Geonomist, #53 — 2007 Winter (Vol. 15, No. 3)
|December 21, 2006||Posted by Jeffery J. Smith under The Geonomist|
Oil corps. pay Norway, not U.S., going rate
Geonomics is …
a term I coined in order to shorten “ecological economics” and to focus on the whole earth, not just natural habitat. Others have borrowed or coined the term. Years after I began this newsletter, CNBC cablecast its “Geonomics Report”; they meant “global economics”, specifically trade that favors US corporations and investors. And a vintner uses “geonomy” as his URL (why?). Literally, geonomics is “earth economics” or “earth management”. It sees economies as part of the ecosystem, operating by similar laws of feedback and balance. It suggests that if prices are accurate – and now we distort them with taxes and subsidies – then markets can be, in theory, perfect for both people and planet. So, the idea is to replace taxes with Land Dues, similar to Sydney Australia’s land tax, and replace subsidies with a Citizens Dividend, similar to Alaska’s oil dividend. In effect, people would share the worth of Mother Earth, instead of tax their efforts to produce value. Everywhere any version of the idea has been tried, it has been successful.
Less than 1/4 enough
Norwegian academic Ole Gunnar Austvik, a specialist on oil leasing, explained that government should take most of oil’s economic ‘rent’ (the profit above ‘normal’ profit, risk adjusted). On top of Norway’s corporate tax of 28%, the government levies upon the companies leasing oil off Norway’s coast a 50% special tax, making oil companies pay 78% of total profit. Seventy-eight percent of profit sounds perhaps like too much, but companies have been queuing up in each licensing round for years. (Vue Weekly, Edmonton, Canada, November 15; via Mark Monson) Could the US and American states, which now recover only a quarter or less of oil’s economic rent, learn to strike a harder bargain? Oil companies rake in billions each quarter – then squeal hardship whenever Congress whispers about ending their subsidies or tax breaks. But once the people do get the rent for oil, our “oiligarchy” would fall. Rather then wage oil wars, we might address peak oil and global warming – in time.
FROM THIS PEN’S PERCH
Everybody wants some
We moved again (closer to Reed College, my mom’s alma mater). Shops are no longer walkable, so rent is lower. The neighbors are quieter (noise pollution is maddening!) – until the pool opens next summer. Meanwhile, my fellow Oregonians complain about rural owners getting compensation for not being allowed to develop. Yet these same concerned citizens expect to sell their urban homes for twice what they paid for them. We all have a right to profit from land. The problem is we do it now by buying and selling rather than by sharing. We could pay Land Dues – the annual rental value of our location – in to the public treasury and get “rent” dividends back. For most of us, who don’t own acres of forests or prime blocks downtown, the net gain would be hundreds of dollars each month. Then we could afford to do without so many subsidized services and hence lower or eliminate other taxes, those on buildings, business, and income – another big savings. But it begins with realizing that the growing value of land and resources is here for all of us to share. May your Winter Solstice of 2006 be your merriest ever.
Policy shows natural law
In Australia, the State Government of Victoria pays wanna-be homebuyers first-time grants, nearly $450 million per year. Using the money, the recipients bid against each other, as sellers well know, and raise the cost of housing. In the suburbs where the “lucky” recipients spend their grants, the increase in housing prices over the last two years was double the rest of the Melbourne region. In September, affordability fell to its lowest in three years. Instead of help would-be buyers, the subsidies merely enrich sellers and their agents. One original argument for the grants was that urban growth boundaries had curbed supply, inflating prices. Since the grants are not helping the intended, some now argue that the money should be given to builders to erect affordable housing. (The Age, November 11; via Phil Anderson) Subsidizing builders would again enrich the rich and keep all decisions as to location and quality up to suppliers, not disadvantaged consumers. A better solution is, yes, pay grants, but to all regional residents and draw the revenue from the region’s site values, quite high in the downtown business district. Having to pay Land Dues, landowners quit speculating and put their locations to highest and best use. That adds to the supply of housing, keeping down its price, while the dividend enables wanna-be buyers with the wherewithal to meet the price. Aspen CO does something vaguely similar.
New tallest structure
In Japan, the six biggest broadcasters plan to open the new world’s tallest structure in 2011. At 618 meters, it will handily top the current tallest structure, Toronto’s CN Tower at 553 meters. (Associated Press; via Phil Anderson). Usually, each new tallest structure opens after the business cycle has peaked, which one Asian economist called the “Erection Index”. New York’s Empire State Building opened in 1931, two years post-peak. If the patterns holds, Japan’s economy would begin receding in 2009 or 10.
Arms sales worsen wars
Arms sales to the most unstable regions – many already engaged in conflict – grew to the highest level in eight years. The US supplied $8.1 billion worth of weapons to developing countries in 2005 – 45.8% of the total and far more than second-ranked Russia with 15% and Britain with a little more than 13%. The US transferred weaponry to 18 of the 25 countries involved in an ongoing war. More than half of the countries buying US arms – 13 of the 25 – were defined as undemocratic by the State Department’s annual Human Rights Report. Arming poor allies risks fueling conflicts rather than enhancing collective defense. Yet making weapons also keeps factories running in certain congressional districts. When a United Nations panel voted to study regulating the sale of conventional arms, the United States was the only country out of 166 to vote no. (Boston Globe, November 13; via Bill Batt)
If instead we were to export geonomics – a fair and efficient system that reinforces our connection to Earth and a species-wide identity – this poor planet could be such a peaceful place. That’s my Christmas wish.
Brit billionaires tax-free
How much tax the superrich pay is something the Irish authorities release – 184 people taking in more than £1m last year paid no personal taxes – but English ones don’t. On their own, private investigators figured the 54 UK billionaires paid taxes totaling £74.5m. Like their fellow Englishmen, billionaires, too, are liable for VAT and council tax. On their £126 billion combined fortunes, their income tax came to £14.7m. One person, James Dyson the inventor worth £1,050m, paid £9m, over half the income tax paid by the billionaires. The £14.7m puts their effective income tax rate at 0.14%. At least 32 of the individual billionaires or family groupings escaped paying any income taxes. Of the 22 billionaires who did pay, it was mostly on share dividends paid by their companies, not on a conventional salary, as the tax on dividends is at 25% rather than the 40% on income. While middle-class Britons face an increasing tax burden, the country is increasingly regarded as an “onshore tax haven” by the superrich and their advisers [which must work wonders for the Brits' sense of social cohesion]. Some of the world’s wealthiest people now use London as their base. (The Sunday Times – Britain, December 03, via Carol Wilcox)
If some have too much, why give it to them? Why pay out corporate welfare and funnel all rents into few pockets? Better than trying to claw back wealth once amassed is to spread it around initially. That is, recover and share society’s surplus, the worth of Earth.
Forbes 400, monopolizers
Forbes magazine used to list millionaires. Now the 400 richest Americans are all billionaires. As a group, they’re worth $1.25 trillion, up $130 billion from last year. The top ten is dominated by owners of new tech, such as top dog Bill Gates, Wal-Mart inheritors, the lone stock trader Warren Buffett, and Sheldon Adelson who owns casinos and hotels not just in Las Vegas but also in Macau China where gambling is a huge part of the culture; his hourly wage was $1 million. The two Google founders, Sergey Brin and Larry Page, took in $13 million each day. (The Oregonian, September 22)
In mass markets in rich or big countries, one must expect some concentration of wealth, but this much? The concentration would be much less in a fair economy, one where we would run parts of our government like a business. Specifically, government would not hand out monopolies for free. Instead, our collective agent would charge full market value for its corporate charters, discovery patents, gambling licenses, etc, just as private business charges full market value for its insurance coverage and bank loans. Then government would pay out the revenue as a dividend to citizens, enabling workers to hold out for higher wages and afford classier goods, popping the Wal-Mart bubble. Once today’s holders of such valuable pieces of paper pay the going rate for their monopolies, then Forbes goes back to listing millionaires, not billionaires.
CEOs falsify option dates
From 1996 through 2005, at least 850 CEOs backdated their stock options to when their company’s shares were at their lowest monthly price. Doing so is often illegal and always dishonest. And the earlier date occurred before the executive took over as CEO. Buying the stock at the lowest possible price then selling it in real time, when if all goes well its price is higher, on average stuffed an extra $1.3 million to $1.7 million into executive pockets. (Too Much, November 27; via Ed Dodson) Failure to report this executive perk, an expense, also lets the company’s stock price reflect too much value. Now as companies confess to backdating, the loss in their value has so far reached $10 billion and should greatly exceed that, losses born by all other stockholders (The Oregonian, October 25).
Backdating is cheating. It’s the sort of thing government is supposed to punish. New York elected a new governor, Eliot Spitzer, with a record for prosecuting such abuse. If voters elect more fair-minded candidates, perhaps a critical mass will become attuned to distinguishing between private wealth and common wealth, between earnings and windfalls, and de-tax what’s yours or mine and recover and share what’s all of ours.
From frying pan to fire?
People and jobs are moving away from cities in search of land that’s not so expensive. Yet the parts that have seen the greatest growth since 2000, the Sun Belt, lack extensive mass-transit. Even in car-addicted places, Blacks and Hispanics are more likely to carpool or use public transit than drive alone to work. Some people leave early to avoid congestion. About half of the people who work in Phoenix and Riverside CA get to work between 5 and 7 a.m. Nationwide, 28% get to work early. Despite cities sprawling onto less pricey land, the share of homeowners spending more on their mortgage than they can afford – 30% of their income or more –went from 27% in 2000 to about 35% in 2005. (USA Today, Oct 3)
Spending more time in cars, one-third of children and teens, about 25 million kids, are overweight and get winded easily, which increases their risk of having diabetes, high cholesterol, high blood pressure, and other illnesses as adults (USA Today, October 3).
