Once Detroit was motown, the home of Mustangs, Chevies and Cadillacs, of Aretha, the Jacksons, the Temptations. What happened? How can it be turned around? How can other cities escape the suffering that Detroit has endured?
In the 1960s, in the town of Southfield, the Detroit suburb where the Council of Georgist Organizations (CGO) annual conference will take place, a forward-thinking Mayor, James Clarkson, and an expert Assessor (Ted Gwartney, who will be one of our featured speakers) implemented reforms that made Southfield one of the fastest-growing cities in the country. Southfield’s success reprised the tax and business climate Detroit enjoyed in the early 20th century, the policies that made it the USA’s automotive capital.
This conference will explore that fascinating history, and bring together social scientists and reformers from around the world to focus on innovative solutions to today’s most “intractable” economic problems. The CGO looks beyond the ideological limits of “Left” or “Right” to explore viable Third Way policy solutions that can move society toward greater equality, without sacrificing prosperity.
Stuart Gaffney and John Lewis spoke at the Council of Georgist Organizations annual conference. Their talk was entitled: Case Study in Building Successful Movements, How the LGBT Community Went from the Margins to Mainstream. They discuss how movements to end poverty and save the environment can benefit from the what they have learned about the LGBT movement.
Stuart Gaffney and his husband John Lewis are leaders in the freedom to marry movement. Together as a couple for 26 years, they were two of the plaintiffs in the historic 2008 lawsuit that held that California’s ban on same-sex marriage violated the state constitution. On June 17, 2008, they married at San Francisco City Hall, surrounded by friends and family.
Stuart and John are leaders in Marriage Equality USA, a national grassroots organization, and API Equality, a coalition targeting outreach and education to the Asian-American community. They have appeared extensively in local, national and international media. The focus of their work has been to foster connection between the general public and the lives of LGBTIQ people.
Stuart is a graduate of Yale University and currently a Policy Analyst at the UCSF Center for AIDS Prevention Studies. [from Huffington Post]
You walk up to a food counter in a train station. You have five minutes to grab a bite before you have to board your morning train. A grumbling young woman, who exudes contempt for you and for every other customer in the line, charges you a premium price for a leathery, slapped-together breakfast sandwich which, nevertheless, takes another three minutes to get to you. She and her colleagues are distracted; each of them likely has a long list of personal problems — but all you know for sure is that she has made your breakfast transaction thoroughly unpleasant. You have encountered Homo Economicus.
“Economic man” is a key template for economic analysis. It assumes that we respond to the problem of scarcity with profit-maximizing behavior— or in other words, we try to secure material gain in the hardest-nosed, most self-interested way. Many people are uncomfortable with this idea: is it a simplifying assumption — or is it simply nonsense? People bristle at the notion of self-interested maximization. What about fun? Family? Spiritual Life? Cat videos?
And, anyway, we are often observed choosing to do things that aren’t “economical.” Someone drives into a convenience store twelve days in a row and buys a soft drink. The buyer could make a single trip to a supermarket and buy a twelve-pack of same beverage for 40¢ less per bottle. Who knows what constitutes economic behavior? Perhaps the soda-drinker had a crush on the cashier. Perhaps he liked to thumb through the magazines on sale there. And, anyway, the soda has zero nutritional value, so it’s really hard to say what’s going on in any sort of practical terms, but, well — he keeps buying those sodas.
“Economic Man” in Economic History
This issue isn’t new; it was recognized by the classical economists. John Stuart Mill was the first to refer to “economic man.” He made it clear that he saw Homo Economicus not as the whole person, but only that part of the person which concerns the science of political economy,
…an arbitrary definition of man, as a being who inevitably does that by which he may obtain the greatest amount of necessaries, conveniences, and luxuries, with the smallest quantity of labour and physical self-denial with which they can be obtained.
Henry George added the clarifying insight that the desires we seek to satisfy are entirely subjective. Contra Adam Smith, George pointed out that our desires aren’t necessarily selfish; they might be spiritual, or altruistic. Whatever our desires are, anyway, we try to satisfy them with the least “irksome toil” (and, what constitutes “irksome toil” is also subjective: one person’s hard labor might be another’s best fun).
When we undertake irksome toil, unwilling to do so without compensation, seeking to do as little of it as we can — our behavior falls under the definition of Homo Economicus. Obviously, we want to spend as little time as possible in that state. We want to get mere profit-maximization out of the way so that we can enjoy our free time.
Despite the tremendous progress of labor-saving technology, there is still work that people have to do. People are still called upon to pick up garbage, change diapers, unclog drainpipes, guard convicts, seize territory, do laundry, teach children, serve all-night customers, patrol streets… and, even, write books. Will there ever be enough labor-saving inventions to get the Homo Economicus out of human lives? In Sacred Cows and Other Edibles, Nikki Giovanni offered an interesting point of view on this question:
I like my profession. I hope the telephone operators, the hamburger turner at McDonald’s, the pressure checker at Kentucky Fried who see to it that those spices and herbs get really deep in the chicken are proud, too.
At first, I thought Nikki Giovanni (whose poetry I like very much) was being facetious. She had the talent, drive and good fortune to enjoy a career as a poet. That didn’t necessarily make her life easy, but I think she’d choose it over frying chicken for Colonel Sanders. Eventually, though, I realized that her point is unassailable: if the chicken fryer doesn’t care about her work, everyone suffers. True, she is underpaid; most workers are. But, jobs are scarce: more personable and diligent workers are eager to take her place. Giovanni is telling us that, despite the manifest injustice of our society, one can still choose to be a person. Remember that young woman at the breakfast counter? She was resigned to being Homo Economicus — and you’re not going back to that breakfast counter, if you can possibly avoid it.
You might point out that it is in a worker’s economic interest to be more pleasant, so she can hold onto her job. But, I suspect that she cares very little for this job; she considers herself to be a worker, (impersonally, insultingly) hired to do a (dull, underpaid) job; perhaps her situation is a notch above abject slavery, but it’s not far above it. She is, in a word, alienated.
Is Social Progress Linear?
