A Practical Proposition for Collectivisation of Land - Politics Forum.org | PoFo

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As either the transitional stage to communism or legitimate socio-economic ends in its own right.
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#15267147
Let's tackle what is an old issue that has already been widely discussed, but has been for long under the carpet of political debate. Should land (soil and subsoil) be public property or private property? Private land ownership is the second super taboo in our society along with inheritance. The question is important from an economic point of view, because land rent is one of the four major types of income along with wage, interest and profit. Until the beginning of the 20th century, it was one of the favourite subjects of economists. Rent is very present in society; much more than it seems, because when the owner operates his property or lives on it, he benefits from it invisibly, not pecuniary but in kind.

Why does land produce rent? Because it is useful and fertile? Admittedly, this is a condition for there to be a rent, but it is not enough. There is rent because land is scarce. The owner can play the auction between non-owners who need it. In young countries like the United States in the 19th century, free land abounds. It therefore has almost no value and no rent is possible. This is a fact that economists understood well from the beginning of the 19th century, even if one of them, Malthus, persisted in making it the price of fertility.

If the State gets its hands on the land rent, including the invisible rent, that would represent an appreciable income. My opinion is that a left government must put nationalisation of the whole land of the country in its program. Income redistribution needs a fall of taxes on poor and low middle classes (such VAT). The left government would also need money to constitute the public participation fund I defended in another topic. The State must find new sources of income to compensate. And to preserve economic welfare, it is preferable that these new incomes do not hinder saving and investment, nor entrepreneurship. Land nationalisation is perfect in this perspective. However, this objective can only be on the program when public opinion has assimilated the merits of this nationalisation: the government program must never be ahead of public opinion.

I shall devote an article specifically to the legitimacy of private property of land. Presently, let us admit that the nationalisation of land in legitimate. The rest of this topic sets out a concrete proposal for this nationalisation.

Before more detailed explanations, I must insist on a distinction: what needs to be collectivised is the PROPERTY of the soil, not its EXPLOITATION or its USE. This distinction is essential for understanding the proposition that follows and also for dispelling the fallacious amalgam between them that underlies many of the arguments defending private property.

How will things work out when my proposition of nationalisation of ALL the land will have been voted? All land is the seat of a dwelling or of an economic exploitation, whether industrial, commercial, agricultural, forestry, leisure... Let's call them “uses” of the land. Holders of the right of use before nationalisation keep it fully and unconditionally in the new situation. The right of use is attached to installations fixed on the ground. Private ownership of buildings does not cease to exist when it is decoupled from ownership of land. If A sells his house to B, B becomes full owner of the building and holder of the right to use the land of which the State is the owner. The civil law of some Western countries already provides for the possibility of owning a building while another person owns the land.

The use of the land will give rise to the payment of rent to the new owner, the State. If before the reform, the holder of the right of use paid rent to a private owner, there is simply a change of payee. If the holder of the right of use was the owner, he will start paying rent to the State. Clearly, transitional measures are needed. It would not be normal to charge rent to someone who has just paid for the acquisition of his piece of land. The transfer of the property to the State will take place as soon as the law of nationalisation is voted, but the expropriated owner will be exempted from rent during a period of suspension which extends until the twentieth anniversary of the acquisition of the property subject to payment. Twenty years is given here as an example; due to the diversity of situations, the duration will no doubt depend on various parameters. After this delay or after the death of the expropriated owner, rent will be due. If the acquisition was made free of charge (bequeath, for instance), rent will be due immediately.

Right of use will be guaranteed perpetually as long as the use remains; Both are united. The user of land who invests in improvement will benefit from his investment for as long as he wishes. Of course, payment of rent is a condition for benefiting from the use. Public land rent is a debt in the same way as the supply of water, gas or electricity, the rental of a dwelling or a loan from a bank. A difficulty could arise if the rent makes the use financially inaccessible to the expropriated owner. Avoiding evictions must be a priority. Transitional support mechanisms are to be provided for.

A special case would be that of a wealthy inheritor living in a manor house on a very large piece of land which he used free of charge. He will be subject to the payment of rent. Rent being proportional to the value of the piece of land and therefore dependent on its surface area, he may possibly be able to pay it only for part of the land. He will be given the opportunity to sign an agreement with the State transferring the right of use on a part of the land which he renounces.

The soil is what human societies stand on. A radical reform concerning its status can generate the fear of “upside down”, the fear of a society that loses its foundations. Admittedly, the transition may prove a little complicated, but when its effects stabilise, the implications of the reform will be only of pecuniary nature, as if there were a new tax on land. Interpersonal and economic relations will not be upset. To assess the result, we must consider the whole of the financial flows related to this reform: State rent, fall of some taxes, possible new allowances to the population (public rent returning to all citizens in the form of dividends). Overall, large landowners will lose, small landowners will break even, and non-landowners will gain.
#15267151
I must add this precision. Even if it is obvious. This nationalisation is without compensation for expropriated owners. As primitive appropriation of land is a theft, the collectivity, that is the legitimate owner of land, need not pay to obtain what is naturally his ownership.
#15269804
Something I would like to point out. In our modern society, from the point of view of most individual people, the value of land almost has more to do with the proximity to desirable city areas and job opportunities than it does the inherent natural value of the land, all by itself.

