GEONOMIST, #51 — 2006 Summer (Vol. 15, No. 1)
|June 24, 2006||Posted by Jeffery J. Smith under The Geonomist|
|Geonomics is …
at work in Africa. Kenya Times (May 10): “Nearing Nairobi, what strikes a visitor first is the difference between the north side of the new Mombasa Road where Mlolongo lies (cited in these pages four years ago), and the south, which spots a few buildings and a vast expanse of undeveloped savannah. The difference is land speculation. Land is not free on either side of the road, but the system of tenure is leasehold in the North and freehold in the South. Result: the lease price paid to the Mavoko Municipality would be wasted by anyone not developing the land paid for; hence the booming construction. On the south side, the landowner sits on his daily appreciating but empty property, waiting to make a kill. Idle land gains value not because of what its owner does, but because of what the people on the other side of the road do. Henry George (1839-97) used to say, capitalist and worker do not divide the wealth; they divide what is left to them after landowner rakes in the rent, usurer the interest, politician the taxes. The perverse system of taxation that Kenya inherited from the British rewards the idle landowner’s sloth, while punishing the people’s industry.” (via Mark Monson)
The Wall St Jrnl of England
Great Britain’s Financial Times (June 8): “Increases in land values give not only a good indication of the benefits of infrastructure investments, but also provide an efficient and just way of financing their costs. It is efficient to tax these values because the tax would reduce the size of a windfall, while other taxes used to pay for infrastructure reduce effort, penalize the division of labor, or discourage capital accumulation. It is also just, because the chief beneficiaries [nearby landowners] would bear the cost.” (via Polly Cleveland)
FROM THIS PEN’S PERCH
A Tao attitude
Looking over shoulders Last issue, we reported on movement in Maryland, France, and in predicting the coming recession. Astute readers wrote back:
When local legislation has the formal support of the local delegation, the Maryland General Assembly applies “local courtesy”. The Ways and Means Committee designated Baltimore City Local Option bill for taxing site value “sponsors only”, which is usually reserved for bills that will sail thru. Then the Chair of Committee, Sheila Hixson, refused to give the bill “local courtesy” because “it might have statewide implications”. (via John Kromkowski who, with help from the Center for the Study of Economics, has drafted the last six LVT bills introduced in Maryland’s 2004, 2005 and 2006 sessions.
The French Sénate had passed a bill for sharing land value between landowners and their communes at the time when local government reclassifies a site as buildable. On their second reading, les Sénateurs canceled their proposal, which the French Députés had merely amended. Meanwhile, a comparable bill has been introduced in Flanders, the non-French part of Belgium. (via F. Coester, firstname.lastname@example.org, May 22)
Phil Anderson, Aussie business forecaster (May 11): “Re the bond yield inversion for forecasting: Others measure the two-year note against the ten-year bond, because both are traded in the market. But I use the federal funds rate against the ten-year bond. The funds rate has historically been the better fore-warner of recession. This pair of rates has not inverted yet in the US on a monthly measurement basis.”
UK’s Rich List of 2006
So land has lost its lucre, some say? Please note: Of the top 1000 people in Britain and Ireland, 211 of them derive their wealth from property. This figure, a record, is up from 198 a year ago, helped by booming industrial and commercial property prices. The richest native Brit, the Duke of Westminster, comes in at no. 3 with a £6.6 billion fortune. The most valuable sites are in London with planning permission, then other urban land, good farming, forestry, poor farming and, finally, desolate land, even with shooting and fishing rights. Agricultural land values ranged from up to £60 for “poor” agricultural land in the Scottish Highlands to up to £3,250 for “good” agricultural land in East Anglia. Some of the wealthy NOT in the property category do, of course, also own land. Some Oxfordshire examples include Richard Branson, whose fortune is estimated at over £3 billion. He has homes, estates and yacht worth about £25 million. Another example: David Allen, worth £85 million, largely from his stake in a Leisure company, is reported to have bought a 1,700 acre estate in Oxfordshire. Barrie Haigh made his fortune in pharmaceutical consultancy, but now owns an organic dairy estate on the Oxfordshire-Buckinghamshire border in the Chilterns. The combined wealth of the top 1000 has soared more than £50 billion – an increase of over 20% from last year, and is one of the highest increases since the Sunday Times started their list in 1989. Overall the rich have got much richer under Labour than ever they did percentage-wise under a Tory Government. (Sunday Times, April 23, via Dave Wetzel)
Chinese divorce for homes
In the Chinese village of Renhe – population 4,000 – 98% of married couples got divorced. The oldest were in their 90s and barely able to move. The youngest had just tied the knot. Some had babies. It seemed to make sense. For giving up their farms, the government offered married couples a small two-bedroom apartment but divorced people a one-bedroom apartment each. The villagers figured they could live in one apartment and sell or rent out the other. Learning about the mass divorces, authorities changed the compensation package. Farmers who divorced recently have to pay market price for a second apartment, which none could afford. Altho’ the marriage registrar reported that a few couples have remarried, most wait for new apartments, which could take years, if ever. (LA Times, May 8)
Fifty years ago, Asian “tigers” like South Korea and Taiwan were poor, very unequal, war-damaged agrarian economies. But unlike backward countries in Latin America, the “tigers” redistributed land to the peasants and invested massively in public health and education. Overnight they created a middle class and set off rapid economic growth. (Johnston, David Kay, NY Times, Apr 5, via Polly Cleveland) The kind of land reform Asia used was a levy on land. To avoid paying it, owners sold off their excess to peasants. As new owners, the farmers worked more efficiently, yielded surpluses, let sons go to work in cities, and had money for purchasing factory-produced goods. If now China uses the geonomic land levy, they could rule everyone; if China doesn’t, they’ll stay second tier.
