I’ve been pretty quiet because I’ve been working on completing the Land Value Research Group’s unique assessment of Australia’s total property sales for the 2010 financial year.  

Of course, with the assistance of Dr Gavin Putland, I’ll use these figures to update the barometer of the economy and the Kavanagh-Putland Index which include similar data all the way back to 1972, and which anybody conversant with The Depression website knows paints the picture of Australia’s immediate economic future.  

Everything’s just about ready. I’m getting a media release together that I’ll also post here in due course.

Regards,

– Bryan Kavanagh

I attended the first day of the Australian Property Institute’s Annual State Conference at Crown Casino on Friday, before venturing off into the evening to witness my once-mighty Geelong humbled by Collingwood at the MCG.

Conference master of ceremonies, financial journalist Michael Pascoe, deftly introduced and posed questions to a diverse range of speakers across a wide range of property-related topics.  

No speech was as legally forensic as Ian Pitt’s details of the bureaucratic impossibilities facing valuers in Melbourne’s five growth areas now overseen by the Growth Areas Authority.

And none was more impassioned than John Anderson’s account of the enjoyment, risks and tribulations in founding Contiki Tours forty-six years ago, at the age of twenty-two.

However, in a presentation suggesting that population and shortage of supply actually support the existing levels of Australian residential property prices, Christopher Joye, the managing director of the research group, Rismark, decided to venture into personal abuse to smear  Associate Professor Steve Keen of the University of Western Sydney as an “Aussie Roubini-wannabe”.   Keen was not in attendance.

I might add that I didn’t see Christopher Joye’s name next to Keen’s among the twelve economists who forecast this global financial crisis.  Envious, perhaps, Chris?

Joye sneered at Keen’s 2008 forecast that house prices are going to fall 40 per cent or so in the next few years and in his 2010 opinion that he now expects to see an accelerating rate of decline in house prices.    

(All Roger Babson’s such as Keen seem fated to be met with derision from those whose interests are wedded to the status quo, I mused.)

Fortunately, towards the end of the day, RMIT Associate Professor of Property, David Higgins more generously allowed that the residential market may be artificially inflated.

His statistical analysis then proceeded to show that government manipulation appears to account at least in part for Australia’s inflated residential markets.  This, it seems, is especially before an election and warrants further investigation.

Higgins’ paper “The impact of political risk on Australian house prices” appears in the September 2010 issue of the Australia and New Zealand Property Journal.

Summary?  A brickbat for Joye’s descent into ad hominem, and a bouquet for Higgins’ more thoughtful analysis of the overheated Australian residential market.  

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At the risk of sounding like a member of the Tea Party, there’s more than a hint of truth about this CNBC Larry Kudlow “Reality Check” Report in connection with US housing. 

It’s what Japan didn’t do, and what the US doesn’t want to do: a bit of “free market shock therapy”, as Kudlow says. 

Oh, that and abolishing taxes on production, thrift and employment – and introducing a land tax, of course!

From COUNTERPUNCH September 13, 2010

OBAMA’S THATCHERITE GIFT TO THE BANKS: A $50 BILLION “INFRASTRUCTURE PLAN”

–   by Michael Hudson

I can smell the newest giveaway looming a mile off. The Wall Street bailout, health-insurance giveaway and support of real estate prices rather than mortgage-debt write-downs were bad enough, not to mention the Oil War’s Afghan extension. But now comes a topper: the $50 billion transportation infrastructure plan that  Obama proposed in Milwaukee – cynically enough, on Labor Day. It looks like the Thatcherite Public-Private Partnership, Britain’s notorious giveaway to the City of London underwriters. The financial giveaway had the effect of increasing prices for basic infrastructure services by building in heavy financial fees – guaranteed for the banks, who lent the money that banks and property owners used to pay in taxes in more progressive times.

The Obama transport plan is like a Fannie Mae for bankers, based on the President’s guiding mantra: “Let’s help Wall Street put Americans back to work.” The theory is that giving public guarantees and bailouts will enable financial managers to use some of the money to fund some projects that employ people – with newly created, non-unionized companies, presumably.

Here’s the problem. Transportation projects will make real estate speculators, the construction industry and their bankers very rich unless the government recovers its public spending through windfall site-value gains on property along the right-of-way.

What’s the point of a party having a constituency, after all, if not to sell it out? Is not the Democratic Party’s role to deliver labor, the minorities and the large cities hog-tied to Wall Street?

