Michael Hudson on Land, Banking and Socialism
Discussion
markcoznottz said:
edh said:
Johnnytheboy said:
loafer123 said:
At the risk of repeating myself, the problem is that income (and therefore the ability to pay tax) and captial are not necessarily correlated so an LVT can't work.
In the short term I can see lots of people like me having to sell their houses, not necessarily being able to, and a mini-housing slump being caused. It would almost by definition reduce the value of land.
I don't get this obsession with inheritance personally. I've lived my life on the assumption I won't inherit a penny from my parents. If I do, then that's great, but it won't change my life. Most people must inherit from their parents after they themselves have retired, so by then it's a bit late for "opportunity" don't you think? What's wrong with meritocracy and making your own way in the world?
btw LVT would enable the abolition of IHT. It's a much better way of collecting tax from the Grosvenors who paid £0 on £8.3bn estate under IHT.
Tuna said:
edh said:
btw LVT would enable the abolition of IHT. It's a much better way of collecting tax from the Grosvenors who paid £0 on £8.3bn estate under IHT.
I assume (perhaps wrongly) that the Grosvenors' £8.3bn estate is not economically inactive and therefore pays tax continuously?edh said:
To me personally? As a house owner, not really. It would be bad for me financially. You presume too much..
I don't get this obsession with inheritance personally. I've lived my life on the assumption I won't inherit a penny from my parents. If I do, then that's great, but it won't change my life. Most people must inherit from their parents after they themselves have retired, so by then it's a bit late for "opportunity" don't you think? What's wrong with meritocracy and making your own way in the world?
btw LVT would enable the abolition of IHT. It's a much better way of collecting tax from the Grosvenors who paid £0 on £8.3bn estate under IHT.
Nothing was inherited so no inheritance tax was due.I don't get this obsession with inheritance personally. I've lived my life on the assumption I won't inherit a penny from my parents. If I do, then that's great, but it won't change my life. Most people must inherit from their parents after they themselves have retired, so by then it's a bit late for "opportunity" don't you think? What's wrong with meritocracy and making your own way in the world?
btw LVT would enable the abolition of IHT. It's a much better way of collecting tax from the Grosvenors who paid £0 on £8.3bn estate under IHT.
Notes to myself as I read this..
Ahh, so this isn't an argument for LVT, it's an argument against neoliberalism. Riiight...
"The effect is to bid up land prices toward the point where the entire rental value is paid as interest." - pretty sure that's not true. Land value is a small part of the cost of putting rentable accommodation on a plot. If that weren't the case, the idea of people building up 'land banks' would actually be losing them money.
"The fact that ... natural resource extraction are practically free of income taxation shows that democratic political reform has not been a sufficient guarantee of socialist success." What? If I dig coal out of the ground, I don't pay any tax when I sell that coal?
"The aim of public investment was not to make a profit, but to lower the cost of living and doing business so as to minimize industry’s wage and infrastructure bill." - the (massive) assumption here is that public investment costs less than an efficient market to deliver infrastructure. There's no clear proof that this is the case.
"[Under Russian Socialism] The state bank created money and credit, so there was no need to rely on a wealthy financial class." From what exactly did it create money and credit? We know that printing money causes inflation.. this is magic money tree territory.
"China is the leading example of socialist success in a mixed economy."... Not according to many articles that say productivity is plunging and debt has doubled in the last five years.
etc. etc. etc.
The core problem here is the presumption that accumulation of wealth with some proportion of the population is bad for society. The counter argument as I understand it is that allowing the market to compete for that wealth encourages efficiencies and innovations that outweigh the cost of a small proportion doing particularly well.
One example would be Wallmart - where their aggressive expansion has delivered a wider range of cheaper goods to the whole of America. I believe that the founders' fortune is something like 3% of the value of the company as a whole. In return for that small percentage 'extracted wealth', we get massive public good in the form of easy access to low cost food and goods. Another would be Amazon - where the fight to innovate has revolutionised distribution and provided massive public infrastructure (in the form of web services) at a fraction of previous costs. For this, Bezos is made wealthy - and (another public good) promptly spends it on space transport. Both of those models appear to be reliant on the very land ownership and 'monopolisation' that the author considers to be so damaging. No socialist economy has demonstrated similar leaps in availability of and public access to food and goods.
