INCOME TAX LEVY TO PAY FOR FLOOD RECOVERY

                       Kangaroo finds refuge
Kangaroo finds refuge

Most Australians have a feeling there’s something wrong with the manner in which Australian Prime Minister Julia Gillard proposes to assist the tragically flood affected residents of south-east Queensland. They need our help, but is increasing income tax the way to do it?

Of course not.

An Abbot-led Liberal government would certainly have done no better, but Prosper Australia’s David Collyer today shows how the Labor government has let another positive opportunity (that could have more easily been sold to the Australian people) slip through its grasp.

Moreover, when capturing land rent, valuations of catastrophe-affected lands will decline sharply and naturally, to recognise the plight of people. As land value always fairly reflects owners’ situations, they will always make the best revenue base. Relative incomes don’t do this. Big landowners recoup their taxes in the rise in the price of their properties.  Can renters and the poor do this?

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Australia Day here; State of the Union address there

            State of the Union Address
State of the Union Address

Barack Obama has just completed a most inspiring piece of rhetoric – a brilliant pep talk encouraging Americans to do better.

Although the US President did touch upon closing loopholes and stopping rorts in the tax system (particularly those favouring the wealthiest 2% of Americans), he didn’t find a place to grease the wheels of productivity with economic rent.

Therefore, stuck with advisors steeped in their neoclassical economic training, Obama unfortunately won’t be able to deal with US debt nor meet his high-minded agenda.    

Without the re-discovery of natural resource rents, the future is bleak for America.  🙁

At least, on Australia Day, Australians can celebrate that they have the Henry Review recommendations on the backburner.

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[My other post today is below.]

LAND PRICES, TAXATION AND THE BANKING SYSTEM TO BLAME …

… NOT VALUERS

Real estate valuers come in for a shellacking from time to time. Some Australian banks even tried to blame them for the 1991 recession, hoping they could sue them for losses the banks made when commercial property values collapsed as much as 75% in central city locations.

A friend yesterday asked me what I thought about the following article by Adam Schwab in Crikey yesterday:

22. Should the property market tumble, taxpayers will foot the bill
Adam Schwab writes:
BIG FOUR, CBA, PROPERTY MARKET, PROPERTY VALUATIONS
Memo to Australian journalists: For the sake of your credibility, the big four banks did not save Australia from the global financial crisis. Bank executives are not oracles with some sort of divine ability to allocate capital (in fact, the contrary is more accurate). Over the past three years the banks skirted the global crisis and continued to make record billion-dollar profits because they have continued to prop up the over-valued collateral on their bloated balance sheets, and because the Australian taxpayer continue to guarantee their funding sources.One could conclude that Australian banks have become a walking embodiment of moral hazard — privatised profits and, should the need arise, socialised losses. Meanwhile, the esteemed heads of these organisations receive remuneration in the millions or tens of millions, headed by Ralph “the $16 million dollar man” Norris.In fact it is Norris’ Commonwealth Bank that has placed Australian taxpayer dollars most at risk, as the briefest of looks at the bank’s balance sheet confirms.The CBA has total assets of $646 billion (which means its return on assets is a paltry 0.92%). These assets largely consist of loans made by the CBA to its customers. For example, if you have a mortgage with the CBA, the amount that you owe to the bank would appear on the bank’s balance sheet as an asset and on your personal balance sheet (if you were to construct one) as a liability. In CBA’s case, about half of its assets ($314 billion) are loans made on residential property. It has about $20 billion in personal loans (usually unsecured) and another $155 billion in business loans. While the CBA reduced its business loan book by $5 billion in 2010, it continued to grow its home loan book by $34 billion or 12%.The CBA then has about $610 billion in liabilities, of which $365 billion comes from depositors and the rest it borrowed from various places. That leaves about $35 billion in “net assets” or equity — this is shareholders’ funds.

The CBA therefore grew its loan book in 2010 by about the same amount it has as equity. This shows just how risky investing in a bank is.

