INELIGIBLE BUSINESSES GET BIG BUCKS

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We don’t need this kind of corruption during a downturn!

Both the Treasury and the Australian Government should take serious lessons from this episode.

When the next big economic crunch arrives, the obvious path forward is to deliver a universal income to all citizens. Businesses will naturally do well under an approach that puts money directly into consumers’ hands to weather the storm.

Businesses require no other favour.

GEORGISM: TOO PERFECT?

Georgism is frequently critiqued through the lens of “not letting the perfect be the enemy of the good,” and the saying is often deployed as a polite political put-down by its detractors.

The relationship between Georgism—an economic philosophy focused on Public Capture of Economic Rents to replace all other taxes—and this aphorism cuts both ways, depending on whether you’re looking at it from the perspective of critics or modern advocates.

1. The Saying as a Critique (The “Put-Down”)

When critics use this phrase against Georgists, it is usually a way to dismiss the ideology as utopian, politically impossible, or dogmatic. In this context, it functions as a put-down, by implying that Georgists are too pure to operate in the real world.

Critics argue that:

  • The “Single Tax” Dogma is Too Rigid: Henry George originally proposed the capture of rent as a single tax that would replace income, sales, and corporate taxes. Despite the Georgist claim that all taxes and their excess burden come out of rent, critics employ the argument that modern government spending is simply too large to cover from natural resource rents. Therefore, to want the single-tax is seen as letting a “perfect” ideal ruin practical revenue generation.
  • Transition Costs are Ignored: Completely dismantling current property, income, and sales tax systems to implement a Georgist system is likely to cause massive economic disruption. Critics argue that waiting for this “perfect” systemic overhaul prevents us from effecting the switch of emphasis between income and sales taxes as proper tax reform.

2. The Georgist Counter-Argument

Modern Georgists strongly reject the idea that they’re letting the perfect oppose the good. They argue that Georgism is adaptable and pragmatic.

  • An Incremental Approach: Rather than demanding overnight revolution, many Georgists advocate working for its gradual implementation, pointing to Singapore as a successful example of the public capture of rent over a period of time, despite not being fully Georgist in its approach.
  • Economic Rent as a Significant Supplement: Many modern Georgists are content with capture of natural resource rents being a major source of revenue alongside other taxes, rather than the only source of revenue. They view a shift towards taxing ‘land’ rent rather than labor as a “good” step forward.

THE COST OF LIVING

As people become more concerned about rising consumer prices, the cost of the war in Iran becomes a handy but superficial excuse for world governments. The war no doubt contributes to costs, but there’s one enormous void in political discourse on cost-of-living increases.

The void was notably also to be found in the 1970s financial collapse. In Australia’s case, the recession was initially blamed on Whitlam government financial mismanagement. However, as the 1973-1975 crisis proved to be a worldwide phenomenon, Gough Whitlam’s shortcomings became a secondary reason to the OPEC oil crisis having generated the recession. Mainstream media had chosen to overlook the bursting of the world’s then greatest real estate bubble which, peaking in 1973, had burst. Therefore, banking, real estate and mainstream media interests weren’t too happy about TIME magazine’s coverage of the land price bubble in a special supplement to its 1 October 1973 edition. [“Land fever is not confined to the US. In England, the average price of a lot has doubled in two years.” …. “For most Americans, land price inflation costs more than it is worth …. a purely theoretical profit until he sells.“]

The early 1970s land boom came at great expense to productivity and to the cost-of-living, putting people across the globe into impossible levels of mortgage debt and, although oil prices worsened the outlook, the vast recession was a natural financial outcome ensuing from the bubble-burst.

Today’s situation, where Strait of Hormuz oil problems receive much of the blame for the burgeoning cost-of-living, masks the grim reality of exceedingly high land prices and impossible levels of mortgage debt again.

History rhymes; as in the relative silence concerning Australia’s escalating land prices. These are published at Table 61 in the National Accounts and tell a sorry story about real inflation (as compared to pointedly concocted ‘CPI’): –

Once again, we’re likely to pay heavily for this.

EVERY 18 YEARS?

Are we about to repeat the incidence of the Global Financial Crisis, about which I spoke with Michael Hudson and Steve Keen on 14 October 2009 at the Melbourne Town Hall?