“Alienation” is something that Marxist theory has a lot to say about; indeed, it is said to be the basic condition of workers under the capitalist more of production. Marx saw workers as suffering from a four-fold alienation: from the things they made, from the process of making them, from their own selfhood, and from other workers. This cubicle of alienation in which workers (inevitably) find themselves is a big part of the reason why Marxist theory sees revolution inevitable, and capitalism doomed.
Others, however — such as Henry George — see the possibility of fundamental reforms that would make a market economy work for everyone. If we all seek to reduce the amount of irksome toil we have to to perform, it follows that a progressive society would be able to reduce the net amount of time that its people spend behaving as Homo Economicus. This would imply a continuum of social progress. At the bottom is slavery: a slave, compelled to perform “irksome toil” to survive and avoid punishment, is pure Homo Economicus. At the top, we might find an artist: getting paid for for work that was done for the sheer joy of doing it.
Then there is the joyous, painful endeavor of raising children — where does that come in on the scale?
Let’s consider a few examples:
Autoworker Aaron works for $17/hr in a nonunion Toyota plant, and has to make a decision about whether to join a union. He decides against it, because $17/hr is better than any alternative that’s available to him, and he doesn’t want to jeopardize his job.
Autoworker Betty is a member of the Communist party working at the Totota plant, and works behind the scenes to organize coworkers. Her activism is frowned on by her supervisors, who stick her with unpleasant tasks and don’t recommend her for promotion.
Dad Charlie chooses to forgo his career and stay home with the kids. His wife makes good money, but has a stressful, long-hours, fast-track career. Charlie’s role as a home support person makes it all work.
Mom Diane chooses to forgo her career and stay home with the kids. They’ve moved to a low-rent area and her husband is working part-time. They don’t have much money, but they have plenty of time together as a family.
Mom Ellen and dad Frank both work full-time. The kids are in pre-school, and after-school activities. They need to do this to keep up with their mortgage and all the other payments, and try to put some money away for the kids’ college educations.
Dad Greg and mom Harriet would both be working full time, if they could both find jobs. As it is, they work as they can, often on conflicting schedules. They’ve had to get help from friends and family to get by, and finding responsible supervision for the kids is a constant challenge.
Neighbor Ian worked overtime to save up enough to hire a contractor to build an addition to his house. Neighbor Jim made sure to have a flexible work schedule (at a lower pay scale) and built his home addition himself.
Can you divide the Homo Economicus behavior from the “for my own good reasons” personal behavior? Which of those examples do you admire? Which do you feel pity for? The further we rise, economically, above abject servitude, the more ambiguous this question gets. It gets harder to separate the time we spend making a living from the time time we spend pursuing personal satisfaction — each blends into the other.
The question is by no means simple. A progressive society, as we’ve seen, is one that succeeds in reducing the net amount if time its people spend as Homo Economicus. But, if we cannot clearly separate out the portion of our labor time we spend that way, then how can we make that distinction? How can we tell (in the aggregate) whether we are gaining or losing?
On the other hand, “gaining,” in the sense of moving along the line on which society is advancing (or retreating) might not be the only option, or the best way to look at things. Marxist theory sees human society as moving along a time-line from feudalism, through capitalism, on the way to socialism and the Workers’ Paradise. Henry George’s conception of social development also sees society as moving along a line, either forward toward a progressive society that maximizes both association and equality, or regressing, failing the promise of civilization, declining into a new dark age. Marx, I suppose, would transform Homo Economicus into HomoComunismus, a fit and happy team player. Henry George would reduce Homo Economicus to a vestige, no more onerous or stressful than brushing one’s teeth. (Some versions of Marxist utopia, as well, have technological development enabling workers to sample many jobs and switch them at will.) These outcomes are, at best, a long way off. In the meantime, is self-interested maximixation all we have to look forward to? (Or as Nikki Giovanni put it, “Spam, Used Cars, and More of the Same”?)
When was Homo Economicus Born?
It may be, however, that in terms of economic behavior, society does not move in a line. There may also be a recursive process at work. Another possible starting point for social/economic development is the traditional society. There are various kinds of traditional societies, of course, but compared to the paradigm we’d call modern, industrial or developed, there are things they have in common. I think it would be accurate to say that the behavior we’ve been calling Homo Economicus was rarely, if ever, exhibited in traditional societies. True, there were fights over land and resources, and there was even slavery. There was drudgery and hardship; winters were long; lifespans were short. Nevertheless, in no indigenous culture was it the norm for people to spend substantial portions of their time performing meaningless tasks in exchange for things. We take this behavior for granted; our ancestors didn’t.
In an earlier stage of industrial development the “labor time” model made perfect sense. It didn’t matter that the work might be meaningless, because the efficiency of industrial production made it possible for everyone to be better off. As productivity continued to increase, workers could organize to collectively bargain for better wages. In the United States this process reached its peak in the industrial golden age of the 1950s and 60s. While not everyone was happy (African Americans, for example, were effectively excluded from the general prosperity), millions of US workers were quite happy to get paid $25 an hour, with pensions, health plans and paid vacations, for being Homo Economicus.
It seemed like such a good plan: you get a decent job, put in the hours, get raises, buy a house (a comfortably appreciating asset), raise kids, send them to college, and then get rewarded for your career of homo economizing by settling into a well-provisioned retirement. But then “our jobs” started getting sent overseas, real wages stagnated or fell, and things started getting confusing. Raising a family started to require two full-time salaries. In the prevailing myth, June Cleaver and her friends had happily done the cooking and the childcare as their part of the family bargain. Now, suddenly, they were too busy, and these “household” tasks increasingly became part of the economy. Should June have received Homo Economicus wages for handling all those poopy diapers?
Such a question would never have come up among the unassimilated Sioux, or Inuit, or Australian Aborigines, the Kalahari Bushmen, or the artists of Lascaux or Mesa Verde. Such societies had their problems, to be sure, but alienation, in the sense that Karl Marx described, was not one of them. The Georgist economist Fred Foldvary put it this way:
Human beings did not start out poor, hungry, needing development. Primal man had natural wealth from the bounty of nature. Only after humanity turned to agriculture and conquerors took the land did the brave hunter become a lowly peasant working for a wage pittance from dawn to dusk while the lord dined on wine and game hens under chandeliers. Only after the descent to serfdom does development beckon with the promise of increasing productivity.