Hollywood surely has made enough movies along these faux-populist lines. The banker of a Western town manages to grab property along the railroad tracks coming through, to make a killing. The local mobster pays off a state legislator to build a highway by his property, making his land much more valuable. Mortgages will be refinanced in much larger sums. At least, this seems to be President Obama’s hope as he positions himself to become America’s Tony Blair. The role of Britain’s New Labor, after all, was to ram through economic programs so far to the right than no Conservative government could get away with them. In the United States it falls to Obama’s New Democrats to shepherd through proposals that Democrats would vote down if the Bush-Cheney Republicans had tried to enact them.

What President Obama did not acknowledge is a basic principle that every transportation economist is taught: Transport investment normally can pay for itself, simply by a windfall-gains tax enabling cities or other jurisdictions to recapture the higher rent-of-location and site value along the right-of-way.

London’s extension of the Jubilee Tube Line to the city’s financial district in Canary Wharf recently demonstrated this principle. The line’s extension cost £3.5 billion but increased property values by an estimated £13 billion along the route. A political protest movement arose over London’s failure to finance its transport system by taxing the higher rent-of-location and site values it created. Failure to do so gave landlords a windfall – one that the city could have recaptured by a windfall tax to cover the cost of what it spent. For instance, it could have issued bonds secured by a windfall property-rent tax.

Paying for capital investment out of such tax levies could provide transportation at a subsidized price, minimizing the cost getting to and from work. That would have made its labor force more competitive by alleviating cost-of-living pressure on wages, freeing more income for spending on goods and services and thus helping the economy.

But Obama’s infrastructure plan is for Wall Street investors to get the windfall – as property owners or as mortgage lenders making much larger loans against the enhanced site value. Balzac said that behind every family fortune is a great theft, and I would add that behind every great fortune is a public-sector giveaway. The largest asset in most families, billionaires as well as small homeowners, is land. The key to its site value (“location, location and location”) is transportation and other public infrastructure. The land grants to railroad barons after America’s Civil War, for example created the largest American fortunes for the ensuing century.

Obama’s guiding principle since taking office is that of his Republican predecessors: It’s Wall Street that makes America rich. In this mythology it’s the wealthiest brackets that employ labor, not downsize and outsource it. So it’s the rich who deserve tax breaks.         

No wonder Americans are listening to populist rants against “big government.” The Wall Street bailout was the watershed in making our government look like those of Britain and France in medieval times, with their special interests, insider dealings and giveaways to court favorites. Governments were hated when they were controlled by landed aristocracies and foreign bankers funding each new war debt by an excise tax borne by the population at large, not by the wealthy.

America got rich from the Progressive Era onward by a different kind of big government than we have today. From the Cumberland Road and Erie Canal onward, it provided roads and other basic services at public expense for free or at subsidized prices. The guiding idea was that the “return” to public investment should be measured by the degree to which it lowers the economy’s costs of living and doing business, not in the amount of income it could extract.

The plan would not add to the government deficit,  Obama promised. Unfortunately, in place of government taking more revenue, it will be the finance, insurance and real estate (FIRE) sector that does the taking. The banking system will now do what government was supposed to do back in the Progressive Era: finance infrastructure. The difference today is that instead of funding transportation out of tax proceeds (levied progressively on the wealthy) or by the central bank monetizing public debt, the Obama plan calls for borrowing $50 billion at interest from banks.

The problem is that this will build in high interest charges, high private management charges, underwriting fees – and government guarantees. User fees will need to cover these financial and other privatization costs “freed” from the government budget. This will build about $2 billion a year into the cost of providing the transport services.

This threatens to be the kind of tollbooth program that the World Bank and IMF have been foisting on hapless Third World populations for the past half-century. The “infrastructure bank,” reports The New York Times, “would be run by the government but would pool tax dollars with private investment.” It would be a test balloon for financing “a broader range of projects, including water and clean-energy projects,” for which Democrats already are drawing up a blueprint:

“[Connecticut Democrat Rosa] DeLauro’s plan would create an infrastructure bank that would be part of the United States Treasury, where it would attract money from institutional investors, then channel the funds to projects selected by a panel. The program, which would make loans much like the World Bank, would finance projects with the potential to transform whole regions, or even the national economy, the way the interstate highway system and the first transcontinental railway once did.

