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This 2014 excerpt of The Web of Debt Blog, May 19, is by Ellen Brown.
In the nineteenth century, Mississippi, Arkansas, Florida, Kentucky, and Indiana all had their own state-owned banks. Some were extremely successful (Indiana had a monopoly state-owned bank). These banks, too, withstood constitutional challenge at the US Supreme Court level.
Several decades earlier, the states had been colonies that issued their own currencies in the form of paper scrip, typically called “bills of credit”.
After the Civil War, the expanding economy needed a source of expandable currency and credit, and when local governments could not provide it, private banks filled the void. They issued their own “bank notes” equal to many times their gold holdings, effectively running their own private printing presses.
Was that constitutional? No. The Constitution nowhere gives private banks the power to create the national money supply – and today, private banks are where virtually all of our circulating money supply comes from. Congress ostensibly delegated its authority to issue money to the Federal Reserve in 1913; but it did not delegate that authority to private banks, which have only recently admitted that they do not lend their depositors’ money but actually create new money on their books when they make loans.
When enough people understand that private banks rather than governments create our money supply, imposing interest and fees that constitute an enormous unnecessary drain on the economy and the people, we might wake up to a new day in banking, finance, and the return of local economic sovereignty.
Ed. Notes: Not that those in power obey the US Constitution always, but the old document does oblige the federal government to define and enforce weights and measures in the same article that it empowers Congress to coin money. So by that language, the government could set standards by which any currency could attain the status of legal tender. After a while, the competing currencies may get down to one or two — as along national borders — but the possibility of a new competing currency arising would keep the old established currency honest.
That means, issuers of currency — whether government, bank, or a consensual currency club — would have to constantly settle their debts and not issue too much new money. That means, inflation would not occur, and the true cost of living would show up as constantly falling prices.
Once again, it appears that allowing people to both cooperate and compete — rather than merely obey a central bank or government — solves an issue of centralization that some reformers try to address with the coercive power of the state. Let a free and fair market rule!
This 2014 excerpt of the Washington Post, May 14, is by Charles Lane, a Post editorial writer, specializing in economic policy, financial issues and trade.
The year 2014 marks the 50th anniversary of the Beatles’ arrival in the United States. The Allies liberated Paris 70 years ago. And, of course, it’s been 135 years since “Progress and Poverty,” by the American journalist Henry George, was published in 1879.
What’s that? Never heard of George or his treatise on the causes of inequality? It sold 3 million copies. Perhaps you missed “Progress and Poverty’s” anniversary while perusing this year’s equally improbable bestseller, “Capital in the Twenty-First Century” by French economist Thomas Piketty.
With its sweeping review of historical data, culminating in a warning about capitalism’s inexorable, destabilizing, tendency toward inequality — to be cured by a global wealth tax — Piketty’s book has earned comparisons with “Das Kapital,” by Karl Marx.
Yet Piketty’s project may have more in common with George’s book than Marx’s, and not only because each tome reached U.S. readers six years after a ruinous financial crisis — the Panic of 1873 for George, the 2008 collapse of Lehman Brothers for Piketty.
Analyzing the stagnant economy and rich-poor gap of his day, George blamed not free markets, which he considered efficient and fair, but their corruption by a privileged few.
Specifically, George argued, land owners commanded a high and growing share of U.S. income even though their claim to it was based on something as unproductive as mere ownership — as opposed to the laborer’s work effort or the investor’s risk-taking.
For George, the solution was to abolish all taxes except a “single tax” on the value of land. Since land could neither be created nor destroyed, taxing it would reduce neither society’s total wealth nor owners’ incentives to put property to productive use — buildings and other improvements wouldn’t be taxed.
To the contrary, taxing land, and only land, to pay the government’s bills would liberate labor and capital to seek their most productive use and thus to grow the economy. A huge source of unearned wealth would be curbed, if not eliminated. Capitalism would be redeemed and democracy saved.
“It is not enough that men and women should vote,” George wrote (including a gender that could not, at that time, cast ballots). “They must have liberty to avail themselves of the opportunities and means of life; they must stand on equal terms with reference to the bounty of nature. . . . This is the lesson of the centuries. Unless its foundations be laid in justice, the social structure of the United States or any other country cannot stand.”
To Piketty, like George an admirer of market efficiency and opponent of protectionism, the resulting accumulation of wealth in relatively few hands threatens economic fairness, economic dynamism — and democracy.
And so, updating Henry George’s single tax, Piketty proposes a global wealth tax.
For Piketty and George, the bottom line, both moral and economic, is to socialize “rent” — rent, that is, not in the colloquial sense but in the economic sense of income disconnected from productivity.
It’s an attractive vision: an egalitarian, productive society, purged of parasitical rent-seeking through the expedient of well-aimed taxes.