“Saved” trees still logged
Almost all the world’s tropical forests designated for some sort of preservation over the past two decades remain effectively unprotected. As tropical nations lose their trees, they lose rainfall, since trees are a vital link in the precipitation cycle, lifting water from the ground to the air. Loggers and ranchers take out the trees that the law says are supposed to be left alone. (Washington Post, May 26) That’s why it’s hard for me to join my fellow environmentalists’ celebrations of new legislation. They’re not worth the paper they’re printed on, as long as basic economic injustices remain in place. One, rich people live far away from the consequences of their decisions on their absentee-owned land, and two, absentee owners displace poor people from savannah land. What corrects land hoarding is government collecting rent from owners. Then people with too much sell off their excess to people with too little, so the latter need not encroach on forests. And as owner occupants, they tend to do a better job as stewards.
Venezuela ups its royalties
In April, President Chávez’s populist government took control of 32 mostly marginal oil fields across Venezuela that had been managed by foreign concerns. Then on May 16, the National Assembly raised royalties on the four heavy crude oil projects of the Orinoco to 33.3%, from 16.6%, and is planning to increase taxes to 50%, from 34%. (NY Times, June 1, via Heather Remoff) Worldwide, oil royalties range from 10% to 90%, depending on the quality of the oil (light weight, few impurities), ease of extraction (wells on flat land vs. at sea or in the arctic), and on how much clout the oil companies have over the local government (pretty much in a US state). The best way to determine a fair percentage for the public is to have oil companies bid at auction. For that to work, it may be necessary to have more oil companies than those left after recent mergers. With fewer bidders, the government granting leases may have to determine an opening bid it won’t go below and shorten the length of the contract, and combine access fees with extraction fees, and impose random spot checks on extraction. Oil companies rightfully profit from exploring, extracting, refining, and transporting oil. The rest of the value of oil – and of nature in general – belongs to everyone equally
In Iraq, the US’s Provisional Authority subsidizes the price of gasoline, making it cheap there compared to high prices elsewhere. As a result, local officials, tribal chiefs, gangs, and rebels steal as much as 30% of imported gasoline and resell it abroad. Its estimated value ranges from $2.5 billion to $4 billion in 2005. Even at the low end, that means gas smuggling accounts for almost 10% of Iraq’s gross domestic product, $29.3 billion in 2005 – plenty enough money to finance terror, resistance, and civil war. The loss of gasoline cuts supply; people wait three days in line for legal gas – or wait a shorter while and pay more in the black market. (The New York Times, June 4, via Polly Cleveland) To make gas affordable, Iraq could pay its citizens an oil dividend, as Alaska does, Kuwait did, and US Iraq governor Paul Bremer endorsed. Until the oil royalties begin to flow in, the Iraqi government could advance their citizens a share and make up the debt when oil revenue at last gets back on track.
The US war over oil fields, creating more terror, making a few corporations richer still, has dropped America’s image in the polls, far below our soccer team. Even the mother country, merry old England, now likes us less than before. India’s positive image of America went from 71% to 56%; Russia’s from 52% to 43%; Spain’s was cut nearly in half in one year, going from 41% last year to 23% this. (The Oregonian, June 14) Besides wasting good will from the past, we incur heavier debt, lose thousands of soldiers, and kill tens of thousands of civilians. Oil companies and reconstruction companies get richer, but is anyone safer?
One tax down, more to go
Great Britain is finishing paying off its debt to the US, used for financing their war against the Nazis, waged 60 years ago. How many decades will it take US taxpayers to pay off their growing debt – now at $90 billion – for Bush invading Iraq? (via Phil Anderson). In the US, Treasury will no longer collect a 3% federal excise tax on long-distance calls. Congress imposed the tax in 1898 to pay for the Spanish-American War. Phone carriers must stop billing for the tax Aug. 1 and refund about $15 billion to taxpayers. Taxes account for about 1/5th of the average bill. (USA Today, May 26) Around tax day, war tax resisters made the news (USA Today, April 14); the majority pay taxes out of fear (MarketWatch, April 14). During the biggest economic boom in recent history – 1992 through 2000 – more than half of all corporations bravely paid no taxes. The rest of society needs to catch up. We could replace taxes with user fees, like London’s congestion charge, for use of sites, resources, EM spectrum, and the ecosystem; corporate owners would pay the lion’s share of such “land dues” – and no longer get corporate welfare. Instead, all members of society would share the recovered value of nature. This Citizens Dividend would grow smaller when our foreign policy grows more belligerent, diverting public revenue into war. If for no other reason than the bottom line, more people would vote for candidates who wage peace sensibly, giving those of strong moral conviction less cause to resist.
