First rate Diary, ARG.

George's work is based upon the Single Tax - ie the taxation of the privilege of the Commons of Land/Location. He thought - possibly wrongly in my view, although it may have been correct at the time - that such a Single Tax would, as the name implies, render all others unnecessary.

But I think he was correct in principle, if not (maybe) in practice. I believe that Georgism may be extended to cover other privileges, such as use of the Commons of non-renewables eg through a carbon levy, and the Commons of Knowledge, through a levy on Intellectual Property. I would also make a levy on the privilege of Limitation of Liability.

Having said that, George did not, as far as I know, have much to say on the subjects of Credit and Money, which constitutes the other twin of the Twin Peaks of Capitalism.

E C Riegel's Flight to Inflation hit the nail on the head in relation to his analysis of money and credit, but Riegel had profoundly right wing views in relation to Capital, as far as I know, and his work is not to be found in progressive circles.

Finally, re Marx

European Tribune - Comments - Henry George and Neo-Classical Economics

There are those who have thought that Clark was arguing against Marx, but Gaffney refutes that theory at length and points out that, at the time, Marx was an obscure figure in the USA, was an atheist, and had been almost entirely focused on Europe

Marx actually shared the anthropocentric assumption of neo-Classical economics that only Labour is "productive".  This is bollocks, but bollocks convenient for those who own the planet, since it justifies taxes on earned income, rather than on Capital, and on the privileges of private property that give rise to it.

Both Marx and Neo-classicals also share a Newtonian world of Absolute property rights.

Firstly, the absolute Divine Right of Capital - through absolute, permanent ownership (eg freehold land; shareholder equity) by private individuals (neo-Classicals) or the State (Marx);

Secondly, the temporary (for a defined term) use of Capital (eg debt finance, freehold land).

The innovation which I believe will come to replace conventional Capitalism and which I observe emerging is what I call "Open" Capital. This has an indefinite or indeterminate term, but that is to digress to my favourite hobby horse...

"The future is already here -- it's just not very evenly distributed" William Gibson

Wow.  Standards are getting very high around here.  When I started to study Economic and Social Studies many years ago I instinctive steered away from Economics and towards Politics/Sociology because I felt you had to make certain (for me) untenable assumptions about rationality and property rights for the whole edifice of economics (as it was then taught) to be sustainable.  It was a bit like observing that 99% of law students were only in it for the money and so law couldn't be for me.

It has taken a long time for those chickens to home to roost but the triumph of neo-classical economics is now long gone.  What I don't see is a new Marx or George or Keynes who is articulating an alternative vision (with the exception of Chris here) and which depends upon fundamentally different assumptions about humanity, ownership, natural resources and sustainability/progress.

Obama seems to be pursuing a significantly different direction without ever having articulated a fundamentally different philosophy, and still seems to be relying on many of the same "intellectuals" who got us into the mess in the first place. And yet when he fails, the reaction is likely to be back towards the even bigger failures of the Reagan era.

We need a post globalisation economic and political philosophy which takes the limited nature of the earth's resources into account, limited resources which can be allocated to any individual/community/society, and the processes which are required to ensure we aren't condemned to a Malthusian apocalypse as thsoe diminishing resources are fought over ever more viciously by growing populations.

Something tells me we aren't even beginning to grapple with those issues within mainstream discourse and even the intellectual freedoms enabled by the internet have not yet spawned a sufficiently radical analysis capable of inspiring the world population as a whole to overthrow the stale elite ideologies which have gotten us to this point.

Maybe when the banking bailouts have finally impoverished us all we will realise than plan A isn't working...

notes from no w here

The diary is long as it stands.  Left out are a summary of the accomplishments made possible by and the benefits of George's positions and the massive influence he has had, albeit in diluted form, on 20th Century politics in the USA.  Later in the day I will try to post a couple of comments to amplify.

"It is not necessary to have hope in order to persevere."

