Ignoring the lessons of history

Any analysis of history shows that for justice to be done to all people, the rent of land must be paid into the public treasury for the privilege of the exclusive occupancy of land: it cannot be ‘owned’ without this contingent liability. All the great social philosophers, from Leviticus (25:23-24) to the USA’s Henry George have signed up on this point.

However, we close our minds to this requirement, choosing to break this natural law and building up inflation-generating land price bubbles. These regularly burst into recession every 18 years or so, and eventually into the major economic depression such as we are now experiencing.

As a real estate valuer acquainted with the principles of Ricardo’s Law, it seems obvious to me that we need to comprehend that land prices are necessarily inflationary, because they simply represent the privatisation of what should be public land rent. Pathological land prices therefore build up into bubbles until they burst into a partial correction. Although banks and borrowers are both savagely affected by this process, governments, in the thrall of the rent-seeking 0.1%, choose to bail out the banks who misguidedly lend against the security of a bubble. They should rather have chosen to write down the impossible debt of those borrowers conned by the banks who know this unfortunate history all too well. They prefer to bury this history in order to continue the monopoly game to their advantage.

There is a long history of people trying to feather their nest in land price bubbles, going back to Cicero in Ancient Rome: “The Consuls valued my house at nearly two million sesterces at their assessor’s advice: and the other places very stingily – my Tuscan villa at half a million sesterces, and my Formian at half that sum.”

We continue to ignore history’s rather obvious economics lessons because we like to think ‘it might be different this time’ – that is, before we learn to our great distress that it never is different.

A world gone mad

mad worldWe were all meant to be wealthy by now – new technologies having assisted the means of production and service delivery. Instead, what we’ve inherited is a world gone mad, and in debt.

Where did all the wealth go?

Look around you. Obviously, it’s gone mainly to those at the very top. No, not just to the one per cent, but especially to the one-tenth of one per cent.

How could they have possibly done it?  How come we didn’t we notice?

I hate to tell you this, but it’s because we’ve all been taken for fools and become happy to work as wage slaves in the forlorn hope that if we work hard enough we’ll have our share of the surplus wealth we create. However, the distribution of created wealth didn’t flow equally to all–it didn’t even trickle down–it shot up in a gusher, into the hands of the 0.1 per cent.

Many erudite contemporary studies show how the middle class is being hollowed out and coming to join in the travails of the poor and dispossessed. These studies come out ad nauseam – without satisfactory resolution.

Similar erudite studies, often aided by mathematical formulae show how our tax regimes are failing us. These come out ad infinitum – but without sensible answers.

You see, you’re allowed to write about bad outcomes, but you’re not allowed to mention the remedy to these, because “there are no easy solutions”.

But there are, you know.

The general public has simply got to capture for revenue that 25 per cent of the economy known as ‘surplus product’, ‘unearned income’, or ‘economic rent’ which the 0.1 per cent takes for itself.

By taking unearned income for themselves, the big ‘rent-seekers’ are acting little differently from chattel slave owners of yore. Worse! At least chattel slaves were fed, clothed and housed by their ‘masters’.

Only thing is, by the 0.1% stealing unearned incomes or economic rents–owed equally to everyone as a societal dividend–investment declines in goods and services other than banking, real estate, and insurance, as do wages and earned profits. On top of this, we make the critical mistake of taxing earned incomes and goods and services, because the rent-seekers, our betters, tell us that’s what we should do.  And we’ve been stupid enough to believe them!

So, as economies grind to a halt, you might want to consider the devastation rent-seeking, particularly in our natural resources, is wreaking across the world.

You might even want to rise up on your hind legs to rectify this stupidity? To date, our politicians are obviously not interested. They’re too busy representing the rent-seekers.

Brexit was largely a protest against the status quo.  It would be nice if protesters understood the rent-seeking mechanism which keeps them suppressed.


BrexitThe Brexit, like most national and international issues, was founded in Britain’s prevailing economic conditions. For a long time, the Brits had been feeling no love for their politicians who had seemed incapable of solving their declining incomes, their levels of debt and general wellbeing. Everything in life seemed to be getting harder, so give us a ‘remain’ or ‘leave’ option and we’re bloody well going to let our so-called ‘representatives’ know all about it. That’ll take them away from their extraordinary attachment to the City! That’ll make them sit up and take notice about how unhappy we are!

Problem is, the reason for the anger is often subliminal. It often expresses itself against migrants, or a political party, a leader, or some idea or other, but it’s always fundamentally based in declining standards of living.

People don’t realise, at bottom, what politicians are failing to address is the un-taxing of wages and capturing instead unearned incomes – economic rents. It needs to be said two or three times to sink in, but that’s exactly what these pages have been all about: explaining why we have been slowly declining towards the end of another Kondratieff Wave, another economic depression, since 1973. It’s about time we woke up to this fact.

It will be a pity if a forthcoming multitude of reasons for the Brexit distracts from the stupidity of taxing wages and earned profits instead of unearned incomes. Worse, if the Brexit is wrongly blamed for the depression!



deathandtaxesNobel prize-winner Joseph Stiglitz has it pretty right. Like Michael Hudson, he notes a serious distinction between rents and taxes. Therefore, capturing economic rents (unearned incomes) should not be confused with “fiddling with taxation”, as some have critiqued the revenue switch from taxes to economic rents recommended for Australia by the Henry Tax Review.

Understanding rent-seeking is to see exactly how wages and profits are having the life squeezed out of them by speculation in economic rents. The rentier economy into which we’ve morphed has not only dug a vast wealth chasm between the 0.1% and everyone else, but it has clearly ground world economies to a halt. By blaming outcomes—governments; debt; Britain’s vote today to leave the European Union, and so on—we make ourselves impotent, effective action remaining both contentious and impossible.

The fact that the US has left the rent-seeking gate open suggests it has learnt nothing at all from the leveraged sins of Wall Street which led to its 2007 property collapse and brought the US financial system to its knees. This is nothing short of flabbergasting.

Surely we need to set our sights on capturing ‘super profits’ (economic rents) if wages and capital are to be freed up and the wheels of industry and productivity are to turn again? However, the remedy is either invisible to mainstream analysis or not contemplated by neoliberal governments because it will take the speculative puff out of land prices. Hopefully, Brexit will assist in undertaking this necessity.

Australia and the US employed this reform constructively during the Progressive Era, in the wake of the 1890s depression. Failing similarly to capture a far greater part of economic rent than we currently do will undoubtedly consign us to contracting Japan’s lingering economic disease.

As economic rent occupies some 25% of the economy, the term ought to be on everybody’s’ lips instead of being verboten, but if that’s too technical ‘unearned incomes’ will have to suffice.

Amending Benjamin Franklin: “The only certainties in life are death and economic rents.”