Amongst the letters in response to Shaun Carney’s article “Labor crisis of faith” in THE AGE on New Year’s Day are these two:-

January 3, 2011

Where are all the true believers?

SHAUN Carney – “Labor crisis of faith” (Opinion, 1/1)  is spot on. A primary reason for the downturn in support is that Labor too readily compromises its values and core constituency for short-term electoral gain. Few people have any idea what it really stands for.

Prime ministers Ben Chifley, John Curtin and Gough Whitlam were strident champions of social justice and the advancement of workers and their rights, and they had strong community connections and respect for the Aussie battler. The ALP of yesteryear valued its grassroots membership and the views of unions. It would not have permitted self-interested, right-wing factional warlords to wrest control.

Old Labor was a party of true believers who kept the light on the hill shining bright and clear. This light has been substantially dimmed by the current mealy-mouthed leadership, many of whom seem hell bent on appeasing big business and their financial interests at the expense of the little person. This can be seen in Labor’s policies regarding planning and industrial relations where the average person is made to feel as though the government is at war with them. There is no point to the ALP unless it changes its name to the Alternative Liberal Party.

Rex Solly, Bolwarra

A soulless party

THE ALP is in a precarious situation because it no longer stands for anything except clinging to office. Driven by focus groups and with MPs largely drawn from recycled union apparatchiks or ministerial advisers such as ”Captain America” Mark Arbib, who spends an inordinate amount of time at the United States embassy, the party has no soul.

The weekly focus group reports often result in sudden policy U-turns and any talk of social justice provokes looks of genuine incredulity. The Greens have a purpose and policies, and will continue to attract disillusioned Labor voters as the party follows the Titanic to the bottom.

Thos Puckett, Ashgrove, Qld

I’m not so sure the Labor Party used to be as responsive to its membership as Rex Solly suggests, but both letter writers and Shaun Carney make several good points.

In its cleverness to be modern and ‘with it’, Labor has become so responsive to focus groups that it now stands for everything and for nothing. 

WHERE THINGS STARTED TO GO WRONG

The rot really began to set in when federal secretary, Cyril Wyndham, simply wrote the longstanding plank of the Labor Party to introduce a tax “on the unimproved value of the land” out of the Labor Party’s platform in 1964. It was never voted out.  (Maybe some Australians mightn’t like it?)

A speech “How Labor Lost Its Way” given by Clyde Cameron four years after his retirement from the national parliament, on the occasion of the opening of the South Australian headquarters of the Henry George League on 13 May 1984, documents this to have been the point from which Labor began to backslide on matters of social and economic principle.  

Cameron records Labor Party leader Arthur Calwell’s parliamentary reaction to the Menzies Government’s Bill to abolish the federal land tax in the early 1950s: “We have always believed in the land tax, and when happy days come again we shall restore the measure imposing the tax to the statute-book of this country.”

Clyde Cameron’s “How Labor Lost Its Way” concluded: “This speech may even cause present day Labor leaders to once again take the road to social justice and fiscal decency.”

It didn’t.  They haven’t. 

Although Ken Henry’s tax review panel has also recommended both parties take the same road to social justice and fiscal decency, they refuse to do so, having a preference for the road that, privatising economic rent, has always led to the collapse of civilisations. 

Such is the wit of our parliamentary ‘representatives’.

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The Ambulance Down in the Valley

’Twas a dangerous cliff, they freely confessed,
Though to walk near its crest was so pleasant,
But over its terrible edge there had slipped

… A duke and full many a peasant. 

 So the people said something would have to be done,
But their projects did not at all tally.
Some said, “Put a fence around the edge of the cliff”,
Some, “An ambulance down in the valley”.

But the cry for the ambulance carried the day,
For it spread through the neighbouring city,
A fence may be useful or not, it is true,
But each heart became moved with pity           

For those who slipped over that dangerous cliff.
And the dwellers on highway and alley
Gave pounds and gave pence not to put up a fence,
But an ambulance down in the valley.