When making a loan for a dwelling, banks such as the CBA will lend up to 95% of the value of the property (with an insurer covering the risk above 80%). The CBA is incentivised to keep growing its loan book because so long as mortgagees make their interest payments, the CBA is able to grow its profits. This was shown last year, when the CBA was able to grow home loan income by $700 million or 38%. This was largely due to strong volume growth (the bank made more loans).

If you think this could be a risky way to improve profits, you’d be right.

It is even riskier when deeper analysis is made into how banks “value” properties when extending loans.

Banks aren’t completely reckless — they don’t simply lend money to anyone. For example, if someone wants to buy a two-bedroom property in Frankston, the bank won’t lend the buyer $2 million. Instead, the banks will usually get a “valuation” done on the property. The problem is, most house valuations don’t value the asset on the present value of future cash flows, but rather, the valuation will generally involve a study of “comparable sales”.

That is, if the three-bedroom house next door sold for $800,000, and the house they are valuing is the same size, they will generally attribute a near identical value. The problem is, the house next door may very well be vastly over-priced (possibly, because another bank lent the owner of that property a sum based on a similarly overly optimistic valuation). This creates a “faux-positive feedback” loop.

Let’s consider a specific example.

Say the Commonwealth Bank agrees to lend a purchaser enough money to cover 90% of the cost of a property that the person wishes to buy (we will call this Property A). The purchaser ends up paying $500,000 for the property.

A few months later, a property down the street (Property B) that is quite similar to Property A is bought by a cashed up investor who has seen the property market appreciate and doesn’t want to miss out on the potential gains. The buyer of Property B has cash so didn’t need to borrow from the bank. Because the buyer of Property B has heard that property never goes down, and Property A was sold a while ago for $500,000, the buyer of Property B pays $550,000 for the asset. His rental yield is low (far less than what he would get putting the money in the bank), but it doesn’t matter — he will make a lot more money if the price of the asset continues to rise at 10%.

Later in the year, another house (Property C) also in the same street, is for sale. This time, the potential purchasers need to borrow from the bank and can contribute about 10% of the purchase price. Before the bank will lend the buyers any money, they get another valuation done. This time, the valuer (who is paid per job, so doesn’t spend too much time and doesn’t really care for the accuracy of the valuation) sees that Property B sold recently in the same street for $550,000. Property B and Property C are similar, so the valuer deems that property C is worth $570,000 because the market seems a bit stronger since Property B was sold. During that time, the rental yields for Properties A, B and C have not increased at all, so in reality, their respective value would not have changed.

Based on that information, the CBA is happy to lend the buyers of Property C about $510,000.

What has just happened?

In a short time, the price of Property C (and Property A) has increased from $500,000 to $570,000. This is not because of any fundamental shift in the value of the properties (as noted, rents didn’t rise), but rather, because the bank was willing to lend the borrower more money. (The difference in equity between the buyer of Property A and Property C is only $7,000, so the buyer of Property C doesn’t even really notice the price rise).

In the short term, the result is a positive one for the lender. That is because the buyer of Property C would be paying greater interest on their borrowing than had the price of the property remained the same. Perversely, the value of the “asset” on the bank’s balance sheet has also increased.

The increased profits made by the bank (or back to real life, made by the CBA in 2010) flow not only through to the bank’s bottom line, but also to its executive team’s hip pockets. This is because the CBA’s Group Leadership Share Plan is based directly on how much profit is generated by the bank. The more loans the bank makes, the more profits is generated, the more executives are paid.

Unsurprisingly, the remuneration paid to the CBA’s top 10 executive sky-rocketed, from $33.8 million in 2009 to $56.7 million in 2010 — an increase of 68%.

There you have it — a quick example of how the banks have been a leading cause (albeit not the only cause) of Australia’s property bubble, and have created an almighty risk for not only property owners, but also taxpayers. Meanwhile, those very risk-taking executives are handsomely rewarded for the privilege.

Should Australia’s residential property market tumble, and the value of the $320-odd billion on CBA’s balance sheet be written down, it will be the taxpayers footing the bill — not the executives.

