common birthright

In my last post I set out what I considered to be the three necessary reforms to create a more equitable society - Land Value Tax (or "The Single Tax"), Citizen's Income and Ownership for All.

In the comments, Tim Carpenter, Head of Policy at the Libertarian Party UK had several objections that I would like to address:

Tim: "LVT can seem fine and dandy at the first off, but over time who decides the future value of your land?"

Why does anyone need to decide the future value of your land? In any case, even if that were necessary the market does that anyway even at present - what people pay for a property reflects their view of what it's worth into the future - they are, literally paying up front, to the previous owner, the rent for a number of years into the future. I agree there are issues with a "100% Land Tax" where the community attempts to collect 100% of the rent (as I and other geo-libertarians would advocate). This would make the capital land value tend toward zero and how would you know whether it's moving up or down over time? Well, the answer I believe is that it would trade at a discount or premium reflecting the buyer's and seller's view of whether the "passing rent" (ie the LVT bill) was set too high or too low.

Tim: "It is fraught with risks, opportunities for corruption and chaos. If you think compulsory purchase was bad..."

As I understand it several of the big RICS member firms have discussed this and have proposed a valuation regime that they would be comfortable bidding for and would expect to be able to handle things like appeals. The Oxfordshire pilot study showed that on average there was only a need to value about one site in ten - ie that that many nearby sites would share the same land value. And there are developing ever more sophisticated data and models for modelling things like "landvaluescape" and how it changes in reaction to things like new infrastructure.

I only don't believe it is as daunting a task as taxing incomes in the multitude of ways we currently do.

Tim: "If CBI is only half what is needed to live on, then surely we will still need welfare."

The Joseph Rowntree report I mentioned included a lot of things that go much further than the "basics needed to survive" (and the headline figure of £13,400 was "pre-tax". Not that I claim that would halve the bill. However the removal of the deadweight loss created by the other taxes that would be repealed, and the ending of subsidies, particularly on agricultural land and other tariffs on the necessities of life would make them cheaper. Two ways to be wealthier - have more money or make everything you need cheaper. As Frank Gallagher in "Shameless" says "Make poverty history; cheaper drugs now!"

Tim: "Removing the minimum wage is fine but be under no illusion, the CBI will be factored into that wage (or lack of)."

But, first, they would also be factoring in the lack of payroll taxes and income taxes - they'd have nearly 40% more in their "wage bill" to play with in many cases. Second, the CBI has two purposes in my mind - one of them is to give people enough to survive, just, day to day, but the intentional beneficial effect of that is that people have a cushion that empowers them to say "no" to a coercive deal from an employer. If the marginal benefit from working x hours for y pay is not worth it and you know you can survive until you get another, hopefully better, offer, this changes the balance of power between employer and employee. And, because it is the same for all workers, and not just the ones currently stuck in the benefits trap, the employers are more likely to have to listen and produce decent remuneration. Though I do concede that there would be hundreds of thousands of currently civil servants in the job market to depress wages...:)

Tim: "It will be no solution to poverty AFAICT and your assertion that it would eradicate x y or x is not explained. I think parish provision is an interesting one, but frankly, look at places like S Wales and you will find that parishes will have little or no wealth creation so no money to spend on their army of dependants - central funding will be needed in precisely the places where people say it causes problems of unconditionality - for once the parish is spending other peoples' money the problems are right back with you again."

However, the LVT is more likely to move economic activity to areas where companies, and employees, and therefore also companies as employers, will pay less tax, which is turn will raise the economic activity in poorer areas and tend to level out regional disparities of economic activity. It cannot be any worse than the current situation where some regional economies make up more than half of their regional GDP from state handouts and subsidies to individuals and businesses.

Tim: "As another person has mentioned, the mutualist company can occur NOW. What is to change here? The fact that it does not happen now should either make you ask what stops it legally/financially or regulatory OR that it is actually a factor of how humans are socially, in that it takes certain individuals the gumption to kick start a company (and that is NEVER to be underetimated) and once they do so, why would they then let a whole load of strangers take just as much out of it as he/she does?"

