Feb 272019
 
 February 27, 2019  Posted by at 10:36 am Finance Tagged with: , , , , , , , , , , , , ,  


Salvador Dali Remorse – Sphinx Embedded in the Sand 1931

 

Michael Cohen Testimony: Trump A ‘Racist’, ‘Cheat’ And ‘Conman’ (G.)
3 Days That Will Decide Brexit – March 12-14th Will Seal Britain’s Fate (Exp.)
UK Economy Could Be 9% Weaker Under No-Deal Brexit – Government (G.)
The UK Doesn’t Have The Right Pallets For Exporting To The EU (BI)
The War on Venezuela is Built on Lies (Pilger)
Survival of the Richest (Nomi Prins)
Hey Yellen, It Was Trump Who Was Right (Every)
Now that Housing Bubble #2 Is Bursting…How Low Will It Go? (CHS)
Russia’s Share Of European Gas Market Surges To Almost 37%, Dwarfing LNG (RT)
UK Hunger Survey To Measure Food Insecurity (G.)
Glyphosate Found In 95% Of Wine And Beer (Ind.)
Am I The Only One Who’s Terrified About The Warm Weather? (G.)

 

 

Lots of wet panties, male and female, today in anticipation of Michael Cohen’s testimony. Of course, it’s been leaked, full text is here. A few quotes:

I may once again be in a party of one, but I think it’s awfully weak, it’s grasping for stuff rather than conveying it. First, there’s the inevitable Assange link:

In July 2016 [..] Mr. Stone told Mr. Trump that he had just gotten off the phone with Julian Assange and that Mr. Assange told Mr. Stone that, within a couple of days, there would be a massive dump of emails that would damage Hillary Clinton’s campaign. Mr. Trump responded by stating to the effect of “wouldn’t that be great.”

Anything related to Assange, whether from Mueller or Cohen, lacks credibility as long as he can’t defend himself against it. And Trump merely says: wouldn’t that be great? Not exactly the stuff of collusion or conspiracy.

Just as inevitable in smear campaigns: Trump the racist.

Mr. Trump is a racist. The country has seen Mr. Trump court white supremacists and bigots. You have heard him call poorer countries “shitholes.” While we were once driving through a struggling neighborhood in Chicago, he commented that only black people could live that way. And, he told me that black people would never vote for him because they were too stupid.

Calling a country a shithole is not racist. The policies that have created a situation in which many shithole countries are populated by black people stem from many decades of US/Europe policies that predate Trump. The rest is not racist either, if you look closer. Perhaps Trump is a bit racist, like so many Americans. But Cohen’s prepared words don’t show that.

Also: Trump doesn’t tell the full truth about his wealth. But Michael Cohen always has…

It was my experience that Mr. Trump inflated his total assets when it served his purposes, such as trying to be listed among the wealthiest people in Forbes, and deflated his assets to reduce his real estate taxes.

Gee, lock him up. I don’t get it. There’s so much wrong with Trump, but politics and media have singled out Russia collusion, and then failed to prove a thing about it, and now they switch to ‘racist conman’, with the weakest of accusations. I swear, they might as well all be working for the Donald.

Michael Cohen Testimony: Trump A ‘Racist’, ‘Cheat’ And ‘Conman’ (G.)

Michael Cohen is to accuse Donald Trump of being a “conman” and a “cheat” who had advanced knowledge that a longtime adviser was communicating with WikiLeaks during the 2016 campaign, according to opening testimony he will deliver to Congress on Wednesday. Cohen’s prepared remarks, confirmed by the Guardian, include a series of explosive allegations about the presidential campaign. The president’s former lawyer, who will publicly testify before the House oversight committee on Wednesday, will state that Trump was told by Roger Stone that WikiLeaks would publish emails stolen from the Democratic National Committee and Hillary Clinton’s campaign.

“In July 2016, days before the Democratic convention, I was in Mr Trump’s office when his secretary announced that Roger Stone was on the phone. Mr Trump put Mr Stone on the speakerphone,” Cohen’s opening statement reads. “Mr Stone told Mr Trump that he had just gotten off the phone with Julian Assange and that Mr Assange told Mr Stone that, within a couple of days, there would be a massive dump of emails that would damage Hillary Clinton’s campaign. Mr Trump responded by stating to the effect of ‘wouldn’t that be great.’” The remarkable allegations by Cohen go further than what has been made public thus far by the special counsel investigation into potential collusion between the Trump campaign in Moscow.

Cohen will also suggest his instructions to lie to Congress about a possible Trump Tower deal in Moscow during the 2016 campaign came from the president – albeit not directly. “In conversations we had during the campaign, at the same time I was actively negotiating in Russia for him, he would look me in the eye and tell me there’s no business in Russia and then go out and lie to the American people by saying the same thing,” Cohen will say. “In his way, he was telling me to lie.” “Mr Trump did not directly tell me to lie to Congress. That’s not how he operates,” he will add.

Read more …

Humor me and please read this. It’s so confusing that you almost forget it’s also complete madness.

3 Days That Will Decide Brexit – March 12-14th Will Seal Britain’s Fate (Exp.)

In a dramatic statement to the House of Commons, Mrs May confirmed that she will put her Withdrawal Agreement – including whatever additional assurances she has secured from Brussels – to a “meaningful vote” by March 12. If that fails, MPs will be offered two separate votes the following day – one on a no-deal Brexit, and the other on requesting an extension to the two-year Article 50 negotiation process to delay EU withdrawal beyond March 29. The sequence of votes will be proposed in an amendable motion tabled by the Prime Minister for debate and vote in the Commons on Wednesday. To uproar in the Commons, Mrs May told MPs: “They are commitments I am making as Prime Minister and I will stick by them, as I have previous commitments to make statements and table amendable motions by specific dates.”

Deputy Political Editor for Sky News Beth Rigby tweeted of Mrs May’s speech: “This really is a big shift. “May has finally played her cards and sided with the Europhile wing of her party .. “Vote for her deal (March 12) Vote for no-deal (March 13) Vote for delay (March 14) .. “Only yesterday she refused to even acknowledge there might have to be a delay to Brexit.”

Mrs May has declared a meaningful vote will take place by March 12, where MPs will vote on her Brexit deal. Should this deal not be voted through, on March 13, MPs will then be offered two separate votes by March 13 on whether the UK leaves with no deal or delays Brexit beyond March 29. The delay will then be voted on March 14, when a motion would be brought forward on whether Parliament wishes to seek a short limited extension to Article 50. If the House votes for an extension, this extension will have to be approved by the House with the EU and then necessary legislation will be brought forward to change the exit date.

