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This 2013 excerpt of the Los Angeles Times, Spt 9, is by The Times editorial board.
Federal efforts to protect growers of sugar beets and sugar cane epitomize everything that’s wrong with U.S. farm programs. At times they’ve artificially raised the price of sugar, costing consumers billions of dollars; at other times they’ve stuck taxpayers with the bill for the surplus sugar production they’ve promoted.
Sweeteners are ubiquitous in processed foods, and sugar is the most popular by far. There are two primary sources in the United States: sugar beets and sugar cane, which is grown only in Hawaii, Texas, Louisiana, and Florida.
Like the rest of the agriculture industry, beet and cane growers enjoy considerable protection from the federal government that’s not contingent on their incomes. But while other farmers are typically offered subsidized crop insurance (taxpayers cover roughly 60% of the cost) and guarantees against steep reductions in revenue, beet and cane farmers are also protected by import and production quotas that limit supply, deter competition, and inflate prices.
When unusually big harvests in the United States and Mexico (which faces no import quota on its subsidized products) push sugar prices below the target set by Washington, growers unload surplus sugar onto the federal government in lieu of repaying their federal loans, forcing Washington to sell the sweetener below cost to ethanol producers. Both of those things are happening this year.
U.S. farm program benefits flow overwhelmingly to the largest — and, consequently, most durable — agribusinesses; 10% of the farm operations collect 60% of the $23.5 billion in annual farm subsidies.
Sugar growers gave more than $4 million to members of Congress in the 2012 campaign. The largest buyers of sugar — bakers and confectioners — contributed about $250,000.
The unusually high farm profits in recent years have given Congress a golden opportunity to try to wean agribusiness from sugar subsidies and other market-distorting protections.
Ed. Notes: The politicians giving public money to the well-connected who don’t need it may seem wrong, but it is the role of government, and has been forever. Trying to reduce the subsidies or redirect them to the “right” recipients has never succeeded. What’s needed is a total overhaul, a transformation of government, a paradigm shift in how we see ourselves and our rulers. We need to see ourselves as worthy of spending our money, thank you very much.
That is, we’d each get a share of the common wealth, of surplus public revenue. With this extra income, farmers would not need any other public assistance. Their share would go further in the countryside where the cost of living is much lower. And they could adopt the strategy of selling directly to consumers, cutting out the middleman — those are the corporations who make the most off of a family’s food budget, not the farmer, and certainly not the lowly farmworker.
So say “no” to all subsidies, abolish them, root out the very concept of bribing politicians and winning handouts as a decent way of conducting business. Replace all that papered-over dishonesty with the share-Earth ethic in which each member of society gets a fair share of Earth’s worth — saving billions in pubic subsidies.
Jobless Growth, the 21st Century Condition in Poor Nations
This 2013 excerpt of the IPS, Nov 25, is by Samuel Oakford.
Though the percentage of people living in extreme poverty (less than 1.25 dollars per day) has declined in LDCs, their numbers have increased due to population growth.
While the economies of LDCs expanded yearly by over 7.5 percent in the decade before the 2008 financial crisis, employment growth per annum stood at just 2.9 percent between 2000-2012, barely ahead of the population growth rate of 2.3 percent.
If high growth couldn’t buoy the job market during boom years, a period of slower increases will require specifically catered policies to spur employment.
In Namibia, the government has set up a national mining company, hoping to replicate Chile’s CODELCO and not the bloated state-run enterprises of post-independence Africa.
If Chile is a model for mineral exporters, garment producers look to Taiwan, South Korea, and Singapore, all of which began by manufacturing textiles before graduating to more complicated consumer goods and electronics.
Ed. Notes: As usual, the wannabe problem-solvers want to tax the businesses that have succeeded, which reduces their success and does not necessarily create success for anyone else. It’s like the swing of the pendulum from leftwing mistakes to rightwing mistakes and back again. How can well-meaning people be so blind to the land? All three of the Asian examples cited — Taiwan, South Korea, and Singapore — first implemented land reform. Not taking land away from large landholders but by taxing the value of land, so owners sold off their excess, usually to their tenant farmers, at prices the landless could afford. The thousands of new family-owned farms is what founded the bedrock of the Asian Tiger miracle economies, and its a reform that could work anywhere. Longer ago, it also worked in Denmark, California, Australia, and New Zealand. Look where their economies are today!
This 2013 excerpt of the Washington Post, Spt 9, is by Debbie Cenziper, Michael Sallah, and Steven Rich.
Steven Berman, son of a Baltimore banker, swept into the District during the height of the housing boom, flush with money and ready to take on hundreds of bidders at the city’s high-stakes tax lien auction.
From 2005 to 2007, Berman’s companies dominated the bidding room, spending millions to buy the liens placed on properties when owners fall behind on their taxes.
He was a big player at tax lien auctions in Maryland, too, where he was caught in 2007 rigging bids at sales across the state, leading to the largest criminal conspiracy case of its kind at the time.
