japan disasterEvents issuing from the Japanese earthquake have taken the ongoing economic collapse of  The United States, Portugal, Greece, Ireland, Italy, Spain and other world economies off newspapers’ front pages.

Live on TV we witnessed yet another natural disaster, this time an earthquake, its after-shocks, and several tsunami waves hammering Japan. The horror of loss of life and destruction transfixed us as people, sometimes in vain, attempted to flee the terror of the tsunami in their vehicles.

We pray the attendant man-made accidents, failing nuclear power plants, may be cooled and remedied without further loss of life.

This tragedy, overlaid on top of Japan’s failing economic performance over twenty years seems to pose insuperable hurdles with which she has to deal. 


So, where’s the good news?

As he travels in New York’s subway, it’s nice to see Irishman David McWilliams recounting a heartening story. He relates the successful turnaround in the fortunes of the New York subway to the approach Ireland must take with its billowing debt.  

One hopes Ireland’s new Taoiseach, Enda Kenny, has the wit to see that the Irish want change – and McWilliams’ formula to initiate that change is quite correct.



I note on the Roosevelt Institute website, James K Galbraith testified on “Sensible Tax Reform” before the US Senate Finance Committee on 8 March 2011.

Insofar as his item 6. Should we tax labor, capital – or rent? came out in favour of the latter, Galbraith’s recommendations for tax reform are remarkably similar to those of Ken Henry in Australia.

I congratulated Galbraith on his submission by e-mail and received a thank you in reply.

With Greens on the left of politics arguing that a proper price should be put upon the use and abuse of our planetary resources, and the Tea Party right wanting taxation to be reduced, does this remarkable confluence towards the centre on tax reform represent the catalyst that might reconcile both political extremes?  

As it offers the only logical escape from the economic lunacy that has delivered the world into its deep economic plight, let’s hope so.



I’ve alluded several times to Mason Gaffney’s engaging account of how universities such as Cornell were endowed and set up to kill off the idea advocated by many social philosophers throughout history, but especially as distilled and expressed so powerfully in Henry George’s “Progress and Poverty” in 1879.

Everyday people responded positively to the process so clearly described by George.  For the first time in history they were cottoning onto how much of the wealth they produce is stolen by taxation-promoting, parasitic rentiers.

This small but wealthy rentier band reacted urgently to George. His idea must be killed off quickly in universities by conflating land and capital. This new paradigm must be enforced within academe and Georgism excised from economics altogether. Its proponents should be excoriated and derided, and antagonists declaim that “economic rent is only a tiny part of the economy today anyway”.

Thus was the 18 year cycle of boom and bust set in concrete; thus did the earnings of the poor and middle class continue to be reduced by taxation; thus did rent-seeking parasites dine obscenely off publicly-generated economic rent; thus, as Mike Moore said in Madison Wisconsin last Saturday, do 44 US citizens accumulate unto themselves the same amount of wealth owned by 150 million of their brothers and sisters.

And so it has become de rigueur for modern economics to pooh pooh Henry George’s ‘fiscal adjustment’ to set economies aright; that is, to use the publicly-generated rent of land and natural resources, instead of taxation, for revenue.


This theory [Georgism] still has its adherents, likeable and mainly older people, who overlook the fact that land rent forms such a small percentage of national income: that 2% is nothing to the present tax percentages, which are around 30.

–      Jan Pen, “Income Distribution”, Pelican Books, London 1974 

George over-estimated the future importance of rents and rental income. Governments at every level have grown tremendously in the last century. Even if governments could take all rents without rebellion or severe recession, rents would not come close to covering expenses. In 1929, property rents accounted for about 6 percent of national income. The percentage has dropped to well under one percent today. Whereas property taxes once provided 65 percent of state and local budgets, they now supply about 17 percent.

–      Todd G Buchholz, “New Ideas From Dead Economists”, Plume Books, New York, 2007

The first surprising implication of this fundamental growth equation is that, in the modern world, land per person, which had completely dominated income determination before 1800, no longer matters in economic growth. This is because land rents have fallen to only a few percent of total output in modern high-income economies.  Figure 10.3 shows this trend for England. Farmland rents, which were 23 percent of national income in 1760, fell to 0.2 percent by 2000. In part this decrease was offset by a rise in the site rental value of urban land. But by 2000 urban land rents represented only 4 percent of national income, even in crowded England with its very high housing costs.

