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This 2014 excerpt of BloombergView, Aug 4, by Edward D. Kleinbard
Some say inequality is an inevitable byproduct of free markets. Others that inequality is greatly overstated. Both claims are harmful and deceptive.
Some defend this as a consequence of rising demand for highly educated and exceptionally talented individuals to deal with technology and globalization. So one would expect similar rates of inequality growth everywhere. Instead, one sees the surge in U.S. inequality.
A more complete explanation includes “rent seeking” — shortcuts to wealth available to some, without creating new economic value, like a tax break. The CEO, lobbyist, and lawmakers are masters of rent-seeking. Much of what went on in the finance industry in the early 2000s was rent seeking. Vast fortunes can buy special relationships and privileges with government, which further act to turn today’s great fortunes into dynasties.
Ed. Notes: Like they say, the key to wealth is (a) to privatize your society’s wealth (dip into the public treasury and into the vast spending for assets never produced, such as land) and (b) to socialize your costs (make others pay for the damage you do, such as pollute). Government, of course, should reverse that. It should make polluters pay. And it should redirect our spending for nature and privilege into the public treasury then back out again as dividends for the members of the society. Extra bonus: doing that let’s you repeal counterproductive taxes and ruinous subsidies. It’s called geonomics and it’s good to see Bloomberg catching on.
This 2014 excerpt of the New York Times, Aug 9, is by Gretchen Morgenson.
Internal Revenue Service officials ruled that Windstream Holdings, a telecommunications company based in Little Rock, Ark, may spin off its copper and fiber network into a real estate investment trust (REIT). The REIT will lease the network to Windstream for $650 million a year. REITs are essentially tax-exempt entities, and because the $650 million will go to the REIT, it will not be taxable income to either company. Windstream will not pay taxes as a result of the company split.
Investors cheered the Windstream news; the company’s shares rose 12 percent on the day of the announcement.
Although the ruling is specific to Windstream, tax experts say it will exponentially broaden the pool of companies able to tap into the preferential tax treatment that was previously limited to real-estate-oriented trusts.
REITs are publicly traded entities that typically own commercial buildings, shopping malls, hotels or other properties. Mortgage REITs own bundles of loans. Both types allow small investors to participate in big-ticket real estate ownership.
A REIT trust must hold at least 75 percent of its assets in real estate and generate at least 75 percent of its income from property rents or interest on real estate financings or sales. Rather than retaining the income they earn and paying taxes on it, REITs pass along 90 percent of their income to shareholders (who then pay taxes). This means these companies have little in the way of taxable income.
Traditionally, REIT tax treatment could be applied only to assets with permanent structures. The new rules say real estate assets may include microwave transmission, cell, and broadcast towers as well as parking facilities, bridges and tunnels, railroad tracks, transmission lines, pipelines and storage facilities.
Electric utilities, cable operators and other telecoms would most likely join the REIT ranks as a result of the I.R.S. stance. Almost any company whose business involved real estate would be able to reduce its tax obligation by shifting taxable income derived from those assets to a nontaxable REIT entity.
Windstream will not have to pay taxes on $650 million in revenue. At the standard 35 percent corporate tax rate, the savings are nearly a quarter a billion per year. However, it could be less since telecom companies paid tax rates of 9.8 percent, on average, from 2008 through 2012.
Utilities paid just 2.9 percent over the period. These companies can pay so little because of tax breaks they receive.
Ed. Notes: Industries that don’t need any favors are those that get them, especially the real estate industry. Government policy is 180 degrees opposite what it should be. Our so-called stewards should auction off utility franchises (which are monopolies) to the highest bidder and renew the terms annually. Same goes for resource leases, broadcast licenses, patents and copyrights. Run government like a business — get as much as we can from corporate charters, banking charters, and other privileges. Even land titles should be granted for an annual rent at full market value.
At the same time, abolish taxes and subsidies and use the bulk of raised public revenue to pay citizens a dividend.
Simplify. Complexity is the enemy of equity. Without policy interfering, we can lock the hood on the economy and enjoy prosperity in liberty.
The basic concept of “profit” is simple: profit equals revenue minus costs. But “cost” is a complex concept, and “revenue” too is not all that simple, so the economic analysis of “profit” ends up being complicated.
A business typically calculates the appearance of profit rather than the economic reality. Most enterprises use money for purchases and sales, so for accounting, the appearance of profit is easy to understand. The revenue equals the proceeds from sales, and the costs are what is paid for the inputs: wages, rentals, interest, and materials. In economics, this is called “accounting profit,” which equals revenue minus the explicit costs, costs paid to others.