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I agree with the thrust of Schwab’s piece. It’s a good article, except for his attack on valuers as a group based upon a rather contrived example. It’s akin to painting all lawyers such as Adam as being negligent because not all of them are perfect. It’s nonsense.

I replied to my friend that, like lawyers, there are good valuers and not-so-good valuers, and the incidence of valuers relying on only one sale (even if it was the sale of the house next door) without further inquiry is tiny and remote.

It won’t be bad valuations that bring our banks down, but a general collapse in property prices as Schwab himself says. He’s also correct that Banks aren’t completely reckless — they don’t simply lend money to anyone.”

Even when the market is bubble-inflated, valuers are required to assess potential sale properties at current market value. But they won’t accept a contract price as the market value of a property if it differs from the weight of comparable sales evidence. 

Although the valuer does provide comments on the risk of the market declining, this is usually ignored by many bankers who simply want to provide a mortgage based upon the market valuation provided by the valuer. Most treat comments on the level of risk to the current price declining as merely conjectural, believing lending only 80% against the value will cover any risk of a decline in property values.

Yes, Sir Ralph Norris is paid excessively from the public rents banks accumulate unto themselves, Adam, and I agree the banking system has failed us. But am I now being just as tough on bankers as Schwab is on valuers? No, I don’t believe  so. There is a structural problem here that needs to be addressed; repetitive failure of bank risk management is central to needless boom-bust cycles and I’ve written about it before.

Until the banking system and governments address the fact that bubble-inflated land prices have an ability to disappear overnight, we’ll continue to repeat financial and social collapse.

EXPLAINING REAL ESTATE BUBBLES BY ZONING CONTROLS?!!

                  Wendell Cox
Wendell Cox

IF IT QUACKS LIKE A DUCK AND WADDLES LIKE A DUCK, IT’S A DUCK

The Age reports today that Wendell Cox’s Demographia has released a study showing Melbourne to be 321st on a list of 325 most affordable world property markets.

In other words, we’re almost the world’s most unaffordable market: almost the world’s dearest city. Incredibly, London, with a population of 7.6 million is said to be cheaper than the city of Geelong which is home to a population of only 200,000 souls.

Amongst more important things I’ll mention later, it could be argued that homes and sites in Geelong are generally larger than those in London, but that’s not mentioned by Cox. Instead, he shoehorns Melbourne’s astronomical residential property prices to square with the extraordinary claim that they’re a result of its zoning regulations. Perhaps this means Melbourne also has the 321st worst residential zoning regulations in the world?

A “shortage of land” to explain ludicrous land prices was also the story put about by real estate agents in California just before its real estate bubble burst in 2007. For one reason or another, they (and Cox) don’t want to accept the rather obvious connection between California’s high land prices and the ceiling Proposition 13 had put on its property tax in 1978.

A strong case may be made that it was a combination of a relatively low property tax regime, necessitating higher taxes on productivity, which turned the once golden State of California into America’s economic basket case. It is no coincidence that the highest property tax-paying states in the US have proven to be its best economic performers; the property tax warns off the land speculator whilst enabling other taxes to be kept to a minimum.

Ken Henry’s review of the tax system caught up with the principle of capturing publicly-created economic rent by taking taxes off productivity and putting them onto land and natural resources, but the government has run scared of any such fundamental reform, preferring not to attempt to educate people to the principles behind such a proposed revenue switch. There’s a vast property and mining lobby to be appeased. Such timorous leadership consigns Australians to repeat the sorry saga of property bubbles and ensuing economic busts.

Wendell Cox and his ilk don’t particularly like zoning controls. They smack of excessive government interference with development. But whilst many examples may be found of excessive bureaucratic intervention in the development process, the zoning of land is clearly not the culprit for high prices.

It cannot be, because there is no shortage of suitably zoned residential land in Melbourne, now, nor previously. Yet the Housing Industry Association, Urban Development Institute of Australia and the Property Council of Australia have signed up to this explanation instead of understanding the dramatic benefits Ken Henry’s proposals would bring to industry and sustainable development .

