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I live in California. It’s a great state. Too great.
A proposition to split California into six states may be on the ballot in 2016. “Six Californias” has announced that it has collected sufficient signatures. Why six? California’s population of over 38 million is six times lager than the US state average. The ruling powers may find a way to block the proposal, as some opponents claim that the signature gathering was unlawful. If “Six Californias” does get on the 2016 ballot, in my judgment, this will be a rare chance for fundamental reforms.
Many Californians have said that the state is too big to govern effectively. But the governance problem is not size, but structure. After the property-tax limiting Proposition 13 was adopted in 1978, taxes and political power shifted from the counties and cities to the state government. California could be governed well if decentralized, but the concentration of fiscal power to the state has made the state among the highest taxed and worst regulated in the USA.
There have been many attempts to reform the lengthy California constitution, but they have all failed. Attempts to replace the Proposition 13 have gone nowhere. The best option is to start over. Creating new states would provide six fresh starts.
Critics of the six-state plan say that the wealth of the new Californias would be unequal. The Silicon Valley state would include the high-tech wealthy counties of San Francisco, San Mateo, and Santa Clara, among others. The promoter of this initiative, Timothy Drapers, happens to be a Silicon Valley entrepreneur.
But the current 50 US states are also unequal in wealth. The income inequality problem is a national and global problem. Income can become more equal without hurting production by collecting the land rent and distributing it equally among the population. Since the critics of Six Californias are not proposing or even discussing this most effective way to equalize income, their complaints should be dismissed as irrelevant, immaterial, and incompetent.
US states have been split in the past. Maine was split off from Massachusetts in 1820, and West Virginia was carved out of Virginia in 1863.
If the initiative passes, a board of commissioners would draw up a plan to divide the state’s assets and liabilities among the six new states. A good way to do this would be to divide the value of the assets by population, but to divide the liabilities (including both the official debt and the unfunded liabilities such as promised pensions) by the wealth of each state. That would go a ways to deal with the inequality problem.
California’s complex water rights could be simplified by eliminating subsidies, instead charging all users the market price of water. There could continue to be a unified water system with a water commission with representatives from the six state.
If this measure is approved by the voters and by Congress, each state will design a constitution. The new constitutions should be brief, like the US Constitution, in contrast to the lengthy current California constitution that contains many provisions best left to statute law.
The new constitutions should retain the declaration of rights in the current state constitution, including Article I, Section 24: “This declaration of rights may not be construed to impair or deny others retained by the people.” This wording, similar to the US 9th Amendment, recognizes the existence of natural and common-law rights. This text should be strengthened with something like this: “These rights of the people include the natural right to do anything which does not coercively invade the properties and bodies of others, notwithstanding any state interest or police power.”
These new constitutions will be an opportunity to replace California’s market-hampering tax system with economy-enhancing levies on pollution and land value. There should be a parallel initiative stating that if Six Californias passes, the states will collect all the land rent within their jurisdictions and distribute the rent to all six states based on their populations. A tax on land value is by itself market enhancing, better than neutral, because it promotes an efficient use of land, it reduces housing costs for lower-income folks, and eliminates real-estate bubbles. Combined with the elimination of taxes on wages, business profits, and goods, the prosperity tax shift would raise wages and make California the best place in the world for labor and business.
This is all a dream, but the past dreams of abolishing slavery, having equal rights for women, and eliminating forced segregation all came true. This proposition will at least provide a platform for discussing such fundamental reforms.
This 2014 excerpt of the Sacramento Bee, Jly 15, is by Dan Walters.
Economist Anne Osborn Krueger coined the term “rent-seeking” in 1974, the year in which Jerry Brown was first elected governor of California. There is a connection between those two events.
“Rent-seekers” came to mean those who use government spending to enhance their private investments, giving hundreds of millions of dollars in subsidies from the state treasury and consumers’ wallets to a favored few.
At Brown’s behest, the Legislature abolished two long-standing subsidy programs that had been largely controlled by local governments, redevelopment and “enterprise zones.”
The rationale was that they had become expensive boondoggles that rarely, if ever, resulted in the private, job-creating investment and urban renewal they were supposed to produce.
They were to be replaced, although it wasn’t apparent at the time, with state-controlled “incentives” for investment, including a sales tax break for manufacturing equipment and a special pot that Brown could use to lure and/or retain business.
Simultaneously, the state was embarking on a massive overhaul of its electric power system, aimed at replacing fossil fuel and nuclear generation with “renewable” power and providing billions of dollars in subsidies, either from taxpayers or utility ratepayers.
And it also was pushing alternatives to gasoline-powered cars, such as electric vehicles, again with subsidies. Elon Musk is building Tesla electric cars. They get direct injections of money and zero-emission credits that Tesla sells to other firms.
Musk’s Solar City has become the state’s leading installer of photovoltaic electric panels, his SpaceX firm aspires to be the nation’s leading conveyor of satellites, and he’s planning an immense battery factory.