Then an old sage remarked, “It’s a marvel to me
That people give far more attention
To repairing the results than to stopping the cause,
  When they’d much better aim at prevention.

Let us stop at its source all this hurt”, cried he,
“Come, neighbours and friends, let us rally.
If the cliff we will fence, we might almost dispense
With the ambulance down in the valley”.

~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~

What a welter of useless government regulation we’ve put into place to ensure that banks and financiers behave responsibly!  And, have they?

Yet the pundits are all sitting around now  devising new regulations to ensure that a global financial collapse can never again happen: banks must only be able to lend so much, based on X and Y; borrowers should only be able to spend Z times their incomes on a mortgage, and so on, ad infinitum. 

These regulations are destined to fail. They are just another part of the vast mountain of corrupt, ineffectual government legislation that intrudes remorselessly into our daily lives – merely ‘ambulances down in the valley’.

The most remarkable of such intrusions are the millions of words of requirements covered by legislation to tax our private and corporate incomes.  (Isn’t our legal drafting a marvel to behold?)

Stick with me here; I’m about to build a fence atop the cliff.

To the extent that publicly-generated land rent is permitted to be privatised instead of captured for revenue, privatised land rent becomes capitalised into land prices.

What if land price is an aberration?  Wouldn’t it cease to exist if governments were to capture the public surplus that economists call ‘economic rent’?  If there’s no rent privatised, there’s nothing left to be capitalised into a land price.  If you continue to pay the rent, you’ve paid all your taxes and the land is yours to do with as you will. Pipe dream? No, not at all; before things became so corrupted we did use rent for revenue.

So, if land price needn’t exist, and land price bubbles have a habit of collapsing and leaving lenders exposed, why do we persist both with taxation and land prices that grow incredibly when land rent is privatised?

For people to thrive, and economies to work, capture of the public’s rent is society’s protective fence around the clifftop.  Instead of a rentier-controlled economy, we’d begin to see what free enterprise really is.   

Such is the extent of land rent – if you add to it all the value of all other natural resource rent licences – when all necessary government costs are met, there’d still remain a substantial dividend to be distributed equally between all citizens.

What an impressive fence!  

We’ve allowed corrupt governments to let common sense fly out the window.

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…. BUT THAT’S JUST HALF THE EQUATION

The US has belatedly come to see the need for taxes to be abolished if it is to resurrect its tax-devastated economy. However, it hasn’t come within a bull’s roar of realising that non-tax revenues must complement the slashing of taxation.

Although it’s now obvious to everybody that the sub-prime loans crisis was merely a pimple on a gargantuan real estate bubble, it is not recognised that the increasing privatisation of the public’s economic rent in the US since 1972 was the catalyst for both increasing taxes and escalating land prices. [The ills delivered to the state of California by Proposition 13 exemplify  how the capture of publicly-generated land rent was restrained in favour of taxes on productivity, so it’s no coincidence that the Governator has been supervising a basket case.  Goodbye Arnie!]

Real average weekly wages have actually declined in the US since 1972.  (And Professor Mason Gaffney suggests the recent uptick is actually more apparent than real!)

And while Joe Sixpack was losing out to powerful rent-seekers who’ve had increasing access to Congress’ ear over the last forty years, Joe’s been forced to take on more and more debt to keep his head above water.  Something had to give …… and it has.

Congress has to understand that it is not privileged rent-seekers who drive the US economy, but Joe and Joan Sixpack having a dollar or two in their pocketbooks. But the figures above speak for themselves; Joe Sixpack has been played for a sucker, and government has been complicit.      

While they’re at it, members of Congress should take the time to understand the vast difference between taxes and natural resource rents: one impedes social and economic progress and the other doesn’t.

But they’ll not learn the difference from their neoclassical economic advisors who’ve been running this one-sided game for privileged rentiers. Bernanke, Geithner and their ilk ought to be sacked for incompetence.

Reducing taxes is only a good beginning. Capturing land and natural resource rents will restore Joe’s confidence that the US is once again headed in the right direction.

