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This 2014 excerpt of Lebanon’s Alakhbar, Jun 17, by Alain Tabourian, industrialist, Minister of Energy and Water from 2008 to 2009, and graduate of the Harvard Business School.
I do not see any future for industry in Lebanon, and definitely not a world-class industry.
Private investors who enter into partnership with the public sector in an unstable region of the world assume a Weighted Average Cost Of Capital (WACC) of 15 to 20 percent.
Still, a major international company reached out to us for collaboration on establishing a world-class production unit in the food industry, which would have employed 1,000 people. It was found not to be feasible due to the high price of agricultural land, which was about 10 to 20 times the global average.
High land prices here have no corresponding economic justifications. Who could believe that our locations produce 10 to 20 times more than elsewhere?
High hotel room rates keeps Lebanon off the global tourism market.
Everything has high prices because of excess liquidity that has no room to be invested productively except in inflating bank deposits or buying up real estate. Acquisition of real estate does not result in any cost. A person may keep a piece of land for 30 or 40 years without paying any fees, then sell it at a huge profit without paying any tax.
Investors in the real economy bear many risks even as they employ people. If these investors profit, they pay taxes, first on profits, and second on distribution. Is that fair? Does this encourage productive investments?
The solution is not to increase tariffs. Doing so would reduce the consumers’ purchasing power, reducing their demand for the rest of goods and services, and subsequently, cause the entire economy to contract.
The rentier economy is also directly responsible for the migration of our young people. The Lebanese economy does not create enough value-added jobs that can accommodate the capacities of educated young people.
These young people send remittances to support their families. Meanwhile, we import low-wage workers for simple jobs, and these workers in turn send a large part of their incomes to their home countries.
We had a war that caused widespread destruction, and we had to rebuild. We benefited from external cash inflows, which drove consumption up. At the same time, oil prices rose, and the incomes of Lebanese expatriates improved, increasing the size of their remittances to Lebanon. Of course, the energy bill skyrocketed, but money was available to pay it thanks to remittances. We also benefited from the global debt crisis of 2008, which reduced interests to zero in the major economies, reducing the cost of our debt and increasing the flow of capital. However, all these factors are precarious.
Ed. Notes: It is painfully ironic that economic troubles are easy to solve logically and hard to solve politically. Imagine if Lebanon taxed land or instituted land dues; there goes speculation and the inflated price for locations. Imagine if Lebanon repealed taxes on wages and on profits from actual output; there goes the scarcity of capital as domestic savings and investments from outside pile up. Imagine if Lebanon did not subsidize any industry or product, not even fuel for heating homes; there goes waste to be replaced by upgrading the means of production. Make these geonomic reforms and maybe Lebanon could lead the Middle East to peace and prosperity.
This 2014 excerpt of the New York Times, Jun 17, is by Michael Forsythe.
President Xi Jinping of China has been pushing his own family to sell hundreds of millions of dollars in investments. If he doesn’t do this, it is very hard for him to convince other elite families to be more self-disciplined.
Xi’s sister Qi Qiaoqiao and brother-in-law Deng Jiagui sold investments in at least 10 companies worth hundreds of millions of dollars, including their 50 percent stake in a Beijing investment company they had set up in partnership with a state-owned bank.
Even while Mr. Xi’s relatives were selling off assets, those calling publicly for more disclosure have been jailed. The websites of The Times and Bloomberg, which have both reported on elite shareholdings, have been blocked in China for many months.
Relatives of the Politburo elite are deeply enmeshed in the state-driven business culture of the country. They have accumulated billions of dollars in assets, including company shares and real estate, in the past decade as China’s economy has boomed. Many of the investments are in areas such as mining, infrastructure, and property that involve the privatization of formerly state-owned assets.
At least four families among the nine-man Politburo Standing Committee that ruled the country from 2007 to 2012 each owned or controlled documented assets in excess of $150 million, including relatives of Xi, former Prime Minister Wen Jiabao, Zhou, and Jia Qinglin (the former fourth-ranked party member).
Deng through a Shanghai holding company owned more than one-sixth of a rare-earth mining company that reported assets of about $2.1 billion. Rare earths go into critical components in electric cars and wind turbines.
Qinchuan was set up in the weeks after Xi ascended to the Politburo Standing Committee in 2007 with $2.7 million in investments, ballooning to $156 million four years later. Deng and Qi did not sell three of its most valuable assets held by Qinchuan, including two infrastructure companies in the city of Xiangyang in Hubei Province. The three assets are together worth at least $234 million.
On Oct. 8, ownership of Qinchuan itself was transferred out of the family and into the hands of a longtime business associate, Xu Zaisheng. Qi, her husband Deng, and her daughter Zhang Yannan still hold tens of millions of dollars in company shares and real estate, including a villa overlooking Hong Kong’s exclusive Repulse Bay.