Ed. Notes: The author claims that the problem with taxing land — or charging land use fees or deed fees or leasing public land or instituting land dues — is not moral but practical. He thinks that assessing the value of a location — apart from any building atop it — can not be done. However, there are many jurisdictions already doing it — notably Singapore and Hong Kong — and private parties in the real estate business appraise the value of sites all the time. So determining rent for land is really not an issue and should not be an obstacle. Governments should be gathering all the rents they can, while not taxing people’s efforts, and disburse the revenues in the most equitable ways possible.
One of the contributions to economics made by Friedrich Hayek is the theory of scattered knowledge. In his famous article, “The Use of Knowledge in Society,” Hayek analyzed how the knowledge needed for economic activity by consumers, producers, legislators, and bureaucrats is dispersed, tacit, and ever-changing. Sellers of goods can conduct surveys to find out what people want, but such data collection reveals only a small fraction of the subjective desires of buyers. The knowledge of how to produce goods is decentralized among the firms, each of which has its own local knowledge of the costs and the demand for its goods.
Much of the knowledge about goods is tacit, not written down. A label can list the ingredients, but it will not tell the buyer about how good it will taste, and does not reveal the full story about the nutritional benefits and harmful effects. A government bureaucrat cannot know all the details about the way a company handles its goods. The biggest and fastest computers cannot be programmed to know everything the economy is doing. The supplies and demands for goods are dynamic, always changing, like the weather, so that even when knowledge is gathered and analyzed, it soon becomes obsolete.
The Hayekian knowledge problem is one reason the Austrian school of economic thought concludes that only a truly free market can effectively apply the relevant knowledge. Government officials who try industrial policy, the promotion of some goods at the expense of others, often fail. For examples, subsidies to energy from the wind end up wasting resources, as a uniform policy cannot be applied to suit local conditions, and the full effects (such as windmills killing birds) are not known in advance, resulting in bad unintended consequences.
The natural environment, everything apart from human action, is too complex for human beings to fully understand it. As with economic knowledge, the data needed to understand human effects on the environment is both global and local. The knowledge of environmental conditions is tacit, and changing. The ecologies of the earth, like the economies, have interconnected elements with feedback loops. Kill the mountain lions, and the deer multiply, eat up the vegetation, and then the rains wash away the soils.
The Hayekian perspective on global climate change as well as local impacts is to admit that we don’t know the full effects of human activity, but we do know that interference with long-established interconnections can be deadly. The policy implication is that we should minimize unnecessary human interference with the natural environment. Any human presence displaces the natural presence, as a farm replaces meadows and forests. But it is excessive to burn down large areas of rainforests in order to have a few years of crops until the soil nutrients are depleted.
The optimal application of the knowledge issue is to understand that we can apply some general knowledge but not specific knowledge. For example, we know that emissions from power plants, factories, and vehicles have bad effects. Costs are ultimately subjective, but some costs, such as lost income and resources, can be quantified. We cannot precisely measure the social cost of pollution, but by comparing places with various amounts of pollution, and the various rates of diseases in those places, we can obtain some estimates of the ill effects. Policy can therefore require a payment for emissions that invade others’ property. To do nothing is to declare a price of zero, which is less accurate than the positive price obtained by statistical means.
The Hayekian policy for emissions is therefore a payment for the estimated damage. A pollution charge requires less knowledge than detailed regulations such as engine requirements, gasoline additives, and smog tests. The emissions charge would not be based on uncertain climate changes, but on the proposition that human interventions into the atmosphere and oceans could be catastrophic. The probabilities are uncertain, but what we do know is that a small probability times a huge cost equals a substantial present value. Because the earth’s environment is a balance of water and air temperatures, cycles of carbon emissions and absorptions, feedback loops, and substances such as the ozone layer, the probability that human interventions are harmful is much greater than the chance that they are beneficial. The mutual relationship of wolves, deer, and vegetation imply that killing off either the wolves or the deer will have bad effects.
The knowledge problem implies that policy has to confront the environmental issue rather than ignore it, because human activity is inherently environmentally interventionist. In some cases, intervention can help the environment, such as with artificial coral reefs. But large interventions such as deliberately dumping iron compounds into the ocean should be avoided.
The Austrian school of economic thought is critical of central planning due to its absence of economic calculation via market prices, and due to the knowledge problem. But the absence of pollution charges itself implies mispricing and the presumption that we know nothing about the effects of emissions. Given today’s highly regulated economy, the implication of Hayek’s thought on knowledge is to replace regulations and emissions trading schemes with the requirement to pay the estimated social costs. Firms (and their customers) can then either pay that cost or else avoid that cost by polluting less. To be most effective, pollution charges would need to be applied globally.
Some free-market economists respond to the pollution issue by stating that property rights are sufficient to solve the problem. But any negotiation or lawsuit to compensate others for negative external effects necessarily requires an objective estimate of the damages. A complete prohibition of an external effect, whether of emissions or noise or visual effects, imposes a cost on the emitter. Tort law, or lawsuits, as well as arbitration and mediation, could replace governmentally enacted pollution levies when the victims can be identified, but there is no avoiding some objective estimate of costs. And where torts are not effective, an international agreement on pollution charges would be optimal.