Gas companies rob us
Each year, do drilling companies and pipeline operators understate the amount and quality of the natural gas they pump on public land? A group of state governments, Indian tribes, and individual citizens claim the energy industry owes the federal government more than $30 billion in unpaid royalties for natural gas alone. When gas and oil companies drill wells on public or tribal land, they agree to pay royalties of about 16% of the value at the wellhead, before the fuel is shipped to market and refined. (Washington Post, May 7, via Hanno Beck) Meanwhile, for every day he worked, former Exxon Mobil Corp. Chairman Lee R. Raymond got $144,573 – daily (LA Times, April 22).
For years, the THUMS Consortium – Texaco, Humble, Union, Mobil, and Shell – extracted oil from Long Beach Harbor in California. They gave 96.25% of the profit (presumably the excess of income over expenses) to the City of Long Beach. The city held the revenue as long as possible before giving the State of California its share. THUMS got along on 3.75% of the profit above the expense of extraction. This may not factor in cost of exploration, which along the southern coast of California, where oil seeps from the ground, may have been low. Apparently, another concern now has the contact. (via Harry Pollard, May 5)
People need to feel as possessive about the value of nature and natural resources as they do about their own homes. If somebody burgles you, you fight back. Enough people fight back, and theft no longer seems excusable.
We pay them to pollute us
Each summer, a lifeless expanse of water about the size of Connecticut forms off the coast of Louisiana. The dead zone has averaged more than 6,000 square miles over the past five years. That’s 20% larger than the 5,000-square-mile average since 1985. When the zone sharply expanded between 1985 and 1998, shrimp production declined 23%, or almost 20 million pounds annually. In the same way they accelerate the growth of corn and other crops, fertilizers washed into the sea spark massive algal blooms. As the algae die, that sucks almost all the oxygen from the water, forcing fish to relocate or perish. Almost 80% of the nitrogen-based fertilizers largely responsible for the low-oxygen zone have been traced to a relatively small number of agricultural counties in the Midwest, just 15% of the Mississippi basin. There agribusiness receives huge handouts – $30 billion from 1997 to 2002 – from the federal government. As more nations adopt Western agricultural practices, they too are having similar hypoxia problems. (New Orlean’s Times-Picayune, April 17, via Hanno Beck) Without subsidies to mechani-chemical agri-business, then competing organic growers could effectively take over a larger market share.
S. 2590, the Federal Funding Accountability and Transparency Act, sponsored by Sens. Tom Coburn (R-OK), John McCain (R-AZ), Barack Obama (D-IL), and Tom Carper (D-DE), would direct the Office of Management and Budget to create a publicly-available website that would list every entity receiving federal grants or contracts and the totals awarded for the last ten fiscal years (via The Progress Report).
Gangs expand inland
A resurgence in gang activity increased the nation’s violent-crime rate in 2005 for the first time in five years. Of the four crime categories that make up the FBI’s violent-crime index — murder, rape, robbery, and aggravated assault — only rape declined in the national figures. The jump in homicides — nearly 5% nationwide — was the largest annual increase in the past 15 years. Some of the biggest increases were in Milwaukee, Oklahoma City, Omaha, St. Louis and other Midwestern cities. Apparently, gangs from the East and West coasts are branching out to smaller cities, where there is still money to be made and turf to be ruled. (USA Today, June 13) Historically, David H. Fischer, in his quite readable and informative Great Wave, correlated not just crime but also bastardy and other social ills not with unemployment but with price inflation. Indeed, an uptick in prices did again precede this jump in violent crime. Whether there is cause or just correlation, any economic condition that worsens crime can be resolved. A less known correlation is that more widespread tenure on land and in homes creates prosperity which fosters more harmony among neighbors. When Pittsburgh taxed land more than buildings, it damped down speculation and kept neighborhoods intact. Its crime rate was like that of a small town. Geonomic tax shifting is a reform that any crime-weary city could adopt.