A Washington Post investigation found that during Berman’s spectacular spending spree in the city, his companies engaged in dozens of rounds of irregular bidding similar to what federal agents had discovered in Maryland.
All told, six companies, three owned by Berman, took turns winning hundreds of liens on real estate worth $540 million through unusual back-and-forth patterns of bidding never detected by city government.
Of hundreds of participants, only those six companies stood out for bidding that was so irregular that the odds of it happening by chance were less than 1 in 1,000, according to The Post’s analysis, which was conducted with a team of economists and antitrust experts from Boston.
Once the liens were won, the companies charted an aggressive course through the District that would shake families for years to come, pressing to foreclose on homes in every ward — often over tax debts of $500 or less.
Ed. Notes: Why does real estate and fraud go hand in hand? And what’s the government doing, selling people’s tax-debt to private collectors? How slimy is that? What government should auction off, and do so with its eyes open, are vacant lots and abandoned buildings. How much money the government gets at the auction won’t matter so much as long as later the government recovers the ongoing annual rental value of the locations, which will rise as the new owners develop their latest acquisitions.
Further, people could afford to pay a tax on property if the tax did not also fall on the value of the building — a stupid tax that merely induces owners to forgo maintenance and improvements — and if the residents were to receive a share of the recovered revenue. It’s a recipe that works elsewhere. In British Columbia, to make the tax on carbon more affordable to lower-income people, the BC government shares out some of the collected revenue as a dividend to residents.
In Maryland, Washington DC, everywhere, the government could use the same scheme: recover all the socially-generated value of all the locations but then pay out the lion’s share as a dividend to residents. Doing so is somewhat similar to what Aspen Colorado does and what Singapore does. Singapore prospers so notably because it keeps taxes on people’s efforts low and taxes on the rising value of locations high, then disburses some of its revenue surplus back to its citizens. It’s a policy that would solve the problem of tax delinquency in Maryland and Washington DC.
This 2013 excerpt of The Ecologist, Nov 23, is by Frederic Mousseau & Serah Aupong.
It has been said that PNG has the most equal distribution of land on earth. The country’s constitution protects customary land rights and there is virtually no private ownership. Land is almost entirely controlled by clans and tribes. The constitution sets self-reliance, sovereignty, and the sustainable management of natural resources as overarching principles for the country.
Yet, even with these legal protections, a massive land rush is currently taking place in the country. In recent years, 12 percent of the country, 5.5 million hectares, has been leased out to foreign corporations, ostensibly to launch agricultural projects. Yet these firms appear to be mostly occupied with harvesting timber that is then exported to overseas markets.
As a result, PNG is now the second largest exporter of tropical logs in the world, after Malaysia, and exports more than 3 million cubic meters of logs every year, primarily to China.
In many deals, landowners were blatantly misled about the size and the nature of an agribusiness project. The logging occurs without free, prior, and informed consent of the local people. State agencies such as the Lands Department, the Department of Agriculture and Livestock, and the Forest Authority fail to perform their duties: fraud, misconduct, and incompetence as well as overall lack of adherence to proper procedures.
Offering Papua New Guinea’s natural resources to foreign interests has made the country one of the fastest growing economies in the world [benefitting insiders, another instance of the "resource curse], a paradox of wealth without development. People have little or no access to safe drinking water, health facilities, nor schools.
The problem does not lie in the law. [It lies in law enforcement.]
Ed. Notes: How many more times must people note the irony of Progress and Poverty — the title of the most famous book on economic reform by Henry George back in the 19th c. — before they finally see the connection and how to uncouple it? The central problem is that people see the profit from land as up for grabs. So a partnership of investors and government officials grab it, leaving ruin for the rest of society. What the rest of society must do is to declare loudly and as many times as it takes that the surplus, rental value of land, resources, and locations is a common wealth, not an object of speculation, but a stream of wealth for all members of society to share, a la Alaska, Singapore, and a handful of other places. It can’t be said often enough, loud enough. Not until the land-squeezing stops and the rent-sharing begins.
This 2013 excerpt of Reuters, Sep 8, is by Lionel Laurent.
The Champs-Elysees lures millions of tourists every year to enjoy shopping at the Elysees 26 mall, poker at the Aviation Club, plush cars and futuristic architecture in the Citroen showroom, or feather-clad showgirls at the Lido cabaret.
But for all their Parisian charisma, none of these attractions are French-owned. They belong to the royal family of Qatar, a resource-rich emirate about 3,000 miles away.
Some Muslims may frown on investments in gambling, alcohol and high-kicking dancers, but over the past few decades the buildings have helped bolster Qatar’s global portfolio of trophy assets, including London’s Harrods and Singapore’s Raffles Hotel. The latest French addition was a chain of upscale malls under the Printemps banner, bought by a fund controlled by Qatari royals in August for 1.7 billion euros ($2.23 billion).
