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Who is a land speculator? Is it some one who buys land in the hope of subsequently selling it at a profit? Does it include also any one who inherited some land and holds on in the hope that its price will increase? Does it include the developer who buys land well in advance of it being ready and holds it with the intention of subsequently developing it in more advantageous circumstances? Does it include the ordinary homeowner who thinks that increasing property values will help him to escape from an impoverished old age?

With land as expensive as it presently is, both urban and rural properties sell for more than can be justified on the basis of present rental values. In these circumstances, any one who chooses to own rather than to rent has no choice but to make a conscious or subconscious decision regarding the future of land prices; to compare this investment with whatever alternatives he can see. This decision makes him partly a speculator. A speculator is any one who attempts to position himself to make the best of the future, literally one who looks ahead.

Is Survival a Sin?

Speculation is done for survival. Is survival or attempting to survive a sin? People will say that surviving by hurting others is a sin. I agree. Then the question is whether land speculation actually hurts people and whether the speculator is at fault or is merely an inevitable and passive link in the chain of harm. Let's see.

There is little doubt that much land remains unused and underutilized for various reasons. If such land were made more available to those who would like to use it, then there would be more employment and a higher level of wealth generally. But are the speculators to blame? Much utilization is simply carelessness or indifference. For instance, some persons own a summer cottage which they use for only three weeks a year and they do not bother to rent it out for the rest of the year. Or an old person stays alone in the outgrown family home because the apartment situation is so hopeless.

Much of the under-utilized land does not even belong to private persons or companies. In every city throughout North America there is government land which is the most under-utilized of all. Don't blame the speculators for that.

Let's look at the speculator realisticially. Even if his land taxes are nil, the property that he owns and is watching appreciate has a present value which represents an opportunity cost. Even though it may increase some more in the future, if he can get a good price for it now, or develop it himself, then he is acquiring an income. It is quite possible that the tax rules distort this choice of whether to develop or to wait, but this is the fault of the tax system and no of the speculator. He is simply making the best decision he can in a hostile tax environment.

Toronto, where I work, has all kinds of taxes against development and taxes against upgrading of properties. On main streets all over the city there are vacant and uninhabitable upstairs apartments over stores at the same time that there is an acute shortage of rental units. Meanwhile the established apartment builders who used to put up tens of thousands of apartments each year have switched to other activities to escape the binds of rent controls and existing apartments are falling into the hands of the most unscrupulous operators, the only ones who can survive the rent controls which gradually destroy capital. It is the do-gooders, not the speculators who are responsible for this mess.

Boom and Bust

We must also note the pernicious effects of the boom/bust real estate cycles. Five years ago many Georgists talked as if land prices were heading for the moon and seemed to imply that land speculators were not really speculating, they were simply sitting back to rake in all the increment over a bare existence earned by the world's working people. Have they forgotten the thirties, when even many of the wealthier landowners were penniless? Henry George was wrong when he wrote that land rent takes up all of the increment in wealth over bare sustenance. Over a long period of time rent takes up a constant portion of total wealth. This alone is enough to make land a most unusual long term investment.

Supposing that over a period of years inflation causes a doubling of prices generally and increased production results in a doubling of the physical quantity of wealth. Then the total value of the wealth in dollar terms is quadrupled and the land rent will also be quadrupled. But this is still a constant proportion of the total income of society, not an increasing proportion.

The permanence of land, and its gradually increasing value, means that landowners get a capital gain in addition to the utilization value of their land. This gain is factored into the price of the land in such a way that any one buying land at current prices can expect about the same total return as in other investments. However this comparison gets complicated by the matter of interest rates and the business cycle.

When the cycle is advancing, people see perhaps a 20% yearly gain in land price; and they keep bidding up the prices to further and further ahead of current rents in order to get in on this good thing. These purchases are financed by credit and lead to higher interest rates. The higher interest rates lead to a collapse of business, occupancy falls and the whole boom collapses. The credit collapse is soon feeding on itself, carrying prices to below their normal equilibrium level.

Land speculators are undoubtedly a part of this boom and bust cycle; so is ever; body else. Are the speculators really to blame or did they simply react in a perfectly natural way to the situation in which they were immersed. If no one were to buy land except for immediate use, would the land boom cycle be stopped? I doubt it but the cycle might become a little less severe.

I think that one could make a case for suggesting that changes in the taxation and credit policies of governments generally have been a destabilizing influence, contributing to the severity of business cycles. But that is not the aim of this paper. All I am trying to prove is that land speculators are not the cause of the cycle; they just happen to be heavily involved in it along with most of us.

Land speculation is a peculiarly North American cultural feature. For instance, in Britain vast tracts of land are still owned by families which supported William the Conqueror. But the evils of the credit cycle and the business- cycle are just as severe there as in America. Whether the land is owned by those who hope to sell it at a profit or by those who hope to keep it for the next thousand years, the bad effects are the same as long as the government can convince people that it has a right to take their wages instead of collecting the rent of land.

Trying to defend land speculation is a bit like trying to defend a toothache. It isn't nice, but it isn't the problem either. The problem in your aching tooth is the decay: the problem with land is its under-taxation. And in my opinion, an even worse problem is the over-taxation of productive work. If we could eliminate taxes against work and the products of work, then I would not mind how much the land speculators Would make out of the resultant increase in total wealth.

