lion’s share of economic growth and activity in Bangladesh would be taking place in the capital city. That’s where everyone is going; that’s where things are happening. Yet that is where the chaos is greatest! Many commentators have reported that Dhaka’s most defining characteristic is its horrendously snarled, essentially immobile transportation situation. It takes literally hours to get anywhere in this city. A relatively small number of automobiles have recently appeared in the city; they confer prestige and status, but the streets are by no means designed for them, and they take up a lot of room. In fact, people try to get around Dhaka in every imaginable kind of conveyance, from rickshaws and donkey carts, to the small three-wheeled motorized taxicabs that are quite common, to bicycles and feet – all trying to make their way through the same narrow and frequently-flooded streets. Indeed, the rivers of Dhaka are nearly as crowded as the streets; watercraft of all sizes (and degrees of repair) careen dangerously around the city on the rivers. The entire transport picture in Dhaka is one of nearly-incomprehensible randomness and chaos. It’s very hard to imagine how goods get to market, how business people get to appointments or how children get to school.

A great deal could be done to improve the flow of traffic in Dhaka. It would take careful study, of course – and any solution would have to account for all of the local, organic factors of Dhaka’s unique traffic situation. Simply dedicating certain pathways to each of the many different kinds of conveyances that are now poured onto Dhaka’s chaotic streets would be a tremendous improvement. If the tricycle taxis, for example, didn’t have to dodge the rickshaws and the donkey carts, they could vastly decrease their travel times. If I could suggest a policy, I would ask a consortium of well-placed foundations, such as the Gates, the Clinton, the MacArthur, etc., to pull together a fund of $300 million to design and implement a comprehensive traffic flow plan for the city of Dhaka. This plan could not simply come from outside experts. It would have to be designed, from the ground up, with input from the people who actually live in and try to travel in Dhaka. Such a well-funded plan would probably even have some money left over to start creating some of the necessary infrastructure. But the initial plan’s goal would not be to build a lot of superhighways, but rather to come up with a comprehensive plan that would help Dhaka make the most efficient use of its existing roads, streets and waterways. Of course, new transportation infrastructure – including public transportation systems – would be forthcoming. But that calls for more funding. Let’s talk about that in a moment.

It might be reasonable to expect the United States government to contribute some of this exploratory funding. One might think the US would benefit in terms of goodwill as well as business – but that’s not going to happen. Our current administration simply thinks that “those Muslims” want “our jobs.” Our current administration is in fact quite stupid about this. You can get a perfectly-good pair of Bangladesh-made jeans at Walmart for twenty bucks. But have you priced a pair of 100% American-made Levi’s jeans lately? Their most popular pair, model 501, original fit, will run you $168. Other US-made Levi’s jeans can be had for as little as $88. Sometimes shipping is free.

We have a few modest proposals

Here at Earthsharing we pay a lot of attention to the issue of public revenue; we don’t seem to be able to avoid it. But, it’s not merely an obsession; we believe that society’s choices about public revenue reveal the most important aspects of the essential relationship between individuals and the community. The leading source of tax revenue in Bangladesh is the value-added tax, or VAT, at just under 30% of overall revenue. The next-largest sources are import duties and personal and corporate income taxes — which take relatively smaller bites. From a business-competitiveness point of view, the news is somewhat good; Bangladesh’s ratio of tax rate to GDP is considerably lower than India’s. Nevertheless, the VAT is by no means an efficient or advantageous source of public revenue. It is sometimes defended on the grounds of encouraging exports — particularly, if the country exports a lot to the United States, which, luckily, has no VAT. But that is hardly a good reason to have a VAT at home – not if there is a better alternative.

Well, there is. A landmark 2010 study, done by Ahsan H. Mansur and Mohammad Yunus for the Policy Research Institute of Bangladesh, detailed the many inefficiencies of the VAT in Bangladesh, and recommended replacing it with the system of broad-based capital gains and land value taxes.

The Khan Mohammad Mridha Mosque in Old Dhaka

As you might expect, Earthsharing recommends land value taxation – most particularly in crowded, growing cities. It’s certainly likely that a place like Dhaka has many lingering land-tenure and cadastral issues. Yet these problems are unlikely to be intractable. The city certainly has a functioning and indeed lively real estate market. Given the extreme density of population – and therefore the intense level of involvement of Dhaka’s people with literally every square inch of the ground they occupy, it stands to reason that the people have a very clear seat-of-the-pants understanding of what Dhaka real estate is worth. Under such conditions, a highly-accurate land cadastre would require just two things: a sincere desire among its organizers to find and publish accurate data, and real input from normal people. These aren’t sure things politically, of course, but they are at least conceivable.

Various accounts track real estate values in Dhaka as having risen by about 90% over the past ten years. It seems that some cautious optimism would be justified about the positive effects of $300 million being effectively spent on designing and implementing improved traffic-patterns in Dhaka. How could that not bump up land values?

