COMMEMORATION ADDRESS 2010

STEVEN SPADIJER

The 119th annual commemoration address of American social philosopher Henry George was given at the Conservatory Room of the Pumphouse Hotel in Melbourne last night, on the 171st anniversary of George’s birth.

Prosper Australia’s Karl Fitzgerald welcomed the good attendance with a rundown of recent positive achievements that ranged from the Henry Tax Review (having come out in favour of mining rents and recommendations for a federal land tax to replace damaging state taxes), to Prosper Australia having made tentative liaison with bodies looking towards land value capture as a means of funding sorely needed public development and infrastructure (out of the uplift in values these projects generate).

Fitzgerald introduced the commemoration address’ youngest-ever speaker, 21 year-old Arts-Law student at the Australian National University in Canberra, Steven Spadijer, who spoke with a confidence and style that belied his years.

The audience was treated to a soundly researched exposition on the role investors’ expectations for economic rent had played over the years in setting up business cycles of boom and bust.

In charts and figures, Spadijer provided evidence showing that Australian real estate speculation at the outset of the 1970s was responsible also for the 1974-75 recession, despite claims by economists that the cause of the worldwide 1970s bust was the OPEC oil crisis.

Endogenous, rather than exogenous, events around the world had proved to be the culprit, he said, and these were invariably related to the numerous private and business implications that sprang from local expectations in connection with rent.

MEMORIES

Steven Spadijer’s tour de force took me back to my own Henry George commemoration dinner presentation on the 100th anniversary of his death in 1997.  Taking from Paul Ormerod (The Death of Economics) and Mason Gaffney (The Corruption of Economics), I mentioned that the Austrians, Chicagoans and neo-Keynsians were negligently as far away as ever from the truth about the central role economic rent plays within the economy.  (It’s in the order of 50%.)

IMPROVED OUTLOOK?

However, as Karl Fitzgerald also suggested last night, things are beginning to change, in Australia, at least:-

  • Few except Georgist economists called the GFC (well before the event)
  • Ken Henry’s panel advocated the capture of publicly-generated economic rent, so that damaging taxes may be abolished
  • Bodies such as the Property Council of Australia, the Urban Development Institute of Australia (UDIA), and the Royal Automobile Club of Victoria (RACV) are coming to see that up-front development charges are counter-productive, and that there may be a case for them to be replaced by rates, or a reformed land tax system, if necessary infrastructure and development is to be undertaken cheaply and efficiently.  (News of another failed privatised freeway shows that public-private partnerships (PPPs), much loved of economic rationalists, have passed their use-by date.)

STUMBLING BLOCKS AND OPPORTUNITIES  

Speaking with several people at the dinner, it was agreed that things have progressed enormously since Ken Henry’s review.

However, that mining interests can lead people in the street to believe that a mining rent is “a big new tax” that can kill off mining and employment is a shocking indictment on the public’s ignorance of natural resource rents.

The Rudd government made no effort to educate people to the fact that Australians own their land natural resources, and that, quite apart from normal profits, they yield a dividend called economic rent, to which private enterprise has absolutely no right.  The government used the terms “super profits”, but maybe it should have educated people to the term “community-generated surplus”?

The big miners played on the ignorance of this publicly-created rent surplus like a grand piano, and this led in part to the demise of Kevin Rudd’s prime ministership.  And Julia Gillard caved into them just before their announcement of enormous ‘super profits’ for the year.

So, in the next phase, public education needs to be drawn to the fact that land and natural resource rents are NOT privately-created; it’s a “community-generated surplus” owed back to the community.

Secondly, although it has gone out of fashion to talk in terms of ‘class’ in Australia (it suits the super privileged to paint this as being “politically-incorrect in Australia’s classless society”), maybe we need to understand that our super wealthy have obtained their position of privilege by cornering the “community-generated surplus” unto themselves.

By monopolising rent, privilege claws back any taxes it pays by means of the increases in the capital value of their lands.  The middleclass and poor are unable to do this.

Until the public is educated to these facts, it seems it is, indeed, “political suicide” for any of the major parties to advocate mining ‘taxes’ or land rent, the Henry review’s intellectually rigorous recommendations notwithstanding.

So, let’s hope in the next year or two we can educate the public to the fact that this natural “community-generated surplus”, not taxes, is the natural source for public revenue!