This 2014 excerpt of IDG News Service, May 14, by Loek Essers.
Samsung offered its “sincerest apology” for the sickness and deaths of some of its workers, vowing to compensate those affected and their families.
Samsung’s apology came in response to a proposal by families and the Supporters for the Health And Rights of People in the Semiconductor Industry (SHARPS) group.
So far there have been 26 victims of blood cancers (leukemia and lymphoma) reported to SHARPS, who worked in Samsung’s Gi-Heung and On-Yang semiconductor plants. Ten have died, the group said on it site.
Other alleged workplace-related illnesses reported to SHARPS include miscarriages, infertility, irregular menstruation, loss of hair, blood disorders, kidney troubles, and liver disease.
Thousands of chemicals that are used for the manufacturing of chips aren’t disclosed to the workers. Cleanrooms in the factories don’t filter toxic gases and are designed to protect the wafers rather than the workers. Workers are also often forced to turn off recently installed protective devices to keep up with the production rate.
Ed. Notes: Until robots perform the lethal jobs, employees die and employers grow rich. The bosses who decide to put their profit above their workers’ lives don’t suffer. The money for the compensation comes from the company, not from the managers, from stockholders not from those culpable. That must change. The liability of managers should not be limited. Indeed, they should work in the same environment that their assemblers do — good for the goose, good for the gander. Then those in charge would likely keep the factory clean and safe.
It would also help if employees had more say in job-place conditions. Workers could negotiate a greater say if they had more leverage. They could get that needed leverage if the corporation no longer were to receive corporate welfare and if the general public were to receive a Citizen’s Dividend. Then potential employees would not be so desperate to accept anything while companies would not exactly become desperate but would lose some political clout for hiding crimes.
What would be the source of funds for the Citizen’s Dividend? It’d be the value of sites and resources, which is the money that society spends for the land and nature it uses. Government would use its taxes or fees or leases or dues to redirect our spending so that it would not land in the pockets of sellers and lenders but in the public treasury. From there, government would pay a dividend a la Alaska’s oil share. Receiving it would give workers the leverage they need … until robots take over.
This 2014 excerpt of Thom’s Blog, May 12 is by Thom Hartmann.
Prior to a large and illegal ATV – or All Terrain Vehicle (something none of the riders invented, nor their rifles, nor the sewing machines that made their cowboy outfits) – ride through Recapture Canyon in Utah, there had been a great deal of criticism and concern from the Navajo Nation. The ride through Recapture Canyon would put thousands of years of cultural resources for Native Americans at risk, not to mention that the ride also went over an ancient and sacred Native American burial ground. But the riders ignored federal law and religious rights.
Some of the ATV-riding law breakers in Utah this weekend were members of the Cliven Bundy camp. In an email blast to his “followers,” Bundy wrote that, “We need to help the people of Blanding re-establish who is in control of the land. This is your next stand. Will you be there to help them like you helped us?”
While Bundy’s call to his followers to illegally ride on government land and put thousands of years’ worth of history and culture at risk is deplorable, it’s a symptom of a much larger problem in America, a problem which has been around since Columbus first sailed the ocean blue. If the culture isn’t White and European-based, much of white America pretty much doesn’t give a damn about it.
Ed. Notes: First Bundy and his followers refused to respect public land, next was sacred land. They still believe that might makes right and land is there for the taking. While they are petty and selfish and threaten violence, they are not much different from land-greedy groups elsewhere in America, everywhere on the planet, and all through human history.
While they are in the wrong, part of the blame falls on conventional society for not making clear the nature of property. Land becomes property only when the occupant or wannabe owner compensates those whom he excludes — his nearby neighbors. All of us have an equal right to life, none of us can live without land, so we all have an equal right to Earth.
Bundy, his followers, and many others despise this notion of paying rent to their community. But they shouldn’t. Not just because morally we all are obliged to compensate those whom we exclude from a part of Earth. But also because, bottom line, they can’t lose. As members of the community, they’ll be getting compensated, too. Everybody would pay land dues into the public treasury and get rent dividends back. Owners of land of average value or less — as are most of Bundy’s followers — would get back more than they pay. With a happy wallet, all they’d have to mollify is their egos about being renters to their neighbors.
This 2014 excerpt of Reuters, May 9, is by Philip Pullella.
Pope Francis told U.N. Secretary General Ban Ki-moon that the world body must do more to help the poor and should encourage the “legitimate redistribution of economic benefits by the State.”
Since his election last year, Francis has often called for significant changes to economic systems.
“An important part of humanity does not share in the benefits of progress and is in fact relegated to the status of second-class citizens,” Francis said.
Francis, an Argentine, is the first non-European pope in 1,300 years and the first-ever Latin American pontiff. He has consistently used his meetings with world leaders, including U.S. President Barack Obama in March, to champion the cause of the world’s have-nots.