This year alone, Brown signed one budget “trailer bill” that extends subsidies for solar panels, another that exempts some SpaceX property from taxes, and a third to subsidize construction of a new strategic bomber. It includes an obscure amendment to subsidize a battery factory. Legislators were never told about that provision.
Ed. Notes: If Musk needs state favors, how good are his ideas? If investors won’t make them happen, why should taxpayers? Sure, I’d love to live in an economy with industries that were lean and clean. But to get there, I’d rather make polluters pay than let insiders engorge. I’d make only polluters, extractors, site-occupiers, and privilege-holders pay and not tax anyone’s buildings, purchases, or valid earnings or over-charge for permits. To top it off, I’d disburse surplus revenue to citizens as a dividend. Receiving such support, independent inventors would be freed to contribute their, often break-thru, ideas. The liberated market — not political dealing — would provide the technological progress the environment needs.
This 2014 excerpt of Squarely Rooted, Jly 14, is by M.
Land may be the key factor behind many of Piketty’s broader conclusions about capital, explaining why the returns to capital decline much more slowly than models with traditional assumptions would predict. E.g., progress hasn’t dampened the return to land on which computing-centric industries are based; quite the contrary (see Silicon Valley). Land (discounting structures) is a large share of national “capital”.
In a society where a handful of people control most of the wealth, even if that wealth is taxed at just-below-confiscatory rates, they still own most of the wealth. That gives them tremendous authority, first-and-foremost over the workplace, but also over politics and the media, and by extension an outsized role in dictating mores, norms, and values.
I deliberately capitalized “Economics” so at to distinguish it from “economics”. Capital-E Economics is a rigid dogma, complete with unchallengeable precepts and inscrutable texts whose minutiae are debated vigorously by devoted inner-circle keepers of the flame, that has stifled public debate about innumerable issues of overwhelming importance since the end of the Cold War.
Ed. Notes: Piketty wants to try tax the wealth the rich have piled up. Much more efficient — and fair — would be to deny them that wealth in the first place. That wealth that they are helping themselves to just happens to be our common wealth already anyway. So what are we waiting for? Let’s share it. As long as we don’t, as long as we leave it on the table for the more grasping among us to grab by hook or crook (or both), then we create the elite and the impoverished and all the problems that go along with an overly hierarchized society. Let’s get rid of corporate welfare and the rest of subsidies. Let’s get rid of taxes on our efforts. Instead, let’s pay in land dues and use that revenue to disburse “rent” dividends to us all. Sort of like Singapore does. That city state is hailed as a capitalist paradise but it’s pretty geonomic, too.
This 2014 excerpt of TakePart, Jly 12, is by Liz Dwyer.
According to the United Nations, of the top ten most common topics in tweets [over what time frame was not stated], the bottom rough one third of them are about environmental issues (about two million each), the middle rough one third are about political issues (well over two million each), and the top third, by far, are about getting a good paying job (from five to seven million). Number 8 was education, which is preparation for flinging oneself into the job market. Number 9 was discrimination, which flings some of us out of the job market. And number 10 was employment itself.
Ed. Notes: So if you want to interest people in reform, tell them how your reform creates jobs. Right? Yes, but bear in mind people who need money and see jobs as the way to get it probably don’t want an economics lesson. They often jump on anything that promises them jobs, even if it does not work out that way, such as giving tax breaks to big business, or if it is something not really good for the community, like a prison.
Worse, offering jobs reinforces the prevailing worldview. Touting jobs agrees with several implied false assumptions:
getting paid and creating value are the same — even if you’re just shuffling paper in an insurance office — while unpaid work is not worthy of pay — even if it is planting trees which exhale oxygen;
people are not good enough to start their own business but must have a boss forever; and
jobs can be conjured up while supposedly technological progress is not a natural process destroying them;
More than jobs, people need an extra income without working. Why? Because society automatically generates a surplus that does not attach itself to anyone’s labor or capital but to the region’s land and to the government-granted privileges such as banking charters and other corporate favors.
Americans spend trillions of dollars to use parts of nature, mostly to the few holders of valuable privileges. Hence now much of society’s surplus goes to the 1% whereas this common wealth should go to members of society equally.
Ironically, if we all did get a Citizen’s Dividend, then we could shrink the workweek which would create more jobs. We’d have more security to negotiate higher wages. We’d even have enough leverage to launch out own startups. It’s called geonomics and it has worked wherever tried.
This 2014 excerpt of Thom’s Blog, Jly 11 is by Thom Hartmann.
Oil Change International figures the oil, gas, and coal industries raked in $21.6 billion dollars in state and federal subsidies in 2013 alone. In comparison, the entire 2013 budget request for the Department of Labor was only $12 billion dollars, and the Environmental Protection Agency only requested about $8 billion. We’re giving the industry that destroys our planet more than two and half times the amount we pay to protect it.