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POOR RISK MANAGEMENT: RBA

guydebelle

RBA: FRUSTRATING AND PRETTY-NEAR USELESS

The Reserve Bank of Australia’s Guy Debelle announced today that he thought poor risk management was responsible for much of the financial crisis.  Oh, surprise!

Maybe Guy found a copy of THE AGE dated March 28 2008 in which I said the same thing?  The RBA is improving.  Guy is only 29 months behind the times.  I’m not being a smart arse here, I’m just completely pissed off at how the RBA continues to make apparently thoughtful statements after the event.  (And chancing your arm that we may be in for a double dip is hardly newsworthy now, Guy!  We’re in a depression, for God’s sake, matey!)

Why always post hoc and never a priori?  Aren’t you guys meant to be protecting us?  What’s the point of the RBA if it can only give an historical account of recent events?  You’re meant to be in there moderating things, folks, not standing back and thereby assisting to make them worse!

Where has the RBA been since land prices shot moonwards from 1999-2000?  In fact, I commented in the British journal Geophilos in 2001 that the then Governor of the Reserve Bank, Mr Macfarlane, had been making soothing statements to the effect that “asset price inflation of either shares or property had not become a problem”  as late as 10 July 2001.   So, when exactly does it become a problem, RBA?  Only after a crash, it seems!

And the RBA can’t get out from under, either, by seeking to lay the blame at the doorstep of the other banks, Guy.  You and APRA have a role of leadership and responsibility in all this.  I said so in the following letter which appeared in The Australian Financial Review on Monday 21 November 2005:-

Home truths for RBA and APRA

Phil Naylor, the chief executive of the Mortgage Industry Association of Australia, argues that mortgage brokers should not have to “take the rap” for the poor quality of home loans (“Don’t blame the brokers”, Letters, November 18).

Mr Naylor is correct, of course, because this smacks too much of searching for scapegoats. The competition between banks and lending institutions to write home loans during property booms has a habit of getting out of hand, and this highlights a structural problem which needs to be addressed at a much higher level.

The creation and eventual bursting of land price bubbles has a history of bringing the Australian financial system to its knees at regular intervals, so the Australian Prudential Regulation Authority ought to be pressing for a federal charge on all land values if it is to be effective in tending to the health of the financial system.

In fact, APRA and the Reserve Bank of Australia need to get their heads together in order to demand of our politicians that the RBA administer an all-in flat-rate charge on land values. Such a charge should replace state stamp duties, payroll taxes and land taxes (the latter with their notorious thresholds, exemptions, aggregation provisions and multiple rates), and the revenue delivered, GST-like, back to the states. Maybe the charge ought also to replace the costly GST.

It is not the job of the RBA to hose down the economy by non-discriminating interest rates, but, as with APRA, it is its job to protect our financial system against the creation of property bubbles.

If the RBA tweaked a federal charge on Australia’s land values as assiduously as it has done with interest rates, both APRA and the RBA might finally begin to carry out their appointed duties, instead of seeking to put the blame elsewhere for the ritualistic lead-up to financial collapse.

Bryan Kavanagh, Director, Land Values Research Group, Melbourne, Vic.

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RIGHT WRONG AS ANGST SPILLS OVER IN USA

Danny Johnson - Copy

THE EVER-UNSPOKEN POINT OF ECONOMIC PROTEST

On 4 January 1991, Danny Johnson, a small businessman from the bush town of Warracknabeal in Victoria led 50,000 farmers and small business people to the steps of Parliament House in Melbourne. He called for a mechanism which would place some sort of control on politicians “of all parties”.

Australia was about to dive into Paul Keating’s “recession we had to have”, and Johnson and his followers saw their political representatives as being responsible for the terrible mess into which the state of Victoria had degenerated in the wake of the late-1980s commercial real estate bubble.

The media branded the rally as being “right wing”; some suggested maybe it had an association with the neo-fascist League of Rights.

Twenty years later, right wing US shock jock Glenn Beck yesterday led a massive Tea Party rally to the Lincoln Memorial in Washington to protest that the financial crisis is the result of government running amok in the USA. “Restore Honor” is the name the rally has been given.

It is 47 years to the day that the Reverend Martin Luther King Jr staged a rally of 250,000 people to deliver his famous “I Have a Dream” speech at the Lincoln Memorial on 28 August 1963, and people politically to the left of Beck have castigated him for sullying both the date and the location.

