The Geonomist Volume Eleven Issue Three

Geonomics is …
… a scientific look at how we divvy up the work and the wealth, how some of us end up with too much or too little effort or reward. That's partly due to Ricardo's Law of Rent, showing how wasteful use of Earth cuts wages. And it's partly due to how a society's elite runs government around like water boys, dishing out subsidies and tax breaks. While geonomists look political reality right in the eye, without blinking, conventional economists flinch. When Paul Volcker, ex-chief of the Federal Reserve, moved on to a cushy professorship at Princeton cum book contract, the crush of deadlines bore down. So Volcker asked a junior associate to help with the book. The guy refused, explaining that giving serious consideration to policy would ruin his academic career. The ex-Fed chief couldn't believe it and asked the department chair if truly that were the case. That head honcho pondered the question then replied no, not if he only does it once. And economics was AKA political economy!

The Council of the City of Philadelphia took another step closer to shifting their property tax from one bearing the same on land and buildings to one mainly on the value of locations (LVT). On September 12, the council passed Resolution 020509 to hold hearings on LVT, how the tax shift encourages development and discourages blight and sprawl, and to seek recommendations from specialists and business people, even citizens and community groups. Promoter Jonathan Saidel, four-term City Controller, is coordinating a detailed statistical examination of Philadelphia's property assessments by a research team from Drexel University. The analysis is funded by his office and community groups, business organizations, and foundations. Joshua Vincent, president of the geoist Center for the Study of Economics, has been invited to testify. (Incentive Taxation, Oct, CSE, Philadelphia) Credit for initiating this process goes to GeoSoc subscriber Alanna Hartzok who a couple years back organized a conference attended by about 100 local honchos including Saidel.

When Oregon homeowners got the annual property tax bill this fall, the main local daily ran an article telling owners of newly built homes, usually richer than owners of older homes, how to beat down what they owe their community. Such a nice gift for Christmas! But it's not just the media; most people believe that Rent, the values generated by society and that attach to land, are there for the grabbing. While grasping for Rent – speculating, investing, mortgaging – seems like business as usual, often it turns brutal. In industrial societies, siphoning so much money out of production, into debt and Rent, throws people out of work and into suicidal despair. In agrarian societies, landowners, with backing from police and military, butcher unarmed peasants. Between societies, the entrenched elites wage war for oil and direct terrorism for patches of “holy” land. For humanity to rewrite this script, a critical mass must realize, and the mass media must repeat, that the taxes we have a right to dodge are those on our homes and businesses, the values that individuals create. But the worth of Mother Earth is all of ours, to share, now and forever. May Santa Claus put that in everyone's stocking.

Cynics that I am, the last issue passed on as gospel a claim in the Toronto Star that Norway recovers five times as much oil rent as does Canada's Alberta. GeoSoc Stalwart Gerry Shaw of Calgary, AB, shows that ratio to be exaggerated (Nov 29): Norway has more oil, Alberta more gas; using data when gas prices are high, then both places' rental royalties come out pretty even. Regardless, the two governments do not compete on a level playing field. Alberta's wells are old and low (closer to the margin where Rent is low), Norway's new and high (closer to the prime where Rent is high). Much Albertan oil is locked in sand; since extracting it is so costly, the province did not invest public revenue but set profit-sharing to attract private capital. And Norway can levy taxes that a mere province cannot.

John Fisher, Canadian Green Party leader (Oct 29): “Our annual geoist conference's attendance was over 100, not under. Speaker Paul Hellyer was a Grit (Liberal) in the Pierre Trudeau cabinet. Under 'Make mansions tax-free?', what's the name and date of Mason Gaffney's paper?” It's “The Taxable Capacity of Land” in Land Value Taxation, Patricia Salkin ed., 1993, Albany Law School, Government Law Center. And your conference was splendid.

David Hopkins, South Hadley, Massachusetts (Oct 4): “Thanks for your stimulating newsletter. As someone who lived, studied, and worked in India for many years, I wanted to point out that "Hindi" is the name of one North Indian language. Hindu is the religion. And 'Indian' is the appropriate word for a national of India. Keep up the nonetheless good work!”

Meta Heller, Olympia, WA lobbyist (Oct 30): “I received the fall issue in the mail this afternoon and read it cover to cover. It is clever, interesting, and informative. I thought you were wrong in analyzing the book, Silent Theft, by David Bollier. We must establish our dominion over commons in many areas, not just land, or we are done for. All I know as a community organizer is that we must garner allies. This is not a matter of clever articles but of organization.” Face-to-face interaction is the essence of any movement. We need more sales people. I meant not that we leave genes, air, and sea out of the commons but that Bollier, Nader, et al. bring land in.

