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Jobless Growth, the 21st Century Condition in Poor Nations
This 2013 excerpt of the IPS, Nov 25, is by Samuel Oakford.
Though the percentage of people living in extreme poverty (less than 1.25 dollars per day) has declined in LDCs, their numbers have increased due to population growth.
While the economies of LDCs expanded yearly by over 7.5 percent in the decade before the 2008 financial crisis, employment growth per annum stood at just 2.9 percent between 2000-2012, barely ahead of the population growth rate of 2.3 percent.
If high growth couldn’t buoy the job market during boom years, a period of slower increases will require specifically catered policies to spur employment.
In Namibia, the government has set up a national mining company, hoping to replicate Chile’s CODELCO and not the bloated state-run enterprises of post-independence Africa.
If Chile is a model for mineral exporters, garment producers look to Taiwan, South Korea, and Singapore, all of which began by manufacturing textiles before graduating to more complicated consumer goods and electronics.
Ed. Notes: As usual, the wannabe problem-solvers want to tax the businesses that have succeeded, which reduces their success and does not necessarily create success for anyone else. It’s like the swing of the pendulum from leftwing mistakes to rightwing mistakes and back again. How can well-meaning people be so blind to the land? All three of the Asian examples cited — Taiwan, South Korea, and Singapore — first implemented land reform. Not taking land away from large landholders but by taxing the value of land, so owners sold off their excess, usually to their tenant farmers, at prices the landless could afford. The thousands of new family-owned farms is what founded the bedrock of the Asian Tiger miracle economies, and its a reform that could work anywhere. Longer ago, it also worked in Denmark, California, Australia, and New Zealand. Look where their economies are today!
This 2013 excerpt of the Washington Post, Spt 9, is by Debbie Cenziper, Michael Sallah, and Steven Rich.
Steven Berman, son of a Baltimore banker, swept into the District during the height of the housing boom, flush with money and ready to take on hundreds of bidders at the city’s high-stakes tax lien auction.
From 2005 to 2007, Berman’s companies dominated the bidding room, spending millions to buy the liens placed on properties when owners fall behind on their taxes.
He was a big player at tax lien auctions in Maryland, too, where he was caught in 2007 rigging bids at sales across the state, leading to the largest criminal conspiracy case of its kind at the time.
A Washington Post investigation found that during Berman’s spectacular spending spree in the city, his companies engaged in dozens of rounds of irregular bidding similar to what federal agents had discovered in Maryland.
All told, six companies, three owned by Berman, took turns winning hundreds of liens on real estate worth $540 million through unusual back-and-forth patterns of bidding never detected by city government.
Of hundreds of participants, only those six companies stood out for bidding that was so irregular that the odds of it happening by chance were less than 1 in 1,000, according to The Post’s analysis, which was conducted with a team of economists and antitrust experts from Boston.
Once the liens were won, the companies charted an aggressive course through the District that would shake families for years to come, pressing to foreclose on homes in every ward — often over tax debts of $500 or less.
Ed. Notes: Why does real estate and fraud go hand in hand? And what’s the government doing, selling people’s tax-debt to private collectors? How slimy is that? What government should auction off, and do so with its eyes open, are vacant lots and abandoned buildings. How much money the government gets at the auction won’t matter so much as long as later the government recovers the ongoing annual rental value of the locations, which will rise as the new owners develop their latest acquisitions.
Further, people could afford to pay a tax on property if the tax did not also fall on the value of the building — a stupid tax that merely induces owners to forgo maintenance and improvements — and if the residents were to receive a share of the recovered revenue. It’s a recipe that works elsewhere. In British Columbia, to make the tax on carbon more affordable to lower-income people, the BC government shares out some of the collected revenue as a dividend to residents.
In Maryland, Washington DC, everywhere, the government could use the same scheme: recover all the socially-generated value of all the locations but then pay out the lion’s share as a dividend to residents. Doing so is somewhat similar to what Aspen Colorado does and what Singapore does. Singapore prospers so notably because it keeps taxes on people’s efforts low and taxes on the rising value of locations high, then disburses some of its revenue surplus back to its citizens. It’s a policy that would solve the problem of tax delinquency in Maryland and Washington DC.
This 2013 excerpt of The Ecologist, Nov 23, is by Frederic Mousseau & Serah Aupong.
It has been said that PNG has the most equal distribution of land on earth. The country’s constitution protects customary land rights and there is virtually no private ownership. Land is almost entirely controlled by clans and tribes. The constitution sets self-reliance, sovereignty, and the sustainable management of natural resources as overarching principles for the country.
Yet, even with these legal protections, a massive land rush is currently taking place in the country. In recent years, 12 percent of the country, 5.5 million hectares, has been leased out to foreign corporations, ostensibly to launch agricultural projects. Yet these firms appear to be mostly occupied with harvesting timber that is then exported to overseas markets.
As a result, PNG is now the second largest exporter of tropical logs in the world, after Malaysia, and exports more than 3 million cubic meters of logs every year, primarily to China.
