“Prime Minister, Julia Gillard, men and women of Australia: the United States of America realizes it has pandered to the one per cent by allowing this minority to privatize the economic rents of its people.
As a result, the United States government, too, is in debt to the tune of $15 trillion dollars.
Therefore, to address this untenable situation and remove the 99% from the deep abyss into which it has been consigned, the US will, as of the next session of Congress, move to un-tax labor and capital.
[Great cheering ensues]
Thank you. Having thus freed up the machinery of free enterprise, which had become so hopelessly shackled by the excesses of arbitrarily-applied taxes, we’ll come to see in the clear light of day that we created a false god of financial rent-seeking and excess.
[Cheers of agreement]
I am supremely confident that this essential initiative—which will almost certainly be followed by the economies of the world when they witness the positive results of this action—will herald the introduction of a new golden age of freedom and prosperity for everyone.
[Relieved from their own guilt, the combined sitting of the lower and upper houses of Australia rises to its feet in prolongued clapping and cheering]
My colleague Gavin Putland has produced a brilliant technical analysis justifying most of what I’ve claimed are the benefits to be derived by the community from the public capture of land rent (the so-called land ‘tax’).
The major stumbling block Gavin puts his finger on is whereas a change “in the ‘land tax’ rate requires legislative change and is regarded as politically impossible, a rise in interest rates requires nothing but the executive decision of a central bank that is not answerable to the voters.”
So, yes, Reserve Bank of Australia interest rate policy might similarly choke off the extent of speculative capital gains to be had from real estate ‘investment’—more particularly in the price of land—but the Bank always fails to employ it when it should, namely, during real estate bubbles.
Also, interest rate policy has proven to be a scattergun approach that affects much more than the property market. It doesn’t discriminate.
Those of a technical bent will be interested to visit Gavin’s exposition. On any reading it leads invariably to the same conclusion, though via a quite different route, to that which Ken Henry’s panel of inquiry came in connection with the Australian tax system—that all-in State land taxes are an essential revenue base.
Property lobbyists might care to note that the place of land value capture in financial stability has now been proven mathematically.
I’ve explained previously that privatisation of the public’s rent is the mechanism by which the earnings of the 99% are stolen by banks and other parts of the 1%. I’m confident the public are beginning to awaken to the fact.
However, the current tax regime not only forces people to deliver the land rent – owed equally to all Australians – to the 1%, but, by not capturing our rent for public purposes, the deep sickness of rising land prices tends to increase exponentially – certainly NOT simply because of population increase and zoning controls, but because more and more economic rent has been permitted to be privately expropriated and capitalised further into rocketing land prices.
Oh, there’ll be an adjustment alright, as our incredible level of household debt finally comes home to roost. Like the rest of the world, the mega greedy have run us right out of the effective demand that might keep the economy limping along. They took too much for themselves for too long.
Meanwhile, the fact that increases in Australia’s land prices are at the expense GDP growth is clearly shown in these three charts I’ve updated. The third chart demonstrates that so-called ‘booming’ real estate markets lead and direct the economy into regular recessions – or worse.
That’s how economies are killed.
THE TIMES THEY ARE A-CHANGING!
120 YEARS AGO ….
Here’s how we’re going to bridge the gap between ourselves and you 1% -> How_to_End_Poverty .
Preface to the Centenary Edition of Progress and Poverty, New York, January, 1979
Agnes George de Mille is the granddaughter of Henry George. She is famous in her own right as a choreographer [incl. of Oaklahoma!] and the founder of the Agnes de Mille Heritage Dance Theater, and she is a recipient of the Handel Medallion, New York’s highest award for achievement in the arts. She is the author of eight books.
“WE HAVE REACHED THE BOUNDARIES, AND WE TURN BACK ON OURSELVES AND DEVOUR”
– Agnes George de Mille
A hundred years ago, a young unknown printer in San Francisco wrote a book he called Progress and Poverty. He wrote after his daily working hours, in the only leisure open to him for writing. He had no real training in political economy. Indeed he had stopped schooling in the seventh grade in his native Philadelphia, and shipped before the mast as a cabin boy, making a complete voyage around the world.