I’d argue, of course, that the two protest rallies are inextricably linked by our failure to observe, understand and act upon the veracity of the distributional economic equation P – R = W + I.

Had the economy of Australia prior to 1990 or of the US prior to 2010 not inserted taxation into the equation, there’d have been no economic collapse on either occasion – and no need for such expressions of angst.

Ironically, it was Martin Luther King Jr, not Danny Johnson nor Glenn Beck, who was able to make the necessary connection.  It’s worth putting the whole quote in its quite moderate context below.

~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~

MARTIN LUTHER KING JR. SAID:

“In the treatment of poverty nationally, one fact stands out: there are twice as many white poor as Negro poor in the United States. Therefore I will not dwell on the experiences of poverty that derive from racial discrimination, but will discuss the poverty that affects white and Negro alike.

Up to recently we have proceeded from a premise that poverty is a consequence of multiple evils: lack of education restricting job opportunities; poor housing which stultified home life and suppressed initiative; fragile family relationships which distorted personality development. The logic of this approach suggested that each of these causes be attacked one by one. Hence a housing program to transform living conditions, improved educational facilities to furnish tools for better job opportunities, and family counselling to create better personal adjustments were designed. In combination these measures were intended to remove the causes of poverty.

While none of these remedies in itself is unsound, all have a fatal disadvantage. The programs have never proceeded on a coordinated basis or at a similar rate of development. Housing measures have fluctuated at the whims of legislative bodies. They have been piecemeal and pygmy. Educational reforms have been even more sluggish and entangled in bureaucratic stalling and economy-dominated decisions. Family assistance stagnated in neglect and then suddenly was discovered to be the central issue on the basis of hasty and superficial studies. At no time has a total, coordinated and fully adequate program been conceived. As a consequence, fragmentary and spasmodic reforms have failed to reach down to the profoundest needs of the poor.

In addition to the absence of coordination and sufficiency, the programs of the past all have another common failing — they are indirect. Each seeks to solve poverty by first solving something else.

I am now convinced that the simplest approach will prove to be the most effective — the solution to poverty is to abolish it directly by a now widely discussed measure: the guaranteed income.

Earlier in this century this proposal would have been greeted with ridicule and denunciation as destructive of initiative and responsibility. At that time economic status was considered the measure of the individual’s abilities and talents. In the simplistic thinking of that day the absence of worldly goods indicated a want of industrious habits and moral fiber.

We have come a long way in our understanding of human motivation and of the blind operation of our economic system. Now we realize that dislocations in the market operation of our economy and the prevalence of discrimination thrust people into idleness and bind them in constant or frequent unemployment against their will. The poor are less often dismissed from our conscience today by being branded as inferior and incompetent. We also know that no matter how dynamically the economy develops and expands it does not eliminate all poverty.

We have come to the point where we must make the nonproducer a consumer or we will find ourselves drowning in a sea of consumer goods. We have so energetically mastered production that we now must give attention to distribution. Though there have been increases in purchasing power, they have lagged behind increases in production. Those at the lowest economic level, the poor white and Negro, the aged and chronically ill, are traditionally unorganized and therefore have little ability to force the necessary growth in their income. They stagnate or become even poorer in relation to the larger society.

The problem indicates that our emphasis must be two-fold. We must create full employment or we must create incomes. People must be made consumers by one method or the other. Once they are placed in this position, we need to be concerned that the potential of the individual is not wasted. New forms of work that enhance the social good will have to be devised for those for whom traditional jobs are not available.

In 1879 Henry George anticipated this state of affairs when he wrote, in Progress and Poverty:

“The fact is that the work which improves the condition of mankind, the work which extends knowledge and increases power and enriches literature, and elevates thought, is not done to secure a living. It is not the work of slaves, driven to their task either by the lash of a master or by animal necessities. It is the work of men who perform it for their own sake, and not that they may get more to eat or drink, or wear, or display. In a state of society where want is abolished, work of this sort could be enormously increased.”

We are likely to find that the problems of housing and education, instead of preceding the elimination of poverty, will themselves be affected if poverty is first abolished. The poor transformed into purchasers will do a great deal on their own to alter housing decay. Negroes, who have a double disability, will have a greater effect on discrimination when they have the additional weapon of cash to use in their struggle.

