Tag: corruption opportunities

How can gov’t officials be permitted to invest personally?

Ugandan Anti-Corruption Sign (credit: futureatlas.com, CC BY 2.0)

There’s been some concern about government insiders demonstrating great skill at choosing investments, at the presumed expense of other investors (not just individuals, but pension funds and other entities on which we depend).  At least they’re required to, ex post, report their trades, including those of their spouses.  But there must be a better solution.

A lot could be accomplished by reducing the role of government, and government-backed monopolies such as the “Federal” Reserve, in our economy.  This would reduce the leverage of gov’t insiders.  But every government operation has a lobby behind it, so this will be a challenge to accomplish. And even a legitimate limited government is going to have an impact on the economy.

So I propose that government insiders be required to post all their trades in advance, let’s say at least an hour before executing them. Put them on an easily-accessible public website (insiders.gov might be a good URL) so folks can front-run them.  It would create a whole new subindustry of forecasting market moves based on what the insiders are doing.

Of course all kinds of new hustles might develop to get around this.

  • Posting a trade and then not executing it
  • Having offshore trusts which they can claim not to control
  • Telling their friends a day ahead of time what they plan to do

But it would at least be progress. And it might discourage some of the wealthy from getting so directly involved in government.

Value capture is different from collecting the land rent

Photo by Sean Munson via Flickr (cc)

Henry George phrased his main proposal in various ways, from “make land common property” to the more pragmatic “abolish all taxation save that upon land values.”  Certainly a land value tax is a practical way of capturing land rent, and to the extent land value figures in existing assessments and taxation we are already capturing some of it.

But it’s important to recognize that land value, or more properly the selling price of land,  is only a close relative, not an identical twin, to land rent. One difference is that selling price is affected by estimates of what the future rent will be.  And land selling price is much more directly affected by the cost and availability of credit than is land rent.  Use of credit, in turn means an opportunity for banksters to get involved, decreasing the likelihood of real public benefit from public investment.

Which brings us to the World Bank’s 2008 report on Unlocking land values to finance urban infrastructure.  This report really could be entitled “Worldwide Catalog of Methods More Complicated and Prone to Corruption than Collection of Land Rent, Which Could Be Used to Finance Some Infrastructure But More Importantly Involve Borrowing and Lending of Large Sums Which Is, After All, What The World Bank Does.” In addition to involving large loans, the outstanding feature of all of these methods is that none provide any resources for operation or maintenance, thus they can help bring about the need for new infrastructure in the not-too-distant future.