You hear people saying we need to run our government like a business. Giving up the versatility a government not run like a business is a short-sighted idea, like fielding an NFL team with nothing but offense, or an NBA team with 15 centers, or staffing a business with nothing but CEO’s.
Having said that, there are plenty aspects of business that would be beneficial if our government were to emulate them.
Let’s start with our Rewards Program, as any economic system that rewards those who use their time and energy making positive contributions to the collective is off to a good start. Before the programmed choruses about employers not adequately rewarding employees, and about people dependent on government subsidies distract us, let’s talk about the effect of mis-rewarding, often handsomely, those making little to no or even a net-negative contribution to the collective. More specifically, as this mis-rewarding affects land and housing.
Check out how much vacant lots are selling for in your town. Despite the fact that the seller did not produce the land, our rewards program is likely going to reward the seller, possibly quite handsomely, with unearned income via sales price less inflation-adjusted purchase price, as if he/she did create/produce the land.
But what contribution has the land-seller made? While utilizing a necessity’s leverage to take maximum advantage of supply, demand, and inflation may be a sign of economic shrewdness, it makes no positive contribution to the collective. At best it is merely a zero-sum gain as the monetary gains of the seller are at the expense of the buyer. More realistically, as the seller’s gains on this transaction inflate nearby real estate prices, further necessitating larger and larger mortgages in the area, and further encouraging land profiteering, speculation, and financialization, the reality is that the seller is being rewarded for a net-negative contribution to the collective.
Moving on to landlords, the income and/or equity they gain are in no way commensurate to the time and energy they expend everyday to earn that income and/or equity. Similar to health-insurance agents, they are unnecessary middlemen between people and shelter. Their hoarding land/housing above and beyond their own personal needs increases demand, which inflates housing costs. While they play no part in building nearby transportation infrastructure, bringing jobs to a city, building colleges, funding arts and entertainment districts, or revitalizing downtowns, they do profit from these improvements via increased rents, sales prices, and equity. They then fight to keep supply low in order to keep their profits up (unless of course they are the ones that get to own any new increases in supply.)
Why are we rewarding these people? The Founding Fathers, happy to have escaped feudalism, were adamant that private citizens be able to own their own land. While the new country’s property laws prevented feudalism via the nobility, the crown, the government etc., they paved the way for a new feudalism – feudalism via private citizen – and since then, via corporation. Instead of ending feudalism, it was a reset, a fresh start with new rules that would allow a new, different group of people to have their big day on the landlordian throne.
So here we are a quarter of a millennia later. Allowing private citizens, and now corporations, to hoard land they don’t personally need, in order to collect rent and/or sell the land for profit, has been damaging on many fronts, culminating with the current housing crisis that has spawned record numbers of homeless, economically enslaved those who are renting or manage to buy, and forced many who outright own their housing to relocate as high housing costs in their area have driven general inflation in their area too high for their incomes. It has also taken its toll on businesses who are often paying profit-prohibitive rents as landlords have the leverage to demand larger and larger amounts of business owners’ earnings.
At one time land was cheap enough, even free, that average citizens could own their own land for housing and business purposes with relative ease and without excessive financial burden. Since then many factors have combined to hyperinflate land & housing. The two most powerful, our feudalistic property system and our credit industry, have together created a haven for those wanting to earn money without having to work for it, and a hell for those who do work.
In a system with a fixed money supply, land inflation, in fact overall inflation, is abated naturally. However, such an inflexible system also negates those uses of credit that have an overall positive impact in which the positive impacts of production on the economy and to society thereby created are greater than the negative impact of the inflation thereby created. Had we limited uses of credit to those that enabled production, we would today have a stable economy with much less inflation.
With regards to housing, had we limited land ownership only to an individual’s living and legitimate business needs, and had credit been extended only for the productive use of building structures – not for the non-productive use of purchasing existing homes/land – home resale prices would today closely reflect only the actual condition of structures (purchase price + improvements – depreciation). Housing inflation would have been nearly confined to the natural limits gold-standard advocates speak of, and the speculation and wreckless financialization so rampant today would never have manifest.
At the same time, the positive production that flexible money-supply advocates speak of would have resulted in an ample supply of homes being built. As predicted by market advocates, that supply would have included the sufficient supply of necessity-based, income-appropriate homes that is reprehensibly missing from the market today. In addition, banks would not have been able to make their mortgages indispensable to the average buyer, and their massive, economically enslaving 24/7 mortgage-interest income torrent would never have materialized.
While these limits would not put an end to the NIMBY zoning motivated by racism, classism, and even nostalgia, that motivated by resale speculation and/or rental potential would be substantially undermined.
