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This 2014 excerpt of Iranian, Apr 14, is by M. Kimya Hedayat-ZadehLife.
In a symbolic and unprecedented move, Ayatollah Abdol-Hamid Masoumi-Tehrani, a prominent Muslim cleric in Iran, has gifted to the Baha’is of the world an illuminated work of calligraphy of a paragraph from the writings of Baha’u’llah, the Prophet-founder of the Baha’i Faith.
This move comes in the wake of several recent statements by religious scholars in the Muslim world who have set out alternative interpretations of the teachings of Islam in which tolerance of every religion is, in fact, upheld by the holy Qur’an.
Ayatollah Tehrani states on his website (see translation of statement) that he prepared the calligraphy of the verse as a “symbolic action to serve as a reminder of the importance of valuing human beings, of peaceful coexistence, of cooperation and mutual support, and of avoidance hatred, enmity, and blind religious prejudice.”
The intricate artwork must have taken several months to painstakingly prepare by hand. Ayatollah Tehrani’s other artworks include the illumination of the Qur’an, the Torah, the Psalms, the New Testament, and the Book of Ezra. His illumination of the Psalms is currently being held in the United States Library of Congress.
On previous occasions, Ayatollah Tehrani has with great courage publicly voiced concern about the ongoing and severe persecution of religious minorities, including the Baha’is in Iran. Since the Islamic Revolution in 1979, hundreds of Baha’is have been killed and thousands have been imprisoned. There are currently 115 Baha’is being held in prison solely on the basis of their religious beliefs. Baha’is in Iran are denied access to higher education, obstructed from earning a livelihood, prevented from burying their dead in accordance with their own burial rites and subjected to the demolition and desecration and expropriation of their cemeteries.
Ed. Notes: People like this cleric are the ones who deserve support from the foreign policy of superpowers. That would improve communication between different cultures. Perhaps then the dialog could move from religion to science, and science could progress to include geonomics.
This 2014 excerpt of TruthDig, Apr 13, is by Ellen Brown of Web of Debt.
Taxpayers are paying billions of dollars for a swindle pulled off by the world’s biggest banks, using a form of derivative called interest-rate swaps; and the Federal Deposit Insurance Corporation has now joined a chorus of litigants suing over it.
Being sued are sixteen of the world’s largest banks – including the three largest US banks (JPMorgan Chase, Bank of America, and Citigroup), the three largest UK banks, the largest German bank, the largest Japanese bank, and several of the largest Swiss banks.
The swap is an ongoing bet on interest rates. The borrower owes both the interest on its variable rate loan and what it must pay out on this separate swap deal. Interest rate swaps are now a $426 trillion business. That’s trillion with a “t” – about seven times the gross domestic product of all the countries in the world combined.
While banks are still collecting fixed rates of 3 to 6 percent, they are now paying public entities as little as a tenth of one percent on the outstanding bonds – an outcome which amounts to a second bailout for banks.
In 2008 and 2009, during the height of the financial crisis, the cost of the swaps that municipalities had taken out jumped in price at the same time that their borrowing costs went up, which was exactly the opposite of how the swaps were supposed to work, and it was chiefly due to manipulation. Nearly every major bank conspired to rig bids and drive up the fixed rates state and local governments pay on their derivative contracts.
Unlike most banks, big ones make most of their money not from ordinary commercial loans but from interest rate swaps. In the fall of 2008, the Federal Reserve dropped the prime rate (the rate at which banks borrow from each other) nearly to zero. This was a giant windfall for the major derivative banks; it lowered what they had to pay their big buyers of swaps.
Fraud is grounds for rescission (terminating the contract) without paying penalties, potentially saving taxpayers enormous sums in fees for swap deals that are crippling cities, universities, and other public entities. Fraud is also grounds for punitive damages, something an outraged jury might be inclined to impose.
Ed. Notes: We really should not let so much money be collected into one place, tempting banksters, in the first place. The most fundamental way to prevent this concentration is to quit buying land from individuals, which often requires a mortgage from a bank, and to start renting land from one’s community, and paying rent is something even the poorest can usually afford without having to borrow. Since most debt is debt for land, that would instantly reduce the enormous flow of funds to banks.
Further, once residents start getting an extra income — a share of those rents for land (and resources and EM spectrum, etc) — then they won’t need much in the way of government services. Government could be streamlined and would no longer have much need to borrow. Public debt is the other huge source of income to banks.
Without fat mortgages, and without indebted governments, big banks would be left with nothing of interest to anyone to swap. Plus, citizens would be getting dividends. That’s how you solve problems: view the bigger picture then apply geonomics.
This 2014 excerpt of the Weekly Wastebasket, Apr 11, is by Taxpayers for Common Sense.
Taxpayers that don’t need subsidies — through direct spending or via tax loopholes — include the oil and gas industry. Extraction of fossil fuel has been subsidized for a hundred years (literally) and it is one of the most profitable businesses in the world (literally). We found that the three largest U.S.-based oil and gas companies had an average U.S. tax rate of 26.2 percent for 2008-2012. If you subtract the billions the companies are allowed to defer each year (thanks to these special tax provisions), it drops to around 20 percent. And, to be sure, oil and gas companies are not the only ones picking from the menu of various tax breaks to lower their rate below the statutory rate of 35 percent.
