April 21st 2018


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Articles from this issue:

COVER STORY The deeper causes of Australia's social malaise

GENDER POLITICS Queensland proposes transgender birth certificates

CANBERRA OBSERVED Malcolm at 30 (polls): the cloud on Turnbull's horizon

NATIONAL AFFAIRS Cardinal Pell firmly denies sex abuse allegations

NATIONAL AFFAIRS Sydney Archdiocese aims to eliminate slavery in supply chain

RURAL DEVELOPMENT Irrigation along Fitzroy River proposed and opposed

LIFE ISSUES Abortion Rethink Summit: the case for care

VERBATIM WA food, drink producers face shortage of carbon dioxide

HOUSING AFFORDABILITY Land costs: economist Henry George's solution

ELECTRICITY Will Turnbull lose three out of three?

ECONOMICS Trade wars: tariffs unlikely to be fired in anger

SEX AND TEENS How about support for the abstaining majority?

VISUAL ARTS Layers of meaning in Botticelli's La Primavera and The Birth of Venus

MUSIC Is it good?: Or, do we just like the sound it makes?

CINEMA The Death of Stalin: Black comedy of a dark time

BOOK REVIEW Cool head on topic that generates heat

BOOK REVIEW Life's not so bad: from the outside

POETRY

LETTERS

OPINION What a republic would really mean for Australia

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HOUSING AFFORDABILITY
Land costs: economist Henry George's solution


by John Young

News Weekly, April 21, 2018

In his article, “Family home in cities further out of reach” (News Weekly, March 10, 2018) Chris McCormack deals with a vitally important issue: the increasingly unaffordable prices in Australia’s housing market.

Henry George

He concentrates particularly on the way that urban containment policy has contributed to this by limiting development around urban areas, thus forcing up prices by restricting the amount of land available. In this article I want to examine another issue closely related to this one, namely, the question of who should receive the return from the unimproved value of land.

A block of land bought 50 years ago in an Australian capital city will typically be worth today many times its original value, even after allowing for consumer price index (CPI) increases. But that is not because the building has become more valuable: it is due to a rise in the unimproved value of the land.

This great increase in the price the land will now bring is not due to the owner’s efforts. It is due in part to the amenities society has added to the surroundings, and in part to the scarcity of available land. Upon selling, the owner will get a fortune without having done anything to earn it.

The anomaly involved here was dealt with, famously, by 19th-century American economist Henry George, who maintained that the government should take the revenue from the unimproved capital value of land instead of taxing what people earn.

Council rates based on the unimproved value of the land were common in Australia, but councils in recent times have moved away from this practice – which is unfortunate.

With this system in full operation, as land prices increased so would the amount of revenue taken by the government. As a result the selling price would remain low. Land speculation would become a thing of the past, because the owner would have no way of gaining a financial benefit by holding on to his land in the hope of future gains.

The boom-and-bust conditions that periodically disrupt the economy are due in large part to the rise in land prices, fuelled by speculation. Prices keep rising until land becomes unaffordable and the price crashes. But with the land revenue system fully operative, this source of instability would be eliminated.

Basically it is a matter of justice.

Apart from the scarcity factor, the price of a block of land depends partly on natural advantages such as a beautiful view, but principally on the amenities society provides around the land: public transport, shopping centres, recreational facilities, and so on. So, it is right that society should benefit from these, not the landowner who did not provide them.

Of course, vested interests oppose any such reform, just as they oppose relaxation of the containment policies, which, as Chris McCormack shows, are doing such harm. But the more powerful the opposition, the more strongly we should advocate sound solutions.

In the late 19th and early 20th centuries, George’s proposed reform was widely advocated, as by Winston Churchill in Britain and Sun Yat Sen in China. It used to be a plank in the platform of the Australian Labor Party and, when it was removed, Clyde Cameron complained that Labor had lost its way.

George’s works are still relevant today, not just for his land philosophy but for his more general social principles. He had a natural moral law approach, maintaining that basic economic principles are moral principles. His most famous work, Progress and Poverty, has four chapters refuting the claim of Thomas Malthus that the world was becoming overpopulated.

A misunderstanding that has made some people suspicious of George is that he was a land socialist, advocating that all land should belong to the government. In fact, he advocated no such thing. He maintained that land should remain in private hands, but that the gains arising from the unimproved value belongs by right to the people as a whole, and should be taken by the government instead of taxing what we earn.

George wrote: “We propose leaving land in the private possession of individuals, with full liberty on their part to give, sell, or bequeath it, simply to levy on it for public purposes a tax.” (Henry George, The Condition of Labor, p8)

(My book, The Natural Economy, available from Freedom Publishing, examines, among other things, George’s key concepts.)

Winston Churchill strongly supported the public appropriation of this site revenue, declaring that land monopoly “is by far the greatest of monopolies – it is a perpetual monopoly, and it is the mother of all other forms of monopoly” (Winston Churchill, Liberalism and the Social Problem, London, Hodder and Stoughton, 1939, p318).

Chris McCormack notes that 48 per cent of our federal MPs own numerous investment properties, and suggests that this is a reason for reluctance to abolish negative gearing. I fully agree.

John Young has taught philosophy for many years. He has had many articles published  in Australia and overseas, and is the author of three books.




























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