Georgism is an economic theory that advocates for common ownership of land and natural resources, while still allowing for private property and capitalism. It proposes a land value tax to replace other forms of taxation and has been tried in various countries, including Hong Kong. It appeals to both environmentalists and economists.
Georgism is an economic ideal which holds that common property, such as land and natural resources, should belong to all people. Unlike many forms of communism, however, Georgism still allows for widespread private property and capitalism, the difference being that ownership is only allowed over things created by an individual. Therefore, since the land is within the natural sphere, it could not be used for private gain, although structures built on the land could be leased or otherwise used for private gain.
Georgism was formulated as a comprehensive theory by Henry George, an American economist in the 19th century. Although many others dealt with similar ideas, including John Locke, Adam Smith, William Penn, Thomas Paine and John Stuart Mill, Henry George was the first to lay it out in a full format and agitate for a smooth transition to the Georgism. Some proponents of his theories prefer the term Geoism instead, leaving the prefix ambiguous as to whether it refers to him or to the earth itself.
While a system like Georgism could, in theory, be accomplished by having the state seize all land and charge it rent, Georgism advocates a system where private ownership of land is still permitted. The difference is that rent is levied on that land, in the form of land value tax, giving the government a basic income equal to the annual value of the unimproved land. Improvements, such as buildings, can then still be exploited, maintaining momentum for landlords to build rentals or industry.
Georgism can be argued in two main ways: via economics or via environmentalism. The economic case for Georgism shows that, with sufficient land value tax, governments could abolish all other forms of taxation and obtain sufficient revenue to survive. Georgism is therefore also sometimes known as a single tax, as it removes income, sales and other forms of tax burden. Some leading economists, including Milton Friedman, have been proponents of some of the ideas of Georgism, noting that land taxation does not artificially manipulate the economy in the way that other taxes can, so that a single tax can actually lead to a free improvement market.
Environmentalists also often embrace the ideas of Georgism as it appeals to those who believe that the earth belongs to all in common in some way. Without an incentive to own huge tracts of land to exploit personally, Georgism could lead to better land stewardship. Furthermore, since Georgism includes all other natural resources, such as timber, oil, coal, and fishing, these resources would also become common. In many ways, the implementation of Georgism appears to solve the tragedy of the Commons, where individuals acting for their own benefit end up harming the larger pool of resources.
Georgism has been tried in a number of countries and localities, both historically and in the modern era. One of the most famous regions that has a heavy land value tax is Hong Kong. The island is able to generate over a third of its total revenue simply through land value tax, allowing the government to run large budget surpluses while keeping income and trade taxes fairly low.
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