The same holds true for individual taxpayers. Special tax deductions that have been in effect for decades benefit a small slice of taxpayers, but cost everyone. Even popular ones like the mortgage interest deduction, which costs roughly $75 billion a year, have no effect on homeownership rates in this country and are basically offset by the increase in home prices it causes. Like the oil and gas industry, some of the wealthiest individual taxpayers can avoid paying higher rates by also utilizing special tax provisions that aren’t available to everyone.
Congress could lower overall tax rates – something everyone wants to do – by cutting out the whole thicket of special credits and deductions that distort both the tax system and business decisions. So why don’t they just do it already?
Ed. Notes: It would not surprise me if the author over-estimated how much tax the oil corporations actually pay, especially when you subtract the payments they get from the US Government for storing oil underground (pump it out, pump it back in), for doing “research”, and for the “services” performed by their subsidiaries, such as uranium miners and processors. You could also subtract the fines not levied for pollution emitted by their trains and ships and gas stations and the fines not collected for their failure to pay over even the tiny royalties that they are charged (Norway charges nearly 80%, not 10% or 12%). This list could probably go on.
Most ironic, most of the value of oil is “rent”, or, its value in the ground, before it’s even extracted. Since oil in the ground is not the product of anyone’s labor or capital, and since its value is created by the demand for it by all of us, oil “rent” is actually our common wealth. It is one of the few things that really should be taxed or levied in some other way (auction or deed fee, etc), with the raised revenue going to the citizenry, a la Alaska’s oil dividend.
If you’re going to have a federal income tax, you should make it as simple as possible, since complexity is the enemy of equity. Have one same rate for everybody. Have absolutely zero loopholes. And spend it all on war. If you want to pay less tax, then shrink the so-called “defense” budget. Make everybody pay, even the poor. They’ll be able to afford paying 10% of an $8,000 income — $800 — since their Citizen’s Dividend would be more like $12,000. After paying $800, they’d still have $19,200 per year to live on. Not bad. And $12k to replace mortgage interest deduction; not bad for the middle class. And $12k to replace billion-dollar oil subsides … well, too bad, “oiligarchy”, but fair is fair.
This 2014 excerpt of MSNBC, May 5, is by Jane C. Timm.
Nevada Democratic Rep. Steven Horsford is trying to oust the pro-Bundy militia from his district, citing constituents who are bothered by the presence of the self-appointed militia.
The group has been camping near Cliven Bundy’s land to defend the embattled rancher in his battle with federal land managers. Bundy – who says he doesn’t recognize the federal government – owes more than $1 million in fees for letting his cattle graze on federal lands for the last two decades. The Bureau of Land Management stopped trying to seize Bundy’s cattle last month, after a face-off with the militia.
Many thought when the face-off was done the militia—who came from all-over the country—would depart, but they have not.
Rep. Steven Horsford is calling on the senator, governor, and others who made Cliven Bundy out to be a patriot to stand with the residents.
Republicans have struggled to reconcile their support for Bundy’s states-right’s views with his racist rants.
Ed. Notes: As usual, both sides are partially right. People should pay for land, they should not just use it without compensating anyone, but they shouldn’t necessarily pay to the federal government but instead to their community, perhaps the county or state. And the government that receives payment shouldn’t necessarily keep the rents but instead disburse them to residents. Doing that would compensate those excluded from the (ranch) land and would give the owner a legitimate title to “hers” ranch.
This 2014 excerpt of The Atlantic, Apr 9, is by Uri Friedman.
In the Swedish city of Gothenburg, the governing coalition has proposed a year-long trial that would divide some municipal workers into a test and control group at the same pay rate, with the test group working six-hour days and the control group working the traditional eight.
They hope to get the staff members taking fewer sick days and feeling better mentally and physically after they’ve worked shorter days.
In Sweden, towns have abandoned the approach in the past when it proved costly and detrimental to workers’ health (it turns out working non-stop for six hours isn’t great for you, either).
The bottom line is that productivity — driven by technology and well-functioning markets — drives wealth far more than hours worked. And very few jobs in developed economies nowadays are classic assembly-line positions, where working 20 percent longer will mechanically produce 20 percent more widgets.
At least 40 years of studies suggest that people work harder if you limit their time to complete a certain task. In some cases, working too hard can actually reduce output. Long working hours are also associated with ill health, which means lost labor in the long term, as well as higher medical costs for employers and government.
Ed. Notes: Since we humans are political animals, we seek a solution that is a mandate: “thou shalt” or “thou shalt not”. We, as a majority, do not seek an organic solution whereby you don’t boss people around but instead create a context for things to work out for the better — sort of like child-proofing a home so a baby can’t stick its finger into any electrical outlets. In this case, to create an ideal length of time for working (during a day, week, month, year, or career), you wouldn’t set a limit. Instead, you would pay everyone a share of the common wealth, the worth of Earth in the region, the annual rental value of sites and resources and EM spectrum. Getting this extra income (from the money that people spend for the nature they use), a resident would not be so desperate to work more than they want; instead, they could work as long or as short as they like.
