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A transcript of Professor Frank Stilwell’s presentation to the 128th Annual Henry George Commemorative Dinner, entitled: Land, Labour and Capital: Understanding economic and social problems.

Thank you for that nice introduction and thank you for the invitation to come and talk at tonight’s 128th HG Anniversary Dinner. This is great and I am indeed honoured by the invitation. Although, on reflection, perhaps it’s not that great an honour, since there are so few university economists with any interest at all in the ideas of Henry George. It doesn’t diminish the honour in any way, but it does mean that there are not that many speakers to choose from, if you’re casting around among university economists who’ve got some sympathies on this subject.

Yes, I am a Georgist but, as I’m going to argue a little later, I’m also a Keynesian, a Marxist, an institutional economist, an advocate of green economics, indeed drawing, some would say rather eclectically, from a whole array of contributions within the tradition of political economic thought. Like most of you, I am very disappointed at the marginalisation of Georgist ideas within discussions of economics and political economy, and have done my modest (best) to try to redress that imbalance. But I think Georgism has probably got a lot to gain from engagement with other currents of economic thought and the selective blending of elements of the sort that I’ve just described. I’ve certainly tried to do that in my own teaching, teaching students about the diverse ways in which we can understand capitalism and its development, trying to research the ways in which we can draw tools from different elements in the history of economic thought, update them and apply them to the challenges that we face today.

So the remarks I want to make to you are partly about the history of economic thought, but they’re also partly about the relevance of Georgist ideas and other currents in the political economy to the major challenges that face us in the world today, in particular, challenges of economic security, social inequality, and ecological unsustainability. But, as a preamble to that, I think I want to reflect a little bit upon the nature of knowledge itself and how it’s used or misused in public arenas.

Out there, in the real world, there’s a whole lot of stuff going on all the time, individuals engaged in a whole array of economic activities: earning a living, managing an income, trying to look for investment opportunities etc. etc. etc. Finding some shape and some pattern in what’s going on out there is the analytical task we face as political economists or, more generally, as social scientists, trying to understand the world so that we may reshape it for the better, or at least make some modest contribution to that process.

But then there’s a third sphere, beyond the reality out there and the analysis developed by intellectuals, and that’s the sphere of understanding. All of us, I think, grapple with that. There are vast amounts of information, vast amounts of arguments about what is and what could and should be. What goes into our heads and what do we act on and, in particular, what do policymakers act on from among that buzzing array of information that they deem useful and appropriate for their purposes? That third realm is a realm of what you might call social psychology. It’s to do, for example, with personal experience that makes some ideas resonate more strongly than others.

I think back, for example, to my own personal experience growing up in the UK in an area that was then quite a rural area. It’s since been swamped by urban expansion, suburbanisation of a nearby big town, but when I was growing up, I, as a kid, used to love wandering around the fields. I came to know that most of those fields were owned by a landowner, a hangover, so to speak, from mediaeval England, with a big country house and a massive estate. But none of that worried me because I would freely roam the area, climb over fences where necessary and scrump the apples out of the orchard because, surely, there were many more apples than any single household could possibly consume, so I didn’t feel that it was outright theft, to get a little for free. Some years later I went back as an adult to revisit some of my childhood haunts and I went wandering around the estate, just like I used to, and some guy came up to me, he might have been a gamekeeper or something like that. He had a gun and guns aren’t very common in the UK, although people do use them for hunting. I was a bit apprehensive because he yelled out across the field to me, “Where have you come from and where are you going?” I yelled out, “I’m just going for a walk, just going for a walk” and he said, “Well, go back to where you came from!” And I did. It was a moment for me when I really thought the question of private ownership of land and the exclusive use of land really resonated. I remember it to this day as almost like a life-changing experience, comparable to the first time I got sacked as a worker for doing what I thought was a good job, but bending the rules in order to get the job done in a way that explicitly flouted the directions of the head waiter. I thought I was pretty good, pretty smart, pretty nimble, but he thought otherwise, I swore at him, and that was the end of my career in the restaurant industry.

Life-changing experiences which cause you to think some things are important and other things aren’t. I say this with some hesitation because I’ve made my career as a university academic on the presumption that knowledge is something we acquire to be useful, to be applied wherever it can make a contribution to human advancement, but I observe, particularly among students but more generally among the general public, that some knowledge is acceptable and others isn’t. Indeed, think about knowledge of climate change. People are sometimes sceptical, that’s fine, but are deeply resistant to accepting the evidence, the arguments, the analysis, so you think, well, what is the barrier that is so obstructing progress in an area such as this? I think these reflections, though they’re a preamble to my remarks, are particularly pertinent to Georgists, who I think have a lot of good analysis to offer, yet feel recurrently frustrated by the lack of interest, let alone action, on the knowledge and arguments that are being presented by Georgists.

Well, I think to some extent the source of that can be found by looking at the history of economic ideas. Mainstream economic thinking is very influential. It has its roots in neoclassical theory developed more than a century ago, which has waxed and waned in its acceptability but, on the whole, has remained a dominant orthodoxy through periods of boom, periods of recession, through periodic economic crises, through periods in which incomes have become more unequal or less unequal, waxing and waning. But orthodox economics seems to go on forever as a set of timeless principles based on theories of demand and supply, individuals seeking to maximise utility, interacting in markets that create efficient outcomes, as long as they’re reasonably competitive, and that that results in the resolution of conflict through the establishment of prices at which mutually advantageous exchanges can occur. And where exchanges expanded internationally into international trade, so to the gains from trade that may not be altogether equally shared, but which benefit all in the sense of paving the way for further economic growth and prosperity.