It is staggering testimony to the effectiveness of the NCE that we hear so little about Henry George.  Progress and Poverty was the #1 bestseller in the English language (bible excepted) for more than 50 years.  He was one of the most known names in America in the late 1800's.  It is unlikely that 1 in 1000 Americans know of him today.  

When George wrote of taxing "land" he was careful to define land in the 19th century notion of all natural resources.  In his later writing he tended to talk more about taxing (or abolishing) privileges, of which land is one form.  But when considering the question of whether enough revenue could be obtained consider all the forms of modern untaxed (or under-taxed) resources:  Broadcast spectrum, pollution permits, surface land, highway land, internet rights-of-way, fishing rights, oil severance, atmospheric carbon, and mining.  Also consider that the cost of government would likely come down if we tax natural resources because urban sprawl would stop, pollution would be reduced, and employment would likely generally increase.

But if any political party actually gets around to taxing rents directly there will be a few challenges yet to be addresses (to my knowledge).  We need credible rent models.  For example, if we tax surface land the "value-scape" would change quickly and dramatically.  Land at the periphery of cities would drop in value (enabling local farming) and would likely increase at the center.  We would also have great tension between the forms of rent.  If we tax the monopolization of highway space then land at the periphery would also probably drop in value, as would the price (demand) for oil.  

Once you understand how big of an influence George was in America your understanding of America in the early 20th century will change dramatically.  The National Parks Service mission statement reads like a Georgist pamphlet (written by a Georgist who was the first parks director).  Almost every property-taxing jurisdiction in American maintains separate values for land and buildings (usually done poorly).  It was George's influence that pushed them to do so and it was not the case earlier.  The California Water Projects of the early 20th century (paid for by land taxes) shared the water, broke up the large estates, created the most productive agricultural area on earth, and created a robust middle class of farmers.  (Mostly reversed since the huge reduction in land taxes over the last 50 years.)  California had a ballot initiative in the 1920's that called for a complete state tax shift to land only.  The initiative lost but it tells you that the subject was very much in the political culture.  Practically everywhere that land was taxed more heavily prosperity followed (upper mid-west, CA, parts of the NE).  Places with low property taxes were the laggards (the SE states in particular).  

George's theory of money was not well developed but does receive considerable attention in his last (less known) book "The Science of Political Economy".  But if we tax rents heavily our understanding of money will have to change too.  In effect, we would create a "complete circuit" for money because rents would be payable in currency only.  If the tax structure were based on rent we would see a sharp distinction between real money and liquid debt (treasury securities, etc.)  Also, most of the "asset inflation" related debt is based on natural resource values and such debt bubbles simply wouldn't form if we taxed privileges for their full value.  

I believe that a successful replacement to the NCE madness we are all suffering from will be based in some way on the ideas George proposed. I don't mean that dogmatically, as there could likely be variations in how we collect rent.  Another important idea George developed late in his life was a labor theory of value that was distinct from Marx but is probably necessary to a new economics.   George's view was that value was related to "labor avoided" not the Marxist notion of "labor contained".  But that would require a whole new diary to explore.

The Neo-Classical stratgem and style compared to George's approach.  NCE is dismal by design and by choice.  Hard dilemmas are presented for public policies.  However, the dilemmas are less hard for the wealthy, who are well positioned to survive and even to profit from crashes.  NCE is a perversion of economics in which rhetoric that protects the rich is incorporated into the "theory," regardless of the stultifying and vitiating effect on the discipline.

Neo-classical economics makes an ideal of "choice". That sounds good, and liberating, and positive. In practice, however, it has become a new dismal science, a science of choice where most of the choices are bad. "TANSTAAFL" (There Ain't No Such Thing As A Free Lunch) is the slogan and shibboleth. Whatever you want, you must give up something good. As an overtone there is even a hint that what one person gains he must take from another. The theory of gains from trade has it otherwise, but that is a heritage from the older classical economists.

