We are Hanno Beck, Lindy Davies, Fred Foldvary, Mike O'Mara, Jeff Smith, and assorted volunteers, all dedicated to bringing you the news and views that make a difference in our species struggle to win justice, prosperity, and eco-librium.
This 2014 excerpt of the Financial Times, Mar 23, is a review by Martin Sandbu of Fragile by Design: The Political Origins of Banking Crises and Scarce Credit, by Charles Calomiris and Stephen Haber.
In Fragile by Design, Charles Calomiris and Stephen Haber, say that one reason conventional economists did not see the financial crisis coming is that their models are free of politics.
This sweeping account of how banking and politics have always been intertwined spans three centuries and five countries: the UK, the US, Canada, Mexico, and Brazil.
Governments typically need banks when they are running out of money (historically, usually when they were fighting wars) and are forced to bargain with private financiers. These financiers obtain concessions in return for funding a bank to channel credit to the government: in the last US bubble, they consisted of allowing megabank mergers. Banking develops as a rent-seeking racket where the politically powerful divide with bankers the spoils extracted from those outside of this political “coalition”.
The 1930s reforms in the US — the New Deal’s adoption of deposit insurance, mortgage guarantees, and the Glass-Steagall act that split commercial and investment banking — are usually taken to have transformed banking. Haber and Calomiris instead see continuity.
They argue that the old, inefficient system was stable only while low inflation prevailed. As price rises gathered speed from the late 1960s on, a legal ceiling on deposit rates encouraged savers to opt for money market funds, undermining the funding of depositary unit banks.
Ed. Notes: Economists shy away from politics because the powerful, who get their riches from ownership, can make life difficult for anyone who wants to study who does the work and who gets the rewards in a rigorous, scientific way. The whole raison d’etre of government throughout history has been to funnel wealth from workers to owners. Indeed, up until relatively recently, landowners were the government, and still are indirectly (more direct in England where they still have a House of [Land]Lords). The few researchers who did study ownership and receivership of rents objectively had no trouble at all predicting the last recession. Our own Fred Foldvary gave a reliable forecast in these pages and even before that he did an academic journal. England’s Harrison and Australia’s Anderson also went out on a limb and were far more accurate than ones who get all the press. If only the Financial Times would write about them!
Our current targeted welfare system is no way to build a society which claims to value intimacy, honesty. and strong families.
The New Economics Party wanted an unconditional Citizens Dividend for all individuals that was not means tested, asset tested, or work tested. The benefits of the commons — land and the natural resources — should be shared equally.
New Zealand had three precedents for unconditional payouts.
In 1948 every household was given a dividend because we had a particularly good wool cheque that year.
The second was the Universal Family Benefit that existed from 1946 to 1991 when family support became targeted.
The third was in 1977 when the unconditional National superannuation was paid to all over 65 without asset or income testing.
Ed. Notes: Big changes come more easily from small countries. In a small country, it’s easier for the citizens to have a conversation. It’s also easier for a citizen to identify with their territory, the nature, the resources, and the economic value of the land. Perhaps New Zealand could lead the world!
This 2014 excerpt of Share The World’s Resources in London, Mar 21, is by Rajesh Makwana, their director.
There is a growing movement of people calling for a proportion of revenues from the use of land and natural resources to be shared among citizens. And countless campaigns for tax justice, an end to austerity, and the strengthening of social welfare are all predicated on the notion of sharing national resources more equitably.
This does not mean abandoning the goals of existing initiatives, but rather supporting the emergence of a common platform for change that can be explicated in the simplest terms and embraced by the greatest number of people.
With support for the principle of sharing rapidly growing across the globe, a united call for sharing the earth’s resources could ultimately hold the key to safeguarding human progress in the 21st Century.
Ed. Notes: Sharing our surplus is key. The revenue to be made from land and resources is a surplus because our spending for these gifts of nature does not reward anybody’s efforts since none of us made the ground or stuck oil and ores in it. We must pay for the useful parts of nature as a civilized way to allocate them. But pay to whom? While none of us made Earth all of us need her and all of us, via our needs and demands, generate the value of her.
Not only is such sharing needed and fair, it also makes possible a total reform of public revenue. With land dues, we could get rid of noxious taxes on our efforts, on our wages and purchases and buildings. With these “rent” shares, we could get rid of subsidies which mainly benefit insiders (corporate welfare).