But the payments for inputs can include capital goods – inventory, buildings, machines and other tools – that last a long time. If an enterprise buys a machine that lasts for ten years, the cost is really spread out over the duration of the capital good. So in the accounting, rather than treat the purchase as a cost in the year purchased, the cost is the depreciation, the loss of value, in each year. For simplicity, the accounting can depreciate the tool in equal amounts each year, or, following tax laws, it could accelerate the depreciation, deducting more in the first years than the last years. The annual depreciation is an explicit cost, since the original purchase consists of funds paid to others.
This accounting convention ignores the effect of price inflation. Suppose a tool costs $100 and lasts for 20 years. Without inflation, the depreciation would be $5 per year. But if during that time, prices have doubled, it will cost $200 to replace the same tool. In the 20th year, the actual depreciation should be $10, but for the income tax in the USA, inflation is ignored, so the company has to record a $5 expense.
To get the real cost, we have to move from accounting profit, which only subtracts explicit nominal costs (not adjusted for inflation), to economic profit, which also subtracts the implicit costs, those which are not paid in money to others, but are nevertheless real.
The implicit costs include all the “opportunity costs,” the costs of giving up next-best opportunities. Suppose you are the sole owner of a business, and your accounting profit is $200,000 per year. Your next best opportunity would be to be employed at another firm for $80,000 per year. Since you give up a $80,000 wage by being self-employed, that is a cost of your business, and in effect you are paying yourself the $80,000 out of your accounting profit.
Suppose also that you own the real estate used by your firm. If you rented, the rental would be $60,000 per year. The opportunity cost of owing your business is the $60,000 you give up if you instead rented the place to a tenant. In effect, your business is paying you as property owner the $60,000 rent from your accounting profit.
Subtract $80,000 and $60,000 from your accounting profit, and your real gain is $60,000. That is the economic profit from your self-owned business.
The same concept applies to corporate profits. Suppose a corporation has an accounting profit of $10 million per year. It owns assets worth $100 million. If the assets were sold and converted into safe bonds, suppose the bonds would pay four percent interest, or $4 million annually. That foregone income is subtracted from the accounting profit, for an economic profit of $6 million. The firm obtains $4 million as an asset owner, and $6 million as an enterprise.
Another aspect of profit is honesty. If a thief steals $1000, this is not economic profit. True profit means that the gain came from voluntary enterprise and legitimately owned assets. Gains from force and fraud are not economic profit. From the viewpoint of the whole economy, profit also has to take into account costs imposed on others, such as from pollution. The absence of compensation for damages is really an implicit theft.
Accounting profit can include government subsidies. But since such subsidies are not from voluntary production, they are not included in economic profit, the real gain from production.
Profit can also consist of capital gains. If you buy shares of stock at $1000 and sell them later for $1500 (after paying the broker’s fee), the $500 capital gain is profit. If you instead had the $1000 in safe bonds and obtained $100 in interest, that would be the opportunity cost of the capital gain, so the economic profit from the asset is $400.
We can also look at opportunity cost from the point of view of society and the whole economy. The opportunity cost of government spending is what the taxpayers would have spent on. Land has an individual opportunity cost for the owner, but for the economy, land has no opportunity cost. The land is here by nature, and no more can be built or imported. Therefore, for the whole economy, all land rent is economic profit.
Economic profit has three origins. First there is entrepreneurial profit, the economic profit of an entrepreneur, due to his skills, insights, and talents. Second is monopoly profit, the economic profit that comes from a price greater than a competitive price, such as the profit from holding a patent. Third is the gains from asset appreciation.
Profit can be negative and zero. When an enterprise has costs greater than revenues, the loss constitutes negative profit. In a highly competitive industry, economic profits tend towards zero, as firms enter to gain profits and exit to avoid losses. But zero economic profit implies just enough accounting profit to pay for all costs, including normal returns on assets values.
If you want to be clear when talking about profits, you should not just say “profit” but indicate whether you mean accounting profit or economic profit. It gets a bit confusing, because when economists say “profit,” they mean economic profit, but when anyone else says “profit,” they mean accounting profit. It may be difficult to calculate economic profit, but we need to do it, because economic profit keeps it real.
This 2014 excerpt in Bitcoinx, Aug 8, is by Steve Shanafelt.
A site in Lake Tahoe sold for 2,739 BTC, or roughly $1.6 million. The 1.4 acre parcel on the California side of the lake is located in the private luxury resort of Martis Camp, and appears to be the single biggest bitcoin-backed property sale to date.
The buyer of the property is unknown, having purchased the land through a trust, but plans to build a home on the site.