So: here are my modest proposals. I don’t claim to have any particular political sway over the situation, obviously – I’ll just submit that they make enough sense to merit real consideration. First, Bangladesh should scrap the VAT. Just do away with it; it never was any good. The roughly 29% of national revenue it now provides could be made up with land value taxes over a three-or-four-year phase-in period. In fairly short order, buildings, commerce and even personal income could be made exempt from taxation. Would that not accelerate all of the positive economic trends in Bangladesh, and even, possibly provide funding to help abate some of the most dangerous threats posed by climate change?

It does not do to try to minimize or gloss over the exceedingly daunting problems faced by developing megacities such as Dhaka. Yet at the same time, it has been well established that the overall ecological footprint, the economic efficiency and the per-capita sustainability of production improves when poor people move from stressed, impoverished rural areas into cities. With all of Dhaka’s urban stresses, those processes are manifestly going on there, right now. With some sensible city-planning and public revenue policies, this “world’s most chaotic city” could become a great 21st-century success story.

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Flooding in Houston: No Real Surprise

Officials kept telling interviewers that nothing on this level had ever happened, that the flooding caused by Hurricane Harvey was a millennial event. This seems to have been both true and not true — and really, more the latter. Turns out that this is the third 500-year flooding event Houston has seen in the last three years. Something is definitely going on here. It seems likely that climate change is a factor; many commentators noted that the waters of the Gulf of Mexico are alarmingly warm this year. That allowed the storm to quickly build in intensity as it swept toward the Texas coast — and, it allowed it to pick up that much more water when it veered back over the Gulf, and then dump it on Houston.

There is another factor: Houston’s motto is “the city with no limits.” This is seen metaphorically, of course, in the spirit of can-do American enterprise. Yet there’s some irony in the fact that it seems to have been taken literally, too: Houston seems to think it has endless land on which to build (and takes pride on having very few land-use regulations). Population has grown rapidly, and Houston has recklessly sprawled out, paving over absorbent grassland. Ian Bogost writes in The Atlantic: “Houston poses both a typical and an unusual situation for stormwater management. The city is enormous, stretching out over 600 square miles. It’s an epitome of the urban sprawl characterized by American exurbanism, where available land made development easy at the edges.”

Sprawl development is often seen as a natural process, just the way things are done these days. For example, back in 2005 the Lincoln Institute issued a report on “American Spatial Development and the New Megalopolis” that implied, with apparent approval, that sprawled-out exurban regions are the new normal, delivering a high quality of life and a good deal of convenience. The report made no mention of the environmental consequences of this mode of development. (It also claimed, dubiously, that urban centers had reached the limits of their infrastructures and would be hard-pressed to accept many more people.) As an example of the exurban model, Houston has been thriving. It is arguably the most diverse city in the US, and unemployment is quite low. Aside from flooding, Houston is nowhere nearly as bad off as many US cities. If you aren’t worried about egregious waste of land and resources, and miles and miles of impermeable pavement shunting water off onto lower-lying (and lower-income) neighborhoods, then Houston is doing pretty well.

Houston has three beltways. The first, I-610, now called the “Inner Loop”, became part of the Interstate Highway system in 1956, encircling the city of Houston proper, as beltways tend to do. A second 88-mile loop, Texas Route 8, or the Sam Houston Parkway, was begun in the late 70s and completed in the early 90s. Now, a third beltway is under construction: Texas Route 99, or the Grand Parkway, will be the longest beltway in the US, encircling an area the size of Rhode Island. Each new loop has, of course, raised land values further out from the city, and led to new waves of sprawl development. These new developments are not always middle-class enclaves, however. Josh Vincent, Director of the Center for the Study of Economics, notes

Keep in mind that Houston with ring roads like the 610 can get people in and out (in good weather) quickly from areas that have little apparent land value. That’s where a lot of low income and subsidized housing is built — I’d say most of it. They have little land value because they are intentionally placed in floodplains. The Feds still provide funding to rebuild after floods because that’s where the city wants low income housing. Climate change may well be playing a role, of course, but the city fathers are clear that they do not care to pay for massive infrastructure to handle flooding. If you look at the views of the flooded city, you’ll note that the bayous and streams are where they built most of the road infrastructure.

Indeed, the low-lying roadways are where a lot of the water has collected, which makes Mayor Sylvester Turner’s decision not to call for an evacuation seem sensible under the circumstances.

Two major reservoirs, called Addicks and Barker, were created in the late 1940s to help control flooding in Houston. They have been in the news lately because they are past full. To guard against this, some water had been allowed to spill out, in a triage maneuver that endangered fewer neighborhoods than it protected. Ultimately, though, both reservoirs began to overflow on their own. While it’s true that Harvey brought a staggering, unprecedented amount of rain to the region, it’s also worth noting that these two dams were initially placed well outside Houston’s built-up region. Today, they are inside the new beltway, surrounded by development.

Cars, after all, are how people get around in Texas. Houston does have some public transportation; in fact its systems have recently been upgraded. Two new light rail lines have been built, at the cost of $1.4 billion. City bus routes have been reorganized, switching from a wheel-spoke pattern to a grid, to improve frequency and decrease travel times without increasing cost. Though these improvements have been moderately successful, ridership on the new train lines has been lower than expected. It’s generally known that people don’t use public transportation in Houston unless they have no other way to get places. On an average weekday about 300,000 rides are taken on Houston’s buses and trains. In New York, whose city-limits population is about 3½ times that of Houston, weekday bus-and-train ridership is about 7.6 million.

