Scene: 21st century Melbourne

Universities seeking overseas students to keep themselves going. They need money, so some Melburnians can attend for lesser fee. Hey!

Banks feeding rampant property speculation. Way to go!

Hospitals, nursing homes, &c. hanging on by the skin of their teeth.

Wages growth falling, jobs becoming casualised and the gig economy growing. If the USA can keep workers lean and hungry for the sake of progress, why can’t we?

Banks performing outstandingly; Melbourne with record mortgage debt.

Middle class becoming poorer; poverty and dispossession growing.

A virus strikes.

We weren’t ready.

We were attending to other things.

Go, Oz! Oi, oi, oi!

We’re told we need to circumscribe discussion on political reform, because “politics is the art of the possible”. If we accept that the media is beholden to big-moneyed interests, how can we possibly remove the metaphorical strait jacket from reform if the media won’t cover the discussion?

Aren’t you being a bit cynical here? What political reforms are really off the table because “big-moneyed interests” stifle them?

Well, we have the current scenario:-

Even with wages growth at low levels, most small business costs remain high and profits are marginal – but not for the monopolies, including banking. Therefore, the workforce has had to become more casualised in order to reduce business costs. This was occurring before the emergent wage-slave ‘gig economy’.

If this has been a retrograde step, what can be done about it?

Well, the taxing of productivity is at least partly to blame for the casualisation phenomenon: Martin Feldstein tells us that income taxes insert deadweight losses of twice the amount levied into the economy. That bears thinking about: income taxes cost the economy that much?

You’re suggesting we get rid of income taxes? That’s not possible!

So, we need to take that option off the table? Not so. It’s been done before. As the following chart shows, when the USA expanded enormously during the progressive era (1890-1920), income taxes were low and property taxes were much higher. And it worked. Infrastructure spending grew massively at local government and state government levels, and property taxes garnered back part of the uplift in property values these capital works provided: in a virtuous loop, you might say.

But this situation changed dramatically at the great depression. Americans were told it was only ‘a temporary measure’.

In Australia, all three levels of government had significant taxes on real estate values. These included taxes on land values. WWII changed this. Again, it was only a ‘temporary’ measure.

So, doesn’t reverting to taxing publicly-generated land values more highly and reducing company and income taxes offer the prospect of great socio-economic reform? The economy’s deadweight losses from income tax would reduce accordingly, and people and businesses would retain most of their earnings. That’s a big plus. So, other than “It can’t be done!”, why not do it? That it hasn’t been a consideration reflects vested interests’ preference for the increasingly-threatening status quo.

Next: a living wage universal basic income (UBI). No go? Why not? At the moment the 0.1% is currently getting the greater part of our economic rent. Poverty is increasing at a great rate, therefore, the economy’s surplus profit needs to be spread more equally.

Now here’s the thing. You can’t expect to have the UBI plus your existing salary. Therefore, businesses wouldn’t have to pay existing salaries. They’d only have to pay sufficient, additional to the UBI, in order to attract or retain workers. So, business costs would decrease significantly. That’s surely win/win, for everyone?

So, this is going to cost a poultice. How’re you going to pay for it?

Well, we’re simply retrieving some of the 50% of the economy extracted by rentiers (and their untoward tax regime), and replacing it with land value taxation, the community-generated surplus.

What’s more, this “How’re you going to pay for it?” has whiskers on it, anyway. Ask any modern monetary theorist. And it ain’t just theory. Moreover, the UBI will not only do better than MMTers’ proposed “job guarantee”, but it’s backed up by the only deduction necessary to keep all inflation at bay – a land value tax, aimed at capturing back, equally to everyone, the unearned land rent now largely expropriated by the 0.1%.

This is an overarching review of genuine reformative action; not an add-on to what’s currently being done. Impractical? Certainly not. In fact, implementation of these reforms is essential in socio-economically distressed times worsened by the coronavirus.

The alternative is a sad proposition. We may keep adding ineffectual “job-keeper” and “job-seeker”-type bandages that the political parties and media consider to be the only options our ‘politics’ allows.

So, maybe it’s time for big thinking?

Oh, and then there’s this. In the 15th century, a labourer with a family of 5, and no particular skills, could save the greater part of his income, after food, clothing and shelter. Can he do that now, or is he deeply immersed in debt? The question’s rhetorical.