For oil-rich royalty from the Arab Gulf, part of the attraction of the United Kingdom has been the fact it charges no taxes on profits foreign investors make when they sell real estate. Five years ago, Qatar sealed a similar agreement with France. The treaty was agreed by former center-right president Nicolas Sarkozy in 2008, and is one of the most generous Qatar has secured, exempting Qatari investors from taxes on the profits they make when they sell properties.
The treaty allows state-owned Qatari entities to avoid capital gains tax – the lowest rate would be 34.4 percent – on any profits made selling French property, whether held directly or via subsidiary companies. Private Qatari investors are entitled to the break as long as they hold the property in an investment vehicle that also has 20 percent in non-property assets. The treaty applies to all purchases made since January 2007.
Aside from the United Kingdom, only Ireland has offered Qatar the same exemption and that only since 2012. At home, Qataris face no personal income taxes but some businesses could be taxable at up to 10 percent on gains from the sale of property.
Property experts say the luxury real-estate deals that are encouraged by the tax treaty mainly benefit a small circle of investors.
“We are always told this type of agreement is designed to promote investments in France but this is money that is not going into the economy,” said Olivier Duparc, a Paris-based notary. “Taxes are going up for everyone except the Qataris, it seems.”
Taxes matter a lot in France: The country’s total tax take was 43 percent of GDP in 2010, according to the Organization for Economic Cooperation and Development (OECD), far bigger than the United States’ 25 percent or the United Kingdom’s 35 percent. A generous healthcare system and faith in the state have helped governments sell tax rises to the public, which are needed to trim a 90-billion euro budget deficit.
Ed. Notes: These deals between rich nationals and wealthy foreigners treat landmarks — what should be our common heritage — as their own game pieces on a real-life MONOPOLY board. The rich always have and always will secure their fortunes in real estate, meaning, in prime locations and in expansive ranches and in fertile mega-farms. Land is tangible and after a bubble bursts will pay off handsomely for a couple decades.
The treaty waives any tax on the sale of land (and building). But why wait ’til then to tax land? The people could be benefitting all along if owners were charged Land Dues all along.
And why should the elite alone benefit? Land’s value should not be lining just their pockets but those of the whole society. Then it wouldn’t matter who owned the land as long as society got its rent. And if society got its rent, then speculators would have no interest in owning land, so ownership would always reside with those who actually use the land or site.
This 2013 excerpt of the New York Times, Nov 7, is by Ron Nixon.
The federal government paid $11.3 million in taxpayer-funded farm subsidies from 1995 to 2012 to 50 billionaires or businesses in which they have some form of ownership.
The billionaires who received the subsidies or owned companies that did include the Microsoft co-founder Paul G. Allen; the investment titan Charles Schwab; and S. Truett Cathy, owner of Chick-fil-A. The billionaires who got the subsidies have a collective net worth of $316 billion.
The findings likely underestimate the total farm subsidies that went to the billionaires on the Forbes 400 list because many of them also received crop insurance subsidies. Federal law prohibits the disclosure of the names of individuals who get crop insurance subsidies.
Congress is debating a House proposal that would cut nearly $40 billion over 10 years from the food stamp program, which helps provide food for nearly 47 million people. A Senate provision would cut $4.5 billion over the same period.
Food stamps kept about five million people above the poverty line last year. The food stamp program was cut by about $5 billion on Nov. 1.
Proposed bills would allow billionaires to get even more in subsidies, all without taxpayers knowing who they are, while imposing draconian requirements on low-income people.
Ed. Notes: Hungry people outnumber billionaires by millions yet exercise nearly no power in America’s so-called democracy. But that’s not unusual. Everywhere, forever, in all times and places, the role of government has not been to serve the people in its entirety but to serve the ruling elite, whether an owning class in a capitalist country or a ruling party in a “communist” country. The only thing that can change the situation is not demanding a bandaid fix but demanding an end to politicians getting to spend all our public revenue and a beginning of every citizen getting a fair share of the common wealth. That’s how to put an end to such vile injustice. And it’s called geonomics.
This 2013 excerpt of Quartz, Spt 6, is by Gwynn Guilford.
Chinese local governments hit the jackpot this week. In Beijing, Shanghai, Hangzhou and Suzhou, land parcels sold for record prices, crowning a slew of new “land kings,” as Chinese slang refers to record-setting plots.
In Beijing, a residential land parcel near the city’s embassy district commanded 73,000 yuan ($11,900) per buildable square meter, or about $1,100 per buildable square foot. For comparison, the most expensive property deal in Manhattan in 2013 fetched $800 per buildable square foot; the average for 2012 was $323.
Why is Beijing more expensive than Manhattan?
Is Beijing supply scarce? Actually, it could mean the opposite. Price rises could be due more to speculation than to a dearth of supply. Even though swanky high-rises are getting more expensive in Beijing, their sales in smaller cities are flagging, suggesting that genuine demand is weak.
Per capita housing stock hit 35 sq m in 2011, and is rising by 1.2 sq m a year, putting China in the same league as many wealthy countries. Demand in mega-cities like Beijing and Shanghai can probably absorb any excess supply. But oversupply is already hitting smaller cities, and as demand flags, prices there have started to fall.