The whole argument against neoliberalism is predicated on the idea that it stifles growth and social improvement. The only problem with that is that over the last century, it has delivered the largest leap in living standards globally, in health and extension of the human lifespan and the lifting out of absolute poverty of the largest proportion - and the largest number of people in the history of mankind.
I'm not an economist, but this seems to be student level debating - the reason socialism hasn't worked is because they weren't doing it properly... sigh.
Ahh, so this isn't an argument for LVT, it's an argument against neoliberalism. Riiight...
"The effect is to bid up land prices toward the point where the entire rental value is paid as interest." - pretty sure that's not true. Land value is a small part of the cost of putting rentable accommodation on a plot. If that weren't the case, the idea of people building up 'land banks' would actually be losing them money.
"The fact that ... natural resource extraction are practically free of income taxation shows that democratic political reform has not been a sufficient guarantee of socialist success." What? If I dig coal out of the ground, I don't pay any tax when I sell that coal?
"The aim of public investment was not to make a profit, but to lower the cost of living and doing business so as to minimize industry’s wage and infrastructure bill." - the (massive) assumption here is that public investment costs less than an efficient market to deliver infrastructure. There's no clear proof that this is the case.
"[Under Russian Socialism] The state bank created money and credit, so there was no need to rely on a wealthy financial class." From what exactly did it create money and credit? We know that printing money causes inflation.. this is magic money tree territory.
"China is the leading example of socialist success in a mixed economy."... Not according to many articles that say productivity is plunging and debt has doubled in the last five years.
etc. etc. etc.
The core problem here is the presumption that accumulation of wealth with some proportion of the population is bad for society. The counter argument as I understand it is that allowing the market to compete for that wealth encourages efficiencies and innovations that outweigh the cost of a small proportion doing particularly well.
One example would be Wallmart - where their aggressive expansion has delivered a wider range of cheaper goods to the whole of America. I believe that the founders' fortune is something like 3% of the value of the company as a whole. In return for that small percentage 'extracted wealth', we get massive public good in the form of easy access to low cost food and goods. Another would be Amazon - where the fight to innovate has revolutionised distribution and provided massive public infrastructure (in the form of web services) at a fraction of previous costs. For this, Bezos is made wealthy - and (another public good) promptly spends it on space transport. Both of those models appear to be reliant on the very land ownership and 'monopolisation' that the author considers to be so damaging. No socialist economy has demonstrated similar leaps in availability of and public access to food and goods.
The whole argument against neoliberalism is predicated on the idea that it stifles growth and social improvement. The only problem with that is that over the last century, it has delivered the largest leap in living standards globally, in health and extension of the human lifespan and the lifting out of absolute poverty of the largest proportion - and the largest number of people in the history of mankind.
I'm not an economist, but this seems to be student level debating - the reason socialism hasn't worked is because they weren't doing it properly... sigh.
Edited by Tuna on Tuesday 24th October 22:15
markcoznottz said:
edh said:
Johnnytheboy said:
loafer123 said:
At the risk of repeating myself, the problem is that income (and therefore the ability to pay tax) and captial are not necessarily correlated so an LVT can't work.
In the short term I can see lots of people like me having to sell their houses, not necessarily being able to, and a mini-housing slump being caused. It would almost by definition reduce the value of land.
edh said:
Tuna said:
edh said:
btw LVT would enable the abolition of IHT. It's a much better way of collecting tax from the Grosvenors who paid £0 on £8.3bn estate under IHT.
I assume (perhaps wrongly) that the Grosvenors' £8.3bn estate is not economically inactive and therefore pays tax continuously?I'm not an economist, but surely also removing some proportion of that estate (either through LVT or IHT) actually reduces the proportion that is economically active, thus effectively borrowing against future taxable income?
There's an additional point that much of the upset about land value is due to there being an asset bubble due to very low lending rates. The idea that you can extract that value by putting LVT seems slightly wrong - if it's a bubble, there's inherently no value in there, and taking money out through something like LVT is just consolidating effective debt into the government from where the individuals will not be able to reclaim it.
In other words, if you pop the bubble by converting it into magic money, you either consign much of the population to huge debt (negative equity) or have to pay it all back out again in rescue packages.
