Resource rents - a counter revolution

Well, there was David Cameron transitioning into number 10 without so much as a suitcase in sight.

And wasn’t the new found camaraderie between him and Nick Clegg pleasantly agreeable to behold? You’ve got to wish them both “good luck” in dealing with the UK’s horrible financial plight that almost went missing during the election.

No, you’ve got to wish them more than luck. You’ve got to wish they discover the fantastic potential of public rent-capture, if the UK is ever to resolve its dire economic situation satisfactorily.

If the Cameron-Clegg team doesn’t discover rent, it also will be thrown upon the scrap heap of history to which the UK public consigned Gordon Brown.

Brown was gracious, almost statesmanlike, during the handover but, regardless of his claim to being one of Britain’s great Chancellors for the Exchequer, Gordon Brown amounted to a political failure, a mere snake oil salesman for 20th century junk economics, a period in world economies that US professor of economics Michael Hudson describes as “The Counter-Enlightenment”.

“Counter Enlightenment”: that is indeed descriptive of the economics that has been permitted to seize us by the “user pays” throat because, where classical economic reform had advocated taxing away land rent, modern neo-liberal economics has promoted its privatisation through rent-seeking in real estate and mineral resources, converting freeways into tollways (and similarly privatising other natural monopolies), and numerous forms of price-gouging - with the results we now see all about us. It’s not coincidental. It’s been a devastating period of false, non-scientific economics. And that's the way economics is taught in our universities!

In Australia late last year, Hudson said:

Yet I have heard no public discussion here of holding down real estate prices and mortgage debt by increasing the land tax. Politicians avoid this because voters react negatively to any kind of a tax rise. The distinction between efficient and inefficient taxes has been lost from public discussion. A revenue-neutral tax shift - lowering sales and income taxes on wages by the amount that property taxes are raised - would not take in any more tax revenue than now. But it would levy taxes in a way that holds down property prices. And it would leave less revenue available for banks to capitalize into interest charges. Holding down housing and real estate prices - and debt - would lower the cost of living and doing business. This would make the economy lower cost. That should be the aim of every economy - to minimize the cost of living and doing business.

We've effectively allowed the rent the community creates - and which represents the community - to be stolen by carpet-baggers. As a result, a sense of community has disappeared as rent-seeking by greedy “investors” replaced productivity and real wealth creation.

Halleluja!

The new Conservative/Lib-Dem coalition could take a lead from Australia.

It wasn’t until I took a few days off interstate with my wife, that the enormity of some of Ken Henry’s recommendations for “Australia’s Future Tax System” really sunk home. While away, I was able to see them in a broader perspective.

Henry’s panel actually came out in favour of slashing taxes and capturing Australia's economic rents: