citizens income

Something for nothing?

Jock — Sun, 20 Jan 2008 11:54:13 +0000

Last week David Cameron unveiled the Tories' latest wheeze - the idea that those able to work but not doing so and claiming benefits should be forced into some form of "community work" to justify their benefits after a period. Two years on Job Seeker's Allowance is enough to prove someone either unemployable or simply lazy goes the line. In some quarters it was hailed, not doubt with the help of the party spin machine, as an end to the "something for nothing culture" that pervades the benefits system.

Now, set aside for the moment the debate about whether this is some form of slave labour, or a way of quietly abolishing the minimum wage (although this latter begs the question as to whether it is right that only the unemployed should be allowed to opt for jobs below the minimum wage or whether only community groups should be allowed to pay below the minimum wage). We do in fact already have a deep rooted "something for nothing culture" in this country and seventy per cent of us, those who live in houses they actually own, believe that they have an absolute right to this "something for nothing" and over the past decade or so of rising land values, pushing house prices through the roof, they have benefitted massively.

Indeed, most of us can probably point to people who, over the past few years, have seen their wealth in the form of property, the value of their home, increase by more than their annual income from working. Equally in the same measure, we can probably point to people who, because they weren't lucky enough to have got in on this rat race of home ownership, have seen their chances of ever doing so fade as the multiple of income they now have to pay increases beyond any prudent lender would allow them to borrow.

Of course there are many who would point out that this wealth only really exists on paper; that for as long as we need a place to live the current value of the spot we own is of little meaning, as everywhere else is rising or falling in similar proportions and if we want to move we'll still need to cash in what we have and perhaps pay even more for our next home. And that this paper value is only of any use to us when we reach our final resting place or, if we are sensible about it, when we decide we no longer need the property we bought when we wanted to get the kids into a good local school or be close to the fast rail line into work or whatever and "downsize" or "escape to the country", hopefully giving us a pot of cash in the process to make our final years more comfortable.

Some may even suggest that it has been an unquestionable benefit to the economy as people have cashed in through equity release schemes and re-mortgaging to supply them with cash which has kept the consumer demand in the economy going when other countries' economies may have suffered recession and stagnation. As we face a possible slide in property values of course some of these people may find out to their cost that funding their lifestyles from the value of their home was a bad idea and that the only people, longer term, to benefit, are the bankers who they will be paying for their profligacy for years to come.

But I do not want to focus on whether housing is a good or bad investment: clearly in many cases it is a good one as the market is currently structured, albeit an unorthodox sort of investment - you don't usually get to consume something that continues to rise in value. I want to show you that it is an inequitable investment, that it is "something for nothing" and that the least well off pay for home owners' prosperity in a very real way even if that prosperity is mostly "on paper" for most of the time.

LAND: A part of the earth's surface, considered as property. The theory that land is property subject to private ownership and control is the foundation of modern society, and is eminently worthy of the superstructure. Carried to its logical conclusion, it means that some have the right to prevent others from living; for the right to own implies the right exclusively to occupy, and in fact laws of trespass are enacted wherever property in land is recognised. It follows that if the whole area of terra firma is owned by A, B and C, there will be no place for D, E, F and G to be born, or, born as trespassers, to exist.
Devil's Dictionary, 1911, Ambrose Bierce

If we go back to first principles, to what philosophy seems to call the "state of nature", some of the most fundamental assumptions are still as valid today as they ever were. We only have one planet. So every living soul born on that planet has to share it with everyone else - there is, as yet, no escape from that. The corollary of that is that everyone born on this planet has a right to a share of the planet - an absolute right, a "birthright". Some things we are completely dependent on the planet to provide for life...we need a place to live; humans cannot wander all the time, we need to sleep and to sleep we need to stop wandering. Similarly we need air, water, sustenance and again, we know ultimately of no way of producing these artificially without involving the natural resources of the planet.

Now, in that state of nature, if there's nothing else, like society, to hold us dependent on one place for any of these requirements of life, we would all be able to spread out, and appropriate as much land as we need to sustain our own lives, as individuals or families without negatively affecting anyone else. This "free land" gives us freedom, independence and life. Even today, in "overcrowded" England, as many would have us believe, there's enough land area for us all, every man, woman and child of us, to have just over a half an acre each - globally there's about 5.5 acres each of land mass. Naturally, not all these acres are fertile and even if they were, subsistence farming does not create wealth. Human growth and ingenuity requires that we specialize and socialize, which will usually mean also urbanize. Until we invent Scotty's instant transporter we have to make do by fitting many more people into urban land simply so they can be close enough to the facilities they need, and we need them to have - such as workplaces, to make working there viable.

But why should any of this mean that we give up our birthright, our common and individual birthright, to share equitably in the wealth of the planet itself? After all, you, the home owner, need me, the tenant, to work at whatever it is I do to provide you and everyone else with goods and services the economy demands. I, to fulfill my potential and contribute to the fullest to society, am better off working at what I do than ever I would be tending half an acre of small-holding (especially if you have seen my attempts to grow a window box of herbs!). But where is that birthright? Well, it is in the value of the location on which your home, office, factory or whatever stands, and it is created by and belongs to all of us!