That’s the standard orthodoxy that is taught in most universities to most university students who enrol in that course, but it’s always been a very selective story situated in the context of economic thought. Some say it has its roots in Adam Smith’s early writings, but that’s a little doubtful. I mean, Smith certainly took the view that it was self-interest that motivates most human behaviour, a reasonable enough assumption. Who was it who famously said, “If there’s two horses running in a race, one called Self-Interest and the other Altruism, put your money on Self-Interest ‘cos you know it’s always trying”?

AUDIENCE: Paul Keating.

Paul Keating, thank you for that. But Smith saw the drivers of economic growth more fundamentally in the division of labour, the expansion of trade, and he was not blind to the dangers of over-reliance on markets. He famously warned against the tendency of capitalists to conspire. So Smith can be said to be in favour of markets where they’re competitive, but very distrustful of capitalists because their self-interest was likely to lead to the development of a monopoly that would work against a broader public interest. So a capitalist economy that was only then emerging at the time Smith was writing could indeed be a driver of increasing the wealth of nations, but it needed to be watched at every step of the way, shepherded through the processes by an enlightened state or sovereign, as Smith wrote in his own time. The importance of the ethical dimension was very prominent in Smith’s thinking – he was, after all, a Professor of Moral Philosophy. Then David Ricardo, himself a landowner, a British parliamentarian who made major contributions to the understanding of land, layering in the land dimension to Smith’s analysis and showing how land can generate an economic surplus. That, I think, was a major contribution that paved the way, albeit for a very different interpretation of the economic surplus, by Karl Marx. Marx, I think, can be situated in terms of this tradition of classical political economy as someone who took the notion of an economic surplus arising from land, as in Ricardo’s thought, and applied it more generally to the exploitation of labour, in other words, seeing the economic surplus arising because of the domination of capital over both land and labour. Now, of course, significantly, that switches the attention from the capacity of the landowning class to extract and appropriate a surplus, to the role of the capitalist class, then emerging and developing, as the principal beneficiary of that surplus extraction process.

These were, in their own time, very unsettling ideas. I mean, Ricardo the landowner talking about the, let’s not mince words, parasitic role of the landowning class in capitalist development and Marx, of course, arguing that the whole system is itself based upon the exploitation of land and, as some Marxists would also add, the exploitation of nature in a way that is tending recurrently to generate economic crises and perhaps, long term, breakdown. Marx was right, of course, before we knew anything about the long term consequences of the abuse of the physical environment, but I think one can see in that analysis some forerunners of modern concerns about ecological catastrophe. So it’s not just the exploitation of labour, but also the relationship of capitalist development to land that comes strongly into the picture. But there were other writers at that time, less scholarly and academic, but picking up on notions of natural justice, writing pamphlets that were circulating in Britain or the United States and Continental Europe about the need for equality in the access and fruits of the land. Natural rights became a very important current of thought and, to some extent, I think the great classical political economist John Stuart Mill was picking up on these concerns and trying to show how capitalist economics could be blended with the quest for a good society in which principals of social justice prevail.

To cut a long story short, in Mill you see the arguments that capitalist development depends upon certain economic principles which must be obeyed, but that the distribution of the fruits of that increasingly productive economy is a political choice, a political choice. So, in other words, let the economy generate the wealth and let the political system decide how the fruits of that wealth will be shared.

I think that, to this day, remains a resonant argument which you might see among some people centre-left of politics who want to harness free market economics to principles of social justice. It’s always an uneasy relationship but, arguably, that’s what Henry George took on as a challenge and I think one can argue, and I’m sure the argument would be well-accepted in this context, that he did it better than Mill because he more fundamentally identified the role of land in that surplus generation process and the need to redress that because without that correction, nothing else could be done that would be of enduring effectiveness in creating a socially just outcome. We celebrate the visit that Henry George made to Australia in, was it 1980?

AUDIENCE: 1890.

1890. Sorry, I’m a decade out. Yeah, Progress & Poverty 1779, 11 years later Down Under having visited the UK in the meanwhile. I think it’s important, apt to remember the context in which this was all done, during a period that had seen the Industrial Revolution, social upheaval, and intellectual concerns about how the fruits of this economic transformation were going to be sustained and shared. George’s ideas had a lot of traction, of course, in any frontier society. They were developed in his own context of the United States, trying to explain how the fruits of westward expansion across this country, stolen, effectively, violently from the Indigenous peoples came to be concentrated in the hands of landowners who then got rich, while leaving others in poverty. That’s a very short version of the Georgist story, but the ideas, I truncate them in that way just to illustrate how it had a natural resonance for settler societies, frontier societies where social injustice was very much associated with the appropriation of land as European colonisation and settlement impacted on that nation.

I understand, from reading John Pullen’s book (Nature’s Gifts), that George received rapturous response, albeit not without some criticism, during his tour of this country. He was here for 98 days and went to 34 Australian cities and towns, as far north as Rockhampton, where he went by ship from Brisbane. So he had a mixture of modes of transport while he was here. He spoke to packed audiences pretty well everywhere he went and Pullen’s research suggests that, according to newspaper reports, bear in mind there are no recordings that we know of about the content of his speech, but extensive newspaper reports of what he said and generally the tone of those reports was to draw attention to his strong arguments, his ethical social concerns that often inspired, I quote, “a semi-religious fervour among his audiences”. George expressed, among other things, perhaps a rather surprising affinity for trade unions. Of course, he was opposed to monopoly, but obviously had some sympathy to the need for labour to band together to pursue its interests collectively.

