Metaphysics and Political Economy
Lev Lafayette
[Originally presented to the Melbourne Unitarian
Church in January 2005. Reprinted from Progress, July-August,
2005]
The topic of this presentation, Providence and Common Wealth, is one
which has overwhelming importance and deserves close scrutiny, far
more than this rather limited summary can possibly provide. It touches
upon the very difficult point of unity between metaphysics and
political economy. By "metaphysics", what is meant is first
principles of logic and being, rather than the common conception
raised by ritualistic and speculative religions which leads to those
inconsequential discussions about how many angels can dance on a head
of a pin. By "political economy" what is meant is the
interdisciplinary study that draws upon law and political institutions
and processes in order to understand how power and ownership alter
economics.
Despite the fact that the two areas of study are deserving of initial
caution does not mean that they can be ignored. Indeed, every
political economy in the world throughout history operates with a
metaphysical foundation. For example, traditional European feudalism
replicated theological notions of obligations to the divine through
the relationship of the lords, vassals and peasants over a fiefdom.
Just as every soul on earth was expected to follow the laws of the
LORD (capitals in the original) in the "Kingdom of God", so
too every vassal and peasant in the fiefdom was expected to follow the
commands of their temporal lord. Of course, the lord in both instances
was duty-bound to provide and maintain the land.
It was the radical philosophy of individual freedom of religious
conscience, of which the Unitarians played a most significant role,
that tore asunder the metaphysical foundation, the very basis of
belief, in the feudal system. After all, if the laws of the spiritual
Lord were to be freely chosen by individuals and subject to individual
interpretation, why not the laws of the temporal Lord? Dramatically
aided by the rise of the money economy and trade goods over agrarian
produce and improvements in knowledge and information technology -- of
which the role of the movable type printing press is still
dramatically under-rated -- the political right of individual
conscience and the right of individual ownership and freedom of
contractual arrangements became both the metaphysic and the political
economy.
This was an extraordinarily radical moment in human history, and not
one which occurred without extraordinary and often bloody resistance
by the temporal lords and the claimed representatives of the spiritual
one. They did not give up their privileges and power without a light,
and it is clear by their contemporary actions that they would gladly
re-establish their rule if given the opportunity. The political
leaders of the time, the rising class of monied and commodity
commerce, undoubtedly played a most revolutionary role ending the
motley feudal relations and the ecstatic religious fervour in favour
of materialist rationality and egotistical calculation. Even today,
one will discover a genuine commitment from the overwhelming majority
of the world's capitalist elite in favour of secular modernism.
THE PRIVATISATION OF NATURAL RESOURCES
As the religious state was dismantled it is not surprising that one
of the earliest problems that arose was what to do with landed
property. Here one comes across a very interesting and critically
important split between the philosophers of the enlightenment and
classical liberalism and the actual practise of the early capitalist
and mercantile classes. For the former, the natural world was defined
as "Providence", an encompassing term that applied equally
whether one thought that the natural world came from either theistic
or atheistic origins. As these gifts of nature were neither the result
of human labour, or of capital investment, ownership and in
particular, ownership in perpetuity, could not be considered
justified. All had equal right to the gifts and nature, and because of
that equality there was agreement; that usage of natural resources
should command a rental fee that would be paid to a collective fund.
That is, the use of Providence would provide a Common Wealth.
Documented support for this point of view is evident in writers
ranging from John Locke, to the Baron de Montesquieu. Adam Smith,
Thomas Jefferson and David Ricardo. Jean-Jacques Rousseau's "Discussion
on Inequality" certainly provides the most evocative and poetic
illustration of the idea; "The first man, who after enclosing a
piece of ground, took it into his head to say, 'This is mine' and
found people simple enough to believe him, was the true founder of
Civil Society. How many crimes, how many wars, how many misfortunes
and horrors would that man have saved the human species, who pulling
up the stakes or filling up the ditches, should have cried to his
fellow! 'Be sure not to listen to the imposter; you are lost if you
forget that the fruits of the earth belong equitably to us all. and
the earth itself to nobody'."
However it was the Unitarian-deist, Thomas Paine, who best
articulated the idea in a practical manner. In his pamphlet Agrarian
Justice he commented: "Men did not make the earth, and though he
had a natural right to occupy it, he had no right to locate as his
property in perpetuity any part of it; neither did the Creator of the
earth open a land-office, from whence the first title-deeds should
issue.
"[I]t is the value of the improvement, only, and not the earth
itself, that is individual property. Every proprietor, therefore, of
cultivated lands, owes the community a ground-rent (for I know of no
better term to express the idea) for the land which he holds; and it
is from this ground-rent that the fund proposed in this plan is to
issue. ...The plan T have to propose ... is, To create a national
fund, out of which there shall be paid to every person, when arrived
at the age of twenty-one years ... a compensation in part, for the
loss of his or her natural inheritance. by the introduction of landed
property ..."
These suggestions however compare poorly with actual events, which
are dutifully if bitterly summarised in Karl Marx's first volume of
Capital, from chapters 27 to 31. Firstly, there was the massive
privatisation of the feudal estates, both church-owned and noble, the
usurpation and enclosure of the commons and direct seizures without
even a pretence of legal process. Then, this class of previously quite
well-off landless peasants and independent farmers, the overwhelming
majority of the population, were forced to seek employment among the
new capitalists and landowners. "Forced" is meant quite
literally here, through both circumstances and legislation. Those who
were not in employment were flogged, if one refused work they became,
by legislation, a slave to the Master who declared the person an
idler. Branding (with a 'V' for vagabond or 'R' for rogue), forced
labour, whipping and even execution was commonly applied to those who,
through no fault of their own, found themselves without the means of
subsistence.