Beyond these advantages, a host of positive psychological changes inevitably will result from widespread economic security. The dignity of the individual will flourish when the decisions concerning his life are in his own hands, when he has the assurance that his income is stable and certain, and when he knows that he has the means to seek self-improvement. Personal conflicts between husband, wife and children will diminish when the unjust measurement of human worth on a scale of dollars is eliminated.

Two conditions are indispensable if we are to ensure that the guaranteed income operates as a consistently progressive measure. First, it must be pegged to the median income of society, not the lowest levels of income. To guarantee an income at the floor would simply perpetuate welfare standards and freeze into the society poverty conditions. Second, the guaranteed income must be dynamic; it must automatically increase as the total social income grows. Were it permitted to remain static under growth conditions, the recipients would suffer a relative decline. If periodic reviews disclose that the whole national income has risen, then the guaranteed income would have to be adjusted upward by the same percentage. Without these safeguards a creeping retrogression would occur, nullifying the gains of security and stability.

This proposal is not a “civil rights” program, in the sense that that term is currently used. The program would benefit all the poor, including the two-thirds of them who are white. I hope that both Negro and white will act in coalition to effect this change, because their combined strength will be necessary to overcome the fierce opposition we must realistically anticipate.

Our nation’s adjustment to a new mode of thinking will be facilitated if we realize that for nearly forty years two groups in our society have already been enjoying a guaranteed income. Indeed, it is a symptom of our confused social values that these two groups turn out to be the richest and the poorest. The wealthy who own securities have always had an assured income; and their polar opposite, the relief client, has been guaranteed an income, however miniscule, through welfare benefits.

John Kenneth Galbraith has estimated that $20 billion a year would effect a guaranteed income, which he describes as “not much more than we will spend the next fiscal year to rescue freedom and democracy and religious liberty as these are defined by ‘experts’ in Vietnam.”

The contemporary tendency in our society is to base our distribution on scarcity, which has vanished, and to compress our abundance into the overfed mouths of the middle and upper classes until they gag with superfluity. If democracy is to have breadth of meaning, it is necessary to adjust this inequity. It is not only moral, but it is also intelligent. We are wasting and degrading human life by clinging to archaic thinking.

The curse of poverty has no justification in our age. It is socially as cruel and blind as the practice of cannibalism at the dawn of civilization, when men ate each other because they had not yet learned to take food from the soil or to consume the abundant animal life around them. The time has come for us to civilize ourselves by the total, direct and immediate abolition of poverty.”

Where Do We Go From Here? Chaos or Community – Martin Luther King Jr.’s final book.

____________________________________________________________________________________________________

MULES AT JACKSON HOLE?

Grand Tetons from Jackson Hole
Grand Tetons from Jackson Hole

THERE IS A MEETING HERE TONIGHT (no, not in the John Moulton barn)

To my mind the reserve bank and economic experts gathering together tonight at Jackson Hole in Wyoming are, to quote Henry George, “mules packing a library”.  Nothing can issue from sterility.

Jackson Hole will remain a void, and we’d do well to avoid its misdiagnoses.

Where are the heterodox economists who forecast this downturn?  Did US Wall Street analyst and balance of payments expert Michael Hudson get an invite?  Did Australia’s debt expert Steve Keen get a guernsey?  Chances are, having forecast the GFC, these men may have had real answers, instead of the usual hot air we get from reserve bank governors.

At the risk of being repetitive, might I suggest that as tax systems of the world generated this bubble in land prices, a revenue system based on land value capture and the abolition of taxes is the only effective way to deal with these impossible levels of debt?

Wallowing in their multi-billion profits, Australia’s banks are about to find out how quickly this situation can reverse.  We paid them obscene interest (rent?) on bubble-inflated mortgages with no risk management, and next we’ll be bailing them out of the mess they’ve left for us.

In so doing, I trust they’ll become government enterprises, because they’ve not been doing us any favours in private ownership.  (No margin adjustments on +100% bubble prices, guys?!)  I guess those who enjoy living through an economic depression won’t agree with me.

____________________________________________________________________________________________________________

Don’t read the times, read the eternities. 

– Henry David Thoreau

WHAT’S IN STORE FOR US?

earthquake1.  THE ELECTION

I remain more upbeat than ever that something good is happening to Australian politics after seeing interviews with some of the independents.

