Open letter to Gorbachev

Last updated

On November 7, 1990, an open letter to then President of the Soviet Union Mikhail Gorbachev was published [1] [2] and signed by a rank of thirty Western sources, most of whom were academics. [3] [4] The contents of the letter made the argument to the Soviet head of state that while moving the economy away from a centrally planned system towards a free market mixed economy was a step forward, they warned the leader against following through with the West had done following the end of feudalism; privatising the land itself, instead opting towards a Georgist system of common ownership and the collection of public revenue through land-value taxation. [3] [4] Nobel prize-winners Franco Modigliani, James Tobin, Robert Solow and William Vickrey were among the letter's signees. [2]

Contents

Contents

While the signatories of the open letter praised the Soviet leader for moving his country towards a market economy, they warned that there was:

"...a danger that you will adopt features of our economies that keep us from being as prosperous as we might be. In particular, there is a danger that you may follow us in allowing most of the rent of land to be collected privately." [3] [4]

The letter then further elaborated that Gorbachev had the opportunity to place much of the USSR's tax burden on the rent of land and forgo in introducing or increasing the rate of taxation on the other two factors of production: labour and capital, in lieu of Henry George's proposal, the Single Tax, from over one-hundred years earlier. The open letter then went on to explain the benefits of land-value taxation:

"First, it guarantees that no one dispossesses fellow citizens by obtaining a disproportionate share of what nature provides for humanity.

Second, it provides revenue with which governments can pay for socially valuable activities without discouraging capital formation or work effort, or interfering in other ways with the efficient allocation of resources.

Third, the resulting revenue permits utility and other services that have marked economies of scale or density to be priced at levels conducive to their efficient use." [3] [4]

The letter then explained and elaborated on how land-value arises from three sources; it's productivity and fixed supply, the growth of the population occupied nearby the land, and lastly the provision of public services and goods.

The work then went on to argue against attempting to collect the net present value of land rents by auctioning off land to private owners, giving six arguments against. [3] [4]

The letter ended with a list of the thirty signatories followed by an appendix on technical issues in regard to land-value taxation.

Signatories

A total of thirty signatories signed the open letter to Gorbachev. [1] [2] [3] [4] They were:

Impact

Today, the former Soviet Republics of Estonia, [5] Russia [6] and Ukraine [7] each impose a degree of land-value taxation. British economist Fred Harrison worked closely with Russia's State Duma in regards to tax reform during the 1990s. [8]

According to Nicolaus Tideman, who organised the gathering of signatures for the letter, claimed in an email to a person that someone with access to Gorbachev's private papers had seen the letter with a notation spelling "This looks interesting. Perhaps we should follow up." [9]

Similar work

A similar argument in favour of the USSR moving towards a system of land-value taxation was made in an opinion piece in the New York Times authored by 'Achilles Fexas', titled "Gorbachev Can Test Henry George's Theory" [10]

See also

Related Research Articles

<span class="mw-page-title-main">William Vickrey</span> Canadian-American professor of economics and Nobel Laureate (1914-1996)

William Spencer Vickrey was a Canadian-American professor of economics and Nobel Laureate. Vickrey was awarded the 1996 Nobel Memorial Prize in Economic Sciences with James Mirrlees for their research into the economic theory of incentives under asymmetric information, becoming the only Nobel laureate born in British Columbia.

A land value tax (LVT) is a levy on the value of land without regard to buildings, personal property and other improvements upon it. It is also known as a location value tax, a point valuation tax, a site valuation tax, split rate tax, or a site-value rating.

<span class="mw-page-title-main">Henry George</span> American political economist and journalist (1839–1897)

Henry George was an American political economist and journalist. His writing was immensely popular in 19th-century America and sparked several reform movements of the Progressive Era. He inspired the economic philosophy known as Georgism, the belief that people should own the value they produce themselves, but that the economic value of land should belong equally to all members of society. George famously argued that a single tax on land values would create a more productive and just society.

In economics, land comprises all naturally occurring resources as well as geographic land. Examples include particular geographical locations, mineral deposits, forests, fish stocks, atmospheric quality, geostationary orbits, and portions of the electromagnetic spectrum. Supply of these resources is fixed.

