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Billionaires in crony sectors have had a great century so far. In the emerging world their wealth doubled relative to the size of the economy — equivalent to over 4% of GDP, compared with 2% in 2000. Urbanisation and a long economic boom have boosted land and property values. A China-driven commodity boom enriched natural-resource owners from Brazil to Indonesia. Some privatisations took place on dubious terms.
Of the world’s big economies, Russia scores worst. The transition from communism saw political insiders grab natural resources in the 1990s, and its oligarchs became richer still as commodity prices soared. Unstable Ukraine looks similar. Mexico scores badly mainly because of Carlos Slim, who controls its biggest firms in both fixed-line and mobile telephony. French and German billionaires, by contrast, rely rather little on the state, making their money largely from retail and luxury brands.
The total wealth of America’s billionaires is high relative to GDP, but Silicon Valley’s wizards [new money] are far richer than America’s energy billionaires [old money]. And few of its billionaires made money in banking [used mainly for sheltering old money]. Even including private equity, compared with Larry Ellison of Oracle, Stephen Schwarzman of Blackstone is a pauper.
Countries that do well on the crony index generally have better bureaucracies and institutions.
Efficient government is no guarantee of a good score: Hong Kong and Singapore are packed with billionaires in crony industries. This reflects scarce land, which boosts property values, and their role as entrepots for shiftier neighbours. Hong Kong has also long been lax on antitrust: it only passed an economy-wide competition law two years ago.
Mainland China scores quite well. One reason is that the state owns most natural resources and banks; these are a big source of crony wealth in other emerging economies. Another is that China’s open industries have fostered a new generation of fabulously rich entrepreneurs, including Jack Ma of Alibaba, an e-commerce firm, and Liang Wengen of Sany, which makes diggers and cranes.
Most countries in South-East Asia, including Indonesia, Thailand, and the Philippines, saw their scores get worse between 2007 and 2014, as tycoons active in real estate and natural resources got richer.
Our crony index has three big shortcomings.
One is that not all cronies make their wealth public. This may be a particular problem in China, where recent exposés suggest that many powerful politicians have disguised their fortunes by persuading friends and family to hold wealth on their behalf. Unreliable property records also help to disguise who owns what.
Second, our categorisation of sectors is crude. Rent-seeking may take place in those we have labelled open, and some countries have competitive markets we label crony. America’s big internet firms are de-facto monopolies that abuse their positions. South Korea’s chaebol, which sell cars and electronics to the world, are mainly in industries we classify as open. But they have a history of bribing politicians at home. China’s billionaires, in whatever industry, are often chummy with politicians and get subsidised credit from state banks. A third are members of the Communist Party. Sectors that are cronyish in developing countries may be competitive in rich ones: building skyscrapers in Mumbai is hard without paying bribes, and easy in Berlin. Our index does not differentiate.
The third limitation is that we only count the wealth of billionaires. Plenty of rent-seeking may enrich the very wealthy who fall short of that cut-off. America’s subprime boom saw hordes of bankers earn cumulative bonuses in the millions of dollars, not billions. Crooked Chinese officials may have Range Rovers and secret boltholes in Singapore—but not enough wealth to join a list of billionaires. So our index is only a rough guide to the concentration of wealth in opaque industries compared with more competitive ones.
Ed. Notes: The authors above give the limitations of their work, which shows a lot of work still needs to be done. Recall the saying in economics: to get really rich you capture values from society and impose your costs upon society. You flip real estate, where the value of locations is generated by the presence of the populace (society). You sell oil which is hugely polluting. Even the new fortunes in tech come in part from society, from the cheap, way under-market fees for copyrights and patents.
The problem is not a matter of envy. The problem is a matter of taking (however legal) vs. making, of taking a bigger share of the pie vs. creating a bigger pie. When some get more than they deserve, others must get less. Those getting more then lobby for ever newer and better privileges. For example, when Y2K was a real scare, tech won extra limited liability from a compliant Congress. And those getting less must then work extra or choose work that shouldn’t be done, such as an IRS enforcer.
The solution is elegant, both moral and practical. Eliminate most privileges, such as subsidies (corporate welfare), sweetheart contracts (military procurers), lenient enforcement of safety standards (agri-biz and other polluters), liability limited by a state (chemical or drug makers), money monopoly (bankers), license-based cartels (doctors, taxi-owners), etc. And, charge full market (annual rental) value as fees for granting little pieces of paper such as patent/copyright, utility franchises, EM spectrum licenses, resource leases, and land titles. Do all that and you’ll still have big fortunes in big economies but not as big as now and it won’t matter because every fortune will be earned.