Overworked sue bosses
Video game software engineers often work 85 hours a week. When a lonely spouse complained in a blog back in 2004, it sparked six lawsuits for unpaid over time. Now, more than a year later, game developers have won settlements in three class-action lawsuits against industry giants. The spouse, Nicole Wong, is becoming a voice against America’s culture of overwork. (San Jose Mercury New, April 25) In 2005, a California jury awarded more than $172 million to more than 100,000 current and former Wal-Mart workers who had been denied lunch breaks and were asked to clock back in before their breaks were over. Fifty-five percent of workers take half an hour lunch break or less. More employees today are forgoing the traditional long lunch and instead using the time to keep working or get other errands done. (USA Today, June 12) One solution to the time famine is an income apart from one’s work. The first US Basic Income Guarantee Bill, HR 5257, was introduced in the House of Representatives by San Diego’ Congressman and former Sierra Clubber Bob Filner. The bill would transform the standard income tax deduction into a standard tax credit of $2000 per adult and $1000 per child. It would give a refundable tax credit to everyone who filed an income tax return, even if the person had no income. (US BIG Newsletter, June) While the credit would not come directly from rent (that should happen later), it would cut the income tax burden, and cutting taxes is the other half of geonomics.
Land price steps back
Over a 12-month period, sales of existing homes were down 5.7% in March and April. Sales of newly built homes were also down 5.7%. In March, both average prices and median prices fell year-over-year, the first time prices had fallen year-over-year since 2003 December. In April, new homes were just 0.9% higher than a year before while existing homes rose 4.2% to $223,000, the lowest price gain since September 2001. (MarketWatch, May 25) The home-price index was up 12.5% in the past year but only 2% from 2005 fourth quarter to 2006 first quarter. It was the slowest quarterly gain since 2004 Q1. Among 275 metro areas, 53 saw prices decline from fourth quarter to first quarter, including some previous hot markets in California: San Jose, Santa Barbara, Santa Rosa, Sacramento and Salinas. For some cities, including Boston and Cincinnati, it was the first quarter one decline in at least 15 years. (MarketWatch, June 1)
As recently as 2004, only three markets of single-family homes, representing 1% of home value, were considered grossly overpriced. By the end of 2005, the number had risen to 64 cities. Three months later – 2006 Q1 – it had risen 11% to 71 cities extremely overvalued and at risk of price correction. Overpriced markets represented 39% of all single-family housing value in the first quarter of 2006. Overall, 17 of the 20 most overvalued markets are in California and Florida. Home price appreciation was fastest (10.1%) in the 50 most overvalued markets during the quarter and slowest (2.7%) in the 50 most undervalued. The fluff is calculated by comparing prices to income, employment, population density, and a city’s premiums and discounts over time. The analysis covers 317 metro areas accounting for 84% of U.S. single-home value, up from 299 studied areas last year. (USA Today, June 13)
By March, the supply of homes for sale had climbed 46%. In April, the backlog reached a six-month supply, its highest level since 1998. Builders are starting new homes at a pace that has plunged at an annualized rate of 56% in the past three months. That’s similar to what occurred early in 1991, when the economy was in recession. Since 1959, of 10 slowdowns in home building, seven slowed down the rest of the economy, often after a 20-month lag. (The Christian Science Monitor, May 26)
Metals take a step back
Gold for August delivery finished down $15.50 at $633.50 an ounce on the New York Mercantile Exchange – its weakest closing level since April 24. It fell as low as $625.70 early in the day, a level not seen since April 20. The contract closed out the month with a loss of almost $12, its first monthly loss since February when the front-month contract lost about 2% of its value. Gold led the way as other metals – silver, platinum, and copper – also lost value. Most forecasters figured commodities were taking a breather and would regain their momentum in coming weeks. (MarketWatch, June 1)
New road to serfdom?
Mortgage foreclosures surged 72% in the first quarter of this year, as compared to a year ago. Go to a bookstore right now and buy a copy of Harper’s (Birch Blog, May 5). May’s issue ran Michael Hudson’s article, “The New Road To Serfdom, an illustrated guide to the coming real estate collapse.” Thru-out history, debtors were medieval peons, or Indians bonded to Spanish plantations, or the sharecropping children of slaves in the post-bellum South. Never before have so many Americans gone so deeply into debt. In 1979, the bottom 80% of Americans got almost 25% of the economic rent, the richest 1% got less than 40%; in 2003, the bottom 80% got around 15%, the richest 1% got around 58%. In 1955, mortgage debt was 30% as much as the GDP; in 2005, it was 11.8 trillion dollars, over 90% of what the GDP was last year. The median price of a home almost doubled from 1995 to 2005 from $109,000 to $206,000. Real Estate prices have far outstretched increases in national income. Mortgage loans account for 90% of the net growth in debt since 2000, more than half the bank loans since 2003, more than $300 billion in 2005 alone. Half the people last year who bought homes put no money down, many took out interest-only loans, a few took on negative amortized loans which dispensed entirely with payment on the principal and required only partial monthly payments on the interest, the extra interest is added to the total debt which can grow indefinitely. Meanwhile the Federal Reserve raises interest rates; the borrowers who took out adjustable mortgages will have to pay more for homes worth less.
