Ken Henry: “Young Australians are victims of wilful acts of bastardry”.

Melbourne Community Tax Summit 20-21 February 2025.

The economist John Bates Clark was paid by special interests to find a means to skirt around the Henry George equation production (P) minus land and natural resource rents (R) leaves labour (W) & capital (I) untaxed: i.e. P – R = W + I. George’s formulation had achieved enormous circulation in his top-selling “Progress and Poverty” and was a clear and present threat to those powerful rent seekers who had been capturing publicly generated unearned land and natural resource rents unto themselves. George had argued that these rents were owed equally to all citizens and needed to be captured publicly. This was war!

Clark and his followers set about establishing a new economics, ‘neoclassical economics’, to conflate land and natural resource rents with capital, to make land and its rent disappear, a measure that would have had classical economists turning in their graves.

Once done and accepted—Mason Gaffney’s “Neoclassical Economics as a Stratagem Against Henry George”, mentions that it took about thirty years to win over the economics’ profession—it became open for rent seekers to merge with ‘capitalists’ to argue that there was a necessary conflict between labour and capital, and that capital could not afford “high wages” because it was inflationary. George had argued that labour and capital had a common interest, as opposed to privatisers of economic rent, or surplus product. Under neoclassical economics, the inflation of escalating land prices and the deadweight losses injected by taxes on incomes and purchases has gone virtually unremarked.

So, now we have central banks and political commentators argue daily that a lid must be kept on wages, so that capital (sotto voce: and rent seeking) may achieve its “rightful reward”. Citing RBA thoughts, the reputable business commentator Alan Kohler did as much on the ABC-TV news tonight.

Once land price inflation and the taxes passed off into prices are seen for the inflation-generators that they are, we’ll be well on the way to mending an atrocious economic rort. It has indeed been kept well hidden.

Tax reform is in the air in Australia. Have we the wit to expose the fundamentalist neoclassical nonsense to which we’ve sadly become accustomed?

Divide and rule working well for the rentier class.

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No taxes at all on incomes and purchases?

Economists, analysts, comentators and people hard-pressed to pay their mortgages will be hanging on the Reserve Bank of Australia’s announcement on the cash rate at 2:30 pm today.

The decision will be made on the basis of how the RBA sees Australian inflation. The Bank has several criteria, including those consumer prices that have been increasing our cost-of-living.

However, the RBA will have zero attentiveness to the extent to which the Australian economy has been sorely affected by compulsory superannuation, the inflation of our land prices and all of the taxes upon our incomes and purchases.

That’s a pity, because if the RBA was to extend its interest (sic) into those areas, it would see the real level of inflation affecting the economy and our cost-of-living. It would assist them to understand that the real estate cycle leads and directs the economy, and that we’re heading into a massive deflation in 2027.

But that’s all Dutch to RBA governors. We’re a long way from understanding that the natural rate of land prices and interest rates are zero and that booms and the eventual bursting of their bubbles and the attendant destructiveness is certainly not “the natural business cycle“.

A good universal income would commence essential reform of an increasingly parlous Australian economy which is now led by gambling and property speculation. Phase Two of the reform would be a gradual shift from the taxing of incomes and purchases to the taxing of our land and natural resource rents.

The problem is that powerful interests hold sway with the political establishment, and they’d regard poorly any measure that would preclude them from continuing to leech off Australians by stealing the economic rents owed equally to every one of us.

We live in hope!

• 1837 high land sales lead to the ‘Hungry 40s’ depression.
• 1850s gold discovery generates another Australian (& American) land boom.
• The ‘Long Depression’ of the 1870s hits Australia.
• The telegraph brings immediate world news to Australia in 1872.
• The rampant 1880s land boom is greatest in Melbourne; elevators make construction of multi-storey office buildings economic.
• ‘The Block Arcade‘ is developed in Melbourne by Benjamin Fink.
• Melbourne’s Princess Theatre has world’s first sliding roof relief for hot summer nights.
• Architect William Pitt constructs Italianate mansions in Melbourne and elsewhere.
• Early 1890s: Building societies hold £5m in depositors’ funds.
• Along with existing banks, ‘land banks’ and building societies proliferate.
• City lands sell for between £1000 and £2000 per square foot.
• Exploding wool prices have the squattocracy building mansions for themselves at home and in the city.
• Melbourne population explodes between 1881 and 1891, for example: in South Melbourne 25,000 to 45,000; in Footscray 5,000 to 20,000; in Brunswick 5,000 to 20,000; in Hawthorn 5,000 to 20,000.
• The 1890s Depression finally strikes in 1993.
• Suicide becomes common.
• 243 Collins Street Melbourne real estate agency, Munro & Baillieu loses £180,000 (read millions of dollars today).
• Many debtors settle for pennies in the in £; several for a halfpenny in the £.

Sources: “The Vanished Land: Disappearing dynasties of Victoria’s Western District“, Richard Zachariah, & “The Land Boomers: The Complete Illustrated History“, Michael Cannon

The 1930s Financial Depression arrives: Another land price bubble has burst. However, greater prominence is given to the 1929 US share market collapse. It is virtually solely blamed and the preceding bursting of land markets overlooked.

We look sideways and see these private debt-laden financial depressions are contemporary with depressions in other countries where land bubble have burst. What’s going on? Why this repetition of these disasters?

2020s Financial Depression: Another world bubble in land prices is about to burst in world land markets …..

All of which poses the question: To what extent are we humans more intelligent than other animals if we’re able pass these socio-economic catastrophes off as “The natural business cycle”?

Can we be 100% sure about anything? “Death and Taxes”? No, because while resource rents will always be with us, taxes on purchases and earned incomes need not. Taxes are quite arbitrarily levied upon us all. So, we might correct the rent-seekers old canard to:-

“The only certainties are death and natural resource rents.”

OK, so is the depressionary collapse of 2027 to which I’ve alluded at length on this site 100% certain?

No, certainly not: It’s only 99.9% indubitable. 🙂

With many world real estate markets at their peak, or even declining in a number of cases, we still await relatively lame but leading United States real estate markets to join the throng. They must skyrocket betwixt now and 2027, out of their current torpor.

If they don’t, all bets are off. However, that’s extremely unlikely; and that’s the 0.1% doubt about the matter.

So watch out for enormous fireworks in US real estate markets ‘twixt hither and yon!

The economy will tank within two years of real estate markets having peaked.