Ed. Notes: Sure, speculators add their bids to demand and keep some of their land out of supply — that’s a big part of the story. The other part is population density. Nowhere is denser than China. Close to 1 of 5 humans are Chinese and China is smaller than America. All those people needing sites for homes and business push up location value sky-high.
While that’s a curse for those who can’t afford the land, it needn’t be. All government need do is not sell land but lease it and renegotiate the leases after short periods of time. The land it already sold it can tax or levy land-use fees or charge Land Dues. Doing that would drive out the speculators. With the revenue, government could pay a dividend, as does Singapore, and that’d enable residents to afford to live there. Then as ground rents rise due to true demand and/or limited supply, the increases in spendiness would benefit everyone.
Following such a geonomic policy, Beijing would be ahead of Manhattan in more ways than one.
The Unique Genius of Hong Kong’s Public Transportation System: The use of a clever financing system has enabled the territory to provide world-class service without breaking the bank.
This 2013 excerpt of The Atlantic, Spt 10, is by Neil Padukone.
Hong Kong’s Mass Transit Railway (MTR) Corporation, which manages the subway and bus systems on Hong Kong Island and, since 2006, in the northern part of Kowloon, is considered the gold standard for transit management worldwide. In 2012, the MTR produced revenue of 36 billion Hong Kong Dollars (about U.S $5 billion)—turning a profit of $2 billion in the process. Most impressively, the farebox recovery ratio (the percentage of operational costs covered by fares) for the system was 185 percent, the world’s highest. Worldwide, these numbers are practically unheard of —- the next highest urban ratio, Singapore, is a mere 125 percent.
In addition to Hong Kong, the MTR Corporation runs individual subway lines in Beijing, Hangzhou, and Shenzhen in China, two lines in the London Underground, and the entire Melbourne and Stockholm systems. And in Hong Kong, the trains provide services unseen in many other systems around the world: stations have public computers, wheelchair and stroller accessibility (and the space within the train to store them), glass doors blocking the tracks, interoperable touch-and-go fare payment (which also works as a debit card in local retail), clear and sensible signage, and, on longer-distance subways, first-class cars for people who are willing to pay extra for a little leg space.
How can Hong Kong afford all of this? The answer is deceptively simple: “Value Capture.”
Like no other system in the world, the MTR understands the monetary value of urban density. Hong Kong is one of the world’s densest cities, and businesses depend on the metro to ferry customers from one side of the territory to another. As a result, the MTR strikes a bargain with shop owners: In exchange for transporting customers, the transit agency receives a cut of the mall’s profit, signs a co-ownership agreement, or accepts a percentage of property development fees. In many cases, the MTR owns the entire mall itself. The Hong Kong metro essentially functions as part of a vertically integrated business that, through a “rail plus property” model, controls both the means of transit and the places passengers visit upon departure. Two of the tallest skyscrapers in Hong Kong are MTR properties, as are many of the offices, malls, and residences next to every transit station (some of which even have direct underground connections to the train). Not to mention, all of the retail within subway stations, which themselves double as large shopping complexes, is leased from MTR.
MTR’s financial largesse means that the transit system requires less maintenance and service interruptions, which in turn reduces operating costs, streamlines capital investments, and encourages more people to use transit to get around. And more customers means more money, even if fares are relatively cheap: most commutes fall between HK $4 and HK$20 (about 50 cents to $3), depending on distance. (In London, by comparison, a Tube journey can cost as much as $18).
Ed. Notes: A transit agency need not own real estate, not if it has the power to recover the land values that arise around its stops and stations (or if the local government recovers those “ground rents” via a tax or fee or dues on behalf of the metro system).
This model of self-financing could be used for all infrastructure, not just transit, and for other public programs, too, like parks. All those improvements increase nearby location value and, if the improvement is truly desired by the public, they increase the value of the site by more than the cost of the project. Some big name economists (Stiglitz, Vickrey) noted this phenomenon and called it the “Henry George Theorem”, after the 19th c. reformer then famous for advocating a single tax on land value.
And it’s not just public works that lift locational rents but also private works, like a private school, a popular shopping district, and in the old days a church (a big speculating landowner would donate land to the faithful for building a church, knowing its followers would move in and push up site values). In general, society has generated so much land rent — and continues to do so daily — that if all were recovered (by dues, taxes, fees, whatever), it’s enough to fund any truly desired public service plus pay citizens a dividend. We just need to apply the lesson of Hong Kong to reforming public revenue to the max.
This 2013 excerpt of Business Insider, Nov 21, is by Rob Wile.
Where is America heading? Last year’s inaugural U.S. 20 list featured things like the end of retail, the revival of manufacturing, and the shale revolution.
Believe it or not, it wasn’t difficult at all to come up with 20 brand new trends this year that will dominate headlines over the next decade. It’s not that all of last year’s forces have already dissipated. But new movements have already sprung up.
The 2013 list includes two new geographic centers of the American economy, evolving patterns of relationships, robots, and the changing energy landscape.
