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This 2014 excerpt of Dirt Diggers Digest, May 29, is by Phil Mattera.
More than half of corporate miscreants (146 of 269, or 54 percent) have received state and local subsidies. These include cases in which the awards went to the firm’s parent or a “sibling” firm. The total value of the awards comes to more than $25 billion.
A large portion of that total ($13 billion) comes from a single company — Boeing, which is not only the largest recipient of subsidies among corporate miscreants but is also the largest recipient among all firms. Boeing made the Justice Department list by virtue of a 2006 non-prosecution agreement under which it paid $615 million to settle criminal and civil charges that it improperly used competitors’ information to procure contracts for launch services worth billions of dollars from the U.S. Air Force and NASA.
Not all the subsidies came after that case was announced. In the period since 2006, Boeing has received “only” about $9.8 billion.
The other biggest subsidy recipients on the list are as follows:
Fiat (parent of Chrysler): $2.1 billion
Royal Dutch Shell (parent of Shell Nigeria): $2.0 billion
Toyota: $1.1 billion
Google: $751 million
JPMorgan Chase: $653 million
Altogether, there are 26 parents on the DOJ list that have received $100 million or more in subsidies. As with Boeing’s $13 billion figure, the amounts for many of the companies include subsidies received before as well as after their settlement.
Ed. Notes: Soon’s you get tired of such corruption, let’s put a stop to it. Quit letting politicians subsidize anybody. And quit fining the corporation but instead punish the CEOs and managers making the decisions.
If not subsidizing, government could save so much public revenue it could climb out of the red. The biggest “subsidy” is letting corporations keep “rents” (society’s payments for land, resources, etc). Once government recovers those socially-generated values, it could not just end counterproductive taxes but even pay citizens a dividend!
If corporations can’t profit when not getting taxed on creating value and when people are endowed handsomely in order to become customers, then the corporation deserves to go broke.
This 2014 excerpt of CalTech, Jun 5, is by Cynthia Eller.
If you’re trying to outwit the competition, it might be better to have been born a chimpanzee. The study involved a simple game called the Inspection Game. To win repeatedly, players have to accurately predict what their opponent will do next.
The game is common in everyday lives. An employee may want to work only when her employer is watching and prefers to play video games when unobserved.
However cleverly you play the Inspection Game, if your opponent is also playing strategically, there is a limit to how often you can win. Unlike humans, chimps learned the game rapidly and nearly attained the predictions for optimal play. They continued to do so even as researchers introduced changes into the game.
Chimpanzees excel at short-term memory; humans find it much more challenging. Further, wherever humans sit on the cooperative/competitive scale, common chimpanzees are more competitive. They continuously update status and dominance hierarchy.
The “cognitive tradeoff” is probably a key. Acquiring capacities such as language and categorization caused human brains to lose other capacities, such as intuiting another’s strategy. In the experiments, humans were not allowed to speak with one another.
Ed. Notes: When humans got TV, they quit reading. When they got literacy, they quit story-telling. So when they got language, what did they quit? ESP? That’s my theory, which did not make me very highly regarded in grad schools decades ago. But guess what? Now the cutting-edge linguists at last agree! So if linguists can open up to “intersubjectivity”, can economists finally open up to the role of rent about which so many of us are in denial?
This 2014 excerpt of the Korea Herald, Jun 5, is by the editors.
Following the Sewol ferry tragedy, uprooting the so-called “bureaucratic mafia” has emerged as an urgent national task. Last month, President Park Geun-hye unveiled plans to prevent retired public officials from pursuing rent-seeking in cahoots with officials on active duty.
While all government agencies are supposed to join this drive, the ethics committee of the executive branch approved the employment of a former director-general of the Ministry of Trade, Industry and Energy at the steelmaking company POSCO. He had been retired for less than two months.
Under the Public Service Ethics Act, high-ranking public officials cannot land a job for two years after retirement with private companies closely connected with the business of the departments to which they belonged for five years before retirement.
The corrupt symbiosis between incumbent and retired public officials is pervasive and deeply entrenched. The government should toughen the penalties for those who breach it.
Currently, retired officials who find jobs at companies in violation of the law are subject to imprisonment for up to a year or a maximum penalty of 10 million won. But the severest punishment meted out so far was a penalty of 4 million won. This is nothing more than a slap on the wrist for officials who make several hundreds of millions of won per year.
Ed. Notes: A more thorough and effective reform — that is, radical — is to quit letting politicians decide how to spend public money. Limit their spending to police and military. But for infrastructure, social programs, and corporate welfare, forget it. Abolish spending on the rich. Pay citizens a dividend, enabling them to hire teachers and doctors. And sell geo-bonds to fund any newly needed road or bridge, etc. If politicians and bureaucrats can no longer stick their sticky fingers into the public till, then no lobbyist or business will try to bribe them. Problem solved.
Central banks such as the Federal Reserve have obtained their income from interest on the bonds they hold. But with interest rates so low now, the central banks, like other bond holders, are receiving little revenue. So now, central banks are buying shares of stock to get higher income from dividends and capital gains.
