THE SCOURGE OF UNEMPLOYMENT

Even in a time of prosperity there are more than a million people in Britain registered as unemployed. Unemployment damages other people as well as the unemployed. The taxpayer is compelled to keep people in idleness. Work which would benefit everybody does not get done. Unemployment is not just a contemporary British phenomenon. In Britain it has brought misery to millions in the past, and over a wide area of the world it continues to do so today. We are not likely to be able to cure unemployment unless be understand the cause, which is essentially the same not only in Britain but worldwide.

The cause.

The root cause of unemployment is the economic system which permits a minority of people or groups of people to own and control a great deal of the world's natural resources, while most people own little or nothing of those resources. The "classical economists" used to call those resources "land". "Land", as they used the word, distinguishes natural resources from the things that human beings have made by their own effort.

All that human beings need and desire comes from land. Nothing can be grown, reared or manufactured without occupation of an area of the earth's surface, or without the use of the earth's raw materials. It follows that if a minority of mankind owns most of the land, the remainder of mankind will not be able to produce goods for their requirements without permission from that minority. No jobs can be performed without access to land. The power to provide or withhold employment remains with those in charge of land. When the owners of land do not require the services of all the landless job-seekers, then some people are left without the opportunity to earn a living. In wealthy countries, those unemployed people may be kept alive in moderate comfort by State payments drawn from taxpayers. In other places they starve.

Land speculation.

Because land is essential for all human activity and the amount is finite, increases in population, developments in technology and expansion of industry lead to a growing demand for land. When people want more cabbages, or computers, agriculture or industry tries to supply the demand by growing more cabbages or manufacturing more computers. When there is an increased demand for land, there is no way of increasing the quantity. In fact increasing demand for land usually reduces the quantity available for use because the hope of higher prices in the future tempts landlords to delay putting unused and under-used land on the market. As land speculation drives prices artificially high, people who want to set up businesses (which, of course, all require land) find it increasingly difficult to do so. So they are unable to offer jobs to unemployed people who want those jobs.

Taxation.

Businesses have to meet production costs. They must pay for buildings, raw materials, machinery and so on. They must pay their workers wages. If they are to stay in business, they must make a profit. But taxes are imposed on goods, on sales, on incomes and so on, while complex administrative procedures involve heavy "compliance costs" which all fall on the business. This means that firms which would make a profit without these tax burdens fails to do so, and go under. Result? More unemployment. And yet there is a need for money to fund essential public services. How can this be done?

Welfare benefits.

The methods used to alleviate the hardship of the unemployed and low paid also contributes to the problem, for the money has to be paid out of taxes, whose ultimate effect is to reduce the available-jobs and cause unemployment-which  in its turn, creates more need for higher taxes.

There is a way of breaking the vicious circle.

The solution.

What is needed is a system which gives everyone a stake in the nation's natural resources, allows everyone to benefit equally from living in an ordered society and secures public revenue without checking production. This can be achieved by replacing current taxes with a tax on the value of land.

A Land Value Tax (LVT) charges for the occupation of a particular plot of land and is assessed on the size and quality of the site. The rate of tax payable is determined both by the natural qualities of the site (for example, fertility) and by the benefits it allows the occupier to draw from the work of his or her fellow citizens (such as ease of access to shops, transport services, public parks, etc.) Buildings, machinery, crops, etc. are excluded from the assessment for LVT because they are the product of the occupier's own work and represent his or her own contribution to society. Nobody would be required to pay more tax for producing more goods or providing extra services. Hard work and efficiency would receive their natural reward.

Businesses operating in the less favoured locations would pay little LVT, and so industry would be encouraged to expand into places which current taxes make unprofitable. Run down areas would be regenerated.

Since L VT would be assessed on the full market value of the land, landowners would be under strong pressure to use their land efficiently in order to afford the tax. Otherwise, they would have to sell. Under-used land would come on to the market for regeneration. Land prices would drop and lower the cost of setting up businesses.

All this increased economic activity would require workers, and would further reduce unemployment. When there are few unemployed, this reduces the cost of unemployment benefit falling on the taxpayer, which means that he will have more money to command goods and services, and therefore pay for workers to provide those goods and services.

The principle behind L VT is simple justice. Everyone has an equal claim to land - the earth itself - and to the advantages of belonging to a civilised society. By collecting from all citizens a sum proportionate to the value of the land they occupy and using the proceeds to fund public services, Land Value Taxation allows everyone to benefit from the productive capacity of all land. It also frees everybody from current taxes which penalise the production of useful goods and the provision of needed services. Unemployment is reduced from a major social evil to a brief "frictional" condition which exists when a person is moving from one job to another.

Further reading

Henry George, Progress and Poverty, and The Condition of Labour

J S Codman, Unemployment and the Revenue Problem (New York 1923)

Frank Geary, Land Tenure and Unemployment (London 1925)

Fred Harison, Boom, bust; house prices, banking and the depressionof 2010. (Shepheard-Walwyn, London, 2005 ISBN-13:978-0-85683 214-3)