…We, and many others, expect the banks of all the major OECD economies to collapse over the next few months. This will drag the UK, Eurozone and US down. In other words, and to be absolutely clear:the Eurozone and the world will be dragged down by the banks, not vice versa.

Politicians, advised by deranged and culpable economists, will hasten, and intensify this global private banking collapse by accelerating austerity. It is those policies that will prolong and deepen the global economic crisis.

So prospects are bleak. Unless and until, that is, politicians in the UK and Eurozone get real, and face reality. It is time now to stop blaming the victims – public sector workers, pensioners, single mothers, the frail and vulnerable – for a global financial crisis designed by bankers, technocrats, economists and politicians.

It’s time now to address the solution: first, subordination of the private banking sector to the interests of society; and second, policies for employment. Only jobs can now generate the income needed to revive the economy, to pay down private debts, and to stabilise the global economy. “Look after employment” said Keynes, “and the budget will look after itself.”  (link to article)

August 31, 2011

LVT in the news again – and Local Economy special issue

The last few days have seen several UK broadsheets give coverage to two policy papers up for discussion at the Lib Dems’ Conference next month (17-21 Sep) both of which suggest that UK’s Third Party plans to strengthen its policy on Land Value Taxation (LVT) – for both national (“Facing the Future” puts tax reform top of the priority list) and local government finance. Sunday Times (front page), Independent, Telegraph, Guardian have all covered this.

Meanwhile the international peer-reviewed journal Local Economy has invited PLRG’s Dave & Heather Wetzel and Dr Tony Vickers to guest edit a special issue next year on Land Value Capture. A Call for Papers appeared in the last issue (repeated below) and the deadline for submission of abstracts is 30th September this year.

How To Share Land

By Kelly McCartney

When looking through the lens of collaborative consumption or the mesh, it’s easy to see how many of our needs can be met through sharing with others to some lesser or greater degree. Surveying this communally inclined world, we find that our homes, cars, jobs, time, and more can easily be shared. Land is another asset that can and should be shared, one that is in high demand as rising food prices and the desire for healthy food blooms alongside the ‘Grow Your Own’ movement’s current momentum.

In 2009, Landshare was launched in the UK to do just that — share land. As stated on the website, “The concept is simple: to connect people who wish to grow food with landowners willing to donate spare land for cultivation.” A mere two years later, more than 60,000 people have signed up to share some 3,000 acres of land across every region of the country. At the outset, creator Hugh Fearnley-Whittingstall proclaimed it a “food revolution destined to be the next great thing.” The project, and others like it, can be credited with helping solve multiple problems with that one simple concept. Food security, carbon emissions associated with factory farming and food transport, crop diversity, community building, and more find a resolution in Landshare… and land sharing.

With the U.S. boasting its own version of Landshare with a capital L in SharedEarth, collaborative land users had some nice coverage. Then, back in March, the two organizations joined forces to become SharedEarth Globally and make it that much easier to match growers with land owners. (link to article)

When are the banks going to be reformed?
March 27th, 2011

It is astonishing that the banks, having cost the country £68bn in bailouts plus an additional £850bn in loan guarantees, asset protection schemes and enhanced liquidity, have not been reformed in any way in structure, pay, bonuses or lending. True, the Vickers Commission is due to report later this year and may some division between the investment and retail arms of banks. Or it may fudge the issue, or the Tory Party, which has been shown to get half its funding from the finance sector, may succumb to the intense lobbying from the banks to do little or nothing. So what should actually be done?

An ingenious new proposal has just been put forward by 2 NGOs, the New Economics Foundation and Positive Money, which deserves strong support. At root it involves two reforms. One is that the bank payments system is separated from risky lending activity, so that the failure of investments cannot damage the essential bank role of providing payments to depositors. This would have prevented the crash of 2007-8; only the investors would have suffered the consequences of their own recklessness and excesses, not the taxpayers. The second is that the Monetary Policy Committee (MPC) should influence money supply, not by the indirect and uncertain method of setting interest rates, but directly through the creation of new money when necessary, though only within strict constraints to avoid inflationary and deflationary pressure. That would effectively reverse the privatisation of the money supply which has existed since the 1844 Banking Act, but which the banks have colossally abused.

At present there are several enormous detriments to the existing banking system. One is that the banks create money out of thin air by repeatedly on-lending to different customers the same money secured by a small capital base, with the risk attached that any breakdown will be covered by taxpayers either through deposit insurance or through massive bailouts. Another is that under current rules the money supply can only be increased by additional bank lending which further exacerbates an already over-extended credit bubble. A third is that there is nothing to stop the banks using therir proceeds from lending to gamble on speculation in commercial property, overseas markets, tax avoidance/evasion scams, or any other money-spinning scheme rather than lending to UK business to create jobs.

