Letter from a Young Distributist: Georgism and Distributism

> This would serve as an effective frontier, like that which the United States used to have, giving families a failsafe in case of hardship. This implicit safety net for new or recovering families naturally favors a distributist small-owner model of business.

This is probably the weakest part of the article. The frontier is not a safety net. You do not go to the frontier because you are in the poorhouse, you leave the frontier for the poorhouse after you have failed at a nearly insurmountable task. Even today this plays out again and again, people imagine that they can start their life over on a farm and earn a living with their hands, very few succeed. The biggest cost of starting a homestead is not the land but the sheer amount of labour and money that goes into improving that land to the point where it can provide for you. Even the basics of clean water, sanitation, power/heat and shelter would be beyond anyone in need of a failsafe. Add to this the insult of the available land being that which is so marginal that already established businesses cannot make it productive and you have a complete non-starter.

If you think that the marginal periphery will consist of abandoned homes instead and that all one would have to do is move in then I'd invite you to visit a few of the existing abandoned homes in your area. Mind you, not unoccupied homes which generally still have an owner that does at least the basic upkeep necessary to avoid fines. Visit a truly abandoned home where the owner has simply walked away. Unless you're coming in hot on their heals, it's going to be a disaster. Cold weather alone will ruin an unheated structure built to modern standards not to mention the toll that wildlife, plants, and vandals can take. Modern, draft free buildings will also develop a significant mold problem if their power is disconnected since no heat and no air circulation mean that temperature changes will produce condensation.

I disagree strongly with his fundamental premise. Even if you acknowledge and accept the full moral premise of Georgism you have to assess the degree to which people are morally culpable. Slavery was a heinous violation of human rights and choosing to participate in it justified heavy financial penalties from its abolishment. Participation in slavery was far from mandatory as evidenced by businesses in the north that competed with those in the south despite not having slaves.

The current real estate system on the other hand is a fundamentally different beast. Everyone who doesn’t want to be homeless has to participate as either a renter or purchaser. Years and years of government policy have made the former decision ill advised as the financial benefits to ownership are quite large. Despite this I’d agree with the proposal if all that was being done was the removal of a subsidy.

The government is not merely removing a subsidy in this case though. They are intentionally cratering the housing market. Years of government policy has encouraged over-participation in that market. For those who want to change things to argue the government is 0% morally culpable and the individuals are 100% morally culpable is disingenuous. His argument seems to be that the financial culpability follows from the moral culpability.

He even argues that individuals participating in a system owe backwards subsidies because the government did the morally wrong thing. This amounts to intentionally bankrupting most home owners, including depriving them of funds needed for retirement. This is done in a single sentence hand waving fashion without any sort of impact analysis.

I’d argue there is a substantial problem here that spans the ethical, economic and political categories. But you seem to believe the government is 0% culpable and the individuals responding to incentives are 100% culpable. I’d argue it seems more likely you don’t actually believe that just don’t want to pay for the costs of a fair transition.

> compensation for the loss of land value is not morally required. The typical landowner has been receiving an implicit subsidy from the government, as public goods generate higher rent and land value. One could argue that justice requires the title holder to pay back the past subsidies

This is an absurd standpoint. You're going to ask 64.8% of the population that own homes, a quarter of who are nearing retirement age, to pay back what for all intents and purposes is their retirement fund? If you want to talk about morals and ethics this is clearly an immoral position. Even if we consider the assumption that the increase in value of their property is some form of subsidy, they entered into this contract in good faith as a way to provide for themselves and their families as they age and eventually retire or are no longer able to do productive work from which they can earn a living. To strip them of this and say with a hand wave that they were in the wrong for thinking that a system of ownership, that has existed for hundreds of years and was generally agreed upon by the vast majority of society, would continue to exist and that they would benefit from by lawfully participating in it... I honestly can't imagine you or anyone saying this to someones face, it's just baffling. It's on par with demanding collectivization at the expense of landowners and it would probably have the same consequences.

I live in Ontario which doesn't have prop 13 and I think development is still far from straightforward or simple. We do see some condo development but I'm not sure how much not having a prop 13 like policy has to do with it. It's almost impossible to measure this given the difference between regions extends far beyond a single tax law.

I think the problem is not with new loans though. As property value is reduced to structure value in the new system, many individuals will be able to own property without mortgages at all given the far lower cost of doing so. Some may still need mortgages and banks will have to provide a viable vehicle for doing so for the fraction of the population that needs them.

The bigger issue is what happens to current mortgages. If I paid 25% down on a 1.5 million property and have paid my mortgage down further so that it's now sitting at $1 million and the value of my land is $1.25 million and the value of my house is $250,000 when the government adopts Georgist policies the value of my land goes to $0 which means my property is now worth $250,000 and I owe $1 million on it. I'm obviously going to walk away from the loan so the debt holder for my mortgage gets an asset worth $250,000 instead of the $1 million of money they were owed, a loss of $750,000. I also lose the $500,000 I had build up in my home since I walked away entirely.