Where’s the money coming from?

“Where’s the money coming from?” is often the cry of those to whom the money is flowing, the parasitical 0.1%, together with their less-likely-to-be-successful (but equally ambitious) rent seeking adherents.

It’s the job of our political representatives to ensure that what needs to be done gets to be done: such basic things as taking care of our roads, rail, ports, airports, energy, education, health, social welfare, public security and defence systems.

If governments take a proactive stance on these matters, there will always be enough money. That’s because the jobs attendant on these issues will fund themselves. If employment is taken to fulfill these tasks efficiently, the money will always flow to them, not vice-versa. Businesses take on additional employees in order to have them do additional work which will make the company greater profits. It is a public good when business employs extra people, but it is not done out of the goodness of its heart: the self-interest of the company is involved, and its workers are worthy of their hire.

The role of government is to assist business by organising the extension and maintenance of necessary physical and social infrastructure, and there is also a role for government administration and infrastructure itself. Although mixed economies have been the hallmark of all successful nations, the point has been lost over the last forty years on supporters of the ideas of Ayn Rand, whose malign influence has achieved political prominence.

“There is no role for government” has seen natural monopolies like power supply, freeways, and airports, whose rents had flowed into the public coffers, sold off to rent-seeking companies in the name of competition and free enterprise. However, once in place for a number of years, we’ve seen their excesses prove to be a faux-competition. It would be a worthy public aim to seek to retrieve control of these natural monopolies, because this was once correctly perceived to be an important role of government.

So when the cry does go up: “Where is the money coming from?” in connection with any worthwhile public expenditure, people may need to be reminded that the central government has control of money-printing and, if the jobs are there to be done and people do them, they ought to be paid for their work.

This is not the case with rent-seekers, however. They have carried out no work in capturing unto themselves the publicly-generated economic rent, the net surplus, which accounts for some 30% of the national economic pie. It is the job of good government to see that this is returned to the public coffers.  This is a secondary source from which ‘the money’ should come.

1 + 2 ADDS UP!

These two interesting quotes assist to make the Georgist case that land prices and taxes are both problematical:-

(1) Richard Cobden: “Cheated, Robbed and Bamboozled”

“I warn ministers, and I warn landlords and the aristocracy of this country, against forcing on the attention of the middle and industrial classes, the subject of taxation ….. If you were to bring forward the history of taxation in this country for the last 150 years, you will find as black a record against the landowners as even in the Corn Law itself.

I warn them against ripping up the subject of taxation. If they want another league at the death of this one – if they want another organisation and a motive – then let them force the middle and industrial classes to understand how they have been cheated, robbed and bamboozled …..

For a period of 150 years after the conquest, the whole of the revenue of the country was derived from the land. During the next 150 years it yielded nineteen-twentieths of the revenue. For the next century down to the reign of Richard III it was nine-tenths. During the next 70 years to the time of Mary it fell to about three-fourths. From this time to the end of the Commonwealth, land appeared to have yielded one-half the revenue. Down to the reign of Anne it was one-fourth. In the reign of George III it was one-sixth. For the first thirty years of his reign the land yielded one-seventh of the revenue. From 1793 to 1816 (during the period of the land tax), land contributed one ninth. From which time to the present one twenty-fifth only of the revenue of the revenue had been derived directly from land.

Thus, the land, which anciently paid the whole of taxation, paid now only a fraction, or one twenty-fifth, notwithstanding the immense increase that had taken place in the value of the rentals. The people had fared better under despotic monarchs than when the powers of the state had fallen into the hands of a landed oligarchy who had first exempted themselves from taxation, and next claimed compensation for themselves by a corn law for their heavy and peculiar burdens.”

  • Richard Cobden: Parliamentary Corn Law debates [1845]

(2) Professor Thorold Rogers on living costs:

“I have stated more than once that the fifteenth century and the first quarter of the sixteenth were the golden age of the English labourer, if we are to interpret the wages which he earned by the cost of the necessaries of life. At no time were wages, relatively speaking, so high, and at no time was food so cheap. Attempts were constantly made to reduce these wages by Act of Parliament, the legislature frequently insisting that the Statute of Labourers should be kept.  But these efforts were futile; the rate keeps steadily high, and finally becomes customary, and was recognised by parliament.  It is possible, that as the distribution of land for terms of years became habitual, the phenomenon of which has often been noted of peasant proprietorship, a high rate of wages paid to the free labourer, may have been exhibited in the period on which I am commenting.”

  • James E Thorold Rogers: Six Centuries of Work and Wages: The History of English Labour, T Fisher Unwin, London 1912, Eleventh Edition, p.326