They could also work with whomever they like, so government would not have to enforce integration. Plus, they’d have the leverage to negotiate higher wages, so government could forget about minimum wages. And they could demand safer conditions, so government could forget about its bureaucracy of inspectors. Further, they could win a say in management, so corporations would evolve into co-operatives naturally, organically.
You can expect this cascade of benefits when you redesign the whole system rather than just address each symptom. But you’d have to have a whole world view, rather than just be a political animal. And that’s hard for us humans.
“Modern Monetary Theory,” a doctrine about fiat money, has captured the attention of some reformers and progressives. This doctrine – a set of propositions contrary to logic and evidence – purports to explain why the US and other economies are ailing, but is beset by contradictions with the historic facts and within the doctrine.
For example, The New Inquiry on 11 April 2014 featured an article by Rebecca Rojer on “The World According to Modern Monetary Theory.” The author regards it as a revelation of MMT that the “rules of money are not immutable laws of nature.” Since the science of economics explains the effects of incentives and decisions, evidently these money “rules” are the outcomes of private and governmental decisions, and since the effects are not immutable laws, people can arbitrarily create whatever outcomes they wish. That would indeed be wonderful, to just print money are thereby eliminate unemployment, depressions, and poverty, all without creating price inflation, because the rules of money creation are not immutable, so we can have whatever outcome we wish!
Science is based on logic and evidence rather than “revelations.” It is possible that there have been revelations, but these create religion rather than science, since if an experience or experiment cannot be duplicated, the revelations are not sufficient for scientific warrants. Various religions have had different revelations, and the members do not believe the revelations of the others.
The author provides an example of the MMT doctrine. Suppose there is an island that has minerals. The owner of the mines hires workers and pays them with fiat money, like the paper and bank-account money we have today, i.e. money created out of nothing. But the owner also imposes a tax on the wages of the miners. So evidently this mine owner is a government, and we are not dealing with private enterprise, but a coercive socialist state. The miners work enough to both pay the wage tax and be able to survive.
But a premise of this MMT island example is that prior to the mining, the people were able to hunt and farm without working too hard. So why would anyone work in the mines? The historical explanation is the “enclosures” movement, in which land that was held by small-scale farmers or by villages was forcibly taken by the aristocracy or by the state or by foreign invaders. This is not a money story, but a land-grab story. Another way to get forced labor, other than chattel slavery, is to require the payment of taxes in money, which forces subsistence farmers to work on plantations at least long enough to pay the taxes. That is more a tax story than a money story, since if the government insists on being paid in coconuts, and a farmer does not grow coconuts, he must work on the coconut plantation, get paid in coconuts, and then pay the tax. Therefore the forced labor is based on the government’s restrictions on alternative employment opportunities.
MMT is correct in stating that one way that the government gets people to accept its fiat money is what economists call the “fiscal theory of money,” that the government reinforces its money as a medium of exchange by requiring the use of that money for paying taxes. However, if the government currency is being hyper-inflated, taxpayers would keep their savings in, say, gold, or a stable foreign currency, and then convert it to the fiat money only when a tax payment is due. The fiscal effect only works if the government is not creating too much inflation.
Therefore MMT is incorrect as stating, as a “core building block,” that forcing people to pay taxes with fiat money “gives it its value.” That was not the case, for example, in Zimbabwe, which suffered hyperinflation. One “immutable” economic law of money is that the creation of money, beyond what is needed for transactions, results in price inflation, and the payment of taxes becomes tied to that inflation, via the nominal rise of prices and wages, rather than preventing inflation.
A related fallacy of MMT is that “sovereigns” in general create money by “spending it into existence.” That can indeed happen, as for example in the Zimbabwe hyperinflation, but in the US and most countries today, government spending comes from taxes and borrowing, not money creation. The central bank, such as the Federal Reserve, does not create money by spending it for goods, but rather by buying bonds and then increasing the banks’ reserves or funds to pay for the bonds.
Since the “core” proposition of MMT, that price inflation can be controlled by government’s taxing and spending, is incorrect, the whole superstructure of the MMT doctrine built on it collapses. Actually, MMT does accept the proposition that monetary inflation creates price inflation, but that true proposition contradicts the core MMT premise that tax-paying gives money its value.
A worse MMT fallacy is that the taxes paid to the government destroys money. MMT tells us that governments create money when they spend, and then the money disappears when taxes are paid. But a tax no more destroys money than the dollars used to buy bread. The seller of bread now has the money, and the government now has the dollars paid in taxes, and they then spend that money.
There have been various theories and doctrines on money and banking in the history of economic thought, and in my judgment, the explanations that best fit the facts are a combination of the monetarist and the Austrian schools of thought. The monetarist core is the equation MV=PT, which explains that the quantity of money (M) multiplied by its annual velocity or turnover (V) equals the price level (P) multiplied by the amount of transactions (T) measured in money. Thus high price inflation, a rise in P, is usually caused by monetary inflation, an on-going increase in M.