He told the U.N. officials that while there had been a welcome decrease in extreme poverty and improvements in education “the world’s peoples deserve and expect even greater results.”
An awareness of everyone’s human dignity should encourage everyone “to share with complete freedom the goods which God’s providence has placed in our hands,” Francis said.
He told the United Nations leaders that the organization must have “a real impact on the structural causes of poverty and hunger”.
Ed. Notes: If the Pope, or anyone, is serious about sharing God’s providence and correcting the structural causes of poverty, then one has to institute the distribution of “natural rents” to everyone. These “rents” for use of parts of nature total the biggest part of GDP. Members of society spend (often indirectly) about half their income for land under their homes (whether a mortgage or a lease), for land growing the food they eat, for resources like oil that becomes fuel for cars and furnaces, for bandwidth in the EM spectrum when buying products advertised on radio or TV, etc.
Presently, only a few people capture this massive spending. They own the land or lending banks or other corporations. The immense stream they now corral could be redirected from the few to society at large if government were to charge taxes or fees or dues on occupation of locations, extraction of resources, and pollution of the environment. Once the funds are in the public treasury, then the government could pay citizens a dividend a la Alaska’s oil dividend, which is not redistribution but mere distribution.
Since most people are not now on the receiving end of society’s spending for Earth, nor do a good number of people own land (never mind an oil field), those people must work for others … when they can find land at all. To avoid poverty, people need land, a share of their region’s land value, and to be able to keep their earnings for themselves untaxed. It’s good that the Pope speaks about these topics, however vaguely, but it’d be great if he’d specify land as God’s providence and society’s failure to share Earth’s worth as the structural cause of poverty.
This 2014 excerpt of News Alert, May 11, is by David Stockman.
The auto bailouts did not save or create a single new auto job. They just shifted 25,000-50,000 assembly plant and supplier jobs from south of the Mason-Dixon Line to the rust belt in Ohio, Michigan, Wisconsin, and Illinois. That is, the North American and global auto industries were drowning in excess capacity on the eve of the crisis, and the only question was whether consumer demand for new cars would be satisfied by the efficient foreign transplant suppliers located in Alabama or high-cost, long-in-the-tooth UAW dominated plants in the north.
Thus, the political decision of the Bush and Obama Administrations to allocate auto jobs based on electoral politics and crony capitalist coddling of the UAW and the Chrysler/GM business complexes did not add a dollar to GDP; it just reshuffled the given level of consumer spending on new cars among regions. And the ultimate result is that the free market was blocked from doing its job of liquidating excess investment and uncompetitive suppliers and plants. In short, true national wealth was reduced by the auto bailouts.
Yet the damage goes beyond dollars and cents. The bailouts have also enabled the rise of a whole generation of soap-salesmen CEOs who tout miracle “recovery” stories, thereby reinforcing the “all fixed” meme. Fiat-Chrysler is a standout case of the latter, and its CEO, Sergio Marchionne, is a bubble illusion merchant of the first rank.
Ed. Notes: Getting bailed out is just one of many subsidies that car makers get. They also get subsidies for “research” and tariffs on imports and exemptions on pollution. If it weren’t for these favors from taxpayers, Detroit probably could not sell one more car — unless they made it non-polluting and fuel-efficient. If they can’t, they should lose market share to those who can. That’s how the market would deliver techno-progress, and how such progress would deliver clean air. And that’s why economic policy should be off limits to politicians of any stripe.
This 2014 excerpt of the Associated Press, May 11, is by Jack Chang.
A protest in eastern China over a plan to build a waste incinerator turned violent, with state media reporting that at least 10 demonstrators and 29 police officers were injured in clashes.
Thousands of people turned out for the protest, which followed government assurances that the project would not pose a health threat, and blocked a highway.
Environmental protests have been on the rise in China, with the public becoming increasingly critical of pollution and health hazards from industry.
“People are losing confidence in the way the government is handling these projects,” said Wu Yixiu, head of environmental group Greenpeace’s toxics campaign in East Asia. “There’s more of a perception that people are not willing to sacrifice the environment and health in exchange for development.”
District government said construction on the incinerator would not begin until the project had won public support. Hangzhou law enforcement authorities also said that protesters could receive more lenient punishment.
Ed. Notes: Pollution is not deadly only in China. People should demand an end to it everywhere. It’s not like there aren’t any solutions. Most waste can be recycled. Even toxic waste can either be neutralized or not used in the first place as there are usually non-toxic alternatives. It seems China and other developing nations are determined to mimic both the West’s good ideas and the bad. If only one Western nation were enlightened enough to geonomize — to defend rights, especially our rights to a healthy environment, to a share of the common wealth, and to our own earning untaxed — then other nations could copy that successful model and their societies could conserve and prosper both. After those newly growing nations geonomize, then the older industrial countries would be the ones to have to play catch up!
