On the Public Banking Report, co-host Walt McRee discusses the location and contents of every community’s “treasure chest” contained in its Comprehensive Annual Financial Reports (CAFRs), with Scott Baker, an expert at evaluating how to determine how much is in it and how it can be used to dramatically change local economic prospects.
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(Reprinted with minor formatting changes and updates from the World Economics Association (WEA) Conferences, 2013, Sept-Oct 2012: http://peemconference2013.worldeconomicsassociation.org/?paper=a-brief-history-of-american-paper-money-with-emphasis-on-georgist-perspectives-scott-baker)
Much has been written about the nature of money, but almost all of it treats money as if it was synonymous with debt, i.e. as debt-money. However, there exists a class of sovereign money, largely unknown in our time, but prevalent in large quantities in Henry George’s time (1839 – 1897), which was written about, appreciated by a money-starved public, and even used as the foundational issue for a political party, the Greenback Party. The constitution and precedence in the Legal Tender cases of Henry George’s time, and beyond, allows for a return to debt-free money.
The Role of Government in Money Creation
Government can, does, and has, created money without debt. It does this currently every time it produces physical coins, and has done so since 1792, under the original coinage act.1 Although the original coinage act allowed for exact convertibility to gold, silver, and copper,2 the conversion amounts were changed, and eventually abandoned altogether except for Gold and Silver Eagle coins.3 Today, and in Henry George’s time, coins could be produced without fixed convertibility rates established by the government (this is quite apart from a private market in precious metals, essentially allowing consumers to “buy” precious metals with coins and other monies). The same option for producing money without a convertibility option exists for paper money.
Henry George, writing in The Standard, (December 1889), during the height of the Greenback era, said4 (emphasis added):
The constitutional power to issue money comes from the following clauses of the constitution:
Sec. 8.-The congress shall have power:
To borrow money on the credit of the United States. To coin money, regulate the value thereof, and of foreign coin, and fix the standard of weights and measures.
As to the nature of money…Gold and silver are not of themselves money, nor yet can money be made by legislative fiat. What makes anything money is the common consent to receive it. Where this exists without it, no intrinsic value is needed, Where this does not exist, governments may stamp and issue and fiat in vain. The history of our own governments, as the history of all governments, proves this….
…gold and silver, and in a less degree, copper, do possess certain natural qualities of permanence, portability and divisibility which peculiarly fit them for use as money so long as intrinsic value is a necessary quality, and which still give to the first of these metals something of the character of an international money as a standard of value and in the settlement of balances. But where there is a credit and confidence behind it sufficiently stable and wide, paper becomes the most convenient and least expensive material out of which money can be made. … The general government should be the only issuer of money, both for the general convenience and the protection (in the true sense of the term) of those who are most liable to have inferior money passed upon them, and because the issuing of credit money for general circulation is a valuable privilege, which ought to be shared by the whole people and not suffered to enrich a few.
We have at the present time in the United States nine kinds of money in circulation. Copper coins, nickel coins, silver coins, gold coins, silver notes, gold notes, national bank notes and direct treasury notes, or greenbacks. Of these nine kinds of money, only one kind, the gold coins, have an intrinsic value equal to their current value. But this one kind of money, which alone has intrinsic value equal to its current value, is not at all preferred by the people on that account. On the contrary, over the far greater part of the United States … silver notes, national bank notes, or even greenbacks, are preferred to gold as having an equal current value and being more portable; and all these nine kinds of money, differing greatly in intrinsic value and representative character, circulate interchangeably at par with one another. The induction is irresistible that it is not the intrinsic value of the money, or anything that is pledged for the redemption of the money, or is held by the United States as its representative, but the credit of the government itself which secures the common consent by virtue of which our money circulates. … One uniform currency, consisting of paper and subsidiary coins, the direct issue of the government, and such gold coin as anybody wanted the United States to assay and stamp, would save an enormous sum annually to the people of the United States.
The real thing which gives paper money its validity is not the government stamp, but the common consent and general credit which attend it.
George concluded with a warning:
What the silver men want are two things, or rather there are two classes of silver men, each wanting a separate thing, who are uniting their forces:
1. Those who want the government to buy silver for which it has no need, in the hope that they will get a higher price for their metal.
2. Those who want to depreciate the currency by bringing it to a silver basis. I am opposed to both these projects. But if we must depreciate our currency let us at least do it in the cheapest and most manly fashion, by issuing directly currency enough to do it, without buying hundreds of tons of silver for which we have utterly no use.
George, then, was a fiat and paper money advocate, even going so far as to call for inflation in “manly fashion” by over-producing currency instead of depreciation by tying it to hundreds of tons of silver. In practice, it is the private and Central Banks, acting in the private interest, which have over-produced money, not the government.
Paper money, like other kinds of currency, has a long and complex history in the United States. Paper Notes were in use before and during the Revolution5:
There are two distinct epochs of paper money in America.
The first began in 1690 and ended with the adoption of the U.S. Constitution in 1789. In this first epoch the legislatures of the various colonies (later states) directly issued their own paper money — called bills of credit — to pay for their own governments’ expenses and as mortgage loans to their citizens, who pledged their lands as collateral. This paper money became useful as a circulating medium of exchange for facilitating private trade within the colony/state issuing it. By legal statute and precedent, people could always use their paper money to pay the taxes and mortgage payments owed to the government that had issued that specific paper money, which, in turn, gave that money a local “currency.” There could be as many different paper monies as there were separate colonies and states.
Several colonies – Massachusetts, New Jersey – issued paper money, not redeemable in precious metals.6 Ben Franklin rescued Pennsylvania from depression caused by lack of currency, by issuing state-sanctioned paper money (1723).7
Paper money became so popular that the English Crown banned it in 1764, preventing the colonies from paying debts to creditors in paper money8 despite pleadings from Franklin:
I’ll tell the honorable gentlemen of a revenue that will produce something valuable in America: Make paper money from the colonies, issue it upon loan there, take the interest, and apply it as you think proper.
Both Franklin and economic historian Alexander Del Mar attributed the true cause of the Revolution to the suppression of paper money in the colonies.9 It was this, and not some small tax on tea, or other duties, they say, which led to the Revolution.
During the revolution, the fate of the Continental is well-known from the phrase “not worth a Continental” but under-appreciated is the “Massive British Counterfeiting of the Continentals”10 during the Revolution, debasing the currency greatly. This, combined with the individual States’ own competing issuance of paper money, contributed to tremendous inflation. Later, the constitution under Article 1, section 10, would explicitly prohibit the states from issuing their own forms of money.
The Constitution and the Coinage Clause
“Poor? Look upon his face. What call you rich? Let them coin his nose, let them coin his cheeks.” – William Shakespeare
The meaning of the phrase to “coin Money” (capitalization in the original) in Article 1, Section 8, has been greatly debated, by the “coiners” of the phrase itself, as well as the ratifiers, and in subsequent Legal Tender Cases by the Supreme Court.
These Legal Tender Cases were argued after president Lincoln first issued United States Notes to fund the Civil War ($450 million); a move that was challenged after the war, even by his own then-Secretary of the Treasury, Salmon Chase (later the Chief Justice of the Supreme Court)! Timothy Canova, writing for the Nova Southeastern University Shepard Broad Law Center says11:
This was the nation’s first fiat currency – “United States Notes,” also known as the greenback – which made up about 40 percent of the nation’s money supply during the peak of the Civil War.
Forty percent. That is an extraordinary amount of new currency to introduce in about a year, via three Legal Tender Acts (1862 – 1863), but even though there was short-term inflation, in large part caused by shortages due to the war itself and by concurrent borrowing, over the Greenback’s heyday in the late 19th century, the Greenback became so popular that a political party was formed to insure its future.12
Robert G. Natelson, writing in the Harvard Journal of Law and Public Policy, opens his long and heavily sourced academic paper with the Shakespeare quote above, immediately casting doubt on the popular, but erroneous, interpretation of the constitutional phrase “coin Money” as meaning to “make any Thing but gold and silver Coin a Tender in Payment of Debts…” (capitalization in the original), a phrase which is actually from Article 1, section 10 – the only place gold or silver Coin is mentioned in the constitution. The constitution makes it clear that gold and silver Coins are to be used as payment by the States alone, not the Federal Government. And in fact, there is no precedent for even the States ever having paid their debts in species (gold or silver coin13).
It is clear that, after some rulings, and reversed rulings, but culminating in Legal Tender case Julliard vs. Greenman, (1884) that the Federal Government does have the power, albeit under the borrowing clause of the constitution, to issue paper money.14
From the opening of the court decision15
Congress has the constitutional power to make the Treasury notes of the United States a legal tender in payment of private debts, in time of peace as well as in time of war.
Under the Act of May 31, 1878, c. 146, which enacts that when any United States legal tender notes may be redeemed or received into the Treasury, and shall belong to the United States, they shall be reissued and paid out again, and kept in circulation, notes so reissued are a legal tender….
MR. JUSTICE GRAY delivered the opinion of the Court.
The notes of the United States, tendered in payment of the defendant’s debt to the plaintiff, were originally issued under the Acts of Congress of February 25, 1862, c. 33; July 11, 1862, c. 142, and March 3, 1863, c. 73, passed during the war of the rebellion, and enacting that these notes should “be lawful money and a legal tender in payment of all debts, public and private, within the United States,” except for duties on imports and interest on the public debt. 12 Stat. 345, 532, 709.
The provisions of the earlier acts of Congress, so far as it is necessary for the understanding of the recent statutes to quote them are reenacted in the following provisions of the Revised Statutes:
“SEC. 3579. When any United States notes are returned to the Treasury, they may be reissued, from time to time, as the exigencies of the public interest may require.”
“SEC. 3580. When any United States notes returned to the Treasury are so mutilated or otherwise injured as to be unfit for use, the Secretary of the Treasury is authorized to replace the same with others of the same character and amounts.”
“SEC. 3581. Mutilated United States notes, when replaced according to law, and all other notes which by law are required to be taken up and not reissued, when taken up shall be destroyed in such manner and under such regulations as the Secretary of the Treasury may prescribe.”
“SEC. 3582. The authority given to the Secretary of the Treasury to make any reduction of the currency by retiring and canceling United States notes is suspended.”
“SEC. 3588. United States notes shall be lawful money, and a legal tender in payment of all debts, public and private, within the United States, except for duties on imports and interest on the public debt.”
Natelson further says:
One might have expected an inquiry into whether the phrase “to coin Money” encompassed paper, for an affirmative answer would render the implied-powers arguments of both sides unnecessary. But neither side has made such an inquiry, and both have assumed that the phrase “to coin Money” was limited to metallic tokens. They have so assumed even though the Constitution’s wording and structure should have encouraged investigation. As explained below, ascribing a purely metallic meaning to “coin” creates serious textual difficulties.
These “textual difficulties” might be summed up thusly: The Founders were perfectly capable of saying when, how, and who, should create actual Coins for repayment of debts, and when they used the verb “to coin” they meant to make. They were neither inarticulate, nor “cute,” in coining the phrase “to coin” but were using the frequently used nomenclature of the times, and still, ours. For example, under the Supreme Court’s decisions,16 McCulloch v. Maryland, (1819) and Veazie Bank v. Fenno, (1869), the Supreme Court has affirmed the…
FISCAL AND MONETARY POWERS OF CONGRESS
Coinage, Weights, and Measures
The power “to coin money” and “regulate the value thereof” has been broadly construed to authorize regulation of every phase of the subject of currency. Congress may charter banks and endow them with the right to issue circulating notes, and it may restrain the circulation of notes not issued under its own authority.
In Veazie, the court said17:
It cannot be doubted that under the Constitution the power to provide a circulation of coin is given to Congress. And it is settled by the uniform practice of the government and by repeated decisions, that Congress may constitutionally authorize the emission of bills of credit.
Today, United States Notes can be bought for about twice their face value on eBay. And…
As of June 2011, the U.S. Treasury calculates that $230 million in United States notes are in circulation, and excludes this amount from the statutory debt limit of the United States.18
Options to reissue U.S. Notes have been proposed by both Republicans and Democrats on several occasions, including the current Transportation Secretary when he was in Congress, Ray LaHood.19 LaHood proposed reissuing $360 billion in 1999, roughly 100 times the last authorized amount – $346,681,01620 – of Greenbacks when they were finally phased out in 1996, in order to rebuild transportation infrastructure. From the bill summary21:
H. R. 1452
To create United States money in the form of noninterest bearing credit in accordance with the 1st and 5th clauses of section 8 of Article I of the Constitution of the United States, to provide for noninterest bearing loans of the money so created to State and local governments solely for the purpose of funding capital projects.
It is telling that United States Notes have been excluded from the debt limits and from directly paying down the debt, but in practice, this is a feature, not a bug, of United States Notes, since it allows this form of currency to be put to more productive use. A better, more productive way to inject this new money into the economy would be via public works jobs (we are still living off the great public works produced by FDR). The national debt can, in any case, be paid off indirectly through increased tax revenues resulting from growth and full employment, while the government ends borrowing, forever. It is unusual to be living in an age with virtually all money based upon a single form of currency, Federal Reserve Notes. George listed nine different types of money (see above), and said Greenbacks were among the most popular.
Double entry accounting, an accountant friend of mine assures me, is not a God-given law, or something without which financial accounting cannot function. Indeed, reforming this part of accounting is part of what the N.E.E.D. Act (HR 2990) would accomplish. There is no reason to stick with a system that must produce debt every time it produces money. We can split debt and money. FDR did it to a limited extent. Lincoln did it more thoroughly. Franklin did it conceptually, as did the founders in the constitution. The Mint does it still today with coins.
Henry George recognized the inherent moral superiority of having the government produce money, debt-free, instead of a private banking cartel, or, conversely, of having “wildcat banking”24 where dozens of regional banks and even private businesses like taverns, could produce their own money.25
So, why not split the difference? Have government provide more money when needed, counter-cyclically, and for big, national projects that only government can do, but do it in a way that doesn’t increase the debt.
To counter ever-rising levels of debt, provide full employment, end the economic crisis, decrease the dependency of democratically elected government on the unelected elite banks, reduce corruption, and to create jobs for things that need to be done, Congress should create debt-free United States Notes.