Ed. Notes: Of the 20 trends, there are the expected ones about hot spots (San Francisco), energy (renewables), and progress (robotics) and the unexpected ones about the new matriarchy, the new soloists, and the lost homeowner. If such changes come to pass, will they make you happier? Is there anything you can do to guide change? Sure. Work for justice.
This 2013 excerpt of Salon, Spt 6, is by Leah A. Plunkett.
Governments are raising revenue by quietly taxing a group even more cash-strapped than they are: the poor.
Counties and states nationwide are sending out bills for services that are often involuntary: charging directly for the costs of certain governmental services traditionally paid for by the public as a whole (e.g., in the case of misfortune: emergency services).
Once services have been used, the government then bills the user for their cost. If payment isn’t made in full and on time, the user’s debt will likely grow through the addition of interest, late fees, and other penalties.
Here are four secret taxes on the poor:
1. Emergency Response Services: A trip in the ambulance or a visit from the fire department can now result in bills for thousands of dollars.
2. Unemployment Benefits: States may make access to this money quite expensive when benefits are provided on debit cards with hefty fees attached that users have to pay.
3. “Pay-to-Stay” Programs: Counties nationwide are charging inmates for the cost of their own room-and-board while they’re in prison, even for the cost of their public defender.
4. Parental Reimbursement Programs: Parents of kids who get into trouble with the law are often required to foot the bill for the government’s attempts to rehabilitate their children.
These “poor taxes” are going to pay for services that support all of us.
Ed. Notes: Is what’s wrong that the poor get charged or that there’s poverty in the first place? Paying one’s way, quid pro quo — that seems fair. What’s not fair is an economic policy that keeps people in poverty. Governments could end poverty — that both citizens and governments experience — by doing things like ending corporate welfare, ending taxes on wages, recovering all the values that society creates, such as the value of locations, and disbursing the recovered revenue to the members of society. Problem solved.
A 2013 excerpt of a US Bureau of Economic Analysis press release, Nov 21.
Americans’ personal income growth slowed in 2012 in most of the nation’s 381 metropolitan statistical areas (MSAs). On average, MSA personal income rose 4.2 percent in 2012, after growing 6.0 percent in 2011. Personal income growth ranged from 12.1 percent in Midland, Texas to -1.6 percent in Yuma, Arizona.
Midland, Texas was the fastest growing MSA, in terms of personal income, for the third year in a row. Odessa, Texas, which grew 11.5 percent, was second fastest, as it was in 2011. For both MSAs, the mining industry, which includes oil and gas extraction, contributed more than any other industry to personal income growth. North Dakota’s three MSAs were also among the fastest growing MSAs in the country in 2012. Personal income in the nonmetropolitan portion of North Dakota—where the booming mining industry is located—grew at an even faster 26.3 percent pace.
Declines in farm and military earnings, which were relatively small nationally, accounted for the personal income declines in four of the five slowest growing MSAs.
Among the 52 MSAs with a population of one million or more, professional services [lawyering, doctoring, etc], the largest industry in the large MSAs, contributed most to personal income growth in 2012.
Personal income grew 3.7 percent in nonmetropolitan counties, compared to 4.2 percent growth in metropolitan counties. The slower growth of the nonmetropolitan counties reflects the much lower earnings power of farming and government services. Nationally, farm earnings fell 1.2 percent while earnings in the private nonfarm sector grew 5.1 percent.
Ed. Notes: It didn’t say if the numbers were correctly for inflation which tends to double prices in the US every quarter century. Did you note the role of land including resources in wages? Demand for oil, a non-renewable, pushes up those salaries. But demand for food, which is reproduced every harvest, did not push up those salaries. And places where population density is greatest, salaries are highest, not just because that’s where lawyers and the like live but also because density delivers efficiency of scale so more profit can be made. So, to strike your fortune, live in a big city. But to balance work and play, live in the country where the cost of living is lower and your Citizen’s Dividend would go much further — once we as a society start sharing the worth of Earth and pay ourselves the extra income.
This 2013 excerpt of the New York Times, Aug 24, is by Mary Pilon.
Monopoly Empire, the latest flavor of the iconic game, substitutes traditional Atlantic City property names with those of large corporations — McDonald’s, Coca-Cola, Samsung, Nestlé, etc. In the latest Monopoly game, players acquire key brands to create corporate empires rather than try to bankrupt their opponents. And the old tokens — the racecar, thimble and top hat that used to race around the board — have been replaced by a 2014 Corvette Stingray, an Xbox controller and a Paramount Pictures movie clapboard.
Ironically the game was created to critique, not celebrate, corporate America. Contrary to popular board game lore, Monopoly was invented not by an unemployed man during the Great Depression but in 1903 by a feminist who lived in the Washington, D.C., area and wanted to teach about the evils of monopolization. Her name was Lizzie Magie.