This 2014 excerpt of World News Trust, Mar 13, is by Joel S. Hirschhorn.
If you ever find yourself in a hospital for an overnight stay that could last from one or two days, or perhaps much more, ask if you are being classified as “under observation.” This means that legally you are not an inpatient. Then you are likely to find yourself owing the hospital a large amount of money, because your Medicare or other health insurance will not provide the benefits associated with inpatient status.
If told that you will be in the observation category, then you might seriously consider whether you should stay in that hospital, or perhaps seek another one if you are not in immediate need of medical attention.
Realistically, you may not be in a clear enough mental state when you enter a hospital to ask questions and demand good answers about how the hospital is classifying your stay.
From 2007 through 2009, the ratio of Medicare observation patients to those admitted as inpatients rose by 34 percent. More than 10 percent of patients in observation were kept there for more than 48 hours, and more than 44,800 were kept in observation for 72 hours or longer in 2009 — an increase of 88 percent since 2007. Note that Medicare guidelines recommend that observation stays be no longer than 24 hours and only “in rare and exceptional cases” extend past 48 hours.
This observation status was a tactic by government to reduce Medicare spending. It puts hospitals in the difficult position of putting their patients in a hard financial situation.
Ed. Notes: Complexity is the enemy of equity. If you want fairness, you really can’t let politicians and bureaucrats issue so many and biased rules. Instead, you must create a system that operates automatically without constant tinkering by managers. For medical costs, allow more entrants into the field to increase supply and clean the environment and shorten the workweek to reduce stress and illness and thus decrease demand. That’ll cut costs of affordable levels. It’s geonomics, rather than letting the government handle it (the latter is not a very adult attitude, is it?)
This 2014 excerpt of Boing Boing, Mar 14, is by Cory Doctorow.
Hampton, Florida is a town so corrupt that it offends the Florida Legislature, a body with a notoriously high tolerance for sleaze. With fewer than 500 inhabitants, Hampton’s major source of revenue is a 0.2 mile stretch of Highway 301 — a stretch where the speed limit dips from 65 to 55. Hampton’s traffic cops write an average of 17 tickets a day against out-of-towners, clearing $419,624 in 2011 and 2012. However, the town also operated at a deficit during this time.
Where’s the town’s money? Ask now incarcerated ex-mayor Barry Moore, his three staffers who resigned in February, the police chief who also resigned, along with 17 “employees”, or the town’s water manager, whose business records were all “lost in a swamp.” According to the sheriff, some residents said they were threatened with having their water turned off if they made trouble.
Then the state legislators heard from the local representative, who was ticketed by a Hampton cop. They’ve given the town 30 days to clean up its sleaze or they’re going to dissolve it, which would make it part of surrounding Bradford County.
Ed. Notes: If somebody robs the entire public, and happens to hold public office, they stand a good chance of getting away with it. So why pay taxes, just to enrich your corrupt rulers? To remove temptation from politicians, remove power from politicians. Don’t let them decide how to raise and spend public money. Put those functions in the constitution, strictly defined.
Government should be limited as to how much it may charge, and for what activity. It should be limited as to how much it may spend, and for what activity. And, most fundamentally, it would act as our steward and institute land dues to recover our common wealth — our spending for sites and resources — and then disperse this socially-generated value of land and nature to citizens as a dividend.
It’s geonomics and it’d make government a lot less tempting to crooks.
This 2014 excerpt of Dollars & Sense, Mar 14, is by Polly Cleveland & Mason Gaffney.
Agriculture consumes some eighty percent of California water. California is basically a dry state, subject to periodic severe droughts. So, how come the largest water user is cow pasture, watered with giant sprinklers sending great sprays into the atmosphere? How come farmers irrigate those long brown furrows by flooding them, losing great quantities of water to evaporation, and bringing harmful salts to the surface? And how come some farmers even grow rice in flooded paddies, seeding them from airplanes?
Why do we see so few elementary efforts to conserve water, such as drip irrigation or mulching fields to protect the soil? Why are irrigation canals not lined and covered to prevent water loss?
Why? Because California farmers get their water free, or close to free.
The California Constitution says that the water belongs to the people. However, farmers may take water provided they put it to “beneficial use,” first come, first served. This is the basis of California “water licenses”. A “senior” water license downstream, used for low-value irrigated pasture, takes precedence over a “junior” water license upstream, used for high-value orange groves.
The California State Water Project (SWP) brings water from the Feather River in the Sacramento Valley south through the Sacramento delta, then pumps it up to a canal running south along the west side of the Central Valley, pumps it up again 2000 feet over the Tehachapi mountains into Los Angeles, and conducts it even further south to San Diego. The SWP was financed by California taxpayers.