Reading John Pullen’s book, I have a copy in my bag here and I recommend it strongly to any of you here, it’s interesting for all sorts of reasons. It transports us back to an era when public meetings were the mainstay of political activity and workers’ education. Its attention to historical detail conveys a strong feeling for the events, atmosphere and concerns of that time, and one gets a picture of George himself as warm, witty and wise, which isn’t a bad trilogy. The book ends, I have to say, with a separate section – you’ve read this, Joffrey, I presume – which is about the relevance of these ideas today. I think it’s extremely well-written because it doesn’t duck any of the challenges. The challenges, for example, about the increased number of people who see themselves as having a stake in the fruits of private landownership and are resistant to anything that can be interpreted as a tax on the family home. We’re all well-aware of that political obstacle and the political fallout that comes from the mention of extended land taxation, let alone propositions about the single tax itself. So I repeat, I recommend it to you strongly. But, of course, the story doesn’t end there. George’s ideas, powerful and well-received as they were in many parts of society, were totally unacceptable to the prevailing economic interests – landowners most generally, but significantly also the mainstream economists. Mason Gaffney and Harrison recount the backlash against Georgism (in The Corruption of Economics).

Prominent American economists, like J B Clark, wrote explicitly about the need to counter these dangerous doctrines, and they must have been perceived as very dangerous in their time because, arguably, the marginalisation of George was even more vigorous than the marginalisation of the dangerous doctrines of Karl Marx. So it’s kind of insightful, I think, about how powerful were the interests of private landownership at that time that they actually had the economics profession on side in their attempt to marginalise these dangerous doctrines.

But then the 20th century rolls on, Great Depressions happen, John Maynard Keynes, his ideas come to the fore and I think very usefully too, as a means of explaining recession and resolving it through increased government intervention via systematic monetary and fiscal policy. We get John Kenneth Galbraith coming along in the footsteps of other great institutional economists, like J R Commons and, earlier still, Thorstein Veblen, showing how institutional change needs to be a central part of economic analysis; how it responds to technological change; how the development of corporate power can be abused and misused; how there becomes a division of interest within the capitalist class between those who actually own the capital and those who manage it, the so-called divide between owners and managers within modern capitalism. These are all extraordinarily valuable contributions. You get modern Marxists coming along, like David Harvey, applying that notion of economic surplus to the study of urban development and the inequalities that are associated with urban development. The Georgists might well say, “I told you so”. We always knew that urban development would create increased inequality of income and wealth, but it’s interesting that those ideas, though discredited in the economic profession, keep coming back into mainstream discussions precisely because the problem doesn’t go away. So it may not be labelled Georgism, but it’s the same concerns about land speculation, the accumulation of wealth through unearned incomes associated with monopoly ownership and control of nature’s wealth.

It’s hard to know what to make of this 200 years and more in the development of economic ideas. Frankly, it’s a bit of a mess. Economists have always claimed to understand what’s going on out there, developing appropriate concepts for understanding it and also changing it for the better. I remember the very conservative predecessor of John Maynard Keynes at Cambridge University, the man who held the chair before Keynes was appointed, a man named A C Pigou who had quite conservative economic doctrines, but made a wonderful preface to one of his books which talked about the growing inequalities in society and the need for economic insights so that we can redress these wrongs. “Out of the darkness, light,” he says in conclusion. Well, I suspect we’re still wandering around in the dark. And if you look at the challenges out there, the challenges in the real world that we need to confront, they have changed in character, but certainly have not reduced in intensity.

To my mind, there are the big three to which I earlier alluded. There’s economic insecurity, social inequality, and ecological unsustainability. The economic insecurity takes many forms. It has a macroeconomic character in the whole vulnerability of the economic system to periodic economic crises. When I went to university in the 1960s in the UK and studied economics, I learnt a Keynesian story which basically said now that we understand the economy pretty well, as a macroeconomic system, we know it’s got a tendency to periodic crises and unemployment, but we’ve got the tools to prevent it ever happening again. That was the dominant story.

Then, of course, some years later, the Global Financial Crash emerges and most astute analysts of that see it as rooted in speculative tendencies associated with housing markets and thus, of course, traceable back to the land question. In other words, the uncertainties arising in the American housing market associated with the issue of mortgages, in high risk lending processes which lead to instability in the value of the assets, the financial assets produced by combining those mortgages together into so-called collateralised debt obligations, which the financial institutions then become increasingly nervous about holding. They don’t know the value of each other’s assets, the system starts to break down, and a rescue operation prevents a horrible crash, comparable to the Great Depression. And certainly in Australia, Keynesian economic policies implemented by the Australian Government did pretty well as a temporary Band-Aid, pumping money into the economy to keep the economic system pumping along, but it didn’t do anything to redress the more fundamental sources of crises that had erupted in the global crash. In other words, it was a Band-Aid. A Band-Aid that worked and stemmed the bleeding, but the underlying problem remains the same. So all the talk about the need to restructure the global financial architecture has really come to nothing much. Indeed, it was always a little preposterous, because finance doesn’t operate according to the principles of architecture. Architecture is about building observable structures. Finance is about processes of exchange in which questions of trust, reliability and risk are ever-present. The notion that you could somehow eradicate the risks through some restructuring of the global financial architecture seems, frankly, rather itself speculative.

