Once upon a time sovereign nations captured land to boost their economic advantage. Land was seized from indigenous populations and often from each other. Very bloody! Meanwhile the sovereign and his bourgeoisie lived in luxury off the fat of the land. Capturing territory was outlawed by the United Nations after WWII, yet the practice continued.
Most every progressive political persuasion on the right or left will tell you that capturing land is abhorrent. However, that is not the message from AFFEERCE. Land capture is essential for human survival, progress, and the abolition of poverty.
But here’s a twist. The rights of sovereignty including the right to capture and annex land outside one’s dominion, capture land inside one’s dominion (eminent domain) and to live off the fat of the land are human rights. These rights of sovereignty shall be extended to every person on Earth! (The rights of sovereignty also include the right to surrender and reclaim sovereignty, but that is beyond the scope of this essay.)
And here is another twist. The capture of land is not bloody. Young men and women will not die capturing land. Instead, all will be better off.
In order to get to this new world, all land must be in the commons. Right! And if everybody loved each other we would have peace on Earth. Skepticism is justified. However, the process of bringing deeded land into the commons is the theme of AFFEERCE’s Viral Community Theory. It leverages the law of rent and mercantilism as weapons for good. Viral Community Theory will be the subject of a future installment, but rest assured there is no heavy handed coercion or violence needed to achieve this goal. To paraphrase Mr. Brando: “We will make them an offer they can’t refuse”.
For now, accept that all land is in the commons without knowing how Viral Community Theory gets us from here to there.
What does it mean to be in the commons? The federation constitution defines what this means:
Any sovereign can capture the land provided they triple the ground rent paid to the people and pay the current owner (I still call them “land owners” even though technically ownership is the commons) 150% of the objective depreciated value (ODV) of improvements.
Land capture in AFFEERCE is called “trebling” (the verb “to treble”) since the ground rent must (at least) be tripled. The sovereign capturing the land is called “the trebler”. The current owner can match the treble in which case the trebler can re-treble (a total of 9x the current ground rent). It would be better to do a 5x treble initially, if there was reason to believe the current owner would not match something that high.
Trebling is win-win-win. To the victor goes the land. To the vanquished goes 150% of the ODV on improvements. To the people go increased ground rents: the spoils of trebler war.
Of course, there is nothing stopping a good old-fashioned property sale. With a sale, the ground rent need not be increased at all, and the buyer need not pay a premium on ODV.
That 50% premium on the ODV of improvements leads to one inescapable conclusion: Homeowners who keep up the value of their property and live not too far from vacant land will ultimately pay a nominal ground rent. Why would they pay so little? Because, why pay a 50% premium on a house that could be built for less on free land just down the road. Conversely, a depreciated home away from vacant land, requires a high ground rent to protect it from the trebler. This leads to a second conclusion: In the inner city, slums are impossible. A treble must happen since 150% of zero is still zero.
Without intervention by the land owner, ground rents are designed to fall by 10%/year. Thus a trebled property returns to its initial value in just over 10 years.
Because every person receives a $370 housing distribution, which can be used for ground rent, apartment rent, mortgages, utilities and renovations, I estimate that 95% of the population will pay nothing of their own money for rent.
Of course a single family mansion, no matter how nice, in downtown Manhattan, would be trebled in an instant. The builder of an apartment tower is said to be a more efficient user of the land. They can easily pay $12 million/year in ground rent. Given 1000 units in the apartment tower, each unit would contribute $1,000/month to the ground rent. The total rent (building + land) on these downtown luxury studios might be $2,400/month.
Here are some hypothetical ground rents for our Manhattan apartment tower. Assume the building, due to a previous treble, is costed at 150% ODV.
With a ground rent of $12 million, our apartment tower shows a profit of $7.88 million. Nobody would treble this to $36 million taking a loss of $16.12 million the first year with continuing losses for at least 6 years.
With a ground rent of $7 million, profit is $12.88 million. Will it be trebled to $21 million? There is a loss of $1.1 million the first year, but the following year, the ground rent drops by 10% and there is a profit almost as big as the initial loss. From then on out it is all profit. There is no question this business will be trebled at $7 million, probably even at $8 million. Depending on interest rates, treble safety will not be achieved until ground rent is around $12 million.
The conservative investor will treble this business at $7 million and freeze at $12 million. A riskier player might treble at $8 million and freeze at $10 million.
What just happened here? We saw a business we liked. The ground rent they paid was too low. So we took over the business. “Hey, I’m a sovereign. I can take over your business if I want to!” This is a new form of hostile takeover. It is a new form of competition in a small town that can support only one grocery store or one hardware store.
The captured business can move or destroy their property. But they won’t, because then they miss out on 150% compensation. Most will take the money, retire to Florida, and let a more efficient business take over. As we will see in a future installment, if machinery uses intellectual property owned by the business, they are even more likely to take the money and run.
So homeowners pay little if any rent, while businesses that are location dependent might voluntarily pay over 50% of their profits in ground rent to be safe from the trebler. Surprisingly, next to businesses a big source of ground rent will be the world’s major religions.
Consider a few square blocks in East Jerusalem. An assessor would give this land almost no value at all. However, three of the world’s great religions would pay anything to keep their holy treasures out of the hands of infidels (and each other). Furthermore, each of these religions would consider it an insult to pay less to protect their holy lands than the other two. Protection from infidels would cost about $300 billion each, taking into account the minimum size of property that can be trebled. That is $900 billion total from a few square blocks. With 10 billion people in the world, that is $90 per capita, or about .7% of the annual total distribution package. Throw in Mecca, Medina, and the Vatican, the rest of East Jerusalem under contention, the holy sites in Asia, and it is not unreasonable to suppose the world’s religions would proudly pay 10% of the total distribution (Finally, the tithe reverses!).
In the next installment, we continue to study Collection Theory.
Note: After considerable discussion in the AFFEERCE group, compensation for improvements has been changed from 150% objective depreciated value (ODV) to 150% appraised market value (AMV). This corrects several conceivable but real problems with an objective theory of value at a small cost.
AFFEERCE is an implementation based on the ideas of economist Henry George. The fruits of our labor belong to us alone while the land belongs to each of us and to all of us. AFFEERCE is an acronym for Alternative Families + Free Enterprise + Universal Entitlement + Balance of the RCs + Enlightenment.
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