Seventeen years before women could vote, Ms. Magie, a fiery stenographer, poet, sometime actress and onetime employee of the United States Postal Service’s dead-letter office, ginned up a game that mirrored what she perceived to be the vast economic inequalities of her day. She called it the Landlord’s Game and saw it as an educational tool and gamy rebellion against the era’s corporate titans, John D. Rockefeller Sr., Andrew Carnegie and J. P. Morgan.
Ms. Magie was an ardent follower of Henry George, who advocated a single tax on land [which would fall most heavily on downtowns where locations are by far the steepest].
Rexford G. Tugwell, a Columbia University professor and member of Franklin D. Roosevelt’s “brain trust,” played and taught the game. Members of the administration of Mayor Fiorello H. La Guardia of New York played it, as did Ernest Angell, an attorney and chairman of the board at the American Civil Liberties Union.
On November 26, 2013, The Vatican press published the apostolic exhortation, “The Joy of the Gospel.” The text was written in Spanish, and its full title in the English translation (converted here from upper case to initial capitals) is “Evangelii Gaudium of the Holy Father Francis to the Bishops, Clergy, Consecrated Persons and the Lay Faithful on the Proclamation of the Gospel in Today’s World.” Besides its religious calls, Pope Francis makes statements about today’s economic problems, and calls for greater economic justice.
One of the aims of this proclamation is to point out “new paths for the Church’s journey in years to come.” One of the questions the Pope seeks to discuss is “the inclusion of the poor in society.” Chapter Two is entitled, “Amid the Crisis of Communal Commitment.” In paragraph 52, Francis writes that “today we also have to say ‘thou shalt not’ to an economy of exclusion and inequality. Such an economy kills… Today everything comes under the laws of competition and the survival of the fittest, where the powerful feed upon the powerless.”
The Pope is wise and correct in seeing the harm done by inequality, but I urge him to see past the appearances to study the underlying reality. What provides the powerful with their might? The state has the ultimate power of force, and by its power to tax, to restrict, to mandate, and to subsidize, the state endows the powerful with the means to feed on the powerless. Market competition as such cannot impose force, and it does not create poverty. In a free society, each person has the power to be employed and pursue happiness. In a truly free market, all are fit to survive, because workers have access to natural opportunities. It is government intervention that stops this access.
Paragraph 54 is the key, widely cited, economic passage. We need to be sure that the English version is true to the original Spanish. In Spanish, Francis wrote, “algunos todavía defienden las teorías del « derrame », que suponen que todo crecimiento económico, favorecido por la libertad de mercado, logra provocar por sí mismo mayor equidad e inclusión social en el mundo.”
The Vatican’s English translation says, “some people continue to defend trickle-down theories which assume that economic growth, encouraged by a free market, will inevitably succeed in bringing about greater justice and inclusiveness in the world.”
The English-edition term “trickle-down theories” is translated from the Spanish, “teoria del derrame.” “Derrame” means a slow leak, hence a trickle, and so the English translation is accurate. The translated term “free market” is more literally “the liberty of the market” in the original Spanish, but the meaning is the same.
As noted by Harvard professor Greg Mankiw in his blog, critics of markets often use the term “trickle down” as a pejorative for the effects of a market economy. There is indeed a trickle down effect, for example, when a tourist resort is built in a location with many poor people, where a few get hired to work to clean rooms and wash dishes. A bit of the wealth of the resort trickles to the local population. But this situation does not confront the issue of why the poverty exists in the first place.
The theory of the free market is not one of “trickle down.” A truly free market is a fountain that gushes up wealth for all. Moreover, economic growth in market economies has indeed raised millions of persons up from poverty. However, the theory of market-driven growth does not claim that growth brings justice. The causation is the opposite: economic justice promotes growth. Moreover, justice and liberty are two faces of the same coin, so if a market has liberty, it must also provide justice.
The Pope continues: “This opinion, which has never been confirmed by the facts, expresses a crude and naïve trust in the goodness of those wielding economic power and in the sacralized workings of the prevailing economic system.”
But the proposition that free markets provide growth that benefits all is not a mere opinion. The proposition is a theory of growth that was first analyzed by the French economists of the 1700s, who concluded that the unhampered market, with free trade, would provide the greatest prosperity for all.
The prescription of the French economists was to abolish taxes on labor and trade, and instead use the surplus of the economy, which is land rent, for public revenue. Adam Smith in his Wealth of Nations brought this theory into classical economics. The American economist Henry George a century later explained in detail how land rent captures the gains from economic progress, and how growth generates inequality and poverty if that rent is not equally shared.
Markets have had various degrees of freedom, but there is no truly free market in the world today. Those who advocate a pure free market do not defend the “prevailing economic system,” but rather, they seek to stop the state’s subsidy of economic powers. The greatest subsidy and economic power is the land rent generated by the public goods provided by government.
The Pope is correct in decrying “the denial of the primacy of the human person” (paragraph 55) and that “Behind this attitude lurks a rejection of ethics” (57). Ethics and the primacy of the human person requires the equal right of each person to pursue happiness without harming others and to keep the earnings of his labor, as recognized by the commandment, “Thou shalt not steal.” Ethics must also respect the equal sharing of the benefits of nature and community, as stated in Ecclesiastes 5:9, “the profit of the earth is for all.”