The latter half of the 19th century and the twentieth century simply
represented, in the main, more of the same theme but on a grander
scale. Having monopolised as much as was possible of natural resources
in their own lands, this new, monied version of feudalists (it is
difficult and unfair to call them capitalists for they don't actually
invest in capital per se) sought foreign lands to plunder, thus
inaugurating the rise of imperialism which, at one stage, led to
Europe's ruling classes owning the entirely of the globe by 1914 with
the exceptions of Ethiopia, Siam and the Americas -- in the latter
case, a new version of economic and indirect political imperialism was
developing in its own right.
Such a distribution of power was explosive. Rousseau's comments
concerning crimes, misfortunes, wars and horrors arising from
ownership of the earth would prove to be haunting as the world lurched
from the imperial world war, to the Great Depression, the rise of (and
world war against) Nazism, to the wars of national liberation - all
largely over natural resources and who gets to "own" it.
Inevitably, exceptions arose from these events. In the Soviet Union,
for example, natural resources became the property of the State which
unfortunately used command directives rather than a market-mechanism
to derive common income. Douglas MacArthur ensured that resource rents
were incorporated into the Japanese constitution thus providing a firm
foundation for its post-war recovery. Recognising this success (and
notably following the recommendations of Sun Yat-Sen), Hong Kong and
Singapore also derive a significant portion of their public monies
from resource rents and correspondingly have very low levels of
taxation. In Alaska, oil royalties are paid annually to every citizen
equally and regardless of age, amounting to roughly $1000 USD per
annum.
CONTEMPORARY VIEWS AND POSSIBILITIES
Today, nearly every economist in the world, whether liberal,
conservative or radical, agrees that public finances should be largely
derived from resource rents. The radical capitalist Milton Friedman
argues that "In my opinion the least bad tax is the property tax
on the unimproved value of land", whereas the neo-Keynesian Paul
Samuelson argues that "pure ground rent is in the nature of a
'surplus,' which can he taxed heavily without distorting production
incentives or reducing efficiency". The conservative Robert Solow
has claimed "For efficiency, for adequate revenue, and for
justice, every user of land should be required to make an annual
payment to the local government equal to the current rental value of
the land he she prevents others or from using", whereas the
radical antifascist Jewish refugee and economist Franco Modigliani
stated "It is important that the rent of land be retained as a
source of government revenue". Finally, the maverick socialist
William Vickery claims "While the governments of developed
nations with market economies collect some of the rent of land, they
do not collect nearly as much as they could, and they therefore make
unnecessarily great use of taxes that impede their economies -- taxes
on such things as incomes, sales, and the value of capital goods."
Each of the people just quoted are Noble laureates in economics. One
can reasonably make the assumption that they have some idea of what
they are talking about. If that is insufficient evidence however,
consider that in 1991 no less than thirty five of the top economists
of the United States -- all either Noble prize winners, professors, or
deans and across the political spectrum -- wrote to the then President
of the Soviet Union Mikhail Gorbachev urging him in the transition to
a market economy to retain public ownership of land and to derive a
market-based common income from land-rents. Unfortunately, in the
replacement of Gorbachev by Boris Yeltsin the latter capitulated to
demands to a cheap sell off natural resources, the results of which
are empirically and readily available; mass impoverishment and even
malnutrition in what used to be the second most powerful nation on
earth.
A little closer to home, consider the following; the GDP per capita
in Australia has, from the period 1951 to 2000, increased by an
average 2.8% per annum. Real housing construction costs (labour and
materials) from 1950 to 2000, has actually fallen by 0.66%. From 1950
to 1997. taxes per capita rose by 2.95% per annum. Yet capital land
value has increased by 6.37% compound per annum. As can be expected
with any natural resource, something which is requisite for life
itself and in fixed supply, private ownership makes some people very
wealthy indeed without doing any labour or productive investment.
whilst others who do labour, or do investment in machinery, genuine
entrepreneurship and so forth, pay the cost. Perhaps it is not
surprising to discover that whilst it is bad enough that the top
twenty percent of Australia receives 48.5% of the national income (and
the bottom forty percent cams 13%), that the top twenty percent of
asset holders hold 63% of national household assets, whereas the
bottom fifty has a mere 5%.
What would happen if the current taxation system, which in itself is
biased towards taxing labour and consumption, was entirely replaced by
a resource rental system? The most obvious question is whether enough
public revenue could be generated. The answer to this according to
detailed research by Terry Dwyer, visiting fellow to the Asia Pacific
School of Economics and Management at the Australian National
University, is the affirmative; all existing taxes, fees, charges and
rates could be replaced with resource rents. There would of course be
significant savings to administration costs and compliance as well.
Site valuations are simple to calculate and "tax avoidance"
becomes a non-issue under such a scheme. Rents, it must be added,
would not change. Social welfare in the form of citizen's dividends,
free of the administrative burden, would increase. Investment, both
corporate and personal, would shift from seeking monopoly over
resources into capital investment and labour and in that investment
real attempts would be made to minimise the amount of natural
resources used -with clear and obvious benefits to the environment.
Unitarians have long held that religion and reason arc actually one
and the same and that there is no need to engage on nonsensical
speculations and artificial rituals. The natural world and the human
spirit is sufficiently impressive in itself. Therefore it should not
surprise us that the most fair and efficient method of raising public
revenue and securing the welfare of the people is actually the one
that is best grounded in realistic metaphysical principles. Likewise,
the most unfair method of raising public revenue is to tax labour,
labour-derived investment and consumption and the best means to
impoverish the world's population is to allow the private
monopolisation of the earth's resources. Of course, powerful
individuals and institutions will seek this. Owning the earth is a
very easy way to make a great deal of money through very little
effort. It is our duty to ensure that this does not happen. The earth.
Providence, belongs to no-one and we all have equal. Common, right to
its Wealth.
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