- 05 Mar 2023 20:51
#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.
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.
Paul Jael
- By Political Interest