Tony Windsor has always been a solid citizen.  Anyone so disapponted with the tripe emitted from the major parties can’t be bad.  I hope he sticks to his principles in favour of a resource rent from mining super profits.   

Rob Oakeshott’s experience in State politics in New South Wales doesn’t seem to have drained the idealism out of him, and he remains capable of a very thoughtful political analysis (albeit some of it shook Tony Abbott to the core.  “A unity government?  Whaaa …!”)

Bob Katter remains Cowboy-hatted Bob Katter – and most of his north Queensland electorate of Kennedy seem to like him that way.

Then, there’s the first Green in the lower house, Adam Brandt.  He’s an unknown quantity and having already stated his preference for a Labor government under Julia Gillard, he’s a bit naive or very upfront, either of which seem preferable to the execrable know-it-all world weary nonsense that often passes for debate and ‘repartee’ within the parliament.

With the number of seats for Labor and Liberal pretty well locked at 73 apiece, let’s see what transpires after absentee votes have been counted and re-counted on the seats in doubt next week.

 

2.  THE ECONOMY 

Everyone but the bubble-deniers know what’s in store looks pretty bad.  David Collyer expresses it very well on Prosper Australia’s website … 

… all of which makes independent Rob Oakeshott’s suggestion for a unity government an interesting thing to conjure with.  Obviously, the big boys ‘n girls aren’t ready for it yet, but it’s a good thing he’s planted the seed: it just might bear fruit when things get really bad.

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THE MORNING AFTER …

Nation Divided… A WIN FOR DEMOCRACY?

Like the Americans, we can get pretty rabid over our two big political parties.  Nevertheless, in government they turn out to be Tweedledum and Tweedledummer once they’ve performed the ritualistic kowtow to banking and big business.

For example, Australia can trump Barack Obama’s incredibly stupid appointment of Timothy Geithner as Secretary of the Treasury with PM Julia Gillard deferring to the big miners by lowering Kevin Rudd’s proposed 40% tax on their profits (which acknowledged Australian ownership of its resources), to an effective 22.5% rate (which doesn’t).    

Whether yesterday’s ‘hung’ election delivers a minority Labor or Liberal conservative government, they’ve both now got to consult with the three conservative independents and two new Green-flavoured members of the lower house.  (See their photos below.)  Which is not to say they’ve got to cave in to them holus bolus, but at least they will have to listen to them.

To which I shout:  Hallelujah!

Our shock jocks of the radio will, of course, beat their breasts, crying that this has delivered ‘unstable government’ to Australia, but I believe we may have matured more than America … to have moved a little closer towards democracy.

Whoever coalesces to form the next government, the Greens will undoubtedly have effective control in the Senate.  Unlike the conservatives, they acknowledge the need to capture our mining resource rents and, thankfully, seem to understand that we need a pollution charge, instead of a derivative-like pollution trading scheme.  But the Greens have some maturing to do on water security and population policy.

Maybe the three independent conservatives, all of whom represent rural or regional areas will be able to convince themselves and Greens leader Bob Brown that Treasury Secretary Ken Henry’s mooted federal land tax (to replace the idiosyncratic array of state government land taxes, payroll taxes and stamp duty) will clearly be the most effective way to revitalize farming and regional areas, because land values are lower in those locations?

Meanwhile, with democracy, land and resource value capture all in the air, Australia seems better placed than any nation in the world to remedy the Global Financial Crisis.

This election result makes me confident that Australians now have the wit to find their way out of this nonsensical rent-seeking maze.

But as the property crunch is about to impact upon Australia, the new political arrangements and effective action will have to be sorted out pretty quickly. In this respect, I encourage people to catch tomorrow’s “Four Corners” program at 8:30 pm on ABC-TV 1.  I expect it will be long on describing why we are about to have a crash, but extremely short on pointing to abolishing taxes and capturing rents as the solution.  See if you agree!

Oh, for Kerry O’Brien, Tony Jones and Co. at the ABC to discover land and resource rents!  (Unfortunately, the bods at the commercial TV channels will never be permitted to do so.)

 

Oakeshott, Katter, Bandt, Wilkie & Windsor
Oakeshott, Katter, Bandt, Wilkie & Windsor

Thanks toYahoo for the photos.

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ELECTION SHENANIGANS

Julia Gillard

 

                                THERE’S AN ELECTION

                                 HAPPENING IN OZ

                                  NEXT SATURDAY  ….