The transaction was handled through Atlanta-based bitcoin payment processor BitPay. BitPay representatives said this was the largest land transaction they’ve processed thus far, although by no means the largest purchase.
Ed. Notes: While switching from statist money to cooperative money is a step forward, the same ol’ payment target — paying the individual who is abandoning the land rather paying the community — is not progressive at all. The ones we owe for land — since we can not pay whoever made Earth — are those whom we exclude, just as they owe us for excluding us from their lots. Once we take that step, the consequences will be far bigger than e-coin.
This 2014 excerpt of OpenSecrets, Aug 6, is by Sarah Bryner.
The Top Overall Federal Contributors list are the organizations and individuals donating the most money to federal campaigns and committees, including parties, federally-focused 527s, super PACs, and Carey committees.
Of the top 20 organizations, only two favor Republicans. The rest, with the exception of one “on the fence” trade association, all strongly prefer liberal policies and Democratic candidates. In addition, 11 of the top 20 organizations are unions.
As is the case with the top overall donors, the top outside money donors are dominated by liberal organizations; all five top donors are liberals.
Regressives do dominate a few categories.
This cycle, 18 of the top 20 organization donors to joint fundraising committees favor Republicans.
On the Top Individuals list, the top three overall donors are Democrats, while six of the top 10 and 11 of the top 20 favor Republicans.
What’s missing is the money that we can’t see: Donations to dark money groups are never disclosed and therefore organizations that choose to spend their money in the shadows will not appear as prominently on the list as we might expect.
Ed. Notes: Reformers rail against the influence of money in politics, against Citizens United (the Supreme Court ruling to allow unlimited campaign contributions), yet their side gives the most disclosed money. Is this preponderance a one-time anomaly in donations? Are these sums dwarfed by dark money and is that money conservative?
Why do progressives get so little in return for their gifts? Why is their party, the Democrats, so conservative? Why does their huge advantage in money not translate into a huge advantage in electoral victories?
Do they waste their millions on messages that fail to communicate convincingly?
This 2014 excerpt of The Ecologist, Jly 18, is by Nafeez Ahmed.
Israel’s defence minister is on record confirming that military plans to uproot Hamas’ are about securing control of Gaza’s gas reserves — the 1.4 trillion cubic feet of natural gas discovered in 2000 off the Gaza coast, valued at $4 billion.
Otherwise, Palestinian gas profits would fund attacks against Israel. The threat is not limited to Hamas. Some of the gas proceeds could reach other Palestinian groups.
If Palestinians develop their own gas resources, the resulting economic transformation could in turn fundamentally increase Palestinian clout.
Israel has made successive discoveries in recent years – such as the Leviathan field estimated to hold 18 trillion cubic feet of natural gas – which could transform the country from energy importer into energy exporter.
Much of the 122 trillion cubic feet of gas and 1.6 billion barrels of oil in the Levant Basin Province lies in waters where borders are hotly disputed between Israel, Syria, Lebanon, Gaza, and Cyprus.
With the depletion of Israel’s domestic gas supplies accelerating, and without an imminent rise in Egyptian gas imports, Israel could face a power crisis in the next few years. Electricity prices are reaching record levels, heightening the imperative to diversify supply.
Despite all formal agreements to the contrary, Israel continues to manage all the natural resources nominally under the jurisdiction of the Palestine Authority, from land and water to maritime and hydrocarbon resources.
Ed. Notes: While natural gas could be a motive, as resources often are, the same claim was made during the Vietnam War, that the US was motivated by a big oil field off the coast of Vietnam, but that purported bonanza never materialized, even after relations between the two government normalized.
That said, are the Jews in that part of the world safer when Arabs are poor and under siege or when they lead comfortable middle class lives in safety? Look at how other enemies quit their enmity, such as France and Germany. Could that have happened if they were not enjoying economic parity?
The strategy of violence, terror, and oppression — practiced by both sides — can not end well. Israel can not count on the American taxpayer forever, nor the European market for its exports. Something must give. Israel might try to “pay its dues” by establishing economic justice in its entire area of influence. That would make it harder for violent men to seize power and easier for rational people to provide leadership. Geonomics could deliver the necessary sustainable and equitable development.
This 2014 excerpt of the AP, Aug 5, is by Josh Boak.
An analysis by the rating agency Standard & Poor’s claims the widening gap between the wealthiest Americans and everyone else has made the economy more prone to boom-bust cycles and slowed the 5-year-old recovery from the recession.
The rising concentration of income among the top 1 percent of earners has contributed to S&P’s cutting its growth estimates for the economy to 2.8 percent rate to a 2.5 percent annual pace in the next decade.
