Reinvigorating old ideas: Who Owns the World

Who Owns the World, by Kevin Cahill, is the first survey of landownership in each of the world’s 197 states or countries and 66 major territories. Kevin Cahill explains,

The Crown is the only ‘absolute’ owner of land in the UK and all Commonwealth countries; all other property owners hold an ‘interest in an estate in land'.

– except in Australia, where the Mabo Act of 1992, gave Aboriginal Australian people, alone, full title to their traditional lands.

The United States of America is the only country in the world where land title is not exclusively ‘owned’ by the government:

In the USA, the final authority lies with ‘We the people.’ As the occupants of a state, its citizens are the sole authors of a state’s being, the sole source of its authority, and the sole reason and purpose for the state’s existence.

Kevin Cahill’s work has much to offer Australians today. Firstly, it indicates the seriousness of the task ahead for the establishment of an Australian Republic; and secondly, it is a reminder that we need to consider making significant changes to our economic system, and especially our taxation system, if we really want our entire society to prosper.

Melbourne economist Phillip J. Anderson’s new book The Secret Life of Real Estate, a timely and thorough study of the history of the mass addiction to land speculation, is the perfect companion to Who Owns the World. Land speculation really began during the establishment of the United States of America, and continued in Australia, with significant exceptions. Now the rest of the world is ‘catching up’, especially with the growing enclosure of the commons in Russia, India and China. But history has shown that real estate speculation cycles only serve to privatise profits and socialise debt and promote chaos and suffering on every level of society in the process.

Both Kevin Cahill and Phil Anderson provide the historical context for understanding how ‘Classical Political Economic Theorem’, the first modern economic theory, also known as ‘Geonomics’ or ‘Classical Economics’, offers hope in light of the breakdown of the current Neo-Classical Economic system.

Geonomics is a philosophy and economic theory that follows from the belief that although everyone owns what they create, land and everything else supplied by nature, belongs equally to all humanity. Geonomists advocate a Single Tax, a Land Value Tax, also known as a Resource Rent. Early Proponents included John Locke, William Penn, Benjamin Franklin, Adam Smith, Thomas Paine, Thomas Jefferson, David Ricardo, John Stuart Mill, Herbert Spencer, Leo Tolstoy, Mark Twain, Henry George, William Ogilvie, Clarence Darrow, David Lloyd George, Sun Yat-sen, Sir Winston Churchill, Walter Burley Griffin, to mention a few.

The current recession is global because no one is immune from its consequences. Phil Anderson explains how real estate boom-bust recessions develop over 18 year cycles, with inflation building up over 14 years, followed by deflation over four years. The current cycle peaked in August 2007, and is expected to bottom out between 2010 and 2012. Ireland is suffering its first experience of this land speculation driven recession. Tax revenues there have fallen to 2005 levels, and unemployment has hit an all–time high. As we are beginning to see, Australia is not immune.

Neo-Classical Economists, or economic rationalists, treat land as capital. But land does not ‘turn over.’ The word ‘land’ is put in quotes in economics textbooks, ‘land’ – even though it was central to Classical Economic thought, from Adam Smith through John Stuart Mill, and the French Physiocrats’ attempt to prevent the French Revolution.

Nature has provided us with plenty of land, but it’s underused due to ‘imperfections in the market’ or ‘land speculation’. The solution to the problem, according to Classical Economic theory, is to put land to its best use, by the simple method of converting property tax, into a tax on pure land value, exempting, buildings on land, commerce and labour from income taxes (including payroll taxes). Excise tax and taxes on commerce should be abolished because trade among people is the basis of efficiency in economics and is the very basis of civilization.

The Melbourne based Land Values Research Group recently defined and studied the effects of property bubbles in a report titled Unlocking the Riches of Oz: A Case Study of the Social and Economic Costs of Real Estate Bubbles, 1972 to 2006.

Brian Kavanagh, Director of The Land Values Research Group, is an experienced property valuer of 32 years. As one of the world’s leading analysts on the inter-relationship between land and the economy, he has this to say:

When it comes to economics, the reintegration of the theory of valuation is essential. It’s the new frontier. Just as we sent Voyager out to explore space, we’re at a turning point where the economy is not working for us. There is a big discovery to be made, and this lies in this epochal change – the rediscovery of Resource Rent. Shifting – transferring taxes to Resource Rent is going to open the way for a whole new development for humanity.

He goes on to say:

Its not just land rents we want to capture, we want to capture licenses for electromagnetic spectrum, aircraft slots, all forms of forestry and mineral licenses, all resources, – these would supplement our charges on land values, and add to the enormous Resource Rent pot, that is now 285 billion – more than our current level of tax revenue.

We’ve witnessed the progressive loss of a sense of community, and land rents represent community. If we collected Resource Rent, we’d get rid of poverty. We have a widening gap between wealthy and poor because the wealthy are capturing Resource Rent. We’ve got to rediscover the Land tax system. This would open up enormous benefits. It would fund infrastructure, education, health, all of these areas that are crying out for funds, and this fund is sitting there, being grossly capitalized by individuals and causing us to ratchet up taxes to fund them. But if we decrease taxes, and capture more of the Resource Rent, we would be doing as nature intends us to do, using growing Resource Rent funds for public purposes.

Maireid Sullivan