Consumer prices including food and energy rose 3.1% over the past twelve months, down from a 3.3% pace in March. Real disposable incomes (inflation-adjusted and after-tax) fell 0.1%. Real per-capita incomes fell 0.2%, the third decline this year. With spending rising faster than incomes, the personal-savings rate fell to negative 1.6% in April from negative 1.4% in March. The savings rate has been negative for 11 consecutive months. (CBS MarketWatch, May 26)
In 1979, homeowners’ equity was 67.3% of the price of their property; in 2004 it was 56.7%. In 1979, the ratio of household debt to disposable income was 71%; in 2005, third quarter, it was 126%. From 1989 to 2001, mortgages for the bottom quintile rose 191%; for the top 10%, only 40%. As a ratio of debt to income, the financial obligation of renters is twice that of homeowners. Renters owe most for credit cards (40% of their debt), then vehicles (35%), then student loans (20%). As of 2005 August, the credit card debt of Americans stood at nearly $800 billion (mortgage debt is about three to four times that). In 1990, households saved 10% of income; in 2005, household spending exceeded income for the first time since the Great Depression. (Woodstock Institute’s Reinvestment Alert, May, via Phil Anderson) Thanks to more credit card debt and borrowing against their homes, the 25% of Americans at the bottom of the wealth scale had negative net worth in 2004. On average, these families owed $1,400 more than their possessions were worth.
Debt can’t grow and income shrink forever. As more people have less money to pay their debts, foreclosures and bankruptcies pile up. At some point – probably in 2008 – recession starts.
FROM THE OP-ED PAGES
Good press in the East
David Warsh, formerly of the Boston Globe for 18 years, Editor of economicprincipals.com, devoted a column to the Dollar & Sense article on rebuilding new Orleans by Mason Gaffney (April 23): “How exactly did single tax work its magic in San Francisco? In modern-day language, it solved a coordination problem. It forced people to get the most out of the land by building on it. (What is a skyscraper, goes an old saw, but a machine for getting cash out of the ground?)”
In Hartford, site of a geoist conference not many years back, The Courant, the main daily, also ran a column April 30 that referred to the article in Dollars & Sense: “According to Gaffney, [taxing land] worked in San Francisco. The city’s credit was quickly restored, and it began borrowing to rebuild infrastructure. The population grew by more than 20% in each of the next three decades.” (via Josh Vincent)
The Star-Ledger, the main newspaper in Newark, New Jersey (across the river from New York City), ran an article May 4 on a fine idea: “the best idea is one that dates back more than a century: a two-tiered system that would impose higher taxes on land than buildings.” (via Josh Vincent)
The Times of Trenton (May 8): “Split the school property-tax rate into a higher land tax and a lower tax on buildings. This scenario – based on the Henry George single-tax dating to the 19th century – proposes taxing land and improvements at different rates, with land taxed more heavily.” (via Mark Monson)
For a sort of land-value tax
Out West, the Portland Metro Fair Growth and Farmland Project Committee recommended that land speculators whose land doubles in value when it becomes available for development should pay a “windfall profits tax”. Metro Councilor Robert Liberty initiated the project along with Councilor Carl Hosticka. The committee included mayors, Realtors, tax officials, and homebuilders. (The Oregonian, April)
Mauritius Times (online issue 215, June): “Capture the proceeds from windfall taxes on land sales in a permanent ‘fund for future generations’. The revenues should not be coursed through the annual national budget. That may serve the interests of the government in power for a short period before the proceeds are dissipated. Instead the funds obtained from taxes on land sales should be sequestered and invested. Government should use only the yield from that corpus for annual capital investments in social housing and other social infrastructure (i.e. schools, universities, hospitals, public leisure facilities, retirement homes and care homes for the elderly, etc.)”
FROM THE ARCHIVES
About.com on Monopoly
A visit to about.com tells the true story about the board game Monopoly. Over a century ago, Lizzie Magie, a Quaker, received the first patent for the board game, which she called “The Landlord’s Game”. She designed the game to teach the insights of Henry George. George noted the rent for land profited a few individuals (landlords) rather than the majority of the people (tenants). To discourage speculation and encourage equal opportunity, he proposed a single tax on land value. The Landlord’s Game and Monopoly are very similar, except all the properties in Magie’s game are rented not acquired as in Monopoly and instead of names like “Park Place” and “Marvin Gardens” one finds “Poverty Place”, “Easy Street”, and “Lord Blueblood’s Estate”. The game spread among Quakers and proponents of the single tax, usually copied instead of purchased, with each new maker adding their favorite city street names as they drew or painted their boards (usually on table cloth). Each new maker did often alter or write new rules. As the game spread from community to community, the name changed from “The Landlord’s Game” to “Auction Monopoly” and then just “Monopoly”. One enthusiast taught the game to Charles Darrow. He sold his version for millions to Parker Brothers, who paid Magie only $500 for her patent. The rest, as they say, is history, altho’ a false story – a classic example of how winners, in this case the wealthy corporation Parkers Brothers, write history.