“The outside investors would expect a competitive return on their money, so many of the completed projects would have to charge fees, taxes or tolls. In an interview, Ms. DeLauro said she would be “looking at a broader base,” meaning the bank would finance not just roads and rails, but also telecommunications, water, drainage, green energy and other large-scale works.

“But if the projects did not raise enough money, the Treasury might get stuck paying back the investors, a prospect that gave pause to so-called deficit hawks like [Ohio Republican Congressman Pat] Tiberi. In an e-mail last week, he said he agreed the nation’s road and communications networks needed to be improved but was concerned about creating another company like Fannie Mae that might need a bailout.” Sheryl Gay Stolberg and Mary Williams Walsh, “Obama Offers a Transit Plan to Create Jobs,” The New York Times September 7, 2010.

Britain’s Public-Private Partnership built enormous financing charges into the cost of providing transport. London could have built the tube extension without running up public debts to the banks, paying the construction costs by funding the higher rent-of-location. America could do the same. In fact, in times past the United States financed public infrastructure out of progressive taxation that fell mainly on the wealthy, and by monetizing the budget deficit. But under  Obama’s plan, the rental value is to be capitalized into interest payments or simply kept by well-placed landowners.

It looks like President Obama sat down with Larry Summers, Tim Geithner and his other Rubinomics holdovers from the Clinton/Goldman-Sachs Administration and asked what policies can be funded without taxing the wealthy, but by borrowing via a separate entity – with a government guarantee like the Fannie Mae and Freddie Mac gravy train for Wall Street.

The cover story is always that giveaways to the wealthy are needed to employ labor.  (“Wall Street creates jobs.”) The Democratic excuse these days is that the economy won’t work without providing financial investors with “incentives.” The Democratic Leadership Council helped President Clinton accept the world as it is, rife with the fraud, crime and the proverbial free lunch as part and parcel of how the economy works. This certainly is how to attract campaign contributors and the Wall Street lobbyists that are designing today’s right-wing shift by Washington.
After its $13 trillion giveaway to Wall Street, the government has little debt-creating ability left in its budget to create jobs by public spending. Or so we are told. The giveaway money has not been lent out as promised to “get America back to work.” It has been paid out as bonuses to the bailed-out campaign contributors on Wall Street – and make offenders such as Bank of America and Citibank for their purchases of Countrywide, Wacovia and Washington Mutual (Wamu) whole for junk mortgages, on the pretense that a “sound banking system” is needed to get the economy moving again – the euphemism for pushing it further into debt.

But if there was so much money for bailouts, why is there any need to finance the fairly modest $50 billion transport initiative by borrowing instead of funding it out of the general budget?

There is no such need, of course. The program is simply an excuse for re-introducing Reaganomics as if the aim this time around is to “create jobs.” The way that  Obama proposes to do this threatens to price American labor even further out of world markets, by raising the cost of getting to work, and of renting or going into debt to buy homes and offices near the new transportation hubs. And I suspect that as in Britain, the new public-private agency will be non-unionized. Britain’s Public-Private Partnership still looms as the dress rehearsal for what we are getting into.

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Michael Hudson is a former Wall Street economist. A Distinguished Research Professor at University of Missouri, Kansas City (UMKC), he is the author of many books, including Super Imperialism: The Economic Strategy of American Empire (new ed., Pluto Press, 2002) and Trade, Development and Foreign Debt: A History of Theories of Polarization v. Convergence in the World Economy. He can be reached via his website, mh@michael-hudson.com

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… MORE SENSITIVE TO THE WISHES OF THE PEOPLE?

The shock jocks have wept their crocodile tears about potential instability and the power assumed by the three independents, but the parliament of Australia will undoubtedly be more democratic than it ever has been.  Both Labor and Liberal parties have been badly shaken, and today’s resolution of the impasse could easily have gone the other way. 

The two major parties have long reflected the desires of the party machine, powerful lobby groups and the sometimes less than admirable thoughts of focus groups – in that order.  It hasn’t been democratic, and politicians haven’t represented the good of the nation: certainly not in matters of taxation.  Let’s hope this changes. 

Let’s also hope the closeness of numbers won’t stop the new government from addressing and debating the big issues that confront Australia.

What excellent news to learn that the new government has agreed with the two independents, Tony Windsor and  Rob Oakeshott, that the Henry Review’s recommendations on tax reform be resurrected into its considerations (and hopefully nothing will be ruled out)!