In many deals, landowners were blatantly misled about the size and the nature of an agribusiness project. The logging occurs without free, prior, and informed consent of the local people. State agencies such as the Lands Department, the Department of Agriculture and Livestock, and the Forest Authority fail to perform their duties: fraud, misconduct, and incompetence as well as overall lack of adherence to proper procedures.
Offering Papua New Guinea’s natural resources to foreign interests has made the country one of the fastest growing economies in the world [benefitting insiders, another instance of the "resource curse], a paradox of wealth without development. People have little or no access to safe drinking water, health facilities, nor schools.
The problem does not lie in the law. [It lies in law enforcement.]
Ed. Notes: How many more times must people note the irony of Progress and Poverty — the title of the most famous book on economic reform by Henry George back in the 19th c. — before they finally see the connection and how to uncouple it? The central problem is that people see the profit from land as up for grabs. So a partnership of investors and government officials grab it, leaving ruin for the rest of society. What the rest of society must do is to declare loudly and as many times as it takes that the surplus, rental value of land, resources, and locations is a common wealth, not an object of speculation, but a stream of wealth for all members of society to share, a la Alaska, Singapore, and a handful of other places. It can’t be said often enough, loud enough. Not until the land-squeezing stops and the rent-sharing begins.
This 2013 excerpt of Reuters, Sep 8, is by Lionel Laurent.
The Champs-Elysees lures millions of tourists every year to enjoy shopping at the Elysees 26 mall, poker at the Aviation Club, plush cars and futuristic architecture in the Citroen showroom, or feather-clad showgirls at the Lido cabaret.
But for all their Parisian charisma, none of these attractions are French-owned. They belong to the royal family of Qatar, a resource-rich emirate about 3,000 miles away.
Some Muslims may frown on investments in gambling, alcohol and high-kicking dancers, but over the past few decades the buildings have helped bolster Qatar’s global portfolio of trophy assets, including London’s Harrods and Singapore’s Raffles Hotel. The latest French addition was a chain of upscale malls under the Printemps banner, bought by a fund controlled by Qatari royals in August for 1.7 billion euros ($2.23 billion).
For oil-rich royalty from the Arab Gulf, part of the attraction of the United Kingdom has been the fact it charges no taxes on profits foreign investors make when they sell real estate. Five years ago, Qatar sealed a similar agreement with France. The treaty was agreed by former center-right president Nicolas Sarkozy in 2008, and is one of the most generous Qatar has secured, exempting Qatari investors from taxes on the profits they make when they sell properties.
The treaty allows state-owned Qatari entities to avoid capital gains tax – the lowest rate would be 34.4 percent – on any profits made selling French property, whether held directly or via subsidiary companies. Private Qatari investors are entitled to the break as long as they hold the property in an investment vehicle that also has 20 percent in non-property assets. The treaty applies to all purchases made since January 2007.
Aside from the United Kingdom, only Ireland has offered Qatar the same exemption and that only since 2012. At home, Qataris face no personal income taxes but some businesses could be taxable at up to 10 percent on gains from the sale of property.
Property experts say the luxury real-estate deals that are encouraged by the tax treaty mainly benefit a small circle of investors.
“We are always told this type of agreement is designed to promote investments in France but this is money that is not going into the economy,” said Olivier Duparc, a Paris-based notary. “Taxes are going up for everyone except the Qataris, it seems.”
Taxes matter a lot in France: The country’s total tax take was 43 percent of GDP in 2010, according to the Organization for Economic Cooperation and Development (OECD), far bigger than the United States’ 25 percent or the United Kingdom’s 35 percent. A generous healthcare system and faith in the state have helped governments sell tax rises to the public, which are needed to trim a 90-billion euro budget deficit.
Ed. Notes: These deals between rich nationals and wealthy foreigners treat landmarks — what should be our common heritage — as their own game pieces on a real-life MONOPOLY board. The rich always have and always will secure their fortunes in real estate, meaning, in prime locations and in expansive ranches and in fertile mega-farms. Land is tangible and after a bubble bursts will pay off handsomely for a couple decades.
The treaty waives any tax on the sale of land (and building). But why wait ’til then to tax land? The people could be benefitting all along if owners were charged Land Dues all along.
And why should the elite alone benefit? Land’s value should not be lining just their pockets but those of the whole society. Then it wouldn’t matter who owned the land as long as society got its rent. And if society got its rent, then speculators would have no interest in owning land, so ownership would always reside with those who actually use the land or site.
This 2013 excerpt of the New York Times, Nov 7, is by Ron Nixon.
The federal government paid $11.3 million in taxpayer-funded farm subsidies from 1995 to 2012 to 50 billionaires or businesses in which they have some form of ownership.
The billionaires who received the subsidies or owned companies that did include the Microsoft co-founder Paul G. Allen; the investment titan Charles Schwab; and S. Truett Cathy, owner of Chick-fil-A. The billionaires who got the subsidies have a collective net worth of $316 billion.
The findings likely underestimate the total farm subsidies that went to the billionaires on the Forbes 400 list because many of them also received crop insurance subsidies. Federal law prohibits the disclosure of the names of individuals who get crop insurance subsidies.
