Prosper Australia

Read Hudson’s latest interpretation of Obama’s economic policies:

At stake now is President Obama’s credibility as an agent for change. Voters see his main “change” thus far to have been favoritism to Wall Street. Jay Leno jokes that Obama has done the impossible: resurrected the seemingly dying Republican Party and given it the coveted label of the “Party of Change,” running against Wall Street.

This is the political setting for what must certainly be a hastily rewritten State of the Union message. Instead of celebrating a Republican- and Lieberman-approved health care bill, Obama finds himself obliged to respond to voters who celebrated his first anniversary in office by choosing a Republican as their designated voice for change.

Those voters in Massachusetts last week who felt duped by Obama’s promise as a reform candidate did not really turn Republican, but obviously felt that at least they could throw out the Democrats for failing to make a credible start fixing the debt-strapped economy. The President has begged the banks to start lending again. But this means loading the economy down with yet more debt. The $13 trillion bailout was supposed to help them do this, but the banks have simply taken the money and run, paying it out in bonuses and salaries, stepping up their lobbying efforts to buy Congress, and buying out other banks to grow larger and increase their monopoly power.

Read More at Counterpunch

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With debate over the impact of China’s real estate bubble leading to a stock exchange ‘flu’ this week, moves are afoot as:

… today’s Beijing Youth Daily reports that the Ministry of Land and Resources recently released a list of 18 land development projects nationwide including five in Beijing that involved developers failing to develop their land timely.

The Ministry stated that it would urge developers to start development of the idle land. Those who failed to develop one year after bidding for development rights will face fines of up to 20 percent of the amount of their bids. If they still leave the land idle after two years, the land will be taken back by the government.

The logical conclusion from this statement is that land hoarding is ok if it is constantly rotated every 10 – 11 months. Whispers are that there are hoards of vacant apartments. These too are a loophole for speculative largesse. It seems that the CCP is willing to allow another class of mandarins or gentry to evolve:

The issue of land speculation has reached such zenith’s that influential blogger Patrick Chovanec reports:

The (TV) series “Dwelling Narrowness”, which aired on Beijing and Shanghai TV, focuses on the difficulties facing average Chinese people in an environment of spiraling apartment prices and official corruption.

The show was quickly pulled from the public airwaves for recensoring.
Wiki describes the past influence of the scholar – gentry:

Now known simply as landowners, they were criticized for demanding and collecting high rent from their tenants during the republican period. Many organized violent gangs to enforce their rule. They were frequent targets of the communists who were able to rally much of the peasant population through their promises of agrarian reform and land redistribution. After the People’s Republic of China was established, many landlords were executed by class struggle trials and the class as a whole was abolished. Former members were stigmatized and faced persecution which reached its heights during the Cultural Revolution. This persecution ended with the advent of Chinese economic reform under Deng Xiaoping.

In 2006, the Chinese rich list found that:

Seven of the 10 richest are property developers.

What would Sun Yet Sen say? He proposed the capturing of the windfall gains that accrue to property owners from the public’s productivity. This was a core issue in Sun Yat-Sen’s Three Principles of the People. Read more on Sun Yat-Sen’s influence.

Patrick Chovanec discussed the bubble on China Radio with the following key points:

• The main driver of mounting housing prices in China isn’t short-term speculation (“flipping”) but longer-term stockpiling of empty apartments as a “store of value,” like gold.
• If “flipping” were the main problem, we’d see a much more active secondary market. In fact, China’s secondary market is quite weak, suggesting that new housing is being stockpiled off-market and not being priced.
• This phenomenon is partly due to a limited range of other investment options, and partly due to low holding costs (my empahasis), particularly the absence of an annual property holding tax. Other holding costs, such as maintenance fees, can often be minimized or avoided entirely.
• Because it addresses the wrong problem, the government’s new tax on speculative “flipping” is unlikely to have much impact, and may actually make things worse by increasing the incentive to holder vacant property longer.
• Local governments in China depend on land sales for as much as 40% of their revenue, so have a keen interest in keeping prices high — in effect, a kind of “hidden tax.” The point of an annual property holding tax is not to increase the overall tax burden, but replace this revenue stream with a more rational and sustainable structure that rewards productivity.
• The so-called “affordability ratio” in China is sky-high. As a result, the unaffordable price of housing is already becoming a hot social issue in China

The flipping issue could be debated re this quote, which some could see as a sign that those ‘in-the-know’ are getting out:

Dec. 21, 2009 (China Knowledge) – Beijing’s second-hand apartment transaction volume was 19,861 units in the first half of this month, an amount 56.6% higher than the 12,680 units that changed hands in the same period of last month, sources reported. About 1.88 million square meters of second-hand apartments changed hands, compared with 1.19 million in the first half of October.

Sun Yat-Sen would be fuming at the formation of a new generation of gentry. As Patrick describes above, the ‘flipping tax’ (which seems to be akin to our stamp duties), impedes the turnover of property. Turnover taxes like this do accentuate hoarding for greater periods until the desired profit is delivered.

A Land Value Tax or Site Rental on all land would ensure that both flipping and hoarding are discouraged.

Perhaps 2010 will be defined by the economic leadership of China, especially as Professor Michael Hudson has recently visited China and inspired deeper thinking on this core issue.

