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.
The pandemic’s been pretty terrible, but no matter what it’s been doing to us we’ve got to get on with life and enjoy it to the extent we are able with family and friends .
Before Ronald Reagan, Margaret Thatcher and neoliberalism there was something we used to care about almost as much as family and friends but that’s gone now namely, society, as represented by the public capture of publicly-generated economic rent, the glue that literally bound us together in a pact of common interest.
Neoliberalism had deemed public capture of publicly-generated economic rent to be forbidden territory. It was the ‘socialist’ expropropriation of ‘private property’. Therefore, society’s natural dividend owed equally to everybody became more greatly enshrined as the natural income of the already-wealthy.
Margaret Thatcher went so far as to deem the Poll Tax to be preferable to a decent municipal rating system. It’s a pity about that having caused rioting in London on 31 March 1990 and Margaret’s subsequent dismissal from the Prime Ministership.
And hasn’t the world done wonderfully ever since neoliberalism took control of our politics?
The middleclass has become debt-ridden from the greater privatisation of land rent and financialisation of escalating land prices, governments have managed to prop up the misbegotten edifice with assistance from their central banks, and no longer extant society has bifurcated into two feuding camps: “You’re wrong!” “We’re right!”
Community no longer exists. Our neoliberal leaders considered it sounded a bit too much like communism – so it’s ‘out’.
Thankfully, we now have AUKUS, or, as a person more appropriately suggests in THE AGE today, “USUKA” – so things should be alright now.
China’s rent-seeking is only marginally behind the west’s.
But maybe she’s further progressed in seeing the need to institute a significant land rent regime?
Maybe Michael Hudson's recent intensive work in China will bear fruit? i.e. Where he's advised them to tax land values more to curb spec? Or are they just as intransigent as our govts & central banks against any correction in the property markets? If so, it's game over, China!
Problem is, now they’ve got us all believing we can join them.
Does nobody understand the manner in which they live parasitically off the surplus product we 99.9% all create?
Hint: Don’t believe the dictionary or Wikipedia definitions of ‘rent-seeking’: ultimately, it all comes from the privatisation of publicly-generated land rent.
Western economies had been struggling with distributional issues for the 50 years prior to the advent of COVID-19. The virus has compounded and added to the phenomena of declining wage growth, disappearance of the middle class and wealth being channelled directly to the already wealthy via the private capture of what is called ‘economic rent’.
What was happening and what can we do about it?
You could say that it all started with the transition from classical to neoclassical economics promoted by John Bates Clark who wrote “at least 24 works directed against (Henry) George, over a span of 28 years, 1886-1914.” [Mason Gaffney in “The Corruption of Economics”, in ‘Neo-classical Economics as a Stratagem against Henry George’, Shepheard-Walwyn, London, 1994]
JB Clark and his neoclassical followers managed to morph publicly generated land rent into the independently earned incomes of labour and capital, but they had they to wait until the Great Depression to achieve the full flowering of their rather devastating idea.
Meanwhile, the greater part of the period between the 1893-1897 depression and that of the 1930s has been termed the ‘Progressive Era’. It is arguably capitalism’s most successful episode, featuring successful attacks on real estate speculation and political corruption. Things began to change in the land boom of the early 1920s, however.
The following chart demonstrates the striking victory of neoclassical economics. JB Clark’s US adherents made the case that as the federal government could not tax land values, there was no alternative to greater use of income tax for the government to address the financial collapse. World War II acted to endorse their pointedly shallow approach to economic distribution.
For some 20 years, the post-war reconstruction period saw governments placing great emphasis on private housing for their peoples and this has been regarded as productive and progressive. However, a real estate bubble which challenged that of the early 1920s in extent developed across the western world at the outset of the 1970s. Although real estate and most media interests preferred to paint the ensuing financial collapse as a result of the OPEC Crisis, TIME magazine of 1 October 1973 provided another story altogether: This was some property boom!