I certainly don't underestimate the setting up of a company. I have been an employer for precisely one month in my life and it was a bloody nightmare. But it would certainly be less troublesome if I was not burdened with all those damn tax calculations! But again, I refer the honorable gentleman to the answer I gave a moment ago - the "cushion" that empowers the employee to say "no" a bit more; to hold out for a better share of the total returns to a business. This of course goes to the core of mutualism as I see it, as opposed to the anarcho-capitalist type of libertarianism. Mutualists believe that the current capitalist system is lop-sided, "toxic" and that it is itself a coercive and damagingly hierarchical system. Empowering labour to hold out for a better deal, making use of new corporate forms like limited liability partnerships and so on, will accelerate this change.

...and finally...

Tim: "Monetary reform and changes to fiat issuance will not happen by itself. The problem is coming up with something to replace it that actually works. I have seen many attempts and none appear to work or are just a cover operation for hatstand ideas like "social credit"."

As I think I said in response to another comment, I'm actually quite agnostic about how monetary reform should happen and what direction it should take. Personally I like the Hayek idea of fully privatised commercially competing currencies. I am told that the legislation actually already exists to allow commercial "complementary" currencies run by corporations. Air miles, Nectar and Kit-Kash are but early examples.

But consider this - if you collect 100% land rent and the capital value of land falls towards zero, the structure of the money system is bound to change - a large proportion of our broad money is lent into existence to pay for land in the form of mortgages. At the very least banks are going to need to have to adjust to that.

Actually I believe the real question is what lengths states will go to to prevent what I see as inevitable change if we allowed it. I haven't played there for a long time, and the hype about it seems to have died down a lot, but "Second Life" and "Kiva" are but a glimpse of what might be to come.

Incidentally, I presume I've been linked to in a discussion on the Libertarian Party forums (link will only work if you are a member and registered on their forums).  And that, now they have closed the public forums that were accessible to non-members, I am unable to see what people are saying.  I believe that none of these three policy areas step outside the bounds of libertarianism.  In fact that they address more inequities that create coercive human relationships than, say, anarcho-capitalist flavours of libertarianism do.  It would be nice to get the jist of what you are saying, if anything, over there!

Nick Clegg, upon his election as Lib Dem leader, said that he wanted to break what he called the "cosy consensus" between Labour and the Tories that has impoverished Britain's political discourse. With Labour now nicking policies on welfare from the Tories, and both vying to be "tough on the work-shy", now is surely the time to offer a radical alternative.

It is not just their approach to benefits that is backwards in vision, but the whole assumption that "full employment" is the thing we should be aiming for. Such a policy actually highlights even more starkly the difference between being independently wealthy on the one hand and having to work for the basics of life on the other. In an era in which more and more of our tasks can be automated or even exported we should be aiming more to live off the financial assets that past productivity has created.

Liberals have, for a century, harboured the secrets of changing all that. Shamefully, over the past quarter of a century we have dropped every one of those secrets from our policy platform, presumably so we could compete in that "cosy consensus". We are only just on the cusp of really rediscovering the oldest of these...

Three key policies in particular would end this cycle of dependency once and for all. A bold claim for sure, but why not? We have gone through sixty years of the welfare state and are still arguing about the outcomes of welfare, health, housing and education, just as Beveridge was trying to address in his report.

The Single Tax - the one policy we are slowly re-engaging with. Though we seem to be stuck on the idea that LVT is simply an alternative tax, we need to get beyond that and understand that it goes to the very core of our relationship with the planet. Land, economic land that is, "everything in the material universe not created by the application of labour and capital" (so basically the things of nature that we all have to share between the 6bn of us born here), is the third factor of production. David Ricardo pointed out nearly two hundred years ago now that land, especially where it is a monopoly, such as with a physical location or site in the built environment or, say, a section of EM Spectrum that can only be used by one wireless operator at a time, tends to absorb the surplus value created by the labour and capital expended around it that makes it a popular location. Ground rent is created where there is more than one potential occupier that could make good, productive use of a site. It creates a massive transfer of wealth from those who don't own a popular site to those who do, through no effort on the part of the owner of that site.

As a non-land example, the UK government has auctioned off the part of the EM spectrum that carries the new WiMax wireless network signals to a single enterprise, Freedom4 for the whole of the UK. They now hold a monopoly on something that is a gift of nature that anyone else wanting to develop WiMAX networks have to use. They can therefore charge more or less what they like for licenses to others to use that part of the spectrum whilst doing precisely nothing to develop the services that would run on it.