As the French say, the more things change, the more they stay the same. For millennia now, groups in power in every country made their fortunes by privatizing Rent. From the Forbes Magazine list of the richest people: The 1980s boom in real estate and construction made Japan's billionaires. Russia's kleptocrats, using their banks to put up the money, got title then sold off Russia's oil, gas, nickel, and other minerals. The son of a former vice-premier made himself China's richest with $850 million from infrastructure and real estate. Seven of the 10 richest Chinese privatized Rent; number six became a half-billionaire in banking. China's premier, who had demanded tax audits of these Rent-winners, was enraged by the results. (Perhaps for being left out?) (Financial Times, Oct 25; via Michael Hudson) Once a fortune has been amassed, trying to tax it back is like closing proverbial doors after departed cows. When land value rises, that's the time to charge owners the full-market value for excluding everyone else from their sites. Some big owners, however, as in Afghanistan, rather than pay Rent shoot lead. Then most central governments exempt owners and tax trade. Better, tho', would be to collect urban Rent, pay residents a dividend, and lead by example.

To avoid taxes, corporations buy high and sell low. They buy tweezers from Japan at $4,896 a unit and sell missile launchers to Israel for $52 a unit. Those losses saved big business over $53 billion in U.S. taxes, up from $45 billion in 2000 and $35.7 billion in 1998. The method to their seeming madness is to deal with their own overseas subsidiaries, keeping profits in the firm and out of reach of the IRS. Criminals use the loophole to launder money. By importing gold at vastly inflated prices, they export funds from the U.S.; they even use licorice roots. Terrorists can cover up their financing the same way. (AP via The Progress Report)

When a loophole closes, even a star can get caught: Pavarotti, Peter Max, Willie Nelson, now baseball's San Francisco Giants ex-manager. Dusty Baker loses the World Series, loses his job, then loses his argument with the IRS. On the advice of his brother, Dusty had invested in tax shelters in the early 1980s that were disallowed in 1981 and 1982. The tax liabilities are under $400,000, but over the years the interest has reached over $600,000. At least the $1 million plus that the revenue agents want is a mere fraction of his new annual salary with the Chicago Cubs. (AP Nov 8) If these celebrities could just use their pulpit to decry taxation upon value added – and the spastic dance that goes with it – and extol charging one for value subtracted. Collect before one harvests a resource, then don't worry about how much money they may make.

Foreigners, too, invest in American buildings when stock markets implode. From 1997 to 2001, their holdings rose from $38 billion to $44 billion (16%), which is still less than domestic owners or pension funds. Most overseas investment comes from Japan, Northwest Europe, Canada, and Latin America. In the last five years, rich Germans, Canadians, and Latins have upped their holdings more than others. U.S. buildings pay higher yields and outpace inflation. Yet as the global rich pour money into gringo property, they drive up its price, even as vacancies rise and rental rates fall, and drive down its yield. Realtors claim the flow from abroad benefits the US economy, providing extra cash to sellers and jobs for realtors. (Steve Kerch, CBS MarketWatch in Chicago, Nov 13; thanks Wyn Achenbaum) All those billions, doing nothing but inflating the cost of buying a building, when they could be redirected into advancing technology, retraining workers, upgrading infrastructure, or developing the Third World. These real benefits are just a tax shift away, since investors flee taxes and seek profits. If we un-tax output and recover Rent, investors will fund the transition to a world we all want.

Two economies reign in America: one for trendy enclaves, the other for everywhere else. While demand for retail space in most of New York City has fallen, in Manhattan on Fifth Avenue and East 57th Street, shops cost more than anywhere else on the planet. At that corner, busy and crowded with rich people, leases average $700 per square foot per year. On Madison Avenue, leases rose 25% from 2001, the fastest in the country, reaching $650 psf. Paris' Champs-Elysees is a distant second at $577 psf. Third is Causeway Bay in Hong Kong, with retail leases of $500 psf. Oxford Street in London at $434 is fourth and Pitt Street Mall in Sydney at $314 is fifth. Next is Manezhnaya Square in Moscow at $279. In 44th place is the Latvian capital of Riga, where retail leases are a bargain at $39 per square foot. (Steve Kerch, CBS MarketWatch in Chicago, Nov 14, via Wyn Achenbaum) And what did landowners do to be able to charge so much? Nothing. Land value reflects the success of their customers.

To make up the difference for under-assessing the buildings of bribe-paying landlords, corrupt New York assessors upped their assessments of other properties; they pegged the Vanderbilt at $72.65 a square foot and doubled that for the Trump World Tower, $149/square foot. The heavier tax liability lowered the price that Donald Trump got for the condos in the building, eventho' a cozy two-bedroom fetched $1.5 million ($1,046 psf). Still hungry, he sued the city for $500 million. Yet the Vandy cannot compare to the 72-story Trump property, which he promotes as the tallest building and most expensive apartments. As beautiful as his building may be, since it's only on First Avenue its evaluation equals that of a less lovely one on Park Avenue, where condos command some of the highest prices in the city. (New York Times, Nov 8; via Wyn Achenbaum) What did we learn? First, value comes from location, location, location; it's not the cost of labor and materials that's rocketing price per square foot into the stratosphere – $1,046! Second, selling price and assessed value – only $149! – can be wildly disparate. And third, the part of the tax on the location part of property lowers prices. On that basis, poor Don may win his suit.

