Michael Hudson on Land, Banking and Socialism
Discussion
I read this yesterday, thought it was very good. I'm sure it won't be to everyone's liking...
I have posted recently about "financialisation" and continue to bang on about economic rent / wealth extraction. This describes it far better than I ever can, in particular with respect to banking.
https://www.nakedcapitalism.com/2017/10/michael-hu...
I think the "crony capitalism" concept that has been developed by some on the right is along the same lines.
Don't get too triggered by the "S" word
I have posted recently about "financialisation" and continue to bang on about economic rent / wealth extraction. This describes it far better than I ever can, in particular with respect to banking.
https://www.nakedcapitalism.com/2017/10/michael-hu...
I think the "crony capitalism" concept that has been developed by some on the right is along the same lines.
Don't get too triggered by the "S" word
turbobloke said:
Not entirely convincing (diplomatically speaking); the reasoning by assertion e.g. "the alternative to socialist reform is stagnation and a relapse into neofeudal financial and monopoly privileges" and description of China as some sort of socialist beacon do it no favours.
Early economic reforms in communist China retained state dominance in terms of large-scale interests but more recently the privatisation of industry occurred rapidly, particularly during the 1990s, and continued albeit more slowly thereafter...fhe state's share of industrial production fell from ~100% in 1978 to below 40% by 2000 and was already approaching 30% in 2004. Their economy is now far more capitalist than socialist.
The article says "China is the leading example of socialist success in a mixed economy." but I think is more concerned with preventing rentier effects not ownership of industryEarly economic reforms in communist China retained state dominance in terms of large-scale interests but more recently the privatisation of industry occurred rapidly, particularly during the 1990s, and continued albeit more slowly thereafter...fhe state's share of industrial production fell from ~100% in 1978 to below 40% by 2000 and was already approaching 30% in 2004. Their economy is now far more capitalist than socialist.
I don't pretend to understand China, but it appears to be neither capitalist nor socialist but some sort of state capitalist hybrid. Appears that you can only function with the approval of the state.
He covers a lot of ground in a short 'ish article - hard to discuss the economy of USSR without reference to the waves of imprisonment and murder of tens of millions, the failures of central planning, or in China's case the lunacy of the "great leap forwards" for example..
fblm said:
I trudged on for a bit past that and don't mind admitting skipped to the conclusion; "Markets have not recovered for the products of American industry and labor since 2008.". Except American industrial output had recovered the 2008 high by 2014 and is higher still today. Where is it all going if there's no market for it? Naked Capitalism is normally pretty good though
I had a quick look for some data. I found the Fed's Industrial Production Index - is this what he's referring to? - as ever it all depends.... looks like there was a peak in 2014 (~107) & it has dropped again (currently ~105) to below Dec 2007 high of ~106.http://www.macrotrends.net/2583/industrial-product...
I like NC, ...no party line apart from healthy scepticism, with informed contributors (I thought the series of articles on uber, and on autonomous vehicles, were very good) I think i first read it after following a link that you posted on here some years ago
James_B said:
richie99 said:
I'd be willing to be that the ones paying most of the income tax are also the ones with the wealth. We all know they will end up being screwed twice over. Progressive to me is just confiscating from those who work hard to fund those who don't.
Those who have done what the state seems to advocate, use education and then career planning and sensibly applied effort to get ahead would be screwed again if we switched now to taxing wealth.I come from a bog-standard Northern comp, and nowadays pay about 45% overall tax rate on my earnings. I was wiped out in 2008, but am back to doing well now, and continue to pay a huge bill for the good of society.
I'm not allowed to fund my pension, won't get child allowance, don't get a tax-free income tax allowance, but am still managing to save hard for my future.
I'd possibly like to give up the city job in a few years and live off what I've accumulated. I'll not be happy if the government decides to tax it again.
I'd likely take it away somewhere else, in fact.
& finally "why does it cost so much to buy / rent somewhere to live?"
Hudson wpuld argue that it's because rent extraction is highly prevalant in our econony & also taxed very lightly, You're paying for it...
Forget a tax on wealth (bad idea very hard to even define let alone implement) but tax land ("least bad tax", & you definitely can't hide it offshore) and we might just have a solution...
James_B said:
They are so high because so many people nowadays feel that “the rich” should be soaked.