The heart of economics is the understanding of the root cause of poverty: the forced redistribution of wealth from the working poor to the landed rich. This is caused not by markets but from state policy. It is good that Pope Francis seeks to remedy poverty. His “new path” should be to go more deeply into the economics and politics of maldistribution.
Millions are required to fight conflagrations such as the Rim fire in and around Yosemite. But what about fire prevention?
This 2013 excerpt of the Los Angeles Times, Spt 6, is by Jamie Simons.
A fire like the Rim fire burned almost 400 square miles, in and around Yosemite. Fueled by dense thickets of pine needles, undergrowth and fallen trees, fires like this one do not move slowly along the ground, clearing the underbrush but leaving parts of the forest intact. Instead, the flames leap through the crowns of trees, creating infernos that are hard to suppress and denude wide swaths of forest floor, making the terrain more susceptible to erosion by winter snow and rain. Even the mighty sequoias, able to withstand most fires and even thrive because of them, are threatened by a crown fire’s staggering heat.
It doesn’t have to be this way. For thousands of years the Indians who made Yosemite their home set small fires to prevent such cataclysmic events. Contained and manageable, their fires turned Yosemite Valley into a meadow that attracted deer for hunting and kept people safe.
For decades, the federal government took the opposite approach. Worried about having to divert men away from the war and into the forests to fight fires during World War II, the U.S. Forest Service and War Advertising Council created the Smokey Bear character. What followed were decades of fire suppression and teaching Americans that fires must be avoided at all costs. The result has been an unprecedented buildup of combustible fuels that has fed massive fires across the West in recent years.
In the late 1980s, the government realized the danger of this approach and began the practice of brush clearance and controlled burns in strategically located parts of the national forests and parks. But even though the practice has brought success where it has been used, we are still more oriented to fighting fires than to preventing them. Big fires are terrifying, and the Forest Service is under tremendous pressure to put them out at all costs. Right now, fighting forest fires comes with a virtual blank check.
After years of living in Yosemite National Park, I learned that, contrary to the teachings of Smokey Bear, fire can be a welcome force for good. It rejuvenates the forest. It clears the way for richer, more diverse habitat. It is essential in the life cycle of the giant sequoia. And if you live in the mountains, surrounded by forests piled high with tinderbox-dry debris, nothing helps you sleep more soundly at night than being in an area that’s been burned.
Those people involved in fighting wildland fires know that managed burns, tree thinning, brush clearance — even letting wildfires burn themselves out when no people or structures are at risk — are the best tools in their arsenal when it comes to preventing future wildfires.
The Rim fire has so depleted the Forest Service’s firefighting budget that it had to borrow from money set aside for fire prevention. So far, just this one fire has seen 5,000 firefighters on the line with a price tag that is at $75 million and growing. Working with those same numbers, it boggles the mind to think of how much good could have been done throughout the United States to prevent these kinds of massive wildfires.
Ed. Notes: In some Brazil, some towns put their budgets on the ballot, so voters can decide what programs to fund. Could that work for a big country, too? Maybe put five or so broad categories on the ballot. It’d at least give politicians some guidance.
Urban density in all the wrong places — thanks to the planner’s delight, an urban growth boundary?
This 2013 of Australian Property, Nov 20, is by Leith van Onselen.
Measures aimed at excluding growth from one part of Melbourne -– as via the fixed urban growth boundary (UGB) -– will naturally generates pressure to accommodate it elsewhere, leading to intensified development either on the fringe or in exurban and underdeveloped jurisdictions well beyond the metropolitan limits.
Melbourne’s UGB will likely encourage many lower income households to ‘leapfrog’ the boundary and settle in far flung commuter towns where developable land is available and housing is more affordable. In such instances, urban sprawl will be exacerbated and reliance on cars and energy use will be increased. Since Melbourne’s UGB was first introduced in the early-2000s, we have already seen widespread development in communities well beyond the UGB.
A related unintended consequence of Plan Melbourne is that ‘densification’ will also be pushed away from the inner and middle suburbs and onto the fringe, where there is less access to employment and amenities. The price of land will be forced up so much by the growth constraints that households will be less able to afford the ‘premium’ price commanded by the inner areas, and will instead be forced to locate at ‘less unaffordable’ but also less efficient locations.
Look at Portland Oregon -– often cited as a model for “smart growth”. There, urban consolidation policies have driven increased density at the fringe of the city but not nearer to the CBD, as revealed by Alain Bertaud, senior research scholar at the NYU Stern Urbanization Project.
Market forces would normally increase population density around the CBD and decrease it progressively toward the suburbs.
Ed. Notes: The political approach of “just say no” was ridiculed by progressives when Nancy Reagan urged teens to say “no” when tempted by drugs, but the same progressives embrace it when they want to halt sprawl. It didn’t work for Nancy, and it didn’t work for planners. Yet there is a policy that does work.