People annoyed by the loud voices of children playing outside are out numbered by people happy to live near a playground, softball field, basketball court, sledding hill, and hiking trails. So happy, they pay more for homes closer to a park. Conversely, planner Deb Sielski found, people paid less for similar homes at greater distances from parks. She analyzed Milwaukee residential property assessments from 1997 to 2001. Since the 1970s, twenty studies in other states also concluded that proximity to parks boosts property values. For the jurisdiction levying a property tax, land-value tax, or somehow charging Rent at some low rate, the higher value of houses within walking distance of a park generates a few extra score thousands of dollars which could be spent on maintaining the park. (The Milwaukee Journal Sentinel, Oct 17, via Wyn Achenbaum) So a government relying on site rent, rather than permit border-to-border building, would zone for ample open space. Then overall site values would be higher and public revenue heftier.

In the 1990s, many poor people got high-interest loans to buy homes. Now out of work, some can't pay the mortgage. In the three months that ended in June, creditors began foreclosing on 134,885 homes, about 4 in 1,000 — the highest rate in the 30 years. At midyear, a record number of families, 220,720, have declared bankruptcy to hold on to their homes, up 8% from last year. (New York Times, Nov 23) The people who loaded up their credit cards also set new records for bankruptcy. Filings the last three months surged 30% from the third quarter 2000. Last year hit 1,547,669, up 7.7% from the previous record of 2001. So banks last quarter wrote off $3.9 billion bad credit-card loans, a 35.6% jump compared with the third quarter of 2001.

While individuals and businesses go bankrupt, banks raked in $23.4 billion, up 34.8% from the July-September period last year and just a hair under the record they set in the previous quarter of this year. And that's with a sharp drop in income from banks' international operations. (Oregonian, Nov 29) Even with “low” lending rates (6% used to be high), banks gorge on the much greater volume of loans to homebuyers and re-financers. With so much money going to deep debt and steep Rents – and not rewarding real production – can this economy really be in recovery or will it bang along the bottom a few more years?

Ranchers using public lands acknowledge that they pay the BLM only a 10th the going market rate. This sweetheart deal wastes money and nature. The cattle grazing on public land are remove vegetative cover and compact soils, reducing infiltration and increasing erosion. Their pollution of streams and wetlands violates the Clean Water Act. So the Forest Guardians, Western Watersheds Project, and the Committee for the High Desert sued the Bureau of Land Management for granting grazing permits for nearly 67,000 animal-unit-months on nearly 2.1 million acres. The agency has acknowledged that this public land in Idaho – home to bighorn sheep, pronghorn antelope, redband trout, red-tailed hawks, sage grouse, and well over 300 other species of wildlife – is already devastated by overgrazing, fire, and drought. The territory, which includes the remarkable canyons of the Bruneau and Jarbidge rivers, is familiar to hunters, hikers, anglers, and birders. Private ranch corporations such as Brackett Ranches and J.R. Simplot, the potato billionaire, use it cheap for a feedlot. Again the BLM has put politics above science.

Nostalgic Congress revived once expired subsidies for another year. They gave shepherds $40 million for wool for uniforms, eventho' they're now stitched out of synthetics, and to oil companies a tax credit of $1 billion for sprinkling waste fuel on coal. (Progress Report)

Where do subsidies come from? From Rent. In Oregon, the biggest donors in the recent races, totaling $3 million ($2.4 million to Republicans) out of $11 million, were owners of Earth; the other eight million bucks came from other privilege holders, like drug companies, and many small businesses battling taxes. (The Oregonian, Oct 28)

Subsidies are guided by the personal touch. Before entering politics, Bush's backers sold him stock in Harken cheap, pumped it up once, then Bush sold for a huge gain and the stock dived, then it briefly buoyed up again, making it seem W was just lucky. Yet the stock was re-flated by Harvard endowment, which was headed by Robert Stone, oilman and Bush Sr. buddy. (Paul Krugman, NY Times, Oct 11). For a $1.8 billion federal loan guarantee, United Airlines hired the best friend of House speaker, J. Dennis Hastert, who lobbied everybody, even Greenspan and Bush – for naught. The guys for the other airlines kept the public purse shut.

After we reported on the front page of our summer issue that Alaska's oil dividend – over $6,000 last year for a family of four – kept Alaska's income gap from widening as it has everywhere else in the nation, then the Anchorage Daily News passed on this observation, then the Associated Press picked up the story and sent it out nationwide (September 25; via Gary Flo). Probably Maureen Clark, the author of the article, put two and two together independently of your editor. But it's encouraging to see the world catching up to those ahead of the curve.

Of course, a locality, state, or nation need not be sitting above bountiful oil deposits to pay Rental dividends to citizens. Check out the fantastic explosion in location values in and around major cities, especially along the coasts. For a prime site on the beach or in Manhattan, people pay $12,000,000/acre and up. Tap that geyser and you could pay each tenured voter about $1,000 per month. Receiving it, Americans would have the security to negotiate a workweek that suits them, without needing a note from their doctor. To cope with the loss of leisure, employees call sick then enjoy the day off. The cost of absenteeism reached an all-time high in 2002, $789 per worker, up 30% from 2000. (Oct 29, USA Today, whom I salute for publicizing America's waning support for the Bushese assault on civil liberties.) Now employers cover that loss, but it should be owners of Earth, who'd pay Rent into the public treasury, which would create a fund for a Citizens Dividend. That's how you change the world.