It’s a bad idea!
First of all, the reason interest is so low now is because central banks around the world have been pushing rates down. The low income from savings accounts and bonds has hurt retired folks and have distorted stock markets. The U.S. stock market averages have been making new highs to a great extent because bonds yields are so low, and also because US companies are borrowing funds at low rates to buy back their stocks.
Secondly, when central banks buy up shares of stock, they, as agents of government, socialize the ownership of otherwise private companies. Government already taxes and regulates the economy, and they own industries such as education and much of medical care, and now they want to own more of the whole economy. Even if a central bank buys shares in an index fund, they artificially raise share prices, and they do it with money they create. Moreover, what happens when the price of stocks has a large drop? Will the central banks contribute to the selling, or buy more?
According to a report to be published this week by the Official Monetary and Financial Institutions Forum, governments and their agencies have already made twenty-nine trillion dollars of market investments. The largest governmental investor is China. The Swiss and Danish central banks have also been buying substantial equities. Central banks have also been buying real estate. Ever more financial and real assets are being acquired by central banks, and thus also by the governments that own and control them.
The ownership of the economy is not what the founders of central banks had in mind. When the Federal Reserve was established in 1913 in response to the banking panic of 1907, its role was to stabilize the banking system as a lender of last resort. For a long time, the Fed purchased US treasury bonds to expand the money supply, as it created the funds it used to buy bonds. But after the recession of 2008, the Fed also bought mortgage-backed securities as well as shares in companies it wanted to bail out.
But now central banks are not buying shares to bail out failing companies, but to increase their income. Ultimately this buying is self-defeating for central banks and all investors, because such massive purchases raise the ratio of share prices to yields, reducing the rates of return.
The pension funds of government employees have, of course, been investing in the stock markets, as well as in bonds and real estate, but these funds can be regarded as belonging to the employees rather than to governments. Governments with surpluses such as from exports or oil sales have set up “sovereign wealth funds” that invest in financial markets, with the potential to manipulate and distort markets. There should be a global treaty to confine sovereign funds to government bonds and global index funds.
It is even worse for central banks to invest in private financial markets because they are creating the money they use for these purchases. This inflation of the money supply is not for stabilizing the currency or helping the banking system, but just to get stock market yield. That monetary inflation will eventually cause price inflation and fuel an even bigger real estate bubble than that which ended in the Crash of 2008.
The ultimate remedy for such asset distortion is the elimination of all central banks. Since that’s not about to happen, we will have to witness a coming financial tragic horror. Just as in the years prior to 2008, we are sitting in boats on a river whose current will take us ever faster the financial waterfall. The most likely year of the next crash will be in 2026, as the 18-year real estate cycle has been the leading cause of the business or interventionist cycle for the past two centuries.
Last time around, government-sponsored enterprises such as Fannie Mae helped stoke the boom by packaging and selling real estate mortgages. The financial reforms after 2007 did nothing to stop the basic causes of the real estate cycle. Now, the massive purchases of stocks, in addition to bonds and real-estate related assets, will help make the Crash of 2026 the biggest ever.
This 2014 excerpt of the New York Times, Jun 5, is by Carl Zimmer.
Billion-dollar levees aren’t the only things that protect coasts from storm damage. Nature offers protection, too. Coastal marshes absorb the wind energy and waves of storms, weakening their impact farther inland, and rebuild themselves.
Protection from storms is one of many services that ecosystems provide us — services that we’d otherwise have to pay for. In 1997, a team of scientists estimated they are worth, worldwide, $33 trillion — equivalent to $48.7 trillion in today’s dollars. Put another way, the services ecosystems provide us were twice as valuable as the gross national product of every country on Earth in 1997.
Robert Costanza, a professor at Australian National University who led the study, has concluded that ecosystems do more for us than researchers could appreciate in 1997.
Coral reefs, for instance, have proved to be much more important for storm protection than previously recognized. They also protect against soil erosion by weakening waves before they reach land. Each acre of reef provides $995,000 in services each year for a total of $11 trillion worldwide.
The global figure for all services is $142.7 trillion a year (in 2014 dollars).
Deforestation and other damage we’ve inflicted on the natural world has wiped out $23 trillion a year in ecosystem services. The gross domestic product of the United States is “only” $16.2 trillion.
Yet ecosystems don’t simply provide us with good things. Ecosystems can also harbor diseases and harm us in other ways.
Ed. Notes: We can’t pay Nature so whom would we pay? And who would do the paying? And who would determine exactly how much? For the last question, if we reformed limited liability, then businesses would buy insurance, and insurance companies, not just armchair academics, would also calculate ecosystem values.
We could look at our species’ damage of ecosystems totally differently. Instead of play brain dead and accept it as the price of progress, we could make polluters and depleters pay. We could auction off emission permits and extraction leases. We could require those who own land to set aside an Ecology Security Deposit, like tenants do when moving into an apartment. We could require those who use the environment to buy Restoration Insurance, like drivers must have insurance. And we’d fine those who exceed emission standards.