It has long struck me that the economic analysis of Henry George, dealing as it does with the pervasive, unavoidable role of land in society, offers a key theoretical bridge between traditional and modern ways of seeing the economy. When indigenous people admonish European colonists that “The land does not belong to us; we belong to the land,” they are not being romantic. They are making an entirely reasonable and true statement that arises from a worldview in which there is no Homo Economicus. That statement only seems quaint from the point of view of industrial society, which is predicated on owning the land and controlling its resources.
But: industrial society has reached a turning point. We can no longer afford to reckon “economic growth” without factoring in its effect on the natural world. And we live in a dysfunctional society in which, in James Baldwin’s words, “not even the most spectacular recipients of this prosperity are able to endure these benefits; they can neither understand them, nor do without them, nor can they go beyond them.” (Soccer moms cannot escape this dilemma in their SUVs.)
I think we need to return — without turning away from the benefits of science and technology, for there can be nothing evil in science and technology per se, only in the self-serving uses to which we put them — to a life in which we are part of where we live, in which we are nurtured and informed by our place and our community. By doing so, we may be able to develop a sustainable understanding of “economic growth.” And then we can finally put Homo Economicus to rest. Not because there will no longer be work to do — but because the challenges of devising a sustainable future will leave us no time for the “irksome toil” that industrial development so usefully, efficiently, imposed on us. What we have to do will be too important not to care about. We will have to keep it real.
Many of us know that capitalism creates wealth, but also that it causes inequality and destroys nature at the same time. But we don’t seem to understand how: For example, how does capitalism lead to financial insecurity for many, even for those who, by all accounts, shouldn’t have to worry about money? And how exactly are we destroying our planet in our frantic conversion of nature into digits and little bits of paper we call money?
One of the main reasons capitalism does not provide equal benefits to everyone is because the commons—the gifts of nature—have been privatized. This privatization of nature is one of the root causes of economic recessions, ecological destruction, as well as social and cultural decline—even in a world of plenty.
All of nature is community wealth, including—and especially—land. People give value to land through the goods and services they provide to their communities. For example, because people offer more goods and services in the city than in the countryside, urban land tends to be much more expensive than rural land. As communities become more attractive to live in, some property owners—but mostly the financial institutions that finance them—then extract this value by making money from real estate—money that in truth belongs to everyone—, and this extraction is one of the root causes of wealth inequality, ecological destruction, and even economic recessions.
Land—even undeveloped land—costs a lot of money in our society. Why is that? It’s because land has an intrinsic value to human beings: We all need land. And because we all need land, those that own land can make money by buying and selling land at the expense of other people who have to pay money to live on it. Under our current land ownership model, property owners only pay other property owners for land as well as the banks that finance property ownership.
While land can certainly be privately used, its value is created by the community and therefore belongs to the community. Land has to be owned in common, and whenever people use land, they need to reimburse their local communities for their exclusive use of it. They can do this by making community land contributions for the land they use. A land contribution approximates the market rental value of land, and the rental value of land is a measuring stick that reveals the financial value of the benefits that land users receive from their exclusive use of land.
In most nations around the world, land has already been privatized: If communities were to suddenly impose land contributions upon existing property owners, property owners would end up having to pay twice for their ownership of land—first to the previous landowner (from whom they bought land), and a second time to their local communities.
In order to transition from a land ownership model to a land stewardship model, local governments and community land trusts would either have to financially compensate existing property owners for the land value portion of the properties in question or cancel their existing mortgage debts. Land users would then be required to share the value of land with all members of their community through community land contributions. And finally, these contributions would then have to be redistributed to all community members in the form of a Universal Basic Income to prevent gentrification, reduce wealth inequality, and create a truly fair economy for all participants.
It’s become a convention, on the news, to refer to the Jihadist force that’s been gaining ground in Iraq and Syria as the “so-called” Islamic State. This seems to be a requirement. Sure, they call themselves a state — but they’re not! States are sovereign. They have governments, and ambassadors and such; they have seats in the UN General Assembly — like Syria, for example.
What is it, really, that constitutes a sovereign nation?
To begin with, it has to do with authority and control; we think of it as “where the buck stops.” It may be comforting to think of this as an absolute thing (i.e., Israel absolutely has it; the Palestinians absolutely don’t). But it is not all-or-nothing, of course; there are degrees. The “national sovereignty” of a place like “The Republic of South Vietnam” (or post-Dubya Iraq) is an evanescent thing, crafted on the fly to suit the interests of a larger power. Nevertheless, international diplomacy rests, however shakily, on the concept of national sovereignty. So far in human history, is nations that make and enforce laws. International law is an ad hoc matter. It is enacted by means of treaties, and only enforced at the national level, if nations choose to do so. (Has the International Criminal Court ever compelled the United States to do anything?)
Nations have various degrees of power, and various degrees, alas, of legitimacy. If the nation is not powerful enough, it may fall to conquest by external powers. But what if it is not legitimate enough? The (so-called!) Islamic State’s legitimacy is bestowed by Allah — the same Deity that confers legitimacy, via the Queen, to land tenure in Great Britain. (It has to be the same Deity: both faiths believe there is only one.) The classical Chinese concept of national legitimacy was called “The Mandate of Heaven.” It was thought possible for a ruling dynasty to lose this, become illegitimate, and become deposed. If a nation is not legitimate enough, therefore, it may succumb to internal revolutionary forces.
Eventually, Divine bestowal of sovereign power came to be vested in hereditary monarchs. In the minds of the Enlightenment philosophers, however, sovereignty came to rest in the incontestable, and infallible, will of the people. Thomas Jefferson, for example, wrote that governments are instituted to secure the people’s inalienable rights, and that their powers — if they are just — are derived from the consent of the governed.
This raises questions. Who are “the governed”? How is their consent ascertained? How, and where, and in what ways are they to be “governed” — presumably through the exercise of the sovereign powers of a “government” which the people have chosen? According to Jefferson, a governments just powers are derived from the consent of the governed — and it wields those powers through the process of creating and enforcing laws. Does this mean that if a majority of a nation’s citizens decide, through some representative process, that slavery is OK, then slavery is OK? Well, it’s legal, anyway; fee-simple private ownership of human beings was legal in the United States for 75 years.