<span class="mw-page-title-main">Georgism</span> Economic philosophy centred on common ownership of land

Georgism, also called in modern times Geoism, and known historically as the single tax movement, is an economic ideology holding that, although people should own the value that they produce themselves, the economic rent derived from land—including from all natural resources, the commons, and urban locations—should belong equally to all members of society. Developed from the writings of American economist and social reformer Henry George, the Georgist paradigm seeks solutions to social and ecological problems, based on principles of land rights and public finance that attempt to integrate economic efficiency with social justice.

Geolibertarianism is a political and economic ideology that integrates libertarianism with Georgism. It favors a taxation system based on income derived from land and natural resources instead of on labor, coupled with a minimalist model of government, as in libertarianism. The term was coined by the late economist Fred Foldvary in 1981.

Thorwald Nicolaus Tideman is a Georgist economist and professor at Virginia Tech. He received his Bachelor of Arts in economics and mathematics from Reed College in 1965 and his PhD in economics from the University of Chicago in 1969. Tideman was an Assistant Professor of Economics at Harvard University from 1969 to 1973, during which time from 1970 to 1971 he was a Senior Staff Economist for the President's Council of Economic Advisors. Since 1973, he has been at Virginia Tech, with various visiting positions at Harvard Kennedy School (1979-1980), University of Buckingham (1985-1986), and the American Institute for Economic Research (1999-2000).

<span class="mw-page-title-main">James Mirrlees</span> British Nobel Laureate in Economic Sciences

Sir James Alexander Mirrlees was a British economist and winner of the 1996 Nobel Memorial Prize in Economic Sciences. He was knighted in the 1997 Birthday Honours.

<span class="mw-page-title-main">Harold Hotelling</span> American statistician and econometrician (1895-1973)

Harold Hotelling was an American mathematical statistician and an influential economic theorist, known for Hotelling's law, Hotelling's lemma, and Hotelling's rule in economics, as well as Hotelling's T-squared distribution in statistics. He also developed and named the principal component analysis method widely used in finance, statistics and computer science.

<span class="mw-page-title-main">John R. Commons</span> American economist and historian (1862–1945)

John Rogers Commons was an American institutional economist, Georgist, progressive and labor historian at the University of Wisconsin–Madison.

Merrill Mason Gaffney was an American economist and a major critic of Neoclassical economics from a Georgist point of view. Gaffney first read Henry George's masterwork Progress and Poverty as a high school junior. This interest led him to Harvard University in 1941 but, unimpressed with their approach to economics he left in 1942 to join the war effort. After serving in the southwest Pacific during World War II he earned his B.A. in 1948 from Reed College in Portland, Oregon. In 1956 he gained a Ph.D. in economics at the University of California, Berkeley. There he addressed his teachers' skepticism about Georgism with a dissertation titled "Land Speculation as an Obstacle to Ideal Allocation of Land." Gaffney was Professor of Economics at the University of California, Riverside from 1976 onwards. He died in July 2020 at the age of 96.

<span class="mw-page-title-main">Max Hirsch (economist)</span> Australian economist and businessman (1852–1909)

Maximilian Hirsch was a German-born businessman and economist who settled in Melbourne, Australia, where he became the recognized intellectual leader of the Australian Georgist movement and, briefly, a member of the Victorian Parliament.

The Henry George theorem states that under certain conditions, aggregate spending by government on public goods will increase aggregate rent based on land value more than that amount, with the benefit of the last marginal investment equaling its cost. The theory is named for 19th century U.S. political economist and activist Henry George.

<span class="mw-page-title-main">Fred Harrison (author)</span> British author

Fred Harrison is a British author, economist, economic commentator, and corporate policy advisor, notable for his stances on land reform and belief that an overreliance on land, property, and mortgages weakens economic structures and makes companies vulnerable to economic collapse. Dirk Bezemer, a professor of economics at the University of Groningen in the Netherlands, noted that Harrison was one of the earliest to have predicted the 2008 global financial crisis. In 2005 Harrison commented: "The next property market tipping point is due at end of 2007 or early 2008 ... The only way prices can be brought back to affordable levels is a slump or recession.”

Land value taxation has a long history in the United States dating back from Physiocrat influence on Thomas Jefferson and Benjamin Franklin. It is most famously associated with Henry George and his book Progress and Poverty (1879), which argued that because the supply of land is fixed and its location value is created by communities and public works, the economic rent of land is the most logical source of public revenue. and which had considerable impact on turn-of-the-century reform movements in America and elsewhere. Every single state in the United States has some form of property tax on real estate and hence, in part, a tax on land value. However, Pennsylvania in particular has seen local attempts to rely more heavily on the taxation of land value.

