(Nov-Dec. 2008 GroundSwell)
SEVEN TRILLION INTO THE BREEZE
By Frank de Jong, Toronto, Ontario, Canada
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
over again.
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 planet.