In The Land Trap, Mike Bird of The Economist has given us something a little unexpected. It’s a history of land ownership and its consequences that spans several centuries and multiple continents.
Sure, readers encounter some trendy topics from the worlds of real estate and housing policy — bubbles, crashes, the failure of modern big cities to build enough homes. But this material takes up relatively few pages. Far more time is spent on historical episodes that most readers will be unfamiliar with, which makes the book far more interesting and informative, if somewhat less relevant to hot-button policy debates, than might easily have been the case.
In its earliest chapters, The Land Trap introduces some basic concepts and a main character of sorts. Land, Bird explains, is a unique asset in a few key ways. It’s rarely created where it doesn’t already exist, and it doesn’t deteriorate over time. If demand rises for land in a certain area, you can’t just import some from elsewhere; instead, a bidding war simply drives the price up, and the families and businesses lucky enough to own the land reap the windfall. Those unlucky enough to live in depopulating areas or to buy into bubbles, by contrast, can see this key asset wither in value.
Despite the risks, land’s resilience and immovability make it a good form of collateral against a loan — a fact that early Americans proved eager to exploit. Back home in stuffy, aristocratic Britain, it was seen as an offense against one’s heirs to put land at risk, and it was difficult for lenders to seize land when loans went unpaid. Absent this taboo, land can be used to finance businesses and fuel economic growth. But as a result, land ends up serving a key role in many countries’ financial systems, putting entire economies at the mercy of a market prone to irrational behavior.
The closest thing The Land Trap has to a protagonist would be Henry George, a 19th-century American journalist and intellectual whose name recurs frequently. Readers may have heard of the “Georgist” philosophy or its idea of a “Single Tax” falling on land values and nothing else. But Bird fleshes out the context in which this concept arose, the wide following George cultivated, and the gradual petering out of anti-landowner sentiment.
George published his signature work, the book Progress and Poverty, in 1879. The big idea was that as technology progressed, cities grew, and infrastructure improved, the value of land in developing places surged. The land’s owners benefited through no merit of their own — and raised rents on everyone else, effectively stealing the fruits of progress from those who’d actually worked to build it. Meanwhile, speculators were buying land without bothering to put it to productive use at all and were driving one financial crisis after another.
The solution? Tax land, but not improvements to the land, at 100% of its rental value. This would entirely fund the government, end speculation, and force landlords to do more than sit on land and enjoy the rewards. It would also reflect a belief that all had, in George’s words, “an equal right to the use of all that nature so impartially offers.”
The concept of a land tax was hardly novel, having been discussed by such high-profile thinkers as Adam Smith and John Stuart Mill. But George took the idea to radical new heights and delivered it to the broader public in confident, righteous prose.
George found a receptive audience among Irish immigrants in New York, whose home country was experiencing protests over the rents charged to farmers. He ultimately traveled to Ireland to make his case there, being arrested for his activism and winning the attention of the media back home. Then the book really started to take off, sparking pushback, a groundswell of support, and even two runs for New York mayor (he lost with about a third of the vote in 1886 and tried again, but died before the vote in 1897).
Bird calls Progress and Poverty “quite possibly the most influential piece of political writing of an entire century,” likely with sales in the millions. A National Single Tax League popped up in 1890. Georgists gained traction in the Democratic Party and were elected to positions throughout the country, including the mayoralties of Cleveland and Detroit. Experiments with land-value taxes took place across the world. The board game Monopoly was originally designed to represent Georgist ideas.
The Single Tax still comes up in newspaper op-eds once in a while, and countless governments today levy property taxes that fall largely on land values, of course. But as Bird documents, full-on Georgism peaked around the time of World War I. It lost its appeal as homeownership became the norm, and as soak-the-rich leftists drifted toward socialism and communism, which, as Bird notes, “saw no specific and crucial role for land in their explanation of the world’s ills.”
Meanwhile, a lot of the world remained heavily rural, and after World War II, major powers relinquished numerous former colonies. “This,” Bird writes, “was the era of land reform, a series of ambitious attempts to reshape the ownership, distribution and use of agricultural land in the newly independent nations of the world.” The results varied.
Bird presents this era largely through the work of Wolf Ladejinsky, an American agricultural economist, born in Tsarist Russia, who advised governments on land reform. Ladejinsky believed that emerging countries needed to deal with their land-distribution issues capably — and aggressively, when the existing distribution was exceedingly unequal and obviously unfair — to reduce the appeal of communism and prevent violence. Fighting communism by expropriating rich people’s undeserved land is a heck of a concept, but it has a certain logic to it when the status quo land distribution is indefensible.
In occupied Japan, the government capped the amount of land an owner could have, compensated the dispossessed owners with government bonds, and turned the confiscated land over to its tenants. This dramatically increased the share of farmers working on land they owned rather than paying rent, and gave them stronger incentives to be productive.
But reform is harder when not backed by a victorious occupying force in the wake of a brutal war, and landowners are often a powerful group. Efforts to transfer land in India were riddled with loopholes. In mid-1950s South Vietnam, where communists from the North threatened to use land to lure peasants to the cause, Ladejinsky made the case for aggressive land reform, but the government opted for half-measures. (It tried again in 1969, in the midst of losing a war, with America agreeing to help compensate landowners.)
Eventually, this era, too, faded, as a revolution in agricultural productivity made this kind of land less of a priority.
In discussing modern times, Bird turns to a series of case studies. One, a welcome break from more serious subjects, focuses on the role of land in the business model of McDonald’s, which owns much of the property on which the restaurants are built and thus can charge rent to its franchise owners.
Another standout chapter focuses on the successful-but-bizarre case of Singapore, where the government owns most of the homes but sells rights to use them for 99 years, rights which can in turn be transferred to others. That might sound like some commie nonsense to the typical American — and the government acquired much of the land under a 1966 law using what is basically eminent domain on steroids. But the system has its upsides. About 90% of Singaporean households “own” their homes, at least in a limited sense, rather than renting them. Further, housing is incredibly cheap and available for such a dense place because the government is willing to build upward and even to create new land entirely by filling in the sea.
Bird also, of course, covers those expected topics — the real estate bubbles that have wreaked havoc on modern economies from Japan to the United States to China, as well as the unaffordability of modern big cities. Indeed, the “land trap” of the book’s title is the situation in which modern rich governments find themselves, thanks to these twin threats.
In Bird’s words: “When prices rise, prolonged credit booms follow, giving greater and greater resources to landowners and depriving resources from those who own little of the world’s oldest asset. But when prices fall, the sudden evaporation of credit can be worse than painful — it can be catastrophic, leading not just to a financial crisis but years, even decades, of seemingly irreversible economic stagnation.”
This is not a book focused on policy solutions and won’t get us out of the conundrum. But Bird has given us deep, welcome context for our current debates. The land trap might not be a good place in which to find oneself. But it seems a much milder problem than the ones Henry George and Wolf Ladejinsky confronted in centuries past.
Robert VerBruggen is a fellow at the Manhattan Institute.