Not only do these subsidies pad the pockets of oil companies, but they put tax payers on the hook for the social costs of destroying our planet. If Big Oil had to pay the true cost of fossil fuel extraction, they wouldn’t be able to drill away without a second thought about the communities and the lives that they devastate in the process.
Ed. Notes: If oil companies had to pay their way, they could not even turn a profit. No extractor could. By subsidizing them, making them profitable, we are paying for our own destruction.
A better way is to not subsidize anybody for anything. Instead, government would merely distribute a dividend to citizens from society’s surplus. What’s that? Earth’s worth. It’s all the money that we spend for the nature we use. The land portion of mortgages. The value of oil in the ground embedded in the price of gasoline. Such “rents” are embedded in the price of everything we buy.
With its power to tax or fine or charge fees or institute dues, government could redirect this spending from oil companies and banks, etc, into the public treasury then back out as a Citizen’s Dividend. Even oil company owners and bosses would get their share. But it’d be a tiny fraction of the subsidies they’re getting now.
This 2014 excerpt of AlJazeera, Jly 11, is by Peter Moskowitz.
As the number of bike riders seems to increase dramatically in cities across the country, there’s been a backlash from people who say bikes are dangerous, and that the added infrastructure that comes with them — namely bike lanes — is an unnecessary burden in a time of large budget shortfalls.
But a new study concludes that policies and projects supportive of bike lanes are worth every penny, and then some. For every dollar spent on bike-related infrastructure, cities can receive anywhere from $6 to $24 in cost savings in the form of reductions to pollution, traffic congestion, and health care costs from decreased traffic fatalities and increased exercise, which alone is the biggest cost savings.
The larger the investment in bike infrastructure, the more people would be encouraged to commute by bike, and therefore the larger the return on investment would be.
Ed. Notes: While some people think bike lanes give privileged travel to the few at a cost to the many, it’s not true. If a road is a right-of-way, then that means anyone has the right to traverse it — not just drivers but walkers, pedalers, horseback mounties, bus riders, you name it. It’s because cars endanger others — not that the others endanger anyone — that cars get to hog what belongs to all.
Roads have not always been the lone province of cars. Not even a 100 years ago, roads were traversed by everyone, as they still are in most places on the planet. But when cars first came out, they were playthings for the rich, and the rich lobbied governments to pave roads for them — at a cost to everyone else — which was an improvement that only cars needed; bikes and horses were fine with dirt roads.
Today, drivers do not come anywhere close to paying for roads or other costs they impose on the rest of society. It’s not the tax on gas but the money in the general fund from other taxes that pay for all this: highway patrols, traffic courts, accident responses, health care for the uninsured, disability payments for those unable to return to work, wasted time of pedestrians and cyclists delayed by automobile congestion, pollution from exhaust, oily runoff, and dust, not to mention sprawling land use that stretches out trip distances, wasting energy and materials.
What’s really needed are not “sidelanes” along streets for bikes like sidewalks for pedestrians so much as entirely separate bike ways. In Germany, bike paths can be a quarter of a mile from highways. Let cyclists enjoy the experience of riding a bike!
To be fair and adhere to the User Pays Principle, there is a way to fund separated bikeways. Government need not register bikes and tax them or tax bike shops. Instead, government could tax land or institute land dues. Land alongside bike paths is of higher value than land alongside roads. Locations where bike paths intersect are of higher value still. Those site rents could be recovered by government and be dedicated to building and maintaining the network of bike lanes. And without any drunk young male car drivers tossing out glass bottles on a weekend night, you won’t even have to worry about flat tires!
Ed. Notes: Drinking coffee can not only help well-fed people of the North lose weight, it can also help the hungry people of the South put on a few pounds. Coffee comes from poor tropical places. Landowners in the tropics do especially well by the Northern demand for coffee … which is why everyone should own some land and not have to work the orchards for others.
The best way to reform land ownership is to institute land dues or land taxes. Having to pay dues makes it impossible to profit from owning more than one can use and just trying to be a middle man. Owners with excess sell off their excess in order to avoid paying land dues. That leaves more land available for former tenant farmers. It’s a reform that has worked wherever tried.
If only there were some way to tie drinking coffee in the North to sharing out land in the South!
This 2014 excerpt of Investors Daily, July 9, is by Russell S. Sobel.
Equilar reports a 6% annual increase in average compensation for the 200 highest-paid chief executives. Their companies receive tax breaks, subsidies, or other assistance from the federal government.
When federal money is up for grabs, businesses invest resources to secure it through a process known as “rent seeking.” Rather than making the entire business more profitable, however, this money remains at the executive level.
In fact, it’s not clear that shareholders or workers are getting a real return on their companies’ lobbying investments.
In the wake of the financial crisis, businesses have rushed to ensure that their interests were and continue to be heard in Washington. With more than 12,000 registered federal lobbyists seeking influence in policymaking, the reported expenditures on lobbying federal government in 2013 topped $3 billion.