Not one solitary square inch of English soil remains unclaimed on which the landless citizen can legally lay his hand without paying a toll to somebody; in other words, without giving a part of his own labor or the product of his labor to one of the squatting and tabooing class in exchange for their permission (which they can withhold if they choose) merely to go on existing upon the ground which was originally common to all alike, and has been unjustly seized upon (through what particular process matters little) by the ancestors or predecessors of the present monopolists.
"Individualism and Socialism," Contemporary Review (1889), Charles Grant Allen

You see, even John Locke, arch-defender of private property, recognized that there were limits to the right to appropriate land - the stuff of nature that exists in a finite amount yet which we all need to survive. Robert Nozick coined the phrase the "Lockean Proviso" for the principle that however much you take and occupy for yourself equity demands that you leave "enough, and as good, in common...to others". A hundred and thirty years after Locke wrote his Second Treatise of Government, David Ricardo formulated his Law of Rent, and a few years later Johann Heinrich von Thunen demonstrated the practicalities of this using data from his family estates.

It would be too much here to explain all of these ideas in any detail, but what they all amount to is that as you get closer to the social, employment, commercial facilities that more people need access to the land value surrounding those facilities absorbs some of the wages of all who need to access those facilities and is reflected in higher land values. So you see, this is not a fight just between the thirty per cent who don't own their home and the seventy that do. Many of that seventy per cent are also affected by this accretion of wages to land values. Think of it this way - you may have to settle (and you may enjoy it!) for buying a property several miles away from your work place or the nearest high quality commercial centre because all the property closer is too expensive. All those land owners that you pass on the way to work are gaining from your and the many other people in the same situation unfulfilled need.

Even more galling is that if we all happen to have the same incomes - you having managed to grab your slice of land at some earlier stage when it was less popular and therefore cheaper - we are taxed at the same level on those incomes. In turn both of our sets of taxes are used to invest in even more facilities that contribute to those land values. The person owning property closer to the "action" is gaining from all of our taxes disproportionately from those living further away. Similarly, the person owning property closer to the action has no incentive at all to release that location for others who may need it more at different stages in their lives, because they are continuing to gain from it and from those for whom it may now be a more appropriate place to settle. They are, quite literally, getting something for nothing, on their part at least. Something from the needs and activities of all of us that could make as good or better use of that location.

If you are interested in exploring this further, I would recommend a recent book by a chap called Fred Harrison, called "Ricardo's Law: House Prices and the Great Tax Clawback Scam (Why Tony Blair's Project Failed)" in which he shows that all the arguments about Londoners and people in the south east subsidizing other areas of the country via the tax and regional grant system pales into insignificance when you realize that the overall effect of that spending is to make property values in the south east and London increase faster.

Harrison concludes, as I do, that the entire tax system should therefore be based on the values created by all of us but currently "enclosed" by land owners. A hundred and more years ago the American self-educated economist, Henry George, encapsulated this into his idea of a "single tax" - that all the rental value of unimproved land in any jurisdiction should be collected by the state, whose fiscal program should be strictly limited to the amount that can be collected this way. He preferred, as again do I, that the state would do very little but turn that money around and dole it out to everyone, equally, in the form of a Citizen's Income; if you like, a dividend from what we all invest by creating that land value in the first place - our common birthright. At the same time, our average tax bill per individual would be halved, our economy would grow by around a third and we'd have a much more equitable society.

"The value of land rises as population grows and national necessities increase, not in proportion to the application of capital and labour, but through the development of the community itself. You have a form of value, therefore, which is conveniently called 'site value,' entirely independent of buildings and improvements and of other things which non-owners and occupiers have done to increase its value - a source of value created by the community, which the community is entitled to appropriate to itself. …In almost every aspect of our social and industrial problem you are brought back sooner or later to that fundamental fact."
[Mr. H.H. Asquith, at Paisley, 7th June 1923]

"We hold, as we always have held, that, so far as practicable, local and national taxes which are necessary for public purposes should fall on the publicly-created value rather than on that which is the product of individual enterprise and industry. That does not involve a new or additional burden on taxation, but it would produce these two consequences - first of all, that we should cease to be imposing a burden upon successful enterprise and industry; and next, that the land would come more readily and cheaply into the best use for which it is fitted. These two things would be two potent promoters of industry and progress."
[Mr. H.H. Asquith, at Buxton, 1st June 1923] read more »

Land. Value. Tax.

Jock — Fri, 17 Oct 2008 22:52:59 +0000

Over at Lib Dem Voice they've printed a biographical piece from the Directory of Liberal Thought about Henry George, the leading proponent of the "single tax" in the nineteenth century that many of us know nowadays as "Land Value Tax" or "Site Value Rating". Several of the correspondents in the discussion following the article felt that they had never really understood, or had explained clearly and convincingly, what LVT is and why it is such a good thing. So I'll give it a go, though many have tried before me, and no doubt many of them more intelligibly.

Land.