Whether it’s on our assets, or outperform earnings, that’s the political reality nowadays. Benefits are means tested, as “the rich” should get nothing back out, stamp duty has been reformed to hit “the rich”, Tax allowances have been removed from “the rich”, and it’s seen as self evident that society’s problems come from “the rich”.
Changing how they hit us is just tinkering.
Ah, so you think you're one of "the rich"?Whether it’s on our assets, or outperform earnings, that’s the political reality nowadays. Benefits are means tested, as “the rich” should get nothing back out, stamp duty has been reformed to hit “the rich”, Tax allowances have been removed from “the rich”, and it’s seen as self evident that society’s problems come from “the rich”.
Changing how they hit us is just tinkering.
JagLover said:
Johnnytheboy said:
I'm afraid I tend to see politics - as it actually affects policy ideas rather than overarching ideologies - through a very cynical lens.
It strikes me that rich left-wingers are more likely to live in cities and have small land areas to their names, and therefore a land tax will seem like a very fair way of redistributing wealth.
If they instead thought you should pay a fixed proportion of the value of your property per year I'd see less partisanship.
If I'm sticking to the ideological, an obsession specifically with land and its ownership is a very old Marxist obsession resurrected, that almost seems to hark back to an era when the ruling classes by definition owned all the countryside.
If it is a tax on the unimproved value of land then the value of a plot of land in the centre of a city is going to be worth allot more than a far larger plot elsewhere. It strikes me that rich left-wingers are more likely to live in cities and have small land areas to their names, and therefore a land tax will seem like a very fair way of redistributing wealth.
If they instead thought you should pay a fixed proportion of the value of your property per year I'd see less partisanship.
If I'm sticking to the ideological, an obsession specifically with land and its ownership is a very old Marxist obsession resurrected, that almost seems to hark back to an era when the ruling classes by definition owned all the countryside.
Johnny you might even find yourself better off.. Don't rely on the scare stories from the Daily Mail. Your large garden is worth next to nothing. get planning permission for seven houses and it's a different matter..
btw the "ruling classes" still own a fair bit of land - check out Grosvenor Estates, or Cadogan...
loafer123 said:
edh said:
You might consider asking 'why are my taxes on work(earned income) so high?" Don't forget employers NI as well. Then "why do I pay more tax on consumption out of my already taxed income?"
& finally "why does it cost so much to buy / rent somewhere to live?"
Hudson would argue that it's because rent extraction is highly prevalent in our economy & also taxed very lightly, You're paying for it...
Forget a tax on wealth (bad idea very hard to even define let alone implement) but tax land ("least bad tax", & you definitely can't hide it offshore) and we might just have a solution...
The problem with a Land Tax is that income and capital do not correlate, so people like pensioners and people who have downshifted their careers can’t afford the cashflow to pay an ongoing tax on their capital assets.& finally "why does it cost so much to buy / rent somewhere to live?"
Hudson would argue that it's because rent extraction is highly prevalent in our economy & also taxed very lightly, You're paying for it...
Forget a tax on wealth (bad idea very hard to even define let alone implement) but tax land ("least bad tax", & you definitely can't hide it offshore) and we might just have a solution...
One response is to say “make it means tested”, but then it is just a wealth tax.
Another is to say “well they will have to move, then”, but that is forcing changes to people’s lives and both unfair and unlikely to pass through and government.
loafer123 said:
It is also worth pointing out that one of the arguments for a land tax is the slow velocity of development on permitted plots. There are many, many reasons for that, including viability, liquidity, finance, infrastructure, planning conditions, etc etc. Introducing a Land Tax to solve this problem would further reduce permissions as landowners and developers seek to avoid triggering it.
The monoculture of large housebuilders will never build faster than the rate which maximises their profits. Why would they?I think we established some years ago on here that large housebuilders own roughly 50% of land with permissions, the rest mainly held by land speculators. Currently it costs them nothing to hold this land. Bringing this into use, and encouraging small builders, self builders, factory built housing, would make a huge difference.
loafer123 said:
The mooted suggestion over the weekend for a huge boost to council housing is a better way of gaining housing starts which could really positively impact the market by reducing pressure on private rents.
It is certainly a good idea. Where do they get the land for this? Wouldn't it be better if the land was cheaper? LVT is good at capturing planning gain also.Hereward said:
Does anyone have a handle on the mooted Land Values Tax calculation/methodology? It's keeping me awake at night. I'm assuming my 5-acre Surrey home (along with everyone else who owns an upper-band property) is right in the crosshairs.