I haven’t been to Houston, so I know nothing of its folkways and nuances. I don’t doubt that there are nice things about the place; one of them seems to be the great courage and fortitude with which Houstonians have pitched in to help their neighbors during the Harvey crisis. One architectural feature of downtown Houston, though, strikes me as, well, kinda creepy. There is a six-mile network of pedestrian tunnels beneath the center-city area. They are built out with shops and restaurants, and are accessible from the basements of prominent office buildings and hotels. They are not a municipal project; as an ad-hoc, private assemblage, they seem not to be very well coordinated or mapped. Perhaps knowledgeable folk can write and tell us why they exist. I could be wrong, but I suspect that they serve as a refuge from the street-level welter of cars, huge belching pickup trucks, parking lots, gas stations, multi-lane streets, service roads and U-turn lanes full of cars, cars, cars.

Center-city Houston. Minute Maid Stadium is where the Astros play these days. The building just to the right of the search bar is an 8-story parking garage. Another one would free up seven of those surface lots!

Metropolitan Houston — the area within I-610, the innermost of the three beltways — may have too many automobiles. But it cannot be said to have too many buildings, or to be unable to absorb more residential construction. There is abundant vacant land, lots of small, obsolete buildings and MANY surface parking lots (which, of course, absorb no floodwater). Some blame this on Houston’s lack of zoning, but that can only be a small part of the story, because Houston’s sprawl is mirrored in many cities that impose stringent regulations. It’s more accurate to say that the “city with no limits” merely epitomizes the exurban model of growth, which seemed so satisfactory for a while — but now shows itself to be not just unsustainable but dangerously unlivable. It might not be an exaggeration to say that in this day and age, the anti-sprawl efficiencies of land value taxation are not just a tool for urban revitalization, but a key to urban survival.

As of the end of August, 2017, it has been reported that at least 1,200 people have died in catastrophic flooding in Bangladesh, India and Nepal.

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The Henry George Program Ep. 6 – Economy of Cities with Kedar

In this May 16, 2017, episode of The Henry George Program, Kedar is back to talk about mobility. We have depressed economies and cities with excess demand. Why? Mark and Kedar discuss whether the desire to move to cities is still justifiable and necessary, and whether everyone should have the same opportunity to move into high-value urban areas. What are the best policies for making this available to all?

The discussion also hones in on the need to alter the incentives of the current building consent system, wherein it is in the interest and within the reach of communities to be as obstructive as possible in the face of development.

“It’s kind of a zero-sum game in our old systems of looking at things. Why shouldn’t you fight? If you say ‘hey, you’re going to block my view’, ‘hey, your neighbor will be worse off…’ Right now, the people who fight for it, they get rewarded and it’ considered to be a righteous thing. You’re defending your tribe, you’re defending your people in your neighborhood, you are keeping it pure. And I’d say there isn’t really considered to be a good alternative to this and I would say there is one valid alternative to NIMBYism and it’s George’s.”

Starting in 2017, EarthSharing.org has been collaborating with KZSU Stanford 90.1 FM to create a weekly hour-long radio show. The Henry George Program is a platform for interviews, roundtable discussions, and debates on economic justice and policy.

Tune in for challenging content on the housing crisis in the Bay Area and beyond, economic stagnation, widening wealth inequality, and environmental degradation ― can Henry George’s ideas offer a path forward that unfettered capitalism and incremental socialism lack?

An archive of the Henry George Program can be found here.

Featured photo: Always Shooting Best place to watch sunset in Phoenix via photopin (license)

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Building A Better Local Economy

BIL: Oakland 2016 Recession Generation was an Earthsharing.org conference in Oakland, California on July 9th, 2016. The ‘Building a better local economy’ panel brought together experts and activists across a range of fields to discuss the future of building communities using technology and compassionate organizing.

The speakers were:

  • Gustavo Aguirre, Director of Organizing with The Center on Race, Poverty & the Environment
  • Aaron Fernando and Mike Lomuto from Bay Bucks, which promotes and facilitates a local currency in the Bay Area
  • Chelsea Rustrum, co-author of ‘It’s a Shareable Life’, consultant and speaker on the sharing economy.

Rustrum spoke about the tremendous changes that had been brought about by websites like Couchsurfing, AirBnB, Uber and Craiglist. Many technologies like Open Source and Creative Commons were taking sharing beyond the profit motive, however, and this was a trend that seemed likely to continue, she said. “Technology is great but who is actually creating the value for these things?”

Bay Bucks’ Fernando spoke about the need to reform our system of money, by which 80 percent of people end up worse off because of interest. Local currencies that keep value circulating within communities were hugely beneficial, and Bay Bucks was driving a movement of interest-free value exchange between businesses.

“When you spend locally, only about 32 percent leaves the local area, whereas when you spend big bucks or chain stores, about 57 percent of it goes away. It is very difficult to keep 100 percent of all spending locally because you have things like taxes…but in general, spending locally keeps that wealth generated by the community within the community.”