<span class="mw-page-title-main">Donald Shoup</span> Professor of urban planning

Donald Curran Shoup is an American engineer and professor in urban planning. He is a research professor of urban planning at University of California, Los Angeles and a noted Georgist economist. His 2005 book The High Cost of Free Parking identifies the negative repercussions of off-street parking requirements and relies heavily on 'Georgist' insights about optimal land use and rent distribution. In 2015, the American Planning Association awarded Shoup the "National Planning Excellence Award for a Planning Pioneer."

<span class="mw-page-title-main">Prosper Australia</span> Nonprofit association

Prosper Australia is a non-profit association incorporated in the State of Victoria, Australia dedicated to reforming taxes onto land as articulated by Adam Smith, the Physiocrats, John Stuart Mill, and most notably by Henry George in Progress and Poverty.

<span class="mw-page-title-main">Harry Gunnison Brown</span> American economist

Harry Gunnison Brown was a Georgist economist teaching at Yale in the early 20th century. Paul Samuelson named Brown in a list of "American saints in economics" that included only 6 other economists born after 1860.

Clement Lowell Harriss (1912–2009) was an American economist, a past president of the National Tax Association and a former executive director of the Academy of Political Science. He was one of the United States' leading tax experts and the author of highly regarded economics textbooks and other books on economic subjects. He was professor emeritus of economics at Columbia University and taught there for 43 years. He was the professor for whom the C. Lowell Harriss Professorship of Economics and International Affairs at the School of International and Public Affairs at Columbia was named.

<span class="mw-page-title-main">Robert Schalkenbach Foundation</span>

The Robert Schalkenbach Foundation, founded in 1925, is a private operating foundation dedicated to the social and economic philosophy of Henry George through publication and research. Among its activities, the Foundation publishes The American Journal of Economics and Sociology, funds the Henry George Chair in Economics at St. John's University, and supports the Henry George Lecture Series at the University of Scranton.

References

  1. 1 2 Samuels, Warren J. (2003). "Why the Georgist Movement Has Not Succeeded: A Speculative Memorandum". The American Journal of Economics and Sociology. 62 (3): 583–592. doi:10.1111/1536-7150.00229. ISSN   0002-9246. JSTOR   3487812.
  2. 1 2 3 Batt, H. William (2012). "Development and Wealth: A Georgist Perspective". American Journal of Economics and Sociology. 71 (4): 1004–1046. doi:10.1111/j.1536-7150.2012.00851.x. ISSN   0002-9246. JSTOR   41721436.
  3. 1 2 3 4 5 6 Fitzgerald, Karl (2007-11-01). "Letter to Gorbachev". Prosper Australia. Retrieved 2023-03-16.
  4. 1 2 3 4 5 6 Tideman, Nicolaus. "Now top economists advise Mikhail Gorbachev: SOCIALISE THE RENT" (PDF). School of Cooperative Individualism. Retrieved 2023-03-16.
  5. ↑ "Land tax | Estonian Tax and Customs Board". www.emta.ee. Retrieved 2023-03-16.
  6. ↑ "Land Tax | FTS | The Federal Tax Service of Russia". www.nalog.gov.ru. Retrieved 2023-03-16.
  7. ↑ Legal, Laudis; Timchenko, Accountancy-Kateryna (2021-08-17). "Taxation of real estate in Ukraine in 2021". Lexology. Retrieved 2023-03-16.
  8. ↑ "Fred Harrison / Russia: After the Cold War -- How to Win the Peace! -- 1992". cooperative-individualism.org. Retrieved 2023-03-16.
  9. ↑ Tideman, Nicolaus (1999-05-19). "Nicolaus Tideman comments on the open letter to Mikhail Gorbachev" (PDF). School of Cooperative Individualism. Retrieved 2023-03-16.
  10. ↑ "Opinion | Gorbachev Can Test Henry George's Theory". The New York Times. 1990-10-09. ISSN   0362-4331 . Retrieved 2023-03-16.

Wikisource-logo.svg The full text of Open letter to Mikhail Gorbachev at Wikisource

This page is based on this Wikipedia article
Text is available under the CC BY-SA 4.0 license; additional terms may apply.
Images, videos and audio are available under their respective licenses.