Half that water has gone to irrigate the holdings of land barons, including the J. G. Boswell dynasty (200,000 acres) and their in-laws the Chandlers (145,000 acres), at that time owners of the LA Times.
The state could charge for water, thus recognizing that we the people own the water. The state could put a meter on every ground-water pump, and charge accordingly. Overnight, California’s fiscal deficit would become a surplus.
Yes, some water-hogging crops like rice and hay and alfalfa might move away, as they should. That would release water for the more valuable, intensive fruit and vegetable crops for which California is famous.
The farmers might threaten to “pass on” higher water prices to consumers. But that’s an idle threat, because shifting land and water into higher-valued and more intensive crops will raise the total supply of food marketed.
This 2014 excerpt of the Washington Monthly, March/ April/ May, is by Ryan Cooper.
How would you like to get $2,000 in free money, fresh off the government printing presses? And we’d do it for all Americans on an ongoing basis? And that doing so would solve our problem?
As a percentage of total output, wages have fallen from a high of almost 52 percent around 1970 to less than 43 percent today. Meanwhile, inequality within wages also increased. The rich began capturing nearly all the results of economic growth —- the top 1 percent’s share of national income increased from about 8 percent in the mid-’70s to about 23 percent today.
The wealthy disproportionately save their money rather than spend it. They don’t save by piling up huge pyramids of cash like Scrooge McDuck, they “save” by buying financial assets —- which means that most of the fruits of economic growth have been channeled into asset price increases. Since the crisis, while both output and employment growth has been weak, the stock market has regained all the ground lost since 2009 and then some.
Such mass money creation is hardly new: the quantitative easing program has already been carried out in a similar way —- with trillions of dollars in new money.
There is no reason to think that our problem will be cured without some kind of aggressive change. If we change nothing, we could be stuck in our current situation for decades.
Ed. Notes: Some people can justify doing the right thing only if it’s good for “the economy”, not if it’s good for real living human beings. But whatever their reason for getting some of the abundant surplus into the pockets of everyone, every voice added to the call for such an extra income is another step toward eventual victory.
A more accurate analysis — one less distorted by paying obeisance to the ruling class and our coercive customs — would note that our spending for land and other aspects of nature (such as oil) does not reward anybody’s labor or capital (nature was not created by any of us) and that how much we spend for sites and resources is set by our demand for them. Hence, owners of the earth — something all life needs and all humans deserve — owe those whom they displace (just as they are owed by others who displace them). Thus, getting an extra income from our aggregate spending for parts of the planet is not a favor from anyone, not an act of charity or generosity, but our rightful share of the natural bounty, which is an automatic surplus, and should be treated as our common wealth.
It’s a moral position but it leads to the most practical of policies — geonomics.
A mixture of good weather and stubbornly bad public policy leaves French capital in grip of worst atmospheric pollution for seven years – with public transport running for free.
This 2014 excerpt of The Independent, Mar 14, is by John Lichfield.
A run of unseasonably warm, windless days and cold clear nights has clamped a lid of warm air over northern France. Under that lid, minuscule particles of pollution – partly generated by France’s long love-affair with the diesel-powered car – have accumulated to dangerous levels.
The level of official “pollution alert” – 80 microgrammes of tiny particles for every cubic metre of air – has been exceeded each day since Wednesday in 30 départements (counties) across northern France.
In an attempt to keep traffic to a minimum, all public transport has been declared free until Sunday in Paris, Rouen. and Caen. Even the Velib’, the Parisian help-yourself, short-term-hire bikes which fathered the Boris Bikes in London, have been declared free.
Is that sensible? In the midst of one of the most intense and prolonged pollution scares northern France has ever seen, is cycling still good for your health?
France is 60 per cent dependent on diesel cars. Exhaust gases are partly blamed for the fine particle pollution affecting Paris and several French cities. The French car giants, Renault and Peugeot-Citroen, invested heavily in diesel engines. Diesel fuel is taxed less heavily than petrol.
Fumes from diesel cars, as well as industrial emissions and agricultural fertilisers, are blamed for increasing the micro-particles in the French atmosphere to potentially dangerous levels.
According to on study, there are 40,000 premature or unnecessary deaths in France each year because of the high level of atmospheric pollution. The European Commission has brought a legal action against France in the European Court of Justice for its failure to respect EU anti-pollution laws.
Ed. Notes: Should politicians be permitted to impose economic policy? Or should they stick to what government really ought to be doing: defend rights. If the latter, government would not tax whoever it favors less, rather it would charge polluters for polluting at the amount of the damage they cause.
