Dr Terry Dwyer

Tuesday 2 September 2008

Sixty people gathered last night on Henry George’s birthday to hear the Commemorative Address. The venue was the Conservatory, just across the road from where Henry George himself spoke to a packed house at the Exhibition Centre to a rumoured 10,000 people in 1890

The Athenian historian Thucydides wrote of “the great and the good” but the phrase may connote cynicism or irony. Tonight we honour the memory of a genuinely great and good man. Henry George spoke truth not merely to power but to that more capricious master, the voting public. He always preferred to appeal to men’s reason and their better natures rather than to score easy political victories on the back of some sort of class envy or hostility.

In that spirit, tonight I want to pose some questions concerning equal and inalienable rights to the Earth, to ground, water and air and to ask “When and how should one allow enclosing the commons?”

The avarice of Henry VIII launched the great enclosure movement and saw the common people reduced to landless rural and urban labourers. We are still living with the consequences of that great enclosure and those which succeeded it, such as the engrossing of the lands of the Australia, against which some of the founding fathers of Federation such as Sir Samuel Griffith and Sir John Quick wrote.

But today we are seeing a new enclosure movement. The “great and the good” of the political and business establishment and the wizards of high finance, blessed with the incantations of many priests from the temples of science, are now saying that we have entered a new period of scarcity where we must – for our own survival – consent to an enclosure of the carbon and water commons. Just as we needed to surrender the over-grazed common lands to selective private ownership to secure their better management, so it is now being urged that water and air are limited resources which should be subjected to some form of licensing or rationing – whether by free grant, by auction or by taxation.

Like Henry George, I am not a Malthusian. Henry George declared “It is a well-provisioned ship, this on which we sail through space. If the bread and beef above decks seem to grow scarce, we but open a hatch and there is a new supply, of which before we never dreamed. And very great command over the services of others comes to those who as the hatches are opened are permitted to say, “This is mine!”” (Progress and Poverty Book IV Ch 2 p 221).

Like Henry George, I distrust those who would keep the hatches forever locked or charge us for opening them and I too consider it a blasphemy upon a beneficent Creator to suggest that he sends children into this world to starve. And, like Henry George, I see lurking behind the new enclosure movements to secure rights over carbon and over water, not the invisible helping hand of Adam Smith, but the grasping or mailed fists of monopoly, vested interest or ideology.

As an economist by training, I naturally tend to accept the proposition that whenever any resource becomes scarce, its price should rise to ensure its allocation to the highest and best use. So I want to ask the question of when, how, how much and for how long the commons should be enclosed in the three cases of ground, water and air, assuming – without deciding – such resources do become scarce

As a lawyer, I also want to ask questions about rights. If we have equal rights to something, what happens if one of us wants to use it and the others don’t want it used at all?  Does the majority simply squash the minority?  Or should the majority match what the minority is willing to pay to use the resource?  Is public ownership the same thing as equal ownership?  Should treasuries pay for locking up resources from the revenues they get from releasing resources?  How does a Georgist deal with mandatory conservation?

Let us turn to what Henry George wrote on the question of equal rights to land, by which he meant all natural resources, including air and water. In A Perplexed Philosopher Chapter IV he wrote–
“… Mr. Spencer has dropped the idea of equal rights to land, and taken up in its stead a different idea—that of joint rights to land. That there is a difference may be seen at once.

When men have equal rights to a thing, as for instance, to the rooms and appurtenances of a club of which they are members, each has a right to use all or any part of the thing that no other one of them is using. It is only where there is use or some indication of use by one of the others that even politeness dictates such a phrase as “Allow me!” or “If you please!”

But where men have joint rights to a thing, as for instance, to a sum of money held to their joint credit, then the consent of all the others is required for the use of the thing or of any part of it, by any one of them.

Now, the rights of men to the use of land are not joint rights: they are equal rights.
Were there only one man on earth, he would have a right to the use of the whole earth or any part of the earth.