Land in decently good areas (not too cold, not too dry) can still be had for not too much money. It's just that nobody wants to live there, there are few good paying job opportunities or few entertaining things to do because so few people around that area have much money to sustain those things, common in more populated prosperous areas.

A lot of these areas have unpleasant weather too. In the U.S. Gulf Coast region, while there may be enough water, the quality of water is not very good for drinking and bathing, which was probably one factor why it never became very settled.
#15287097
Monti wrote:This nationalisation is without compensation for expropriated owners.

How to make a good solution unattainable....

Are you aware that slavery was abolished peacefully in a number of places by compensating the expropriated owners? We may say, accurately, that the compensation should rightly have been to the slaves, and should have consisted of the entire assets of their owners, distributed in proportion to the slaves' years of servitude; but that was never going to be politically feasible. And where slavery was abolished without compensation, as in the USA, the result was often very violent and destructive. It is indisputable that just buying all the slaves from their owners and freeing them would have cost far less than the Civil War.
As primitive appropriation of land is a theft, the collectivity, that is the legitimate owner of land, need not pay to obtain what is naturally his ownership.

There can be no legitimate or rightful owner of land. The community just rightly administers possession and use of land for the purposes and benefit of the people who have a natural liberty right to use it.
#15287115
Puffer Fish wrote:Something I would like to point out. In our modern society, from the point of view of most individual people, the value of land almost has more to do with the proximity to desirable city areas and job opportunities than it does the inherent natural value of the land, all by itself.

Yes, land value is determined by the economic advantage obtainable by using it, not just its physical qualities. In advanced countries, the vast majority of land value is urban and suburban, because that is where the economic opportunity is. The advantage of a location is determined by the desirable public services and infrastructure government provides and the opportunities and amenities the community provides, as well as the physical qualities nature provides. You might note the absence from that list of anything the landowner provides.
A lot of these areas have unpleasant weather too. In the U.S. Gulf Coast region, while there may be enough water, the quality of water is not very good for drinking and bathing, which was probably one factor why it never became very settled.

Historically, tropical areas have been less desirable because there was no air conditioning, and many nasty tropical diseases.
#15287122
Monti wrote:Let's tackle what is an old issue that has already been widely discussed, but has been for long under the carpet of political debate.

There are good reasons discussion of land is suppressed -- by landowners.
Should land (soil and subsoil) be public property or private property? Private land ownership is the second super taboo in our society along with inheritance. The question is important from an economic point of view, because land rent is one of the four major types of income along with wage, interest and profit.

It might be a good idea to define those.
Until the beginning of the 20th century, it was one of the favourite subjects of economists. Rent is very present in society; much more than it seems, because when the owner operates his property or lives on it, he benefits from it invisibly, not pecuniary but in kind.

In advanced economies, land rent is typically 20%-30% of GDP. In highly resource-dependent economies like Kuwait, it can be over 50%.
Why does land produce rent? Because it is useful and fertile? Admittedly, this is a condition for there to be a rent, but it is not enough. There is rent because land is scarce. The owner can play the auction between non-owners who need it.

Though everyone needs to use land, land rent arises because the liberty rights of people who want to use it have been forcibly removed and made over into the private property of landowners. Animals also need to use land, as did our hunter-gatherer and nomadic-herding ancestors, but there was never land rent before the advent of settled agriculture and private landowning.
In young countries like the United States in the 19th century, free land abounds.

That was no longer the case in the eastern and southern states by the time of the Civil War. In western states, it was no longer true well before the end of the 19th century.
It therefore has almost no value and no rent is possible. This is a fact that economists understood well from the beginning of the 19th century, even if one of them, Malthus, persisted in making it the price of fertility.

Ricardo explained the Law of Rent around 1810. He used agriculture in the explanation, but the same reasoning applies to any use.
If the State gets its hands on the land rent, including the invisible rent, that would represent an appreciable income. My opinion is that a left government must put nationalisation of the whole land of the country in its program.

That is a recipe for political failure.
Income redistribution needs a fall of taxes on poor and low middle classes (such VAT).

More to the point, justice requires taxing what people take from the community by dint of privilege rather than what they contribute to it by their productive labor and investments in producer goods.
The left government would also need money to constitute the public participation fund I defended in another topic. The State must find new sources of income to compensate. And to preserve economic welfare, it is preferable that these new incomes do not hinder saving and investment, nor entrepreneurship. Land nationalisation is perfect in this perspective. However, this objective can only be on the program when public opinion has assimilated the merits of this nationalisation: the government program must never be ahead of public opinion.

I consider myself a centrist, but I agree with this.
Presently, let us admit that the nationalisation of land in legitimate.