The Austrian school explains how excessive monetary inflation not only cause price inflation, but distorts relative prices, such as when house purchase prices rise faster than rentals. Austrian theory shows how governmental central planning fails because the knowledge to do so well is always lacking, and that applies to money as well. Hence the Austrians propose free-market money and banking, so that the market sets interest rates and the money supply.
Indeed the Fed failed to prevent the Great Depression of the 1930s and the Great Recession of 2008, and its policies generated high inflation during the 1970s and the cheap credit that has fueled land-value bubbles. MMT cannot do any better, because, as the Austrian theory explains, the optimal money supply is not only not known, but not knowable. The pure free market provides the optimal money supply just as it provides the optimal amount of bread and the optimal amount of shoes.
Here are nine more 2014 excerpts from: (1) Vox, Apr 8, by Matthew Yglesias; (2) Business Week, Apr 10, by Peter Coy; (3) Common Dreams, Apr 16, by Mark Weisbrot; (4) Wall Street Journal, Apr 21, by Daniel Shuchman; (5) New Republic, Apr 22, by Robert Solow; (6) Time, Apr 23, by Rana Foroohar; (7) Forbes, Apr 29, by Tim Worstall; (8) Huffington Post, May 1, by Ryan Grim; and (9) Salon, May 1, by Jesse Myerson.
The Short Guide to Capital in the 21st Century
Much of modern-day wealth appears to take the form of urban land (Silicon Valley houses are much more expensive than houses in the Houston suburbs, not because the houses are bigger but because the land is more expensive), control over oil and other fossil fuel resources, and the value associated with various patents, copyrights, trademarks, and other forms of intellectual property. Land and resources differ from traditional capital in that even a very high rate of taxation on them won’t cause the land to go away or the oil to vanish. Intellectual property is deliberately created by the government. Stiff land taxes, and major intellectual property reform could achieve many of Piketty’s goals without disincentivizing saving and wealth creation.
An Immodest Proposal: A Global Tax on the Superrich
The top hundredth of 1 percent of U.S. taxpayers—that’s 16,000 people—have a combined net worth of $6 trillion. That’s as much as the bottom two-thirds of the population.
Owners of assets such as empty lots might be more likely to put them to good use if capital [actually, land] were taxed.
He proposes a global tax on capital—by which he means real assets such as land, natural resources, houses, office buildings, factories, machines, software, and patents, as well as pieces of paper, such as stocks and bonds, that represent a financial interest in those assets.
The proceeds in Piketty’s view should not fund an expansion of government: “The state’s great leap forward has already taken place: there will be no second leap—not like the first one, in any event,” he writes.
Piketty in Washington: How to Reverse the Increasing Concentration of Wealth
In the U.S. we pay $380 billion per year for drugs whose price is composed of something like 80 or 90 percent monopoly rents.
The “too-big-to-fail subsidies” are 20 percent of after-tax corporate profits in the euro zone.
We have 40 percent of corporate profits going to financial sector, and “intellectual property” capturing a growing share of returns at the same time that technology is increasingly making much of consumption available at zero marginal cost.
Poverty, unemployment, and unequal opportunity are major challenges for capitalist societies.
Societies need markets and private property to have a functioning economy.
He says that his solutions provide a “less violent and more efficient response to the eternal problem of private capital and its return.” Instead of Austen and Balzac, the professor ought to read “Animal Farm” and “Darkness at Noon.”
The very highest income class consists to a substantial extent of top executives of large corporations, with very rich compensation packages. (A disproportionate number of these, but by no means all of them, come from the financial services industry.) With or without stock options, these large pay packages get converted to wealth and future income from wealth. But the fact remains that much of the increased income (and wealth) inequality in the United States is driven by the rise of these supermanagers.
Executive pay at the very top is usually determined in a cozy way by boards of directors and compensation committees made up of people very like the executives they are paying.
Top management compensation, at least some of it, does not really belong in the category of labor income, but represents instead a sort of adjunct to capital, and should be treated in part as a way of sharing in income from capital. It is clear that the class of supermanagers belongs socially and politically with the rentiers, not with the larger body of salaried and independent professionals and middle managers.
Why This Bestseller Is Freaking Out the Super-Wealthy
The rich take a greater and greater share of the world’s economic pie. That’s because the gains on capital (meaning, investments) outpace growth of GDP. Result: people with lots of investments take a bigger chunk of the world’s wealth, relative to everyone else, with every passing year. The only time that really changes is when the rich lose a bundle (as they often do in times of global conflict) or growth gets jump started via rebuilding (as it sometimes does after wars).
Piketty credits his work to the fact that he didn’t forge his economic career in the States, because he was put off by the profession’s obsession with unrealistic mathematical models. “The truth is that economics should never have sought to divorce itself from the other social sciences and can only advance in conjunction with them,” he argues.
We can only hope that the politicians crafting today’s economic programs will take this book to heart.
Piketty’s Wealth Tax Would Require A Constitutional Amendment In The US
Piketty’s proposed wealth tax to solve the ills of unconstrained inequality would actually require a constitutional amendment for it to be legal.
We’d get much the same result in a reduction of societal inequality in wealth if we were to impose a proper land value tax and do some tinkering with patents and copyrights.