Then economic inequality, much in my mind because in the wake of Thomas Piketty’s major contribution in the book Capital in the 21st Century we now know that there’s an underlying tendency in capitalism to the increased inequality of wealth. Only in exceptional circumstances does that process get reversed. Such exceptional circumstances did occur, for example, during the 1950s and 1960s, when governments here in Australia, Britain, most of Europe and North America engaged in progressive redistribution. In other words, increasing rates of income tax with marginal rates of tax up into the 80s and 90s for the very highest incomes and using those funds to develop a welfare state that provided more of a social safety net to address the problems of poverty and exclusion from the mainstream economy. A very successful process but, once again, you might say, certainly from a Georgist perspective or, for that matter, from a Marxist perspective, that that didn’t fundamentally change the nature of capitalism. It made sure there was buoyant demand for goods and service,; it was therefore conducive to economic growth, and it seemed to tick the social justice box, for a while at least, by moderating the underlying tendencies to increased economic inequality, but now, with the neoliberal era, we’ve moved on into letting it rip and the economic inequalities are continuing to increase within most capitalist countries. And, increasingly of course, in the developing countries, like China and India that have achieved spectacular economic growth, spectacular as anything in human history in the case of China, but have also produced increased inequality. The growth has lifted the floor for the poorest of the poor, but it’s enabled the richest of the rich to increase their overall share, even in communist China where the official ideology, of course, is still of that egalitarian character. The practice is quite different, but then don’t get me started on the Chinese State at the moment. In the context of what’s going on in Hong Kong, I think we have to just accept that that’s a rather volatile and unfinished story.

I tried to summarise some of the evidence and arguments around inequality in my latest book on The Political Economy of Inequality. It doesn’t focus particularly on Australia, I’ve written about that in some earlier books, but trying to take stock of what’s happening around the world in this process of globalisation, neoliberalism, financialisation and ongoing urbanisation, shaping who gets what. Frankly, I think the short version in one sentence is ‘who gets what depends upon who owns what’ and within those structures of ownership, it’s ownership of land and natural resources that is a central part of the action. Then there’s ecological sustainability and the challenges arising from climate change and other environmental threats. Here too I think we can see the ongoing relevance of Georgist ideas if expanded, as I understand George wanted to, to embrace natural resources rather than simply land per se. I’m talking about natural resources, mineral resources, the atmosphere itself as a common property, so to speak, in which we all share and deserve equal rights and access to in a healthy environment, then I think we can interpret the challenge here from a Georgist perspective. I think there’s a lot of future for the increased tractability of Georgist ideas in contributing to debates around the resolution of climate change, if it’s not already too late.

I might, as I move to conclusion, come back to the issue of the political process itself and our political institutions, because in addition to the challenges of economic insecurity, which involves often increasing layering up of debt, increased insecurity of work, a growing incompatibility between housing unaffordability on the one hand and volatile and uncertain wage incomes on the other hand. I pause at that moment because when I’m talking to student audiences they immediately relate to that: how could you buy a house if you don’t have a steady job with career prospects? I mean, just making the commitment itself, even if you pass the criteria for getting loans, involves taking on an enormous risk, which frankly you wouldn’t want to burden the next generation with if you’ve got any sense of social justice at all. Mark you, the notion somehow that all of the oldies have stuffed the opportunities for all the younger folk is a bit misleading, because among the oldies are some people who are doing very nicely indeed and are sitting on valuable real estate, quite able and willing to help their offspring acquire property, sometimes buying it for them, certainly lending them money that’ll get them started.

So what I’m saying is it’s not a problem of intergenerational stress, so much the intragenerational stress which becomes magnified over the generations themselves.

Can our political system resolve these sorts of issues? In Australia one has to be, I think, rightly sceptical about whether governments can tolerate the possibility of falling real estate values, for example, given that the appeal is always by the major political parties to people who see themselves as having a stake in ongoing appreciation of land and property values. They’ll talk about the problem of housing affordability facing first home buyers, but the only way actually to make housing more affordable is to reduce its price. Of course, it would help if wages were rising too, but even that wouldn’t solve the problem because already we’re in a situation where the average urban house is going to take ten years or more of wages to become affordable. It’s not surprising that people have become very sceptical about the political systems’ capacity to solve economic and social problems.

I think George had in mind the notion that if you just develop the evidence and the argument, then people of good intent and good thought will act on it, including by introducing appropriate policies. His mechanism and weapon for social change was the force of his argument and perhaps also, to some extent, the strength of his character, those warm, witty and wise characteristics for which he became so renowned. If he were here with us today I think he would, like all of the rest of us, have to grapple with the profound problem of the modern state. What is it? It’s not just a carrier of vested interest. It’s become, in a sense, an obstacle to progress itself and, not surprisingly, some people have turned to erratic public figures, such as President Trump, in the hope that somehow he can drain the swamp, change the array of political possibilities. Whether for better or worse we don’t know, but let’s do something different. There seems to be a sentiment of that kind abroad and, of course, we know the potential for corruption of the political system.

I’ve brought along a bag with me today. It’s not actually an ALDI bag, but if anyone’s got any bunches of used notes that they want me to deliver to Sussex Street in Sydney, I’ll be passing that way tomorrow afternoon, after I go back to Sydney. So I’ll leave this over by the piano, just in case anyone wants to deposit some spare readies. $100,000 given by property developers to the Labor Party. Flagrant corruption and it’s not surprising it’s all over the news over the last week, but when you think about it, it’s pretty small change. Pretty small change. Indeed, over many years I’ve been surprised how little you have to bribe people in order to get them to behave in unprincipled ways. A few thousand dollars here and there. If you’re talking about the corruption of a political system, it’s much more fundamental than that. This is the tip of a big iceberg. Further down the iceberg is Malcolm Turnbull putting in $2 million of his own money a week before the last general election, before this recent one. Well, he’s got the right to do that, there’s nothing illegal about it, but it just goes to show how being rich, whatever the source of the funds, can help to bias the political outcomes. Even more strikingly, of course, was Clive Palmer spending something in the range of $60 to $80 million trying to prevent a Labor government being elected at the last election. That was clearly the message. I mean, he was totally unsuccessful in getting any of his own candidates up, but it was, I think, a significant contribution to the “Kill Bill” process. Many of the advertisements more or less said that, “Kill Bill. You don’t want this guy running the show”. Well, certainly Clive Palmer didn’t want him running the show because, in their own inept way, the Labor Party were moving to redress some of these inequities, talking about changing negative gearing as a tax rort and the capital gains tax discount on the skids too.