To avoid the charges, both producers and consumers would seek and find clean alternatives. And those alternatives would push the dirty engines out of the marketplace sooner if government quit taxing labor, the biggest cost in manufacturing, freeing that money up for R&D, production, and delivery.
Further, there’d be less need for engines – dirty or clean – if government were to recover the socially-generated value of land. Cars are huge land-users, especially in cities. Imagine if drivers had to pay for all the costs they impose, such as land lost to streets, parking lanes, parking lots, dealer lots, junk yards, gas stations, repair shops, part of the sites for parts stores, insurance offices, and cop shops. If drivers paid directly the costs that are feasible to do so in the price of fuel — where drivers could see them and feel them — then many would forgo driving for walking, pedaling, and riding transit.
Finally, if citizens received a share of the socially-generated value of land and resources, then they’d not be tied down by jobs. They could less, and at various hours, utterly destroying rush hour, which is when transportation spews forth most of its smog.
While France might have a feeble environmental movement, it does have in its intellectual heritage the reform of physiocracy. Those thinkers from the Age of Enlightenment recognized “natural law” (physiocracy) as a guiding principle and called for a single tax on land. If only today’s French thinkers and politicians would resurrect their past!
An article in the 19 March 2014 NewScientist featured Catherine Brahic’s interview of Christiana Figueres, executive secretary of the U.N. Framework Convention on Climate Change. She is leading a project to create a Global Climate Treaty in December 2015. A draft agreement is scheduled to be delivered to all country governments in May 2015.
There was a U.N. climate change conference in Copenhagen in 2009 which failed to achieve an agreement. Christiana Figueres points out that while in 2009 there was doubt that countries would adopt policies to curb emissions, more than 60 countries now have climate legislation that apply to 90 percent of global emissions. There has been more investment in renewable energy. But this progress is much less than what is needed to reduce air pollution to a sustainable optimal level.
A major technological obstacle to the use of renewable energy is the expense of storing electricity in batteries in order to have a steady supply of power on grids. Another technology that is needed for emission reduction is carbon capture and storage.
Unfortunately this interview did not delve into the economics of climate policy. Economists are in wide agreement that the most effective policy to reduce widespread pollution is full-cost pricing, to make the polluters pay the social cost of the damage. The charge is passed on to the buyers of the products, who buy less. The firm either installs methods of reducing the emissions or else pays the fee and reduces pollution by producing less of the product.
A pollution charge or tax is more efficient than command-and-control restrictions, because the tax lets the polluter respond according to its particular costs. In contrast, when government dictates particular methods such as gasoline additives and engine technologies, these may not be the most effective means, and the mandates and restrictions may not encourage innovations.
There is much talk about carbon taxes, but carbon exists in both the inputs and outputs. A tax on the gasoline input does not create an incentive to capture the carbon and other emission outputs, and the tax imposes an excess burden on cars that have already reduced their pollution. A tax on the emission output does induce technology to capture the carbon, and avoids the excess burden.
The executive secretary talked about carbon neutrality, such that each factory, building, city, and vehicle has very low or zero carbon outputs. But the most effective policy is not to regulate and micro-manage, but to set an overall goal and an emission charge per ton of pollutant, and then let each person, enterprise, and facility adjust according to its own costs and benefits. If the cost of carbon neutrality is greater than the social benefit, then such neutrality is bad for the environment, because it wastes resources.
Unfortunately, governments are moving towards regulations rather than pollution taxes. The government of Australia is seeking to replace the carbon tax, enacted by a coalition of the Green and Labor parties in 2012, with a subsidy to industry and an emission permit trading scheme. On 20 March 2014 the Australian Senate voted against repealing the carbon tax, but the prime minister continues to seek repeal.
While emission permit exchanges are more efficient than regulations, the increase in the price of permits is a gain only to the permit holders, and the price of the permits may be different from the social cost of the pollution. A pollution fine, charge, or tax, however it’s called, enables the government to enact a “green tax shift” to replace market-hampering taxes on income, sales, and value added, with payment for emissions that not only reduce pollution but also prevent what would otherwise be a subsidy to polluters by not having them pay the full social costs.
Economists and their journalist followers should be in the forefront of promoting a green tax shift as the best policy both for the environment and the economy. Even the skeptics of global warming should embrace the green tax shift, as pollution is harmful trespass regardless of climate change, and the shift promotes greater economic freedom along with productivity.
If the 2015 Global Climate Treaty is based on pollution levies, it will succeed. If instead the Treaty calls for “command and control,” it will doom the planet to yet another failure of central planning, and the result will be both a worsening global economy and a backlash against the tyranny of regulation strangulation.
