For the sake of more affordable housing, we should revert to the former system.
Whilst that situation is being remedied, we can also hope that Ken Henry’s review of the tax system has the gumption to recommend the elimination of the exemptions, thresholds, multiple rate and aggregation provisions that make state land taxes such a dog’s breakfast.
The principle at issue here is that local and state governments have an ongoing interest in capturing on the public’s behalf at least part of the uplift in land values provided by public infrastructure.
Up-front charges, including headworks charges, don’t do this; nor do our misbegotten state land taxes.
Research Associate, Land Values Research Group
Sir Samuel Griffith (1845-1920), after whom Prime Minister Kevin Rudd’s federal electorate seat is named, would be turning in his grave over some of his acolyte’s recent shortcomings.
Rudd’s crazy “Indonesian Solution” to the plight of the 78 Tamil asylum seekers now refusing to budge from the Oceanic Voyager is in tatters, as it was always destined to be. Sir Samuel, an advocate of immigration, would at least have had the 78 Tamils processed within Australia; he was a practical decision-making politician, not a shirk. Kevin Rudd has left himself open not only to the guffaws of Liberal Opposition Leader, Malcolm Turnbull, but also those of the Australian public. How did the Prime Minister dream this one up? Was he ‘set up’ by the Indonesians?
Griffith’s keen mind had early discovered that investigation and forethought will always trump glibness.
Maybe he would also encourage his similarly Ipswich-educated protege to revisit his Elementary Property Law Bill of 1890, if the Prime Minister wishes to develop an effective population growth strategy to accommodate Treasury’s estimated 35 million population for Australia by 2050. But Griffith would cringe at Ken Henry suggesting (to a business lunch on 22 November) that Sydney and Melbourne’s populations would grow to about 7 million each in the next 40 years.
Sir Samuel’s Bill proposed a method for natural decentralisation of the population. A revenue system that, being based on land values and not upon what one earns, would charge regional cities and towns much less than capital cities, encouraging the flowering of the regions and arresting the drift towards Megapolis. (Our town planners, too, would be well advised to look to Sir Samuel here.)
Griffith undestood that taxing work and industry was literally counter-productive. Rudd, having yet to learn this lesson, has therefore also come up short on any practical response to the GFC. But he surely doesn’t want to miss out on any of the G20 shoulder-rubbing and back-slapping!
Right at this moment, Sir Samuel Griffith is undoubtedly marking down his tyro’s report card.
It’s starting to get interesting. Britain has just announced its sixth quarter of negative economic growth and is calling it a depression. Not poor ol’ Gordie Brown, former world greatest treasurer, though!
As in the US, where Barack Obama has only bailed out the banks and Wall Street – not the people – there will be no recovery. The economy is people, and people need a dollar in their hands for the economy to work. If people have no more capacity to borrow, why do we bail out banks?
Australia’s land price bubble will burst shortly, so we have the advantage of extra time in which to let our press and media know there should be no bank bailouts, nor propping-up of collapsing businesses. That’s arse backwards. The people need support – through tax cuts and a national land rent system. It’s the only way out of a depression.
When our land bubble is allowed to burst, as it must, the banks must quickly write down mortgage values to market and do their sums based on that. If it means they go under, they will be picked up at their true value by other companies, as the capitalist system demands.
But socialism for banks who over-lent without concern for risk management isn’t on! ‘Retaining confidence in the system’ by bank and stock market bailouts is the greatest load of BS. It is simply a con to keep putting dollars into the hands of the wealthy and delaying events until THEY put THEIR affairs into order – and the devil take the hindmost!
If rational people can’t get this message out, you can bet your bottom dollar that Kevin Rudd’s also going to try to ‘convince’ Australians that we need to assist the wealthy, too!
That’s why Michael Hudson’s current Australian tour has been so timely. He’s slaying them talking about this depression! He’s one professor of economics prepared to call BS when he sees it.
Last Wednesday night’s symposium “Lifting the Lid on the GFC” at the Melbourne Town Hall – with Michael Hudson, Steve Keen and me – was most enjoyable.
The meeting was chaired by Henry George Foundation of Australia’s John Poulter, who provided nicely-researched comments about the three of us, and provided Steve Keen with some jogging shoes for his upcoming ‘bet’ trek to Koscuisko.