Surging income inequality in China is among the highest in the world and far greater than in Japan, South Korea, and Taiwan: neighbors that, unlike China, do not have Communist roots.
Ed. Notes: These details from China show how government creates fortunes, a universal process, that happens in all times and places, even in so-called market economies. In the US, investors and politicians both got rich off railroads. Oil companies, thru their lobbyists and the banks they spun off, enriched helpful politicians along with the businessmen. Governments paid for paving roads which made it possible to sell millions of cars. Governments bought millions of desktop computers and developed the internet, paving the way for fortunes to be made in Silicon Valley. If government is to have a role in industry, then the resultant profit should go to the public. Or better yet, politicians should not give or receive favor from any players in the business world.
This 2014 excerpt of Wired, Jun 12, is by Jordan Golson.
Tesla CEO Elon Musk announced that his company will not “initiate patent lawsuits against anyone who, in good faith, wants to use our technology.” In plain English, that means that if other car companies want to produce electric cars, they can use Tesla’s technology to do it.
Of course, Tesla wants to make and sell electric cars (it exists to make a profit, theoretically), but in order to do that on a large scale, the company needs to move past the niche markets that the Model S currently plays in. They need the public to stop thinking of them as electric cars and to start thinking of them simply as cars.
“They need to see Americans … at least be open to switching to an electric vehicle lifestyle,” Kelly Blue Book analyst Karl Brauer said. By themselves, “they’re never going to convert the average American into an electric car fan, even with great press and great publicity.” A $90,000 electric car for celebrities and the Silicon Valley elite isn’t going to save the world.
At the moment, the Model S is the only electric car that acts as a true replacement for a more traditional gasoline-powered automobile, with its 200+ mile range and network of rapid charging stations that stretches from coast-to-coast across 96 stations in the US, with dozens more coming in North America, Europe and Asia. Not enough people are interested in electric cars with 70-100 miles of range, as Nissan and others are discovering.
If other automakers begin using Tesla’s technology, it increases the value of the company and its inventions. Tesla has hundreds of patents, but if the company goes bust because not enough people buying electric cars, they’re all meaningless. Tesla needs widespread adoption of electric cars and the easiest way to do that is to get other automakers to sell them too.
Ed. Notes: This is not the only time that it’s not a good idea for an inventor to hoard his discovered knowledge. Actually, it’s rarely a good idea. Patents and copyrights don’t protect inventors so much as they benefit corporations who use the legalisms to post “no trespassing” signs on the field of knowledge, hampering the spread of good ideas.
Competition and cooperation work best together, not apart. More beneficial to inventors is getting a head-start in business, establishing a brand identity, and capturing huge market share (see Apple).
Of course, inventors deserve to be rewarded for their useful creations. But is owning and hoarding knowledge the best way to do that? Preventing everyone else from using a good idea when they’re not the first to realize it?
Should ownership go on forever? Should the descendants of Newton be paid every time somebody uses calculus? Should no one ever repeat a joke without paying the person who first told it?
Does the first person who stepped on the moon own the moon? Nope. Not unless they compensate everyone else who also wants to and can visit the moon. That’s what makes owning land — or ideas — proper … or “property”, and that is compensating those excluded. Pay the rental value of land, or of knowledge, to society and it is yours … for as long as you keep paying your neighbors (as they’ll be paying you in your harmonious geonomy).
This 2014 excerpt of Fortune, Jun 10, is by Chris Matthews.
When we think of government corruption, our biased minds often gravitate to thoughts of military juntas and third world governments. But corruption is everywhere, in one form or another. And it’s costing U.S. citizens big time.
Corruption on the state level is costing Americans in the 10 most corrupt states an average of $1,308 per year, or 5.2% of those states’ average expenditures per year.
Between 1976 and 2008, there have been more than 25,000 convictions of public officials for violation of federal corruption laws. Further, state spending reveals patterns of corruption.
Based on these data, the the most corrupt states are:
8. South Dakota
Mississippi and Louisiana are some of the least economically developed states in the country. Illinois and Pennsylvania are part of the Rust Belt. Alaska is resource rich.
For 9 out of the 10 of the most corrupt states, overall state spending was higher than in less corrupt states (South Dakota was the only exception). Attacking corruption could bring down state spending without hurting programs that benefit people.
Spending in these states was different than their less corrupt counterparts; it favors construction, salaries, borrowing, correction, and police protection at the expense of schools and hospitals.
Construction spending, especially on big infrastructure projects, is particularly susceptible to corruption because the industry is dominated by a few monopolistic, well-connected firms. Corrupt states also have more and better paid public employees, including police and correctional officers, who may have more to do where residents are kept poor.
