Therefore, to the extent that economic rent is permitted to become privately capitalised into land prices—and this has grown massively with the winding back of land-based revenues over the last 30 to 40 years—production, wages and profits will be reduced by taxation and its accompanying deadweight effects. GDP growth will decline.
That’s what has occurred around the world: that’s why economies are struggling.
In this retrogression of economic thought, known as neo-classical or neo-liberal economics, labour and capital have been increasingly squeezed by rentiers, and economies are gradually grinding to a halt, into a deepening deflation. The role of land and the pathology of land price have been ignored.
Incredible land price inflation, and financial products leveraged therefrom, together with household debt, has generated a deflation in other prices.
Economies can recover only when this situation has been reversed: when land prices are allowed to retreat and impossible private debt has been written off. Debt that cannot be repaid won’t be repaid.
It would be best if governments could bring themselves to acknowledge this reality, but they are in the thrall of a false economics, and a powerful and self-serving set of rent-seekers who will try, Japan-like, to fight this essential reversal.
Fascinating times! Hyman Minsky and Nikolai Kondratieff had valuable things to say about these periods. Neither of them seemed to have realised that Henry George had already explained them.