Watch the full panel discussion below:

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Featured photo: wuestenigel Mercado dos Lavradores in Funchal via photopin (license)

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The Henry George Program Ep. 4 – James Hughes: Technoprogressivism

We featured the libertarian transhumanist perspective of Zoltan Istvan a few weeks ago. In this May 2, 2017 episode, we speak with James Hughes, who couples a concern for transhumanism with a progressive attitude and a focus on economic justice.

Hughes is an American sociologist and bioethicist who falls on the progressive side of the political spectrum. He is the Executive Director of the Institute for Ethics and Emerging Technologies, which he founded with Nick Bostrom. He serves as Associate Provost for Institutional Research, Assessment and Planning for the University of Massachusetts Boston.

Starting in 2017, EarthSharing.org has been collaborating with KZSU Stanford 90.1 FM to create a weekly hour-long radio show. The Henry George Program is a platform for interviews, roundtable discussions, and debates on economic justice and policy.

Tune in for challenging content on the housing crisis in the Bay Area and beyond, economic stagnation, widening wealth inequality, and environmental degradation ― can Henry George’s ideas offer a path forward that unfettered capitalism and incremental socialism lack?

An archive of the Henry George Program can be found here.

Featured photo: KnightCap via Wikimedia.

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Reversing Sprawl: Part II

Read Reversing Sprawl: Part I here.

Public Good Funding Public Good

Properties near Central Park are vastly more valuable than those even a few blocks away. Parks are among many publicly funded amenities that can raise the value of land because people want to be near to them. Since a Land Value Tax is designed so that governments obtain most or all of their revenue from it, any increase in tax revenue must come from increases in land value. This is why LVT is often thought of as a “single tax” or “central tax”.

To increase annual revenue, governments must construct parks, public spaces, and infrastructure to raise land values. This spurs the ‘Up & In’ private development discussed in Part I, but it also creates an incentive for government to develop and maintain such spaces and amenities.

Figure 1. Parks raise the value of land and are thus encouraged under Land Value Taxation.

People have to actually like the spaces in order for government to be able to increase revenue. Therefore, the nature of government intervention in urban planning and infrastructure will likely better reflect people’s needs under LVT, since government revenue will depend directly on the quality of public spaces. This concept applies to roads, utilities, amenities, and many other public works.

Using land value as the central or sole source of revenue aligns the government’s interest with that of the general public in many ways. Though it would improve government incentives in many ways, Land Value Tax would not render zoning completely unnecessary. There are many legitimate and illegitimate zoning restrictions, and these do not disappear ipso facto a land value tax.

If government spends money efficiently, in line with people’s needs, tax revenue will also increase vis a vis land value. For more information on this, see the Henry George Theorem. The theorem, supported by Nobelists Joseph Stiglitz, Willam Vickery, and others describes how governments can sustainably fund all activities, solely using a land value tax, through the creation and maintenance of public works. For an example, watch the video above.

Skyscrapers Everywhere? No.

Some people become confused when thinking about a Land Value Tax, believing it would cause tall buildings to be constructed in the middle of the Amazon rain forest or the Sahara desert. This mischaracterization stems from thinking that the incentive to use land intensively applies to areas with low land values.

If the land value is high, a landowner must generate more income to cover their high tax bill. This is often accomplished by constructing taller buildings, offering more units on which to collect rent. However, if the land value is low, the incentive to build is low as well. This will be reflected in the height of the building, or the lack of a building altogether in areas further from city centers.

Incidentally, even if the Land Value Tax paid by a particular owner is low, there is still an incentive to not own enormous tracts of land for mere speculation. Speculative gain becomes less attractive when any increase in land value will be accompanied by a heftier tax bill. This means that it is easier for small-scale farmers to get started, whereas the current tax system favors large monoculture agribusiness.

Who Pays And Where?

A progressive income tax is said to be pro-poor because those with more income pay more than those with little. In theory, this is a proxy for taxing all wealth progressively, but it is not so in practice. Land value taxation is progressive in a spatial sense. Those who own the best locations pay much more than those who own less valuable locations, and renters do not pay taxes at all. The Land Value Tax curve is very steep as you can see in Figures 2 and 3. This means that wealthy landowners pay a vastly higher tax than owners of outlying parcels.

Figure 2. Moving from the center of the city to the periphery, land value drops exponentially.

Of course, in practice land values do not make a perfectly smooth curve. Below is a land value map of Chicago, looking south toward the loop along Lake Michigan.

Figure 3. Chicago’s central land values depicted as proportional to the height of the colored blocks. Notice the similarity to Von Thunen’s land value curve. The land values in central Chicago are so high that the image cannot capture their full height. Credit: Lincoln Institute of Land Policy

Tax The Rich

A square meter of land in New York City will buy an acre of land in upstate New York. An acre of land in some parts of the Saharan desert are the price of a hamburger. Yet, $120,000 will only buy you a square meter of land in Pollock’s Path, Hong Kong. Who owns the most valuable land in Chicago, in the City of London financial district, or in New York’s Times Square and on Wall Street? There are not your average Joes. By shifting to a land value tax, the vast majority of revenue would come from the super-rich, not from regular working people. However, unlike taxes on income and abstract financial instruments, land can not be hidden in Swiss bank accounts and the Cayman Islands.

