A Modern Resolution to The Enclosure of The Commons

An introduction to Geoism (which can be applied to any resource possessing natural scarcity)

There is an underlying inequality that goes unrecognised in modern free-market capitalism, however its source is not regarding free markets, but the establishment of private property. The problem can be understood as follows: Imagine that you have an area of land that a group of people are occupying as a commons. Before the establishment of private property everyone has equal access to the land and therefore it can be said that they have equal equity in the land. Now imagine that the government intervenes and decides to privatise a part of that land. By virtue of doing so the government has given exclusive occupancy rights to a single holder, and taken away the occupancy rights of every other person without giving them fair compensation (commonly known as the enclosure of the commons). An underlying inequality has therefore been created by government intervention and the disenfranchised masses should be compensated for their lost equity from the property that they were formerly able to occupy freely, but no longer can. A simple solution to this problem does, however, exist; if the value of the private parcel of land can be evaluated and the market rate of return is known, then the private parcel of land should be taxed annually or monthly at the market rate of return (the rental value of the property) and the proceeds of this tax should be divided amongst everyone else who can no longer use the land as compensation for lost accessibility. The implications of this model are far reaching. Surprisingly, even if it [ applied to all resources of natural scarcity ] were used as a substitute for all other taxes, it would create a more equal distribution of income than most modern nation-states currently exhibit, and generate a higher economic growth rate not a lower one. The discovery of this underlying inequality is not entirely new, but was rather first recognised by the late economist Henry George who wrote a book in 1879 called Progress and Poverty.

One of the major implications of this model of “taxation” is that by virtue of offering a mechanism for redistributing income in the form of a residual income it offers the possibility of implementing a fully market-based approach for determining spending for items such as health-care, education, and pensions in place of existing centralised government decisions and offers the option for expenses to be voted on whether to be public or private and for the remaining income to be given directly to the people. For example, if a person were sick, disabled, in need of funds for education, or retired and requiring additional income, they could simply choose to occupy land with a lower than average market value, and would receive a residual income from the other property-owners as compensation for using less than their share of property. I would like to point out that a person occupying a property of average value pays no net tax under this model. It should also be noted at this time that such a tax would not be applied to all private property, but only those resources that occur naturally, and not the portion of the value of goods that have been appreciated due to labour activity or value-added processes. The rational being applied here is that since no person is responsible for creating natural resources, no person or group of people should have an exclusive claim to them, but rather equal equity should be assumed.  Labour, on the other hand, is created at the discretion of individuals and is considered the produce of their efforts or capacity and therefore should not be taxed. I additionally recommend that the residual income created from the payment of private property externalities be protected to deter predatory lending that has become replete. It is recognised that for the purposes of utility and practicality private property does need to be allocated, but should only exist with proper resolution of the aforementioned inequality. Ironically enough, if the government does only this it can potentially enhance the economy by creating a framework that facilitates fair exchanges. Given that the government has a monopoly on the use of force, the underlying inequality should be considered an externality of government intervention.

Contrasting this with the current policies of most developed economies, current fiscal policy unduly taxes labour (through income tax) while ignoring the inequalities created by the creation of private property entitlements. This results in the artificial depression of labour rates while temporarily raising return on capital. Seen from the perspective of demographics it keeps the relatively small portion of people who derive the majority of their income from the ownership of capital artificially higher, while keeping the wages of the majority of people who work for their income artificially lower- a scenario which is both inequitable and falls short of its meritocratic claims. It is also absolutely true that the modern welfare state emerged from the system’s inability to pay the externalities of its own enclosure, and had it even cleared its own bill, we would need it to do far less.

To summarise, governments are responsible for creating the single largest cause of inequality, by virtue of not correcting the externality of their intervention in creating private property rights and attempt to remedy the economic inequality that results from this by unduly taxing labour, which is little more than a cosmetic remedy for a deep underlying problem, and artificially depresses labour rates and artificially [and only temporarily] raises return on capital. If left unchecked it will result in an ever-growing disparity between the rich and the poor, of which there is already great empirical evidence for. Finally, the most promising thing that this system offers is a stronger pressure towards automation and a society where the machines work for the living instead of the living working for the machine.

The only thing that the system ever had to do was pay its own externalities – the alternative is for it to be the author of inequality while claiming to be a corrector of it, and yet this insight can lead to its sound resolution.

Rough numbers on how much the Residual Income  would be in America

[ Resulting from Applying Geoism to Oil Globally ]

1-time payout:

$1,739 Trillion in oil [2014] / 7.53 Billion people = $230,942.89/person 
( less cost of extraction & refinement but not shipping ).