Henry George, in contrast, had a genius for reconciling-by-synthesizing.  Reconciling is far better than merely compromising. He had a way of taking two problems and composing them into one solution, as we lay out in detail below. He took two polar philosophies, collectivism and individualism, and synthesized a plan to combine the better features, and discard the worse features, of each. He was a problem-solver who did not suffer incapacitating dilemmas and standoffs.

As policy-makers, neo-classical economists present us with "choices" that are too often hard dilemmas. They are in the tradition of Parson Maithus, who preached to the poor that they must choose between sex or food. That was getting right down to grim basics, and is the origin of the well-earned "the dismal science" epithet. Most modern neo-classicals are more subtle... Here are some dismal dilemmas that neo-classicals pose for us today. For efficiency we must sacrifice equity; to attract business we must lower taxes so much as to shut the libraries and starve the schools; to prevent inflation we must keep an army of unfortunates
unemployed; to make jobs we must chew up land and pollute the world; to motivate workers we must have unequal wealth; to raise productivity we must fire people; and so on.

The neo-classical approach is the "trade-off'. A trade -off is a compromise.  That has a ring of reasonableness to it, but it presumes a zero-sum condition.  At the level of public policy, such "trade-offs" turn into paralyzing stand-offs in which no one gets nearly what he wants, or what he could get. It overlooks the possibility of a reconciliation, or synthesis.  In such a resolution, we are not limited by trade-offs between fixed A and B: we get more of both.

This approach has dramatic effects on popular politics.  The basis for a true resolution of public policy dilemmas has been defined out of the common discourse.  While a generation of  economic policy makers embraced Keynes from 1936 through the Vietnam era, when political and economic developments required an update to Keynesian political economy Walter Heller was able to oblige under JFK, but, after JFK, Heller retired from the field and other  events dominated the discourse--Vietnam and Civil Rights.  The vast majority of economists from which a replacement could be chosen, along with the vast preponderance of commentary in the public discourse was found among the Neo-Classical Economists.  Milton Friedman's time was coming.  Nixon's famous statement "We are all Keynesians now"  probably served to damn Keynes with faint praise and hang the economic failures derived from LBJ's "guns and butter" approach to political economy around the neck of John Maynard Keynes.  

Popular responsiveness to problem-solvers

Voters faced with two candidates, each coached by a neo-classical economist, also face a hard choice. They often appear apathetic and take a third choice, staying home. However, history denies that voters are intrinsically apathetic. They have been excited by candidates who try to lead up and away from dismal trade-offs.

In 1980 it was Ronald Reagan. Instead of the dismal Phillips Curve ("choose inflation or unemployment"), he offered the happy Laffer Curve: lower tax rates would lead to higher supplies, higher revenues and lower deficits, he promised. Lowering taxes, said Laffer, would eliminate the "wedge effect". He often cited Henry George in support of his position. Thus he would unleash supply, and collect more taxes while applying lower tax rates. The voters were sick of second-generation Keynesians who had been reduced to preaching austerity, so they were game (if not wise) to buy into Reaganomics as advertised.

Unfortunately, the Laffer Curve turned out to be wildly overoptimistic, and Reaganomics partly fraudulent and hypocritical in application. The voters again tuned out and seemed apathetic. They are not saying, however, that they don't care. They are saying "come back when you have something better, mean what you say, and deliver what you promise".

From 1936-70 it was John Maynard Keynes and his apostles who had a long run with the voters, in spite of virulent critics. Keynes' winning political formula was that consumption and capital formation are not alternatives to be traded off, but complements that reinforce one another. Raise wages, he said, raise private and public consumer spending, and get more capital formation as a happy by-product. "We can have it all," he said.  Who would not prefer that to long-faced moralizers preaching that we must suffer for the prodigalities of the past, or for the sake of a remote and uncertain future? Even puritans learned better as children from Longfellow's "Psalm of Life".