If both housing and transportation are to become affordable – and leisure possible – then regions must recover and share their sky-high site values. Speculators will take less land or none, and others will use what they take efficiently. That in-fills cities and towns so people don’t need cars – which are fattening – and can get about on buses, bikes, or foot.
Wal-Mart on shaky ground?
While retailers that attract higher-income consumers continued to do well in November, others, especially Wal-Mart, did not. Wal-Mart’s November sales were down 1%, and the company predicted December sales would be flat. The November decline was Wal-Mart’s first monthly drop since 1996 April. Moody’s still has an Aa2 rating on Wal-Mart, making it the highest-rated retailer in the world. Its low-budget customers may still be feeling the pinch of high fuel prices, as may others. More shoppers plan to buy online this year, 43% compared with 36% last year. More planned to use catalogs, too: 16% vs. 13% last year. (USA Today, December 1)
This is part of the scenario dubbed the end of suburbia, painted by those who note our energy use has passed peak oil. If such trends continue, Wal-Mart will need to find other uses for parking lots besides park cars. The transformation could come sooner, too, if jurisdictions shift the property tax off buildings onto land, making asphalt-covered aprons a financial drain.
Our audience withers?
National parks are seeing 20% fewer campers than 10 years ago, probably due to a slumping economy, higher gas prices, more competition for people’s time, and changing demographics. The long weekend is replacing the two-weeks off, and groups that seldom visit parks, such as minorities, are growing. Overnight stays in national parks fell by 13.8 million, or 20%, between 1995 and 2005 and have fallen an additional 4.3% in the first eight months of 2006. Tent camping dropped 23%, backcountry camping 24%, and RV camping 31% in the 10-year period. Visits to “gem parks” – which include Yellowstone, Grand Canyon, and Rocky Mountain – dipped between 2% and 15% during that time. (USA Today, Sept 28). As more people lose touch with nature, does that make it harder to win a critical mass for sharing Earth’s worth?
Airports rent out locations
After years of operating strictly as public agencies, airports are becoming more entrepreneurial. Besides serve airlines, they’ve always granted concessions to retailers, parking, and rental cars. Now airports are developing malls, office parks, and golf courses. They are also pursuing agricultural projects, drilling for gas, and marketing consulting services. In doing so, they rely less on the shaky finances of struggling airlines. Getting a high percentage of revenue from non-aviation sources earns airports an “A+” bond rating. Commercial airports last year generated about $13 billion in operating revenue, more than half of it from landing fees and various services to airlines, and 47% from non-aviation sources, mainly parking fees as well as rent from retailers and car-rental agencies. (USA Today, Sept 25) Sooo, land no longer matters in the modern economy, huh? For airports, both land (the stuff) and location (the proximity) generate revenue.
Income down, banker frets
Labor’s economic slice – including wages, health insurance, and pension benefits – declined 2.5 percentage points from 2000 to 2005, to 56.5% of GDP. Workers in Germany lost 3.1 percentage points over the last half-decade. In Japan the decline was 3 points. Overall, the workers’ share of the economy fell in four of the Group of 7 industrialized nations. In real terms, the wages of non-management employees in the US are now 10% below their level in the early 1970′s. (New York Times; via Heather Remoff)
San Francisco Federal Reserve Bank President Janet Yellen: income inequality has risen to such a level that “there are signs that (it) is intensifying resistance to globalization, impairing social cohesion, and could, ultimately, undermine American democracy.” She noted that during the past three decades, much of the increase in wealth had gone to the people at the top. Yellen said inequality is higher in the US than in other industrial nations and the safety net less generous. “Inequality has risen to the point that it seems to me worthwhile for the US to seriously consider taking the risk of making our economy more rewarding for more of the people.” (USA Today, November 7)
How risky is it for the economy to serve the people instead of vice versa? In the same article, former Fed chairman Alan Greenspan said that while the housing market has not hit bottom, “The worst is behind us.”
Outgo up; blame land
Today’s median-earning, median-spending family sends two people to jobs but has about $1,500 less for discretionary spending than their one-income middle-class counterparts of a generation ago. They spend less on food, clothing, major appliances, and fun in order to spend 75% of their income on mortgage, car payments, insurance, and childcare. (Elizabeth Warren, Harvard professor of law; via Alanna Hartzok) From 2000 to 2005, real estate prices escalated while incomes stagnated. Mortgages are burdening a growing number of people not only in fast-growing areas of California, Colorado, and Texas pay but also in the Midwest and in suburbsnationwide. On average, Americans spend 21% of income on housing; spending 30% is when housing becomes a burden. (The Oregonian, October 3)
While house prices have leveled and in some places are dropping, rents are rising. The share of renters spending 30% of income also jumped, from 37% to about 46%. In a poor city like Newark NJ and in some Southern California towns, over 70% of renters are paying burdensome amounts. In some Western campus towns, about half the renters spend at least half their income on housing. (The New York Times, October 3; via Heather Remoff)
To raise income, don’t tax it. To lower the cost of land, do tax it or charge Land Dues. Then direct a hefty portion of the revenue into a dividend to residents.
Murder & robbery in cities
In 55 cities during the first six months of this year, the overall number of homicides rose 4.2% compared with the same period in 2005. In 2005 the nation’s murder rate increased1.8%, after a two-decade low in 2004. While homicides have declined in some cities in 2006, of those 55 cities, 19 had double-digit percentage increases in homicides. More than 40 cities reported jumps in robberies. (USA Today, October 13)
David Hackett Fischer (The Great Wave) noted that for centuries crime followed inflation. Prices rose when population growth (demand) outstripped output of a basic necessity (supply) such as firewood. Today’s fastest inflation rate occurs in Zimbabwe – 1000% annually; there the state’s land seizures have discouraged work; everything’s scarce. In the US and the rest of the West, immigration exacerbates declining oil reserves.
For prices to stay up and not return to “normal”, more money gets issued than goods and services produced. In Britain, as mortgage approvals return to boom levels and consumers start to borrow more on credit cards again, money supply is growing at its fastest rate in 16 years. Some members of the Bank of England expect inflation to rise, too (The Times, October 31). In Zimbabwe, those with enough money speculate in real estate and foreign currency exchange while the state keeps printing new notes with strings of extra zeroes (The Economist, Aug 26).
Another impact on the US dollar is foreigners trading them in for other currencies, which also expands the domestic money supply. Result: inflation, meaning the cost of living overly burdens people at the bottom, where most crime is committed.
Home+sites’ prices cool off
In August, the median sales price of existing homes fell on a year-over-year basis for the first time since 1995 April. It was just the sixth drop in the past 38 years of theRealtors survey. Over the past five years, prices had been rising at an annual rate of 7.5%. As late as 2005 October, prices were up 16.8% on a year-over-year basis. Even after this decline, prices are still up 27% over the last three years. (CBS MarketWatch, Sep 25)
In September, the median price of a single-family existing home fell to $219,800, a drop of 2.5% from the median price in September 2005. That was the biggest year-over-year price decline in records going back nearly four decades. Sales of existing homes fell for a sixth straight month. (USA Today, Oct 25)
In September, the median price of a new home dropped from $240,400 a year earlier to $217,100. The 9.7% decline was the biggest drop since an 11.2% year-over-year fall in 1970 December. The median price was the lowest since 2004 September, when it was $211,600. Thanks in part to falling prices, purchases rose for the second month in a row, after falling for three straight months from May through July. (Associated Press, October 25)
While more than 100 metro areas posted price gains over the summer, 45 did not, and not just in industrial cities, where job losses have taken a toll on housing, but also in the Sun Belt. The 45 metro areas that saw year-to-year price declines in Q3 were the most since the Nat. Assoc. of Realtors began keeping records in 1979. (USA Today, November 21)
Insiders: recession ahead?
Treasury Secretary Hank Paulson, who built a $700m private fortune at Goldman Sachs, is re-activating the ‘plunge protection team’ (PPT). Otherwise known as the working group on financial markets, it combines the heads of Treasury, Federal Reserve, Securities and Exchange Commission (SEC), and key exchanges. After the Wall Street tumble in October 1987, Ronald Reagan created it to buy stocks, currency, and credit futures whenever a crash looms. During the 1998 global crisis triggered by Long Term Capital, the Fed orchestrated all of the major banks to prop up the currency markets. They have an informal agreement to do the same for stocks. (UK’s Telegraph, October 30)
Keep their number handy. A chart plots the National Association of Home Builders’ confidence against the Standard & Poor’s 500 stock market index over the past ten years. Not only did the NAHB index presage the start of the post-1994 bull market in stocks, but its decline starting in 1999 foreshadowed the equity market collapse the next year. Builder confidence rebounded in 2001 November – a year ahead of the stock market upswing that began in 2002 October. Over the past year, builder confidence plummeted 54%. Were stocks to follow suit, the S&P – 1400 in late October – would be south of 700 this time next year. We’ve had 11 sharp declines in the housing market since World War II, including this one. Eight of the last ten preceded a recession. (Fortune Magazine, November 13)
Could be coincidence; ten years are not much in the history of cycles. There was another eye-popping chart: the exponential J-curve growth in using homes as cash machines – cash you pay back with interest.