Significantly, when the Government has engaged in £200bn quantitative easing over the last 3 years to extend the money supply, this money creation was intermediated through the banks which used it overwhelmingly to shore up their own rickety balance sheets rather than lend to business or householders. Nationalising control over the money supply is a key reform long overdue.

See how easy we have been to judge debt laden economies such as Greece, Ireland and Iceland as the gullible conduct of the masses. We have accepted the myth that the guilt lies with those who got in to debt, rather than those who made the foolish loans in the first place. It’s not the done thing these days to renege on one’s debt, no matter the complicity of the lender. We are being conditioned to conclude that the public deserves the austerity, as if it were a mess of their own making. Freedom can be a cruel mistress when she turns on her suitor. So when the loan shark’s knife is turned to our throats, will we submit so obediently?

The 20th century brought stark warnings of what we should be fearful of; Orwell’s state repression and Huxley’s self-conditioned triviality. It also brought two prominent theories of human nature to the fore. To Sartre, the human spirit needs unleashing from the shackles of constraint. To Skinner, the human intellect and contribution to society can be improved by rewarding constructive behaviour and punishing the harmful. Viewed from this standpoint the late 20th century would best be characterised as the overt promotion of individual freedom, mobility and opportunity, yet the covert exertion of behaviourist control methods, which actually constrain liberty, concentrate wealth and obliterate opportunity. The gap between rhetoric and reality is just getting wider and wider. It is in effect little more than “sell freedom, buy control”.

We have been suckered in to a con trick known as “bait and switch”. The bait was being sold an opportunistic expansionary future, meanwhile those with the real foresight and power base are conscious of a harsher and constrained future, and so have bought our compliance through a sedative mass culture and financial debt peonage; a masterful sleight of hand. The current practice of financial gerrymandering is merely a smokescreen for “keeping up appearances”. It is about deluding the man in the street into thinking that all will be rosy in the future, therefore he is justified in getting further into debt. But it’s an asymmetric pay-off matrix. The debtor is taking all the risk with little scope for reward, whereas the creditor takes no risk, yet legal entitlement to all gains.  (link to full article)

When the Government taxes successful effort, people strive less — some work less, others don’t bother setting up a business, a few relocate overseas — and since hiring is more expensive, fewer jobs are created. But taxing land wouldn’t crimp economic activity, as Adam Smith explained in The Wealth of Nations. It wouldn’t reduce the supply of land, which can’t be spirited away to a tax haven. And it wouldn’t push up rents, which depend on what tenants are prepared to pay rather than landlords’ expenses.

A land tax would actually encourage development. Since it would be payable irrespective of how land is used, it would stimulate the regeneration of derelict sites — such as Battersea power station, where David Cameron launched his election campaign and which has lain idle since 1982. Infrastructure investment that raises surrounding land values, such as Crossrail or a high-speed rail network, would pay for itself and thus escape short-sighted budget cuts. And unlike property taxes, people who do up their homes would not be penalised.

Taxing land values could also limit property bubbles — and the inevitable busts — without discouraging mobility (unlike stamp duty) or business investment (unlike interest rate rises). Relaxing planning restrictions, as Policy Exchange, the Prime Minister’s favourite think-tank, has suggested, would help too. The notion that we can all get rich by swapping more or less the same stock of houses at ever more inflated prices is a dangerous delusion. Property speculation diverts funds from productive investment in promising companies — and when the bubble bursts, the economy plunges into recession, home-owners are stranded with huge debts and banks laid low by bad loans seek bailouts from taxpayers. Isn’t it time we learnt from our mistakes?  (link to full article)

October 28, 2010
UN SWOTs on Land Value Capture on LandValueScape
Tony Vickers

Did you know that the UN supports Land Value Taxation? In 2006, UN HABITAT awarded a contract to the US-based Earth Rights Institute to develop one of several Global Land Tools for the benefit of governments in the majority/developing world: an online “How to do it” course on Land Value Capture. The contract document stated: “Land Value Taxation is the appropriate instrument for the urgent fight against global inequity and poverty”. Securing Land Rights for the poor is seen as crucial to the UN’s Millennium Development Goal 7, which includes the principle of “integrating sustainable development into national policies and programmes, to help reverse loss of environmental resources.”

Earthrights’ co-founder Alanna Hartzok has just contacted PLRG to inform us on project progress in a number of countries, using the SWOT methodology to analyse a country’s current status as regards capture of land values for securing land rights and combating poverty.

Among the components of what the UN-HABITAT regards as good practice for land policies are:-

“Consider fiscal and other measures, as appropriate, to promote the efficient functioning of the market for vacant land, ensuring the supply of housing and land for shelter development; Develop and implement land information systems and practices for managing land, including land value assessment, and seek to ensure that such information is readily available; Make full use of existing infrastructure in urban areas, encouraging optimal density of the occupation of available serviced land in accordance with its carrying capacity; Consider the adoption of innovative instruments that capture gains in land value and recover public investments”.