Something else to do is to charge owners land dues. Having to pay, they won’t want their precious land to get ruined and will provide better care. And with all these collected revenues we could pay dividends to the citizenry. Where land is healthier, its value is higher, so the dividend would be fatter, and everyone would have a financial reason, too, to go with love, to conserve resources and be better stewards.
This 2014 excerpt of Forbes, Jun 5, is by Contributor Michael F. Cannon of the Cato Institute.
Lobbyists pursue rents on behalf of their clients. In economics, “rents” are income above and beyond the value you provide to your customers; they are income in excess of production.
When lobbyists for labor unions demand mandatory unemployment minimum-wage laws, it is in part because adding to the labor costs of non-union shops makes union shops more competitive. When lobbyists for physicians demand laws preventing nurse practitioners from signing death certificates or performing other tasks within the NPs’ training, it is in part because physicians earn more income if they are the only ones permitted to perform those services. Union members and doctors receive more income, but not because they are more productive than they were before. The added income they receive are rents.
When lobbyists use government to extract rents for their clients, that additional income comes at the expense of vibrant and thriving parts of the economy: from the clients’ competitors and customers.
Ed. Notes: Want to know how to put lobbyists out of business? Quit letting politicians spend our public dollars. No more subsidies and tax breaks.
Instead of politicians deciding how much to fund programs like schools and medical care and welfare, pay the citizenry a hefty dividend. Instead of politicians deciding how much to fund infrastructure, force them to sell bonds to be paid off from any rise in land value near the project — no rise, no sale. Instead of exempting certain people from unfair taxes, exempt everyone from those but no one from fair charges, such as pollution fees and land dues and resource royalties.
Let politicians spend our money on one thing only: war. So if we don’t want to pay the war tax (on our incomes), we’ll have to learn how to wage peace.
This 2014 excerpt of Robert Reich’s Blog, Jun 5, is of course by Robert Reich.
Corporations don’t break laws. People do. In the cases of GM and Credit Suisse, the evidence points to executives at or near the top.
Credit Suisse pleaded guilty to criminal conduct. GM may also face a criminal indictment. Yet the government imposes corporate fines.
Such fines are often treated by corporations as costs of doing business. GM was fined $35 million. That’s peanuts to a hundred-billion-dollar corporation.
Credit Suisse was fined considerably more — $2.8 billion. But even this amount was shrugged off by financial markets. In fact, the bank’s shares rose the day the plea was announced – the only big financial institution to show gains that day. Its CEO even sounded upbeat: “Our discussions with clients have been very reassuring and we haven’t seen very many issues at all.” (Credit Suisse wasn’t even required to turn over its list of tax-avoiding clients.)
Fines have no deterrent value unless the amount of the penalty multiplied by the risk of being caught is greater than the profits earned by the illegal behavior.
The people hurt aren’t the shareholders who profited years before when the crimes were committed. Most current shareholders weren’t even around then.
To be sure, corporations can effectively be executed. In 2002, the giant accounting firm Arthur Andersen was found guilty of obstructing justice when certain partners destroyed records of the auditing work they did for Enron. As a result, Andersen’s clients abandoned it and the firm collapsed. (Andersen’s conviction was later overturned on appeal).
But here again, the wrong people are harmed. The vast majority of Andersen’s 28,000 employees had nothing to do with the wrongdoing yet they lost their jobs, while most of its senior partners slid easily into other accounting or consulting work.
Conservatives talk about personal responsibility. But when it comes to white-collar crime, I haven’t heard them demand that individuals be prosecuted. Yet the only way to deter giant corporations from harming the public is to go after people who cause the harm.
Ed. Notes: When a big name talks tough about powerful people, that’s great. An even deeper reform, one that might discourage criminal behavior by executives in the first place, would be to get government to end its practice of limiting the liability of all business people automatically (for a mere filing fee). Without that blanket license to do harm to others, business people would buy insurance and sign contracts with investors. Insurance companies and stockholders would pressure managers to clean up their act.
This 2014 excerpt of the Philippines’ Inquirer, Jun 2, is by Tonette Orejas.
The agrarian reform process for Luisita lands had been “hijacked by financiers who reconsolidated the [distributed agrarian] lands through the arriendo (land rent) system. Big sugar planters have leased agrarian lands in Hacienda Luisita owned by farm workers. The contracts bind the agrarian reform beneficiaries to continue farming sugar exclusively and prevent them from planting other crops, not even food for their tables.
The arriendo contracts would last until 2016, which is the end of the six-year term of President Aquino, whose relatives lost a 6,000-plus hectare estate in Tarlac province to agrarian reform.
A legislator, a retired police general, a former Land Transportation Office chief, and a relative of President Aquino are among the arriendo contractors.
Ed. Notes: Some land reforms work, some don’t. One that has always worked wherever tried, whenever tried, is for government to tax land or charge owners a land use fee or institute land dues. Having to pay such a periodic charge constantly makes it too expensive to own too much land; there is no profit for absentee owners who’re nothing more than useless middlemen. So the hoarders and speculators get out of the way of those who actually work the land.
