LVTFan's Blog

The Land Questions: #39

39.  The Israelis and the Palestinians each want to occupy the same land.  How might they go about settling this peacefully, to create the greatest prosperity and security for everyone involved, and without subjugating one people to another?

A. By living side by side, collecting the land rent for each property from whomever has title, and using that revenue to provide public goods.  Any excess can be distributed as a Citizens Dividend, similar to the Alaska Permanent Fund.

The Land Questions: #37

37.  Our ancestors bought or stole the land which the ancestors of some of those now identified as "Native Americans" relied on.  How should we and our children pay back them and their children?

A. By giving them the privilege of selling cigarettes without taxes, forgoing revenue that could help meet the health costs associated with smoking, both for smokers and for those who live with them.

B. By giving them the privilege of running casinos, even if a percentage of that revenue must be contributed to the state, and even if gambling is creates tremendous problems for some individuals in society, beyond those who actually gamble.

C. By collecting from everyone who owns land and natural resources the annual economic value, and giving everyone a per-capita share of those resources, every year, forever.  (Similar to the Alaska Permanent Fund)

D.  By collecting from everyone who owns land and natural resources the annual economic value, and giving everyone a per-capita share of those resources, every year, forever, and providing a double share to those who are starting from a disadvantaged position for some fixed number of years

E. By collecting from everyone who owns land and natural resources the annual economic value, paying the costs of government and common spending from that source, producing equal opportunity for all.

F. Your suggestions?

 

The Land Questions: #10 -- Broadcast Frequencies

10.   The advent of digital TV freed up many broadcast frequencies. What should we do with them?

A. Give them to the media companies, in proportion to their current share of market.  Let them decide what to do with them; after all, they are the experts.

B. Give them to the media companies, in proportion to their current share of market.  Let them decide what to do with them; after all, they created them!

C. Auction off the frequencies to the highest bidders, forever, with no further strings attached; they can hold onto them without using them if they choose, for as long as they like, or simply put a test pattern on the air, or whatever they prefer.  When demand rises and they believe they can make a high enough profit, they are welcome to sell them to the highest bidder, forever, and use the profits to enrich their deserving and smart shareholders.

D. Auction off to the highest bidder the licenses, for five year terms, with the auction to be repeated every five years, or the price to be set as a function of the size, wealth, income of the available audience.  Use the revenue to reduce taxes on productive activity.

E. Auction off to the highest bidder the licenses, for five year terms, with the auction to be repeated every five years, or the price to be set as a function of the size, wealth, income of the available audience.  Use the revenue to provide a dividend to every American, something like the Alaska Permanent Fund.

F. Your suggestions?

 

 

The Land Questions: #9 -- Federal Lands, Natural Resources

9.  The corporations which pump oil from beneath federal lands are paying low royalties into the federal treasury, despite the fact that the price of oil has risen significantly since their royalties were set.  The royalties should be raised.  To whom should the revenue go?

A. The Roman Catholic Church, the Southern Baptist Church, the Methodist Church, the Episcopal Church, the LDS Church, the orthodox, conservative, and reform bodies of Judaism, the American Islamic governing entity, etc., in proportion to their proven membership.  Further provision should be made to insure that those who belong to no religious group can name an entity which should control their share.

B. Keep giving it to the corporations, but increase their corporate income taxes.  Or reduce their loopholes.

C. Use the revenue to fund education, providing all children the same amount of funding, to be used at any school their parents choose.

D. Use the revenue to fund education, providing all children some funding, but more for those in poverty or handicapped, autistic, special needs, gifted.

E. Create a national version of the Alaska Permanent Fund, to provide, over the decades, an income to every American.

F. Use the revenues to reduce other taxes which burden the economy, and most particularly those which burden the poor most heavily.

G. Give the revenues to the people of the states where the oil is pumped. They're more entitled than the rest of us.

H. Use oil royalties to fund wars overseas, particularly those which relate to oil.

I. Use oil revenues to finance health care, or fund Social Security.

J. Your suggestions?

The Land Questions: #7 -- Air Pollution

7. The corporations which pollute the world's air through emissions from their US-based factories and refineries and electricity-generating plants will be asked to pay for carbon credits to offset the pollution they create.  Where should the revenue go?

A. Back to the corporations and their shareholders

B. To the American people as a Citizen's Dividend (similar to the Alaska Permanent Fund)

C. To American workers and retirees in the form of revenue to support Social Security

D. To the American people as a reduction in federal income taxes, starting with the highest income people who pay the highest income taxes

E. Same, starting with the lowest-income workers who have the least left from their wages

F. To corporate  shareholders in the form of a reduction on their dividend taxes

G. your suggestions?

The Land Questions: #6 -- Airwaves, Spectrum

6. We say that the airwaves [over the US, that is] belong to the American people.  Who should get the economic rent on their value?

A. The American people, in the form of a Citizen's Dividend (similar to the Alaska Permanent Fund)

B. The American people, in the form of a reduction in payroll withholding for Social Security

C. Those who pay federal income taxes (about 75% of us pay more in withholding  for social insurance than we do in federal income taxes) in the form of a reduction of federal income tax rates -- starting from the bottom?  starting from the top?

D. The corporations which pay corporate income taxes, in the form of a reduction on corporate income taxes

E. The shareholders of the media companies, small, medium and large: let them keep that rent, or just tax it as we do now, as a corporate income tax, and then light taxes on dividends and capital gains

F.  The management of the various media companies, to the extent that they can negotiate good contracts for themselves.

G. The lobbyists for the media companies, to the extent that they are successful in preserving the privileges we currently grant the media companies, their management and shareholders

H. Your suggestion?

"It was there for the taking"

When the structures that our laws and traditions create provide opportunities for someone to capture a windfall, should we blame the fellow who "takes advantage" of those structures, or should we respond by studying and correcting those structures and laws?

Winston Churchill, in his speeches under the baanner "The People's Rights," in 1909, said this:

I hope you will understand that when I speak of the land monopolist I am dealing more with the process than with the individual landowner. I have no wish to hold any class up to public disapprobation. I do not think that the man who makes money by unearned increment in land is morally a worse man than anyone else who gathers his profit where he finds it in this hard world under the law and according to common usage. It is not the individual I attack, it is the system. It is not the man who is bad, it is the law which is bad. It is not the man who is blameworthy for doing what the law allows and what other men do; it is the State which would be blameworthy were it not to endeavour to reform the law and correct the practice. We do not want to punish the landlord. We want to alter the law.

The 99% need to start identifying the laws and structures that must be adjusted.  This is not easy work.

What individuals produce, and corporations produce, should not be "there for the taking" -- be it by corporate management in the form of hugely generous compensation packages and golden parachutes, or by simply saying "these resources are OURS, not everyone's" or by establishing monopolies or duopolies or other such structures.  We-the-people need to educate ourselves about how things are done now, who benefits from that, and what alternatives exist.  It won't be easy.  We'll be challenging special interests who somehow think they're entitled to their advantaged positions, and the rest of us exist to keep them comfortable.

Labor should get its share, and capital should get its share, and we-the-people should get land's share.  That last could fund a large portion of our common spending, on infrastructure and services, and permit us to reduce or eliminate the dumb taxes which take which individuals and corporations legitimately create.  That "keeping what we create" extends, also, to "externalities," to being responsible for the pollution we create, and setting up incentives so that it is minimized, for the good of all of us now here and the good of future generations.

I think it is quite possible, even likely, that a few years after we've made this shift in who gets what, we'll find that we don't need nearly so robust a social safety net, and that we-the-people may get some of "land's share" back in the form of a Citizen's Dividend, just as all permanent residents of Alaska receive an annual dividend from the Alaska Permanent Fund. 

In any case, letting some corporations and some individuals grab that which we all create together is just plain wrong.  Letting it be "there for the taking" is insanity and injustice.  And don't we pledge "liberty and justice for all?"

Our ancestors may have granted some privileges to some lucky folks for one reason or another.  That doesn't mean that we can't, politely and firmly, revoke those privileges.  A couple of centuries is plenty.  Experience has shown us that those privileges don't serve the greater good, and it is time to revoke them.  Will the privileged give up those privileges graciously?  Quite possibly not.  But the first step is to identify them, and then to seek to change the system so that those rightly-common assets aren't "there for the taking."

Sarah Palin’s Alaska – Would the Tea Party Like It? | ChuckHuckaby.com

Sarah Palin’s Alaska – Would the Tea Party Like It? | ChuckHuckaby.com.

I'm quoting the first part of this blog post, which I thought pretty good:

This blog post is about tax policies in Sarah Palin’s Alaska, not the TV show by that name.

As I looked at the tax policies at work in Alaska, I began to wonder if the Tea Party who responds so favorably to Sarah Palin would like her to implement the tax policies in Alaska for the rest of the United States of America? (However unlikely that prospect is at the moment given our present tax paradigm.)

Why might there be problems taking a lead from Sarah Palin’s Alaska? Once you learn how great the tax principles are in Alaska, you’ll realize there are bound to be very powerful vested interests who would like to keep the rest of us from going in that direction, if only out of the fear of change or their loss of power and revenue. Big Oil who wants to profit from nature’s bounty while paying as few taxes as possible is one potential opponent. And those who want to use the income tax code to manipulate society would also oppose such a transition.

I hope America’s Tea Parties will get to know about the tax structure in Alaska… In fact I wish all America had the same basic setup!

Here’s how things work in Alaska:

According to Wikipdedia, Alaska (yes, I know they are often unreliable but useful enough for this post) has the lowest personal tax burden of any state. That is confirmed by the Tax Foundation article on Alaska Taxes which has other information on their taxes. Both sources rate the state as extremely “Business Friendly” tax wise also.

How do they do this?  Good question.

Alaska has:

• No State Income Tax
• No State Sales Tax (though some local governments do have such a tax…

But they DO have…

• Royalties charged on natural resources
• State and local property taxes, and they receive
• Federal subsidies – $1.84 for every $1.00 in federal taxes.

It wasn’t always this way in Sarah Palin’s Alaska: Before 1977  Alaska had the second highest tax burden in the country prior to finishing the Trans-Alaska oil pipeline. Then, as recorded at the Tax Foundation “By 1980, with oil tax revenue a certified bonanza, Alaska repealed its personal income tax and started sending out checks instead. The tax burden plummeted, and now Alaskans are the least taxed.”