When there is more than one man on earth, the right to the use of land that any one of them would have, were he alone, is not abrogated: it is only limited. The right of each to the use of land is still a direct, original right, which he holds of himself, and not by the gift or consent of the others; but it has become limited by the similar rights of the others, and is therefore an equal right. His right to use the earth still continues; but it has become, by reason of this limitation, not an absolute right to use any part of the earth, but (1) an absolute right to use any part of the earth as to which his use does not conflict with the equal rights of others (i.e., which no one else wants to use at the same time), and (2) a coequal right to the use of any part of the earth which he and others may want to use at the same time.
It is, thus, only where two or more men want to use the same land at the same time that equal rights to the use of land come in conflict, and the adjustment of society becomes necessary.

Locke was not in error. … Labor can, of course, produce nothing without land; but the right to the use of land is a primary individual right, not springing from society, or depending on the consent of society, either expressed or implied, but inhering in the individual, and resulting from his presence in the world. Men must have rights before they can have equal rights.

Each man has a right to use the world because he is here and wants to use the world. The equality of this right is merely a limitation arising from the presence of others with like rights. Society, in other words, does not grant, and cannot equitably withhold from any individual, the right to the use of land. That right exists before society and independently of society, belonging at birth to each individual, and ceasing only with his death. Society itself has no original right to the use of land. What right it has with regard to the use of land is simply that which is derived from and is necessary to the determination of the rights of the individuals who compose it. That is to say, the function of society with regard to the use of land only begins where individual rights clash, and is to secure equality between these clashing rights of individuals.

What Locke meant … is simply this: That the equal right to life involves the equal right, to the use of natural materials; that, consequently, any one has a right to the use of such natural opportunities as may not be wanted by any one else; and that the result of his labor, so expended, does of right become his individual property against all the world. For, where one man wants to use a natural opportunity that no one else wants to use, he has a right to do so, which springs from and is attested by the fact of his existence. This is an absolute, unlimited right, so long and in so far as no one else wants to use the same natural opportunity. Then, but not till then, it becomes limited by the similar rights of others.

For so long as only one man wants to use a natural opportunity it has no value; but as soon as two or more want to use the same natural opportunity, a value arises. Hence, any question as to the adjustment of equal rights to the use of land occurs only as to valuable land; that is to say, land that has a value irrespective of the value of any improvements in or on it. … As to land that has a value, or, to use the economic phrase in the economic meaning, bears rent, the principle of equal freedom requires only that this value, or economic rent, be turned over to the community.

In this way all members of the community are placed on equal terms with regard to natural opportunities that offer greater advantages than those any one member of the community is free to use, and are consequently sought by more than one of those having equal rights to use the land. And, since the value of land arises from competition and is constantly fixed by competition, the question of who shall use this superior land desired by more than one is virtually decided by competition, which settles clashing individual desires by determining at once both who shall be accorded the use of the superior land, and who will make the most productive use of it.

In this way all, including the user of the superior natural opportunity, obtain their equal shares of the superiority, by the taking of its value for their common uses … This is the single-tax system.”

The Lockean proviso to which Henry George refers was John Locke’s argument that any man had the right to take whatever he wanted from the land to use so long as he left “enough and as good” for others.

Interestingly, John Locke’s argument reflects the English law on riparian rights to water whereby every landholder adjoining a river can take as much water as he likes provided that he does not unduly disturb the flow of the river going to others.

Neither John Locke nor Henry George makes the exercise of this natural right of the individual to use land subject to the consent of any sovereign or majority. The sovereign or the majority may regulate access to land where there are competing would-be users, but neither has the right to forbid the use of land where “enough and as good” would be left for others. Nor may they prohibit the use of land by him who is willing to compensate his fellows.

The idea of equal rights to use the Earth raises many interesting questions.

Are these rights inalienable? Can I sell my right to draw water, air or stand on land and make myself a slave to him who would provide me with these things and more besides?

Can 99% of the voters veto the use of a river by a farmer where the flow is hardly affected?

And where the flow is affected, but the farmer offers to pay for the privilege of drawing water from the river, should those 99% of voters be able to veto his right to use natural resources without matching any bid he makes to use the river?

Can a majority of this generation lock up natural resources from development by anyone on the argument that “enough and as good” would not be left for future generations?

Can a fundamentalist ecologist say nothing should ever be developed by anyone since, by definition, future generations will never see Melbourne, Sydney, Rome or London as they were in BC 753 and therefore “enough and as good” has not been left for those future others?