Drawing together national organizations working on housing, civil rights, faith-based action, worker rights, and economic development, the National Neighborhood Coalition, based in Washington, DC, in their new Smart Growth Tool Kit recommend fixing sprawl by fixing the property tax. ”The 'split-rate' property tax, another tax reform component that shows promise, taxes land more heavily than what is built on it. The split-rate tax encourages landowners to develop their property more intensively.” The kit offers a strategy for introducing this two-rate tax. The 134 page loose-leaf document costs $20. Contact leah@neighborhoodcoalition.org; Leah Kalinosky; 202-408-8553; Thanks to Walt Rybeck)

In the Federal Reserve Bank branch of Boston's Regional Review (Q1 2002), "A New England Approach to Preserving Open Space": "To revive New England's cities and to discourage sprawl, there is 'two-rate property taxation', in which cities tax buildings at a lower rate than lot values. A lower tax rate can spur renovations and new construction in already-developed areas. Pennsylvania has had such a law since 1913. If similar legislation were enacted in New England, cities like Hartford, Lawrence, and Waterville could encourage economic development." Author Richard England, Professor of Economics and Natural Resources at the University of New Hampshire, joined us at the Environmental Tax Conference in New Hampshire where Bill Batt, Tony Vickers, and myself played roles. (Georgist News, Dec 1) The World Bank Policy Research Working Paper 2807, “The Role of Natural Resources in Fundamental Tax Reform in the Russian Federation”, by Benoit Bosquet, recommends that the Ruski federal government get more Rent from oil and timber, collaring the corruption now draining it away.

While businesses worry that being singled out to pay a pollution tax may disadvantage them, they may worry about nothing. The UK imposes its Climate Change Levy that “does not lessen sectoral competitiveness”, said those attending a conference in Berlin of the German federal government and the OECD (June 27). Joe Kresse, former trustee of the Foundation for Global Community, head of its Economics Team set up to judge business by its impacts on people and planet beside profit, in a talk he gives around the country, “Business as if the Earth Matters”: “We ought to shift from taxes on income to taxes on carbon, the use of virgin materials, and the production of waste and pollution. It 's a no-brainer. Why would you tax people for working? You want people to work. If you got rid of income and payroll taxes, you could employ more people because the cost per employee would be lower for every dollar of take-home pay.” (Timeline, No.55 2001 Jan/Feb) Before wishing more work on the masses, he might try some first. And exempt homes and sales, too.

Carl Pope, executive director of the Sierra Club: “The English commons was not privatized because commons management had failed, but because landlords wanted to monopolize it for their own gain. Here in America, our national forests have been overlogged, but many private forest holdings have been almost liquidated. Yet 'the tragedy of the commons' has become accepted as gospel. The reality is that we live in a commons. The oceans, the atmosphere, the genetic legacy of biological diversity, even the global geochemical cycles are all common resources. Maybe we should reexamine our cultural prejudice against the commons.” (SIERRA magazine, Sept/Oct) And after that, share Earth's worth and quit taxing effort.

Crunching numbers deep within the National Bureau of Economic Research, Martin Feldstein assumed that to avoid paying the US income tax, legally, people do things like be less productive. He figured that for every dollar you pay, you lose another 30 cents to avoidance. Throw in the social security tax and you lose 50 cents. And the more you make, the more you try to avoid paying. If Congress raised the rates another 10%, they'd raise $21 billion, but cost us (“us” – mainly the rich) $44 billion. Privilege holders use these figures to argue for a flat tax, say 25%, saving themselves enormous sums at the expense of everyone else. (“The Deadweight Loss of Income Taxes”; via Bill Batt, ex-tax researcher for the NY Legislature) Even before Marty got hot, James Payne (1993) calculated for every buck paid, you lose 67 cents (reviewed here, '96 Winter). Better than taxing income downstream is charging Rent upstream for the government permits – corporate charters, utility franchises, DNA patents, broadcast licenses, resource leases, etc – worth fortunes.

Henry George anticipated several intellectual landmarks:
(a) by about 90 years, "Spaceship Earth", later in the 1960s “reinvented” by Brit author Barbara Ward, then futurist Bucky Fuller, then Prof. Ken Boulding;
(b) by 11 years, the Turner thesis, the effects from the closing of the frontier;
(c) the "Lorenz Curve" for measuring concentration of wealth and income, in his debates with academic Francis Walker; George's attack on Walker moved the US Census to revise its reporting methods, from 1900. (Mason Gaffney, UCR; Jan 11; this editor adds the following):
(d) it's trendy now to refer to paradigm shifts and to system-vs.-symptom; HG, 1879: “When a few things go wrong it is useful to look for proximate causes, but when everything begins to go wrong then it is wise to search out one common cause.” Hoarding the multi-trillion dollar flow of Rent throws off endless troubles;
(e) Jared Diamond in Guns, Germs, & Steel said man satisfies their desires with the least effort, which HG made a cornerstone of economic analysis in 1879;
(f) conservatives like US News and WSJ quote HG on tariffs: “We do to ourselves in peace what our enemies try to do to us in war.”
(g) Ronald Coase got a Nobel for noting how enforcing law (or not) impacts output, which HG noted in 1879, talking about law, corruption, justice, and India;
(h) Keynes is famed for touting lavish public spending with no clue how to afford it, yet George is ignored for touting lavish public spending with the only feasible way to afford it; and
(i) the conservative San Diego Union quotes HG: “No belief is too absurd for mothers to send off their sons to kill and die for it.”