Investment in residential structures plunged at an annual rate of 17.4% in the summer months, the steepest slide in 15 years, since a 21.7% drop in 1991 Q1. Investment in commercial structures helped offset the housing collapse by rising at a 14% annual rate. Conventional economists said back in July that GDP in Q3 would hit 3.1%; in October they revised themselves downward to about 2%. Nouriel Roubini, a professor at the Sterns School in NYU, back in July forecast 1.5%. GDP came in at 1.6%, its weakest growth since the beginning of 2003, when it was emerging from the 2001 recession. For Q2, economists on average had expected the GDP to grow at 3.2%, while Roubini had forecast 2.5%. It reached 2.6%. Roubini predicts a housing-led recession to be in place by 2007 Q1 or Q2 at the latest. (MarketWatch, October 27)
FROM THE OP-ED PAGES
Brits and other northerners
Financial Times (London Edition, October 20): What is needed now is a shift of the discussion from funding local authorities to the gradual use of land levies to enable workers to protect their living standards and, if possible, transfer to them some of the gains from a single world economy. (Via Mark Monson)
Guardian (UK, Spt 29): “Taxing land values is an old idea, but one as relevant today as it was when Lloyd George first proposed it.” (Via Mark Monson)
The Gazette (Montreal, September 11): Land-value taxation makes it costly for speculators to sit on vacant land because they pay the same tax as the owner of an office building on comparable land. Land-value taxation discourages speculation, encourages development, and helps curb urban sprawl. The idea developed with Henry George, a 19th-century editor and political economist in the United States who argued speculators shouldn’t profit from rising land value because they’ve contributed nothing to it. The system would be best applied uniformly across Quebec and Canada. (Via Mark Monson)
ISAIAH, an ecumenical alliance of 80 congregations in the Twin Cities metro area: We need an incentive system in place that makes speculating in sites less attractive and instead encourages investment and productive use. Land Value Taxation has been a powerful redevelopment force. We support efforts to bring this innovation to Minnesota. (By member Rich Nymoen and Sarah Gleason in The St. Paul Pioneer-Press, November 22; via Mark Monson)
Let’s flatten or shift taxes
Nobel laureate Joseph Stiglitz in the Miami Herald (November 15; via Ed Lawrence): “A global externality can best be dealt with by a globally agreed tax rate. This does not mean an increase in overall taxation, but simply a substitution in each country of a pollution (carbon) tax for some current taxes. It makes much more sense to tax things that are bad, like pollution, than things that are good, like savings and work.”
LA Times (November 20): “Since 1986, Washington has taken about 15,000 steps backward, enacting an average of 750 new or modified exemptions, deductions, and other wrinkles to tax law every year. Two Democrats — Sen. Ron Wyden of Oregon and Rep. Rahm Emanuel of Illinois — have introduced bills that would simplify and flatten federal taxes. Lawmakers should eliminate all but the most vital and effective tax breaks and tailor those as precisely as possible to the goal they want to achieve.”
Let’s lose subsidies
John Stossel, host of ABC’s 20/20 (September 27): “Big business and big government prosper from the perception that they are rivals instead of partners (in plunder). Politicians like it that way because they get power and prestige, and businessmen like it because they get protection from competition. They knew regulation would burden smaller companies more than themselves. Regulation isn’t the only form of protection that big business gets from government. Companies with political clout get cash subsidies, low-interest loans, loan guarantees, and barriers to cheap imports. Even foreign aid is a subsidy to big business because governments receiving the taxpayers’ money buy American exports.” (Via Mark Guttman of the DFCP)
Ex-Bush Sr. advisor, Catherine Austin Fitts (July 24): “Cui bono? Who benefits? There is no place on Al Gore’s time line that shows the growth of consumer, mortgage, and government debt; the corporate model’s economic dependence on subsidy that drives up debt … is a critical piece.” (Via Kathleen Walsh)
It’s not just Congress. States and localities also put lots of pork in their budgets. Here in Oregon, tens of millions in grants intended for country doctors end up in the pockets of rich plastic surgeons, covering malpractice premiums (Oregonian, Sept 21). And the City of Portland subsidizes the Chamber of Commerce.
USA Today (October 25): “US taxpayers shouldn’t help create the next catastrophe in the Big Easy. The federal program collected only $2.2 billion last year in premiums but will pay out more than $20 billion in Katrina claims, leaving taxpayers on the hook for the rest. Worse, the program encourages development in areas subject to flooding – not just in New Orleans, but everywhere – by offering insurance at bargain rates in areas where private insurers fear to tread. If local authorities allow residents to rebuild in the most dangerous areas, it should be at their own risk.”
LA Times (October 31): “Few US growers would be in the cotton business if not for one of our most obscene corporate welfare programs. Much of the roughly $3.5 billion every year goes to large corporate operations or wealthy families. The payments encourage overproduction and make it almost impossible for African farmers to compete. This doesn’t just hurt people overseas. The US government last year spent about $23 billion on farm subsidies. What did taxpayers get for their money? A fat agribusiness industry and inflated land values. When other nations subsidize industrial exports that compete with our goods, we cry foul, and this incessant hypocrisy contributes to anti-American sentiment in much of the world. While the United States spends billions of dollars a year on foreign aid, it spends even more on agricultural subsidies that make it harder for those countries to wean themselves off outside support. Enough already.”
FROM THE ARCHIVES
Trade or raid? Our call.
The Christian Science Monitor (November 20): “Reducing barriers to both trade and capital flows can promote a more peaceful world. Examining military conflicts from 1816 through 2000, countries that rank lowest on an economic-freedom index are 14 times more likely to be involved in military conflicts than are countries whose people enjoy significant economic freedom. Economic freedom is about 50 times more effective than democracy in diminishing violent conflict.” By Donald J. Boudreaux, chairman of the economics dept at George Mason University.
A Sustainable World
Creating a Sustainable World: Past Experiences, Future Struggles is edited by Trent Schroyer and Thomas Golodik (Apex Press, 2006). Essayists include: Robert Engler, author of The Politics of Oil, Vandana Shiva, Wolfgang Sachs, Peter Montague (editor of the blog Rachel), Ward Morehouse, Alanna Hartzok who recently won a contract from the UN to put Land-Value Taxation on the web, among others. The authors reckon that neo-liberal politics and neoclassical economics have been subjugated to corporate power, which abuses both natural and human resources unsustainably. Each contributor interprets what is happening, speculates about the consequences, and opines how to sustain our world. Introductions to each section of the book integrate the material well. The book’s four sections are: sustainable development, the impact of corporate power, requirements for a sustainable lifestyles, and redesigned social systems that might achieve them. Their answers urge us to limit corporate power, return to local economies and polities, reassert the commons, rebuild sustainable agriculture, and strengthen local democratic institutions – which would only reverse the prevailing trends of the last three centuries. Some of the articles were a bit prolix yet Creating a Sustainable World offers hope to a readership, likely to be comprised largely of students, who need encouragement and direction. (This digests a review by Bill Batt which appeared in Groundswell, November.)
Losing home investment
Dean Baker, author of The Conservative Nanny State: How the Wealthy Use the Government to Stay Rich and Get Richer, in an editorial published by Truth Out (October 24): “In the recessions in the mid 70s and early 80s, housing fell off by close to 50%. However, house prices had not gotten so out of line with fundamentals in those earlier periods, nor had housing wealth fed so directly into consumption. In the fall of 2000, six months after the stock market crash and just a few months before the beginning of the last recession, not one of the ‘Blue Chip’ 50 economic forecasters saw a recession on the horizon. In fact, the most pessimistic forecast for the next year was that the economy would grow at a modest but respectable 2.2%. This time, tens of millions of families bought homes at bubble-inflated prices and now face the prospect of seeing their life savings disappear in the housing crash.” Baker is Director of the CEPR in DC which frequently appears in the mainstream press and wins funding from major foundations. (via Paul Martin)
Builders’ debt gets risky
Barron’s, (Oct 2): The housing market downturn means option deposits on land and joint ventures could come back to haunt some homebuilders, their financial partners, and their stockholders – not to mention the economy. If orders dry up and homebuilders abandon optioned land, they have to spread the sunk costs of developing a community – which range from architectural plans to the construction of model homes and swimming pools – over fewer homes. Walking away from unfinished communities would kill their reputations. Under accounting rules, options on land are considered assets plus builders need not disclose debt, no matter how many millions, if it’s a minority stake in the equity used to buy land. Yet if builders are forced to write off their land options or off-book investments, that they must disclose. Significant use of options and joint ventures put downward pressure on these companies’ Moody’s ratings relative to companies with more straightforward financing. Some builders could face substantial hits to book value. Housing bulls argue that those shares already reflect such losses; the Standard & Poor’s Supercomposite Homebuilding Index is down 41% from its high of 2005 July [so bad news is good news?]. When homebuilders forfeit their option, the landowner presumably would shop the property anew, and at a reduced price, particularly if it carries debt. Selling at 25% to 50% off would impact the rest of the land market and thus the economy.
