‘Events’

Social unrest may be expected in the wake of C19. Not because we were hit by a disaster not of our making; but because the wilful starvation of public services, leading to poor pandemic precautions, will be repeated if there is no root and branch change to the way in which public services are funded.

Our call for the functions of state to be funded out of the rents of land and natural resources (AGR/LVT) is criticised for being too radical. How could you possibly even think of replacing income taxes?

Question: What would it take for a country like Scotland to take seriously a change of revenue from taxes that repress wealth production and privilege a minority, to a levy which dismantles privilege, boosts prosperity and shares the country’s net income with all of its producers?

Answer: EVENTS.

Events such as the Coronavirus pandemic may at last focus the minds of politicians. Or the looming avoidable depression of 2028? The UK and Scotland have been hit unexpectedly by a tragedy requiring state intervention on a massive scale. MMT suggests money be produced by governments to pay for it all. But what about when the limits of credibility in the currency are reached? Money production can only go as far as a country’s real potential production.

Today Scotland has taxes on wages and on trade. The tax rates are already set as high as they can be without repressing the tax base by an unacceptable level. Production is already repressed by at least £500bn/yr (UK). But more money is needed to make good the anticipated government Coronavirus spending.

Austerity will not be acceptable and if forced will produce social unrest. What is the way then for current unfortunate events to be faced up, challenged and pushed aside?

It is time for Holyrood to take seriously the SLRG proposals to start funding government functions with AGR/LVT and to cancel as much as possible of Scotland’s wage and enterprise imposts. This will collect a significantly larger sum into Scotland’s Public purse – all from UNEARNED income – and at the same time boost and share Scottish prosperity.

Everyone will be a winner except the parasites who expect to grow rich from by extracting wealth produced by the efforts of others. Yet even they will share the opportunities to invest in new productive enterprises germinating across the new Scotland. And they will also receive their full share of newly expanded and at last properly funded Scottish public services.

Rent is half of GDP …not 5%

By Roger Sandilands, Emeritus Professor of Economics, Strathclyde.

How can the claim be justified that Rent, the product of society and nature, is about half of GDP, when the text books put it at about 5%?

The national income accountants (who are accountants rather than what we would define as economists) look only at the surface phenomena. They look at income and basically allocate it between only two very broad categories: wages and ‘profits’ (or ‘operating surplus’).

I gave some figures for 2011 in my 2015 SLRG conference paper, The Hidden Potential of Rents. I reproduce the Appendix below showing basic figures for 2011.

Rent is camouflaged

There you see that there is no explicit mention of ‘rent’. It is bundled up in an aggregate of gross operating profits, as also defined in the Appendix. “Rental income” is any money paid for buildings, including land. No separate figures are given for land rent except where rent is paid for bare land and this is a very small fraction of all ‘rental income’.

We know that much of what is income from ownership of buildings is actually land rent

Accountancy approach problematic

But the more important problem with this accountancy approach to the distribution of income is that it takes no account of the way that the taxation of earned incomes (including income from man-made capital – buildings, machinery, equipment etc) ultimately falls on (squeezes) the rents that can be charged on land qua land. This again is the ATCOR principle: All Taxes Come Out of Rent.

Rent is half the national income

Once this is recognised and accepted then you can indeed justify the claim that rent is about half of national income. But otherwise people will scoff and refer you to the textbooks that state that rent in the modern urbanised economy is only about 5% or less of GDP, and hence totally insufficient to finance a modern state’s public spending (about 40% of GDP).

Remember that our aim is to replace taxes on earned incomes and trade. As those taxes fall, so the annual value of unearned land and natural resource rents increases. This large underlying annual ground rent (AGR/LVT) thus becomes transparent and available to finance the modern state. And in the process would breathe greater life, health and fairness into our sclerotic economy and society.