Those checks come from the Alaska Permanent Fund that sends annual dividend checks to every permanent Alaska resident regardless of age. A family of 5 would receive 5 such checks annually. Checks have averaged between $ 1,000 and $2,000. To receive a check as a permanent resident one must reside there from January to January in the qualifying year and receive the dividend check the following October.

The Permanent Fund – and State Government – are funded by royalties on petroleum production.  (As noted above, land taxes also form some part of the State revenues.)

Except for the Federal subsidies (and I don’t know how much of that goes to military spending), what we see is a tax structure in Alaska similar to one described by Henry George, one of America’s best loved economists. A summary of George’s thought is available in this modern updating of his book Progress and Poverty.

Alaska Government  is primarily funded by revenues from what God has created and which people seek to monopolize for themselves (land, minerals, and other natural resource). The “rents” from these gifts of God pay for the government and pay back a basic “dividend” or income to the residents. Best of all,  the system allows the people to live without having to pay “income” or “sales” taxes that are a drag on economic growth.

Of course folks in Sarah Palin’s Alaska have to pay Federal income taxes – but in theory, those revenues could be derived without income taxes either. How could this be implemented in the “Lower 48″?

1. “Drill, Baby, Drill!” Tap into the onshore and off shore oil reserves and natural gas (not to mention coal) that we know exist and divert royalty revenues to fund government. (And defund overseas petroleum providers who fund terrorism along the way!)
2. Shift to a land value tax (on the “rental” value of land, not the improvements) and natural resources harvested for resale to round out the income needs of local, state, and federal governments (this is an idea endorsed by the Articles of Confederation Article VIII
3. Use the revenues to eliminate personal income taxes and eliminate sales taxes.
4. To expand on the definition of “natural resources”, that means tax the value of those things which the classical economists would have recognized as land, i.e. water rights, mineral rights, the “right” to pollute, access to “airwaves”, geosynchronous orbits, and other God given uses of the earth that private individuals and corporations presently claim for themselves at our expense and for their profit.
5. Create dividends for permanent, legal residents while building emergency reserves based on real assets.

I’d like to see the Georgist tax policies of Sarah Palin’s Alaska applied to the “lower 48″. Eliminating personal income and sales taxes would go a long way towards making all of the United States a “business friendly” area and should, accordingly, draw investment and spawn productivity by businesses of every size.

There’s just one thing. While I really like the tax policies of Sarah Palin’s Alaska, I wonder why I’ve never heard her mention “exporting” them down here?

Why tinker with simply lowering personal income tax rates? I’ve discussed here why that’s wrong.

Flat taxes, “Fair” taxes (national sales taxes), income taxes, etc. are all just ways the people with means, lawyers, and lobbyists cash in on the benefits of God’s creation for themselves while shifting the costs to the rest of us.

As far as I’m concerned, the Tea Party is settling for too little unless they seek a major overhaul of the way we do taxes in our nation.

Let’s eliminate personal income taxes completely just like Alaska did.  Let’s switch to a completely different tax system on the same principles that Alaska uses. That’s the most valuable gift the rest of America could receive from Sarah Palin’s Alaska!

Along the way, I believe we’d see prosperity flourish wherever people were willing to work. Isn’t that what America is about?

How to End the Great Recession

Where have all the economic gains gone? Mostly to the top. The economists Emmanuel Saez and Thomas Piketty examined tax returns from 1913 to 2008. They discovered an interesting pattern. In the late 1970s, the richest 1 percent of American families took in about 9 percent of the nation’s total income; by 2007, the top 1 percent took in 23.5 percent of total income.

It’s no coincidence that the last time income was this concentrated was in 1928. I do not mean to suggest that such astonishing consolidations of income at the top directly cause sharp economic declines. The connection is more subtle.

The rich spend a much smaller proportion of their incomes than the rest of us. So when they get a disproportionate share of total income, the economy is robbed of the demand it needs to keep growing and creating jobs.

What’s more, the rich don’t necessarily invest their earnings and savings in the American economy; they send them anywhere around the globe where they’ll summon the highest returns — sometimes that’s here, but often it’s the Cayman Islands, China or elsewhere. The rich also put their money into assets most likely to attract other big investors (commodities, stocks, dot-coms or real estate), which can become wildly inflated as a result.

Meanwhile, as the economy grows, the vast majority in the middle naturally want to live better. Their consequent spending fuels continued growth and creates enough jobs for almost everyone, at least for a time. But because this situation can’t be sustained, at some point — 1929 and 2008 offer ready examples — the bill comes due.

This time around, policymakers had knowledge their counterparts didn’t have in 1929; they knew they could avoid immediate financial calamity by flooding the economy with money. But, paradoxically, averting another Great Depression-like calamity removed political pressure for more fundamental reform. We’re left instead with a long and seemingly endless Great Jobs Recession.

THE Great Depression and its aftermath demonstrate that there is only one way back to full recovery: through more widely shared prosperity.

via www.nytimes.com

I think Robert Reich sees part of the problem, but he doesn't see the solution.   How do we achieve more widely shared prosperity?  By a variation on Alaska's theme.  In Alaska, a significant share of the value of the state's natural resources is used to fund state government, and another significant share is placed each year into the Alaska Permanent Fund, which is invested in a broadly diversified portfolio and pays an annual dividend of $1000 to $2000 to every permanent resident of Alaska, of all ages.  [See http://www.nytimes.com/2010/09/04/us/politics/04alaska.html for an article mentioning this, and the Alaska Permanent Fund link, at the left of this page.]   Alaska has it half right: they collect a decent share of the value of the natural resources, but they don't tax their land value much.

How do we share the prosperity beyond the top 10%?  By shifting our incentives so that those who currently grow wealthy in their sleep by collecting economic rent find themselves sharing that rent with the rest of us.  Untax wages, starting with incomes under the median.  Untax sales.  Untax buildings.  Tax land value.  Tax the value of those things which the classical economists would have recognized as land -- water rights, "rights" to pollute, airport landing rights at congested airports, geosynchronous orbits (which prevent satellites from bumping into each other), electromagnetic spectrum (those airwaves which most people would say "belong to the American people" but which we have permitted corporations -- public and private -- to privatize), natural resources such as oil, natural gas, copper, coal, lithium, etc..   All these things are going into corporate portfolios (here and abroad -- and some of those corporations are families in power, despite attempts at nation-building), week in and week out, and their value accrues to the shareholders of the corporations.  Stock ownership is quite concentrated, and these benefits flow into the pockets of a relative few, who, as Reich rightly points out, may or may not spend or invest in America's products.  When they do invest, they often acquire our best land and resources, buying thereby the labor of thousands of Americans.  When an acre in Manhattan can be worth $400 million, the seller of that land didn't make it valuable.  WE did!  So why should an individual, or a corporation, or a trust, or a university, or a pension fund -- or any private entity -- get to pocket that value as if they did?   (The kindest thing I can say is that we have a bad habit!  Something like chattel slavery -- and look at how long it took us to end that.)

Pocketing that value has two sorts of effects: when they sell, they pocket that so-called "capital" gain.  It isn't capital!  It is land value!  Capital depreciates; what rises in value is land, and it rises for reasons which have nothing at all to do with the "fellow" who owns it.  

But even when they buy and hold, there are important effects of permitting that privatization.  The rich don't need to put the land to its highest and best use, because they can get by with something less while they wait for the community to cause it to grow.  (See The Taxpayer at 72nd and Madison.  Notice all the surface parking lots in Manhattan, Philadelphia, Hartford and many other cities.  See the 4.3 acre "hole in the ground" in Stamford, CT, right near the city's 100% location, vacant since the early 1980s.) They're patient!  They can afford to be.  The top 10% of us hold 71.5% of the chips, according to the 2007 Survey of Consumer Finances.)   Not using the land well reduces the supply of housing close to the center of things (adding to sprawl) and/or of jobs (which we say we want) and contributes to a wide range of our most serious social, economic, environmental and justice problems.

If we collected more of the annual rental value of our urban land, the holders of that land would turn into active users or sell it to someone who would put it to good use.  Good use creates jobs, and homes and other things that the market wants.  But when the market can't afford them, it does without.  People are priced out of housing in the places they'd prefer to live.  They lack jobs or are underemployed, and the rich keep getting richer.

Reich advocates extending the EITC, exempting the first $20,000 of wages from payroll taxes, improving and extending early childhood education, making public universities free in return for 10% of the first 10 years of full-time earnings, creating "earnings insurance."  He concludes,

Policies that generate more widely shared prosperity lead to stronger and more sustainable economic growth — and that’s good for everyone. The rich are better off with a smaller percentage of a fast-growing economy than a larger share of an economy that’s barely moving. That’s the Labor Day lesson we learned decades ago; until we remember it again, we’ll be stuck in the Great Recession.

Well, 130 years ago, Henry George spoke to some of the kinds of measures that have been proposed over the years for reducing poverty and promoting widely shared prosperity.  See "Part VI -- The Remedy" and particularly "Ineffective Remedies" and "The True Remedy"

"Ineffective Remedies" begins,

OUR CONCLUSIONS point to a solution. It is so radical that it will not be considered if we believe less drastic measures might work. Yet it is so simple that its effectiveness will be discounted until more elaborate measures are evaluated. Let us review current proposals to relieve social distress. For convenience, we may group them into six categories:

1. More efficient government
2. Better education and work habits
3. Unions or associations
4. Cooperation
5. Government regulation
6. Redistribution of land

That 10% of us who hold 71.5% of the net worth also received 41.3% of the current income. [Note that these percentages are understated, since the SCF purposely omits the Fortune 400 families.  They hold about 1% of the nation's net worth.] 

Picketty & Saez provide annual updates on income concentration.  For 2008, they report that the top 10% of us (sorted by income, not net worth) received 45.60% of the income when capital gains are excluded and 48.23% of income including capital gains.   (For 1988, the corresponding figures are 38.63% and 40.63%; in 1958, 32.11% and 33.56%.   Do we notice a trend here?  Do we like it or think it a healthy trend?)

We have permitted and supported a structure which funnels wealth and income into relatively few pockets.   We have to reform this structure, and we have to recognize that the current beneficiaries are not likely to be keen on reform -- conservatives have a lot to conserve for themselves -- and those who are dependent for their salaries on being popular with those beneficiaries are not likely to be particularly interested in looking at the underpinnings of the structure with an eye to removing some of the ladders (escalators!!) or  gentling the chutes.

Those who get to privatize the value of what ought to be common assets grow wealthy in their sleep.  Until enough of us understand the mechanism to constitute a majority, we aren't likely to correct it.

