LAND, LAND TRUSTS, AND EMPLOYMENT
By Robert Swann
Much of the discussion about land and Community Land Trusts
revolves around obtaining land,
use of land for housing, farming,
homesteading, etc. But seldom do we approach the problem from
the standpoint of what is the key issue
today, and has been for a long time, the issue of employment. When John Maynard Keynes wrote his
book, The General Theory of Interest and Employment, he became famous because the world
saw his theory of financial manipulation by the government as the solution to
the problem of unemployment. This
is not to imply that Keynes was
the only, nor the first, to
advocate such ideas, but to a large extent his name has become associated with
them in academic and governmental circles. Ever since then virtually all the
economists trained in the United States and European universities have
been taught the Theory. It has
become the Bible of the economic establishment. It is true that there have been dissenters, including the
Marxists, but these dissenters
have received little attention within the halls of government "decision
makers" in the Western economies.
At the risk of over-simplification,
Keynes' "monetary" and
"fiscal" policies,
which are the basis of what is often called a "managed economy,"
all add up to trying to stimulate
the economy if it is sluggish or slow it down if it is over-stimulated. The economy is stimulated or cooled off merely by increasing or decreasing
taxes (fiscal policies), or by
printing money to create inflation
or reducing the supply of money if inflation is getting our of hand (monetary
policies). Keynes said: "A
little inflation is a good thing."
By this he meant that, with inflation people are encouraged to spend
more, and spending stimulates the
economy. He did not, of
course, explain that inflation can
lead to disasters, perhaps worse disasters than unemployment. In the same way, reducing taxes is
supposed to give the consumer more
spendable money and therefore stimulate the economy, or vice versa.
WHY ARE
SUCH POLICIES FAILING?
On the face of it, such
theories can be understood by the average person to be artificial and doomed to
failure. Yet they seemed to
"work" for a number of years (since the 1930's). Why? And why are they failing now? In the first place, Keynes was fortunate that his ideas
should have come at the moment in history when not only was the "great
depression" with its
resulting high level of unemployment pressing all Western government, but also when new
technology, particularly communications and transportation technology, was
making it possible to exploit the entire earth's resources at an
ever increasing rate. As the
result of government tight money policies and the near total collapse of the
private banking system in 1921, the money supply (issued through the central
banks - including the Federal
Reserve System in the US) had shrunk to an unprecedented low. There was, then, ample opportunity to
expand the money supply in order to exploit the new technology and earth's
resources. This expansion of the money supply was accomplished through vastly
increased government spending (deficit spending - the unique
"Keynesian" method),
under the New Deal in the US and
its counterpart programs in
Western Europe. Even so,
due to the generally conservative nature of bankers, who have always controlled
the central banks and to a considerable degree the government policy, and who,
even at that time, for the most
part still believed that "real money" consisted solely of gold, it
was difficult to expand the supply rapidly enough to solve unemployment
until World War II removed all of the previous
resistance. Even bankers
must relent before the emotion of patriotism. With the War came full employment as all the old resistance
to simply printing money gave way
to patriotism. (Benjamin Franklin preceded Keynes by more than 150
years by both advocating the printing of
money and printing money on his own presses to pay for the Revolution in
1776, resulting directly in the runaway
inflation of 1778-80.) It
was this pattern of appealing to patriotism, or "national security" as it came to be known, which
permitted every subsequent US administration down to the present to increase
relentlessly the Federal budget
deficits. (Total Federal government deficit is now over
$600 billion dollars representing excess printed, or inflationary, money.) Every time the economy became slack with increasing unemployment, the
cry of "national security"
would go out to justify more spending for defense. Along the way, the
Korean War in the early 1950's, then the Cold War with the Russians and
accompanying missile and satellite production, and finally the Vietnam War
followed this pattern and seemed to
bolster the case for great concern about "national security." (Not until the reign of Richard Nixon did this phrase fall
into disrepute.)
With all this extra spending on "defense" why did not
inflation grow worse during this
period? After all, we cannot eat, clothe, or house ourselves in tanks, guns,
missiles, warships, and airplanes.
Therefore, production of
these strictly military (vs. consumer) goods must place additional inflationary
pressure on the goods that are needed.
They do. But the remarkable
fact about this era, which ran from the mid-1930's to the mid mid-1970's, is that the rapid expansion in use of
new technology (automation, cybernation etc.) resulted in such enormous
increases in productivity that the resulting low cost per unit of production
offset most of the inflationary pressure.
An example is agriculture.
During this period,
efficiency of production in agriculture went up so fast that today one
farmer can produce enough food to feed 58 people vs. only 8-10 in
the 1930's (this is not to say that the quality of the food produced has gone
up). At the same time improvements in transportation (e.g. supertankers) and
other new technology was permitting the Western world to exploit the resources
(particularly low cost oil for energy) of the underdeveloped world
where labor costs were very low relative to US labor costs. (It was not until the 1930's that oil
began to flow in the Middle East.)