Decades ago, famed inventor, generalist, and visionary Buckminster Fuller noted that taxation becomes unnecessary and impossible once society shares natural abundance: “Big government can see no way to collect taxes to run its bureaucracy if people are served directly and individually by daily cosmic-energy wealth income.” (Critical Path, p 219, 1981). While not explicitly a Citizens Dividend from recovered Rents, at least Bucky was headed in the right direction.

The first Green Party, actually older than Germany's, is the Values Party of New Zealand. There one of their candidates, Dr. Peter Whitmore (publisher, engineer, and economist) a decade ago campaigned on "resource rentals" and a "resource dividend". Two Euro GPs – Ireland's and England's – have both in their platforms.

The subtitle, “How Your Government Wastes Your Money to Wreck Your Environment," leaves little to the imagination. But it's the facts, now, that greens need to marshall. The tale is told by Charlie Pye-Smith from Earthscan in London, out this year. The publishers are the UK's biggest house of enviro titles, sort of the Brit version of our Island Press, which put out Perverse Subsidies: How Misused Tax Dollars Harm the Environment and the Economy by Norman Myers and Jennifer Kent (2001). Another useful work in this vein is Take the Rich Off Welfare by Mark Zepezauer and Arthur Naiman (1996). This latest of these three might be the best, since it's not left, like Rich Off Welfare (tho' quite good) and it's not written by academics, like Perverse Subsidies, but by a real reporter who writes very well.

Eric Miller reviews this book by Richard Florida who refers to the growing ranks of entrepreneurs, software engineers, artists, even a line-worker whose inspiration adds value to a product. They flee older generic cities building stadiums and mega-malls for smaller towns revitalizing their centers and neighborhoods. He gives an example of a city making strides, Allentown, PA. After Billy Joel wailed about its woes back in the Reagan 80s, voters of this rust belt burg junked the conventional property tax for one with a rate low on buildings, high on locations. That spurred owners to improve their lots, which helped heal the town. Its an option open to any city council trying to attract the creative types, without losing a bundle on huge, rarely used complexes and on tax breaks for job-promising outsiders. To help residents become creative, Florida says invest in research and universities. Or, we say, invest in residents directly. Charge Rent for all sites, resources, and permits like utility franchises and pay residents a dividend from that. Then they can work as much (or little) as they like and as creatively as possible.

The uproar about Augusta's all-male membership policy led me to wonder. Memberships go for incredible prices, making private clubs the purview of a relative few. Golf courses use lots of often-scarce water plus fertilizers that pollute water. Were some clubs sold and developed, the land would often be worth many million dollars. Without accurate assessment, never mind a land-value tax, the ones who bear the tax burden are the lower-income folks, as well as those on the waiting lists. Relatedly, a friend who had a locker at a beach club on Long Island Sound paid a very small price for it when the club went condo, but it appreciated incredibly. It was large enough to store a couple of folded up lounge chairs and to change in after the chairs were removed. I seem to remember it was worth over $100,000 perhaps 20 years ago. I wonder what it is worth today. – Wyn Achenbaum (Nov 21) So where does the value lie? There's little capital in a locker and none in a membership. The location of the beach club or the golf club accounts for some, but not all. Most of the value resides in privilege, being one of the privileged few to belong. So are more clubs needed to meet the demand of frustrated bathers and golfers?

What to do about the twinned problem of exorbitant executive pay and fraudulent earnings statements? The CEOs of major corporations average 500 times the pay of their employees, whether the company does well or goes bankrupt; the captain gets the rewards while the crew gets the risks, which too often turned out to be a sinking ship. And in the last two years, companies have restated their profits 500 times, when normally that'd happen just a couple dozen times. The New Yorker writer on business, John Cassidy (who once did a piece on removing economics from the list of fields eligible for the Nobel Prize), fingered stock options. Since a huge chunk of their huge salary comes from cashing in, options give execs an overpowering motive to manipulate their company's stock; they become corporate raiders but from within.

For years, lone voices in the wilderness have been crying foul, yet as long as investors reaped profits, too, no one listened. Howard Schilit published Financial Shenanigans: How to Detect Accounting Gimmick and Fraud in Financial Reports and founded the Center for Financial Research & Analysis, which issues reports and warnings to its members, institutional investors. Lest anyone rock the boat, members of Congress, including Senators Joe Lieberman and Dianne Feinstein, threatened to eliminate funding for the Financial Accounting Standards Board.

Cassidy suggests banning stock options for head honchos. Since in the US, the price at which CEOs can buy their stock is not indexed to the market, as in Europe, and since stock fluctuates more wildly than actual company performance, ending executive pay via options might make sense. (The New Yorker, Sept 23)

Yet how big a problem would CEO pay and earnings fraud be in a geonomy? Many of the shenanigans are financed by debt, by borrowing from other huge over-concentrations of capital. What if wealth, savings, and income were more equitably distributed, so there were not these ready pools of eager cash, just anxiously awaiting the chance to turn a fast buck?