I did find an internet link at election time and it suggested a tax of about £30k/yr based upon my property value, but this might have been sensationalist.
I thought I paid a lot of tax on my property already - the Stamp Duty upfront and the current £3k/year Council Tax. I'm not sure I could swallow a hike to £30k/yr (presumably payable from net salary) and the resultant destruction of the market value of the property.
You've had a good run with your bargain council tax payments for the last 20 years...I did find an internet link at election time and it suggested a tax of about £30k/yr based upon my property value, but this might have been sensationalist.
I thought I paid a lot of tax on my property already - the Stamp Duty upfront and the current £3k/year Council Tax. I'm not sure I could swallow a hike to £30k/yr (presumably payable from net salary) and the resultant destruction of the market value of the property.
5 acres or tiny plot, it matters little, it's about value not acreage. I would certainly expect your liability to increase...
But
LVT should be used to reduce other taxes. As I tried to suggest earlier, the intention of LVT is to move the burden of taxation from work and consumption onto land and rent.
There is a significant proportion of the economy that is undertaxed (And arguably detrimental to economic performance). LVT tries to address this.
drainbrain said:
V8 Fettler said:
I doubt if most UK voters currently want a fairer society.
Probably most of the poorer voters do. The trick is to get them to not care, be content with their lot, and blame themselves for being poor in the first place. Nothing worse in a capitalist culture than some pov mouthing off about 'inequality'.
turbobloke said:
Fittster said:
turbobloke said:
That's one viewpoint, one among many and certainly not the absolute truth hinted at.
Another viewpoint holds that capitalism, including in its present form, has been good enough and done well enough to see off the alternatives including Corbyn-McDonnell marxism. In this alternative perspective, the failure rests with decades of left-liberalism including from UK governments regardless of tie colour, with its empty promises accompanied by patting little people on the head rather than listening to them. This has been misinterpreted by the liberal-left, thinking that it knows best at all times and now joined in the UK by the hard left, as a failure of capitalism rather than a failure closer to home. For contemporary left-liberal misdiagnoses and resulting failures of interpretation - resulting in political failure - see Brexit, Trump, Austria, AfD and so on.
Just another viewpoint, not absolute truth.
Do you really the policies advocated by Corbyn-McDonnell are Marxist? Another viewpoint holds that capitalism, including in its present form, has been good enough and done well enough to see off the alternatives including Corbyn-McDonnell marxism. In this alternative perspective, the failure rests with decades of left-liberalism including from UK governments regardless of tie colour, with its empty promises accompanied by patting little people on the head rather than listening to them. This has been misinterpreted by the liberal-left, thinking that it knows best at all times and now joined in the UK by the hard left, as a failure of capitalism rather than a failure closer to home. For contemporary left-liberal misdiagnoses and resulting failures of interpretation - resulting in political failure - see Brexit, Trump, Austria, AfD and so on.
Just another viewpoint, not absolute truth.
If you re-read the post, you'll see that I described a particular flavour, not a representation of some absolute, universal and singular definition which you appear to be referring to. Where and what is that? If we have McDonnell's hands on the UK economy they are the hands of a self-confessed marxist who has advocated insurrection to bring down an elected government and called for property to be confiscated.
McDonnell is outed as a liar by faking news that he's not a Marxist at the link below, with another revealing vid to go.
https://order-order.com/2017/05/07/mcdonnell-lies-...
http://www.huffingtonpost.co.uk/entry/john-mcdonne...
On this basis, where the strategy is to hide the truth / hide reality, how naïve does a person have to be to accept the idea (as put forward by McDonnell) that unlike Marx he merely wants to “transform” the capitalist system rather than work at destroying it?
Looking at what Corbyn and particularly McDonnell have said, and at the Labour manifesto for their failed general election strategy, what can be seen includes punitive taxes, nationalising businesses and attacks on private property. This is the Corbyn-McDonnell Marxism that I referred to above.
So they are lying to us, policies in manifestos aren't the real policies, & they will be able to subvert parliament and do whatever they want in pursuit of their "marxist" paradise?
Even if it was true, what it would need of course, is for a govt to pass some legislation that gave the executive powers to amend Acts without recourse to parliament..but no-one would be that daft would they?