[..] In her statement to MPs following a Cabinet meeting with senior colleagues at 10 Downing Street, Theresa May said she wanted to set out “three further commitments” to the Commons. She said: “First, we will hold a second meaningful vote by Tuesday, March 12 at the latest. “Second, if the Government has not won a meaningful vote by Tuesday, March 12, then it will – in addition to its obligations to table a neutral amendable motion under Section 13 of the EU Withdrawal Act – table a motion to be voted on by Wednesday March 13 at the latest, asking this House if it supports leaving the EU without a Withdrawal Agreement and a framework for a future relationship on March 29.

“So the United Kingdom will only leave without a deal on March 29 if there is explicit consent in the House for that outcome. “Third, if the House, having rejected the deal negotiated with the EU, then rejects leaving on March 29 without a Withdrawal Agreement and future framework, the Government will on March 14 bring forward a motion on whether Parliament wants to seek a short, limited extension to Article 50.” The Prime Minister also said she still believes she will be able to secure a deal: “I’ve had a real sense from the meetings I’ve had, and the conversations I’ve had in recent days, that we can achieve that deal. “It’s within our grasp to leave with a deal on March 29 and that’s where all of my energies are going to be focused.”

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Scared yet? Because that’s the idea.

UK Economy Could Be 9% Weaker Under No-Deal Brexit – Government (G.)

The government has issued a bleak warning over a no-deal Brexit, estimating the UK economy could be 9% weaker in the long run, businesses in Northern Ireland might go bust and food prices will increase. In an official document only published after repeated demands by the former Conservative MP Anna Soubry, the government also revealed it was behind on contingency planning for a third of “critical projects” in relation to business and trade. The latest no-deal notice states:

• The economy would be 6%-9% smaller over the next 15 years than it otherwise might have been, in the event of no deal, in line with Bank of England forecasts. • The flow of goods through Dover would be “very significantly reduced for months”. • With 30% of food coming from the EU, prices are likely to increase and there is a risk that panic buying might create shortages. • Only six of the 40 planned international trade agreements have been signed.

The document was published just hours after Theresa May was forced to promise two key votes, allowing MPs the option to reject no deal and to potentially delay Brexit for a short period, following pressure from remain-minded cabinet ministers. The prime minister set out a timetable that includes a vote on her Brexit deal by 12 March; if that fails, a vote the following day to support no deal, and if that also fails, a vote on 14 March on extending article 50. The delay is likely to further agitate the Tory party’s Eurosceptics, with Brexiter ministers including Andrea Leadsom and Liz Truss expressing their frustration over the issue in cabinet on Tuesday morning. Speaking in the House of Commons on Tuesday, May did not specify the length of any delay, saying only that she would prefer it to be the shortest possible. An extension beyond the end of June would involve the UK taking part in the European parliament elections.

[..] The no-deal notice said customs checks alone could cost businesses £13bn a year and that it was impossible to predict the impact of new tariffs. It said this was partly because the government’s communications to businesses and individuals about the need to prepare for no deal had not been effective. [..] The EU, which would treat the UK as a third country in the event of no deal, could impose tariffs of 70% on beef exports, 45% on lamb and 10% on cars, it said. “This would be compounded by the challenges of even modest reductions in flow at the border.”

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Absolutely fabulous.

The UK Doesn’t Have The Right Pallets For Exporting To The EU (BI)

The UK government is due to hold emergency talks with industry leaders on Tuesday after discovering that the country doesn’t have the right pallets to continue exporting goods to the European Union if it leaves without a deal next month. Under strict EU rules, pallets – wooden or plastic structures that companies use to transport large volumes of goods – arriving from non-member states must be heat-treated or cleaned to prevent contamination and have specific markings to confirm that they meet standards. Most pallets that British exporters are using do not conform to the rules for non-EU countries, or “third countries,” as EU member states follow a much more relaxed set of regulations.

The Department for Environment, Food, and Rural Affairs last week told business leaders that the UK would not have enough EU-approved pallets for exporting to the continent if it leaves without a withdrawal agreement next month. That means UK companies would be competing for a small number of pallets that meet EU rules, and those that miss out would be forced to wait for new pallets, which could take weeks to be ready. DEFRA has arranged for a conference call on Tuesday morning to discuss the pallet shortage, with 31 days until Brexit day on March 29. “It is the tiny, procedural, mundane-seeming stuff that will absolutely trip people up,” one industry figure briefed by Theresa May’s government told Business Insider, adding that the country was “not even remotely ready” for a no-deal Brexit.

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Chavez is the guy US intelligence have been chasing for so long, and still trying to get at after his death.

Got to love the man quoting world literature. Also because in the next article, Nomi Prins does the same.

The War on Venezuela is Built on Lies (Pilger)

Travelling with Hugo Chavez, I soon understood the threat of Venezuela. At a farming co-operative in Lara state, people waited patiently and with good humor in the heat. Jugs of water and melon juice were passed around. A guitar was played; a woman, Katarina, stood and sang with a husky contralto. “What did her words say?” I asked. “That we are proud,” was the reply. The applause for her merged with the arrival of Chavez. Under one arm he carried a satchel bursting with books. He wore his big red shirt and greeted people by name, stopping to listen. What struck me was his capacity to listen. But now he read. For almost two hours he read into the microphone from the stack of books beside him: Orwell, Dickens, Tolstoy, Zola, Hemingway, Chomsky, Neruda: a page here, a line or two there. People clapped and whistled as he moved from author to author.

Then farmers took the microphone and told him what they knew, and what they needed; one ancient face, carved it seemed from a nearby banyan, made a long, critical speech on the subject of irrigation; Chavez took notes. Wine is grown here, a dark Syrah type grape. “John, John, come up here,” said El Presidente, having watched me fall asleep in the heat and the depths of Oliver Twist. “He likes red wine,” Chavez told the cheering, whistling audience, and presented me with a bottle of “vino de la gente.” My few words in bad Spanish brought whistles and laughter. Watching Chavez with the people, la gente, made sense of a man who promised, on coming to power, that his every move would be subject to the will of the people. In eight years, Chavez won eight elections and referendums: a world record. He was electorally the most popular head of state in the Western Hemisphere, probably in the world.

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See? Like Pilger and Chavez, Nomi talks about literature. No space here to do this justice, please go read it. Key point: unlike the poor(er), the rich don’t live off the rewards of labor, but of that of wealth.