I argued in “The Coming Kondratieff Crash: Rent-seeking, income distribution & the business cycle” [Geophilos Autumn 2001 No.01(2)] that 1973 was the turning point in the ‘Long Wave’ between economic depressions; that we were now into its downslide. The relative un-taxing of land values in the 1970s and 1980s [Hello Proposition 13!] had acted to exacerbate the ever-increasing bank financialisation of escalating land prices. Property speculation had become the name of the game in the second half of Nikolai Kondratieff’s fourth Long Wave.
In early 2007 I called the Global Financial Collapse in “Unlocking the Riches of Oz: A case study of the social and economic costs of real estate bubbles 1972 to 2006”. Ironically, based on a warning from US Treasury Secretary Hank Paulson to Australian Treasurer Wayne Swan that real estate prices must be kept inflated, the Australian Rudd government pumped $50 billion into the economy and was able to do what the USA could not do: it avoided a recession.
In August of 2008 Mason Gaffney also documented with valuable detail “The Great Bust of 2008” whilst the mainstream media was more concerned, fascinated even, with the personalities rather than the causes and cures of the crisis.
So, with another land price bubble around our ears in 2021, as we try to endure the ills of Delta version COVID, the question becomes: What next?
Should my narrative strike a chord, may I suggest you join the body having an effective response to boom-bust, namely, Prosper Australia? It’s not costly! Inquire how you may assist us. We need you.
The worldwide festering political split can only be mended by recognising that humanity has a common interest in the social surplus being shared by everybody, not just the few.
The point has become lost on the left, right and centre of the political spectrum.
Economic rent is the surplus generated in the productive process by public initiative rather than by private investment. It therefore belongs equally to all, not just to rent-seeking privateers, including banking, mining and other monopolies.
Whereas private property has been produced by individuals and companies, the economic rent of land has not and should not be confused with ‘private property’. But it has been confused, and therein lies the genesis of the widening social schism.
We recognised the case for public capture and distribution of publicly-created rent during the Progressive Era (1897 to 1930) without the label ‘communist’ being dropped on it, as by rent expropriating interests today.
Should everyone get a “basic income”? Yes, says Bryan Kavanagh – providing it comes out of economic rent. He uses Oz data to make his case, here:https://t.co/Fy5DURQjAy
1890 Henry George visits Australia talking to enraptured audiences, providing insights into likely economic results of the speculative state of the economy.
“In the colonies [of Australia] I have been through, the curse of land monopoly and land speculation is over everything. I don’t know of any new country where more striking instances of the absurdity and injustice of our present treatment of land is to be seen.” – Adelaide Observer, 26 April 1890
1908 A site is selected for the nation’s capital, between Melbourne and Sydney.
1912 (September) Walter Burley Griffin, one of the American designers of the national capital, along with Marion Mahony Griffin, congratulates Home Affairs Minister King O’Malley in a letter:
“I cannot refrain from extending congratulations to your Government on the stand it has taken to maintain in perpetuity the rental value of the capital site. Failure to do this everywhere is largely responsible for distortion and prevention of natural city growth, nowhere better exemplified than in our own capital, Washington, where speculative holdings perverted the development” – Walter Burley Griffin, Single Taxer and Social Reformer’
12 March 1913 Lady Denman officially announces Canberra as the name of Australia’s capital city.
Both need each other to generate wealth, but they’re always at each other’s throat.
There’s no other argument.
Except ….
…… nobody notices that the price of all goods and services is twice what it should be, because prices have been inflated by taxation and its cascading deadweight losses, down through every part of the production process.
Were we to capture land rent from production instead of taxing wages and profits (viz, labour and capital) i.e. P – R = W + I, we wouldn’t have to introduce taxes (which are passed on in prices) into the equation.
Labour and Capital would discover that they’re actually complementary, not at odds. Each would receive its full reward. Prices would halve.
