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By George! 

A forgotten San Francisco economist survives, barely, in his adopted city

Wednesday, Jul 8 1998
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Behind the frosted-glass office doors of an old building on New Montgomery you can find a barbershop, a bartending school, and a number of lawyers. In half of one office you'll also find a cluttered space devoted to the Henry George School of Economics, run by a single person, David Giesen, who sits hunched in the corner like the man behind the curtain in The Wizard of Oz -- eccentric, excitable, idealistic -- curating a legacy that reaches beyond his little room.

The fact that the school currently can't even afford the rent on a whole office is an irony George himself would have smirked at. His ideas about land ownership made him world famous in the late 1800s -- hero to Tolstoy, George Bernard Shaw, and American labor; enemy of both robber barons and Karl Marx; and grandfather of the so-called Third Way between Marxism and capitalism that people like Vaclav Havel and Allen Ginsberg were touting in Eastern Europe back in 1989.

A few new countries, in fact, are becoming cautiously Georgist. Estonia has raised local revenue the Henry George way since 1991; the Czech Republic and Latvia are preparing tax systems based on his model now. The "Henry George way" means taxing the value of land -- not the buildings, just the lots. The underlying idea is that land belongs to the people, so rent charged for its use should naturally go to a public fund.

Pure Georgism would scrap income and sales tax and run a country on so-called "socialized rent," but no country has ever tried pure Georgism. All three Eastern European countries will go on raising most of their money through sales and income tax.

But Georgists believe their model is the key to a fair and equitable society. The school holds Tuesday night orientation meetings, which include games of "Anti-Monopoly" and one-man shows by Giesen, the director, who also likes to act. For the right audience Giesen will put on a brown vest and tie, glue on a beard, and play George in 1886, holding forth on his upcoming run for mayor of New York and railing against the gulf between rich and poor. "Yippee, Mr. Ivins!" Giesen-as-George hollers, after a politician warns that he won't win the race. "I don't desire the work of the office of the mayor of New York City, but I do wish to raise hell. This decides me. I will run!" And Giesen's eyes go crazy and wide; he gestures like a fanatic.

Behavior like this may be why The Economist recently dismissed both George and his followers as a bunch of cranks. "Mr. George is probably the only tax theorist in history whose beliefs have become an object of cult devotion," the magazine wrote, in a short article on Eastern Europe. But the piece never let on that George was a devoted free-market man who simply used laissez faire theory against big business. Unearned income from land, he said -- through rent and speculation -- mucks up a free market and forms the crux of inequalities under capitalism.

"Rising land prices are seen as a sign of prosperity," writes Al Date on the Henry George Institute's Web site (www.henrygeorge.org), in an essay on the real estate bubble in Japan, "but they gradually sow the seeds of economic reversal. Every recession in the USA has been preceded by a 'land-boom,' and accompanied by a 'land-bust,' as documented by Prof. Mason Gaffney," another Georgist.

George himself lived in San Francisco just after the gold rush, and saw small patches of claim-staked mining land east of the bay pass into the hands of a few large companies, creating an immediate underclass of rent-paying gold miners who eventually gave up and drifted into the city. Wealth and poverty appeared in S.F., both for the first time, and George argued with traditional economists who said the poverty came naturally with the mounting population.

"There are liveried carriages on the streets of San Francisco and pleasure yachts on her bay; the class who can live sumptuously on their incomes has steadily grown," he wrote in Progress and Poverty. "There are on every hand the most striking and conclusive evidences that the production and consumption of wealth have increased with even greater rapidity than the increase of population, and that if any class obtains it is solely because of the greater inequality of distribution."

George also noted that Sacramento had given huge portions of California, for free, to railroad companies, and suggested this was one reason for the inequalities. He pointed to the potato famine in Ireland, where most of the land was held by English landlords. "There is plenty of good land, but on it are only fat beasts, and sheep so clean and white that you at first think that they must be washed and combed every morning," he wrote in Social Problems. "The 'owners' of this land, who live in London and Paris, many of them never having seen their estates, find cattle more profitable than men, and so the men have been driven off." The poorest Irish land was overpopulated with peasants trying to cultivate rocky or sandy soil, and whatever food they did produce was shipped to England or sold to pay the rent. Under Georgism the landlords would have paid Ireland for the use of its pastures.

"People call it socializing rent, but what we do now is socialize goods and services," explains Giesen from his tiny office. "Sales tax and income tax are nothing but socialized produce and labor."

Giesen points out that California gets less revenue from its land than other states, partly because a law passed by Proposition 13 in 1978 froze many property values at then-current levels for tax assessment. Right now, of course, local real estate is booming, and the recent scandal over Doris Ward, the city's assessor-recorder, plays right into Georgist theory. (Ward has been accused of underassessing property values, depriving the city of almost $100 million in revenue from the rocketing market prices.) But there's a deep difference between property tax -- which lumps land with the value of a building -- and a Georgist land tax, which considers only the value of a site (to keep from penalizing improvements). No one is quite sure what effect such a radical rejiggering of the tax laws would have; never mind the fact that every level of government -- federal, state, and city -- has more money right now than it knows what to do with.

But Henry George might have recognized a few local conditions we take for granted. "Sixty-five percent of Oakland is owned by absentee landlords," claims Giesen. "That is taking away a significant portion of the income of those who are working in Oakland. ... But just to isolate that part of the problem, without looking at what the private appropriation of land rent does to wages, is also to miss the point. It doesn't tell the whole story of what's causing relative poverty in Oakland."

Hence the Henry George School. There you might learn why privately appropriated land rent depresses wages; why labor and capital are not natural enemies; how the Depression could have been avoided; and the interesting tidbit that Willie Brown was once a member of the school's board of directors. Several California politicians flirted with Georgism in the early '70s, and Brown even tried, twice, to push a land-value tax bill through the state's Lower House.

"I was badly defeated with that legislation both times," he wrote in a 1973 letter to a school associate, "but I am still convinced that land-value taxation should be given a try. The experience of those countries utilizing the land-value taxation indicates that it is in fact a way of reducing slums and fostering better development, and I hope that one day we will see it tried in California, if only on a trial basis." Brown has since distanced himself from Georgism, though, and says there was no political will for a land tax in "the body politic. ... It doesn't carry enough weight on merit to persuade a majority of the people who need to be persuaded."

According to David Giesen, the Georgists' biggest PR problem is convincing people to distinguish between capital and land -- "stuff created by human beings, as opposed to the earth," is how he puts it -- which are now universally lumped together as "property." Giesen once asked journalist William Greider about Georgist reform in the U.S., and Greider's response on tape is something he cherishes as evidence of how mainstream thinking is marshaled against Georgist theory. Because if Rolling Stone's economic writer won't discuss the difference between capital and land, who will?

"I resist choosing sides in those distinctions," Greider told Giesen, "because I own a home.

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