Seven Trillion Into the Breeze
GroundSwell, November-December 2008]
Desperate to appear decisive in the face of the deeper then
usual cyclical economic downturn, the U.S. government is shoveling
$7 trillion of public money (probably far more when the dust settles)
to private banks and corporations. Most world governments are
following suit. Their concern is touching; no speculator will be left
behind. Amazingly, the left and right are united in reviving this
until yesterday discredited Keynesian interventionist economics. But
it will do no good. All this wealth, too, will sublimate away in
the continuing collapse.
The world economy will recover only after the speculative wealth
built up throughout the boom years has evaporated and the productive
economy reemerges. Nothing can stop this process.
Bailouts to banks or corporations will only delay the recovery, and
in the process reward people who hold signed bad mortgages and
companies who gambled on earning speculative profits. As Naomi Klein
describes in her book Shock Doctrine, bailouts are disguised transfers
of public wealth into private hands.
Instead of bailouts or fast-tracking infrastructure to attempt to
boost the economy, governments should instead free up capital by
untaxing incomes and instead fund services by capturing the unearned
income, also know as economic rent, or the societal surplus, which now
goes mostly untaxed to those who hold monopoly ownership of land,
resources and other finite assets.
Governments could then fund services like health care and education
without taxing the earned incomes of the entrepreneurial sector and at
the same time encourage resource efficiency, reduce sprawl, and spur
local, value-added production. Since most speculation is on the
control of land and resources, disallowing speculative wind-fall
profits would help green the economy by right-pricing the use and
abuse of the global commons.
Collecting the speculative earnings (economic rent) out of the
recovering economy would even out the economy, preventing future booms
and busts, since the resulting wealth could not be used to re-inflate
the prices of real estate and other finite assets and start the cycle
And economies would become more efficient since the dead weight taxes
would be lifted off production, and since people and businesses would
be encouraged to invest creatively in the productive economy, as there
would be no unearned profits to be had through speculative investing.
Warranted infrastructure should be built, of course, however it
should not be funded by government indebtedness but rather by
collecting the up-kick in land values that the infrastructure
generates over its lifespan.
This economic collapse should be viewed as an optimal time to repair
the economic system flaw that equates speculative profits with
entrepreneurial profits. Unearned income should be collected by the
community which creates it, while earned income should be untaxed
since it belongs to the entrepreneurs who generate it.
This long overdue accounting change would precipitate multiple
benefits to humanity and the other species with which we share this