When the theory of the propensity to consume, and the multiplier, lost their charm, and some strong trade unions (like Hoffa' s Teamsters) showed their nastier side, the American voters tuned in to John F. Kennedy and "business Keynesianism" in which the emphasis turned to fostering new investment. Keynes had been shrewd enough to cast his theories to accommodate either emphasis. Here the formula was to raise the "marginal efficiency of capital" (today we say the marginal rate of return) after taxes by giving preferential tax treatment to new investment, keeping tax rates high on income from old assets like land. It was a species of Georgism, applied via the Federal income tax. The key devices were fast write off for new capital, and the investment tax credit. There was no talk or thought, however, of enriching capitalists by impoverishing workers. The promise was to enrich capitalists and workers together, as higher investment raised aggregate demand for labor and its products through the "multiplier" effect.

In time that happy glow of mutuality turned to ashes. After JFK, with his influential economist Walter Heller, the flame burned low; later leaders stumbled in the dark. They relied too simple-mindedly on demand management through fiscal and monetary policy, carrying them well beyond their power to stimulate supply. Thus they lurched into Stagflation: double- digit inflation and recession conjoined. They blamed the war, then the Arabs. They scolded the public, and they called for sacrifices, as leaders always do when they lack ideas. "You must mature and face the facts of life," they lectured. "There is no way to stop inflation except unemployment.  Whichever evil you choose, don't blame us, we told you so.  Faced with that, the voters exercised a third choice: they retired the patrons of those new dismal scientists.

There are a number of economists among the "heterodox," a group to which our own Frank McF claims membership.  They include Michael Hudson, the late James Tobin and his students, including Paul Krugman, and Mason Gaffney.  They constitute a decided minority among academic economists, where they serve as evidence of "balance" in various departments.  This is hardly surprising, as one of the effects of the dominance of NCE in the academy is to cause those who are naturally inclined to a progressive agenda to gag and turn away from economics in revulsion.  Some who have remained have re-branded their field as "Non-Autistic Economics."   I was unaware of Mason Gaffney until I followed a link provided by Chris Cook.  We should treasure those who enable us to see through the deliberately set smoke screen that is Neo-Classical Economics  

"It is not necessary to have hope in order to persevere."

Michael Hudson interview:

http://kpfa.org/archive/id/48892

Quite a "dystopic" view of our future he presents here.

As a means of illustrating the manner in which Neo-Classical Economics came to have such a strangle hold over academic economics in the U.S.A. I will provide a quote from Upton Sinclair's The Goose Step. Early in that work Sinclair states: "Our educational system is not a public service, but an instrument of special privilege; its purpose is not to further the welfare of mankind, but merely to keep America capitalist."  To demonstrate that thesis he describes the role of Columbia University in New York City.