Congress is debating a House proposal that would cut nearly $40 billion over 10 years from the food stamp program, which helps provide food for nearly 47 million people. A Senate provision would cut $4.5 billion over the same period.
Food stamps kept about five million people above the poverty line last year. The food stamp program was cut by about $5 billion on Nov. 1.
Proposed bills would allow billionaires to get even more in subsidies, all without taxpayers knowing who they are, while imposing draconian requirements on low-income people.
Ed. Notes: Hungry people outnumber billionaires by millions yet exercise nearly no power in America’s so-called democracy. But that’s not unusual. Everywhere, forever, in all times and places, the role of government has not been to serve the people in its entirety but to serve the ruling elite, whether an owning class in a capitalist country or a ruling party in a “communist” country. The only thing that can change the situation is not demanding a bandaid fix but demanding an end to politicians getting to spend all our public revenue and a beginning of every citizen getting a fair share of the common wealth. That’s how to put an end to such vile injustice. And it’s called geonomics.
This 2013 excerpt of Quartz, Spt 6, is by Gwynn Guilford.
Chinese local governments hit the jackpot this week. In Beijing, Shanghai, Hangzhou and Suzhou, land parcels sold for record prices, crowning a slew of new “land kings,” as Chinese slang refers to record-setting plots.
In Beijing, a residential land parcel near the city’s embassy district commanded 73,000 yuan ($11,900) per buildable square meter, or about $1,100 per buildable square foot. For comparison, the most expensive property deal in Manhattan in 2013 fetched $800 per buildable square foot; the average for 2012 was $323.
Why is Beijing more expensive than Manhattan?
Is Beijing supply scarce? Actually, it could mean the opposite. Price rises could be due more to speculation than to a dearth of supply. Even though swanky high-rises are getting more expensive in Beijing, their sales in smaller cities are flagging, suggesting that genuine demand is weak.
Per capita housing stock hit 35 sq m in 2011, and is rising by 1.2 sq m a year, putting China in the same league as many wealthy countries. Demand in mega-cities like Beijing and Shanghai can probably absorb any excess supply. But oversupply is already hitting smaller cities, and as demand flags, prices there have started to fall.
Ed. Notes: Sure, speculators add their bids to demand and keep some of their land out of supply — that’s a big part of the story. The other part is population density. Nowhere is denser than China. Close to 1 of 5 humans are Chinese and China is smaller than America. All those people needing sites for homes and business push up location value sky-high.
While that’s a curse for those who can’t afford the land, it needn’t be. All government need do is not sell land but lease it and renegotiate the leases after short periods of time. The land it already sold it can tax or levy land-use fees or charge Land Dues. Doing that would drive out the speculators. With the revenue, government could pay a dividend, as does Singapore, and that’d enable residents to afford to live there. Then as ground rents rise due to true demand and/or limited supply, the increases in spendiness would benefit everyone.
Following such a geonomic policy, Beijing would be ahead of Manhattan in more ways than one.
The Unique Genius of Hong Kong’s Public Transportation System: The use of a clever financing system has enabled the territory to provide world-class service without breaking the bank.
This 2013 excerpt of The Atlantic, Spt 10, is by Neil Padukone.
Hong Kong’s Mass Transit Railway (MTR) Corporation, which manages the subway and bus systems on Hong Kong Island and, since 2006, in the northern part of Kowloon, is considered the gold standard for transit management worldwide. In 2012, the MTR produced revenue of 36 billion Hong Kong Dollars (about U.S $5 billion)—turning a profit of $2 billion in the process. Most impressively, the farebox recovery ratio (the percentage of operational costs covered by fares) for the system was 185 percent, the world’s highest. Worldwide, these numbers are practically unheard of —- the next highest urban ratio, Singapore, is a mere 125 percent.
In addition to Hong Kong, the MTR Corporation runs individual subway lines in Beijing, Hangzhou, and Shenzhen in China, two lines in the London Underground, and the entire Melbourne and Stockholm systems. And in Hong Kong, the trains provide services unseen in many other systems around the world: stations have public computers, wheelchair and stroller accessibility (and the space within the train to store them), glass doors blocking the tracks, interoperable touch-and-go fare payment (which also works as a debit card in local retail), clear and sensible signage, and, on longer-distance subways, first-class cars for people who are willing to pay extra for a little leg space.
How can Hong Kong afford all of this? The answer is deceptively simple: “Value Capture.”
Like no other system in the world, the MTR understands the monetary value of urban density. Hong Kong is one of the world’s densest cities, and businesses depend on the metro to ferry customers from one side of the territory to another. As a result, the MTR strikes a bargain with shop owners: In exchange for transporting customers, the transit agency receives a cut of the mall’s profit, signs a co-ownership agreement, or accepts a percentage of property development fees. In many cases, the MTR owns the entire mall itself. The Hong Kong metro essentially functions as part of a vertically integrated business that, through a “rail plus property” model, controls both the means of transit and the places passengers visit upon departure. Two of the tallest skyscrapers in Hong Kong are MTR properties, as are many of the offices, malls, and residences next to every transit station (some of which even have direct underground connections to the train). Not to mention, all of the retail within subway stations, which themselves double as large shopping complexes, is leased from MTR.