Sharing Earth’s worth does not have to be justified by that fact that it’d help the poor, or spare the environment, or make life much more pleasant for all, because it’s already the moral thing to do.
This 2014 excerpt of the New York Times, Mar 20, is by David Gelles.
Robert D. Marcus became chief executive of Time Warner Cable at the start of the year. Less than two months later, he agreed to sell the company to its largest rival, Comcast, for $45 billion.
For that, he will receive nearly $80 million, once the FCC approves. That’s more than $1 million a day for six weeks.
The extraordinarily large exit package is another instance of corporate America rewarding executives with outsize sums for minimal amounts of work — and an example of income inequality in America.
Marcus’ payout will not be close to the largest golden parachutes of all time.
John Welch got from General Electric in 2001 more than $417 million.
Lee R. Raymond got from Exxon Mobil in 2005 $321 million.
William McGuire got from UnitedHealth Group in 2006 $286 million.
Dozens of executives got more than $150 million.
But Welch, Raymond, and McGuire had been at their companies for years. Marcus, 48, for such a short period.
Executives can receive golden parachutes not only when they sell their companies, but also when they retire, and even when they are fired.
Time Warner Cable shareholders can express their displeasure with the package when they vote on the deal. But it will not change a thing. Such votes are nonbinding.
Mr. Marcus will not be the only Time Warner Cable executive in line for a big payday. Arthur T. Minson Jr., the chief financial officer, will receive severance pay of $27 million. Michael L. LaJoie, the chief technology officer, will receive $16.3 million. And Philip G. Meeks, the chief operating officer, will take home $11.7 million.
Ed. Notes: Why is this not theft? Management did not earn those millions that they take from the company. The money belongs to shareholders.
Government needs to break from Big Business and side with the public and write laws that would lead to executives getting arrested and serving time when they steal via paying themselves from their companies.
Also, such fat payouts prove that government, were it truly in the people’s corner, could negotiate far higher “rent” payments for letting tele-comms use the airwaves or enjoy other monopolies in various regions. Government could use the revenue from granting such privileges to pay dividends to citizens, since corporations are not paying fair dividends to shareholders.
This excerpt of The Real News Network, Mar 22, is an interview by Essica Desvarieus of professors Jeffrey Sommers and Michael Hudson.
Essica Desvarieus: The IMF is lending the interim government in Ukraine a $15 billion IMF bailout package. The conditions include cuts to gas subsidies, pensions, public sector employment, as well as privatization of government assets.
Hudson: The UN and the World Bank put Ukraine next to Nigeria for the GINI coefficient of concentrated income. The Europeans have told the kleptocrats that run the country, we will give you a lot of IMF money, you transfer it into your banks and your bank accounts, you send it abroad to your offshore banking centers, and the Ukrainian people will owe it; you tax your people and make them pay.
Russia says that Ukraine owes $20 billion, dating back to the Soviet Union era in exchange for, in addition, to about $5 billion or $6 billion for the oil subsidies that it’s been given. Russia said it is going to charge Ukraine the normal oil price, not the subsidized price. So all the money that the IMF and the U.S. gives Russia says is immediately owed to it itself.
None of the money none of this money’s going to go to the Ukrainian economy any more than the IMF money went to the Irish economy or the Greek economy. It goes to the billionaires who run the countries and immediately send it back to the West so it’s a circular flow. It goes in and out of Ukraine in about 20 minutes.
The government has to pay the IMF loan by privatizing whatever remains in the public domain. The Westerners want to buy Ukrainian farmland. They want to buy the public utilities. They want to buy the roads. They want to buy the ports. And all of this is going to be sold at a very low price to the Westerners. It will pass into foreign ownership, just like it did in Russia and Latvia.
Many Ukrainians say they haven’t been paid for two months. In Russia in 1994, during the Yeltsin selloff, labor went ten or 12 months without being paid. You can’t pay labor and at the same time pay the IMF and pay the kleptocrats.
In Latvia, Greece, and Ireland, 20 percent of the population emigrated. Just like 20 years ago you had an influx of Polish plumbers into London, you’re now going to have millions of Ukrainian plumbers pouring into Western Europe.
Russia moved in to Sevastopol for military reasons. It couldn’t let NATO put hydrogen bombs 20 miles from Russia, because then somebody in the neocons would have said, hey, we’ll never have a better chance to blow up Russia than we have right now; let’s do it. So Russia’s decisions here are cultural and military.