 

 

 

 

 

 

Australia Election

 

 

 

 

 

 

 

 

 

 

julia_gillard

 

 

 

 

 

 

 

 

 

 

juliaabbott

 

 

   

                                              

 

 

 

                                                      

                                                         … AND NOT ONE OF THE PARTIES 

                                                              HAS A SOUND STRATEGY TO

                                                                                                                                                              DEAL WITH THE DEPRESSION!

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POPULATION REVISITED

Q & AC’MON, GUYS, THERE IS AN ANSWER!

I was at a Prosper Australia committee meeting last Thursday night, so I missed entrepreneur Dick Smith’s “Population Puzzle” and the “Q and A” session that followed on ABC-1.  But I got to see a tape of them yesterday. Unfortunately, the fears I expressed in my previous blog were realised: Dick Smith’s Population Puzzle was disappointingly lightweight.

At least it posed a question worthy of debate in Q and A.

Tony Jones Q and A show, also attended by Dick Smith and a number of special invitees, was quite interesting; but it was extremely frustrating for anybody understanding anything about land and natural resource rents.  It featured:-                                                                     

  • Green’s leader, Bob Brown
  • businessman, John Elliott
  • Minister for Sustainable Population, Tony Burke
  • Opposition immigration spokesman, Scott Morrison, and                       
  • Suvendrini Perera, from Curtain University in WA                                                                                                

They were all pretty good, seeming to accept that there is a world population ceiling. But the debate rested upon whether we’re anything like being ‘there’ yet. Each made a combination of valid and less valid points, but none zeroed in on the equitable access to resources by employing natural resource rents and pollution charges for revenue, before we consider population controls.

The ‘resources are finite’ slogan played its usual role. (Why not capture their rent, then?)  However, the inference made is that they’re disappearing, rather than being converted in substance.  (What about the conservation of mass, Bob?)  So, by changing their form and then recycling our resources, it is indeed possible to have a chain of continued economic growth, notwithstanding many peoples’ view to the contrary.

Bob Brown correctly mentioned that the mining tax was fair before he proceeded to lose me by favourably invoking the Reverend Thomas Malthus.  “Malthus was wrong!” interrupted Elliott. (Of course he was.  We’re still here regardless of his gloomy predictions, but Dick Smith’s and Bob Brown’s neo-Malthusianism still garners incredibly strong support.)

Some of the participants came from a less gloomy point of view.  They may even have agreed with the American social philosopher, Henry George, who famously said: “It’s a well provisioned ship, this on which we sail through space”.

John Elliott was the surprise package.  He said we should tax people in the regions less.  Yes, John!  Take it a little further, though.  Wouldn’t a single rate land value ‘tax’ do this, because land values are higher in the cities and lower in the regions?

However, the point that those who monopolise and speculate in our land and natural resources are ripping us off eluded the Q & A panel. How was this?  Surely, it patently mocks us as world economies flounder and collapse as a result of taxation and resource speculation?  No?  People still in denial, maybe?  We clearly do need to capture more of our land and resource rents if we are to allocate natural resources more fairly and efficiently, before we seek to pull up the population ladder and cry “That’s enough!”

But we should do that quickly, because travelling in time from Joshue De Castro’s important 1955 “Geography of Hunger” through Colin Clark’s 1973 “The Myth of Over-Population” until today, there’s a welter of studies evidencing that when economies in underdeveloped countries start to improve, their birth rates also decline.  Meanwhile, national economies continue to crumble as a result of the ongoing privatisation and monopoly of land rent, a process that is pauperising so many once reasonably well-off people in the west.

It was so frustrating that Dick Smith and Tony Jones both failed to touch upon this most natural solution to so-called ‘overpopulation’!  No, we don’t have to wear hair shirts nor return to the middle ages, guys!

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THE WORLD NEEDS TO REDISCOVER LAND RENT

To solve any political problem at all, whether it be collapsing economies, unemployment, poverty, sustainable population, the environment, or how infrastructure can be self-funding, the 21st century needs urgently to rediscover economic rent, because rent was central to classical economics.

That’s because about 50% of the economy is rent, yet nobody understands anything about it at all now. 