And given that we need to go and do some tinkering with patents and copyrights (the current system just isn’t fit for duty) and that a land value tax is an excellent idea in its own right, that’s probably the course we should take.
Why It Took Until Now For An Economist To Expose The Flaw In Capitalism
Cold War self-censorship prevented mainstream economists from diagnosing adequately the fundamental flaw in capitalism, Thomas Piketty said.
Returns on capital grow faster than the regular economy, meaning that without some policy intervention, the rich get richer, and richer, and richer.
“The existence of a counter model was one of the reasons that a number of reforms or policies were accepted,” he said, arguing that those in capitalist countries fared better thanks to the threat of communism.
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.
The left response to this conundrum (including Piketty’s) is to try to grow g (growth of the economy) through more egalitarian taxation and stimulus and whatnot. But this concedes way too much, when we can actually solve the conundrum. The bulk of society doesn’t need to be devoted to accommodating the tiny number of people who capture r (rate of return) and ride capitalism’s natural flow, merrily, merrily, merrily. It is not necessary for everybody to keep bending over backward to grow the economy, just in order to help one another survive. There is a way out of this conflict, a way of generating equality as naturally as capitalism generates inequality.
Make sure the people who capture r is: everybody. If the stream of wealth flows to everyone, then the pressure’s off g to keep pace with r. We can just let r exceed g and focus on more meaningful things like availing ourselves of our inalienable right to the pursuit of happiness.
Rent and real estate value can flow to everyone by taxing (especially urban) land value, perhaps to ply a sovereign wealth fund with investment cash.
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: Funny how one can know so much and so little at the same time. Piketty suggested that taxing great wealth could make it possible to cut other taxes, such as the property tax on land and buildings. De-taxing buildings would be beneficial but you de-tax land, then you just let buyers, speculators, and assessors pump up the price of land. That only benefits sellers, flippers, and lenders, which widens the gap between rich and poor, the problem Piketty set out to solve.
Piketty and his reviewers talked about astronomical CEO pay but all failed to note it’s from corporate welfare — it’s not market success so much as lobbying success.
And even the best commentators left out a crucial key: disbursing the raised revenue to the populace in general. A tax might lower the highest incomes and fattest fortunes but a tax by itself does not put the money into the pockets of the rest of society. We need to have Citizen’s Dividend to do that.
Veteran lawmaker Tengku Razaleigh Hamzah said the country has fallen victim to the machinations of politicians habitually lining their own pockets and colluding with businessmen who were uncompetitive without preferential treatment.
Profits are made through outright corruption, poor regulation, and the transfer of public assets through privatisation at bargain prices.
The former finance minister, or Ku Li as he is popularly known, cited cases such as the RM2.5 billion bailout of Bank Bumiputera in 1985 plus an additional RM1 billion aid payout to the bank six years later, and also the RM2 billion rescue of Konsortium Perkapalan Berhad in 1997.
Tengku Razaleigh, author of “Rich Malaysia, Poor Malaysians”, said, “In all, more than a half trillion ringgit has been spent rent-seeking and patronage system. This amount could have been used more productively to fund a national pension programme for Malaysians.”
The outspoken Gua Musang MP added that this change must be supported by a revamped education system that puts a premium on logical and critical thinking over rote memorisation.
Ed. Notes: The title of his book is very similar to a refrain in America’s Appalachia, the nation’s poorest region, where people in one state say, “Why are we poor and West Virginia so rich?” The answer, as usual, is that the masses don’t get their fair share of the common wealth — the worth of Earth and of government-granted privileges — but the insiders capture that wealth for themselves. Nothing will change until people recognize that all the spending for land and resources is our common wealth and should be directed into our public treasuries to be disbursed as dividends — and a critical mass demands that this happen! Meanwhile, the corruption in places like Malaysia acts like a ravenous parasite that prevents the nation from growing a sizable middle class.
This 2014 excerpt of the American Heart Association, Apr 3, is by Bridgette McNeill.
The risk of stroke may be much higher in people with insomnia compared to those who don’t have trouble sleeping.
The risk also seems to be far greater when insomnia occurs as a young adult compared to those who are older.
Diabetes also appeared to increase the risk of stroke in insomniacs.
The mechanism linking insomnia to stroke is not fully understood, but evidence shows that insomnia may alter cardiovascular health via systematic inflammation, impaired glucose tolerance, increased blood pressure or sympathetic hyperactivity. Some behavioral factors (e.g., physical activity, diet, alcohol use and smoking) and psychological factors like stress might affect the observed relationship.
It’s unclear if the findings also apply to people in other nations [beyond Taiwan], but studies in other countries have also pointed to a relationship between insomnia and stroke.
Ed. Notes: What makes it hard to sleep on a regular basis? Worry. Usually financial worry. Without enough money, it’s hard to take care of oneself, never mind those one loves. So even health issues get back to economics. Economic injustice worsens our other problems. Economic justice — or geonomics — can make it easier to solve them. Imagine how different your life would be if getting a fair share of the common wealth while not having to pay taxes!