Forget what you might think you know about land. In economic terms land refers to the third factor of production. If "labour" is the work that goes into something, "capital" the wealth invested or expended in producing more wealth then "land", in economic terms, is everything else - "the entire material universe not produced by the application of capital and labour." So yes, it includes the land underneath our feet, but it also includes the air, the electromagnetic spectrum, the cosmos, the mineral wealth of the planet, all in their natural states, natural fertility, self-seeded trees and plants, water and fish and non-domestic animals and so on.

Now, billions that we humans number, for most purposes most of these types of land are either unlimited or of indefinite supply. Some types we don't absolutely need to survive. Others we do need to survive. Others are fixed or limited in supply. As far as I am aware, we are pretty well attached to this planet. Every single human born so far has only had the resources of this one planet to sustain them. And since we need it to survive, then we must all, every one of us, have an equal claim on its natural bounties.

In early human society, hunter gatherer family units or tribes would simply range over as big a territory as necessary to meet their nutritional needs. For some, in fertile temperate parts of the world, this may have been a small area. For others, in less fertile territory, it might be a large area of rough foraging. But of course this sort of isolation, subsistence living, is not very conducive to human development. Through trade we grow, both as individuals and as communities. And as soon as we come together to trade certain locations become more important as places where people meet and we can no longer justly grab as much space as we want without excluding others. It is at this point that land begins to have...

Value.

The value of "land" is its "rent". Just as the cost of "labour" is "wages" and the cost of "capital" is "interest". When natural resources (land) are in infinite supply, so that anyone who wants to use some of it can just take it and there will still be plenty for everyone else, it has no rental value. But as soon as humans get together in clusters, the further we move away from being a agricultural based economy and as our survival is based more on our ability to sell our specialist labour for enough to sustain us those locations where we form our clusters begin to attract rent, because many people are in the scramble to be in the best location for their market.

A landowner might be able to make more efficient use of his location and fit more people onto a particular piece of land, or they might invest in creating a work of art for the discerning occupier who will pay a premium for quality. But the landowner, as a landowner, does not have to lift a finger to contribute to any change in the rental value of that location.

And when we buy our homes, what we are doing is rolling up all the location rent for a number of years and handing it over, together with the capital value of the buildings at that location, to the previous landowner, and usually borrowing to do so. This is a key concept in LVT - we are already paying this rent either monthly when we actually rent, or up front when we buy (but inflated often by the cost of borrowing to afford it). It is this "rent" value that Land Value Tax seeks to...

Tax.

To me, this is a big misnomer, and causes a deal of confusion about LVT even amongst "Land Value Taxers". The Georgist purist like me intends really for the community to share the rent for the locations that are made valuable by that whole community equally with everyone in that community. Shared equally because, remember, we have that equal right of access to the land as our birthright as creatures tied to it for the very stuff of life, and because we all help to create that overall rent value. We more commonly think of a "tax" as an imposition used to fund government spending. The community sharing of rent is really a way of each and every one of us paying everyone else who has just as much right to make as good use of our location as we do for the inconvenience of having to avoid it because we have exclusive rights to it.

The community in question is the area within which land has rental value - technically speaking "within the margin of production". In some cases that may still be just a single town or city - the desert outside Phoenix, Arizona, for example might well tail off to zero in rental value at the end of the irrigation system pipes. In others, it could be an entire country - for example it could be argued that we are such a small country that London creates some rental value almost everywhere in the country.

The effect of this rent sharing is that those in that geographical community, however big it is, whose productivity - ability to earn - means they can only afford to live in the cheapest locations with the lowest rents will get more, perhaps much more, than they pay out in location rent. Those whose ability to earn enables them to commandeer the best locations will be paying into the community rent fund much more than they get out. And the net effect of all that is that we create an automatic, self-adjusting safety net which, if you have nothing else coming in, should enable you to eke out a basic living on the most marginal, cheapest locations.

Of course many of you reading this actually do believe that government is sometimes the best body to deliver "essential" "public" "services" and will recoil from the idea of giving people a basic income for fear it becomes an invitation to idleness. That's fine. For you, the Land Value Tax would be a way of financing those public services. I will tend to try to persuade you to take that one further step and believe that giving people their money to spend for themselves will lead to better and more efficient services in most circumstances.

The single tax.

Now this is the other side of the equation. Nobody who is serious about LVT's benefits wants to add to the current tax bill. LVT must replace other taxes if it is to achieve its most important benefits - of freeing up labour and capital to invest and work in productive wealth creation. And so Henry George called it the "Single Tax" and his adherents were called "Single Taxers". Henry George reasoned that virtually all other forms of taxation constituted tariffs, and therefore barriers to wealth creating free trade. All except tax on land in the generic economic sense affect the resources that can be applied to productive enterprise - labour, capital and, in the end, consumer spending.

And remember, the best thing about all this is that most of us, that is everyone who is still paying a mortgage or anyone who rents anyway from a landlord, are already paying this "single tax" in the form of location rent to our landlord or previous landowner, who have done nothing as landowners to earn that bit of the rent. So reductions in any of these other taxes, such as employers National Insurance, Income Taxes, VAT and capital taxes, feed straight through into more money in our pockets. And not only that, but all the disincentives to work and creating employment created by our complex income tax system and the problems associated with benefits withdrawal rates and tax credits and so on, will be removed.