Western Europe is drying up. Russia’s turning towards an economy that’s not destroying itself, towards China and other Asian economies. We’re seeing a vast shift.
Also there’s the Budapest Memorandum of 1994 that bans all foreign countries from interfering in the domestic politics of Ukraine. Russia pointed out that it was the West that had violated the Budapest memorandum; the U.S. and E.U. stated they no longer regard the legally elected head of state as a legitimate partner, unlike the new leaders appointed in the square.
Sommers: The Soviets felt that they were given assurances from the United States that NATO would not encroach upon the former Warsaw Pact nations. What does the United States do over the past two decades? They take in the Warsaw Pact, and then they move even into the former Soviet Republics themselves, the Baltic states, moving towards Georgia, and now tentatively towards Ukraine.
Ed. Notes: You see why you shouldn’t let politicians spend your money? Why you shouldn’t let bankers concentrate your savings and create your currency? Why you shouldn’t let your militaries try to “solve” problems much more complex than meets the eye while merely enriching military contractors? And why, most importantly, you should work for geonomics to create a model of economic justice that would spread worldwide?
This 2014 excerpt of TripleCrisis – global perspectives on finance, development, and environment – Mar 18, is by James K. Boyce.
Rent isn’t just the monthly check that tenants write to landlords. Economists use the term “rent seeking” to mean “using political and economic power to get a larger share of the national pie, rather than to grow the national pie.”
Two other types of rent originate in nature rather than in human investment. Extractive rent comes from nature as a source of raw materials. The difference between the selling price of crude oil and the cost of pumping it from the ground is an example.
Protective rent comes from nature as a sink for our wastes. In the northeastern states of the U.S., for example, the Regional Greenhouse Gas Initiative requires power plants to buy carbon permits at quarterly auctions. In this way, power companies pay rent to park CO2 emissions in the atmosphere. Similarly, green taxes on pollution now account for more than 5% of government revenue in a number of European countries. When polluters pay rent to use nature’s sinks, they use them less than when they’re free.
The current value of the world’s oil, coal, and natural gas reserves is estimated at $27 trillion. Much of this will have to be written off if we phase out fossil fuels. Fossil fuel corporations have shown themselves willing to fight hard to defend extractive rent.
Who should get protective rent? One possibility is to return it to the people via equal per capita dividends. Another option is to let the government keep the money, as in the case of Europe’s green taxes.
Dividends are based on the principle that the gifts of nature belong to everyone equally. Cap-and-giveaway is based on the premise that the same corporations that profit from extracting nature’s wealth ought to be paid to leave it in the ground.
The only way we’ll see a switch from extractive rents for corporations to protective rents for the public will be if ordinary people join together to make this happen. To change the rent we get from nature, we must change who gets it.
Ed. Notes: Of course people should pay for polluting, which would encourage them to find clean alternative fuels. But it’d also be a good idea to quit paying corporate welfare to polluters. And to de-tax wages and investments to facilitate tech-progress to clean fuels and engines.
Another crucial part of the puzzle is to charge people for merely occupying land; doing that would encourage owners to use land efficiently. In cities, they’d develop vacant lots, parking lots, abandoned buildings, and under-sized buildings — they’d infill. Compact metro regions have buildings side by side and shorter trip distances so they both consume fewer resources and emit fewer pollutants.
Cutting demand for fuel weakens the grip of oil companies while charging landowners is something localities can do; without waiting for federal action, cities and counties can shift their property tax off buildings, onto locations, and that would trigger the cascade of benefits for both people and planet. As does Aspen CO and Singapore, they could even generate a surplus and pay residents a dividend — way cool.
A growing number of American children are developing infections caused by antibiotic-resistant bacteria.
While still rare, the bacteria are being found more often in children of all ages, especially those who are 1 to 5 years old.
The prevalence of resistant-enzyme(ESBL)-producing bacteria rose from 0.28 percent in 1999 to 0.92 percent in 2011. Resistance to third-generation cephalosporins climbed from 1.4 percent to 3 percent.
ESBL-producing bacteria were found in children of all ages nationwide, but slightly more than half were found in youngsters 1 to 5 years old. About 74 percent of these bacteria were resistant to many types of antibiotics.
These antibiotic-resistant bacteria have traditionally been found in health care settings but are increasingly being found in the community, in people who have not had a significant history of health care exposure.