S&P estimates that the U.S. economy would grow annually by an additional half a percentage point — or $105 billion — over the next five years, if the average the American worker had completed just one more year of school.
Income disparities hurt growth because consumers tend to become more dependent on debt to continue spending, thereby worsening the boom-bust cycle. Or they curb their spending, and growth improves only modestly, as it has during the current recovery.
Adjusted for inflation, the top 0.01 percent’s average earnings have jumped by a factor of seven since 1913. For the bottom 90 percent of Americans, average incomes after inflation have grown by a factor of just three since 1917 and have declined for the past 13 years.
Ed. Notes: There are better reasons than growth to justify closing the income gap and wealth gap. The main reason is the very rich are not earning all that money. They don’t have jobs packaging food or sewing clothes or driving buses. No, it’s not work they do but owning. Their companies get corporate welfare and society’s spending for land and resources, aspects of nature that nobody made. That belongs to everyone, not only to the 1% now getting it.
Not only is such skewed distribution bad, growth is not always good. Do we really want to spend more money on sprawl, divorce, prisons, weapons, ethanol, etc? GDP counts all spending: the good, the bad, the ugly.
And while a better educated or skilled workforce can grow growth, that workforce does not necessarily get higher wages, or at least not for long. You just create more competition among more competent workers. And under the current system, both taxes and inflation will rise, too.
The only growth really worth measuring is growth in leisure, in enjoying the same standard of living or better while working the same or less.
It would be possible to live comfortably, to work less, to study whatever captured one’s fancy, and to live in a less hierarchical, less class-ridden society if we were to adopt geonomics and share the worth of Mother Earth.
This 20124 excerpt of the Washington Post, Aug 1, by Rachel Feltman.
Even though modern humans started appearing around 200,000 years ago, it was only about 50,000 years ago that artistry and tool making became popular. New research shows that society bloomed when testosterone levels in humans started dropping. A paper published in the journal Current Anthropology, suggests that a testosterone deficit facilitated the friendliness and cooperation between humans, which lead to modern society. “Whatever the cause, reduced testosterone levels enabled increasingly social people to better learn from and cooperate with each other, allowing the acceleration of cultural and technological innovation that is the hallmark of modern human success,” says University of Utah biology graduate student Robert Cieri.
Ed. Notes: So, for civilization to really progress, beyond mere domestication which is all it is for most humans, does that mean the male sex hormone must fall again? Should people with too much testosterone be denied the right to vote or bear arms? Can people with abundant testosterone teach others how to deal with their hormonal mates? Should parents of a child with the DNA for high production be required to raise the child using certain techniques of nonviolent conflict resolution? What does it mean for reformers who try to advance sharing and the notion of a common wealth? Should they target the “fairer” sex?
This 2014 excerpt of Weekly Wastebasket, Aug 1, is by Taxpayers for Common Sense.
The effective tax rates of the 20 largest oil and gas companies based in the U.S. from 2009 through 2013 is 24 percent, well below the statutory corporate rate of 35 percent.
The deduction for intangible drilling costs (IDC) has been in the tax code since 1916, a few short years after the income tax was introduced.
Deducting all costs up front – instead of waiting for the asset to generate income and then expensing these costs over 5, 10, or 20 years, like other taxpayers – allows oil companies like ConocoPhillips to shelter more of its current income from federal taxation.
Also, able to defer payment of taxes means the amount the 20 companies in our study paid to the federal government during the last five years was equal to 11.7 percent of their U.S. pre-tax income. What small businesses wouldn’t be psyched to pay a federal income tax rate of less than 12 percent?
By the end of 2013, the 20 companies had accumulated $175.8 billion in total deferred tax liabilities. Depending on how much income they report in the future, it could take a decade or more to eventually pay it.
Ed. Notes: Are they ever forced to pay all of it? When they get caught not paying royalties, nothing happens to them.
This attitude of government toward oil is the complete reversal of sense and logic. Norway, for example, gets 80% of the world price for its oil. So should every nations, for every resource, and for every square foot of valuable surface land.
That’s because nobody made Earth and everyone together as society are the ones who create demand and generate the economic value of oil and the rest of nature we use.
What government should exempt from taxation is not “rent” but the actual earnings of anyone, whether a corporation or an individual. Don’t worry about the rich getting away with not pulling their weight. Their income, more than anyone else’s is “rent” of the money that society spends for the nature it uses.
That spending stream is so huge that oil-rich Alaska pays its residents a dividend and location-lucky Singapore pays its citizens one, too.