W124 said:
That's the idea. That the assets are spent. The money is used. Anyways - the principle is not that things cannot be left. The principle is that doing so, in the form we currently choose, is bad for society as a whole. It makes true equality of opportunity (not outcome) absolutely impossible.
To be honest, I'm kind of in two minds about it.
I make most of my money from royalties. On music. There was a recent manifesto pledge by the Greens to drastically limit the length of copyright. For similar reasons. Got me thinking - after my initial outrage I realised that my skin in the game was causing me to see it from a skewed perspective. I still think the degree of change they proposed was the problem. The numbers were wrong, the rate of change to strong. The actual aim was laudable.
I would be hit by LVT. That does not mean I can't see the sense in it.
Of course IP is another significant area of rent seeking activity... patent trolls being the worst I guess. Limited IP protection is necessary I'm sure. To be honest, I'm kind of in two minds about it.
I make most of my money from royalties. On music. There was a recent manifesto pledge by the Greens to drastically limit the length of copyright. For similar reasons. Got me thinking - after my initial outrage I realised that my skin in the game was causing me to see it from a skewed perspective. I still think the degree of change they proposed was the problem. The numbers were wrong, the rate of change to strong. The actual aim was laudable.
I would be hit by LVT. That does not mean I can't see the sense in it.
loafer123 said:
edh said:
Of course IP is another significant area of rent seeking activity... patent trolls being the worst I guess. Limited IP protection is necessary I'm sure.
So if I invent a widget after years of graft which saves thousands of lives what sort of IP protection should I get?What about a bit of gaming software?
There does appear to be a lot of daft IP activity, particularly in the tech sector. Seems to be used to attack competitors, not protect their own ideas / products.
IP of AI and automation will be an interesting one. Huge profits to be made.
loafer123 said:
I think the fundamental problem with LVT remains that it is aiming to bring down house prices and tax wealth and yet whole swathes of people who have prudently saved and bought houses in expensive markets, and who have little disposable income, including most of Greater London, will be the most punitively affected leading to substantial negative equity and distress.
That is what makes it unimplementable.
A wealth tax has the same problem - wealth does not equal income, and a wealth tax favours those who spend and fritter and punishes those who save and invest.
I agree it's a big issue. I'm not too worried about notional losses on windfall gains though. Recent buyers who have been sucked into the bubble would be worst affected & would probably need help. An even bigger problem is the survival of the banking system, who would need to massively write down their property loan book That is what makes it unimplementable.
A wealth tax has the same problem - wealth does not equal income, and a wealth tax favours those who spend and fritter and punishes those who save and invest.
We managed to print money following 2008, it would probably be the answer again in some shape.
turbobloke said:
As I'm sure you realise there is some nonsense in it also!
Firstly there's the question of how to disentangle the intrinsic value of land from what we see and semi-automatically associate with it: the transaction values when people buy/sell property on land.
I don't see why this is a problem. We have a whole profession whose job it is to value land and buildings. Every house insurance policy has a rebuilding value. Every year there are tens of thousands of houses sold, giving us masses of data - comparing similar houses in different areas across the UK gives us an indication of land valuesFirstly there's the question of how to disentangle the intrinsic value of land from what we see and semi-automatically associate with it: the transaction values when people buy/sell property on land.
turbobloke said:
At the point of introduction, a person landed with a LVT bill may have made no contribution to the value of their land (or the property on it) and depending on the point in time, may have owned it for mere weeks or months and therefore not been in ownership when its value increased markedly; the value will then go up or down largely outside their control. They will have already paid SDLT....
This is the principle of LVT - you don't have any control over land values and therefore you benefit from their increase & pay additional LVT that year, and when land values fall your LVT falls. I don't see it as a problemEdited by turbobloke on Monday 23 October 21:32
LVT helps bring marginal land into use. Consider low income / de-industrialised areas of the UK. Any business is still hit with rates, which can be a significant element of their costs. Any improvements to premises can result in an increase in their rates. Under LVT they would be likely to have a much lower bill, theoretically zero. This might make the difference between a viable business and not. This employment, and the multiplier effect, helps regeneration, and is much simpler and less liable to gaming than enterprise zones or similar IMO.
In broader terms, returning to the mooted crisis in capitalism, I'm sure there's a re-think needed.
When we see stuff like the RBS GRG scandal, the capture of govt by financial interests under new Labour, the failures of Serco/G4S and the rest, the recent asset stripping of schools by a MAT, something needs to change. Government is working to serve the interests of this crony capitalist class, not the people.