Some worry that multinational corporations will leave high-value areas for this reason. However, if a few decide to leave, it will be those that take up lots of space and hire few employees. Land values and taxes will drop until an equilibrium is reached. What remains are the productive businesses who use space for employees rather than cars, companies who pay their fair share of taxes and contribute to the economic vitality of their communities.

Leave Ma & Pa Alone

Productive businesses will get a boost. With zero taxes on wages and sales, hiring people and selling things will be less expensive. Such businesses will also benefit from lower rent, especially for the average ma and pa shop.

How Is A Land Value Tax Levied?

The Land Value Tax is not the same as a property tax, which is levied on both land and buildings. The Land Value Tax is levied on land only, not buildings. All land is taxed at the same rate, but landowners near the city center naturally pay more than those further away. Let’s imagine for example that the Land Value Tax is set at 10 percent of the market value for all land.

The amount of tax paid by each owner varies as a function of the land value only. The tax rate does not vary from plot to plot, and the value of the building on a given plot will not change the amount of tax paid by the owner.

Hypothetically, land in the city center assessed at $1,000/sq ft will pay $100/sq ft in Land Value Tax per year. Land relatively further from the city center assessed at $100/sq ft will pay $10/sq ft in Land Value Tax per year. Breaking the tax into monthly payments is ideal.

In order to have the effects described in this article, value assessments need to be accurate and the Land Value Tax needs to be high enough to generate the right incentives. LVT is not an additional tax, but a replacement for most other taxes like those on wages and sales. Pollution taxes and a few other good taxes should remain, but the Land Value Tax would be the primary source of revenue.

No Taxes, Just Rent.

So, what does all this mean for the average person? People who do not own land do not pay any taxes under Land Value Taxation, including wage or sales taxes. Public transportation could be made free because such services increase land values and thus revenue.

Many landowners would actually pay far less than they currently do in property taxes, since they own land at the periphery and beyond. Add to that the savings from other types of tax being eliminated, and their total tax burden would be drastically lower as a group. Almost all revenue would come from ultra-wealthy central landowners. If a rural area did gentrify quickly, landowners could protect themselves by purchasing insurance in advance. Those wishing to become landowners pay a lower purchase price, since buyers and sellers know that the Land Value Tax must continuously be paid.

Apartment Rent Decreases

We know that if the supply of something rises, the price falls. If more space is available in and near urban centers, ceteris paribus, the rent decreases, facilitating more urbanization and reversing sprawl over time.  Increasing the supply of residential and commercial units will likely become a much faster and cheaper process as advances continue to be made in modular construction and 3D printingBuildings can be stacked upon one another like legos as demand for particular locations rise or even fall. With the removal of taxes on buildings, labor, demolition, and other construction inputs, developers will be able to streamline the process. The seven-storey apartment building below was built in 11 days, even in the absence of Land Value Tax incentives.

High Rises, Not Just For The Rich

Fancy high-rises currently cause displacement and are often built with speculative returns in mind. Land values are going up, but these values are not being taxed away, as they would under Land Value Taxation. Rather than build for the people who need housing now, property owners build for the rich elite that will occupy the units later, perhaps years after.

Thus, whole buildings sit vacant in the United States, while entire cities sit vacant in China! Under Land Value Taxation, an urban landowner would have to run at an exorbitant loss to accomplish this, and would instead opt to provide relatively less extravagant units in the short term.

Under Land Value Taxation, new luxury developments or an influx of rich people to an area would spur the creation of more housing units nearby. The first thing to be pushed higher is land values, then tax, followed by development incentives, and the area’s housing supply.

This greater supply of housing units, in turn, lowers apartment rent relative to its high just before additional construction.

Protecting Tenants

The Land Value Tax in no way terminates or precludes existing safeguards protecting existing tenants from gentrification, safeguards like rent control. If rent control were still in place under Land Value Tax, developers would simply have to find ways to create more units at a fixed rent in order to generate the required income to pay the tax.

The land value tax would make rent control unnecessary, but that is a decision financially liberated renters can make for themselves after land value tax has been in place for a long while. Remove economic chains before crutches. Let people decide for themselves what protections they want to pare back after they have the luxury of thinking in terms of economic efficiency and utilitarianism rather than their day to day survival.

Tenants would benefit from land value tax for three reasons:

  • First, it would make cities more compact overall, so affordable housing units will tend to be closer to the city center than they are now;
  • Second, a city would have a stable and ample source of funding for public transportation, services, a citizen’s dividend, public renters insurance, etc.
  • Third, it would reduce the pervasiveness of land speculation, which causes the belief that housing markets don’t work and must be interfered with. The reason for this market failure is speculation, not new construction per se. Speculation, holds down supply, creating a sense of scarcity and desperation, like a few people hogging all the seats on the metro train -while pregnant women and the elderly are forced to stand, cramming together near the doors.

In truth, the Land Value Tax would be an enormously powerful tool for fostering inclusive communities that benefit everyone.

