I don’t agree with former Geelong star, Sam Newman, on many things, but I must agree with him that the “Welcome to country” has become more than a bit wearing at the footy. [Am I allowed to say that?] Newman told Darren James on 3AW this morning that it’s divisive and a mistake.
However, I doubt that Sam would agree with the treaty in my blog (maybe a prologue to the Constitution) which would set to socio-economic rights the original dispossession of Australia’s first nations peoples.
It struck me that the ‘Magpies’, Collingwood, won four consecutive VFL premierships in 1927, 1928, 1929 and 1930. That was incredible!
Those years were the leadup to the 1930s ‘Great Depression’.
100 years on, I doubt that any AFL team will repeat that feat during our upcoming depressionary years: 2027, 2028, 2029 and 2030. I’d like it to be the Cats, of course!
[BTW, have you seen the cat? It explains the chart.]
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ps. Congrats Brissie!
Yes, we need to be vigilant about government expenditures.
The first thing is to ensure that our governments don’t borrow.
The second is to acknowledge that governments don’t spend from the taxes they raise. These disappear into ‘consolidated revenue’ and necessary spending is conducted digitally, not from consolidated revenue.
However, while neither the federal nor state governments need to borrow, there are limitations: their spending must be necessary programs if inflation isn’t to occur.
We also need to understand from where the greatest part of inflation comes, and the consumer price index (CPI) is an inadequate measure.
Few people realise that land prices and all taxes, except those on land values (which are in the nature of a ‘rent’) are key generators of inflation. Although land has no cost of production, its privatised rent is capitalised into land price escalation. All other taxes are similarly passed off into prices, but not those on land values.
Along with listeners and an expert from the Grattan Institute, Tom Elliott bemoaned Victoria’s infrastructure cost blowouts on 3AW this morning. No doubt the excesses of the CFMEU have acted to inflate infrastructure costs, but they don’t explain what appears to be extraordinary blowouts.
Discussions reminded me of the cost blowouts associate with construction of the Sydney Opera House. Jorn Utzon’s design was approved for an estimated $7 million 4-year build in 1957. Construction commenced in 1959, and the Opera House was completed 14 years later for a total cost of $102 million: a $95 million or 14.5 times cost blowout. Yes, there were political delays, and they certainly didn’t help, but it still looks pretty cheap in today’s dollars, doesn’t it? Note: today’s dollars.
Could it be that the cost blowouts that are upsetting Victorians may be expected over a period of time, and that the CPI is a ridiculously too low measure of real inflation? I’d argue that increases in land prices are a far better measure of what inflationary increases we may expect for any large infrastructure project.
Let’s look at the Sydney Opera House again, using land values as our measure of inflation, and taking 1957 as our base year. In 1957, the total value of all land in Australia was $5884 million. In 1973, it was $39,900 million, an increase of 6.78 times. (Terry Dwyer, “The Taxable Capacity of Australian Land and Resources” in Australian Tax Forum, Vol 8 No.1, 2003.) This superior inflationary measure at least assists to explain half of the Sydney Opera House blowout.
I’d argue that at this particular junction in the 18-year property cycle, many Australians are experiencing their own increasing cost-of-living issues, “So, what the hell is this rotten Victorian government doing about these incredible infrastructure cost blowouts, Tom Elliott!” The point is that the government isn’t a household, and curtailing necessary expenditure will have the private sector suffering and recession ensue.
In my opinion, it would be a great pity now to curtail construction of Melbourne’s suburban rail loop – just as it was for the Labor government to put an end the Liberal government’s extension of the Eastern Freeway to Citylink.
Things that are necessary should get done, and we need a complete rethink about “taxpayers’ money” and inflation.
Small business does a good job looking after us, usually on slim margins. The same cannot be said for banking and other corporate monopolies making super-profits. Super-profits are those beyond the more common level expected of businesses, often called ‘economic rents’.
Economic rents are unearned incomes. Why ‘unearned’? They’re ‘surplus product’ in the economic process, the nation’s net income after all normal wages, profits and costs. This surplus product is owed equally to all citizens as an annual dividend or universal income, but we gift it to big corporations by way of tax regimes which tax our earned incomes and purchases, leaving the greater part of these unearned rents untaxed.
By skirting around the biblical injunction that “The land shall not be sold” Jews and Christians have permitted banking and real estate interests to privatise the rent of land, capitalising it into land prices. This process, in turn, escalates land prices year after year, generating mortgages that repetitively become impossible to pay. In effect, we’re working for banks, the real estate industry and other businesses leveraging off these super-profits. It’s all unnecessary.