Nor must you believe that the "Single Tax" only refers to a tax on the rental value of one type of land. There are other finite natural resources that we can rightly claim belong equally to all of us but which attract an economic rental value because they are scarce amongst a given community of users. One can argue for a "Land Value Tax" on the exclusive right to transmit on particular frequencies in the electromagnetic spectrum. Or to fly through our airspace at a particular time and place. You could even describe some mechanisms for taxing polluters as a specialized "Land Value Tax" - though it may not be the best way to deal with such issues.

Common Objections:

"We've already been taxed on the money we bought our home with"

Actually, you've been taxed on what you have paid your rent with - whether you actually rented, or bought from the previous owner by paying over several years' rent up front. Any rise(or fall) in your property's rental value by the time you come to sell it on is mostly accounted for by changes in the location rent, to which you have not actually contributed, as a landowner anyway.

But think of it in a post-LVT world - you'll have paid substantially less for your home, you'll have borrowed substantially less to do so, and you will not be paying all those unproductive taxes on income and capital anyway.

We have plenty of "double taxation" in our current system anyway. I pay tax on my income, but then when I go out and spend my post-tax income on most most goods and services I will pay VAT at another 17.5% and possibly duties. And this is an ongoing double taxation - at least with LVT we're only talking about this effect being felt once - at the implementation date and then not again because all the other taxes will have been ended.

"Land rich, income poor - the "poor widow bogey""

As long ago as 1909 Winston Churchill used to be taunted by the Tories with what he called the "poor widow bogey" - the supposedly unbeatable argument that LVT would be wrong because people who happen to have seen the rental value of their location rise will have to pay more in location rent without necessarily having more income with which to do so.

First, again, think of it in a post-LVT world - you will have borrowed substantially less to acquire the various places you will have lived in your life and you will be paying, if you are efficient in your use of land at least, less in tax in the form of location rent. You will have more to save and invest in productive assets other than housing. If you choose to save for your retirement an amount that allows you to continue paying your location rent till you drop, fair play to you. But the evidence is in fact that there is a huge unmet demand for people downsizing nearing retirement (indeed it is mostly the best off pensioners who are able to do this at present). LVT, because it makes the market in land and locations much more reactive to community change, will more than likely encourage this need to be met.

But in the implementation there is some evidence that a very small proportion of pensioners would indeed face larger bills than they have at the moment. For those Land Value Taxers who would prefer to implement LVT slowly, increasing the rate of the tax over a long period of time, their answer would be to allow such people to roll up their tax bill until they do eventually sell up and move or for their estate to pay. I, preferring the big bang approach, would simply compensate people for the lost land value in bonds which they can use to pay their tax into the future.

"Confiscating the value of our biggest asset"

It is true that implementing the full rent sharing I outline above will wipe out the capitalized rent values that one is accustomed to seeing as part of the "sale price". And it is also true that this will hurt those most recently on the ladder and having just borrowed to pay for that up-front location rent.

But the home you live in is not really "wealth" in the conventional sense. Until you are at the stage of downsizing or selling up completely, the value of your home really only matters in respect of its relationship to the price of your next one. For most of us, for most of our lives, our shelter is a cost of living - either in rent or mortgage payments. And if we have slashed the cost of buying by removing the land value, then we have also slashed the cost of your next home in similar proportion.

Again though, in transition from one system to another, with my big bang approach, those who lose out can be compensated with bonds with which, for example, they could pay off any outstanding mortgage over the new land-free market value. If you take the slower incremental implementation mechanism, again, the loss will be less all at once; indeed you could structure implementation such that it effectively only capture future rises in rental values.

"Impossible to value"

This is the "experts' objection" that it will be too cumbersome to invent a system that values the rent for each plot of land every year. And more than that, that it will be arbitrary. But we know from evidence in on the ground pilot studies that we only actually have to value about one in ten plots that share common characteristics in the form of access to services and infrastructure say. It's also not really too different from the current system of self-assessed income taxes. A game is played out every year with taxpayers trying to minimize their liability and the HMRC trying to catch people out hiding some of their income. And here there is no market to help.

The average mortgage lasts eight years. That means that somewhere around 12.5% of our owner occupied housing is valued every year just to get a mortgage valuation. More in recent years where people have been encouraged to chop and change their mortgage even though they are not moving home.

And then there's the rental market. There will always remain benefits to renting for some in the population - short term workers and so on. So there will remain a rental market. This presents yet more, and really very accurate, evidence on which to base valuations- more accurate once you take away the capital gains aspect of land ownership as landlords will only be investing in a rental stream.

And ultimately the market will still highlight areas where the assessed location rents are higher or lower than investors think they should be. If buyers think the current rents are too high, they are going to offer a discount on the capital value of the buildings themselves and if assessed rents are adjudged too low by the market, buyers will offer a premium over the building values in order to get the more desirable location at a lower location rent until the location rent is adjusted the next year.