I would prefer to put it that as the community administers possession and use of land in any case, it should do so for the purposes and benefit of the citizens, not for the unearned profit of landowners.
Before more detailed explanations, I must insist on a distinction: what needs to be collectivised is the PROPERTY of the soil, not its EXPLOITATION or its USE.

The form of private property in land can be retained, as long as the owners make just compensation to the community of those whom they deprive of it.
All land is the seat of a dwelling or of an economic exploitation, whether industrial, commercial, agricultural, forestry, leisure... Let's call them “uses” of the land. Holders of the right of use before nationalisation keep it fully and unconditionally in the new situation.

They don't hold it "unconditionally" even now: they have to keep the property taxes current.
The right of use is attached to installations fixed on the ground. Private ownership of buildings does not cease to exist when it is decoupled from ownership of land. If A sells his house to B, B becomes full owner of the building and holder of the right to use the land of which the State is the owner. The civil law of some Western countries already provides for the possibility of owning a building while another person owns the land.

True: the Empire State Building was built on leased land.
The use of the land will give rise to the payment of rent to the new owner, the State. If before the reform, the holder of the right of use paid rent to a private owner, there is simply a change of payee. If the holder of the right of use was the owner, he will start paying rent to the State.

So it's not unconditional.
Clearly, transitional measures are needed.

There's the rub.
It would not be normal to charge rent to someone who has just paid for the acquisition of his piece of land. The transfer of the property to the State will take place as soon as the law of nationalisation is voted, but the expropriated owner will be exempted from rent during a period of suspension which extends until the twentieth anniversary of the acquisition of the property subject to payment.

Problem: if landowners can see this coming -- and they are not stupid -- they will just sell their land, use the proceeds to buy some other land, and be thus exempt from taxation for 20 years, confident that some later government will reverse the nationalization -- which won't work, as it will thus raise no revenue for 20 years.
Twenty years is given here as an example; due to the diversity of situations, the duration will no doubt depend on various parameters.

The devil is in the details.
After this delay or after the death of the expropriated owner, rent will be due. If the acquisition was made free of charge (bequeath, for instance), rent will be due immediately.

How will the rent be measured/assessed?
Right of use will be guaranteed perpetually as long as the use remains; Both are united. The user of land who invests in improvement will benefit from his investment for as long as he wishes. Of course, payment of rent is a condition for benefiting from the use.

Presumably the owner of improvements can sell them, and the new owner has the same right of use.
Public land rent is a debt in the same way as the supply of water, gas or electricity, the rental of a dwelling or a loan from a bank.

Right. The problem is that landowners are accustomed to getting the subsidy without paying for it. It's like they have been used to going to the bakery and taking bread without paying the baker for it. When someone proposes that they should rightly pay the baker for what they are taking from him, they will get all shirty, and accuse the baker of proposing to steal from them something they have a right to.
A difficulty could arise if the rent makes the use financially inaccessible to the expropriated owner. Avoiding evictions must be a priority. Transitional support mechanisms are to be provided for.

Details would be nice here -- but land "owners" should be clear that they do not have any right to deprive others of their liberty to use the land without making just compensation for what they are taking, and if they cannot afford to make compensation, they need to make arrangements to yield the land to someone who will.
A special case would be that of a wealthy inheritor living in a manor house on a very large piece of land which he used free of charge. He will be subject to the payment of rent. Rent being proportional to the value of the piece of land and therefore dependent on its surface area, he may possibly be able to pay it only for part of the land. He will be given the opportunity to sign an agreement with the State transferring the right of use on a part of the land which he renounces.

Just let him divest the land he can't pay for, yielding it to someone who will.
The soil is what human societies stand on. A radical reform concerning its status can generate the fear of “upside down”, the fear of a society that loses its foundations. Admittedly, the transition may prove a little complicated, but when its effects stabilise, the implications of the reform will be only of pecuniary nature, as if there were a new tax on land. Interpersonal and economic relations will not be upset.

That is a bit naive. Justice in public revenue and land tenure arrangements will make society and the economy anywhere from better to radically better for everyone but a tiny minority of rich, privileged, parasitic landowners. Economic and social relations based on landowners owning everyone else's rights to liberty will not survive.
To assess the result, we must consider the whole of the financial flows related to this reform: State rent, fall of some taxes, possible new allowances to the population (public rent returning to all citizens in the form of dividends).

Better than a dividend would be a universal, uniform, per-capita exemption.
Overall, large landowners will lose, small landowners will break even, and non-landowners will gain.

I would say non-landowners will gain tremendously, doubling or tripling their real, disposable, after-taxes-and-land-rent incomes; small landowners (e.g., those who own only the little postage stamp of land under their dwellings) will gain quite a lot; larger landowners will break even; and only the largest landowners -- the top 1%, or at any rate some low single-digit percent -- will lose a lot. The problem is to persuade the two former groups that this reform would be massively in their interest, and is politically possible.

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