–      Gregory Clark, “A Farewell to Alms: A Brief Economic History of the World”, Princeton University Press, New Jersey, 2007


Hmmm … so that’s 2 percent, well under one percent and 4.2 percent? Where lies veracity and intellectual rigour in these three opinions?

The truth is that it lies far from each of these poorly researched sources.

The first hint that land rent may be grossly understated in modern neo-classical economics textbooks came to me in the form of Dr JFN Murray’s excellently-researched valuation text “Principles and Practice of Valuation”, published by the Commonwealth Institute of Valuers in Sydney in 1969:-

Economists have, because of the lack of a satisfactory basis for isolating and understanding the causes of economic phenomena, occurring in a world of infinite complexity, been compelled to develop their methodology within a framework of imaginary models and to show, by reasoning, how a given set of conditions is always and inevitably followed by particular effects. A phenomenon is then explained by showing that it is bound to occur by the operation of the set of conditions postulated by the hypothesis. The illustrations are, however, often vested with an air of unreality because, in the desire to achieve simplicity, the process of elimination is carried so far that the only factors remaining are more appropriate to the Garden of Eden. ….

The theory of valuation is a pragmatical extension of economic theories relating to value and price, but it is remarkable to find that there is an almost complete dissociation between economic theory and the theory of valuation, although the latter from the materialistic viewpoint stands in the forefront of the social sciences. ….

The professional valuer with his insistence on demonstrative proof and acceptance of harsh realities has displayed intolerance of the tenuous abstractions of pure economics. His is a branch of applied economics, which takes into account all the complexities of land utilization and of commerce, and is closely aligned with scientific method, in that it depends upon empirical verification of hypothesis. ….

With some notable exceptions the principles of valuation are in general correspondence with economic theory, but a reintegration of the two sciences, which have been separated since the time of Adam Smith, would greatly advance learning.”  [My emphasis]

So, could the Land Values Research Group find an economist who might undertake impartial research into the real quantum of land rent within the Australian economy?  We did: Dr Terry Dwyer.  His paper “The Taxable Capacity of  Australian Land and Resources” provides a time series analysis of land rent from 1911 to 1999. It was published in the refereed academic journal Australian Tax Forum Volume 18 Number 1, 2003.

I have used Dwyer’s technique to extend his analysis to 2010 and constructed the chart below to put it into pictorial form. It assists to correct the nonsensical sort of economic rent estimations provided by Pen, Buchholz, Clark and others.

GDP breakup


Table 61 in Australian Bureau of Statistics Catalogue 5204.0 assesses Australia’s total land (site) values at $3.6144 trillion in 2010.

Even on Clark’s (highest) estimate of rent being only 4.2% of Australia’s c.$1.35 trillion economy, viz, $56.7 bn, this is suggestive of a capitalization rate of 1.5%.  As Dr Murray might have said: how totally unrealistic can economists get?

ps: I’m a professionally qualified valuer. Economists need to speak to us about the extent of land rent in the economy.

 I’m not sure whether Pen, Buchholz or Clark were able to forecast the global financial crisis. Quite independently, Georgists in the US, UK and Australia did.

Maybe the Georgist school of economics is onto something?


Social reform is not to be secured by noise and shouting; by complaints and denunciation; by the formation of parties, or the making of revolutions; but by the awakening of thought and the progress of ideas. Until there be correct thought, there cannot be right action; and when there is correct thought, right action will follow. Power is always in the hands of masses of men. What oppresses the masses is their own ignorance, their own short-sighted selfishness. – Henry George, Social Problems, Chapter 22: Conclusion



On ANZAC Day, Australia and New Zealand remember the WW1 defeat inflicted upon their soldiers by the Turks at Gallipoli. Some celebrate this enormous loss of life as Australia’s coming of age in the world of international affairs. That’s debatable.

Most Australians consider the Eureka Rebellion at Ballarat a Pyrrhic victory. By facing the odds, the miners, although badly defeated, made their point concerning “No taxation without representation” and legislation was later to confirm their case.

