This blog is political. It will address political subjects and problems at all levels. It will be critical towards to the present reality and the politics that have created it and are still controlling it; but it will also put forward a different kind of politics – an alternative way.
What are the greatest political problems?
Two subjects are serious contestants to this title, in the minds of most people:
The climate issue with increasing temperatures, increasing frequency of weather extremes, and accelerating melt off of the glaciers ice sheets of the world, threatening with increasing sea-levels, etc.
The other is the pressure of migrants on the rich part of the world. The asylum pressure, combined with a labour market under pressure from wages and a lack of workforce, plus extensive social hardship and crime rates. Islamification and international terror is the overpowering ghost in that debate.
Others could be mentioned: population growth, loss of biodiversity, extensive poverty…….
They are all huge problems: the climate issue threaten the very existence of our livelihood, and the migration pressure threaten the socio-economic fabric of every society, either loosing people or gaining to many.
BUT: They are not isolated problems: They cannot be solved separately. They are part of an overall fabric of problems with a common denominator. They need to be solved together.
The loss of biodiversity is a part of the climate problem through deforestation, thawing of the permafrost, overheating of the poles, and increased desertification; another aspect and general cause of biodiversity-loss and climate change is the immense consumption of resources, especially by the rich majority. This is also the main cause of extreme socio-economic inequality, leading to poverty.
Migration is to a great extent caused by this poverty, which is both an effect and a cause of population growth: poor families can only increase their joint income by having more children, put to work at an early age.
Climate and migration are just aspects of the same overall fabric of problems.
It is my assertion that the common denominator to this fabric of problems is socio-economic inequality, caused by the unequal right and access to the prosperity created by the development of society – the fruits of our joint effort. This prosperity is NOT allocated equally to all members of society, even though every member contribute equally to its creation. A small minority use this prosperity to line their own pockets, to the long-term detriment of all of us.
The main purpose of this blog:
Is to pinpoint problems facing the existing political system and the political-economic ideologies behind them, and to put forward alternative ways to think and to act politically: A political ideology that can become the foundation for rebuilding of local, national and supranational societies, where the rights of the individual member of society to our common livelihood is the main focus, instead of short-term growth, profit and power for the few.
This ideology is called Rights-and-Democracy. Its main purpose is to allocate the prosperity created by the joint effort of society as a whole, equally to all members of a certain society, by means of certain principles of taxation. Tax is often regarded as a very technical and boring issue. But that is not the case: taxation should be about obtaining socio-economic justice and decency, by reallocating prosperity.
All economic activity is based on land: no economic profit can be obtained without the use of land. Land is a place to live on, a place to build and run your company, and land is all the natural resources needed to live and produce goods.
That means that land is the most important economic factor. The prosperity created by society shows itself as an increase in land values far beyond what can be obtained by effort of all the individuals put together; as a society develops the conditions for human economic activity improves, thereby increasing land values, because it is unequivocally necessary to have access to land. Land values are capitalized when land is bought and sold, generation after generation.
This long-term increase of land values brought about by capitalization should be redistributed to all members of society, not just to those controlling or owing land. This has lead to the idea of using taxation for this redistribution.
There are two basic principles: these principles have been inexistence for hundreds of years:
- To tax land values to an extent where the capitalization gain is removed from the land value, thereby avoiding that landowners can obtain workfree profits from the control of land ownership – a Land Value Taxation.
- To use the revenue from land value taxation to replace all taxation on wages and capital gain from production. Income tax and tax on profit obtained by companies as a result of their work effort should be removed completely.
In other words: We should not tax the profits obtained by human activity. These profits are the cogwheels of our economy, and they should not be put under pressure from income-taxation. Instead we should tax the prerequisite of any human activity: the capitalization of land values. And we should redistribute any surplus revenue from this land value tax as a citizens salary, after the revenue has been used to finance public expenditure.
How will these principles of taxation contribute to solving the fabric of problems facing the human race?
As long as the capitalization gain of land ownership is NOT controlled strictly by taxation of this capital gain, those few people gaining this revenue will always want more. This is the reason why so few own so much. And they don’t just own so much, they also consume so much and stimulate all members of rich societies to consume way out of proportion as well. It is this consumption together with workfree profit due to landownership and trade that creates the distortions in the economy, and is the main reason for environmental problems facing mand kind.
When taxing this capital gain so that workfree profits cannot be obtained, these few will not be able to rake in these enormous riches, and we will not be stimulated to consume way more than we need. Land Value Taxation is a resource taxation: land itself and the resources extracted from land will all be taxed to prevent workfree profits.
This does not mean that by taxing land values all environmental pressure is prevented. But land taxation creates a fabric on which to build policies that can keep human consumption of resources, including fossil energy, at check, thereby minimizing pressure on ecological systems. It will also stimulate development of new technologies that will minimize the consumption of natural resources and stimulate recycling.