The Unnatural End of American Social Reproduction
This 2014 excerpt of Law School Tuition Bubble, Apr 03, is by Matt Leichter.
The cog in the generational lifecycle is the Georgist land cycle. Because the supply of land (especially urban locations) is fixed, its value is inevitably whipsawed by speculation. The more people buy land at the peak of the land cycle and lose out, the more land ends up in the hands of the wealthy (banks), who can afford to wait to sell the land when prices rise again. Everyone else must suffer.
If after several of these cycles, people lack the purchasing power to buy out the previous generation, they cease to reproduce and existing landowners hoard land for longer, exacerbating the disruption of the generational lifecycle.
Without reform it could take many years for the negative feedback from the land cycle to stop disrupting social reproduction.
Ed. Notes: Actually, we should not fear high land prices but welcome and share them; as they go up, so would our share. With a heftier share, we could wean ourselves from government “services”. With a slimmer government, we could repeal taxes, especially the counterproductive ones that shrink their base (which we could do any time, anyway).
Elections are supposed to achieve social peace by providing a government that represents the people. But voting has not brought peace to Ukraine. Many people distrust the honesty of the elections, and many in Ukraine have disagreed with the policies of the government, both when policy favored association with Europe and when it favored association with Russia. The fact that many voters in the Crimea and eastern Ukraine favor union with Russia, or else independence, shows that many there do not feel well represented.
The coming election in Ukraine will not solve the governance problem, because it is just a continuation of the same system that some are rebelling against. Ukraine needs a new structure of government and democracy. The solution is to shift political power from the central government to the people as individuals. When a citizen of Ukraine holds power equal to that of all others, he will have nothing to rebel against.
Individual sovereignty can best be represented by a neighborhood council. The neighborhood should have a small population, such as a thousand residents. That is small enough for the people to personally know the candidates and for someone to be elected with little cost. The government of Ukraine can begin the decentralization by establishing neighborhood or village election districts. If the neighborhood population is a mixture of ethnic Ukrainians and Russians, and the people wish to have a council that is aligned with one of these groups, or other interests, then the residents may regroup their districts and have councils that best represent their individual interests. This is the level-one level of governance.
In the Russian language, “Soviet” means “council”. The Soviet Union was supposed to be a union of elected councils, and there was indeed a structure of bottom-up multi-level soviets, but in practice, the Communist Party ruled top-down. Ukraine should resurrect the old Soviet system, which actually derives from the 19th-century anarchist concept of associations of voluntary communities. The Bolshevik slogan was, “All power to the soviets!”, but instead they perpetuated the dictatorship of the proletariat, usurped by the party oligarchs.
The power of the neighborhoods has to be constrained by a constitution that recognizes and enforces natural rights. In most countries, constitutions that proclaimed liberty have failed to be implemented, mainly because the structure of mass voting facilitates plutocracy, with policies that transfer wealth from workers to the moneyed and landed interests, resulting in poverty that gets remedied by trickle-down government welfare.
But with the bottom-up system of genuine soviets, the government would much better represent the people, and constitutional rights would be more strongly protected. As the level-one councils elect level-two regional councils, and these elect the supreme soviet or national parliament, the structure would prevent the usurpation of power from the top. The president would be elected by the parliament and easily dismissed if the people are dissatisfied. Any council member could be recalled by the council that elected him.
Decentralized government gets hampered by centralized tax collection, such as an income tax or value-added tax imposed from the central government. Decentralized governance is suitable to decentralized public finance, and the source of public revenue best suited to local power is the tapping of the area’s land rent or land value. Taxing wealth and investment invites capital to flee, hide, or else it shrinks from the burden. But land cannot hide, and it does not run away, nor does land shrink when taxed. Revenue from land-value taxation can be applied by the level-two councils, with revenues sent to both the level-one and level-three governments.
Ukraine needs two things: better governance and strong economic growth. The replacement of the current complex of market-hampering taxes by taxes on land value and pollution would give the economy such a comparative advantage that investment would pour in, wages would rise, the government would be able to pay off its debts, and the economic misery that fuels much of the unrest would be replaced by an economic joy that would eliminate the economic motivation to join Russia.
With small-group voting, the residents of eastern Ukraine would have their own local Russian-speaking councils, and probably ethnic Russian level-two councils representing some 25 thousand persons. The constitution of Ukraine should devolve most government services to the level-two councils, including local security, education, and public works. The ethnic Russians would no longer feel alienated from the government, and the government of Russia would find it difficult to control the local governments, because the council members would come from the people.
As to the situation of takeovers of government buildings in eastern Ukraine, the national government should surround them with walls of troops while establishing new centers of administration in other guarded buildings. But a lasting solution needs to replace the current government with councils that people feel represents them. The one good thing about the old Soviet Union, the bottom-up multi-level system of soviets, was the element that was most discarded without any debate. Ukraine: bring back the soviets, only this time, make it “all power to the people” as individuals and their chosen councils.
This 2014 excerpt of ThinkProgress, Mar 31, is by Alan Pyke.
Almost half a million college graduates are working minimum-wage jobs.
There were 260,000 Americans with bachelor’s degrees earning the federal minimum wage of $7.25 an hour or less in 2013. Another 200,000 associate’s degree holders also worked for that wage.