13 This writer has argued elsewhere that gold and silver, when used simply as a store of value, as in gold bars, should be taxed, like other forms of Land, under a Georgist paradigm, since gold and silver are two of very few metals that never rust, degrade or age. The amount of wasted human and natural resources used simply to store gold and silver bullion, plus the under-taxed pollution costs of this intensely polluting industry, makes it something that should be paid for by those who operate it. George said: “We have deliberately substituted a costly currency for a cheap currency; we have deliberately added to the cost of paying off the public debt… We are digging silver out of certain holes in the ground in Nevada and Colorado and poking it down other holes in the ground in Washington, New York, and San Francisco.” (Soc Problems, pg. 168)
Canova, Timothy A., January 1, 2009, Lincoln’s Populist Sovereignty: Public Finance Of, By, and For the People – http://papers.ssrn.com/sol3/papers.cfm?abstract_id=1489439 – Nova Southeastern University Shepard Broad Law Center
Canova, Timothy A., February 5, 2010, Pacific Progressive, Reviving the Economy via Public Transportation – http://www.pacificprogressive.com/2010/02/reviving-the-economy-via-public-transportation.html
Coinage Act of 1792, Wikipedia – http://en.wikipedia.org/wiki/Coinage_Act_of_1792
George, Henry, The Issue of Bimetalism and Money Creation, The Standard, 21 December, 1889, http://www.cooperativeindividualism.org/george-henry_issue-of-bimetalism-and-money-creation-1889.html
Grubb, Farley, March 30 2006 (based on a lecture), Benjamin Franklin And the Birth of a Paper Money Economy – www.philadelphiafed.org/publications/economic-education/ben-franklin-and-paper-money-economy.pdf
Holton, Woody, 2008, “Unruly Americans and the origins of the constitution,” Hill and Wang
Johnson, Cliff, January 3, 2012, The American Crisis: To Free a Lender-Owned Nation (Part 1) http://www.opednews.com/articles/The-American-Crisis–To-F-by-Clifford-Johnson-120103-997.html
Justica.com, U.S. Supreme Court Center, Legal Tender Cases, Case 110 U.S. 421 (1884), https://supreme.justia.com/cases/federal/us/110/421/case.html
Meaning and origin of the phrase “to coin” http://dictionary.reference.com/browse/coin
Natalson, Robert G., The Coinage Clause in the Constitution, The Kettle Pond Institute for Debt-Free Money, http://www.economicstability.org/history/the-coinage-clause-in-the-constitution
The Greenback Party, Wikipedia – http://en.wikipedia.org/wiki/Greenback_Party
“The Declaration of Independence and the United States Constitution,” Georgetown University Press, 2003, Note: capitalizations are as provided in the original constitution
United States Note, Wikipedia – http://en.wikipedia.org/wiki/United_States_Note
United States Supreme Court, LEGAL TENDER CASES, 110 U.S. 421 March 3, 1884, JUILLIARD v. GREENMAN, Findlaw.com, http://laws.findlaw.com/us/110/421.html
United States Supreme Court, VEAZIE BANK v. FENNO, 75 U.S. 533 (1869), Findlaw.com http://caselaw.lp.findlaw.com/scripts/getcase.pl?navby=case&court=us&vol=75&page=533
Zarlenga, Stephen, Henry George’s concept of Money and Its Application to 21st Century Monetary Reform — Concluding Remarks: – http://www.progress.org/2003/moneyz05.htm
Zarlenga, Stephen, 2002, “The Lost Science of Money” The American Monetary Institute
President of Common Ground-NYC, a chapter of Georgist Organization Common Ground-USA – http://commonground-usa.net/ ; New York Coordinator for Public Banking Institute – http://publicbankinginstitute.org/ ; Graduate of >12 courses at the Henry George School, NYC & PT instructor – http://henrygeorgeschool.org/ ; Adviser to Plaintiff Cliff Johnson in Johnson v. Treasury, case No. C 11-06684-WHA; Blogger on Political Economy at Huffington Post and Op Ed News.
The right question is “What is the Social Security Multiplier?” The multiplier measures how much the national income goes up, or gets cut, by a given government expense or policy. By convention, if the multiplier is <1, that means the government policy reduces the GDP by the fraction below 1. So, Defense Spending is about .7, meaning that every dollar spent on defense reduces GDP by .3 (30 cents). That’s better than zero because some jobs are created, products made, etc, but it’s a net loss because those things made tend to blow up and have to be remade, over and over.
What is Social Security’s multiplier effect then?
Well, AARP has a study that makes it clear:
“A new report from AARP, in fact, shows that every $1 paid out by Social Security generates, in turn, about $2 of total output for the U.S. economy — or nearly $1.4 trillion in 2012.”
Read the rest here: http://blog.aarp.org/2013/10/01/social-securitys-one-two-punch/
So, this means that there is a net GAIN for every dollar spent on Social Security and, though this is somewhat controversial, it may be as high as double the input.
Seen that way, we ought to fund SS unless the funding would cost us more than double the amount spent – say, with a 100% interest rate AND a government that did not have the right and ability to “coin” Money. Since the U.S. has essentially an unlimited ability to borrow money, and at rates close to zero – not 100%! – there really is no question that we ought to do that.
This is quite apart from the moral and societal impact of having millions of impoverished seniors that family members — often in their prime earning years — and over-stressed private institutions, from churches to soup kitchens, would struggle to care for. We’ve been there and done that, before we had Social Security. It was mass poverty of seniors, well beyond the ability of the institutions of a hundred years ago, that caused FDR to create Social Security in the first place. The need for Social Security really ought to be beyond debate now. However, for those who still require proof, and who are not so blinded by theo-economic beliefs that nothing will convince them, the National Bureau of Economic Research says:
Elderly poverty in the U.S. decreased dramatically during the twentieth century. Between 1960 and 1995, the official poverty rate of those aged 65 and above fell from 35 percent to 10 percent, and research has documented similarly steep declines dating back to at least 1939. While poverty was once far more prevalent among the elderly than among other age groups, today’s elderly have a poverty rate similar to that of working-age adults and much lower than that of children.
Social Security is often mentioned as a likely contributor to the decline in elderly poverty. Enacted in 1935, the Social Security system experienced rapid benefit growth in the post-WWII era. In fact, there is a striking association between the rise in Social Security expenditures per capita and the decline in elderly poverty, as Figure 1 illustrates (with both series scaled to fit on the same figure).
Social Security works. It does what it was designed to do, and although this was not the concern when it was set up, it actually boosts the national output above what it distributes. It is a win-win-win.
Of course, from an economic standpoint, a separate issue is whether a truly sovereign government ought to borrow its own currency at all. This gets into whether we want to support a growing (in wealth) class of idle rent-seekers, both at home and abroad. At home, the issue becomes whether these institutions that seek to rent our money to us, actually put more back into the economy than they take out. This is the banking sector and institutional bond buyers. Well, though some of these bond buyers are funds that do support pensioners, who, like Social Security recipients, spend more into the economy than they take out, there are more direct ways to do this, like Social Security.
How about this? We stop borrowing our sovereign money, eliminate the deadweight Social Security payroll tax altogether, which is 12.4% (half employee, half employer, typically), and simply fund social security payouts directly with debt-free money. Since we would be now saving money by cutting out bond-buying middlemen and paying interest payments to banks, and since we know seniors’ demand for goods and services produces more national income than it takes out (see above), why not give seniors a raise while we’re at it? The cost of living for that group has consistently outpaced general inflation and payments have not kept up.
While we should never spend all our dollars on any particular group, a dollar spent on seniors seems like a remarkably good deal and should be funded with debt/interest-free sovereign money.
President of the Henry George School and former Fortune 500 President, Andy Mazzone, and I, debated Political Economist Dr. Yanis Varoufakis, on November 9, 2013, in a TV-style multi-screen debate format from the Henry George School.
President of the Henry George School and former Fortune 500 President, Andy Mazzone, and I, debated Political Economist Dr. Yanis Varoufakis, on November 9, 2013, in a TV-style multi-screen debate format from the Henry George School. Dr. Varoufakis came to us from a live feed at the University of Texas at Austin, where he teaches, currently.
The issues were trade (free or not), the changing balance of power and historical agreements, and Henry George and Georgism. One thing we all agreed upon: the world has changed drastically in the post-WWII period, and the old arrangements and agreements no longer work, or even apply. The rise of China especially tilts the major economic power back to where it has historically been throughout most of human history. Reasons are given, and prescriptions for a better, more just, world are given. Here, for the first time is the total collection of all 6 parts of the debate:
Eric Lima is a reporter for Baycurrents.net, an independent newspaper focusing on oceanfront Brooklyn, New York, including Sheepshead Bay, Brighton Beach, and Coney Island. The newspaper is published bi-weekly by Brooklyn Media. It has a readership of about 30,000. Its interactive website, www.baycurrents.net, is continually attracting more visits. Lima interviewed Scott Baker, president of Common Ground-NYC in the Spring of 2011, but the interview was never published in Baycurrents or elsewhere, until now. Herein is a slightly updated version of that interview.
EL : One way to battle climate chaos and the contamination of vital resources is to demand full restitution from polluters by charging an eco-tax. Scott Baker, Novelist and President of Common Ground NYC, discusses in this interview how applying Georgist economic theory is good for the environment. Baker and the NYC Chapter of Common Ground, are a Georgist single tax organization looking to charge for the use and locational value of natural resources and untaxed production in NYC.
Since 1932, the Henry George Institute for Social Science in NYC has taught Georgist economic philiosophy. Henry George was an American writer and political economist who preached that economics could be applied scientifically through a single tax system in his book Progress and Poverty published in 1879. His book was an instant success in Europe and America and is an economics bestseller to this day. In 1886, he ran for mayor of NYC coming in second, and ran again in 1897, but died of a heart attack four days before the election. Henry George is buried at Green-Wood cemetery in Brooklyn.
After his death, institutes were created in the US and Europe teaching his economic theory. Several communities in countries like Hong Kong, Taiwan, Australia, South Africa, South Korea and Altoona, Pennsylvania, here in the United States, now pay only a single tax for the land they occupy, which pays all the community’s bills, and excludes all other taxes such as wages or sales taxes. Some consider George’s Land Value Tax an Eco-tax because it discourages waste.
Columbia University Professor Joseph Stiglitz has praised Georgism saying: “And using natural resource extraction and using land rents as the basis of taxation is an argument that I think makes an awful lot of sense…”
In this interview Baker talks about energy sources, their environmental impacts and how a Georgist tax on land can save our ecosystems.
EL: How does your organizations concept of the “Commons” prevent harmful environmental effects like Fracking, or drilling from taking place in NYC?
SB: Well, our organization’s mission is Tax reform along Georgist lines, but we do believe that the Commons – which includes our water – need to be protected against pollution, or else it will not be available for everyone. Further, in the case of fracking, which uses millions of gallons of fresh water, whatever water is used cannot be used in life-vital functions like drinking or bathing or sanitation. So we would want to charge a high rent for the use of water and its spoilage. At some point, we would say “No” to a process which imperils the drinking supply for 90% of the metropolitan region’s water supply (i.e. the Catskills reservoir).
EL: Can you explain the concept of the “Commons”?
SB: The Commons are what we use in common, literally air, water, land itself, all of these things were created by nature, not by man, so we own them all equally in common. We say everybody has a right to those things. If you use a prime area of land for example, then you should pay for that privilege. Now if you have a productive factory or a building which has a lot of rich tenants then you draw enough money and you can pay for that prime location, but that payment (land tax) should not go to a landlord because he did not create the location, that should kick in and go back to the community. So, the Commons are things that we all share in common and we all have a right to equally.
EL: What is the connection between the concept of the “Commons” and a Bill of Rights for nature?
SB: Anybody who pollutes the air, water or land is polluting the Commons and we should charge for those externalities. A twisted legal theory says that people not polluting should pay the cost of keeping something clean. We say you have a right to clean water, air and land, and anybody who takes that away should pay, and if they take it away too much, they shouldn’t be allowed to do that at all. You shouldn’t be able to poison the earth to the point you can’t breathe or it’s making you sick. Period! That’s poisoning the Commons and poisoning the other people who have a right to clean air.
EL: Does nature have rights?
SB: Do species have rights of their own, or do they have them only because we need them? We’re all part of nature and we have rights, therefore nature itself has to have rights as well by extension. How many rights does nature have that we believe we have? We have to eat and kill to survive. Nevertheless, nature has to live as well. If we just dilute the planet we’re in essence saying only we have a right to survive and nothing else.
EL: Where does your organization’s philosophy originate?
SB: We get our philosophy from Henry George back 132 years ago when he wrote Progress & Poverty. He was the first to coherently organize (and greatly expand upon) the Physiocratic system that land and location have a value. He put (his theory) into a book called Progress and Poverty, which is still the bestselling economics book of all-time. And we put it into practice by promoting various bills that emphasize taking location rent and returning it to the community and un-taxing productive activities such as wages, capital and sales because those are the things that people produce and people have a right to what they produce. So we believe the rent which comes from the community because the number of people and the amenities, commerce and all the hustle that goes on in the city, in fact, belongs to the community. We take that back instead of it going into private hands, so people can produce things. They can build buildings, make cars, they can do all of these things which require labor acting upon the land to create things that satisfy human desires. If we do that, people can produce whatever they want. They won’t be discouraged by taxes. They’ll collect the land rent, which we call land value tax, and return it to the community, for the benefit of the community.
EL: What do you mean you’re taking the rent which comes from the community out of private hands; you mean you’re taking land tax?
SB: We believe in the complete legal right to private property. What we’re talking about is an economic right. It’s an economic right to return to the people that which the people created. If you think about it this way: if a building is in NYC it has one value, if you move that exact building to the middle of Wyoming or Alaska then it has a much lesser value, and the only difference is not the building, but the location. So the location is not something the builder or the landlord produced, it’s from the community itself and all the enhancements that come from living in a bustling urban community. So that location value really belongs to the community. We’re not taking it away; we’re returning it to the community that deserves to have it in the first place.
EL: And how are you returning that value back to the community?
SB: We would take the private collection of rent on the land itself, only the land; not the building and we would return that back to the community.
EL: New York City has some of the highest rents in the country, how are you going to tax the land without taxing the building?
SB: The value of the land is inelastic because people are already being charged as much as they can bear, that’s the market forces. All we’re saying is to reallocate what’s being charged for the land part of it back to the community. Let the landlord keep whatever he makes in his building, and the upkeep, and his maintenance, and improvements of the building. Now what happens in practice when you charge more in land value taxes is the land value price has to go down. So as taxes go up, the price of land goes down, then the land becomes cheaper to buy and more expensive to rent. That would be enough money to run everything the government runs. If we really took all the resource rent (land tax) back for the community, we’d even have some left over for a citizens’ dividend, which should be an inherent right of all human beings.
EL: How does your organization plan on implementing this?
SB: We have four local bills, one of which passed. They basically would inventory and then tax vacant land at a higher rate to encourage developers and owners to develop the land, instead of hoarding it and speculating, hoping the price would go up. We tax that and the price goes down, therefore the developer has an incentive to develop it or do something, rather than pay the tax or to sell it to someone who can. More broadly, we’d like to do something on a national level which would probably be similar to the Articles of Confederation Number (8), which was actually a property tax, except we wouldn’t tax the building. We would only tax the land. That was the original way the founders sought to pay for government services, but it turned out that the property owners, which were most of the founders, decided they didn’t want to pay the tax that other people weren’t paying. Now we have a different situation because everybody either pays rent or owns property, so they can do this on a more equitable basis. We don’t have these vast land owners far and few between.
EL: What about a country like China which has many problems with pollution?
SB: They’re not being charged for their externalities, we would charge them for that. We wouldn’t charge them for their production, in a sense they could produce more efficiently and produce with less pollution. We don’t want to stop them from producing, we like electricity, we like steel, but we don’t like the pollution. Let’s tax the bad things and not the good things.
EL: What would be the consequences of “not” passing a law of the Commons and letting everyone pollute without paying for damage?
SB: I think we see it already because China is choking on pollution. They have to turn to desalination to get water from the ocean. They can’t drink their own rivers and streams. Their air is estimated to take 10 years off the life of each urban dweller. It’s leading to disease and this is an economic cost, as well as a violation of human rights. If people and factory owners paid enough there would be incentives to do something. Some say it’s a job killer, but it’s actually a people saver and an economic saver. New industries will come up, new improvements that will save people’s lives and save money. So electricity, steel, and buildings and so forth”we won’t tax, but pollution we’re going to tax. We’re not going to let you foul the earth. We’ve been treating the earth as if it’s unlimited and it’s not unlimited. There are about 7 billion people on this planet and not only is the population rising, but our resource use is rising geometrically at a much faster rate. Last week the UN projected 10.1 billion people are going to be on the earth by the end of this century and that an area the size of Russia will have to be cultivated just to feed us, it’s questionable if that’s possible to do.