And the future of mining? Well, Labor made a complete mess of that in the election in identifying what their actual position was, but I think Clive Palmer would have rightly worked out that “Kill Bill” was a good strategy from the viewpoint of his narrow self-interest. It’s the more certain outcome now, climate change is back on the backburner, terrible metaphor, and mining’s ripping ahead. Adani here we come, thank you very much! Who gives a bugger? So it’s not surprising that there’s a certain disquiet around the use of information and knowledge to produce enlightened public policy. I’m hoping some of you have got the answers to this. Let’s have some discussion.

MC Emily Sims: Thank you so much, Professor Stilwell. I wish that I had been in at least one of your lectures – I went to the wrong university. So, Frank has generously offered to answer our questions or perhaps he’s taking answers, I’m not quite –

Yeah

MC: Yeah, let’s have a conversation. I’ve got heaps. I’ve also got the mic, so this is awkward.

AUDIENCE: What are your thoughts on a universal basic income?

I like the idea of a universal basic income, for all sorts of reasons. Henry George, I think, toyed with it. He raised, on a number of occasions during his talks in Australia, the possibility that a single tax on land might generate revenues that could be directly redistributed to the people. I don’t think it was his preferred option, but he talked about it as one of the possibilities. If you’re talking about a process that eliminates poverty, tick. If you’re talking about a process that frees people from what some people would call wage slavery, tick. It would help to provide a floor to inequality and the distribution of income, but it doesn’t actually address the inequalities associated with land and natural resources. In other words, it’s a redistributive mechanism first and foremost, rather than a structural change in how wealth is generated and captured. But having said all of that, I think it’s a policy that’s been talked around for a long time. It hasn’t been acted on in any significant way to-date, but it just seems to be that its time is coming. I’m supervising a PhD student at Sydney University whose topic is exactly this, the potential applicability of a universal basic income system in Australia, and he’s doing all the numbers, yes, the modelling about whether it would be affordable. He says on a modest scale it could be affordable and he’s got some interesting calculations that he’ll be publishing soon done in conjunction with the statistical team at NATSEM in Canberra, who are pretty good at this kind of economic modelling.

But, ultimately, I think the reason it breaks through is it opens up further possibilities. If people are entitled to receive income as of right, this involves an expansion of our civil rights, I think. In other words, the right not just to be free of racial, ethnic, religious discrimination, but the right to actually have freedom of the sort that I think Henry George envisaged, that we would have the freedoms that come with being in a more equitable society, the greater freedoms of an equality of opportunity. So I think all of that is well worth considering and, in summary, it’s a radical reform, something that isn’t just tinkering with the system, because it’s not only redistributive, it changes citizens’ rights in ways that I think are conducive to equality and freedom. So that’s my take on it, but I’d be very happy to hear other people’s views.

AUDIENCE: Hi, I really loved your presentation and the talk, it was very inspiring. I recently went back to study economics after a different career and, like many people, you’re bright-eyed and maybe quite idealistic and thought this’ll help me understand how you can maybe optimise some different values in society, and then I was kind of shattered to see that you’re taught just to optimise one metric, it’s just GDP, Gini co-efficient is irrelevant. Second year you get there and I’m like, “Okay, I’m interested in intergenerational mobility” and you start to look at hidden equations and we’re instrumenting away class factors. There’s that assumption that all of the constructs don’t have any normative assumptions embedded in them and if you try to raise a question you’re shutdown. I just wondered, have you seen that that’s been a recent shift, that it’s just become so orthodox and homogenous? For the new students coming up, I meet people who are frustrated or have started their studies, how can they go about shifting that needle? We see so much in the media, economic inequality is so hot right now, all the movies, and even Thomas Piketty has a doco that has a really good poster, the Fresh Prince is even in the poster, it’s crazy. But what do we do?

MODERATOR: That’s a big question.

FRANK: You develop an alternative which is, of course, what Henry George tried to do in his own time to challenge the prevailing orthodoxy, develop alternatives and more effective alternatives. The root problem, I think, in economics is two-fold. One is that it’s separated itself off from the other social sciences or what you might more broadly call social inquiry. If you go back to the era of classical political economy, the year of Smith, Ricardo, Marx, Mill, George, there was no clear separation between the economic inquiry and the analysis of social issues, ethical issues, historical issues, political questions. This was all the stuff of political economy, but then around the end of the 19th century economics becomes separated from the study of politics, it becomes separated from sociology, and moral philosophy somehow disappears into the ether. This, I think, has been largely unhelpful. Obviously, for the organisation of universities and the organisation of knowledge acquisition it’s sometimes useful to compartmentalise to get started, but when God created the universe She didn’t divide it up into the economy, the polity, the society. All these aspects of life are interdependent and so a good holistic understanding requires putting the pieces back together again, hence I think political economy is more interdisciplinary in character than the narrow economics that defines itself in terms of a certain set of analytical techniques and therein, of course, lies the second problem: the attempt to be scientific in emulating the physical sciences, physics in particular.