James_B said:
drainbrain said:
If you become rich you will receive an accompanying awareness which is of your obligation to help the poor.
No. I have no obligation in any way to help you, your wife, or your children.You may come to believe that it’s my job to dig your family out of the results of your decisions, but that doesn’t make it true.
Some individuals with massive personal fortunes have become as well known for their foundations as for their financial achievements.
And many individuals with (much) smaller fortunes also play the same tune. Almost all of these people have also rejected the idea of leaving enormous fortunes to their children.
They all to a man (or woman) understand their obligation to use their wealth to benefit the poor (or sick or malnourished etc etc). Why do you think that is? Do you think it's something they decided at a conference? Or do you think it stems from something they realised about the relationship between themselves their wealth and the rest of the world ? What do you think obliges them to create these foundations etc other than an understanding they have each reached as individuals?
Tell me, could you stand in front of a malnourished little African girl holding her baby brother's hand as he dies of dehydration and repeat to her face the part of your words I have emboldened above?
Edited by drainbrain on Wednesday 25th October 00:52
Tuna said:
edh said:
Tuna said:
edh said:
btw LVT would enable the abolition of IHT. It's a much better way of collecting tax from the Grosvenors who paid £0 on £8.3bn estate under IHT.
I assume (perhaps wrongly) that the Grosvenors' £8.3bn estate is not economically inactive and therefore pays tax continuously?I'm not an economist, but surely also removing some proportion of that estate (either through LVT or IHT) actually reduces the proportion that is economically active, thus effectively borrowing against future taxable income?
Tuna said:
There's an additional point that much of the upset about land value is due to there being an asset bubble due to very low lending rates. The idea that you can extract that value by putting LVT seems slightly wrong - if it's a bubble, there's inherently no value in there, and taking money out through something like LVT is just consolidating effective debt into the government from where the individuals will not be able to reclaim it.
In other words, if you pop the bubble by converting it into magic money, you either consign much of the population to huge debt (negative equity) or have to pay it all back out again in rescue packages.
I think you should read up a bit more about how LVT actually works. Try Friedman or possibly the IEA or Tim Worstall if you want a right wing flavour, or Churchill perhaps?In other words, if you pop the bubble by converting it into magic money, you either consign much of the population to huge debt (negative equity) or have to pay it all back out again in rescue packages.
Wikipedia says: "Land value tax has been referred to as "the perfect tax" and the economic efficiency of a land value tax has been known since the eighteenth century.[1][3][4] Many economists since Adam Smith and David Ricardo have advocated this tax, but it is most famously associated with Henry George, who argued that because the supply of land is fixed and its location value is created by communities and public works, the economic rent of land is the most logical source of public revenue.[5]"
Your other stuff about a "bubble" doesn't make sense to me - if there is one it exists with or without LVT and will "pop" anyway. LVT is for life, not just for a "bubble"
Tuna said:
Notes to myself as I read this..
Ahh, so this isn't an argument for LVT, it's an argument against neoliberalism. Riiight...
If you describe neoliberalism as rent seeking and financialisation, then yes.Ahh, so this isn't an argument for LVT, it's an argument against neoliberalism. Riiight...
Tuna said:
"The effect is to bid up land prices toward the point where the entire rental value is paid as interest." - pretty sure that's not true. Land value is a small part of the cost of putting rentable accommodation on a plot. If that weren't the case, the idea of people building up 'land banks' would actually be losing them money.
Check out the rebuilding cost on your home insurance... Land value will be a major element in some parts of the UK otherwise an identical house in Middlesborough or Kensington would have a similar price.Why would you lose money holding land when the cost of holding it is effectively zero?
Tuna said:
"The fact that ... natural resource extraction are practically free of income taxation shows that democratic political reform has not been a sufficient guarantee of socialist success." What? If I dig coal out of the ground, I don't pay any tax when I sell that coal?
Depends where you dig it out from, what subsidies / tax breaks you've "extracted" from govt I guess.Tuna said:
"The aim of public investment was not to make a profit, but to lower the cost of living and doing business so as to minimize industry’s wage and infrastructure bill." - the (massive) assumption here is that public investment costs less than an efficient market to deliver infrastructure. There's no clear proof that this is the case.