EL: Can you give examples of some pollution externalities?
SB: There are several recent disasters. In Tennessee the coal ponds, these giant slurry ponds that keep all the coal ash, burst out and basically wiped out a neighborhood. This is a danger and we have to make stronger ponds and we have to recycle that ash, which is possible to do, or else those people will have to pay so much to keep that stored that it makes it uneconomical for a coal plan to do that.
EL: How about in NYC?
SB: Well there is a lot of pollution from the cars, and there are high asthma rates. This comes from all the trucks, especially in the poorer neighborhoods.
EL: And how would Common Ground-NYC fix this?
SB: We’re in favor of congestion pricing. We believe in charging the cars coming into the city at the most congested times. Also Meter side parking, so parking spots go up as they are more in demand, and we would charge for pollution controls.
EL: What would you do if you were (re)elected?
SB: We support the phasing in of a single tax which means charging for location and resource values, and un-taxing people’s productivity. For one thing that would simplify the tax code immensely; it would also take away the corrupting influences because you wouldn’t have all these loophole hunting lawyers, accountants and lobbyists. It would be much easier to asses the land, and assess the pollution.
EL: Has that been implemented somewhere else in the US?
SB: We just had it in Altoona, Pennsylvania.
EL: And how has it worked?
SB: It’s driving up the value of the land, because people now have an opportunity to develop things and build buildings without being penalized for developments or improvements, so Altoona as compared to another city like Johnstown, is thriving. Johnstown is not thriving, it’s going under. (Now, critics might rightly claim that we Altoona is not charging enough rent on the land to offset the increased value — that is why the price is going up, despite the land value tax, or “rent”. This needs to be addressed by ongoing assessments that are honest and current.)
EL: How are people being charged for improvements under our current system?
SB: You have a mixed system where you tax everything. You tax the buildings, which discourages building. You tax the land, which may encourage land use but it’s all mixed together. The better the building is”the more you tax that building, so you’re discouraging the best improvements possible. In NYC you have vacant parking lots or buildings that are maybe one story occupied and four stories vacant, that pay very little property tax. There’s no incentive to use those buildings, and there are people homeless who can’t pay those rents. We had a situation on 26th street and Park Ave. where a parking lot was paying one-tenth the property tax of the building next door – a 17-story building. They finally sold that parking lot because the owner got his price. But for years he was paying a tiny property tax and able to pay that just from the activity of the parking lot.
EL: Aren’t there tax incentives for improvements on buildings?
SB: Yeah, the problem is you give the tax incentive to the developer of the property, instead of the rental value of the land going back to the community. So what happens? You’ve already taken away revenue from the city by giving the breaks to the developer, so now you have to make it up somewhere else and that means traditionally taxing the productive activity of the middle class or cutting down on services to the poor. (It is also a subsidy to the developer, which drives the price up not down, making it harder for non-subsidized developers to compete, and lessening the opportunity for everyone. This is exactly the opposite of what we want and what Common Ground proposes.)
EL: In laymen’s terms, what is the productive activity that they’re taxing?
SB: All the things people earn. We tax wages. People pay more, longer into the year. It may take until June to earn enough to pay their taxes. We don’t want to tax wages at all. We don’t want to tax sales. We don’t want to tax actual capital, by capital I mean cars, factories and buildings, actual tangible things; not stocks or bonds, those are forms of money and speculation we think should be taxed. Money is not real wealth. Wealth is tangible things that satisfy human desires that are made from the resources of the earth.
EL: If someone wants to learn more about your organization, what can they do?
SB: They can go on to our website Commongroundnyc.org. Keep an eye out for our meetings. We try to work and get these types of measures passed. (We do other things to raise awareness, for example, we recently sponsored a panel with Dr. Michael Hudson, Dave Kelley — adviser to Dennis Kucinich, and Georgists and Henry George School teacher, Andy Mazzone and Common Ground member Dr. Cay Hehner. To understand our philosophy better,) read George’s Progress and Poverty and come to the Henry George School and take a 10-week course on economics for free, and understand how the single tax works.
EL: Do you have any final thoughts?
SB: We are biased towards our planet, and towards our planet with a certain set of conditions which geologically and over the course of eons is neither guaranteed nor consistent. In the past, and without our interventions, the Earth has been a frozen ice-ball. It has also been so warm that dinosaurs swam in the unfrozen Arctic Ocean. Both were natural. Neither is conducive to civilization as we know it. (We need to encourage conditions which are conducive to human civilization as much as possible, since we now have the power, whether we like it or not, to influence global climate. Georgism is the only fair way to do so).
EL: Thank You Scott Baker, Novelist and President of Common Ground NYC.
Interviewed by Eric Lima, Spring, 2011; updated by Scott Baker 4/11/12
Originally published in Opednews: http://www.opednews.com/Diary/Interview-with-President-o-by-Scott-Baker-120412-486.html and GroundSwell, the newsletter of Common Ground-USA
This is a quick review of the Robert Reich film, Inequality for All, which I saw during a special sponsored screening by Moveon.org last night. This film is, as advertised, the economic equivalent of Al Gore’s “Inconvenient Truth” and just as good and unsettling.
I think many people are already familiar with the fact that inequality has again grown to historic proportions, but Reich’s use of an income graph, superimposed on top of a suspension bridge, with 1928 and 2010 as the two peaks of inequality, may startle even those who have heard the statistics before. Reich also brings out the recent fact (the movie is current up through 2012, at least) that just 400 individuals now “earn” as much as the bottom 150 million Americans, or nearly half the country. Reich was focusing mainly on income inequality. His point would have been driven home even harder had he also included assets, in which case the towers on the “suspension bridge” would be twice as high.Going further, Reich shows, both in anecdotes – some taken from students of his own standing-room only overflow class at Berkeley – and in studies, that our polarization, indeed, even our democracy, is reaching similar breakdown extremes, precisely matching our economic inequality. It is not just our inequality that is at nearly unprecedented levels, but the inverse possibility of social mobility as well. We have, as he points out, less social mobility with 42% of those born into poverty staying there their whole lives, than even England (30%), which still has a royal aristocracy!
I wish Reich hadn’t been so stubbornly non-partisan, lumping together the Tea Party and Occupy movements, as if both were fighting equally for the 99% – a term born solidly out of the Occupy movement, and even ideologically opposed by many in the Tea Parties as one of “whining” and of envy, as several Fox TV and Right-wing politicians put it. Similarly, Reich gives the soft-glove treatment to his life-long friend and former boss, Bill Clinton, whose signoff on the dismantling of Glass-Steagall had as much to do with the gargantuan derivatives explosion, and threatened middle-class destroying IMPLOSION, as anything Ronald Reagan or those more traditionally thought of as “from the Right Wing” did. Reich did not address the role of the big banks in systematically robbing the middle class of everything they produced, as a reason for what he calls the prolonged recovery. But it is no accident that every recovery since deregulation really stepped into high gear since 1980, has been longer and less satisfying than the last. The recoveries are really recoveries for the 1%, not for ordinary workers, who have not seen a raise in over 30 years, as Reich points out.
Reich also did not go far enough in identifying rent-seeking as a particular form of productivity-destroying wealth creation (or really, accumulation), critically distinct from that achieved through entrepreneurship. By failing to distinguish between different types of wealth creation, Reich lends ammunition to those who accuse him of being a re-distributionist, socialist, or even, as Reich cited, somewhat light-heartedly, a “communist.” More recently, the far Right pundit Bill O’Reilly has made this claim again, to which Reich is sending out the following in various third party emails:
“In case you missed it, Bill O’Reilly slammed me on Monday night for mentioning, in a New York Times op-ed, that he called me a “Communist” on his FOX News show.
In that op-ed, I referred to his “Communist” name-calling as an example of the kind of incivility that now passes for political debate in America — of which O’Reilly is a part. O’Reilly took umbrage that I would even bring it up. Apparently he thinks it’s perfectly fine to call me names but offensive for me to criticize him for doing so.
Yet O’Reilly refuses to have me on his show to debate any of this — either his initial charge that I’m a Communist, or his indignation that I mentioned it in last weekend’s op-ed. When he first claimed I was a Communist I challenged him to a debate — a civil debate. He refused. He still refuses. He won’t even debate the topic of my op-ed — the increasing shrillness and divisiveness of Fox News and other media outlets, which are only adding to the vitriol of American politics.
Reich is right to claim, as he does in the movie, that “we are being pulled apart” as a nation. He is too soft-glove about it, however, perhaps due to his inherent optimism.
Several highlights of Reich’s life, both as an agitator, and as a 4′ 10.5″ “little person,” are brought into this partial biopic. Many will be surprised to learn for the first time that Reich suffers from a rare disorder called “Fairbanks disease,” which causes his short stature. His reflections on a bullied youth are both poignant and helpful to understanding his proclivity in standing up for the “little guy” throughout his life. His frustrations in doing so are evident, both during his time in the Clinton cabinet, and afterwards. Reich ultimately wonders if his life’s work has been in vain, even if he has been a failure, but then concludes in an upbeat way that it is his students who will prove the fight worth it, with their idealism, their ability to change their community, even the world.
Some helpful links are provided at the end of the movie – http://inequalityforall.com/ – as has become customary in films like this. At the screening I went to, which was delayed over 40 minutes due to technical difficulties, a Moveon.org volunteer asked specific guests to talk about their experiences, including a fast-food worker making a little more than $8/hour, after 7 years work, trying to unionize, and an adjunct faculty teacher working toward a Phd, not making much more than that, also represented by an attenuated union. The decline of Unions, says Reich, is yet another “suspension bridge” parallel with the rise in inequality.
We have a very long way to go, and lots of work to do. The “pulling apart” that Reich sees, has led to revolutions in other countries, and it is not impossible for this to happen here, though Reich didn’t, or won’t, suggest that. Some of the Occupiers and other protesters, who Reich identifies as having their rights to protest squashed, may believe differently.
In short, a movie well worth seeing. I give it 4 out of 5 stars (the “inequality movement” lacks an appropriate icon to use). It tackles the issues, but pulls its punches at the real and necessary solutions – such as ending rent-seeking by changing the economic and tax incentives, ending the debt-based money system, and even establishing public banks and CAFR reform (the last one challenges the very notion that “we are broke” at all, something which would have strengthened Reich’s case even more).
I met with long-time Finance and Land reporter, Fred Harrison: Research Director of the London-based Land Research Trust, in New York City, a couple of months ago. We talked about the vast wealth inequities allowed by land monopolizers and rent-avoiders like Goldman Sachs.
Goldman Sachs struck a deal with politicians to avoid paying property tax. Subsidized by the small businesses and home owners of New York City, the financiers are enriched, leaving the homeless searching for shelter at night. I argued that it doesn’t make economic sense. Fred Harrison simply calls it cheating.
Whatever you call it, it amounts to billions lost by New York City alone, and trillions worldwide.
A video of our efforts follows:
Expanding outward to the country at large, Georgist economist and Fred Harrison’s sometime collaborator, Mason Gaffney, explains the loss of economic rent further. US Governments could scrap their bad taxes and fund public services out of community-created rents. Another professor of economics, Nicolaus Tideman, calculates that income of the average American family would rise by $6,300. And yet, governments refuse to audit their fiscal performance to disclose the negative impact of political decisions on the economy. This denies citizens the information needed to make informed choices at elections.
For further information on New York City’s particular arrangements that leave working people paying a much higher percentage in property taxes than billionaires, see this slideshow I presented at the Henry George School (video from a second presentation of the same material below)
on similar and even more egregious examples of rent-seeking. I promise, you’ll never think of property taxes the same way again.
<iframe src=”http://www.slideshare.net/slideshow/embed_code/28203125″ width=”427″ height=”356″ frameborder=”0″ marginwidth=”0″ marginheight=”0″ scrolling=”no” style=”border:1px solid #CCC; border-width:1px 1px 0; margin-bottom:5px; max-width: 100%;” allowfullscreen> </iframe> <div style=”margin-bottom:5px”> <strong> <a href=”https://www.slideshare.net/ScottOnTheSpot/case-studies-in-new-york-city-property-development-28203125″ title=”Case studies in new york city property development” target=”_blank”>Case studies in new york city property development</a> </strong> from <strong><a href=”http://www.slideshare.net/ScottOnTheSpot” target=”_blank”>Public Banking Institute & Common Ground-NYC</a></strong> </div>
<iframe src=”http://www.slideshare.net/slideshow/embed_code/28203105″ width=”479″ height=”511″ frameborder=”0″ marginwidth=”0″ marginheight=”0″ scrolling=”no” style=”border:1px solid #CCC; border-width:1px 1px 0; margin-bottom:5px; max-width: 100%;” allowfullscreen> </iframe> <div style=”margin-bottom:5px”> <strong> <a href=”https://www.slideshare.net/ScottOnTheSpot/case-studies-in-new-york-city-property-development” title=”Case studies in new york city property development” target=”_blank”>Case studies in new york city property development</a> </strong> from <strong><a href=”http://www.slideshare.net/ScottOnTheSpot” target=”_blank”>Public Banking Institute & Common Ground-NYC</a></strong> </div>
While focusing on portions and food categories, like meat vs. fruits, it fails to take fully into account the effect of different food (or, food-like) choices on obesity.
Despite what the articles imply, or say outright, about fat consumption from meats, etc., there’s actually no evidence that high protein, i.e. meat, diets per se, cause obesity- just ask any traditional Eskimo or Aboriginal hunter, who tend to be lean and fit. Of course, we don’t have anywhere near the kind of calorie-consuming lifestyle a hunter-gatherer had.We do work longer to get the food we need (or, more precisely, to get everything else), but the hunter-gatherer worked much harder for his or her food.
However, there’s increasing evidence that artificially sweetened/salted foods make us crave more calories than we would if we ate more “normal” food. See, for example, Morgan Spurlock’s movie “Supersize me” (http://www.hulu.com/watch/63283 ) in which Spurlock goes on an all-McDonald’s diet for a month, with both humorous and tragic results.
Besides Big Macs, it’s possible, and probable, that “no one can eat just one” (http://marketingpractice.blogspot.com/2006/04/lays-no-one-can-eat-just-one.html) Lays potato chip (or Oreo cookie, pretzel, 8oz. soda, etc.), but binging on apples or even plain cooked (not fried) chicken is actually pretty hard to do. The Food Manufacturers (and, think for a moment, how strange that phrase ought to sound, but doesn’t anymore, since food became “made” instead of “grown.”) have gotten very good at fooling our pallet into wanting more than our bodies need. The flip side of that is that food-like substances have become calorie-delivery vehicles, not even fully digestible.I once saw one of those pill-cams – http://www.huffingtonpost.com/2012/02/09/ramen-digestion_n_1263825.html – comparing some regular noodles with Romen Noodles after a few hours, then days. The latter was so undigested it was fully recognizable, meaning no nutrients, or very few, were being absorbed. The Romen literally just “sits there” in your stomach, leaving you hungry for more calories, triggering more eating, until…well, you get the idea. So, even though there are not many calories in Romen Noodles, what calories there are, are literally “junk calories.”