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Further thoughts:  Robert Reich, University of California (Berkley):-

Where have all the economic gains gone? Mostly to the top. The economists Emmanuel Saez and Thomas Piketty examined tax returns from 1913 to 2008. They discovered an interesting pattern. In the late 1970s, the richest 1 percent of American families took in about 9 percent of the nation’s total income; by 2007, the top 1 percent took in 23.5 percent of total income.

It’s no coincidence that the last time income was this concentrated was in 1928. I do not mean to suggest that such astonishing consolidations of income at the top directly cause sharp economic declines. The connection is more subtle.

The rich spend a much smaller proportion of their incomes than the rest of us. So when they get a disproportionate share of total income, the economy is robbed of the demand it needs to keep growing and creating jobs.

Ben Franklin was wrong, and he knew it, when he said: “In this world nothing can be said to be certain, except death and taxes”, because he was aware that economic rent is a surplus arising out of the production process. He might more correctly have observed that nothing in life is certain except death and rent.

Franklin knew well that rent could be captured for public purposes without penalty to labour and capital, that is, without the introduction of taxation, but he didn’t want to offend his land-owning colleagues.

Like Franklin, Adam Smith also went to France to understudy the Physiocrats. That he was also impressed with the truism land rent must be the revenue base is evident in his writings, but Smith couldn’t quite bring himself to argue for l’impote unique, and that taxes be abolished.  Did this have anything to do with the Duke of Buccleuch being Smith’s mentor?

We’re told we ought not be dogmatic, that it’s a blessing to be adaptable and flexible, but that certainly does not apply to the revenue base which has to be land and natural resource rent – because corruptions begin to emerge if they’re not the base.

And, once we fall for the corruption represented by stealing from the earnings of labour and capital, the following social ills spill into society:-

• The return to capital and wages proves inadequate and must be supplemented by taking on more and more debt.
• Governments, besotted by and beholden to taxation, legislate and spend in areas they’d not have to if people were allowed to retain their own earnings. They’re forced to pay pensions of different descriptions, then try to get provision for these of these off their balance sheets by privatising retirement through compulsory contributions to private superannuation funds (further reducing peoples’ net wages).
• Like taxation, private superannuation is revered as a public good.  Black becomes white.  Only a few see through this nonsense.
• Government and superannuation both balloon impossibly, driving up household debt even further.  As rent is being privatised instead of captured for public purposes, it gets capitalised into an impossible land price bubble.
• Businesses are forced offshore to where “labour is much cheaper”, but it is rarely said “to where taxes and land prices are much cheaper”.
• The land price bubble implodes.
• So does the financial system – because debt has been ‘secured’ against bubble-affected real estate prices.
• As a form of survival, commerce sets up arrangements to defer payment for client purchases.  Business schemes become more and more elaborate, more and more questionable.  White collar crime becomes rampant.
• Not only does it go unremarked that governments have drained effective demand out of the citizenry as rentiers are rewarded obscenely (bank CEOs being the most visible of this category), but a remedy is suggested: wages must be wound back. This acts to deepen the lack of demand in the economy, and to compound the corruption that has taken place.

All this happens when people are kept ignorant about the alternative to taxation.  

And, no, David McWilliams’ new account of the Irish being forced to nationalise their banks to keep them as ‘going concerns’ isn’t some sort of an Irish joke. (Hey! Isn’t the definition of a going concern an enterprise that is able meet its debts?)  It serves to demonstrate the depths into which the world’s taxation-induced corruptions have descended.

But as few understand the cause, few understand the urgent need to abolish taxation.  What unwitting sheep we humans can be!

______________________________________________________________________

“There is no subjugation so perfect as that which leaves the appearance of freedom.”

– Jean-Jacques Rousseau

HAVE A HAPPY CHRISTMAS AND – THE BEST I CAN WISH ANYBODY –  MAY YOUR NEW YEAR BE GEORGIST!