Vulture funds are hedge funds who buy from bondholders the debt of countries in economic crisis at very low prices and then when nations receive debt relief, or enter economic stability, they sue the country for repayment at face value. Vulture funds remain protected by the law, and generally win their lawsuits.
In 2005 under President Nestor Kirchner, Argentina exchanged US$62.3 billion of the US$81.8 billion in principal owed for a lower price.
A diverse group of holdouts representing US$18.6 billion did not tender their bonds and opted to litigate. Another US$12 billion was renegotiated in 2010 with most of the holdouts, but still around US$6 billion remained. Argentina was able to negotiate discounted repayment rates with the 92.4 percent of creditors but not hedge funds Elliott Management and Aurelius Capital Management.
As part of the struggle with the vulture funds, the Argentine navy frigate “Libertad” was impounded in Ghana in October 2012, at the request of U.S. hedge fund NML Capital Ltd, which says Argentina owes it US$300 million on bonds which have been in default since 2002. The International Maritime Organization (IMO) said the ship couldn’t be seized.
In a ruling by the U.S. Supreme Court this June, Argentina was ordered to pay the holdout vulture funds, who had demanded to be paid the face value of the bonds. The U.S. Federal Judge Thomas Griesa also ordered that the country could not pay its other creditors, without also paying the vulture funds, blocking the US$539 million payment made by Argentina in June 30 to the other 92.4 percent of creditors.
And Argentina is supposed to pay all its creditors the same. Therefore, if Argentine pays the vulture funds the full US$1.3 billion they are claiming, it could be forced to pay all the other creditors in full also.
Argentine President Cristina Fernandez de Kirchner said that the country would be forced into default if subject to pay this amount.
The IMF along with other international organizations and governments have supported Argentina on the grounds that the ruling could set a precedent, making the restructuring of unmanageable debt more difficult for struggling countries.
The vulture funds may be after Argentine natural resources, principally the second largest shale oil gas field in the world, Vaca Muerta, which is located in the Neuquen province of southwest Argentina.
Ed. Notes: Government bonds and debt in general is a trick as old as the hills. In the American Revolution, Congress paid soldiers with IOUs, which could not be used as real money, and never reimbursed the soldiers. So soldiers sold the scrip for pennies on the dollar to rich, insider speculators. Only then did the US Treasury, under the orders of Alexander Hamilton, pay the holders of the IOUs in full.
But why do governments borrow so much in the first place? Part of the answer is many are very corrupt; politicians and their business cronies steal from the public treasury. And they are wasteful, operating bureaucracies that are little more than welfare for the middle class.
Further, they hobble their economy — their small businesses and workers. They levy taxes on sales, incomes, and buildings. And they fail to recover the socially-generated value of land. That lets speculators under-use the best urban sites and when prime locations lie fallow, nobody can make any money there, so the economy is hobbled again.
Rather than borrow, all Argentina or any nation need do is look to its land for revenue.
This 2014 excerpt of the Financial Times, Jly 25, is by Adair Turner, senior fellow at the Institute for New Economic Thinking and former chairman of the UK Financial Services Authority.
Thomas Piketty’s book, Capital in the Twenty-First Century, illustrates rising wealth-to-income ratios in all advanced economies. They are primarily explained by one factor: rising property prices. And the rises mainly reflect not new investment in housing stock but the rising value of the land on which existing housing sits. As the lucky ones grow richer, they spend an increasing share of their income on competing to own homes in desirable locations.
Technological progress drives down the price of many goods and services but up the value of the oldest and most physical thing of all – land.
By 2010, more than 70 per cent of all advanced-economy bank lending was against property. The more credit is available, the more prices rise. Credit-driven price rises encourage borrowers to demand more credit and banks to supply it – until land soaks up so much money that the cycle goes into reverse. Property booms and busts have been central to all recent financial crises.
Between 2010 and 2011 Sweden’s Riksbank raised interest rates by 1.75 per cent in the hope of slowing a Stockholm property boom. The boom continued unabated, but the economy fell into slow growth. Interest rates cannot be the sole policy lever.
More construction is no panacea: Ireland’s relaxed planning rules did not prevent a devastating property boom and bust.
In the Netherlands, mortgage interest relief has helped drive a house price boom that has turned to bust.
Increased property taxes, on higher-priced properties in particular, could help reduce the bias towards property investment and encourage more efficient use of the existing housing stock.
Ed. Notes: The author is half right. If you’re going to increase the property tax, increase only the half on land, not the half on buildings. Taxing buildings creates slums. But taxing land — or instituting land dues — spurs owners to put their sites to highest and best use.
Further, neither the location nor its value is generated by the owner. While land is not made by any of us, its value at least is the product of all of us in society. It is the perfect common wealth.