Of course, our whole agriculture sector is set up to support a very few monoculture crops, particularly High Fructose Corn Sugar (HFCS) (Thank you, Earl Butts! – http://www.culinate.com/articles/opinion/meeting_king_corn). This is great for John Deere and other high tech, low labor/low land productivity-per-acre farming, and lousy for the national, and increasingly, the international, diet. (I have a couple of cousins who work in both the farming and farming supply industries in Iowa – the corn belt – and they basically tell me it is all but impossible to get off the corn-based farming model due to the complexity of the alternate farming and the debt-based farming model, where this year’s tractor is paid for by the high but simple yield of monoculture using that same tractor/fertilizer input combined with low labor costs).
The truth is, we not only have to work on the end result in diet as the NYC soda ban – parodied by the Daily Show, as shown in the clip on the NBF blog, shows – but on the agriculture policy as well, to encourage more small scale farming, and less vast land-rich, but nutrient-poor, farming. We could start by taxing the land more heavily and the food grown on it (production) less, or not at all. This Georgist tax would have the salutatory effect of encouraging less pollution too, more recycling, including of animal manure for fertilizer and even fuel, and better soil management (even Henry George wrote alarmingly of the loss of top soil in the pre-fertilizer days of 1883 – p. 234, Social Problems). If we untaxed labor as well, in favor of taxing land instead, farmers could hire more help and have a healthier, more diversified farm as well, albeit one on less acres.This would do much more to support the “family farm” than all the political bloviating that substitutes for policy.It would also do more for the healthcare crisis than Obamacare, or any other endgame policy that is too little, too late, and too wrong. We have to get back to the source of our food: the Land.
I saw this movie last night, and also met the Director/Writer/Interviewer Rachel Boynton after the movie. It was very good, balanced, and complex. There’s a potentially Georgist angle, never explored, regarding the resource curse, but it’s more complicated than that, involving culture, poverty – both before and after the oil is drilled – and aspirations of both oil men and of third world countries like Ghana and Nigeria. The Director said afterwards that she does not see the world in terms of villains and heroes, and the film reflects that lack of judgmentalism. One is left wondering how so many things could go wrong with so many people who felt they were trying to do right, but that is due to the underlying economic corruption of the oil resource business, which the film does not seriously challenge, but merely documents. The clear underdogs are the people of Ghana and Nigeria, who have few opportunities outside the oil industry.
The film ends before it’s clear whether the people of Ghana will ultimately see the profits from the oil in their land. In contrast to the Norwegian model, most African nations suffer from the oil curse, where the wealth is not redistributed to the People. A compromise was reached with the impoverished militants to basically pay them off not to destroy oil equipment in Nigeria, but during Q&A, Boynton said the job-training part of the deal was “a joke.”
Presentation on Collecting the Land Rent for NYC
(image by Scott Baker)
I was pleased to be able to present the case for Land Value Taxation to a mixed audience of community leaders, alumni of the Henry George School – which sponsored the event – and other interested students.
This New York City-centric presentation presents real, practical, solutions to the issues of:
- Sustainable Growth
- Job Creation
- Affordable Housing
- Fairness in Taxation
- Urban Sprawl
- Monopoly and Speculation on Land (which leads to booms and busts)
No new revenues needs to be raised if the city captures the Land Rent that really is already part of the Commons.
See the complete presentation here:
The slideshow used in this presentation may be found here, and with comments here.
Alanna is a dedicated activist and colleague in the Georgist community, which will certainly treat her run as very wonderful news, as might the good people of Pennsylvania, once they become aware of her campaign. Her theme of collecting the Land Rent is particularly timely given Pennsylvania’s recent embrace of Fracking, often to the enrichment of the companies doing the Fracking, but to the detriment of its local citizens. How Hartzok handles the multifaceted nature of Fracking will be a test not only of her, but of the Georgist philosophy of sharing the gifts of nature via rent collection as well. I got some indication of her high attention to this issue from a featured debate she arranged and chaired at the Annual Council of Georgist Organizations in Harrisburg, in the summer of 2012. Her views on the rights to the commons may be found in her articles, such as this one: Claiming the Commons, published in the Common Ground-USA newsletter, GroundSwell (Full disclosure: I am president of the local NY-metro Chapter of Common Ground-USA).
The following information was supplied to me by a Georgist source and lightly edited for publication here.
Alanna Hartzok is now officially on the ballot, running for Congress in the 9th district of Pennsylvania. As soon as her campaign website is set up, it will be: http://www.alannaforcongress.com/
Here are quotes from an article in the Daily American, March 11, about Hartzok’s campaign:
Democrat enters the fray in the 9th Congressional District
The 9th Congressional District race appeared to have only three candidates, all Republicans.
But a Franklin County woman quickly put together an effort and turned in enough signatures to appear on the primary ballot.
Alanna Hartzok said she was asked by the Franklin County Democratic chairman if she would run for the Democratic nomination.
This will not be Hartzok’s first run in the 9th District. She ran as the Green Party candidate in the 2001 special election to replace U.S. Rep. Bud Shuster. His son Bill won that race.
Hartzok is the co-director of the Earth Rights Institute, which is described as an organization “working for economic justice and peaceful resolution of conflicts.”
Hartzok said she is in favor of a free and fair economy and fair market rules. She said there is a horrible distribution of wealth in the United States and a collapsing middle class. She is calling for economic democracy.
“The rules and the program go beyond left or right,” she said. “The bird flies on two wings: The right is freedom and the left is fairness. I am in favor of a free, fair economy.”
She said there are ways to take ideas from both the right and the left which could make for a better democracy.
She said the state’s wealth is found in its gifts from nature.
“We have to fairly share the limited gifts of nature,” she said. “People need environmental rules and regulatory rules enforced. We should not eliminate the (Clean Air or Clean Water Act). We need permission from we the people on what resources are extracted from the earth.”
She favors an arrangement similar to the Alaska Permanent Fund, through which funding related to the oil industry is invested and a dividend is paid to the state’s residents. One of the ideas behind the fund was to save money for future generations, which would no longer have oil as a source of revenue.
She said the fund allows people to get their fair share of the profits from the oil resource. She said money could also be put into education.
Although Hartzok does not appear to have a primary opponent, there will be a race on the Republican side of the ticket. U.S. Rep. Bill Shuster, Travis Schooley of Franklin County, and Art Halvorson of Bedford County all turned in signatures by the state deadline.
And Hartzok is not the only Georgist Democrat in a political race this year:
A Democratic candidate for County Council in Maryland, Jim Wildoner, advocates a land user fee approach to property tax reform, and cites the Democratic Freedom Caucus (DFC), a caucus within the Democratic Party, advocating LVT-oriented tax reform, individual liberty, constitutional democracy, and social responsibility.
Wildoner’s campaign website says that he has:
“Proposed an infrastructure user fee (IUF) that would be placed on your property tax bill and be tax deductible.”
His website also says:
“Jim has adopted the DEMOCRATIC FREEDOM CAUCUS platform (http://www.democraticfreedomcaucus.org) because it generally states his political views on promoting social justice, individual liberty, constitutional democracy and fiscal responsibility.”
He has previously served as a Council Member for New Carrollton, from 2003 to 2013, where he has held all positions on the council, and has a degree in Business Management and an MS in Finance.
I was happy to receive an invitation to appear on the popular RT TV show, “Breaking the Set” with Abby Martin, to talk about Geoism/Georgism. The invitation came the night before, and I was originally scheduled to be interviewed remotely in their NYC studio the next evening at 6:00, but a surprise NYC winter snowstorm pushed that up to 3:30pm! Luckily, I don’t have to study Georgism very much any more.
You can see the archived interview, starting about 6:00 minutes in, for about 7:00 minutes.
You can click on the transcript icon if you need the written transcript for some reason, and it is also slated to appear in an upcoming issue of GroundSwell – the official publication of Common Ground USA.
Abby Martin is a quick study and I hope to have a future chance to appear on her show. There are more economic reforms. Maybe next time we can talk about Greenbacks…
They cut about a minute of me talking about our group, Common Ground-NYC’s, local efforts, but it was still a good interview and probably an eye-opener to their global audience. Here is a chance to learn about efforts in NYC to collect the ground rent:
The Source of Prosperity is Under Our Feet: The Land
Why is there so much building in NYC, but so little affordable housing? Why do so many people want to live and work here, yet the market does not meet the demand?
The answer may be literally beneath our feet, in the collective value of the Land. The Land is part of the commons that gets its value not from any specific building, but from the demand of all of us who share and contribute to the commons.
Common Ground-NYC and the Henry George School invite you to a seminar on the effect of under-taxing NYC land and over-taxing its buildings and improvements.
By replacing the existing tax system with a split-rate tax that taxes land higher than buildings, we will encourage more efficient use of land and more opportunities for development that will provide jobs and businesses for the city. The split rate tax has been used successfully all over the world to improve communities, ranging from Pittsburgh and Harrisburg, PA, to Singapore and Hong Kong. It is perhaps the most proven economic theorem in the world.
The seminar will cover local examples of inefficient taxation ranging from McDonald’s (one of the biggest real estate owners in the city) to the new Billionaire’s Row on 57 Street. At the end, participants will know where billions of dollars in city revenues can be found. They will also understand how only the tax on land can actually spur growth and opportunity, unlike all other taxes that discourage productivity.
The seminar is particularly timely given Mayor Bill de Blasio’s and Comptroller Scott Stringer’s support for taxing vacant land at higher prices to encourage development.
Action steps given at the end will show activists how they can make New York City a vibrant, livable, sustainable, city for ALL its residents.
The seminar will be given at:
The NYC Conference and Seminar Center,
71 West 23rd Street, New York, NY 10010
6:30-8:30 on February 5.
It will be recorded for webcasting as well.
America has no internationally recognized High Speed Railroads – that is, our fastest train, the Accela, does not even meet international standards for a High Speed Train.
I left a response to an article on the popular blog: Nextbigfuture, regarding the potential, but thus far unrealized, benefit of building Elon Musk’s Hyperloop between Los Angeles and San Francisco.
This is the short original article:
“If Hyperloop could succeed it would disrupt airline and rail travel as we know it and improve the whole economy with more economical and efficient transportation. There have been many innovative engineering designs and proposals but they are not taken seriously and have not been funded even if they could greatly benefit society and potentially be economically successful.
The entire culture of Silicon Valley, and entrepreneurship around the globe, has taken on a groupthink that prevents truly novel inventions, like the Hyperloop, from reaching the market. The result is a major loss. It’s a loss to our society. It’s a loss to our capital markets. It’s a loss to private investors. And it’s a loss to entrepreneurs.
The age of software is suffocating investment in improved largescale physical changes that require a lot more funding and patience to get to a lower return than software can provide.
If we want to have companies like Hyperloop in Silicon Valley, and we want to have less companies like Instagram, we have to stop building startups based on a one-size-fits-all formula. This formula produces companies like Instagram and Buffer. They hit all of the checkboxes, but entirely fail to innovate. Not to mention, they’re boring.
Companies like Hyperloop break all of these rules. There is no MVP, it’s very high risk, there is no angel who specializes in it, it’s a first-time inventor, the company wants to go public, and all the founder has is a scribble on a legal pad to explain how it’s going to work. It goes against all conventional wisdom, but that may be the best investment of our generation.
Bigger societal goals and embracing change
Even though the electrical grid in North America and other developed countries has many known problems only about 1% of the grid is upgraded. There is a large backlog of unrepaired bridges and other infrastructure.
Very little power generation is replaced even though it is well known that existing coal plants are polluting or is an old and inefficient system.
Adopting best practice in infrastructure could boost global infrastructure productivity and save $1 trillion per year within 18 years. This would be a 40% increase in productivity.”
In response I wrote:
The problem is that the people who benefit are those who live along the hyperloop line, to the tune of billions of dollars, while those who would pay are either private entrepreneurs (too little capital and too much risk), or the general taxpayer (too little benefit for most), or the rider (too few to be able to pay for it on their own without ticket prices that will drive away all but the elite, who might just take their own planes and helicopters anyway).
The people who benefit the most should pay the most. This means a non-attenuated government charging a Land Value Tax based on Von Thunen (http://en.wikipedia.org/wiki/Johann_Heinrich_von_Th%C3%BCnen) analysis of marginal productivity:
R = Y (p – c) – Y Fm
where R=land rent; Y=yield per unit of land; c=production expenses per unit of commodity; p=market price per unit of commodity; F=freight rate (per agricultural unit, per mile); m=distance to market.
Formulas aside, the point is that landowners are the ones who win when a new rail line goes through, particularly near stops (this only works if it’s not a train to nowhere). Here in NYC, for example, billions in new property development is already springing up, seemingly overnight, along the projected 2014 #7 line extension from 8th Avenue and 42 street to 11th Avenue and 34 street. Speculators build because of their correct perception that value will be added to the new “corridor” even in an already bustling city like New York.
Read Fred Harrison’s book, Wheels of Fortune to understand this better:
“It is often assumed that government intervention is required to bring to fruition large scale infrastructure projects because the large initial capital outlays such projects require must be funded from the public purse. In Wheels of Fortune, Fred Harrison shows that large scale infrastructure projects can be made self-funding. Infrastructure projects almost always bring about a large increase in the value of adjoining land. For example, it is estimated that the London Underground Jubilee Line extension increased adjoining land values by close to GBP3 billion. When such infrastructure projects are funded by government, they therefore involve a substantial transfer of wealth from a large number of taxpayers to a small number of property owners. Harrison argues that a fairer and more efficient means to fund infrastructure projects is to capture and use the increases in land values that they bring…
There were actually MASSIVE subsidies and outright giveaways for the railroad companies to get the transcontinental lines built. It was the checkerboard policy — giving away alternating miles of land on either side of the track to the railroad companies so they would build. More info:
“The transcontinental railroad, completed in 1869, passes through southern Wyoming. It was financed in part by land grants to the railroad under the Union Pacific Act of 1862. In that Act, Congress granted every other section (one square mile) of land within ten miles of the railroad to the Union Pacific, which tried to sell it to raise capital for the venture. When sales proved less than brisk, Congress doubled the area to 20 miles on each side of the railroad. Congress believed that the coming of the railroad would greatly increase the value of the land retained by the government. The land could then be sold at a profit at a later date. This scheme, used successfully in the East, was not practical in the vast semi-arid rangelands of the West. Many sections in remote areas remained unsold and in government possession. When homesteading and government sales of land ceased, many areas were left in a permanent checkerboard pattern of alternating public and private land.”
To change the zeitgeist regarding Land Value Taxation, we need to reach beyond the usual audience and introduce the concept in novel ways. There are opportunities to do so almost everywhere.
Today, Pope Francis released an 84-page document, known as an apostolic exhortation, called an Official Platform for his papacy by Reuters. Frankly, most of it is arcane religious doctrine and prescriptions to this atheist, but the pope’s economic plan ought to be of interest to everyone.
This pope lives simply, in a guest house, and has been known to wash the feet of ordinary people, despite having access to vast wealth, like all popes. Further, like his namesake, Saint Francis, he seems to sincerely wish to do something to combat poverty. However, most of the MSM articles are crafting his message in purely moral terms. From the Reuters article:
“In (the document), Francis went further than previous comments criticizing the global economic system, attacking the “idolatry of money” and beseeching politicians to guarantee all citizens “dignified work, education and healthcare”.”
Did the pope just call for universal healthcare? Where was he when Obamacare ruled out the Public Option? On safer ground, the Reuters article continues:
“(The pope) also called on rich people to share their wealth. “Just as the commandment ‘Thou shalt not kill’ sets a clear limit in order to safeguard the value of human life, today we also have to say ‘thou shalt not’ to an economy of exclusion and inequality. Such an economy kills,” Francis wrote in the document issued on Tuesday.
