I've been watching this global economic panic like most everyone else and certainly have no answers, but I'm wondering who is vindicated in all of this? Paul Krugman, the recent Nobel Prize winner? Ron Paul, the Congressman who ran for President of the US and constantly harped on strict finance? Alexander Hamilton, who wanted a national bank? John Kenneth Galbraith, who advocated wage and price controls along with more government involvement with the market?
I have no idea. I'm sure there are many economists and pundits out there either feeling vindicated or who are now running for cover. But I can't help thinking that--in his own way--Henry George is the one most vindicated, however posthumously. Though notable for a few things, he is most remembered for his advocacy of a single tax on land--arguing that land and natural resources should belong to the public good.
It is Land, Real Estate, that was really behind this latest crisis. Before there can be sharply rising home prices, lax lending practices, defaulted mortgages, bankrupted mortgage insurance firms, or any of the things that have gone wrong, there needs to be land and the need for shelter. And it is land that governments have still not really figured out, I think. Land is certainly taxed all around the world in different ways, but I'm not sure what the best way to do it is. And I don't think many do.
Ideally, Henry George would have the dirt itself be as close to a zero-profit market as possible due to taxes taking away any increase in price. So, if one buys a plot of land for $1 million dollars and sells it for $2 million later, the $1 million increase in value would be taxed at 100%. Here is where it gets tricky, however. If one spends $1 million building something on the land and sells that building for $2 million, the $1 million increase in value for the building is not taxed at 100%. George would not have it taxed at all, in fact--just the dirt.
From what I understand, Philadelphia (and other cities in Pennsylvania) has a system something like this, where the land and the structure are taxed at different rates. No idea how well it works, but I imagine it has it's detractors. Hong Kong is known for steep land taxes so they can keep income taxes low. Even Winston Churchill favored a Land Value Tax early in his career. There are plenty of other schemes as well, of course (look here, if interested).
What I hope is that present-day economists look less at the details of government regulation, lending practices, interest rates, etc., and instead look at land tax policy again. Land is an expense to everyone from the richest to the poorest, inflating the price of everything from lease space, warehouses, factories, apartments, homes, movie theaters--anything with a structure on it--which, of course raises the prices of all goods and services. Hyper-inflated real estate prices sunk Japan into a decade-log recession back in the 90s and a mortgage crisis has caused a global financial crisis today.
I don't know how to handle it best (or really how to handle it all, truthfully--not a well trained economist). But I can't help but think that Real Estate is the last vestige of feudalism and, therefore, the hardest to deal with in a market economy. It has nothing to do with capitalism. Construction and development have everything to do with capitalism, however, and it seems quite difficult to separate the two in tax policy or overall land value. But I think it has to be done somehow.
If it can be pulled off, perhaps income and sales taxes could be lowered for everyone. Perhaps more affordable housing could result (requiring a 30-year mortgage for a modest home seems to be a failure of modern capitalism, truthfully), perhaps lower prices for goods and services could result. I really don't know. But at least it would make our supposed capitalist market economy much closer to that--a capitalist economy. As it is now, we are--quite literally--paying for our continued failure to effectively deal with the most basic of human needs: earth and shelter.
Most ironic of all, it is Real Estate--the most non-capitalistic element of our sainted market, capitalist economy--that is compelling capitalists around the world to forgo market principles and behave like socialists now. What I would give to bring Adam Smith, Karl Marx, and Henry George back from the dead to see where we are at now. Criticism would come from each of them, I'm quite sure. And we would probably deserve it.
I have no idea. I'm sure there are many economists and pundits out there either feeling vindicated or who are now running for cover. But I can't help thinking that--in his own way--Henry George is the one most vindicated, however posthumously. Though notable for a few things, he is most remembered for his advocacy of a single tax on land--arguing that land and natural resources should belong to the public good.
It is Land, Real Estate, that was really behind this latest crisis. Before there can be sharply rising home prices, lax lending practices, defaulted mortgages, bankrupted mortgage insurance firms, or any of the things that have gone wrong, there needs to be land and the need for shelter. And it is land that governments have still not really figured out, I think. Land is certainly taxed all around the world in different ways, but I'm not sure what the best way to do it is. And I don't think many do.
Ideally, Henry George would have the dirt itself be as close to a zero-profit market as possible due to taxes taking away any increase in price. So, if one buys a plot of land for $1 million dollars and sells it for $2 million later, the $1 million increase in value would be taxed at 100%. Here is where it gets tricky, however. If one spends $1 million building something on the land and sells that building for $2 million, the $1 million increase in value for the building is not taxed at 100%. George would not have it taxed at all, in fact--just the dirt.
From what I understand, Philadelphia (and other cities in Pennsylvania) has a system something like this, where the land and the structure are taxed at different rates. No idea how well it works, but I imagine it has it's detractors. Hong Kong is known for steep land taxes so they can keep income taxes low. Even Winston Churchill favored a Land Value Tax early in his career. There are plenty of other schemes as well, of course (look here, if interested).
What I hope is that present-day economists look less at the details of government regulation, lending practices, interest rates, etc., and instead look at land tax policy again. Land is an expense to everyone from the richest to the poorest, inflating the price of everything from lease space, warehouses, factories, apartments, homes, movie theaters--anything with a structure on it--which, of course raises the prices of all goods and services. Hyper-inflated real estate prices sunk Japan into a decade-log recession back in the 90s and a mortgage crisis has caused a global financial crisis today.
I don't know how to handle it best (or really how to handle it all, truthfully--not a well trained economist). But I can't help but think that Real Estate is the last vestige of feudalism and, therefore, the hardest to deal with in a market economy. It has nothing to do with capitalism. Construction and development have everything to do with capitalism, however, and it seems quite difficult to separate the two in tax policy or overall land value. But I think it has to be done somehow.
If it can be pulled off, perhaps income and sales taxes could be lowered for everyone. Perhaps more affordable housing could result (requiring a 30-year mortgage for a modest home seems to be a failure of modern capitalism, truthfully), perhaps lower prices for goods and services could result. I really don't know. But at least it would make our supposed capitalist market economy much closer to that--a capitalist economy. As it is now, we are--quite literally--paying for our continued failure to effectively deal with the most basic of human needs: earth and shelter.
Most ironic of all, it is Real Estate--the most non-capitalistic element of our sainted market, capitalist economy--that is compelling capitalists around the world to forgo market principles and behave like socialists now. What I would give to bring Adam Smith, Karl Marx, and Henry George back from the dead to see where we are at now. Criticism would come from each of them, I'm quite sure. And we would probably deserve it.