The least corrupt states are: Oregon, Washington, Minnesota, Nebraska, Iowa, Vermont, Utah, New Hampshire, Colorado, and Kansas. All are in the North, are either mountainous or prairie, and several are play states.
Ed. Notes: Government officials can’t be corrupt if they can’t spend public money. There is no good reason to continue to allow them to enjoy this ppwer. The budget could be put on the ballot and bonds could be offered for sale for infrastructure projects; if they don’t sell, the project dies. If we could clean up public spending, then next we could correct taxation. And once we straighten out the state and local governments, then we could shape up the federal government … and finally live in a citizen-friendly nation — a geocracy!
This 2014 excerpt of Weekly Wastebasket, Jun 06, is by Taxpayers for Common Sense.
With the near-trillion dollar farm bill now law, the U.S. Department of Agriculture (USDA) shovels out cash for at least 55 new programs, reports, and studies for everything from catfish inspection and cotton trust funds to studying the marketability of U.S. Atlantic Spiny Dogfish and conservation of the Lesser Prairie Chicken.
Instead of eliminating wasteful, outdated, and ineffective programs, the farm bill created a whole new alphabet soup of agribusiness income entitlement programs – Agriculture Risk Coverage (ARC), Supplemental Coverage Option (SCO), Price Loss Coverage (PLC), and Stacked Income Protection (STAX) to name a few.
These programs only add more waste to highly subsidized crop insurance for more than 120 crops; this number will soon balloon as Congressional mandates for “priorities” such as sugarcane, swine, and sorghum (used as a bioenergy crop).
USDA just dispensed $6 million to universities, extension offices, and even a crop insurance consultant to create “decision tools and educational materials” designed to tell producers [who mainly now are not families but corporations] to squeeze the most money out of the programs.
USDA is delaying enrollment until spring 2015 so producers will be picking their “safety net” for their 2014 crops after they’ve already harvested and sold them. It’s like being able to make your poker bet after you’ve seen everyone else’s cards.
Ed. Notes: You really must rein in your politicians if ever you’re to save money and save land. Real farmers don’t need subsidies. All they need is zero taxes and fines upon fake farmers who ruin land and raise crops of low nutritional value.
Farmers, by living in the country, enjoy one huge advantage over others — the land rent they pay is much less per acre than that paid by people leasing city land. If everyone paid land rent into the public treasury and got a rent share back, country folk would come out way ahead, compared to urban dwellers.
Then maybe farmland could catch a long needed rest.
This 2014 excerpt of the New Economics Party, Jun 6, is by Deirdre Kent.
Like the formation of a river from the small streams to the river to the sea, create a new national currency at Local Board level and pass it up the line. Then the monetary authority, in conjunction with the monetary authorities of the supercities and the government, would make sure the local board did not issue more money than it was allowed, as inflation must be kept strictly under control.
We aim to move to a tax system that taxes the monopoly use of the commons rather than labour and sales. Some revenue will be distributed as a Citizens Dividend to all citizens who have lived there for a year or more, the rest will be shared by all levels of government.
Government pays you for your land, and the title of your property then bears a covenant, an obligation to pay a ground rent from then on, whoever owns the land. The tenure is for a lifetime, with rights that your descendants can get the next lease.
Land rents are stable over time. When there is a major event like an earthquake they decline or when a railway is put in or a labour intensive business arrives they rise more than just a tiny bit.
Councils and Government should never sell land. They should keep it and auction the leases to the highest bidder, then share that revenue with the public (via a Citizens Dividend) and the central government. This should be entrenched in law.
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.
of interest to Dave Lakhani, President Bold Approach (Mar 8) and Matt Ozga (Jan 29): “I write for the Washington Square News, the student run newspaper out of New York University. Geonomics seems like it has great significance, especially in this area. When was geonomics developed, and by whom?”
About 1982 I began. Two years later, Chilean Dr Manfred Max-Neef offered the term geonomics for Earth-friendly economics. In the mid-80s, a millionaire founded a Geonomics Institute on Middlebury College campus in Vermont re global trade. In the 1990s, CNBC cablecast a show, Geonomics, on world trade as it benefits world traders. My version of geonomics draws heavily from the American Henry George who wrote Progress & Poverty (1879) and won the mayoralty of New York but was denied his victory by Tammany Hall (1886). He in turn got lots from Brits David Ricardo, Adam Smith, and the French physiocrats of the 1700s. My version differs by focusing not on taxation but on the flow of rents for sites, resources, sinks, and government-granted privileges. Forgoing these trillions, we instead tax and subsidize, making waste cheap and sustainability expensive. To quit distorting price, replace taxes with “land dues” and replace subsidies with a Citizens Dividend.
Matt: “This idea of sharing rents sounds, if not explicitly socialist, at least at odds with some capitalist values (only the strong survive & prosper, etc). Is it fair to say that geonomics has some basis in socialist theory?”