How can it be that it is not a news item when an elderly homeless person dies of exposure, but it is news when the stock market loses 2 points?”
This is safe territory for most media. “Just give a little more…share what you’ve made with those less fortunate,” is safe because how much is enough? How much is too little? One could debate redistribution forever without addressing the reason for maldistribution in the first place.
Senator Bernie Sanders digs a bit further, recognizing the pope’s “past passionate criticism of the global financial system, which has plunged more of the world into poverty while benefiting the wealthy few.”
“In (the exhortation), economic inequality features as one of the issues Francis is most concerned about, and the 76-year-old pontiff calls for an overhaul of the financial system and warns that unequal distribution of wealth inevitably leads to violence.
“As long as the problems of the poor are not radically resolved by rejecting the absolute autonomy of markets and financial speculation and by attacking the structural causes of inequality, no solution will be found for the world’s problems or, for that matter, to any problems,” he wrote.”
The pope is clearly not a believer in deregulated markets! What would (catholic) Ronald Reagan have thought?
But, there is more to the Pope’s plan than just exhortations to — somehow — lessen the wealth gap. Although for some reason, none of the articles I found directly linked to the actual apostolic exhortation, I was able to find it here.
In chapter 2, section I, the pope writes of “SOME CHALLENGES OF TODAY’S WORLD,” saying:
“52. In our time humanity is experiencing a turning-point in its history, as we can see from the advances being made in so many fields. We can only praise the steps being taken to improve people’s welfare in areas such as health care, education and communications. At the same time we have to remember that the majority of our contemporaries are barely living from day to day, with dire consequences. A number of diseases are spreading. The hearts of many people are gripped by fear and desperation, even in the so-called rich countries. The joy of living frequently fades, lack of respect for others and violence are on the rise, and inequality is increasingly evident. It is a struggle to live and, often, to live with precious little dignity. This epochal change has been set in motion by the enormous qualitative, quantitative, rapid and cumulative advances occurring in the sciences and in technology, and by their instant application in different areas of nature and of life. We are in an age of knowledge and information, which has led to new and often anonymous kinds of power.”
So far, this is pretty standard stuff, maybe equivalent to a “papal rant.” But Francis goes on to more stridently argue “No to an economy of exclusion,” arguing that there should be a new commandment “‘thou shalt not’ to an economy of exclusion and inequality. Such an economy kills.”
Better yet, from the point of view of an atheist like me who looks for rational solutions to defined problems, he is impatient with certain popular, but failed, economic theorems.
“54. In this context, some people continue to defend trickle-down theories which assume that economic growth, encouraged by a free market, will inevitably succeed in bringing about greater justice and inclusiveness in the world. This opinion, which has never been confirmed by the facts, expresses a crude and naive trust in the goodness of those wielding economic power and in the sacralized workings of the prevailing economic system. Meanwhile, the excluded are still waiting.”
Did the Pope just repudiate the trickle-down free market ? It sure seems that way. This is sure to not sit well with the typical elite V.I.P.s that normally fill a Pope’s daily itinerary!
Furthermore, he is saying that merely trusting in the goodness of others is naive and unworkable as an economic plan. There are specific remedies to be applied, not just spiritual awakening. This is quite refreshing coming from a spiritual leader!
He goes on to say “No to the new idolatry of money,” though one can be forgiven for thinking it’s all very well for one of the — potentially — wealthiest men in the world to say stop worshiping money, or that “Money must serve, not rule!” But what we want to know what is he proposing to do about it, beyond preaching “A financial reform open to such ethical considerations?”
Well, he squarely says that violence comes from inequality and social injustice, “at its root,” not just from a failure of character (or faith). And the pope has his cross hairs aimed at the hyper-security state too:
“No to the inequality which spawns violence
59. Today in many places we hear a call for greater security. But until exclusion and inequality in society and between peoples is reversed, it will be impossible to eliminate violence. The poor and the poorer peoples are accused of violence, yet without equal opportunities the different forms of aggression and conflict will find a fertile terrain for growth and eventually explode. When a society — whether local, national or global — is willing to leave a part of itself on the fringes, no political programmes or resources spent on law enforcement or surveillance systems can indefinitely guarantee tranquility. This is not the case simply because inequality provokes a violent reaction from those excluded from the system, but because the socioeconomic system is unjust at its root. Just as goodness tends to spread, the toleration of evil, which is injustice, tends to expand its baneful influence and quietly to undermine any political and social system, no matter how solid it may appear. If every action has its consequences, an evil embedded in the structures of a society has a constant potential for disintegration and death. It is evil crystallized in unjust social structures, which cannot be the basis of hope for a better future.”
So, the pope is saying that lack of opportunity and gross inequality creates violent reaction, not jealousy.
I wish he had said something about the lack of faith in one’s fellow man. Evil does not just happen; it is driven by fear and distrust. This is a lack of faith in the inherent goodness of people. And it is inherent too. Only a small minority of people, including the oligarchs, disrupts or pathologizes the conditions for the rest of us. The small number of oligarchs taking the wealth through rent-seeking and monopolization is comparable to the number of hard core terrorists, but only one group gets the attention it deserves, or perhaps too much attention, given how the 1% elite create conditions for terrorism to breed.
The pope seems to be calling for an end, or at least curtailment, of the “war on terror” and says it is ultimately futile:
“Inequality eventually engenders a violence which recourse to arms cannot and never will be able to resolve. This serves only to offer false hopes to those clamouring for heightened security, even though nowadays we know that weapons and violence, rather than providing solutions, create new and more serious conflicts.”
The pope goes on to criticize today’s consumerism– this, at a time when economists are stuck in the mode of growth at all costs to achieve happiness, instead of asking what it is that makes us happy to begin with, beyond just having more “stuff.”
As Francis reminds us:
“Human beings are themselves considered consumer goods to be used and then discarded. We have created a “disposable” culture which is now spreading. It is no longer simply about exploitation and oppression, but something new. Exclusion ultimately has to do with what it means to be a part of the society in which we live; those excluded are no longer society’s underside or its fringes or its disenfranchised — they are no longer even a part of it. The excluded are not the “exploited” but the outcast, the “leftovers”.”
This is pretty radical stuff, even the talk of revolutionaries. This is also new, as the pope says. He is telling us that we have actually discarded a whole class of human beings, not merely exploited them. Is he calling for an uprising, even a peaceful one?
” 60. Today’s economic mechanisms promote inordinate consumption, yet it is evident that unbridled consumerism combined with inequality proves doubly damaging to the social fabric.
Inequality eventually engenders a violence which recourse to arms cannot and never will be able to resolve. This serves only to offer false hopes to those clamouring for heightened security, even though nowadays we know that weapons and violence, rather than providing solutions, create new and more serious conflicts. Some simply content themselves with blaming the poor and the poorer countries themselves for their troubles; indulging in unwarranted generalizations, they claim that the solution is an “education” that would tranquilize them, making them tame and harmless. All this becomes even more exasperating for the marginalized in the light of the widespread and deeply rooted corruption found in many countries — in their governments, businesses and institutions — whatever the political ideology of their leaders.”
The quotes around “education” are his. He is obviously skeptical of today’s schooling, and its usefulness later on.
Unfortunately, the pope does not quite follow through with a true understanding of how the Haves take from the Have-Nots, if not by force, than as economic hitmen, making loans with impossible payment requirements, and then seizing collateral, even whole countries. He once again pleads for redistribution:
With due respect for the autonomy and culture of every nation, we must never forget that the planet belongs to all mankind and is meant for all mankind; the mere fact that some people are born in places with fewer resources or less development does not justify the fact that they are living with less dignity.
…instead of for just compensation for the use of resources. Africa, for example, is resource rich, yet its people are among the poorest. Clearly, they are not being compensated for their natural wealth. It is not that their resources are not worth more, without some of them, our modern electronic age could not exist. But those who ought to pay, would rather take the resources by guile or by force. To pay more is not charity, it is justice. For example, a tax on the use/abuse of resources, including location in dense urban areas, would encourage sustainable development while collecting enough money to feed and house all the poor. For that matter, it would force empty warehoused buildings into becoming homes for the poor, or at the very least, make it possible for government to provide a small stipend to make that happen. Right now, most government housing programs are notoriously more expensive than they ought to be, and the dangerous shelter system is no moral solution.
Francis does recognize that:
” 202. The need to resolve the structural causes of poverty cannot be delayed, not only for the pragmatic reason of its urgency for the good order of society, but because society needs to be cured of a sickness which is weakening and frustrating it, and which can only lead to new crises. Welfare projects, which meet certain urgent needs, should be considered merely temporary responses. As long as the problems of the poor are not radically resolved by rejecting the absolute autonomy of markets and financial speculation and by attacking the structural causes of inequality,  no solution will be found for the world’s problems or, for that matter, to any problems. Inequality is the root of social ills.”
Again, he is rejecting a “market” solution.
” We can no longer trust in the unseen forces and the invisible hand of the market. Growth in justice requires more than economic growth, while presupposing such growth: it requires decisions, programmes, mechanisms and processes specifically geared to a better distribution of income, the creation of sources of employment and an integral promotion of the poor which goes beyond a simple welfare mentality. I am far from proposing an irresponsible populism, but the economy can no longer turn to remedies that are a new poison, such as attempting to increase profits by reducing the work force and thereby adding to the ranks of the excluded.”
Francis defines an economy thusly:
“206. Economy, as the very word indicates, should be the art of achieving a fitting management of our common home, which is the world as a whole. Each meaningful economic decision made in one part of the world has repercussions everywhere else; consequently, no government can act without regard for shared responsibility. Indeed, it is becoming increasingly difficult to find local solutions for enormous global problems which overwhelm local politics with difficulties to resolve. If we really want to achieve a healthy world economy, what is needed at this juncture of history is a more efficient way of interacting which, with due regard for the sovereignty of each nation, ensures the economic well-being of all countries, not just of a few.”
As Francis says: “No to a financial system which rules rather than serves .”
“If there be time to expose through discussion the falsehood and fallacies, to avert the evil by the processes of education, the remedy to be applied is more speech, not enforced silence.” – Supreme Court Justice Louis Brandeis, Whitney v. California (1927), http://prospect.org/article/remedy-more-speech
The team of panelists from last year’s Pace University Left Forum panel – reviewed in the March/April, 2012 issue of GroundSwell – reconvened this year on June 8, 2013, minus Kucinich adviser Dave Kelley who was sidelined due to a back injury. The remaining panelists were Dr. Michael Hudson, Dr. Cay Hehner, and Chair Andy Mazzone. The title of this year’s panel was “Wall Street’s War to Impose Austerity.” Here is the abstract I developed, with the blessing of the panelists:
Wall Street had a record year in profits last year. Bonuses were up and stock prices zoomed. Meanwhile, the productive classes continued to see their wages stagnate as they have for 40 years, while under-reported inflation figures and regressive tax schemes took more of their paychecks, if they could find work. But now Austerity threatens to siphon whatever is left from the bottom to the banking elites. Faux progressive organizations like Third Way in the U.S. are attempting to privatize Social Security to pour billions into Wall Street for further gambling. From Cyprus’ confiscation of up to 70% of bank deposits to Greek pro-recession budget slashing, the road to neo-feudalism continues. Based on Professor Dr. Michael Hudson’s book “Finance Capitalism and its Discontents” and “The Bubble and Beyond”, panelists Dr. Michael Hudson, Dr. Cay Hehner, Dave Kelley, and Chair Andy Mazzone will discuss specific austerity measures that are designed to confiscate, impoverish, and destroy the middle class, while widening the already historic wage gap even further. Learn how the expansive forces of industrial capitalism have been subverted by today’s predatory finance capitalism aided by junk economics and failure to collect the economic rent. What is the rentier class and how does it collect 1/3 of GDP? Is government regulation always wrong? What is the best tax policy? Why the 1% versus the 99%?
Current president of the Henry George School, Andy Mazzone, gave the opening, and after introducing himself as an ex-CEO of a Fortune 500 company, and a trained economist in Marxism, said he now classifies himself as a neo-Georgist — defined as “someone who believes all forms of monopoly should be taxed” while untaxing all forms of earned income — wages, sales, capital. (In previous discussions with Mr. Mazzone, I have challenged this tax-all-monopolies philosophy a bit, relying on my experience in the fast-changing world of Information Technology where I was a Manager of Information Systems for over 2 decades, and where monopolies may last no longer than the next business cycle. I think we get into questionable territory in advocating taxing patentable innovations (though I would agree that patents are too easily granted nowadays). The land monopoly is different, of course, because land, unlike capital, cannot be created by people, is finite, and generally appreciates, while capital goods depreciate and are replaced by newer “improvements,” just as Henry George said over a hundred years ago when improvements came along at a much slower rate.)
Mazzone went on to say that Michael Hudson’s book, “Super Imperialism” basically forecast the current crisis and the financialization of everything, and the subsequent collapse from de-industrialization.
Mazzone spoke of what has become accepted wisdom among Georgists — that 1/3 of GDP, here identified by Mazzone as “surplus,” is rent of some kind. (Hudson later confirmed this figure in his portion of the presentation too). This rent is taken by “guile and force,” an example of which, Mazzone said, is the operations of Goldman Sachs.
After setting up a hypothetical world in which the elite owned everything (this is really not so hypothetical, after all; in a Vanity Fair article sometime rentier-critic Joseph Stiglitz says the top 1% own 40% of the wealth: click here), Mazzone further challenged the audience to determine why the “elite 1% should not continue to “garner the lion’s share of society’s wealth as it always has, albeit within certain limits, and with some overhead for priests, rabbis, police and courts to enforce the disparity, while keeping it just low enough to prevent a revolution” (the elite are apparently quite good at figuring out how far they can push things, most of the time). He pointed out that the financial elites can create bubbles by literally controlling the creation of money, blow it up, and if their power is large enough, force government to bail them out and continue the game in an unlimited way, not because they are necessarily evil, but because there are no constraints. This gets to the crux of economics – that to change people’s behavior, you have to change the incentives, and not rely on some “better nature” coming out of human beings. The clear implication is that the incentives are therefore perverse and literally counter-productive. Obama and many of the political class, says Mazzone, has no clue how to change this, and neither does almost anyone else. There is no way, under the present system, to change the outcomes, and the temptation to collect “100 million dollars at the expense of the country” instead of working, is simply too great. (Super-regulator Bill Black, who led the reform efforts of the S&L crisis and who is a colleague of Michael Hudson’s at the University of Missouri, Kansas City’s economics department, has called this a criminogenic environment, leading to fulfillment of Gresham’s law — in which bad money forces out good money. His colleague at the University of Missouri Kansas City, Steve Keen, has recently published a paper showing that the stock market rise since 1982 is almost entirely due to margin expansion, i.e. “bad” credit for traders, here).
With that sobering ending, Mazzone introduced Michael Hudson.
Hudson started by saying the “whole point of classical economics was to free society from feudalism” and it could, and has, been argued that we are currently going back to feudalism. Hudson further supported this view in a post-panel paper in the Real World Economics Review here. He writes:
“This is a different kind of inflation than one finds from strictly financial bubbles. It is creating a new neo-feudal rentier class eager to buy roads to turn into toll roads, to buy parking-meter rights (as in Chicago’s notorious deal), to buy prisons, schools and other basic infrastructure. The aim is to build financial charges and tollbooth rents into the prices charged for access to these essential, hitherto public services. Prices are rising not because costs and wages are rising, but because of monopoly rents and other rent-extraction activities.”