Three years later, he was halfway through a second voyage as able seaman when he left the ship in San Francisco and went to work as a journeyman printer. After that he took whatever honest job came to hand. All he knew of economics were the basic rules of Adam Smith, David Ricardo, and other economists, and the new philosophies of Herbert Spencer and John Stuart Mill, much of which he gleaned from reading in public libraries and from his own painstakingly amassed library. Marx was yet to be translated into English.
George was endowed for his job. He was curious and he was alertly attentive to all that went on around him. He had that rarest of all attributes in the scholar and historian – that gift without which all education is useless. He had mother wit. He read what he needed to read, and he understood what he read. What is more, he saw what was before his eyes, exactly, with the clear vision of an artist and the appraisal of a scientist. And he was fortunate. He lived and worked in a rapidly developing society in which his environment changed daily.
George had the unique opportunity of studying the formation of a civilization – the change of an encampment into a thriving metropolis. He saw a city of tents and mud change into a fine town of paved streets and decent housing, with tramways and buses. And as he saw the beginning of wealth, he noted the first appearance of pauperism. He saw the coming of the first beggars the West had ever known in its entire history. He saw degradation forming as he saw the advent of leisure and affluence. It was his personal characteristic that he felt compelled to discover why they arose concurrently.
The result of his inquiry, Progress and Poverty, is written simply, but so beautifully that it has been compared to the very greatest works of the English language. Indeed, there are pages that cannot be bettered for eloquence, for sparkling imagery, and for sound – that lovely poetic sound of the English language beautifully spoken. He always had this superb gift. His sea-log at fourteen compares with the style of Joseph Conrad.
Because he was totally unknown, no one would print his book. And so he and his friends, also printers, set the type themselves and ran off an author’s edition which eventually found its way into the hands of a New York publisher, D Appleton & Co. An English edition soon followed which aroused enormous interest. Alfred Russel Wallace, the English scientist and writer, pronounced it “the most remarkable and important book of’ the present century.” It was not long before George was known internationally.
During his lifetime, he became the third most famous man in the United States, only surpassed in public acclaim by Thomas Edison and Mark Twain. George was translated into almost every language that knew print, and some of the greatest, most influential thinkers of his time paid tribute.
Leo Tolstoy’s appreciation stressed the logic of George’s exposition: “The chief weapon against the teaching of Henry George was that which is always used against irrefutable and self-evident truths. This method, which is still being applied in relation to George, was that of hushing up …. People do not argue with the teaching of George, they simply do not know it….”
John Dewey fervently stressed the originality of George’s system of ideas, stating that, “Henry George is one of a small number of definitely original social philosophers that the world has produced.” In another appreciation Dewey said that “It would require less than the fingers of the two hands to enumerate those who, from Plato down, rank with Henry George among the world’s social philosophers.”
And Bernard Shaw, in a letter to my mother, Anna George, years later wrote, “Your father found me a literary dilettante and militant rationalist in religion, and a barren rascal at that. By turning my mind to economics he made a man of me….”
Inevitably he was reviled as well as idolized. The men who believed in what he advocated called themselves disciples, and they were in fact nothing less: working to the death, proclaiming, advocating, haranguing, and proselytizing the idea, and even, when lacking inspired leadership, becoming fanatically foolish so that the movement which touched greatness began to founder. It was not implemented by blood, as was communism, and so was not forced on people’s attention. Shortly after George’s death, it dropped out of the political field. Once a badge of honor, the title, “Single Taxer,” came into general disuse.
Except in Alberta (the richest and most prosperous province of Canada) and in Australia and New Zealand, his plan of social action has been neglected while those of Marx, Keynes, Galbraith and Friedman have won great attention, and Marx’s has been given partial implementation, for a time, at least, in large areas of the globe.
But nothing that has been tried satisfies. We, the people, the whole people, are locked in a death grapple and nothing our leaders offer, or are willing to offer, mitigates our troubles. George said, “The people must think because the people alone can act.”
We have reached the deplorable circumstance where in large measure a very powerful few are in possession of the earth’s resources, the land and its riches and all the franchises and other privileges that yield a return. These monopolistic positions are kept by a handful of men who are maintained virtually without taxation; they are immune to the demands made on others.