Yup! It is.

Land has no cost of production, but costs so much because we refuse to capture its rent publicly. Instead, we prefer to tax people for working.

So, we have the worst of both worlds: high taxes and high land prices. At least, that is, until the land price bubble bursts every 18 years or so.

It’s a Ponzi alright!

It’s probably too simplistic to suggest that the conservative right doesn’t want political change, whilst the left does; but the dichotomy serves a purpose.

I have conservative views, but see myself as being on the left of the spectrum. We do need political change. What sort of change? Fundamental change.

However, apart from climate change, which a goodly proportion of the right also wants addressed, the left is no longer able to put its finger on what exactly it wants by way of socio-economic reform.

In Capital in the Twenty-First Century Thomas Piketty had it pretty right that wealth and income inequality has grown over the last 200 years, and this has proven to be an inbuilt feature of capitalism. Rentiers are somehow involved and we need a ‘wealth tax’.

The left knows it doesn’t like what conservative governments have been dishing out. It’s got to do with the neoliberal economics introduced by Reagan and Thatcher and they’re against it. But what are they ‘for’?

They’re lost.

But they have myriad ideas …..?

Yes, that’s the problem. It’s all petty stuff, basically opposing what’s been occurring. Where’s the big picture? What’s the overarching plan? They’re lost in confusion and reductionist detail.

Does the left understand ‘modern’ monetary theory (MMT)? Nup, most of them are against it, even though it’s not modern and is the way we used to do things, before neoliberal austerity economics insisted we had to balance national budgets. In 1945 Sir Ronald East quite properly denied that future generations must pay for current government spending:

Do they see that if poverty has been increasing under capitalism for 200 years, and has worsened recently, there’s a particularly good case for a living wage universal basic income (UBI)? Nup, you can’t do that: people might ‘bludge’.

Hang on! At a time like this, with the coronavirus on the rampage and people being thrown out of work, they’re worried they might bludge? Aren’t Piketty’s ‘rentiers’ bludging on us, by capturing the greater part of the economic rents owed, equally, to all of us? Wouldn’t money in people’s hands provide some comfort at a time like this, and also assist businesses? Businesses would only have to offer something additional to the UBI to attract employees.

Yup, yup, and yup!

That’s why we also need to tax land values (LVT), to capture what Adam Smith called the annual ground rent, not to tax wages and earned profits as though that’s some sort of crime to work:

A citizen can hardly distinguish between a tax and a fine, except that a fine is generally lighter. – GK Chesterton

If we taxed annual land values, it reduces land prices, curbs property speculation (and asset price inflation), and rewards workers.

Workers have lost out badly as wage growth declined over the last 40 years and household debt skyrocketed, because tax regimes have rewarded the rent-seeking 0.1% whilst penalising workers and productivity. Extractive rentier drones have been winning, hands-down!

It’s really basic stuff. Tax regimes serve the gig economy well; they’ve literally been “got up for gigs” (gig: Oz slang for idiot). The Henry Tax Review tried valiantly to get the ball rolling on real tax reform, but the right didn’t want it, and the left, not understanding ‘Australia’s Future Tax System’, didn’t quite know what to do with it. As mismanagement crashed the economy, ever before the virus, the report lies stuffed away in a shelf in Canberra.

The left is lost. It doesn’t understand taxation. Curiously, it wants more taxation, still believing it’s a fund from which national governments may spend, instead of money being withdrawn from the economy to protect the currency. (I’m able to hear the spluttering and conniptions from here!)

The right has the whip hand as it moves further rightward. The left buries itself in protest and trivia, completely lost as reform beckons urgently. It’s gone missing in action.

The 3 things needing attention now, MMT + UBI + LVT, aren’t on the agenda of any political party – and for that we’ll pay dearly.

Maybe valuers should be writing the federal budget?

Not those economists who fail to see the destructive role of privatised land rent within the economy?

Prime Minister Scott Morrison and Treasurer Josh Frydenberg today announced their plans to continue combatting the economic effects of the coronavirus.

They’re inadequate at this point in time, of course, but I’m optimistic enough to believe that Australia has commenced its journey towards vimmlbutt – i.e. MMT, LVT and UBI.

Australia and New Zealand have led the world before in social initiative, and we can do it again.