Featured photo: mrlins My rainbow view [HDR] via photopin (license)

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Reversing Sprawl: Part I

The Secret

Why is it that, every year, the average American spends almost an entire work week stuck in traffic? We are wasting so much time, money, and resources making our daily rounds, but when exploring better ways of doing things, conversations tend to be dominated by improvements to public transportation and more fuel-efficient cars. But to focus solely on transport is to ignore the elephant in the room: the problem is not getting from A to B, but that we live in cities where the long commute is necessary in the first place.

How can we create walkable cities with affordable housing, a strong sense of community, more parks, the means to innovate, explore, create art, enjoy nature, and all of the other things that make communities thrive? What’s the secret?

Posted at http://isNSFW.blogspot.com
Figure 1. Cities currently develop down and out, away from city centers, destroying nature and increasing time spent in traffic.

Underused And Over Capacity

Spaces can feel like they’re at capacity when in reality they are just poorly organized. This can be said of a single room in a house where clothes are strewn across the floor or of an entire city where vacant lots and short buildings are scattered across the landscape. It is possible to make better use of space on a macro scale so that everybody can have affordable housing near job opportunities, public transportation, and nature. Right now, vacant and underused sites make this very difficult, dividing neighborhoods, forcing sprawl to outlying areas, increasing demand for oil, and causing a great deal of ecological damage in the process. Car culture ensues; walkability and the social nature of space decays.

Remix Everything

Taxing land value, not buildings and improvements, encourages the development of city centers, allowing more people to be accommodated. This is because landowners require a higher return to cover the Land Value Tax and still make a profit. Centrally-located land in urban centers will attract the highest Land Value Tax, and this will create the strongest incentives to develop vacant and underused sites. Done properly, as the main or only tax, the Land Value Tax increases the housing supply and lowers rent in and near city centers. In the long term, urban sprawl can be reversed.

Up & In vs Down & Out

Our cities have taken a long time to get this bad, and it stands to reason that the remedy would be gradual as well. A high Land Value Tax, uniformly applied, can gradually reverse sprawl, putting vacant and underused land to its best use. There are many other positive social, environmental, and economic effects of Land Value Taxation, but many of these can only be understood by first understanding the spatial effects. Under such conditions, cities develop up and in toward the city center, instead of down and out, away from the city center (see Figure 2 below). Many will notice the fully intended pun here, as the shape of a city has a lot to do with human welfare. Under Land Value Tax, up and in produces good results, down and out produces bad results.

Image 2. Under land value taxation, cities develop up and in, not down and out. The top image represents how most cities develop. The bottom image represents how cities would develop over the long term with a strong land value tax. Owners to the left would pay a high tax, while those to the right would pay exponentially less tax. © Haskellot Illustrations

Land Value Tax And Sprawl

When there is no incentive for vacant lots to be developed into productive community spaces, there will obviously be fewer buildings. There will also be fewer parks since the surface area is wasted on vacant and underused sites. In a city with a Land Value Tax, not only is the vacant land filled, but buildings are consistently higher closer to the central business district. In the end, more people have the opportunity to live and work closer to the urban core. Starved of taxes on labor and other economic activity, a government must raise revenue by investing in beautiful and inspiring public spaces where people are willing to pay more for the privilege, thus bidding up the land value and in turn government revenue from the land value tax.

Figure 3. Vertical garden in Bangkok. Such use of all available building space in cities would be incentivized under Land Value Taxation. Photo: Roberto Trombetta via photopin (license)

Under this system, much of the wild areas destroyed by current sprawl (Figure 2) are reoccupied by trees and other natural features. Farms can also be closer to cities, reducing transportation costs. The Land Value Taxation city also has a great deal of green on buildings, as the need to maximize the land value incentivizes ecological architecture in the form of vertical, rooftop, and green wall farming.

How Land Value Taxation Improves Good-Density

 

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Figure 4. This image represents how 21 blocks of sprawling land use could be accommodated within 60% of one block in a central business district. A Land Value Tax incentivizes such land use. Credit: Ascher, Kate, and Rob Vroman. 2011. The heights: anatomy of a skyscraper. New York: Penguin Press.

Use It Or Lose It

Vacant lots, ground level parking, and paved or barren areas left unused are commonplace in our cities. In many cases, this is extremely valuable land in central business districts. If a Land  Value Tax is applied here, the total tax paid will be drastically higher relative to vacant land further from the city.

Imagine that you are the owner of that vacant lot. Will you continue to leave it unused if the tax bill is much higher? Without Land Value Taxation, you may have left the land vacant because you did not want to take a financial risk to build anything. You were simply waiting for the land value to rise. However, that rising value is taxed away under Land Value Taxation. Thus, you start to view owning the land as less of a passive investment and more as something that can only be beneficial when it is used well.

You must either start generating income from the land to pay the tax, or sell it to someone who will. Similarly, if you own a small building among centrally-located skyscrapers, you will be incentivized to build higher, to generate more income in order to pay the tax and keep what is left over. Use it or lose it, as the saying goes. While there would be no law that said the land must be used for a particular purpose, financial self-interest would drive landowners toward the most efficient use. They would inadvertently be doing what is in the best interest of everyone.

 

Figure 6. Under Land Value Taxation, the landowner of this McDonald’s in Manhattan would be incentivized to add residential and commercial units above it in order to pay the tax.