Geocracy would eliminate not watchdog boards but corporate welfare. Minus that free, excess income, it'd be harder to inflate stock. Then execs would prefer to be paid from actual earnings, even if reduced.

Say we recover the Rent for corporate charters, franchises, patents, resource leases, land titles, etc and share it among the citizenry. Then corporations would not have this hefty revenue, and citizens would. More secure, they'd be in a position to demand higher pay from their bosses.

Say we abolish taxes on buildings, sales, and income. Sans taxes, there'd be no tax write-offs, and no advantage to borrowing (interest payments are now tax deductible) and good reasons to avoid debt and pay salaries from earnings. Plus, neither company nor shareholder would any longer have any reason to keep two sets of books, one for the truth, the other for the IRS. Keeping one set of books would raise the ethical bar.

Thus geonomics would lift employee pay and reduce CEO pay at the same time, automatically. And it'd provide less motive and less opportunity for inflating company stock. But since some head honchos will always try accounting shenanigans, we should still toss any corporate frauds into the hoosegow for a long, long time. (This also appeared in Lindy Davies' “Land Rant”, http://www.henrygeorge.org/.)

About three and a half millennia ago in ancient Egypt, in the temporary capitol of Akhetaten, most houses were small, covering about 60 square metres; one or two covered about seven times that area. Then as now, few were rich and inequality the norm. As fewer people own more, more people own less. In 1897, Vilfredo Pareto noted that for his contemporary Italy, 20% of the population held 80% of the wealth. Today economists regard Pareto's distribution as a fundamental law of society. (Philip Ball, Nov 29, via Wyn Achenbaum) 20% of the criminals commit 80% of the crimes. 20% of sick people infect 80% of all who get sick. 20% of the cars emit 80% of the pollution.

Two physicists at the University of Paris, Jean-Philippe Bouchaud and Marc Mezard, use a mathematical model of the economy to show how inequality arises. Even when everyone starts with exactly the same amounts, after trading goods and services for a while, just by the luck of the draw some end up with more. This extra they invest, and collect more still. Some investments do better than others, so even fewer people get richer. Soon, about 20% of the people own about 80% of the wealth. In Mexico, a nation of over 80 millions, 40 individuals own 30% of the wealth. The distribution of wealth is mild when the volume of trade is great – the more often stuff goes around, the greater chance the poor have of getting a piece of the action – and when business cycles don't fluctuate wildly, creating big winners and big losers. Thus a sales tax, even on luxury items, backfires, since it persuades the rich to spend less (hurting poor people hired to make or deliver luxury items) and to invest more (helping themselves). A kind of sales tax, the tariff, does not help spread wealth, since there'll be fewer exchanges between rich and poor nations. Nor do subsidies help, since they make such exchanges one-sided. (The Australian Financial Review, Spt 20, Mark Buchanan, author, Small World: Uncovering Nature's Hidden Networks)

Outside math models and in the real world, besides exchanges there are also transfers. The most egregious are losses of publicly generated values – values that attach to land, natural resources, and government granted privileges like corporate charters – to private retainers. Recover these Rents and dramatically lower the ncome ceiling; share these Rents and dramatically raise the income floor. Sharing Rents also lets workers, no longer desperate, demand higher wages. Ending taxes not only raises net wages but, since private spending is more efficient than pubic spending, also creates more jobs, again lifting wages. Collecting Rents would preclude massive corporate profits and massive stock gains. It'd also keep much money out of speculation, tempering the business cycle. By luck or skill, not conniving and oppressing, some may earn more, but geonomics will keep winners much closer to the rest of the pack.

So asked Harvard prof Christopher Jencks, then said: “Economic goods and services do not drop like manna from heaven. People have to produce them. How much people produce depends partly on how generously their efforts are rewarded. Therefore rulemakers have to make tradeoffs between the motives of producers and the needs of consumers.”

You don't have to go to Harvard to make such mistakes – but it helps to hide them. Some goods – useful and costly – do "drop from heaven": the land and other natural resources beneath our feet, provided in situ without one bead of human sweat. Blindly the many pay the few for this "manna". However, if all were to pay all, we'd have predistribution of wealth without any need for redistribution. A la Alaska's oil dividend, all government need do is charge land dues (land tax, land use fee, deed fee, resource lease, or whatever at full market value) then disburse the recovered Rent in equitable shares to residents. With Rent being trillions each year in the US alone, this Citizens Dividend would solve the inequality problem. (Dædalus, Winter; thanks, Wyn Achenbaum; to join her list, try wyn@attglobal.net)

In the Portland Tribune (Sept 27), our article drew positive response from a local legislator among others: Jim Austin, Aide to Oregon State Representative Jackie Dingfelder (Oct 9): “I am writing to you on behalf of my boss. She read an article you wrote about levying taxes on land instead of buildings, and she asked that I get some more information from you. After which, we might like to schedule a meeting if that would be OK with you? (Oct 14): “Ah, many of my questions are answered on your web site. I'll let St. Senator Charlie Ringo, City Commissioner Erik Sten, and the folks at the Oregon Environmental Council know that we are interested in this concept. Metro Representative Rex Burkholder expressed interest (you may already know that). Lastly, a draft of a letter to Legislative Counsel. Please review and comment. As you will read, most of the language is taken out of your last reply to me.”