Or does the Earth belong to the living – neither to the dead nor the unborn nor the unconceived – and one’s right to use the Earth only arises once one is in being?

What if we have two competing would-be users of land – a farmer who wants to develop land as a farm and another who wants to keep it as forest?

Does it matter that the one who wants to keep it as forest wants to keep it for public use?

If there is such a contest should it be resolved by letting the land to the highest bidder?

Should the majority, if operating through the Government, be forced to bid against a private individual if the land is Crown land?

If not, what is to stop the majority, through Crown ownership, blocking all use of land, even where the Lockean proviso is satisfied?

If the majority do bid through the Government, should they be allowed to use public funds to do so where those funds are raised from the whole community including those who are content to accept the farmer’s bid for the land?

Should any bidding for land be regularly revisited from time to time, bearing in mind that an exhausted farm may be better returned to forest or a forest preserve may be better turned to housing in 100 years time?

Can a Government right of veto as to land use be squared with the idea of a direct original right in the individual? Can I do what I like with land if I am willing to pay the going rate for it? What if I want to build a nuclear waste dump?

On the other hand, should others demand a rental bond or indemnity for the damage such a use of land may cause?

How should we charge land rent for depletable resources?

How do we apply the idea of equal rights to common lands where there is excess demand taking, for example, the cases of crowded beaches, parks, highways or footpaths?

Should we impose congestion charges on surfers, picnickers, motorists or pedestrians? Who is to set these charges? And who is to receive them?

Or should we let congestion act as its own deterrent to over-use of common lands?

Let me throw in some more confronting questions.

If I have a right to do something, like breathe air while trapped in a coal mine even though it means less for all of us trapped down below, can anyone stop me?  By analogy then, even if the global warming thesis is true, if I am on this planet by the grace of God, who is to tell me I cannot breathe the air or make a fire to stay warm?

What if three carbon emitters say – “We, as much as you, have an equal right to use the resources of the Earth, we will put in one collective bid to burn all we like. If you, the rest, want to stop us, you should bid against us instead of trying to veto our right to do as we please with our inheritance – it is as much ours as yours. Fair enough, we recognize that by burning so much we may be encroaching on the amenity of the commons but if the rest of you aren’t willing to put a value on limiting our rights why should you be able to do so? Words and rhetoric are cheap and it is unfair to us that we should be prevented from using a resource just because you don’t like it. Put up or shut up. Let’s have an auction. We start the bidding at $1”

In throwing up such questions, I do not want to presume on the answers but to highlight the importance of getting both the questions and answers right. If we can define the problem correctly often we can often see the solution.

Let us now look at enclosing land.

The argument for allowing the enclosure of the ground is that it leads to better and more efficient management which is in everyone’s interest. No one would build a skyscraper if he could not guarantee his tenants quiet enjoyment of the premises.

Henry George’s solution was elegant and simple. You may enjoy exclusive tenure provided you compensate your excluded fellows by paying rent to a common fund. This solution is much the same adopted by the executors of a deceased estate where one beneficiary is allowed to occupy the family home upon paying a market rent to the estate for the equal benefit of all beneficiaries, including himself.
But we cannot allow the enclosure of all land. To allow all land to be enclosed as private property in the sense that private landholders can exclude the rest of the population would mean that civil society ceased to exist.

We cannot and should not allow the enclosure of public roads and foot paths willy-nilly. Nor has it ever been done. If it had been done, we would all long since have starved as prisoners in our own lots. No business could operate if it had to negotiate a way through 300 plots to get its goods to the ports. It was for that reason that in America and England, railroads were given rights of eminent domain to resume some private lands to ensure that more lands were served in the public interest.

There is a natural limit to the extent to which enclosure of the ground should be allowed. Privately held land requires the existence of common use land, just as a home unit requires the existence of common use facilities such as stairs, lifts and water pipes.

When we see persistent congestion of roads, economists tend to leap to a solution of congestion charging (which is justified on the grounds of pricing according to short run marginal cost). However, is it possible that congestion problems are at least partly due to an excess private enclosing of common land?

To see this, suppose the Victorian Treasury were to grab some easy money by selling off streets so that Melbourne’s streets were all reduced to one or two lanes. The city would face far greater peak hour congestion. But if the present congestion is intolerable, is it not perhaps a sign that the right of eminent domain should have been used to restore land to common use by resuming private lands to build better expressways?