And finally, let's not pretend that this is new - we had Schedule A imputed rent on our homes on our tax returns until 1963.

"Concreting over surburbia"

There is often concern that when Land Value Taxers talk about our system leading to more efficient land use we mean that every available inch of land will be developed. There is no reason to think this in reality. It will first bring into use completely unused land - that mouldering old factory that's been sitting empty and becoming more and more of an eyesore for a decade for example.

But there's no reason why Land Value Tax would not be subject to a similar planning regime as now. It would change - because a community decision that they would prefer housing to a factory on a particular site for example will lead to that factory being redeveloped a deal sooner than it might today, because its owners are going to be seeing their location rents rise to the point that running a factory there would be inefficient compared with developing it for housing, say.

Personally I would also like to see many planning controls repealed anyway and have most (ie small scale) developments make their peace privately with its neighbours through mediation rather than state control.

Overall though, there is little evidence that people would suddenly settle for a squashed apartment instead of a suburban semi with garden and garage just because of LVT. It will encourage people to consider whether their continuing use of a particular location is cost effective for them and it will make the market more efficient and so there is likely to be more rebuilding, but that doesn't need to be at the expense of amenity.

In conclusion

So, there then was my now not so concise explanation of Land Value Tax and some brief responses to some of its most common objections. It is quite important to get across just how land gains its value though. That helps to explain why some of us see LVT as such a just and equitable way of doing things. If we had Star Trek style free instant transportation systems, land would again be worthless but while it take time (which is money opportunity lost) and money itself to get from A to B the land in between A and B is absorbing some of your hard earned income (and that of everyone else who has to pass it by every day) for doing precisely nothing.

Land values are effectively a tax on all production and one we already pay anyway. Getting rid of all those other taxes on production and capturing for the community the rental values of land will create such a different more equitable economic playing field on which we all continue to ply our various trades. read more »

Private charity, voluntary co-operation or state welfare

Jock — Thu, 25 Sep 2008 20:56:26 +0000

One of the most common points of disagreement between, let's call them "state-interventionists" and "non-interventionists", is the claim that "non-interventionism" would leave the poorest in society on the scrap heap with no welfare, no support. That the much vaunted idea of "non-interventionists" that "private charity" or "voluntary co-operation" would take the place of state welfare is just an impossible pipe dream. So determinedly do "state-interventionists" believe their own claims that they frequently castigate "non-interventionists" as heartless uncaring selfish individualists who would rather see others die than pay taxes. One quote from a Lib Dem Voice "discussion" just today will give you the general idea:

"Well none of them [Libertarians] are serious, because it an incoherent philosophy....send the kids back down the mines, it’s only a lifestyle choice."

And to an extent, I used to believe that propaganda. As a geo-libertarian of course I do have an answer of sorts - the basic income derived from land user fees (which would on their own create an almost unimaginably more equitable society in any case) would cover the basics of life for everyone, and give everyone an incentive to top it up with as much or as little work as they can manage.

But a recent discussion on a "non-interventionist" mailing list I've been frequenting recently has challenged the basic assumption of this debate for me. Would people really not contribute voluntarily to the upkeep of others if you don't have a government apparatus threatening them with the confiscation of their property and ultimately the loss of their freedom unless they pay their taxes?

It is a strange proposition. Governments for at least the last sixty years have been supporters at some level or another of some form of state welfare. They may argue about how much is appropriate but the fact is, people have overwhelmingly voted for a state that takes money from you in order to give some of what's yours to someone deemed "less fortunate". We even have a cliche about the inevitability of death, and taxes.

We have tens, maybe hundreds of thousands of people who do voluntarily give up their time to care for another. Most people are someone's relative, someone's friend, someone's colleague. And whilst I recognize that some do not have such support networks and would still require some form of collective support, most people do not want to see their friends and relatives on skid row or worse.

One has to wonder whether the interventionist route actually makes things worse. And in how many ways. When we look at our pay packets do we not think often that we've given quite enough for the support of others through our taxes thank you very much. National Insurance and Income Tax between them effectively make the worker near forty per cent worse off. I know what I would do with an extra forty per cent each month. It would pay the interest bill on the piece of land we have just acquired for our first Community Land Trust for a start.

Other taxes and protectionist policies keep the prices we pay for basics artificially high and create incentives for companies to produce cash cows rather than exciting developments. I'll bet if we didn't guarantee one pharmaceutical company a contract for however many millions of doses of Metformin diabetes pills every year a dozen others would have put the effort in to find a cure, not a chronic treatment regime.

The attempt to do welfare as a "universal" system, with the same rules for everyone, means a bloated bureaucracy enforcing inflexible regulations. If welfare were, say, to be dealt with at the parish level, and the barriers to job creation caused by taxes eradicated, I'll bet you more people would be found some work, appropriate to their abilities, even if it didn't give them everything they need and then people would feel much better about helping them out with the rest - because they were trying to help themselves as best they could. We have no way of measuring that at a national level really.

