RECOVER SOVEREIGNTY OVER OUR NATURAL ASSETS

Although no political party other than the Australian Democrats and the Republican Party of Australia promote capture of publicly-generated land rent in their policies by way of land tax (the Australian Labor Party having written, but never voted, it out of the party platform), fortunately the major parties still seem to accept the need for an ad-valorem charge on real estate at local and state government levels.

The extreme right is quite different, however.  It doesn’t accept the principle that land and resource rents are owed, equally, back to all the nation’s inhabitants.  Ayn Rand is their god, and in their eyes economic rent belongs to individuals. ‘Royal libertarians’ still seem to be in Rand’s thrall.

And thus it has been that a healthy suspicion of government has been replaced by a mindless call of the right to privatise all those natural monopolies once understood should necessarily be controlled by government.

In the state of Victoria we’ve seen the supply of gas and electricity privatised, the metropolitan rail network privatised, and our freeways turned into private tollroads – the latter reversing the age-old English dictum of the freedom of the highways and byways.

Ironically, the hard economic times brought about by the failure to capture Victoria’s rents in the late 1980s boom made the public asset sell-off all the easier in the recession of the early 1990s. The legislation was able to be passed by the forces of the extreme right on the proposition Victorians had no real entitlement to retain these natural monopolies when they were so eminently saleable in the recession. (They were obviously undersold in the recession.)

In a tribute to this Ayn Randian neo-liberalism, Victoria has now had more of its public infrastructure sold off to big private rent-seekers than any other state – and we’re beginning to witness the devastating effects.

As with the privatisation of Australia’s privately-constructed once publicly-owned telephone network, there is little doubt these state privatisations are not working: under the questionable guise the ‘user pays (twice)’, they’re coming at far too great a cost to the public.

It’s almost certain Melbourne’s trains would be running supremely better under public ownership than the procession of private companies which have endeavoured to run them; that tollways have been responsible for poorer people being unable to use their major highways to the extent they’d like to be able to; that the supply and maintenance of gas and electricity are not up to the standard when these utilities were in the hands of the public.

Private ownership of natural monopolies will never work satisfactorily, full stop. [Thoughts of US Enron fraud loom large!]

AN ULTIMATE EXAMPLE?

Properly engineered embankments would certainly not have provided the outrageous sight of the Morwell River recently disappearing into Tru Energy’s brown coal mine.  [Want an ironic laugh?]

Whilst the Victorian Labor opposition is quite correct in calling for an inquiry into the incident, and federal Democratic Labor Party Senator John Madigan is to be commended for bringing the matter up in the Senate on Tuesday night—and warning New South Wales and Queensland governments against going down the same path as Victoria in selling off their electricity generators—the real hope of the side for Victoria is to reverse these privatisations at such extreme breaches of care, and otherwise as the opportunity arises.







9 thoughts on “RECOVER SOVEREIGNTY OVER OUR NATURAL ASSETS”

  1. Not true – the surplus rent remains what it originally was and was intended to be – the free contribution of nature to society. This remains significant. I would also concede that over time, many improvements do become indistiguishable from nature.

    It is only this natural bounty that is due as rent, free of assignation. There is a bounty, even if it is not as large as you might have imagined.

    Furthermore, if the rent is returned fairly to those to whom it is due, then the need for government services – and therefore rent – will be markedly reduced. Far from being a dark vision, return of rent to its originator frees up the individual and the company to become publically minded. For if an individual or company benefits directly from public mindedness, then that will be a distinct consideration in their actions.

    While currently an private entity is recompensed in some measure for their labors by wage or profit, the same arguments which suggest that govenrment works that result in an uplift should be funded out of rent (with a usage charge related to immediate costs rather than recovery of capital), work for private ventures. And it works more approporatiely – for the resulting uplifts remain uncertain – there is no automatic connection between a public good and an increase in rent. It must be a public good that there is potential demand for, in that place, at that time. Your example of a school on the Nullabor illustrates that.

    ….

    The ironic side of all this is that the very Randian’s you speak of would and do make the opposite criticism.

    Community recognition of individual contribution is necessary, just as individual recognition of community contribution is necessary.

    The distinction between Randian and Georgian is which of these self evident truths they choose to ignore to their own end. Everyone likes their little bit of something for nothing.

  2. Of course it will extend for miles around. You can measure it, and the uplift it brings, and the corresponding increase in rent. On the null labor, there would be no or little increase in rent, so no value would accrue to the builder. However, where that uplift occurs – and the community receives additional value – in rent – due to the efforts of private individuals or firms, the cause of that uplift must be recognised and due consideration given. Otherwise there can be no argument that the community is due greater rent when a public work is undertaken.

    I care not what any great philosopher thinks – it is self evident that if an individuals work results in uplift, there is no valid argument that can be made against the return of the increased rent to that individual. George’s argument amounted to a statement that it was too complex; this may very well have benn the case in George’s day, it is not so today. While complex, deconvolution algorithms are perfectly capable of teasing out the sources and magnitude of uplift due to specific works.
    With recognition of private contribution, you will see an increase in consideration for public value; without it, a preference by government to conduct no works over time as they receive all of the uplift with none of the capital expenditure if they only leave works to be completed at the cost of private industry.
    To say that nothing an individual does contributes to the value of land in his community is false; rather is is the diverse efforts of the community, each of value in a small way, that sum to result in rent increases.
    Most evident and localised is the farmer who improves his pasture; under Georgist construct he would be assessed extra in rent due to using more valuable land that he himself alone contributed the value to. This must not be. Rather, the effort placed into his land must be recognised and the rent unchanged, else there would be no value to the farmer in improving the land. Even should he sell the land – by definition at no price – he should receive them additional rent accrued to the land by his labours.