Moreover, tax fraud often enhances environmentally harmful activities (e.g. tax evasion and tax avoidance related to company cars). Therefore it is of utmost importance for environment protection to combat tax fraud and the corruption related to it.
In Hungary just the opposite is happening. The sum of the illegally evaded VAT and illegally reimbursed VAT in Hungary is equivalent to between 5% and 6 % of GDP. The main actors are not private persons or small enterprises but highly organized criminal groups with close relations to the state. The main beneficiaries are several retail chains and big exporting companies.
Ed. Notes: Naturally, governments feel they have the right to take what they want from anyone in any way and at any amount, and rationalize their taking by claiming the money will be used to benefit those from whom they take the money. But as we all know, that’s not always true. The EU, for example, pays billions of euros to millionaire farmers to not farm. Why should a middle class person fork over some of their hard earned pay just to have it wasted in an unfair way?
Taxists also overlook another basic truth: they don’t distinguish between individual earnings and social surplus. An individual starts a business or erects a building but it’s the society that creates the value of a location. Our spending for land, resources, EM spectrum, etc, is a surplus because it’s not needed to reward anyone’s effort, since nobody created Earth.
Society’s agent – government – should not tax our wages, sales, and homes but rather recover the annual rental value of locations. Then use the raised revenue to pay citizens a dividend. Government need not use taxes; it could use fees, leases, dues, etc. While corruption would still be possible – a wealthy owner might bribe an assessor to reduce his Land Dues – it’d be more difficult to pull off, as long as the books are kept open and any citizen could check up on the assessments and dues collected. Sunlight is the best disinfectant!
This 2014 excerpt of Corporate Social Responsibility Newswire, Mar 5, is by John Perkins.
Freddy Elhers is Minister of the newly formed cabinet position in Ecuador known as Buen Vivir (literally Good Living).
Freddy’s closing talk on the opening day of the Human Resources Summit in Istanbul for 2,000 corporate executives from all over the world was the “bookend” for my opening keynote in the morning. He talked about how Ecuador is the first country to have a Ministry of Buen Vivir, a ministry that guides all the other branches of government.
The recently revised Ecuadorian Constitution reads:
“We … hereby decide to build a new form of public coexistence, in diversity and in harmony with nature, to achieve the good way of living.”
Freddy Elhers likes to point out that “the pursuit of happiness” is embedded in the most sacred document of the United Sates. We the People can get back to those unalienable rights that our founders fought so hard to insure: “that among these are Life, Liberty and the pursuit of happiness.”
We’re all living on this tiny, fragile space station. It’s time to collectively choose Buen Vivir and to make this the time to get back our freedoms – in fact to attain more freedom than humankind has ever before experienced, the freedom to enjoy true prosperity, good living.
Ed. Notes: Progressive, ethical politics is one thing but it needs progressive, ethical economics to support it. Otherwise, it’s just nice sounding words on paper. OTOH, any place that uses geonomics could probably almost forget about politics altogether.
This 2014 excerpt of Grist, Mar 13, is by Holly Richmond.
Ordos is an epic ghost town. Ghost city, to be precise — the largest in the world. Sitting in the middle of a desert in northern China, Ordos was intended to be the Vegas of Inner Mongolia.
The Kangbashi district, planned to accommodate a population in excess of one million, is home to 20,000 people — leaving 98% of this 355-square kilometre site either under construction or abandoned altogether … a glamorous and nearly empty airport, the rickety corpse of a sports stadium, an unused mosque, and a ghostly downtown. The hotel minibar has peanuts, booze, and gas masks.
Deadlines weren’t met, loans went unpaid, and investors pulled out before projects could be completed — leaving entire streets of unfinished buildings. The ridiculous cost of accommodation put off many would-be inhabitants, so that even fully completed apartments became difficult to sell.
Ed. Notes: Build it and they will come? Well, not exactly. This is a good example of what value is. Things don’t have value, even big things like cities. Rather, people value things. Value is a verb, not a noun, essentially.
Therefore, because value comes from people, and land comes from none of us, then who should get its value? If those who get it are those who create it, and if they get it from those who own the land, then owners would be compensating those whom they exclude from a part of earth, earth being our common birth right. (Of course, each owner as a resident would likewise be compensated by “hers” neighbors.)
How much would owners pay as land dues to their community? Depends on how much demand there is for their site, how much those excluded value the site. In a ghost town, not much if anything at all. Another nice feature of this geonomic arrangement of dues-in-dividends-out is that it could replace taxes and subsidies. Becoming a tax-free jurisdiction might change any place from being a ghost town to a booming city!
