The Role of Land Tenure, Taxation, and Monetary Systems in Achieving and Enjoying Free Trade

• Author: Edward J. Dodson
• DOI: http://doi.org/10.1111/ajes.12306
• Date: 01 January 2020
• Published date: 01 January 2020

The Role of Land Tenure, Taxation, and

Monetary Systems in Achieving and

Enjoying Free Trade

By Edward J. dodson*

abstract. Civilizations rise and fall based on the effectiveness of their

socio-political arrangements and institutions. The institutions that

matter most are the laws and customs that govern 1) production and

exchange of goods (trade), 2) land tenure and the distribution of the

surplus associated with it, 3) the levying of taxes to provide public

goods and services, and 4) the monetary systems adopted to facilitate

such activities. If those institutions distribute the benefits of civilization

equitably to all members of society, the result is likely to be peace and

prosperity. However, if the rules of a society are designed to protect

the interests of an elite, conflict is likely to ensue. Unrestricted trade

across national borders (“free trade”) has the potential to produce

socially beneficial outcomes, but it is not sufficient to overcome

systemic injustices associated with flawed systems of land tenure,

taxation, and monetary management. This article makes use of

historical examples to examine trade in relation to the other institutions

to show why just social arrangements must be considered an essential

part of trade policy.

Introduction

Over the course of the last 300 or 400 years, a thoughtful, but not

always evidence-based, debate has occurred over the degree to which

the state should regulate exchanges of goods and services. Late in

the 19th century, the American political economist Henry George

American Journal of Economics and Sociology, Vol. 79, No. 1 (January, 2020).

DOI: 10.1111/ajes.12306

© 2019 American Journal of Economics and Sociology, Inc

*Vocation in financial services. Retired in 2005. Avocational adult educational instruc-

tor in political economy and history for almost 40 years, including Osher Lifelong

Learning Institute at Temple University and the Learning Is for Everyone program at

Rowan/Burlington County College. B.S., 1973, Shippensburg University; M.L.A., 1990,

Temple University. Frequently publishes on principles of political economy in the tradi-

tion of Henry George. Email: edod08034@gmail.com

88 The American Journal of Economics and Sociology

(1839–1897) contributed what many reviewers have regarded as one

of the clearest and most persuasive arguments in defense of free trade.

George ([1886] 1950: 277–278) cautioned, however, that certain con-

ditions were required before the full benefits of free trade could be

realized:

Our inquiry has shown that the reason why the abolition of protection,

greatly as it would increase the production of wealth, can accomplish no

permanent benefit for the laboring class, is, that so long as the land on

which all must live is made the property of some, increase of productive

power can only increase the tribute which those who own the land can

demand for its use.

George was referring to what political economists from Richard

Cantillon in the mid-18th century to George’s contemporary Karl Marx

described as the great “land question.” George made his mark on the

history of economic thought, not in defense of free trade, but through

an attack on the private appropriation of rent—wealth derived from

land ownership. To George, private control of rent amounted to the

redistribution of wealth from actual producers of wealth to those who

control wealth through their ownership of the land and other natu-

ral resources. Generations of political economists have also consis-

tently identified a third systemic issue facing human societies: the

nature and use of money and credit. Together, these three systemic

challenges—trade, land tenure, and money—affect one another in

a manner that must be understood if societies are ever to achieve

sustainable economic growth, full employment, and the wisest use of

natural resources. This article examines and evaluates the evolution

of human civilizations and the institutions designed to address these

challenges. Only by examining the ways in which trade, land tenure,

taxation, and monetary systems interacted with each other in their

historical development can we understand how flaws in those systems

persist and continue to create economic problems.

Development of Human Civilization

The history of humankind’s struggles to establish civilizations gov-

erned by the rule of law is characterized by a complex process of