MTR’s financial largesse means that the transit system requires less maintenance and service interruptions, which in turn reduces operating costs, streamlines capital investments, and encourages more people to use transit to get around. And more customers means more money, even if fares are relatively cheap: most commutes fall between HK $4 and HK$20 (about 50 cents to $3), depending on distance. (In London, by comparison, a Tube journey can cost as much as $18).
Ed. Notes: A transit agency need not own real estate, not if it has the power to recover the land values that arise around its stops and stations (or if the local government recovers those “ground rents” via a tax or fee or dues on behalf of the metro system).
This model of self-financing could be used for all infrastructure, not just transit, and for other public programs, too, like parks. All those improvements increase nearby location value and, if the improvement is truly desired by the public, they increase the value of the site by more than the cost of the project. Some big name economists (Stiglitz, Vickrey) noted this phenomenon and called it the “Henry George Theorem”, after the 19th c. reformer then famous for advocating a single tax on land value.
And it’s not just public works that lift locational rents but also private works, like a private school, a popular shopping district, and in the old days a church (a big speculating landowner would donate land to the faithful for building a church, knowing its followers would move in and push up site values). In general, society has generated so much land rent — and continues to do so daily — that if all were recovered (by dues, taxes, fees, whatever), it’s enough to fund any truly desired public service plus pay citizens a dividend. We just need to apply the lesson of Hong Kong to reforming public revenue to the max.
This 2013 excerpt of Business Insider, Nov 21, is by Rob Wile.
Where is America heading? Last year’s inaugural U.S. 20 list featured things like the end of retail, the revival of manufacturing, and the shale revolution.
Believe it or not, it wasn’t difficult at all to come up with 20 brand new trends this year that will dominate headlines over the next decade. It’s not that all of last year’s forces have already dissipated. But new movements have already sprung up.
The 2013 list includes two new geographic centers of the American economy, evolving patterns of relationships, robots, and the changing energy landscape.
Ed. Notes: Of the 20 trends, there are the expected ones about hot spots (San Francisco), energy (renewables), and progress (robotics) and the unexpected ones about the new matriarchy, the new soloists, and the lost homeowner. If such changes come to pass, will they make you happier? Is there anything you can do to guide change? Sure. Work for justice.
This 2013 excerpt of Salon, Spt 6, is by Leah A. Plunkett.
Governments are raising revenue by quietly taxing a group even more cash-strapped than they are: the poor.
Counties and states nationwide are sending out bills for services that are often involuntary: charging directly for the costs of certain governmental services traditionally paid for by the public as a whole (e.g., in the case of misfortune: emergency services).
Once services have been used, the government then bills the user for their cost. If payment isn’t made in full and on time, the user’s debt will likely grow through the addition of interest, late fees, and other penalties.
Here are four secret taxes on the poor:
1. Emergency Response Services: A trip in the ambulance or a visit from the fire department can now result in bills for thousands of dollars.
2. Unemployment Benefits: States may make access to this money quite expensive when benefits are provided on debit cards with hefty fees attached that users have to pay.
3. “Pay-to-Stay” Programs: Counties nationwide are charging inmates for the cost of their own room-and-board while they’re in prison, even for the cost of their public defender.
4. Parental Reimbursement Programs: Parents of kids who get into trouble with the law are often required to foot the bill for the government’s attempts to rehabilitate their children.
These “poor taxes” are going to pay for services that support all of us.
Ed. Notes: Is what’s wrong that the poor get charged or that there’s poverty in the first place? Paying one’s way, quid pro quo — that seems fair. What’s not fair is an economic policy that keeps people in poverty. Governments could end poverty — that both citizens and governments experience — by doing things like ending corporate welfare, ending taxes on wages, recovering all the values that society creates, such as the value of locations, and disbursing the recovered revenue to the members of society. Problem solved.
A 2013 excerpt of a US Bureau of Economic Analysis press release, Nov 21.
Americans’ personal income growth slowed in 2012 in most of the nation’s 381 metropolitan statistical areas (MSAs). On average, MSA personal income rose 4.2 percent in 2012, after growing 6.0 percent in 2011. Personal income growth ranged from 12.1 percent in Midland, Texas to -1.6 percent in Yuma, Arizona.
Midland, Texas was the fastest growing MSA, in terms of personal income, for the third year in a row. Odessa, Texas, which grew 11.5 percent, was second fastest, as it was in 2011. For both MSAs, the mining industry, which includes oil and gas extraction, contributed more than any other industry to personal income growth. North Dakota’s three MSAs were also among the fastest growing MSAs in the country in 2012. Personal income in the nonmetropolitan portion of North Dakota—where the booming mining industry is located—grew at an even faster 26.3 percent pace.
Declines in farm and military earnings, which were relatively small nationally, accounted for the personal income declines in four of the five slowest growing MSAs.
Among the 52 MSAs with a population of one million or more, professional services [lawyering, doctoring, etc], the largest industry in the large MSAs, contributed most to personal income growth in 2012.