 

It is a bit disheartening to think how many well-regarded economists live in California, the land of Proposition 13, and haven't lifted a finger or opened their mouths to suggest that it is not in the best interests of California's people.   Milton Friedman acknowledged many times that the tax on land values was the "least bad" tax -- and didn't have anything to say about Proposition 13, which was the antithesis of what a wise person or society would do with that information.    So I guess I shouldn't be surprised that today's California economists, with very few exceptions, aren't all that concerned with the economic wellbeing of ordinary people any more than economists elsewhere are.  Or maybe, as my late mother would have expressed it, their educations have simply been neglected.  (At which point she would proceed to fill in my newly-identified knowledge gap.)    Economists can start with the links in this post, and then explore from there.

Major new oil find in North Sea | SNP - Scottish National Party

Major new oil find in North Sea | SNP - Scottish National Party.

2010-08-27
Following on from reports today (Friday) that a ‘major’ discovery of oil in the North Sea, Aberdeen North MSP Brian Adam has renewed Prof. Josef Stiglitz call for an Oil Fund. The Nobel Prize winner and former Chief Economist of the World Bank, said on BBC Scotland’s Newsnight programme on Tuesday (24th August) that the UK had “squandered" it's oil wealth and that it is now "imperative" an oil fund is established to secure the wealth that remains under the North Sea for future generations.

The discovery, made by German firm Wintershall yesterday, of up to 100 million barrels of oil would equate to, at today’s oil prize, to over $7billion. This comes just a few short months since the last major discovery in Scottish waters in June, when up to 300 million barrels were discovered by EnCore Oil.

Commenting, SNP Brian Adam said: “The oil industry has contributed a great deal to Scotland, especially in Aberdeen, and it’s showing no sign of drying up despite the pessimistic view taken by the London Parties in the 70’s, which still continues today.

“Over the course of the summer we have seen two major discoveries in North Sea, plus the GERS report which showed that with independence Scotland would see a budget surplus of over £1 Billion, whilst the UK struggles with a mammoth £50 Billion deficit. Even the most hardened unionist cannot deny that the financial case for independence couldn’t be any stronger.

“On Tuesday, Professor Stiglitz said that the SNP was “absolutely right” on the need for an Oil Fund, the UK Government has ‘squandered’ Scotland’s oil, that current situation is unsustainable and that an Oil Fund was now “imperative”.

“The unionist parties must put aside their petty party politics and start putting the interest of Scotland, and it’s people, first before it’s too late.”

Why were resources expunged from neo-classical economics? | Martin Wolf's Exchange

Why were resources expunged from neo-classical economics? | Martin Wolf's Exchange

Almost a month ago (7/12), Martin Wolf, the Financial Times' chief economics commentator, posted a piece to his blog under this title. The last time I looked, perhaps 10 days after his initial post, there were about 150 responses.  I circled back recently, and found that the comments count had risen to over 350.  

Here is his response, posted 7/23:

This ended up as a heated debate. Nobody will be surprised if I conclude that the result of the debate (often surprisingly ill-tempered) was pro-LVT 10, anti-LVT zero. I am surprised by some of what the anti-LVT proponents have said. I would have thought they would wish to open their minds a bit. I did and was persuaded of the case, as a result. Is not the purpose of such exchanges to learn from one another?

Some of the arguments addressed at the case for LVT are quite extraordinary.

The essential point is quite simple: the value of resources is created by the economic activity of other factors of production. The owners of these resources can become hugely wealthy and are often untaxed on that increase in wealth: the Duke of Westminster is the richest Englishman simply because he owns a large amount of land in a valuable part of London. So why should he have command over the labour of so many other people?

That wealth is, in the strictest sense, unearned. If that rise in wealth were taxed away, other taxes -- those on labour, capital and entrepreneurship -- could fall. This would be both efficient (because taxes on rent do not create distortions, as Ricardo showed) and also just, because the wealth was unearned. Now, surprisingly, the UK allows foreign landowners to enjoy the increase in value created by the British economy, entirely tax-free. This is utterly crazy.

Let me add four other points.

First, throughout history, the main source of wealth was land-ownership. The parasitic landowner became wealthy on the efforts of others -- peasants, tenants and even developers. Sometimes the parasite was also a farmer or developer, but that does not change the fact that these are two distinct economic roles. The parasite built fine castles and palaces and often sponsored music and culture. But he was still a parasite. The beauty of capitalism is that many of the wealthiest are no longer parasites. This is good. But many of the wealthy still are parasites. Moreover, now everybody wants to get rich by being a mini-landowner. That is a huge diversion of effort.

Second, the financial system's ills are the result of unchecked credit-creation. Yes. But unchecked credit-creation would be impossible without collateral. Land is always the principal form of collateral (buildings are a depreciating asset). That is why financial bubbles that do not create credit booms (like the dotcom bubble) are economically benign, while property bubbles are potentially catastrophic. When the value of collateral collapses, the financial system implodes.

Third, there is really nothing new about this understanding of the role of resource rents. They were central to the classical system, from which modern economics, in its various forms, derives. Ricardo's analysis of rent remains intellectually impeccable.

Finally, as Herman Daly has noted (http://steadystate.org/modernizing-henry-george/), today economically valuable resources are much more than just land (and what lies below it). They include all the services of the biosphere - those that are appropriated, those that are appropriable and those that are non-appropriable. If we do not think seriously and intelligently about how to price resources, we are likely to go seriously adrift, perhaps even into disaster. Here land is the least of our problems -- it is appropriable and, by and large, appropriated. So, at least, the price mechanism works, even though the distribution of the gain is grossly unjust. But, in other cases, no appropriation is possible, or at least it is not easy. Nobody can appropriate the atmosphere. It is nigh on impossible to appropriate the oceans. How do you own species diversity? These are serious challenges.

So, I conclude where I started: resources matter. It was a great mistake to exclude them from the canonical neo-classical model. It is also a great mistake not to tax their owners to the hilt.

Joe Stiglitz: the people are being cheated and the economy is getting poorer

Joe Stiglitz made some important observations in a talk on July 26 at the University of Queensland.  Here are the first few paragraphs from an article on the University's website:

Inadequate taxes on mining means the people of Australia are being cheated and the economy is getting poorer, a Nobel Prize-winning economist told a crowd of 1400 people at The University of Queensland last night.

Professor Joseph Stiglitz shared his thoughts on the proposed mining tax in response to a question from an audience member during the seventh UQ Centenary oration.

“Natural resources lead to an appreciation of the currency and that leads to an imbalanced economy because it's hard for any other sector to do well, competing with imports or exporting,” Professor Stiglitz said.

“You're selling off your assets and in many cases you're selling them off at a very low price.

“If you are taking resources out of the country and you are not reinvesting those resources in one way or another – a stablisation fund, human capital, infrastructure – then your economy is getting poorer, not richer, and a good accounting framework can show that,” he says.

“When you're taking out natural resources from an economy you ought to have a subtraction from GDP - a firm that held a resource and was selling it off would take off depreciation and that would show up in its books as depreciation.”

A bit of searching returned another account of that same evening:

Professor Stiglitz told a packed UQ Centre that Australia's economic stimulus package was the best designed in the world.

AND he said natural resources - coal, iron ore - should be properly valued at market just like the electromagnetic spectrum.

The government auctions the spectrum to the highest bidders who want to operate mobile phone networks, cable companies, television and radio stations. 

Basically, a country - like Australia - will end up poor if doesn't get the best price for its assets - and natural assets are not renewable, once they are gone they are gone. If the proceeds from the sale of these assets are not invested in infrastructure to support and grow other sectors the economy (manufacturing and value-adding, goods creation) then a country and it's people will not prosper - HELLO! HELLO! Drowning not waving.

"It should be subtracted from Gross Domestic Product (GDP)," he said. "You are selling off assets at a very low price if you don't have adequate taxes on mining - you are being cheated," he said to audience applause.

He thinks resources should be auctioned off to the highest bidder - the free market at work. Of course, the mining industry will make all kinds of threats.

To everyone's amusement he joked about how mining companies bamboozled, threatened and bribed governments of developing, fragile nations. 

"I assume that's not the case in Australia," he mused.

To prosper, a country needs to set up a stabilization fund (from a mining tax, if not a resources auction) for nation building.

This is what he calls an investment fund for building infrastructure and to grow value-adding industries, maintain education, job creation.

Not only that but the sell-off of natural resources should appear on a country's accounts as a kind of depreciation of assets - otherwise the accounts are not accurate. ...

He made these comments at the end of the oration after he explained the difference between the financial sector and the economy - the economy is not the financial sector.

The financial sector (the banks and regulators) are the culprits behind the global financial crisis which has crippled the global economy. Apparently, moneylenders have been skimming 40 percent of the profits from companies that actually make and produce things. His big point was that this is not really the role of the financial sector. The financial sector's job is to support economic growth, not cripple it. 

"Finance is a means to an end," he said. "The lack of balance between the financial sector and the economic sector was actually the real problem in this economic crisis (NOT the real estate bubble)."

The second account concludes with:

And as for Climate Change and the price of carbon and waiting for the rest of the world before we do anything?

Economies are not restructuring because there is no carbon price. The western world worries about the growing and changing consumption patterns of China and India.

Professor Stiglitz doesn't believe the West should begrudge them at all.

It's not consumption that's evil - it's profligacy. WASTE! Now, I wonder who wastes more the West or countries raising people out of poverty?

India and China will follow the wasteful ways of the West if the world fails to set a carbon price and force everyone to consume less to save the planet - the planet will force us to change in the end (*he says).

"If we had agreed to have a price on carbon at Copenhagen that would have been the answer," he said. "It would have provided an increase in global aggregate demand (global economic spending) as firms all over the world needed to retrofit (their business to meet pollution standards)."

So why is the US not hearing this advice?   There is a lot here that speaks to issues which Americans would be wise to attend to.   Alaska pays for a large portion of its costs by taxing its natural resources, and also provides an annual income to every permanent resident, of any age, from the proceeds of investing oil revenue into a broadly diversified portfolio, through the Alaska Permanent Fund.   We have sacrificed many American lives in Iraq, but not produced a situation in which Iraq's oil revenue gets used either to finance infrastructure and government-provided services OR to provide an income to every citizen.

Re-read these excerpts with Iraq in mind, and then thinking of Afghanistan, and then of America.

Postscript:  see also Karl Fitzgerald's account of Stiglitz's 7/30 talk.

The Larger Struggle - David Brooks

Op-Ed Columnist - The Larger Struggle - NYTimes.com.