There’s more than enough residentially-zoned land around Melbourne, and a massive amount of vacant and underutilised land within its existing boundaries. Nevertheless, Wendell Cox has found such admirers as the Institute of Public Affairs’ Alan Moran  to support his vacuous conclusion. The Ayn Rand-like baggage to delimit zoning controls, if not get rid of them altogether, has come to override their logic.

Like most people untrained in the theory of valuations, Cox and Moran haven’t yet discerned that land price is the capitalization of that part of the economic rent of land which has not been captured to the public purse. The amount privatised simply becomes capitalized into the land price of a block of land.

Except for relative locational values, supply and demand plays little part in the price of a residential lot. Up-front government development costs play a far greater role. We allow too much publicly-generated economic rent to be privatised by a relatively few individuals, and Wendell Cox is their spokesperson.

As with real estate interests, who don’t appreciate the principles behind land-based revenues, Australia’s big mining companies recently also displayed a preference for retaining the public’s rent in their profits. Of course, banks also captured the economic rent of land from the public via interest and capital mortgage repayments on bubble-inflated prices. In both cases, the big boys will take it if the public doesn’t claim it.

For corroboration that a land price bubble is the result of inadequate rent capture, Cox and Moran could do worse than consider the early affects of Canberra’s land rent system. Public rent capture in the ACT initially kept both land prices and local taxation at bay, until the system was eventually undermined by the failure to maintain land rent payments at anywhere near market levels.

Since then, vested interests and ignorance have done their darndest in the ACT to ensure that there’s no difference between what is now only a nominal land rent system and freehold ownership in Australia.

Interestingly, when there was once no damaging income tax, it was often incumbent upon the freehold owner to pay his annual ‘quit rent’ if he wished to remain in possession of his property. (Owe[n]er: Middle English: He who owes the land rent.)

Contrary to Demographia’s conclusion, my 2007 study “Unlocking the Riches of Oz: A case study of the social and economic costs of real estate bubbles 1972 to 2006” shows the international fashion for reducing land and property taxes, which has amounted to a virtual contagion from the outset of the 1970s, to have been responsible for stimulating each of Australia’s four real estate bubbles.

In an explosion of purple rage to the Heartland Institute on 4 July 2007, Wendell Cox castigated me for being anti-suburban for having pointed out his logical error in blaming zoning controls for bubble residential prices. I also showed the US cities he held so close to his heart for having the least zoning controls also had the highest crime rates in the United States. His own home city of St Louis topped the US crime list with its incredibly high murder rate. To let municipalities grow in an unbridled fashion in an environment of high taxation and inadequate infrastructure invites poverty and criminal behaviour.

Hopefully, the strange conclusions Cox and his fellows draw from their data will one day come to be seen for the canards they are. Meanwhile, the press will continue to report them dutifully as fact.

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Breakfast Radio 3AW’s Ross Stevenson this morning asked Wendell Cox whether our ‘negative gearing’ of real estate had anything to do with Australia’s unrealistically high property prices.

“Probably not” (or something to that effect) said Wendell.  “I don’t know much about that.”

Nor anything much about how the failure to collect economic rent instead of taxes created this worldwide real estate bubble, Wendell!

A NEW CONTINENT IN ECONOMICS

7 continentsWhen I first discovered the Georgist School of economics, I probably experienced much the same feeling European navigators had when they “discovered” the Americas and Australia.

Here was a new continent, unknown to western civilisation: tangible and true – a new world of opportunity.

Trouble is, where Europeans chose to work indefatigably to develop those opportunities in the Americas and Australia (and we can’t deny this was often done with a rapaciousness that came at a horrible cost to the native populations),  the Georgist school has continued to be kept a secret from the world.  Why?

Whilst Chicagoan, Keynesian and Austrian economists cling to the restrictive neo-classical limits of their shorelines, the vast new territory that is Georgism remains pristine, untouched – even though it offers incredible opportunities to resolve forever many of the problems that currently beset the world.

