Posted by: Ken Homer | August 22, 2008

Wealth and Waste

Among the more challenging issues we face as we attempt to develop systems for integrating human activity with planetary activity in ways that are mutually supportive is the question of wealth distribution. Personally, I think the term wealth when applied to money is misleading. Real wealth is not monetary, though in our culture it may be valued and measured as such. 

However, for the purposes of discussion, the term “wealth” will be used here as it relates to what is going on in the world of fiscal policy, consumer spending, class relationships, and democracy.

A strong case can be made that the concentration of wealth and power in the hands of the few is not only detrimental to those who are left at the margins, but also for the kinds of decisions that get made by those in positions of power which fail to take into account the consequences of their actions because they can insulate themselves from theses consequences.

The video below is from c-span, but before you jump to the conclusion that it is going to be another yawner speech delivered by some overfed politician, it has been “spiced up” a bit with some music and images that you may find entertaining. The message seems clear to me, but what about you? Do you agree with Senator Bernie Sanders (Indp.)VT, or is he just blowing hot air?

My thanks to my friend Steve Higgins for pointing me to this video.

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Responses

  1. Disparity of wealth is a legitimate problem that we should do something about only if there is some sort of unfairness involved. In and of itself the fact that someone has more money, wealth, resources than someone else does not in and of itself prove anything. The disparity of wealth may be the result of completely natural, honest and just individual and social forces at work. Certainly no one is suggesting that we perpetrate an injustice as a way to have more people participate in the benefits of economic progress.

    So here is the unfairness and failure to talk about this directly and often makes a mockery of all the complaining about the problem because the cause of disparity of wealth is obvious and self evident once it is pointed out.

    Land value is created 100% by the community not by the individual owners of land and natural resources. Private collection of community created land value is the historical root cause of the disparity of wealth owned by the few at the expense of the many. Private collection of community created land value in all the ways that it is done, i.e. land rents, sale price, imputed income from land privately used, private use of public lands and electromagnetic airways at less than market rent, land speculation, real estate speculation, etc. etc. etc., is an entirely unearned income to those who collect it. It is a value collected by those who do not create that value and therefore is a 100% free lunch of which there isn’t supposed to be any. Why Sanders et al do not point this out in their complaints about the problem, is a mystery to me since it contains the rational for their outrage and suggests the way to solve the problem.

    Because land value is created by society as a whole it is the most and probably only appropriate source of revenue to pay for public/government provided services. Taxation of land values is just because it merely taxes back to the community the value community confers on land and natural resources. Because it is the policy of our culture and current governmental and economic paradigm to give this value away to private “owners” of land and natural resources we, the community, are obliged to tax the earned incomes of labor and capital, the products they produce and commerce in general all of which taxes are destructive of incentive, skew economic decisions, and are mostly passed on to the final consumer of goods and services anyway.

    The disparity of wealth and about every other problem you can name would be solved merely by beginning to shift our current dysfunctional tax burden on to land value in all its myriad forms and untax labor and capital at the same time.

    If you are obsessed with idea of imposing a progressive tax, if you love the idea of requiring people to pay their “fair” share, the idea of land value taxation and untaxing of labor and capital meets these requirements. Land and natural resources and land value associated with them are highly concentrated in ownership. Taxing land values would therefore be highly progressive and could not be fairer. The truly fair thing to do is to tax community created land value as much as possible before even thinking of taxing earned incomes from labor and capital.

    The community would have its proper source of income from the value it creates, land value, and individuals would have their proper source of income from individual effort and investment of the rewards of that effort.

    There IS an unfairness in the disparity of wealth. It is no longer necessary to complain about it without pointing out at the same time the cause of it. Those who complain of the problem without pointing out its obvious cause do no service to the cause. In the current environment all they do is confirm the fears of my conservative friends that the Democrats are going to impose communism on the country. There is no argument against the obvious truth that land value is created by the community and therefore belongs to the community. The Republicans scream that taxes are bad. They are 100% correct in regard to taxes that fall on labor and capital but no when it comes to land value. Those who care about sharing the wealth (and sharing the planet) have failed to use the most powerful argument there is to accomplish this result while relying on an argument that satisfies all the legitimate concerns of the opposition.

    Oh, by the way, taxing land values would the the easiest and most effective way to remove most if not all the current incentives for environmental abuse. Why do people abuse the environment? For profit of course. People are entitled to keep the value they add by way of labor and capital but not by collection of the community created value of the raw resources they use in the process of production. Example: to end the use of coal and the destruction to the environment that extracting it causes, tax its community created value heavily and see what the coal companies do.

    In anticipation of the objection that taxes on land value will merely be passed on to the final consumer just as all other taxes are, please note something that all economists agree with: taxes on land value cannot be passed on. Why that is too long to go into but it is so. Ask any economists.

    Also by the way, Sarah Palin’s Alaska already does this kind of thing to some degree. Alaska imposes a royalty on oil produced in the state and yearly gives a “fair” portion of that revenue equally to every citizen of the state. Alaska is taxing and distributing the community created value of oil to its citizens without taxing the value created by the oil companies’ expenditure of effort and capital investment. They don’t like it but they can’t complain because they know that the royalty merely takes from them a value they do not create.

    The earth belongs to all humans in common. We create its value and that value belongs to all of us in common. Historically we have given it away, mostly because we were forced to do so (law of the conqueror) but also because vested interests have hot been interested in us understanding the economics involved. The first thing to do, therefore, is education.

    As the economy collapses further perhaps this out of the main stream idea may be of use to you. Google Henry George.


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