One writer about this has described it as “physics envy” – a slightly nuanced phrase there – as a problem within economics; that they want to have the status that’s accorded to people in the physical sciences who’ve made major breakthroughs in understanding the physical world. I think it’s always important to be as coolly analytical as one can be. I don’t think I’ve exhibited that in my remarks tonight, but I certainly do in my own writing. I try to look at alternative points of view, the evidence, fairly coolly and weigh up where the balance lies, but that’s different from being scientific in that narrow sense. The over-mathemitisation, the abstraction from reality that’s necessary in order to construct theoretical models has, on the whole, been rather unenlightening. So getting down and dirty, getting some dirt under your fingernails by actually looking at what’s going on out there, rather than remaining in a rarefied world of theoretical abstraction. In fact, I remember some years ago, just a little bit of a rant here, hearing a public lecture being given by a winner of the Nobel Prize for Economic Science. Actually, there’s no such thing. There’s a prize given annually by the Bank of Sweden in honour of Alfred Nobel, but it’s not a proper Nobel Prize, like the Peace Prize or for literature, for example. But the winner of the so-called Nobel Prize for Economics one year was a man named Gerard Debreu, an economic theorist who came to Sydney one time. I went along to his public lecture and he said as a preamble to his talk, “I don’t want you to be confused about what I’m about to say. I’m going to be talking about economic theory. Please don’t compare this with anything to do with economic reality. And when I’ve finished, don’t ask me questions about how my theory relates to reality, this is a purely theoretical exercise” and I thought, “Jesus, what’s the point?”

I think I now know what the point is. Constructing an ideology and doing so, rather refreshingly, frankly, saying, “I want to develop an ideology of an ideal world; don’t confuse that with reality”. That tendency within economics seems to me to be so inward-looking as to render it if not useless, possibly even worse than useless because it distorts our perception of reality when economics is dominated by these unrealistic thought experiments.

MODERATOR: That sounds like a discussion for the bar downstairs later.

Yeah, let’s do it.

AUDIENCE: Frank, I have long admired your work from afar, so thank you very much, it’s been a really very interesting talk. My question is, isn’t part of the problem complacency within we can talk about the working class, but let’s just call it the populous? As you rightly point out, poverty levels in China, India and, indeed, most of the world are decreasing. The wealth of most people in the world is rising, with the obvious notable exceptions that the OECD tends to ignore. That is not an issue that affects the increasing inequality, but what do you say to people who, in response to the critique that inequality is increasing, the critique being “but the base level is increasing, such that an increasing level of inequality is not that much of an issue anymore”? There are fewer people in abject poverty now, so why does inequality matter?

FRANK: Yeah, very nice question. There was a famous American vaudeville star who once said, “I’ve been poor and I’ve been rich and, believe you me, rich is better”. I agree that getting out of poverty reliably reduces people’s misery, but the evidence that further increases in material prosperity and the accumulation of prodigious wealth is not convincing in terms of its contribution to human wellbeing. Indeed, there’s a growing volume of evidence which suggests that a) the redress of poverty in the longer term and maintaining people out of poverty depends upon lowering the ceiling as well as raising the floor. In other words, that successful and sustainable assault on poverty will require reduced inequality. In other words, it’s not just helping people at the bottom; it’s also looking at the processes by which wealth is accumulated causing growing inequality, which, in turn, feeds back into the reproduction of poverty. Oxfam has certainly taken that line. They’ve been renowned for decades as one of the international NGOs concerned with the reduction of world poverty but, as you may have seen in recent publications over the last decade, they’ve switched their focus from simple poverty alleviation to a more general assault on inequality. I think they’re on sound grounds and the reason for that is primarily because of the growing volume of evidence generated by social scientists about the statistical and causal connections between inequality and a vast array of social problems.

I’m thinking particularly of a book written just over a decade ago by some British epidemiologists, Wilkinson and Pickett (The Spirit Level – https://en.wikipedia.org/wiki/The_Spirit_Level_(book)) , who took data from an array of countries according to an array of social problems. So they looked at rich countries and poor countries and they looked at social problems, such as physical ill health, mental ill health, low rates of educational attainment, high rates of crime, violence, prison incarceration, and they found there was a broad co-relation between those social problems and the level of inequality. Now, one shouldn’t be surprised that poverty causes ill health, but Wilkinson and Pickett’s evidence suggests that more than that, inequality or the countries in which inequality is greatest tend to be those with the poorest health, other things being equal. It’s a complex story. None of these co-relations are perfect or absolutely conclusive, but in their more recent book (The Inner Level) Wilkinson and Pickett try to tease out a little bit more some of the causal connections why inequality has such pernicious effects on social problems. They look at issues to do with the bonds of social solidarity and of trust. In other words, the thought’s only just occurred to me, they go back to Adam Smith. Not to Smith’s Wealth of Nations, which is all about economic incentives and the drivers of growth, but to Smith’s earlier book (The Theory of Moral Sentiments) which was about the social bonds that make societies work. If there’s too much inequality, those social bonds become fractured.

People sometimes talk about such heresies as trying to stir up class war. Well, as Warren Buffet famously said, ‘there’s a class war going on alright and our side’s winning’. Yes, there are inequalities, they’re structured around class, they’re structured around gender, they’re structured around ethnicity, and these are sources of social division and conflict. One should hardly be surprised that in societies where you get that breakdown of common interests that you find this proliferation of social disorders and also, and here’s the real punchline, you find generally lower levels of happiness. Now, you shouldn’t be surprised that in societies with a higher instance of social disorders that people tend to be a little unhappy. I mean, life may be insecure, you can’t walk down the street without getting mugged, or you can’t get a good education because the system’s been privatised and you can’t afford the best of the available options on the menu, blah, blah, blah, blah, blah. In other words, it’s not surprising really that in societies where you get this high instance of inequality you get these less happy people.

AUDIENCE: Amanda Vanstone called it “politics of envy”.