This 2014 excerpt of the New York Times, May 9, is by Edward Alden and Rebecca Strauss of the Council on Foreign Relations.
Each year, state and local governments in the United States spend more than $80 billion, or roughly 7 percent of their total budgets, on tax breaks and subsidies to attract investments from auto companies, movie producers, aircraft makers, and other industries.
State governments would be better off if they collectively ended the handouts and competed for business in other ways, such as making investments in infrastructure or education or offering lower overall tax rates.
The World Trade Organization has rules that restrict government subsidies. The Organization for Economic Cooperation and Development has a longstanding arrangement to limit financing subsidies to exporters. These international models should be adapted to our states. Kansas and Missouri are trying to reach a truce to stop bribing businesses to move from one side of the Kansas City area to the other.
Ed. Notes: It’s not just when state politicians compete that opening loopholes is bad; it’s always bad. Either everybody pays or nobody pays; fair is fair. If any state or locality or nation wants to be a haven for business — as are Singapore or Hong Kong — all it has to do is geonomize — as did Singapore and Hong Kong. That is, cut taxes on people’s efforts — even eliminate them. Instead, recover the rental value of land. Land is something that a new business moving in has to pay for anyway, so if the local government gets the payment, it’s only sellers and lenders who’d lose, and the value of land is not theirs anyway.
The value of land is created by the presence of community while land itself is created by nobody. Ground rent makes the perfect common wealth. It’s our earnings and purchases and buildings — private wealth — that should never be taxed.
And if we did not tax what we should not in the first place, we’d have no excuse to open loopholes for favored insiders.
This 2014 excerpt of the Los Angeles Times, May 5, by Amina Khan.
Looks like good news may come in threes. The teenage pregnancy rate, birth rate and abortion rate have all dropped sharply since their respective peaks in the 1990s. Fewer teens are getting pregnant in the first place.
The teenage pregnancy rate dropped 51% between 1990 and 2010. The 2010 rate of 57.4 pregnancies per 1,000 teenage girls and women 15-19 also represents a drop of 15% since 2008 alone.
The teen birthrate also declined by 44%, from its peak in 1991 of 61.8 to 34.4 births per 1,000. The teen abortion rate experienced the steepest drop of 66%, from 43.5 abortions per 1,000 at its 1988 peak to just 14.7 per 1,000.
The declines were seen across racial and ethnic groups, declining 56% among white teenagers (from 86.6 to 37.8 per 1,000), 56% among black teenagers (from 223.8 to 99.5 per 1,000) and 51% among Latino teenagers (from 169.7 to 83.5 per 1,000).
Progress from state to state was uneven. New Mexico had the highest rate, with 80 pregnancies per 1,000, and New Hampshire had the lowest, with 28 per 1,000.
Ed. Notes: Nobody in-the-know knows why today’s teens are not playing Juno, altho’ perhaps a teen does. It amazes me that society can change so much yet sociologists haven’t got a clue, really; maybe it’s not hearing “education” from adults but seeing older sisters lose their fun time.
BTW, if someone could figure why and how society changes, then perhaps they could create the conditions to guide society to make positive changes for the good of all … and if they could predict a fad or fashion, they could probably make a fortune!
Meanwhile, having kids later should be better for the kid, the mom, and the planet which might need a breather from humanitis. More at Progress.org.
This 2014 excerpt of Vox, May 5, is by Matthew Yglesias.
Dentists’ participation in Medicaid means dentists see more publicly insured patients without decreasing the number of visits provided to privately insured patients. Dentists manage to pull this off without increasing the number of hours per week that they work. Dentists don’t do much work in a typical dental visit; dental hygienists are the people who do the vast majority of the work in a dental office — and as a result, more patients increase not dentists’ work time but their incomes.
Waiting times for patients waiting to get in to see a dentist go up modestly. The increased wait times are concentrated in states with relatively restrictive “scope of practice” laws. In some states, hygienists can clean teeth with considerable autonomy from dentists whereas in other states a hygienist can only clean teeth if she’s employed by a dentist.
An essentially parallel situation exists in mainstream medical care. Some states allow certified nurse-practitioners to evaluate patients, diagnose, order and interpret diagnostic tests, initiate and manage treatments. People with serious medical conditions still need to see doctors. But patients with routine care needs can get them taken care of by nurses. Other states, by contrast, create more of a financial windfall for MDs.
Proponents of restrictive licensing say that the issue is patient safety and not greed. But research says otherwise. As Health Affairs has noted, “studies comparing the quality of care provided by physicians and nurse practitioners have found that clinical outcomes are similar” while subjective measures of patient satisfaction indicate that nurse practitioners do better than MDs.
As the number of people with insurance rises thanks to Obamacare, that’s great news for doctors but a much worse result for patients than we could achieve if we changed these laws.
Ed. Notes: Competition among competent providers is one main way that markets are efficient and why they need to be free of statist interference. Let government handle cases of fraud. The law need not create oligopolies and monopolies but instead defend our rights.