Is there proof to the contrary? Is PFI a roaring success? "efficient market" is a big assumption alsoTuna said:
"[Under Russian Socialism] The state bank created money and credit, so there was no need to rely on a wealthy financial class." From what exactly did it create money and credit? We know that printing money causes inflation.. this is magic money tree territory.
Do you know how money is created? AFAIK 97% of UK money is created by banks, who will charge you for that privilege. BoE has some good primers on money creation. Money (and debt) creation is a necessity for our economy. Money creation is not "printing money" - although it can be - not that QE has supplied much inflation (yet).Tuna said:
"China is the leading example of socialist success in a mixed economy."... Not according to many articles that say productivity is plunging and debt has doubled in the last five years.
yet you argue below"over the last century, it has delivered the largest leap in living standards globally, in health and extension of the human lifespan and the lifting out of absolute poverty of the largest proportion - and the largest number of people in the history of mankind."
Surely China is a major element here? Is it a success or not?
Tuna said:
etc. etc. etc.
The core problem here is the presumption that accumulation of wealth with some proportion of the population is bad for society. The counter argument as I understand it is that allowing the market to compete for that wealth encourages efficiencies and innovations that outweigh the cost of a small proportion doing particularly well.
One example would be Wallmart - where their aggressive expansion has delivered a wider range of cheaper goods to the whole of America. I believe that the founders' fortune is something like 3% of the value of the company as a whole. In return for that small percentage 'extracted wealth', we get massive public good in the form of easy access to low cost food and goods. Another would be Amazon - where the fight to innovate has revolutionised distribution and provided massive public infrastructure (in the form of web services) at a fraction of previous costs. For this, Bezos is made wealthy - and (another public good) promptly spends it on space transport. Both of those models appear to be reliant on the very land ownership and 'monopolisation' that the author considers to be so damaging. No socialist economy has demonstrated similar leaps in availability of and public access to food and goods.
Walmart is a pretty nasty example - if that's the best capitalism has to offer... Reliance on govt to subsidise its staff wages and real estate / infrastructure costs.. you're right, both rely on "monopolisation" - most capitalists also think monopolies are bad.The core problem here is the presumption that accumulation of wealth with some proportion of the population is bad for society. The counter argument as I understand it is that allowing the market to compete for that wealth encourages efficiencies and innovations that outweigh the cost of a small proportion doing particularly well.
One example would be Wallmart - where their aggressive expansion has delivered a wider range of cheaper goods to the whole of America. I believe that the founders' fortune is something like 3% of the value of the company as a whole. In return for that small percentage 'extracted wealth', we get massive public good in the form of easy access to low cost food and goods. Another would be Amazon - where the fight to innovate has revolutionised distribution and provided massive public infrastructure (in the form of web services) at a fraction of previous costs. For this, Bezos is made wealthy - and (another public good) promptly spends it on space transport. Both of those models appear to be reliant on the very land ownership and 'monopolisation' that the author considers to be so damaging. No socialist economy has demonstrated similar leaps in availability of and public access to food and goods.
Tuna said:
The whole argument against neoliberalism is predicated on the idea that it stifles growth and social improvement. The only problem with that is that over the last century, it has delivered the largest leap in living standards globally, in health and extension of the human lifespan and the lifting out of absolute poverty of the largest proportion - and the largest number of people in the history of mankind.
I think you're describing capitalism / state capitalism (China). Best years for growth / living standards in the western world were post WW2 when our model wasn't "neoliberal"? Unfortunately the more recent "neoliberal" approach has resulted in lower growth. Some evidence now suggests that the rate of innovation is slowing (fewer startups for example) as the big tech firms are too powerful & can easily wipe out the new entrants.Tuna said:
I'm not an economist, but this seems to be student level debating - the reason socialism hasn't worked is because they weren't doing it properly... sigh.
Edited by Tuna on Tuesday 24th October 22:15
Edited by edh on Wednesday 25th October 18:39
edh said:
I don't get this obsession with inheritance personally. I've lived my life on the assumption I won't inherit a penny from my parents. If I do, then that's great, but it won't change my life. Most people must inherit from their parents after they themselves have retired, so by then it's a bit late for "opportunity" don't you think? What's wrong with meritocracy and making your own way in the world?