Burke and Wills

Another heroic tragedy remembered in Australian history is the Burke and Wills expedition from Melbourne to the Gulf of Carpentaria. After an epic journey crossing Australia from south to north, an exhausted Burke and Wills missed the depot party at the “Dig Tree” on Coopers Creek by only a matter of hours, lending a dramatic irony to their terrible saga.

Dig Tree  

Although these events need to be remembered, Australians tend to seek out and revel in these tragedies, none of which should ever have occurred; there are better things to celebrate.

Of course, we do celebrate our sporting achievements and, to a lesser extent, the efforts of our inventors, scientists, performing artists, businessmen and public servants.

But some of the really amazing things we’ve done that should be the cause for celebration are allowed to be buried and forgotten under the dust of history.

One such thing was the founding of the national capital, Canberra, on a leasehold system of landholding so as to exclude land speculators and stop land prices from escalating upwards. It was a formidable effort.

But such became the level of ignorance of the principles involved in this aspect of the formation of the Australian Capital Territory that speculative interests came to undermine it, so that Canberra land values are now indistinguishable from those of other capital cities.

Also certainly worthy of great celebration was Ken Henry’s recent recommendation, after lengthy public argument and discussion with his panel, that Australia’s 128 taxes be reduced to only four. Ho hum went the media; ho hum went the Australian public. Fie! Fie! cried those with a vested interest in the status quo.

After many years of public service Ken Henry has retired as Treasury secretary. Over the next few years, let’s hope Australians are able to warm to, put into practice, and celebrate the incredibly positive template for tax reform he and his panel have set for Australia’s future prosperity.

Henry’s is a prescription for tax reform that could give a lead to the world, as Australians have done, almost unsung, in so many other fields.


inside jobINSIDE JOB

With the words of Oscar winning documentary director Charles Ferguson still resident between my ears, to the effect that no prosecutions have been brought to bear from the extensive Wall Street corruption and fraud exposed in the US, I popped along today to the Rivoli, Camberwell, to see his film.

It was worth the effort. Its material was much better than most such documentaries. Matt Damon narrated.

The audience couldn’t constrain ironic chuckles as outrageously rent-rewarded investment bank, treasury and reserve bank officials and their academic hangers-on, presumably all paid for their acumen, took it it in turns to feign absolute ignorance of critical events during the global financial collapse, despite the roles they’d played in it.  They knew nothing.  It was all a complete surprise.

The rent and value-free economics expounded in Harvard economics degree and MBA courses gave the ‘boys club’ the life raft by which to enrich themselves at public expense. No other Harvard course could possibly offer such perversions nor generate such social and financial chaos. Other universities fell into line with the Harvard paragon.

And Barack Obama showed by appointing the same class of culprits he, too, is in Wall Street’s thrall.  He owes them; they contributed generously to his campaign for the presidency, thereby ‘insuring’ themselves.  Overcrowded US jails are places only for the poor.

When, three-quarter way through, the documentary alluded to “the corruption of economics”, I leaned forward anticipating Mason Gaffney’s thoroughgoing exposition from Fred Harrison’s book of the same name, but was unfortunately disappointed. Maybe this might be the basis for Charles Ferguson’s next outing? (It would be a worthy subject for any director.)

Like most films documenting the financial collapse, Inside Job shows the pattern originally set during Ronald Reagan’s presidency attained full blossom with Bill Clinton’s repeal of the Glass-Steagall Act in 1999.  The line between banks of deposit and investment banks having been removed, it became a matter of “Go for it boys! Anything goes!”  In this confusion between free enterprise and total license was born new forms of financial derivatives, packaged with falsely analysed risk ratings, these weird products often insured, reinsured …. until the truth spilled out that many of them stood for nothing.

Ultimately, though, the laugh is not on the culprits, but on the people of the US (as undoubtedly it will also prove to be on Australians), because it is they who’ve allowed themselves to be defrauded by a false economics and by lying cheats who’ve aggrandized themselves at the expense of the public.

A Chinese commentator tellingly reflects counterpoint to these predatory individuals. It is suggestive of why the sun now sets on a once glorious Pax Americana and a new economic dawn begins to spread across China’s eastern horizon.