This 2014 excerpt of Oxfam, Mar 13, is by Ian Gary.
Rachel Boynton’s documentary “Big Men” goes inside board rooms and presidential living rooms, onto oil rigs and the floor of the New York Stock Exchange, after the discovery of a huge oil find in Ghana in 2007.
Who gets a license to explore oil and how? Who’s behind these companies (the “beneficial owners”) and what are their connections to political elites? Who bears the risk and who gets the rewards?
Jim Musselman is the CEO of Kosmos Energy at the start of the film – an affable (and quotable) Texan who had previous success in the oil-rich dictatorship of Equatorial Guinea.
George Owusu founded an obscure company called the E.O. Group and gained a license to explore in Ghana and who, by his telling, “cold-called” Musselman in the Dallas phone book and lured Kosmos to Ghana.
When Erik Solheim, Norway’s environment minister at the time, tells the audience that Ghana should tax oil companies to the hilt, Musselman is stone faced. When Musselman tells the chairman of the Ghana’s state oil company that he didn’t taxes, the chairman assures him, “Oh, we won’t do it.”
The American Petroleum Institute argued against implementation of a US law requiring oil company transparency.
Will Ghana’s citizens benefit from the more than $20 billion the government is expected to receive from oil in the next decade?
Ed. Notes: Oil should benefit everyone. The value of oil in the ground should be paid into a nearby regional treasury. Companies should profit from extracting, processing, and transporting, but should pay over the value of oil in situ to the surrounding populace.
Government could disburse the “royalties” as dividends to citizens, a la Alaska.
At least, that’s what should happen until the oil runs out or people quit burning it to save their world and to save money by switching to solar energy.
Oil is not so different from other resources or lands or locations in general. The rental value of all nature — the money one is willing to pay to own or use them — is what should be our common wealth to share. Meanwhile, taxes on wages, sales, and buildings should be forgotten.
It’s the geonomic recipe and people who care about Africans would do well to help raise awareness of our right to a fair share of Earth’s worth.
The US Food and Drug Administration (FDA) is now imposing restrictions that will devastate many small farms that provide healthy food. The bad news was published by the Health Impact News Daily issue of 16 March 2014 in an article by the Alliance for Natural Health, “FDA Starts to Take Control of American Organic Farms.”
According to the article, an inspector of the FDA visited the New Morning Farm in Maryland and threatened to impose fines unless the owner switched to government-dictated farming, even though there has been no health problem from food grown on that farm.
Another article, in the 22 February 2014 Los Angeles Times, announced, “Planned food safety rules rile organic farmers.” It stated that the FDA regulations will stop common organic farming techniques such as the use of locally-made fertilizers and irrigation from creeks.” Draft animals used for plowing may become illegal.
The FDA gets its new powers over farms from the Food Safety Modernization Act (FSMA), signed into law in January 2011. You can go to the FDA web site and read the “FSMA Rules & Guidance for Industry.”
If you run a farm, what would you think of having to read through a dozen complicated rules you will have to obey? After a hard day of farming work, the tired farmer has to read publications such as:
“What Information is Required in the Records You Must Establish and Maintain to Identify the Nontransporter and Transporter Immediate Previous Source and Immediate Subsequent Recipients? (Sections 1.337 and 1.345).”
“Who is Required to Establish and Maintain Records for Tracing the Transportation of All Food? (Section 1.351).”
“What Are the Consequences of Failing to Establish and Maintain Required Records or Make Them Available to FDA? (Section 1.363).”
The new FDA farming rules require periodic audits that will cost several thousand dollars for each one. Farms are already closing down their produce production to avoid costs that can be over $100,000 per year.
The FDA is now choking organic farming with huge amounts of such details. As with many other regulatory proceedures, the FDA rules promote the concentration of industries into large companies that can handle the regulation costs, while small companies shut down because of the compliance costs.
The “market failure” doctrine that prevails in economics claims that in a free market, monopolies will arise to dominate industries with higher prices than in competitive industries. But in actuality, it is big government’s regulations that drive out the small producers and promote the concentration of firms in an oligopoly, an industry dominated by a few firms. Despite the presence of large banks, there are still small banks and credit unions that serve local communities. But regulations are too costly, all that will remain are large banks.
Many regulations exempt very small enterprises, but these also stifle business by preventing small firms from getting bigger. The result is less cultivation of fruits and vegetables in the USA and more imported food. Perhaps one good aspect of the FSMA is that in response to safety concerns about imported food, foreign exporters will be subjected to new safety rules. To facilitate foreign compliance, the FDA has translated documents about the FDA Food Safety Modernization Act into 11 languages.