Survival of the Richest (Nomi Prins)

In George Orwell’s iconic 1945 novel, Animal Farm, the pigs who gain control in a rebellion against a human farmer eventually impose a dictatorship on the other animals on the basis of a single commandment: “All animals are equal, but some animals are more equal than others.” In terms of the American republic, the modern equivalent would be: “All citizens are equal, but the wealthy are so much more equal than anyone else (and plan to remain that way).” Certainly, inequality is the economic great wall between those with power and those without it. As the animals of Orwell’s farm grew ever less equal, so in the present moment in a country that still claims equal opportunity for its citizens, one in which three Americans now have as much wealth as the bottom half of society (160 million people), you could certainly say that we live in an increasingly Orwellian society.

Or perhaps an increasingly Twainian one. After all, Mark Twain and Charles Dudley Warner wrote a classic 1873 novel that put an unforgettable label on their moment and could do the same for ours. The Gilded Age: A Tale of Today depicted the greed and political corruption of post-Civil War America. Its title caught the spirit of what proved to be a long moment when the uber-rich came to dominate Washington and the rest of America. It was a period saturated with robber barons, professional grifters, and incomprehensibly wealthy banking magnates. (Anything sound familiar?) The main difference between that last century’s gilded moment and this one was that those robber barons built tangible things like railroads.

Today’s equivalent crew of the mega-wealthy build remarkably intangible things like tech and electronic platforms, while a grifter of a president opts for the only new infrastructure in sight, a great wall to nowhere. In Twain’s epoch, the U.S. was emerging from the Civil War. Opportunists were rising from the ashes of the nation’s battered soul. Land speculation, government lobbying, and shady deals soon converged to create an unequal society of the first order (at least until now). Soon after their novel came out, a series of recessions ravaged the country, followed by a 1907 financial panic in New York City caused by a speculator-led copper-market scam.

To fully grasp the nature of inequality in our twenty-first-century gilded age, it’s important to understand the difference between wealth and income and what kinds of inequality stem from each. Simply put, income is how much money you make in terms of paid work or any return on investments or assets (or other things you own that have the potential to change in value). Wealth is simply the gross accumulation of those very assets and any return or appreciation on them. The more wealth you have, the easier it is to have a higher annual income.

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Tyler got his hands on a piece by Michael Every at Dutch Rabobank.

Hey Yellen, It Was Trump Who Was Right (Every)

Rabo are already predicting a US recession in 2020, which will drag many down with it, and as the OECD now warns that swollen corporate debt piles, which central banks have so encouraged, is of ever lower quality and potentially more dangerous than it was back in 2008. 54% of investment grade bonds are now BBB-rated, up from 30% in 2008. The OECD argues “In the case of a downturn, highly leveraged companies would face difficulties in servicing their debt, which in turn, through higher default rates, may amplify the effects…Any developments in these areas will come at a time when non-financial companies in the next three years will have to pay back or refinance about USD4 trillion worth of corporate bonds. This is close to the total balance sheet of the US Federal Reserve.”

Guess what guys? China is right ahead of you on that curve – which is why it is trying to find another whale to nuke ASAP: things are looking truly ugly given many firms can’t even pay the interest on their debt, let alone the principle. And guess what else? That OECD and China warning sounds like an admission of the Minsky debt dynamic that you might have thought all central banks would have to have learned the lessons of post-GFC. Apparently not, however – because they think they already know everything. As former Fed Chair Yellen mocked yesterday, Trump doesn’t understand what the Fed’s dual mandates of price stability and stable employment are. That might well be true.

But was it the Fed or Trump who publicly called out how dangerous continuous Fed rate hikes are in a debt-laden, Minsky-teetering financial system where the yield curve is still inverted 9bps on 1s-5s even after a pause? I think Yellen will find it was Trump who was right and the Fed who was forced into a humiliating and frankly incongruous policy U-turn. So much expertise! Trump also made a similar intervention over oil prices overnight, and once again they dipped, though are opening up strongly this morning in Asia. [..] easy policy in the UK; ultra-easy policy in China; promises of more easing in Japan; an ECB U-turn to come(?); and the Fed on hold and stopping QT soon at least. And that’s with bullish markets and reasonable global growth – just wait until things head south: if all you have is a nuke, everything looks like a whale.

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Every bubble that bursts ends up below its starting level. Nicole had these graphs, Tulip, South Sea etc., that showed just that. This graph doesn’t quite do that.

Now that Housing Bubble #2 Is Bursting…How Low Will It Go? (CHS)

There are two generalities that can be applied to all asset bubbles: 1. Bubbles inflate for longer and reach higher levels than most pre-bubble analysts expected 2. All bubbles burst, despite mantra-like claims that “this time it’s different” The bubble burst tends to follow a symmetrical reversal of very similar time durations and magnitudes as the initial rise. If the bubble took four years to inflate and rose by X, the retrace tends to take about the same length of time and tends to retrace much or all of X. If we look at the chart of the Case-Shiller Housing Index below, this symmetry is visible in Housing Bubble #1 which skyrocketed from 2003-2007 and burst from 2008-2012.

Housing Bubble #1 wasn’t allowed to fully retrace the bubble, as the Federal Reserve lowered interest rates to near-zero in 2009 and bought $1+ trillion in sketchy mortgage-backed securities (MBS), essentially turning America’s mortgage market into a branch of the central bank and federal agency guarantors of mortgages (Fannie and Freddie, VA, FHA). These unprecedented measures stopped the bubble decline by instantly making millions of people who previously could not qualify for a privately originated mortgage qualified buyers. This vast expansion of the pool of buyers (expanded by a flood of buyers from China and other hot-money locales) drove sales and prices higher for six years (2012-2018).

As noted on the chart below, this suggests the bubble burst will likely run from 2019-2025, give or take a few quarters. The question is: what’s the likely magnitude of the decline? Scenario 1 (blue line) is a symmetrical repeat of Housing Bubble #2: a retrace of the majority of the bubble’s rise but not 100%, which reverses off this somewhat higher base to start Housing Bubble #3. Since the mainstream consensus denies the possibility that Housing Bubble #2 even exists (perish the thought that real estate prices could ever–gasp–drop), they most certainly deny the possibility that prices could retrace much of the gains since 2012.

More realistic analysts would probably agree that if the current slowdown (never say recession, it might cost you your job) gathers momentum, some decline in housing prices is possible. They would likely agree with Scenario 1 that any such decline would be modest and would simply set the stage for an even grander housing bubble #3. But there is a good case for Scenario 2, in which price plummets below the 2012 lows and keeps on going, ultimately retracing the entire housing bubble gains from 2003.

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Interesting how Europe smears Putin wherever it can, except where it counts.

