The 119th 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 171st 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.
Steven Spadijer’s tour de force took me back to my own Henry George commemoration dinner presentation on the 100th 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%.)
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!