Yeah, politics of envy, I’m all for it. No, joking aside, this is not the politics of envy.

AUDIENCE: It’s a very difficult argument, I think the left has not, it’s not found a very good response yet.

Well, this is mine.

AUDIENCE: If everybody is getting richer and the levels of abject poverty are lower than they used to be, what’s the problem?

Well, I don’t think I can add much to what I’ve just said. The problem is the higher levels of social malaise and the reduced levels of social mobility, even though incomes, on average, are rising in most of the world. Not all the world. Africa south of the Sahara is missing out anyway and, interestingly enough, Africans in general seem to be quite happy people according to the statistics, but maybe there’s a cross-cultural difference in the way in which we interpret happiness.

MODERATOR: I think this post-discussion discussion is going to be a beauty.

AUDIENCE: Professor Stillwell, I noted that you made reference to the fact that there are so many Australians invested in high land values and increasing house prices as being one of the increasing obstacles to change. I was thinking about the Rudd Government introducing a $250,000 insurance protection on bank balances during the GFC phase. To what degree – and it’s as if cost was not an obstacle – would an insurance policy against falling land value undercut their concerns sufficient to get the traction you need to make major changes in the fiscal position of land?

That’s an interesting thought. I haven’t heard that possibility being floated before. If we’re talking about compensation of landowners for falling land values, I personally recoil from that because unless you’re going to average it out over the whole period since they bought the land. Let’s take the swing and the roundabouts into account here. If you’ve had 15 years of steady appreciation in land values without doing anything in the way of human effort to justify that increase in your wealth, so what if you have a couple of lean years when the land values drop? I mean, God, one’s got to look at the whole lifetime of this process, not just compensate people for downturns if you don’t take the fruits of the upturns.

AUDIENCE: But if they re-mortgaged it at 90% last year, then they’re in debt. The falling land values could put them under water.

Sure. I think this recent Progress Report, though I haven’t read it carefully yet, can address some of these problems. The question of the time period over which you take into account the wealth impacts of changing land values and changing forms of taxation, such as a shift from stamp duty to land tax, there may be a solution that can be engineered. So perhaps this latest report for Progress signals some clues here, but I’m frankly a bit floundering myself.

AUDIENCE: Don’t mean to hijack it, but I’ve actually got two questions, an easier one and a tough one. The easy one is if “global financial architecture” is an inappropriate metaphor, what’s a better metaphor? The hard one is if 130-odd years of campaigning hasn’t changed government’s minds about this and we can assume we’re not going to change the mind of government around this, how can local or grassroots projects actually implement something towards Georgist economic policies for ourselves? Have you considered this, contemplated it and developed any theories to that end?

On the first easy question, I don’t know that it’s that easy, but if it’s not about constructing a new global financial architecture, it’s probably just about muddling through and putting some shock absorbers into the system so that there are limits which trigger stabilising mechanisms. I’m starting to sound like an architect again.

On the second bigger question, I don’t know the answer. All I do know is, from observing processes of social change, they tend to be more successful when there’s a powerful critique and I think the Georgists have got that; where there’s a powerful vision of the desired alternative and I’m not sure that the Georgist vision has been all that well updated, but work can be done on that; there needs to be a strategy getting from the unacceptable present to the desired future. That, I think, has to be more than just banging the drum and rearticulating the arguments. Even if they become more sophisticated and backed by good reports and evidence, I still think that notion that knowledge and its broader dissemination and stronger advocacy is not enough. Then, fourthly, there’s the need for organisation. There are, of course, Georgist organisations, perhaps a little more unity across them might be helpful, but I’m still not sure that what is regarded by much of the rest of the populous as a rather irrelevant religious sect cuts it as an effective organisation. I don’t mean to be rude about that, but I’m talking about that as a popular perception about people who are interested at all, and most people just don’t know. So I can’t prescribe, but it seems to me those are the four sets of questions: do we need to refine the critique; do we need to update the vision; do we need to diversify the strategy; and do we need some reorganisation of the troops?

AUDIENCE: And people need to vote for that change as well. We do have politicians now that do bring in a narrative that comes closer to what we’re trying to advocate. We work very hard within our organisation on bringing the Georgist narrative more into modernisation, but people need to vote for it and I think it goes to the conversation we had earlier and that is nobody really wants to work for a living, nobody really wants their capital gains taxed away. So we can all come down here, and there’s a lot of people in here that have earned their wealth from rising land values, and the concept of changing the economy, we have to come up with a narrative about how we’re going to transition the economy towards what we want, without causing too much pain. I think that went to what your question was. Andrew wants to just compensate everybody, then they won’t feel any pain and then we quickly change it all around and walk it in the right way.

AUDIENCE: Thank you very much for your interesting talk. Two comments I’d like to make with regards to the financial system and its buffers. Quantitative easing was a theme that saved the system by providing cash liquidity into the market. The second one was that Kevin Rudd’s guaranteeing of people’s accounts in banks was a stealth approach to refinancing the banks in Australia, because at that time the banks in Australia had very little cash in their vaults as opposed to the huge mortgages they were holding. However, the question that I’m putting is in regards to economic philosophy. With all the great thinkers you mentioned, one thing that never came through your talk was simply the DNA of us being humans. Greed is what drives the system. Since the time of hunters and gatherers, we’ve managed to acquire land and it was always wars fought over land, because land is valuable for agriculture, for everything else, the basis of land, water, minerals and so on. So I think in terms of the overall economic philosophy, we have to think about who we are, what we are, what our DNA is, and what are those needs that drive us into an economic system.