Russia’s Share Of European Gas Market Surges To Almost 37%, Dwarfing LNG (RT)

Russia’s state-run energy major Gazprom said its share of sales of natural gas in the European Union has increased to 36.7 percent last year, rising over two percent against 34.2 percent in 2017. “In 2018, according to preliminary data, the share of gas supplies to the EU countries and Turkey has reached an all-time high and totaled 36.7 percent,” the director general of Gazprom Export Elena Burmistrova said at Gazprom’s Investor Day event, taking place in Singapore. Burmistrova added that Gazprom’s gas exports to Europe last year amounted to record 201.8 billion cubic meters, and is expected to significantly grow by 2035 due to the increasing demand.

According to a member of Gazprom’s management committee, Oleg Aksyutin, the company saw no threat to Gazprom’s business in the European market from global producers of liquefied natural gas (LNG), including the US. The company’s gas exports to Europe are reportedly three times more than the amount of LNG shipped to Europe by all global producers combined. Though the share of LNG shipments have been growing, it still makes up only 13 percent of the entire gas market, according to Burmistrova. The executive added that prices for natural gas saw a significant surge. “In 2018, in accordance with linked fuel prices, the average price of Gazprom gas increased by 24.6 percent to $245.5 for 1,000 cubic meters,” she said, stressing that in 2016 it stood at $167.

When it comes to China, one of the world’s biggest energy consumers, Gazprom is planning to become the country’s biggest supplier as soon as 2035, with the company’s share expected to reach 13 percent of Chinese overall consumption by the same year.

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It’s completely insane that any western country would have to do a Hunger Survey. Don’t fall for thinking it’s normal.

UK Hunger Survey To Measure Food Insecurity (G.)

The government is to introduce an official measure of how often low-income families across the UK skip meals or go hungry because they cannot afford to buy enough food, the Guardian can reveal. A national index of food insecurity is to be incorporated into an established UK-wide annual survey run by the Department for Work and Pensions (DWP) that monitors household incomes and living standards. Campaigners, who have been calling for the measure for three years, said the move was “a massive step forward” that would provide authoritative evidence of the extent and causes of hunger in the UK. They say food insecurity is strongly linked to poverty caused by austerity and welfare cuts and is driving widening health inequality.

Food insecurity is generally defined as experiencing hunger, the inability to secure food of sufficient quality and quantity to enable good health and participation in society, and cutting down on food because of a lack of money. The decision, which took campaigners by surprise, was revealed at an informal meeting on Tuesday attended by the DWP, the Office for National Statistics, Public Health England and the Scottish and Welsh governments, as well as a number of food poverty charities. Ministers have for years resisted calls to bring England into line with the US and Canada by measuring food insecurity. Critics said this was to avoid shedding unwanted light on the impact of welfare policy and the public health consequences of being unable to eat regularly or healthily.

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Why the hunger? Here’s why: we feed ourselves with plastics and poison.

Glyphosate Found In 95% Of Wine And Beer (Ind.)

A new study has shown that traces of a commonly-used and possibly cancerous weed killer can be found in the majority of wine and beer. Researches tested five wines and 15 beers from the US, Asia and Europe for traces of pesticide glyphosate. The research found that of the 20 samples, 19 (95 per cent) contained particles of the chemical, including products labelled as organic. The US Public Interest Research Group, which conducted the study, said the levels of the pesticide aren’t necessarily dangerous, but are still concerning. In 2015, the World Health Organisation’s International Agency categorised glyphosate as “probably carcinogenic to humans”, leading the state of California to add it to its list of chemicals that can cause cancer, which makes companies responsible for providing warnings to potential consumers.

The findings of the study coincide with the beginning of a class action lawsuit against Bayer, which acquired Monsanto last year. The suit claims that Roundup caused thousands of plaintiffs to develop non-Hodgkins lymphoma, a type of blood cancer. The first plaintiff, Ed Hardeman, testified this week, alleging that his use of the chemical on his 56 acres of land caused him to develop cancer aged 66. [..] Bayer has not commented on the results of the study, but the researchers are calling for glyphosate to be banned unless it can be proven safe.

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The earth’s weather system is far too complex to draw conclusions from a sunny day. The only things we can say about the climate must be based on long-term stats. This kind of article doesn’t help one bit, it merely points out the author literally doesn’t know what he’s talking about.

Am I The Only One Who’s Terrified About The Warm Weather? (G.)

They were everywhere in London on the weekend. The people in short sleeves or sandals. The ones with sunglasses ostentatiously hanging from the front of their shirts or balanced on top of their heads. The beer gardens and riverside pubs of the capital were heaving; corner shops ran out of ice-cream. Outside it was 17C (62F). Monday was another warm day, without a cloud in the sky, and in the late afternoon the light took on a magical, honey-coloured hue. It brought to mind one of those summer evenings you remember from childhood, when you’d be in the park all day and your parents let you stay out until bedtime, and you felt like you were doing something deliciously naughty just by being there.

Except it isn’t early summer: it’s February. And the entire developed world has not so much been doing something slightly naughty as systematically attacking the global ecosystem over a period of decades, and that’s how we go into this mess. We should try to hold on to this fact as young, posh men the nation over develop a strange delusion that anyone would want to see their elbows; this is not supposed to be happening. Less than a month ago, there was video footage of extreme cold weather coming out of Chicago. Forks supported in midair by suddenly frozen noodles, water poured from kettles instantly freezing on its way to the ground: you know the sort of thing.

OK, that was on the other side of the world, and was extreme and terrifying enough. But at least it was terrifying in the right direction. On Monday, though, the temperature hit 20.3C in Ceredigion, west Wales: the highest February temperature ever recorded in Britain and the first time the thermometer had breached 20C in winter. The BBC weather account tweeted it out with a gif of the sunshine icon and the same excitable breathlessness with which Springwatch would announce it had found a new type of vole. My response contained a single word, repeated seven times. It began with F.

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Feb 062015
 
 February 6, 2015  Posted by at 3:01 pm Finance Tagged with: , , , , , , ,  


William Henry Jackson Silverton, Colorado 1901

An Automatic Earth afficionado who goes by the moniker GeoLib posted something in the comments section for yesterday’s Debt In The Time Of Wall Street that I think deserves a better fate than to be stuck there. He makes a gracious connection between 19th century American writer, politician and political economist Henry George, in particular his book Progress and Poverty, which in its day was a huge bestseller, and Greek finance minister Yanis Varoufakis, who, in GeoLib’s words, “is graciously returning the book to us”.

Consider it economics 101 for those who look at the field from the outside, or consider it that which could have been, but is not. And then think about why that is. George’s words show us that we could do much better than we do, but we don’t want to. That is not only true in economics, of course, we’re making an awful mess of things in just about every field we try our hand at. Try the earth, or our relationships with others. That says quite a lot about not only our character, but also about our future.