About our quizzes at our website, Progress: Lyle S Aaron (Sept 8): “Geonomics? Never heard of it, but I did score 117 on your quiz. Sounds interesting. In fact, I see some similarities with some work I have done, that you can see at my website Laissez-faire socialism. I can't stay long today, but I'll be back to explore this in more detail.” Trina (Nov 3): “I enjoyed your quiz. How is it all of America is so focused on individual welfare (food stamps etc.) and nobody seems to mind that corporations have a license to steal us all blind? Please help us to inform more Americans. The news is no source of verifiable information these days. Thanks for the information and keep it coming.” Diana E Forrest (Nov 4): “Good quiz – entertaining way to learn.” Anonymous (Nov 4): “Great test. Have you ever been able to get one of our political leaders to take the test?”

Presented to two conferences by the Alps. First, “Design in Nature”, sponsored by England's Wessex Institute of Technology and Udine's Centro International for Sciences Mechanical, Sept 10-12 in northern Italy, attended by materials scientists and architects. Second, “Making Cities Livable”, Sept 15-19 in Austria's mountain village of Alpbach (birthplace of the movement for the European Union and gravesite of Schroedinger, he of the cat) and in Saltzburg (birthplace of Mozart and setting for The Sound of Music), attended by architects, planners, mayors, and other elected officials who meet at least annually in some successful urban setting. The Chief Architect of Krakow, where Dr. Nic Tideman and I proselytized for weeks in 1990, reported there is still a vigorous faction trying to push the property tax from buildings to land; corruption remains their main obstacle. Thanks for grants from the Robert Schalkenbach Fdn and John A. Morales, who worked in the Office of the Comptroller of the Panama Canal Commission and recently had an interesting letter published on the atomic scientists doomsday clock.

Eight fresh faces, double the number of last fall, including a Sandy Planning Commissioner and a Green Party leader, attended our Nov 19th symposium in Portland (funded by some generous and judicious New Yorkers to whom we are grateful). They learned ironies: Henry George's brief fame, poverty with progress, how speculating in land curbs opportunity for labor, the iron Law of Rent shaping distribution, and how recovering Rent lifts wages (and profit, tho' that part did not thrill grassroots activists). They heard where tax shifting has worked and who has endorsed it. I learned literature from campaigns circa 1909 and 1911 survives. They wanted to know the big picture (how this helps the environment and deters war against Iraq), and the little (how their own property tax would change). Some neo-geos bought literature. We stayed over two hours (the librarian kicked us out). Then half the group retired to a nearby restaurant for pizza. Rather than return for more discussion, everyone wanted to work on application. We met again to draft a brochure explaining the proposal to ordinary voters and on a before/after scenario of property tax payments. New enthusiasts are arranging talks before the Sandy City Council and the Green Party. Plus, we recognized the need to submit grant proposals to McKensie River and other possible fundors.

Michael Hudson, ex-World Banker (Oct 25): “I loved your last issue of The Geonomist. It's just the kind of thing that is needed to demonstrate the importance of Rent from all over the world. I hope you get the support you deserve.” One hope, two hope = actual support?

John Watkins, President, Simple Society (Oct 29): “Last issue's definition of geonomics, 'neither left, nor right, but in front'. Wow, I like this. I'm including it in tomorrow's Simple Solutions, attributed to you. Is that OK with you? I wonder if it would not be fair to use for our work. Your (Green Party platform tax) plank will also appear tomorrow. I've altered the title a bit: 'Taxes and Subsidies? No! Dividends for Citizens Instead!' OK? I'll assume it is unless I hear to the contrary.”

John Fisher, Canadian Green Party leader (Oct 29): “Thanks for the latest Geonomist. Another great issue! Could I get copies of 'Plugging the Leaks in Local Economics' and 'Financing Livable Cities'? Will send some money soon. Keep up the good work!”

Dharmadeva, Australian yogi who issues PROUT Gems; PROUT is an acronym for Progressive Utilization Theory, another alternative to both capitalism and communism; from 1955 to 1990, Prabhat Ranjan Sarkar gave about 180 discourses, published as PROUT in a Nutshell (Nov 10): “(Your website) looks good, and a welcome approach that moves away from pure Georgism.”

Mason Gaffney, UC Riverside (Nov 25): “Attached is 'The Problem of Balkanization', a chapter for Bob Andelson's forthcoming new edition of *Critics of Henry George*. I would value your criticism, as well as your thoughts on where this matter of 'local particularism' should lead us.” You got it. (Nov 26): "Thanks for gigging me on Alberta; I'll watch that. But, 'A fun read'? Is that all the thanks I get for promoting your social dividend idea?! Next time I'll call it the Smith Dividend!” How about: the JEFF Smith Dividend?