On tax-funded land abuse
The federal government has long shaped local land use decisions, via tax breaks and subsidies. Cities in the Wilderness: A New Vision of Land Use in America by Bruce Babbitt and Wildfire and Americans: How to Save Lives, Property and Your Tax Dollars by Roger Kennedy were both by Clinton administrators: Babbitt, Interior Secretary, and Kennedy, head of the Park Service. Kennedy argues the biggest incentive was the interstate highway system, officially built for national defense but enhanced commuting to the exurbs. Another factor was the feds building dams and a power distribution grid. Mortgage deductions and insurance programs also loosed people into unsettled areas. Babbitt cites farm subsidies and rules that produced “agricultural sprawl” and severely damaged the Everglades ecosystem and taxpayer dollars supporting overuse and pollution of waterways and watersheds that ravaged streams and grasses. He says government subsidizes efforts to extract resources from the land, particularly oil and gas. Most damage is done not by the mining or drilling itself, but by the construction of roads the enterprises need. Where the roads go, development often follows. (The New York Times, May 30, via Heather Remoff) When will land abuse end? When a critical mass realizes that the value of land is not for a lucky few to hoard but for all of us to share. Instead of arguing that your subsidies stink, mine smell sweet, we could not subsidize anything, not even clinics and schools, and instead pay everyone a hefty CD. It wouldn’t be enough for corporadores to fund factory farming and strip mining, but it would empower everyone else to find security.
On Henry George
John Laurent, editor, Henry George’s Legacy in Economic Thought, published by Edward Elgar, 2005, reviewed for EH.NET by Donald E. Frey, Department of Economics, Wake Forest University. This book demonstrates that George was significant and that his ideas have relevance to contemporary issues. The introductory chapter outlines George’s influence in Australia and New Zealand. The rest of the fist half covers other historical issues, such as the debate with Thomas Huxley. The second portion of the book shows George’s ideas emerging in modern debates. Laurence Moss argues that the increment in land values caused by social progress might fund public goods. John Pullen argues that George’s rhetoric on private property was a mistake that alienated potential support; Pullen suggests “conditional” ownership instead. Terry Dwyer argues that efficiency might be restored in industry with monopolies – as well as a measure of equity – by taxing enhanced land values created by an infrastructure monopoly. Frank Stilwell and Kirrily Jordan argue that a land tax is compatible with environmentalism. Phillip Day notes, in our era of globalization and mobile tax bases, that taxes on land cannot be shifted. (via Polly Cleveland, May 15)
Murdoch on monopoly
Media mogul Rupert Murdoch said, off the cuff, whilst delivering the 1994 John Bonython lecture: “Because capitalists are always trying to stab each other in the back, free markets do not lead to monopolies. Monopolies, he said, could only exist when governments supported them.” (via Phil Anderson, forecaster of business cycles, May 23) See the difference between capitalism and a free market? Capitalism is the partnership of the elite and the state. Not too many centuries ago, rich owners of nature and the state – the nobility – were one same on the surface, too, not just deep down as they are today – the “oiligarchy”. A free market, on the other hand, has the government not granting privileges to anyone but defending the rights of everyone. Punishing polluters. Punishing robbers, whether white or blue collar. And, most basically, recovering and disbursing society’s surplus – the money we spend on the nature we use – to all members of society equitably. When society allows only a few to corral the values of nature – oil, most conspicuously today – that’s when the trouble starts. Such hoarding is the origin of class, privilege, obscene wealth and undue poverty. As Thoreau said, for every 1000 hacking at the branches of evil, only one hacks at the root. The flow of natural values is the root. Sharing those values is the primary correction for a world working right for everyone.
Geo-green = geonomics?
Thomas Friedman in his column in the New York Times (2005 February 13) touted his “geo-green” strategy that combines environmentalism and geopolitics. That is, reduce oil consumption and thereby reduce damage to the global climate and funds flowing to Muslim terrorists. To spur Americans to consume less oil, he’d tax gasoline. Even if that could do some good, it would not do enough. It’s at least as necessary to end subsidies to cars – road costs covered from the general fund – to oil companies, such as paying for a “strategic reserve”, and to developers who build sprawl, leaving the costs of new schools to old residents. With ending subsidies, we must also end taxes on earned income. Taxes on wages make it more expensive to hire people to do things like organic gardening which consumes far less fuel than agribusiness. Taxes on profits make it more risky to invest in energy alternatives. Besides ending taxes and subsidies, we also need to recover the value of natural resources in the ground, and use the funds to pay a Citizens Dividend, as Alaska does for its residents. Nobody put minerals in the ground and everybody generates their value. Once we recover and share it, we whittle the oil companies down to a more human-scale size, and we empower ordinary people to adopt lifestyles less dependent on commuting and rush hour – a huge waste of fuel. Total reform of the flow of public revenue may not yet be on Friedman’s radar screen, but like Lincoln said, “nothing’s fixed until it’s fixed right.” And nothing less than total geonomics will cure us of our addiction to oil.