Programs such as the Troubled Asset Relief Program (TARP) and the American Recovery and Reinvestment Act of 2009 (or the “stimulus”) doled out more than $1 trillion in federal subsidies, grants, and contracts directly to specific private businesses.
It’s now a common belief that business success depends partly on a company’s ability to secure favors through political connections. This “cronyism” — rather than consumer-driven market forces — picks the winners and losers in the marketplace. Such logic is taught in actual business-school classes.
Political activity and connections do not lead to higher profits for the vast majority of firms or industries, with the only notable exception being banking-related firms [they use mortgages to capture land rents].
We see no statistically significant correlation between firm or industry profitability and firm (or industry) lobbying or political action committee activity.
If lobbying and political efforts do not increase returns for firm shareholders, why would firm executives channel resources in this direction? Our research suggests that — while measures of firm performance and profitability are not correlated with political activity — the compensation of top firm executives is strongly correlated.
Ed. Notes: Robbing the public treasury to pay insider schmoozers might be legal but it’s not moral.
And if it’s only banks that lately have gained, the others must keep up their lobbying to at least not lose market share.
Further, companies in brand new fields such as IT don’t need handouts to grow since those recently launched industries are growing rapidly anyway.
Finally, the only solution is to remove the power of discretionary spending from politicians to the public. That means, putting the budget on the ballot as some towns in Brazil do or better yet, paying citizens a dividend, like Singapore often does, and that city state is often rated the world’s best for business.
From whence the surplus? From society’s spending for assets never created by anyone’s labor or capital (or lobbying for privilege). Goods like land, oil, EM spectrum, ecosystem services, etc, yield huge rents that society — via its agency, government — should be seeking, recovering (site value is socially generated), and sharing. Doing so allows the repeal of most taxes and subsidies. Called geonomics, the policy has worked wherever tried.
This 2014 excerpt of the Schumacher Center for a New Economics blog, Jly 7, is by their Staff.
Thomas Piketty’s book Capital in the 21st Century shows that owners of capital assets – including stocks, bonds, and real estate – have historically realized a financial return higher than wage growth, favoring those with capital assets over those living on wages alone.
Though this bias of the economic system is recognized intuitively, the myth of a level playing field has persisted, largely based on the exception to the rule following World War II. Pent up demand for new goods meant an unusual period of wage growth that was almost equal to the income from rents, dividends, and interest.
Piketty imagines possible mechanisms for adjustment, his preferred being a global progressive tax on capital assets. It would rely on transparency regarding reporting of assets and the cooperation of all nation states – so hard to achieve.
Peter Barnes proposes a more pragmatic approach. In his new book, With Liberty and Dividends for All: How to Save Our Middle Class When Jobs Don’t Pay Enough, he suggests a tax on assets such as atmosphere. Those using up that commons, environmental polluters for instance, would pay a tax into a fund for equal distribution to all citizens of a region.
His latest book is an evolution of Barnes’s thinking, starting in the 1970′s with Who Owns the Land. An author and entrepreneur, Barnes co-founded Working Assets (now Credo) and has written extensively on capitalism and the commons.
Barnes names Thomas Paine, as one of the influences on his thinking. In the 1797 pamphlet, Agrarian Justice, Paine proposes a “ground rent” on land, paid into a fund from which cash payments would be made to citizens when they reached twenty-one.
Peter Barnes will discuss inequality of wealth distribution and ways to address it in a Schumacher Lecture titled “Economics for the Anthropocene.” Sunday, July 27th, 7:30PM at the American Institute for Economic Research. The Lecture will be available online later this summer.
Ed. Notes: These are good ideas that I wish were more popular. I think part of the problem is mixing commons and taxes. Commons belong to community whiles taxes belong to government. Paying taxes to politicians does not mean you’ll ever see the money again. But a commons means you get to take your turn using the resource, without having to go through any bureaucracy. If wannabe reformers did not bundle commons and government together but reinforced their distinct differences, then people might warm up to the idea of sharing the common wealth, which is the worth of Earth. Doing that would both protect the environment and narrow the income gap.
Israel’s bombing of Gaza has not stopped its rocket attacks, so it is counterproductive. Instead, Israel should help the people of Gaza establish a communitarian democracy.
The government of Israel would announce on radio, television, web sites, and leaflets, that it will be sending in troops, not to fight against the people of Gaza, but to empower their communities.
The Israeli government would also apologize for its misguided policies of the past, and for the suffering and humiliation it caused for the Gaza Palestinians. Of course the Israelis have suffered also, but if one demands a counter apology, one is not really repenting and regretting.
The Israeli administration would designate neighborhood boundaries for communities of about 1000 residents and also enterprise owners. Residents would volunteer to serve on the community council. The Israeli troops would defend the community from any extremist opponents of the new democracy. The communities would set up their own protective elements, and the Israeli troops would withdraw.
Israel should have democratized Gaza in 1967 rather then let the area fester. Then in 2005, Israel removed its settlements without negotiating with the Palestinian rulers. Now Israel should do what occupiers world-wide have failed to do, lay down an infrastructure of democracy.
The community councils of Gaza would elect representatives to regional associations, and the regions would elect representatives to a Gaza parliament. The Palestinians of the West Bank should also elect their own parliament. Then the two parliaments would elect a Palestinian federation of two provinces, Gaza and the West Bank (perhaps renamed East Palestine). It would be best to leave local matters to the two provinces.
Israel should then stop imposing tax policy on the Palestinians and let them set up their own public finances. But advisers should encourage the Palestinian councils to collect the land rent and use that for public revenue rather than tax their wages and goods.
Unfortunately the Palestinian governors have focused their resources on fighting Israel rather than economic development. But after the communities in Gaza have become empowered, Gaza will no longer be occupied territory. Israel would remove the barriers around Gaza gradually, since there will still be extremists who seek destruction. But Israel should facilitate the greatest possible mobility for the Palestinians under the constraint of protection, rather than treat the Palestinians with the arrogance that has been practiced in the past. “No more humiliation” should be the stated slogan.
A similar policy should be pursued in the West Bank. The Palestinian authority chiefs will resist transferring power to the people and their local councils, but a democratic Gaza (or West Palestine) will cause the East Palestinians to demand genuine democracy. A bottom-up governance in the West Bank would then result in a federation of West and East Palestine that would then negotiate a lasting peace with Israel.
There have been some peace gatherings among Israelis and Palestinians to humanize their relations and to see that individuals are people much like themselves. But such personal interactions are no substitute for confronting the essential issue of who shall own the land.
The solution that is both just and politically feasible is to recognize the pre-1967 boundaries and then convert the Israeli settlements as leaseholds that pay rent to the Palestinian government.
Ideally all landowners in Israel and Palestine should pay the market rent of their land possessions. Land rent would serve as the best public revenue for a Confederation of Israel and Palestine. Palestine would be a state within the Confederation and would itself also be a federation of West and East Palestine.
The other contentious issue has been the return of displaced Palestinians to their pre-1948 lands. A peace treaty should allow a limited return of Palestinians to Israel, with some compensation for lands that have become homes for others. So long as justice is sought, the maximalists will usually be in the minority.
If justice is not established, time will be an enemy of both the Israelis and the Palestinians, as extremists and nuclear perils are on the rise. The choice is either justice now or destruction later.
This 2014 excerpt of the UK’s New Economics Foundation blog, Jly 9, is by Faiza Shaheen.
80% of Brits want the government to stop talking about economic inequality and do something.
Lisa Nandy MP, participated in the launch of a new NEF report setting out the five pressure points:
5. Fairer taxes
Progressive tax reforms, such as a Land Value Tax, would help address inequality at root and redistribute economic power. Shifting the burden of taxes onto environmentally unfriendly activities would kill two birds with stone by relieving struggling families and speeding up the transition to a low-carbon economy.
This 2014 excerpt of The Nation, Jly 3, is by Michael Hudson, Ionuț Stănescu, and Sam Adler-Bell. The story is part of a joint investigation by the International Consortium of Investigative Journalists, New York magazine, and the Organized Crime and Corruption Reporting Project.
Since 2008, roughly 30 percent of condo sales in pricey Manhattan developments have been to buyers who listed an international address -— most from China, Russia, and Latin America —- or bought in the name of a corporate entity, a maneuver often employed by foreign purchasers. Because many buyers go to great lengths to hide their interests in New York properties, it’s impossible to put a number on the proportion laundering ill-gotten gains. But according to money-laundering experts as well as court documents and secret offshore records reviewed by the International Consortium of Investigative Journalists, New York real estate has become a magnet for dirty money.
Oligarchs and despots like to put their money into high-end real estate for a number of reasons: they need an escape option if things take a turn for the worse in their home countries; they want to park their assets in an investment that’s known to preserve value; and they want to be able to enjoy and flaunt their wealth.
Many walk a fine line between showing off and staying on the down-low. Instead of putting property in their own names, they may arrange to put the names of their spouses, children, lawyers or other proxies on property deeds. Often, the buyer of record isn’t a flesh-and-blood person —- it’s a limited liability company set up in a US state, or an offshore company established in the British Virgin Islands or some other overseas haven.
The name for the process of creating mazes of bank accounts and offshore companies to move and hide money is layering. When the layers are laid down skillfully, it’s often impossible to detect flows of illicit cash. The United Nations Office on Drugs and Crime estimates that as little as one-fifth of 1 percent of money that’s laundered around the world is identified and intercepted.
US authorities don’t require escrow and real estate agents to find out the true identities of property buyers. The “Patriot” Act has a loophole that gave an opening for the US Treasury to “temporarily” exempt the real estate industry from such requirements. A dozen years later, the exemption still stands.