To spure builders to use land efficiently, one must stop the speculators from misusing land inefficiently. Builders need land but they don’t need it beyond cities, there’s plenty of buildable land within cities. Now it lies fallow as vacant lots, parking lots, sites with abandoned buildings or short, old buildings woefully inadequate for a bustling downtown.
To spur speculators to put their land to best use, have the city recover the value of land — which is socially-generated anyway and morally should be the residents’ common wealth. When owners pay over the land rent as a land tax or Land Dues or land-use fee, then they get busy and put their locations to best use in order to afford the charge. By developing their sites, they absorb all or most of the demand for new buildings, so there’s little leftover to appear on the fringe.
It’s not necessary or even feasible to stop sprawl by drawing a line in the sand. What’s necessary and rational is to recover the socially-generated value of locations. Then you’ll have the car-freest, most livable cities in the world.
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 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.
a way to redirect all the money we spend on the nature we use – trillions of dollars annually. We can’t pay the Creator of sites and resources and are mistaken to pay their owners this biggest stream in our economy. Instead, as owners we should pay our neighbors for respecting our claims to land. Owners could pay in land dues to the public treasury, a la Sydney Australia’s land tax, and residents could get back a “rent” dividend, a la Alaska’s oil dividend. We’d pay for owning sites, resources, EM spectrum, or emitting pollutants into the ecosphere, then get a fair share of the recovered revenue. The economy would finally have a thermostat, the dividend. When it’s small, people would work more; when it’s big, they’d work less. Sharing Earth’s worth, we could jettison counterproductive taxes and addictive subsidies. Prices would become precise; things like sprawl, sprayed food, gasoline engines, coal-burning plants would no longer seem cheap; things like compact towns, organic foods, fuel cells, and solar powers would become affordable. Getting shares, people could spend their expanded leisure socializing, making art, enjoying nature, or just chilling. Economies let us produce wealth efficiently; geonomics lets us share it fairly.
a 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 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.
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.
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 neologism for sharing “rent” or “social surplus” – the money we spend on the nature we use. When we buy land, such as the land beneath a home, we typically pay the wrong person – the homeowner. Instead, since land cost us nothing to make and is the common heri-tage of us all, rather than pay the owner, we should pay ourselves, our neighbors, our community. That is, we should all pay land dues to the public treasury, then our government would pay us land dividends from this collected revenue. It’s similar to the Alaska oil dividend, almost $2,000 last year. Indeed, the annual rental value of land, oil, all other natural resources, including the broadcast spectrum and other government-granted permits such as corporate charters, totals several trillion dollars each year. It’s so much that some could be spent on basic social services, the rest parceled out as a divi-dend, as Tom Paine suggested, and taxes (except any on natural rents) could be abolished, as Thomas Jeffer-son suggested. Were we sharing Earth by sharing her worth, territorial disputes would be fewer, less intense, and more resolvable.
the Great Green Tax Shift maxed out”
Economically, taxing pollution and depletion does reduce pollutants and extracts – and thus the tax base; plus such taxes are regressive, requiring a safety net. On the other hand, collecting site rent is progressive and generates a revenue surplus payable as a dividend to residents, which can serve as the safety net.
Environmentally, taxes on waste and extraction do not drive efficient use of land, as does getting site rent. Better settlement patterns do reduce extraction upstream and pollution downstream.
Politically, green fees have less impact if applied locally; local is where grassroots movements have more impact. Yet getting rent usually entails shifting the property tax (or charging user fees), the province of local jurisdictions; both mayors and city voters have been known to adopt a site-value tax.
Ethically, putting into practice “tax bads, not goods” skirts the issue of sharing Mother Earth which collecting rent confronts head on. Since nothing is fixed until it’s fixed right, ultimately, greens must lead humanity into geotopia where we all share the worth of Mother Earth.
in part the Great Green Tax Shift maxed out. Economically, taxing pollution and depletion does reduce pollutants and extracts – and thus the tax base; plus such taxes are regressive, requiring a safety net. On the other hand, collecting site rent is progressive and generates a revenue surplus payable as a dividend to residents, which can serve as the safety net. Environmentally, taxes on waste and extraction do not drive efficient use of land, as does getting site rent.
When we seek to discover the best in others, we somehow bring out the best in ourselves.
William Arthur Ward
When a man wants to murder a tiger he calls it sport; when a tiger wants to murder him he calls it ferocity.
George Bernard Shaw
Suppose you were an idiot and suppose you were a member of Congress. But I repeat myself.
Knowing is not enough; we must apply. Willing is not enough; we must do.
Johann Wolfgang von Goethe
Never let your good get in the way of your better.
The equal right of all men and women to the use of land is as clear as their equal right to breathe the air. It is a right proclaimed by the fact of their existence. For we cannot suppose that some men and women have a right to be in this world and others do not.
In matters of style, swim with the current; in matters of principle, stand like a rock.
It could probably be shown by facts and figures that there is no distinctly American criminal class except Congress.