Personal income grew 3.7 percent in nonmetropolitan counties, compared to 4.2 percent growth in metropolitan counties. The slower growth of the nonmetropolitan counties reflects the much lower earnings power of farming and government services. Nationally, farm earnings fell 1.2 percent while earnings in the private nonfarm sector grew 5.1 percent.
Ed. Notes: It didn’t say if the numbers were correctly for inflation which tends to double prices in the US every quarter century. Did you note the role of land including resources in wages? Demand for oil, a non-renewable, pushes up those salaries. But demand for food, which is reproduced every harvest, did not push up those salaries. And places where population density is greatest, salaries are highest, not just because that’s where lawyers and the like live but also because density delivers efficiency of scale so more profit can be made. So, to strike your fortune, live in a big city. But to balance work and play, live in the country where the cost of living is lower and your Citizen’s Dividend would go much further — once we as a society start sharing the worth of Earth and pay ourselves the extra income.
This 2013 excerpt of the New York Times, Aug 24, is by Mary Pilon.
Monopoly Empire, the latest flavor of the iconic game, substitutes traditional Atlantic City property names with those of large corporations — McDonald’s, Coca-Cola, Samsung, Nestlé, etc. In the latest Monopoly game, players acquire key brands to create corporate empires rather than try to bankrupt their opponents. And the old tokens — the racecar, thimble and top hat that used to race around the board — have been replaced by a 2014 Corvette Stingray, an Xbox controller and a Paramount Pictures movie clapboard.
Ironically the game was created to critique, not celebrate, corporate America. Contrary to popular board game lore, Monopoly was invented not by an unemployed man during the Great Depression but in 1903 by a feminist who lived in the Washington, D.C., area and wanted to teach about the evils of monopolization. Her name was Lizzie Magie.
Seventeen years before women could vote, Ms. Magie, a fiery stenographer, poet, sometime actress and onetime employee of the United States Postal Service’s dead-letter office, ginned up a game that mirrored what she perceived to be the vast economic inequalities of her day. She called it the Landlord’s Game and saw it as an educational tool and gamy rebellion against the era’s corporate titans, John D. Rockefeller Sr., Andrew Carnegie and J. P. Morgan.
Ms. Magie was an ardent follower of Henry George, who advocated a single tax on land [which would fall most heavily on downtowns where locations are by far the steepest].
Rexford G. Tugwell, a Columbia University professor and member of Franklin D. Roosevelt’s “brain trust,” played and taught the game. Members of the administration of Mayor Fiorello H. La Guardia of New York played it, as did Ernest Angell, an attorney and chairman of the board at the American Civil Liberties Union.
Millions are required to fight conflagrations such as the Rim fire in and around Yosemite. But what about fire prevention?
This 2013 excerpt of the Los Angeles Times, Spt 6, is by Jamie Simons.
A fire like the Rim fire burned almost 400 square miles, in and around Yosemite. Fueled by dense thickets of pine needles, undergrowth and fallen trees, fires like this one do not move slowly along the ground, clearing the underbrush but leaving parts of the forest intact. Instead, the flames leap through the crowns of trees, creating infernos that are hard to suppress and denude wide swaths of forest floor, making the terrain more susceptible to erosion by winter snow and rain. Even the mighty sequoias, able to withstand most fires and even thrive because of them, are threatened by a crown fire’s staggering heat.
It doesn’t have to be this way. For thousands of years the Indians who made Yosemite their home set small fires to prevent such cataclysmic events. Contained and manageable, their fires turned Yosemite Valley into a meadow that attracted deer for hunting and kept people safe.
For decades, the federal government took the opposite approach. Worried about having to divert men away from the war and into the forests to fight fires during World War II, the U.S. Forest Service and War Advertising Council created the Smokey Bear character. What followed were decades of fire suppression and teaching Americans that fires must be avoided at all costs. The result has been an unprecedented buildup of combustible fuels that has fed massive fires across the West in recent years.
In the late 1980s, the government realized the danger of this approach and began the practice of brush clearance and controlled burns in strategically located parts of the national forests and parks. But even though the practice has brought success where it has been used, we are still more oriented to fighting fires than to preventing them. Big fires are terrifying, and the Forest Service is under tremendous pressure to put them out at all costs. Right now, fighting forest fires comes with a virtual blank check.
After years of living in Yosemite National Park, I learned that, contrary to the teachings of Smokey Bear, fire can be a welcome force for good. It rejuvenates the forest. It clears the way for richer, more diverse habitat. It is essential in the life cycle of the giant sequoia. And if you live in the mountains, surrounded by forests piled high with tinderbox-dry debris, nothing helps you sleep more soundly at night than being in an area that’s been burned.
Those people involved in fighting wildland fires know that managed burns, tree thinning, brush clearance — even letting wildfires burn themselves out when no people or structures are at risk — are the best tools in their arsenal when it comes to preventing future wildfires.
The Rim fire has so depleted the Forest Service’s firefighting budget that it had to borrow from money set aside for fire prevention. So far, just this one fire has seen 5,000 firefighters on the line with a price tag that is at $75 million and growing. Working with those same numbers, it boggles the mind to think of how much good could have been done throughout the United States to prevent these kinds of massive wildfires.