Lawrence D. Clark, Sr. (Medfield, Massachusetts)

The title of Mr. Cringan's article (Georgist Journal, No. 51) is "In Defense of Land Speculators", but in his last paragraph he writes of defending land speculation. My father always said you must hate the sin, not the sinner. There is a big difference.

The analogy is not perfect. Land speculation is not illegal. It is not sinful to play the game to win as long as you play by the rules. Land speculation is bad for the health of the economy, but certainly it is not the fault of the speculators. It is the fault of those who have written the rules of the game wrong.

When a Georgist speaks harshly of land speculators, he or she is not thinking of such cases as the ordinary homeowner, mentioned by Mr. Cringan, "who thinks that increasing property values will help him (or her) to escape from an impoverished old age." The Georgist is thinking of the professional land speculator who routinely buys land and holds it until it doubles in value and then sells it for 100% profit without having produced one cent's worth of wealth. Even such a speculator is not to blame except to the extent that he or she may have taken an active part in opposing the Georgist tax reform that would make land speculation impossible.

Mr. Cringan demonstrates in his last paragraph that there is a flaw in his thinking. He correctly states that the problem with land is its under-taxation. He also correctly states that the over-taxation of productive work is a bad problem. He goes on to say that if we could eliminate taxes against work and the products of work, land speculation would be O.K. with him.

Mr. Cringan does not seem to understand that you cannot have it both ways. In order to eliminate the taxes on productivity it will be necessary to fully tax privilege. Taxes on capital and labor must be replaced with taxes on land values at a rate sufficient to take the whole of the economic rent, making land speculation impossible. The disappearance of land speculation is a consequence of the reform necessary to get taxes off work and the products of work.

George Curtis (South Humberside, England)

Craig Cringan, among other things, says that Henry George was wrong when he wrote that land rent takes up all the increment in wealth over bare sustenance. George was not wrong. In Progress and Poverty he carefully traces the primary cause of all recurring industrial depressions and points to the speculative advance in land values as these tend to press the margin of production beyond its normal limit, thus compelling labor and capital to accept a smaller return or cease production altogether.

It must be obvious that this speculative advance in land values is spearheaded by the land speculator, causing pressures on the productive process which are so serious that these crowd down wages to the point beyond the minimum of return upon which labor can continue to exist. So when Henry George examines the role of the land speculator he sees their activities creating a speculative rent line beyond the normal rent line which must be extremely hurtful to millions forced out of a job altogether. He also explains how such a period of recession must continue until, among other things, this speculative rent line has been lost.

Mr. Cringan has made a great step forward when he writes saying that land is under-taxed and productive work is over-taxed. Does he also agree with Henry George when he says that the refusal to take for public purposes the increasing values which attach to land with social growth is to necessitate the taking of public revenues by taxation which lessen production, distort distribution and corrupt society? If so, so far so good.

Does Mr. Cringan accept that appropriating wealth created by the community which the moral law forbids us to hold as private property represents a robbery of the masses? Is he saying that the attempt to rob others in this way in an attempt to survive is not a sin?

Does Mr. Cringan accept that at the basis of all social life is set up an unjust inequality between one person and another, compelling some to pay others for the privilege of living, for the chance of working, for the advantages of civilization, for the gifts of God? Again, so far so good. But George goes further; he says: "The very robbery that the masses of men thus suffer gives rise in advancing communities to a new robbery. For the value that, with the increase of population and social advance, attaches to land, being suffered to go to individuals who have secured the ownership of land, it prompts to a forestalling of, and speculation in, land wherever there is any prospect of advancing population or prospective improvement, thus producing an artificial scarcity of the natural elements of life and labor, and a strangulation of production, that shows itself in recurring spasms of industrial depression as disastrous to the world as destructive wars."

No one can rightfully defend on any count land speculation when the consequences are as disastrous in the manifold misery and waste of human lives to the world as destructive warfare.

We have no choice but to be unequivocal in our contention that the land speculator has no place in a civilized society based upon the rock-hard moral and economic truths so ably expounded by Henry George.

Siebe Sevenster (Bennekom, Holland)

In the main I agree with Craig Cringan when he says that speculation by itself is not responsible for too high land prices. I disagree with him when he says, "Rent takes up a constant proportion of total income of society." As I see it, rent is only a small part of total income in a farming community, but in a big city it will be much more. Godfrey Dunkley once showed a diagram with very high land values in the centre of Johannesburg. Another test occurs as we look at the portion of land values in a house and lot. In a good location the value of land can be half of the total value; in other locations it may be one-fifth or less. Another way of saying it is, Rent comes with people; the more people there are the more is the rent of land.

Robert Clancy (Georgist Journal Editor)

If Mr. Cringan thinks land speculation is just a North American activity, he ought to check out the action in such diverse places as Zurich, Tel Aviv, Tokyo and Sao Paolo. If he thinks land values stay in proportion to other returns, he ought to watch for periodic reports in such publications as U.S. News and World Report and The Wall Street Journal which show that land values are an increasing proportion of the price of a home* If he thinks that land speculation is in any way benign, he ought to take a look at New York where speculation is resulting in an increasing number of homeless people, enterprises a century or more old are suddenly forced out of business because of escalating rents, and it is becoming more and more a city of rich and poor with the middle class less and less able to live here. If he thinks there should be less taxation of labor and more taxation of land... I agree.