All posts by Bryan Kavanagh

I'm a real estate valuer who worked in the Australian Taxation Office (ATO) and Commonwealth Bank of Australia (CBA) before co-founding Westlink Consulting, a real estate valuation practice. I discovered, by leaving publicly-generated land rents to be privately capitalised by banks and individuals into escalating land price bubbles, this generates repetitive recessions and financial depressions. We need a tax-switch: from wages, profits and commodities onto economic rents/unearned incomes, if we are to create prosperity and minimise excessive private debt.

OPEN LETTER TO AUSTAN GOOLSBEE

 

 

 

 

 

 

Dear Austan,

You didn’t reply to my last e-mail on 10 March 2009, but that’s OK, because I know you’re pretty busy. But most people can see this thing’s become a full-blown financial depression now, and I thought you might be more interested in what I want to suggest to you this time around.

I e-mailed you because I know you’re a mate of President Barack Obama’s, and you might convey to him this recipe for a quick exit from this collapse.

It’s all about the ONLY way to get out of it, Austan. Nothing else can possibly work, believe me. There’s much history to this effect.

President Obama needs to do a near-immediate tax shift, off producers, off workers, off exchange and thrift – and onto the rent of land and natural resources.

We’ve just had a major inquiry into tax reform here in Australia, Austan. The panel for ‘Australia’s Future Tax System’ was headed up by Treasury Secretary, Ken Henry. Henry and his panel did a great job.

The panel has come out in favour of abolishing most of our hopelessly inefficient taxes and getting significantly more rent revenue from mineral resources and from land.

The mining tax is being amended to a less effective format, but it’s going ahead. There’s to be a public meeting in Parliament House, Canberra, from 4th to 5th of October this year to see what other of Ken Henry’s panel recommendations Australia ought to employ.

I’m hoping we’ll take up the recommendation for an all-in single rate land tax – more correctly (as you’d realise) a land rent.

That’s because, as you’ll see at this particular hyperlink, the land rent/tax has an incredibly strong pedigree.

You’ll know, as any economics text book says, Austan, the charge on land values won’t be able to be passed on in prices, and it will help to allocate our natural resources more efficiently. It will put an end to monopoly and speculation in land, virtually reversing the process that led to this financial collapse, because we’ll also be taking taxes off productivity and getting things moving again.

Such a revenue shift will give all the right signs to productivity.

We have a politician here, Barnaby Joyce, who warned us of this ‘economic Armageddon’.  I doubt, however, he’ll take it further, because it would need guts for him to take the next step and press for the implementation of Ken Henry’s reformed State land tax to get us out of this mess.

I hope you might have the gumption to do so with President Obama, Austan.

Good luck, and best regards,

–      Bryan Kavanagh

TODAY’S “AGE” MUST BE HAVING US ON?

MY ITALICISED COMMENTS FOLLOW PART OF  (a)  ITS EDITORIAL  (b) ROSS GITTINS’ BRAINLESS OPINION PIECE

(a) “Reasons to resist the financial panic”

Confidence and psychology play a nebulous but massive role in the real economy, as they do in financial markets. Australia long ago embraced global markets for goods and services and capital. Thus we are not immune from the turmoil wiping hundreds of billions of dollars from financial assets the world over, including some $55 billion here in several hours yesterday.

….. But there are fundamental reasons, too, why Australians ought to have greater confidence than is suggested by the plunge in the local sharemarket. Our economy is not shackled by debt. Nor is it highly taxed relative to other industrialised nations. The federal budget is headed towards surplus. This is the result of prudent public policy over the past quarter of a century. ….

Oh, good, the government’s doing fine, but what about the astronomical level of debt Australian households are carrying (and trying, with mixed success, to reduce)?  Generated, of course, by record land prices and, yes, by respective governments’  excessive taxation! That private debt doesn’t rate a mention, Mr Editor? Isn’t the fact that the Australian public doesn’t have a dollar to spend just a little bit worrying, you great pillock!

As for the “prudent public policy” of both Liberal and Labor governments presiding happily over the reduction of Australians’ real wages and their spending into a real estate bubble of $2.8 trillion between 1999 and 2010 ….! This includes some $805 billion we are somehow going to have to manage writing off, by the way.

Australia’s position is, in fact, far WORSE than anywhere else in the world, Mr Editor, whilst you, are off in la la land, away with the fairies!

Oh, I get it! Maybe making soothing noises will patch over the structural financial mess that surrounds us! Fat chance!

(b) “Importing gloom belies burgeoning national economy “

“While Europe and the United States are struggling, our budget deficit isn’t particularly big and our level of government debt is laughingly small, writes Ross Gittins.