I’ve quantified land rent alone, i.e. before mineral rent, spectrum rents, fishing, forestry and aircraft path licenses, to be 32.5% of GDP in 2007, enough to replace taxes at all levels of government in Australia, so if we also captured these rents to the public purse instead of taxation (no, they’re definitely not taxes!), everyone would additionally be able to receive a citizen’s dividend. There’d never be any need for unemployment benefits nor pensions of any kind.

First thingsSo, to hear on ABC radio this morning in “Australia All Over” that entrepreneur Dick Smith is concerned about Australia’s population growth, without mentioning taxation or resource rents at all, is perplexing. 

Dick, you seem to miss the point that the Reverend Thomas Malthus has already been proven wrong: food supply has indeed been able to grow at a greater rate than population growth, despite his gloomy forecasts to the contrary.

Do I hear you say “But look what population is doing to the Australian environment, Bryan?” No, Dick, in a British journal in 2001 I forecast a global financial collapse by 2009 because of the failure of governments to capture for revenue the annual value of land (what economists call ‘economic rent’). This failure leads to the rape and pillage of the environment and economic decline.  Tax systems around the world gave all the wrong signals and brought on rampant land speculation and the Global Financial Crisis.  Now it’s our turn:  Australia’s real estate bubble is about to burst.

If we put an annual charge on land, as argued by Ken Henry’s review of the Australian tax system, we’ll stop people from treating it as a mere commodity, monopolizing it, speculating in it, and systematically destroying it. Don’t you see, Dick, that when land is treated as a commodity, we humans also lose our freedom?

To be frank, Dick, I think the impassioned reasons “Macca” read out on “Australia All Over” today as to why Rob Westcott lives at Glenthompson resonated much more strongly than your concerns on population growth.  But I guess I’ll be watching your upcoming TV show to see what you have to say, all the same.

I suspect you’ve made a far greater profit from real estate than you ever did by selling electronics, Dick, so I hope that the principle of capturing greater land rent instead of taxation hasn’t eluded you for this reason?

Do you not see that the failure to capture adequate land-based revenue favours expensive capital city locations and acts to depopulate our regional towns and cities, Dick?  Think about it: no taxation at all; only a charge only on land values. See the positive implications? As people in our capital cities will pay more than people in our regional areas, this will re-invigorate the regions.  And taking taxes off performing work will get the economy moving once again. 

Still no, Dick? OK, let’s take another tack. As wars rage overseas, people will always seek refuge, peace and freedom by fleeing to more secure countries like Australia. But as many Australians feel threatened by existing taxes and their impossibly high mortgages (both of which would be much lower under a land rent revenue regime) they’ll tend to react against population increase or migration, as you do. In bad times, they’ll consider it threatens their welfare and jobs.  But that’s not the real problem: it’s taxation of employment, thrift and industry which directs us into real estate speculation.  Workers get slaughtered, property rorters get rewarded.

But would we be as fearful of refugees (‘queue jumping illegal boat people’?)  if the economy was more buoyant and healthy? Almost certainly not.  (And studies in underdeveloped countries show that birth rates tend to fall as prosperity increases.)

So, surely Australia should seek to solve its unhealthy economic situation before it adapts its population to suit all our existing pathologies? Are you not repeating Malthus’ mistake of advocating population control, while you seek no other significant changes to the status quo (such as the  aristocracy’s locking up of the land at the expense of the poor and dispossessed), Dick?

Why not let a land-based revenue system obviate land monopoly and speculation first, and encourage production of real wealth without taxation, to see to what extent we really do have a population problem? (Our cattle and sheep don’t seem to be experiencing an overpopulation problem, although they occupy many more times the land that we humans do.)    

Not to capture rent to the public purse is to allow a few private individuals to collect most of this income stream which, after all, is not generated by them, but by the Australian community as a whole.  That’s why the economy is crumbling and why we are beginning to see absolutely everything as a problem.

Australia once rose to solve these challenges instead of blaming their symptoms.  So, Dick, before you concern yourself with population control, try to comprehend the great truth Joseph Stiglitz, former chief economist at the World Bank has expounded: “Rent is a secret tax the wealthy charge the poor.”  

It’s indeed probable if we were to collect more land-based revenue instead of taxation, Dick, that many of our apparent economic, environmental, ‘overpopulation’ and capital works problems would overnight start to resolve themselves.

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I’VE ADDED AN INDEX

booksI’VE ADDED AN INDEX …

… at the top of the page at last.

That should make it much easier to find an article.

 

 

 

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