Monopoly rents on notice
The last few weeks have seen more good news in support of our objectives for economic justice. Monopoly rents have been called into question in a variety of different guises.
Yesterday Peter Orszag (Obama’s budget czar) was in Australia for a conference and was quoted in an article entitled Piketty got inequality wrong says former Obama budget chief.
Celebrity economist Thomas Piketty got his diagnosis of inequality wrong, and his remedy too, Citigroup vice-chairman and former Obama administration Office of Management and Budget chief Peter Orszag says.
The French economist became a sensation in 2013 for his book Capital in the Twenty-First Century. The book argued that excessive returns on capital concentrated wealth and caused social and economic instability. He recommended punitive taxes on the rich to fix the problem.
But Mr Orszag said a recent study by him and Jason Furman, chairman of the president’s Council of Economic Advisers, found that housing and land mostly drove returns on capital faster than wages over three decades to 1999.
Contrary to Professor Piketty and popular wisdom, overall returns on productive capital – or capital invested by business firms – increased only slightly from 1970 to 1990.
Land is the driver of inequality. Piketty’s failings are a damning demonstration of the corruption of economics enacted by the robber barons in the 1880s when the earth, the land was removed from the production function. The combination of land’s removal from theory alongside the culling of economic history = irrelevant economics.
The former Victorian Government was heavily criticised by a report on the Fisherman’s Bend rezoning, with the opening few paragraphs reflecting the growing literacy on economic rents, unearned incomes and windfall gains:
The former Victorian Coalition government’s signature urban renewal project delivered windfall profits to land holders but was unmatched worldwide for its failure to plan for transport and other key services, a scathing confidential report has found.
The now opposition leader Matthew Guy’s decision to allow unfettered high rise development of Fishermans Bend in industrial South Melbourne and Port Melbourne was taken without a strategy or funds for decontamination, transport, open space or affordable housing, the report finds.
As The Age revealed in October 2014, the uplift in land values from the rezoning delivered billions of dollars in windfall to existing landowners, without a cent captured for the wider Victorian community or for infrastructure or services in the area.
“Land rezoning is the last remaining pork barrell, next to defence” so said Vince Vaughan as Frank Semyon in the latest True Detective series. Context to this statement can be no better summated than by Cameron Murray’s groundbreaking report Clean Money in a Dirty System. It was recently written up by Fairfax Michael Pascoe as Insider trading rife in land rezoning racket with the opening line:
Two University of Queensland economists published a paper in April that should have brought down state and local governments, sparked a royal commission and radically changed the Australian housing industry.
This report was also written up this week in the online Sourceable as Is land rezoning Australia’s biggest rort?.
Prosper Australia CEO Karl Fitzgerald agrees, saying the process was ‘essentially a public giveaway’ to the tune of at least 90 per cent of the infrastructure costs, and that some of these practices were actually leading to higher costs for first home buyers.
“Some of these new train stations now are costing between $50-$110 million dollars, and the value of the land surrounding some of these train stations will be going up by $300 million dollars,” he said. “And not only are we not capturing or recouping our initial investment, we are actually handing these developers a license to make easy money. Billions of dollars of valuable taxpayer money is going down the drain.”
There are just so many stories flying through our social media pages of Dont Buy Now (how witty is David Collyer!) and Earthsharing. Make sure you click ‘get notifications’ to get the facebook updates directly. These feed through to our twitter, where another source of good information can be found looking at hashtags #LVT, #rentier, #henrygeorge.