On the one side are those who believe in democratic capitalism — ranging from the United States to Denmark to Japan. People in this camp generally believe that businesses are there to create wealth and raise living standards while governments are there to regulate when necessary and enforce a level playing field. Both government officials like President Obama and the private sector workers like the BP executives fall neatly into this camp.

On the other side are those that reject democratic capitalism, believing it leads to chaos, bubbles, exploitations and crashes. Instead, they embrace state capitalism. People in this camp run Russia, China, Saudi Arabia, Iran, Venezuela and many other countries.

Many scholars have begun to analyze state capitalism. One of the clearest and most comprehensive treatments is “The End of the Free Market” by Ian Bremmer.

Bremmer points out that under state capitalism, authoritarian governments use markets “to create wealth that can be directed as political officials see fit.” The ultimate motive, he continues, “is not economic (maximizing growth) but political (maximizing the state’s power and the leadership’s chances of survival).” Under state capitalism, market enterprises exist to earn money to finance the ruling class.

The contrast is clearest in the energy sector. In the democratic capitalist world we have oil companies, like Exxon Mobil, BP and Royal Dutch Shell, that make money for shareholders.

In the state capitalist world there are government-run enterprises like Gazprom, Petrobras, Saudi Aramco, Petronas, Petróleos de Venezuela, China National Petroleum Corporation and the National Iranian Oil Company. These companies create wealth for the political cliques, and they, in turn, have the power of the state behind them.

It might be worth looking at these assertions in light of how wealth is distributed ... concentrated might be a better description ... in America.  The 2007 Survey of Consumer Finances, from the Federal Reserve Board, reports the following distribution of "Equity," which includes individual stocks and equity mutual funds, whether held in retirement or non-retirement accounts:

Bottom 50%      1.5%
Next 40%        19.6%
Next 5%          12.4%
Next 4%          30.5%
Top 1%           36.0%

The SCF also reports the distribution of holdings of "BUS" -- the value of privately-held businesses:

Bottom 50%      0.4%
Next 40%          6.0%
Next 5%            5.5%
Next 4%          25.5%
Top 1%           62.7%

The two categories are of roughly equal size: Equity $13.7 trillion and BUS $14.9 trillion.   So one might reasonably estimate that the top 1% have roughly 50% of the aggregate value of these two categories, and the next 4% have about 28% -- leaving 22% for the bottom 95% of us.

If state capitalism puts, say, 80% of business in the hands of the top 5%, is it that much worse than what we've got?  In some ways, yes -- but the question is worth pondering.

Brooks closes with this:

We in the democratic world have no right to be sanguine. State capitalism taps into deep nationalist passions and offers psychic security for people who detest the hurly-burly of modern capitalism. So I hope that as they squabble, Obama and BP keep at least one eye on the larger picture.

We need healthy private energy companies. We also need to gradually move away from oil and gas — the products that have financed the rise of aggressive state capitalism.

More than "needing healthy private energy companies" we need to start collecting for the commons more of the value of the natural resources they draw from our common supply -- not to mention forcing them to privatize the environmental risks associated with drilling.  Remember what Henry George said about a well provisioned ship?  He who controls the hatches controls his fellow human beings.

And of course, we need to be undertaking the shift of incentives which will redirect sprawl into the underused sites in our cities.  Land value taxation -- untaxing buildings, and uptaxing land value -- will produce the urban density which will lead to walkable cities and populations which will support effective public transportation systems.  It will provide technologically modern housing affordable to people at all levels of the income spectrum, close to their work -- for those who want that.  The reduced pressure on the suburban markets will lower prices there, too, for those who want that.   That urban redevelopment will also create more commercial venues in the centrally located places where specialized businesses thrive.  And of course all that building activity creates jobs, and those new technologies will produce buildings which use less energy and produce less pollution.  And because untaxing buildings removes the penalties associated with things like solar power, all the incentives will be pointing in the same direction.

t

The oil and gas billionaire, and estate taxes

The New York Times reported recently that Dan Duncan died in March, leaving an estate estimated by Forbes Magazine to be $9 billion.   He started with $10,000 and two propane trucks, and "and built a network of natural gas processing plants and pipelines that made him the richest person in Houston."

I do not begrudge his heirs the value of the plants themselves, other than the value created by any sort of monopoly they might benefit from -- which may be considerable -- and the value of the well-located land on which they sit.  But the pipelines run over rights of way whose value has probably gone very lightly taxed, just as the value of railroad rights of way has traditionally been under-valued and therefore taxed lightly.

The estate includes over 100 million shares of the stock of Enterprise GP Holdings, worth $43 per share at the time of his death, shares which likely have appreciated hugely over the years without being taxed.  Because Duncan's estate escaped paying estate tax, the value of the shares was not stepped up, so when the shares are sold someday, a 15% "capital" gains tax will be due, and his heirs will keep the other 85%.

Had Mr. Duncan died in 2009, while the estate tax was still in place, the $4.3 billion of shares would have resulted in a $2 billion estate tax. (That ignores his other holdings, including a 5,500 acre hunting ranch.)

The estate tax is an imperfect tool, but it is better than no tool at all to collect back for the community value which individuals during their lifetimes have managed to privatize. 

The best solution, though, would be for each of us who privatize something from the commons to be required to compensate the commons, month in and month out, for that which we claim title to.  Buildings, machines and pipelines are rightly private property, but the land on which they sit and the nonrenewable natural resources which they draw down are OURS, not the rightful property of any individual or corporation, and when we permit some to privatize that value without compensating society, we create wide channels for TRICKLE-UP.  We're so used to it that we don't even notice.

Recall that a huge something over 70% of America's net worth is owned by just 10% of us, and over 34% is owned by 1% of us.  Mr. Duncan's children are in that 1%.  They have inherited the reins to a corporation which we've permitted to privatize the value of what ought to be common property.

Those who have high hopes and sincere expectations of someday winning a large jackpot in the Powerball Lottery may think it appropriate to defend the privileges associated with having large amounts of wealth (Powerball winnings, however, are income -- that's a detail) and they may think it to be in the best interests of their future lucky self to protect privileges associated with privatizing the commons.  (They might want to take a look at the odds in their favor compared to the odds associated with the privilege of access to America's or the world's natural resources.)

Which Georgist first called LVT the "least bad" tax?

Most Georgists reading this will respond that it was Milton Friedman who called LVT the "least bad" tax -- at least twice, first in 1978 and then again in a newspaper interview in 2006, a few weeks before he died.  And they'll add, "but he wasn't a Georgist" -- he never pursued the importance or implications of that observation.

But the answer to the question, I submit, is Lowell Harriss!  I had occasion to read a report dated November 9, 1966 by Weld Carter (my grandfather) reporting to a foundation he worked for [the Robert Schalkenbach Foundation] about a symposium of the Tax Institute of America which had occurred the previous week.   He does not report where it took place, but mentions that the program chairman was Dr. Alfred Buehler, who pointed out that (the quotes here refer to Carter's report):  "this was the first time since 1939 that the Tax Institute had selected the property tax for its annual symposium.  Of the present panelists, he, [Lowell] Harriss and [Harold] Groves had all been on the 1939 program.  He praised Dick Netzer's book as being the most important since the work of Jensen in the early '30's, calling attention to Netzer's suggested alternatives to the general property tax."

"Ken Back presided over the opening session.  He cited the way in which scholars had sought in the past to bury the property tax.  For his part, he showed its present importance and vitality, pleading that it should be brought up to date.  He called attention to three 'myths':  (1) that the property tax has limits; (2) that its administration is so poor as to condemn it; and (3) that it is unsound in principle.

The report goes on to say,

"Harold Groves could not appear, but he sent his paper on "Property Tax -- Effects and Limitations."  This was read by a former student, Leonard Kust, vice president and tax counsel for Westinghouse Electric.  The paper wound up with a plea for better administration and the prevention of the continuing erosion of the property tax base, followed by an endorsement of the taxation of economic rent, with the recommendation that it be collected at the state level and returned to the local communities.  He appended the observation that this tax conserves the base.

"Lowell Harriss, had problems, which Miss [Dr. Mabel Walker]Walker explained later.  When Dr. Groves had his heart attack, he (Groves) had already been scheduled to do a paper on "Growing Property Tax Burden: Effects and Upper Limits."  After the attack, Lowell Harriss had kindly consented to substitute for Groves.  But at the last minute, Groves sent in a paper, so Miss Walker had to change the title of Groves' paper and, I gues, get Harriss to modify his presentation somewhat accordingly.  The Harriss paper was good.  He spoke of the expanding potential of the property tax, saying that generally it should be able to meet advancing needs without increasing rates.  He objected to the notion of "limits," point out that as services were expanded, land values would grow continuously higher.  He called attention to the fixed quantity of land.  He called attention to the effects of differential rates on land: higher rates forcing more intensive rates and lower rates tending to take the pressure off owners.  He then spoke of some of the unfavorable effects of taxation on improvements, with their tendency to increase slums.  He pointed out that there was no hitherto undiscovered alternative to the property tax, saying that the question is the comparison of more intensive use of other tax modes.  Speaking negatively, he said, "The least bad tax I can imagine is a tax on land values.  It will score better than any other tax."  On the favorable side, he spoke of land value taxation as enhancing local autonomy, as providing equity, as aiding optimum resource allocation, as providing good competition between communities.  At one point he also alluded to the fact that a lowering of the tax rate on land value would be of no benefit to prospective newcomers because any remission of such tax would only be capitalized into higher prices for land."

Congressman Curtis opened his luncheon address on "The Property Tax in the Perspective of our National Tax System" with the statement that the property tax is the cinderella of taxes, who, in shabby clothes, must  stay home while her far less attractive sisters go to the ball.  ..."

A Google search on "least bad tax" and "Lowell Harriss" yielded a newspaper article, appearing originally in the Adrian Daily Telegraph, and picked up by the Nevada Daily Mail of April 5, 1976 -- two years before Milton Friedman's statement:

Looking Forward to Paying Taxes

Most college students will pay taxes equal to more than 40 per cent of what they earn throughout their lives.

Those who are especially successful or live in localities with above average government spending may pay more than half of their lifetime incomes in direct and indirect taxes.

"All of us have a vital interest in making the tax system as 'least bad' as possible."  This food for thought was served by Prof. C. Lowell Harriss at Hillsdale College, to students in the Constructive Alternatives Program.

"And taxes affect our lives in many kinds of ways other than extracting dollars," he added.