SECRETARY OF THE TREASURY KEN HENRY RESIGNS

We can ask no more of our public servants than they do their jobs competently and well.  Occasionally, one emerges from the ruck to  go well beyond these criteria.

Dr Henry was one such person, and Prosper Australia’s David Collyer today expressess gratitude for Ken Henry’s service to the Australian public. 

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SOME GAMBLE!  (I’d be shorting)

I remember in my callow youth in the mid 1960s being invited to a poker game at the home of a colleague who also worked for the Claims Agent in the Commercial Branch of the Victorian Railways.

I can’t remember whether there were four or five of us playing, but early into the morning I was well ahead when one of them declared he’d have to be leaving shortly.

“We’re not finishing yet, while Bryan is up like this”, insisted my host.

I got the message, and duly commenced to lose before excusing myself with another guest sometime later.

Obviously, the relationship with my colleague changed. Fortunately for both of us, he left the Claims Office shortly thereafter. I’ve never since gambled at cards.

Seems to me, the world’s also playing in a rigged game. Having converted all their hard earned cash into their US host’s chips, world economies find the host has no real money in the game: he’s got someone out the back simply producing new chips for him.

The end of this game also promises to be ugly.

_______________________________________

ps.

BTW, you Ukranians (recently 4% of the hits here), stop your parliamentarians from brawling!  (Shouldn’t they be home, helping to prepare the borsht and cold cherry soups for Christmas?)

What are you going to do?

Although neo-liberal economists missed the boat in forecasting the financial collapse, they still control the levers of world economies. This seems crazy, as it will prolong the economic disaster. Printing money and bailing out banks can’t possibly resurrect economies, but that’s exactly what they’re doing.

But it’s not so crazy once you understand what’s been, and is being, done to you.

In the first instance, rent-seekers stole from your wages and salaries. Since the peak of the Kondratieff Wave in 1972 (whether in Australia, the US, or elsewhere), they got into the ear of governments, demanding they wind back property and resource-based revenues .

We can only surmise why governments listened.  They either naively believe it’s better to tax productive effort rather than land-speculating parasites, or else realise from whence real power stems, and have yielded to it, instead of representing their constituents.  And you don’t want to offend political powerbrokers! Just look at the tens of millions Australian miners were prepared to spend in advertising in order to defeat Prime Minister Kevin Rudd’s proposed 40% mining profits rent!

Oh sure, these top few rent-seekers also pay income taxes, but as land-based revenues were reduced, they made such enormous capital gains on their real estate and mineral assets that it dwarfs whatever they’ve paid in taxation.  Do you have this privilege also?  (I doubt it!)

But now that they’ve driven economies into the ground by taxing doers and rewarding themselves, what do they do?  They tell us it’s because we can’t compete with the cheap labour in China and India (not their lower land prices and taxes which, in reality, it is) and get their minions to pump-prime real estate markets with your (i.e. taxpayers’) money, because it would be ever so bad if real estate markets were allowed to correct to where they really ought to be!

And if banks were to collapse because of their abysmal risk management – as they shovelled more and more money into land price bubbles – that would be absolutely terrible for these leeches! The jig, as they say, would be up.

So we’re going through this period of economic crassness where privilege and those politicians in its pocket believe most people are idiots, stupid enough to go along with it.  (What ever happened to “the free market”? This is socialism for the super-rich, pure and simple.  You’re being done in the eye, folks!)

On the other hand, there are a number of heterodox economists (and one heterodox real estate valuer) who spoke out to say that real estate bubbles, such as this enormous one, must always lead to recession and depression.

Do you find yourself in the former or latter group? (Or neither; still under the influence of a ‘normalcy bias’ which makes you disbelieve what you’re seeing happening around you, perhaps?) 

And – if you are alert to what’s happening – do you simply give up, or do you intend to speak up about it?  

Some people are doing so:-   

Bubblepedia

Patrick

UK House Price Crash

Land Values Research Group

Prosper Australia

Why not think about it – then act?  Too many people are still sitting around like stuffed dummies, copping it in the neck!