 

Cumulative Spatial Effect

Under Land Value Taxation, all landlords are faced with the same incentive: meet the market demand for space in the area or sell to someone who will. Cumulatively, more of the demand to use central locations is satisfied and there is less demand to use outlying areas.

The areas with the highest land values pay the highest Land Value Tax. Thus, these high-value areas also have the strongest incentive to build high, while those areas that are lower in value have increasingly less incentive to develop as the need for space was fulfilled in the city center. The incentive to build high exponentially decreases moving away from the city center.

Boost to Urban Farming

Farming can use very little land and still produce a lot of food. The video below shows a man who produced a million pounds of food in one year on only three acres. His permaculture farming techniques could be stacked in buildings closer to the urban core and/or near the city on community farms. Necessity is the mother of invention and such practices could become widespread with the proper economic incentives in place, i.e. a Land Value Tax. Such an operation requires a lot of labor but little land. Therefore, if taxes are shifted off wages and onto land, these activities become more practical and profitable.

 

More Idyllic Farming Communities Nearby

Environmentally destructive farming practices, such as widespread use of pesticides, only make financial sense when land is cheap relative to labor. The equation is reversed when taxes are moved off labor and onto land. Though cities would welcome more people, it would also make living and working in outlying areas much more affordable too. This is because the cost to buy or rent rural land would decrease and wages for rural workers would increase.

Ultimately, this would give people greater freedom with respect to where and how they lived. Today’s huge monoculture plantations would be broken up, and the resulting farms would employ more labor. An increased demand for such labor would further increase wages.

“No one would want more land than he could profitably use. Instead of scraggy, half-cultivated farms, separated by great tracts lying idle, homesteads would come close to each other. Emigrants would not toil through unused acres, nor grain be hauled for thousands of miles past half-tilled land.” – Henry George, Social Problems

Read Part Two.

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Won’t Somebody Think Of The Family Farmer?

My father’s side of the family were peanut farmers and Angus ranchers in west Texas and east New Mexico. I grew up riding horses, and was active in both 4-H and Future Farmers of America. I even took part in junior bull riding. I thought that Willie Nelson was just about the greatest guy ever. Ok, let’s admit it, Willie Nelson is an amazing person, both as a musician and in his desire to help people and animals alike. The kinds of people Willie really intends to help with his farmer benefit concerts are the type of people I would like to see helped.

Billions of taxpayer dollars go toward subsidizing crop production each year. So often, the supposedly vulnerable members of the agriculture community are held up as an example of why this is a necessary and compassionate policy. Not only is this perception false, but the very image of the struggling, cash-strapped family farmer is one that doesn’t really hold true in the 21st century. In the 1930s, about 20 percent of the U.S. population were actively working in agriculture. Today, it’s only one percent and the rate of new farmers entering the workforce is dropping dramatically.

When we imagine a family farm, we think of the painting American Gothic, Charlotte’s Webb, Babe, and the Hidden Valley Ranch Dressing label. It’s a reminder of how things supposedly ought to be, an idyllic country fantasy of modest people working and often struggling to provide the rest of us with food.

Photo: David Reece Gathering the Hay via photopin (license)

Everyone seems very concerned about the plight of family farmers these days. But, what does the term “family farmer” really mean? Pretty much everyone has a family. What I really want to know is: who are these farmers who don’t have families? They are the ones who really need help!

The USDA claims that 97 percent of farms are family farms. However, this classification relates to the ownership structure and the top-level management rather than who actually works the land. Just 59 percent of farm laborers and supervisors are U.S. citizens. Half of the hired labor on crop farms, according to the USDA, is people not even legally allowed to work in the United States. They are mostly Mexican migrants making abysmally low wages. Farming subsidies surely don’t go to these ‘family farmers’. Many probably miss their families desperately.

‘Small family farms’ as the USDA defines them, operate 48 percent of all farmland and own 47 percent of the value of farm real estate including land and buildings. In 2012, they held 40 percent of U.S. cattle, 89 percent of the horse inventory, and “grew 64 percent of all acres in forage production”. Yet, despite owning so much, they only produce 20 percent of agriculture sales and five percent of the country’s net farm income. Almost half of small farms are “off-farm occupation farms” which means that the operator’s primary occupation is not farming.

Farmers soak up about $20 billion in subsidies each year. Despite the rhetoric of “preserving the family farm,” the vast majority of farmers do not benefit from federal farm subsidy programs. According to Environmental Working Group president Ken Cook, most subsidies go to the largest and most financially secure farm operations.

The first thing to keep in mind is that two-thirds of the farmers counted by the census of agriculture do not get farm bill subsidies. So most farmers don’t get anything… And even within the third that does get money from farm bill subsidy programs, the very large ones dominate. And it’s getting more and more concentrated all the time.

Farming subsidies largely prop up wealthy landowners who are not what we would we would intuitively agree to be real family farmers at all. In general, the concept of the nice old landowning family farmers struggling to make ends meet simply doesn’t exist on a large scale anymore. The average farm household enjoys an income about 15 percent higher than that of the average U.S. family.