It was great to speak to people afterwards. Despite assertions of politicians and the media, people are becoming increasingly sceptical about the ‘relatively healthy’ state of the Australian economy in comparison with those countries whose real estate prices have already tanked . Many believe it’s only a matter of timing and that it looks like we’re simply going to be the last cab off the rank for the GFC.
The greatest problem confronting the world must surely be population growth? After all, look what we’re doing to the planet; look at the Global Financial Crisis; look at our overcrowded cities; look at the water shortages; look at global warming ….?
Although this is an intuitively appealing argument, in what way does limiting populating growth begin to answer the corruptions into which Western civilisation has degenerated, where finance, insurance and real estate have been mounted on an altar to which the poor and dispossessed and, increasingly, the middle class are required to genuflect before consideration is given to the needs of the citizenry and sustainable wealth creation? Do not the 1.5 billion cattle that occupy 100 times more land than the 7 billion people on the planet pose a greater environmental threat?
Is the drift of population to the world’s great cities healthy? Is not the drift associated with the promotion of rent-seeking by errant tax regimes? Would the drift (in search of jobs?) be arrested if, instead of taxing people for working, we were to capture publicly-generated land rent, the annual value of locations? Would not the higher revenues drawn from cities act to reverse this drift and the rape of city hinterlands as Megapolis feeds upon itself at a terrible coast to rural and regional areas?
Although the Reverend Thomas Malthus was proven wrong and shown to have the cart before his horse, insofar as population growth has been found to decline with economic security, this hasn’t stopped the emergence a neo-Malthusianism which holds that populations must adapt to pathological environments before the health of the planet may be restored. This must be our starting point is their claim. But they are wrong.
I don’t know what constitutes a sustainable population but – like Bill of Rights advocates who fail to have peoples’ right to share equally in the rent that flows like oil from land and natural resources as priority one – zero population growth advocates are misguided. They’re akin to so-called ‘Productivity Commissioners’ who refuse to see that taxation does indeed destroy, and that land-based revenues conserve.
(1) ALAN KOHLER DISCUSSES NEW US/AUSTRALIA DOLLAR ‘CARRY TRADE’
Move over Japanese yen! Alan Kohler describes the newly-developing USD/AUD borrowing-lending relationship in today’s “Business Spectator”. Of course, the thinking underpinning the USD/AUD ‘carry trade’ in the article relies on the premise that Australia has somehow or other managed to outsmart other nations by averting the property crash resulting from its bubble. Apparently, the Australian government believes it has forestalled the real estate collapse by means of the ‘First Home Buyers’ Boost’, a handout never designed to assist first home buyers but to pump up the real estate market. It hasn’t obviated the crash. It has only delayed it and made it much worse. Given that its real estate bubble was actually 1.7 times America’s, might I suggest the new US/Australia dollar carry trade will be relatively short-lived as Australia’s chickens come home to roost? Hmmm… on the other hand, as the downside prospects for the US dollar are also extremely threatening, maybe some sort of ignoble nexus may linger between the two doomed currencies? 🙂
There’s a remarkable ability for the human psyche to draw the line behind bad news and to conclude “Well, if this is as bad as it gets, it should be easy running from here”. However, this will often ignore fairly obvious things called FACTS. We’ve become expert, for example, at overlooking the sheer extent of the debt leveraged off this worlwide land price bubble. But I guess if newpapers don’t offer a new ray of hope each day amid the gloom, folks might get a little depressed?
But how long can governments continue to ‘stimulate’ the economy to keep things moving, while unemployment continues to rise and people cut their real spending. Forever? Not likely! Can governments really be ‘stimulating’ the economy with one hand while they tax (read fine) labour and capital for working with the other, anyway? They’ve got to get out of the way; they’re meant to be helping us!
Now, let’s get down to basics. What’s the bottom line in the US, for example? What if their real estate prices haven’t finished declining? What if the share market recovery IS a ‘dead cat bounce’? What if they ARE moving into a depression?
(2) DEPRESSION CONTINGENCY PLAN?