I’ll give you GeoLib’s piece first, followed by an article he cites by professor Mason Gaffney on George’s work. I think it’s interesting to note that Gaffney posits George was so successful at presenting his argument for ‘socializing land rents through taxation’ that this very success became the root of its failure.

GeoLib: In 1879 Henry George published Progress and Poverty. The book was an international sensation, at the time outsold only by the Bible. It remains economics’ No. 1 best seller.

Mason Gaffney: “George came out of a raw, naive new colony, California, as a scrappy marginal journalist. Yet his ideas exploded through the sophisticated metropolitan world as though into a vacuum. His book sales were in the millions. Seven short years after publishing Progress and Poverty in remote California he nearly took over as Mayor of New York City, the financial and intellectual capital of the nation.

Three more years and he was a major influence in sophisticated Britain. In 1889, incredibly, he became “adviser and field-general in land reform strategy” to the Radical wing of the Liberal Party in Britain. It adopted a land-tax plank after 1891 (The “famous Newcastle Programme”), and came to carry George’s (muted) policies forward under successive Liberal Governments of Campbell-Bannerman, Asquith, and Lloyd George.“

The book, you see, explained poverty. It answered why progress does not and cannot eradicate poverty. Disconcertingly for many, it also provided the solution – the Single Tax on land value aka Land Value Taxation (LVT). “The “single tax” is so simple, so fundamental, and so easy to carry into effect that I have no doubt that it will be about the last land reform the world will ever get. People in this world are not often logical.” – Clarence Darrow

The land reform/single tax movement in Britain was strong enough to bend the Liberal govt to its will having delivered it a landslide in 1906. By 1910 there was a constitutional crisis over LVT. Gaffney argues that Henry George was deliberately written out of economics because he was too dangerous to the rentier state, the feudal core of capitalism. Maybe, and WW1 killed a generation of land reformers – this perhaps explains the absence of collective memory.

The very language of George’s economics – classical economics – was changed – neoclassical economics deletes the concept of land – we talk of real estate because we can’t understand that land itself is priced. We can’t see that real estate booms and busts are actually land value booms and busts and thus can never stray into the territory where the rentier makes so much money. Land is just another form of capital – a costly intellectual regression.

Greek Finance Minister Varoufakis meets Schäuble in Berlin Thu 5 Feb: “Our government will stop at nothing to combat not only corruption, tax evasion, tax immunity, inefficiency and waste but also a whole political economy underpinning the ethos and the conventions of crippling rent seeking.” The rentier is an obscure, quaint character but he is the key character for Varoufakis. Progress and Poverty is all about the rentier and Varoufakis is graciously returning the book to us.

In a democratic setting, playing a Georgist card can be a powerful move. Neither Right nor Left can criticise a Georgist position because Georgist reform gives them both what they want. George, as Mason Gaffney writes “had a way of taking two problems and composing them into one solution. He took two polar philosophies, collectivism and individualism, and synthesized a plan to combine the better features, and discard the worse features, of each.”

“Thus, George would cut the Gordian knot of modern dilemma-bound economics by raising demand, raising supply, raising incentives, improving equity, freeing up the market, supporting government, fostering capital formation, and paying public debts, all in one simple stroke. It’s quite a stroke, enough to leave one breathless.“ “George’s proposal lets us lower taxes on labour without raising taxes on capital. Indeed, it lets us lower taxes on both labour and capital at once, and without lowering public revenues.“ “Ultimately, Georgist policy saves the cost of civil disturbances and insurrections, and/or the cost of putting them down.”

Excerpts from The Corruption of Economics by Mason Gaffney

Introduction: The Power of Neo-Classical Economics

Neoclassical economics is the idiom of most economic discourse today. It is the paradigm that bends the twigs of young minds. Then it confines the florescence of older ones, like chicken-wire shaping a topiary. It took form about a hundred years ago, when Henry George and his reform proposals were a clear and present political danger and challenge to the landed and intellectual establishments of the world. Few people realize to what a degree the founders of Neoclassical economics changed the discipline for the express purpose of deflecting George, discomfiting his followers, and frustrating future students seeking to follow his arguments. The stratagem was semantic: to destroy the very words in which he expressed himself. Simon Patten expounded it succinctly. “Nothing pleases a … single taxer better than … to use the well-known economic theories … [therefore] economic doctrine must be recast” (Patten 1908; Collier, 1979).

George believed economists were recasting the discipline to refute him. He states so, in his last book, The Science of Political Economy. George’s self-importance was immodest, it is true. However, immodesty may be objectivity, as many great talents from Frank Lloyd Wright to Muhammad Ali and Frank Sinatra have displayed. George had good reasons, which we are to demonstrate. George’s view may even strike some as paranoid. That was this writer’s first impression, many years ago. I have changed my view, however, after learning more about the period, the literature, and later events.

Having taken shape in the 1880-1890s, Neo-Classical Economics (henceforth NCE) remained remarkably static. Major texts by Marshall, Seligman, and Richard T. Ely, written in the 1890s, went through many reprintings each over a period of 40 years with few if any changes. Not until 1936 was there another major “revolution,” and that was hived off into a separate compartment, macro-economics, and contained there so as not to disturb basic tenets of NCE. Compartmentalization, we will see in several instances, is the common NCE defense against discordant data and reasoning.

J. B. Clark’s capital theory “… gives the appearance of being specially tailored to lead to arguments for use against George” (Collier, 1979). “The probable source from which immediate stimulation came to Clark was the contemporary single tax discussion” (Fetter, 1927). “To date, capital theory in the Clark tradition has provided the basis for virtually all empirical work on wealth and income” (Dewey, 1987; cf. Tobin, 1985). Later writers have added fretworks, curlicues and arabesques beyond counting, and achieved more isolation from history, and from the ground under their feet, than in Patten’s dreams, but all without disturbing the basic strategy arrived at by 1899, tailored to lead to arguments against Henry George.

To most modern readers, probably George seems too minor a figure to have warranted such an extreme reaction. This impression is a measure of the neo-classicals’ success: it is what they sought to make of him. It took a generation, but by 1930 they had succeeded in reducing him in the public mind. In the process of succeeding, however, they emasculated the discipline, impoverished economic thought, muddled the minds of countless students, rationalized free-riding by landowners, took dignity from labor, rationalized chronic unemployment, hobbled us with today’s counterproductive tax tangle, marginalized the obvious alternative system of public finance, shattered our sense of community, subverted a rising economic democracy for the benefit of rent-takers, and led us into becoming an increasingly nasty and dangerously divided plutocracy.

