Tuesday, 29 April 2008

Land, Land Values and Land Tax after peak Oil

As we approach peak oil a major challenge for society is going to be the re-organisation of
the agricultural and food supply system to grow enough food. The current rise in food prices is just an indicator of things to come. Another challenge is likely to be how we can grow enough biomass to take CO2 out of the atmosphere and then convert into bio-char.

In both cases a major challenge is where is the land going to come from for all of this? The answer is not as straightforward as one might think - as food prices rise, and as the money and banking system wobbles and returns from money lending becomes insecure, the clever money is now trying to transfer wealth into the place from which the food comes in the first place - into agricultural land, pushing up its price. This is a world wide trend. (See the articles from the Financial Times at the bottom of this e mail).

People in Transition Nottingham (and other Transition Initiatives) might like to think about the implications of this. As we consider how we are going to grow more food close to home the scope for growing food in allotments and gardens is going to be rather limited. So it will be important that we turn a lot of land, currently lawns and other sterile spaces, into cultivated areas.
But that is not going to provide us with bulk foodstuffs which will require a substantial amount of land close to the cities and close to home.......

But it will not be straightforward doing this is the land that we want to use is owned by financiers who charge higher and higher rents for the privilege of working to put something in our mouths.

One prospect for the future would be a situation where competition for land means that you slog your guts out to grow food, but can only keep just enough to live on while the landlord makes an extremely nice living on your efforts (and does not invest this money into increasing agricultural yields either - preferring to invest the money into buying yet more land an a rather luxurious lifestyle).

A good part of human history has been the story of this kind of parasitism.

In fact it is surprising how little people who are social and economic radicals know about land and land rent. For decades radicals have focused the relations between labour and capital but how the land property system works is a closed book to most people.

It was not always so. At the same time that Karl Marx was expounding his ideas about the exploitation of the working classes another author, Henry George, was writing a different account of how one might understand poverty and exploitation. It is still relevant today. Few people realise how, despite the progressive tax system, poor people who pay taxes are actually subsidising the rich people. It works like this. Taxation revenues and council taxes are used to build a social infrastructure of roads, parks, social facilities, in which some places are very nice to live or very favourable business locations. Public expenditure on the infrastructure near these places builds up capital values and helps them command high rents. In other words state
expenditure bestows real monetary value on places that are already owned by the rich and they capture this value for themselves. This far outweighs anything that they pay in taxes, if indeed the rich pay anything in taxes at all - so the poor end up subsidising the rich.

In general terms the most favoured locations for business, the best agricultural land (in terms of fertility and in terms of proximity to markets) commands a premium value that the landowner has done nothing at all to earn - rather the extra value is created because this land cannot be
created and reproduced at will but is scarce in relation to society's needs. It is society that creates the value, not the landowner who does nothing at all to earn their income - except capturing an asset that others want.

So what's the solution? As peak oil morphs into a deeper and deeper food crisis are we all going to end up paying a nouveau landed gentry for the privilege of growing our food when they have done nothing except cleverly escaped out of the collapsing financial sector in time and bought up the land that we need to grow food?

Well, if we let it happen! But there is another way. That other approach is a land value tax. Rather than trying to expropriate the landlords we can let them keep their land on condition that they pay back the additional income in rising rentals and land values back through rising taxes. And that land value tax is then used as a revenue that would allow the abolition of income tax
and/or as a way of supporting vulnerable and socially dependent people.

This requires a bit more spelling out. A land value tax is not a tax on the additional income that arises from your work and effort on improving some land by building or growing on it. It is a tax on the value that the land has - even if nothing is happening on it - because of its favourable location in relation to a community (and the collective expenditures and developments of
a community).

The point about a land value tax is that this not only it gives the community back a value that rightfully belongs to the community but that it liberates land and makes it available for use. The reason is this. When land is owned by a landowner and the land value from the piece of land accrues to the landowner as a capital gain then landowners typically have an interest in
holding back land from development for speculative reasons. However, if rising land values are taken back by the community then landowners have no reason to do this - indeed the reverse is the case. If a landowner hangs onto land and does not use it, but, nevertheless finds that they must pay a tax on the land equal to its value, then they give it up pretty quickly and makes
the land available to someone who can use it.

That way land gets into use and is used by the people who can use it best - to grow food on if that's the best use.......and the community gets the additional revenue that accrues because of favoured locations...and can use that revenue in the interests of all.

Here are a few links which explain the idea from the Labour Land Campaign (including a YouTube Video) plus some FT articles about rising agricultural land prices...




Link to Financial Times article:

European farmland hits record prices

By Andrew Bounds in Brussels


Last updated: April 24 2008 08:23

With prices of commercial and residential property falling, investors are increasingly turning to a more traditional asset: farmland. Long seen as a declining industry, farming has received a fillip in the last few months as global demand for food has increased. As a result, the cost of agricultural holdings across the European Union has risen to record levels.

In response several funds have recently been set up to buy farmland. In particular the UK, where prices have risen 40 per cent over the last year, has been active. Braemar, a fund manager, is one example. The Manchester-based group has been swamped with offers since it launched a fund
this year.....

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