Alienation once does not found a perpetual right to keep land alienated from the commons. Land should be returned to the commons when there is not enough left. Curiously, this is recognized by urban planning practices which require a return of land to open space when developers want to demolish old buildings and replace them with higher ones.

True, where congestion on highways becomes persistent, congestion charges like peak time tolls should be applied if they can be applied without undue administrative costs. But this should not be regarded as a permanent solution. Congestion revenues should be spent on resuming privately-held land and building better transport facilities to reduce the congestion. Congestion rents, like other super-normal profits, are a sign that supplies should be expanded.

Nor can congestion charges cannot be legitimately imposed where there is no congestion. For example, if a local council imposes parking meter charges at times when car parks or streets are half empty, that is a violation of the principle that price should equal short run marginal cost. It also violates Henry George’s idea of a “direct, original right” to use space no one else wants. Perhaps this explains why motorists become angry when they receive a parking ticket in a half empty car park on a Saturday or Sunday!

Water and Air

These days we see arguments for charging resource rents for water and air. Personally, I see merit in such arguments provided –

    • the resource in question is truly limited;
    • the resource cannot be augmented and the charge is based on free, open and fair competition, not bureaucratic fiat.

But we should remember that, in contrast to sites (which are spatially fixed), water and air are flowing resources which can move or be moved from place to place and which can be recycled by both Nature and Man. So scarcity may not be a permanent issue. Water and air may be captured from Nature or produced as goods. One can drink clean water from a mountain stream or have it produced by a desalination plant. Water can come to Melbourne from Gippsland, from Tasmania or from the Murray-Darling Basin. Air quality may be degraded – or improved – by Man.

Without water or air we die. We take our right to breathe and emit carbon dioxide for granted, as we used to take for granted our right to catch water on our land.

Access to clean water is often seen as a basic human right. The delivery of water is important enough to be mentioned in the Constitution Act of this State.

But what if there is not enough water? Alfred Deakin tried to solve this problem by vesting water in the Crown and allocating irrigation licences. But what if the Crown, having taken away the public’s general right of access to flowing water, gives water licences for a low price to some large users and imposes high charges on large numbers of small household users? You will see I am describing how Australian States have punished small urban users while enriching some very large water users by giving away cheap or free licences to large amounts of water.

How does this square with Henry George’s philosophy? Is it right that a majority can make our common birthright the plaything of patronage for politicians buying rural or urban votes? Is this the way a common resource should be enclosed or are we seeing a repeat of the landgrabs of the squatters?

What would that great Victorian and Father of Federation Sir John Quick say about this, having deplored in the 1880s the heedless alienation of the Crown lands of this State?

If water in excess of that required to satisfy the subsistence needs of the community is to be tradable it would seem only fair, in terms of equal rights, that the Crown should offer it to all by free and open auction.

Where is the justice or equality or economic efficiency in imposing different prices for water on town and rural users in the same location? It is hard to see equal rights where some urban users in the Murray-Darling Basin are paying 30 to 40 times more than holders of rural irrigation licences. I am not, of course, suggesting that rural users enjoying intermittent supplies of untreated irrigation water should pay the same for as town users may pay for a permanent supply of treated clean water. I am saying that they should pay the same for raw water of the same security.

Further, if there is to be a free and fair auction, shouldn’t those who want excess water to be withheld from human use bid for it against those who want to use it? In other words, should a majority or minority of pressure groups or voters be allowed to prevent the use of a natural resource by their fellows without having to put their money where their mouths are? In other words, should environmental water flows be paid for if some people want them?

Let us apply Henry George’s doctrine of equal rights to the Murray-Darling.

Consider a householder in Canberra near the head of the river system, a farmer in the Murrumbidgee Irrigation Area and a retiree living at the river flats near the Murray Mouth. Each wants water; each has an equal right to water.

The view of Governments and the law, once riparian rights were abolished, is that the Crown owns the water and none of these people may have it except as the Government pleases. Hence if the Canberra householder is charged 50 cents per kilolitre, the MIA irrigator pays 20 cents per kilolitres and the retiree pays nothing because the water comes past as an environmental flow, that is all fine. No one should complain since you are lucky to get any water at all.