Yes, thank you. These are profound observations. I value your observations about the elements that provided at least some temporary rescue from the Global Financial Crash, but those reflections on the broader character of human nature I think are more deeply challenging. Greed, yes, I take that as an eternal feature of human nature, but it’s not the only feature of human nature that’s relevant to economic activity. We are all social beings. We flourish in social conditions. We are more prosperous and, I think, happier when we’re engaged in co-operative activities. I think it’s not inconceivable to think that those aspects of human nature, if one can use that concept, are the ones that a good society would wish to promote. Not necessarily to eradicate greed and self-interest, as I said earlier, it’s always trying, it’s always present – the Paul Keating quote – but there are these other elements that would create the society that Wilkinson and Pickett are talking about, more akin to, say, the Nordic states. I often think that Australia’s on the cusp between the United States’ model on the one end, where, as Piketty and others have demonstrated, inequalities of wealth and income have relentlessly increased in the last few decades. I mean, it’s become an enormously unequal society, with the top 1% capturing the bulk of the increased income and wealth generated in that society. At the other extreme are the Nordic states, which have always been much more egalitarian, long traditions of more social democratic politics, stronger labour movements, which have resulted in a much narrower differential between the rich and poor and, in general, according to surveys, more coherent, cohesive, contented societies. Which way is Australia to go?

AUDIENCE: Let me make a comment on the social aspect. I was just thinking with social, people put hundreds of hours into their creative commons in their social media, often with no hope of remuneration and at the expense of their paid employment, and they’re just getting creative commons and identity and social connection out of that. So doesn’t that question the fact that greed is the only thing that motivates you? If you’re getting nothing in return and you’re putting heaps of your time, labour, opportunity and reputation into something that’s only about connection and the fact that these companies have grown so fast, to make connection is just as important as acquiring goods?

Sure. I used to tell my students, “Don’t use Wikipedia as a source for essays” but I’ve completely changed my tune on that. I think this is a community resource produced by people freely contributing, co-operating to get a better database on everything under the sun. It’s a wonderful example of more generally what you’re talking about and so be it; I think there’s a way forward here with using those network technologies which could provide plentiful opportunities for productive social advance. Now, whether that’s going to satisfy our full array of human needs I don’t know but, going back to Maslow’s pyramid of needs, we’ve all got basic needs for food, clothing, shelter; we’ve got social needs for friendship, networks, communication; and we’ve got higher level needs for self-actualisation, which you might get out of spirituality, you might get out of a relationship with nature, you might just get it out of a very enjoyable bushwalk, back to nature. Those are perhaps the ultimately more fulfilling aspects in that pyramid of needs. So greed’s in the story, but so too is co-operation and so too are other aspects of human fulfilment, and if we can’t build that all into our economic and social system, we’ll be the poorer for it.

MODERATOR: Just for those who couldn’t hear the comment that was made, Instagram was put up as an example of how humanity is not egotistical.

AUDIENCE: I know, I know! [inaudible]

MODERATOR: Again, it’s a fruitful discussion for the bar. This is going to be our last question, folks.

AUDIENCE: Professor, as a kid I can remember watching some black and white movies and the great cities of the world were London, Paris, Rome and New York. In recent years, Melbourne and Sydney have been seen as some of those wonderful cities because of the prices that people are prepared to pay. I thought that we had higher prices because in Australia because we don’t have non-recourse loans, which was America’s problem. Too simplistic. I also thought, well, my father applied for a loan, the bank manager didn’t even talk to my mother, and then a couple would go along to the bank and the bank would say, “We can lend these people twice as much money, because we’ll take both incomes into account”. Those theories were completely floored early on when Emily mentioned that Henry George came out to Australia 140/170 years ago and identified Australia as being one the dearest countries in the world. Other than greed, because the whole world’s greedy, what is it about Australia that for 150 years we’ve had the most ridiculous bloody prices in the world?

Yeah, interesting, isn’t it? Australia is a huge continent with a relatively small population, but they’re disproportionately clustered into a few urban areas. I think, in brief, that’s the answer to your question, is that we’ve not balanced our regional development in ways that are economically efficient, socially equitable and ecologically sustainable. We’ve developed this metropolitan primacy, not in the nation as a whole but within each of the states, which is simply a colonial hangover. These were the points of initial settlement that, like Topsy, have just grown and grown and grown. Governments have fuelled the process in many respects but governments have not been very vigorous in promoting more balanced patterns of regional development. The Whitlam Government had a go in the early ‘70s with its Department of Urban & Regional Development, or DURD as it was fondly known, but it was a very short-lived experiment. I think had the Whitlam Government stayed in power and, more importantly, had the program had cross-party support, it could’ve come to fruition with new town developments. Albury-Wodonga was one, the Bathurst Orange area in New South Wales another. Murray Bridge in South Australia was floated but nothing happened, not a sod was turned. The program was completely abandoned once the Whitlam Government was ejected and the Fraser Government installed and no government since then has gone in that direction.

There are periodic conferences on the future of Australian cities – Emily recently attended one in Darwin – and these issues get talked about but, once again, the lack of political action is pretty blatantly obvious. Some would say, “Cross-party co-operation, are you dreaming? Cross-party co-operation on anything?” but without that you simply can’t get a policy like this up and running because it would take 20 years to develop significant changes in our pattern of urban and regional development, but without that I think we’re on this treadmill to nowhere. So that’s why throughout my whole academic career I’ve tried to blend the study of political economy with the study of cities and regions, because although thank you to the geographer at the back, geography matters of course. It’s not the only decisive thing, but it has to be incorporated into any planning process for a sustainable future and I think if new cities were developed around modem sustainable technologies, renewable energy sources, that would be an added bonus, a contribution to the major ecological challenge of the time.

Thank you very much.