During his presentation, Hudson went on to say that the rise of capitalism then, prior to Marx, was an attempt to garner the surplus for capitalists, at the expense of labor. There was no thought to raising the standard of living of labor, but just to how to get more of the surplus. The taking of the surplus, however, has fallen to a new and more dangerous class: the rentiers. As an example, Hudson pointed out that buildings “pretend” to lose their value over and over again, thereby garnering profits for their owners, who re-expense these “losses” each cycle. This has led to the Real Estate sector not paying any income tax since 1945, because it supposedly doesn’t make any money, though that has not prevented developers from somehow becoming among the richest people on the planet. They keep on building! Thanks to Alan Greenspan and other “smart guys” said Hudson, the tax burden, meanwhile, is shifted off of capital and onto labor. We are, says Hudson, going back to primitive accumulation, and for the working person, back towards austerity.
Here (almost 19 minutes into the session), Hudson went on a bit of a rant, slipping in things like calling Henry George “self-educated anti-intellectual negative marketist”, a “racist journalist” who sided with racist southern Democrats against the Chinese, and of being a right-wing libertarian – though he did finally redeem George because of his espousal of the land value tax. (To paraphrase: “Yes, he was a serial killer, but on the other hand, he was a great lover of the arts”). This sort of speech was guaranteed to raise the ire of some of the Leftists at the Left Forum, and of several Henry George fans, including those from Common Ground-NYC, who vocally interrupted. They came to me (as event organizer) both immediately after the session, and later through heated but informative phone and email discussions. I present some of these rebuttals to Hudson’s characterization of George below, as well as my own. These sorts of incendiary charges should not even need refuting by anyone who has read Progress & Poverty (1879), as Cay Hehner also pointed out, but which Hudson called “one of the worst books I ever read,” but I will do so anyway.
In “Progress and Poverty, Book X, Chapter 2,” George wrote:
“A gentleman who had taught a colored school once told me that he thought the colored children, up to the age of ten or twelve, were really brighter and learned more readily
than white children, but that after that age they seemed to get dull and careless. He thought this proof of innate race inferiority, and so did I at the time. But I afterward heard a highly intelligent Negro gentleman (Bishop Hillery) incidentally make a remark which to my mind seems a sufficient explanation. He said: ‘Our children, when they are young,
are fully as bright as white children, and learn as readily. But as soon as they get old enough to appreciate their status– to realize that they are looked upon as belonging to an inferior race, and can never hope to be anything more than cooks, waiters, or something of that sort, they lose their ambition and cease to keep up.’”
So, George, who spent the first formative 1/3 of his too-short 57-year life in a country that had chattel slavery, evolved his views enough to believe that the supposed inferiority of the “colored” races was due to educational disadvantage and to low societal expectations rather than to innate differences. George himself admits to having changed his mind radically about this over time.
This is really quite extraordinary and in a short paragraph speaks volumes of George’s ability to out-think even his own deep-set prejudices (in contrast, Thomas Jefferson, scientist and espouser of human liberty, was a lifelong slave-owner). We could all, including Hudson, learn something from this ability to transcend one’s past beliefs.
George is also often accused of having a prejudice against the Chinese immigrant worker. But this too, bears further scrutiny. Even if there is a smidgeon of truth from George’s early days when he saw the danger of cheap foreign labor displacing American workers, and before his land epiphany, as Common Ground-NYC (CGNYC) member and seminar attendee Toby Lenihan wrote me afterwards:
The only shred of truth in any of (what Michael Hudson said) was that H.G. complained about the Chinese bringing down wages because they worked for such low wages (which in this landlord system when there’s no free land to be had, does bring it down). There was a lot of anti-Chinese feeling out west because of that. Henry George didn’t start it, by any means.
About the Blacks, Henry George always wrote well and he was virulently anti-slavery & did want to fight on the Union side but was out in California during that.
And, as far as aligning with the racist southern Democrats, Toby wrote:
“The Republicans were even more Big Business in H.G.’s time than now. Even in a recent documentary on PBS about the robber barons they told about how (Republican president) Taft supported Big Business monopolies & (Democrat) Williams J Bryan was trying to counteract that. H.G. strongly supported Bryan & said the country was going to the dogs (or words to that effect) when Taft won. So being Democratic was what all those who favored the common working man did. And Hudson equates that with being pro-slavery because the South was Democratic.”
I have left some more colorful denunciations of Hudson’s view out of this family journal, but they could stand up just as well. There is simply nothing to the charge that Henry George was racist, classist, or even in the traditional sense, a free market libertarian-capitalist in the way it is meant today. As Hudson himself has pointed out on several occasions, when classical economists like George talked about the “free market” they meant a market where the economic rent was collected and business and individuals were otherwise free to produce and keep what they earned. It certainly didn’t mean “free to do whatever you want and can get away with.” That is a 5-year-old’s definition of a free market. Not only is such a market immoral, it is unworkable and criminogenic. George recognized that and railed against it with sophisticated arguments for hundreds of pages in all of his books. It is why, as much for his economic theory, he continues to be read today, when his near-contemporary apologists like Malthus are not – except by those who love doomsday scenarios and do not wish to expend the energy to change them. (A whole sub-industry of economic doomsayers has sprung up to feed, and, in some cases, take money from, those who are too lazy, ignorant, scared, inept, or otherwise incapable of changing external events, or even their own lives. I recently wrote an article about this, “Countering Disaster Porn” for Opednews here. I suspect some Disaster Porn aficionados were in the audience of the Left Forum, as these kinds of events attract passive onlookers looking for affirmation and inclusion, more than activists trying to change things. Often, they cheer the most those who promise the possibility of reform the least. This creates a cycle of passive-aggressive approval that few speakers may be able to resist catering to).
Hudson also seemed to be channeling his 2008 article in the American Journal of Economics and Sociology 67 (January 2008), pp. 1-46. My comments are in brackets [ ].
Henry George’s Political Critics
By MICHAEL HUDSON
ABSTRACT. Twelve political criticisms of George were paramount after he formed his own political party in 1887: (1) his refusal to join with other reformers to link his proposals with theirs, or to absorb theirs into his own campaign; (2) his singular focus on ground rent to the exclusion of other forms of monopoly income, such as that of the railroads, oil and mining trusts; [George, writing in 1868 in “What the Railroad will Bring Us” said: ” The truth is, that the completion of the railroad and the consequent great increase of business and population, will not be a benefit to all of us, but only to a portion. As a general rule (liable of course to exceptions) those who have it will make wealthier; for those who have not, it will make it more difficult to get. Those who have lands, mines, established businesses, special abilities of certain kinds, will become richer for it and find increased opportunities; those who have only their own labor will be come poorer, and find it harder to get ahead-first, because it will take more capital to buy land or to get into business; and second, because as competition reduces the wages of labor, this capital will be harder for them to obtain. (http://www.grundskyld.dk/1-railway.html)] (3) his almost unconditional support of capital, even against labor; [Not so. In an article by Richard Giles, Giles refutes Hudson’s repeated charge specifically:
Here one may surmise is the truth about (Hudson’s) criticism of George “his almost unconditional support of capital, even against labour’ and the “alliance of his followers with the right wing of the political spectrum.’ They were not a consequence of actions that George had taken. Nonetheless, this still represents a reformist movement akin to that of the physiocrats, one designed to make capitalism work more honestly, equitably, and efficiently. Hudson just does not regard that movement as a reform movement.
Right from the start George opposed (single-tax movement leader) Shearman’s narrow and fiscal-driven doctrine of the “single tax limited” but, seeing him as a “fellow-traveller’, George also opposed those who would expel Shearman from the movement.
His “alliance’ with Shearman in the opinion of some like Dr. Kenneth Wenzer did not serve the movement well. Hudson makes reference to Wenzer (2000) but does not point out as Wenzer does how Shearman helped turn the movement “from a philosophy of freedom to a nickel and dime scramble” (see esp. 2000, 75). These considerations make it difficult to accept the view that it was George who turned to “capital’ for support against “labour’ and that, in turn, later Georgists followed his path. REFERENCES: Wenzer, Kenneth C. (2000). “The Degeneration of the Georgist Movement from a Philosophy of Freedom to a Nickel and Dime Scramble” In: The Forgotten Legacy of Henry George. Kenneth C. Wenzer and Thomas R. West. Waterbury, CT: Emancipation Press.
Above all, it is critical to remember that George did not conflate Capital with Land, unlike some of his contemporaries, and even more so today. Therefore, to say George was pro-capital owner is not to say he was pro-Landowner.] (4) his economic individualism rejecting a strong role for government; [Writing in Social Problems, albeit in 1883, before George formed a political party, George said: " It is the more necessary to simplify government as much as possible and to improve, as much as may be, what may be called the mechanics of government, because, with the progress of society, the functions which government must assume steadily increase. It is only in the infancy of society that the functions of government can be properly confined to providing for the common defense and protecting the weak against the physical power of the strong. As society develops in obedience to that law of integration and increasing complexity " it becomes necessary in order to secure equality that other regulations should be made and enforced; and upon the primary and restrictive functions of government are superimposed what may be called cooperative functions, the refusal to assume which lead, in many cases, to the disregard of individual rights as surely as does the assumption of directive and restrictive functions not properly belonging to government." George's view was much more nuanced and cogent than Hudson would have us believe.] (5) his opposition to public ownership or subsidy of basic infrastructure; [See previous citation.] (6) his refusal to acknowledge interest bearing debt as the twin form of rentier income alongside ground rent; (7) the scant emphasis he placed on urban land and owner occupied land; [It’s hard to understand where this is coming from; George clearly understood the high relative value of urban vs. rural land — indeed, concentration of population created high land value in George’s view, in his theory. How could it not be thus?] (8) his endorsement of the Democratic Party’s freetrade platform [this is true and acknowledged by even many of George’s strongest supporters, though it could also be said that George’s views on free trade don’t contradict his theory, they exist outside of it, and are presumptive of Land reform already being in place]; (9) his rejection of an academic platform to elaborate rent theory [at the time, universities were already being corrupted by land-holding interests, though that is perhaps not an excuse for not trying to change the system from the inside]; (10) the narrowness of his theorizing beyond the land question [not so; besides advocating Free Trade, for better or worse, both Stephen Zarlenga (Henry George’s Concept of Money) and the present author (World Economics Association: A Brief History of American Paper Money, with emphasis on Georgist Perspectives) have written of George’s support for monetary reform along the lines of his early-contemporary, President Lincoln, who introduced the nation’s first debt-free paper money, United States Notes]; (11) the alliance of his followers with the right wing of the political spectrum [many of whom actually came along well after George's too-short life]; and (12) the hope that full taxation of ground rent could be achieved gradually rather than requiring a radical confrontation involving a struggle over control of government. [Point 12 is contradicted several times by George's own writings that it was even more urgent to right the wrongs of economic impoverishment via Land monopoly than to abolish chattel slavery; George said the absence of access to land meant immediate absence of life, whereas slavery at least afforded that possibility, however curtailed. George neither called for "gradualism," nor for compensation to landowners for a wrong perpetuated for centuries, though others of his day did].
Hudson also contradicted his negative views of George or at least emphasized George’s positive contribution so strongly, that they overshadowed George’s other alleged failings, with his own earlier video interview here: “The old man (Henry George) was right.” In this video interview, Hudson traces the classical idea that collecting economic rent “would eliminate the need to collect…any other taxes and result in the lowest labor costs in the world.” Hudson ranks George among those economists who understood this, along with J.S. Mill, Veblen, etc. (22 seconds in). Taxes on broadcasting spectrum, and ALL other income are used, Hudson said, as a “tollbooth to resources provided by nature.” Property taxes would not have gone up if property was taxed at full rental value, and all other taxes would have gone away. “Rent is conflated with earnings and profit”Rental income needs to be disaggregated from other income, which can be done by going to (the) Federal Reserve’s fund accounts and making (a) distinction between value of land and value of buildings and you’ll find land represents over half of value of property.” This is a refinement and a practicalization of Georgism, not a refutation. In this video, Hudson went on to say “(if the) original income tax (supported by Georgists of the day) did what it was intended to do and taxed the wealthiest”(the tax would fall) on the wealth, most of which took the form of Real Estate – Real Estate is the largest asset form in any modern economy – (The) original income tax fell on the wealthy. Over the last 100 years, the wealthy’s lobbyists chipped away at the tax system and – tax shifted to lower wealth brackets (particularly labor). In 1913, the original income tax taxed capital gains.”
So, Hudson admits that George’s first followers, however misguided ultimately, were trying to get back the value of Land through income taxation.
Hudson’s attack on George was not new with the Left Forum presentation, though he has more cogently articulated it previously. See “Has Georgism been Hijacked by Special Interests?” - ( A presentation delivered to the Council of Georgist Organizations conference, Bridgeport, Connecticut, Saturday, 19 July 2003) . But, a ccording to Hudson at the time:
“The Socialists agreed with the Ricardians (and for that matter with the Physiocrats and with the fiscal systems of classical Greece and Rome) that groundrent should be the basis for taxation. Kindred to this position was that of the American tax reformer Henry George, describing how land ownership had been appropriated from the public domain, often by insider dealing within the public sector-as he had seen most flagrantly in his country’s vast land grants given to the railroads. Yet despite the fact that they were united by a similar analysis of groundrent, George, the Socialists and the Classical Economists moved in opposite directions politically. For generations to come, this divergence in directions shaped the coloration of rent theory and the fiscal policy that it implied.”
George may not have been the most politically astute reformer, though in his defense he only had 18 scant years between the not-quite-overnight success of Progress and Poverty and his death in 1897 to learn, but we must also distinguish between what George thought and what some of his later followers believed. Still, and fittingly, Hudson’s assertion from this article stands out:
Henry George was remarkably perceptive about the danger of Marxian socialism leading to dictatorships of the bureaucracy.
For some reason, Hudson did not see fit to mention that insight of George’s to this often pro-Marxist crowd. Hudson continues in his article:
“And the Socialists for their part were short-sighted in not seeing that the only kind of socialism that would work was one that retained market reference points. Every successful economy in history has been a mixed economy, in which the private and public sectors relate to each other through a system of mutual checks and balances. This is how Sumer and Babylonia were organized, and industrial Britain at its takeoff, and America in its rise to industrial power after its Civil War.”
But today, both sides have polarized between the one-sided anti-government politics of libertarianism and the shreds of post-Stalinist socialist theory. What has been missed is the fact that government does have a legitimate role in collecting economic rent – unearned income created by and rightly belonging to the community, as Henry George advocated – and in using this revenue as the basis for public finance of public services and inherently rent-generating infrastructure and other public enterprise” I think the failure of Georgism is attributable to the fact that it pulls its punches so seriously as to cripple its basic message – the message of economic justice that made Progress and Poverty so successful as a vehicle to advocate the taxing of land rent.
This is not a criticism of George’s prescription, but of the failure of people to exercise it. In other words, there is not too much Georgism, according to Hudson, there is too little. This makes Hudson a staunch advocate of George, more so then perhaps even many other practicing Georgists.