It’s much the same process for all monopolies, especially the mega-corporate social media. We continue to tax our incomes and purchases, failing to understand the sheer quantum of economic rent available to be taxed away to kill off the inflation that continues to bedevil us.
It’s a destructive process we could do without if we want to experience prosperity. However, we seem to prefer daily headlines describing the wars and social ills that ensue from the paralysis of thought in economic analysis that has us repeating destructive cycles of boom and bust that we witlessly label ‘the natural business cycle’.
Henry George’s ideas, particularly his advocacy for a single tax on land values, posed a significant threat to the established economic and political order of his time. Neoclassical economists, who emerged in the late 19th and early 20th centuries, had several reasons for attempting to marginalize George’s theories:
Interestingly, while Karl Marx’s ideas were also revolutionary, they were often discussed more openly because they were seen as a different kind of threat—one that could be contained within the broader ideological battle between capitalism and socialism. George’s ideas, however, struck at the heart of property rights and economic distribution within the capitalist framework itself, making them particularly unsettling for the established order4.
HENRY GEORGE: RESURRECTING A BURIAL?
Written in 1879, Henry George’s “Progress and Poverty” received worldwide acclaim, early readers experiencing the 1893-1897 depression, reasons for which were surgically explained in his equation: production minus land rent leaves wages and the returns to capital untaxed, i.e. P – R = W + I. Hence, privatisation of land rent into the escalating land prices that accompany progress, along with the taxing of incomes and purchases, generates repetitive cycles of boom and bust. (Outrageously, we now call these ‘The natural business cycle’.) The book’s sub-title being “An inquiry into the cause of industrial depressions and of increase of want with increase of wealth … The Remedy”, all that remained was for governments to apply George’s remedy to ensure there would be no repetition of the incredible real estate speculation that had taken place during the late 1880s and early 1890s. These were indeed heady days, later to be labelled The Progressive Era!
Unions and political parties were formed around George’s prescription for the corruption and speculative excesses which occurred during this latter part of the Gilded Age. [George’s fiscal adjustment to capitalism has been buried in favour of that of the then lesser-known Karl Marx’s anti-capital stance. It’s curious that Marx second-guessed his own conclusion (in Book III to capture rent) to launch his attack on capital.]
By the 1920s, Georgist anti-corruption reforms had been put into effect to some extent in several countries, particularly in Australia which applied taxes on land values at all three levels of government. Canberra was established on a 99-year leasehold system to avoid the property speculation that would likely arise in its absence when the nation’s capital territory was established.
Henry George’s thinking threatened powerful interests, of course. He’d faced down their voices during his visits to England in the 1880s where audiences at his speeches were strategically laced with antagonists demanding that their opinions be heard. However, by the time of his three-month tour of Australia in 1890, rampantly speculative world property markets were all too obvious to everyone, so his opponents assumed a more defensive posture. The Adelaide Observer of 26 April 1890 reported George saying to an Adelaide audience: “In the colonies 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.”
Meanwhile, powerful interests decided that steps needed to be taken to kill off this anti-rent seeking incursion once and for all, as land speculation had been the mechanism integral to creating their wealth. The US economist John Bates Clark was recruited for the purpose. He and chosen acolytes conspired to create a new economics that would conflate labour and capital to help address what was seen as a grave threat to socio-economic status quo. They’d also publicly press the case that George was an imposter: he wasn’t university-trained!
The times surrounding George’s Australian visit in 1890 bear a striking resemblance to the world’s failing 2024 economies, commentators having alluded to the similarity. Is it possible we’re again three years out from experiencing the damning outcome from long-escalated land prices and the taxing of income and purchases? Using Henry George’s analyses, the cyclical pattern separately demonstrated in rising land values by Australian technical analyst Philip J Anderson and British author Fred Harrison is most compelling.
REFLECTIONS
I’d just completed the real estate valuation course at RMIT in the early 1970s without having once heard the name ‘Henry George’, when I came upon a shop at Hardware Lane in Melbourne. It bore the name ‘The Henry George League’. Working as a newly graduated valuer in the Australian Taxation Office at the time, I noted the front window displayed pamphlets concerning land tax. “What would this little outfit know about land taxes?” opined this callow valuer. Wasn’t I cognisant that real estate outgoings, such as municipal rates and land tax, needed to be deducted so that the net rental could be capitalised into market values? I took some free brochures from the shop and bought a copy of Progress and Poverty. Immediately immersing myself into reading Henry George’s astounding logic, I learnt very quickly of the void in my education concerning the destructive roles of land prices and the taxing of incomes and purchases. Why had I heard nothing about these during my RMIT course? I was later to learn from the president of my professional body, the Australian Institute of Valuers, now the Australian Property Institute, the reason for the omission was that it was “too political”.