The FDA is implementing a mandate authorized by Congress. The U.S. government claims this authority from the “commerce clause” of the US Constitution (Article I, Section 8, Clause 3), which states that Congress has the power “To regulate Commerce … among the several States.” Many constitutional scholars think that the founders intended this clause to prevent trade barriers among the states, and not to give the US government a blank check to enact any legislation it pleases, which is the current situation, even though this contradicts the original intention of the founders to limit the power of the federal government to strictly listed functions.
There is indeed a global food safety problem, with frightening cases of food contamination and poisoning. But the optimal way to deal with this problem is with a liability rule that enables victims to obtain quick compensation for any damage, and indeed, inspections, ideally by state government agencies rather than the federal government. As a service to the public, the inspections should be paid for from government funds, rather than imposing arbitrary and burdensome costs on farmers. It should be the responsibility of governmental officials to know the rules and apply them, and allow any farm method to be used so long as the inspectors do not judge them to be dangerous.
A demand by the public for food safety, combined with liability for damage, will be met by the market supply of safety measures and assurances. Insurance companies would inspect the farms in order to avoid the adverse selection of bad farms getting the most insurance. There are in fact private food inspectors operating, but since government preempts food safety, the demand and supply for private inspections diminishes.
The US government is responding to a real problem, but as typically happens, the government’s response fails a cost-benefit analysis. Congress ignores the cost of its regulations, and the voters are too busy and too ignorant to insist that Congress adhere to economic logic.
Meanwhile, we can expect a greater concentration of farming into large corporate agriculture, more expensive food, and fewer opportunities for progressive food entrepreneurs.
This 2014 excerpt of In These Times, Feb 20, is by Julia Wong.
More than 400 San Francisco city workers, many dressed as Cupid, marched in protest of Twitter’s ‘sweetheart’ tax break to Twitter headquarters.
The protesters were members of Service Employees International Union Local 1021, which is currently negotiating with the city over contracts covering more than 13,000 workers.
The Twitter tax break — a six-year payroll tax exclusion area around Twitter’s offices in the Central Market/Tenderloin neighborhood — has drawn numerous tech companies to the area.
Add to that the $6 million tax break the nearby Zynga received in 2011 and the $500 million in fines San Francisco chose not to levy against Silicon Valley companies whose private shuttles illegally use public bus stops.
City workers, in recent contracts, accepted furloughs, increased contributions to pensions, wage freezes, and layoffs. Hundreds of workers were also temporarily reassigned to classifications with lower rates of pay.
SEIU 1021 plans to support an anti-speculation tax aimed at those buying real estate for reselling soon thereafter at a higher price.
Another idea local officials are discussing with SEIU International leaders is investing the 1021′s reserves in community land trusts to create affordable housing in San Francisco or Oakland.
Ed. Notes: All the ingredients are there to make San Franciso a geotopia. People are savvy about tax breaks, land speculation, rent inflation, and land trusts. All they need to do is to quit opposing tax breaks for wages, demand a tax hike on locations, and thereby use the sky-high site values of the City on the Bay for resident’s dividends, a la Singapore.
I say, “All they need to do” as if it’s a simple political matter. It’s not. But they do have a movement already started with the unions. They might be able to expand it to include students, homeowners, small businesses, and environmentalists.
Greens tend to like the shift of taxes off buildings and other goods, onto sites, since the higher “land dues” (land tax, land use fee, deed fee, whatever) spurs owners to use their land efficiently. As metro land gets used more intensely, suburban and rural land need not be used at all.
This geonomic policy has worked before, wherever tried, to the degree tried.
What’s needed is something that’d captivate the imagination and inspire a critical mass, and that could be the call to transform high land values into dividends for all San Franciscans. The dividend could actually make a furlough fun!
Ed. Notes: Why should anyone fund Ukraine? Its government is deep in debt because it’s corrupt. Why does the US always choose corrupt rulers to give Americans’ money to? Better than all this macho posturing would be to shut down US bases in Europe and admit Russia into NATO — then shut down NATO, too.
The main reason that power-grabbing individuals want their own country is so that they can rip off their own people. The reason that vast numbers want their own country is so they can be ruled by individuals who belong to the same ethnic group that the people identify with. Both are shallow reasons and make the notion of country appear shallow, too.
If the world went geonomic, these disagreements would become non issue. Who cares who’s in power if they have no power to tax your labor or capital or subsidize their cronies? Who cares where the border is drawn if there’s free trade, free travel, and global Earthling dividends? It’s hard for most people to see beyond the imposed framing on current conflicts but once you do, you see the solutions that work right for everybody.
