Allowing rent to mostly accrue to land owners (as in Canada and other democracies) has the same negative effect as not collecting it all, as in the former USSR.
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Michael Hudson writes:
The former Soviet Russia and other [communist] economies had NO payment of rent. But they had land. Because Russia did not collect the rent for land it led to inefficiency. Bureaucrats let the "best" flats in a city to Communist Party members in return for favours.
I visited Minsk in 1983. They had a huge, successful tractor factory whose grounds on one side of the city spread from almost the centre to the outskrits. It consisted of a rambling network of workshops and loads of wasted space. I asked the factory manager how much they paid for the site? He answered (through an interpretor) "You have to realise this is a communist economy and the land is free".
His factory was prohibiting other potenial industries and enterprises (such as worker or consumer co-ops) from operating on the most productive sites. Even our trade union-owned hotel was on the outskirts of town close to a forest.
If the manager had had to pay the economic rent for the site then he/she would have contracted the amount of space used, probably to the cheapest land on the outskirts or maybe close to a highway or railhead. But releasing a huge amount of land for other productive purposes. In addition the state would have received a considerable income from land rent from all users especially with new enterprises springing up on favourable available sites.
In the former communist Yugoslavia under Tito, I once read of a dispute between a forestry co-op and the local town about who should pay for a new road. The town council refused to finance it as the forestry co-op would be the main beneficiaries. The co-op refused to pay as they claimed that it was the civic duty of the town council to build roads. As far as I know - the road was never built!
Now if the Communists had not just nationalised land - but also charged the full economic rent how efficient would the Soviet system have become?