Jock's Place - Unconditional benefits: now is the time to smash that "cosy consensus" - Comments

The Effect of Introducing LVT

David Chester — Wed, 13 Aug 2008 12:13:55 +0000

Much as I appreciate all the comments in support of this inovation, I always find it strange how much people can comment about a subject which they don't really understand. To properly understand how any change is going to affect the macroeconomy at large, one needs to first understand how such a system actually functions. This involves a simulation of the complete system. All of us can find out what macroeconomics is, but there are very few explanations about how it works and in particular the effects on making a change to the method of burdening the population by taxation.

As a researcher who has been examining this problem over many years, I have managed to develop such a means of providing a true explanation. It is essential to model the closed system as a set of functional entities (which allows for a lot of simplification due to collection of various operations into groups), connected by all of the kinds of macroeconomic activities. I find that but 6 entities are needed with 19 mutual money/goods connections only.

As a semi-retired engineer, I use this presentation within an extremely logical and scientific approach (which incidentally allows macroeconomics to now be regarded as an exact science), and I find that the short-terms effect of introducing LVT compared to that of increasing income tax by the same total amount, is to stimulate the economy. The income tax also stimulates the economy but when LVT replaces it, the amount of stimulation is 3 times as much. This is a discovery that is provable by theory and analysis, using George's two axioms, some high-school mathematics (no computing) and a Leontief type of model for the whole of the macroeconomic system.

Over the long-term other factors come into the picture including the reduction of landed monopolies and the greater opportunities available to entrepreneurs. My model has not yet been applied here.

On-communications

Jock — Thu, 24 Jul 2008 10:35:47 +0000

Very interesting, thanks Anon. Nobody here seems to know anything about them! But Wireless Oxford is rather hoping not to have to build out a system ourselves, so a supplier aiming at a different part of the market could be a very welcome partner. I will be in touch with them!

WiMAX

Anonymous — Thu, 24 Jul 2008 10:20:43 +0000

On-communications currenltly supply a WiMAX service in the Oxford area. Check out their website.

Tim - thanks for those

Jock — Thu, 24 Jul 2008 09:36:59 +0000

Tim - thanks for those comments. I think that deserves another post, so will maybe have to reply more fully when I get home this evening if that's okay!

Richard - I kind of agree that the position we are currently in is not the place to start "living off the financial assets" partly because even if they were sound they are not well enough distributed. I think what I am saying in this post is that we need to rebuild that as you say.

Very nice, but...

Richard Allan — Thu, 24 Jul 2008 09:11:15 +0000

I agree with almost all of this, but:

"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."

I would say that trying to "live off the financial assets..." is part of the problem, for now. The gov't is busy liquidating all of the nation's assets to pay for current consumption, and they won't last forever! I would say that realising people need to start working for money again instead of borrowing from the past/mortgaging the future is more the issue. Of course, once people are working and producing again we'll want them to save as much as possible so that

1) Capital stock will increase, allowing people to produce the same amount with less labour and therefore take more leisure time (possibly - I gather the jury's still out on this, economically)
2) Stock of "financial capital" will increase; ie. by exporting goods to other countries we can import more from them later and allow them to do the work for us.

Of course this is predicated on the re-allocation of ground rents from landlords to the community as you attest.

Land snatching... land land land...see "Snatch".

Tim Carpenter — Thu, 24 Jul 2008 08:31:42 +0000

LVT can seem fine and dandy at the first off, but over time who decides the future value of your land? It is fraught with risks, opportunities for corruption and chaos. If you think compulsory purchase was bad...

If CBI is only half what is needed to live on, then surely we will still need welfare. Removing the minimum wage is fine but be under no illusion, the CBI will be factored into that wage (or lack of). 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.

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?

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".

Backed by - well nothing

Jock — Thu, 24 Jul 2008 07:56:41 +0000

Backed by - well nothing fixed necessarily. I am of course aware of moves towards hard currency in several parts of the world - the Qatari gold dinar for example. But in practice, currency is just a token of trust which at the moment happens usually to be "backed" by governments. But it's not really, it's really backed by the trust of its users.

In a globally interconnected trading world, I could see the large scale equivalent of, say, eBay where people built up very public credit scores based on trading feedback and so on. That in itselg may be all the trust that's needed.

Thanks for that info IanPJ -

Jock — Thu, 24 Jul 2008 07:54:13 +0000

Thanks for that info IanPJ - one of my current "good causes" is trying to get a group going to develop a social enterprise operated city-wide wirless system for Oxford and we are really now looking at WiMAX so I had only gleaned from WiMAX Forum and places like that that Freedom4 had the whole lot - good to know I might have two people to play off agains each other for spectrum renting! Though I remain a bit pissed off that I have to buy it from somewhere else since it's "already ours" in my opinion!

You said:

Andrew — Thu, 24 Jul 2008 07:19:51 +0000

"truly free trade enabled by tariff eradication will soon create a demand for a common currency of some kind"

Backed by..?

Unconditional benefits - point of order

IanPJ — Thu, 24 Jul 2008 06:41:32 +0000

Freedom4 do not hold an absolute monopoly for WiMax, but it is the only one making use of WiMax to date.

The firm holds one of two national 3.6GHz WiMAX licences issued by Ofcom so far.

The other is owned by Hong Kong-based Pacific Century Cyber Works, which hoovered up 13 UK spectrum licences in 2003, but has failed so far to make use of them.

Yes, the very fact of "free

Jock — Thu, 24 Jul 2008 00:00:09 +0000

Yes, the very fact of "free land" combined with "citizens income" would create an environment where people do not need to settle for a mere wage. This is the key to mutualism from what I can gather. Libertarianism without the rampant anarcho-capitalism.

If you want more John

Bishop Hill — Wed, 23 Jul 2008 19:40:18 +0000

If you want more John Lewis-style collective ownership, how do you intend to bring it about? I mean, it's legal to do this now, but for some reason people don't want to do it (or perhaps they try but it doesn't work). Are there some barriers that need to be brought down?

Deliberate

Jock — Wed, 23 Jul 2008 17:16:14 +0000

I did mention seignorage didn't I? I thought I did! Maybe I cut it out as too much at once. But I am sort of assured by discussions elsewhere that the "free land" and more level playing field will drive forward a sort of automatic monetary reform in that money will be less inflated by debt if land values come out and bank customers more able to survive without their credit. Banking will have to change in other words.

Besides, I have become more agnostic about the best direction for "money" anyway. I think increasing truly free trade enabled by tariff eradication will soon create a demand for a common currency of some kind as exchanging currencies in order to trade is a barrier, of sorts. And developments in global communications and so on will enable more people to deal direct with one another with complementary currenices, even virtual ones.

The choice of "The Single Tax" was deliberate. I was trying to move away from using the word "land" because it tends to create confusion with "location". "The Single Tax" is in theory a charge on all "economic" land. But I also agree that one may want to keep slightly different taxes on certain rsources etc

Bravo!

Anonymous — Wed, 23 Jul 2008 16:57:36 +0000

You missed out monetary reform, although I guess that could qualify as a variant of LVT.
"Single Tax" is a simplistic misnomer as well, as there are many possible charges and/or user/licence fees on the monopolistic "ownership" of all non-human, non-capital resources.
I hereby launch the "Jock for Federal Policy Committee" campaign!

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.

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

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

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