Is it possible for a country that’s the envy of the developed world to talk itself into a recession? I don’t know. But it seems we’re about to find out.   …. Mining boom (blah blah) …. Pay rises are few (blah blah) …. Not  because the media are putting a negative spin on all the news, reveling in the bad news and forgetting to mention the good.

Now, Ross, please tell me you’re not a neo-liberal economist; a blinkered high priest for the status quo?

You didn’t write THE AGE editorial, did you. Ross?

Hey! Fairy stories some other time, you guys! Australia meanwhile has a serious structural problem of household debt with which we have to contend!

THE AGE can be much more forensic.  It can surely do much better than that sort of crud.


Giving tea partiers and so-called libertarians a serve

TELLING IT LIKE IT IS – THESE TWO MOBS ARE BEYOND THE PALE

Unfortunately, modern Tea Partiers and most libertarians, who should be able to solve the problems of the US economy, have become integral to its hopeless morass.  They should read the proud history of the Boston tea party.

If you’re against taxes, guys, you’ve got to be for rents.  Only morons can be against both. Read your Locke, your Adam Smith, your Henry George.

And look at the timeless common sense of your forebears: “Put to the vote: as many are of the opinion that a public tax upon the land ought to be raised to defray the public charge, say ‘yea’.” …. “Carried in the affirmative, none dissenting.” (Philadelphia’s first tax law, 30 January 1693)

You are usurpers! You’ve fallen for the neo-classical idiocy that land doesn’t exist separate from capital anymore, and therefore, like the return to capital, land rent may be privatised. [!]

But land and its rent are separate from capital, guys. Unlike capital, no individual created them – and therein lies your BIG fallacy!

Land and natural resource rents which represent the community occupy 50% of the economy, and are therefore owed back to ALL the people because they created it.  But you seem to think this is communistic and are therefore presumably happy to include bank CEOs and their minions in with the 0.1% of the population who, like parasites, capture these publicly-created values.  I hate to tell you, guys, but that’s not ‘free market’, it’s socialism for the rich!

And allowing them to thieve from us is why we’re taxed when we should not be. (That last bit’s the only part you’ve got right!)

You have now made yourselves as irrelevant as the politicians you criticise.  Wake up to yourselves, you boorish idiots!

Surprise, Surprise – RBA gets it right!

 

The Reserve Bank of Australia (RBA) was quite right not to increase the overnight cash rate yesterday.

Having run their mortgages and credit cards up to record levels, the GFC has brought about a Pauline conversion amongst Australians. They’ve come to their own conclusions, because neither the RBA nor APRA (the Australian Prudential Regulatory Authority) had really warned them their household debt load had become nigh on impossible.  Whilst people were waking up by themselves, the RBA and APRA remained asleep on the job.

In an article in THE AGE on 15 June 2005, I warned that the RBA shouldn’t increase interest rates because Australia’s “economic growth is primed to tank into a major deflation”.

Nevertheless, the RBA subsequently ratcheted the cash rate up from 5.75% to 7.25% over the next 27 months to 5 March 2008, before proving me right by having to drop it by 4.25% (to 3%) in a period of only 7 months!

But if I was ahead of the pack in foreseeing a drop in property prices in Australia and around the world as early as 2005, I’m surely not now? Is it not fear of a worsening global financial collapse that Australians have ‘deep pockets’ and our retail industry is now suffering so badly?

By not understanding the real problems faced by Australians, misguided RBA monetary policy has added to retailers and mortgage-holders deep concerns. Increases in the cash rate has made it more difficult for both. It has also sent the Australian dollar higher than it should be, thereby damaging our exports.

So, whilst it is the job of the RBA to attend to stability of the currency and full employment, it is its third criterion, the economic prosperity and welfare of all Australians, which is most important right now.

May I remind RBA governors that whilst Australians aren’t spending, whilst real estate values are declining and the dollar remains too high, it is STILL not the time for the RBA to even consider increasing interest rates.  A reduction is more appropriate.

In the current financial environment it’s only superficial commentators, unaware of the overarching concerns of Australians, who could believe otherwise .

It helps to understand that taxation and land price escalation is responsible for most inflation – and there certainly aint going to be much increase in land prices from hereon in!

So, get with the program, RBA!

Greens and Libertarians: The Yin and Yang of our Political Future

Greens and Libertarians:
The Yin and Yang of our Political Future

by Dan Sullivan

Over the past three decades, people have become dissatisfied with both major parties, and two new minor parties are showing promise of growth and success. They are the Libertarian Party and the Green Party. These are not the only new parties, but they are the only ones that promise to attract people from across the political spectrum. Most other small parties are either clearly to the left of the Democrats or to the right of the Republicans. Such parties would have a place in a system that accommodates multiple parties, but are doomed to failure in a two-party system.