Christopher Thacker, Missouri grad (Nov 5): “I regret to inform you that my former instructor in Henry George economics & Geonomics, Irene Hickman, D.O., passed away today around 1:00 pm CST. If you could please run a brief tribute in your next issue, I think it would be a good way to honor her clear desire for economic and social justice.” Irene was (and perhaps is) a strong and entertaining person. As a county assessor in Northern California, she dared to take on the big landholders, raised hell, and laughed to tell about it. She explored many fields, connected them all, and in that web of hers always managed to snare another open and curious mind. We'll miss her.

Last quarter, the Robert Schalkenbach Fdn helped us organize events here in Portland and attend conferences in Europe (above) then later elsewhere (below). For rejoining, thanks to sustainers Michael Neil (CA healer; “I applaud your commitment and your labors!”) Gerry Shaw (retired Canadian), stalwart Heather Remoff (PA engaging intellectual), supporter Bill Parish (OR investment advisor who called the corporate fraud scandal months before the major media picked it up; cited here 2001 Spring), and subscribers Vernon Saunders (NY reitree) and Sue Walton (IL Better Cities Com't treasurer). Anyone else if so moved, please contribute; invest in a better world ASAP.

Join us, the US Basic Income Group and yours truly in New York City, February 21-23 for the 2003 annual conference, this year held jointly with the Eastern Economics Association. The EEA will handle registration and logistics, and anyone attending the USBIG conference is welcome to attend any of the EEA sessions, but in content USBIG is entirely autonomous, and will continue in its interdisciplinary character. Scholars and activists will present papers and act as discussants on panels. More information: Karl@Widerquist.com.

The bestseller by Malcolm Gladwell of The New Yorker on how ideas spread like viruses, The Tipping Point, which itself is behaving like an epidemic, offers insights for anyone hoping to influence society in a hurry. Entrepreneur Matt Harris of Austin got me to read it and I got Hanno Beck, webmaster of Baltimore. According to the author's three principles – the Law of the Few, the Stickiness Factor, and the Power of Context – geoists should do these things: First (L O Few), not starve our people. If we have any of those few rare birds in our movement – Connectors, Mavens, and Salesmen – let's enable them with livable wages. Second, make our message stick. Drop all the stuff that has proven itself over and over to not work. Use only what does work, like quizzes, games, movies, and terms like 'geonomics”, “Property Tax Shift”, “Citizens Dividend”, etc, and keep looking for new twists. And Third, seek the correct medium, probably the web and the video store. So sign on and brainstorm.

Todd Altman: “To optimize the use of our limited time and resources, do things in a logical sequence. Just as one builds a house not by doing things at random, so one brings about a better world. Our starting point: reform the election process: (1) repeal exclusionary ballot access laws, (2) replace plurality voting with instant runoff voting, and (3) require the use of paper ballots, so as to eliminate vulnerability to computerized – and hence undetectable – vote fraud. We can simultaneously pursue other reforms, but give election reform top priority.”

Did you know our incumbency rate is higher than that of the old USSR? That election results are 100% predictable based not on issues or contributions or the electorate but on redistricting? Search for “fairvote”. Amazing.

David Tver, ex-expatriate (Oct 10): “Your op-ed in the Tribune, which I read with interest, reminded me. In England during an election, I went door-to-door in Essex for the Social Democratic Party. They got one seat in the town council with the major parties divvying up the remainder equally, which gave the SDP the swing vote and removed the Tories from local power for the first time in a hundred years. Living in town, I came to realize that we were suffocating inside a green belt of farm and park land, which in actuality was where the wealthy could live without seeing their neighbors. This belt raised the price of real estate, often owned non-locally, as did speculators keeping properties empty or under-developed. Their vacant property was exempt from taxes. I proposed to the SDP that these properties be taxed and explained the benefits: it'd increase the city's tax base, utilizing them would lower Rents and, eventho' purchase prices might drop, affordability would increase business. Plus, the city would save on purchasing properties to give to the poor. Initially, the SDP thought the idea was too 'outre', but about two months later I saw in the newspaper that just such a law had been passed.”

Tom Sherrard, retired attorney of San Diego who made it onto 60 Minutes by challenging the funeral Industry with cut-rate cremations (Nov 2): “Besides myself, someone else should also visit the county assessors office, investigate the sweetheart leases of public property at below market rates to the well-connected, find a pro bono lawyer, then file a class action suit in court to recover the missing Rents for the public with a commission for yourself and your attorney.”

Dayle Beach (Oct 11): “Your article in the Portland Tribune made a lot of sense. Didn't this idea originate with Henry George? It's sounds like it to me. I'm sorry George didn't think of the term 'geonomy'. It would have been better than 'single tax'. I really hope that geonomy takes root and comes into full bloom. I'm not much for joining organizations, but I would like to join the Geonomy Society.” We'll make it easy for you. Just use the coupon below. Anyone can do it. And send as much as your conscience allows. Merry Solstice. Happy Holidays.

THE GEONOMIST

Vol. 11, No. 3
Editor: Jeffery J. Smith

THE GEONOMIST

Vol. 11, No. 3 Editor: Jeffery J. Smith

Vol. 11, No. 3
Editor: Jeffery J. Smith