These figures are sure to understate the total number of people with higher education degrees who are working minimum wage jobs because data does not factor in state minimum wage laws that are higher than the federal floor. That means that likely thousands of workers in the 21 states with higher minimum pay rates are likely also degree-holders.
Ed. Notes: You hear that education will solve poverty. While it is true that the right education, as in engineering, will qualify you for a decently paying job, watch out; once a horde of people qualify for that job, how long do you think it’d still pay a decent wage? Besides, you must have noticed that people are better educated now than in the past — the literacy rate is quite high — yet has poverty disappeared? Nope. You need a more basic solution than just higher skills if you want to rid society of humbling poverty.
What solution is more basic? Concretely, it’s efficient land use. Why? Well, look in your city — where you have the most poverty there you will see the most vacant lots. Look at where commerce thrives; there you will see the most intense use of land.
So, how do you get landowners to use their locations efficiently? You don’t let them keep the rent, you make them pay it by charging them the annual rental value of their site while de-taxing their buildings. To pay these land dues, owners put and keep their parcels at highest and best use. Developing land and staffing new stores and offices all require not just capital (investment) but also, obviously, labor (employees).
Not only do workers get a slice of the pie, but the demand for labor also raises wages, so that slice grows.
Of course, the better educated will earn more than others when the employment rate hovers near 100%, but education itself can not create full employment; it takes public recovery of rents, driving efficient land use, to do that.
These five excerpts of endorsements of the public recovery of socially-generated location values are from: (1) Toronto Star, Mar 31 by Frank de Jong; (2) Huffington Post, Apr 20 by Joseph Finlay; (3) Demos, Apr 21, by Matt Bruenig; (4) Australian Property, Apr 23, by David Collyer; and (5) The Guardian, Apr 23, by Jonathan Portes.
Frank de Jong’s Big Idea
Frank de Jong has a great idea about housing: Taxing land alone without buildings will transform Toronto by encouraging landowners to put vacant and underused land to more productive use.
5. More taxes on wealth, less on income. We should refocus our taxation away from the taxation of economically useful activity and onto the holding of wealth, discouraging the hoarding of valuable cash, land or possessions. This would be much more sensible for the overall economy whilst raising as much revenue or more.
6. Tax land ownership. The greatest source of wealth is the ownership of land and yet it is only lightly taxed in the UK. Better would be a land value tax, an annual tax on the underlying value of land owned (rather than the value of buildings that occupy it). This is a policy that has been recommended by economists from across the political spectrum, and could wholly replace current taxes like council tax and stamp duty. Done right, it would mean lower bills or equal bills for the vast majority of the population, and substantially increased taxation on the top 10%.
LVT could capture all of the rents that flow from the land to the owner, but the owner could still make money by doing productive things on the land (like providing housing services or running a business).
In our discourse about “housing wealth,” we often conflate land value and building value. Home values (i.e. the value of the physical structure) should hardly ever increase in price. When we are talking about “housing wealth” increasing, what we are talking about is land value increasing.
LVT could blow up this source of racial wealth disparity. The dollar value of rents would never be accessible to the owner of the land. It would not cause racial wealth divergence.
Yesterday REIWA president David Airey issued a call in the West Australian newspaper for the WA government to abandon Stamp Duty and fund this by removing the many wheezes from the tattered State Land Tax.
To Make Housing Affordable Requires More Than Tinkering Around the Edges
Danny Dorling argues for a land tax and an increased, much more progressive council tax, to encourage housing to be used more equitably and efficiently.
Building more houses would reduce the price of existing ones, and hence in itself would make the UK a less unequal society. So would higher taxes on land and property. And both would make it less attractive to leave properties empty as an investment rather than using them productively by letting them out.
Ed. Notes: If you’re going to tax, do tax the values that society generates, rather than the values individuals generate. But note: you don’t need to levy a tax, you could institute dues, and you don’t have to hand over all the rents to politicians and bureaucrats, you could disburse the revenue to residents as dividends. That should please both policy wonks and real people.
This 2014 excerpt is of Ellen Brown’s blog, Mar 29.
On March 20, 2014, European Union officials reached an historic agreement that authorizes both bailouts and “bail-ins” – the confiscation of depositor funds.
Under the deal, after 2018 bank shareholders will be first in line for assuming the losses of a failed bank before bondholders and certain large depositors. Insured deposits under £85,000 (€100,000) are exempt.
The US, UK, Canada, Australia, New Zealand, and other G20 nations also have bail-in plans for their troubled too-big-to-fail banks.
Bankers win both ways: they can tap up the taxpayers’ money and the depositors’ money.
But at least, you may say, it’s only the uninsured deposits that are at risk (those over €100,000—about $137,000). Right?
Not necessarily. All deposits could be at risk in another meltdown.
Only after the taxpayers – and the depositors – are stuck with the tab will the curtain be lifted and the crippling insolvency of the banks be revealed. Predictably, panic will then set in, credit will freeze, and the banks will collapse, leaving the unsuspecting public to foot the bill.