Land taxation will redistribute wealth so that poverty will be averted in the long-term, and will improve economic livelihood in every country in the world.
Rights-and-Democracy is not just about Land Value Taxation and equal rights. It is also about how to attain a political system adhering much stringently to the basic principle of democracy.
Money is power, so the unequal distribution of wealth is equal to an unequal distribution of political power. Rights-and-Democracy is also about how to build a society so that the highest possible degree of equal political power can be attained.
Equal right economically is but one aspect. Another basic principle is that only individuals can accept responsibility and can be held responsible. Therefore only individuals should be electable as members of parliament. Only individuals should be allowed on the ballot, not private clubs calling themselves political parties.
But this is but the most basic principles of democracy. Another is the division of power and how to safeguard that this is the actual case. That is far from being true, not even in my home country of Denmark. This blog entry argues the details.
So far my focus has been on the national level in politics. Rights-and-Democracy has a lot to say about the supranational level – globalization. The blog treats global issues critically: like the EU and its nation-destructive principles; international trade and its many socio-economic distortions; the almost complete lack of international prevention and solving of crises and conflicts. Social inequality at the global level and the many conflicts arounds the world are the main reasons for the flow of refugees; a topic that is dominant in most European countries and the USA. The debate in these countries are lacking any long-term ideas for solving the causes for people becoming refugees.
The blog will not only criticize. It will also point to solutions: how to restructure globalization so that it does not undermine international economy and social justice.
Regarding Land Value Taxation (LVT):,
Socially Just Taxation, and Its 17 Effects On: Government, Land Owners, Communities and Ethics
Our present complicated system for taxation is unfair and has many faults. The biggest problem is to arrange it on a socially just basis. Many companies employ their workers in various ways and pay them diversely. Since these companies are registered in different countries for a number of categories, the determination the criterion for a just tax system becomes impossible, particularly if based on a fair measure of human work-activity. So why try when there is a better means available, which is really a true and socially just method?
Adam Smith (“Wealth of Nations”, 1776 REF. 1) says that land is one of the 3 factors of production (the other 2 being labor and durable capital goods). The usefulness of land is in the price that tenants pay as rent, for access rights to the particular site in question. Land is often considered as being a form of capital, since it is traded similarly to other durable capital goods items. However it is not actually man-made, so rightly it does not fall within this category. The land was originally a gift of nature (if not of God) for which all people should be free to share in its use. But its site-value greatly depends on location and is related to the community density in that region, as well as the natural resources such as rivers, minerals, animals or plants of specific use or beauty, when or after it is possible to reach them. Consequently, most of the land value is created by man within his society and therefore its advantage should logically and ethically be returned to the community for its general use, as explained by Martin Adams (in “LAND”, 2015, REF 2.).
However, due to our existing laws, land is owned and formally registered and its value is traded, even though it can’t be moved to another place, like other kinds of capital goods. This right of ownership gives the landlord a big advantage over the rest of the community because he determines how it may be used, or if it is to be held out of use, until the city grows and the site becomes more valuable. Thus speculation in land values is encouraged by the law, in treating a site of land as personal or private property—as if it were an item of capital goods, although it is not (Prof. Mason Gaffney and Fred Harrison: “The Corruption of Economics”, 2005 REF. 3).
Regarding taxation and local community spending, the municipal taxes we pay are partly used for improving the infrastructure. This means that the land becomes more useful and valuable without the landlord doing anything—he/she will always benefit from our present tax regime. This also applies when the status of unused land is upgraded and it becomes fit for community development. Then when this news is leaked, after landlords and banks corruptly pay for this information, speculation in land values is rife. There are many advantages if the land values were taxed instead of the many different kinds of production-based activities such as earnings, purchases, capital gains, home and foreign company investments, etc., (with all their regulations, complications and loop-holes). The only people due to lose from this are the “army” of tax collectors employed by the government, as well as those who exploit the growing values of the land over the past years. Here “mere” land ownership confers a financial benefit, without the owner doing a scrap of work. Consequently, for a truly socially just kind of taxation to apply there can only be one method–Land-Value Taxation.
Consider how land becomes valuable. New settlers in a region begin to specialize and this improves their efficiency in producing specific goods. The central land is the most valuable due to easy availability and least transport needed. This distribution in land values is created by the community and (after an initial start), not by the natural resources. As the city expands, speculators in land values will deliberately hold potentially useful sites out of use, until planning and development have permitted their values to grow. Meanwhile there is fierce competition for access to the most suitable sites for housing, agriculture and manufacturing industries. The limited availability of useful land means that the high rents paid by tenants make their residence more costly and the provision of goods and services more expensive. It also creates unemployment, causing wages to be lowered by the monopolists, who control the big producing organizations, and whose land was already obtained when it was cheap. Consequently this basic structure of our current macroeconomics system, works to limit opportunity and to create poverty, see above reference.