Prof. Harriss pointed out that government spending per capita in 1975 was $9,409 for a family of four, up, in today's dollars, from $1,130 just over 20 years ago.  That's an increase during the lifetime of today's college student averaging $244 a year.  Students should ask whether they are getting their money's worth, he suggested.

People create their own conditions and the framework within which they are free to use their capacities.  If this freedom is "collectivised" by big governemnt to get all the "services" people want, do they really get them?

Certainly there has been some improvement accompanying the growth of big government, in some cases a lot of it.  But would private deployment of, say, half of the increased tax burden have produced more of what the people want?  "This question," said Prof. Harriss, "I leave with you as a challenge."

Lowell Harriss is a professor of economics, Columbia University.

This talk was given at Hillsdale College, which is libertarian in orientation.  In July, 2006, in Hillsdale's publication Imprimis, Friedman had this to say.  (The interview took place in May, 2006, at an event honoring the 25th anniversary of "Free to Choose: A Personal Statement.")   He failed to see that there can be a difference between common property and government property.  (Too few pixels in the picture, one might say.)  But despite his language -- praising as "privatization" that which Georgists would consider the socialization -- he recognizes

LA: Let me ask you about demographic trends. Columnist Mark Steyn writes that in ten years, 40 percent of young men in the world are going to be living in oppressed Muslim countries. What do you think the effect of that is going to be?

MF: What happens will depend on whether we succeed in bringing some element of greater economic freedom to those Muslim countries. Just as India in 1955 had great but unrealized potential, I think the Middle East is in a similar situation today. In part this is because of the curse of oil. Oil has been a blessing from one point of view, but a curse from another. Almost every country in the Middle East that is rich in oil is a despotism.

LA: Why do you think that is so?

MF: One reason, and one reason only — the oil is owned by the governments in question. If that oil were privately owned and thus someone's private property, the political outcome would be freedom rather than tyranny. This is why I believe the first step following the 2003 invasion of Iraq should have been the privatization of the oil fields. If the government had given every individual over 21 years of age equal shares in a corporation that had the right and responsibility to make appropriate arrangements with foreign oil companies for the purpose of discovering and developing Iraq's oil reserves, the oil income would have flowed in the form of dividends to the people — the shareholders — rather than into government coffers. This would have provided an income to the whole people of Iraq and thereby prevented the current disputes over oil between the Sunnis, Shiites and Kurds, because oil income would have been distributed on an individual rather than a group basis.

LA: Many Middle Eastern societies have a kind of tribal or theocratic basis and long-held habits of despotic rule that make it difficult to establish a system of contract between strangers. Is it your view that the introduction of free markets in such places could overcome those obstacles?

MF: Eventually, yes. I think that nothing is so important for freedom as recognizing in the law each individual's natural right to property, and giving individuals a sense that they own something that they're responsible for, that they have control over, and that they can dispose of.

Those "shares" would be better implemented as a guaranteed share of the income, not shares which could be sold to others (say, as an alternative to a payday loan).   And "natural right to property" obfuscates the distinction between (a) that which nature provides or the community creates (to which all of us have an equal right), and (b) that which individuals or corporations create (to which individuals and corporations should have an unfettered right, subject to (a)!

The Alaska Permanent Fund does something similar: some of the royalty revenue Alaska collects on oil extracted within the state is used to fund Alaska's services, and some goes to the Alaska Permanent Fund, which invests the proceeds in a broadly diversified portfolio and pays an annual income to every adult and child who is a permanent resident of Alaska.  See http://lvtfan.typepad.com/lvtfans_blog/2008/09/pbss-now----8108-alaska-governor-palin-and-oil-resources----who-do-they-belong-to.html

Anyway, even if Lowell Harriss was not the first to apply the term "least bad tax" to land value taxation, he said it well before Milton Friedman said it.

If you're not a regular reader here, you might want to know that there are a few other posts about Lowell, who died in December, 2009, at the age of 97. 

• http://lvtfan.typepad.com/lvtfans_blog/2010/01/farewell-to-c-lowell-harriss-professor-of-economics---dec-29-2009.html
• http://lvtfan.typepad.com/lvtfans_blog/2010/01/reading-lowell-harriss.html which explores some of Lowell's writings on the property tax, and how we might best reform it.

To circle back to Milton Friedman, it is worth noting that he and his wife Rose were both at the University of Chicago in the early 1930s for economics PhDs.  I don't know how large that program was, but I can only assume that students in it were aware of the research of others in the program. In 1933, Homer Hoyt's dissertation was entitled "100 Years of Land Values in Chicago."  It was an analysis of 5 boom-bust cycles.  I encourage you to read a couple of things which reference this book:

• Mason Gaffney's The Great Crash of 2008, at http://www.masongaffney.org/essays/Great_Crash_of_2008.pdf
• Weld Carter's "A Clarion Call to Sanity, to Honesty, to Justice,"  at http://www.wealthandwant.com/docs/Carter_Clarion.html

One might reasonably wonder why Milton Friedman didn't apply his knowledge to reducing poverty.  Perhaps other concerns topped that one.  I wonder what they were.

Paring the Deficit, by Selling Part of the Radio Spectrum

Economic View - Paring the Deficit, by Selling Part of the Radio Spectrum - NYTimes.com.

I'd missed the article when it was published a week ago, but an LTE brought it to my attention.  The author is Richard Thaler, a professor of economics and behavioral science at the newly re-named business school at the University of Chicago (forever to be recalled as GSB by some, despite stern orders in the alumni rag).

He proposes auctioning off "The Buried Treasure in Your TV Dial."  But he isn't suggesting leasing it for some finite period of time, with a new auction at the end of, say, 5 or 10 or 15 years, but selling it forever.   As one of the LTE's says,

Re “The Buried Treasure in Your TV Dial” (Economic View, Feb. 28), in which Richard H. Thaler cites an estimate that the government could reap $100 billion by auctioning the portion of the radio spectrum used for over-the-air television:

How long would such a sum last, however, in an era of military adventures and over 700 foreign military bases? What would be permanent is the loss of both choice and the free reception of radio and television programming. Ownership of electronic media, and access to the privatized airwaves, would be as concentrated as cable and satellite systems are today.

The column says that such an auction would have many national benefits. But virtually all them, like faster broadband connections for schools, could be obtained by federal policy, not a fire sale.

Those airwaves belong to the American people, and the American people ought to be collecting full rent on them -- year in, year out -- not giving away licenses and then permitting corporations to make a business in re-selling or leasing out what they choose not to use.

Here's Thaler's article.  I look forward to his next suggestions; he has the germ of a good idea, but gets a very important aspect of it wrong.  Don't sell our common asset to anyone.  AUCTION OFF LEASES.  Wait 5 years.  Repeat.

HERE’S a list of national domestic priorities, in no particular order: Stimulate the economy, improve health care, offer fast Internet connections to all of our schools, foster development of advanced technology. Oh, and let’s not forget, we’d better do something about the budget deficit.

Now, suppose that there were a way to deal effectively with all of those things at once, without hurting anyone. And suppose that it would make everyone’s smartphone work better, too. (I’ll explain that benefit shortly.)

I know that this sounds like the second coming of voodoo economics, but bear with me. This proposal involves no magical thinking, just good common sense: By simply reallocating the way we use the radio spectrum now devoted to over-the-air television broadcasting, we can create a bonanza for the government, stimulate the economy and advance all of the other goals listed above. Really.

The reason for this golden opportunity may be in your purse or pocket: that smartphone to which you could well be addicted. The iPhone, the BlackBerry and competing devices are already amazing technologies. But precisely because of the nifty features they offer, like the ability to text photos, stream video and provide GPS directions, the radio spectrum is looking as crowded as Times Square on New Year’s Eve. Demand for spectrum is growing rapidly — a trend that will surely continue.

The problem is that the usable radio spectrum is limited and used inefficiently. Think of it as a 100-lane highway with various lanes set aside for particular uses, including AM and FM radio, TV and wireless computer technology. The government — specifically, the Federal Communications Commission — is in charge of deciding which devices use which lanes.

Because we can’t create additional spectrum, we must make better use of the existing space. And the target that looks most promising in this regard is the spectrum used for over-the-air television broadcasts.

These frequencies are very attractive on technological grounds. People in the industry refer to them as “beachfront property” because these low-frequency radio waves have desirable properties: they travel long distances and permeate walls. We have already allocated parts of this spectrum for mobile wireless, and the F.C.C. recently auctioned other parts for $19 billion. That has left 49 channels for over-the-air television.

Why is the current use of this spectrum so inefficient? First, because of the need to prevent interference among stations, only 17 percent of it is actually allocated by the F.C.C. for full-power television stations. (The so-called white space among stations is used for some limited short-range applications like wireless microphones.)

Second, over-the-air broadcasts are becoming a nearly obsolete technology. Already, 91 percent of American households get their television via cable or satellite. So we are using all of this beachfront property to serve a small and shrinking segment of the population.

Suppose we put this spectrum up for sale. (The local stations do not “own” this spectrum. They have licenses granted by the Federal Communications Commission.) Although the details of how to conduct this auction are important, they don’t make compelling reading on a Sunday morning. Interested readers should examine a detailed proposal made to the F.C.C. by Thomas W. Hazlett, a professor at the George Mason University School of Law who was formerly the F.C.C.’s chief economist.

Professor Hazlett estimates that selling off this spectrum could raise at least $100 billion for the government and, more important, create roughly $1 trillion worth of value to users of the resulting services. Those services would include ultrahigh-speed wireless Internet access (including access for schools, of course) much improved cellphone coverage and fewer ugly cell towers. And they would include other new things we can’t imagine any more than we could have imagined an iPhone just 10 years ago.

But some compelling technology that could use these frequencies already exists, like wireless health monitoring — to check diabetics’ blood sugar regularly, for example — and remote robotic surgery that can give a patient in Idaho a treatment like that available in New York or Chicago.

Who would oppose this plan? Local broadcasters are likely to contend that they are providing a vital community service in return for free use of the spectrum that was put in their hands decades ago. Whether the local news or other programs are vital services is up for debate, but their value isn’t the issue, because they can be made available via cable, satellite and other technologies, including improved broadband.

Say there are 10 million households that still get their television over the air, including those that can’t afford cable or satellite and some that generally just don’t care for what’s on TV. (Yes, there are people who don’t like “American Idol.”) But about 99 percent of these households have cable running near their homes, and virtually all the others, in rural areas, could be reached by satellite services. The F.C.C. could require cable and satellite providers to offer a low-cost service that carries only local channels, and to give vouchers for connecting to that service to any households that haven’t subscribed to cable or satellite for, say, two years.

