“It does not matter where you look or what examples you select, you will see that every form of enterprise, every step in material progress, is only undertaken after the land monopolist has skimmed the cream off for himself, and everywhere today the man or the public body who wishes to put land to its highest use is forced to pay a preliminary fine in land values to the man who is putting it to an inferior use, and in some cases to no use at all.”
Winston S Churchill in a speech in Edinburgh, July 17, 1909
This book is as relevant today as it was when it was published in 1983. The Author draws attention to a remarkably regular 18-year cycle in the land market which is a major cause of the endemic boom and bust, so characteristic of the ‘free market’ economy, and the maldistribution of wealth.
His comparative study of the land markets in the UK, the US, Australia and Japan showed how despite variations in the four national economies, they were all subject to the same systemic defect which makes booms and busts inevitable and predictive. His warning about the collapse at the end of the 1980s proved correct – land prices in Tokyo having risen so high even embassies had to abandon their offices because rents were too high. Japan had not fully recovered by the time the next crisis hit at the end of 2007.
The remedy proposed by the author is a fiscal one which would remove the disruptive factor of land speculation and transfer the burden of taxes from labour and capital to economic rent, a publicly created revenue. This would create employment and higher growth rates, while avoiding the inflation-risk policy of deficit financing; increased consumption and investment would be generated by the private sector, not government.
Fred Harrison is Research Director of Land Research Trust, London. After a career as a Fleet Street investigative journalist, he became advisor to a number of Russian academic and political bodies, including the Duma (parliament), in their efforts to implement a more equitable transition to a market economy. Recently he has turned his attention to the failure of economic analysis and public policies in the market economies.
Keywords: Economic rent, Land values, Tax reform