And no, Bob Katter: it wasn’t free trade that has crucified Australian industry and the farming communty.  It has been a tax system that rewards rent-seekers (including your mining friends, Bob) and punishes workers in every industry, including farming.

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IT’S BECOMING MORE OBVIOUS BY THE DAY THAT WE NEED TO APPLY HIGHER PUBLIC CHARGES ON THE USE AND ABUSE OF OUR LAND AND NATURAL RESOURCES

To treat them only as commodities is idiocy, but even Greens are slow in coming to this conclusion.

Hear San Franciscan Dave Giesen speak about Henry George’s ideas on Radio National’s “Saturday Extra” yesterday.

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STEVEN SPADIJER

The 119^th annual commemoration address of American social philosopher Henry George was given at the Conservatory Room of the Pumphouse Hotel in Melbourne last night, on the 171^st anniversary of George’s birth.

Prosper Australia’s Karl Fitzgerald welcomed the good attendance with a rundown of recent positive achievements that ranged from the Henry Tax Review (having come out in favour of mining rents and recommendations for a federal land tax to replace damaging state taxes), to Prosper Australia having made tentative liaison with bodies looking towards land value capture as a means of funding sorely needed public development and infrastructure (out of the uplift in values these projects generate).

Fitzgerald introduced the commemoration address’ youngest-ever speaker, 21 year-old Arts-Law student at the Australian National University in Canberra, Steven Spadijer, who spoke with a confidence and style that belied his years.

The audience was treated to a soundly researched exposition on the role investors’ expectations for economic rent had played over the years in setting up business cycles of boom and bust.

In charts and figures, Spadijer provided evidence showing that Australian real estate speculation at the outset of the 1970s was responsible also for the 1974-75 recession, despite claims by economists that the cause of the worldwide 1970s bust was the OPEC oil crisis.

Endogenous, rather than exogenous, events around the world had proved to be the culprit, he said, and these were invariably related to the numerous private and business implications that sprang from local expectations in connection with rent.

MEMORIES

Steven Spadijer’s tour de force took me back to my own Henry George commemoration dinner presentation on the 100^th anniversary of his death in 1997.  Taking from Paul Ormerod (The Death of Economics) and Mason Gaffney (The Corruption of Economics), I mentioned that the Austrians, Chicagoans and neo-Keynsians were negligently as far away as ever from the truth about the central role economic rent plays within the economy.  (It’s in the order of 50%.)

IMPROVED OUTLOOK?

However, as Karl Fitzgerald also suggested last night, things are beginning to change, in Australia, at least:-

• Few except Georgist economists called the GFC (well before the event)
• Ken Henry’s panel advocated the capture of publicly-generated economic rent, so that damaging taxes may be abolished
• Bodies such as the Property Council of Australia, the Urban Development Institute of Australia (UDIA), and the Royal Automobile Club of Victoria (RACV) are coming to see that up-front development charges are counter-productive, and that there may be a case for them to be replaced by rates, or a reformed land tax system, if necessary infrastructure and development is to be undertaken cheaply and efficiently.  (News of another failed privatised freeway shows that public-private partnerships (PPPs), much loved of economic rationalists, have passed their use-by date.)

STUMBLING BLOCKS AND OPPORTUNITIES  

Speaking with several people at the dinner, it was agreed that things have progressed enormously since Ken Henry’s review.

However, that mining interests can lead people in the street to believe that a mining rent is “a big new tax” that can kill off mining and employment is a shocking indictment on the public’s ignorance of natural resource rents.

The Rudd government made no effort to educate people to the fact that Australians own their land natural resources, and that, quite apart from normal profits, they yield a dividend called economic rent, to which private enterprise has absolutely no right.  The government used the terms “super profits”, but maybe it should have educated people to the term “community-generated surplus”?

The big miners played on the ignorance of this publicly-created rent surplus like a grand piano, and this led in part to the demise of Kevin Rudd’s prime ministership.  And Julia Gillard caved into them just before their announcement of enormous ‘super profits’ for the year.

So, in the next phase, public education needs to be drawn to the fact that land and natural resource rents are NOT privately-created; it’s a “community-generated surplus” owed back to the community.