Henry George suggests a radically different approach. First, neither the Government nor the irrigators with their licences should be seen as “owning” the river. If there are competing uses and one person’s equal rights must be limited by other people’s equal rights: we should all be treated equally.

That suggests that all claims to use water must be thrown into the pot, including claims to use it for environmental purposes. Ignoring for a moment transmission losses, this means that the householder, the irrigator and the retiree should be charged the same for raw water of the same quality. In the case of the retiree, if he is enjoying the flow in the river by virtue of environmental flows, the government which wants those environmental flows should pay the same price as other users.

This sounds a bit odd – the Government paying itself to use water it owns anyway?

But if you think of the river as being claimed by all users, each must contribute to a common user fund to compensate those whose equal rights are being abridged. From the Henry George point of view, the Government does not own the river – it has no more right to it than you or I.

For practical purposes, such a common fund should not be a central treasury fund but a fund for would-be river users (including the cities of Adelaide and Melbourne which, though outside the Basin are tapping water from it). So the Government would not be exactly paying itself.

The discipline of having to weigh environmental flow uses (desired by many) against other uses (also desired by many), prevents a system where political fiat can abridge equal rights without any compensation.

For example, in the ACT, the residents of Canberra have been limited by a stroke of the pen to less than 5% of their available water resources and the rest earmarked for environmental flows. It seems to me Henry George would take a dim view of a social arrangement where the equal rights of some can be abridged by fiat to favour water uses desired by others without any form of compensation.

Curiously enough, the idea of paying for environmental flows is one which commends itself to an economist because it makes explicit the nature of the social choices and the benefits and costs involved. However, the Henry George solution is not for the Government to pay the farmers for their water rights – as if they were the only ones with rights to water – but to make all of us bid on equal terms.

I suspect that Henry George would then go on to say that if these payments are large it indicates a great value in use for water and that perhaps these payments into a water fund should be used to build more dams, improve aqueducts etc so that more water can be stored in years of plenty and less lost in years of drought. In other words, maybe we do not need permanent enclosure of the water commons but only in periods of scarcity and if we use the money from that period well we may reduce the need for and the extent of charging. We may end up with more water for all uses, including environmental flows.

Scarcity rents
This brings us to basic questions about the nature of scarcity rents.

The objective of economic progress is to eliminate scarcity. Economics is about creating wealth so that we can have more of what we want more cheaply. Economic progress should drive the price of all material wants ever lower, just as computers have fallen in price.

What then should our attitude be to scarcity rents for water, air or land? Should we rejoice that they exist and try to appropriate them for the public purse? Or should we try to eliminate them?
Some scarcity rents cannot be eliminated. Though skyscrapers can increase lettable space they cannot overcome the fact that space on earth is essentially finite. Yet skyscrapers do work to reduce the scarcity of usable office space. What they cannot do is expand ground space.

But with reproducible or recyclable things which carry rents such as scarce water, it is conceivable that investment in storage, aquifer management or desalination can reduce or eliminate scarcity rents.
The attitude of Henry George would be to delight in the reduction of such scarcity rents for natural resources, just as he would rejoice in the opening up of the American prairies reducing the cost of wheat in Britain, reducing British land rents and improving the lives of working people.

The fact that scarcity rents in reproducible or recyclable resources such as water may be reduced or removed does not mean the Georgist state runs out of public rental revenue – far from it.

The cheapness of other natural resources increases the productivity of sites and increases ground rents.
There is no need to put arbitrary prices on air or water and call those prices rents to fund a Georgist state. It is enough that, if there is a scarcity, the going market rate be collected on those resources for public revenue.

Tonight, I have asked a few questions. I have tried to provoke thought rather than impose dogma. I do not know all the answers or even whether the questions are well framed.

But I hope that fact that we all may find such questions and their answers not only interesting but of great social importance will be seen as a fitting tribute to the man who so clearly placed the question of rights to the natural resources of the Earth at the heart of all economic reasoning and all discourse in social philosophy.

I therefore ask you to charge your glasses. I invite you to stand and drink to a great and generous man who is with us yet. I give you a toast to Henry George.