These factors prevented a rapid increase in inflation in spite of the
Government's recklessly inflationary policies and war spending spree.
Today the situation has changed and it has become increasingly clear
that high technology is beginning to reach a plateau of development (after all,
"labor saving" can only go so far) and the limits of the world's resources have begun to loom on
the horizon. Thus we have 'Stagflation," where
increasing unemployment and increasing inflation occurring simultaneously - a
condition that has confounded most Keynesians, although Keynes
himself may have foreseen it with his famous statement "For a time we must pretend that
fair is foul and foul is fair."
Whether he meant it this way or not, we have been depleting the world's resources and polluting the environment as the means
with which to maintain the value of the dollar. His devotees have forgotten the first part of the statement
and are puzzled over what to do now since he left no further directions. There is, of course, still a large
portion of the population who are not well fed, well clothed, or well housed,
and direct government subsidies - if
politically possible - to
those groups may continue for a time to prop up the system and stave off
runaway inflation. This is only
relatively true, of course;
government subsidies for real needs are not necessarily as inflationary
as guns and bombs, but bureaucratic red tape can add enormous inflationary
costs. But these subsidies
cannot forever be advanced without
a reduction in the subsidies to
the big corporations in the form
of defense spending. We cannot
much longer have "guns and butter" too.
Moreover, there are a number of vulnerable places in the economic system
which could, at almost any moment, bring about major inflationary pressures
without any offsetting rise in production or unemployment. One of these places is the vulnerability
of the international monetary system to major political or economic changes in
the developing countries. Outstanding private and public debt to
these countries now runs into $200 plus billions; and while it is all legally guaranteed by the government or
the lending nations, even the private portion of this gigantic debt is
generally recognized to be de facto government-guaranteed. Therefore, any internal change (such as
revolution or a collapsing economy) or external change (such as a failure of
the export market or continued increase in the price of oil) could start a domino effect - through a
succession of defaults on the loans - in the world banking industry. This, in turn,
would trigger rapid inflation as the governments of the lending nations
would be forced to step in and save
themselves and their banks by printing money (the US recently did this in the
case of the Franklin National Bank in New York City.)
What has all this to do with land and Community Land Trusts? The combination of land reform and
appropriate technology is the best, if not the only, alternative to the
Keynesian prescription for
unemployment. Virtually all the
great economic thinkers, in my opinion, beginning with Henry George and
including those latter-day economists who were not mesmerized by
Keynes, have agreed on this point.
I include, besides
George: Ralph Borsodi, E. F. Schumacher, Rudolph Steiner (in
his book World Economy), and even Karl Marx who admitted that the industrial
proletariat (the dispossessed at the mercy of capitalists) could never have been created so long as land
was available to all. It is
possible that Keynes knew this also,
but his fear of Communism, with which he was almost obsessed, paved the way for his preaching of economic nonsense (Borsodi refers to him as a
"charlatan"). Moreover,
had Keynes been able to foresee
that his policies would lead to a world dependent on war - or the constant
temptation to go to war and even risk annihilation - it is likely that he might have, at least,
been more emphatic about warning his followers of the consequences of the
General Theory. Not only, in fact,
is war and the threat of instant annihilation at least the partial consequence
of the slavish following of Keynes' dictums but just as importantly, the world
stands before a future in which increasing pollution from industrial wastes is
likely, in the long run, - if not the short run - to eliminate all life on
earth as well. (There is a possibly apocryphal story about Keynes who was
attempting somewhat unsuccessfully, to explain his ideas to
a friend. They were near a hotel and Keynes invited his friend to the men's
room where he proceeded to illustrate by pulling reams of toilet
paper from the holders, all the while exclaiming, "Waste, man waste -
that's the way to keep the system going!")
Such is the price we are paying for accepting an artificial remedy
(inflation and stimulation) for unemployment and ignoring the most important
alternative to the problem of unemployment - land reform. I use the term "land reform"
with some trepidation, because it is often assumed to mean politically-inspired
reform or redistribution by the
state, not taking into account
ecological factors. State
controlled land reform has failed again and again. Many people will point to China as an example of state land
reform that succeeded. I am very
dubious about this assumption, but a proper discussion of the issue would have
to be the subject of another
article. In any case, Western
countries are not China; and I
submit that such methods as were used in China to bring about land reform would
not be acceptable or even possible here in the US or most Western countries.
Land reform
through land trusts is the most important step we could take toward solving the
employment problem. Community Land
Trusts can provide the natural resources which are the basic conditions for all
employment. Let me illustrate with
an example of what could happen in any Northeastern community if all the land
in the community were held in trust.
In the first place, let us say that the entire area might consist of 20,000 acres (about average for a Massachusetts
town). In this area we would
have perhaps 70-80 percent
forested land and the rest open
space devoted to farming or built up in housing, industry, etc. (such a
distribution is typical in New England).
