The Crime of Poverty
   
The Solution: Economic Justice

When we see people sleeping in cardboard boxes in the centre of London, when young men sit on the steps of underground stations endlessly repeating the words "any spare change, please; any spare change?", and when old ladies are bludgeoned to death for their pension money, the results of poverty are all too horribly apparent.

Undoubtedly, there is a moral as well as an economic dimension to this tragedy. Drugs are used as an escape from the emptiness of lives with no purpose, with no prospect of work and with no future which has any sign of hope in it. Of course, this is a negative response to the problem, but it is an increasingly sizeable response and is one that is largely funded by violent crime. It is a dangerous addition to the rising tide of burglary, car break-ins, shoplifting and lesser forms of petty theft that are now swamping this country and which, in part at least, can be blamed on poverty.

The Rich/Poor Gap
The gap between rich and poor has widened over the last few decades. Governments talk about minimum wage legislation, and employers respond by saying that they can't afford to increase pay to the levels proposed. In other words, they are saying that they cannot afford to pay their workers a living wage.

This is not a problem when it comes to the bosses with their 'fat cat' salaries and generous perks. There seems no limit to upward pressure for them, but a very definite ceiling when it comes to low-paid workers.

What is the bottom line for the low-paid?
It is the unemployment benefits that they could receive if they did not work. For skilled workers in demand, the professionals, the managers and the like, competition for their services drives their salaries up. But because there are more unskilled workers on the market than there are jobs for them, competing for those jobs drives wages down.

"Lives with no purpose, no prospect of work,
no future with any sign of hope in it."

   

However, poverty doesn't just affect the unemployed or the low-paid. Millions of pensioners are in equally dire straits, and the situation is likely to get worse. By the year 2035, there will be a ratio of nearly 40 dependent elderly people to 60 workers - a formidable burden for those younger people.

An Affordable Answer
Is there an answer to the problem and, if there is, what is it? There are some who would say that the tax-payer cannot continue to afford increasingly expensive nursing homes to keep the ailing elderly alive; that we cannot indulge in costly high-tech treatments on the NHS. Some ask why the state should make itself responsible for the welfare of single mothers or give income support. Indeed some feel that we should reduce unemployment benefits to discourage scroungers.

If reasonably paid work could be found for the unemployed, we could do away with the dole, and many fathers of children of single mothers would be able to support them. If instead of low pay we had a high pay economy, we could do away with income support and everyone could make provision for their pensions and long-term care. The taxpayer would benefit from this almost as much as the victims of poverty themselves.

The Key
The key is to raise wages. The employers rightly say that high employment taxes make it impossible to do this and that they would have to raise prices to cover the extra cost and would become uncompetitive in the international market. But what if take-home pay were increased by greatly reducing taxes which fall on employment, such as PAYE and National Insurance? Would not this result in the abolition of poverty? The employers' costs would remain the same, so it would have no affect on prices. Workers would be able to provide (via pension funds and insurance) for the future.

Replacing the lost tax revenue
The money for doing this would come from the one source which does not affect production, which provides a totally unearned income - namely, the rent of land. By 'rent of land' is meant the value of land sites throughout the country, whether the money is paid to a landowner, or whether the value is enjoyed by a freeholder himself. 'Rent of land' in this sense does not include the value of buildings or other 'improvements' which people have added to land.

We have no official figures to show just how much of our GDP today is really land rent - but unofficial figures suggest that it is in the region of 20% or 30%. This is not obvious from taxation statistics, because much land rent is hidden in the profits of businesses which own their own sites. And, of course, all house owners benefit from a notional rent which does not show up in official figures.

The American economist and political philosopher Henry George, in an address given in America over 100 years ago under the title 'The Crime of Poverty', justified this method of raising revenue: "To take land values for public purposes is not really to impose a tax, but to take for public purposes a value created by the community. And out of the fund which would thus accrue from the common property, we might, without degradation to anybody, provide enough to actually secure from want all who were deprived of their natural protectors or met with an accident, or any man who should grow so old that he could not work."

He ended his talk with his view of the results of such a way of raising the public revenue:
"The great thing would be that the reform I propose would tend to open opportunities to labour and enable men to provide employment for themselves. That is the great advantage. We should gain the enormous productive power of idle hands that is going to waste all over the country, the power of idle hands that would gladly be at work. And that removed, then you would see wages begin to mount..... And as wages mounted to the higher levels, then you would see the productive power increased. The country where wages are high is the country of greatest productive power. Where wages are highest, there will invention be most active; there will labour be most intelligent; there will be the greatest yield for the expenditure of exertion." A hundred years later, those words still hold true. The philosophy of Henry George does not advocate taking more money from the taxpayer to give a miserly hand-out to the poor, but proposes that the poor themselves should be given access, to the wealth-creating process by abolishing taxes on production and instead collecting the publicly created revenue from land.

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HENRY GEORGE FOUNDATION