Ed. Notes: Is our “arms race” against single-cell life forms a battle humans can win? Or should we try to improve our immune systems in other ways, such as improving our medical system?
People catch most of these bugs in hospitals, which may soon see more patients as government tries to lower the costs that hospitals now charge patients. Perhaps government should instead make hospitals less needed and help people lead healthy lives.
Government could combat pollution and distribute the common wealth — the value of land and resources — two actions that’d take the stress out of our lives so we could feel and live healthier. To lower medical costs, government could permit more qualified competition. And to raise the bar for safety at hospitals, government could hold the doctors there liable.
This 2014 excerpt of ZMEscience, Mar 19, is by Mihai Andrei.
If you look at the global annual earnings of all time for all companies, the top 5 spots are all occupied by Exxon Mobil – the world’s largest private company. In 2008, they made $45.22 billion. More recently, in 2011 they made $41 billion. In the same year, Shell made over $31 billion. Chevron made almost $27 billion. So why in the world are these companies being subsidized?
Ed. Notes: For the above to ever happen, you have to get everyone you know to demand such a sensible policy. Of course, it might be more sensible to not let politicians invest in alternative energy and simply to de-tax it. But one must compromise in politics.
The German government has told European Union officials that it will try to block the inclusion of an investor-to-state dispute settlement (ISDS) clause in the proposed Transatlantic Trade and Investment Partnership (TTIP).
An ISDS clause is an arbitration mechanism which would allow private investors to sue governments if they believed that local laws were threatening their investments.
The proposal has won backing from businesses but has faced opposition from consumer and environmental groups who claim it could allow investors to challenge broader government policies – such as the ban on fracking currently in place in France.
From the perspective of the [German] federal government, US investors in the EU have sufficient legal protection in the national courts.
ISDS provisions have been common in trade agreements since the 1960s.
Ed. Notes: If German businesses don’t push for overruling local laws, it must mean that a big part of the German public has the power to defend their right to protect nature and consumer. The fact that businesses elsewhere can attack laws that prohibit pollution, etc — if that truly is the intent of global business — then that means the public in America and the rest of Europe lack the power to confront Big Business. Germany is a truer democracy; the other places are not.
To give business credit, at least they take the initiative to push their agenda, however selfish or not it may be, while their opponents waste time merely in opposition.
It’d be nicely ironic if business were to set a precedent that could come back and bite them. That is, it should not be too hard for an investor to show that some corporate welfare favors “hers” competitors, not “hermself”; and to show that taxes on wages, sales, and buildings hurts business while not taxing land and resources favors mere idle ownership. Indeed, rather than protest such clauses in trade treaties, wanna-be defenders of nature and justice could try to use the legal language to bring a “jujitsu” suit to court.
According to common wisdom, catch-up sleep repays one’s “sleep debt”. But chronic sleep loss may be more serious than previously thought and may even lead to irreversible physical damage to and loss of brain cells. The research is published today in The Journal of Neuroscience.
Ed. Notes: Can sleep-deprived people effectively agitate for economic justice? Whatever … once won, no one will ever have to lose sleep again due to their financial situation. So put all your surplus energy into winning geonomics!
“Science is the belief in the ignorance of experts,” said Richard Feynman in the 1960s.
The 500 major discoveries, almost all initiated before about 1970, challenged mainstream science and would probably be vetoed today.
Agencies claiming to support blue-skies research use peer review, of course, discouraging open-ended inquiries and serious challenges to prevailing orthodoxies.
Mavericks once played an essential role in research. Indeed, their work defined the 20th century.
We must relearn how to support them, and provide new options for an unforeseeable future, both social and economic. We need influential allies. Perhaps Guardian readers could help?