Secondly, although it has gone out of fashion to talk in terms of ‘class’ in Australia (it suits the super privileged to paint this as being “politically-incorrect in Australia’s classless society”), maybe we need to understand that our super wealthy have obtained their position of privilege by cornering the “community-generated surplus” unto themselves.

By monopolising rent, privilege claws back any taxes it pays by means of the increases in the capital value of their lands.  The middleclass and poor are unable to do this.

Until the public is educated to these facts, it seems it is, indeed, “political suicide” for any of the major parties to advocate mining ‘taxes’ or land rent, the Henry review’s intellectually rigorous recommendations notwithstanding.

So, let’s hope in the next year or two we can educate the public to the fact that this natural “community-generated surplus”, not taxes, is the natural source for public revenue!

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RBA: FRUSTRATING AND PRETTY-NEAR USELESS

The Reserve Bank of Australia’s Guy Debelle announced today that he thought poor risk management was responsible for much of the financial crisis.  Oh, surprise!

Maybe Guy found a copy of THE AGE dated March 28 2008 in which I said the same thing?  The RBA is improving.  Guy is only 29 months behind the times.  I’m not being a smart arse here, I’m just completely pissed off at how the RBA continues to make apparently thoughtful statements after the event.  (And chancing your arm that we may be in for a double dip is hardly newsworthy now, Guy!  We’re in a depression, for God’s sake, matey!)

Why always post hoc and never a priori?  Aren’t you guys meant to be protecting us?  What’s the point of the RBA if it can only give an historical account of recent events?  You’re meant to be in there moderating things, folks, not standing back and thereby assisting to make them worse!

Where has the RBA been since land prices shot moonwards from 1999-2000?  In fact, I commented in the British journal Geophilos in 2001 that the then Governor of the Reserve Bank, Mr Macfarlane, had been making soothing statements to the effect that “asset price inflation of either shares or property had not become a problem”  as late as 10 July 2001.   So, when exactly does it become a problem, RBA?  Only after a crash, it seems!

And the RBA can’t get out from under, either, by seeking to lay the blame at the doorstep of the other banks, Guy.  You and APRA have a role of leadership and responsibility in all this.  I said so in the following letter which appeared in The Australian Financial Review on Monday 21 November 2005:-

Home truths for RBA and APRA

Phil Naylor, the chief executive of the Mortgage Industry Association of Australia, argues that mortgage brokers should not have to “take the rap” for the poor quality of home loans (“Don’t blame the brokers”, Letters, November 18).

Mr Naylor is correct, of course, because this smacks too much of searching for scapegoats. The competition between banks and lending institutions to write home loans during property booms has a habit of getting out of hand, and this highlights a structural problem which needs to be addressed at a much higher level.

The creation and eventual bursting of land price bubbles has a history of bringing the Australian financial system to its knees at regular intervals, so the Australian Prudential Regulation Authority ought to be pressing for a federal charge on all land values if it is to be effective in tending to the health of the financial system.

In fact, APRA and the Reserve Bank of Australia need to get their heads together in order to demand of our politicians that the RBA administer an all-in flat-rate charge on land values. Such a charge should replace state stamp duties, payroll taxes and land taxes (the latter with their notorious thresholds, exemptions, aggregation provisions and multiple rates), and the revenue delivered, GST-like, back to the states. Maybe the charge ought also to replace the costly GST.

It is not the job of the RBA to hose down the economy by non-discriminating interest rates, but, as with APRA, it is its job to protect our financial system against the creation of property bubbles.

If the RBA tweaked a federal charge on Australia’s land values as assiduously as it has done with interest rates, both APRA and the RBA might finally begin to carry out their appointed duties, instead of seeking to put the blame elsewhere for the ritualistic lead-up to financial collapse.

Bryan Kavanagh, Director, Land Values Research Group, Melbourne, Vic.

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THE EVER-UNSPOKEN POINT OF ECONOMIC PROTEST

On 4 January 1991, Danny Johnson, a small businessman from the bush town of Warracknabeal in Victoria led 50,000 farmers and small business people to the steps of Parliament House in Melbourne. He called for a mechanism which would place some sort of control on politicians “of all parties”.

Australia was about to dive into Paul Keating’s “recession we had to have”, and Johnson and his followers saw their political representatives as being responsible for the terrible mess into which the state of Victoria had degenerated in the wake of the late-1980s commercial real estate bubble.

The media branded the rally as being “right wing”; some suggested maybe it had an association with the neo-fascist League of Rights.