The Libertarian Party is made up mostly of former conservatives who object to the Republican Party’s penchant for militarism and its use of government to entrench powerful interests and shield them from market forces. The Green Party is made up mostly of former liberals who object to the Democratic Party’s penchant for centralized bureaucracy and its frequent hypocritical disregard for natural systems of ecological balance, ranging from the human metabolism and the family unit to the ecology of the planet.

Both minor parties attempt to adhere to guidelines that are much clearer than those of either major party. Libertarians focus on rights of individuals to control their own lives, limited only by the prohibition against interference with the rights of others. These rights include their right to the fruits of their labor and the right to freely associate and form contracts. They advocate limiting government to protecting those basic rights.

Greens advocate ten key values (ecological wisdom, grass roots democracy, social justice, non-violence, decentralization, community-based economics, post-patriarchal values, respect for diversity, personal and global responsibility, and sustainable future focus as a guide for government as well as for their own party organization.)

These different guidelines underscore basic differences between the approaches of the two parties and their members. Libertarians tend to be logical and analytical. They are confident that their principles will create an ideal society, even though they have no consensus of what that society would be like. Greens, on the other hand, tend to be more intuitive and imaginative. They have clear images of what kind of society they want, but are fuzzy about the principles on which that society would be based.

Ironically, Libertarians tend to be more Utopian and uncompromising about their political positions, and are often unable to focus on politically winnable proposals to make the system more consistent with their overall goals. Greens on the other hand, embrace immediate proposals with ease, but are often unable to show how those proposals fit in to their ultimate goals.

The most difficult differences to reconcile, however, stem from baggage that members of each party have brought with them from their former political affiliations. Most Libertarians are overly hostile to government and cling to the fiction that virtually all private fortunes are legitimately earned. Most Greens are overly hostile to free enterprise and cling to the fiction that harmony and balance can be achieved through increased government intervention.

Republicans and Democrats will never reconcile these differences, for whatever philosophical underpinnings they have are overwhelmed by vested interests that dominate their internal political processes. These vested interests thrive on keeping the distorted hostilities alive and suppressing any philosophical perspectives that might lead to rational resolution of conflict.

But because minor parties have no real power, they are still primarily guided by values and principles. Committed to pursuing truth above power, they should be more willing to challenge prejudices and expose flaws in their current positions.

There is nothing mutually exclusive between the ten key values of the Greens and the principles of the Libertarians. By reconciling these values and principles, we can bring together people whose allegiance to truth is stronger than their biases.

This could be of great value to both parties, partly because any new party that wants to break into a two-party system has to appeal to a broad spectrum of voters. But even more importantly, each party needs attributes the other has to offer. Libertarians need the intuitive awareness of the Greens to keep them from losing touch with people’s real values, and Greens need the analytical prowess of the Libertarians to keep them from indulging in emotional self-deception. Libertarians can teach Greens about the spirit of enterprise and the wonders of economic freedom, and Greens can teach Libertarians about the spirit of compassion and the wonders of community cohesion.

Reconciliation is absolutely necessary. Even if one of the parties could rise to power, it could do great harm by implementing its current agenda in disregard for the perspective of the other. Moreover, proposals that violate values and principles of one party often violate those of the other. If members of both groups come together to discuss each other’s proposals, they are likely not only to find areas of agreement, but to find conflicts between each group’s proposals and its own principals. If this happens, and the two parties work in concert, they stand a real chance of overtaking one of the major parties and drastically altering the political power structure.

Many third parties have had important impacts on American politics, but the last time a political party was dislodged was when the Republicans knocked the ailing Whig party out of contention over 130 years ago. It should be noted that the Republicans were a coalition of several minor parties with seemingly differing agendas, including the Abolitionist Party, the Free-Soil Party, the American (or Know-Nothing) Party, disaffected northern Democrats, and most of the members of the dying Whig Party. A similar coalition of parties has a much better chance of repeating this success today.

Anyone who looks at current national platforms of Greens and Libertarians will conclude that bringing these groups together is no easy task. For example, the Libertarian platform states dogmatically that they “oppose any and all increases in the rate of taxation or categories of taxpayers, including the elimination of deductions, exemptions, or credits in the name of ‘fairness’, ‘simplicity’. or ‘neutrality to the free market.’ No tax can ever be fair, simple, or neutral to the free market.” On the other hand, the national platform of the Greens leaves one with the impression that they never met a tax they didn’t like.