Although “I saw the cat” as Henry Georgists say (i.e. I had been persuaded to the case), it nevertheless took me several years to join the Henry George League. I needed to read literature out there against the public capture of ‘land’ (i.e. all natural resource) rents before joining what seemed to me to be this small but committed band of Henry Georgists. Although many historical figures had come to the same conclusion as Henry George–ever since the Mosaic injunction that “The land shall not be sold” was overridden by Jew and Christian alike–Henry George’s account is the most formidable and thoroughgoing.
Later, as president of the Henry George League, I successfully pressed for a change of the name to “Tax Reform Australia” to promote the idea rather than to deify the man. Following professional advice several years later, the organisation was again to change its name, to “Prosper Australia”.
Prior to the computerised recording of real estate sales data, it was common for valuers such as me to seek sales evidence from municipal valuation departments. Anything of particular interest I’d discovered during inspection of a property for the Australian Taxation Office (other than the market value of a subject property) was sometimes shared with the municipal valuer as a quid pro quo for having provided the sales data. On one such occasion at a south-eastern Melbourne municipality, a young assistant valuer sought to confirm that I was a supporter of the ideas of Henry George. I replied that I was, and asked whether he knew much about George. He replied something to the effect, “Not really, but why has ‘X’ (his boss, an older senior valuer) told me that I should beware of any follower of the ideas of Henry George?” I mentioned that his particular municipality based its council rates on site valuations, unlike some other Victorian municipalities which struck their rates on the net annual valuations of properties, and that land value taxation was actually a critical requirement for Henry George’s ideas, so that any development in the municipality was not penalised. The valuer clearly had not been aware that Australia had led the world in land value taxation. He inquired further as to why then senior people in the profession appeared to have been warned off getting close to Henry George supporters. I suggested that the campaign may have initially been engineered by economists, not valuers, because the valuers’ professional institute, the Australian Institute of Valuers (AIV), was actually founded by Australian Valuation Office valuers who assessed properties for the 1910 federal land tax. This was news to him also. I left the exchange feeling I may have countered to one person, at least, the background scare about Henry George’s taxing of land rents instead of incomes and purchases.
I wondered whether it was for amusement’s sake that I was later invited to speak about Henry George at an AIV discussion group’s annual dinner. The gathering comprised senior valuers from major city real estate agencies and from areas of banking and insurance. It turned out not to be altogether for amusement; the vote of thanks for my address proved to be generous. Apparently, I didn’t have horns growing from my head in putting Henry George’s case to attendees. Most agreed they would roll with the punches if a significant land tax was enacted. The speaker completed his vote of thanks with a very forthcoming comment: “Bryan, you may note that Pat Gill (of McGee, O’Callaghan & Gill, the Catholic Church’s real estate valuation company) is absent tonight. In organizing the event, Pat told me that he would never attend any dinner where a supporter of Henry George was to be the guest speaker!” Eliciting laughter from attendees, the comment acted curiously to warm the cockles of my heart. Not every contact with my professional institute has been as pleasant.
So, here we are now in 2024, likely three years out from another Great Depression, with the income tax regime fining people and companies for working at things they’re doing, and precluding others from doing what they would like to be doing instead. Real estate speculation and gambling has been running rife and tax reform has come to be seen as the most pressing issue. The excellent Australia’s Future Tax System (‘The Henry Tax Review’) has lain dormant following extensive misbegotten advertising by mining companies having acted to defeat the Rudd Government’s attempt to introduce a Resource Super Profit Tax on mining rents; a tax, along with land tax, completely in accord with what’s necessary to free up Australian productivity, competitiveness, and cheaper access for companies and individuals to land. Rent-seeking forces, such as neoclassical economists, banking, real estate, media and other monopoly interests will obviously endeavour once again to sell a switch of emphasis from income tax to greater reliance on the goods and services tax as the necessary ‘tax reform’. Having learnt the lesson of the mining tax, let’s hope Australians are now up to defeating this canard, the GST being a more regressive manner of taxing incomes, having no threshold at all, and failing to capture what overseas ‘investors’ owe to the nation. On party lines, politicians beholden to special interests will be difficult to convince, but let’s trust Australians can hold them to account as individuals. We have current land values on all properties in Australia, so, within a VIMMLBUTT package, maybe an all-in land tax offers hope to allay the upcoming financial depression?
We’ve gone with the woke “Welcome to country” drivel that makes one cringe, but there’s still no sign of the structural economic reform that would finally make first nations peoples our soulmates.
Cui bono?