Twenty years later, right wing US shock jock Glenn Beck yesterday led a massive Tea Party rally to the Lincoln Memorial in Washington to protest that the financial crisis is the result of government running amok in the USA. “Restore Honor” is the name the rally has been given.

It is 47 years to the day that the Reverend Martin Luther King Jr staged a rally of 250,000 people to deliver his famous “I Have a Dream” speech at the Lincoln Memorial on 28 August 1963, and people politically to the left of Beck have castigated him for sullying both the date and the location.

I’d argue, of course, that the two protest rallies are inextricably linked by our failure to observe, understand and act upon the veracity of the distributional economic equation P – R = W + I.

Had the economy of Australia prior to 1990 or of the US prior to 2010 not inserted taxation into the equation, there’d have been no economic collapse on either occasion – and no need for such expressions of angst.

Ironically, it was Martin Luther King Jr, not Danny Johnson nor Glenn Beck, who was able to make the necessary connection.  It’s worth putting the whole quote in its quite moderate context below.

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MARTIN LUTHER KING JR. SAID:

“In the treatment of poverty nationally, one fact stands out: there are twice as many white poor as Negro poor in the United States. Therefore I will not dwell on the experiences of poverty that derive from racial discrimination, but will discuss the poverty that affects white and Negro alike.

Up to recently we have proceeded from a premise that poverty is a consequence of multiple evils: lack of education restricting job opportunities; poor housing which stultified home life and suppressed initiative; fragile family relationships which distorted personality development. The logic of this approach suggested that each of these causes be attacked one by one. Hence a housing program to transform living conditions, improved educational facilities to furnish tools for better job opportunities, and family counselling to create better personal adjustments were designed. In combination these measures were intended to remove the causes of poverty.

While none of these remedies in itself is unsound, all have a fatal disadvantage. The programs have never proceeded on a coordinated basis or at a similar rate of development. Housing measures have fluctuated at the whims of legislative bodies. They have been piecemeal and pygmy. Educational reforms have been even more sluggish and entangled in bureaucratic stalling and economy-dominated decisions. Family assistance stagnated in neglect and then suddenly was discovered to be the central issue on the basis of hasty and superficial studies. At no time has a total, coordinated and fully adequate program been conceived. As a consequence, fragmentary and spasmodic reforms have failed to reach down to the profoundest needs of the poor.

In addition to the absence of coordination and sufficiency, the programs of the past all have another common failing — they are indirect. Each seeks to solve poverty by first solving something else.

I am now convinced that the simplest approach will prove to be the most effective — the solution to poverty is to abolish it directly by a now widely discussed measure: the guaranteed income.

Earlier in this century this proposal would have been greeted with ridicule and denunciation as destructive of initiative and responsibility. At that time economic status was considered the measure of the individual’s abilities and talents. In the simplistic thinking of that day the absence of worldly goods indicated a want of industrious habits and moral fiber.

We have come a long way in our understanding of human motivation and of the blind operation of our economic system. Now we realize that dislocations in the market operation of our economy and the prevalence of discrimination thrust people into idleness and bind them in constant or frequent unemployment against their will. The poor are less often dismissed from our conscience today by being branded as inferior and incompetent. We also know that no matter how dynamically the economy develops and expands it does not eliminate all poverty.

We have come to the point where we must make the nonproducer a consumer or we will find ourselves drowning in a sea of consumer goods. We have so energetically mastered production that we now must give attention to distribution. Though there have been increases in purchasing power, they have lagged behind increases in production. Those at the lowest economic level, the poor white and Negro, the aged and chronically ill, are traditionally unorganized and therefore have little ability to force the necessary growth in their income. They stagnate or become even poorer in relation to the larger society.

The problem indicates that our emphasis must be two-fold. We must create full employment or we must create incomes. People must be made consumers by one method or the other. Once they are placed in this position, we need to be concerned that the potential of the individual is not wasted. New forms of work that enhance the social good will have to be devised for those for whom traditional jobs are not available.

In 1879 Henry George anticipated this state of affairs when he wrote, in Progress and Poverty:

“The fact is that the work which improves the condition of mankind, the work which extends knowledge and increases power and enriches literature, and elevates thought, is not done to secure a living. It is not the work of slaves, driven to their task either by the lash of a master or by animal necessities. It is the work of men who perform it for their own sake, and not that they may get more to eat or drink, or wear, or display. In a state of society where want is abolished, work of this sort could be enormously increased.”