In Sweden or Finland in the early 1990’s, government did not bail out but nationalized troubled banks [and] took over their management and assets. In the Swedish case the end cost to taxpayers was estimated to have been almost nil.
In the U.S. today, finance charges on credit-money amount to between 30 and 40% of the economy, depending on whose numbers you believe.
Ed. Notes: The above scenario is not far-fetched. Recently in Cyprus depositors lost money. In the US, banks have failed before without returning a penny to depositors (which was why federal insurance was created). Bankers feel no embarrassment demanding bailouts; why not bail-ins, too?
Presently, US banks help themselves to depositor’s money via nit-picking fees and closing one’s account to end a dispute (while keeping the money). Banks also charge usurious amounts for their credit cards, which profit the banks handsomely. Plus, banks play a big role in creating inflation, and do not pay depositors enough interest to keep up with the constant rise in prices.
Further, banks promulgate the modern custom of borrowing to buy land (rather than renting from one’s community). Banks profit enormously from mortgages (both principle and interest). It must be society’s servicing of its mortgage debts that gets included in the figure above — 30%-40% of the price of everything you buy going to lending banks — otherwise that percentage seems way too high.
While bighearted reformers want government to take over banking, that does not reduce our demand for loans. Our need for debt is artificially high; it gets exaggerated by our purchases of land and resources. If we rented locations from our community — as residents and businesses do in Hong Kong, Israel, US port districts, and elsewhere — then the demand for borrowing funds would drop dramatically and bankers would be cut down to size.
That said, letting the public treasury perform some banking functions might not be a bad idea, even if it does not get to the root of the money problem.
This 2014 excerpt of FT Advisor, Mar 27, is by Sarah Davidson.
Oxfam’s director of campaigns and policy, Ben Philips, called for a focus on the greater taxation of wealth by exploring a land value tax, and set out a long-term strategy to raise the minimum wage to a living wage.
His comments came as Oxfam published a four-page report revealing just five UK households have more money than the poorest 12.6 million Britons put together, the bottom 20 per cent of the entire population.
Another key stat: 85 people on the planet own the same amount as half the world’s population.
a discipline that, compared to economics, is as obscure as Warren Buffett’s investment strategy, compared to conventional investment theory, about which Buffett said, “You couldn’t advance in a finance department in this country unless you taught that the world was flat.” (The New York Times, Oct 29). The writer wondered, “But why? If it works, why don’t more investors use it?”
Good question. Geonomics works, too. Every place that has used it has prospered while conserving resources. Yet it remains off the radar of many wanna-be reformers. Gradually, tho’, that’s changing. More are becoming aware of what geonomics studies – all the money we spend on the nature we use. Geonomics (1) as an alternative worldview to the anthropocentric, sees human economies as part of the embracing ecosystem with natural feedback loops seeking balance in both systems. (2) As an alternative to worker vs. investor, it sees our need for sites and resources making those who own land into landlords. (3)As an alternative to economics, it tracks the trillions of “rent” as it drives the “housing” bubble and all other indicators. And (4) as an alternative to left or right, it suggests we not tax ourselves then subsidize our favorites but recover and share society’s surplus, paying in land dues and getting back “rent” dividends, a la Alaska’s oil dividend. Letting rent go to the wrong pockets wreaks havoc, while redirecting it to everyone would solve our economic ills and the ills downstream from them.
People must learn to stop whining so much and feel enough self-esteem to demand a fair share of rent, society’s surplus, the commonwealth.
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.
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.
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.
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.
about the money we spend on the nature we use. It flows torrentially yet invisibly, often submerged in the price of housing, food, fuel, and everything else. Flowing from the many to the few, natural rent distorts prices and rewards unjust and unsustainable choices. Redirected via dues and dividends to flow from each to all, “rent” payments would level the playing field and empower neighbors to shrink their workweek and expand their horizons. Modeled on nature’s feedback loops, earlier proposals to redirect rent found favor with Paine, Tolstoy, and Einstein. Wherever tried, to the degree tried, redirecting rent worked. One of today’s versions, the green tax shift, spreads out of Europe. Another, the Property Tax Shift, activists can win at the local level, building a world that works right for everyone.
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.
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 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 study of Earth’s economic worth, of the money we spend on the nature we use, trillions of dollars each year. We spend most to be with our own kind; land value follows population density. Besides nearness to downtowns, we also pay for proximity to good schools, lovely views, soil fertility, etc. These advantages, sellers did not create. So we pay the wrong people for land. Instead, we should pay our neighbors. They generate land’s value and deserve compensation for keeping off ours, as they’d pay us for keeping off theirs. It’s mutual compensation: we’d replace taxes with land dues – a bit like Hong Kong does – and replace subsidies with “rent” dividends to area residents – a bit like Alaska does with oil revenue. Both taxes and subsidies – however fair or not – are costly and distort the prices of the goods taxed and the services subsidized. By replacing them and letting prices become precise, we reveal the real costs of output, the real values of consumers. Then, just by following the bottom line, people can choose to conserve and prosper automatically. A community could start by shifting its property tax off buildings, onto land – a bit like a score of towns in Pennsylvania do; every place that has done it has benefited.