Fortune proposes a voucher
Fortune magazine (November 13) proposed a health voucher for all Americans, which would be a partial Citizens Dividend. The authors would not fund the voucher from rent but would replace the Medicare tax on wages with a national Value-Added Tax. People could spend the voucher on any health provider, which would stimulate competition. The reformers would also replace malpractice insurance with federal adjudicators who could also ban bad doctors. Lowering malpractice costs while raising competition should lower overall medical costs.
Except for the VAT, which would certainly grow over time, the plan appears to be an improvement over the present costly system that caters to rich dying people. A better funding source might be the source of so much illness – pollution, especially the burning of hydrocarbons; the feds could auction of emission permits and raise extraction leases to full market value. Once people grow accustomed to recovering the value of nature and receiving a universal benefit, they’ll be ready for total geonomics – no taxes on efforts while sharing all of society’s surplus.
Citizens Dividend key?
Fred Harrison, author, Ricardo’s Law (Oct 17): “The Alaska/Alberta model – population-poor/resource-rich – is not representative of most regions. Once people have paid for all the benefits they receive in the locations they occupy, I don’t see a surplus left to share out as a Citizens Dividend. ”
Editor: Every region has a metro center of sky-high values. Across America, people spend at least 40% of GDP on rights to or use of nature. Redirect that immense flow from a few owners and lenders to everyone.
John Watkins, founder, Simple Society (October 18): “A Citizen’s Dividend means every human in this country from birth to death would receive $600 a month – $900-$1,000 a month if children are not included.”
Editor: It’s not that kids are excluded, exactly. Say you did include them directly. Probably you won’t give $500 bucks monthly to an infant. Probably you’d give it to their parents to hold or spend for the kid, pretty much the same thing, or set up some bureaucracy to hold the dough til they come of age, which unduly complicates things. Plus, savings imply debt. You save their share, the bank lends it to somebody else, who has to pay it back with interest. Better than debt – which created money, absentee owners, and class historically – is a constantly falling cost of living. You can rev up the pace of techno-progress if you don’t save but spend all the rent today, so when kids reach maturity, their cost of living will be minuscule. Thus parents are not just spending their kids’ inheritance but also bringing about a better future sooner.
Mark Porthouse, Brit (Oct 21): “If the dividend goes to citizens, what about struggling immigrants?”
Editor: Better to struggle in a society that’s prosperous, open, and just – one’s bound to reach their goals sooner. Also, if citizens share rent, eventually, the idea will spread, even all the way back to the immigrants’ homeland; at that point, they’ll no longer have to emigrate, as their homeland will be prosperous, too.
John Kromkowski, Baltimore lawyer (Oct 3): “If the Citizens Dividend is the solution, what would it matter economically how the CD is funded: by Income Tax, by Land-Value Tax, by Real Estate transfer tax.”
Editor: If the source of the CD is not site values, then paying the CD would just inflate site values. To recover site rent, you don’t need LVT. The mechanism could be the deed fee, collected annually, like some states do for cars. Or try a land use fee. Or Land Dues. Also, recovering site values motivates the recycling of sites, which increases housing supply, lowering the cost of housing, letting the CD go further. The CD is a dividend, literally, a share of regional site values. If local land values are high, your CD is high; so, the less affordable the land, the fatter your CD.
Alanna Hartzok, Pennsylvania activist (Oct 17): “One other way is to join LVT to the Peoples Budget process. People could then decide what services to fund and how much to put into CDs.”
Editor: Put the Budget on the Ballot was a campaign I waged a couple decades ago with our VP Gary Flo now at the U of Vermont. We got a little ways with the Greens. It cheered us greatly to see some Brazilian towns (in the commie south) adopt the reform. While I no longer devote much energy to it, certainly I would not oppose it. One drawback to combining the political and the economic is that it’s biased towards those who are more political, who like the sound of their own voice, who like to stand up at meetings and argue. A CD is much cleaner, sparing those who’d rather get on with life and leave the debates to the barbershops.
Bent Straarup of Denmark, a nation that has had more LVT than most countries (October 20): “I so agree with you! Thank you for your arguments on simplicity and equal shares to every one! The point is to me that we should not expect every citizen to go deep into this subject. Everyone should, however, understand that he or she has a birthright to fight for.”
Richard Reid, Oregon reformer (November 14): “The builders claim home ownership is the American Dream. We won’t make much progress without reclaiming the rhetoric. Millions get diverted to subsidize development – go Intel! Growth could be sustainable if it pays its own way, meets community needs, spreads the wealth. That’s why I like your Citizen Dividend so much. If people saw the whole picture, they’d get angry. A simple cartoon, if drawn fairly and clearly and placed in the right places in public discourse, would make it difficult for the real estate industry to push back even with their millions in ill-gotten gains. Thanks again for keeping the Geonomist going. It’s so very good to know that progress is continuing around the world.”
In the media, on a podium
Howard Kronish, Portland, ret (October 5) on Lewis & Clark College’s environmental conference: “You got the land aspect of the environmental movement just right. I could see the preparation it took to fashion the brief talk into the main topic at hand. I really enjoyed your presentation, as I think the audience did too. I was observing their concentration and interest. It wouldn’t surprise me if you get many inquiries from your talk. Too bad you didn’t have more issues of The Geonomist on the table for the audience to take.”
Editor: At the beginning of the day, the table had a pile of newsletters. Their disappearance gives me hope!
The American Journal of Economics and Sociology in July and a new book, Natural Resources, Taxation & Regulation, edited by Laurence S. Moss, published my annotated bibliography co-authored with Tom Gihring, “Financing Transit Systems Through Value Capture”. It’s also reprinted by the Urban Land Institute and posted at the Victoria Transport Policy Institute website. Bill Sell, a Milwaukee businessman bitten by the land-tax bug, in three interviews with his County Supervisors and/or staff, peddled his essay and my transit bibliography.
The editorial team of Re-public has decided to publish my essay, Beyond Ownership, in their forthcoming special issue, ‘The promise of the Commons’, in both English and Greek. The Portland Tribune printed our letter (September 21) that urged putting the property tax shift on the ballot. Wetzel Dave, Vice-Chair, the Mayor’s Transport for London, wondered if I had available a short essay on using rent to fund a Citizen’s Income. In fact, I’ve a stable of pre-used articles that I’d happily provide anyone.
Newcomers, old stayers
The fall Geonomist elicited enough renewals and newals to cover the costs of copying and postage: from super stalwart Jing Chen (U N BC economist); stalwarts Chuck Metalitz (IL activist), John Morales (MO ret. Panama Canal); sustainers Stephen Bezruchka, MD (Seattle activist), C. Lowell Harriss (NY ret. prof), Heather Remoff (PA author); supporters Karen Harding (OR activist), Joan Sage (Philadelphia activist); and subscribers Meta Heller (WA retiree), Howard Kronish (Portland retiree), among others. Big thanks to all for re/joining, donating, and granting. If you don’t see your name above and know it belongs there, just send a check. We’ll know what to do with it.
WHERE FROM HERE?
Free solutions newsletter
John Watkins, founder, Simple Society (October 7): “The fall issue of The Geonomist is exceptional. Hard work too, I’ll bet. It’s interesting the way you fund your efforts; you must live in doubt all the time. One of the benefits of your membership in The Alliance is that you can give up to 50 free subscriptions to Simple Solutions every month. If any of them ever gives a gift subscription to a friend, or orders a transcript of one of our forums, your Forum on Geonomics earns 30%. It starts small but can grow fairly large.”
Editor: Check out John’s good work at http://simsoc.org. If you’d like a trial subscription to his newsletter, please get in touch.
Make majorities move
Alan Durning, founder of Sightline Institute, nee Northwest Environment Watch, posted (September 18): “A 2003 survey of legislators and local elected officials found that some 63% believed that land-value (or split-rate) taxation would be a positive stimulus for urban development.” (Via Mark Monson) Are your elected representatives among the majority? Are they acting on their beliefs? Our supporter Al Hartheimer is helping his new governor act positively. The governor-elect of Massachusetts has on his Transition Committee Working Group for Economic Development a friend of Al named Michael Wilcox. To turn Massachusetts around, Al suggested instituting a state land tax while reducing the state income and sales taxes. Michael wants to know who else think this is a good idea. Besides telling him, if you know anyone on any of the governor’s other transition committees, write to them directly; if not, submit your thoughts at http://patrickmurraytransition.org. Let Michael Wilcox know at mfw at mfw.us that there are lots of people who think these are good ideas. And cc Al at ahartheimer at yahoo.com.
What you can do
What you can do Meta Heller, Olympia WA retiree (October 20): “Eventho’ I live in subsidized senior housing and would otherwise be out on the streets, I send $15 (not $50). However, send me a T-shirt and I will wear it in the legislature where I will testify for tax reform.”
Editor: Next batch of T-shirts, you definitely get one. Anyone else so eager? However much you can afford, it all helps us highlight a path to a better world. Send what you can; we’ll do even more to deserve it. Happy Winter Solstice of 2006!
Dear Forum on Geonomics (an educational IRS 501(c)(3));
Here’s my tax-deductible yearly dues:
___ $15.00 to be updated via THE GEONOMIST and other occasional announcements.
___ $25.00 to be a supporter receiving THE GEONOMIST plus free slogan button, discounts, and the right to vote.
___ $50.00 to be a sustainer receiving above plus free bumper-sticker and T-shirt.
___ $100.00 to be a stalwart receiving all of the above plus free two books.
___ $500.00 to be a patron receiving above plus free signed original editions of art and posters.
___ $1000.00 to be a benefactor receiving above plus free passes to all events and programs (except global tours).
Send to THE FORUM ON GEONOMICS, 5117 SE 30th Ave., Unit 44, Portland OR 97202
The bottom line: Secure Earnings, Share Earth
Finns, Germans for BIG
Imagine getting an income just for being a member of a society with a surplus. You’d have so much security, you could choose to do only useful work. You’d have time to enjoy your brief stay on this planet.
