Prosper Australia

An occasional commentary on the economic depression # 3

5 January 2009, New Year Insights

There’s amazing synchronicity in the centenary year of the “People’s Budget”, delivered in the UK under the Liberal Prime Minister Herbert Asquith, that never so much since as now has the world needed fiscal policy capturing a greater part of our annual land values if we are to correct out-of-control economies.

Although the principles behind David Lloyd George’s 1909 “People’s Budget” were better understood and overwhelmingly supported by the British people than they are now, they were strongly resisted by House of Lords aristocrats, despite the fact that it had been accepted practice since the 17th century that the Lords would not reject house of commons budgetary measures. Nevertheless they vetoed the chancellor’s land ‘tax’ budget ….the government be damned! The land tax proposal was withdrawn, but preparations to devise a land tax valuation base continued. Meanwhile, Winston Churchill and Lloyd George were quick to use the people’s wrath against the upper house’s action to stop the power of the House of Lords from being again misused.

Militarism was already in the air a century ago when Germany began to overtake Britain industrially and pose a threat to her markets. The aristocracy of both countries saw war as appropriate and almost inevitable, perhaps also offering a useful way to finally resolve politically vacillating imperial boundaries. Lloyd George didn’t accept this fatalistic logic. He tried to countervail militaristic bravado by proposing a cut in expenditure on Britain’s new Dreadnought battleships, reducing their planned number from six to four. However, the Tory opposition, with illicit support from First Sea Lord Jackie Fisher, mounted a formidable campaign (“We want eight and we won’t wait!”) which saw Lloyd George defeated on the matter within his own cabinet. War was thereby ensured.
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photo credit: Joel Bedford

Mason Gaffney

October 25, 2008
In a follow up to Professor Gaffney’s The Great Crash of 2008, he now delves into how credit can be freed from the current crisis. The Great Reckoning awaits…

1. Introduction

Working capital is the bloodstream of economic life. It is physical capital, the fast turning inventory of goods in process and finished goods that supplies materials to the worker, and feeds and clothes her or his family. Short term commercial loans and trade credit buy it, but the capital is “real” — a fact often forgotten in the paper and virtual worlds of high finance whence come the highest inner circles of government.

The bloodstream metaphor harks back to François Quesnay, an 18th century French physician turned economist. Quesnay drew on William Harvey’s (1578-1657) earlier discovery of how blood circulates. Adam Smith and other classical economists followed Quesnay, distinguishing “circulating capital” from “fixed capital,” the kind that is stuck in the ground or otherwise lasts for many years. Today we call the bloodstream metaphor “macroeconomics”, elaborated but not always improved from Quesnay’s insights.
Now the economic blood is drained down, and what’s left is slushy. We need to restore and thaw it, and get it circulating, right away as well as over time. To understand how, let’s see what drained it away in the first place.
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by Leo Foley
The primary source for this paper is “Canberra in Crisis” by Frank Brennan, 1971

The Road to Leasehold – the origins of the Canberra leasehold system..

Canberra is the offspring of politics and a social ideal.

• The politics were those of Federation and nation making.
• The ideal was one of social and economic freedom.

In the early years of Federation, there was a widespread belief in the need for government ownership of all the land within the proposed federal territory. It was considered that the taking of the unearned increment for the people would make the capital city a paying proposition within a few years. In 1901, the Prime Minister, Edmund Barton spoke of the territory to be chosen for the seat of government: “we shall be able to get the land on fair terms, lease it on fair terms and still make a profit for the Commonwealth”.

These were the years when the words ‘unearned increment’ were basic to any discussion of leasehold tenure in the proposed Federal Territory. As King O’Malley (Labour, Tas) saw it, ‘Every dollar spent by the people of Australia in the erection of that capital will create an unearned increment in the property for miles around. The question is, are the people of Australia prepared to spend thousands, yea millions, and then lose the benefit of their expenditure? I say the unearned increment created by the expenditure of the people’s money belongs to the people…”
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