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Rent revenue for a resilient society

By Bryan Kavanagh - posted Wednesday, 20 April 2011

For years I've argued that we ensure the phenomenon of recurrent financial and social collapses once we come to believe that taxes are essential to the running of government, that is, once we lose sight of the truism that taxation destroys.

Australia has an incredibly vast bureaucracy (and much of its citizenry) wedded to the gross stupidity that there is some sort of social responsibility to pay taxes, and slowly but surely over the years we have progressed this manner of organised public theft into law.

The phenomenon of periods of social instability and financial collapse we experience every eighteen years or so is neither the fault of capitalism nor of socialism per se, but of a sorely misguided revenue system.


A proper blend of capitalism and socialism is necessary if society is to be resilient and to flourish, but, of course, this observation would be vehemently opposed by the Ayn Randian right in the grand polarization that has fractured America and begun to turn up on the political shores of Australia.

Where the right might say "We're with you about taxes, bro!", it fails completely to observe that social and financial collapse has been the direct result of the extensive private rent-seeking of publicly generated economic rent by a tiny minority that obscenely enriches itself at enormous cost to the wider community- and the feverish but doomed-to-fail attempts of a far greater part of the population to do likewise - something that should offend both capitalist and socialist alike.

"Economic rent?", do I hear the left and right inquire? Or maybe, in attempted put-down, "That's just the late nineteenth century mumbo jumbo of Henry George!" Not so. Classical economists from Adam Smith to John Stuart Mill understood that as land rent is the surplus arising in the production process, it is eminently suited to be the revenue base.

However, those on the right, claiming to be godchildren and inheritors of the wisdom of Smith and Mill, selectively eschew that part of their ideas that as land and resource rents are community-generated they lend themselves admirably to this purpose if we are to shake off the incredibly pathological effects of taxation.

In failing to realise that everyone in the community is entitled to share equally in the economic rent of Australia's land and resources, we've left it available to be monopolised and plundered by the finance, insurance and real estate (FIRE) sector, nominally a service provider to the more productive side of the economy, but rather parasitically pillaging it.

Other resource monopolisers, such as mining companies, are equally pleased that land and natural resource rents are in most Australians' blind spot. That's how our mining billionaires, armed with $22 million dollars in advertising, were able to convince us we had no right to Kevin Rudd's proposed 40% resource rental on their profits.


A rampant FIRE sector has rapidly turned western capitalism into a caricature. As the private capture of land and resource rents has been elevated to the position of an end in itself, tax levels have increased, land prices have inflated into impossible bubbles, and production has begun to wilt, or forced to go offshore. Unemployment will follow, now that the real estate bubble is bursting.

It's not just the right that's misguided in allowing the private capture of land and resource rent. The left has little or no idea of its sufficiency, not only to replace all taxation, but to additionally to provide such a substantial dividend to all Australians that pensions of every description could be readily abolished, along with a second bureaucracy that could easily re-employ itself in a healed and proactive economy.

In fact, it seems that Russian and Chinese communism graduated from Marx without having ever having read him thoroughly, because Karl Marx finally did espy the singular nature of the rent surplus in Book 3.

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About the Author

Bryan Kavanagh is a real estate valuer and associate of the Land Values Research Group.

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