Better still, as government recovers socially-generated land values, it can lose counterproductive taxes. If government were to disburse the revenue as a dividend, sort of what Singapore does, then it could get rid of many wasteful programs. Imagine that: nearly no taxes nor subsidies, along with affordable housing and a conserved environment. Such is the power in geonomics.
Individual sovereignty means that it is evil for any other person to interfere with one’s honest and peaceful choices. This prescription comes from natural moral law, as expressed by the universal ethic:
1) “Harm” means an invasion into another’s domain.
2) All acts, and only those acts, which coercively harm others, are evil.
3) Welcomed benefits are good.
4) All other acts are neutral.
Natural moral law is derived from human individuality and equality, and the premise of equality implies individual sovereignty. For if one is not sovereign, some other person has the moral authority to be a master, and equality does not exist. Individual sovereignty is moral equality taken to its logical conclusion. The concept of “self ownership” is the same as individual sovereignty.
Because individual sovereignty derives from the universal ethic and its premise of human equality, it does not imply that a sovereign individual may do anything he pleases. A self-owner may not impose coercive harm on others. One may do as one pleases so long as one’s actions are honest and peaceful. An honest action does not coercively harm others through fraud.
“A person has a functioning mind and the actual or potential ability to make choices based on reason and awareness” (Dictionary of Free-Market Economics). Young children have such minds and are therefore also sovereign. But the ability to use reason is something that develops as children mature, and therefore the parents have a responsibility to exercise some of the sovereignty rights on behalf of their children. Conversely, creating a child also creates a moral obligation of the parent to provide judgment as well as material needs for their children. Upon some age of maturity, the child becomes a fully sovereign human being.
In political theory monarchs have been said to be sovereign, and are called “the Sovereign”. But even if the king has absolute legal power, he is a human being equal to all others, and any coercive power he has over others is a usurpation of individual sovereignty.
When republics and democracies replaced absolute monarchs, the state and its government were said to be sovereign. A country is sovereign when there is no other political body above it. In the United States, the federal and state governments have parallel sovereignty, and the native Indian nations are supposed to have some elements of national sovereignty. The US federal government has entered into treaty obligations and has joined international organizations such as the United Nations and World Trade Organization, but it could withdraw from these organizations and treaties, as the UN and WTO have no sovereignty, but only delegated powers.
Power is always exercised by individual persons, not by mental constructs. Governments and states are mental constructs, having no reality other than what people believe. If a government exercises its sovereign power, in reality, it is the president or prime minister applying the forces of government, ultimately its army, police, and prison guards. Arbitrary state power is ultimately the unequal power of some individuals over others. There is no moral authority or legitimacy for government other than to enforce the universal ethic, which implies that it is immoral for government to interfere with peaceful and honest individual sovereignty. If government makes theft legally a crime, it is already morally a crime, and government simply acts as an agent of the people to enforce moral law, although if it does that, the financing must also be moral.
Therefore individual sovereignty implies peaceful anarchism, with no imposed government, because even if the government confines itself to enforcing the universal ethic, the rulers are human beings who have no greater wisdom, in general, than others, and they could end up imposing their wills to alter peaceful choices. Therefore, pure equality implies that there be no rulers imposed on unwilling persons.
Anarchism, as the absence of imposed government, does not imply chaos and disorder, as connoted by the unfortunate other meaning of “anarchy”. Human beings have always lived in organized communities. In anarchism, most people would join associations such as condominiums, cooperatives, and proprietary communities (owners with tenants). These local communities would federate into broader or higher associations, ultimately covering a continent or the whole planet. The benefit of government – a uniform rule of law – would be provided, without its fatal flaw, the denial of individual sovereignty.
One more element of individual sovereignty needs to be addressed: the issue of land ownership. Self-ownership implies the ownership of one’s labor, the products of labor, and the wages of labor. But self-ownership does not apply to nature, all that is apart from persons and human action. The premise of human equality implies that all persons have an equal share of the benefits of natural resources, and that can be accomplished by collecting the economic rent of land, its yield when put to optimal use, and distributing that rent equally.
The local site rentals, generated by the local population, commerce, and public goods, would be paid to the community’s providers of civic goods. The multi-level federations of voluntary communities and associations would implement the collection of land rent and local rentals, and this geo-anarchism would provide the funding needed to implement the voluntary governance.
Individual sovereignty is therefore feasible and is consistent with, and indeed best generates, peace and prosperity. Wars, such as in the Middle East, would cease if most people recognized individual sovereignty and equal rights to natural benefits, rather than fight over the coercively collective and fictitious sovereignty of states.