Professor Hazlett estimates that $300 per household should do it: that amounts to $3 billion at most. Compared with the gains from selling off the spectrum, it’s a drop in the bucket. Or, as an interim step, we could reduce the number of channels available in a community from 49 to, say, 5.

I KNOW that this proposal sounds too good to be true, but I think the opportunity is real. And unlike some gimmicks from state and local governments, like selling off proceeds from the state lottery to a private company, this doesn’t solve current problems simply by borrowing from future generations. Instead, by allowing scarce resources to be devoted to more productive uses, we can create real value for the economy.

Economists are fond of saying that there is no such thing as a free lunch. Here we have an idea that is even better than a free lunch: being paid to eat lunch. More paid-lunch ideas will be coming in future columns.

The classical economists might never have heard a radio or seen a television, but they'd immediately recognize broadcast spectrum as "land" -- a gift of nature, finite and scarce -- and would have regarded it as our common treasure.  Unfortunately, Professor Thaler is not a classical economist.  He is a neoclassical economist, and his training in economics probably glossed over the truths the classical economists saw.  And quite likely, that's how he teaches the subject, too.

We can concentrate more wealth in the hands of a few corporations, or we can collect the economic rent on this scarce and valuable resource.  (See also Alaska Permanent Fund, in the topic cloud at left.)

I hope we'll do the latter.

The other Davos website

I came across an interesting website the other day ... http://www.we-forum.org/en/events/AnnualMeeting2010/index.shtml.

Unfortunately, the link to the Stiglitz interview doesn't work ... but here is a short one from the same interview.  It is an excerpt from the Philippe Diaz film, The End of Poverty?  Think Again.   Once you see that one, you'll also see links to other excerpts from the film and to trailers and other information.

The Davos website is not what it appears to be, but I encourage you to explore it anyway.   Some of the videos are priceless.

The link under "initiatives" for "Sane Tax Initiative" strikes me as directionally correct:

Sane Tax Initiative

The cancellation of taxes on labor and basic consumption, the creation of a 2% worldwide tax on property ownership (except basic habitation for the poor), and the implementation of a global 0.5% flat tax on all financial transactions with a total prohibition of speculation on food products.

Until the beginning of the 19th century, taxes were largely used as a means of reducing inequalities, and fell mainly on property ownership.

Neoliberal policies of the 20th century slowly shifted the tax burden away from the rich to the poor by taxing labor and consumption—making the poor responsible for financing our economic system while giving the rich most of the benefit. And we all know what became of trickle-down theory.

Taxes must be shifted away from basic necessities and consumption, and back to profit-making operations, and the ownership of natural resources and other industrial properties. A tax must also be levied on financial transactions.

I would differentiate between property in land, which I strongly believe ought to be taxed, with the revenue applied to public purposes, and property in buildings and other owner-created structures and improvements to land, which I do not believe ought to be taxed.

Further, I do not think that "operations" ought to be taxed because they are profitable or buildings because they are "industrial."  But I do agree that the ownership of natural resources ought not to enrich private individuals, or corporations, or any entity other than the public at large.  (Alaska has taken important steps in this direction, with good results, over the past 30 or so years.)

I'm not sure what I think of taxing financial transactions, but I'm certainly in favor of measures which would end the speculation which we've been seeing and which has contributed to awesomely large fortunes created by hedge funds and other traders.  Those fortunes don't come out of thin air, and the traders aren't growing the wealth pie or adding to the stability of our economy; when some reap what they didn't sow, others who sowed are not getting to reap.  And that's wrong. 

I'll post separately about the film, "The End of Poverty?  Think Again," which is currently showing in NYC.

Ben Stein's Farewell to C. Lowell Harriss, professor of economics - Dec. 29, 2009

Farewell to C. Lowell Harriss, professor of economics - Dec. 29, 2009.

I finally got the time to sit down and read through some of the obituaries and tributes to Lowell Harriss, who died in late December (just after Paul Samuelson).  His name was one I grew up with; he was a younger and much respected colleague of my late Georgist grandfather, and participated in the Committee on Taxation, Resources and Economic Development in the 1970s, and, likely, beyond.

The tribute I'm reading right now is interesting in light of data I've reported here recently, and in light of yesterday's Supreme Court decision on corporate free speech.  The data I report has only been gathered in its current form since the 1980s, and I have no idea what the earlier data sources on the subject might have been.

The tribute comes from Ben Stein, who young people know from "Win Ben Stein's Money,"  and a film or two, and those who watch the nightly news sponsored by the pharmaceutical companies may recognize from Visine commercials.  He is the son of two economists, and writes for Fortune Magazine.  He was a student of Lowell's at Columbia University in the mid 1960s.  He wrote, in tribute to Lowell,

But when Professor Harriss started talking about how corporations manage their affairs, he said, "Now assume that the stockholders of the corporation, the owners and beneficiaries of the corporation, are all widows and orphans."

This was an eye-opener indeed. And it made total sense. Of course, except in the rarest of cases in those days, then, and even now, the biggest companies are owned by legions of pension funds, mutual funds, (now, also ETFs and index funds). They are not owned by the Rockefellers or the Astors, as Professor Harriss used to say. They are owned by our parents and by us. The corporations are the people every bit as much as the workers are the people.

This insight, seemingly rarely taught in today's universities, has enabled me to ask -- for example -- why we as a nation would be angry at the oil companies, when we as a nation and as families own the oil companies, when the oil companies employ our fellow Americans at a decent wage, and when the oil companies pay us Americans as savers and retirees oil company dividends. Why would we hate any company without understanding that -- generally speaking, definitely not always -- its managers are simply trying to do the best for the widows and orphans and retirees who own the company? The companies are not a cancer on the society: they are the society.

Let's look closely at that second paragraph in light of the Survey of Consumer Finances data (2007, the newest available).

The SCF doesn't report pension fund assets.*  Others do -- see Ed Wolff's work.  But it is widely understood that a small and diminishing portion of the workforce today has a defined benefit pension -- that which we think of as a pension.  Some of today's workers still have some pension assets, either from a current employer who is no longer contributing to the pension fund, or from a previous employer.

The SCF reports several relevant categories, all mutually exclusive, and then an aggregate called "EQUITY."  The individual categories which might include stock or mutual funds are STOCKS; the category NMMF -- non-money-market mutual funds -- which represents holdings of mutual funds (which includes bonds as well as equities) outside of retirement assets; and RETQLIQ represents total holdings of such retirement assets as IRAs, 401(k) accounts, and other similar individually controlled retirement funds, which likely includes stocks, bonds and mutual funds.   The SCF also reports an aggregate called EQUITY.  Here are the ownership rates, and the distribution of holdings for 2007:

Table 1: Ownership Rates (2007)
	Stocks		Mutual Funds		Retirement Assets		Equity
			[NMMF]		[RETQLIQ]
Total:	17.9%		11.4%		52.6%		51.1%
Bottom 50%	7.2%		2.3%		33.6%		29.7%
Next 40%	22.7%		15.0%		68.3%		68.2%
Next 5%	43.7%		36.5%		83.3%		86.9%
Next 4%	59.5%		47.6%		85.3%		92.0%
Top 1%	65.4%		52.7%		87.8%		92.8%
Table 2: Share of Holdings (2007)
Total:	100.0%		100.0%		100.0%		100.0%
Bottom 50%	0.6%		0.4%		3.8%		1.5%
Next 40%	9.0%		11.6%		36.7%		19.6%
Next 5%	8.0%		10.3%		16.9%		12.4%
Next 4%	30.5%		30.9%		28.0%		30.5%
Top 1%	51.9%		46.7%		14.5%		36.0%

So while it might have been true that the young people sitting in Lowell's classes were likely to be beneficiaries of the corporations as shareholders, I think it is safe to say that the larger society was not, unless the distribution of stock holdings has concentrated even more precipitously than I suspect it has between 1964 and today.  The widows and orphans were far more likely to be in the bottom half of the wealth distribution, which, as of 2007 shared 1.5% of the EQUITY value.   

Today, it is clear that many corporations are not being managed even for the long-term benefit of their shareholders.  It is the top tier of employees whose interests are being served.

But perhaps one other piece of data ought to be considered: the distribution of the owners of holdings. This is the sort of figure which corporate advertising refers to when they talk about stock ownership being broad.  The "Total" line matches the first distribution; the others add to that total.

Table 3: Distribution of Holders of Assets (2007)
	Stocks		Mutual Funds		Retirement Assets		Equity
			[NMMF]		[RETQLIQ]
Total:	17.9%		11.4%		52.6%		51.1%
Bottom 50%	3.6%		1.2%		16.8%		14.9%
Next 40%	9.1%		6.0%		27.3%		27.3%
Next 5%	2.2%		1.8%		4.2%		4.3%
Next 4%	2.4%		1.9%		3.4%		3.7%
Top 1%	0.7%		0.5%		0.9%		0.9%

   

Do you feel better now?  The top 1% folks represent less than 2% of those who own EQUITY!  What's the big deal?  Look how many more of EQUITY owners are from the bottom 50%!  Isn't America wonderful?  Does Ben Stein's memory of Lowell's classroom statement sound right now?

One more table.  This one looks at the relative holdings across the holders in each wealth quantile.  It divides the dollar holdings for each group by the percentage in Table 3.  Data is comparable both across columns and up and down each column.

Table 4: Average Dollar Holdings per 1% of Households Who Hold
	Stocks		Mutual Funds		Retirement Assets		Equity
			[NMMF]		[RETQLIQ]
Average:	221		309		146		231
Bottom 50%	7		11		17		12
Next 40%	39		68		103		85
Next 5%	145		200		312		337
Next 4%	508		573		629		977
Top 1%	3,142		3,127		1,271		4,577

Notice what percentage of us are "below average."  Compare each figure to the average in its column.

Let me throw in one other set of figures:   The Table 4 data for BUS -- equity in privately held companies.  Average: 1,069.  Bottom 50%: 24   Next 40%: 137; Next 5%: 443; Next 4%: 1,507; Top 1%: 10,960.  (That's what the Astors and Rockefellers of today own.  And much of it is land value and the value of other natural resources, value which we permit them to privatize.)  We call much of it "small business" and permit the owners to style themselves as self-made successes.