Donald W Braben University College London
John F Allen Queen Mary, University of London
William Amos University of Cambridge
Richard Ball University of Edinburgh
Tim Birkhead FRS University of Sheffield
Peter Cameron Queen Mary, University of London
Richard Cogdell FRS University of Glasgow
David Colquhoun FRS University College London
Rod Dowler Industry Forum, London
Irene Engle United States Naval Academy, Annapolis
Felipe Fernández-Armesto University of Notre Dame
Desmond Fitzgerald Materia Medica
Pat Heslop-Harrison University of Leicester
Dudley Herschbach Harvard University, Nobel Laureate
H Jeff Kimble Caltech, US National Academy of Sciences
Sir Harry Kroto FRS Florida State University, Tallahassee, Nobel Laureate
James Ladyman University of Bristol
Nick Lane University College London
Peter Lawrence FRS University of Cambridge
Angus MacIntyre FRS Queen Mary, University of London
John Mattick Garvan Institute of Medical Research, Sydney
Beatrice Pelloni University of Reading
Martyn Poliakoff FRS University of Nottingham
Douglas Randall University of Missouri
David Ray Bio Astral Limited
Sir Richard J Roberts FRS New England Biolabs, Nobel Laureate
Ken Seddon Queen’s University of Belfast
Colin Self University of Newcastle
Harry Swinney University of Texas, US National Academy of Sciences
Claudio Vita-Finzi FBA Natural History Museum
Ed. Notes: It’s funny that even forward-looking thinkers want to go backward to their good old days. Not knowing any other existence than living off the taxpayer, I suppose they can not envision one. But would their income depend on coercion in a just economy? Just like younger people crowd-source to fund a movie, couldn’t those academics cloistered in the ivory tower do the same thing? And in a geonomy — minus taxes and with a Citizen’s Dividend — how much would the researchers need?
This 2014 excerpt of Policymic, Mar 18, is by Tom McKay.
A study by researchers utilizing research tools developed for a separate NASA activity concludes we only have a few decades left before civilization collapses.
The report was written by applied mathematician Safa Motesharrei of the National Socio-Environmental Synthesis Center along with a team of natural and social scientists.
Analyzing five risk factors for societal collapse (population, climate, water, agriculture, and energy), the report says that the sudden downfall of complicated societal structures can follow when these factors converge to form two important criteria. All societal collapses over the past 5,000 years have involved both “the stretching of resources due to the strain placed on the ecological carrying capacity” and “the economic stratification of society into Elites [rich] and Masses (or “Commoners”) [poor].”
The two key solutions are to reduce economic inequality so as to ensure fairer distribution of resources, and to dramatically reduce resource consumption by relying on less intensive renewable resources and reducing population growth.
“Although the study is largely theoretical, a number of other more empirically-focused studies — by KPMG and the UK Government Office of Science for instance — have warned that the convergence of food, water, and energy crises could create a ‘perfect storm’ within about fifteen years.
Ed. Notes: Can we keep our civilization and our planet, too? I bet that economic justice would let us enjoy both. If we put geonomics into practice, we would waste much less. We’d also enable many more people to prosper, who then lower the birth rate. Whether it works or not, getting out from under taxes while sharing the worth of Earth sure would make life a lot more pleasant meanwhile.
This 2014 excerpt of Macrobusiness, Mar 11, is by Catherine Cashmore.
Rising property prices – the product of the plot of land that sits underneath the structure – are unashamedly promoted in most modern economies as the key driver to boost the privatised wealth of its nation, with the hope the payoff effect will feed other areas of consumption. They are no longer just ‘national’ affairs, but open to international speculation and investment, of which Australia is by no means immune.
None of this has assisted the home buying sector in America’s property market. Ownership rates continue to fall, and local buyers remain priced out. Yet Obama had no hesitation in boasting: ”Today, our housing market is healing!” (Healing!) “Home prices are rising at the fastest pace in 7 years…” (Faster even than incomes it seems, with first homebuyers at their lowest level since the crisis began.)
Premium localities in the cities of New York and London are openly marketed as ‘safe havens’ for the internationally wealthy. Isolated from the local economy, as local workers are forced out, and rumors of homes laying vacant for much of year provoke neighbourhood outrage. It’s now reported, for every minute you spend on the three Underground stops between Earls Court and Sloane Square, property prices rise by £96,647.
It’s not just the 1% of billionaires seeking out safe haven’s abroad, in what’s been termed the “largest and most rapid wealth migrations of our time.” But the rise of China’s ‘Consumer Class’ – ‘middle income’ individuals, discretionary spenders, whose wealth goes largely under-reported in a “grey economy” of illegal and quasi-legal activities. If trend continues, in a few years, China will become the world’s richest country, and India won’t be far in its wake.
The geographical location of land is fixed and limited in supply. Therefore we can’t all benefit from economic advantage gained from ownership of the best seats in town, without effective taxation of the resource that is.
A correctly administered broad-based land value tax (as explained here – reducing taxes on productivity) would not only encourage the ‘good’ utilisation of land, but if handled efficiently, gains could be fed back into the community to assist increased investment into infrastructure and social services.