Ed. Notes: In some Brazil, some towns put their budgets on the ballot, so voters can decide what programs to fund. Could that work for a big country, too? Maybe put five or so broad categories on the ballot. It’d at least give politicians some guidance.
Urban density in all the wrong places — thanks to the planner’s delight, an urban growth boundary?
This 2013 of Australian Property, Nov 20, is by Leith van Onselen.
Measures aimed at excluding growth from one part of Melbourne -– as via the fixed urban growth boundary (UGB) -– will naturally generates pressure to accommodate it elsewhere, leading to intensified development either on the fringe or in exurban and underdeveloped jurisdictions well beyond the metropolitan limits.
Melbourne’s UGB will likely encourage many lower income households to ‘leapfrog’ the boundary and settle in far flung commuter towns where developable land is available and housing is more affordable. In such instances, urban sprawl will be exacerbated and reliance on cars and energy use will be increased. Since Melbourne’s UGB was first introduced in the early-2000s, we have already seen widespread development in communities well beyond the UGB.
A related unintended consequence of Plan Melbourne is that ‘densification’ will also be pushed away from the inner and middle suburbs and onto the fringe, where there is less access to employment and amenities. The price of land will be forced up so much by the growth constraints that households will be less able to afford the ‘premium’ price commanded by the inner areas, and will instead be forced to locate at ‘less unaffordable’ but also less efficient locations.
Look at Portland Oregon -– often cited as a model for “smart growth”. There, urban consolidation policies have driven increased density at the fringe of the city but not nearer to the CBD, as revealed by Alain Bertaud, senior research scholar at the NYU Stern Urbanization Project.
Market forces would normally increase population density around the CBD and decrease it progressively toward the suburbs.
Ed. Notes: The political approach of “just say no” was ridiculed by progressives when Nancy Reagan urged teens to say “no” when tempted by drugs, but the same progressives embrace it when they want to halt sprawl. It didn’t work for Nancy, and it didn’t work for planners. Yet there is a policy that does work.
To spure builders to use land efficiently, one must stop the speculators from misusing land inefficiently. Builders need land but they don’t need it beyond cities, there’s plenty of buildable land within cities. Now it lies fallow as vacant lots, parking lots, sites with abandoned buildings or short, old buildings woefully inadequate for a bustling downtown.
To spur speculators to put their land to best use, have the city recover the value of land — which is socially-generated anyway and morally should be the residents’ common wealth. When owners pay over the land rent as a land tax or Land Dues or land-use fee, then they get busy and put their locations to best use in order to afford the charge. By developing their sites, they absorb all or most of the demand for new buildings, so there’s little leftover to appear on the fringe.
It’s not necessary or even feasible to stop sprawl by drawing a line in the sand. What’s necessary and rational is to recover the socially-generated value of locations. Then you’ll have the car-freest, most livable cities in the world.
Among adults who grew up in the bottom half of the income distribution, only one out of 25 had family income of at least $100,000 by age 30. But one of every three 30-year-olds who grew up in the top 1 percent of the income distribution was already making at least $100,000 in family income.
This 2013 excerpt of the New York Times, Jly 22, is by DavidLeonhardt.
Climbing the income ladder occurs less often in the Southeast and industrial Midwest, with the odds notably low in Atlanta, Charlotte, Memphis, Raleigh, Indianapolis, Cincinnati, and Columbus. By contrast, some of the highest rates occur in the Northeast, Great Plains, and West, including in New York, Boston, Salt Lake City, Pittsburgh, Seattle, and large swaths of California and Minnesota.
That variation does not stem simply from the fact that some areas have higher average incomes: upward mobility rates often differ sharply in areas where average income is similar, like Atlanta and Seattle. Fairly poor children in Seattle —- those who grew up in the 25th percentile of the national income distribution -— do as well financially when they grow up as middle-class children -— those who grew up at the 50th percentile -— from Atlanta.
In Atlanta, concentrated poverty, extensive traffic, and a weak public-transit system make it difficult to get to the job opportunities.
Four broad factors affect income mobility, including the size and dispersion of the local middle class. All else being equal, upward mobility tended to be higher in metropolitan areas where poor families were more dispersed among mixed-income neighborhoods.
Income mobility was also higher in areas with more two-parent households, better elementary schools and high schools, and more civic engagement, including membership in religious and community groups.
Larger tax credits for the poor and higher taxes on the affluent seemed to improve income mobility only slightly. There’s only modest or no correlation between mobility and the number of local colleges and their tuition rates or between mobility and the amount of extreme wealth in a region.
Children who moved at a young age from a low-mobility area to a high-mobility area did almost as well as those who spent their entire childhoods in a higher-mobility area. But children who moved as teenagers did less well.
Ed. Notes: To change cities from habitats for cars to habitats for people, you could change land from an object of speculation to a source of common wealth. Where owners pay a land tax (or could be Land Dues or land-use fees), they can’t afford to speculate so they keep their land at best use. Their individual acts of development add up to in-filling the city, making it more compact, which makes mass transit (getting to work) more efficient.