 Steam train

The Train, a new 5 minute video by Fred Harrison

Harrison’s points include:-

  1. Passengers pay twice
  2. Trains pay for themselves
  3. Trains more than covers their costs
  4. Governments can pay for railways without taxing their citizens
  5. Investment in railways yields huge profits
  6. The problem is the way governments pay for the capital they invest in the tracks and rolling stock
  7. Payback is like winning the lottery
  8. The Jubilee line raised productivity in the London economy
  9. [Re the Jublilee Line] Every one pound invested provided a payback of 4 pounds
  10. That is what railways do, make the economy more efficient
  11. Who pocketed the fat profit? Not the shareholders, not the taxpayers, wages were not raised
  12. Profits cascaded into the profits of the land owners
  13. Taxes destroy jobs

…. and he’s right, you know.

EarthSharing has more about earth-based economics here.


Christchurch Cathedral
Christchurch Cathedral


Our hearts go out to the people of the beautiful city of Christchurch on New Zealand’s southern isle. What a catastrophic earthquake, as we learn of people needing limbs to be amputated so they may be rescued from the rubble of collapsed buildings in the city’s heart.

As this disaster follows hot on the heels of lives lost in the droughts, fires and floods of Australia, we Antipodeans wonder what we’ve done to have these natural disasters visited upon us. I am reminded of Gloucester’s cri de coeur from Shakespeare’s “King Lear”:-

As flies to wanton boys are we to th’ gods,
They kill us for their sport.
  [Act IV Scene 1]

When we look more broadly, however, we see that we’re not alone. Natural calamities occur fairly regularly around much of the world.


But not all calamities are natural; not all calamities grab the headlines, and our hearts.

Some, such as poverty, hunger, wage slavery and despair are more insidious. They are enormous, ongoing, and man-made, daily claiming more lives than those lost in nature’s most violent moments.

For these, Gloucester seems to have a more considered opinion:-

           ‘Tis the times’ plague, when madmen lead the blind. [Act IV Scene 1]

The American social philosopher, Henry George, tried to remedy this blindness, noting there was a simple “fiscal adjustment” for these most unnatural of disasters.

But Gloucester’s modern “blind” don’t want to see or understand this simple adjustment.  It won’t happen, they say. It can’t happen, they say. And they ironically liken this simple fiscal adjustment to encouraging turkeys to vote for Christmas.

But the reality is that if people of the world don’t vote for Christmas, whether rioting in the streets or not, they are surely carrying wealth, power and privilege on their backs, thereby making turkeys of themselves.


Financial havoc in the land of Oz

dreamingLast night I had the strangest dream – a nightmare. I was in a land called Oz, a land where the government taxed productivity. There were taxes on people’s earned incomes, on the goods and services they produced and purchased, and on their comings and goings in general. If businesses produced anything at all, they were fined for so doing. If they employed too many people they were slugged with something they called a payroll tax.

This was ‘post industrial’; this was an economy of high finance.

Oz had a Productivity Commission to ensure that as little real wealth as possible was produced. It did a fine job.

But they did give tax breaks to property speculation in Oz, calling it property ‘investment’, or an impetus to ‘the provision of housing’. You could ‘negatively gear’ your investment property and exaggerate your depreciation and repairs, so other taxpayers helped you buy your property. Nice?

Having fined the hard-earned salaries of the people of Oz with taxes on their efforts – as though they had just punched a policeman in the eye, or committed some other crime – the prices of their land shot up spectacularly because that’s what this strange tax regime had encouraged. Their ecclesiastical high priests preached that the phenomenon was “simply a matter of supply and demand: the tax system has nothing to do with high land prices.”

Look, I know this all sounds too stupid, but that’s often the way it is with dreams, isn’t it?

On top of their taxes and a Mediplank levy, the sad little wage earners of Oz were slugged a further 9% penalty called a superannuation levy, because it was thought they were too stupid to provide for themselves in retirement. Truly!

With all these taxes and the skyrocketing land prices of Oz, many people could no longer afford food, clothing and shelter without assistance – much less money for entertainment or recreation – so they increasingly turned to the banking sector or government for help or, at times, for their very survival.

