Is the property-owning democracy (freedom and capitalism in the twenty-first century) any good?

A review by HGSD’s Julian Pratt of Gavin Kerr’s new book The property-owning democracy: freedom and capitalism in the twenty-first century 

Gavin Kerr has written the most important book to set out the philosophical basis of Land Value Taxation that has been published from within the liberal tradition during the last century. There are some socialists and some libertarians who will not be swayed by its arguments, but for anybody with sympathy for liberalism in any of its guises this book provides a convincing basis for a truly liberal society that provides both economic freedom and fairness. It is a book of academic philosophy that all supporters of Land Value Taxation will want to be aware of, some will want to dip in to and a few will want to read from cover to cover (or the ebook equivalent).Gavin Kerr book cover

Liberals share the desire for a society in which all individuals can be truly free. The nature of this freedom, or liberty, is what divides them. ‘Classical (19 th century) liberals’ like Adam Smith, David Ricardo and their followers such as Friedrich Hayek and Milton Freidman stressed that liberty is rooted in economic freedom, in particular private property and the freedom from government intervention.

This version of liberty was described by Isaiah Berlin in his famous lecture Two concepts of liberty as ‘negative liberty’, which he contrasted with ‘positive liberty’. For ‘social liberals’ from John Stuart Mill onwards, most famously John Rawls, freedom is not just the negative liberty of ‘freedom from’ but the positive liberty of ‘freedom to’. They, too, favoured economic freedom, though as a means to a wider freedom that maximises the opportunities of the least advantaged members of society to pursue a reasonable conception of the good. Social liberals advocate positive liberty, with the reduction in inequalities this requires, and view negative liberty as little more than the freedom to
starve in the gutter.

Gavin Kerr rehearses the positions of the ‘classical’ and ‘social’ liberals and makes clear the limitations of each approach. Classical liberals cannot in practice do entirely without government, and therefore without the taxes on which government relies, and so have to accept some level of taxation with the loss of economic liberty this entails. Social liberals either have to accept the additional inefficiencies which result from excessive redistributive taxation, or are forced to accept meagre levels of redistributive taxation by their desire to avoid these inefficiencies.

His central argument is that liberals can find a substantial area of common ground that would enable both classical and social liberals to achieve their aims. He draws on the geo-classical insights of Adam Smith, David Ricardo and Henry George that contrast the need for unconditional property rights to the things we make, artefacts, with the need for property rights to land that are conditional on the duty to pay rent for that land to the community. He suggests that inequalities can be reduced not by restricting market freedoms but by re-defining them to create a new conception of market freedom that strengthens both the unconditional right to artefacts and the conditional right to land.

He points out that economic liberty is damaged in two major ways by the current property system that legalises outright and perpetual ownership of the natural world. Ownership means that, once all land is in ownership, there can be no equality of opportunity as the population is divided into the rent-exempt class and the class of rent-payers. And if land is treated as the same sort of property as artefacts then taxes, which for most of human history have fallen on the land, can be shifted on to the things that people should be free to keep for themselves – income, sales, profits, value added and so on.

Gavin Kerr proposes that property rights to the natural world should take a form that is different from conventional ownership. He calls this use-right ‘quasi-private property rights’, conditional on the payment of rent to the community. Nobody made the natural world and its value is the result of the activity of the community, so this value should be returned to the community in the form of a Land Value Tax.

He argues that land is an essential input to economic activity, and that rent is distributed prior to production. In an economy that is grounded in ownership, rent is regressively pre-distributed to landowners; while in an economy that is grounded in quasi-private property, rent is progressively pre-distributed to all. This pre-distribution provides a fairer distribution of opportunities, economic power and rewards for the operation of the free market. Only once it is in place can we know whether there is a need for other forms of taxation.

The property-owning democracy has left me with many questions. Does this justification for Land Value Taxation from a position of geo-liberalism reinforce and develop Hillel Steiner’s left-libertarian justification or does it undermine it – particularly in the light of Steiner’s positive review of the book? How does it dovetail with and how does it differ from Henry George’s justification from natural rights? I can imagine the book provoking many interesting conversations. But perhaps its most important legacy is the establishment in the 21 st century of an academic argument from within liberalism for the need to rethink our ideas of the ownership of the natural world.

The property-owning democracy has also left me wanting more. I would certainly appreciate a short summary for the general reader, self-published by Gavin Kerr to avoid the eye-watering price of even the ebook option – not even the British Library receives a hard copy. For many of us his article in Land and Liberty (issue 1240, Summer 2017) will have to serve as a taster.

But the book also provides a challenge to those who identify themselves as lying outside the liberal tradition. Can they achieve a similar synthesis between apparent extremes within their own tradition? The task for a socialist is to perhaps to transcend Marx’s early rejection of the ‘trinity formula’ of land, labour and capital and recognise that the root of class struggle lies in the difference of power between the owner of monopoly rights granted by the state, in particular land ownership, and those deprived of such rights (including both capital and labour). The task for a conservative is perhaps to
recognise that the freedom from oppression by the state sought by right-libertarians can only be achieved by providing the equal opportunity for all advocated by One Nation conservatives; and that this requires an equal opportunity of access to land as well as freedom from taxation. For socialists and conservatives as well as liberals, these aims can only be achieved by the same reform – to move from ownership of land that is unconditional and perpetual to the use-right of quasi-private property that is conditional on paying dues to the community.

Julian Pratt
January 2018

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