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.
as unfamiliar as geo-economics. The latter is a course some universities offer that combines geography and economics. A UN newsletter, Go Between (57, Apr/May ’96; thanks, Pat Aller), cited an Asian conference on geopolitics and “geoeconomics”. The abbreviated term ‘geonomics” is the name of an institute on Middlebury College campus and of a show on CNBC. Both entities use the neologism to mean “global economics”, in particular world trade. We use geonomics entirely differently, to refer to the money people spend on the nature they use, how letting this flow collect in a few pockets creates class and poverty and assaults upon the environment, and how, on the other hand, sharing this rental flow creates equality, prosperity, and a people/planet harmony. This flow of natural rent, several trillions dollars in the US each year, shapes society and belongs to society.
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!
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.
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.
close to the policy of the Garden Cities in England. Founded by Ebenezer Howard over a century ago, residents own the land in common and run the town as a business. Letchworth, the oldest of the model towns, serves residents grandly from bucketfuls of collected land rent (as does the Canadian Province of Alberta from oil royalty). A geonomic town would pay the rent to residents, letting them freely choose personalized services, and also ax taxes. Both geonomics and Howard were inspired by American proto-geonomist Henry George. The movement launched by Howard today in the UK advances the shift of taxes from buildings to locations. A recent report from the Town and Country Planning Association proposes this Property Tax Shift and their journal published research in the potential of land value taxation by Tony Vickers (Vol. 69, Part 5, 2000). (Thanks to James Robertson)
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 heritage 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 dividend, as Tom Paine suggested, and taxes (except any on natural rents) could be abolished, as Thomas Jefferson suggested. Were we sharing Earth by sharing her worth, territorial disputes would be fewer, less intense, and more resolvable.
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 POV that Spain’s president might try. A few blocks from my room in Madrid at a book fair to promote literacy, Sr Zapatero, while giving autographs and high fives to kids, said books are very expensive and he’d see about getting the value added tax on them cut down to zero. (El Pais, June 4; see, politicians can grasp geo-logic.) But why do we raise the cost of any useful product? Why not tax useless products? Even more basic: is being better than a costly tax good enough? Our favorite replacement for any tax is no tax: instead, run government like a business and charge full market value for the permits it issues, such as everything from corporate charters to emission allowances to resource leases. These pieces of paper are immensely valuable, yet now our steward, the state, gives them away for nearly free, absolutely free in some cases. Government is sitting on its own assets and needs merely to cash in by doing what any rational entity in the economy does – negotiate the best deal. Then with this profit, rather than fund more waste, pay the stakeholders, we citizenry, a dividend. Thereby geonomics gets rid of two huge problems. It replaces taxes with full-value fees and replaces subsidies for special interests with a Citizens Dividend for people in general. Neither left nor right, this reform is what both nature lovers and liberty lovers need to promote, right now.
what you do when you see economies as part of the ecosystem, following feedback loops and storing up energy. Surplus energy – fat or profit – enables us to produce and reproduce. To recycle society’s surplus, the commonwealth, geonomics would replace taxes with land dues (charged to users of sites and resources, including the EM spectrum, and extra to polluters), and replace subsidies with rent dividends to citizens (a la Alaska’s oil dividend). Without taxes and subsidies to distort them, prices become precise, reflect accurately our costs and values; then, motivated by no more than the bottom line, both producers and consumers make sustainable choices. While no place uses geonomics in its entirety, some places use parts of it, most notably a shift of the property tax off buildings, onto locations. Shifting the property tax drives efficient use of land, in-fills cities, improves the housing stock, makes homes affordable, engenders jobs and investment opportunities, lowers crime, raises civic participation, etc – overall it makes cities more livable. Geonomics – a way to share the bounty of nature and society – is something we can work for locally, globally, and in between.
I have never let my schooling interfere with my education.
The secret of getting ahead is getting started.
If you don’t know where you are going, you might wind up someplace else.
Be careful about reading health books. You may die of a misprint.
My country is the world and my religion is to do good.
So many of our dreams at first seem impossible, then they seem improbable, and then, when we summon the will, they soon become inevitable.
When in doubt, tell the truth.
Whatever you do, or dream you can, begin it. Boldness has genius and power and magic in it.
Johann Wolfgang von Goethe
To prevent government from becoming corrupt and tyrannous, its organization and methods should be as simple as possible, its functions be restricted to those necessary to the common welfare, and in all its parts it should be kept as close to the people and as directly within their control as may be.