How I Came to Embrace the Principles
Embraced by Henry George

Robert Keall

[Reprinted from Progress, with the original title,
"How I Saw the Cat," September-October 2002]

In 1947 at 18, the year after leaving school, I was unbelievingly dragooned into going to a World Scout Jamboree in France. From the market gardens of Taita just this side of the black stump out of Wellington in the Antipodes, to Paris and then the U.K., centre of the recent global conflict, the land of my forebears and the substance of our schooling. An overseas experience that in those days was rare indeed and divorced us from our parochial contemporaries.

With that introduction to the big wide world, what does a 20 year old do with his life? Assiduous study of Christian doctrine might give a steer. But what about where the rubber hits the road? A socialist P.M.'s sophistry that socialism was Christianity in action -- from each according to his ability, to each according to his need (provided the P.M. was the Commissar and notwithstanding his knowledge of George I later learned) -- was just too facile, and electorally being contested about that lime. With the family experience of the Depression and war, social issues were often discussed.

Seeing the first cat

During that wilderness time that I still cherish, I replied to a 3 line ad in the newspaper, "Free Course in Economics. Reply Henry George School of Social Science". (Run by Betty Noble in a room at the YMCA). With the generous availability of my brother's aged jalopy, I travelled the 15 miles to Wellington, often under a jet of steam from the overheating motor, to attend the classes. I read the chapters week by week and casually considered the questions assigned. Came -- "The Remedy". One didn't have to be an Einstein to see its significance and to be riveted to the rest of the book. Then followed the Free Trade and Advanced Courses, and the rest of George's books. This led to helping Betty promote the classes, and to joining Rolland O'Regan's committee promoting post-war rating polls, with desultory success, and distributing up to 8000 Rating Bulletins to counsellors mainly, discussing topical rating issues.

Eventually, I landed a job in the Government Valuation Department reconstructing post-war Valuation Rolls for rating and land tax purposes. That was instructive. However, I later returned to the commercial world, studied accounting, bought a mortgage and somehow raised two lovely kids with the wife I had met in the Valuation Department and who had since become the Associate to a Supreme Court Judge.

In 1977 I contested the local Mayoralty on the issue of Differential Rating. Fortuitously I lost, but as runner-up my judgment had been vindicated and my involvement in irrelevant minutiae avoided. I had learned more about Differential Rating, and of (hose outside the movement who want to see Land Value Rating work rather than be sidelined as impracticable.

1979 saw me at the San Francisco for the International Union Conference to meet those who today lead the movement.

By 1986 Land Value Rating had been adopted by poll by 90% of all municipalities and accounted for about 90% of Local Government revenue. The dissident areas still on Capital Value were Auckland, Lower Hull, Queenstown and a few rural counties where a dairy factory absorbed a large portion of the rates. At that time we reckoned that land price would be half as dear again without the charges then in place.* And that with tax-deductibility and devolution of some functions lo local government, incurring heavier land value charges, there would be a re-incidence of revenue raising -- a bloodless revolution, as envisaged by George!

Within three years the New Right Labour Govt. had deviously reduced the impact of L.V. Rating by half, and abolished the Land Tax.*

Seeing the second cat

By about 1995 the New Right National (Cons) Government was continuing the assault on the infrastructure, central and local. The Labour Government had already sold Telecom and NZ Rail. Fishing quota had been gratuitously alienated in 1986 after a Resource Rental had been considered and rejected "because there was no comparable model on land"! The new government now required the corporatisation of electricity, some public transport, water, waste water (with a view to privatisation), "required political and subjective judgment" of local Councils on rating issues (a constitutional travesty), and planned to privatise the roads. By this time the much-lauded New Right experiment was no longer acceptable. The government changed to a so-called Centre Left. But the damage is unresolved and likely to remain so by the regulatory regimes in process.

This new focus and equivocation about the alienation of public property built up out of taxes - the 20th Century equivalent of the "Enclosure of the Commons", demanded a Georgist answer. L.V.T. was clearly irrelevant terminology. The only practicable way to distinguish ownership rights from the operation was the normal commercial arrangement of a lease -- whether for cars, trucks, houses or pasture. This establishes the rights and responsibilities of both parties and in fact is already modeled in our Public Bodies Leases Act for land. A lease also allows environmental constraints as terms of the lease, significantly!

So was launched Resource Rentals for Revenue in 1997. I had introduced the idea in my paper at the 1993 Conference in Melbourne, and again in my NZ Chapter for "L.V.T. Around the World" -- (Ed. Dr R.V. Andelson). Right now the proprietorship of the whole country under the Treaty of Waitangi is coming to the boil in this election year*. My paper at Melbourne was titled "NZ -- Crucible for the world". The record supports that view.

Seeing the 3rd cat

About 1995 we sustained a multitude of Asian immigrants with their money, mainly in Auckland. Property prices soared unrealistically. Humble homeowners on the traditional '/< acre urban site could suddenly cash in on $100,000 by subdividing for infill housing.

These sudden realised unearned gains were recognised by even the Reserve Bank as inflationary - i.e. too much money chasing too few goods*.

This led to the insight that an economic rent payable annually to the state is simply a diversion of current production. But a capitalised, speculative land price gives a purchasing power now, on the limited current production of goods and services, so is thus inflationary. Future money but only present production. A large proportion of the proceeds goes back into the system, fuelling the pernicious cycle.

The property price escalation was exacerbated by the corporatisation of electric power boards and the issue of shares to consumers at $3, who immediately sold them for $5, $8, $13 -- "a billion $ of wealth released into the community" -- (as the media described it). And so it went on all over the country -- revalued assets, takeovers, mergers, buyout, the tradable rights to a natural monopoly.

A Resource Rental for land and other natural monopolies eliminates this enormous incestuous, inflationary hazard -- the fiscal aspect of George's economic analysis.

Seeing the 4th cat

The question remained -- how to do it?

• with compensation?
• all at once, in the sweet bye and bye?
• now, and progressively? But how? Past experience was no omen for success.

Most investments are expected to show a positive net return, and pay tax. But the clever trick with property investment is to borrow to the maximum (negative gearing), so to incur a net loss to set off against other income, in order to minimise net tax payable overall i.e. a tax rebate or set-off now to finance a capital gain. On this basis some on huge incomes pay no tax at all, and may even supplement their income with drafts on their growing equities, farming economic rent and inflation. Even in terms of the income tax regime this is now regarded as anomalous.

THE SAME MECHANISM NOW BEING ABUSED TO DESTROY SOCIETY CAN Bt USED TO BUILD IT*.

Set-off shows the charge as a valid and fair alternative -- not just another tax, vulnerable to every tax collector, at every level, every year and avoids the need for compensation.

Set-off is the alchemy by which George's vision should be implemented now and progressively.

So having "seen the cat", found the Holy Grail and seen some new aspects of it, I now look forward to promoting a comprehensive, relevant resolution of humanity's relationship with the earth, its resources and natural monopolies.

* More fully discussed in separate papers on this and other topics, available at: takasec@xtra.co.nz