Appendix (extracted from The Hidden Potential of Rents)

Table 8.2 of the UK National Income Accounts gives GDP in 2011 at market prices (£1,537bn) by category of income and by its percentage composition, thus:

Total gross operating surplus: £436bn (28.4%)   

“Mixed” incomes (of the self-employed): £ 85bn (5.5%)

Employee compensation £820bn (53.4%)

Taxes less subsidies on products and imports: £190bn (12.5%)

Gross operating surplus is gross value added (GVA) minus labour costs paid by producers. It is the sum of (i) gross trading profits and (ii) “income earned through the ownership of buildings (rental income).” But separate figures are not easy to find for (i) and (ii); and nor is “rental income” calculated separately for land and buildings.

The opportunity for shared prosperity to be greatly boosted across Scotland is detailed in The Hidden Potential of Rents. Once the proportion of the national income composed of rent is understood, the question must be asked, who gets it?

Equal life chances in the Indus Valley

In this radio programme Neil MacGregor examines the great Indus Valley civilisation. 4,500 years ago a state thrived in which it appears each contributor was valued equally.

https://www.bbc.co.uk/programmes/b00qb5xx

The evolution of the science of economics featured the thinking of numerous philosophers, starting in the recent era with the French Physiocrats. These predecessors and teachers of Adam Smith knew that if the French Revolution was to be avoided there had to be a way to include all members of society in the fruits they all helped to produce.

Classical economics discovered that equality of opportunity could be achieved in societies where the net income is shared amongst the participants. Its thinkers realised that the rent of land and other natural resources had to be shared between its producers. Otherwise a two-tier society would emerge:

Tier 1: A privileged elite of site and resource owners.
Tier 2: An underclass consisting of those who received none of the net income.

How did the sustainable single tier version of society work?

To the classical economists ‘justice’ dictated that wealth belonged to its producers. They observed that labour and capital produced wages and profits. And that land produced rent. The latter was gathered freely from nature or from amenities funded by society as a whole. It was no great leap from there to work out to whom the rent (the net income) belonged:

SOCIETY.

If a viable and sustainable society was to be maintained – as seems to have happened in the Indus Valley civilisation – the net income had to be shared out between all participants in the joint social project that was ‘society’. Thus, those who monopolised a part of the commons had to compensate the community accordingly – with Ground Rent.

How else to explain a society in which all homes were of a decent size and the absence of any evidence of violence or conflagration? A sustainable society can exist today too which does not find itself constantly in danger of implosion, or where privilege must be ‘protected’ by strong ‘policing’.

The Physiocrats lost the argument just prior to the French Revolution when Marie Antoinette’s advisers threw out Turgot and his ideas. The inevitable social implosion found heads a-rolling…

When the simple observation that rent belonged to everyone was expounded and amplified by Henry George at the end of the 19th century in his famous book ‘Progress and Poverty’, those in unjust receipt of the net income were roused to action.

‘Georgists’ today (such as the SLRG) continue to promote the concept that a society will thrive if taxes are removed from wages and trade and revenue collected instead from the rent of a country’s land and resources – the compensation that should logically and fairly be given to the community by those using any and all of its resources.

When farming first arrived in prehistory, the very first enclosed field was removed from the commons. How was society to be sustained? What if ALL the commons was eventually to be privately owned? Adam Smith’s Annual Ground Rent is the answer: the means by which a society is rendered sustainable, peaceful and prosperous. Like the Indus Valley society.

The evolution of the economic philosophy dominating our 21st century world is decidedly NOT like the justice-based philosophy of the Physiocrats or Adam Smith or the Indus Valley. ‘Neo-classical economics’ has no notion of economic justice. The history of its cynical founding by vested US landed interests in the early 20th century is documented in Professor Mason Gaffney’s ‘The Corruption of Economics’… a hair raising tale of mercenary academics in the employ of wolves.

In the new economics fiscal justice is replaced by something called ‘utility’. ‘Land’ as a separate factor of production is conveniently absent. Which renders the activities of rent extractors hidden. Result? A two-tier society in which the net income is first camouflaged and then extracted unseen, creating an unsustainable society composed of the haves and the have-nots. At the heart of the new economics is the desperate goal to sustain the unjust privileges of an elite – the owners of land. And to keep for that minority group as much as can be achieved of the net income that has been produced by everyone.