Creating so called "free land" by capturing the value of these natural assets for the common wealth rather than having to tax economically beneficial processes like work and trade is absolutely essential to achieve equity. And the best time to do it would be the bottom of a property cycle. Hint. Hint!!

Citizen's Income - this is the real challenge to the "cosy consensus" that has emerged in the past few days on welfare. It was, I believe, Lib Dem policy up until around 1991. At the top of the recent property cycle there would have been enough land tax (on residential locations alone, setting aside what might be available through commercial, industrial, central business disrict or agricultural locations, airspace, EM spectrum or other forms of economic land) available to pay a citizen's income of about £100 per week per adult and a proportion of that for children depending on age. Further reforms, for example on seignorage - the extraordinary "profit" that creating money as debt gives to the banks that is rightfully part of the common wealth (since the money they "create" is denominated in our national currency) - would enable us to pay for the current health or education budgets if we wanted to, or to add around another £1,000 to the adult Citizen's Income.

People seem to have a problem with the idea of giving everyone an unconditional and non-withdrawable payment like a Citizen's Income because, they say, it will entrench the work-shy in their bad habits, maybe even create more of them. But let's face it, if Joseph Rowntree's lot reckons you need £13,400 to live a basic but comfortable life in the UK, less than half that is hardly going to be comfortable. And it's not meant to be comfortable. It is meant to be hard enough to persuade anyone who wants anything more than the basics of life to do something to earn some additional money. Minimum wage would be scrapped so people would be free to choose to accept a job for whatever they like - just to be able to top up their citizen's income to whatever level they want, but crucially, it would not be withdrawn when people start earning, so there is every incentive for all that nearly ten per cent of the population trapped on various benefit systems to work, even if only a little.

Yes, in the light of campaigns by the tabloids against "benefits scroungers" and the "something for nothing culture" it will be a difficult alternative to sell, but we should be prepared to do it. Think of it the other way around - if we all contribute to the value of locations by our activities around them, why should the dividend from that only go to those who can't work, say? Why not to all of us. It creates a cushion to fall back on in hard times and the ability, even if only for a short while, to be more choosy about the work we accept. No longer do we have to accept the lowest job just to survive. Instead of only the very wealthy gaining financial independence by privatising the collection of land rents, everyone gains a measure of financial security from the common wealth we all contribute to creating.

You could then say that any additional "benefits" must be provided locally, through locally raised taxes and much more accountably than at present. The "parish rate" would have to be used to provide say a basic education for those who were not earning anything more than their Citizen's Income and A&E type health services. But remember, much of the illness in society is because of the sort of poverty that both the Single Tax and the Citizen's Income would eradicate. And not having to pay several taxes on incomes - employers' and employees' NI, income and capital gains taxes - would enable more people to save more of their incomes in productive financial assets for their old age reducing the reliance on a crumbling state pensions system. And, apart from say the armed forces, the troughs at Westminster could be emptied and everyone sent home (and James Purnell would have to find a real job, or discover how life is on the dole perhaps!)

Ownership for All - this third plank of Liberal "redistributive" policy came to the fore in the middle decades of the twentieth century, this is crucial to creating more financial independence for more people. I'm not talking about the sort of free for all sale of state companies as in the eighties, which became in effect a gambling opportunity for anyone who had a few quid stashed away - "Let's have a flutter on Sid" type thing. This is about creating structures in which the workers can share in the success of their employers by becoming part owners. Much more like, say, John Lewis, or, in the seventies, the National Freight Corporation. And things have moved on even since then. New corporate forms such as limited liability partnerships enable different types of partners entitled to different proportions of the profit, not just the providers of the capital.

Again, with the Citizen's Income behind them enabling people to turn down work that does not offer optimum returns to the worker, more and more employers would have to offer the sort of package of benefits that enables ordinary workers to build up a financial stake for the future. These financial assets are fairer than putting all your capital assets in the single basket of one's home, which is not really "net wealth" in any case. More liberal than both socialist style "common ownership" and ownership solely by the capitalist, such partnerships would generate real wealth that can produce an income when you no longer want to work for whatever reason.