At 53 years of known energy reserves @ current rate of consumption and cost ($33T/annum) that means that global known energy reserves are worth $1,739 T. That’s 7x more than the CIA appraisal of the total declared economy with the value of energy alone. There is a lot more wealth than reported!

BP Says The World Only Has 53 Years Of Oil Left, Should You Panic? [2014]

With consideration for Future Generations:

If a 1-time payout were made on Oil it would leave this generation with an advantage over future generations. I therefore advise that the newly nationalised wealth be used to purchase a perpetuity. In order to do this we must convert an asset into an income stream and so will apply the market PE (Price/Earnings) assuming a PE ratio of 20-25 (22.5 being the average) to create a residual wage that will pay future generations. A price-earnings ratio can be likened to the ratio between the value of a chicken to a farmer vs. the cost of their eggs.

from above: $230,942.89/person [price ] / 22.5 [ Current Market PE ratio ]
= $10,264.13 / person / annum [ residual earnings / year ]

I strongly advise this option as it will offer more promise to future generations. Also as world population rises the residual income / person from this stream will fall (inversely proportional to expansion of population).

See Also: Barrel Breakdown –

[ Resulting from nationalising The Federal Reserve ]

US total debt $73T [2019] @ 4% interest/annum (the long-term interest rate when America was free [before the Federal Reserve Act of 1913]) = $8,984.62

$8,984.62 /person / year from nationalisation of the Fed

“I am a most unhappy man. I have unwittingly ruined my country. A great industrial nation is controlled by its system of credit. Our system of credit is concentrated. The growth of the nation, therefore, and all our activities are in the hands of a few men. We have come to be one of the worst ruled, one of the most completely controlled and dominated governments in the civilised world. No longer a government by free opinion, no longer a government by conviction and the vote of the majority, but a government by the opinion and duress of a small group of dominant men.”
~ Woodrow Wilson
(1856-1924) 28th US President
Attributed. In reference to signing the Federal Reserve Act in 1913.

[ From Applying Geoism to land private property entitlements: ]

The total value of the land that makes up the contiguous United States was $23 trillion dollars in 2009, according to new data [PDF] released by the United States Bureau of Economic Analysis (BEA). That amounts to roughly 160 percent of U.S. Gross Domestic Product for that year, which stood at $14.5 trillion:

$23,000,000,000,000.00 US land valuev ($23T)
325,000,000 (US Population)
$707,692.31 raw land  value/ person

@4% (market rate of return in America during years of Freedom [ before Fed Reserve act of 1913]) = $2,830.40/person/annum
@2.5% (market rate of return under the Fed) = $1,769/person/annum

In America it would result in a residual income of $1,769.19/year /person:

The market rate of return is about 2.5% in America, so it’s actually 2.5% x the Total Land Value. Taxing all resources of natural scarcity (Geoism) at the market rate of return is the exact equation necessary to prevent monopolisation. If this was practised historically land values would have been lower (property would be more affordable) but since it was not mortgages are now larger than they should be.

I believe if property started to be taxed at the market rate of return then the market will no longer result in one winner (like a game of monopoly), which would be beneficial. If we started taxing property this way the market rate of return would lower, labour rates would go up, then the markets would fluctuate and stabilise at the correct rate and the result would be a greater degree of automation with the machines working for the people instead of people working for a system which disenfranchises them. I am concerned that this would be highly disruptive, so maybe it would be better to try on native land or somewhere that doesn’t have a system yet so that the new system can be developed?

[ I invite you to do the math on applying Geoism to other sectors like wireless spectra, airspace,  other natural resources to complete the process of de-enclosure. ]

[ Additionally I advise that an externalities market be established to compensate for health-loss due to pollution, wireless communications, etc. ]

Read more at Facebook Effective Geoism Page & GeoLibertarianism Facebook Page

GeoLiberty.org

Facebook Comments:

Dan Sullivan That data is useful for attracting Basic Income advocates, which is certainly worthwhile. Those numbers would change if we began collecting land rent, but cheaper land is as big a benefit as the basic income itself.

Douglas McLain I’d like to see a global tax on all natural resources, not just land. For example, the Alaska Permanent Fund Tax on oil pumping. Also James Hansen wants a global tax on carbon emissions as a way to help avoid global warming. Distribute the money to everyone as an Earth Citizens Dividend. How much could the ECD be?https://youtu.be/PWq4TTI_DNw

Nelson Guedes I think this topic [ Federal Reserve ] is actually fairly important for the LVT discussion, considering that the private banking system facilitates the inflation of land cost by lending more and more money for mortgages.