Imagine the implication of an accepted currency backed by land value in the commons. By definition, there is enough money to purchase all the land on Earth into the commons at a fair market price. The money is issued, precisely for the reason of making the purchase. The currency outstanding is exactly equal to the value of land in the commons. If new land is purchased into the commons, currency must be created. Not coincidentally, this currency is used to purchase the land in the first place.
It is a flawless plan to create a geoist federation, assuming there exists an accepted currency backed by land in the commons. Emphasis is on the word accepted. If the currency is not accepted, the plan fails.
Significantly, we have reduced the intractable problem of creating an economy where every person has equal claims on the ground rent, to one of creating an accepted currency backed by land in the commons.
It is generally accepted that land value increases with population and progress. It is thus logical to conclude that issuing currency only for land purchases and not for land appreciation is deflationary. On the other hand, issuing currency for both purchases and land appreciation is hyper-inflationary. However, the latter is only a problem in an actual federation and easily solved by the treasury (See earlier essays for details.)
In the viral community, currency is issued only for purchases. The deflationary pressures create demand for the currency, encourage hording and lead to acceptance. In fact, the easiest way for landowners to get their hands on this valuable commodity is to sell their land to the commons.
Issuing currency only for land purchases is insufficient to create currency demand without population and economic growth. As discussed in the previous installment, growth in the first 20 years of the viral community is explosive due to both the ideal and material motivations of the Affeercianados. However, this precedes the first land monetization which does not occur until year 20, just after all rent freezes are lifted, and coinciding with new premiums for once free medical care. Growth is stifled, and the start of Phase II is a critical point for the viral economy.
However, at this moment of negative growth, the Affeercianados are flush with money, having received big payouts for sale of their land to the commons. Whatever the demand for the currency is at that time, it is a condition of the land trust that the currency is always accepted as ground rent and can be used to treble land. This non-sustainable monetary stimulus should suffice to prop the viral economy until the engine of Phase II kicks in.
The engine of Phase II is free money! Recall that in Phase I, 30% of the ground rent was used for public services (including free medical care for residents) and 70% to either improve the existing land or purchase more land. In Phase II, public service revenue drops with the elimination of free medical care and land purchases, should anyone choose to sell, are done with newly created currency. There will be few, if any land purchases during the 20 years of Phase II. So a vast majority of the ground rent is available to be given away. How can this be done to further our objectives, including spur growth that will create a demand for our land-backed currency?
In Phase II, we auction a distribution package that includes necessities for life. Benefits, in 2012 dollars, include $220/month for food, $370/month for housing, free quality medical care at the Affeercianado’s hospital and free and unlimited advanced education at the Affeercianado’s university, as well as other benefits. This is nothing more than a specialized annuity. Typically, annuities are so-so investments, but given enough subsidy, they become very attractive. Investors bid on the minimum subsidy they will accept. The auction continues until the all the ground rent available is exhausted subsidizing the present value of the annuities.
Just as wealthy individuals and businesses will be attracted to our community by the relatively free Affeercianado labor in Phase I, they will be attracted to our community by the local nature of the free money they win at auction. As more people move in, land values rise, generating more ground rents to subsidize more basic income auctions. Discounts based on years of residency will allow less affluent residents to bid competitively. Nevertheless, we are creating a Beverly Hills or Upper East Side, and it is counter-intuitive to believe that this will somehow end poverty. But it will, and that will be apparent in Phase III, the final 20 years.
In Phase II, our goal is to increase land value, increase the demand for our currency and auction off as many basic income annuities as possible.
In Phase III, we are ready to take over the world. While the strength of our currency alone would entice a few to sell their land into the commons, we want to create an overwhelming desire to sell land into the commons and, at the same time, realize the vision of an AFFEERCE Georgist economy. We want to make them an offer they can’t refuse.
In Phase II, the majority of the ground rents subsidized the annuities at auction. In Phase III, we will use the majority of ground rents to purchase free basic income annuities for all tenants (owners and renters) on land that is sold to us for a fair market price. Remember that no ground rents are needed to purchase the land, since money is simply created for that purpose. All the ground rents can be used for the basic income annuities.
There are a lot of sticking points such as too many people per acre (we will solicit charitable donations to bring in densely populated impoverished communities), under-water mortgages, and absentee landlords. Even absentee landlords, who have no regard for their tenants, benefit by the $370 per month for housing given every tenant. Not only does the landlord receive 20 years’ worth of ground rent in exchange for the sale, but the rents on the apartments will tend to increase slightly due to the massive tenant housing subsidies.
A few landowners will not sell and we won’t care. Their land will end up as worthless islands in a sea of liberated territory.
You might believe it is a pipe dream that the vast majority will sell their land, even with these perks. But the amazing thing is that it doesn’t matter. Consider that you have a choice between; living in territory where the ground rents go to a landlord or a bank, or one where they come back to you, all other things being equal. During the land rush of Phase III, called “deluxe land expansion”, renters will flock to land that promises to sell, in order to acquire basic income for life. For this reason, it would be foolish to refuse to sell, for the land being held back will soon become marginal and worthless, and picked up for a song.
There are other techniques, derivatives of the law of rent, used in the three phases of the viral community discussed in AFFEERCE Volume II, The Plan. Together they constitute what I like to call “progressive mercantilism.” In the book Protection or Free Trade, Henry George failed to recognize that mercantilism helped landlords. He failed to differentiate between the export of labor (finished goods and services) and the export of land (raw materials), and foolishly argued that shipping out goods in exchange for currency diminished the wealth of the nation. By these, his third fatal mistake, the simple path to a just society was obfuscated and all of humanity has paid the price.
In the next installation, I will leave the plan (mostly) and return to the vision to discuss the set of rights (natural and sovereign) and political structure that logically follows from the economic principles of AFFEERCE.
This article is a part of an ongoing series explaining the AFFEERCE Georgism 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. To further understand, check out AFFEERCE Volume I – The Vision at AFFEERCE.org. For more info on AFFEERCE natural rights, See AFFEERCE – Volume I – Chapter 8 – The Natural Rights of Mankind. For an introduction to AFFEERCE, See AFFEERCE Volume I – Introduction and AFFEERCE Volume I – Chapter 1 – What is AFFEERCE? See also the stand alone PDF “What is AFFEERCE”a 12 page introduction. All of these are available free on the AFFEERCE website http://AFFEERCE.org.
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Jeff Graubart is a software engineer and one of the earliest fighters (1970s) for marriage equality. He organized the first conference in 1973 for an LGBT March on Washington. He has spent a lifetime applying principles of logic to ideologies on the left and right. AFFEERCE Georgism is the outcome of that lifetime endeavor. Currently he is working on what he hopes to be the next viral app called NowSeeHere.tv. He plans on using the revenue from NowSeeHere to fund the land trust that will give birth to AFFEERCE Georgism. More information is available at http://AFFEERCE.org.