We have the biggest political challenge of the 21st century to solve inequality and climate change

challenge_ident2007bWhen I was writing my book on money I noticed there were two camps that claimed they had the “complete answer” to growing debt, environmental deterioration and inequality.

One was the monetary reform movement and one was the natural resource taxes movement. In some cases the antipathy to the other movement was palpable.

Why was this? Well when monetary reformers advocate money being created without interest, some – but by no means all – of them realised the detrimental consequence. The price of property increases. Without so much interest to pay, the extra liquidity simply goes into land speculation. The price of sections rises, the price of houses rise and this brings inflation. (well since 1999 this hasn’t been measured because land came out of the Consumer Price Index. The CPI no longer reflects reality) But in the seventies I recall the professionals all out- smarting each other by buying sections, which obligingly rose in value before their very eyes.

I even met a Georgist who said he will fight inflation to his dying breath and would never, never consider interest free money. To him the monetary reform movement was the enemy. He tended to confuse interest when it is involved with money creation with interest when it is the price you pay for borrowing already created money. But he didn’t know it.

During the Global Financial Crisis of 2008 more Georgists became aware of the activities of banks, especially in America. They looked at the issue and some became enthusiastic monetary reformers as well as Georgists.

But how do you marry these two issues? Theorists can marry them but not politicians. To put it mildly it’s tricky. A group of us have worked on it for two years and have come up with a possible solution. It is a slideshow at http://www.slideshare.net/deirdrekent/the-land-dollar-a-national-land-backed-currency. I presented it at the recent Council of Georgist Organisations conference in California.That is as far as we have got. And of course, since we have to reform the welfare system too and replace it by a Basic Income that is yet another challenge and must be integrated into the solution(s).

It is not surprising that those who find monetary reform the most difficult – the group that is quickest to dismiss it – are the traditionally educated economists. They know that low interest rates cause land speculation and they seem unable to redirect money towards productive enterprises and away from land and other natural resources in limited supply. A few of them (quite a few, but politicians consistenly ignore them) advocate a small land tax.

Of course money will flow into land speculation when there is no price to be paid for holding land.

British Colonists did two things: they introduced western banks and the money system that came with it and they changed the land tenure system. Freehold land was what the settlers wanted. The definition of freehold is “land free of rent”. And that is what we have. As I watch the Commonwealth Games I think of what the British have done to bring inequality and injustice right round the world. The same could be said for Spain or Portugal I suppose.

So it is heartening to know there are now a handful of economists tackling the issue of combining the two issues. They come from the Georgist movement – Michael Hudson, Nic Tideman come to mind.

Reversing the tax system is huge, as 80% of New Zealand’s tax revenue comes from income tax, GST or company tax when it should be coming from land value tax, other resource taxes and from Pigouvian taxes.

I have no idea how it will all play out. But I can’t help getting the feeling that politicians are faced with the biggest political challenge of the 21st century – the task of creating money without interest as well as changing the tax system and fundamentally reforming the welfare system away from asset or income testing.

What is needed is a way to reverse the colonisation process.

With inequality and climate change being the big two issues of the early 21st century, the time for political creativity is now.

Henry George influenced a movement, now reviving

Alanna and Deirdre at pool - Version 3I have just returned from California where I attended a conference of the Council of Georgist Organisations and delivered a presentation on the Land Dollar.

I was one of four presenters in a session on Land and Money. I was invited by author Alanna Hartzok, (photo above with me) an amazingly vital and wise woman who seemed very well respected in the movement. My presentation offered a wholistic solution to the three issues and was generally well received, though some dismissed the money issue as secondary. We have a money system that leads to rising debt and a growth imperative on a finite planet which threatens to leave it uninhabitable for our grandchildren. Second we have a tax system that treats labour as scarce and land as infinite and this needs to be turned right side up. Otherwise the inequality will continue to get worse as those who seek to “own” land and resources will accumulate more wealth. Third we all need sufficient income for all but we have a welfare system that encourages lying about relationships, even to the point where couples live in different houses to get more benefit money. What sort of society are we aiming for when we disincentive intimacy and love? The slideshow I delivered is now online at http://tinyurl.com/ou9stc6.

First let me tell you about the elevator pitches on Georgism I tried. When asked in the hotel lift what the conference was about I sometimes blundered and sometimes succeeded. “What is Georgism?” was usually the question. “Well it’s a old movement you probably won’t have heard of. It’s based on the writings of a man called Henry George. He was a San Francisco journalist during the Depression of the 1870s and saw a lot of poverty. He believed the value of land rose because of the activities of the public and so the increase really belonged to the public. Basically the idea is for the public to recoup this rise in land value. And he effectively said you should pay for what you hold or take not for what you do or make. No income tax but a land tax. At this stage the person said “Oh he must have been a good thinker. Sounds fair enough” or something like that.

IMG_1720And that is where the elevator usually stopped. That one worked. I was also asked the same question by a woman I befriended on a Los Angeles bus tour but I botched my answer completely. I started off saying we believed the land belonged to everyone and all the minerals, fish, water, trees etc. After that I blundered on and naturally she didn’t light up.

Sometimes people would ask why hasn’t the movement made much progress? And it is sad. So many Georgists have lived and died without seeing change. But, like the monetary reformers who followed Major Douglas, they have continued staunchly on till their eighties, loyal to the end. Their numbers dwindle and they speak more and more to themselves. At this session as will the Social Credit movement during its 60th anniversary in Christchurch next month, we had a time remembering those who had passed on the previous year. (I must say I think I heard one older woman report she had been president of her little society for 50 years, hope I was hearing wrong)

I met many who had taught courses at Henry George Schools for decades. They know that wealth is accumulated by monopolising the land and all its bounties. They weep to see the cheating society we have all become, pocketing the unearned gains from rising land prices. Their knowledge of the money issue varies. Dan Sullivan, the president of the council, attends the Modern Monetary Institute gatherings and was a fellow presenter. Many understand that if we create money as interest bearing debt we add another parasite. As Dan said “If you kill one parasite the other grows larger. You have to tackle them both together”.

One blog post can’t do justice to the variety of competent speakers. We had Peter Barnes, the author of “Who owns the Sky” tackling the twin issues of inequality and climate change. He said “Recycle the rent is a better term than tax the land”, as did other speakers. A giant Rent Recycling Fund should be redistributed as a dividend. He thinks it could be $5000 a year, enough to revive the middle class.

A young women PhD graduate had studied the man who influenced Henry George and gave an excellent talk on the geneology of the ideas.

The older Georgists were all greatly heartened by the infusion and energy of the new young men who have come into the movement. Two came, I believe, from working on reintroducing an inheritance tax, and the others arrived simply through trying to find a solution to inequality and environmental issues. They were self taught from the web and found their own way there. They were obviously struggling financially. I hear five of them shared a room. Karl Fitzgerald, of Prosper Australia and one of only five people worldwide working full time for the movement helped me greatly and seems to be a mentor for the new blood, all of whom are on the Facebook group called LVT.

Of course the group should be called something else but that is for another day… The session on campaigning was speakers from another movement. Hopefully next time there will be better teaching on soundbites, controlling the language, controlling the images, writing media statements, working with bureaucrats and journalists.

Next year the conference will be held in Detroit and for it the Council of Georgist Organisations will combine with the International Union for Land Value Taxation. So let’s make sure we get someone there from New Zealand. (Second Photo: Peter Barnes with a Canadian Green Party man, Erich Jacoby-Hawkins)