Furthermore, the idea of government cannot be separated from the question of jurisdiction. Over what area does sovereign control extend? There is no global government. Our concept of sovereignty is inextricably bound up with the idea of nationhood. Now, sometimes we might speak of a “nation” in spiritual or cultural terms — a holy covenant? a community brought together by its victimhood? a romantic generational consciousness, such as the “Woodstock Nation”? But, in stark political terms, such notions are frivolous. In the “real world,” nationhood is a matter of jurisdiction over a defined portion of the planet: a territory — a piece of land.
Job #1 for any nation is the administration of its territory: its boundaries and their defense; the duties and prerogatives of states, municipalities and other lesser jurisdictions; and — most important — what people can do with that territory: what rights they have to its possession and use. This has obvious economic implications, because all economic activity must use land in some way. It is incumbent upon a sovereign nation to set rules concerning how people use the land: to make stuff, to live on, and to dump their garbage in.
Fine, OK — all of this sounds so commonplace as to hardly be worth mentioning. But, when we start to think about how these issues play out, we find some astounding breaches of logic.
Many smart people have told us that international trade agreements, such as the Trans-Pacific Partnership, or TPP, dangerously erode national sovereignty. Democratic societies have repeatedly chosen to implement regulations deemed necessary to protect health, safety and the environment. Pacts like the TPP seem to be taking these powers away from governments. I wonder how many citizens in struggling, export-dependent poor countries have any inkling what prerogatives their “sovereign governments” have given away in order to stave off trade sanctions.
But it’s not just the poor countries that are “yielding up their sovereignty” to multinational corporations — oh, no! Lots of people in the Great and Powerful USA are exercised about the increasing ease with which corporations reconfigure their profits into other jurisdictions to avoid paying “their fair share” of US taxes. Have the governed given their consent to that? Perhaps not, but the Emperor, in any case, has made it legal.
If Job #1 of a nation is to administer its territory, what can we say of a country that allows private investors to hold hundreds of thousands of hectares of that territory entirely idle, while its people have no place to make a living? Hasn’t that nation’s sovereignty been seriously degraded?
Furthermore, if a corporation is making “obscene” levels of profit in the United States and then paperworking them into another country to avoid taxes, well — did it not need land, locations and natural resources, to undertake the activities that created those profits? Did it fully compensate the community for the privilege of using that land?
Questions like these have a way of making one’s head swim. They seem to sudden, too sweeping. One is tempted to back-track to see whether some key factor has been left out. That impulse is both understandable and necessary — because in today’s discussions of economic policy a key factor is left out.
So let’s back-track. We’ve said that the most vital task of a nation is the administration of its territory. It defends against invasion, creates and enforces laws, and provides all kinds of infrastructure, both civil and physical. To the extent that nations do these things effectively, they become pleasant and prosperous places to live and do business. And to the extent that they become pleasant and prosperous places, the land in them — most of which is held in fee simple by private interests — increases in value.
Any nation that allows fee-simple ownership of land has already — long since — yielded up its sovereignty to private interests. These recent “sovereign giveaways” are just minor embellishments. We can close the barn door if we like, but the horse is long gone.
One of the many things this means is that, while the TPP will exacerbate a number of problems, the solution to those problems is not to be found in protectionism. “Local self-sufficiency” will only make the local landlords a bit less rich.
There was a West African nation that took a series of effective steps to assert its own rightful sovereignty — have you heard of it? It began with a military coup — nothing very noteworthy in that; there are lots of military coups — but this one set out to implement a novel program of reform. The country defaulted on its foreign debt. It proceeded to abolish all income taxes, VATs and tariffs, and to collect the value of land for its public revenue. And what happened? It no longer needed exports, or foreign loans, because its domestic markets were strong, its employment full. The most serious policy problem it had to deal with was the large numbers of people who wanted to immigrate. This country’s name is Alodia — but, alas, it is fictional. So far.
As of Friday, same-sex marriage is now protected in all 50 states under the 14th amendment to the US Constitution. Justice Anthony Kennedy delivered the 5-4 decision:
“It would misunderstand these men and women to say they disrespect the idea of marriage. Their plea is that they do respect it, respect it so deeply that they seek to find its fulfillment for themselves.”
“Their hope is not to be condemned to live in loneliness, excluded from one of civilization’s oldest institutions. They ask for equal dignity in the eyes of the law. The Constitution grants them that right.”
Before today’s decision, same-sex marriage was legal in 36 states, covering 70 percent of the US population. The remaining 14 states included: Alabama, Arkansas, Georgia, Kentucky, Louisiana, Michigan, Mississippi, Missouri, Nebraska, North Dakota, Ohio, South Dakota, Tennessee and Texas.
The Sixth Circuit Court of Appeals in Cincinnati had previously determined that states should define marriage laws, and “to allow change through the customary political processes” instead of the courts. In recent years, public opinion has shifted rapidly. A Gallup poll in 1996 indicated that 27% of people approved of same-sex marriage, up to 60% now. Over the last year and a half, 60 decisions struck down same-sex marriage bans.
This is Audrey. Audrey is a high achiever, likes nice things, and is lots of fun to be with. Her goal is to have a nicer house. She likes to share things, but her house will be her own.
Audrey has no interest in history or politics which is ironic because she causes them. Why? Because the desire for your own place is the driving force behind human history.
This is Audrey’s current house. Her parents grabbed it when it was cheap. Since then, house prices have skyrocketed, so it’s a nice little nest egg.
The woman in the picture cleaning Audrey’s steps is Jaanai. Jaanai attended the same college as Audrey and got the same grades. but Audrey got a good job, and Jaanai didn’t: she wanted to be an architect, not a cleaner. So what went wrong?
This is Audrey and Jaanei’s college. Audrey spent her evenings networking, and developing a wide range of interests. After graduating she landed an unpaid internship at a prestigious company. Now she is climbing the career ladder.
Unlike Audrey, Jaanai spent her evenings working as a waitress. She thought she could pay her way through college. But an architectural degree is very long, and she miscalculated. She had to drop out and take another job.
The problem? Jaanei had to find $900 in rent every month. Whereas Audrey is free.
Jaanei would have been a really good architect. She could have built Audrey her dream home. But Audrey will never see that home, because Jaanei has to pay too much rent.
Audrey and Jaanei’s story is repeated a billion times around the world. Some people are free to reach their potential and some people are not.
Let’s look at how it all began.
How it all began
The story of mankind is the story of a hundred billion Audreys: we all want our own home, where we don’t pay rent to anybody.
Originally this was not a problem. There was plenty of land. If somebody said “this is my land” people could just say “OK” and move somewhere else. So mankind spread across the planet (See the appendix for details.)
You could walk almost anywhere. There were no borders, and the ice age was ending, so there were convenient land bridges/ As the ice receded more land became available.
But some land was much better than others. Soon Audrey’s ancestors were fighting over the best bits, like the warm fertile coasts and rivers of the middle east. Often they were willing to share the land, but only if Jaanai paid them rent. Because Audrey got there first.
But once land was scarce, Jaanai’s ancestors could not move on. They had to pay Audrey’s ancestors rent. This changed everything. Audrey’s ancestors were now rich, and Jaanei’s ancestors were now poor.
Audrey’s ancestors no longer had to be “better” to own the land: they could pay other people to do the fighting and thinking. All they had to focus on was keeping the rent coming in.
Since kings own the land that people need, people have to do what they say. So even those who disagree with the king become his unpaid servants.
Unpaid servants can never reach their potential. They cannot make their own decisions and they cannot invest in their own future.Just as bad as the lack of investment is the lack of critical thinking. Kings must discourage people from questioning their authority. A third weakness, besides the lack of investment and the subjugation, is war. The quickest way for a king to increase his power and income is to have a war: grab more land and collect more rent (called taxes). But wars are expensive and destructive.
The combination of no investment and periodic wars meant most nations were dirt poor and stayed that way for thousands of years. Some nations however won the wars, and gained more land. This made it easier to win the next war. Gradually kingdoms became empires, and empires grew bigger.
But the unwillingness to share land made the empires weak. Pliny the Elder (the Great Roman statesman) identified the problem:
“latifundia perdidere italiam”
(“the great estates destroyed Italy”)
Every rich person wanted to grab land; soon the land was covered by a few gigantic estates. These estates were so big that they became self sufficient. They no longer cared what happened in the city of Rome. So, Rome became weaker and weaker, and eventually fell. Other kings grabbed the land.
The common people didn’t like this endless war and poverty. A lot of them preferred the teachings of “holy men” who said we should share. But the words of “holy men” could be used selectively, allowing rulers to say “we must be the chosen people” and grab even more land.
Eventually “new” lands were discovered (such as America), leading to more land grabs.
Gold (and other loot) from America allowed Europe to finance even more land grabs. Soon Europe had the biggest empires of all.
Britain grabbed the most land, because as an island it had the best navy. France grabbed the second largest amount because it had Napoleon.
Africa was a popular place to grab land, as it was nearby. The Europeans just walked in, measured it up, and took almost everything.
The Europeans were still fighting each other, of course. In this picture the German leader tries to grab all of Europe in the First World War .
Meanwhile something amazing was happening in America.
Earlier we saw how concentrating land is economically inefficient, as the poor people cannot reach their potential. The people who moved to America learned from this: they decided to have no kings, but to share the land a little more. So America quickly changed from just another colony to being the most powerful nation on Earth.
But the same old forces still applied. Americans who grew rich grabbed the land. America produced a different kind of king: the global corporation. Big farms bought smaller farms. Railroads bought land for the rails plus a lot of land on each side. Businesses that did not need land found ways to influence the government (the effective landowners) and get favorable rules. This picture shows Standard OIl, a corporation that grabbed most of the oil bearing land and made everybody else pay.
And so history continues as it has always done, as one big land grab. That is the history of the world in a nutshell. Like children, we often do not want to share. Children fight over sweets, but adults fight over land. Because whoever grabs the land wins.
So when Audrey wants to own her house without paying rent, and Jaanai has to pay too much rent, they are acting out the history of the world, and ensuring that it continues as usual.
The problem with grabbing too much land
1. Even the rich eventually lose.
People with the most land always want more. So the land, especially the most valuable land, goes to fewer and fewer people.
The game of Monopoly (originally called The Landlord’s Game) was invented to show why this is a bad thing. If you don’t share the value of land then one by one everybody goes bankrupt.
It’s fun for the winner, but only for a short time. Because once everybody else is bankrupt there is nobody left to give you money, and it’s game over. Society ceases to function.
2. Even when they win, they lose.
Being a king has its downsides. You can never sleep easily. Somebody somewhere is always out to kill you: they all want your job.
Worse, by keeping other people poor you stop scientific progress. So when a really big problem appears, you can’t solve it. If the next kingdom is more efficient, you lose. And if you get sick you are more likely to die.
Audrey will never get the house of her dreams because Jaanai could never become the architect she was destined to be.
All those poor people who can’t pay their rent could have been doctors and scientists, architects and great thinkers. They could have solved our biggest problems. However, they never reached their potential, and that hurts everyone -even the rich.
The Rise of Earth Sharing
After thousands of years of war and poverty, things did began to improve a little. Science began to advance. Hunger began to go down. Why? Because a few more people gained the freedom to reach their potential.
Gradually more people gained some land. They then created laws to reduce poverty. This gave more people the freedom to reach their potential. More people could get an education and then invest in their futures. They created businesses, machines and ideas. Each advance led to another advance, so progress accelerated.
How people began to break free
How did more people gain land when the king wanted to be all-powerful? Largely due to war. Not sharing leads to war, and war shakes up the economy. After each war a few more people gain land: this is why:
Wars drive down incomes, so landowners have to charge less in rent. But after a war the government has to rebuild, so more people have jobs. There is a brief period when land is cheap but people have more jobs . Remember Audrey’s parents? They bought their house soon after World War II, before prices went up and jobs went down again.
So many people gained a share of land after World War II that unprecedented numbers of people were free to try new ideas. Science and technology exploded, as did funding for new science. People could see a better world.
Those who control the world’s resources are still very powerful. There will be setbacks. But Earth sharing is happening, slowly. And every tiny step makes the world a better place.
Most people are kept back from reaching their potential because they don’t have their share of the planet. They cannot take chances and invest in their future because they must spend all their spare money on rent just to live.