A closer descriptor would be Christian. Beyond ethics into praxis, Alaska shares oil rent with residents, and they’re more libertarian than socialist. While individuals provide labor and capital, no one provides land while society generates its value. Rent is not private property but public property. Sharing Rent is predistribution, sharing it before an elite or state has a chance to get and misspend it, like a public REIT (Real Estate Investment Trust) paying dividends to its stakeholders – a perfectly capitalist model. What we should leave untaxed are our sales, salaries, and structures, things we do produce.
a 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.
an answer to a rarely asked question. If price is a reward for production, why do we pay for land, never produced by any of us? What is land price a reward for? Good behavior? How much money do we spend on the nature we use? Who gets it? What do they do with it? (If you answer all these correctly, you’re not a genius but a geoist.) The worth of Earth is enough that were we to collect and share it, we could abolish taxes on the goods we do produce. For example, San Francisco’s Redefining Progress has calculated that Cali-fornia could abolish all state and local taxes were it to collect the values of resources and of using na-ture as a dump. By exorcising the profit motive from depletion and pollution, rent collection could replace bossy regulation. Economies could self-regulate, as the rest of the eco-system does. See how big problems yield to big answers when we ask the right questions?
suitable for framing by Green Parties. When Greens began in Germany two decades ago, they defined themselves as neither left nor right but in front. Geonomics fits that description. The Green Parties have their Four Pillars; geonomists have four ways to apply them:
Ecological Wisdom. Want people to use the eco-system wisely? Charge them Rent and, to end corporate license, add surcharges. To minimize these costs, people will use less Earth.
Nonviolence. Want people to settle disputes nonviolently? Set a good example; don’t levy taxes, which rely on the threat of incarceration, to take people’s money. Try quid pro quo fees and dues.
Social Responsibility. Want people to be responsible for their actions? Don’t make basic choices for them by subsidizing services, addicting them to a caretaker state. Let people spend shares of social surplus.
Grassroots Democracy. Better have grassroots prosperity. Remember, political power follows economic. Pay people a Citizens Dividend; to keep it, they’ll show up at the polls, public hearings, and conventions.
close to the policy of the Garden Cities in England. Founded by Ebenezer Howard over a century ago, residents own the land in common and run the town as a business. Letchworth, the oldest of the model towns, serves residents grandly from bucketfuls of collected land rent (as does the Canadian Province of Alberta from oil royalty). A geonomic town would pay the rent to residents, letting them freely choose personalized services, and also ax taxes. Both geonomics and Howard were inspired by American proto-geonomist Henry George. The movement launched by Howard today in the UK advances the shift of taxes from buildings to locations. A recent report from the Town and Country Planning Association proposes this Property Tax Shift and their journal published research in the potential of land value taxation by Tony Vickers (Vol. 69, Part 5, 2000). (Thanks to James Robertson)
a study of a phenomenon David Ricardo noted going on two centuries ago. When wine grapes rise to $10,000 a ton from the very best land (last year, cabernet sauvignon commanded an average of $4,021 a ton in the Napa Valley), then vineyard prices soar from $18,000 an acre in the 1980′s to $100,000 an acre five years ago and now for a top pedigree up to $300,000 an acre (The New York Times, April 9, via Wyn Achenbaum). Pricey land does not make wine pricey; spendy wine makes land spendy. While vintners make their wine tasty, nature and society in general – not any lone owner – make land desireable. Steve Kerch of CBS’s MarketWatch (April 5) notes that much of what a home sells for on the open market is a reflection of intangible factors such as what school district the house sits in. The price the builder has to pay for the land also tends to be driven by the same intangibles. Because the value of land comes from society, and because one’s use excludes the rest of society, each user owes all others compensation, and is owed compensation by everyone else. Sharing land’s value, instead of taxing one’s efforts, is the policy of geonomics.
a 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.
what you do when you see economies as part of the ecosystem, following feedback loops and storing up energy. Surplus energy – fat or profit – enables us to produce and reproduce. To recycle society’s surplus, the commonwealth, geonomics would replace taxes with land dues (charged to users of sites and resources, including the EM spectrum, and extra to polluters), and replace subsidies with rent dividends to citizens (a la Alaska’s oil dividend). Without taxes and subsidies to distort them, prices become precise, reflect accurately our costs and values; then, motivated by no more than the bottom line, both producers and consumers make sustainable choices. While no place uses geonomics in its entirety, some places use parts of it, most notably a shift of the property tax off buildings, onto locations. Shifting the property tax drives efficient use of land, in-fills cities, improves the housing stock, makes homes affordable, engenders jobs and investment opportunities, lowers crime, raises civic participation, etc – overall it makes cities more livable. Geonomics – a way to share the bounty of nature and society – is something we can work for locally, globally, and in between.
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.
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.