All posts by Bryan Kavanagh

I'm a real estate valuer who worked in the Australian Taxation Office (ATO) and Commonwealth Bank of Australia (CBA) before co-founding Westlink Consulting, a real estate valuation practice. I discovered, by leaving publicly-generated land rents to be privately capitalised by banks and individuals into escalating land price bubbles, this generates repetitive recessions and financial depressions. We need a tax-switch: from wages, profits and commodities onto economic rents/unearned incomes, if we are to create prosperity and minimise excessive private debt.

OZ USED TO DO GOOD THINGS

Georgist reform in Australia

1890 Henry George visits Australia talking to enraptured audiences, providing insights into likely economic results of the speculative state of the economy.

In the colonies [of Australia] 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.” – Adelaide Observer, 26 April 1890

1908 A site is selected for the nation’s capital, between Melbourne and Sydney.

1910 Andrew Fisher’s Labour government introduces a progressive federal tax on unimproved land values. https://www.legislation.gov.au/Details/C1910A00021

1912 (September) Walter Burley Griffin, one of the American designers of the national capital, along with Marion Mahony Griffin, congratulates Home Affairs Minister King O’Malley in a letter:

I cannot refrain from extending congratulations to your Government on the stand it has taken to maintain in perpetuity the rental value of the capital site. Failure to do this everywhere is largely responsible for distortion and prevention of natural city growth, nowhere better exemplified than in our own capital, Washington, where speculative holdings perverted the development” – Walter Burley Griffin, Single Taxer and Social Reformer’

12 March 1913 Lady Denman officially announces Canberra as the name of Australia’s capital city.

Weell ……. maybe?

MANAGING COSTS

Where does it all go wrong?

Labour says Capital is to blame.

Capital says wages are too high.

Both need each other to generate wealth, but they’re always at each other’s throat.

There’s no other argument.

Except ….

…… nobody notices that the price of all goods and services is twice what it should be, because prices have been inflated by taxation and its cascading deadweight losses, down through every part of the production process.

Were we to capture land rent from production instead of taxing wages and profits (viz, labour and capital) i.e. P – R = W + I, we wouldn’t have to introduce taxes (which are passed on in prices) into the equation.

Labour and Capital would discover that they’re actually complementary, not at odds. Each would receive its full reward. Prices would halve.

So, the existing position: Cui bono?

Hmmm …..

Winston Churchill (1909)

David Lloyd George and Winston Churchill

Liberalism and the Social Problem

….. See how this evil process strikes at every form of industrial activity. The municipality, wishing for broader streets, better houses, more healthy, decent, scientifically planned towns, is made to pay, and is made to pay in exact proportion, or to a very great extent in proportion as it has exerted itself in the past to make improvements. The more it has im­proved the town, the more it has increased the land value, and the more it will have to pay for any land it may wish to acquire.

The manufacturer proposing to start a new in­dustry, proposing to erect a great factory offering employment to thousands of hands, is made to pay such a price for his land that the purchase price hangs round the neck of his whole business, hamper­ing his competitive power in every market, clogging him far more than any foreign tariff in his export competition, and the land values strike down through the profits of the manufacturer on to the wages of the workman.

It does not matter where you look or what examples you select, you will see that every form of enterprise, every step in material progress, is only undertaken after the land monopolist has skimmed the cream off for himself, and everywhere today the man or the public body that wishes to put land to its highest use is forced to pay a preliminary fine in land values to the man who is putting it to an in­ferior use, and in some cases to no use at all. All comes back to the land value, and its owner for the time being is able to levy his toll upon all other forms of wealth and upon every form of industry.

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Churchill went on to advocate the taxation of land values to remedy this condition.

The land tax component in Lloyd George’s “People’s Budget” of 1909 was defeated in the House of Lords. (Funny about that!)

Thus the way was paved for the early 1920s mad speculative bubble which developed across the world, bursting into the Great Depression and WWII.

Any similarity to today?

LAND PRICE TAKES IT ALL

Despite the heartache of failing small businesses there’s a lot of money around at the moment. If ever we needed to understand the Georgist principle that land without a serious land tax sucks up available money like a sponge, we’re witnessing it now.

House prices have gone troppo again.

Here’s the ABC’s “The Economists”, Gigi Foster and Peter Martin, discussing the escalating property markets with their guests.

https://www.abc.net.au/radionational/programs/the-economists/why-are-home-prices-soaring/13494582

And I should let you know, Peter Tulip, that we had land booms and bubbles ever before we had zoning controls!

WAR, WAR, WHAT IS IT GOOD FOR?

Absolutely nothing?

Not on your Nellie! It’s used by ‘smart’ political leaders locked into serving the ruling elite and its financial model, instead of addressing essential economic reform.

The need for war is basically a “Look over there!” tactic to unite countries bifurcated into haves and have-nots as in the imperial WWI obscenity whose terms of settlement resulted directly in WWII. Resistance to the idea is simply painted as ‘communist’, so that war becomes a test of patriotism. It’s therefore a win/win tactic for corrupt political leaders and is virtually impossible to resist.

Look around. Do you see the middle class dissolving as the nation divides into a uber-wealthy 0.1% and the 99.9% indebted and poor? Let’s just forget trying to repair the political division developing over who gets what! OK? So, wealth distribution needs fixing with a big diversion.

Look at what China’s been doing! “Belt and road” indeed! It’s getting its fingers into too many pies! It may not have waged wars against countries other than those on its borders—Japan, Tibet and India—but is there any doubt at all that it’s aiming to replace the United States of America as the world’s leading economy! Pax America to become Pax Sinae? No way! This is obviously a fight between democracy and communism – and any treasonous resister will receive a white feather!

But look, we won’t go to war just yet. Let’s start things happening with a little trade war?

That seems to be our future, unfortunately.

The logic is irresistible, isn’t it?

I’d better get ready to wave my flag.

FIXING A PARADOX

The pandemic has shown how much we rely on the producers and distributors of food and essential supplies, along with other basic services such as health, teaching, cleaning and banking.

We are led to wonder about the enormous disparity between the incomes earned by people in these necessary occupations and the astounding incomes of the rent-grabbers who feed at the top off the financialisation the economy, like bankers, fund managers, mining or other monopoly company executives such as at Microsoft, Apple, Google, Facebook, Amazon, &c.

It’s obvious we’ve not been able to get to grips with those people who create wealth and those who mercilessly extract it.

A switch from taxing productivity, wages and good and services onto the taxing of land and natural resource values would go a long way towards remedying this anomaly and repairing faltering economies.

It would also prove to be sufficient to provide a living wage universal income and to abolish poverty.

The response of big rent-seekers: “No! You too can do this!” may appeal to so-called ‘libertarians’ but it really isn’t good enough.