Michael Hudson’s recent essay, Incorporating the Rentier Sectors into a Financial Model, published by the World Economic Review, and extracted from his book, “The Bubble and Beyond,” is also supportive of Georgism (emphasis added):
“Extending credit to purchase assets already in place bids up their price. Prospective homebuyers need to take on larger mortgages to obtain a home. The effect is to turn property rents into a flow of mortgage interest. These payments divert the revenue of consumers and businesses from being spent on consumption or new capital investment. The effect is deflationary for the economy’s product markets, and hence consumer prices and employment, and therefore wages. This is why we had a long period of low cpi inflation but skyrocketing asset price inflation. The two trends are linked. Henry George helped establish the principle that land rent was the major form of economic surplus in any economy – and to make matters worse, it was unearned. The private appropriation of rent diverted this surplus income from being invested in capital formation to increase the productive powers of labor, and hence the flow of output that was supposed to increase living standards over time. Progress was subverted to an impoverishing dynamic.”
With this conclusion, the present author agrees. The few successful Georgist implementations we have are two-rate systems that primarily benefit the developer sector, and secondarily the cities, but not necessarily all the city’s citizens, and never to the degree that George prophesized or advocated. Hudson bottom-lines the power of George’s solution: “It is true that overall functions could un-tax labor and capital and make up the difference with a land tax. This is what George said, and it is what I believe and support.”
In a similar discussion, Professor Mason Gaffney said that Georgists should abandon the notion that a Land Value Tax (LVT) will lower land prices because in the few instances where it has been applied it has actually raised them. However, as Hudson pointed out then as well, the problem is that LVT has been so little applied as to fall below the inflection point where land prices are negatively impacted by the tax. This is not a fault of Henry George, but of either his followers to fully implement his philosophy, or of political realities, or both. As Hudson points out (emphasis in the original) “The theory of rent and its implications for land taxation is more radical than Marx’s labor theory of value.” In the back and forth emails that ensued among a list of nearly 80 Georgists during this debate, Hudson finally exasperatingly bemoaned “Haven’t any of you read Henry George?”
This writer, along with many other Georgists, also worry that too many Georgists have become a “lobby for the construction industry,” as Hudson phrased it, but that is not what George had in mind. Whether this 2-rate tax is a limited form of Georgism done for temporary political expediency or is simply exploiting modern Georgist support while mainly (or only) supporting the developer lobby, is something that is hotly debated by the neo-Georgist community. In fairness, those who have been most successful in getting the 2-rate system adopted point out that neither Hudson nor George ever implemented actual land value taxation anywhere in their lifetimes.
Continuing in his lecture, Hudson said that whatever the past, today, “the European Socialists are to the right of the Georgists.” This just goes to show how slippery and unreliable mere labels are. They can be used to confuse as well as enlighten.
Getting back to the larger theory, Hudson pointed out that we are living in something Marx never predicted, because he was an “optimist,” and that is how much rent would be collected by the landowners, who are now mostly the banks. Hudson cited Fannie Mae and Freddie Mac, which allow up to 43% of the worker’s income to go towards their mortgage; this is a form of extreme land rent given over to private parties, and a good bit beyond the historical rent-as-1/3-of-GDP tipping point that Mazzone had earlier warned could lead to social unrest, though half of this is perhaps for the house (Yet, this is not the only souce of rent collected either).
Hudson went on to say that whatever the conflicts between capitalist and laborers, it is surrounded by the rentier economy, where rent itself, including monopoly rent, is “technologically unnecessary.” This is why, Hudson says, Marx thought rent would disappear eventually. The die-hard communists in the audience might not like to have heard it, but Marx was wrong.
In his presentation, Hudson brought in his own experiences of having George’s teachings suppressed when he was teaching at the New School in New York City in 1959. He says he was told not to “confuse people” when talking about how workers are exploited by adding in the taking of rent. The New School, of course, is a school originally set up by Marxists.
But perhaps the best guidance can again be found in Hudson’s own writing: ” The guiding principle here should be just what Henry George insisted on: the principle of economic justice. He sought to create a level playing field – within the context of freedom and capitalism.”
And this is why I invited Hudson to participate — indeed, lead — panel discussions the last two years at the Left Forum. Not because he praises the ideals of latter-day Georgists (Hudson also points out that the phrase “Georgist” did not even come into being until the mid-twentieth century; before that, there were simply “Single Taxers”), but because he praises, and advocates, the highest ideals of Henry George. For some reason, he chose to impugn George with the actions of some of his perhaps misguided, or perhaps simply less effective, later followers. Should we then hold Jesus responsible for the Inquisition, the crusades, and other intolerant acts of more modern “Christians?” Perhaps Hudson is right that modern Georgists have been the enemy of Socialism, but the history of Socialism itself, if indeed it is more theoretically sound than Georgism to begin with (not something I or most Georgists believe), has its own roster of failures from Lenin to the mass murderer, Stalin, a fact that Hudson himself acknowledged during Q&A by acknowledging that Marxism was taken over by Stalinists. To those who would say Stalin is not a true Socialist (or even Communist), well, let us equally discount those who say they are true Georgists, but whose actions belie their stated ideals as well (I have a list of such people myself, as do others, I’m sure). These false Georgists do far more harm to the movement than do other progressives pushing other social justice themes, to whom George may or may not have given proper weight. Internecine fighting is the main enemy of all social movements, much more so than their identified opponents. Progressive reformists’ self-destruction, rather than destruction by outsiders, is much more frequent and less attended to; perhaps it is too gratifying to “rage against the machine.” It’s important to get the theory right, yes, but it’s at least as important to pick your battles and to coalesce against a common adversary, in this case, the rentier class. Too much energy is spent, in my opinion, on getting Henry George’s theory perfectly right, past and present, while 99% of the public says, “Henry who?”
Common Ground-NYC member and former Director of the Henry George School, and now instructor at the New York Institute of Technology, Cay Hehner, had the unenviable task of speaking next, after Hudson had stirred the pot to the boiling point.
Hehner began by citing an article that showed how hedge funds have been buying up depressed properties and land throughout the “recovery” since 2009, thereby driving the prices up and creating a new land bubble (some of them are even now, flipping those properties, perhaps anticipating the next crash. This is further confirmed by the latest Fannie Mae National Housing Survey, which showed an accelerating trend of those who say it is a good time to sell housing vs. a good time to buy, though the latter category is still less (40%) than the former (76%); a year ago the results were 72% good time to buy and just 16% good time to sell). Yet, he pointed out, the recession continues for most people. “This crisis has not gone away,” he said, though there is hope for a new period of openness, hope, and an end to government secrets from the example of people like Julian Assange.
George, Hehner continued, turning to Hudson, has to be distinguished between being a theorist and a politician. “As a theorist, you may call (George) simplistic,” Hehner said, but he did stress the ecology of resources a hundred years before almost anyone else and the concept of one planet. Meanwhile, the failures of the current system, Hehner continued, have resulted in high unemployment figures, two lost decades in Japan, and even here where “some have made some money” the overall picture is still abysmal. The next bubble is forming. Increasingly, as this author and many others have also noted, the FIRE sector lives in its own world, pumped up by nearly free monopoly money, while the real economy, boring and unrewarding to such speculators, goes wanting for funds; it is possible to have an inflationary boom in a subsidized FIRE sector and a deflationary depression everywhere else, as Hudson has written. This finding also reinforces a previous conclusion of Mazzone’s — that the top 15% basically sells to itself. (And, increasingly what that 15%, and especially the top 1%, is reselling, has no price basis in reality).
In the old definition of a recession being 2 quarters of negative growth, said Hehner, an economy that was down for 6 quarters (2008-2009) would have been said to have been in a depression.
Continuing on in a larger theme, Hehner said the problem with economics as a science is that scientists have been able to make accurate predictions, whereas only Georgist economists have made accurate predictions as to the economic cycle. Without the ability to predict, a field of study cannot be called a science at all. (Although not covered in this talk, Hehner, a career educator, has hit upon a revolutionary theme now spreading across campuses, and beyond: that economics has little relation to the real world, and needs to be reinvented from the ground up). Hehner cited Fred Foldvary as one such accurate predictor, but Hudson interrupted here to say that Foldvary is basically a “stopped clock’ who had predicted a downfall for years. A more useful example, in my opinion, would have been Fred Harrison, who follows the 18.6 year land cycle, or even Phil Anderson, who wrote “The Secret Life of Real Estate,” and who uses it to time the stock market, to the betterment of his high net worth clients, perhaps cynically (not cyclically).
Recovering from the interruption, Hehner went on to say that what is needed is a “coalition of the Left and Right, and to get a fresh start.” By way of example, Hehner cited China as an example of a new kind of economy — a Market Communism. China introduced the Free Market when they realized that things were not working, and we need to do something just as radical. Supposed free-market worshiper George Bush began the largest bailout in history. Yet today, both American and Chinese systems are broken, said Hehner, and in need of further reform.
Hehner, while agreeing that George’s ideas were sometimes hijacked by right wing libertarians and reactionaries, argued that progressives need to come together to support taxing value from monopolies, value from obligations, surplus, and resources, and to provide a citizen’s dividend (Common Ground-Oregon/Washington chapter member’s Jeff Smith’s idea as well). An example is the tax on resources in Alaska, which also makes sure the resources are not destroyed and are used most efficiently, Hehner noted. Instead we have a system that covers up environmental damage. Hehner’s example: the Deepwater Horizon oil spill that was treated with a chemical that made it worse, while removing it from sight. (This author sometimes worries that a system based on charging for environmental damage would still be gamed. Just as Georgism needs honest assessors, neo-Georgism needs honest pollution monitors).
Hehner continued: today, we instead have a false two-party system, which is really a one-party system. There is no left wing party, no party for the workers. They have been crushed.
Taking the stand again, Hudson rebutted to explain where he felt he (and by inference, other Socialists) and Georgists including Hehner disagreed. He said that “Marx was the last free market economist”free from the banks, free from the rentiers, free from the landlords” — a radical idea that he also claimed was opposite of Henry George. But here there were audible audience guffaws and denunciations of “Wrong! Wrong!” over his claim that George was “for the landowners, and the rentiers.” Hehner exasperatedly interrupted to say that one should not confuse George’s followers with George himself. “To say that George was for the landlords is complete nonsense,” Hehner said, with visible restraint. Mazzone made a similar comment later as well, to absolve the Henry George School of such unhealthy alliances, to which Hudson good-naturedly agreed.
Hudson attempted to discredit George’s environmental background (the concept of environmentalism, he said, came into being in 1860), who, he said, opposed a former Whig party idea, then taken up by Republicans, that statistics on soil depletion should be kept and included in the balance of trade as a form of deficit. Hudson claims that George worked with southern ex-slave-owners to attack ecology – a word coined in 1870 and, Hudson claimed, the root of protectionist doctrine, which George opposed, particularly in his book “Free Trade or Protectionism.” Perhaps due to an audience interruption, Hudson never finished citing the reference specifically, but here is what George said in two of his other books :
“Man produces by drawing from nature”In the production of wealth land cannot act; it can only be acted upon.” — p.p. 408-409, The Science of Political Economy.
In Social Problems, George goes even further, complaining:
“12,000 head of cattle (are) killed weekly in”New York”as to the elements of fertility, which, instead of being returned to the soil from which they come, are swept out through the sewer of our great cities. The reverse of this is the destructive character of our agriculture, which is year by year decreasing the productiveness of our soil, and virtually lessening the area of land available for the support of increasing millions.” — p. 234, Social Problems.
So, George, writing in 1886, when the American population was about 1/6th of what it is today, and our resource usage an even smaller fraction, was already concerned about wasted effluence (at a time before commercial fertilizers) in the cities, and about destructive soil erosion on farms. George was worried about the exact thing that Hudson claims he was not worried about! Further, this hardly sounds like the anti-environmentalist Hudson paints George as.
George remains ahead of his time in so many unappreciated ways. We are still catching up.
The argument returned to Hudson’s take on George’s views of slavery, but his claim that George worked with slave-owners is demonstrably false: George was not even politically active when slavery was abolished by Lincoln’s emancipation proclamation in 1863, and George was just 24 years old, and learning about the world through his travels (Perhaps this is a good time to point out that Henry George’s life would be the good basis for a dramatic movie; a thought which has crossed the mind of at least one film-maker, Charles Ashira, http://backhomepictures.com/#section_development). So, George could not have been pro-slave-owner, as there were no such people to support, later on. Hehner also reminded Hudson of one of George’s earlier writings in which he came out against slavery.
The record is clear on this.
Furthermore, as Toby Lenihan noted above, the Democratic Party and newly formed Republican Party underwent radical changes during Reconstruction, and the Republicans had already started to adopt the pro-business policies that they continue to espouse today. George then, would have been left with little choice but to promote the interests of the working-man in the Democratic Party, or to form a party of his own”which he did, in New York, running twice for NYC Mayor in 1886 and 1897. There is not enough space here to delve into George’s mayoral campaign, but the reader is invited to decide for him/herself whether he supported the Establishment and Big Business, or the common man, perhaps by reading his acceptance speech for the first Mayoral run here: Throwing His Hat in the Ring: Henry George Runs for Mayor: http://historymatters.gmu.edu/d/5321/.
A free-ranging, even raucous, Q&A session followed the main presentation for about half an hour, much of which would be nearly impossible to summarize here. I even contributed to it myself, when the issue of Public Banking came up, since I am the New York Coordinator for the Public Banking Institute. Hudson added that Marx had expected banking to become a public utility as well. This is why China cannot have a banking collapse, despite high debt — it can simply be forgiven.
During Q&A, Hudson stressed further the point that the current version of capitalism emphasizes profiting from debt, not production, and is actually responsible for de-industrializing America. Mazzone challenged the audience further to answer why someone who had wealth and power wouldn’t continue to operate along such lines, especially when any failures would be propped up with freshly printed money from the government (technically, this is freshly issued money form the Federal Reserve, created to pay for “toxic assets” of the banks, and George would have almost certainly been opposed to this, as he believed money creation was too important to be left to private banks). “Failure pays today in that kind of world,” Mazzone argued. He agreed with a questioner that austerity — also the thematic challenge in the title of the seminar — was a symptom of the current system. Added Mazzone, the arbitragers don’t care about America; they just move their money offshore and into protected accounts (the Tax Justice Network calculates this may be as high as $32 trillion). Hudson said this is a form of short-term looting via bonuses and high salaries and that the Federal Reserve gave “cash for crash” money to the TBTF banks.
Later, Hudson said that the Tea Party is pulling both parties to the Right, since the Democrats move to the Right in order the reclaim the vacant center the Republicans have now abandoned.
A questioner asked about the Trans-Pacific Partnership and how that would wreck economies (by driving labor and environmental laws to their lowest common denominator). Mazzone said, “It’s a (president) Clinton world.” I added that TPP negotiators have said they want to get rid of state institutions, including public banks.
Ending on a reconciliatory note, Hehner said that though reactionaries may have infiltrated the Georgist movement, they are in no way representative of the movement or of George’s views. Hehner, who was born and brought up in Germany, brought up the example of his own ancestors as pro-labor, and who believed in worker’s rights. George was first and foremost pro-labor and for taxing the surplus of the land, said Hehner. Whether you are a neo-Marxist or a neo-Georgist, Hehner said, taxing surplus, funny money, and the idle gain of people who get something for nothing, is something all the panel should agree on. Hudson smiled and conceded, “these guys are OK, it’s the Georgists I was talking about.”