Since working the land does not actually pay very much, country people could be greatly aided by getting back shares of all the ground rents collected in their region by their regional government. With land dues in and rent dividends back out, land would be distributed automatically and family farming would be a comfortable way of life.
Another benefit is the toppling of class and hierarchy and the creation of an egalitarin society.
These two 2014 excerpts on taxing land are from (1) The Guardian, Jun 2, by Hilary Osborne which was not so precise, and (2) Sightline, Jun 10, by Jerrell Whitehead and Clark Williams-Derry which was very precise.
Britain Told to Rein in Property Boom by European Commission
Britain needs to reform its council tax system, build more houses and make changes to the Help to Buy scheme to stop the property boom getting out of control, the European commission has warned.
The EU’s executive body urged the government to reform the “regressive” council tax system as taxes are relatively higher on low-value homes than high-value ones.
“Reforms to the taxation of land and property should be considered to alleviate distortions in the housing market. At the moment, increasing property values are not translated into higher property taxes as the property value roll has not been updated since 1991 and taxes on higher-value property are lower than on lower-value property in relative terms.”
Is an underused (at midday), 63-spot parking lot the new normal for downtown Seattle? It shouldn’t be. Proximity to jobs, people, retail, and transportation should have made parcels like these ideal targets for new homes or office buildings.
The Eitel Building is a historic building that is a stone’s throw from Pike Place Market, Seattle’s number one tourist attraction, and has been unoccupied above the ground floor since the 1970s.
There are plenty of other badly underutilized properties dotting the landscape of downtown Seattle, and there are undoubtedly similar cases in other major cities throughout the Northwest and beyond.
Under today’s tax rules, leaving a lot empty, or letting a building slowly rot, gives the property owner a light tax bill. Land speculators detract from the value of their neighborhood by leaving productive land derelict or by allowing buildings to disintegrate.
One of the best solutions is a land-value tax. In its purest form, the LVT taxes only the value of land itself, while leaving buildings and other improvements tax-free. Shifting taxes from buildings to land would make downtown land speculators’ tax bills soar, creating powerful incentives to put high-value land to more productive uses. A more built-up, vibrant downtown diverts growth from lower-value properties in the suburbs.
The greatest advocate for the tax was 19th century economist Henry George, whose seminal work Poverty and Progress (1879) argued for a “single tax” on land. Arden, Delaware (1900) and Fairhope, Alabama (1894) are small Georgist single tax “colonies.” Altoona, Pennsylvania in 2013 adopted a pure land-value tax.
When you tax something, you get less of it. Taxing sales reduces sales, taxing income reduces income, taxing buildings reduces building. Such taxes subtly distort the decisions of consumers, households, and businesses. But a land-value tax mostly discourages land speculation, particularly on the highest-value land.
Land-value taxation is fairer than many other taxes. Location, location, location —- that’s what gives land its value. The LVT puts a tax on benefits that a landowner didn’t earn either through their own labor or their own investments.
The LVT could replace other regressive taxes, including the sales tax.
What’s required to get the LVT moving are legal and political daring from determined champions that are willing to make the case for a fairer, more effective tax system.
Ed. Notes: It need not be a tax to recover the socially-generated value of land; a fee or dues or lease would work as well. And the revenue need not go to legislators to spend; it could come back to residents as a dividend. Incorporating the dividend is what gets carbon taxes passed; money in the pocket should work for asking people to pay land rent to their community, too.
This 2014 excerpt of Web of Debt, Jun 1, by Ellen Brown.
A general rule for government bonds is that they double the cost of projects, once interest has been paid. The San Francisco Bay Bridge earthquake retrofit was originally slated to cost $6.3 billion, but that was just for salaries and physical materials. With interest and fees, the cost to taxpayers and toll-payers will be over $12 billion.
And those heavy charges pale in comparison to the financing of “capital appreciation bonds.” The borrower pays only the principal for the first few years. But interest continues to compound; and after several decades, it can amount to ten times principal or more. Folsom Cordova used capital appreciation bonds to finance $514,000. The sticker price after interest and fees will be $9.1 million.
California needs $700 billion in infrastructure over the next decade, and the state doesn’t have that sort of money in its general fund. Where will the money come from?
North Dakota uses its Bank of North Dakota to generate credit. The BND partners with local banks rather than competing with them. North Dakota has the most local banks per capita of any state. Every year since the 2008 banking crisis, it has reported a return on investment of between 17 percent and 26 percent. North Dakota is the only state to escape the credit crisis, boasting a budget surplus every year since 2008.
California’s population is more than 50 times that of North Dakota. California has over $200 billion stashed in a variety of funds identified in its 2012 Comprehensive Annual Financial Report (CAFR), including $58 billion managed by the Treasurer in a Pooled Money Investment Account earning a meager 0.264% annually. California also has over $400 billion in its pension funds (CalPERS and CalSTRS).