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These three measures are, I believe, essential to a truly economic liberal platform. They share, equitably, the common wealth created by us all, and distribute more fairly the ownership of financial assets between those who provide capital and those who provide labour to an enterprise. They would reduce the cost of the basics of life by removing tariffs, subsidies and the private collection of rents and so instantly make people better off. They would leave a vanishingly small number of people genuinely unable to fend for themselves and the "parish rate" system would enable localities to support them while the work-shy would have a hard time surviving only on their Citizen's Income and those who are currently trapped on benefits have every incentive to take up even small amounts of work to top up their Citizen's Income.

It is time for such a revolution, for the Liberal Democrats and for the country. You don't have to be the first country on the planet to do this, but whoever does will instantly become the most liberal and economically just country on the planet and a magnet for international trade seeking to avoid damaging tariffs. We have gone sixty, a hundred, even, if herbert Spencer is to be believed a hundred and fifty years tinkering with redistributive policies involving moving incomes that people have worked to achieve around and still have not achieved the "greater good". The recent press coverage of the Welfare Green Paper shows that the politics of envy and "deserving and undeserving" are still alive and well. It is time to try these different strategies instead of "more of the same" attempts to be tough on the undefined undeserving.

And the biggest prize of all - it would enable us to get rid of vast swathes of bureaucracy and get those state employees into real productive work generating real additional wealth for the country instead of pushing other peoples' around the corridors of Whitehall.

I hate the G8, there's no doubt. I find the whole idea a nauseating display of mankind's folly that a few people with power can do more or less anything, from manipulating the world's climate to holding in their grasp the lives of billions whose lot in life those leaders of the industrialised nations can barely comprehend, let alone decree how to change.

It epitomizes to me why nation states are vile, unnatural divisions of humanity and the planet which, frankly, seem to have more to do with protecting the wealth of the few and patronizing the poverty of the many on this earth. Their leaders pose, Atlas-like, for photo-calls after their vacuous pronouncements, like some cabal of gallactic princelings in some dystopian Sci-Fi vision of a future inter-stellar imperial court.

Yet I'm no crusty protester you'll find scaling fences at Gleneagles or taking a bullet in Genoa complaining that these neo-cons and neo-liberals want to sell our world to the most hated capitalist profiteer. Oh no. Business, amongst other examples of voluntary human co-operation, has a huge part to play in addressing the needs of everyone on the planet. If only it could all be carried out on a billiard-table-level playing field.

And this is the greatest power these eight chattering onanists have - they could, if they chose, level that playing field tomorrow, or at least leave Japan this week having agreed to do so. But they don't want that, do they. because they also represent the businesses already raping the planet and its people by dint of playing on a skewed field.

They make me puke when I think of them, quite literally. I am nauseous writing this to be honest. I do not believe there are eight people on the planet, in fact not 2008 nor yet even 200,000,008 endowed with the wisdom of gods and strength of titans who could do any better at securing the future of this planet than the possibility oif billions of us being able to communicate and co-operate directly among ourselves.

At the top of my front page you will find what must be one of my favourite quotes from any politician, in this case the truly radical, Richard Cobden:

"Peace will come to earth when the people have more to do with each other and governments less." 150 years later, like infants only learning to crawl, we still rely on those protectionist, egotistical, smugly self-important governments despite the evidence that they cannot and will not deliver on their promises.

Whilst I certainly do not agree with all their policies, I find the idea of SimPol, in which we use modern communications technology to get ordinary people throughout the world, in diverse and distant countries, to voice together our aspirations and make those same sort of global changes on a consensual and co-operative basis.

Y I H8 G8.

What is the world coming to? You know, I may have very grave concerns about our own democracy and the things our elected dictators are imposing on us, but it behoves us daily to thank whatever deity, sprite or inspiration we believe in, that we are not in Zimbabwe. The inhuman brutality of Mugabe is an affront to mankind. And this is a man who professes to be a Christian.

Leviticus is not my favourite tome, but Chap 23 verse 22 seems quite apt: "And when you reap the corn of your land, you shall not cut it to the very ground: neither shall you gather the ears that remain; but you shall leave them for the poor and for the strangers." There's no conditionality in there. It doesn't say "so long as they vote for me.