It’s puzzling to hear Hudson denounce Henry George to the extent he did at the Left Forum. The fact is, Hudson has been the first to promote the Georgist ideal of collecting the economic rent, especially on Land, whenever applicable, even sharing the advice with the government of China — which is in the middle of an enormous land bubble and in desperate need of land value taxation (Fred Harrison has suggested this as well). Hudson regularly ranks George among those who “get” the concept of economic rent, along with other classical economists like Ricardo and Marx. Whatever his personal negative experiences with later-day followers, or with those who ran the Henry George School when he worked there, it is a shame that this has interfered with his otherwise sound scholarship. Hudson does have a point in that the Georgist economic philosophy does not fit neatly into Right or Left boxes. However, if one looks at the theories of Henry George, and drops any ideological bias before doing so, one can decide if they are valid or not — and that should be the only criteria for judging economic theorems. As Cay Hehner taught me from my first classes at the Henry George School, it is best not to try to try to determine if Henry George was to the Right or to the Left, that will just make it much harder to understand his theories. Perhaps Hudson should heed this advice as well.
Beyond that, this author cannot speculate as to Hudson’s motives.
*** UPDATE ***
Panel member Cay Hehner wanted to add the following comment after reading the article:
I didn’t call for a “coalition of the right & the left”, but for a coalition of all progressive forces. I’ve often said in class that I’d call for an across-the-board coalition, following George’s rare magnanimity in political matters. You may have had that in mind when you wrote this sentence.Truthfully speaking I do not care for the right or far right and am as uneasy w/ reactionaries as is Michael. In my political analysis the far right creates fascisms and totalitarianism, two pitfalls to be avoided at all times & costs. I can coalesce more easily w/ a neo-Keynesian or a liberal Marxist than I can w/ a neo-classical economist or a right-wing libertarian. Climate change deniers and Heartland institute people are off-limits for me as are, say, white supremacists. If you wanted to identify and classify my position you could say I’m a neo-Georgist, like Mazzone, and a progressive libertarian, like George, philosophically speaking I’m a progressive Hegelian Platonic, and spiritually speaking I follow Sri Aurobindo. Anyway, that might be breaking the boundaries of your summary a tad.When I was in college my first year I had a neo-Keynesian professor named Michael Bolle, brilliant man who had taught at Harvard, who urged us to always identify our own position, economic, social political,
philosophic upfront before engaging in a free-for-all discussion. I believe till today that this is a sound piece of advice and if followed it would clarify discussions and obviate much misunderstanding.
The concept of “libertarianism” is radically different in different contexts, cultures, and settings.
In French, for instance, there is no such thing as “right-wing” libertarianism, if you designate some one or yourself ‘libertaire’, the word comes from liberte after all, that automatically denotes a progressive position and mind set. It also is connected to a very precise anti-authoritarian, emancipatory political and economic philosophy. Ct. Kropotkin would stand as one of the spiritual fathers of that movement, even the Great and incomparable Lev Tolstoy. It took me a while to realize that here on this side of the Pond “libertarian” can mean anything and everything not excluding the kitchen sink. For not just historic reasons but reasons of plain common sense and brotherly ethicality I am fundamentally ill at ease to be put in bed (ideologically speaking) w/ any kind of conservative or reactionary. Fox News, and its various reactionary offshoots & commentators are not viable news distributors, they are ideological machinists, slanderers, and character assassins. The Reagan-Bush era or the Thatcher/Kohl era overseas was an abomination in my eyes that did incalculable damage to national and world history. By contrast the Progressive Era of the beginning of last century carried (domestically) by TR and (internationally) by Woodrow Wilson as well as after the Harding/Coolidge/Hoover national bankruptcy by FDR/s WPA went broadly speaking in the right direction and it carried the U.S. and humanity as a whole forward in leaps and bounds. As if you needed a physical proof the Harding/Hoover years led in the worst financial crash of the century, and so did the
Reagan/Bush deregulation. The Italians foolishly voted in this speculator/monopolist Berlusconi only to have him preside over the worst financial debacle of this venerable country. I let you draw your own conclusions regarding politics in our town. Just because s.o. has the nimbus of being rich doesn’t mean he or she will make you rich when you vote them into office. Likelihood is on the contrary that they will continue to pick your pockets as they have done all along.
Anyway an alliance w/ right-wing libertarians is not something I would recommend or stand for under any circumstances. Anybody who knows me or has taken five minutes of class time or discussion time w/ me would be in the clear on as much.
*** UPDATE ***
From Michael Hudson:
The problem with “Georgist scholarship” (an oxymoron, I realize) is that they only read George from the late 19th century, not the other contemporary literature of his time. The idea of ecology — above all the return of urban waste (nightsoil, slaughterhouse refuse, etc.) — was a fundamental tenet of American protectionism. On my website you will find my PhD dissertation on E. Peshine Smith, who emphasized this. Henry Carey picked it up and pointed out that under free trade and the specialization of labor, urban/rural balance of this sort was blocked. Protective tariffs were needed to balance the economy and its ecology.
I give a long history of this ecological argument in America’s Protectionist Takeoff, and also in my Trade, Development and Foreign Debt. George often plagiarized Carey and others, removing their trade and tariff arguments. His argument for free trade rejected the very ecological concepts you are trying to give him credit for.
Regarding George’s views on rent, I of course applaud his support of this basic classical concept. Unfortunately, despite his advocacy of taxing rent, George lacked a conceptual framework of price and value. So this prevented him from defining an idea of rent that could be measured in practice. This blind spot to classical economics is largely responsible for his followers for the past century-plus never measuring rent statistically, or even in theory.
In that respect, George’s anti-intellectualism (an expression of his “not invented here” lack of formal education himself) has poisoned his followers, blocking them from being able to communicate with economists or other academics trained in classical doctrine. This is what made the Single Taxers and Georgists a cult, with its own vocabulary.
What George REALLY was railing against was absentee ownership. Veblen made this clear in his book of that title. Now that two-thirds of Americans own their own homes — on credit — should they be taxed fully on the land? Or as I — and also Ed Dodson — have suggested, should there be a “basic allotment” that is untaxed, in order to lower the cost of living?
I have suggested to Andy Mazzone that he join me in calling ourselves post-Veblen economists. I prefer this to my UMKC colleagues’ post-Keynesianism. And inasmuch as Veblen wrote nearly half a century afterMarx, it is preferable to post-Marxist, with all the baggage that moniker would entail.
George’s fatal failing — and what cripples his attempt to create an overall economic theory out of his head in Progress and Poverty — is his failure to understand money, credit, debt, interest and the financialization of economies. His theory of interest — as BÃ¶hm-Bawerk calls it, a naÃ¯ve productivity theory — is entirely non-monetary, and shows his lack of understanding Price Theory 101, or the relationship between cost of production, price and value. This makes his book best suitable for the wastebasket as far as modern readers are concerned.
His blind spot has crippled his followers into imagining that landlords end up with today’s rent — not the bankers as “Rent is for paying interest.” So they miss the point that the major defenders of the real estate interests are the banks, who sit on the landlord’s shoulders so to speak (or if you prefer, lurk in the landlord’s intestines as a tapeworm to extract the nourishment).
This is what I meant when I characterized George as pro-rentier. Today’s dominant rentiers are bankers and bondholders, that is, financial investors. That is why Occupy Wall Street focused on Wall Street.
By missing the target and not understanding the economy — largely by leaning on P&P as a crutch, instead of reading classical economics or George’s more effective contemporaries who analyzed rent (Patten, Veblen, etc.), Georgists have fallen off the right wing of the political spectrum.
a manual. The world did not come without a way for people to prosper, and the planet to heal and stay well; that way is geonomics. Economies are part of the ecosystem. Both generate surpluses and follow self-regulating feedback loops. A cycle like the Law of Supply and Demand is one of the economy’s on/off loops. Our spending for land and resources – things that nobody made and everybody needs – constitutes our society’s surplus. Those profits without production (remember, nobody produced Earth) can become our commonwealth. To share it, we could pay land dues in to the public treasury (wouldn’t oil companies love that?) and get rent dividends back, a la Alaska’s oil dividend. Doing so let’s us axe taxes and jettison subsidies. Taxes and subsidies distort price (the DNA of exchange), violate quid pro quo by benefiting the well-connected more than anyone else, reinforce hierarchy of state over citizen, and are costly to administer (you don’t really need so much bureaucracy, do you?). Conversely, land dues motivate people to not waste sites, resources, and the ecosystem while rent dividends motivate people to not waste themselves. Receiving this income supplement – a Citizens Dividend – people can invest in their favorite technology or outgrow being “economan” and shrink their overbearing workweek in order to enjoy more time with family, friends, community, and nature. Then in all that free time, maybe we could figure out just what we are here for.
a study of Earth’s economic worth, of the money we spend on the nature we use, trillions of dollars each year. We spend most to be with our own kind; land value follows population density. Besides nearness to downtowns, we also pay for proximity to good schools, lovely views, soil fertility, etc. These advantages, sellers did not create. So we pay the wrong people for land. Instead, we should pay our neighbors. They generate land’s value and deserve compensation for keeping off ours, as they’d pay us for keeping off theirs. It’s mutual compensation: we’d replace taxes with land dues – a bit like Hong Kong does – and replace subsidies with “rent” dividends to area residents – a bit like Alaska does with oil revenue. Both taxes and subsidies – however fair or not – are costly and distort the prices of the goods taxed and the services subsidized. By replacing them and letting prices become precise, we reveal the real costs of output, the real values of consumers. Then, just by following the bottom line, people can choose to conserve and prosper automatically. A community could start by shifting its property tax off buildings, onto land – a bit like a score of towns in Pennsylvania do; every place that has done it has benefited.
a scientific look at how we divvy up the work and the wealth, how some of us end up with too much or too little effort or reward. That’s partly due to Ricardo’s Law of Rent, showing how wasteful use of Earth cuts wages. And it’s partly due to how a society’s elite runs government around like water boys, dishing out subsidies and tax breaks. While geonomists look political reality right in the eye, without blinking, conventional economists flinch. When Paul Volcker, ex-chief of the Federal Reserve, moved on to a cushy professorship at Princeton cum book contract, the crush of deadlines bore down. So Volcker asked a junior associate to help with the book. The guy refused, explaining that giving serious consideration to policy would ruin his academic career. The ex-Fed chief couldn’t believe it and asked the department chair if truly that were the case. That head honcho pondered the question then replied no, not if he only does it once. And economics was AKA political economy!
a new policy from a new perspective. Once your worldview shifts — so that vacant city lots are no longer invisible — then epiphany. “Of course! Why didn’t I see it before?” Once you do see the emptiness and what damage it does, how can you ever go back to the old paradigm?
in part the Great Green Tax Shift maxed out. Economically, taxing pollution and depletion does reduce pollutants and extracts – and thus the tax base; plus such taxes are regressive, requiring a safety net. On the other hand, collecting site rent is progressive and generates a revenue surplus payable as a dividend to residents, which can serve as the safety net. Environmentally, taxes on waste and extraction do not drive efficient use of land, as does getting site rent.
not a panacea, but like John Muir said, “pull on any one thing, and find it connected to everything else.” Recall last month’s earthquake in El Salvador. We felt it and its formidable after-shocks in Nicaragua. Immediately afterwards, my host nation, one of the poorest in the Western Hemisphere, sent aid to its Central American neighbor. The Nica newspapers carried photos of the devastation. They showed that the cliff sides that crumbled had had homes built on them while the cliffs left pristine withstood the shock. Could monopoly of good, safe, flat land be pushing people to build on risky, unstable cliffs? If so, that’s just one more good reason to break up land monopoly. What works to break up land monopoly, history shows, is for society to collect the annual rental value of the underlying sites and resources. That’d spur owners to use level land efficiently, so no one would be excluded, forced to resort to cliffs. To prevent another man-induced landslide is yet another reason to spread geonomics.
the study of the money we spend on the nature we use. When we pay that money to private owners, we reward both speculation and over-extraction. Robert Kiyosaki’s bestseller, Rich Dad’s Prophecy, says, “One of the reasons McDonald’s is such a rich company is not because it sells a lot of burgers but because it owns the land at some of the best intersections in the world. The main reason Kim and I invest in such properties is to own the land at the corner of the intersection. (p 200) My real estate advisor states that the rich either made their money in real estate or hold their money in real estate.” (p 141, via Greg Young) When government recovers the rents for natural advantages for everyone, it can save citizens millions. Ben Sevack, Montreal steel manufacturer, tells us (August 12) that Alberta, by leasing oil & gas fields, recovers enough revenue to be the only province in Canada to get by without a sales tax and to levy a flat provincial income tax. While running for re-election, provincial Premier Ralph Klein proposes to abolish their income tax and promises to eliminate medical insurance premiums and use resource revenue to pay for all medical expense for seniors. After all this planned tax-cutting and greater expense, they still expect a large budget surplus. Even places without oil and gas have high site values in their downtowns, and high values in their utility franchises. Recover the values of locations and privileges, displace the harmful taxes on sales, salaries, and structures, then use the revenue to fund basic government and pay residents a dividend, and you have geonomics in action.
what you do when you see economies as part of the ecosystem, following feedback loops and storing up energy. Surplus energy – fat or profit – enables us to produce and reproduce. To recycle society’s surplus, the commonwealth, geonomics would replace taxes with land dues (charged to users of sites and resources, in-cluding the EM spectrum, and extra to polluters), and replace subsidies with rent dividends to citizens (a la Alaska’s oil dividend). Without taxes and subsidies to distort them, prices become precise, reflect accurately our costs and values; then, motivated by no more than the bottom line, both producers and consumers make sustainable choices. While no place uses geonomics in its entirety, some places use parts of it, most notably a shift of the property tax off buildings, onto locations. Shifting the property tax drives efficient use of land, in-fills cities, improves the housing stock, makes homes affordable, engenders jobs and investment opportunities, lowers crime, raises civic participation, etc – overall it makes cities more livable. Geonomics – a way to share the bounty of nature and society – is something we can work for locally, globally, and in between.
shaped by reality. In the 1980′s, the Swedish government doubled its stock transfer tax. Tax receipts, however, rose only 15%, since traders simply fled to London exchanges. Fearing a further exodus, the Swedish government quickly rescinded the tax altogether. (The New York Times, April 20) That willingness to tax anything leads us astray. Pushing us astray is that unwillingness to pay what we owe: rent for land, our common heritage. Assuming land value is up for grabs, we speculate. We cap the property tax on both land and buildings and the rate at which assessments can go up; while real market values rise quicker, assessments can never catch up. Our stewards, the Bureau of Land Management, routinely sell and lease sites below market value, often to insiders, says the Government Accounting Office. Once we grasp that rent is ours to share, we’ll collect it all, rather than let it enrich a few, and quit taxing earnings, which do belong to the individual earner. That shift is geonomic policy.
a way to connect the dots. Making the cyber rounds is “The Cavernous Divide” by Scott Klinger, from AlterNet (posted March 21): “As the number of billionaires in the world expands, so does the number of those in poverty.” Duh. The yawning income gap is not news. Nearly every issue of our quarterly digest carries a similar quote. Yet the connection was worked out long ago by one of America’s greatest thinkers, Henry George, who labeled his masterpiece, Progress and Poverty. Techno- and socio-advances always enrich few and impoverish many. Yet progress also pushes up location values – the geonomic insight (is Silicon Valley cheaper now or more expensive?). Instead of taxing income, sales, or buildings, society could collect those values of sites, resources, EM spectrum, and ecosystem services via fees and dues, which would lower the income ceiling, and instead of lavishing corporate welfare, pay out the recovered revenue via dividends, which would jack up the income floor. Dots connected.