CBS says CPI distorted
With home prices remaining high and mortgage rates rising, more people get priced out of the real estate market and seek rentals. Their fresh demand pushes up rents. Higher housing rents, not higher housing prices, push up the government’s inflation rate. Their economists measure the housing costs of both renters and homeowners by looking at rents, not at prices, as if owners rented their homes to themselves. Homes are not only shelter – a cost of living – but also investments that, when sold later, may cancel out the purchase cost, even return a profit. Yet some homeowners lose money, and some don’t sell their homes. And even if housing did turn out to be a moneymaker in every case, mortgages are still a cost of living. Leaving them out means that when home prices soar, the official consumer price index (CPI) doesn’t. The current rate, reflecting higher rents, reveals a truer picture of the cost of living. The housing sector makes up 40% of the government’s CPI. (CBS MarketWatch, May 17)
Inflation really not slow
According to Ricardo Reis of Princeton, the government’s measurement of inflation is flawed. To calculate the Consumer Price Index, their number crunchers use the market basket. It does not allow for substitution: if the price of one good rises, consumers switch to another; and if they expect a price to rise or fall, they will accelerate or postpone purchases. Reis constructs a dynamic price index or DPI. Its most influential factors are the prices of housing (land, actually) and bonds. While the DPI roughly tracked the CPI over the last thirty years, in recent years it has sharply diverged. In the four years to 2004, while the official CPI rose only 2.3%, the DPI rose an annual average of 7.4%. See princeton.edu/~rreis/papers.html#DPI. Note that over a 10-year period, an annual percentage increase of 2.3% comes to about 26%, an annual increase of 7.4% comes to about 104%. (via Polly Cleveland, April 30)
Life after losing land profits
Chuck Metcalf, ex-architect, jazz bassist, and systems theorist in the Bay Area (Apr 22): “If all increase in land value were to be recovered by the community—would that not tend to make land ownership more of a burden than a boon?”
Editor: No longer retaining all of a site’s rent would make land speculation a burden but not land use. By using their location, owners could still profit from the building or farm or whatever. Owners would either use their excess or sell off to other, more productive, users.
Bill Grennon, New Hampshire activist (Jun 8): “If all economic rent is recovered by community and thus there is no longer a sales price to purchase land – how is an assessor to know what the economic rent is?”
Editor: Since land price is capitalized rent, buyers already know it. As Dan Sullivan notes, most property is improved, and has a selling price. A price that exceeds the value of the improvements suggests that the site is under-assessed; a price that falls short of that value suggests the site is over-assessed. Next year’s reassessments could make the corrections. Improved properties are also sublet, which supplies rental data directly. For vacant sites, communities could auction them off. How do wanna-be owners know how much to bid? Depends on where the land is and how it’s used (among other factors). For residential sites, ambient income is a good clue. For commercial sites, foot traffic.
Like land, like knowledge
René Heeskens of Holland’s GBI Foundation (Jun 2): “I just read your paper, ‘Fund BI not from income but from outgo’, on the USBIG website. Though the argument was not new to me, I especially liked your clear analysis of all the economic benefits of making society’s members the rightful recipients of our spending on nature, instead of individual owners who have appropriated nature by excluding others. The ethical argument that nature belongs equally to us all can be broadened to other factors, such as knowledge. The increase in productivity is nowadays the most important factor in producing economic value.”
Editor: While it seems true, it’s not. Just as the 1849 California Gold Rush made more millionaires out of land speculators than among gold miners, so today in Silicon Valley, land prices exceed hi-tech stock prices. Location always soaks up values made originally by other factors. Yet fields of knowledge are like fields in nature; if you want to exclude others, then pay the going rate for patents, copyrights, titles, or deeds. “Renting” their patents from the government, Microsoft would not get 3k patents every year just to exclude others; others could charge Microsoft et al for their ideas, and Gates would not be a billionaire but a millionaire (some concentration has to happen in mass markets).
Gary Denton to the Democratic Freedom Caucus (DFC) list: “The blog Kos, a viral effort for younger folks to mobilize the D Party, gets millions of hits. Kos (short for Markos, first name of the founder) has come out as a Libertarian Democrat (6/7). Hopefully he’ll discover and incorporate the principles of the DFC, which touts geonomic reform of taxes and subsidies. Kos regulars are having their first annual convention; among the scheduled speakers are ex-Virginia Gov. Mark Warner, House Minority Leader Nancy Pelosi, and Senate Minority Leader Harry Reid. Iowa Gov. Tom Vilsack and retired Gen. Wesley Clark will also be in attendance. It’s getting plenty of media coverage.”