While I'd agree with all that, and am constantly telling my mother to spend her money on herself rather than worrying about leaving it for us, It's a bit of a leap from there to "therefore the state should take it all and decide what to do with it".Aside from which, you won't stop people wanting to help their kids. It's part of a very successful inbuilt instinct to preserve one's genes. The rich will always find a way around it. The harder you make it to pass wealth on, the more you ensure that the rich will be the only ones able to get around it.
Tuna said:
edh said:
btw LVT would enable the abolition of IHT. It's a much better way of collecting tax from the Grosvenors who paid £0 on £8.3bn estate under IHT.
I assume (perhaps wrongly) that the Grosvenors' £8.3bn estate is not economically inactive and therefore pays tax continuously?loafer123 said:
As well as normal taxes, the Grosvenor Estate pays a real LVT of 6% of value every 10 years, and as a result doesn’t pay IHT.
Interesting, thanks. A quick Google threw up a telegraph article that suggested it was between 2 and 6 % with opportunities for deductions. Better than nothing. I guess we won't know what the actual figure is / was.edh said:
Interesting, thanks. A quick Google threw up a telegraph article that suggested it was between 2 and 6 % with opportunities for deductions. Better than nothing. I guess we won't know what the actual figure is / was.
If a business had £3bn worth of assets, what would it pay on those assets each year? Nothing - a business can retain assets indefinitely without paying a penny. In contrast, the Grosvenor payments could be around £300 million. And I suspect you don't have a clue how an estate of that size runs. They have 1000 staff to manage the place, who will be paid and paying tax themselves. They will pay tax on income from that estate. They will also be paying a small fortune in upkeep and maintenance. Basically, unlike your house, an estate of that size is a business, and like any business will be both generating value and employment and paying (sizeable) taxation.
If you re-read the discussions on LVT, the arguments are about the most efficient use of land - *not* that an estate like Grosvenor's isn't generating value. In fact a large estate would be better able to pay LVT (being run as a business) than you might (as your house generates no value of its own). It's a fundamental misunderstanding to think that LVT would level the playing field between the super rich and us mere mortals.
Unfortunately for tenants any LVT could be dealt with by landlords by raising rent or factoring the amount required for LVT into increased rents. Of course rent could be capped or otherwise legally prevented from being raised. As letting became decreasingly profitable an increasing number of landlords would throw in the towel. That might not be a great idea given how little social housing of any quality is available.
A pretty comprehensive paper on LVT was produced in Scotland a couple of years ago. Here it is. It's voluminous but easy to read.
http://www.andywightman.com/docs/LVTREPORT.pdf
There's a lot of "stuff" happening with residential property in Scotland just now. Could well be heading for something akin to what this paper outlines. Hopefully slowly enough to become effective after I'm dead. But who knows?
A pretty comprehensive paper on LVT was produced in Scotland a couple of years ago. Here it is. It's voluminous but easy to read.
http://www.andywightman.com/docs/LVTREPORT.pdf
There's a lot of "stuff" happening with residential property in Scotland just now. Could well be heading for something akin to what this paper outlines. Hopefully slowly enough to become effective after I'm dead. But who knows?
Edited by drainbrain on Wednesday 25th October 23:54
There 's been a long and detailed discussion about changing the main source of tax revenue, and that's interesting. What about other aspects of modern Capitalism that may be damaging? The private equity quick turn model has been a thing now for quite a while. Also, what sensible things could be done to reduce low pay and unfair employment practices?
https://www.ft.com/content/fbc9c146-a698-11e2-885b...
“The objective now is to raise income. In the past, when the estate needed to pay a dividend, it sold property; today, we pay investors through rental income, not capital”.
The people who own the land, control the supply of houses and thus control the prices. Their interest is rental income - A rentier society.
The stats show an increase in the PRS which shows no sign of abating. How far this will be allowed encroach into the privately owned sector only the Gov/BOE can decide.
“The objective now is to raise income. In the past, when the estate needed to pay a dividend, it sold property; today, we pay investors through rental income, not capital”.
The people who own the land, control the supply of houses and thus control the prices. Their interest is rental income - A rentier society.
The stats show an increase in the PRS which shows no sign of abating. How far this will be allowed encroach into the privately owned sector only the Gov/BOE can decide.
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