Men die, but the plutocracy is immortal; and it is necessary that fresh generations should be trained to its service.  Therefore the interlocking directorate has need of an educational system, and has provided it complete.  There is a great university, of which Mr. Morgan was all his active life a trustee, also his son-in-law and one or two of his attorneys and several of his bankers.  The president of this university is a director in one of Mr. Morgan's life insurance companies, and is interlocked  with Mr. Morgan's Bishop, and Mr. Morgans physician, and Mr. Morgans newspaper.  If the president of the university writes a book, telling the American people to be good and humble servants of the plutocracy, this book may be published by a concern in which Mr. Morgan (or a partner) is a director, and the paper maybe bought from the International Paper Company, in which Mr. Morgan has a director through the Guaranty Trust Company.  If you visit the town where the paper is made, you will find that the president of the school board is a director in the local bank, which deposits its funds with the Guaranty Trust Company at a low rate of interest,  to be reloaned by Mr. Morgan at a high rate of interest.  The superintendent of the schools will be a graduate of Mr. Morgan's university, and will have been recommended to the school board president by Mr. Morgan's dean of education.  Both the board and  president and the school superintendent will insure their lives in the company of which Mr. Morgan's university president is a director; and the school books selected in that town will be published by a concern in which Mr. Morgan (or a partner) is a director, and they will be written by Mr. Morgan's university's dean of education, and they will be praised by Mr. Morgan's newspaper and magazine editors.  The superintendent of schools will give promotion to teachers who take the university's summer courses, and will cause the high school pupils to aspire to that university.  Once a year he will attend the convention of the National Educational Association, and will elect as president a man who is a graduate of Mr. Morgan's university, and also a member of Mr. Morgan's church, and a reader of Mr. Morgan's newspaper, and of Mr. Morgan's university president's educational journal....And when the Republican Party, of which Mr. Morgan (or a partner) is a director, nominates the president of Mr. Morgan's university for Vice President of the United States, Mr. Morgan's Bishop will bless the proceedings, and Mr. Morgan's newspapers will report them, and Mr. Morgan's school superintendent will invite the children to a picnic to hear Mr. Morgan's candidates' campaign speeches on a phonograph, and to drink lemonade paid for by Mr. Morgan's campaign committee, out of the funds of the life insurance company of which Mr. Morgan's university president is a director.

Such is the system of interlocking directorates:  such is, in skeleton form, that department of the plutocratic empire which calls itself American Education.  And if you don't believe me, just come along and let me show you--not merely the skeleton of this beast, but the nerves and the brains, the blood and the meat, the hair and the hide, the teeth and the claws of it.

                           CHAPTER VI

                    THE UNIVERSITY OF THE HOUSE OF MORGAN

The headquarters of the American plutocracy is, of course, New York City.  Here are the three central banks, and here the hundred and twelve corporations have their offices, and the interlocking directors roll about in their padded limousines and collect their gold eagles and half-eagles with the minimum of trouble and delay.

-Skip-

It is inevitable that this headquarters of our plutocratic empire should also be the headquarters of our plutocratic education.  The interlocking directors could not discommode themselves by taking long journeys; therefore they selected themselves a spacious site on Morningside Heights, and there stands the palatial University of the House of Morgan, which sets the standard for the higher education of America.  Other universities, we shall find, vary from the ideal;  there are some which have old traditions, there are others which permit modern eccentricities; but in Columbia you have plutocracy, perfect, complete and final, and as I shall presently show, the rest of America's educational system comes more and more to be modeled upon it.  Columbia's educational experts take charge of the school and college systems of the country, and the production of plutocratic ideas becomes an industry as thoroughly established and standardized as the production of automobiles or sausages.

"It is not necessary to have hope in order to persevere."

... economics in the US after WWII was that it was originally convenient to argue against George's economics, and remained convenient after WWII to argue against Commune-ism.

And, of course, lots of American Institutions went to work for the Government during the New Deal and WWII, while the neoclassical economists were of no use for getting actual economic management accomplished, so they stayed in the Universities and reproduced themselves, ready to start using the new fangled computers and do lots of meaningless statistical regressions to make purely ideological models look more scientific.


I've been accused of being a Marxist, yet while Harpo's my favourite, it's Groucho I'm always quoting. Odd, that.

FT Alphaville » Blog Archive » A suspension of space for airlines

For a bit of background -- under current rules airlines hold so-called "grandfather" rights to their takeoff and landing slots, or space at the airport. That means as long as they use them 80 per cent of the time they keep the rights to the space. This often leads to funny things like airlines operating empty flights in off-seasons to keep hold of their slots, much to environmentalists' consternation. BMED's 2007 'ghost flights' were a prime example of this.

Slots are valuable things, particularly at crowded airports like London Heathrow,

Classic case of enclosure of a Commons. In this case the right for a plane to be 2000 feet up over Hounslow or Windsor at (say) 0930 hrs.

"The future is already here -- it's just not very evenly distributed" William Gibson