The most basic cause of our continuing poverty is the lack of properly paid work and the reason for this is the lack of opportunity of access to the land on which the work must be done. The useful land is monopolized by a landlord who either holds it out of use (for speculation in its rising value), or charges the tenant heavily for its right of access. In the case when the landlord is also the producer, he/she has a monopolistic control of the land and of the produce too, and can charge more for this access right than what an entrepreneur, who seeks greater opportunity, normally would be able to afford.
A wise and sensible government would recognize that this problem derives from lack of opportunity to work and earn. It can be solved by the use of a tax system which encourages the proper use of land and which stops penalizing everything and everybody else. Such a tax system was proposed 136 years ago by Henry George, a (North) American economist, but somehow most macro-economists seem never to have heard of him, in common with a whole lot of other experts. (I would guess that they don’t want to know, which is worse!) In “Progress and Poverty” 1879, REF. 4, Henry George proposed a single tax on land values without other kinds of tax on produce, services, capital gains etc. This regime of land value tax (LVT) has 17 features which benefit almost everyone in the economy, except for landlords, tax-men and banks, who/which do nothing productive and find that land dominance has its own reward.
17 Aspects of LVT Affecting Government, Land Owners, Communities and Ethics
Four Aspects for Better Government:
1. LVT, adds to the national income as do other taxation systems, but it should replace them.
2. The cost of collecting the LVT is less than for all other production-related taxes, since tax avoidance becomes impossible–the various sites are visible to all, and their ownership is public knowledge.
3. Consumers pay less for their purchases due to lower production costs (see below). This creates greater satisfaction with the management of national affairs.
4. The speculation in and withholding of unused land is eliminated, see item 7 and the national economy stabilizes. It no longer experiences the 18 year business boom/bust cycle, due to periodic speculation in land values (see below).
Six Aspects Affecting Land Owners:
5. LVT is progressive–owners of the most potentially productive sites pay the most tax. Urban sites provide the most usefulness and resulting tax. Big rural sites have less value and can be farmed appropriately to their ability to provide useful produce.
6. The land owner pays his LVT regardless of how his site is used. A large proportion of the present ground-rent from tenants becomes the LVT, with the result that land has less sales-value but a significant “rental”-value (even when it is not used).
7. LVT stops speculation in land prices because the withholding of land from proper use is not worthwhile.
8. The introduction of LVT initially reduces the sales price of sites, even though their rental value can still grow over a longer term. As more sites become available, the competition for them is less fierce.
9. With LVT, land owners are unable to pass the tax on to their tenants as rent hikes, due to the reduced competition for access to the additional sites that come into use.
10. With LVT, land prices will initially drop. Speculators in land values will want to foreclose on their mortgages and withdraw their money for reinvestment. Therefore LVT should be introduced gradually, to allow these speculators sufficient time to transfer their money to company-shares etc., and simultaneously to meet the increased demand for produce (see below, items 12 and 13).
Three Aspects Regarding Improved Communities:
11. With LVT, there is an incentive to use land for production or residence, rather than it being unused.
12. With LVT, greater working opportunities exist due to cheaper land and a greater number of available sites. Consumer goods become cheaper too, because entrepreneurs have less difficulty in starting-up their businesses and because they pay less ground-rent–demand grows, unemployment decreases.
13. Investment money is withdrawn from land and placed in durable capital goods. This means more advances in technology and cheaper goods too.
Four Aspects About Kinder Ethics:
14. The collection of taxes from productive effort and commerce is socially unjust. LVT replaces this national extortion by gathering the surplus rental income, which comes without any exertion from the land owner or by the banks– LVT is a natural system of national income-gathering.
15. The previous bribery and corruption for gaining privileged information about land cease. Before, this was due to the leaking of news of municipal plans for housing and industrial development, causing shock-waves in local land prices (and municipal workers’ and lawyers’ bank balances).
16. The improved use of the more central land of cities reduces the environmental damage due to a) unused sites being dumping-grounds, and b) the smaller amount of fossil-fuel use, when traveling between home and workplace.
17. Because the LVT eliminates the advantage that landlords currently hold over our society, LVT provides a greater equality of opportunity to earn a living. Entrepreneurs can operate in a natural way– to provide more jobs because their production costs are reduced. Then untaxed earnings will correspond to the value that the labor puts into the product or service. Consequently, after LVT has been properly and fully introduced as a single tax, it will eliminate poverty and improve business ethics.
References:
1. Adam Smith: “The Wealth of Nations”, 1776.
2. Martin Adams: “LAND– A New Paradigm for a Thriving World”, North Atlantic Books, California, 2015.
3. Mason Gaffney and Fred Harrison: “The Corruption of Economics”, Shepheard-Walyn, London, 2005.
4. Henry George: “Progress and Poverty” 1897, reprinted by Schalkenbach Foundation, NY, 1978.
Thank you for your comments David.