Perhaps it’s time for the world to discover that the 50% of the economy that is economic rent – not the miserable one to two per cent guessed at in Jan Pen’s Income distribution: facts, theories and policies (1971) – is owed back equally to everybody because they create it?

Once known and really understood, the implications for the freedom of humanity will prove more important than the discovery of new continents.

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URGENT NEED …

taxes… ABOLISH TAXES AND PAY THE RENT

I hyperlinked my last post to Taylor Caldwell’s attack on income taxes. It echoed Thomas Jefferson’s warnings that, by having citizens of America work for government, income tax would enslave them.

In view of these incredibly strong words, why do we simply accept the levying of income taxes today?

The Progressive Income Tax equates to slavery? Certainly. Enormous bureaucracies are engaged looking into our private business affairs. Big Brother has been with us for quite some time.

And, if we acknowledge the current inability of nations such as Portugal, Ireland, Italy, Greece and Spain to meet their international liabilities, it may indeed be seen that the peoples of these nations have been made slaves to their creditors; they’ve been subordinated to debt and bank bailouts. People matter only insofar as they will underwrite these debts with their incomes for two or three generations.

And it’s not to draw too long a bow to add the USA to the top of the sovereign risk list. Britain might also be thrown into the mix.

However, these countries will prove only precursors of every country on the face of the earth, because we’re having the economic depression of all depressions if you are able to pierce through the veil of media denial, folks.

How then did we ever come to accept income taxes?

Income tax was introduced at the federal government level in the USA as a WWI measure, and in Australia during WWII. Governments knew that war emergencies were the only manner in which people would ever accept the introduction of an income tax nationally at the time.

But the oligarchy’s job was done and we succumbed to it by not insisting income tax be revoked after the wars. We thereby made ourselves slaves in fact.

As much as I don’t care for the ideas of the Tea Party movement, it is undoubtedly correct to identify income tax as problematic. Unfortunately, the Tea Party doesn’t understand how economies work, and in this it is like just about everybody else.

If economists and others came to understand the economic distributional relationships between the returns to natural resources, labour and capital, P = R + W + I, they’ll see there’s no place for taxation, that ALL taxes on earned incomes enslave citizens, people who comprise the backbone of economies, and that they may be liberated only by the public capture of publicly-generated land and resource rents.

Of course, the oligarchy wrongly believes it’s in its interests to keep them ignorant of these facts and under the serfdom of depression-inducing taxation. It’s not, because even the oligarchs are going to suffer big time in this one.

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OTHER TRAGEDIES: DROUGHTS AND FLOODING RAIN

Few countries are free from devastating natural phenomena of one sort or another, whether it be bushfire, cyclone, tornado, earthquake, volcano, flood or landslip.  

In February 2009, 173 Victorians were tragically killed in bushfires. Twenty is unlikely to be the final number of those drowned in the floods of south-eastern Queensland last week. This week lesser, but nonetheless devastating, floods have now been visited upon people in many parts of rural Victoria.

Dorothea Mackellar’s touching “My Country”, of which most of us know smatterings, told years ago of the drought and flooding rain that do not lessen her love (nor that of most Australians I would think), for the beauty and terror of a country that she says is no England. I can’t reproduce the poem here because agents for the estate of Dorothea McKellar have extended the copyright and won’t allow me to do so, but why not Google it if you want to read it in its entirety?

Meanwhile, those Australians remaining bereft as a result of fire, flood and drought still require our assistance. Our perverse system of revenue will ensure, however, that it proves to be hopelessly inadequate.  🙁

ARE WE STUPID, OR WHAT?

silly… ANSWER FOR YOURSELF

Bloomberg tells us US Fed officials saw the housing bubble in 2005 but didn’t alter policy. We are told Greenspan did increase interest rates but that he didn’t warn the US strongly enough.

OK, so what’s new? What could he have done without scaring the horses? Even if he’d increased interest rates 5% in one fell swoop, it wouldn’t have done a thing.

