Amongst economists it is generally understood that the term ‘land’ includes all natural resources, all gifts of nature, natural forests, wildlife, minerals in the ground, fish in the sea etc. This definition raises the question of ownership, exploitation rights and also the concept of resource rents. Justice Cranston’s ruling could apply equally to all natural resources.
It is debatable whether land is actually a natural resource. Food, air and water are not seen as resources but as the very essentials of life; land is just as essential. Perhaps resources may be considered as necessary for civilised life, but not life itself; human beings existed and flourished, however primitively, before the discovery of minerals, coal or oil. However for the purpose of this essay land is considered as a natural resource if not the most fundamental of all resources. (see item 17, Definitions), The questions raised here are about the control or ownership of these resources, and who should receive the benefit?
The basic principles that govern land value taxation may be applied equally to all natural resources. As all natural resources are a gift of nature, they cannot be owned, not even by governments or nations1. Public custodianship may be accepted by general consent as a practical administrative necessity, but a wise government would be careful to distinguish this from ownership.2 If ownership of a natural resource is to be allowed, then the benefits derived may be equally claimed by all human beings on the planet, who could be seen as the collective beneficiaries. This of course raises the issue of practicality – or the impracticality of determining such an equal shareholding. This problem has been resolved historically by the convention of accepting that each nation (or tribe) may claim ownership of those resources over which it has territorial control, so natural forests, minerals, water, oil or fish in the sea are allowed to be claimed by mutual unwritten consent amongst all nations. Fishing of the open seas beyond territorial limits has always been seen as open to all, inside these limits disputes are commonplace. This dispensation has obtained throughout history (despite periods of warfare) but is now coming under some strain with the exponential growth of world population, the rise of international corporations and the phenomenon of globalisation. Claims for the ownership of natural resources are now put forward by private companies on the strength of their new control, not of territory, but over the economy of the erstwhile owner; the private economies of corporations are now often greater than those of the host country, so they are able to dictate the terms of gaining access to resources. These developments have given rise to a new awareness of the value of the world’s natural resources and the issue of ownership.
The principle guiding resource rents is that no individual or organisation has the right to appropriate or exercise control over any gift of nature without recognising the debt to society, in the form of an appropriate payment. Such payment may be described as a Resource Rent. A land value tax is a similar payment, otherwise known by economists as a tax on the economic rent (of land). A land value tax is strictly not a tax but rather a payment to society for the beneficial occupation or use of a site. In a system of private land ownership this payment is made to the landlord. In his book, The corruption of Economics, co-authored with Mason Gaffney, Fred Harrison makes the interesting point: ‘The tenant does not claim that he is being taxed when he pays rent to the private landlord!’ 3
However, where LVT is concerned, it is important to distinguish between rural land and urban land. Rural land may have value already due to natural circumstances, and this may be increased through directly applied work. The three dimensional resources of coal, oil, fish etc. are tangible physical resources that require work to convert them into useable wealth.* Urban land, however, requires no such work; it simply has to be there. With urban land, what is being considered is a two dimensional area on the surface of the earth that only has value because of its location within a man-made agglomeration. Where natural resources are concerned, the increase of land value due to agglomeration does not apply; the natural resource may be remote from the location that benefits from its exploitation. The increased land values in Aberdeen are due to remote ‘work on land’ a hundred miles away in the North Sea. For all these reasons it is more appropriate for the wealth derived from natural resources to be taxed through a licensing or leasing system, whereby a private entrepreneur is granted a lease to exploit the natural resource for an agreed return over an agreed period to the controlling government––a resource rental. Another option is for the government to invite companies to bid for a contract to carry out the extraction. Whoever came in with the best rental offer would get the contract for a fixed period.
* An exception has to be made for the electromagnetic spectrum which, as an intangible resource, requires no work for extraction but only for exploitation. It is undoubtedly a resource from which a revenue may be derived for its use. In his book The Stewardship Economy, Julian Pratt notes that in the year 2000 the British government received over £22 billion from private companies in payment for 20-year licences granting access to the radio spectrum.4
References.
(1). I suggest that private ownership is only legitimate where it is related to work: refer to Related Essays: – ‘Work, Gift and Theft’.
(2). Comprehensively discussed in The Stewardship Economy, by Julian Pratt. Lulu.com, Creative commons, San Francisco, USA. 2011.
(3) Fred Harrison and Mason Gaffney, The Corruption of Economics, 1994, Shepheard-Walwyn Ltd. p.223
(4) Pratt, The Stewardship Economy, p.22.