Back in 1985 in the UK Parliament, the Labour Land Campaign sponsored a bill to craft a dividend paid to citizens from the recovered values of sites and resources. Dave Wetzel worked on that campaign and works for the “rent” dividend now. He wields some clout among civic leaders worldwide; he’s a VP in the capitol’s mass transit agency, Transport for London.
Something similar to this dividend is the Basic Income Grant (BIG). Some of its advocates note the payment should come from “rent” – the money we spend on the nature we use (sites, resources, EM spectrum, ecosystem services). Most proponents, however, are silent on how to fund BIG. The Scottish Green Party advocates both a “Citizen’s Income” and a tax on land value but does not connect the two – a case of the left hand not knowing what the right hand is doing.
Among the BIGists are some fairly big (no pun intended) names. Prime Minister of Finland, Matti Vanhanen of the Centre Party, in joining his nation’s debate on BIG, said that the current wide range of benefits could be replaced by a BIG of about 600 or 700 euros per month, supplemented by incentives to encourage people to work. The Finnish Greens had accused the Social Democrats of using false reasons to reject this extra income for everyone.
Several newsworthy Germans have endorsed BIG, including sociologist Ulrich Beck, author of “The Risk Society,” and chairperson of the left party PDS, Kayja Kipping. One of the 500 richest Germans, Gotz Werner, owner of over 1700 drug stores with annual sales of 3.7 billion euros said, “Like almost all entrepreneurs, I wanted more and more in the past. Today maximizing meaning is my top priority. I have read the classics, Goethe, Schiller. I understand my own success is not everything. I want to help others succeed. ‘Nothing is stronger than an idea whose time has come,’ Victor Hugo said. Two years ago BIG was something for a few experts. When I give lectures today the halls are full.”
In behalf of Africa, the UN Commission for Social Development praised Namibia’s basic income grant proposal. The Lutheran World Federation (LWF) urged its member churches to consider poverty reduction initiatives like Namibia’s BIG proposal. The LWF also praised Namibian Lutherans for their work promoting the BIG in South Africa.
In Australia, John McDonnell has been an MP for the Australian Labour Party since 1997. Now he campaigns to become the next Labour leader and endorsed social rights to a Citizen’s Income (or BIG). If his campaign succeeds, he’d be poised to become Prime Minister of Australia next general election, after which he could likely get his Citizen’s Income implemented.
In South America, Uruguayan member of the Parliament Pablo Álvarez (Frente Amplio, left wing coalition) presented at the Chamber of Representatives of the National Parliament a proposal to create the “Uruguayan National Network for Basic Income”. The Parliament approved the creation of a Committee to study the political meaning and feasibility of BIG. A committee can be a graveyard for new ideas, but at least the discussion is underway.
In North America, participants in a survey by the [Canadian] National Council on Welfare ranked the Guaranteed Livable Income (another name for BIG) number one for action to permanently reduce poverty. Three Canuck politicos declared their support: Conservative Senator Hugh Segal, Green Party Leader Elizabeth May, and the Green Party of Manitoba. Ontario Green Party leader Frank de Jong wrote us (May 26), “I just got around to reading your amazing piece on the citizen’s dividend in Common Ground. You inspire me greatly.” US BIG posted on the web a copy of “Can a Citizens Dividend Replace Welfare?” What do you think the answer is?
FROM THIS PEN’S PERCH
Gulfs and support widen
Summer’s already begun and here I am in a New York airport, after the Ecological Economics meeting, stranded by a hard rain, trying to wrap up this summer issue. Sitting butt-numb, wondering what’s next as some basic trends keep moving apart. Some guys get a billion dollars a year while others must keep working past the old retirement age. Subsidies and oil account for ever more of the income gap. Bankruptcies pile up while, too late, home (site) prices drop. The environment worsens yet investors appear oblivious as the stock market hits new highs and the newest world’s tallest building nears completion. In the Pacific Northwest, it’s different. Land prices are still high – they always follow the rest of the nation – and its environmentalists keep ahead of the pack, getting local governments to address both climate change and peak oil, altho’ one problem seems to cure the other. And the solution to this myriad of ailments along economic lines keeps making more friends, more in Britain and Asia than in America, yet the coming housing bust could change that. Enough middleclass Americans lose all their savings by defaulting on mortgages and they may become ready to hear what works. It’d be a hard way to learn, but sometimes it seems only pain gets thru. On the bright side, once the rules on property are fixed right, they’re fixed forever.
Iraqi oil funds bad guys
Between 100,000 and 300,000 barrels a day of Iraq’s declared oil production over the past four years is unaccounted for. Using an average of $50 a barrel, the discrepancy was valued at $5 million to $15 million daily. It’s possible that Iraq has been consistently overstating its oil production. However, Iraq has a history of corruption – the “resource curse”. Bush’s Administration has spent billions of US tax dollars to improve Iraq’s oil industry while output has dropped. These new figures reinforce longstanding suspicions that smugglers, insurgents, and corrupt officials control significant parts of the country’s oil industry. (James Glanz, International Herald Tribune, May 13) That oil corrupts and absolute oil corrupts absolutely is not peculiar to Iraq; it happens in the US, too. One current and two former Alaska legislators – all Republicans – were indicted for accepting bribes to back a pipeline negotiated by a former governor. More than just cash, the bribes included a job offer in Barbados. Yet businesses lavishing politicians with perks and campaign contributions is how permits, taxes, and subsidies get passed – until we realize the worth of Earth belongs to us all. One US presidential candidate, Tommy Thiompson, does call for giving the oil revenue to the Iraqi people, something Bush’s administrator Brenner talked about doing, too.
Rich from oil & subsidies
According to the United Nations, in 2006 the net transfer of capital from poorer countries to rich ones was $784 billion, up from $229 billion in 2002. (In 1997, the balance was even.) Even the poorest countries, like those in sub-Saharan Africa, are now money exporters. Rich-country governments spent $283 billion in 2005 to support and subsidize their own agriculture, mainly companies like Archer Daniels Midland and Cargill. They undercut small farmers in poor countries who stop farming; three-quarters of the world’s poor people are rural. Then their nation buys food from the North. (NY Times, March 25, via Heather Remoff)
While income for the lower 55% of the world’s 6-billion-plus people declined or stagnated last year, the total wealth of the global ruling class grew 35%, topping $3.5 trillion USD. It came mostly from speculation on equity markets, real estate, and commodity trading, rather than from technical innovations. One hundred millionth of the world’s population owns more than over 3 billion people. Over half of the current billionaires (523) come from just 3 countries: the US (415), Germany (55) and Russia (53). (James Petras at stwr.net)
The oil-rich, former Soviet Union, including billionaires in Russia, Ukraine and Kazakhstan, would rank second to America as home to 65 billionaires. Turkey is home to 25; Hong Kong accounts for 21; but France has only 15. Quite a few of these billionaires in emerging markets, such as Mexico and Russia, were helped along the way by cronyism and weak antitrust laws. (Los Angeles Times, March 17)
Topping off tallest of all
Burj Dubai, the iconic super-tower, is now the tallest structure in the Middle East and Europe and it is not finished. Already at 110 levels and 380 meters high, Burj Dubai shares the honor of having the largest number of floors in any building in the world, alongside Sears Tower in Chicago. At the current unfinished height, the tower is also the world’s ninth tallest building. Burj Dubai is only one meter shorter than the Empire State Building, the second tallest in the US. It is the centerpiece of the AED 73 billion (US$20 billion) Downtown Burj Dubai, a mixed-use project in the heart of Dubai featuring residences, commercial space, hospitality projects, and several retail outlets including The Dubai Mall, the world’s largest shopping and entertainment destination. Burj Dubai is on course to become the world’s tallest building. (Emaar Properties PJSC press release, March 3, via Phil Anderson) Every time the newest world’s tallest building opens, it has been just after the 18-year land-price cycle peaked.
Buy bottled air? Got to.
Take a deep breath. Or, maybe not. Not if you’re in the Indian city of Calcutta. Traffic has so dirtied the air that 70% of its residents suffer from lung disease, including breathing difficulties, asthma, and lung cancer. The worst offenders are the 50,000 rickshaws – half of them unregistered – that burn “kantatel”. This fuel is a deadly concoction of kerosene and petrol. Government cannot force rickshaw drivers to convert to a cleaner fuel because they’re protected by powerful trade unions. What government has done is soothe the headaches of police who breathe the worst smog at work. The city equipped traffic offices with oxygen concentrators, the kind used by patients in hospitals. Doctors caution, however, that the oxygen cannot dislodge pollutants buried deep in the lungs. (17 May, BBC News) We already have the technology: fuels, motors, and mass transit that’d emit less pollution. But we still choose the same old entrenched smoggy ways because they’re cheaper, made cheaper by subsidies while the more efficient clean ways are made more expensive by taxes. Stop letting drivers pollute for free and start recovering the socially-generated value of sites and resources, then cities won’t be choked with traffic and the air with smog. Denizens could breathe again.
Retire when? Not soon.