Cheers,

– BK

NO WIKILEAK ON THESE ECONOMIC SECRETS YET

Julian Assange and the media have done us a favour in reminding us of the secrets and hypocrisy behind international diplomacy.

But there’s no sign yet of the following on WikiLeaks.  Is it possible that the ‘powers that be’ keep these facts under a much deeper level of security?

1. Classical economics was re-cast into neo-liberal economics for a particular reason, namely, to hide the manner in which those few who privatise the common wealth (land and natural resource rents) steal from the wages of the vast majority via taxation, thereby creating economic recessions.
2. This parasitic process has accelerated since 1972 as the public capture of rent for revenue was wound back by a rent-seeking lobbyocracy.  It is a misbelief that people are better off now than they were 38 years ago because of the mountainous levels of household debt that have accompanied the resultant escalation of taxation and land prices (as land and resource rents increasingly became privatised).
3. The current economic depression will continue to implode, because of crass public policies, such as creating more debt to solve the problem of excessive debt, and making taxpayers responsible for the delinquency of financial institutions.  
4. Until we recapture resource rents back into the public purse, the after-tax returns to labour and capital will continue their drift towards vanishing point.

There’s a sense in which WikiLeaks’ exposure of all the political gossip amounts to little more than a distraction from these blatantly unaddressed socio-economic issues that lay waste to world economies.

                                   —oooOOOooo—

Don’t study the times, study the eternities. 

MORNING TEA WITH THE GUYS

It was great to catch up with former colleagues (male and female) in Melbourne yesterday to celebrate 100 years of the Australian Valuation Office.

Hey! And what a pity it would be if some of the older characters don’t get to  commit  the droll accounts of some of their more memorable experiences in the AVO into print.

How many valuers must the AVO have trained both for statutory purposes and for private enterprise over all those years!

The Valuation Branch of the Federal Land Tax Office was of course created by the new Commonwealth Government after enactment of the Federal Land Tax Act 1910.

This led the way for the professional body, the Commonwealth Institute of Valuers, now the Australian Property Institute, to be established in 1926.

The federal land tax was unfortunately abolished by the Menzies government in 1952 under the misbegotten belief that the land tax had done its job in freeing up land for Australians, and that new taxes were now in order.

The current Secretary to the Treasury, Ken Henry, and his panel of review of the Australian tax system have recommended reinstating the federal land tax and capturing our resource rents in general. In terms of the current state of the Australian economy, it has never been more necessary, but these days this imperative becomes lost in the dross that passes for economic analysis. 

That’s more than a pity because, site values being currently assessed all around Australia and competent AVO staff at the ready, the superstructure is already in place.  There’s probably no other nation in such a good position to be able to exit the GFC .

THE EUREKA REBELLION

Today, we commemorate, hopefully celebrate, the only armed rebellion in Australia’s history.

In a show of civil disobedience over the cost of their mining licences, thousands of Ballarat gold miners revolted. “No taxation without representation!” was their cry.

Only about 120 remained in and around the scanty ‘stockade’ on the morning of Sunday 3 December 1854 when 276 police and British soldiers cunningly attacked. 

The battle lasted only fifteen minutes. 22 miners and 6 soldiers died as a result of the one-sided skirmish.

Those later tried in Melbourne for sedition were released amid public adulation. As a direct result of the rebellion, full male suffrage was achieved for the Victorian parliamentary lower house. 

Like almost every rebellion, the battle at the Eureka stockade was fought over the right of a privileged class to levy taxation upon the poor.

By and by there was a result, and I think it may be called the finest thing in Australasian history. It was a revolution — small in size; but great politically; it was a strike for liberty, a struggle for principle, a stand against injustice and oppression….It is another instance of a victory won by a lost battle. It adds an honorable page to history; the people know it and are proud of it. They keep green the memory of the men who fell at the Eureka stockade, and Peter Lalor has his monument.  – Mark Twain (who was to visit the Ballarat goldfields in 1895).