DOWN THE GARDEN PATH

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Taxation policy has gone backwards since the 1920s in the USA and a little later in Australia. The transition was from taxing unearned land values to far greater emphasis on the taxing of earned incomes.

How was this obviously detrimental change able to be accomplished?

It was done by the popularisation of two lies.

The first was that there is no significant difference between the earned return to man-made capital and the unearned income flowing to land titles. The late great Mason Gaffney documented John Bates Clark to have been the main proponent of this fantasy. JB Clark had been given a job to do: to lay waste to the popular ideas of Henry George. Clark’s errant nonsense was quickly taken up in academia, mainly because George had no formal qualification in economics. However, it took troubled times: WWI in the USA, and WWII in Australia, for governments to be able to sell this mess of pottage to their citizens. And, oh yes, it was “a temporary measure”!

The second lie was that there is now insufficient rent for capitalism to tax land values. From John Locke to Mason Gaffney, it has been understood that all taxes come out of rent (ATCOR) – so this was no small fib. Nonetheless, even though a Prosper Australia study showed economic rent to be 50% of the economy, economists are still to be found who propose a miserably tiny figure for rent. Here are six:-


The percentage [of property rent in the economy] has dropped to well under one percent today”, New Ideas from Dead Economists: an introduction to modern economic thought, Todd G Buchholz, Plume, 2007, p.86.

But by 2000 urban land rents represented only four percent of national income”, A Farewell to Alms, Gregory Clark, Princeton University Press, 2007, p.198.

Rent is one percent of the US income in 2004”, Economics, Paul Krugman and Robin Wells, Worth Publishers, 2006, p.283.

Rental income was 4.7 billion, or 0.079% of GDP in 1992”, Economics (Third Edition), Karl Case and Ray Fair, Prentice Hall, 1994, p.559.

Rental income is $7.9 billion of a total GNP of $5,234 billion, or 1.5 percent”, Economics: Principles and Policy, Fifth Edition, William J Baumol and Alan S Blinder, Harcourt Brace, 1991, p.137.

… land rent forms such a small percentage of national income: that 2% is nothing compared to the present tax percentages which is around 30”, Income Distribution, Jan Pen, Pelican, 1974, p.210.

The study of economics continues to spout such nonsense, seemingly for much the same reason of ‘austerity’ to which Ronald Reagan had fled in his first inauguration address: “In this present crisis, government is not the solution to our problems; government is the problem.”

Governments as ‘different’ as those of Margaret Thatcher in Britain and Bob Hawke and Paul Keating in Australia accepted the premise that government had become too costly. Prime Minister Keating believed that pensions were going to become unaffordable in Australia, so it was necessary to set up private superannuation funds in order to reduce government retirement income expenditures. That this would act to reduce the cost of wages, already held down by a wages accord with the unions, was all to the good. Business would do well out of such ‘reforms’ and save the country from ‘big government’.

People have now come to see these Ayn Randian ‘reforms’ as misguided, that there is indeed a positive role for government, and that its spending can actually provide the private sector with economic stimulus.

It went unnoticed, however, that the taxing of earned incomes and under-taxing of land values shifted the scales to such an extent that people found they’re able to create more money for themselves by inflating land prices than by working. A burgeoning parade of property touts makes a pretty good case to the uninitiated to this effect .

Unfortunately, we’re about to pay a big price for all that, and for the lies that have sent us down this socio-economically devastating path. No doubt, however, we’re going to be told it was COVID-19 that brought about the financial catastrophe. It certainly didn’t help things, but for how long will we avoid taking the cure for pumping up totally extractive land prices? Especially when unlike capital, land has zero cost of production.

OZ RECESSION: OFFICIAL

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Thanks for telling me what I knew in January 2019, Prime Minister Morrison. Australia is in recession. Yes, Covid-19 has exacerbated it, but it was on the way, anyhow, with the bursting of the land price bubble in 2018.

That’s because you, Mr Morrison, and the Leader of the Opposition, Mr Albanese, our political parties in general, are too timorous to call out Australia’s rent-seeking in escalating land prices. Our first peoples understand that land rent is common property, not private property.

Now you’re stuck with the BS that Australia must issue bonds to pay for your ‘pandemic’ recession. The government could simply have spent the job-keeper and job-seeker money into existence. There’s a far better way of supporting people and businesses, too: a living wage universal basic income. That’s if you have the guts, and also to stop taxing earned incomes and goods and services, and instead start taxing land values.

But you don’t have the guts to educate people to these economic realities. Here they are in simple words you might understand. Not interested? Thought not!

It’s ‘too difficult’ for any party to do the right thing. “We’d get slaughtered at the next election, so we’ve got to keep support banking and other monopoly interests, at least until we have the financial depression that they’ve been busy creating!”

HEY, QANDA!

Is this difficult to imagine?

If a true economics were able to be taught in schools, a whole new world becomes possible.

A world in which publicly-generated land rents are no longer able to be privatised by land holders, banking and monopolists.

A world in which earned incomes are no longer fined by taxation.

A world in which a universal basic income is practicable, distributed as a citizens’ dividend from the economy’s net surplus.

A world where the crime of poverty is abolished.

A world in which humanity would be able to blossom, where people, properly educated, could choose either to employ themselves using their own talents, or to work in businesses freed of monopoly interests because they pay the formerly expropriated economic rents that were aided and abetted a pernicious taxation regime.

A world in which there is no further ‘wage slavery’. Is that even possible?

A world of true economics with no rent seeking, that generates wealth and freedom. An economy of abundance.

You may say that I’m a dreamer …….

LIVING IN THE GREAT RETROGRESSION …..

…. CAN IT BE ENDED?

The JJ Wallis chart (with my comments inserted), doesn’t figure in the late Mason’s Gaffney’s magnificent account of John Bates Clark’s successful efforts to divert the study of economics away from the Henry George conclusion that if society is to progress, the rent of ‘land’ (i.e. all natural resources) must not be treated as private property. Real freedom required cheap access to land for all upon the payment of its rent.

The chart is enlightening, however. We tend to consider that we always progress socially and economically with the progression of time. That’s not so. In fact, even the humble labourer had cheaper access to land and to greater disposable income in 15th century England than most people have today!

We may establish JB Clark’s re-direction of the study of economics as being extremely successful by asking anyone ‘Have you ever heard of Henry George?’ The answer will almost certainly be ‘No’, even though from the 1880s to 1920 George’s ideas were on everybody’s lips. Today, Karl Marx is by far the better known personality.

The world is realising only now that having the latest television, motor vehicle or home, doesn’t necessarily signify progress when these are set against the measure of levels of private debt to which the vast majority of people in the developed world are committed. Poverty increases apace.

What’s happening?

Like our parents and grandparents, we’re living through the great retrogression. The economic rents owed equally to everyone, continue to be expropriated by the 0.1%. To this, high tech and social media are oblivious. Education has nothing to say on the subject, because economics remains in the hands of neoclassical and neoliberal economists. The number of challenging heterodox economists is pitifully small.

The question arises, for how long will this Great Retrogression continue? Will we come out the other side of the impending financial depression, as we did after the 1930s depression and WWII, failing to grasp the point that land rent, being common property, must not be privatised if people are to be freed from paying high prices and impossible levels of debt for access to land? First nations people have it right: Land is not a commodity.

CENTRAL BANKS GO WITH THE SPECULATIVE FLOW

Capitalism reached another of its blind spots in 2007. It had pumped up a massive real estate bubble; basically a bubble in land prices.  And that’s peculiar, because land has no cost of production, yet it costs so much. Maybe that’s because homes are no longer a place in which to live, but a commodity in which we may ‘invest’, or speculate?

When the land bubble burst in the USA in 2008, crashing the economy, it was the banks which (with a couple of exceptions) were bailed out: not the people. Problem seemed to be that the population wasn’t “too big to fail”. The federal reserve and government understanding was that whereas the people of America didn’t matter, banking most certainly did matter.

“Occupy Wall Street” protesters complained, but they didn’t see the need to tax land values if they were to repair the incredibly indebted situation of most Americans. The few who did know, didn’t realise land income may be legally taxed in the USA at the federal level. It used to be done pretty well at local and state government levels, until the ‘temporary’ tax measures of the Great Depression took hold.

This had still been ‘capitalism’, before it was permitted to morph into assisting rent-seekers at the expense of workers. Capitalism’s ills were worsened in 1971 as US Vietnam War debt forced President Nixon to free the Federal Reserve from the gold standard. Land price speculation became rife. With the support of world governments, capitalism had morphed into rentierism, pure and simple.

In Australia in 2008, the Rudd government was fortunate enough to have been sufficiently behind the curve to do as Hank Paulson had suggested to Wayne Swan. The government pumped more than $50 billion into the economy to keep land prices ‘up there’, and was ‘successful’ in doing so. That permitted the Australian real estate bubble to continue apace, virtually unimpeded, until 2017. Rentierism had also come to rule in Australia.

Meanwhile, although it was bruited about that the American economy had ‘recovered’, all that really recovered were share and real estate markets, big tech, banking, and escalated private debt. With no compunction, the Federal Reserve’s quantitative easing has fostered what used to be the previously criminally corrupt activity of public companies buying back their own shares, now with virtually cost-free money.

So here we are now at the ‘mid-term’ recession: that is, within the 18-year real estate bubble cycle: viz, 1954-1972-1990-2008-2026.

With the Covid-19 virus now overlying the recession, the question becomes: What sort of genuine world financial recovery can we really expect to have, before the depressionary crunch in 2026, if central banks keep asset markets inflated, instead of governments looking after the interests of their people, with such positive actions as a living wage universal basic income, complemented by taxing publicly-generated land incomes, in order let asset prices finally deflate?

Things ain’t looking too good in this respect, because governments and central banks continue apace with speculative priorities favouring banking, real estate and monopolies.

In this mad scenario, people don’t matter.