This 2014 excerpt of Vox, Jly 29, is by Ezra Klein.
About one-half of one-percent of adult Americans gave more than $200 to a federal candidate in the 2011-2012 cycle. About four percent contributed if you look at donations under $200.
More than a quarter of the nearly $6 billion in contributions from identifiable sources in the last campaign cycle came from just 31,385 individuals, a number equal to one ten-thousandth of the U.S. population.
The small minority of people who fund American politics are much more politically polarized than the vast majority of people who don’t contribute to campaigns.
You’re a lot likelier to contribute to a political campaign if you think the fate of the nation rests of your guys defeating the other guys.
Politicians have to appeal to the people who fund their campaigns. The people who fund their campaigns really believe the other party is terrible. And so spending a lot of time working across the aisle or questioning your party’s political strategy is not going to make your donors very happy.
Ed. Notes: So should more people give money to politicians? Or should more people make it safe for politicians to do the right thing by making the right thing popular? How would citizens do that? The way they always have. Read, Write. Talk to friends, family, co-workers, neighbors. Wear T-shirts. Put on bumper stickers. Attend meetings. Join fundraisers. Host events. When giving money, give it to successful organizers and purveyors of inspiring messages. Create the parade that politicians will then have the courage to get in front of. That strategy — making a movement — is what makes most sense to me.
This 2014 excerpt of the New York Times is by James K. Boyce of the University of Massachusetts, Amherst.
Representative Chris Van Hollen, Democrat of Maryland, plans to introduce legislation that would require coal, oil, and natural gas companies to buy a permit for each ton of carbon in the fuels they sell. Permits would be auctioned, and 100 percent of the proceeds would be returned straight to the American people as equal dividends for every woman, man, and child.
The state of Alaska has been paying dividends since 1982. That’s when the Alaska Permanent Fund, the brainchild of Gov. Jay S. Hammond, a Republican, began to pay dividends from oil royalties based on the principle that the state’s natural wealth belonged to all its people. The biggest payout came under Gov. Sarah Palin.
The number of permits initially would be capped at the level of our 2005 carbon dioxide emissions. This cap would gradually ratchet down to 80 percent below that level by 2050. Prices of fossil fuels would rise as the cap tightened, spurring private investment in energy efficiency and clean energy. Energy companies would pass the cost of permits to consumers in the form of higher fuel prices. But for most families, the gain in carbon dividends would be greater than the pain. And that doesn’t count the benefits of cleaner air and a cooler planet.
The outsize consumption — and outsize carbon footprints — of the richest 10 percent of Americans means that they’ll furnish a similarly high fraction of the carbon dollars generated by household spending on gasoline, electricity, airplane trips, and so on. For these households, the dividends won’t outweigh the costs. But the affluent can afford to pay for their emissions.
The bill’s main political weakness is that no one stands to make a killing on it. The bill’s main strength is that it protects the incomes of ordinary Americans as it protects the planet for their grandchildren.
Ed. Notes: A better reason to share the raised revenue is that the atmosphere is not some overarching dumpsite but a major part of the commons. It has an economic value and that value belongs to all of us, not to the class of polluters.
Not just the atmosphere’s value but all parts of nature with value should be shared — even surface land. People have an equal right to Earth, so residents should pay land dues into their community treasury and get back rent dividends. That way, each citizen would compensate and be compensated by every other citizen.
Were this geonomic system in place, then what need would we have for taxes and subsidies? Not much. We could lose the worst of them and enjoy a far more efficient economy along with all the benefits that follow from an extra income from the worth of Earth.
This 2014 excerpt of Occupy, Jly 28, is by Ellen Brown.
Shadow banking refers to hedge funds, derivatives, and credit default swaps.
Conventional banks also engage in “shadow banking.” The cash cushion from excess deposits does not make the banks less vulnerable to shock. The proprietary trading desks at these “banks” use that cash as collateral to take out loans to gamble with.
Despite the 828-page Dodd-Frank Act, the derivatives pyramid has continued to explode to a notional value now estimated to be as high as $2 quadrillion.
Taxpayers pay about $400 billion a year in interest on the federal debt, just as they did in 2006 — although the debt has nearly doubled, from $9 trillion to over $16 trillion. The total interest is kept low by extremely low interest rates.
Raising interest rates could implode taxpayers and the derivatives scheme. The biggest banks have written over $400 trillion in interest rate derivatives contracts, betting that interest rates will not shoot up.
If they do, the banks would become insolvent. It will be our deposits that get confiscated to recapitalize them, under the new “bail in” scheme approved by Janet Yellen as one of the Fed’s more promising tools (called “resolution planning” in Fed-speak).