Four newspapers last month recommended that the public recover the rental value of land. The reform might lack intuitive appeal — people don’t like taxes and do love land — but it is fair, since site value is generated by the surrounding populace, and it is efficient, since it prompts owners to quit speculating and build. These four 2014 excerpts are from: (1) The Independent, May 4, by Patrick Diamond, a former Downing Street adviser to Tony Blair and Gordon Brown; (2) The Guardian, May 19, by George Monbiot; (3) The Washington Post, May 20, by Emily Badger; (4) The Economist, May 24.
We Need a Radical Reform of the Tax System
Progressives should focus on shifting the burden of tax from incomes to land values, unearned capital receipts, and property.
After 15 years of devolution, Scotland, the nation with the rich world’s greatest concentration of land ownership remains as inequitable as ever.
Fifty per cent of the private land in Scotland is in the hands of 432 people – but who are they? Many of the large estates are registered in the names of made-up companies in the Caribbean.
Landowners seek to justify their grip on the United Kingdom by rebranding themselves as business owners. The Country Landowners’ Association has renamed itself the Country Land and Business Association. So why do they not pay business rates on their land? Tax exemptions inflate the cost of land, making it impossible for communities to buy.
Though the estates pay next to nothing to the exchequer, and though they practice little that resembles farming, they receive millions in farm subsidies.
It should list all the beneficial owners of the land; impose the taxes Westminster refuses to levy.
Investors Make Housing Expensive. OK to Tax Them For It?
Increasingly, the wealthy in Latin America are buying homes in Miami. Canadians are buying homes in Arizona. Seemingly everyone but Londoners is buying a home in London — and then leaving it empty. And the Chinese are flocking to Vancouver (or, at least, their money is). Vancouver’s real-estate market is tightly connected to what happens in the Chinese economy.
For many of them, property in Vancouver or Seattle is a safer place to put money than property at home.
We expect housing prices to reflect local fundamentals — above all, how much people earn. In a global market, that may not be the case. If there are enough rich people in China who want property in Vancouver, prices can float out of reach of the people who live and work there.
Absentee homeowners can price out people who are actually living in the area.
Urban Planner Andy Yan suggests: Make foreigners pay a premium to buy up local housing. Tax them for the privilege — beyond existing property taxes.
Having risen by 8% in the past year, British house prices are almost back to the double-digit pace that preceded the financial crisis.
Britons are stretching to meet ever-rising prices by borrowing more. Average loan-to-income ratios have passed their 2007 peak. With more pay devoted to mortgage repayments, consumption is bound to fall. That is bad news for firms, and, in turn, workers. Household debt also reduces the funds that could be channelled towards productive investment.
Shifting the burden of tax from income to property would reduce the flood of foreign cash. Taxing land rather than buildings would encourage speculative construction and would push those sitting on large stocks to build or sell up.
Ed. Notes: Three of the four newspapers were British. When will the rest of the world catch up to the United Kingdom? If we’re serious about solving our problems, we need to adopt these good ideas that work right now.
The legal basis for land ownership in the Americas is “Christian Discovery.” This land doctrine derives from the 15th century theology of the Catholic Church. The moral origin of the Vatican’s land doctrine is its old claim of the supremacy of Christianity over all other religions. The “Christian discovery” doctrine is not in the US Constitution, yet it has been adopted by the US government and upheld by the courts.
“Bully’s Justice” by George Zebrowsky, an eye-opening article on Christian Discovery, was published in the June/July 2014 issues of Free Inquiry. Under Christian Discovery, the first Christians to “discover” land previously unknown to the Christian chiefs of state, and held by non-Christians, have a legally legitimate claim to that land. The indigenous and current dwellers have no legal property rights.
A court case in 2005 showed that the Christian Discovery doctrine is still in force. The Onondaga Indian (native American) nation in the State of New York sought federal-court recognition to title of ancestral lands. Also in 2005 the Oneida and Cayuga Indian nations had their land claims dismissed by the US Supreme Court. The Onondaga claim was dismissed in 2010 based on the 2005 Supreme Court decision.
The Supreme Court stated that “Under the doctrine of discovery,” the ownership of “lands occupied by Indians when the colonists arrived became vested in the sovereign, first the discovering European nation and later the original states and the United States.”
There are three moral justifications of land ownership. First is natural moral law, the universal ethic that is inherent in human nature and is a moral imperative for humanity. Second is tradition. Third is force. Natural moral law invalidates both tradition and force as moral rationales.
The laws of the United States derive from English common law, the US Constitution, natural moral law, and the Vatican’s doctrine of land discovery. The US Constitution recognizes the supremacy of natural moral law in its Ninth Amendment, and it also recognizes common law. The US Constitution does not recognize the legality of tradition, force, or the Christian Discovery doctrine, yet the US Supreme Court continues to adhere to Christian Discovery.