Cook goes on to describe to Mother Jones how historical subsidies can be enjoyed by subsequent generations who have no involvement in production:

Absentee owners exist everywhere. Let’s say you and I are brothers. You came to town to be a journalist, I came to work at an environmental group, but we both came from a farm family in Arkansas. If mom and dad give us 5,000 acres in their will, we don’t have to go back down to Arkansas and farm. We’ll get the direct payments automatically for that rice and cotton mom and dad kept growing, and on top of that we’ll get other payments.

What we should do is not only cut off these subsidies to landowners but tax the farmland in proportion to its value. This would enable us to fund government without taxing farm equipment and labor.

Photo: David Cornwell Favored by the Sun via photopin (license)

This would actually help small farmers, whose major startup cost is purchasing land. But wait, if you tax land, wouldn’t their costs go up? No. Unlike taxing consumer goods, which drives up prices, taxing land has the benefit of not reducing its supply. Somebody always owns it. Taxing it makes hobby ownership less attractive, thus actually lowering the purchasing price.

If you’re an economics wonk, here’s an explanation of taxes on inelastic supply:

If the taxes on labor and equipment were reduced while the cost to purchase land went down too, this would be a boon for families purchasing small plots of land to grow food. Their holding costs for land would be higher, but that would just incentivize them to use land more efficiently, like real family farmers used to do.

We could actually see a resurgence of what we would agree is real family farming. These families could hire a lot of workers and pay them more without the burden of paying wage and sales taxes. And if all of these families were using less land and employing more people at higher wages, family farms could thrive and new farmers could enter the market.

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The Henry George Program Ep. 1 – Urban Economics Of The Asian Tigers

In this April 11, 2017 episode, Mark Mollineaux, Jacob Shwartz-Lucas, and Edward Miller discuss the land-use policies of Hong Kong, Singapore, Taiwan and more. How responsible is municipal ownership of land for the world-class infrastructure and vibrant economies of these cities?

 

Starting in 2017, EarthSharing.org has been collaborating with KZSU Stanford 90.1 FM to create a weekly hour-long radio show. The Henry George Program is a platform for interviews, roundtable discussions, and debates on economic justice and policy.

Tune in for challenging content on the housing crisis in the Bay Area and beyond, economic stagnation, widening wealth inequality, and environmental degradation ― can Henry George’s ideas offer a path forward that unfettered capitalism and incremental socialism lack?

An archive of the Henry George Program can be found here.

Featured photo: Castelaze_Studio Lost in Hong Kong via photopin (license)

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Land Value Tax Now A Mainstream Policy In Scotland

Significant strides toward a fairer tax system have been made in Scotland, where the establishment of a dedicated commission on land reform has cemented the policy direction of the leading Scottish National Party.

SNP, Scotland’s governing party, held its annual conference in March, and attendees were jubilant at the commitment made to some form of land taxation. An amended motion stated that as the government works through its land reform program it “must include exploring all fiscal options including ways of taxing the value of undeveloped land”.

Back in 2015, grassroots SNP members rejected the party’s proposed land reform policy, on the basis that it didn’t go far enough and was thought to be a watered-down version of the ideal policy. This was considered significant then because it is rare for a party’s membership to overturn a policy on its own and send its representatives back to the drawing board.

Writing for Bella Caledonia, Jen Stout explains that growing pressure for land reform in Scotland was bolstered by debate during the nation’s independence referendum in 2014.

“The stark inequalities that damage Scottish society so much were a frequent topic, and few statistics hit you so hard as ‘432:50’ – around 432 interests own half the private land in Scotland. That private land, incidentally, makes up 89 percent of our 19 million acres. Community ownership accounts for two percent. Just one man, the 10th Duke of Buccleuch, owns one percent of Scotland.”

Adding to the chorus of Land Value Tax advocates is the Scottish Green Party, one member of which has prepared a manifesto on implementing Land Value Tax. Andy Wightman writes that the only major barrier to achieving this is the establishment of a land register, which currently does not exist for Scotland.

“Land Value Taxation is no longer the preserve of advocates and lobby groups on the margins of public debate. It is now a mainstream part of contemporary debates over the future of public finances, local revenues and public infrastructure.”

“There are signs that the public is becoming weary of the house price escalator. For one thing, young people (and by that I mean almost anyone under the age of 30) are being impoverished through the high cost of accessing property. For another, the credit crunch has exposed the weakness of an asset-based debt model. Combined with pressure for just rewards, fairness and greater equality, the arguments for LVT suggest its time may at last have come.”

Photo: Rob McDougall via Crofting Law Blog.

For all the progress being made in setting the priorities of major political parties, significant misunderstanding of the Land Value Tax policy remains. Public opinion regularly equates a land tax with explicit “community ownership”, which is a failure to grasp the concept of returning the value of public goods to communities.

Wightman writes that while some industries, like forestry and agriculture, and the owners of buildings on high-value land would be resistant to the new system, serious effort should be expended to educate low and middle-income families and the business, retail and industrial sectors on their potential cost savings.

Support for Land Value Taxation in Scotland is now a force to be reckoned with, and its proponents are numerous and well-respected. EarthSharing.org will be continuing to observe and encourage this debate as it develops.

Featured photo: J McSporran Drink and Drive via photopin (license)

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