Land Rent - the Genesis of the British Class System
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Land Rent - the Genesis of the British Class System

Written by Mark Braund Wednesday, 13 July 2011

Land rent is one of several sources of unearned wealth that bestow privileges on a minority of citizens while biasing the economy against the interests of the majority.

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In classical economics, each of the three factors of production - land, labour and capital - earns a share of the wealth generated through enterprise: land earns rent, labour earns wages, and capital earns profit.

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There are various determinants of how much each factor earns, but what distinguishes rent from the other two, is that rent just happens. Wages are earned by people who give their labour effort; profits are earned by entrepreneurs who make judicious use of their capital, but rent fall into the laps of landowners without their having to do anything to earn it, besides having their name on the title deed.

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Entrenched Privilege vs. the Jobless Underclass

Land ownership bestows considerable economic power. In Britain today, 70 per cent of the land is owned by just 1 per cent of the population. Most land is owned by a few wealthy individuals and a handful of large corporations. The major beneficiaries of landownership are people who are already rich. The steady rise in the value of their land has nothing to do with effort, ability or merit. Simply put, wealth begets wealth. As well as holding an asset that automatically increases in value, they can charge for the use of their land, and they are able to leverage the means to additional wealth through borrowing, using their land as collateral.

David Ricardo first described how the rightful earnings of labour and capital are appropriated by landowners in his famous law of rent. Much of the wealth that should be paid out in wages to people who work, or as profits to the entrepreneurs who employ them, currently ends up on the balance sheets of landowners who get richer at the expense of the rest of us, especially the poorest, who own no land.

As more wealth becomes locked into land values, less is available for investment and consumption; both key drivers of economic growth. And when land ownership is concentrated in the hands of so few people, the majority are denied viable economic opportunities because they have no land to farm, or can’t afford premises from which to run a business.

Unexamined Assumptions and Injustice

This state of affairs may have existed since humans first conceived of private property in land, ten thousand years ago, but historical precedent doesn’t absolve present injustice. We succeeded in abolishing slavery, women won the right to vote, apartheid was overthrown; so why hasn’t our growing moral awareness led to a reassessment of the entitlements of land ownership?

Justice demands a more equal distribution of land and the benefits of land ownership. Obliging landowners to pay at least a portion of their unearned wealth over to the state via a tax on land values would make a real difference: It would curtail the enjoyment of unearned wealth by the landowning minority; it would provide an alternative stream of public revenue to fund investment in public infrastructure; it would enable a reduction in other, disincentivising, taxes; it would bring about a more equitable distribution of both land and economic opportunities; and it would help create an economy in which everyone receives a fair reward for their work.

Next Week…

I shall look at the pernicious role of speculative investment in promoting a divisive and unjust economy.

Mark Braund

Mark Braund

Mark Braund Is a freelance writer with a specific interest in the prospects for transformative social change towards a more just, inclusive and sustainable society. He also is regular contributor to the Guardian and lives with his family in London

Website: www.markbraund.com

4 comments

  • Comment Link Mark Wadsworth Monday, 18 July 2011 10:19 posted by Mark Wadsworth

    I'd broadly agree with all that, but let's not forget that the 70% of land which 1% of people own is largely farmland, i.e. if there are half a million farmers and agricultural workers (call it 1% of the population) on 50 million acres (80% of surface area) of farmland, so that's 100 acres each. These acres sell for about £5,000 each, so each of them owns £50,000's worth of land.

    People who own a normal house worth £160,000 also own a site worth about £100,000, so assuming normal household is a couple, they also own £50,000's worth of land each.

    It is far more important to look at value, rather than surface area, and as to ownership, indirectly about a third of all land is owned by banks (i.e. because they hold mortgages).

    The chances are that the richest 1% of people own 70% of all land BY VALUE as well (or some such horrific concentration), but this is an important distinction - it's not surface area that matters, it's VALUE.

  • Comment Link Mark Braund Tuesday, 19 July 2011 07:32 posted by Mark Braund

    Of course, you're right Mark. If I'd had more space I'd have mentioned the immense value of the tiny plots of land underneath the towers at Canary Wharf - most of which house banks - or the couple of acres from which The Shard is currently rising.

  • Comment Link Linda McConnell Thursday, 04 August 2011 11:35 posted by Linda McConnell

    In response to Mark Wadsworth's comments -

    Agricultural land on average is valued at much more than £5,000 per acre now (in the UK) and speculative landowners can zone and gain planning permission for their land leveraging large amounts of capital by shoring off small areas of their vast tracts. (In fact a recent land survey by the Government of Scotland indicates that driving the driving land use factor is economic)

    The vast majority of the elite landowners do not have a mortgage on their land as it has been inherited (usually through a trust deed) and in the UK land ownership qualifies for the Single Agricultural Payment and Rural Development Grants and Funding for 'stewarding' the land. All very different from a couple paying back a mortgage costing almost double the amount their modest semi-detached is actually "worth" over a period of half their lives.

  • Comment Link Ron Monday, 19 March 2012 10:44 posted by Ron

    There's no point teaching a man to fish when the fishing rights on every body of water are "owned" by someone a thousand miles away.

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