The crabbed spirit of neo-classical economics

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

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

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

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

Popular responsiveness to problem-solvers

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

In 1980 it was Ronald Reagan. Instead of the dismal Phillips Curve (“choose inflation or unemployment”) he offered the happy Laffer Curve: lower tax rates would lead to higher supplies, higher revenues, and lower deficits, he promised. Lowering taxes, said Laffer, would eliminate the “wedge effect.” He often cited Henry George in support of his position. Thus he would unleash supply, and collect more taxes while applying lower tax rates. The voters were sick of 2nd-generation Keynesians who had been reduced to preaching austerity, so they were game (if not wise) to buy into Reaganomics as advertised.

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

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

When the theory of the propensity to consume, and the multiplier, lost their charm, and some strong trade unions (like Hoffa’s Teamsters) showed their nastier side, the American voters tuned in to JFK and “business Keynesianism” in which the emphasis turned to fostering new investing. Keynes had been shrewd enough to cast his theories to accommodate either emphasis. Here the formula was to raise the “marginal efficiency of capital” (today we say the marginal rate of return) after taxes by giving preferential tax treatment to new investing, keeping tax rates high on income from old assets like land. It was a species of Georgism, applied via the Federal income tax. The key devices were fast write off for new capital, and the investment tax credit.

There was no talk or thought, however, of enriching capitalists by impoverishing workers. The promise was to enrich capitalists and workers together, as higher investing raised aggregate demand for labor and its products through the “multiplier” effect.

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

Before Keynes there was another great reconciler, Henry George. In 1879, George electrified the world by identifying a cause of the boom/slump cycle, identifying a cause of inadequate demand for labor, and, best of all, following through with a plausible, practicable remedy. Like Keynes and Laffer after him, he turned people on by saying “Forget the bitter trade-offs; we can have it all.”

George came out of a raw, naive new colony, California, as a scrappy marginal journalist. Yet his ideas exploded through the sophisticated metropolitan world as though into a vacuum. His book sales were in the millions. Seven short years after publishing Progress and Poverty in remote California he nearly took over as Mayor of New York City, the financial and intellectual capital of the nation. He thumped also-ran Theodore Roosevelt, and lost to the Tammany candidate (Abram S. Hewitt) only by being counted out. Three more years and he was a major influence in sophisticated Britain. In 1889, incredibly, he became “adviser and field-general in land reform strategy” to the Radical wing of the Liberal Party in Britain, where he was not even a citizen. It also happened that when Chamberlain bowed out, the Radical wing became the Liberal Party. It adopted a land-tax plank after 1891 (The “famous Newcastle Programme”), and came to carry George’s (muted) policies forward under successive Liberal Governments of Campbell-Bannerman, Asquith, and Lloyd George.

How could a marginal man come out of nowhere and make such an impact? The economic gurus of the day, even as today, were in a scolding mode, blaming unemployment on faulty character traits and genes, and demanding austerity. They were not intellectually armed to refute him or befuddle his listeners. He had studied the classical economists, and used their tools to dissect the system. Neo-classical economics arose in part to fill the void, to squeeze out such radical notions, and be sure nothing like the Georgist phenomenon could recur.

Again, are we not imputing too much weight to a minor figure? We are told that Georgism withered away quietly with its founder in 1897. That, however, is warped history. One of the great derelictions of American historians is to have neglected the single-tax movement, 1901-24. It is also a warped view of “The Single Tax” as a discrete, millennial change, a quantum leap away from life as we know it (Gaffney, 1976). Pure Georgism never “took over whole hog,” but no single philosophy ever does. Modified Georgism, melded into the Progressive Movement, helped run the USA for 17 years, 1902-19, working through both major political parties.

At the local level, it continued on through the early 1920s. Local property taxation was modified on Georgist lines even as it rose in absolute terms. The first Federal income tax law was drafted by a Georgist (Congressman Warren Worth Bailey of Johnstown, Pennsylvania) with Georgist goals uppermost. Real concessions were made: the politicians heard the voters. Historians of the Populist Party and movement often note that its ideas succeeded even though the Party failed, because its ideas were co opted by major parties. Georgism was a strand of American populism, later wrapped into Progressivism.

Consider, for example, that in 1913 Wm. S. U’Ren, “Father of the Initiative and Referendum,” created this system of direct democracy for the express purpose of pushing single-tax initiatives in Oregon. According to U’Ren, another by-product of the single-tax campaigns in Oregon was the 1910 “adoption of the first Presidential Primary Law, which was quickly imitated by so many other States that (Woodrow) Wilson’s nomination and election over Taft was made possible” To that we may add that another “Father of the Direct Primary,” George L. Record of New Jersey, was a mentor of Woodrow Wilson and an earnest Georgist who had gotten railroad lands uptaxed to the great benefit of public schools in New Jersey, and to the impoverishment of special interest election funds.

“… it was the passage of these great election reforms in the Wilson Administration (in New Jersey) that led … (to) winning the Bryan support and the Democratic nomination for President”. That helps explain the gratitude of President Wilson, who included single-taxers in his Cabinet (Newton D. Baker, Louis F. Post, Franklin K. Lane, and William B. Wilson), and worked with single-tax Congressmen like Henry George, Jr., and Warren Worth Bailey.

Consider that in 1916 a “pure single-tax” initiative won 31% of the votes in California. Even while “losing,” such campaigns raised consciousness of the issue to a high degree, such that assessors were focusing more attention on land. Thus, in California, 1917, tax valuers focused on land value so much that it constituted 72% of the assessment roll for property taxation – a much higher fraction than today. Joseph Fels, an idealistic manufacturer, was throwing millions into such campaigns in several states, having earlier thrown himself and his fortune into the English land tax campaign that brought on the Parliamentary revolution of 1909.

Consider that there was a single-tax party, the Commonwealth Land Party. In 1920 its Presidential candidate was Carrie Chapman Catt, fresh from leading her successful campaign for the 19th Amendment, and just before founding the League of Women Voters. In 1924 its Presidential candidate was William J. Wallace of New Jersey, with John C. Lincoln, brilliant Cleveland industrialist, for Vice-president. In 1919 Georgists began working through the Manufacturers and Merchants Federal Tax League to sponsor a federal land tax, the Ralston-Nolan Bill. Drafted by Judge Jackson H. Ralston, it would impose a “1% excise tax on the privilege of holding lands, natural resources and public franchises valued at more than $10,000, after deducting all improvements” In 1924 Congressman Oscar E. Keller of Minnesota reintroduced it (H.R. 5733). In spite of Harding, Coolidge, and Hoover, Progressivism still lived in Congress. In 1923, for the first and last time, income tax returns were made public, giving valuable data-ammunition to land taxers.