This money is earmarked for specific purposes and cannot be spent on the state budget, but it can be invested. It could be invested in a state-owned bank, and deposited in the bank as interest-bearing certificates of deposit, which the bank could lend. The interest would return to the state.
By doing its own financing in-house, the state can massively expand its infrastructure without imposing massive debts on future generations.
Ed. Notes: While public bankers might charge a lower interest, that rate could also be lowered by law, as old laws against usury used to. And however much the rate, the interest could be returned to the state not just by owning the bank that does the lending but also by taxing interest rather than exempting it as is now the case.
Bigger picture, some of that interest paid by governments goes to seniors, retired government workers, and others who own the bonds and need the income. If they lose that income, from where will they get replacement income?
Bonds could play a vital role in eliminating wasteful public spending. What if bonds had to be paid back only from any resultant rise in land value near the new infrastructure? If the proposed project looked like a bad idea, nobody would buy its geo-bonds, and white elephants like bridges to nowhere would not get built; only truly useful infrastructure would get built.
Often one of the biggest costs in new infrastructure is buying up the land. However, if the local government is recovering land value, then land price is nil. The project would only have to pay for any buildings on the land.
Establishing a public bank, or empowering the public treasury with banking functions, is not a bad idea but it might not be a necessary idea either, once the public recovers its own location value that its presence creates.
This 2014 excerpt of Salon, Jun 1, is an interview of David Graeber, author of “Debt: The First Five Thousand Years” and co- launcher of Occupy Wall Street, by Thomas, author of “What’s The Matter With Kansas” and “Pity the Billionaire” and “One Market Under God” and is the founding editor of The Baffler magazine.
By the ‘60s, most people thought that robot factories, and ultimately, the elimination of all manual labor, was probably just a generation or two away.
Today productivity continues to increase, but Americans work more hours per week than they used to, not fewer. More than workers in other countries.
Administrative and managerial positions jumped in manufacturing. The same thing happened in universities, the same endless accretion of layer on layer of administrative jobs. Has the process of teaching become three times more complicated than it was in the 1930s?
The total number of people involved in industrial production has declined. Service, administrative, and clerical jobs have gone from roughly a quarter of all jobs in the ‘30s to maybe as much as three quarters today.
Most work is stupid, degrading, unnecessary, and best avoided whenever possible. Some industries don’t need to exist, like most of the corporate lawyers, or telemarketers, or lobbyists. In a hospital, half the employees never seem to do anything for sick people, but are just filling out insurance forms and sending information to each other. Some of that needs to be done, but for the most part, 90 percent of what they do is bullshit.
Ancillary workers support people doing the bullshit jobs: an office where people translate German formatted paperwork into British formatted paperwork, and there has to be a whole infrastructure of receptionists, janitors, security guards, computer maintenance people. They’re actually doing something, but they’re doing it to support people who are doing nothing.
The financial crisis, the Wall Street bailouts, reveal that people who do almost nothing that’s productive reap so much of our society’s rewards. A lot of this stuff was not just scams, but pretty simple-minded scams, like taking bets you couldn’t possibly pay if you lost and getting the government to bail you out if you did. These guys weren’t creating value of any kind. They were making the world worse and getting paid insane amounts of money for it.
If there’s a rule, it’s that the more your work benefits others, the less you’re paid for it. CEOs and financial consultants that are making other people’s lives worse were paid millions, useless paper-pushers got handsomely compensated, people fulfilling useful functions like taking care of the sick or teaching children or repairing broken heating systems or picking vegetables were the least rewarded.
If you’re a fork-lift operator or even a florist, you know your kid is unlikely to ever become a CEO, but you also know there’s no way they’ll ever become drama critic for the New Yorker or an international human rights lawyer.
The only way they could get paid a decent salary to do something noble, something that’s not just for the money, is to join the army. So saying “support the troops” is a way of saying “fuck you” to the cultural elite who think you’re a bunch of knuckle-dragging cavemen.
In education, almost all the problems aren’t created by the teachers or teachers’ unions but by school administrators —- the ones who are paid much more, and mostly have classic bullshit jobs that seem to multiply endlessly even as the teachers themselves are squeezed and downsized. A lot of people resent the teachers. And the logic seems to be: shouldn’t teaching be enough? They want that, and middle-class salaries, job security, vacations, and benefits, too? You even see that with auto workers. “But you get to make cars! That’s a real job! And you also want $30 an hour?”
People were saying, “I realize my job is pointless, but how can I support a family doing something that’s actually worthwhile?” Young Wall Street types would say, “I know you’re right, we’re not doing the world any good doing. But I don’t know how to live on less than a six figure income.”
But I don’t think we can solve the problem by mass individual defection. Let’s ditch all traces of the ideology that says that work is a value in itself; redefine labor as caring for other people, classic “women’s work”, nurturing children, looking after things.
Ed. Notes: As usual, the critics are pretty strong on the problem and not so strong on the solution. And their focus is on what people believe and value, not on fundamental change of public policy. But logically, if people are to work less, but not sacrifice their modern standard of living (which constantly improves), then people must receive an income apart from their wages for labor or interests for saving and investing.