New development adds to the stock of buildings, both residences and businesses, so neighborhoods have more variety of goods and services. Living in a city that’s pretty and fun gives residents some civic pride, which leads to civic involvement. Pretty soon they’ll have all the ducks in a row to make upward mobility easier and commonplace.
When Denmark shifted to a land tax (1957, an article also in the New York Times), workers received their biggest raise in pay in Danish history, proof that this revenue reform works.
This 2013 excerpt of Alternet, Nov 20, is by David Dayen of Salon.
JP Morgan Chase’s long-awaited $13 billion deal with the Justice Department is not a $13 billion deal. $4 billion of this figure was the conclusion of a lawsuit between JPMorgan and the Federal Housing Finance Agency. So, let’s talk about this $9 billion settlement.
Nearly half of the figure comes in the form of “mortgage relief” that the bank has four years to distribute. Any time you extend the time horizon of a penalty, you’re reducing its real value.
The bank only has to put $1.2 billion of the $4 billion into first-lien principal reductions for homeowners facing foreclosure, which is less than JPMorgan Chase’s obligation under the original foreclosure fraud settlement. Now $300 million goes toward extinguishing second liens, like a home equity line of credit. Another $300 million is earmarked for principal forbearance, where the homeowner still owes the money but gets to skip a few immediate payments. $2 billion would go toward interest-rate reductions or refinancing or even writing new mortgages for moderate-income borrowers (that’s a penalty, writing mortgages that pay the bank interest?), and the balance toward anti-blight provisions like bulldozing homes or buying out properties where the bank has delayed foreclosure.
Almost none of this represents a real penalty for the bank. It performs anti-blight procedures annually in its normal course of business. Principal forbearance has minuscule long-term cost. Second liens that typically cannot be recouped are worthless to a bank, and it’s hard to say it “costs” anything to extinguish them. The bank is even credited for writing down principal on loans owned by mortgage-backed securities investors, paying off their fine with other people’s money (the other people in this case being the very investors they defrauded!). And all the measures to help struggling homeowners actually help JPMorgan Chase in the long run, because it makes financial sense to modify loans rather than foreclose.
Meanwhile, almost all of the deal, save a $2 billion penalty to the U.S. Attorney’s Office in Sacramento to settle a civil lawsuit, is tax deductible as a business expense. Assuming a 38 percent rate for deductions (as JPMorgan does) on $7 billion in business expenses, this knocks another $2.66 billion off the real cost to JPMorgan Chase. A ballyhooed $13 billion settlement winds up being closer to $2.74 billion.
It’s impossible for the punishment to fit the crime here, in monetary terms. If you calculate the actual harm done through fraud in the housing market and the impact on the broader economy, JPMorgan and its fellow banks would owe more money than they could ever scrounge up. Jail sentences for those who authorized and directed the conduct could at least create a deterrent for the future.
The bank settled mortgage-backed securities claims with private investors just last week. The long delay in finalizing the settlement with the Justice Dept. kept the facts from being used against them in the other cases.
Ed. Notes: This bad behavior by banks will go on as long as we keep giving them so much of our money, especially our common wealth, our spending for land and resources, a torrent of spending that we should keep in our communities, where it can compensate each of us for keeping off the land of all the rest of us. Further, it is community features that generate site value — views, crime rates, etc — so it is the community that deserves to keep locational value circulating within its borders. Collecting site value from owners will spur them to keep their land at best use while paying shares of collected “rents” will empower residents to live securely, having their economy serve them rather than they serve it.
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Geonomics is …
an economic policy based on the earth’s natural patterns. Eco-systems self-regulate by using feedback loops to keep balance. Can economies do likewise? Why don’t they now produce efficiently and distribute fairly? The answers lie in the money we spend on the earth we use. To attain people/planet harmony, that financial flow from sites and resources must visit each of us. Our agent, government, must collect this natural rent via fees and disburse the collected revenue via dividends. And, it must forgo taxes on homes and earnings, and quit subsidies of either the needy or the greedy. As our steward, government must also collect Ecology Security Deposits, require Restoration Insurance, and auction off the occasional Emissions Permit. And that’s about it – were nature our model.
one of many words I coined over 20 years ago: geoism, geonomics, geonomy, geocracy, etc – neologisms that later others came up with, too. CNBC once had a Geonomics Show, and Middlebury College has a Geonomics Institute. If “economy” is literally “management of the household”, then geonomy is “management of the planet”. The kind of management I had in mind is not what CNBC was thinking – top-down. My geonomics is not hands-on, interfering, but hands-off, organic. It’d strive to align policy with natural processes, similar to what holistic healing does in medicine, what organic farming does in agriculture. Geonomics attends to two key components: One, the crucial stuff to track is fat – or profit, especially profits without production, such as rent, or all the money we spend on the nature we use. Society’s surplus is the sine qua non for growth, needed to counter death – not merely more, but sustainable development, more from less. Two, the basic process to respect is the feedback loop. These let nature maintain balance automatically and could do the same for markets, if we let them. Letting them would turn our economies, now our masters, into a geonomy, our servant, providing us with prosperity, eco-librium (to coin a term) and leisure, time off – a hostile environment for economan but a cradle for a loving and creative humanity.
