As a research associate of the Land Values Research Group, land values speak to me about many things. They reflect relative advantage. You know, Ricardo’s Law of Rent, otherwise known as location, location, location and all that?
A great part of land values are situated within our capital cities, and it is in our capital cities where real estate yields are the lowest, because land is deemed less risky in the capitals than in rural and regional areas. That’s why land-based revenues are good for rural and regional people: their lower liability for land tax reflects lower land values, and acknowledges their greater transport needs and costs. As income taxes make no such concessional allowance, farmers and people in the regions get the double whammy, thereby doing it much harder than their city cousins.
As a decided land value bug, it eludes me why policymakers fail to see the enormously positive implications the Henry Tax Review’s recommendation for an all-in land tax have for decentralisation and reducing the size of our overgrown cities.
Another thing that leaps out at me is the Australian government’s currently misplaced solicitude for businesses, with its proposal to provide them with almost $50 billion in tax cuts over the next ten years.
Is that the best way to improve business outcomes? I think not.
Here, again, the relative quantum of land values may offer a hint. Commercial and industrial land values currently amount to a total of $380.2 billion; that’s only 8% of Australia’s total land values of $4,722.2 billion. (ABS 5204 Table 61) So, what’s the alternative to cosseting business in this fashion?
Wouldn’t putting an extra $50 billion over the next ten years into the hands of those occupying the other 82% of land values be a far better option to improve the prospects for Australian businesses? If people have the extra money, aren’t they likely to spend it?
You tell me.
Think in terms of land values if you want to see where the great privileges lie.
The latest episode of “Jennifer Byrne presents” isn’t on the web as I write, but her latest book club discussion, on the subject of greed, was most entertaining.
Entertaining but frustrating.
Jennifer’s guests were writer Shane Maloney, adman Geoff Cousins, adwoman Dee Madigan, and Boost Juice founder Janine Allis.
Cousins has shown that he is a businessman with a conscience, and provided worthy contribution to the discussion, but seemed to believe there’s no workable alternative to capitalism.
Where Cousins and Janine Allis seemed to define greed as excessive capitalism, Shane Moloney thought capitalism was inherently flawed, as it is, but he couldn’t propose an alternative.
Janine Allis went as far as to say there’s nothing wrong with banking – even though it is the beating heart of what is fundamentally wrong with capitalism: the industry sans pareil at capturing unearned ‘super profits’, or economic rents – via mortgages which are based on the ‘security’ of a bubble in land prices. [!]
We went back to BC with greed, but not to where Leviticus tells us land must be rented, not sold in perpetuity.
How on earth do we solve the tremendous problem of so many people being ignorant of private rent-seeking – the very mechanism that has driven world economies into collapse?
Any workable answer gratefully accepted.
Great discourse the public needs to heed (but won’t?)
Ignoring the lessons of history
Any analysis of history shows that for justice to be done to all people, the rent of land must be paid into the public treasury for the privilege of the exclusive occupancy of land: it cannot be ‘owned’ without this contingent liability. All the great social philosophers, from Leviticus (25:23-24) to the USA’s Henry George have signed up on this point.
However, we close our minds to this requirement, choosing to break this natural law and building up inflation-generating land price bubbles. These regularly burst into recession every 18 years or so, and eventually into the major economic depression such as we are now experiencing.
As a real estate valuer acquainted with the principles of Ricardo’s Law, it seems obvious to me that we need to comprehend that land prices are necessarily inflationary, because they simply represent the privatisation of what should be public land rent. Pathological land prices therefore build up into bubbles until they burst into a partial correction. Although banks and borrowers are both savagely affected by this process, governments, in the thrall of the rent-seeking 0.1%, choose to bail out the banks who misguidedly lend against the security of a bubble. They should rather have chosen to write down the impossible debt of those borrowers conned by the banks who know this unfortunate history all too well. They prefer to bury this history in order to continue the monopoly game to their advantage.
There is a long history of people trying to feather their nest in land price bubbles, going back to Cicero in Ancient Rome: “The Consuls valued my house at nearly two million sesterces at their assessor’s advice: and the other places very stingily – my Tuscan villa at half a million sesterces, and my Formian at half that sum.”
We continue to ignore history’s rather obvious economics lessons because we like to think ‘it might be different this time’ – that is, before we learn to our great distress that it never is different.