We have a Professor here at Brookes, a chap called Steven King. His area is the History of Welfare mostly in the 18th and 19th centuries - probably the period which received wisdom says was the harshest environment if you were poor or hapless. But I was fascinated by a lecture he gave a couple of years ago on being elevated to the professoriate (you are elevated to that aren't you?). Apparently when parishes were responsible for pensions, those who actually got a pension - those whom their own peers and neighbours if you like knew had simply tried and been unable to support themselves (in common parlance I guess the "deserving poor") would get on average 75% of the average working wage for their area. For others there were varying levels of support down to a pretty basic safety net that was intended to be subsistence rather than comfortable for those they felt were "swinging the lead".

And then there's the problem of administrative costs. If I had an extra 40% in my pay packet and was going to give it away, I'd know that the people or organizations I was giving it to would get all of my donation. I'll bet for the 40% the state apparatus take off me in taxes, probably half actually gets to someone who needs it, to direct service delivery, if that.

So, given all those disadvantages of, and the singular advantage that people actually vote for, this tax based welfare system at some level or another, is it not just possible that by doing away with all that coercion, all that centralization, all that unproductive bureaucracy, the people who get to keep what they earn would be quite proud to "do the right thing" by their neighbours and communities? If they vote at the ballot box to have money taken off them by the state for things they obviously believe are necessary, would they suddenly feel they were not necessary or that they should not contribute towards those same things without the threats of the state? Isn't that a totally illogical position? You'd vote for it but not do it if the people you vote for didn't force you to do it?

And so, at the very least, would it not be at least a courtesy to accept that Libertarianism is an optimistic creed; that it is positive about humanity's innate ability and even need to help each other. You may call that a naive optimism. But I'd rather be a glass half full freedom lover than the glass half empty authoritarian approach that says humanity will not help itself unless it is forced to do so by the agents of a state apparatus that may, just may, cause more problems than it actually solves. Libertarian is not a "devil may care/beggar thy neighbour" philosophy but one that places the utmost faith in people, as individuals, to know and do what is right.

And as to whether it is a "coherent philosophy" or not, I submit that "non-interventionism" is the only truly coherent philosophy in the game. For once you admit the state can do one thing better than we can through voluntary co-operation, you inevitably end up in endless arguments between factions about just how much the state can do better, and the ultimate end of that arms race is totalitarianism - that the state can do everything better than voluntary co-operation. Which is manifestly not true. read more »

Land Tax and Citizens Income - further discussion...

Jock — Sat, 26 Jul 2008 01:00:03 +0000

Again, I'm starting a new post to respond to some very interesting comments by Tim Carpenter. My inept attempt at a Drupal template means it's almost possible to follow a thread of comments and especially given this is going to be another long response I think it deserves an airing on its own.

For anyone coming new to this debate, it follows on from my original "three point plan" for equity and economic justice and some clarifications and responses I gave yesterday to comments on that original by Tim Carpenter, Head of Policy at the Libertarian Party UK.

Tim, thanks for taking the time to respond. However I think we are, as a colleague used to say to me "talking past each one another". Paul Lockett has put it all a deal more eloquently than myself , and for that, and if I have caused any confusion, apologies.

I am a geo-libertarian (of the "geo-mutualist" variety if you will). The main thing you seem not to have appreciated is that in calling for the "Single Tax" I mean just that - the community/state can only take economic rent on the land resources within its jurisdiction and has no call on incomes or trade. As I understand it this is the "purist Georgist" position.

The ideal 'state' would be limited to collecting the rent and distributing it all as a dividend to citizens for the reasons Paul outlined. "Commonwealth" - you are right, it's lazy, I should put a space between "common" and "wealth"! Economic rent from the finite natural resources we all require to share is "common wealth" and should be collected as such and distributed as fully as possible whilst every other tax is a tariff.

Tim: "1. When I say who defines the value of your land, you say "why does anyone need to decide", yet immediately go on to talk about collecting the tax! Someone DOES decide the taxable value and that affects the actual value. Can you not see that?"

No, the market sets a location's value. It does it all the time at the moment. And it will continue to do so in an LVT system. Even in a "100% LVT" system. If a location is appreciating in value, buyers will be prepared to pay a premium over last year's rent bill and vice versa, in a falling market sellers will effectively have to be prepared to pay someone to take the rent bill off them. The following year's rent bill will reflect that premium or discount by going up or down respectively.

Tim: "2. As you should know, we aim to eradicate income tax., so the comparison does not hold."

See above - I'm a single taxer. No income tax here either. It is a tariff on employment and trade. Though I would say that if a local community decided mutually to have a local tax on incomes or sales to finance some mutually agreed local project it would be doing so in competition with neighbouring communities that perhaps were not or were charging a different rate or a different tax. Tax competition is good, in itself, isn't it? Also I am aware of some "single" taxers who would justify retaining some income tax at least temporarily in order to try to address the "embedded" historical advantages of monopoly ownership. I don't.

Tim: "The problem comes when some local area under the influence of whomsoever, adjusts taxation on land they wish to gain access to because a new development is coming. So, building a road, whack up the value of land next to it. Farmer has no CAPITAL to develop it, so has to sell it for a knock-down price because he HAS to sell to meet the tax bill. If this does not concentrate land into a few hands, I do no know what would. This is just one example of the potential risks."