Consider that in 1934 Upton Sinclair, so-called “socialist,” almost became Governor of California on a modified Georgist platform. Two years later, Jackson H. Ralston, by then a Stanford Law Professor, led another California Initiative campaign to focus the property tax on land values. Norman Thomas, perennial Socialist candidate for President of the U.S., kept a land tax plank in his platform. Daniel Hoan, the “socialist” Mayor of America’s model city, Milwaukee, had his tax assessor focus on upvaluing land. Hoan distributed land value maps to the Milwaukee public, to raise their consciousness of the issue.

Historian Eric Goldman (1956) found George to have inspired most of the major reformers of the early 20th Century. “… no other book came anywhere near comparable influence, and I would like to add this word of tribute to a volume which magically catalyzed the best yearnings of our grandfathers and fathers”. Raymond Moley wrote, “George … touched almost all of the corrective influences which were the result of the Progressive movement. The restriction of monopoly, more democratic political machinery, municipal reform, the elimination of privilege in railroads, the regulation of public utilities, and the improvement of labor laws and working conditions – all were … accelerated by George”.

Consider that most American states and Canadian provinces required separate valuations of land, for tax purposes. Professional valuers, responding to the general interest, were routinely valuing land separately from buildings, and developing workable techniques to handle the occasional tricky case. Valuation anticipates taxation. Lawson Purdy, one of those valuers, was Tax Commissioner of the City of New York, a founder of and power in the National Tax Association, a campaigner for George in the 1897 race, and a leader of the Manhattan Single Tax Club. Under this kind of influence, New York City kept its subway fares down to 5 cents, paying for most of the cost from taxes on the benefitted lands, It also exempted new residential structures from the property tax for ten years, 1924-34.

Consider that Wright Act Irrigation Districts were spreading fast throughout rural California, using Georgist land taxes to finance irrigation works. The Wright Act dated from 1887, and sputtered along fitfully until in 1909 the California Legislature amended the enabling legislation to limit the assessment in all new districts to the land value only. It also let old districts do so by local option. The old districts soon did: Modesto in 1911, Turlock in 1915. This was Georgism getting its “second wind,” so to speak. Beyond much question, the idea was identified with George. The legislative leader, L.L. Dennett of Modesto, got the idea from his father, an old neighbor of Henry George in San Francisco.

In 1917, rural Georgism got a third wind: the California Legislature made it mandatory for all Districts to exempt improvements. They then grew to include over four million acres by 1927, and to dominate American agriculture in their specialty crops. They built the highest dam in the world at that time (Don Pedro, on the Tuolumne River in the Sierra Nevada), financing it 100% from local land taxes. Albert Henley, a lawyer who crafted the modified District that serves metropolitan San Jose, evaluated them thus: “The discovery of the legal formula of these organizations was of infinitely greater value to California than the discovery of gold a generation before. They are an extraordinarily potent engine for the creation of wealth”. They catapulted California into being the top-producing farm state in the Union, using land that was previously desert or range. They made California a generator of farm jobs and homes, while other states were destroying them by latifundiazation.

If this is a “minor” phenomenon it is because the neglect of historians and economists has made it so. One searches in vain through academic books and journals on farm economics for recognition of this, the most spectacularly successful story of farm economic development in history. What references there are consist of precautionary cluckings focused on attendant errors and failures. “Economic development” theorists neglect it altogether, as though California’s commercial farming had sprung full blown from a corporate office, with no grass roots basis, and no development period. It is as though the clerisy were in conspiracy against the demos, under some Trappist oath against disclosing what groups of small people achieved through community action, and through the judicious application of the pro-incentive power of taxing land values.

There is a common defeatist notion that “farmers” are implacably against land taxation. The California experience seems to belie it. In other states, also, The Grange and the Farmers’ Union were pushing for focusing the property tax on land during the ‘teens. In Minnesota, the Dakotas, and the Prairie Provinces the Non-Partisan League became a major power in state and local politics, electing a Governor of North Dakota and swaying many elections. North Dakota exempted farm capital from the county property tax, taxing land only. The spirit of Prairie Populism straddled the 49th parallel (the international boundary), radicalizing politics in rural Manitoba, Saskatchewan, Alberta, and British Columbia, all of which were focusing their property taxes on land in this period.

George’s ideas were carried worldwide by such towering figures as David Lloyd George in England, Leo Tolstoy and Alexandr Kerensky in Russia, Sun Yat-sen in China, hundreds of local and state, and a few powerful national politicians in both Canada and the USA, Billy Hughes in Australia, Rolland O’Regan in New Zealand, Chaim Weizmann in Palestine, Francisco Madero in Mexico, and many others in Denmark, South Africa, and around the world. In England, Lloyd George’s budget speech of 1909 reads in part as though written by Henry George himself. Some of Winston Churchill’s speeches were written by Georgist ghosts.

Thus, to the rent-taker, the typical college trustee or regent, George’s ideas remained a real and present danger over several decades: the very decades when neo-classical economics was spreading through the academic clerisy. With the development of direct democracy, open primaries, the secret ballot, direct election of US Senators, the Initiative, Referendum, and Recall, and the like, crude vote-buying such as prevailed in the late 19th Century would no longer dominate the electorate. Mind-control became the urgent need; NCE was the tool.

George’s ideas and the allied Progressive Movement fell, not from failure to deliver, but to the Great Marathon Red Scare that has dominated much of the world from 1919 to 1989. This panic marshalled and energized rent-takers everywhere; by confusion, some of it deliberate, its victims included Georgists. It inhibited them until their message lost its vigor and excitement and became just a minor local tax reform. Its leaders have moved to the trivial center, downplaying George’s grand goals for full employment, catering to the practical but small and prosaic advantages of median homeowners at the local level. Now, with the fall of the Berlin Wall, Progressive ideas might very well pick up again where the original Movement was aborted.

Henry George as reconciler and problem-solver

Let us itemize the several constructive reconciliations in George’s reform proposal. This will explain its wide potential appeal, hence its ongoing threat to embedded rent-takers with a stake in unearned wealth. It will explain why they had neo-classical economists working so hard to put this genie back in the bottle.