After falling for more than 100 years, the retirement age edged up; in the 1980s, 18% of over-65s kept on working, now 29% do. What choice do those Boomers have? Aging has gotten spendy and benefits scarce. (LA Times, May 30) Slow trends that are so hard to sense can only get worse until people feel right about getting an extra income apart from their labor, one from the value of the land in their region, a value that all residents contribute to just by contributing to population density, one of the main factors by which society generates the value of locations.
Congress to tax oil?
The World Bank Group reports in 2005, public institutions such as the World Bank and US agencies such as the Export-Import Bank provided more than $3 billion to the international oil and gas industry; over the past year, lending for oil projects increased more than 75%. Instead of alleviating poverty, most oil and gas projects have exacerbated corruption, worsened economic inequality, increased local conflict, and intensified global climate change. Hence Congressman Maurice Hinchey (D-NY) on April 17 introduced a bill to help end international subsidies to Big Oil. (The Progress Report)
Despite the market price for crude oil and natural gas being lower than a year ago, in Q1 Exxon Mobil, the world’s largest publicly traded oil company, saw profits rise 10% to $9.3 billion. Sen. Bob Casey (D-PA), introduced a bill to impose a windfall profits tax and close certain tax loopholes for big oil companies. (AP, April 26)
Ethanol subsidy to land
When we subsidize them, farmers can make money farming or by selling or leasing land. On one hand, returns from farmland have averaged 10.9% annually the last 15 years (Bloomberg, February 20). On the other hand, the growing demand for ethanol has pushed up corn prices an average of 63% to $3.31 a bushel during the first quarter of 2007. So farmers nationwide expect to plant 16% more acres to corn this year. In Iowa, the value of good farmland shot up 16% over the last 12 months, with 7%, or nearly half the total increase, coming in the first quarter of 2007. (Des Moines Register, May 29) Dr. Fred Foldvary, Sta Clara U, uses this example to show how higher prices for goods get capitalized into higher land values. In this case, it is corn, as subsidies to ethanol drive up corn prices. Who benefits? Owners of corn farms.
Pay for rich golfer’s links
The more you can afford to pay, the less you have to. Bill Gates, Michael Jordan, and Don Johnson have all hit the links at the Bandon Club in central Oregon. To play golf there, rich CEOs fly into the nearby Bend airport on 5000 private jets per year at a cut rate, thanks to their shareholders kicking in and taxpayers paying $31 million for the airport and its new expansion. Golfers pay $200 each and altogether play 120,000 rounds each year, besides drink, dine out, and hire hotel rooms. Despite raking in tens of millions each year, Bandon also gets a break on its property tax and the local government’s power of eminent domain to take land for a reservoir in that dry part of the state. (David Cay Johnston, The Oregonian, June 15, via Gil Herman) While not a major rip-off, it is exemplary of how the elite-state partnership works. It’s spending like that that makes government expensive and a bad bargain and that keeps the rich rich since they can slough off their costs onto everyone else. It’s why discretionary spending should reside not with politicians but with citizens – pay public revenue to citizens directly, equally, by paying them a monthly dividend from raised revenue, from charging for granting privileges like land titles, resource leases, utility franchises, charters, and … airport landing slots.
Showy insider confesses
CNBC TV’ Jim Cramer, host of Mad Money: “A lot of times when I was short (in debt for stocks) at my hedge fund – meaning I needed it (the stock to go) down – I would create a level of activity beforehand that would drive the futures. It’s a fun game, and it’s a lucrative game.” Cramer told how he’d make bets that gave the impression insider investors were predicting a stock’s future. Cramer said everything he did was legal but added that illegal activity is common in hedge funds, where regulation is lax. He said some hedge fund managers spread false rumors about a company to the media and large trading desks to drive a stock price lower. He said this practice is illegal, but easy to do “because the SEC doesn’t understand it.” He said, “The way that the market really works is to have that nexus hit the brokerage houses with a series of orders that push it down, then leak it to the press, and then get it on CNBC.” (Matt Krantz, USA Today, March 23,)
For 2006, some managers of hedge funds were paid more than $1 billion each, way more than they’ve been paid in the past. While the Standard & Poor’s 500 index returned 15.8% last year, many hedge funds did 40%. Centaurus Energy, before fees, posted 317%; it hasn’t done less than 200% since its founding in 2002. Hedge funds pool the capital of very rich individuals or institutions such as pension funds who meet financial minimums set by the SEC. Unlike the more regulated stocks and bonds bought by mutual funds, hedge funds buy derivatives and other exotic debts – which can hit the jackpot or swallow an entire investment. Hedge fund managers typically take 2% of the fund’s assets and 20% of its returns. (AP, Tim Paradis, May 1)
Stocks defy gravity
Are giant corporations any longer national? Companies like IBM, Coca-Cola, and Intel – all among the 30 in the Dow Jones Industrial Average – derive well over half their revenue from abroad. The growing economies of Europe, China, and other emerging giants absorb US exports. US-based corporations saw the earnings of their foreign affiliates in 2006 Q4 surge to an annualized level of $272 billion, up 38% from the pace in 2005 Q4. That amounts to 15% of all US corporate profits.
Flushed with global profits, companies buy back their own stock and purchase that of others – they merge. Both actions pump up share value. The price of shares for the Standard & Poor’s 500 index is about 16 times the companies’ earnings. The S&P 500 is flirting with its historic high of 1527.46 set in 2000. The Dow Jones Industrial Average crossed 13000 for the first time. All this despite the housing-market slump and gasoline topping $3 a gallon.
An old adage on Wall Street advises, “Sell in May and go away.” Historically, from May through October share prices average lower than during the winter-to-spring period. Some of the stocks performing the best are companies that typically do well during downturns – relatively safe industries such as healthcare, utilities, and telecommunications. Like farming, football, and fashion, markets are cyclical, too. As the US economy – the globe’s largest and the one that imports the most goods – slows, other economies must slow, too. Those places will quit returning such fat profits to US firms. (Mark Trumbull, Christian Science Monitor, May 8)
Income gap 2x 1980′s
Income inequality grew significantly in 2005, with the top 1% of Americans – those with incomes that year of more than $348,000 – receiving their largest share of national income since 1928. Their incomes rose to an average of more than $1.1 million each, an increase of more than $139,000. The top 10%, roughly those earning more than $100,000, also reached a level of income share not seen since before the Depression. Average incomes for those in the bottom 90% dipped slightly compared with the year before, dropping $172. The new data also shows that the top 300,000 Americans collectively enjoyed almost as much income as the bottom 150 million Americans. Per person, the top group received 440 times as much as the average person in the bottom half earned, nearly doubling the gap from 1980.
Defaults up, prices down
In California, Florida, Nevada and Arizona, speculators walked away from properties since home prices fell as interest rates rose. Late payments and foreclosures on adjustable-rate home mortgages spiked to all-time highs in 2007 Q1, up from 14.44% to 15.75%. The percentage that started the foreclosure process climbed from 2.7% to 3.23%, the highest on record. Among lenders of loans with teaser rates, 30 have gone bankrupt this year. In Q1, the number of all mortgages starting the foreclosure process rose to 0.58%, a record that surpassed the previous high in 2006 of 0.54%. (Jeannine Aversa, AP, June 14)
Sales of existing homes in May fell by about 10% from last year to the lowest level in four years, and prices dipped for the 10th month in a row. The inventory of properties on the market has swelled to an 8.9-month supply, highest in 16 years. The median price for an existing home fell about 2% to $223,700 from a year ago. (AP, June 26)
Home prices in the 10 cities fell 2.7% on a year-over-year basis, the largest decline since September 1991. Meanwhile, prices in 20 cities dropped a record 2.1% year over year. Price appreciation has slowed for 17 consecutive months. (MarketWatch, June 26)
Commercial real estate, which lags behind residential, seems to have peaked in February. See the iShares Dow Jones US Real Estate index (an ETF and NYSE: IYR). Go to the YTD or 1-year chart.http://finance.google.com/finance?q=IYR
Land eats up our budget
The number of households spending more than half their income on housing increased in one year by 1.2 million to 17 million in 2005. That year, records were set for home sales, single-family starts, and house-price appreciation. Then in 2006, while median house prices increased at least 10% in 23 of 149 metropolitan areas, they fell in 34 metros. Of the 11 metros that had declines of greater than 3%, nine were in economically depressed areas in the Midwest. The amount of home equity cashed out set a record. (MarketWatch, June 11)
Employees who’re asked to relocate balked, fearing losing money were they to sell their home. Some companies are losing prized recruits or paying higher relocation costs, as much as $100,000. (Amy Hoak, Market Watch, May 11, 2007)
Freddie Mac, which bundles and resells mortgages as securities, lost $211 million in Q4. The report marked Freddie Mac’s first on-time filing of a quarterly report in five years. Freddie Mac paid a then-record $125 million civil fine in 2003 for management misconduct in their faulty accounting. (AP, June 14, USA Today)
FROM THE OP-ED PAGES
British influenced world
New Statesman (June 4) ran “50 ideas for Brown’s Britain”, asking five leading think tanks to suggest ten-point plans for the Gordon Brown premiership. The second point in the submission from Compass reads: “Tax Land – It is often public investment in schools, roads and other supply-side measures that creates unearned gains by landowners. A land tax would stabilise house prices, slow speculation, and rebalance regional and wealth inequalities.” (via Dave Wetzel)
The Herald (May 8): “Amid the council taxation debate, the Scottish Green Party wants to tax land value rather than property price for both homes and businesses … to spur owners to bring unused shops and brownfield sites into use.”