Fundamentally we may also need to question the assumptions that growth is good.
I work less than I did 15-20 years ago, and earn less, but have a much better life. I'd thoroughly recommend it. How much is "enough"?
Then there's the challenge of AI and either job losses on a massive scale, or an even more polarised society between the people who own the AI IP and the masses. The Tech companies seem to be touting UBI as a solution, but how do we pay for this if we don't tax the wealth of the 0.1% (or maybe 0.01%) who are sucking it all up. I'd suggest concerted action on tax havens / profit shifting and dodgy accounting is needed as "only the little people pay taxes".
When we see stuff like the RBS GRG scandal, the capture of govt by financial interests under new Labour, the failures of Serco/G4S and the rest, the recent asset stripping of schools by a MAT, something needs to change. Government is working to serve the interests of this crony capitalist class, not the people.
Fundamentally we may also need to question the assumptions that growth is good.
I work less than I did 15-20 years ago, and earn less, but have a much better life. I'd thoroughly recommend it. How much is "enough"?
Then there's the challenge of AI and either job losses on a massive scale, or an even more polarised society between the people who own the AI IP and the masses. The Tech companies seem to be touting UBI as a solution, but how do we pay for this if we don't tax the wealth of the 0.1% (or maybe 0.01%) who are sucking it all up. I'd suggest concerted action on tax havens / profit shifting and dodgy accounting is needed as "only the little people pay taxes".
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.
a. It is used in some countries / cities, so can workb. We used to have domestic rates, a much more progressive form of property tax than current council tax. They worked.
c. There are well understood options for old people in big houses to roll up LVT payments.
loafer123 said:
Far from encouraging regeneration, it also discourages people from bringing forward planning applications as they would increase their tax bill without necessarily having the revenues to pay it until much later when and if the consented scheme get's developed.
Please explain why my example above would not encourage regeneration?There is a lot of land with permissions already granted. Lots of brownfield sites. Lots stay empty or unused for years. LVT incentivises optimum use.
As for new builds LVT might well increase the tax bill but would also lower land costs. Might reduce costs incurred before sales revenue arrives.
loafer123 said:
You appear to believe the hype that developers choose not to build out permissions for nefarious reasons. My experience is that developers love to build and make profits, but need funding, stable construction prices, willing buyers to buy houses, repay their construction loans and move on.
I wrote that "The monoculture of large housebuilders will never build faster than the rate which maximises their profits. Why would they?" I didn't accuse them of being nefarious, just rational as land supply is finite.But we also have been told on a past PH thread that builders own ~50% of the land bank, the rest is owned by property speculators, sorry "investors".
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.
loafer123 said:
I'll give you a practical example.
I dealt with a large site for over 300 flats on the south coast. Despite a live and valid planning permission, it was not viable to build and is unlikely to be for some time because of the lack of buyers.
Now you could argue that as a result it had a nil land value, but there were also many ways of arguing it had a value. In those circumstances, why would a landowner take the risk to get a permission in the likelihood that they would get charged LVT if the value of the land was argued and, even at the point that it had a minimal value, that LVT would be payable for some time before it was worth developing?
a few thoughts - obviously I don't have any info on the back storyI dealt with a large site for over 300 flats on the south coast. Despite a live and valid planning permission, it was not viable to build and is unlikely to be for some time because of the lack of buyers.
Now you could argue that as a result it had a nil land value, but there were also many ways of arguing it had a value. In those circumstances, why would a landowner take the risk to get a permission in the likelihood that they would get charged LVT if the value of the land was argued and, even at the point that it had a minimal value, that LVT would be payable for some time before it was worth developing?
1. LVT might have stopped you spending lots of time and effort on a speculative planning application for a scheme with no buyers (at the price you wanted to charge)
2. The scheme didn't get built, LVT or not. That wasn't really the issue.
3. The permission by itself might have satisfied the land owners objectives i.e. an uplift in land value.
under LVT, assuming you had the planning permission, you would have the following options
1. Hold on to the land and speculate that your scheme would come good and pay LVT, which is designed to capture planning gain, so working as intended.
2. Devise a new scheme that had buyers, maybe taking a lower profit? Putting the land into use for housing - good outcome
3. Sell the land to a buyer who would do 2. - again a good outcome
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?Gassing Station | News, Politics & Economics | Top of Page | What's New | My Stuff