Meanwhile, important people in charge of things called trusts and investment funds shunted around hither and yon the billions to which people had to wave goodbye as it disappeared into almost certainly depleting superannuation funds playing favourites with share and property markets, and inflating with gay abandon bubbles in both. When the bubbles burst, so much for retirement, folks, but gee it has been quite an entertainment with your money, a regular hoot for fund managers and their minions!

Oz’s once efficient shipbuilding industry and most other significant manufacturing had long been shut down as a side effect of all its taxes on production and real wealth creation. It had now become a fantasy land where finance ruled the roost, and any manufacturer wishing to remain in business was forced offshore to where taxes and land were cheaper; or, as the financial spin had it “to where labour is cheaper”. It seemed, however, a well paid workforce in counter-culture land, Germandom, where manufacturing wasn’t regarded as some sort of sin, had no such problem. Nor did it prioritise home ownership as the sine qua non for heavenly bliss. Two-thirds of Germaniums actually rented their homes on long leases and knew not real estate bubbles.

Meanwhile Oz banks continued, unimpeded, to lend on bubble-inflated land prices, their CEOs paid handsomely in multi-millions to completely disregard the prudent risk management practice of not advancing funds into a soon-to-burst residential real estate bubble.

Journalists had become fascinated with the lively, if sometimes incredible, stories in and around the banking sector, putting banks on their front pages and upon a pedestal, quite oblivious to the pedestal’s precarious tilt.

Natural monopolies, once under government ownership and tight management, were sold off to private companies in the name of business “efficiency” and “competition” to help fund extravagant government, the companies craving to suck at the teat of the public’s surplus land rent. Freeways became tollways as the poor were directed into intentionally constructed labyrinthine side streets.

At the first sign of the real estate market flagging, more Oz revenues were directed into home-vendors’ schemes, in order to re-inflate their property prices and keep this unreal finance-based economy happening. They had to be kept primed or it was ‘game over’.

With household debt at record levels and economic instability now abounding, it was thought best the government should guarantee Oz banks, rather than let them go to the wall like failed businesses once ought.

Wasn’t this service industry capturing the public’s rent, that is, the common wealth, per medium of bubble-inflated capital and interest repayments on mortgages, more important than wealth creation itself? Banks were most certainly ‘too big to fail’ in this Noddy land, so the peasants could readily be taxed to bail them out if needs be.

The plutocracy ruled with finance and taxes as their weapons. As the poor and middle class in the land of Oz were left with little wherewithal and pitloads of debt, the economy turned ‘cactus’. So, what was to be done?

Maybe a $900 handout, maybe a BER program here, a home insulation program there, not to keep people paddling, mind, but to keep the weirdly-lopsided financial system and the uber wealthy of Oz afloat in this concocted life raft.

There was a fallback plan in this land of which I dreamt. If things turned really grisly, why not simply roll the money-printing presses, just like its gargantuan neighbour, Brobdingnag, had done? That’ll fix things. It’s that easy!

Suddenly, a bloke by the name Hen Kenry broke into my dream, crashing through a brick wall with a ponderous mallet, announcing Oz to be a financial mess. He and his Alice-in-Wonderland tea party panel that followed him through the wall opined that Oz abolish its taxes and instead tap its vast reserve of land and natural resource rents.

Killjoy! That certainly wouldn’t go down well in the land of Oz.

I awoke in a state of utter confusion and déjà vu.  Had I not visited this fantastic place before …… somewhere? ….. sometime?



Oh, Egypt’s President Hosni Mubarak is probably the world’s richest man, with real estate interests in London, New York and Los Angeles? How surprising.  (Not!)

That’s why privilege, power and landed interests have fought for centuries to have governments wind back land-based revenues. They have the money and influence, so governments listen.  But, by listening, governments and the wealthy generate economic depressions such as this.

Here we are in the 21st century having less to spend after expenses for food, clothing and shelter than people had in the 15th century.  Incredible, but true.

As invention, innovation and science have made great strides, we’ve permitted economics to retrogress back into the dark ages because privilege wants it that way. It suits them to hide this corruption.

In the year 2011, don’t you feel a little silly about allowing the privileged (who by private legislation) channel publicly-created wealth unto themselves? Not just a little bit shamed? No?

Hey, wake up world!


You're earning less than people earned centuries ago.
You're earning less than people earned centuries ago.