Depressions, credit crises, and financial collapse are not acts of God but are induced by mechanical flaws or corruption in the financial system. Credit may stop flowing, but the workers, materials and markets are still there. The rules of money and banking have changed every 20 or 30 years for the past three centuries. We can change them again.
Ed. Notes: Forget changing regulations — lose them, their bureaucracies, and the Federal Reserve, and address fundamentals.
For safety, let people put their savings in any public treasury, earning no interest. Prohibit politicians and bureaucrats from touching it. If people want to receive an interest, they’d have to invest elsewhere.
Yet getting an interest payment won’t matter so much if there is no inflation, and there won’t be any if government quits overspending on wasteful programs like war and quits taxing people’s useful efforts like trade.
Getting an interest payment will matter even less when government pays citizens a dividend from surplus public revenue. Whence the surplus? It’s the worth of Earth, its economic parts, none of which needed human effort to exist. It’s all our payments for the nature we use, the land, resources, EM spectrum, ecosystem services.
Presently mortgages direct most of that spending into banks, the source of the trouble. However, government could use taxes or fees or dues to redirect that flow into the public treasury then back out again as a Citizen’s Dividend. Already, Singapore does something like that.
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.
an answer to a rarely asked question. If price is a reward for production, why do we pay for land, never produced by any of us? What is land price a reward for? Good behavior? How much money do we spend on the nature we use? Who gets it? What do they do with it? (If you answer all these correctly, you’re not a genius but a geoist.) The worth of Earth is enough that were we to collect and share it, we could abolish taxes on the goods we do produce. For example, San Francisco’s Redefining Progress has calculated that Cali-fornia could abolish all state and local taxes were it to collect the values of resources and of using na-ture as a dump. By exorcising the profit motive from depletion and pollution, rent collection could replace bossy regulation. Economies could self-regulate, as the rest of the eco-system does. See how big problems yield to big answers when we ask the right questions?
as unfamiliar as geo-economics. The latter is a course some universities offer that combines geography and economics. A UN newsletter, Go Between (57, Apr/May ’96; thanks, Pat Aller), cited an Asian conference on geopolitics and “geoeconomics”. The abbreviated term ‘geonomics” is the name of an institute on Middlebury College campus and of a show on CNBC. Both entities use the neologism to mean “global economics”, in particular world trade. We use geonomics entirely differently, to refer to the money people spend on the nature they use, how letting this flow collect in a few pockets creates class and poverty and assaults upon the environment, and how, on the other hand, sharing this rental flow creates equality, prosperity, and a people/planet harmony. This flow of natural rent, several trillions dollars in the US each year, shapes society and belongs to society.
suitable for framing by Green Parties. When Greens began in Germany two decades ago, they defined themselves as neither left nor right but in front. Geonomics fits that description. The Green Parties have their Four Pillars; geonomists have four ways to apply them:
Ecological Wisdom. Want people to use the eco-system wisely? Charge them Rent and, to end corporate license, add surcharges. To minimize these costs, people will use less Earth.
Nonviolence. Want people to settle disputes nonviolently? Set a good example; don’t levy taxes, which rely on the threat of incarceration, to take people’s money. Try quid pro quo fees and dues.
Social Responsibility. Want people to be responsible for their actions? Don’t make basic choices for them by subsidizing services, addicting them to a caretaker state. Let people spend shares of social surplus.
Grassroots Democracy. Better have grassroots prosperity. Remember, political power follows economic. Pay people a Citizens Dividend; to keep it, they’ll show up at the polls, public hearings, and conventions.
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.
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.
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 answer for Jonathan of the Green Party (Nov 7): “What does ‘share our surplus’ mean?”
Our surplus is the values that society generates synergistically. It’s the money we spend on the nature we use: on land sites, natural resources, EM spectrum, ecosystem services (assimilating pollutants). It’s also the money we pay to holders of government-granted privileges like corporate charters. We could share it by paying for the nature we use and privileges we hold to the public treasury then getting back a fair share of the recovered revenue. Used to be, owners did owe rent (“own” and “owe” used to be one word). And presently, some lucky residents do get back periodic dividends: Alaska’s oil dividend and Aspen Colorado’s housing assistance. Doing that, instead of subsidizing bads while taxing goods, is the essence of geonomics.
Jonathan: “Is local currency what you mean?”
Editor: It’s not. Community currency is a good reform, but every good reform pushes up site values. That makes land an even more tempting object of speculation. Now, any good will eventually do bad by widening the income gap – until you share land values.
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.
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.