.

Taxation policy has gone backwards since the 1920s in the USA and a little later in Australia. The transition was from taxing unearned land values to far greater emphasis on the taxing of earned incomes.

How was this obviously detrimental change able to be accomplished?

It was done by the popularisation of two lies.

The first was that there is no significant difference between the earned return to man-made capital and the unearned income flowing to land titles. The late great Mason Gaffney documented John Bates Clark to have been the main proponent of this fantasy. JB Clark had been given a job to do: to lay waste to the popular ideas of Henry George. Clark’s errant nonsense was quickly taken up in academia, mainly because George had no formal qualification in economics. However, it took troubled times: WWI in the USA, and WWII in Australia, for governments to be able to sell this mess of pottage to their citizens. And, oh yes, it was “a temporary measure”!

The second lie was that there is now insufficient rent for capitalism to tax land values. From John Locke to Mason Gaffney, it has been understood that all taxes come out of rent (ATCOR) – so this was no small fib. Nonetheless, even though a Prosper Australia study showed economic rent to be 50% of the economy, economists are still to be found who propose a miserably tiny figure for rent. Here are six:-

“The percentage [of property rent in the economy] has dropped to well under one percent today”, New Ideas from Dead Economists: an introduction to modern economic thought, Todd G Buchholz, Plume, 2007, p.86.

“But by 2000 urban land rents represented only four percent of national income”, A Farewell to Alms, Gregory Clark, Princeton University Press, 2007, p.198.

“Rent is one percent of the US income in 2004”, Economics, Paul Krugman and Robin Wells, Worth Publishers, 2006, p.283.

“Rental income was 4.7 billion, or 0.079% of GDP in 1992”, Economics (Third Edition), Karl Case and Ray Fair, Prentice Hall, 1994, p.559.

“Rental income is $7.9 billion of a total GNP of $5,234 billion, or 1.5 percent”, Economics: Principles and Policy, Fifth Edition, William J Baumol and Alan S Blinder, Harcourt Brace, 1991, p.137.

“… land rent forms such a small percentage of national income: that 2% is nothing compared to the present tax percentages which is around 30”, Income Distribution, Jan Pen, Pelican, 1974, p.210.

The study of economics continues to spout such nonsense, seemingly for much the same reason of ‘austerity’ to which Ronald Reagan had fled in his first inauguration address: “In this present crisis, government is not the solution to our problems; government is the problem.”

Governments as ‘different’ as those of Margaret Thatcher in Britain and Bob Hawke and Paul Keating in Australia accepted the premise that government had become too costly. Prime Minister Keating believed that pensions were going to become unaffordable in Australia, so it was necessary to set up private superannuation funds in order to reduce government retirement income expenditures. That this would act to reduce the cost of wages, already held down by a wages accord with the unions, was all to the good. Business would do well out of such ‘reforms’ and save the country from ‘big government’.

People have now come to see these Ayn Randian ‘reforms’ as misguided, that there is indeed a positive role for government, and that its spending can actually provide the private sector with economic stimulus.

It went unnoticed, however, that the taxing of earned incomes and under-taxing of land values shifted the scales to such an extent that people found they’re able to create more money for themselves by inflating land prices than by working. A burgeoning parade of property touts makes a pretty good case to the uninitiated to this effect .

Unfortunately, we’re about to pay a big price for all that, and for the lies that have sent us down this socio-economically devastating path. No doubt, however, we’re going to be told it was COVID-19 that brought about the financial catastrophe. It certainly didn’t help things, but for how long will we avoid taking the cure for pumping up totally extractive land prices? Especially when unlike capital, land has zero cost of production.

Economic Rent as a fraction of Australian GDP

by Dr Gavin Putland

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Thanks for telling me what I knew in January 2019, Prime Minister Morrison. Australia is in recession. Yes, Covid-19 has exacerbated it, but it was on the way, anyhow, with the bursting of the land price bubble in 2018.

That’s because you, Mr Morrison, and the Leader of the Opposition, Mr Albanese, our political parties in general, are too timorous to call out Australia’s rent-seeking in escalating land prices. Our first peoples understand that land rent is common property, not private property.

Now you’re stuck with the BS that Australia must issue bonds to pay for your ‘pandemic’ recession. The government could simply have spent the job-keeper and job-seeker money into existence. There’s a far better way of supporting people and businesses, too: a living wage universal basic income. That’s if you have the guts, and also to stop taxing earned incomes and goods and services, and instead start taxing land values.

But you don’t have the guts to educate people to these economic realities. Here they are in simple words you might understand. Not interested? Thought not!

It’s ‘too difficult’ for any party to do the right thing. “We’d get slaughtered at the next election, so we’ve got to keep support banking and other monopoly interests, at least until we have the financial depression that they’ve been busy creating!”

Is this difficult to imagine?

If a true economics were able to be taught in schools, a whole new world becomes possible.

A world in which publicly-generated land rents are no longer able to be privatised by land holders, banking and monopolists.

A world in which earned incomes are no longer fined by taxation.

A world in which a universal basic income is practicable, distributed as a citizens’ dividend from the economy’s net surplus.

A world where the crime of poverty is abolished.

A world in which humanity would be able to blossom, where people, properly educated, could choose either to employ themselves using their own talents, or to work in businesses freed of monopoly interests because they pay the formerly expropriated economic rents that were aided and abetted a pernicious taxation regime.

A world in which there is no further ‘wage slavery’. Is that even possible?

A world of true economics with no rent seeking, that generates wealth and freedom. An economy of abundance.

You may say that I’m a dreamer …….

…. CAN IT BE ENDED?

The JJ Wallis chart (with my comments inserted), doesn’t figure in the late Mason’s Gaffney’s magnificent account of John Bates Clark’s successful efforts to divert the study of economics away from the Henry George conclusion that if society is to progress, the rent of ‘land’ (i.e. all natural resources) must not be treated as private property. Real freedom required cheap access to land for all upon the payment of its rent.

The chart is enlightening, however. We tend to consider that we always progress socially and economically with the progression of time. That’s not so. In fact, even the humble labourer had cheaper access to land and to greater disposable income in 15th century England than most people have today!

We may establish JB Clark’s re-direction of the study of economics as being extremely successful by asking anyone ‘Have you ever heard of Henry George?’ The answer will almost certainly be ‘No’, even though from the 1880s to 1920 George’s ideas were on everybody’s lips. Today, Karl Marx is by far the better known personality.

The world is realising only now that having the latest television, motor vehicle or home, doesn’t necessarily signify progress when these are set against the measure of levels of private debt to which the vast majority of people in the developed world are committed. Poverty increases apace.

What’s happening?

Like our parents and grandparents, we’re living through the great retrogression. The economic rents owed equally to everyone, continue to be expropriated by the 0.1%. To this, high tech and social media are oblivious. Education has nothing to say on the subject, because economics remains in the hands of neoclassical and neoliberal economists. The number of challenging heterodox economists is pitifully small.

The question arises, for how long will this Great Retrogression continue? Will we come out the other side of the impending financial depression, as we did after the 1930s depression and WWII, failing to grasp the point that land rent, being common property, must not be privatised if people are to be freed from paying high prices and impossible levels of debt for access to land? First nations people have it right: Land is not a commodity.