    To not do so is just as much theft as when the community receives no rent for the land or it’s resources. In fact it is worse, as who has recourse when they are stolen from by the community?

    No, the contribution of each must be recognised, as much as is practicable given the technology of the day.

    1. Of course what an individual produces DOES contribute to society! There’s no disputing that. But he/she is FULLY rewarded by his/her profit or wages, but for the sake of a workable society the individual has no claim to super profits or economic rent.

      In contradistinction to your reading, society should capture in sum of all community-generated surpluses reflected by economic rent, so that taxes on labour and capital may be abolished. There is no surplus rent remaining under your interpretation, Chris, so the tax penalties on labour and capital continue on, the gap continues to widen between major rent-seekers and the citizenry, regular financial collapse is set in concrete, society continues to fracture …. Sounds positively Ayn Randish to me: rent-seeking greed is good.

      Do you mind if I can’t join you in such a dark philosophy?

  3. The privatisation of public assets like utilities and transport hubs, violates the constitution
    that government should not dictate or force the consumption of a private product or service. Instead privatisation which has raised the cost of doing business, arts & leisure
    have bid-up essential assets into a huge price bubble like property. The only tall poppies Australia creates are Hock off economists and economic rationalism of management
    under the Neo-liberal consensus and continuity of public private agenda, who get in the way of genuine creative dynamic and productive people through censorship or poverty.

  4. BTW, Georgism itself is an example of how privatised monopolies can and should be run. The value of the monopoly should be returned to the community – in land, in resource, in any instance where monopoly is held.

    Rather than eliminating the grant of privilege, Georgism exemplifies the methodology for a privilege to be granted in a consistent and equitable manner.

  5. What Georgism doesn’t do is pay private interests for the uplift in land values due to their actions.

    It considers all actions that increase land values to be common, which is simply not the case.

    A private interest who builds a school, should receive the same benefit from the resulting uplift in land values (if that occurs) that the government would.

    A private interest who builds a road should receive the return in uplift rather than having to impose a toll.

    All of these actions involve uncertainty in consequence – the uplift that occurs due to any given action can be estimated but not known – and should be undertaken commercially, not by government.

    Government is the basis for social order, and as such is not an appropriate vehicle for risk. For that, we developed the company.

    1. That’s incorrect, Chris. The building of the school will raise property values in the neighbourhood – and you say these super-profits/rents belong to the builder? No, I’m sorry. The private interest who builds a school is entitled to his costs PLUS his profit, but he’s certainly NOT entitled to the community uplift in land values – that might extend for kilometres. That’s the community’s, and the community ought to capture it, instead of taxing the builder’s income (or people’s incomes), or the builder’s purchases (or people’s purchases). No INDIVIDUAL (such as the builder) can create the uplift in surrounding property values, Chris: it is the existence of the community surrounding the school which creates it, not the builder. Proof? To how much super profit would the builder be entitled above his contract price if he were to build the same school on the Nullabor? Nil, because of lack of sufficient community. Community-generated rent is what real estate agents refer to as “Location, location, location!” It’s otherwise known as Ricardo’s Law of Rent, and just about any great philosopher agrees economic rent cannot belong to ANY individual.

      Henry George put it far better than I have above:

      “For justice to be done between men it is not necessary for the State to take the land; it is only necessary to take its rent.”

      “Our primary social adjustment is a denial of justice. In allowing one man to own the land on which and from which other men must live, we have made them his bondsmen in a degree which increases as material progress goes on.”

      “A tax on land values is of all taxes that which best fulfils every requirement of a perfect tax. As land cannot be hidden or carried off, a tax on land values can be assessed with more certainty and can be collected with greater ease and less expense than any other tax, while it does not in the slightest degree check production or lessen its incentive. It is, in fact, a tax only in form, being in nature a rent – a taking for the use of the community of a value that arises not from individual exertion but from the growth of the community. For it is not anything that the individual owner or user does that gives value to land. The value that he creates is a value that attaches to improvements. This, being the result of individual exertion, properly belongs to the individual, and cannot be taxed without lessening the incentive to production. But the value that attaches to land itself is a value arising from the growth of the community and increasing with social growth. It therefore properly belongs to the community, and can be taken to the last penny without in the slightest degree lessening the incentive to production.” ( Introduction to Protection or Free Trade)

  6. The problem with the right naturally occurs because Georgism switches collection of public rent by private interests – which is wrong – for collection of private rent by public interests, which is equally wrong.

    You have to resolve both sides of the problem, not just trade one problem for the other.

    1. No. Georgism does recognise that government interventions should go missing (be unwound) once the natural revenue source has been adopted, Chris. However, there is absolutely no case for privatising natural monopolies. That’s called granting privilege. (i.e. privi-lege – legislation in favour of private interests.)

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