Michael Strong, Exec. Dir. of FLOW (April 30):” I know enough about your thought to know that I need to know more. I like moving from ‘educational vouchers’ to a Citizens Dividend. I have often struggled with the government control that would invariably be associated with government-given vouchers; it would be better just to give each family $10K or so per kid each year to do as they pleased, especially in secondary school. With geonomics, of course, it could be higher, as long as we had a corresponding decrease in other taxation. I’d like to build up enough momentum, publicity, and funding so that we can advocate these ideas with ever more credibility and effectiveness.”
In the media, on a podium
Had letters in Portland’s Oregonian, the main daily in the state, on May 28, a Sunday (the most read day of the week) on immigration, noting it’d be slowed by prosperity in the South, and that geonomics lets people prosper, so we should model this rational revenue reform in the North; on Blue Oregon, the blog of progressives, June 20, garnering 18 hits in one day; and in the June Mensa Bulletin, the magazine of American Mensa. Cited in Simple Solutions, edited by John Watkins (June 8). The New America Foundation, a DC-based foundation that often has op-eds in The Wall Street Journal and other papers, has a Senior Fellow, Joel Kotkin (May 18): “Would it be OK with you to post your comments on my website?” Prof. Casey Condon, Jacksonville FL (May 21): “Interesting info, some of which I incorporate into lectures.” The FLOW Project, founded by Whole Foods Market, promotes freedom and the entrepreneurial spirit as ways to move toward a better society. Executive Director Michael Strong welcomes support “for a green tax shift using geonomic principles and for innovative property rights solutions and Ostrom solutions to commons problems”. (via Mike O’Mara, May 31) In Portland on Earth Day, we had a table, thanks to the generosity of Brian Beinlich, Mark Nedleman, and Kathleen Walsh. We unloaded dozens of this newsletter, had enjoyable conversations, listened to some original and uplifting music, and hopefully helped generate some buzz for sharing the worth of Mother Earth everywhere.
Newcomers, old stayers
The Robert Schalkenbach Foundation contracted for a paper on Oregon’s land compensation law, Measure 37, and another on the supposed correlation between the Fed’s lending rate and housing costs. Our spring Geonomist elicited enough renewals and newals to cover the costs of copying and postage: from sustainers Bill Grennon (New England activist) and Jeff Strang (Oregon building inspector, humanist, and Green Party candidate); supporters Robert Bernstein (California leisure expander), Greg Young (Missouri caregiver); and subscribers Joan Sage (ret. Philadelphian) and Jeffrey Weih (Oregon medicine man), 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?
Along Lake Michigan
The Council of Georgists Organizations holds its annual conference in Chicago, July 19-23. The deadline for the early price is June 15. For more information or to register, please visit: www.progress.org/cgo or www.georgists.org. See you in Chi-town! Afterwards, a few of us continue the proselytizing a couple hours to the north in Milwaukee. All are welcome to those meetings and outings as well. Get in touch for more details.
What you can do 1
How polluted is the air you, your family, and neighbors breathe? To find out, enter your zip code at the website of the American Lung Association. Over 150 million Americans live in counties where they are exposed to unhealthful levels of air pollution. Polluted air hurts us all, but most especially children, the elderly, and those living with chronic lung diseases like asthma, emphysema, or diabetes and cardiovascular disease.
Editor: What can you do? Short-term, insist that government enforce at least the weak laws we have now. Long-term, end subsidies to polluters and instead charge them for the damage they do. Then clean alternatives will claim a larger market share.
What you can do, too
Meta Heller, retired but active in Washington’s capital Olympia (April 29): “I shall take your Geonomist to our Current Affairs Discussions which I’ll be leading.”
David Bean, Oregon carpenter (May 15): “Can you give a talk on the housing bubble to the Economic Justice Action Group of the Unitarians for about an hour total which is to leave room for questions?”
Elvin Todd Allen, Oregon activist and travel agent (Apr 13): “I plan on questioning our speaker tonight. I would like to introduce Geonomics there. And to all the organizations I belong to (inc. the NAACP). Please give me a few attention-getters and a basic outline.”
Luke Scott Mead, Oregon college student (May 31): “Let’s meet up. Perhaps I could send you some gas money. How about getting a measure on the ballot to tax land values statewide? That would be a great. Especially in light of Portland’s scandalous tax breaks for urban renewal. That and resource taxes might replace most federal and state taxes that we now pay.”
What you can do $
Chuck Metcalf, ex-architect, jazz bassist, and systems theorist in the Bay Area (April 22): “Thanks for the newsletter and personal note. Great distilled information, as usual. I’m sending you a couple of my CDs.”
Editor: Thanks for the tunes. Other readers, help highlight for everyone a path to a better world. Send what you can; we’ll do even more to deserve it. Happy New Summer!
|Dear Geonomy Society (an educational IRS 501(c)(3));
Here’s my tax-deductible yearly dues:
The bottom line: Secure Earnings, Share Earth