As stated in “Bully’s Justice” (p. 28), this Doctrine of Discovery is “one of the rare principles of American law that came not from English common law or from the pen of some Enlightenment philosopher but rather from the Vatican.” The US Supreme Court recognized the doctrine in Johnson v. M’Intosh in 1823 under Chief Justice John Marshall.
The doctrine of Christian Discovery originated in 1455 when Pope Nicholas V issued the papal bull Romanus Pontifex. Without any Biblical justification, this declaration justified the conquest of African lands by the king of Portugal. Pope Alexander VI extended the doctrine to the Spanish conquests in the Americas. The doctrine of Christian Discovery authorized European Christian explorers and their monarchs the rationale to claim lands not occupied by Christians. The doctrine deprived the indigenous inhabitants of any legal land rights.
As ultimate legal owner of the land, the state can then lease land to private tenants, and it can sell or transfer land titles to private persons, but such titles are always secondary to the state as senior and supreme owner, as the state can tax land, control its use, and forcibly buy back title with eminent domain.
The current Pope has expressed concern with global inequalities, but he has not gone to the core cause of inequality and poverty: privileged land tenure and the denial of labor’s self-ownership rights. The Catholic Church would have to confront its old doctrine on the conquest of land, and this it cannot do, and therefore popes must confine their concern about poverty and inequality to laments and exhortations. Now come economists such as Thomas Pikkety calling for massive redistribution to treat the effects of income inequality, but refusing to acknowledge the origins and remedies in land and labor.
The Christian Discovery doctrine is based on supremacism, the belief that one’s religion, culture, and traditions are superior to those of others, justifying the use of force to maintain this supremacy. Such supremacy has been adopted by several religions, but this violates the human equality that is the basis of natural moral law and that has been recognized in declarations of human rights. Such constitutional cognitive dissonance does not seem to bother legal authorities.
If we seriously apply natural moral law to the question of land ownership, we need to confront both the false justifications of Christian Doctrine of Discovery and also the aboriginal land claims. As stated by John Locke in his Second Treatise of Government, human moral equality implies that one may fully own land only so long as there is free land of that quality available to others. When such land is scarce and has a price, the analysis of Henry George kicks in, that one may have possession conditional on paying the land rent to the members of the relevant community in equal shares.
Therefore the native American Indians may not take full ownership of their former lands. The land rent belongs not to them but to all humanity. Also, the rental value of land due to civic improvements is a return on the capital goods, not the natural spacial resource.
Justice requires the abolition of the supremacist Doctrine of Discovery and its replacement with natural moral law. Some compensation and restoration of rights of possession are due to the aboriginal inhabitants, but history cannot be erased, and the current residents, users, and title holders, having followed the current rules, also deserve some consideration.
Ed. Notes: Wouldn’t it be nice if outsider critics could improve the performance of those who get criticized? For me, the worst abuse in the US is the cost of housing which is the cost of land. If Americans shared the value of land, life would be so much better in all the aspects noted above.
Everyone is reading Piketty wrong — including Piketty! Want to really shut down the chief engine generating inequality? Forget the author’s solution and do this instead.
This 2014 excerpt of Salon, May 1, is by Jesse Myerson.
Thomas Piketty’s 700-page economics tome “Capital in the 21st Century” is beating out Colton Burpo on Amazon.
He shows that the rate (r) of return (profits, dividends, interest, rents, royalties, etc.), to the people who own capital assets (stocks, bonds, real estate, land, patents, etc.) outpaces the growth of the full economy (g).
The liberal response to this conundrum (including Piketty’s) is to try to grow g through more egalitarian taxation and stimulus and whatnot.
But we can actually solve the conundrum.
It is not necessary for everybody to keep bending over backward to grow the economy, just in order to help one another survive. Instead …
Make sure the people who capture r is: everybody. If the stream of wealth flows to everyone, rather than Donald Trump and Mitt Romney, then the pressure’s off g to keep pace with r.
We can let r exceed g and focus on more meaningful things than sales (which GDP, i.e. “growth,” reflects) – things like availing ourselves of our inalienable right to the pursuit of happiness.
Stocks and bonds can be held by a sovereign wealth fund just as easily as by a hedge, trust, mutual, pension or any other kind of fund. The only difference is that instead of heirs and speculators, the people getting the dividends, profits and interest is everybody.
Rent and real estate value can flow to everyone by taxing (especially urban) land value.
By liberalizing the intellectual property regime (i.e. stopping handing out all these monopolies), and moving to a Creative Commons structure, we can make sure that our society’s ideas and artworks aren’t just a source of cash for pharmaceutical companies, media conglomerates, and litigious vultures.
Ed. Notes: Actually, you don’t have to take over ownership of stocks and bonds if you recover rents (both for nature and for privilege). Most of the value in a corporate stock or bond is not in the factory or product but in the facilities’ locations and in the products’ patents and copyrights. So, if you institute land dues (or land taxes) and charge full market value for monopolies on new ideas (p&c), then you can ignore capital (s&b) and still recover all of society’s surplus — which is plenty of money for paying all citizens a decent dividend.