To return to Ben Stein's questions:

This insight, seemingly rarely taught in today's universities, has enabled me to ask -- for example -- why we as a nation would be angry at the oil companies, when we as a nation and as families own the oil companies, when the oil companies employ our fellow Americans at a decent wage, and when the oil companies pay us Americans as savers and retirees oil company dividends. Why would we hate any company without understanding that -- generally speaking, definitely not always -- its managers are simply trying to do the best for the widows and orphans and retirees who own the company? The companies are not a cancer on the society: they are the society.

The nonrenewable natural resources belong to the people, not exclusively to those who extract them from the soil, or their shareholders, even if 100% of us were shareholders in name.  Until our system collects the royalties on those natural resources from those who we currently permit to privatize our COMMON asset, Stein is just plain wrong.  Fortune Magazine's subscribers may appreciate his assertions, but the rest of us ought to be very very skeptical.   

*  Postscript, 1/30/2010:

I came across some data about stock ownership which showed where pension funds fit in the picture, at least in the 1990s.  See Pension Fund Capitalism, by G. William Domhoff, at http://sociology.ucsc.edu/whorulesamerica/power/pension_fund_capitalism.html, Table 1, which shows that Corporate Pension Funds held 18% of Corporate Stock, and Public Pension Funds held 8% in 1994, compared to Households, which held 48% and Mutual Funds which held 12%.  He sources the data to Margaret M. Blair, Ownership and Control, 1995)

So is the Woodstock Generation going to fix America's most serious problems?

I was a rising senior in high school when Woodstock took place. A fellow waitress in the local deli in which I worked -- Max for Snacks, in King of Prussia, PA -- took off for Woodstock, and the rest of us dreamed of doing so. 

We thought we could change the world.  Many had a vision of a society in which all could prosper, all could succeed.  We sang, we danced, we applauded, we protested.  Gradually we worked our way up.  We educated ourselves, we bought homes, we had children -- not always in that order -- and we became part of the establishment.  We bent the establishment, a bit, perhaps, to our advantage.

But we didn't correct the problems, and arguably, we let them grow worse.  We watched as the benefits of public investment -- local, muncipal, county, state, federal -- accrued not to all of us but to those who own our land and claim title to our natural resources.  We permitted corporations and individuals to lay claim to our common resources, we who grew up hearing about Jed Clampett being somehow entitled to the oil revenue, to the exclusion of the rest of us.

We're so used to the way this aspect of the world was handed to us that few of us think to question it.  And yet the privatization of the economic value of urban land and the privilege of collecting the revenue on non-renewable natural resources on which all of us are dependent together produce some of our most serious social, economic, environmental, poverty and justice problems.  Most wars are fought over these two things.

And until we come to recognize this, all we can do is put bandaids on those problems -- locally, nationally and globally.

These two things are what someone wisely referred to as "Natural Public Revenue" sources.  Yet we largely ignore them, and use taxes which set up perverse incentives -- and wonder why we can't seem to solve any of our biggest problems.

Thou shalt not suffer thyself or anybody else to be stolen from

"Thou shalt not steal." That means, of course, that we ourselves must not steal. But does it not also mean that we must not suffer anybody else to steal if we can help it? "Thou shalt not steal." Does it not also mean, "Thou shalt not suffer thyself or anybody else to be stolen from?"

If it does, then we, all of us, rich and poor alike, are responsible for this social crime that produces poverty. Not merely the men who monopolize land — they are not to blame above any one else, but we who permit them to monopolize land are also parties to the theft. The Christianity that ignores this social responsibility has really forgotten the teachings of Christ. Where He in the gospels speaks of the judgment, the question which is put to men is never, "Did you praise me?" "Did you pray to me?" "Did you believe this or did you believe that?" It is only this: "What did you do to relieve distress ; to abolish poverty ?" To those who are condemned, the judge is represented as saying: "I was ahungered and ye gave me not meat, I was athirst and ye gave me not drink, I was sick and in prison and ye visited me not." Then they say, "Lord, Lord, when did we fail to do these things to you?" The answer is, "Inasmuch as ye failed to do it to the least of these, so also did you fail to do it unto me; depart into the place prepared for the devil and his angels." On the other hand, what is said to the blessed is, "I was ahungered and ye gave me meat, I was thirsty and ye gave me drink,'I was naked and ye clothed me, I was sick and in prison and ye visited me." And when they say, "Lord, Lord, when did we do these things to thee ?" the answer is, "Inasmuch as ye have done it unto the least of these ye have done it unto me."

Here is the essential spirit of Christianity. The essence of its teaching is not, "Provide for your own body and save your own soul!" but, "Do what you can to make this a better world for all!" It was a protest against the doctrine of "each for himself and devil take the hindermost I" It was the proclamation of a common fatherhood of God and a common brotherhood of men. This was why the rich and the powerful, the high priests and the rulers, persecuted Christianity with fire and sword. It was not what in so many of our churches to-day is called religion that pagan Rome sought to tear out — it was what in too many of the churches of to-day is called "socialism and communism," the doctrine of the equality of human rights!

Now imagine when we men and women of today go before that awful bar that there we should behold the spirits of those who in our time under this accursed social system were driven into crime, of those who were starved in body and mind, of those little children that in this city of New York are being sent out of the world by thousands when they have scarcely entered it — because they did not get food enough, nor air enough, nor light enough, because they are crowded together in these tenement districts under conditions in which all diseases rage and destroy. Supposing we are confronted with those souls, what will it avail us to say that we individually were not responsible for their earthly conditions? What, in the spirit of the parable of Matthew, would be the reply from the judgment seat? Would it not be, "I provided for them all. The earth that I made was broad enough to give them room. The materials that are placed in it were abundant enough for all their needs. Did you or did you not lift up your voice against the wrong that robbed them of their fair share in what I provided for all?"

"Thou shalt not steal!" It is theft, it is robbery that is producing poverty and disease and vice and crime among us. It is by virtue of laws that we uphold; and he who does not raise his voice against that crime, he is an accessory. The standard has now been raised, the cross of the new crusade at last is lifted. Some of us, aye, many of us, have sworn in our hearts that we will never rest so long as we have life and strength until we expose and abolish that wrong. We have declared war upon it. Those who are not with us, let us count them against us. For us there will be no faltering, no compromise, no turning back until the end.

There is no need for poverty in this world, and in our civilization. There is a provision made by the laws of the Creator which would secure to the helpless all that they require, which would give enough and more than enough for all social purposes. These little children that are dying in our crowded districts for want of room and fresh air, they are the disinherited heirs of a great estate.

Did you ever consider the full meaning of the significant fact that as progress goes on, as population increases and civilization develops, the one thing that ever increases in value is land ? Speculators all over the country appreciate that. Wherever there is a chance for population coming; wherever railroads meet or a great city seems destined to grow; wherever some new evidence of the bounty of the Creator is discovered, in a rich coal or iron mine, or an oil well, or a gas deposit, there the speculator jumps in, land rises in value and a great boom takes place, and men find themselves enormously rich without ever having done a single thing to produce wealth.

Now, it is by virtue of a natural law that land steadily increases in value, that population adds to it, that invention adds to it; that the discovery of every fresh evidence of the Creator's goodness in the stores that He has implanted in the earth for our use adds to the value of land, not to the value of anything else. This natural fact is by virtue of a natural law — a law that is as much a law of the Creator as the law of gravitation. What is the intent of this law ? Is there not in it a provision for social needs ? That land values grow greater and greater as the community grows and common needs increase, is there not a manifest provision for social needs — a fund belonging to society as a whole, with which we may take care of the widow and the orphan and those who fall by the wayside — with which we may provide for public education, meet public expenses, and do all the things that an advancing civilization makes more and more necessary for society to do on behalf of its members?

Today the value of the land in New York City is over a hundred millions annually. Who has created that value? Is it because a few landowners are here that that land is worth a hundred millions a year? Is it not because the whole population of New York is here? Is it not because this great city is the center of exchanges for a large portion of the continent? Does not every child that is born, everyone that comes to settle in New York, does he not add to the value of this land? Ought he not, therefore, to get some portion of the benefit? And is he not wronged when, instead of being used for that purpose, certain favored individuals are allowed to appropriate it?

We might take this vast fund for common needs, we might with it make a city here such as the world has never seen before — a city spacious, clean, wholesome, beautiful —a city that should be full of parks; a city without tenement houses; a city that should own its own means of communication, railways that should carry people thirty or forty miles from the city hall in a half hour, and that could be run free, just as are the elevators in our large buildings; a city with great museums, and public libraries, and gymnasiums, and public halls, paid for out of this common fund, and not from the donations of rich citizens. We could out of this vast fund provide as a matter of right for the widow and the orphan, and assure to every citizen of this great city that if he happened to die his wife and his children should not come to want, should not be degraded with charity, but as a matter of right, as citizens of a rich community, as coheirs to a vast estate, should have enough to live on. And we could do all this, not merely without imposing any tax upon production; not merely without interfering with the just rights of property, but while at the same time securing far better than they are now the rights of property and abolishing the taxes that now weigh on production. We have but to throw off our taxes upon things of human production; to cease to fine a man that puts up a house or makes anything that adds to the wealth of the community; to cease collecting taxes from people who bring goods from abroad or make goods at home, and put all our taxes upon the value of land — to collect that enormous revenue due to the growth of the community for the benefit of the community that produced it.

LVTfan here.  That was an excerpt from one of my favorite speeches, by Henry George (entitled "Thou Shalt Not Steal.")

Now consider the newest evidence from the Federal Reserve Board's 2007 Survey of Consumer Finances, as reported in a too little noted paper issued a few months ago entitled "Ponds and Streams: Wealth and Income in the U.S., 1989 to 2007"

• 1% of our households hold over 1/3 of America's wealth. 
• 10% of our households possess over 70% of America's wealth.
• The other 90% get to split the remaining 28.5%
• The bottom 50% of us have only 2.5% of that net worth.

Ranked by income:

• 1% of our households receive 21.4% of the income
• 10% of our households receive 47.2% of the income
• The other 90% of our households get to split 52.8% of the income
• The bottom 50% of our households have only 14.6% of that income.

Coheirs to a vast estate.  Hmmm.  In America?

We could out of this vast fund provide as a matter of right for the widow and the orphan, and assure to every citizen of this great city that if he happened to die his wife and his children should not come to want, should not be degraded with charity, but as a matter of right, as citizens of a rich community, as coheirs to a vast estate, should have enough to live on. And we could do all this, not merely without imposing any tax upon production; not merely without interfering with the just rights of property, but while at the same time securing far better than they are now the rights of property and abolishing the taxes that now weigh on production.