an alternative to conventional land trusts. Just as it seems some functions should not be left to the market – private courts and cops invite corruption (while private mediation is fine) – just so some land should not be left in the market. That said, sacred sites do not make much of a model for treating the vast acreage of land that we need to use. So the usual trust model, which is anti-use and counter-market, can not apply where it’s needed most. Trust proponents worry about ownership and control – two very human ambitions – but they’re not central. Supposedly, we the people own millions acres – acres that private corporations treat as private fiefdoms – and conversely, the Nature Conservancy owns wilderness the public can some places use as parks. So, the issue is not who owns but who gets the rent – ideally, all of us.
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 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.
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.
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. Better settlement patterns do reduce extraction upstream and pollution downstream.
Politically, green fees have less impact if applied locally; local is where grassroots movements have more impact. Yet getting rent usually entails shifting the property tax (or charging user fees), the province of local jurisdictions; both mayors and city voters have been known to adopt a site-value tax.
Ethically, putting into practice “tax bads, not goods” skirts the issue of sharing Mother Earth which collecting rent confronts head on. Since nothing is fixed until it’s fixed right, ultimately, greens must lead humanity into geotopia where we all share the worth of Mother Earth.
a way to have everybody pulling on the same end of the rope. Last summer’s expansive forest fires shed light on growing class resentment in the West. Old log-gers and ranchers rankled at the new urgency to stamp out the blazes that threatened the recent Aspenesque settlers. The newcomers expected working class firemen to make protecting their expensive homes top priority. (Chr Sci Mntr, Spt 7) The tinder for this envy? Rich people moving in bid up the price of land, making it hard to afford by people on the margin. The fault really lies with our system of privatizing land value. If this rising value were collected by land dues and shared by rent dividends – the essence of geonomic policy – who’d complain? The more people move in, the higher the land value, and the fatter the dividend paid to residents. Then people on the margin might go out of their way to invite rich outsiders in.
a way to redirect all the money we spend on the nature we use – trillions of dollars annually. We can’t pay the Creator of sites and resources and are mistaken to pay their owners this biggest stream in our economy. Instead, as owners we should pay our neighbors for respecting our claims to land. Owners could pay in land dues to the public treasury, a la Sydney Australia’s land tax, and residents could get back a “rent” dividend, a la Alaska’s oil dividend. We’d pay for owning sites, resources, EM spectrum, or emitting pollutants into the ecosphere, then get a fair share of the recovered revenue. The economy would finally have a thermostat, the dividend. When it’s small, people would work more; when it’s big, they’d work less. Sharing Earth’s worth, we could jettison counterproductive taxes and addictive subsidies. Prices would become precise; things like sprawl, sprayed food, gasoline engines, coal-burning plants would no longer seem cheap; things like compact towns, organic foods, fuel cells, and solar powers would become affordable. Getting shares, people could spend their expanded leisure socializing, making art, enjoying nature, or just chilling. Economies let us produce wealth efficiently; geonomics lets us share it fairly.
a study of a phenomenon David Ricardo noted going on two centuries ago. When wine grapes rise to $10,000 a ton from the very best land (last year, cabernet sauvignon commanded an average of $4,021 a ton in the Napa Valley), then vineyard prices soar from $18,000 an acre in the 1980′s to $100,000 an acre five years ago and now for a top pedigree up to $300,000 an acre (The New York Times, April 9, via Wyn Achenbaum). Pricey land does not make wine pricey; spendy wine makes land spendy. While vintners make their wine tasty, nature and society in general – not any lone owner – make land desireable. Steve Kerch of CBS’s MarketWatch (April 5) notes that much of what a home sells for on the open market is a reflection of intangible factors such as what school district the house sits in. The price the builder has to pay for the land also tends to be driven by the same intangibles. Because the value of land comes from society, and because one’s use excludes the rest of society, each user owes all others compensation, and is owed compensation by everyone else. Sharing land’s value, instead of taxing one’s efforts, is the policy of geonomics.
It is incumbent on every generation to pay its own debts as it goes. A principle which if acted on would save one-half the wars of the world.
I have never let my schooling interfere with my education.
The real voyage of discovery consists not in seeking new landscapes but in having new eyes.
Non violence leads to the highest ethics which is the goal of all evolution. Until we stop harming all other living beings, we are still savages.
Experience hath shewn, that even under the best forms of government those entrusted with power have, in time, and by slow operations, perverted it into tyranny.
Everything should be made as simple as possible, but not one bit simpler.
Democracy is a device that ensures we shall be governed no better than we deserve.
George Bernard Shaw
If all economists were laid end to end, they would not reach a conclusion.
George Bernard Shaw
Educate and inform the whole mass of the people… They are the only sure reliance for the preservation of our liberty.
Labor is prior to, and independent of, capital. Capital is only the fruit of labor, and could never have existed if labor had not first existed. Labor is the superior of capital, and deserves much higher consideration.