This alone, would go a long way to reducing the wealth inequality currently experienced in our big cities.
This 2014 excerpt of Psych Central, Mar 14, is by Traci Pedersen.
When it comes to trusting others, intelligent people are more likely to give the benefit of the doubt, while those who score lower on IQ tests are more likely to have trust issues, according to a new study by Oxford University.
The findings, published in the journal PLOS ONE, are based on an analysis of the General Social Survey — a nationally representative public opinion survey given every one to two years.
The research supports the previous findings of studies on trust and intelligence from European countries. Social trust is vital to the success of social institutions — such as welfare systems and financial markets. Furthermore, research shows that individuals who trust others tend to enjoy better health and greater happiness.
Billionaires in crony sectors have had a great century so far. In the emerging world their wealth doubled relative to the size of the economy — equivalent to over 4% of GDP, compared with 2% in 2000. Urbanisation and a long economic boom have boosted land and property values. A China-driven commodity boom enriched natural-resource owners from Brazil to Indonesia. Some privatisations took place on dubious terms.
Of the world’s big economies, Russia scores worst. The transition from communism saw political insiders grab natural resources in the 1990s, and its oligarchs became richer still as commodity prices soared. Unstable Ukraine looks similar. Mexico scores badly mainly because of Carlos Slim, who controls its biggest firms in both fixed-line and mobile telephony. French and German billionaires, by contrast, rely rather little on the state, making their money largely from retail and luxury brands.
The total wealth of America’s billionaires is high relative to GDP, but Silicon Valley’s wizards [new money] are far richer than America’s energy billionaires [old money]. And few of its billionaires made money in banking [used mainly for sheltering old money]. Even including private equity, compared with Larry Ellison of Oracle, Stephen Schwarzman of Blackstone is a pauper.
Countries that do well on the crony index generally have better bureaucracies and institutions.
Efficient government is no guarantee of a good score: Hong Kong and Singapore are packed with billionaires in crony industries. This reflects scarce land, which boosts property values, and their role as entrepots for shiftier neighbours. Hong Kong has also long been lax on antitrust: it only passed an economy-wide competition law two years ago.
Mainland China scores quite well. One reason is that the state owns most natural resources and banks; these are a big source of crony wealth in other emerging economies. Another is that China’s open industries have fostered a new generation of fabulously rich entrepreneurs, including Jack Ma of Alibaba, an e-commerce firm, and Liang Wengen of Sany, which makes diggers and cranes.
Most countries in South-East Asia, including Indonesia, Thailand, and the Philippines, saw their scores get worse between 2007 and 2014, as tycoons active in real estate and natural resources got richer.
Our crony index has three big shortcomings.
One is that not all cronies make their wealth public. This may be a particular problem in China, where recent exposés suggest that many powerful politicians have disguised their fortunes by persuading friends and family to hold wealth on their behalf. Unreliable property records also help to disguise who owns what.
Second, our categorisation of sectors is crude. Rent-seeking may take place in those we have labelled open, and some countries have competitive markets we label crony. America’s big internet firms are de-facto monopolies that abuse their positions. South Korea’s chaebol, which sell cars and electronics to the world, are mainly in industries we classify as open. But they have a history of bribing politicians at home. China’s billionaires, in whatever industry, are often chummy with politicians and get subsidised credit from state banks. A third are members of the Communist Party. Sectors that are cronyish in developing countries may be competitive in rich ones: building skyscrapers in Mumbai is hard without paying bribes, and easy in Berlin. Our index does not differentiate.
The third limitation is that we only count the wealth of billionaires. Plenty of rent-seeking may enrich the very wealthy who fall short of that cut-off. America’s subprime boom saw hordes of bankers earn cumulative bonuses in the millions of dollars, not billions. Crooked Chinese officials may have Range Rovers and secret boltholes in Singapore—but not enough wealth to join a list of billionaires. So our index is only a rough guide to the concentration of wealth in opaque industries compared with more competitive ones.
Ed. Notes: The authors above give the limitations of their work, which shows a lot of work still needs to be done. Recall the saying in economics: to get really rich you capture values from society and impose your costs upon society. You flip real estate, where the value of locations is generated by the presence of the populace (society). You sell oil which is hugely polluting. Even the new fortunes in tech come in part from society, from the cheap, way under-market fees for copyrights and patents.