Watch this short video from our colleagues in Philadelphia to see how the tax system places community activity in the waste bin via the waste-land mentality.

photo credit: Omar Eduardo

Taken from an early 1900’s document

I don’t know what the country is coming to; I work from morning till night every day of my life and yet it’s as much as I can do to make ends meet.

I am Simply Working for the Landlord ! ! !

How often do we hear such a declaration; yet, how few, even among those who make it, pause to consider its full signifcance ? There appear to be a mysterious tacit mental agreement that, above all things, no matter who else may go short,

The Landlord Must Be Paid.

Why the LANDLORD more than the butcher, baker, grocer, or other persons who furnish us with one or other of the daily necessaries of existence ? Is it because the landlord needs the money more than others? No! for, as a matter of fact, he needs it less than any of them, for he generally has plenty and to spare. Is it that he gives us more of the good things of the world in return for money than any of the others? No! for, as a matter of fact, he gives us nothing except permission to continue to occupy a certain portion of God’s earth, and he raises the rent as often as possible, and still gives nothing in return.

Is IT BECAUSE WE HAVE A GREATER AFFECTION FOR HIM as an individual than for anyone else ? Hardly! for, in point of fact, our feelings towards him have rather an opposite tendency.

What Then is the Reason ?

Sinply that the landlord, by reason of his ownership of the site upon which we live, or carry on business, has THE POWER TO BRING RUIN AND DESTRUCTION UPON US if we refuse to pay the tribute he exacts from us. This is a very serious matter to every householder, every shopkeeper, and shop employee, every business man and clerk, and, in short, every worker, whether by hand or brain, throughout the length and breadth of the land; for, in the power of the landlord to exact from each and all rent tribute for the

Permission to Occupy a Piece of the Earth

lies the secret of trade depression, industrial inactivity, Iow wages, and scarcity of employment. This may not at first sight be apparent, but a little enquiry into the operation of “the law of rent” will soon reveal the fact.

Here is an illustration: Twenty years ago, the owner of a vacant lot in George-street built thereon a shop and dwelling, which, when completed, was let on a three years’ Iease at a rent £2 per week, the tenant to keep the place in good repair. Upon the renewal of the lease for a further short term, the rent was raised on the unhappy tenant (who had just got fairly established and could not afford to leave) to £4 per week, although the landlord had done nothing at all to increase the comfort or accommodation of the building.

The extra rent aimost ruined the shopkeeper, who had to reduce the wages of an assistant, whom he had engaged, as well as to deny himself and family of certain articles of food and clothing, to which they had hitherto been accustomed but by dint of close attention and untiring energy, he managed to improve his business, and ultimately, after he had earned the £4 tribute for his landlord, he had a little for himself, even after paying wages to the additional hands he had engaged to assist. But he did not enjoy the advantage of his extra work, worry, and anxiety long. The lease expired, and once more the lease went up and swallowed all the extra profits, entailing further reductions in working expenses and

Another Lowering of Wages.

And so the process has gone on until today, the rent of that one shop is £12 per week, although not a shilling has been spent upon it by the landlord since the day it was completed. Just think of the shame and the monstrosity of the thing. The tenant

Must now Earn £12 for the Landlord

every week before he can earn ONE SHILLING FOR HIMSELF, aud he gets nothing in return, except the wretched accommodation of a structure that when new paid the owner l0 per cent interest on his capital at a rental of £2 per week, and which now, after twenty years wear and tear, would not realise £I00 if pulled down and sold as old material.
It is self evident that with such a

Heavy Incubus of Rent

to meet weekly, the price of his goods must be raised to the highest point which competition with other shopkeepers in the same locality will permit, whilst the wages of employees will be reduced in a corresponding degree. And when we consider that the SAME PRINCIPLE IS IN OPERATION in every branch of industry, we can form some idea of the share of the earnings of every member of the community which is annually appropriated by landlords in rent.

Every advance in Rent

means a corresponding reduction in wages, for even when wages are not directly reduced by the rack-rented employer, the purchasing power is lessened by the ever advancing tide of rent. Rent is added to the cost of every commodity, and consequently every purchaser, in addition to paying rent directly to his own landlord is compelled to contribute his quota to the rent of every person with whom he deals.
And when we reflect that

Rent has to be Deducted from the Wages

of the men who get the raw material, the men who fashion it into a finished product, the men engaged in conveying the product to market, the wholesale and retail dealers and the clerks, storemen, shopmen and others in their employ, it is tolerably certain that rent absorbs an enormous proportion of the annual wealth production of the community; and the larger the proportion that is absorbed by the landlord in rent the smaller must necessarily be the proportion that remains available for distribution in wages to employees and profits to employers, and in inverse ratio, the smaller the proportion that is absorbed in rent the larger is the balance available for division between wages and profits. Obviously then it is to the interests of employers and employees alike to bring about a REDUCTION IN RENT

The Single Tax

will do it, for the value of land fictitiously inflated by private monopoly is the main factor in determining rent. The taxation of land values will destroy land monopoly and thus reduce the value of land. And as by the destruction of monopoly, a corresponding increase in the available supply of land will take place, it necessarily follows that rents will fall in corresponding ratio, wages will rise with the increased avenues open to the employment of labor and a HEALTHY ACTIVITY WILL SOON MANIFEST ITSELF IN EVERY BRANCH OF INDUSTRY THROUGHOUT THE LAND.