Does President Obama, or Congress, have a contingency plan of ‘last resort’ for this situation? I think not. Why not? So let me offer one. How about we keep this shot in our locker …. just in case stimulus gets to the point it isn’t working any longer, unemployment is still skyrocketing and depression has set in:-
1) Eliminate EVERY tax on productive effort – in order to encourage employment and production. (We may even discover that we’re not ‘post-industrial’ after all!, and that finance, insurance and real estate [the ‘FIRE’ sector] is relegated from its ‘leading’ role within the economy to where it more properly belongs – as part of the ‘service sector’.)
3) The combination of these two measures, AS A DISASTER CONTINGENCY will, at least while the contingency is being exercised, eliminate tax write offs and other advantages given to real estate, so that land is stimulated into USE for labour and capital (rather than held out of the market, dog-in-the-manger-like, for capital gain by monopolists and speculators).
On any analysis, it can be seen that this contingency measure works. No quibbles. Just do it. After all, isn’t it preferable to another lengthy economic depression which ends in war?
But it mightn’t get that bad? Hey! It’s a CONTINGENCY remember! THE ONE WE FAILED TO EXERCISE LAST TIME!
I’m sure our approaches to “Lifting the Lid on the GFC” will differ, but I’m just as certain we’ll be united in asserting the need for a new economics for the remainder of the 21st century. The monstrously repetitive bubble-burst perversion that has become neo-classical economics has to be replaced by a saner economics.
If you take a peep at these Michael Hudson YouTubes here and here (after setting them to HD!) you’ll get a taste of this economic historian’s background – including his time as a former Wall Street balance of payments expert – and of the common sense approach that has seen him invited to advise several European nations how to extricate themselves from the GFC, intact and in fact.
Michael Hudson has seen all this nonsense before, from the inside, and Keen has challenged the weaknesses in the economic system since the 1970s. For that matter, none of us are exactly ‘fly-by-nights’, and each of us called this financial meltdown quite independently.
ALAN Kohler’s Theatre of the Absurd in today’s Business Spectator is worth the read. While politicians around the world are congratulating themselves on their stimulus packages, they’ve not put anything in place that’s going to stop financial collapses from happening in future! That’s been a problem for a long time now. Maybe they’re too scared to offend powerful landed interests who ‘cruel the pitch’ for the rest of us?
Maybe we need to sack weak-kneed neo-classical economists and put scientists on the case? They’d soon understand the implications of P – R = W + I. They wouldn’t bury it, or turn absurdly ad hominem against Henry George.
People understood the principle centuries before Henry George came on the scene. They’d seen the collapse of Ancients Rome and Greece due to taxation and land speculation and, under the inspiration of William the Conqueror, tried something else.
“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 insisting that the Statute of Labourers should be kept.
But these efforts were futile; the rate keep steadily high, and finally becomes customary, and was recognized by Parliament.
It is possible, that as the distribution of land became more general, and the tenancy of land for terms of years became habitual, the phenomenon which has often been noted as characteristic of peasant proprietorship, a high rate of wages paid to free labour, may have been exhibited in the period on which I am commenting. …..
[Rogers goes on to provide the daily wage of artisans, agricultural labourers, skilled craftsmen, carpenters, plumbers and joiners.] ….
Nor, as I have already observed, were the hours long. It is plain the day was one of eight hours.”
Six Centuries of Work and Wages – The History of English Labour, James E. Thorold Rogers, T. Fisher Unwin, 12th edition, London, 1912, pp. 326-327.
It’s too sweeping and glib to ascribe the peak in the above chart by the Reverend WPD Bliss (constructed from Thorold Rogers’ painstaking examination of Manor Rolls over six centuries) to the labour shortage resulting from the Black Death. This would sell Rogers short as an economic historian. The Black Death peaked in 1350 and this accounts for the large uptick appearing in the latter half of the fourteenth century.
So, when land rent was collected and there were few taxes, workers were actually more prosperous than they are today! And they were debt free!
Maybe this key aspect of feudalism still carries an important lesson for our current brigade of smug and self-congratulatory ‘ploticians’ and ‘conomists’? The chart below demonstrates that under their policy-making, we continue to have the sort of retrogressions shown in Bliss’ graph.