This appears to be Churchill's "market gardener" bogey, or, to others, the "poor widow" bogey. If you look at it under the current system, that same farmer, in similar circumstances is perfectly able, regardless of the squalor growing around, to sit on that land, not paying anything and watch its value "ripen" until the value, created merely by excluding others from what they need to use, is so great it becomes irrational not to sell. That process is outright extortion.

In fact, under an LVT system, land values at the margin would tend to move much more incrementally in any case. In the absence of other restrictions - zoning, green belts etc (it is your policy to remove those restrictions once an LVT system proves practical isn't it?) - you would not get these large leaps in hope value. I would actually retain green belts and such like for a while after LVT was implemented so that it can have its greatest effect in turning existing urban land to its most efficient use before going for sprawl. But I am prepared to be convinced on that. After all, we know that at relatively low densities compared with what planning guidance seeks nowadays, it would take up less than three quarters of one per cent of the non urbanized land in England to build the three million new homes predicted to be necessary over the next twenty years.

But once a point of equilibrium was reached between supply and demand rents at the margins of production would move slowly and via the democratic influence of the market. If that market and the community that makes up its participants eventually get as far as that farmer's land and all that remains to bring it in from the margin to profitable development is to develop a road, the farmer will have had plenty of opportunity to see it coming long before the tax bill becomes an issue for him.

Tim: "3. Living costs - if you have CBI as described you would still keep the most expensive parts of the Welfare bureaucracy - the entire means-testing apparatus. Housing benefit would probably remain in all but name."

I disagree. But I don't think what you understand me to have described is what I think I have! ie, in particular, that I am not paying for CBI out of income taxes, but out of the community collected rent on economic land. Land at the margins tends as I said towards a nil value. More people will be able to own their home because they will not be borrowing twice as much as the value of the capital good (the building) in order to pay the land value in up front capital. Renting a basic home at the margins ought to be achievable out of the Citizens Income.

With so many pulled out of poverty anyway by not having punitive benefits withdrawal regimes that reduce the marginal value of doing even the smallest amount of paid work and by the reduced costs of living owing to tariff eradication and the better off keeping more of their own money, the capacity of private charity or local mutualism to assist the much smaller number of people that would be needing top up hand outs above their CBI would be much increased.

Tim: "4. Income. You need to clarify here - are you saying that COMPANIES have 40% more or that wage earners do? Be under no illusions, if you have CBI, income tax will be enormous. I worked out once that if we went for CBI with no other tax changes but a cull of QANGOs, income tax would need to be about 64% flat from the very first penny (IT is currently £140bln, 7k x 50m = £350bln pa). A HUGE disincentive to working especially at the lower end. Result: black economy, unproductive citizens, more companies shutting down and a growth in imports (and do not say "cheap imports make us richer" because that only holds if we are simultaneously exporting a greater amount of higher value exports)."

I hope you'll agree that that objection is moot given I am not talking about income taxes at all. My calculation of the CBI cost at £5200 pa for adults and a decreasing proportion for under-18s to 20% for 2 year olds is around £285bn. £245bn if only the adults. I reckon there was about £200bn a year's worth of economic rent in residential land alone at the recent peak of the market. I don't think it is beyond belief that there's another £85bn in commercial, industrial, retail and, possibly, agricultural economic rents.

Tim: "5. Movement to low tax areas: A company will consider workforce supply as a prime consideration, not just rental costs. If that were not the case, expensive London would be empty. People pay top dollar for London rents because of a massive pool of labour - they can gain access to many cheap or more chance of snaring the best. To think LVT would make a company move out to a depressed area? Those places are already cheap. Why doesn't it happen now? Limited skilled labour pool. As you say the Government does it now and did it in the past (remember the Hillman Imp?) and it creates quasi-soviets. If LVT has an influence, it might IMHO move a few companies, deter some from even setting up where they need to and the rest of the companies will be bled paying higher rates just to keep near the labour pool they require. In the case of London, the move will be to New York or Hong Kong and we all lose out."

There are so many issues in this paragraph I can only assume again that I have failed adequately to have explained my position. At the moment businesses pay rents, yes? In an LVT system they will still pay rents. The only difference is that whereas currently the entire rent, that which accrues to both the building and the site or location goes to the current landowner, ie it is enclosed, privatized. Under an LVT system, the same rent is due (assuming they were paying the market rent originally), only the portion of it that accrues to the location goes to the community and that attributable to the building to the building owner. There's no corporation taxes, no more employee taxes. There's no increasing of rent or rates; there's no bleeding anyone. Except those, as landowners, who have bled the rest of us for centuries.

Areas of low land value will also be areas in which it is cheaper for employees to live (lower LVT for them too). For a business operating at the edge of profit it would seem to me to be quite an attractive move. But one that remains in London because their key skills are there is not penalised by that. Indeed, if sufficient other businesses do it who do not need to be in London for optimal profitability do move, costs will also likely fall for those left behind, increasing their profit, distributable to capital and labour.