We are losing generations of scientists and artists and thinkers because they are not free to develop. This hurts everybody, including the rich.
Life can be many times better for everyone, wonderfully better, if we just let everybody reach their potential.
Appendix: early land monopoly
On territoriality (i.e. grabbing land as your own):
“As with other vertebrates, the territoriality of protohominids and early hominids had a significant influence on their behaviour. In the case of primates quite generally, the relevant territory is that of the band as a whole, i.e. the group’s territory. […] the defence of the territory is taken on by all the fit members (males) in the group. However, while both protohominids and their arboreal forebears were group-territorial, the nature of their territories differed. When the ancestors of humans became hunters, their group territories went from being relatively small and vegetation-dense to being large and open, encompassing the whole of the area in which they migrated throughout the year.” (“Too Smart for Our Own Good: The Ecological Predicament of Humankind” By Craig Dilworth, Cambridge University Press, 2009, p.172)
On fights over who controlled the land:
“Attempts to exclude others and utilize a territorial system provide advantages if there is competition for available resources. Among early hominids this was probably the case. Starting out as omnivores, they probably competed with members of the same species, and with other species, for the same food sources. Thus, if members of one group were able to exclude others using some type of territorial strategy, they were preserving more resources for themselves and thus enhancing their fitness.” (“Human territorial functioning: An empirical, evolutionary perspective on individual and small group territorial cognitions, behaviors, and consequences” by Ralph B. Taylor, Cambridge University Press, 1988, p.37)
On how people left when other land became available:
“[There is no evidence that early humans migrated due to learning new skills.] However, as a result of the warmer climate conditions, the habitats to which East African australiopithecines became adapted may have shifted ever further away from the equator. Although paleobotanical evidence for vegetation conditions is largely absent in the Pliocene, it can be assumed that the southern part of the East African Rift Valley might have served as a prime corridor linking eastern and southern Africa.” (From the chapter “Origins of human territorial functioning” in “The Global Prehistory of Human Migration” by Immanuel Ness and Peter Bellwood, Wiley-Blackwell, 2014, p.11)
On how increasing wealth led to increasing investment in keeping others out:
“Given the emergence of elite groups marked by warlike status kits, it would be very surprising if competition and wealth accumulation did not extend to land and to the crops and stock it supported: the substantial palisades around the major settlements presumably served to keep the stock inside and the raiding party outside.” (“Prehistoric Farming in Europe” by Graeme Barker, Cambridge University Press, 1985, p.150)
Notes and images
The names are fictional, but the situation is a simplified composite of a common scenario: one person is able to get a better education due to parents not having to pay a mortgage or rent. The name “Audrey” means “noble strength.” The name “Jaanai” means “answering afflicted, made poor”.http://www.meaning-of-names.com/israeli-names/jaanai.asp
The house steps image is from the out of copyright magazine Punch, October 3rd 1917, via Project Gutenberg.
The school image is the author’s own work, based on the public domain image “Arsenal Technical High School” from the Historic American Buildings Survey, via Wikimedia.
The migrations map is “Human migration out of Africa” by “Ephant”, Creative Commons 3.0 (sharealike), via Wikimedia.
The fertile crescent sketch map is from the out of copyright book “Ancient Man”, by Hendrik Van Loon, via Project Gutenberg.
Other sketch maps and similar graphics: from the out of copyright book “The Story of Mankind”, by Hendrik Van Loon, via Project Gutenberg.
The painting of Columbus is from “The return of Christopher Columbus; his audience before King Ferdinand and Queen Isabella.” by Eugene Delacroix (who died in 1863), via Wikimedia.
The slaves painting is from “Israel in Egypt” by Edward Poynter (1867), via Wikimedia.
The crusaders image is from the out of copyright book “The Story of the Crusades” by E. M. Wilmot-Buxton, via Project Gutenberg.
The Cecil Rhodes image is: “The Rhodes Colossus” from the out of copyright magazine Punch, December 10th 1892, via Wikimedia.
The assassination image is from the out of copyright book “Beacon Lights of History, Volume X, by John Lord” via Project Gutenberg.
The dying aristocrat image is from the out of copyright book “History of France” by Guizot, Volume I, via Project Gutenberg.
The Pliny the Elder image is public domain, via the National Institutes of Health, via Wikimedia.
The Kaiser eating the world is “Guerre 14-18-Humour-L’ingordo, trop dur-1915”: an out of copyright propaganda image from 1915, via Wikimedia.
The Standard Oil Octopus is from the out of copyright magazine “Puck”, v. 56, no. 1436 (7th Sept 1904) via Wikimedia.
The Landlord’s Game is an out of copyright image (from 1906) via landlordsgame.info.
The image of carving up the world is from the out of copyright image “plum pudding” by James Gilray, via Wikimedia.
The other charts’ copyright details are printed on the charts.
I once introduced a paper at a conference with the laugh line, “Many of the papers you’ll hear this week make extensive use of mathematics, but mine is a bit different: it makes extensive use of arithmetic.” The economists in the audience knew what I was getting at: minutiae can be examined in fascinating (sometimes Nobel-winning) detail, but often the really important points are made by keeping track of the relevant orders of magnitude — in other words, by counting the zeros.
Here’s an example, to get us started. How many days, months, whatever, does it take for a million seconds to go by? I whipped out my calculator and discovered that a million seconds equals about 11.6 days. Surprised? Well, then, how about a billion seconds? That’s a thousand times longer: 31.7 years. The next one is easier, because we’re sticking with the same unit, but it boggles the mind nevertheless: a trillion seconds equals 31,709 years.
Let’s explore the wonders of zero-counting by comparing and contrasting a couple of lines in the budget of the United States.
Amtrak’s Northeast Corridor Passenger Rail Service
The F35 “Lightning” Joint Strike Fighter
— relatively inexpensive; mildly profitable
— most expensive weapon in history
— deeply maligned, desperately underfunded
— despite criticism, lavishly funded
— used by over 11 million passengers annually
— appropriations shared by contractors in 46 states
— ridership increasing as highway congestion worsens
— not yet cleared to fly in inclement weather
Dear reader, you can probably see where I’m going with this, but please bear with me: the numbers involved are noteworthy.