If people got a share of all the rents we all now pay for the land and government-granted privileges we use, instead of that immense flow going mostly to the 1%, and if the 1% no longer got corporate welfare, and if taxes were removed from our earnings and morphed into fees for pollution and depletion, which would hit the 1%’s dirty and wasteful corporations especially hard, then everybody’s income would be much closer together, the extreme highs and lows would not be so extreme, and the gaps in wealth and income would become of human-scale.
The principle to follow is really quite simple. Respect private property (human-made stocks, buildings, purchases, etc) and don’t tax it. Respect common wealth (the value of nature and privilege, neither one being the result of human exertion) and do share it — land dues in, rent dividends back out. Doing so is not leftist, not rightist, but geoist. And wherever geonomics has been employed, it has worked. Try and top that!
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.
of interest to Dave Lakhani, President Bold Approach (Mar 8) and Matt Ozga (Jan 29): “I write for the Washington Square News, the student run newspaper out of New York University. Geonomics seems like it has great significance, especially in this area. When was geonomics developed, and by whom?”
About 1982 I began. Two years later, Chilean Dr Manfred Max-Neef offered the term geonomics for Earth-friendly economics. In the mid-80s, a millionaire founded a Geonomics Institute on Middlebury College campus in Vermont re global trade. In the 1990s, CNBC cablecast a show, Geonomics, on world trade as it benefits world traders. My version of geonomics draws heavily from the American Henry George who wrote Progress & Poverty (1879) and won the mayoralty of New York but was denied his victory by Tammany Hall (1886). He in turn got lots from Brits David Ricardo, Adam Smith, and the French physiocrats of the 1700s. My version differs by focusing not on taxation but on the flow of rents for sites, resources, sinks, and government-granted privileges. Forgoing these trillions, we instead tax and subsidize, making waste cheap and sustainability expensive. To quit distorting price, replace taxes with “land dues” and replace subsidies with a Citizens Dividend.
Matt: “This idea of sharing rents sounds, if not explicitly socialist, at least at odds with some capitalist values (only the strong survive & prosper, etc). Is it fair to say that geonomics has some basis in socialist theory?”
A closer descriptor would be Christian. Beyond ethics into praxis, Alaska shares oil rent with residents, and they’re more libertarian than socialist. While individuals provide labor and capital, no one provides land while society generates its value. Rent is not private property but public property. Sharing Rent is predistribution, sharing it before an elite or state has a chance to get and misspend it, like a public REIT (Real Estate Investment Trust) paying dividends to its stakeholders – a perfectly capitalist model. What we should leave untaxed are our sales, salaries, and structures, things we do produce.
the policy that the earth’s natural patterns suggests. Use the eco-system’s self-regulating feedback loops as a model. What then needs changing? Basically, the flow of money spent to own or use Earth (both sites and resources) must visit each of us. Our agent, government, exists to collect this natural rent via fees and to disburse the collected revenue via dividends. Doing this, we could forgo taxes on homes and earnings and subsidies of either the needy or the greedy. For more, see our web site, our pamphlet of the title above, or any of our other lit pieces; ask for our literature list.
a neologism for sharing “rent” or “social surplus” – the money we spend on the nature we use. When we buy land, such as the land beneath a home, we typically pay the wrong person – the homeowner. Instead, since land cost us nothing to make and is the common heri-tage of us all, rather than pay the owner, we should pay ourselves, our neighbors, our community. That is, we should all pay land dues to the public treasury, then our government would pay us land dividends from this collected revenue. It’s similar to the Alaska oil dividend, almost $2,000 last year. Indeed, the annual rental value of land, oil, all other natural resources, including the broadcast spectrum and other government-granted permits such as corporate charters, totals several trillion dollars each year. It’s so much that some could be spent on basic social services, the rest parceled out as a divi-dend, as Tom Paine suggested, and taxes (except any on natural rents) could be abolished, as Thomas Jeffer-son suggested. Were we sharing Earth by sharing her worth, territorial disputes would be fewer, less intense, and more resolvable.
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.
the annoying habit of seeing the hand of land in almost all transactions. In geonomics we maintain the distinction between the items bearing exchange value that come into being via human effort — wealth — and those that don’t — land. Keeping this distinction in the forefront makes it obvious that speculating in land drives sprawl, that hoarding land retards Third World development, that borrowing to buy land plus buildings engorges banks, that much so-called “interest” is quasi-rent, that the cost of land inflates faster than the price of produced goods and services, that over half of corporate profit is from real estate (Urban Land Institute, 1999). Summing up these analyses, geonomists offer a Grand Unifying Theory, that the flow of rent pulls all other indicators in its wake. Geonomics differs from economics as chemistry from alchemy, as astronomy from astrology.
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 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.
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.
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 loggers 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.