The Land Values Research Group published a study of the City of Fitzroy in 1949 showing the extent to which the municipality would benefit by switching its rating system to one based on unimproved land values, instead of on the net annual value of the property as improved.

Where half the population of Victoria–excluding the City of Fitzroy–once used land values as it rating base, none now employ site value rating. Property speculators–hiding behind arguments about the ubiquitous “poor widow”–have won out.

On the other hand, every council in New South Wales and Queensland does rate on site value (unimproved land values).  However, property speculators in those states discovered a method whereby vacant or underdeveloped properties, or those of the super-wealthy may be subsidised just as effectively as rating improvements subsidises them in Victoria.  They saw to it that  ‘minimum rates’ were introduced.  Effectively, this means if you’re paying the minimum rate–and some cities have 80% of ratepayers on minimum rates–then you’re subsidising those who aren’t on the minimum rate.

The increasing use of minimum rates is a move by stealth towards the poll tax which caused a bloody revolt in the streets of London in 1990 when it was proposed by Margaret Thatcher.

Local governments around the world are under severe financial stress because they tax construction or charge minimum rates.  They fail to act on the simple fact that the value of land held is the fairest and cheapest revenue base, and the only base that encourages efficient redevelopment to land’s “highest and best use”.

…. and Australia’s residential land supply.

When you privatise society’s lifeblood for yourself, honesty demands you also acknowledge your parasitic nature.

But we seek to deny this fact in order to be able to live with ourselves.

This is not unlike the modern economist who claims his or her work is ‘value-free’.

If an economist is able to deny –

• land rent is approximately one-third of economies, and
• its privatisation by individuals necessitates the raising of arbitrary taxation on labour and capital (with all taxation’s damning deadweight)

then he or she is certainly working without values!

That economic analysts refuse to deal with the private capture of publicly-generated land rents currently creates the world’s greatest hurdle. Credit and money are quite secondary considerations to the main issue, that is, rent-seeking.

So far Australia, which has had one of the biggest residential land price bubbles in the world and record household debt, has avoided much of the financial and social disorder seen elsewhere, but you simply cannot break the laws of rent, wages and interest—the laws of distribution–without ultimately experiencing the gravest of consequences.

To think otherwise is much the same as believing you can jump off a tall building without going ‘splat’ at the bottom.

Somewhere along the line we’ve got to start capturing more of the annual value of land to the public purse if the social and financial decay we’re currently witnessing isn’t to worsen.

Tax bads, not goods.

Dr Gavin Putland shows the money lenders haven’t changed their spots. Plus ca change ….

But that’s OK.  Except for a feudal interruption, selling land for “ownership” has obviously long been accepted as a part of the boom-bubble-crash game.  We’ve been indoctrinated to believe boom-bust is “just part of the normal business cycle”.

The hegemony of ‘private property in land’ still has the 99.9% by the throat.  Just try to overthrow its faulty logic.

Apparently a lifetime of debt and taxes–and the ensuing economic recessions and depressions–are preferable to paying our land rent into the public coffers as an alternative to taxation and debt.

Leave the rent-seeking parasites alone, pillory the people.

Just as I like to explain the shadowy recesses of the land market–otherwise known as the  ‘property’ (sic) market–there occasionally comes a journalist who is prepared to speak out on the goings-on in the inner sanctum of the Australian share market.

Congratulations, Michael West, in THE AGE today:  “For dark pools, just wade into the ASX”.

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Mind you, former Victorian Premier, John Cain, doesn’t do a bad job on the Reserve Bank of Australia, either: “Parliament should show brazen bank who’s boss”.

I think John Cain harbours strong inklings that it was also the RBA’s delinquency during the last property boom–the commercial bubble of the late 1980s–that had him overthrown as leader of the ALP government in 1990, and replacement leader Joan Kirner tossed out on her ear in 1992 (to be replaced by the Kennett Liberal government selling off the state of Victoria’s heritage, Ayn-Randian style).

Of course, John Cain also needs to accept a great portion of the blame himself for the woeful excesses of Tricontinental, The State Bank of Victoria’s investment arm.  (333 Collins Street and all that.)  But where was the RBA during THAT bubble?

There are indeed BIG questions to be asked of the ASX and the RBA and it’s about time these two bastions of ‘rectitude’ were stormed. Neither institution should be allowed any longer to get away with its many misdeeds, as the system slowly implodes from within.

Regulatory bodies?  Bah!!

GETTING IT OFF YOUR CHEST

Maybe they thought I was out of line, so that’s why Business Spectator didn’t publish my comment on Robert Gottliebson’s article “Blame CEOs for a National Cost Explosion” yesterday.

I wasn’t out of line.

As Business Spectator usually publishes my comments, maybe I was getting a bit too close to the bone in criticising how analysts–such as they?–were wrong in either condemning the Henry Tax Review’s recipe for reforming of an out-of-control tax system or else damming the report with faint praise.