I think there is, in particular, one form of LVT that could have a significant effect in this regard...the auctioning of air-space, via "landing slots" at airports. Making more efficient use of regional airports would draw business into those areas. I'm likely to propose this to our regional conference this autumn as part of an "anti third runway at Heathrow" motion. Interesting choices of examples though - Hong Kong of course is famous for having state owned land - everything except the Anglican Cathedral is leasehold and that has been used to raise revenue in a form of LVT and keep income taxes low. Modern valuation tracking and billing systems would make that far more efficient and not prone to some of the problems Hong Kong suffered by having too infrequent valuations.

In China before Mao took over, I understand that Chiang Kai Chek's regime looked into LVT as a way of staving off the rise of Mao's totalitarian collectivism. And in the former Soviet Union, Gorbachev I believe looked into LVT as a way of capturing the value of natural resources and in not implementing it allowed the so called "oligarchs" (really "kleptocrats" in my opinion) to enclose the revenue from that vast pool of common wealth.

I'm getting a bit tired here! I'm going to call it quite at this point and maybe think some more about the issue of mutualism. I think Paul answered the point about the "state as landlord" objections quite satisfactorily and there's no need for me to repeat it. But for fairness, other readers can read Tim's further points in the comments on the previous post.

Tim: "p.s. your page has a script that my browser asks me to kill due to risk of resource hogging."

Yes - I only notice this on older machines or slower network connections - I never experience the problem at home or at work. I think it must have been an advertising panel I have just removed, but if others still experience the problem let me know and I'll have another look. read more »

Response to some comments on "Unconditional Benefits"

Jock — Thu, 24 Jul 2008 19:52:49 +0000

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! read more »

Unconditional benefits: now is the time to smash that "cosy consensus"

Jock — Wed, 23 Jul 2008 13:57:15 +0000

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.

-------------------------------------------------

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. read more »

Tax policy: one I made earlier

Jock — Fri, 18 Jul 2008 14:21:33 +0000

I spotted someone seemingly scouring my blog for articles relating to "citizens' Income" and came across this now seemingly very prescient post I did nine months ago about our tax policies hitting the mark or not. read more »

debt money, monetary reform

Is the Starving Man Free?

Jock — Mon, 03 Mar 2008 02:46:53 +0000

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, this would mean cash with which to satisfy their most basic needs, a "Citizen's Income" allowing them then to sell their labour, their bellies full and their body rested, without having to accept a potentially exploitative bargain.

Unlike taking part of what a person earns from his labour, impinging on his or her self-ownership, this can be justified because it is value that the owner does not earn for themselves, that it does not affect their ability to earn from their labour in future, and as a user fee in return for the state's or community's protection of their right to occupy such a location, a user fee in proportion to the potential natural productivity of that location, whether they make use of that potential productivity or not. Location is a monopoly, protected by the state; libertarians are against monopoly and state protection. It forms a neat, virtuous circle, from which those left without access to free land can be supported without the "mass robbery and enslavement" O'Neill rightly denounces. read more »

Workfair - a question

Jock — Tue, 08 Jan 2008 19:00:07 +0000

This workfair business...can anyone answer me a question:

If there are jobs that need doing, someone should be employed to do them. Are people at the end of their two years on JSA simply being herded into compulsory minimum wage jobs then - in which case they may be miserable with the job they get but they would, by definition, no longer be on benefit? Or would they still be getting benefit rates, just being made to "do something" (anything?) to "earn" their benefits?

Obviously I don't like this idea. Citizens Income would solve all of this without any potential stigma that might be associated with a sort of "community service order" for benefits. To me it all just demonstrates that there aren't really any new ideas coming out of the Tories (or anyone else for that matter!) on welfare, just that "something must be done and this is something". read more »

The real "Stumblers and Mumblers"

Jock — Thu, 03 Jan 2008 08:25:16 +0000

Why do the IPPR want to make things even more complicated:

The think tank is suggesting several reforms to combat the problem of what it calls the "forgotten million", including:

A new Personal Tax Credit Allowance to make it more attractive for both adults in a two-parent family to work. The second parent would be able to earn up to £100 a week before their tax credits are reduced, a move the IPPR says would make a family earning the minimum wage £36 a week better off.

Raising the value of tax credits for couples by one third to £91.31 a week. The IPPR says this would benefit 1.6m families and lift 200,000 children out of poverty.

Increasing the minimum wage in line with average earnings growth, ensuring tougher enforcement of the minimum wage, and extending the adult rate to people aged 21 and under.

Kate Stanley, head of social policy at the IPPR, said "significant progress" had been made since 1997, but the challenge now was "to ensure that work really is a route out of poverty".

The way to make work the route out of poverty is to make it pay in every case, on top of a basic non-withdrawable universal income and by abolishing the disincentive to create work embodied in the Minimum Wage, as promoted by Chris Dillow , discussed at Compass , and even with some approval at Bloggers4Labour , the Citizen's Income . And it was formerly Liberal/Lib Dem policy to boot. read more »