The only source for such an extra income is the one thing of value that’s not created by anyone’s labor or capital and that is land, including resources and the EM spectrum and ecosystem services, etc. Members of society spend the biggest part of their household budget on natural goods like the land beneath their home and indirectly for the oil in their fuel, the iron in their car, the tree in their paper and wood, etc. Our spending on the rental value of land — not on building or harvesting or extracting — is an immense flow, the biggest in the GDP.
Government could redirect our spending, by using taxes or fees or leases or dues, into the public treasury then back out again as a dividend to the citizenry. Getting a share of the worth of earth, people could choose to work less. And as techno-progress drives up location values — as it has in Silicon Valley and many other places — our Citizen’s Dividends will fatten, and drudge jobs will become a thing of the past.
This 2014 excerpt of the Weekly Wastebasket, May 30, is by Taxpayers for Common Sense.
The Senate Armed Services Committee authorized $514 billion for the Pentagon and for building bombs at the Department of Energy. The Pentagon requested an additional $79.4 billion for undescribed expenditures in so-called “Overseas Contingency Operations ” (OCO) in Afghanistan. Yet the committee didn’t include any authority to spend money for this account.
The Pentagon could not provide Congress with a single detail in support of this enormous request. Is the OCO account really just a gimmicky “slush fund” that is technically off-budget so it does not count against the caps on spending? Historically the OCO account has been far smaller than in the last several years, typically in the range of $2-3 billion.
Given the ever increasing portion of the Pentagon budget that is eaten up by personnel costs, the funds available to actually develop and buy weapon systems are being squeezed. The Senate committee did go along with the Pentagon’s request to cap the pay raise for military service members at 1 percent and freeze the pay of generals and admirals. It also reinstated a previous cap on the retired pay of generals and admirals, but “grandfathered” in some of those officers.
Ed. Notes: Wasn’t too many wars ago when the entire US military budget was the size of the current OCO portion. And note the Pentagon budget does not include the spending for past wars — such as on veterans — and on future wars — such as some NASA research. There is so much money to be made by waging war that waging peace does not stand a chance. The US would probably be the most peaceful nation on earth if bureaucrats, officers, and weaponeers could not rake in such easy money.
Probably the only way to make Americans pro-peace is to tie every single income tax dollar to military spending. People complain about the taxes imposed upon them. If Yanks want to lighten their tax burden, they will have to become less belligerent and more tolerant of foreign ways.
The US could even try to make the world a better place instead of a global war zone by doing what works: free trade, no foreign aid (especially to dictators), de-tax labor to make US exports less costly to manufacture, and pay citizens a dividend to set a lofty example of economic justice. As other nations adopt the geonomic model and prosper, they won’t want to go to war either. Then we can totally eradicate the military/industrial complex.
Now that the Islamic State of Iraq and Syria (ISIS) has conquered territory in both states, the US policy response is up for debate. We should, first of all, heed one of the major axioms of economics: in making a decision, ignore sunk costs, and consider only the future costs and benefits. The USA has spent huge amounts of treasure and sacrificed many lives, and also cost the lives and health of its allies and the people of Iraq. That is all in the past, and the US and other players should not make the mistake of being slaves to history.
One of the problems of US foreign policy has been that there is no unifying vision. The US seeks to defend itself from enemies, but it also claims to promote human rights and democracy, and it seeks to protect the status-quo, current boundaries and governments. The US is also pursuing an aggressive foreign war on drug makers and users. Another policy goal is greater trade and economic development.
Another economic principle is that it is often less costly to prevent problems than to have to remedy them. The best foreign policy for the US is to, first, prevent the generation of enemies, and secondly, to defend against them when the enemies insist on that status. That proposition implies that US policy should avoid automatically protecting the status quo, and deal with the reality that exists.
The US has been fighting al-Qaeda because that organization has declared war against the US along with other countries, but we should not assume that all self-proclaimed Islamic regimes are necessarily at war with the USA. The problem in Iraq is that there are two clashing Islamic sects, Shiite and Sunni, and the US occupation set up a veneer of mass democracy that established a Shiite domination over the Sunni. That domination fuels an insurgency which now has been captured by ISIS.
It is probably now too late to restructure the governance of Iraq. Exhortations for greater inclusiveness are useless. Aiding the current government of Iraq would amount to taking sides in a civil war. The US should instead seek contact with the chiefs of ISIS and find out what they ultimately want. If they seek the destruction of the USA, then the US should defend itself now, before the ISIS becomes more powerful. But if they only seek to govern territory and re-establish a caliphate, and do not threaten other countries such as Jordan, then the US should monitor their activities but not become an ally of the Iraqi and Iranian Shiite governments in a religious war against ISIS. The US and its allies would then accept the fact that Iraq is no longer a unified country, but has split into three governments, the Kurdish region, the ISIS, and the remaining land governed from Baghdad with the help of Iran.