We are likely to find that the problems of housing and education, instead of preceding the elimination of poverty, will themselves be affected if poverty is first abolished. The poor transformed into purchasers will do a great deal on their own to alter housing decay. Negroes, who have a double disability, will have a greater effect on discrimination when they have the additional weapon of cash to use in their struggle.

Beyond these advantages, a host of positive psychological changes inevitably will result from widespread economic security. The dignity of the individual will flourish when the decisions concerning his life are in his own hands, when he has the assurance that his income is stable and certain, and when he knows that he has the means to seek self-improvement. Personal conflicts between husband, wife and children will diminish when the unjust measurement of human worth on a scale of dollars is eliminated.

Two conditions are indispensable if we are to ensure that the guaranteed income operates as a consistently progressive measure. First, it must be pegged to the median income of society, not the lowest levels of income. To guarantee an income at the floor would simply perpetuate welfare standards and freeze into the society poverty conditions. Second, the guaranteed income must be dynamic; it must automatically increase as the total social income grows. Were it permitted to remain static under growth conditions, the recipients would suffer a relative decline. If periodic reviews disclose that the whole national income has risen, then the guaranteed income would have to be adjusted upward by the same percentage. Without these safeguards a creeping retrogression would occur, nullifying the gains of security and stability.

This proposal is not a “civil rights” program, in the sense that that term is currently used. The program would benefit all the poor, including the two-thirds of them who are white. I hope that both Negro and white will act in coalition to effect this change, because their combined strength will be necessary to overcome the fierce opposition we must realistically anticipate.

Our nation’s adjustment to a new mode of thinking will be facilitated if we realize that for nearly forty years two groups in our society have already been enjoying a guaranteed income. Indeed, it is a symptom of our confused social values that these two groups turn out to be the richest and the poorest. The wealthy who own securities have always had an assured income; and their polar opposite, the relief client, has been guaranteed an income, however miniscule, through welfare benefits.

John Kenneth Galbraith has estimated that $20 billion a year would effect a guaranteed income, which he describes as “not much more than we will spend the next fiscal year to rescue freedom and democracy and religious liberty as these are defined by ‘experts’ in Vietnam.”

The contemporary tendency in our society is to base our distribution on scarcity, which has vanished, and to compress our abundance into the overfed mouths of the middle and upper classes until they gag with superfluity. If democracy is to have breadth of meaning, it is necessary to adjust this inequity. It is not only moral, but it is also intelligent. We are wasting and degrading human life by clinging to archaic thinking.

The curse of poverty has no justification in our age. It is socially as cruel and blind as the practice of cannibalism at the dawn of civilization, when men ate each other because they had not yet learned to take food from the soil or to consume the abundant animal life around them. The time has come for us to civilize ourselves by the total, direct and immediate abolition of poverty.”

Where Do We Go From Here? Chaos or Community – Martin Luther King Jr.’s final book.

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THERE IS A MEETING HERE TONIGHT (no, not in the John Moulton barn)

To my mind the reserve bank and economic experts gathering together tonight at Jackson Hole in Wyoming are, to quote Henry George, “mules packing a library”.  Nothing can issue from sterility.

Jackson Hole will remain a void, and we’d do well to avoid its misdiagnoses.

Where are the heterodox economists who forecast this downturn?  Did US Wall Street analyst and balance of payments expert Michael Hudson get an invite?  Did Australia’s debt expert Steve Keen get a guernsey?  Chances are, having forecast the GFC, these men may have had real answers, instead of the usual hot air we get from reserve bank governors.

At the risk of being repetitive, might I suggest that as tax systems of the world generated this bubble in land prices, a revenue system based on land value capture and the abolition of taxes is the only effective way to deal with these impossible levels of debt?

Wallowing in their multi-billion profits, Australia’s banks are about to find out how quickly this situation can reverse.  We paid them obscene interest (rent?) on bubble-inflated mortgages with no risk management, and next we’ll be bailing them out of the mess they’ve left for us.

In so doing, I trust they’ll become government enterprises, because they’ve not been doing us any favours in private ownership.  (No margin adjustments on +100% bubble prices, guys?!)  I guess those who enjoy living through an economic depression won’t agree with me.

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Don’t read the times, read the eternities. 

– Henry David Thoreau