The F35 is, in terms of its design parameters, one seriously groovy airplane. It is a “fifth-generation” fighter jet, intended to supersede a number of the fighter jets that are now in use. It is called “joint strike” because the basic plane would be used, with some modifications, by various branches of the military in different missions: fly from carriers for the Navy, take off and land vertically for the Marines, evade radar detection, and locate enemy fighters long before they’re able to locate it. Its pilot will wear a helmet designed to make the plane an extension of his brain; all manner of information will be displayed right before his eyes; next-level optics will allow the pilot to see through the plane as if it were transparent. This is majorly awesome, sci-fi stuff. Lockheed Martin puts it this way:
The supersonic, multi-role F-35 represents a quantum leap in air dominance capability with enhanced lethality and survivability in hostile, anti-access airspace environments…. Missions traditionally performed by specialized aircraft — air-to-air combat, air-to-ground strikes, electronic attack, intelligence, surveillance and reconnaissance — can now be executed by a squadron of F-35s.
However, alas, the F35 is also far behind schedule, and way over budget. “A single Air Force F-35A costs a whopping $148 million.” writes Winslow Wheeler, for the Project on Government Oversight. “One Marine Corps F-35B costs an unbelievable $251 million. A lone Navy F-35C costs a mind-boggling $337 million. Average the three models together, and a ‘generic’ F-35 costs $178 million.” That’s per plane — and, because the F35 is being tested as it is produced, and faulty systems must be retrofitted on planes that are already being flown, the per-plane cost is likely to increase.
The following cost figures for the F35 program were reported by CBS news: $400 billion will be spent to buy 2,400 aircraft — twice as much, in constant dollars, as the Apollo program. To date, the F35 program is $163 billion over budget. It will cost approximately $1.5 trillion over the life of the program. In 2014 we spent approximately $6 billion on the F35.
Maybe you didn’t hear me. I said: twice the cost of the Apollo Program.
Reasonable people can disagree about the urgency of the United States’s need for this airplane. The stated mission is to assert overwhelming superiority, in any aerial combat mission, over any plane the Russians or Chinese might plan to build in the foreseeable future. The US already has a fifth-generation fighter in service, the F22A Raptor — which itself costs some $150 million per unit and, according to the US Air Force, “cannot be matched by any known or projected fighter aircraft.” Only Russia has any plane that is even remotely comparable, and Russia is obviously throwing much less money at the problem than the US is.
The thing about the F35, though, it that its development and manufacture is distributed with great skill through a multiplicity of key Congressional districts. “Lockheed takes every opportunity to remind politicians that the airplane is manufactured in 46 states and is responsible for more than 125,000 jobs and $16.8 billion in “economic impact” to the US economy….” wrote Adam Ciralsky in Vanity Fair. “Political engineering has foiled any meaningful opposition on Capitol Hill, in the White House, or in the defense establishment.”
To make a long story short: it is virtually certain that — whether we need it, or can afford it, or not — we’re going to have the F35 “Lightning” Joint Strike Fighter. That nickname, by the way, is ironic, because the F35 has not yet been cleared to fly within twenty miles of a thunderstorm.
Fixing Our Trains
Amtrak, the US’s much-maligned passenger rail system, operates 21,300 miles of routes. But, for the purpose of our present comparison, we’ll concentrate on the 471-mile segment that actually turns a profit: the Northeast Corridor. This is the rail service between Washington, DC and Boston, on which Amtrak carried 11.4 million passengers last year. It is only on this route that Amtrak operates its Acela express trains, which can go over 150 mph — they can, at least, on the few sections of track that are in good enough repair. Amtrak owns and maintains these tracks, which are also used by commuter-rail systems in DC, Baltimore, Philadelphia, New York and Boston — and some of them have gotten quite rickety over the years.
To pick one of many examples, the Portal Bridge over the Hackensack River in New Jersey is 100 years old and carries 450 trains a day — if things stay on schedule. The old swinging drawbridge causes many delays. It would cost $900 million to replace it with fixed bridge. Republicans have harshly criticized Amtrak for many years — and they can’t all be wrong; it’s likely that there is some significant degree of inefficiency and inertia in Amtrak’s program. The House of Representatives recently voted to cut Amtrak funding for the coming year to the tune of one and two-thirds F35s ($260 million) — the very day after a deadly derailment outside of Philadelphia.
This seemed an exceptionally spiteful move, even for Congress. This particular accident was probably caused by human error. But it could have been prevented, had a “Positive Train Control” system been in place; a 2008 law requires it to be implemented by the end of this year. Such systems are routinely used across Europe. Amtrak, however, is strapped for funds. Its “Vision Statement for the Northeast Corridor” laments:
In the New York vicinity, some areas are operating at 100% capacity, resulting in significant delays from even minor operating disturbances. The [Northeast Corridor] consists of a mix of aging infrastructure, much of it built 80-150 years ago, that will require extensive repair for safe and efficient operations at current traffic levels.
Folks, that’s like commuting to work every day at 70 mph. in an old VW beetle that only goes that fast (and has a tendency to overheat). Nothing against the beetle, but — how long could you count on that?
Reasonable people can disagree about the efficacy of subsidized passenger rail service in the megalopolis between DC and Boston. I don’t think anyone disputes, however, that the highways in that region are getting more congested all the time, and that reliable, reasonably-priced intercity rail service wouldn’t be a bad thing. But, can we trust Amtrak to provide that? Not according to Rep. John Mica (R-FL), who said this on the day of the budget vote: “The problem is you give Amtrak the money and they blow the improvements or squander it. Congress does not trust Amtrak. They’ve given them the money before.” Mica’s largest campaign contributor is the air travel industry.
Let’s talk numbers
Amtrak’s overall operation was $329 million in the red for 2014, but its Northeast Corridor service made a profit of $286 million. You heard that right: that means that the 20,829 miles of non-NEC Amtrak routes are subsidized by over half a billion dollars a year! That’s fully ten percent of what we spend annually on the F35 “Lightning” Joint Strike Fighter! (And, it’s eight percent of what the British government spends annually on passenger rail.)