The human-rights angle should still remain, as when the rulers become vicious, committing mass murder, then if that can be stopped, action would be warranted. But many regimes around the world are repressive and corrupt, and the US can do little about it other than to stop aiding them. The USA has its own violations of natural rights, and reform should start at home.
These 2014 excerpt of IPS, May 29, is by Stephen Leahy.
The world is increasingly hungry because small farmers are losing access to farmland. Small farmers produce most of the world’s food but are now squeezed onto less than 25 percent of the world’s farmland. Corporate and commercial farms, big biofuel operations, and land speculators are pushing millions off their land.
If all farms in Central America matched the output of small farms, the region would produce three times as much food.
Zimbabwe was harshly criticised by the international community for redistributing farmland to smallholders, including women, in 2000. They now produce over 90 percent of the nation’s food crops, compared to 60 to70 percent before 2000.
Small farmers practicing agroecological farming produce more food, protect soil and water, have far lower CO2 emissions and provide better livelihoods.
Big investors see farmland as a safe and secure investment, especially in the US, with its multi-billion dollar farm subsidies. In many areas the price of land has shot upwards pushing many farmers off their land. US farms are increasingly run by corporate farm managers who hire farm workers not farmers.
Ed. Notes: If investors could not keep the rental value of land, would they still want to own it? Is the profit from harvests enough to attract investors? Or is it the subsidies not just to big farms but also to big shippers and big truckers? And factory farms do not have to pay for the damage they do to the environment, such as the dead zones in the ocean from fertilizer runoff. If they had to buy insurance and pay compensation, how eager would outside investors be? Is agri-business another of those industries that’s unable to profit unless it can pollute, free of charge?
Not only should government quit its subsidies and charge our polluters but it should also quit taxing wages. Gardening and small farming is labor intensive while factory farming is capital intensive. Hence taxes on labor and deductions for capital shift profit from small farms to big.
Government should also charge land dues and pay rent dividends. Since land value is low in the country and high in the city, and the dividend would be equal for all citizens, farmers would come out ahead while wealthy investors, who typically live on locations of sky-high site value, would pay more. These two shifts — of profit and of location value — are all the help farmers need. But it’s is up to us to declare that all land — not just farmland — is not a usual source of profit but also our common heritage, to be shared and conserved. Land dues and Citizen’s Dividends make that claim loud and clear.
This 2014 excerpt of the Financial Times, May 23, is by Dr Hugh Goodacre, University of Westminster and University College London, UK.
The current debates over the teaching of economics demonstrate how far university departments have fallen behind their own students in their response to the requirements of the times, just as they have been falling behind the economic and financial press and other opinion formers.
Departments aim to justify to first-year students that their further curriculum will centre overwhelmingly on mathematical models.
To suggest that the orthodox approach is amenable is not the same thing as “rethinking economics”, which is what is being called for by students and others. Indeed, giving the impression of change but not actually providing any change will hold back other attempts at breaking the orthodox stranglehold over the curriculum.
Ed. Notes: Economists are too conformists to think outside the box and come up with any good ideas for making the economy serve us instead of us serve the economy. That task is left to true scientists. As astrology gave rise to astronomy and alchemy did chemistry, some day economics must give way to geonomics, the discipline that puts the immutable laws of nature first.
a manual. The world did not come without a way for people to prosper, and the planet to heal and stay well; that way is geonomics. Economies are part of the ecosystem. Both generate surpluses and follow self-regulating feedback loops. A cycle like the Law of Supply and Demand is one of the economy’s on/off loops. Our spending for land and resources – things that nobody made and everybody needs – constitutes our society’s surplus. Those profits without production (remember, nobody produced Earth) can become our commonwealth. To share it, we could pay land dues in to the public treasury (wouldn’t oil companies love that?) and get rent dividends back, a la Alaska’s oil dividend. Doing so let’s us axe taxes and jettison subsidies. Taxes and subsidies distort price (the DNA of exchange), violate quid pro quo by benefiting the well-connected more than anyone else, reinforce hierarchy of state over citizen, and are costly to administer (you don’t really need so much bureaucracy, do you?). Conversely, land dues motivate people to not waste sites, resources, and the ecosystem while rent dividends motivate people to not waste themselves. Receiving this income supplement – a Citizens Dividend – people can invest in their favorite technology or outgrow being “economan” and shrink their overbearing workweek in order to enjoy more time with family, friends, community, and nature. Then in all that free time, maybe we could figure out just what we are here for.
a way to redirect all the money we spend on the nature we use – trillions of dollars annually. We can’t pay the Creator of sites and resources and are mistaken to pay their owners this biggest stream in our economy. Instead, as owners we should pay our neighbors for respecting our claims to land. Owners could pay in land dues to the public treasury, a la Sydney Australia’s land tax, and residents could get back a “rent” dividend, a la Alaska’s oil dividend. We’d pay for owning sites, resources, EM spectrum, or emitting pollutants into the ecosphere, then get a fair share of the recovered revenue. The economy would finally have a thermostat, the dividend. When it’s small, people would work more; when it’s big, they’d work less. Sharing Earth’s worth, we could jettison counterproductive taxes and addictive subsidies. Prices would become precise; things like sprawl, sprayed food, gasoline engines, coal-burning plants would no longer seem cheap; things like compact towns, organic foods, fuel cells, and solar powers would become affordable. Getting shares, people could spend their expanded leisure socializing, making art, enjoying nature, or just chilling. Economies let us produce wealth efficiently; geonomics lets us share it fairly.