Thou shalt not steal, yes.  But also "Thou shalt not suffer thyself or anybody else to be stolen from."  

The first step is to understand the nature of the theft that is structural, legal, even respected and treated as reflective of personal or corporate virtue.  Shine a light on it.  A Mount-Rushmore-at-night illumination. 

Progress, and Poverty -- how do they relate?

I suspect that many people relate these two words, without quite knowing why.  A google alert on the two words brings me 4 to 6 items a day which mention the two words fairly close together.  In many the context is "We're making progress against poverty."  In others, the context is more like "we're making progress in many areas, but little progress against poverty." 

Putting those two words into the search field at Amazon yields these books:

• The Poverty of Progress: Latin America in the Nineteenth Century by E. Bradford Burns (1983)
• Progress, Poverty and Exclusion: An Economic History of Latin America in the Twentieth Century (Inter-American Development Bank) by Rosemary Thorp (1998)
• Poverty and Progress: Social Mobility in a Nineteenth Century City (Joint Center for Urban Studies) by Stephan Thernstrom (1981)
• Poverty, Progress, and Population by E. A. Wrigley (2004)
• Poverty and Economic Issues (Africa: Progress & Problems) by Tunde Obadina (2006)
• Progress and Poverty: An Economic and Social History of Britain 1700-1850 by Martin Daunton (1995)
• The Other Bostonians: Poverty and Progress in the American Metropolis, 1880-1970 by Harvard University Press (1999)
• Poverty and social progress, by Maurice Parmelee (1926)
• Poverty and Progress (Down to Earth) by Fred Martin and Aubrey Whittle (1990)
• Poverty and Progress in the Caribbean, 1800-1960 (Studies in Economic & Social History) by J.R. Ward (1985)
• Progress, Poverty and Population: Re-reading Condorcet, Godwin and Malthus by John Avery (1997)
• The Time Has Come: To Confront the Tragedy of World Poverty Through Centers of Village Progress by James Mayfield (2006)
• Poverty and Progress in the U.S. South since 1920 (European Contributions to American Studies) by Suzanne W. Jones and Mark Newman (2006)
• Profits, Progress and Poverty by Richard N. Farmer (1985)
• Poverty and progress;: An ecological perspective on economic development by Richard G Wilkinson (1973)
• Poverty Reduction and the World Bank: Progress in Operationalizing the Wdr 2000/2001 by World Bank (2002)
• The Developing Nations Poverty and Progress (Volume 41, Number 1) by Irwin (Editor) Isenberg (1969)
• Poverty and Progress in New Zealand by W. B. Sutch (1969)

All of these books together can not have come close to the sales of Henry George's 1879 book, Progress and Poverty: An inquiry into the cause of industrial depressions and of increase of want with increase of wealth; the remedy.  By the turn of the century, over 6 million copies had been sold, it had been translated into 30 or so languages, serialized in newspapers in a number of countries. [6 million copies would be a large number today ... think of it in 1885!] Today, there are at least two foundations, created by industrialists of another era (using identical language), whose missions are to share Henry George's ideas, as expressed in Progress & Poverty -- the Robert Schalkenbach Foundation (based in NYC) and the Lincoln Foundation (with offices in Cambridge, MA), founded, respectively, by a printer and an electric utility magnate.  Joseph Fels, of the Fels Naptha soap company (and brother of the endower of the Fels Planetarium at Philadelphia's Franklin Institute) also devoted much of his mature years to promoting these ideas. 

George's Progress & Poverty was the #2 best seller of its decade, second only to the Bible, and the "progress" in its title helped inspire the Progressive movement.  Anyone in English-speaking countries who read at all was likely to be familiar with its ideas, and George was an effective speaker who traveled widely.  In NYC, he ran twice for mayor; the first time, he lost to Abram Hewitt (the Tammany Hall candidate) in 1886, but beat out the 29-year-old Theodore Roosevelt (whose Bull Moose Party platform about 25 years later looked remarkably Georgist; it is said TR learned his George at San Juan Hill, from a hero who died there); the second time, he died a few days before election day in 1897.  His funeral was among the largest ever in NYC.  (Search the NYT's free archives for articles.)

So what sets Henry George's Progress & Poverty apart from the other books which mention those two words in their titles?  Why did he choose that title?  What is the relationship between these two aspects of our society?  Is it a necessary relationship, ordained by immutable natural forces or laws of economics, or is it something created by human structures, and therefore something we can alter?

George saw clearly something that others had seen through a glass darkly.  He laid it out clearly in Progress & Poverty.  Extend your education by reading this book.  It will probably change your mind and your vision forever, and if enough of us understand the workings of the poverty machine, we will be able to retool it, and leave our children a better world, and a country which genuinely lives up to its ideals.

Progress and Poverty.  You might also want to go read the first essay in George's second book, Social Problems.  It is very timely.

I'm not thrilled with our choices in November

I hate the idea of voting for the lesser of two evils because the other candidate scares me more.  I like the rhetoric of one party better than that of the other, but I don't regard either one of the parties or the presidential slates as being good choices. 

I am unable to vote for the libertarian candidate because they pandered to the people who think they should be able to insert themselves into the relationship and decision-making between a woman and her doctor.  They aren't serious about what they claim to stand for.

When I cast my vote, it will because of the sort of Supreme Court nominations I think each is likely to make.   It will be because one candidate seems less likely to fly off the handle than the other.  It will be because I am far more comfortable with one VP nominee than the other, and with the sort of judgment that went into the choice.  It will be because I think one candidate is likely to be consulting people who mean somewhat better for the ordinary American's interests than does the other party, despite both being largely ignorant about how things actually work and how we might intervene to make things more just and more efficient.  It will be because one presidential candidate is a high-stakes gambler, a man who called his wife names he acknowledges are offensive (google "trollope" with his name for more detail), a man with little foresight or depth.  It will be because I prefer a president with a grasp of and respect for constitutional law, particularly after one who abused us with his signing statements.  It will be because one candidate may have some serious health problems which to date he has not considered the business of the voters.  It will be because I care about how the other 95% of the world regards us. It will because I think one slate is more likely to be reality-based than the other, even if neither of them have really good lenses through which to understand reality.

Can I suggest lenses that will clarify their understanding of reality?

Absolutely.  Start with some of Henry George's speeches ... The Crime of Poverty, Thou Shalt Not Steal and Thy Kingdom Come.   Move next to Bob Andelson's essay, "Henry George and the Reconstruction of Capitalism."  Then read Progress and Poverty and Social Problems, a collection of essays.

Am I sufficiently indifferent between the two major party candidates that I will write in the sort of candidate I want?  No.  For me there is enough difference that I must vote for one of them, and continue working to promote my best understanding of how we can transform America into the country we say it is and is meant to be.    

Democracy is not enough to produce widely-shared prosperity.  And our current form of capitalism, which might reasonably be termed land monopoly capitalism, is a poverty machine, a wealth concentration machine -- but a machine which can be very easily transformed into a machine to produce broadly shared prosperity.  All we need is an understanding of the mechanics of that machine, and we'll be on our way to retooling it.  We need to understand which sorts of wealth ought to be socialized, and which ought to be privatized, and then to act on that understanding.

Spreading the Wealth: Some kinds of wealth OUGHT to be spread!

One candidate speaks of spreading the wealth.  The other derides the notion as socialism.  But I suspect that neither of them have read, or thought deeply, or discussed in any context what sorts of wealth OUGHT to be spread around, and what sorts OUGHT NOT to be spread?

Not all wealth is the same.  We can divide it first into that which is created by individual or corporate human effort and that which is provided by nature or by the workings of the community as a whole. The former can rightly be privatized.  The latter must not be.

Rich in Natural Resources

But what if our natural resources are in private hands?  Are we rich in natural resources if the Jed Clampetts own the land under which our natural resources reside?

Or are we rich in privileged people, whose trickling down the rest of us must be content with?

A significant share of Alaska's oil revenue flows to the state and to the Alaska Permanent Fund because the oil sits under state-owned land.  But in the lower 48, our oil is on privately owned property, or under corporate property, and the revenues flow not to the American people, or to the people of one of our states, but to private portfolios.

Is this consistent with the notion that we hold it to be self-evident that all men are created equal?   Discuss.

Democratic Capitalism ...

Democratic capitalism has given us highly concentrated wealth (source: 2004 SCF, data here):

• the top 1% of us have 33.38% of the net worth (29.5% of the assets);
• the next 4% of us have 24.13% of the net worth (22.2% of the assets);
• the next 5% of us (the remainder of the top 10%) have 11.99% of the net worth (11.4% of the assets);
• the next 40% of us (the remainder of the top half) have 27.95% of the new worth (31.0% of the assets) -- offset by 48.6% of the debt;
• the bottom 50% of us have 2.54% of the net worth (5.8% of the assets -- offset by 24.2% of the debt.

and highly concentrated income (source: Piketty and Saez, 2006 data, Table A3 -- including capital gains)

• the top 1% of us have 22.90% of the income;
• the next 4% of us have 15.51% of the income;
• the next 5% of us (the remainder of the top 10%) have 11.27% of the income;  
• the bottom 90% of us have 50.34% of the income.

And while the top 1% of wealth holders are not precisely the same people as the top 1% of income recipients, there is probably a fair amount of overlap in the top 5% groups.   And, more important, it is quite likely that most of the people in the bottom 50% of the wealth distribution (who in aggregate 2.54% of the net worth) are also in the bottom 50% of the income distribution, which in aggregate likely has less than 10% of the nation's income.  In other words, these low income people are not living off their wealth.

Tell me again about the virtues of Democratic Capitalism, please.

I'm in favor of democracy, and in favor of free market capitalism.  But what we are experiencing is not free market capitalism.  We permit some of us to treat valuable land and natural resources, and the economic value of these vital and scarce assets, as their own treasure, rather than as common treasure.

What we need is to end land monopoly capitalism.

How Much Oil Do We Use?

Research for a blog post below led me to an interesting page at http://politicalcalculations.blogspot.com/2008/06/how-much-oil-do-individual-americans.html which provided the statistic that on average, Americans use 2.58 gallons of oil per day per capita  This has remained remarkably consistent over the past 25 or so years. (The graph is quite interesting.)

Being born into the Landed Gentry is like holding the winning lottery ticket

The Ianded gentry ...  sounds so noble ... so gentle ...  so aristocratic .... so entitled!

What is it about?