Somehow the “mainstream” didn’t anticipate the 2008 global financial crisis until it actually happened, yet a few analysts did issue warnings. So it seemed like a good idea for the Real World Economics Review Blog to organize a contest and award a prize to “the economist who first and most cogently warned the world of the coming Global Financial Collapse.” Yet somehow they couldn’t allow even the nomination of the guy who predicted it first and most accurately (pdf). We are fortunate that Mason Gaffney has reviewed the record and documented what happened.
Archive for the ‘Georgist/geoist’ Category
Hong Kong’s “citizens dividend”
May 3rd, 2011 by Administrator
I have previously discussed Hong Kong’s land tenure system, under which the land is publicly owned, but improvement owners have security of tenure in exchange for paying significant land rent. One result is that most working people don’t have to pay any sales or income taxes. Another is that land is efficiently used.
But there are a couple of concerns:
- Since Hong Kong doesn’t collect all the economic rent, speculation can still drive up the cost of housing as well as any activity which uses land (and they all do).
- Wealthy mainland residents are moving to Hong Kong to take advantage of the increased liberties which HK residents get, further driving up costs for local people.
Now we read that every HK has declared a sort of citizens’ dividend, every permanent resident will get HK$6,000 (US$773, currently). Bloomberg calls it a “handout,” but I think “share of economic rent” might be more appropriate. Opponents of the move say it will be inflationary, and certainly it could lead to higher economic rent, with speculation driving land costs even higher. Of course, if people expected the government to collect all the economic rent, speculation would not occur. While the cost of living might still increase, giving an equal dividend to every resident would tend to flatten the income distribution, helping the poor much more than the wealthy.
Inside Job gets outside
April 4th, 2011 by Administrator
Prize-winning documentary Inside Job was posted for free download at archive.org a few days ago. It was withdrawn late yesterday or this morning, but in the interim I had a chance to watch it. It was pretty much as I expected: A very well-documented expose of the forces which brought down the world economy, emphasizing that they have been rewarded, not punished, for doing so, and essentially escaped prosecution (some paid fines amounting to a small part of their takings.) It’s well put together, director Charles Ferguson seems to be a skilled and persistent interviewer, getting on-camera answers even from some of the guilty parties. Ominous music reflects our ominous economic future, lots of shots showing the Manhattan skyline, other centers of wealth, as well as foreclosed houses and abandoned developments.
As a documentary with a point of view, this film says “The guys who drove us off this cliff and unpunished and still in charge,” which might lead one to suppose that, if only they could be caught and punished, perhaps our long-term future would become brighter. These guys own the government, of course, so exactly how a prosecution would work isn’t clear. Elliott Spitzer’s experience, reported in the movie, does not make one optimistic.
The problem, as I see it, is that Inside Job doesn’t tell the story from the beginning. I would represent the principal causes of the global financial crisis as the five connected items below
5 Regulatory capture and control of the government
↑
4 Concentration of financial power
↑
3 Securitization
↑
2 Loans against capitalized rent
↑
1 Private collection of economic rent
IJ describes 5 quite well, addresses 3 and 4, but doesn’t get into the fundamentals. As long as, and to the extent that, we have private collection of economic rent, we will continue to suffer from economic crashes. Inside Job needs a prequel explaining the root cause of the problem.
Paradox of geoist publicity
March 29th, 2011 by Administrator
Innovative geoist group Prosper Australia are promoting a homebuyers’ strike against that country’s still-high housing prices. It’s getting them worldwide publicity and certainly seems to be in the interest of non-homeowning Aussies, encouraging them to avoid leveraging themselves in a soon-to-burst land bubble.
But what is the message? The message is, “don’t get yourself deeply in debt to buy a house that may put you underwater in a few months.” I hope the message also is “We at Prosper Australia understand the economy and know how to fix it. Pay attention to us.”
Whether that’s getting thru, I don’t know. But the campaign can’t hurt.
Progressive revenue move in Zimbabwe
March 8th, 2011 by Administrator
Harare is now taxing residential parcels based exclusively on the value of the land, with all houses free of tax. The net result is that most homeowners will pay the same or less, but owners of vacant plots will pay “a lot more,” with total revenue expected to increase from US$8 million/month to US$12 million/month. Authorities will not literally value every individual parcel, but assign values based on zones and size categories, providing a pretty good approximation of value at relatively little cost.
In addition to the 50% increase in revenue,
[T]he migration from land and improvements valuations to land only with the rates set by zoning was designed to encourage people to develop land fully or sell it to those who will.
According to the source article, houses in some parts of Harare had already been exempt before the change. Thanks to Gil Herman for the link.
Our local authorities, if they were serious about the need for more revenue without burdening residents, would seek a similar system.
And some Chicagoans might want to try Harare activists’ approach to the privatization of parking and towing.
Collecting the Rent in Hong Kong
March 6th, 2011 by Administrator
Georgists often like to point to Hong Kong as a successful example of funding a community’s needs from economic rent. The result is a prosperous and (relatively) free city, a magnet for immigrants. But our information is old, and numerous changes have happened since the transfer of power, from UK to PRC in 1997.
So I was pleased to spend a bit of time this afternoon with a Hong Kong native, who now lives and works in Chicago. Not familiar at all with Henry George, not even interested in political philosophy as far as I could tell, but able to speak with me about current economic conditions. If I have any errors below, I trust that someone will correct me. (more…)
Is waste paper our major export?
December 2nd, 2010 by Administrator
There is a meme floating around the Internet (for example, here):
Do you know what our biggest export is today? Waste paper.
and
The United States has lost a total of about 5.5 million manufacturing jobs since October 2000.
The former assertion seems based on 2007 data reported here, which indicates (without giving a specific figure) that waste paper fills more shipping containers leaving the U S than any other product. A big volume, surely, but is it our largest export, either by dollar value or physical volume?