The very poor, who have nothing, are the object of compulsory charity. And the rest – the workers, the middle-class, the backbone of the country – are made to support the lot by their labor. They are made to pay for the men in possession who are, in effect, their rulers, and for the paupers who are denied the opportunity and dignity of earning their own living. Forcing one group to pay for all amounts to tyranny.
We are taxed at every point of our lives, on everything we earn, on everything we save, on much that we inherit, on much that we buy at every stage of the manufacture and on the final purchase. The taxes are punishing, crippling, demoralizing. Also they are, to a great extent, unnecessary.
It was rage at unjust and proliferating taxation that drove the people of California to revolt. In June, 1978, they voted overwhelmingly to adopt Proposition 13, an amendment to the state constitution which would greatly diminish all taxes on real property – on land, houses, gardens, farms, buildings. This was neither a thoughtful nor a searching reform, since the improvements and the site and all natural resources were lumped together, and income and sales tax rates were not separated. Under the so-called reform, the great landholdings remained intact, and therefore the great profiteering, untouched.
The voters believed that there was too much wastage in government, too much public welfare, and that they could do very well with a great deal less of both. The results so far have not been what was intended. State funds will undoubtedly be commandeered to bail out local treasuries and probably the state funding of schools, universities, libraries, symphony orchestras, museums and archives will be drastically reduced while the bureaucracy and welfare remain relatively untouched. But there has been an amount of serious thinking and if this change does not work the miracles that people hope (and it won’t), at least it will cause them to study the problems thoughtfully. The electorate is, at long last, beginning to ask questions. In this sense, the adventure has been of value.
But our system, in which state and federal taxes are interlocked, is deeply entrenched and hard to correct. Moreover, it survives because it is based on bewilderment; it is maintained in a manner so bizarre and intricate that it is impossible for the ordinary citizen to know what he owes his government except with highly paid help.
Contrary to basic American law which presupposes innocence until guilt is proven, the government now takes for granted that every American citizen is lying and cheating at every turn and he must pay an advocate to persuade the duly elected authority that he is neither a liar nor cheat. It comes to this: we support a large section of our government (the Internal Revenue Service) to prove that we are breaking our own laws. And we support a large profession (tax lawyers) to protect us from our own employees. College courses are given to explain the tax forms which would otherwise be quite unintelligible.
All this is galling and destructive, but it is still, in a measure, superficial. The great sinister fact, the one that we must live with, is that we are yielding up sovereignty. The nation is no longer comprised of the thirteen original states, nor of the thirty-seven younger sister states, but of the real powers: the cartels, the corporations. Owning the bulk of our productive resources, they are the issue of that concentration of ownership that George saw evolving, and warned against.
These multinationals are not American any more. Transcending nations, they serve not their country’s interests, but their own. They manipulate our tax policies to help themselves. They determine our statecraft. They are autonomous. They do not need to coin money or raise armies. They use ours.
And in opposition rise up the great labor unions. It is war. In the meantime, the bureaucracy, both federal and local, supported by the deadly opposing factions, legislate themselves mounting power never originally intended for our government and exert a ubiquitous influence which can be, and often is, corrupt.
I do not wish to be misunderstood as falling into the trap of the socialists and communists who condemn all privately owned business, all factories, all machinery and organizations for producing wealth. There is nothing wrong with private corporations owning the means of producing wealth, with, as the socialists would say, Capitalism.
All Georgists believe in private enterprise, and in its virtues and incentives to produce at maximum efficiency. It is the insidious linking together of special privilege, the unjust outright private ownership of natural or public resources, monopolies, franchises, that produce unfair domination and autocracy. The means of producing wealth differ at the root, some is thieved from the people and some is honestly earned. George differentiated; Marx did not. The consequences of our failure to discern lie at the heart of our trouble.
This clown civilization is ours. We have achieved it out of the hopeful agrarian society that flourished in the eighteenth century, out of a new government we had every right to believe was founded on reasonableness, wisdom and justice. We were not compelled to come to this. We knew neither king nor conqueror. We chose this of our own free will, in our own free democracy, with all the means to legislate intelligently readily at hand. We chose this because we insisted on following the worn-out European grooves, because it suited a few people to have us do so. They counted on our mental indolence and we freely and obediently conformed. We chose not to think.