Neoclassical economics laughs at the social schisms threatening human existence. Schisms that are the product of Neo-classical economics. Instead, the mission is to guard the concept of private property in land – even with special ‘human rights’ declarations, to remove all levies on land entirely and replace them with taxes on productive workers and traders.

In this way the cream of the socially produced rent of land (the net income of each country) can be extracted by a privileged minority of social parasites for producing and doing nothing in return.

Shall we put up with it any longer?

No!

AGR!

Avoiding Scottish economic collapse after 2026

The 18 year land cycle is real.

The next bust will erupt after house prices peak in 2026. Even Covid-19’s disruptions are not sufficient to delay the inevitable. Only world wars have in the past disturbed the cycle.

Speculators use this insider knowledge to extract ground rent that belongs in the public purse.

Real estate expert Catherine Cashmore explains it all here: https://pro.agorafinancial.com.au/p/w4panmidcyca/MPANW503/?a=20&o=41960&s=119100&u=1229624&l=1588991&r=MC2&vid=u-8KQg&g=0&h=true

Yes, you can use the cycle to get rich. But at the cost of inevitable eventual mass destitution of human beings.

SLRG is saying that we can and must END land speculation (with AGR replacing existing taxes) if devastating carnage is to be avoided in Scotland in 2028.

Investment in the enterprises that actually produce the wealth would be the result of moving taxes off wages and trade and on to the unearned rent of land and all natural resources.

Society would not then be threatened with collapse in 2028.

Over to you, Holyrood.

Why are MMT proponents on the wrong bandwagon?

Because were the optimum and fair public revenue stream being collected, there would be no requirement for schemes to help governments struggling with deficits.

Economists Professor Roger Sandilands and Fred Harrison point out that Economic Rent (often disguised as interest/profit) accounts for about half the UK gross income.

Current taxes collect about one third. And non-contributing parasites extract one fifth (the yellow zone in our diagram).

This net income is the rent of land and natural resources which Adam Smith and the classical economists said was the optimum source of state revenue.

Collecting this stream of wealth would be both fair and efficient: At least £500 billion a year of UK deadweight losses (Scotland at least £38bn) would be avoided. This is the lower estimate of the production absent in the UK each year for as long as we continue to tax wages and trade.

As we can see from the diagram, the public purse would double in a very short time.

Apart from the obvious implications for public service funding and embedded UK inequality, the Westminster and Scottish governments would no longer require any scheme devised to help governments in deficit. Nor would the citizens of any country making the change require such schemes; all their needs would be met out of the collected funds they all help collectively to produce.

Rather, as Adam Smith pointed out, were the rents of land and natural resources to again be directed back to the community that generated them, they might be as well of after the levy as before.

What then for industry, investment and today’s fragile communities? Let Henry George himself answer:

And that wealth would be shared.

BBC rams Scotland’s plushest homes in your face

Is it really a good time for the BBC to obsess over Scotland’s plushest homes? https://bbc.co.uk/programmes/m00043v0…

Renters are already enslaved to landlords with housing costs sent into the stratosphere by government-led land speculation.

Now they face the abyss.

Any ‘property expert’ still not actively exposing the unjust transfer of free capital gains from society to home owners might do well to lie low.

AGR/LVT please.

…Just to remind you what the average Scot, under current fiscal arrangements, will never attain.

Preparing for the next pandemic

South Korea 20,000+ tests/day at the start
Scotland 1,370 tests/day at the peak

A country taking the threat of a pandemic seriously might have prepared for one. Like South Korea did after MERS.

Scotland and the UK were unprepared. The projected outcome? 100 times as many Scottish deaths (per capita) and vastly multiplied economic damage.

In the future it may be that money will be found to take the necessary precautions. But there is no doubt that starving public services in Scotland ensured proper precautions against a pandemic could not hitherto be funded despite the warnings of epidemiologists.

‘Maybe it will never happen’ proved to be wishful thinking on the part of our politicians.

Which is why Scotland needs to move immediately to AGR/LVT as state revenue. One of the numerous positive outcomes for Scots would be to find the contents of their public purse doubling in short order. After which any and all precautions against pandemics will be easily affordable …not to mention the rest of Scotland’s currently enfeebled publicly funded services.