In September, a judge approved US prosecutors’ bid to seize 650 Fifth Avenue, a commercial tower at edge of Rockefeller Center, ruling that the property’s owners had violated international embargoes by secretly siphoning profits from tenants’ rental checks to Iran’s government. US authorities said it could be “the largest-ever terrorism-related forfeiture.”
Allies of both the winner and the loser in Ukraine’s 2010 presidential election — former Prime Minister Yulia Tymoshenko and Viktor Yanukovych, the winner — have been accused of money-laundering schemes involving New York properties. So have Russian fertilizer magnate Dmitry Rybolovlev and Romanian Gabriel Popoviciu, who helped introduce his country to KFC and other American fast-food icons. He became one of Romania’s richest men by bribing government officials to gain control of valuable state-owned land and develop a huge project that includes supermarkets, restaurants, and the US Embassy.
Money laundering and New York real estate have a long history. Mafia clans bought properties around New York’s five boroughs. The former first couple of the Philippines, Ferdinand and Imelda Marcos, used a series of offshore companies to channel almost $700,000 into the purchase and consolidation of three apartments near the top of Midtown’s famed Olympic Tower, which had recently been built by Greek-Argentine shipping magnate Aristotle Onassis.
Former Mayor Michael Bloomberg said, “Wouldn’t it be great if we could get all the Russian billionaires to move here?” The massive flow of foreign money —- licit and illicit -— not only drains home countries but also inflates location values in the target nation, pricing average New Yorkers out of buying or renting.
Ed. Notes: Real estate in New York is like oil in Texas. Wherever land costs a lot (and pays off a lot), and wherever oil is deposited, you find bullies hurting people and raking in fortunes. Easy money always attracts loose morals.
It does so inside and outside government, both the bribe givers and the bribe takers. (What’s the difference between a bribe and a campaign contribution of millions? Time’s up.) The real state is real estate and always has been, from the days lords and kings to the present day of landlords and bank lenders.
The only antidote is realize natural rents belong to us all, to share them a la Singapore, and to keep promulgating that realization.
This 2014 excerpt of Common Dreams, Jly 3, is by Deirdre Fulton, staff writer.
Canadian academics and activists are engaged in that country’s first national campaign for a basic guaranteed income, which they say would “help prevent poverty, reduce inequality, enhance individual freedom, boost human creativity, stimulate entrepreneurship, promote citizenship, increase efficiency in public services, and reduce government intrusion in private life.”
Last weekend’s 15th International Basic Income Earth Network Conference, held in Montreal, marked the public debut of a campaign to raise awareness about and support for the concept of a basic income in Canada, which is home to about 35 million people. The Basic Income Canada Network’s BIG Push campaign suggests that an annual income of between $20-25,000 would be sufficient for a working-age adult.
Canadians are no strangers to the concept of basic income —- the “Mincome” experiment that took place in the province of Manitoba during the 1970s had positive effects on health and education. Several countries, including Brazil, already implement some sort of basic income program (or pilot program). Later this year, voters in Switzerland will have their say on a proposal to give every citizen $2,800 a month.
Ed. Notes: It’s ironic to me that the proponents of BI use the word “guarantee”, presupposing that’s something governments can do, yet don’t breathe a word about from where would come the money?
I’d rather see proponents focus on our common wealth, which by its nature (being common property), is something we should share, something that all of us are already entitled to a share.
Indeed, it is immoral that the vast majority of us do not receive our share while a small handful of people capture the shares of millions of fellow citizens. However, eventho’ this situation is not ethical, nobody’s behavior is unethical. To behave badly, one must first know what’s right and wrong and most people are not even aware that common wealth exists, so how could they realize that hogging it is wrong?
What is our common wealth? It is the worth of Earth. Nobody made land and resources and all of us make them valuable, by our demand for usage of various locations. Each of us has a right to land and to compensation when we’re excluded from land. Plus, each of has the duty to compensate those whom we exclude from our land.
Economic value in practice is spending, herein our spending for all the locations and ecosystem services that we use. This flow is a surplus since it does not reward anybody’s labor or capital; Earth was created by whatever created us. This surplus is social since it is society’s recognition of property rights that makes it possible to use and exchange use of locations.
If society did institute land dues, then it could do away with counterproductive taxes. If society did institute rent dividends,then it could do away with addictive subsidies. Minus the interference of taxes and subsidies – both of which distort prices and thus behavior – economies could operate at peak efficiency and government bureaucracies could shrink.
Dues and dividends are the policy of geonomics. Wherever tried, to the degree tried, it has always worked. So rather than propose an unfunded BIG, propose a Citizen’s Dividend. Dividends by definition are shares of surplus, so the details of the proposal are built in.
This 2014 excerpt of the American Enterprise Institute’s Tech Policy Daily, July 2, by Jeffrey Eisenach.
Entrenched incumbents often fail to see outside their traditional business models. Human nature (being comfortable with the familiar), institutional dynamics (the first instinct of any bureaucracy is self-preservation), and simple economics (milking a cash cow) all create a bias for the status quo among those currently in power. It’s not that big companies never innovate (look at Apple for one obvious example), but rather that they tend to innovate as a result of competition – because “only the paranoid survive.”
Incumbents lobby for government regulation to deter entry by potential competitors – Ma Bell’s attempts to use its pet regulatory agency, the Federal Communications Commission, to cut off competition from Hush-a-Phone, CarterPhone, and later MCI is the classic example. Uber’s battle with taxi regulators is today’s cause celeb.
Entrants have also figured out the rent-seeking game. They too seek laws and rules that tilt the playing field in their favor, and history suggests they are pretty good at it: Dwayne Andreas securing literally billions of dollars in ethanol subsidies for Archer Daniels Midland, or FCC Chairman Reed Hundt falling for Competitive Local Exchange Carriers (CLECs, resulting in billions being wasted on stadium naming rights while venture capitalists walked off with still more billions in IPO proceeds), etc.
It is often difficult to tell the difference between the disruptive innovator and the creative rent seeker. Take Tesla for example. Incumbent auto dealers seek to prevent competition from Tesla by opposing direct sales. But Tesla also gets $7,500 in direct Federal tax subsidies to support every sale and tens of thousands more from states and various other indirect subsidies so wealthy buyers can pay less for their $90,000 “superluxury” sports cars.
Using government power to enrich those who deploy lobbyists and contribute to campaigns is wrong. Having a level playing field that forces firms and business models to face dynamic competition is great public policy. The idea of disruptive innovation is gaining currency in conservative/Republican policy circles.
After World War I, Germany had to pay reparations to the United Kingdom and France. Having sold off its gold, the German government had no specie with which to back its currency, the mark. Therefore Germany issued fiat money, not backed by anything. It was called the Papiermark, the paper mark.
With its economy in ruins, the German government printed more and more currency with which to pay its bills, and the German expansion of money became the world’s most famous example of hyperinflation.
The inflation induced alternative currencies in Germany. In 1922, the Roggenrentebank was established, issuing notes backed by rye grain. In 1923 several local governments issued small-denomination loan notes denominated in commodities such as rye, coal, and gold. The commodity front served as a price index relative to marks for the notes.
The inflation came to a halt with the replacement of the Papiermark with a new currency, the Rentenmark on October 15, 1923. One Rentenmark could be exchanged for a trillion Papiermarks.
The Rentenmark was fronted by bonds indexed to amounts of gold. Since the US dollar was backed by gold then, the Rentenmark was thus also pegged to the US dollar at 4.2 RM to $1. To “back” a currency means to exchange it for a commodity at a fixed rate. It was not enough to merely index the units of the Rentenmark to gold. To become stabilized, the new currency needed to be fronted by a commodity that was actually used. That commodity was real estate.
The Deutschen Rentenbank, the central bank of Germany, established reserves that included industrial bonds as well as mortagages on Germany’s real estate. A currency is fronted when the issuer has collateral that it can deliver in exchange for indexed units of the money. Real estate rentals payable in Rentenmarks were fronts for the new German currency. “Rente,” derived from French, means income in German, such as a pension.
After having stabilized the money, the Rentenmark was replaced by the legal-tender Reichsmark in 1924 one-to-one, although Rentenmark notes continued to serve as money until 1948.
Previous attempts to front a currency with land value failed, because such frontage is insufficient. In France during the early 1700s, John Law’s bank issued money on the collateral of land in Louisiana, but that hypothetical land value did not constrain the over issue of the banks’ notes. Then during the French Revolution, the government issued “assignats” on the collateral of confiscated church land, but that too did not prevent the inflation of the money.
Land rent cannot “back” a currency, since there are no uniform units of land that can be exchanged for units of money. But land rent can be a “front” for money when taxes are payable in that currency, which helps give that money its value. But that alone does not prevent an excessive expansion of the money. To stabilize the currency, it also needs to be backed by or indexed to some commodity. And gold has been a common and suitable backing for paper and bank-account currency.
The German experience also shows that the gold backing does not require large amounts of gold. It is sufficient for stabilization that there is some credible limit to the expansion of the money. The Germans were lucky in 1923 in having monetary chiefs such as Hans Luther of the Finance Ministry, and Hjalmar Schacht, Commissioner for National Currency, who maintained the gold index by limiting the expansion of the new currency.
But as the experience of France, shows, it is risky to depend on the integrity of monetary chiefs. Permanent monetary stability requires a structure of money and banking that is self-correcting. That structure is best provided by free-market banking, in which the real money (outside money) is some commodity beyond the control of the banks, and the banks issue “inside money” or money substitutes backed by the real money. Competition and convertibility prevent inflation.