Yet the historical roots of the Greens and the Libertarians are quite similar. That is, early movements for alternative, intentional communities that live in harmony with nature greatly influenced, and were influenced by, anarcho-syndicalists who advanced principals now embraced by the Libertarian Party. This essay will attempt to show that the differences that have emerged are due less to stated principals and values of either group than to the baggage members have brought to each party from their liberal and conservative backgrounds.

On Conservatism and Liberalism

It is said that Libertarians have a conservative philosophy and Greens have a liberal philosophy. In reality, conservatism and liberalism are mere proclivities, and do not deserve to have the name “philosophy” attached to them. People who have more power than others are inclined to conserve it, and people who have less are inclined to liberate it. In Russia, as in feudal England, conservatives wanted more government control, as government was at the root of their power. Liberals wanted more private discretion.

In the United States today, where power has been vested in private institutions, conservatives want less government and liberals want more. What passes for conservative and liberal “philosophies” is merely a set of rationalizations that power-mongers hide behind.

Conservative support for traditional approaches and liberal support for new ways of doing things also follows from the desire for power. Traditional approaches have supported those now in power, and change threatens to disrupt their power. Changes are often embraced by conservatives once they prove unable to disrupt the underpinnings of power.

For Greens and Libertarians to rise above the power-based proclivities of liberalism and conservatism, they must focus on their roots and reconcile their positions with their philosophical underpinnings.

On the Roots of the Greens

In The Green Alternative, a popular book among American Greens, author Brian Tokar states that “the real origin of the Green movement is the great social and political upheavals that swept the United States and the entire Western world during the 1960’s.” As part of that upheaval, I remember the charge by elders that we acted as though “we had invented sex.” Mr. Tokar acts as though we had invented Green values.

Actually, all the innovative and vital features of the Greens stem from an earlier Green movement. The influx of disaffected liberals to the movement since the sixties has actually imbued that movement with many features early Greens would find offensive.

This periodical, for example, has been published more or less regularly since 1943, calling for intentional communities based on holistic living, decentralism, sharing natural bounty, freedom of trade, government by consensus, privately-generated honest monetary systems and a host of other societal reforms. Yet the founder, Ralph Borsodi, wrote extensively about the evils of the state, and would clearly oppose most of the interventionist policies brought to the Green Party by disaffected liberals and socialists. The same can be said of more famous proponents of Green values, such as Emerson and Thoreau.

The Green movement grew slowly and steadily and quite apart from mainstream liberalism throughout the sixties and seventies. In the eighties, however, it became clear that the liberal ship, and even more clear that the state socialist ship, was headed for the political rocks. The left had simply lost credibility, even among those who felt oppressed by the current system. Gradually at first, discouraged leftists discovered the Green movement provided a more credible platform for their positions.

Because of their excellent communications network, additional members of the left quickly discovered the Greens, embraced their values (at least superficially), joined their ranks and proceeded to drastically alter the Green agenda. For example, early Greens pushed for keeping economies more diverse and decentralized by promoting alternative, voluntary systems, and by criticizing lavish government expenditures on interstate highways, international airports, irrigation projects, and centralized bureaucracies that discriminated against small, independent entrepreneurs. Today the National Platform of the Green Party calls for “municipalization” of industry (that is, decentralized socialism), limits on foreign trade to save American jobs (which they insist is not protectionism), and other devices to create artificial decentralization under the guiding hand of some benevolent central authority.

The influence of Greens who are fond of government intervention (referred to as Watermelons by more libertarian Greens) seems to be strongest at the national level and weakest within most Green local organizations. Despite the National Green Platform’s resemblance to a new face on the old left, many people who are genuinely attracted to Green principles are either undermining or abandoning the left-dominated Green Party USA. Specifically, the principal of decentralism is being used to challenge the right of a national committee to dictate positions to local Greens. This is fortunate for those of us interested in a coalition of Greens and Libertarians, as reconciliation between the Green Left and libertarianism is clearly impossible.

On the Roots of Libertarianism

The Libertarian Party was born in 1970. Like the Green Party, it has philosophical roots that extend far back into history. It emerged, however, at a time when conservatism was in decline. Just as Greens attract liberals today and are strongly influenced by the liberal agenda, Libertarians attracted conservatives and were influenced by their agenda. However, as Libertarians are more analytically rigorous, there are fewer blatant inconsistencies between their positions and their principles.

Libertarian bias tends to show up more in prioritization of issues than in any particular issue. For example, Libertarians are far more prone to complain about the capital gains tax than about many other taxes, even though there is nothing uniquely un-libertarian about that particular tax.