The problem is not a matter of envy. The problem is a matter of taking (however legal) vs. making, of taking a bigger share of the pie vs. creating a bigger pie. When some get more than they deserve, others must get less. Those getting more then lobby for ever newer and better privileges. For example, when Y2K was a real scare, tech won extra limited liability from a compliant Congress. And those getting less must then work extra or choose work that shouldn’t be done, such as an IRS enforcer.
The solution is elegant, both moral and practical. Eliminate most privileges, such as subsidies (corporate welfare), sweetheart contracts (military procurers), lenient enforcement of safety standards (agri-biz and other polluters), liability limited by a state (chemical or drug makers), money monopoly (bankers), license-based cartels (doctors, taxi-owners), etc. And, charge full market (annual rental) value as fees for granting little pieces of paper such as patent/copyright, utility franchises, EM spectrum licenses, resource leases, and land titles. Do all that and you’ll still have big fortunes in big economies but not as big as now and it won’t matter because every fortune will be earned.
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.
what you do when you see economies as part of the ecosystem, following feedback loops and storing up energy. Surplus energy – fat or profit – enables us to produce and reproduce. To recycle society’s surplus, the commonwealth, geonomics would replace taxes with land dues (charged to users of sites and resources, in-cluding the EM spectrum, and extra to polluters), and replace subsidies with rent dividends to citizens (a la Alaska’s oil dividend). Without taxes and subsidies to distort them, prices become precise, reflect accurately our costs and values; then, motivated by no more than the bottom line, both producers and consumers make sustainable choices. While no place uses geonomics in its entirety, some places use parts of it, most notably a shift of the property tax off buildings, onto locations. Shifting the property tax drives efficient use of land, in-fills cities, improves the housing stock, makes homes affordable, engenders jobs and investment opportunities, lowers crime, raises civic participation, etc – overall it makes cities more livable. Geonomics – a way to share the bounty of nature and society – is something we can work for locally, globally, and in between.
a neologism for sharing “rent” or “social surplus” – the money we spend on the nature we use. When we buy land, such as the land beneath a home, we typically pay the wrong person – the homeowner. Instead, since land cost us nothing to make and is the common heritage of us all, rather than pay the owner, we should pay ourselves, our neighbors, our community. That is, we should all pay land dues to the public treasury, then our government would pay us land dividends from this collected revenue. It’s similar to the Alaska oil dividend, almost $2,000 last year. Indeed, the annual rental value of land, oil, all other natural resources, including the broadcast spectrum and other government-granted permits such as corporate charters, totals several trillion dollars each year. It’s so much that some could be spent on basic social services, the rest parceled out as a dividend, as Tom Paine suggested, and taxes (except any on natural rents) could be abolished, as Thomas Jefferson suggested. Were we sharing Earth by sharing her worth, territorial disputes would be fewer, less intense, and more resolvable.
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.
a new field of study offered in place of economics, as astronomy replaced astrology and chemistry replaced alchemy. Conventional economics, in which GNP can do well while people suffer, is a bit too superstitious for my renaissance upbringing. If I’m to propitiate unseen forces, it won’t be inflation or “the market”; let it be theEgyptian cat goddess. At least then we’d have fewer rats. Meanwhile, believing in reason leads to a new policy, also christened geonomics. That’s the proposal to share (a kind of management, the “nomics” part) the worth of Mother Earth (the “geo” part). If our economies are to work right, people need to see prices that tell the truth. Now taxes and subsidies distort prices, tricking people into squandering the planet. Using land dues and rent dividends instead lets prices be precise, guiding people to get more from less and thereby shrink their workweek. More free time ought to make us happy enough to evolve beyond economics, except when nostalgic for superstition.
the annoying habit of seeing the hand of land in almost all transactions. In geonomics we maintain the distinction between the items bearing exchange value that come into being via human effort — wealth — and those that don’t — land. Keeping this distinction in the forefront makes it obvious that speculating in land drives sprawl, that hoarding land retards Third World development, that borrowing to buy land plus buildings engorges banks, that much so-called “interest” is quasi-rent, that the cost of land inflates faster than the price of produced goods and services, that over half of corporate profit is from real estate (Urban Land Institute, 1999). Summing up these analyses, geonomists offer a Grand Unifying Theory, that the flow of rent pulls all other indicators in its wake. Geonomics differs from economics as chemistry from alchemy, as astronomy from astrology.
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 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.
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.
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.
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.