Over on the Ludwig von Mises Economics blog last week, Ben O'Neill, an Australian libertarian and academic, wrote a piece against the welfare state in Is the Starving Man Free? and the full article is here:

'Modern "liberals" who advocate the view that government should provide us with the necessities or alleged necessities of life rarely appreciate that this assistance rests on a system of mass robbery and enslavement that is highly inimical to their professed belief in liberty. In fact, the advocates of such policies present them in quite the opposite light, as enhancing our liberty.'

Now, much as I hesitate to go up against an article at the great Mises Institute, this issue goes to the heart of differences between some liberals and some libertarians, though not this liberal libertarian. Indeed it is one of the core messages of the "Liberal Alternative" book we are compiling under the auspices of ALTER, and, to give it a plug, what I will be talking about in the ALTER fringe next Saturday evening in Liverpool, alongside James Graham, Tony Vickers and Vince Cable.

I also believe it gives some libertarians a "bad rap"; seeming to leave the "safety net" to the possible vicissitudes of private charity gives them a "beggar thy neighbour" reputation. Yet Liberals, and before the Ayn Rand/Ludwig von Mises school of libertarianism the mutualists and individualist anarchists like Lysander Spooner, had a neat response. For the record, I tend to agree that if we take from people what they earn with their own labour and resourcefulness it is coercion and even theft, but there is a source of value that properly belongs to us all, and not, as in the current predominant model, to the occupier - rent.

Benjamin Franklin wrote:

But notwithstanding this increase (of population), so vast is the territory of North America, that it will require many ages to settle it fully; and, till it is fully settled, labor will never be cheap here, where no man continues long a laborer for others, but gets a plantation of his own; no man continues long a journeyman to a trade, but goes among these new settlers, and sets up for himself.

[From: Observations Concerning for Increase of Mankind (1751), Sec. 8, Works, Vol. II, p. 225]

If we had free land, nobody would starve, unless that is they could not physically lift a spade to grow their own sustenance. The poor could up-sticks, spread out to the next available plot of unoccupied land and cultivate it. It would be a basic existence to be sure, but one that would not depend on another to provide, by state coercion or by reliance on private charity. And in time, one which could provide the most basic means of providing not just sustenance but opportunities to create wealth.

Now the fact is, we are not in that happy situation Franklin described. We do not have "free land". It is all enclosed. And indeed it would not suit modern, sophisticated, "civilized" (in the sense of "urbanized") humanity well if we did have lots of unused land lying around being unproductive. But the corollary of that is that there is no way the landless poor can sustain themselves without recourse to selling their labour to another. And in that state of desperation where one is about to "starve" one is surely more than most liable to coercion by that other. "Will work for food" maybe a simple slogan, but it hides a desperation likely to be seized upon by the unscrupulous.

Ralph Waldo Emerson said:

Then he says: "If I am born into the earth, where is my part? Have the goodness, gentlemen of this world, to show me my wood lot, where I may fell my wood, my field where to plant my corn, my pleasant ground where to build my cabin." ..."Touch any wood or field or house-lot on your peril," cry all the gentlemen of this world; "but you may come and work in ours for us, and we will give you a peice of bread."

[From: The Conservative, A Lecture delivered at the Masonic Temple, Boston, December 9, 1841]

Now what of the other side of O'Neill and the Mises style libertarians' claim that for the state to take anything from everyone to support the "starving man", to give him his basic needs, is "mass robbery and enslavement"? Well, as I said, I tend to agree that taking anything of what someone has made with his own labour or resourcefulness is theft. It is justified by the "liberals" that O'Neill castigates (that's most of us!) on the several grounds that it prevents a greater evil - the starving man, that it pays for the inputs that enable us to make money from our labour - our education and that of others to work for us, and the somewhat vague assertion that those who have much should give more to support those who have less. But it is still an offense against self-ownership; that which John Locke describes as being able to retain the fruits of our own labour.

But there is value in land that the owner does not create for him or herself. It is two hundred years since David Ricardo showed that rent increases to absorb the extra productivity that can be gained from a good piece of land compared with an inferior piece with no effort from the land owner, as owner. There is a perfectly reasonable strand of libertarianism, known as geolibertarianism, that asserts that since this rent is not earned by the landowner, but created by the expenditure of others, in labour and capital, that gives a particular location more social and commercial attractiveness, it is legitimate to collect this value from owners to compensate those who suffer from lack of land. And in a modern, urbanized economy, thi