For some historical context regarding our property laws, Thomas Jefferson sensed the inevitable state our unlimited property laws would one day lead to. As today we all still need shelter, and a place to run a business if we choose to have our own business, his words are just as relevant today as they were in the agrarian society of his time:
“Another means of silently lessening the inequality of property is to exempt all from taxation below a certain point, and to tax the higher portions of property in geometrical progression as they rise. Whenever there is in any country, uncultivated lands and unemployed poor, it is clear that the laws of property have been so far extended as to violate natural right. The earth is given as a common stock for man to labour and live on. If, for the encouragement of industry we allow it to be appropriated, we must take care that other employment be furnished to those excluded from the appropriation. If we do not the fundamental right to labour the earth returns to the unemployed. It is too soon yet in our country to say that every man who cannot find employment but who can find uncultivated land, shall be at liberty to cultivate it, paying a moderate rent. But it is not too soon to provide by every possible means that as few as possible shall be without a little portion of land. The small landholders are the most precious part of a state.”¹
Jefferson’s geometric property tax was an attempt at a rewards system that would not mis-reward those who are taking more than their share, who are making a net-negative contribution to society.
Abraham Lincoln, nearly four score later, saw the seedlings of the problems our so-far-extended property rights had already begun to grow by this time. He realized feudalism via private citizen or corporation was just as evil as feudalism via an unfriendly government. Here he suggests limiting the amount of land an individual can own, which would have stopped the feudalistic, rentier class dead in its tracks:
“The land, the earth, God gave to man for his home, sustenance and support, should never be the possession of any man, corporation, society or unfriendly government, any more than the air or water — if as much. An individual or company, or enterprise, acquiring land should hold no more than is required for their home and sustenance, and never more than they have in actual use in the prudent management of their legitimate business, and this much should not be permitted when it creates an exclusive monopoly. All that is not so used should be held for the free use of every family to make homesteads and to hold them so long as they are so occupied.”²
What a different world we’d be living in today if we had a rewards program in place that adequately and consistently rewarded those who routinely put time and energy into making a net-positive contribution to society, yet stopped rewarding those who make net-negative contributions to society.
Revamping our feudalistic property system in tandem with our non-productive credit system would benefit the economy and society in many ways. The employees and employers in this country producing real goods and providing legitimate services make up the real economy. All unearned income eventually comes from the earned income of employers and employees producing real goods and providing legitimate services. Without them, those who have managed to find unearned income streams would have no one to leech off.
Our economic MO has long been to force employers to pay the higher wages necessary so their employees can then pay the inflated housing costs the landlords, real estate investors, real estate corporations, and mortgage bankers controlling local housing can command in their neverending addiction to unearned income. It’s the employers and employees who are the pawns from which the great transfer of wealth to the asset class is coming from. The asset class’ propaganda branch, the corporate media, successfully distracts the public from this fact with its divide & incite strategy – “conservative” outlets constantly making employees out to be the villain, and “liberal” outlets constantly making employers out to be the villain. TTSO.
If we fix housing by its sordid roots, employers will be able to reinvest in their businesses, boosting production and the economy. Employees will have more cash to spend in their local economies. Employees will be less stressed, which means they will be more productive at work and be less of a burden on our healthcare system. Economic inequality will lessen and societal morale will increase.
And those people amassing wealth via hoarding land/housing will have to find means of investing that have a net-positive impact on the economy, or join the rest of us and actually do work that makes a meaningful contribution to our society.
If we fix housing once and for all by effectively addressing its feudalistic and inflationary non-productive credit roots, we can stop wasting the enormous amounts of time, energy, talent, and money that we are expending vainly attempting to address the symptoms of these roots. No more scheming about, struggling to pass, and possibly enacting renters credits, wage increases, and UBI’s that go (or would go) in and out of recipients’ pockets straight into the pockets of those controlling land/housing. No more of the land/housing inflation that occurs when the government, unable to hide its deep pockets, is forced to buy land and hire contractors at inflated prices to build affordable government housing projects. While these projects get a lucky few into housing, their inflationary affect drives up prices a little more for everyone else still in need of housing.
The short-term, superficial solutions to our housing problems forever floating around, that have proven over and over to be marginally effective at best, are not only the poster boys of housing futility, but they have those controlling land/housing frothing at the mouth over the potential increases to their unearned incomes. To them, these “solutions” are like another boatload of caviar docking at a Roman holiday. They’re the rumble of the wildebeest stampeding toward the river while the alligators lie in wait. They’re the silhouette of the skinny dippers undressing at the water hole’s edge while the leeches lasciviously peer up.
They are the rewards our system gives to those who are making a net-negative contribution to society. And if that isn’t enough, our Rewards Program then rewards them some more via our tax code.
No sane business would do this. If our government is to be run like a business, and its owners are the people – all of the people, as any country claiming to be a democracy would suggest – we should not be rewarding activities that have a net-negative effect on the economy and society, on the employees and employers who are actually making meaningful contributions to society and the economy, nor on the country as a whole.
If we really want to run our government like a business, the first thing on our to-do list is a total revamping of our Rewards Program starting with our feudalistic, nonproductive-credit-driven inflationary, unearned-income enabling, land/housing rewards.
Until then all other “solutions” are feudal.
1. The Founders’ Constitution, Volume 1, edited by Philip B. Kurland and Ralph Lerner (Indianapolis: Liberty Fund, 2001), Chapter 15, Document 32.
2. Robert Browne, Abraham Lincoln and the Men of His Time, Volume 2, (Cincinnati, Jennings & Pye, 1901), 89-90.