Our government, alas, was predicated for its effectiveness in expansion on free land. Now there is no more free land, and the flaw in the great plan grows evident. We have reached the boundaries and we turn back on ourselves and devour.
Henry George was a lucid voice, direct and bold, that pointed out basic truths that cut through the confusion which developed like rot. Each age has known such diseases and each age has gone down for lack of understanding. It is not valid to say that our times are more complex than ages past and therefore the solution must be more complex. The problems are, on the whole, the same. The fact that we now have electricity and computers does not in any way controvert the fact that we can succumb to the injustices that toppled Rome.
To avert such a calamity, to eliminate involuntary poverty and unemployment, and to enable each individual to attain his maximum potential, George wrote this extraordinary treatise a hundred years ago. His ideas stand: he who makes should have; he who saves should enjoy, what the community produces belongs to the community for communal uses; and God’s earth, all of it, is the right of the people who inhabit the earth. In the words of Thomas Jefferson, “The earth belongs in usufruct to the living.”
This is simple and this is unanswerable. The ramifications may not be simple but they do not alter the fundamental logic.
There never has been a time in our history when we have needed so sorely to hear good sense, to learn to define terms exactly, to draw reasonable conclusions. We needs must, or perish. As George said, “The truth that I have tried to make clear will not find easy acceptance. If that could be, it would have been accepted long ago. If that could be, it would never have been obscured.”
We are on the brink. It is possible to have another Dark Ages. But in George there is a voice of hope.
Alan Joyce’s lockout of Qantas staff last weekend bore out my recent fulminations in The Third Way: Why Businesses and Unions are Both Wrong, that IR trouble is about to break out in a big way.
Wage and salary earners continue to lose ground in an increasingly difficult economy, but employers’ margins are feeling the pinch, too. How is the impasse to be resolved?
In the overly simplistic Labour v. Capital model we practise, Alan Joyce considers he has no choice but to chase cheaper labour for Qantas in Asia if he is to resurrect the international fortunes of the airline: he must put an end to the unions slowly finishing off what increasingly resembles a carcass.
Naturally, the unions disagree. They claim Joyce and the company have overreacted to their campaign for wage justice and the need to maintain Qantas employment in Australia.
So, IR is reduced, as always, to cheap labour v. wage justice.
However, where the usual resolution of this situation is for companies simply to go offshore, let me proffer an infinitely better solution.
It is not only wages that are cheaper across Asia and South-East Asia. The prices of their products and services are cheaper because their taxation and land inputs are also vastly less than ours. We not only fine labour and capital more for producing, but our small population of only 23 million souls has the dearest land in the world, therefore, the dearest land inputs in our cost of production.
How may Australia reduce its land and tax inputs in order to become more cost competitive?
For starters, we could look to the findings of Ken Henry’s inquiry into our incredibly pernicious tax regime. We should abolish all the taxes he recommends should be abolished, and put greater emphasis on capturing the economic rents of our land and natural resources as his panel advised.
The chart below clearly shows that labour and capital should NOT be fighting each other for what is left of the returns to labour and capital after the taxman and the rentier class have had their way with us. Wage earners and employers have common cause in reducing their taxation by abolishing as many taxes as practicable, as recommended by Ken Henry, and replacing these with the publicly-generated land rents currently captured by banks and other rent-seekers.
Interestingly, the same solution was once applied by Sir Thomas Stamford Raffles in what is now known as Indonesia. Raffles went on to found Singapore on the same principles.
Hey, Qantas, this form of IR works! Hey, labour, this form of IR works! Hey, capital, this form of IR works!
In fact, the only real stumbling blocks are (a) politicians and (b) rent-seekers. Do we have the wit and energy to overcome them, if we want workable revenue and IR systems? Probably not?
C’mon guys! Let’s pull our fingers out and implement the Henry Review! The times call for it as an essential reform!
1. Australia has the most profitable banks in the world – because we have the highest land prices in the world.
2. Australia manufactures less and less, because our taxes on productivity and our exceptionally high land prices (the latter of which are about to self-correct) give all the wrong signals.
3. Despite our politicians and rent-seekers, we CAN do something about this incredible corruption and stupidity.
This site will help you, mate!