Any kind of tax can serve to help endow money with value, but a land-value tax offers the greatest frontage for currency, because in effect, LVT acts as a mortgage on land value, and the government can take over land when the tax is not paid. Unlike with taxes on income, nobody goes to prison for not paying a real estate tax, because the rent serves as a reliable collateral. Land rent can serve as collateral not just for real estate loans, but also for taxation, and for currencies. All countries can have “renten money” when they covert from market-hampering taxes on production to market-enhancing taxes on the economic surplus that is land rent.
the annoying habit of seeing the hand of land in almost all transactions. In geonomics we maintain the distinction between the items bearing exchange value that come into being via human effort — wealth — and those that don’t — land. Keeping this distinction in the forefront makes it obvious that speculating in land drives sprawl, that hoarding land retards Third World development, that borrowing to buy land plus buildings engorges banks, that much so-called “interest” is quasi-rent, that the cost of land inflates faster than the price of produced goods and services, that over half of corporate profit is from real estate (Urban Land Institute, 1999). Summing up these analyses, geonomists offer a Grand Unifying Theory, that the flow of rent pulls all other indicators in its wake. Geonomics differs from economics as chemistry from alchemy, as astronomy from astrology.
a study of a phenomenon David Ricardo noted going on two centuries ago. When wine grapes rise to $10,000 a ton from the very best land (last year, cabernet sauvignon commanded an average of $4,021 a ton in the Napa Valley), then vineyard prices soar from $18,000 an acre in the 1980′s to $100,000 an acre five years ago and now for a top pedigree up to $300,000 an acre (The New York Times, April 9, via Wyn Achenbaum). Pricey land does not make wine pricey; spendy wine makes land spendy. While vintners make their wine tasty, nature and society in general – not any lone owner – make land desireable. Steve Kerch of CBS’s MarketWatch (April 5) notes that much of what a home sells for on the open market is a reflection of intangible factors such as what school district the house sits in. The price the builder has to pay for the land also tends to be driven by the same intangibles. Because the value of land comes from society, and because one’s use excludes the rest of society, each user owes all others compensation, and is owed compensation by everyone else. Sharing land’s value, instead of taxing one’s efforts, is the policy of geonomics.
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)
shaped by reality. In the 1980′s, the Swedish government doubled its stock transfer tax. Tax receipts, however, rose only 15%, since traders simply fled to London exchanges. Fearing a further exodus, the Swedish government quickly rescinded the tax altogether. (The New York Times, April 20) That willingness to tax anything leads us astray. Pushing us astray is that unwillingness to pay what we owe: rent for land, our common heritage. Assuming land value is up for grabs, we speculate. We cap the property tax on both land and buildings and the rate at which assessments can go up; while real market values rise quicker, assessments can never catch up. Our stewards, the Bureau of Land Management, routinely sell and lease sites below market value, often to insiders, says the Government Accounting Office. Once we grasp that rent is ours to share, we’ll collect it all, rather than let it enrich a few, and quit taxing earnings, which do belong to the individual earner. That shift is geonomic policy.
not a panacea, but like John Muir said, “pull on any one thing, and find it connected to everything else.” Recall last month’s earthquake in El Salvador. We felt it and its formidable after-shocks in Nicaragua. Immediately afterwards, my host nation, one of the poorest in the Western Hemisphere, sent aid to its Central American neighbor. The Nica newspapers carried photos of the devastation. They showed that the cliff sides that crumbled had had homes built on them while the cliffs left pristine withstood the shock. Could monopoly of good, safe, flat land be pushing people to build on risky, unstable cliffs? If so, that’s just one more good reason to break up land monopoly. What works to break up land monopoly, history shows, is for society to collect the annual rental value of the underlying sites and resources. That’d spur owners to use level land efficiently, so no one would be excluded, forced to resort to cliffs. To prevent another man-induced landslide is yet another reason to spread geonomics.
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!
an economic policy based on the earth’s natural patterns. Eco-systems self-regulate by using feedback loops to keep balance. Can economies do likewise? Why don’t they now produce efficiently and distribute fairly? The answers lie in the money we spend on the earth we use. To attain people/planet harmony, that financial flow from sites and resources must visit each of us. Our agent, government, must collect this natural rent via fees and disburse the collected revenue via dividends. And, it must forgo taxes on homes and earnings, and quit subsidies of either the needy or the greedy. As our steward, government must also collect Ecology Security Deposits, require Restoration Insurance, and auction off the occasional Emissions Permit. And that’s about it – were nature our model.
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.
an alternative to conventional land trusts. Just as it seems some functions should not be left to the market – private courts and cops invite corruption (while private mediation is fine) – just so some land should not be left in the market. That said, sacred sites do not make much of a model for treating the vast acreage of land that we need to use. So the usual trust model, which is anti-use and counter-market, can not apply where it’s needed most. Trust proponents worry about ownership and control – two very human ambitions – but they’re not central. Supposedly, we the people own millions acres – acres that private corporations treat as private fiefdoms – and conversely, the Nature Conservancy owns wilderness the public can some places use as parks. So, the issue is not who owns but who gets the rent – ideally, all of us.
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.