The times they are a changing, but what’s the genesis of the turmoil that now confronts us at every turn? Some might even call it an economic depression. Book after book offers fantastic intelligence on the subject, but virtually all fail to comprehend, at bottom, the trouble is simply a variation on a longstanding theme of which we had biblical warning. Empires collapsed and revolutions occurred when access to land was denied the hoi polloi and it became only the preserve of the wealthy.
I’ve derived intriguing insights over the years from Englishman Sir William Petty who fathered economics with his understanding of economic rent and the national accounts, long before Adam Smith and David Ricardo appeared on the scene; from Russian economist Nikolai Kondratieff and his extensive empirical studies of ‘long waves’; and, from the incredible wisdom of the American social philosopher/economist Henry George.
Kondratieff demonstrated a series of long waves in prices in France, Germany, the UK and the USA between the two economic depressions from 1789 to the third he saw was about to head into a trough from the time he wrote in 1922. Each featured an economically buoyant first half cycle followed by a slowly-deflating second half. On the other hand, using a simple distributional formula, Henry George showed land prices and taxation were the culprits in fashioning recessions and “industrial depressions”.
Georgist experts have gathered together for a new book edited by Fred Harrison to honour the indefatigable Mason Gaffney, and to offer suggestions for managing the incredible array of challenges we see about us today. For what it’s worth from a Kondratieff fan, I’d say the social fracture has been relentlessly widening since the peak of the fourth K-Wave in 1972 whilst, like the slowly-boiled idiomatic frog, we were diverted by political personalities and mainstream media fripperies; although I do consider the social fabric has been torn for the same fundamental reasons as evinced by the knowledgeable contributors to Rent Unmasked:-
The sophisticated solution is to transfer taxes off earned incomes and trade and raise revenue from rents. One immediate consequence is the removal of the financial incentives that contribute directly to the destruction of nature. A nuanced system of public finance encourages behaviour that includes: leaving fossil fuels in the ground, reducing farming on marginal habitats, conserving fresh water and allowing nature to bury carbon in the ground.
– Peter Smith, Rent Unmasked How to Save the Global Economy and Build a Sustainable Future, Essays in Honour of Mason Gaffney, edited by Fred Harrison, Shepheard-Walwyn (Publishers) Ltd., London 2016, Cries of the Wild, p.243
Disappointment with the transformation in Russia and China is based on outcomes ranging from the eruption of the billionaire oligarch class to the extensive poverty in both countries, and the undemocratic power exercised by authoritarian governments. All the socially significant symptoms may be traced back to the misappropriation of socially-created rents. That record provides the guidelines for the policy reforms that would empower Western democracies to fulfil the goals that are formalised in their social contracts.
– Fred Harrison, Op. Cit., Beyond Socialism: Science and the Culture of Society, p.17
The greatest heterodox contribution of Gaffney was his delving into the history of economic thought to uncover the dark side of the history of neoclassical economics. The Corruption of Economics revealed the deliberate and successful endeavour by landed interests in the USA to deflect the land-tax movement sparked by Henry George. The best way to stop the movement to tax land value was to change economics itself, so that LVT would lack an academic imprimatur. …
…. Piketty’s empirical claims have been rebutted by, among others, Matthew Roglie (2015), who finds that the increase in financial wealth has been in land value, especially in housing, as ‘the non-housing capital share shows no clear trend’ (p.17). He adds, ‘since the higher cost of housing is mainly due to higher residential land values, rather than elevated construction costs for the structures themselves, it has made a particularly large contribution to net capital income.’ (p.18)
– Fred E Foldvary, Op. Cit., Shifting the Landscape: Mason Gaffney as Ultimate Heterodox, pp.89, 99.
Citizens of the modern polity are to be forgiven if they seem perplexed by the decisions and financial guidance routinely served up by their governments and institutions. ….
…. Currency devaluation is also another way to financially repress most of the population. Today, many of the world’s free floating fiat currencies are in a downward death spiral. Taxation reduces the base upon which it is levied. Economists call this deadweight loss. When governments tax labour income, or business net income, or individual consumption, the less you will have of these things. What less takes many forms, including distorted business decisions, inefficient allocation of resources, and the lawlessness of underground economies.
– Francis K Peddle, Op. Cit., Accounting for the Common Good, pp. 105-6
The thirteen contributors are to be congratulated on excellent contributions to the economic debate. One can only hope they will help blow the whistle on an economics concocted by the 0.1% to keep people from realising that real estate bubbles reflect inadequate capture of publicly-generated land rent; and that, as these bubbles grow larger and larger as they burst into each recession, they will eventually form a super bubble which must burst into an economic depression such as the world is now facing.