The Brexit, like most national and international issues, was founded in Britain’s prevailing economic conditions. For a long time, the Brits had been feeling no love for their politicians who had seemed incapable of solving their declining incomes, their levels of debt and general wellbeing. Everything in life seemed to be getting harder, so give us a ‘remain’ or ‘leave’ option and we’re bloody well going to let our so-called ‘representatives’ know all about it. That’ll take them away from their extraordinary attachment to the City! That’ll make them sit up and take notice about how unhappy we are!
Problem is, the reason for the anger is often subliminal. It often expresses itself against migrants, or a political party, a leader, or some idea or other, but it’s always fundamentally based in declining standards of living.
People don’t realise, at bottom, what politicians are failing to address is the un-taxing of wages and capturing instead unearned incomes – economic rents. It needs to be said two or three times to sink in, but that’s exactly what these pages have been all about: explaining why we have been slowly declining towards the end of another Kondratieff Wave, another economic depression, since 1973. It’s about time we woke up to this fact.
It will be a pity if a forthcoming multitude of reasons for the Brexit distracts from the stupidity of taxing wages and earned profits instead of unearned incomes. Worse, if the Brexit is wrongly blamed for the depression!
Nobel prize-winner Joseph Stiglitz has it pretty right. Like Michael Hudson, he notes a serious distinction between rents and taxes. Therefore, capturing economic rents (unearned incomes) should not be confused with “fiddling with taxation”, as some have critiqued the revenue switch from taxes to economic rents recommended for Australia by the Henry Tax Review.
Understanding rent-seeking is to see exactly how wages and profits are having the life squeezed out of them by speculation in economic rents. The rentier economy into which we’ve morphed has not only dug a vast wealth chasm between the 0.1% and everyone else, but it has clearly ground world economies to a halt. By blaming outcomes—governments; debt; Britain’s vote today to leave the European Union, and so on—we make ourselves impotent, effective action remaining both contentious and impossible.
The fact that the US has left the rent-seeking gate open suggests it has learnt nothing at all from the leveraged sins of Wall Street which led to its 2007 property collapse and brought the US financial system to its knees. This is nothing short of flabbergasting.
Surely we need to set our sights on capturing ‘super profits’ (economic rents) if wages and capital are to be freed up and the wheels of industry and productivity are to turn again? However, the remedy is either invisible to mainstream analysis or not contemplated by neoliberal governments because it will take the speculative puff out of land prices. Hopefully, Brexit will assist in undertaking this necessity.
Australia and the US employed this reform constructively during the Progressive Era, in the wake of the 1890s depression. Failing similarly to capture a far greater part of economic rent than we currently do will undoubtedly consign us to contracting Japan’s lingering economic disease.
As economic rent occupies some 25% of the economy, the term ought to be on everybody’s’ lips instead of being verboten, but if that’s too technical ‘unearned incomes’ will have to suffice.
Amending Benjamin Franklin: “The only certainties in life are death and economic rents.”
“There was a hemispheric conference called by Washington, February 1945, in Mexico where the western hemisphere was compelled to adopt an economic charter for the Americas which banned any interference with market principles. The goal was—read the State Department reports—to oppose the new nationalism in Latin America which was based on the idea that the people of a country should benefit from the country’s resources. That’s evil: can’t allow that. It’s western and US investors who have to benefit from resources.
So that was the Economic Charter for the Americas, imposed on the countries in the hemisphere with one exception – here. The United States did not follow this policy. Quite the contrary. As I mentioned, there was a massive development of a State-based economy with an industrial policy, the kind that created the modern high-tech economy.”
The so-called “Employment Debate” between Brendan O’Connor and Michaelia Cash at the National Press Club today has shown just how far both sides of politics have become removed from reality.
The world has just experienced the greatest real estate bubble in its history—and Australia’s is yet to burst—but neither party can bring themselves to mention that this has had a disastrous effect on productivity, genuine full employment, and housing affordability for our young. They apparently support such bubbles.
Prosper Australia showed that economic rents—or unearned incomes—constituted more than 22% of the economy in 2012. These would now be nearer to one quarter of the economy. If a greater part of unearned income were to be captured for revenue, and other socially-damaging revenues were abolished accordingly–as per the Henry Tax Review recommendations–it is not clear that both wages and profits must also be greater; that employment would be greater?
No. Brendan O’Connor representing labour, and Michaelia Cash standing in for capital, would rather continue to be adversaries, failing to see they are actually complementary parties in wealth creation, and that both ‘sides’ are currently being savagely squeezed by those rent-seekers who continue to capture some quarter of Australia’s GDP unto themselves.
Rentiers turn themselves into millionaires and billionaires at a dire cost both to labour and capital – yet this can be ignored by O’Connor and Cash who claim to represent each.
This is worse than sad: it’s disastrous.