Amtrak’s “Vision for the Northeast Corridor,” offers various proposals for improving service and reliability, which are echoed in somewhat greater detail in a report by the by the Federal Railroad Administration. The proposals are graded, A through D, in escalating wish-lists. The ones in section A amount to simply maintaining existing capacity (which nevertheless calls for some rather expensive catching up). The suggestions in section D, though, are the stuff of Republican apoplexy; they propose to:
transform the role of rail, so that the rail system would accommodate a significantly higher percentage of travelers and passengers, enabling new travel patterns and new markets to be served… positioning rail as a dominant mode. This would be accomplished through a major increase in the capacity of the NEC along its entire length, service to new markets, and a dramatic reduction in trip times.
What the heck, you might as well ask for what you want. This dramatic vision (including such luxuries as replacing the Portal Bridge in Hackensack), this pie-in-the-sky wish list, way more than Congress would ever appropriate, this tremendous infrastructure enhancement that would make life so much more efficient and convenient in the Northeast (not to mention conferring significant environmental benefits) — this commie-liberal subsidized rail boondoggle — would be gradually implemented between now and 2040, at a projected cost of $151 billion. That would amount to about $6 billion per year. Does that figure sound familiar? It’s the amount that we spent in 2014 on the F35 “Lightning” Joint Strike Fighter.
To reiterate: the total projected cost of the most ambitious plan for a long-term upgrade of Northeast Corridor Rail infrastructure is $151 billion. The amount by which the F35 program is over budget, so far, is $163 billion. It really helps to count the zeros.
Two P. S.’s
1) It is widely known by economists and smart people everywhere that quality public transportation facilities increase real estate values. The city of London has capitalized on this obvious fact to fund rail improvements with levies on the windfall gains that the railroads have created. In Florida, a private concern, Florida East Coast Industries, has bought up lots of land around the terminals of a passenger rail service it plans to introduce between Miami and Orlando. Indeed, this is exactly the way the transcontinental railroads in the US were financed. Financing passenger rail improvements with taxes on land values is an easy, sensible and fair policy; we should start doing it immediately!
2) By the way: If you really want to get your mind boggled, you gotta check out Wikipedia’s page on Orders of Magnitude!
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).
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.
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.
Detroit, in the mid 20th century, was a vibrant center of American industrial manufacturing with a prospering middle class. It is now the poster city of blight and urban decay. As industry has collapsed across the region, job scarcity, white flight, and soaring crime rates have driven hundreds of thousands of people out of the city. Thousands of homes, retail spaces, and civic buildings sit empty and dilapidated. Today, due to the faulty set of incentives implemented to encourage investment, real estate investment–a force that was once thought to have the potential to save Detroit–is worsening blight and costing the city millions of dollars.
After decades of declining investment in Detroit, locals were excited when, beginning in 2013, investors began to purchase large swaths of residential properties. Jimmy Lai, a billionaire based in Hong Kong, purchased 32 homes at a tax foreclosure auction. At the same auction, local real estate agent Wendy Briggs walked away with a staggering 428 properties. Despite the hopes of local residents, it became obvious right away that Jimmy Lai, Wendy Briggs, and the myriad others snatching up Detroit real estate had no plans to invest in their properties. Instead, they anticipated that Detroit would experience a real estate boom in the next several years, allowing them to unload their properties at a large profit.
Thousands of homes owned by speculators have fallen into disrepair as their owners wait for a real estate boom that does not appear on the horizon. In the meantime, a house at 3383 15th Street, owned by Jimmy Lai, partially burned down in 2015. To date, he’s made no effort to clear the wreckage, which poses a safety hazard in the neighborhood. At one point, Detroit paid over $200,000 demolishing a single speculator’s properties after they fell into disrepair and then into foreclosure.
So what factors are driving this mess? A big cause is real estate taxation in Detroit. Facing debilitating revenue shortages during the 2008 financial crisis, Detroit over-valued residential properties with the hope that increased revenue from property taxes could help the city stay afloat. They did this without the understanding that increasing property taxes reduces incentives to build or rebuild. Without this understanding, Detroit’s taxing strategy proved disastrous. In 2016 alone, the city sent 38,000 foreclosure notices due to unpaid taxes. The majority of tax bills totaled less than $2,000. If overdue taxes couldn’t be paid, the homes went up at tax foreclosure auctions, where speculators would subsequently make the majority of their purchases. It simply was too easy for speculators to game the system–with minimal cost to them and minimal gain for the city.
Many speculators fail to consider taxes in the total cost of their investment, now owing Detroit millions of dollars in back taxes. Wendy Briggs alone, who purchased 428 properties for just $379,000, owes $4.7 million in back taxes. 95% of her properties will be auctioned in 2016. In fact, nearly 80% of all properties purchased at the 2013 tax foreclosure auction are back in foreclosure. So not only do speculators let their properties fall into decay, they fail to pay their taxes, which deprives the city of a critical revenue stream and puts homes back into the tax foreclosure auction. This cycle continues to repeat itself.
Detroit and Michigan are taking steps to reduce the number of foreclosures and ability of investors to hoard properties. The state has cut interest rates on tax repayment plans by two-thirds, reducing the number of homes foreclosed due to unpaid taxes. Wayne County has closed a loophole that allowed speculators owing back taxes to purchase additional properties at auction. In addition, property assessments are expected to drop. The next step would be to eliminate taxation on buildings and focus solely on taxing land values. Both measures, if implemented worldwide, are predicted by experts to induce landlords to either immediately develop their properties or to sell to those who will.
These measures have cooled investor interest in Detroit. In 2016, the top ten investors bought nearly half as many homes than they did in 2013. Although housing activists applaud this progress, they believe more can be done. Local residents propose making it easier for people in poverty to file property tax exemptions and further decreasing the number of real estate investors in the market. However, this could have the opposite effect, as low property taxes decrease property owners’ incentive to develop their properties.
Detroit residents, having learned that speculators tend not to care about their communities, are thrilled to see them go. “They think Detroit is just a bunch of criminals who don’t care and the city is meaningless to them. The idea of a neighborhood or community is a foreign concept to these people,” says Bill Cheek, a resident in the North Corktown neighborhood. The challenge, some believe, will be keeping them out. By implementing sufficient land value taxation and exempting buildings from taxation, they should be able to do just that.