The Sunday Herald, Deputy Business Editor Antony Akilade: “The Greens propose a land value tax. As such, it compensates the community for the private gains made from public investment in the infrastructure and financial assistance to attract development.”
Financial Express, F. H. M. Masoom (March 20): “The owners of properties whose value increases year to year enjoy the unearned increment without contributing anything towards the development of the country. To tax them is most justified and not to tax them is unethical.”
Sun Star, Antonio V. Osmeña (April 11): “In many urban areas, particularly those of high population concentration, vacant land or lots with blighted structures should be assessed and taxed in excess of their contribution to overall real estate market value, in order to stimulate its use, to discourage the holding of vacant urban land for speculative purposes, and to encourage improvement of blighted structures.
US Banker and NE editor
St. Louis Post-Dispatch, Jo Mannies (April 15, via Joe Casey): “Retired investment banker, Rex Sinquefield, plans to invest millions in upcoming years in an effort to shape Missouri’s future. He also helped to establish the Show-Me Institute. He believes that state income taxes, as well as earnings taxes in St. Louis and Kansas City, hurt job growth and economic prosperity. He proposes replacing St. Louis’ earnings tax with a land tax that would be separate from a property tax.”
Hartford Courant, Tom Condon, editor of Place (June 10): “The thought is that the land tax, pioneered by 19th-century economist Henry George, will encourage owners to get the most out of the land by building on it, or selling it to someone who will build on it. Downtown seems like a very good candidate. Speculators are buying buildings and holding on to them. If owners had to pay higher taxes on land, this kind of bottom-feeding would be discouraged. Conversely, building in the trident areas would be encouraged.”
Gore, LA Times for shift
Before the House Energy and Commerce Committee on global warming, former vice president Al Gore urged Congress “to reduce taxes on employment and production and make up the difference with pollution taxes,” principally on carbon dioxide emissions. (The San Francisco Chronicle, March 23 (via Paul Martin)
Daniel Rosenblum, cofounder of the Carbon Tax Center, interviewed by Ray Suarez on PBS NewsHour (April 11): “So whenever the refiners or the oil companies sell oil into the pipeline, there will be a tax imposed there. When you take coal out of the ground, it will be taxed as it goes into commerce… Raise one tax, reduce another. You tax the bad, you tax pollution instead of productive work… We’re proposing that all the monies that are received from the carbon tax go back to all Americans, either by offsetting the payroll tax or through a rebate to all Americans, kind of like the Alaska Permanent Fund.” (via Paul Martin)
The Los Angeles Times (May 28): “While all the added costs under cap-and-trade go to companies, utilities, and traders, the added costs under a carbon tax would go to the government, which could use the revenues to offset other taxes. So while consumers would pay more for energy, they might pay less income tax, or some other tax.”
The Huffington Post (June 27): “They’re being showered with government subsidies to develop and deploy carbon capture and sequestration (CCS), whereby the emissions from coal-fired power plants are collected and stored underground. It’s technologically precarious and enormously expensive, but with taxpayers footing the bill, what the hell?”
FROM THE ARCHIVES
From Gutenburg Project
Eric Freyfogle, College of Law, U of Illinois: “To get people to mix labor with the land we need to protect the value of their labor. There is far less need to protect the land’s speculative value for future development… [M]any observers have reached these economic and moral conclusions. Among them was the late 19th-century economist Henry George, who based his enormously popular writings on this line of reasoning.” (APA journal, Planning & Environmental Law, 2006 June, Vol. 58 No. 6, via Chuck Metalitz via Bill Batt)
From Resurrection by Leo Tolstoy (1828-1910): “Henry George’s fundamental position recurred vividly to his mind and how he had once been carried away by it, and he was surprised that he could have forgotten it. The earth cannot be any one’s property; it cannot be bought or sold any more than water, air, or sunshine. All have an equal right to the advantages it gives to men… he formed a project in his mind to let the land to the peasants, and to acknowledge the rent they paid for it to be their property, to be kept to pay the taxes and for communal uses.”
Gamasutra, Ian Bogost (April 3): “In 1903, thirty years before the initial release of Monopoly as we know it, Elizabeth Magie Phillips designed The Landlord’s Game, a board game that aimed to teach and promote Georgism, an economic philosophy that claims land cannot be owned, but belongs to everyone equally. Henry George, after whom the philosophy is named, was a 19th century political economist who argued that industrial and real estate monopolists profit unjustly from both land appreciation and rising rents. To remedy this problem, he proposed a ‘single tax’ on landowners.”
It’s All For Sale
Subtitled, “The Control Of Global Resources”, it’s by James Ridgeway (2004). Five companies dominate the US petroleum industry. Five control the worldwide trade in grain. Two have a corner on the private market for drinking water. In terms of actual dollars, trade in heroin, cocaine, and tobacco ranks alongside grain or metals. There are more slaves in the world today than ever before. Resource by resource, It’s All For Sale uncovers and discloses who owns, buys, and sells what. Some resources—such as fuel, metals, fertilizers, drugs, fibers, food, forests, and flowers—have, for better or worse, long been thought of as commodities. Others—including fresh water, human beings, the sky, the oceans, and life itself (in the form of genetic codes)—are more startling to think of as products with price tags, but as Ridgeway shows, they are treated as such on a massive scale in lucrative markets around the world. Vandana Shiva calls it, “Essential reading for the ecology movement, the justice movement, the peace movement, and all who believe ‘Our World is not for sale.’” (Katipo Books website)
FCC defends EM auctions
“Spectrum Auctions Do Not Raise the Price of Wireless Services: Theory and Evidence” is by Evan Kwerel of the Office of Plans and Policy, Federal Communications Commission (2000 October). “A widely held misconception about auctions for spectrum licenses is that they will raise the price of wireless communications services. If licensees pay for their licenses instead of getting them for free, it is argued that they would have higher costs and that these costs would be passed on to their customers in the form of higher prices. This conventional wisdom is, however, contradicted by both economic theory and empirical evidence.” (via Heartland’s Institute’s Joe Bast) It’s good to know that Ricardo’s Law is still true after all these years (two centuries).
LA Times & Bulgaria
The Sofia (Bulgaria) Echo (June 25): “Subsidies create a culture of dependence and do not stimulate innovations and an enterprising spirit among market players. Subsidies are the reason for making short-sighted decisions and sustaining unprofitable and losing productions. European policy on banana production stimulates producers in France and Spain to increase output, although their costs are many times higher than the costs of Latin American producers. In the long run, without relying on EU officials for support, these producers will go bankrupt.”
Los Angeles Times (April 8): “Go ahead and rage at the peanut farmer, but in the government-handout economy – a world of concentrated benefits and distributed costs – he’d be a fool to say no to that money, and his representative in Congress would be a fool not to deliver it.”
Los Angeles Times (June 25): “Conservatives don’t like farm subsidies because they’re a waste of taxpayer money and interfere with free trade. Consumers don’t like them because they inflate food prices. Anti-poverty activists don’t like them because they encourage American farmers to overproduce certain crops and dump them on the world market, putting farmers in poor countries out of business. Even most U.S. farmers don’t like them because its benefits are distributed so unevenly; the top 20% of recipients collect 84% of crop payments, and roughly two-thirds of American farmers don’t get any subsidies at all. There are alternatives, particularly the bipartisan Farm 21 bill introduced in the Senate by Richard G. Lugar (R-Ind.) and in the House by Ron Kind (D-Wis.), Jeff Flake (R-Ariz.), Joseph Crowley (D-N.Y.) and Dave Reichert (R-Wash.). It would end crop subsidies and instead put the money in ‘risk management accounts’ – sort of like Individual Retirement Accounts for farmers – and end government payments entirely within seven years.”
The Twinkie offense
New York Times (Michael Pollan, April 22): “The Twinkie is basically an arrangement of carbohydrates and fats teased out of corn, soybeans, and wheat – three of the five commodity crops that the farm bill supports, to the tune of some $25 billion a year. (Rice and cotton are the others.) For the last several decades – for about as long as the American waistline has been ballooning – US agricultural policy has promoted the overproduction of these five commodities. The reason the least healthful calories in the supermarket are the cheapest is that those are the ones the farm bill encourages farmers to grow. By making it possible for American farmers to sell their crops abroad for considerably less than it costs to grow them, the farm bill helps determine the price of corn in Mexico and the price of cotton in Nigeria and therefore whether farmers in those places will survive or be forced off the land, to migrate to the cities or to the United States. The public-health community has come to recognize it can’t hope to address obesity and diabetes without addressing the farm bill. The environmental community recognizes that as long as we have a farm bill that promotes chemical and feedlot agriculture, clean water will remain a pipe dream. The development community has woken up to the fact that global poverty can’t be fought without confronting the ways the farm bill depresses world crop prices. Voting with our forks can advance reform only so far. It can’t, for example, change the fact that the system is rigged to make the most unhealthful calories in the marketplace the only ones the poor can afford. To change that, people will have to vote with their votes as well.” (via Bruno Moser)
Say “no” or say “share”?
Some wanna-be defenders of Earth rely on the same tactic that got Nancy Reagan ridiculed: “just say no”, as in “no” to misplaced development. It didn’t work for Nancy, it doesn’t work for “greens”. What would work is to propose a way for people to both receive profit from Earth and to live within natural constraints.