Presently (before going into trust) the forested land is not being used
for lumber except to a limited degree - and only a small portion is used for
firewood - or sometimes for pulpwood for paper production. In general, such forest land is totally
underutilized because of the former pattern of ownership which generally
consists of small parcels (23-300 acres), none of them large enough to justify
sustained-yield forest management.
Moreover, the former owners tended to view the land as an investment, to
be held for future sale at , hopefully, a good capital gain or high speculative
price. Holding the land for a high
speculative price has eliminated the possibility of anyone buying it for forest
management purposes because it would be too expensive at the
"speculation price" per
acre for such purposes - in fact it would also be too expensive for
farming. Thus, the farmers who became too old to farm
have usually sold their farms off to non-farmers - either speculators or people
rich enough to be able to afford
to buy their "piece of this country" without farming. Even when the land was used, the
economic rent went into private hands and did not
tend to accrue to the benefit of
the community, thus the full
impact on employment in the area was minimized.
But now it is held in trust (never mind how it got there - we will
discuss that later). Now it can be put into sustained-yield
management, because the forest
area is large enough (15-16,000 acres) for good management, and no longer is
being held for speculation. What does
this mean in terms of
employment? In the first
place, it means that for every
300-400 acres the project can employ one person full time to clean out and thin
out the trees (dead wood, poor species etc.) so that the remaining trees selected for lumber will grow
rapidly. This employs about 50 or
so persons who probably were not
formerly employed within the community. We will also
need 4-6 full time foresters to manage the forests. Secondly, the weed trees which are cleaned out will go into
one or more of the following
markets: energy (firewood
or wood chips) , pulpwood (paper),
or the newly developing cattle food market.[1]
Since these
markets will in turn
stimulate new local industries,
more new jobs will be
created. In addition, over time,
good lumber will be grown in these forests which will bring a higher
price, require logging operations,
and provide increased employment, as well as put new better quality lumber into
the local market for housing and wood industries.
At the same time, since the farm land has been freed of speculative
demands, it too can go back into production and once again provide employment
for young people anxious to get t
back into farming but frustrated at all points because of the high cost of land. With increased production from forests
and farm land, local taxes assessed
through the trust as the price of leasing the land, will mean that the
town can provide better services, better roads, better schools, etc., without
burdening the older homeowners (taxpayers). These services will also increase employment and improve
everybody's standard of
living. New housing for the
new employees in the forest and farm industries will also bring increased
employment, but because of the trust, this housing can be planned to go on the most suitable land from an
ecological and planning viewpoint
- not simply where land can be purchased - thus saving extra costs of unplanned
development. Moreover, since the
land is not purchased, the cost of the housing can be lower in cost with local
employees receiving first option
on purchase.
Finally,
then, how is this to come about?
Because the people in the town decide for themselves that they will set up the trust and voluntarily
give the land to the trust. After all, they
will be the major beneficiaries when increased employment means that their sons
and daughters can find employment near home and the entire town becomes
revitalized. But if not enough of
them are attracted to this proposition, then there would be other direct
financial benefits derived from the increased productivity of forests and
farmland. These would go directly
to the former landowners and indirectly, through improved town services and
increased local business, to all residents.[2]
One other important
point Rudolph Steiner makes in his World Economy is that not only have we " de-commoditized" the land
(by taking it out of the
speculative market) we have also "decapitalized" the land. That is, no longer is it necessary to draw on the capital
Markets (including local banks) to buy the land. Thus the capital formerly tied up in the land is free to
be used for other kinds of
investment. These may be mortgages on housing, new industries such as solar
energy, farm improvements, etc. Or
they may go into "spiritual" needs such as new kinds of education, or
"spiritual work" which as Steiner points out (and Borsodi agrees) are
really the most economically productive for the future.
There will be those who will sneer at the above as mere
"idealistic" dreams. It
may be so, but it has never been tried.
No such vision has ever been put into before a community, large or small, where the community (it would
require less than a majority to put it into practice) could make the
decision. In any case, it needs to
be tested. As inflation and
unemployment grow, I suspect that many communities will be ready to try new
approaches, particularly when they realize that none of the government programs
are working except in peripheral
ways.
(Swann, 1972)
[1] In those parts of the country where forest land is not available, other sources of "bio-mass"(e.g. rapid growing crops) could substitute for wood as an energy source, providing the land is available at reasonable cost.
[2] Even if the cost of such an undertaking were subsidized by the federal
government, the funds thus
expended would "leverage" far more employment than any other kind of
subsidy. Economists have calculated that for every family who moves into the urban areas , from
rural areas requires about $50-60,000 in local municipal or federal subsidies
in order to cover the increased loan on public services (fire, police, road repair and maintenance, etc) health and welfare, job training,
etc. Only a fraction of this
amount would be required in rural
areas - if land were made
available - to accomplish the same
purposes.