1. George reconciled common land rights with private tenure, free markets, and modern capitalism. He would compensate those dispossessed and made landless by the spread and strengthening of what is now called “European” land tenure, whose benefits he took as given and obvious. He would also compensate those driven out of business by the triumph of economies of scale, whose power he acknowledged and even overestimated. He proposed doing so through the tax system, by focusing taxes on the economic rent of land. This would compensate the dispossessed in three ways.

a. Those who got the upper hand by securing land tenures would support public services, so wages and commerce and capital formation could go untaxed.

b. To pay the taxes, landowners would have to use the land by hiring workers (or selling to owner-operators and owner-residents). This would raise demand for labor; labor spending would raise demand for final products.

c. To pay the workers, landowners would have to produce and sell goods, raising supply and precluding inflation. Needed capital would come to their aid by virtue of its being untaxed.

Thus, George would cut the Gordian knot of modern dilemma-bound economics by raising demand, raising supply, raising incentives, improving equity, freeing up the market, supporting government, fostering capital formation, and paying public debts, all in one simple stroke. It’s quite a stroke, enough to leave one breathless. In practice, landowners faced with high land taxes often choose another, even better, course than hiring more workers: they sell the land to the workers, creating an economy and society of small entrepreneurs. This writer has documented a strong relationship between high property tax rates, deconcentration of farmland, and intensity of land use (Gaffney, 1992).

2. George’s proposal lets us lower taxes on labor without raising taxes on capital. Indeed, it lets us lower taxes on both labor and capital at once, and without lowering public revenues.

3. Georgist tax policy reconciles equity and efficiency. Taxing land is progressive because the ownership of land is so highly concentrated among the most wealthy, and because the tax may not be shifted. It is efficient because it is neutral among rival land-use options: the tax is fixed, regardless of land use. This is one favorable point on which many modern economists actually agree, although they keep struggling against it.

George showed that a tax can be progressive and pro-incentive at the same time. Think of it! An army of neo-classicalists preach dourly we must sacrifice equity and social justice on the altar of “efficiency.” They need that thought to stifle the demand for social justice that runs like a thread through The Bible, The Koran, and other great religious works. George cut that Gordian knot, and so he had to be put down.

The only shifting of a land tax is negative. By negative shifting I mean that the supply-side effects of taxing land will raise supplies of goods and services, and raise the demand for labor, thus raising the bargaining power of median people in the marketplace, both as consumers and workers. This effect makes the tax doubly progressive: it undercuts the holdout power and bargaining power of landowners vis-a-vis workers, and also vis-a-vis new investors in real capital. This effect also makes the land tax doubly efficient.

4. A state, provincial, or local government can finance generous public services without driving away business or population. The formula is simple: tax land, which cannot migrate, instead of capital and people, which can. By eliminating the destructive “Wedge Effect,” the land tax lets us support schools and parks and libraries and water purification and police and fire protection, etc., as generously as you please, without suppressing or distorting useful work, and without taxing investors in real capital.

5. Georgist tax policy contains urban sprawl, and its heavy associated costs, without overriding market decisions or consumer preferences, simply by making the market work better. Land values are the product of demand for location; they are marked by continuity in space. That shows quite simply that people demand compact settlement and centrality. A well-oiled land market will give it to them.

6. Georgist tax policy makes jobs without inflation, and without deficits. “Fiscal stimulus,” in the shallow modern usage, is a euphemism for running deficits. George’s proposed land tax might be called, rather, “true fiscal stimulus.” It stimulates demand for labor by promoting hiring; it precludes inflation as the labor produces goods to match the new demand. It precludes deficits because it raises revenue. That is its peculiar reconciliatory genius: it stimulates private work and investing in the very process of raising revenue. It is the only tax of any serious revenue potential that does not bear down on and suppress production and exchange. As I said, George takes two problems and composes them into one solution.

7. George’s land tax lets a polity attract people and capital en masse, without diluting its resource base. This is by virtue of synergy, the ultimate rationale for Chamber-of-Commerce boosterism. Urban economists like William Alonso have illustrated the power of such synergy by showing that bigger cities have more land value per head than smaller ones. (Land value is the resource base of a city.) Urbanists like Jane Jacobs and Holly Whyte have written on the intimate details of how this works on the streets. Julian Simon (The Ultimate Resource) philosophizes on the power of creative thought generated when people associate freely and closely in large numbers. Henry George made the same points in 1879.

8. Georgist policies let us conserve ecology and environment while also making jobs, by abating sprawl. It is a matter of focusing human activity on the good lands, thus meeting demands there and relieving pressure to invade lands now wild that are marginal for human needs. Urban sprawl is the kind of sprawl most publicized, but there is analogous sprawl in agriculture, forestry, mining, recreation, and other land uses and industries.

9. Georgist policies let us strengthen public revenues while in the same process promoting economy in government.

Anti-governmentalists often identify any tax policy with public extravagance. Georgist tax policy, on the contrary, saves public funds in many ways. By making jobs it lowers welfare costs, unemployment compensation, doles, aid to families with dependent children, and all that. It lowers jail and police costs, and all the enormous private expenditures, precautions, and deprivations now taken to guard against theft and other crime. Idle hands are not just wasted, they steal and destroy.

Ultimately, Georgist policy saves the cost of civil disturbances and insurrections, and/or the cost of putting them down. In 1992 large parts of Los Angeles were torched, for the second time in a generation, pretty much as foreboded by Henry George in Progress and Poverty. Forestalling such colossal waste and barbarism is much more than merely a “free lunch.”

George’s program would abort other, less obvious wastes in government. It obviates much of the huge public cost now incurred to reach, develop, and safeguard lands that should be left in their natural submarginal condition. Today, people occupy flood plains and require levees, flood control dams, and periodic rescue and recovery spending. Others scatter their homes through highly flammable steep brushlands calling for expensive fire-fighting equipment and personnel, and raising everyone’s fire insurance premiums. Others build on fault lines; still others in the deserts, calling for expensive water imports. Generically, people now scatter their homes and industries over hundreds of square miles in the “exurbs,” or urban sprawl areas, imposing huge public costs for linking the scattered pieces with the center, and with each other.

This wasteful, extravagant territorial overexpansion results from two pressures working together. One force is that of land speculators manipulating politics seeking public funds to upgrade their low-grade lands so they may peddle them at higher prices. The other force is that of landless people seeking land for homes, and jobs, and public funds for “make-work” projects.

Both these forces wither away when we tax land value and downtax wages and capital. This moves good land into full use, meeting the demand for land by using land that is good by Nature, without high development costs. It also makes legitimate jobs, abating the pressure for “make-work” spending. Above all, it takes the private gain out of upvaluing marginal land at public cost. Such lands, if upvalued by public spending, will then have to pay for their own development through higher taxes.

Those nine compelling features of George’s program should be enough to persuade one that it had the potentiality of becoming very popular. Its premise, however, was socializing land rents through taxation. Its very strengths were its undoing, then, by evoking a powerful, intransigent, wealthy counterforce.