Take a look at the U S Statistical Abstract, 2010 edition, table 1272 (download the pdf for the international trade section here). Latest data shown is for 2008. Total value of “pulp and waste paper” exported: $7.744 billion. This is less than 1% of total exports ($1287.442 trillion). A few larger figures are Coal ($8.196 billion), Vehicles ($98.871 billion), “Television, VCR, etc” ($24.379 billion). There are eight different categories of chemicals, five of which each exceed $7.744 billion. And $115.248 billion of “agricultural commodities,” including Corn ($13.931 billion) and “Vegetables and fruits” ($14.040 billion).
I don’t have data on physical volume, but many of the products I mentioned above typically do not travel in shipping containers. In fact, one reason for export of waste paper might be that many containers would otherwise have to return empty to Asian ports.
As for the loss of manufacturing jobs, certainly there has been a decline, largely because manufacturing workers have become more productive. The Statistical Abstract only shows manufacturing data back to 2000, but during the period 2000-2008 the constant-dollar manufacturing GDP increased by over 10%, just slightly more than population growth.
I won’t deny that there are serious problems with the U S economy, and I won’t deny that the net outflow of dollars (largely due to petroleum consumption and “defense” expenditures) is unsustainable. It would be a good thing to remove obstacles which hinder American labor from producing in America, such as taxes on production and encouragement of nonproductive speculation. A more balanced flow of trade would likely be a byproduct. The more important result would be higher incomes and a better standard of living for working people.
Free land still available
November 19th, 2010 by Administrator
It’s been over three years since I blogged about free land available to anyone who wants to use it, and now CNBC has an article (more conveniently accessible via Yahoo, but with fewer pictures) about 7 Towns Where Land is Free. Each place has some requirements, basically that you must build something and you must conform to local codes. In most places you need not pay for the land but of course you’ll be liable for future taxes. Even if we go back to the Homestead Act, you had to eventually pay ($1.25/acre) for and use the land you claimed.
Of course, there are probably thousands of towns in America where $1,000 will get you a decent lot, and if you can’t afford $1,000 you may not be able to build anything anyway.
Thinking in terms of Progress & Poverty, such free or cheap lands are, for practical purposes, approximately at the margin of production. As the towns grow, one could expect the land value to increase; however it is unlikely that any of these towns will grow substantially any time soon.
Does poverty cause conservatism?
November 18th, 2010 by Administrator
A University of Tennessee study, reported at phys.org among other places, finds that, when incomes are more concentrated, people are more likely to say they oppose governmental redistribution of income. This decidedly includes low-income people. Why would low-income people oppose redistribution of income?
It might be because they’re too busy with survival to pay much attention to the question. Or, having been screwed by the powers-that-be, they assume any redistribution will be away from them, toward those already in control. Might even be that they are “free-market” types who expect to make a better living in the absence of government interference. I really have no idea.
I’ve only seen the news report, the actual paper seems to be behind a paywall, so there’s a lot of detail left unspecified. Such as whether “redistribution” is defined to include the current pattern of redistribution from those who work to those who manipulate, what specific surveys were analyzed, and how the matter of sequence (Does public support for redistribution cause redistributive programs to be expanded?) was handled.
Why Why the German Republic Fell is Hard to Find
November 13th, 2010 by Administrator
Bruno Heilig’s 1938 essay Why the German Republic Fell is posted and freely available on the Internet. Unfortunately, the Scholars at the School of Cooperative Individualism are not the world’s greatest proofreaders, so google has some trouble finding it, but it is here. There is also a nice abridgement here. Hardcopy, of course, is for sale cheap at Schalkenbach.
I read this booklet about 25 years ago, didn’t remember a thing about it, but hoped it would give me some insight into how the Weimar inflation was dealt with. No such luck, it really begins after inflation had been tamed and prosperity commenced, but it’s all the more worthwhile for that. Heilig asserts that the rise of Hitler was caused by land speculation. I am no expert in German history, but he does seem to make a good case.
Not by land speculation exclusively, of course, but land speculation as an ingredient along with:
- public aid to large landlords, encouraging them to withhold land from use
- privatization, on especially favorable terms to connected individuals and groups
- failure to fully utilize farmland, resulting in unemployment as well as high food prices
- tariffs, raising prices of consumer and industrial goods
- public subsidies to favored enterprises
- control of the major news media by the landed class
Land prices soared, wages fell, eventually the economy slowed, and:
Although it was obvious that the, “invariable costs” — i.e. the tribute land monopoly exacts from the working people — were eating into all production, the responsible men and the leading exponents of what was taught as economics kept their eyes, as if under some hypnotic influence, fixed upon the worker’s pay-packet.
Reformers advocated unworkable or ineffective solutions: If progress brings poverty, they urged that we retard progress.
The newspapers, of course, served the interests of their owners:
I need not explain what that propaganda organization meant in operation. Its effect was to sway public opinion into believing that the interests of the landowners were the interests of the nation. Subsidizing the landlords was the accepted policy for preserving and even saving the sources of subsistence of the people: the higher tariff walls were for the benefit of the wage-earning population: increase in land values meant increase in the national wealth: and so on…
[A]s unemployment grew, and with it poverty and the fear of poverty, so grew the influence of the Nazi Party, which was making its lavish promises to the frustrated and its violent appeal to the revenges of a populace aware of its wrongs but condemned to hear only a malignant and distorted explanation of them.
Much in this essay is similar to today, tho Heilig never uses words like “TIF” or “terrorism.” Some things are decidely different, for example I don’t think Germany at the time had anything like a well-paid public employee class, nor a large class of small-scale investors, such as workers with 401k’s. But it’s easy to see how today’s conditions could lead to similar results.