There’s only one way to curtail a property bubble, and Greenspan and his crew know it, but he wouldn’t recommend the government employ it to put an end to repetitive real estate bubbles because it cries “Enough!” to the great rort the banking system perpetrates upon us all.

Banks capture the rent of land, one-third of the economy, by way of mortgage repayments on the land-inflated price of real estate.

The scam can only be put paid to by governments capturing land and natural resource rent for public purposes instead of taxation.

If we haven’t the will for that, we can write all the stories we like about Greenspan and other distracting individuals, but we must ultimately blame ourselves for being played for idiots in the creation of economic recession or depression – and then coming back for more.

We lack not only the intestinal fortitude to do the right thing, preferring to be taxed on our comings and goings, but also have a remarkable ability to deny that this is the only course of action we may take to stop being ripped off by the already super-wealthy.

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CHINA RULES

Great WallTHE NEW PAX SINICA

China isn’t going to come out of the first depression of the twenty-first century unharmed, but it is clearly going to emerge as the new economic leader.

With history as a guide, the transition to the new Chinese peace won’t be without conflict.

What does China’s emergence say about capitalism versus communism?

Not much; remember, European communism collapsed in 1989.

The Pax Americana downfall, like Pax Britannica before it, rather suggests Shakespeare’s  Lord Polonius had it just about right in Hamlet: “Neither a borrower nor a lender be”.  More particularly, maybe a borrower of the impossible trillions of dollars the United States of America owes the world? She couldn’t even pay the interest on her debt were she to garnishee the wages of every US citizen. Here’s a Wikileak secret: the US has been an example of government in complete disarray. (Keep that to yourself, because the media has been doing so.)

Don’t hold your breath if you are Tea Party-inclined, or a ‘money as debt’ person. If government, not private banks, were to strictly control the issue of money, we’d be no better off if we continue to provide credit against the so-called ‘security’ of land price.  

To the collapse of each civilisation before ours, to every economic depression, we may accurately assign the lending of money against ephemeral land price, i.e. failure to capture its rent for necessary government, as its cause. 

You’d think we’d learn, but Jews and Christians alike are slow learners. History’s millennia demonstrate Moses wasn’t just whistling Dixie with “The land shall not be sold forever, for the land is mine, and you are but strangers and sojourners with me.” (Leviticus 25:23)

Now the baton is being passed to China, I wonder whether she’ll do any better in this regard.

She’s had a couple of great people point her in this direction:-

Once, natural resources were fully used for the benefit of all, and not appropriated for selfish ends. This was the age of the Great Commonwealth of peace and prosperity.” – Confucius (551-479 BC)

The land tax as the only means of supporting the government is an infinitely just, reasonable, and equitably-distributed tax, and on it we will found our new system.” – Dr. Sun Yat-Sen (1866-1925)

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THE ISSUE IS LAND PRICE, NOT EASY CREDIT

 

chimera

I regularly make the point here that we’re having this financial collapse (which will prove to be a depression) because the study of economics isolates itself from the real estate market – and never the twain shall meet.

I argue that many people in real estate, like me, have a better idea of what’s happening in the economy because we’re happy to integrate real estate with the economy. [Here’s another real estate person who can tell you of the future of retailing, depression or no depression.]

Oh sure, looking over their shoulder, some economists now refer to the involvement of real estate in the collapse but, not understanding its deeper role, they will only provide a most superficial analysis.  Otherwise, Austrian economists, and others, wouldn’t reduce the reason for the downturn to one of “easy credit” as they do.

It’s like this. Banks and financial institutions provide credit to customers believed to be ‘creditworthy’. Virtually all creditworthy clients offer a mortgage over real estate assets.

The nub of the difference on this issue is that economists and bank managers don’t understand that the land price component of a mortgage is more than nebulous; it’s a chimera. Where they believe land price to be a thing of substance, like a dwelling, many real estate valuers and agents know that fire-breathing dragons will disappear in the full light of day.

Once land price is seen for what it is, that is, the wanton private capitalisation of the public’s uncollected rent, it becomes apparent that the price of land does not reflect conditions of supply and demand as argued mindlessly by some economists. 

So, no, the problem isn’t one of easy credit and low interest rates: it is that credit can be provided against land price, an ‘asset’ that can disappear overnight.

So, rather than easy or excessive credit, the issue still remaining completely unaddressed is one of risk management, namely, why do banks keep lending against a ‘value’ – rather a price – that will disappear, like a chimera?

As land price is too volatile, why not capture its rent, in order both to reduce and stabilise land prices and abolish damaging taxes?

This problem’s not going to go away until we fix it.

HOW LABOR LOST ITS WAY

Amongst the letters in response to Shaun Carney’s article “Labor crisis of faith” in THE AGE on New Year’s Day are these two:-

January 3, 2011

Where are all the true believers?

SHAUN Carney – “Labor crisis of faith” (Opinion, 1/1)  is spot on. A primary reason for the downturn in support is that Labor too readily compromises its values and core constituency for short-term electoral gain. Few people have any idea what it really stands for.

Prime ministers Ben Chifley, John Curtin and Gough Whitlam were strident champions of social justice and the advancement of workers and their rights, and they had strong community connections and respect for the Aussie battler. The ALP of yesteryear valued its grassroots membership and the views of unions. It would not have permitted self-interested, right-wing factional warlords to wrest control.

Old Labor was a party of true believers who kept the light on the hill shining bright and clear. This light has been substantially dimmed by the current mealy-mouthed leadership, many of whom seem hell bent on appeasing big business and their financial interests at the expense of the little person. This can be seen in Labor’s policies regarding planning and industrial relations where the average person is made to feel as though the government is at war with them. There is no point to the ALP unless it changes its name to the Alternative Liberal Party.

Rex Solly, Bolwarra

 

A soulless party

THE ALP is in a precarious situation because it no longer stands for anything except clinging to office. Driven by focus groups and with MPs largely drawn from recycled union apparatchiks or ministerial advisers such as ”Captain America” Mark Arbib, who spends an inordinate amount of time at the United States embassy, the party has no soul.

The weekly focus group reports often result in sudden policy U-turns and any talk of social justice provokes looks of genuine incredulity. The Greens have a purpose and policies, and will continue to attract disillusioned Labor voters as the party follows the Titanic to the bottom.

Thos Puckett, Ashgrove, Qld

 

I’m not so sure the Labor Party used to be as responsive to its membership as Rex Solly suggests, but both letter writers and Shaun Carney make several good points.

In its cleverness to be modern and ‘with it’, Labor has become so responsive to focus groups that it now stands for everything and for nothing. 

 

The Hon. Clyde R Cameron, AO, Minister for Labour (1972-1975)
The Hon. Clyde R Cameron, AO, Minister for Labour (1972-1975)

WHERE THINGS STARTED TO GO WRONG

The rot really began to set in when federal secretary, Cyril Wyndham, simply wrote the longstanding plank of the Labor Party to introduce a tax “on the unimproved value of the land” out of the Labor Party’s platform in 1964. It was never voted out.  (Maybe some Australians mightn’t like it?)

A speech “How Labor Lost Its Way” given by Clyde Cameron four years after his retirement from the national parliament, on the occasion of the opening of the South Australian headquarters of the Henry George League on 13 May 1984, documents this to have been the point from which Labor began to backslide on matters of social and economic principle.  

Cameron records Labor Party leader Arthur Calwell’s parliamentary reaction to the Menzies Government’s Bill to abolish the federal land tax in the early 1950s: “We have always believed in the land tax, and when happy days come again we shall restore the measure imposing the tax to the statute-book of this country.

Clyde Cameron’s “How Labor Lost Its Way” concluded: “This speech may even cause present day Labor leaders to once again take the road to social justice and fiscal decency.”

It didn’t.  They haven’t. 

Although Ken Henry’s tax review panel has also recommended both parties take the same road to social justice and fiscal decency, they refuse to do so, having a preference for the road that, privatising economic rent, has always led to the collapse of civilisations. 

Such is the wit of our parliamentary ‘representatives’.

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