Presently, we profit only when we develop – needs of the ecosystem be damned – or when we sell out and move on – integrity of the community fabric be damned. An alternative is to share the region’s natural values. That is, owners would pay in land dues (or land taxes) to the public treasury according to the value of the land they claim and residents would get back rent dividends (like Alaska’s oil dividends) in equal shares. Most people – not owning oil fields or downtown blocks while living on sites of less than average value – would come out well ahead.
The land dues would make it unprofitable for absent owners to exploit or speculate. Alert residents, enjoying receipt of rent dividends, will want to keep sufficient space open since that’d maximize the region’s value. Thus without changing popular bottom line values, environmentalists can align profit with planet.
People sharing ground rent is not new. The words “own” and “owe” were one. Our ancestors understood landowners owed rent to their community, unlike contemporary property rightists who claim the socially-generated value of land for themselves exclusively.
When we get offended, our first response it to oppose. But our opposition goes unheeded if people still need to meet their needs the same old way. To succeed, we need to show others a win/win for all.
Private property a right?
If you’re the first person on a planet, and no one else will ever follow you, you neither have nor don’t have the right to own it all or exploit it all, since there’s nobody else there to suffer the consequences of your actions. Human rights exist only when there’s more than one person, putting them in competition for the same opportunity. Rights are a way to settle competing claims.
If I’m responsible enough to respect your rights, then they actually exist. If you respect mine, mine exist. Rights and duties are the flip side of each other.
And rights are equal. If you’re first and own all, that does not mean me, who comes second, loses my right to the same opportunity. You ever see the movie Whale Rider? In one scene, some tough motorcycle guys are sitting on a bench. When another shows up, they don’t fight; the seated ones slide their big butts over and make room. Eventho’ they all could’ve torn anyone from limb to limb, they quite naturally yielded ground and settled their competing claims peacefully, unconsciously.
A good way to settle two or more rightful claims is mutual compensation – you pay me what yours is worth annually in an open market and I do the same for you: we all pay land dues in to the common kitty and we all get rent dividends back.
Animals, humans too, need privacy and a place on Earth to call their own. So yes, there is a right to private property in land. Yet it doesn’t exclude the same right of everyone else. And the dues/dividend scheme is the most efficient way to settle competing claims.
How to get attention
David W Burdick, Portland economist (Apr 19): “What are the major categories of products and services purchased in the world (as a percentage of world GDP). Its a key figure for my presentation coming up soon.”
Editor: The World Bank site should break it out, or the UN. In the US economy, according to the official website of the US, it’s not any manufactured good or popular chain stores but FIRE (Finance, Insurance, and Real Estate). I suspect most economies are the same.
Tom Sherrard, San Diego ret. Lawyer (April 15): “This is the Georgists’ first problem: how do we get the attention of a growing number of people? We know how HG did: how do we do it today?”
Editor: Lose the identity of taxists. First focus on what it is you’d like to tax or somehow charge for, and that is the worth of Mother Earth, that multi-trillioin dollar flow of all the money we spend on the nature we use. Economists call it “rent” which misleads most people. So invent new words like other world-shakers did, coining “ego”, “dianetics”, “sexism”, “Reagonomics”, etc. Call it “society’s surplus”. Whatever, once you focus public attention on this natural bounty, the public will know what to do with it. At our easy urging, they’ll be happy to share it all out fairly. Then you can talk about losing the counterproductive taxes and subsidies.
Oregon reacts to action
The Oregon legislature considered a bill, HJR 45, which would lift the lid on the property tax. Several urged legislators to lift the lid only on land value while keeping the cap on built value. For writing, thanks to David W Burdick, Portland economist, Howard Kronish, Portland ret., Christine Yun, Portland supporter, Dr. Mason Gaffney, UC-Riverside, Al Sheahen, LA ret./BIG activist, Gilbert Herman, Connecticut ret., Wendy Rockwell, Costa Rican elected official, and Godfrey Dunkley, South African businessman and activist.
Lenny Dee, organizer of Onward Oregon and the Oregon Bus Project (May 20 & 21): “I’ve always thought the concept of givings would help turn the Oregon’s Measure 37 [compensate landowners for no growth] conversation. We’re adding technology to our site to create Conversation Circles. When it goes live you’d be welcome to post and see how folks respond.”
Laine Young, BS, MES, Landlinks Consulting LLC and organizer of Orenco Urban Farm, a Permaculture Site (May 14): “I don’t know you, but I’ve been watching the dialogue and appeals for action for Measure 37. I wholeheartedly agree that land-grab and undermining our planning process must be balanced with an equally strong message about sharing (a lesson lost for many of us after leaving our parent’s home) and 7-generations view of what we leave as our legacy. Let me know if there is an effort worth getting involved in.”
BlueOregon, the web discussion of progressive Oregonians, posted my guest editorial, “Environmental-ists: For or Against Reforming the Property Tax?” (May 29) which first appeared in The Progress Report. It generated about a dozen responses the first day, more later, evenly split between those who got it and those who thought they did. Seems unlearning must precede learning. Australian geoist Karl Williams wrote, “I’ve just read your great guest piece and would love to reprint it the Aussie journal Progress.” (Any other re-printers?)
In the media
Michael Strong, CEO and Chief Visionary Officer of FLOW, Inc, promotes Women’s Empowerment Free Zones where at least 50% of the land gains are distributed to women’s credit institutions and to health and education vouchers for women and children. In his “Sustainability in a Bright Green Future”, he cited Alan Durning of Sightline and our work. Tom Greco, author on consensual currencies, posted our article, “An Introduction to Geonomics” (Feb 23). The Robert Schalkenbach Fdn. hired me for an essay on attitudes towards property and environment during the debate over Oregon’s Measure 37 and to edit the monthly Georgist News and the daily Progress Report.
The Democratic Freedom Caucus responded June 18 to my comment: The call to limit government worries some people not because they want big government but because they don’t want big business, big religion, big military – or little lynch mobs. The issue is not size but coercion. Power cannot be banished. It can only be concentrated or spread around. That’s what we’re for, precluding a big government or big anything by empowering individuals with full rights and responsibilities. John: “Outstanding. I applaud your common sense.” William Cerf: ”This is so well spoken and really speaks to why I’m a Libertarian Democrat.”
Christian Butterbach of Germany (May 20): “I thank you. I am mostly on your side (geolibertarianism is almost never mentioned or taken seriously; if libertarians did, they would have to change too much of their ideology). I was happy to discover your site and hope to be able one day to get back at all this.”
Newcomers, old stayers
The fall Geonomist elicited enough renewals and newals to cover the costs of copying and postage: from super stalwarts Jing Chen (Canadian prof), Marion Sapiro (ret. CA prof) and Artie Yeatman (PA organic farmer), supporters Brian Beinlich (Oregon programmer), three friends of John Morales (ret. of Panama Canal), and subscribers Mario Cordero (Costa Rican American), John Fisher (ret. Canadian), Mark Nedleman (West Coast personal organizer), and Joan Sage (ret. Philadelphia), among others. Big thanks to all for re/joining, donating, and granting. If you don’t see your name above and know it belongs there, just send a check. We’ll know what to do with it.
The Robert Schalkenbach Foundation has contracted with us to produce the monthly e-newsletter, The Georgist News. It’s free, fact-packed, and timely. If you’d like a sample copy, let me know.
WHERE FROM HERE?
What you can do
Scott, The Roots, Oregon father (Apr 5): “Would like to get up to Portland to meet you in person. Your writings have had a profound effect on my understanding and am forever grateful for that. It took some time before Henry’s concepts sunk in but when they finally did they sunk all the way to the core. Given enough reflection, it is impossible for anyone to deny the Truth underlying the concepts. I was able to deny it for almost two years. For some reason it just didn’t click; strange when I think back about it. Lindy Davies was also a large part of my awakening as was Alanna Hartzok. Anyway, no turning back now – impossible. When it grabs you, it really grabs you. Thanks again.”
Editor: You echo Tolstoy, who kept a photo of George on his desk, warned the Czar that refusing to fairly share land and its rent would lead to revolution, whose dying words to passengers on a train were to tax land alone, and wrote: “People do not argue with the teaching of George, they simply do not know it. And it is impossible to do otherwise with his teaching, for he who becomes acquainted with it cannot but agree.” And thanks for the kind words. Would be great to meet you, too, and any other readers passing thru. Drop by whenever you can.
Greg Young, Missouri caregiver (April 13): “What it would take to get you to come to Springfield, MO before or after your St Louis talk. Call or write as soon as possible. Thanks.”
Editor: Thank you. All it takes, as always, is lucre. Won’t move mountains but it will me to any audience. Like the Conference of Georgist Organizations in Scranton PA the last week of July. It features a dialog of theologians and geoists. To join us, visit their website.
What else you can do
Rita Rowan, Common Ground NYC Chapter (April 10): “I’d like to get a hard copy of The Geonomist. I’d like to make a small donation to pay for it. Or better still, I could buy a regular subscription.”
Joan Sage, ret. (Apr 5): “Does one write a check to The Geonomy society?”
Editor: Yes, as often as one wishes. Our bank accepts any permutation, including Forum on Geonomics, The Geonomist, etc. Also, we are enrolled at Pay Pal.
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The bottom line: Secure Earnings, Share Earth
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