In the UK today, almost the only people (outside the top decile of income earners) able to enter the domestic property market are those with family already in it, via “the bank of mum and dad”. Therefore it is timely that RICS is taking a long hard look at how tax impacts on the entire property cycle. Our Coalition Government is ‘market friendly’ and should be receptive to ideas that make the housing and land markets work better.

Posted by Tony Vickers at October 28, 2010 5:05 PM

Did 2010′s man of the year die in 1897?
by Colby Cosh on Thursday, October 21, 2010 7:14am – 22 Comments

Marxism is dead; long live Georgism! With Britain in austerity mode, its government pre-emptively decommissioning aircraft carriers that haven’t been built yet and preparing to bounce a half-million public-sector employees, everybody is looking for policy solutions to make the state’s in-flow exceed its out-go with the least possible agony. That has some progressives, including the Liberal Democrat Business Secretary Vince Cable, looking at the notion of Land Value Taxation (LVT)—applying the new tax burdens not to capital and labour income, which would discourage work and investment, but to the unimproved value of land area, where, to a first approximation, it would merely encourage efficient land use and make it more affordable.

As the Spectator‘s James Forsyth points out, LVT is an “eye-catching” policy that the Conservatives, if only for cultural or spiritual reasons, would be unlikely to adopt. (They’ll still be the party of the great country houses long after the last one is reduced to ashes and its occupants sent to the salt mines of Gliese 581g.) The Lib Dems will need distinctive policies to help preserve their identity after years of helping the Conservatives govern.  (link to full article)

Second, asset inequality at the individual level would be primarily addressed through the inheritance-tax-funded Citizens’ Endowment described in the Great Redistribution, but would then be held in check through a progressive capital gains tax, complemented with a national land value tax87 to create a regional inequality reducing mechanism: if some areas grew more prosperous than others, this would be reflected in higher land values, generating higher tax revenues. Land in less prosperous areas, in contrast, would have lower values and so attract lower tax rates, providing incentives for investment and economic regeneration.  (link to download)

Welcome to the World of the “New Normal,” UK Style, Huffington Post 11.8.2010
from Marshall Auerback
We are now starting to see the economic impact of the ‘new normal’ in practice, as Paul Krugman outlined the other day. Having been bullied into adopting austerity measures apparently thinking they will help their economies grow, it is beginning to dawn on many “Austerian” governments that their embrace of hair shirt economics is beginning to undermine growth.

Exhibit A is the United Kingdom. The NY Times gave an account of British towns “reeling” from the implementation of nationwide expenditure cuts of some $130 billion introduced in last June’s budget. “A mass execution without appeal” is how the Times described it.

Along with this article comes a report from the Financial Times, “Economic Fears Rise as House Prices Dip”, documenting how UK house prices have began to fall for the first time in over a year this past July. The article notes that this setback has come “after a year when the recovery in house prices surprised almost everyone and brought relief to Britain’s stretched banks, [so] the return of a buyers’ market threatens to increase jitters in a fragile economy.”

Well, to us neither today’s news about British municipalities reeling from the impact of the new Tory coalition government’s budget cuts, nor last year’s recovery in UK housing, was at all “surprising.” Beset by the greatest financial crisis in the post World War II period, the last UK Labour Government did what any sensible administration ought to do when there is not enough activity in the economy to maintain employment and labor force growth: they increased public demand via increased net government spending……

Having publicly deprecated the impact of fiscal policy and warned of the long term deleterious effects of climbing public debt, of course, the Federal Reserve and/or the Bank of England cannot now reverse course and credibly back more fiscal stimulus. To cover up the flaccid nature of their respective central banks’ ineffectual monetary policy response, a number of economists present the current high levels of unemployment as “structural”, implying that there is little that can be done about it. It is simply the “new normal”, which in reality represents the ultimate in political failure. Our policy elites don’t dare concede the futility of fiscal austerity. Hence, they resort to invoking theories like the “equilibrium unemployment rate”, or “non-accelerating inflation rate of unemployment” (NAIRU, for short), the implication being that attempts to reduce labor underutilization by expansionary fiscal policy would be inflationary in the absence of “structural reforms” , such as privatization, labor market deregulation, anti-union legislation and harsh welfare measures. But these “supply side” measures in effect reflect the agenda preferences of the late 20th century, which have destroyed incomes and eviscerated the middle class. Our “new normal”, then, represents a collective shrug of our policymakers’ shoulders, ignoring a growing undercurrent of anger and despair.

Cross-posted from New Deal 2.0.