Many Libertarians ignore classic libertarian writings and dwell on the works of Ayn Rand, Murray Rothbard and Ludwig von Mises. The classical libertarians get mere superficial attention. For example, few have read Tragedy of the Commons, but many quote the title. Specifically, they are unwilling to recognize that the ecological mishaps like those referred to in that work had been absent for centuries when almost all land was common. As with the tragedy of the reservations, commons were abused because so many people had to share access to so little land. All this was a result of government sanction, allowing vast tracts of commonly held land to be appropriated by individuals without proper compensation to those who were dispossessed of access to the earth. These facts are ignored because they cannot be reconciled with pseudo-libertarian conservatism.

Just as contemporary Greens have fondness for government and contempt for private property that their forebears did not share, Libertarians take an extreme position on private property and have hostility to all forms of government that their philosophical predecessors did not share.

Their refusal to acknowledge natural limits to private property and their insistence of unlimited protection of property by the state is their one great departure from their predecessors and their principles. For example, they dismiss the following statement by John Locke, known as the father of private property:

God gave the world in common to all mankind. Whenever, in any country, the proprietor ceases to be the improver, political economy has nothing to say in defense of landed property. When the “sacredness” of property is talked of, it should be remembered that any such sacredness does not belong in the same degree to landed property.

They similarly ignore Adam Smith’s statement that:

Ground rents [land values] are a species of revenue which the owner, in many cases, enjoys without any care or attention of his own. Ground rents are, therefore, perhaps a species of revenue which can best bear to have a peculiar tax imposed upon them.

Private ownership of the earth and its resources is the one area where Libertarians depart from their own philosophy. After all, their justification of property is in the right of individuals to the fruits of their labor. Because the earth is not a labor product, land value is not the fruit of its owner’s labor. Indeed, all land titles are state-granted privileges, and Libertarians deny the right of the state to grant privileges.

Even here, Libertarians are on solid ground when they argue that freedom could not survive in a society where land tenure depended on bureaucratic discretion. They are split, however, over devices like land value taxation that would, with a minimum of bureaucracy, put the landless in a more tenable position with respect to land monopolists. Just as liberals dominate the National Greens, conservatives dominate the Libertarian position on this issue, though many Libertarians, including Karl Hess, former editor of the Libertarian Times, do not share that conservative position.

Again, this is a key issue for reconciliation. The Green tradition cannot be reconciled with pseudo-libertarian claims that a subset of the people can claim unlimited title to the planet.

The Magic of Honest Compromise

Compromise is too often a process whereby people on each side give up what they know to be right in order to gain a supposed advantage for their interest group. What I am proposing is that each side give up supposed advantages in order to harmonize with what is right. It takes an open mind and a great deal of courage, but the results can be magnificent.

If the Libertarians accept that ownership of land is a privilege, and agree to pay a fair rent (or land value tax) for that privilege, they will hold the key to getting rid of property (building) tax, income tax, sales tax, amusement tax, and a host of other taxes.

Furthermore, statistical evidence indicates that land value tax promotes compact, harmonious use of land and eliminates a root cause of poverty. In this case, adopting land tax can reduce the need for zoning and protection of rural land, and for housing projects, welfare, and a host of bureaucratic services for the poor.

Greens who study this issue will find that small and simple combination taxes that are essentially payments for exclusive access to common resources will address most of their interests without complicated and intrusive bureaucracies. Land tax itself will eliminate land speculation and land monopoly, and will promote orderly development of land in cities and towns, taking developmental pressure off suburban and rural land.

Severance taxes on our common heritage of non-renewable resources can even-handedly reduce the rate of exploitation of these resources, conserving them for future generations.

Finally, taxes on pollution are really payments for exclusive use of our common rights to clean air and water. It reflects that the air and water is less valuable to the rest of us when it is polluted, and those who pollute literally owe us for the right to trespass on our air and water.

Of course ending land monopoly will not solve all the problems by itself, but it is the key area where Greens and Libertarians are separated from each other as well as from their own principles. Once this is reconciled, we can more readily work together on other issues where we are in agreement, such as liberating our monetary system the banking monopoly, ending military domination of foreign peoples, and ending government interference against people who commit victimless “crimes.”


Greens and Libertarians: The Yin and Yang of our Political Future was first published in Green Revolution (Vol. 49-2, Summer of 1992) by the School of Living, and also circulated to Libertarian newsgroups.

Positive feedback having been received from within both camps, it’s interesting to contemplate what a powerful combination it might be were Greens and Libertarians able to obviate their excesses and unite politically against the obviously moribund economics of the Democrat and Republican parties.