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.
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.
a way to have everybody pulling on the same end of the rope. Last summer’s expansive forest fires shed light on growing class resentment in the West. Old loggers and ranchers rankled at the new urgency to stamp out the blazes that threatened the recent Aspenesque settlers. The newcomers expected working class firemen to make protecting their expensive homes top priority. (Chr Sci Mntr, Spt 7) The tinder for this envy? Rich people moving in bid up the price of land, making it hard to afford by people on the margin. The fault really lies with our system of privatizing land value. If this rising value were collected by land dues and shared by rent dividends – the essence of geonomic policy – who’d complain? The more people move in, the higher the land value, and the fatter the dividend paid to residents. Then people on the margin might go out of their way to invite rich outsiders in.
about the money we spend on the nature we use. It flows torrentially yet invisibly, often submerged in the price of housing, food, fuel, and everything else. Flowing from the many to the few, natural rent distorts prices and rewards unjust and unsustainable choices. Redirected via dues and dividends to flow from each to all, “rent” payments would level the playing field and empower neighbors to shrink their workweek and expand their horizons. Modeled on nature’s feedback loops, earlier proposals to redirect rent found favor with Paine, Tolstoy, and Einstein. Wherever tried, to the degree tried, redirecting rent worked. One of today’s versions, the green tax shift, spreads out of Europe. Another, the Property Tax Shift, activists can win at the local level, building a world that works right for everyone.
one of many words I coined over 20 years ago: geoism, geonomics, geonomy, geocracy, etc – neologisms that later others came up with, too. CNBC once had a Geonomics Show, and Middlebury College has a Geonomics Institute. If “economy” is literally “management of the household”, then geonomy is “management of the planet”. The kind of management I had in mind is not what CNBC was thinking – top-down. My geonomics is not hands-on, interfering, but hands-off, organic. It’d strive to align policy with natural processes, similar to what holistic healing does in medicine, what organic farming does in agriculture. Geonomics attends to two key components: One, the crucial stuff to track is fat – or profit, especially profits without production, such as rent, or all the money we spend on the nature we use. Society’s surplus is the sine qua non for growth, needed to counter death – not merely more, but sustainable development, more from less. Two, the basic process to respect is the feedback loop. These let nature maintain balance automatically and could do the same for markets, if we let them. Letting them would turn our economies, now our masters, into a geonomy, our servant, providing us with prosperity, eco-librium (to coin a term) and leisure, time off – a hostile environment for economan but a cradle for a loving and creative humanity.
more transformation than reform; it’s a step ahead. Harvard economics students this year did petition to change the curriculum, in the wake of the English who caught the dissension from across The Channel. French reformers, who fault conventional economics for conjuring mathematical models of little empirical relevance and being closed to critical and reflective thought, reject this “autism” – or detachment from reality – and dub their offering “post-autistic economics”. Not a bad name, but again, academics define themselves by what they’re not, not by what they are, unlike geonomists. We track rent – the money we spend on the nature we use – and watch it pull all the other economic indicators in its wake. We see economies as part and parcel of the ecosystem, similarly following natural patterns and able to self-regulate more so than allowed, once we quit distorting prices. To align people and planet, we’d replace taxes and subsidies with recovering and sharing rents.
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.
a discipline that, compared to economics, is as obscure as Warren Buffett’s investment strategy, compared to conventional investment theory, about which Buffett said, “You couldn’t advance in a finance department in this country unless you taught that the world was flat.” (The New York Times, Oct 29). The writer wondered, “But why? If it works, why don’t more investors use it?”
Good question. Geonomics works, too. Every place that has used it has prospered while conserving resources. Yet it remains off the radar of many wanna-be reformers. Gradually, tho’, that’s changing. More are becoming aware of what geonomics studies – all the money we spend on the nature we use. Geonomics (1) as an alternative worldview to the anthropocentric, sees human economies as part of the embracing ecosystem with natural feedback loops seeking balance in both systems. (2) As an alternative to worker vs. investor, it sees our need for sites and resources making those who own land into landlords. (3)As an alternative to economics, it tracks the trillions of “rent” as it drives the “housing” bubble and all other indicators. And (4) as an alternative to left or right, it suggests we not tax ourselves then subsidize our favorites but recover and share society’s surplus, paying in land dues and getting back “rent” dividends, a la Alaska’s oil dividend. Letting rent go to the wrong pockets wreaks havoc, while redirecting it to everyone would solve our economic ills and the ills downstream from them.
People must learn to stop whining so much and feel enough self-esteem to demand a fair share of rent, society’s surplus, the commonwealth.