I consider the Henry panel’s recommendations for Australia’s Future Tax System to be world’s best revenue reform practice. They provide an urgently needed template for making the necessary shift from taxes to resource rents if we are to negotiate our way our way out of the debt deflation that’s currently grinding world economies to a halt.

I’ll let you draw your own conclusions. This is what I said:-

No, Robert. I blame the blindness and shortsightedness of those business analysts who refused to see what Ken Henry’s tax inquiry tried to make clear.

Businesses can’t cope with the deadweight of the myriad inefficient taxes and burgeoning requirements they are all required to face.

Henry’s panel wanted more than 100 taxes ABOLISHED and a quid pro quo of an all-in (instead of selective) land tax, plus all Australians to share in the surplus rents (not profits) from the mining boom.

…. in order ‘to keep prices up’.

They’re offering incentives to buy, rather than letting residential land prices find their true levels.

I’m reminded of the over-supply of office accommodation in Melbourne in the commercial bubble of the early 1990s when there were twenty Melbourne Cricket Grounds of new office space available for lease. That’s one million square metres of carpeted and airconditioned offices.

Nominal asking rental rates of $650 per square metre per annum for accommodation in these new buildings translated to as low as $120 per square metre per annum once it was discounted back for estimated letting up periods and the rent free periods of up to ten years and free office fit outs being offered.  But developers and agents refused to drop their highly imaginative asking rental rates.

Get real guys. You’re only fooling yourselves and people ignorant of the facts.  Oh, but then you like to keep as many people as possible ignorant of the facts as you can, for ulterior motives, don’t you?

I caught the ABC’s “Q & A” on TV last night.  Panelists were Judith Sloan, Kevin Rudd, Malcolm Turnbull and Heather Ridout.

There were a number of wry jokes about deposed party leaders Rudd and Turnbull having greater popularity than current leaders Julia Gillard and Tony Abbott, of course.

“You’re both popular and liberal-minded; why not join together and form your own party?” (or something to this effect) inquired one audience member.

Mention was made that the MRRT designed by Julia Gillard and selected big miners yields literally nothing in comparison to Kevin Rudd’s proposed RSPT. (Surprise, surprise!)

Greater productivity was the one thing that’s going to save us, they all agreed.

The show transitioned from tax reform onto IR – almost as though tax reform hasn’t anything to do with industrial relations.

Don’t both labour AND capital have a great common interest in getting rid of all the taxes that Ken Henry’s panel of inquiry showed were inefficient, and in clawing back some of their earnings, by making the switch towards land and natural resource-based revenues?

“Flexibility will get people into work”, opined Turnbull, hinting at a swing back in the direction of WorkChoices (because Labor’s swung the pendulum back too far in favour of the unions again Ridout, Sloan and Turnbull all agreed).

“It’s not just labour’s productivity” (on which we need to concentrate) countered Rudd.

You’re quite correct, Kevin. And as Malcolm’s wife, Lucy, has spoken publicly in favour of the positive affects land value taxation has on development and productivity, I think you may be biting your lip on this point, Malcolm, because you don’t want to ‘scare the horses’ before a federal election.

That’s because there’s a great educational void about resource-based revenues as an alternative to taxes on labour and capital, isn’t there?

But why not take the lead and help educate people to the point, Malcolm? You do have real leadership, statesman potential in you? Winston Churchill did.  David Lloyd George did. On this very point.

“We’ve got to use taxpayers’ dollars efficiently” expounded Malcolm, now invoking statements in favour of motherhood.

Yes, but it’s from whence you draw your revenues that’s key to the world’s current problems, Malcolm.

Learn from Lucy, Malcolm. Stand up and be counted.

Modern economists are  lost because, although they occasionally like to speak of economic rents in the abstract, they have absolutely no idea of the sheer volume of land rent within the economy. It’s some 33% of GDP.  It seems the vast majority of economists are able to turn a blind eye to what happens to one-third of the economy.

Georgists comprehend the damage taxes wreak upon the economy and that whilst their deadweight destroys business and employment, a charge on land rents does not. In fact, it not only helps the efficient allocation of natural resources, but assists in conserving the environment.

Georgist economists were well represented amongst those who predicted the global financial collapse.  Those accurate forecasters who were not Georgist, such as Nouriel Roubini, had a grasp of the destruction aberrant real estate markets could work upon economies, so theirs also remains scientific explanations of why we are where we are.

Once you understand the role of land and its rent within the economy, you can have worthwhile discussion abut how to fix the current depression. Not until then.

Do you understand, Barack Obama, Wayne Swan, et al?

If so, pay attention to this short video conversation between two people who forecast this economic depression, Fred Harrison and Michael Hudson.