Review of the Book:
Boom Bust: House Prices, Banking and the Depression of 2010
By Fred Harrison
Marvin Morris
[Reprinted from
GroundSwell, November-December 2005]
This book is published by Shepheard Walwyn Ltd.,
London.
Fred Harrison's book is a superb work with touches of genius in
clarifying how the speculative land problem plays a major role in
cyclical depressions. I have read this book with great admiration
for his crystal clear insights and marvelous ability to express
himself -- and his spirited forthright ability to attack problems
head on. I have been in contact with the author by mail and phone.
His background includes a career in investigative journalism
ending as Chief Reporter of a Fleet Street newspaper. He then left
to work as an economic consultant. This included ten years during
the 1990's advising the Economics Department of the Russian Academy
of Sciences and the Russian Parliament on the importance of tax
reform in the transition from a command economy to a more equitable
market economy. He now turns a strong focus on the failure of the
past and current economic analysis and public policies. This
includes a clear and positive resolution based on his very extensive
experience and knowledge pertaining to this global problem.
Fred Harrison was alerted to an 18-year property cycle by a very
successful, Washington-based property speculator. His early research
into this phenomenon in the UK, USA, Japan and Australia was
published in his first book, The Power in the Land. Twenty years
later, having witnessed his prediction of a recession in 1991/1992
come true, he now exposes the internal mechanism that periodically
causes the capitalist economy to crash.
This book contains interesting charts that show the ongoing
increase in land value in relationship to the cost of a residence
done in Harrison's colorful way. It is hoped that this awareness
will motivate people to consider the solution that is being offered.
The book delves into the history of ground rent discourses. It deals
with rent as site value, which is determined by the value of the
infrastructure services and its benefits (services not provided by
the titleholder). The book refers to several of the major world
protagonists over a considerable time in history and their
quotations which support land rent or site value legislation. These
include Winston Churchill, Leon Tolstoi, Sun Yat Sen and Andrew
Jackson. It includes legislators and political parties in England
and other countries now giving this serious consideration.
The emphasis in government today is to maximize the acceleration
and growth of the nation's income as the guideline for the country's
economic welfare and stability. This releases politicians from the
responsibility for the persistent failure to confront the power that
is in the hands of those who control the land and rental income.
There is a need for the population to understand the need to
recognize rent as a reflection of the value of infrastructure
services and should be collected at point received -- the benefit,
in part, being lowered income taxes, reduced taxes on home and
business structures and very possibly the elimination of sales
taxes.
HOW DOES OUR TAX SYSTEM WORK TO MANIPULATE THE BOOM AND BUST
CYCLE?
Governments stealthily intervene in our lives through the medium
of rent. The size and the distribution of rent (net rent after
taxes) are manipulated through the tax system. The partial retention
of ground rents rewards those who choose to speculate -- resulting
in capitalization of the untaxed portion of the rent. This is the
equivalent of selling the rights to claim the net rent. This
capitalization is the value of the rights to claim the value of what
the government is losing. The author's conclusion is that by
collecting proper and adequate land rent to cover infrastructure
services there will be a vast reduction on income taxes, reduction
or possible elimination of sales taxes, much lower prices for the
combination purchase of house and land, a definite reduction in
sprawl and its pollution caused from extra car mileage, less
corruption in government, a giant step toward balancing the budget,
and much more funding available to meet the social needs that the
government is now providing with much more private and corporate
funds, new construction and more jobs. Fundamentally, with the above
and lesser taxes paid from wages and interest will be an uplift in
purchasing power to aid our economy -- with stability and growth.
ATTENTION: To all members of Common Ground USA and the Council of
Georgist Organization members and others:
Reading and reflecting on the events in this book and its facts
and logic will provide assistance in educating and motivating others
-- by the clear and strong manner in which Fred Harrison presents
himself. Books are available at bookstores and can be requested at
libraries. At a dinner meeting held earlier this year for its
clients, Merrill Lynch of London provided this book at no charge to
its guests. The knowledge will be forearmed information for
understanding and guidance and conceivably save clients substantial
sums as well as aggravation.
You are urged to contact accountants who may wish to do likewise,
other professionals and financial councilors who may offer this as a
guide on their own personal planning. Following this book review is
my requested response from Fred Harrison on the current state of
legislation in England.
For comments and questions please email: Marvin Morris at
zmarmor18@frontiernet.net, And/or to: the author, Fred Harrison at
Metaman@compuserve.com
MOVING THE GEORGIST AGENDA ALONG
by Fred Harrison, Teddington, Middlesex, UK
My study of the business cycle in the UK and USA leaves me in no
doubt that the only effective remedy to booms and busts is the
recovery of every red cent of rent from land and natural resources
to pay for public services.
Some say that this is a utopian project, that I am whistling in
the wind. And yet, in Britain, we seem to be making progress in
terms of public debate. The Financial Times (the British
equivalent of the Wall Street Journal) is now campaigning for land
value taxation. As recently as the December 9, 2005 edition, that
paper's senior columnist, Samuel Brittan, wrote an article that
was entitled "Land: a suitable case for taxation". He
wrote:
- "Of all the three traditional factors of production -
land, capital and labour - land is the most obvious object for
taxation."
But progress will not be made until something like a consensus
emerges among the political parties. And as it happens, the
opposition Liberal and Conservative Parties in Britain are
re-examining their tax policies. Samuel Brittan had some advice
for them. He concluded his article by declaring: "If the
promised policy re-examinations of both opposition parties mean
anything at all, they should be prepared to examine land taxation
on its merits." In the policy circles in Britain, just about
everyone reads -- and respects -- what Sam Brittan writes.
It gets better than that, however, for land taxation is now on
the Blair government's agenda. In his pre-budget Autumn Statement,
in December 2005, the finance minister, Chancellor of the
Exchequer Gordon Brown, announced a consultation process on what
he had previously called "the unearned increment of land".
A public charge on the rent of land is now at the heart of
political debate. That debate is well advanced in Scotland, where
parliament and government have commissioned investigations into
property taxation with special reference to site-value taxation.
Is LVT likely to surface as a topical issue in other countries?
It did so in the past, supported by such luminaries as Winston
Churchill in Britain, Leo Tolstoy in Russia and Sun Yat-sen in
China. They all believed that Henry George was correct when he
advocated that government should rely, in the main, on the rents
of land for public revenue. The debate needs to be revived in the
United States at the state and federal levels, in a way that
challenges America's political parties to rethink their policies.
To animate people's vision of the benefits that would flow from
LVT, it will be necessary to drag the policy away from the sphere
of local property taxation and relocate it -- as Henry George did
-- at the heart of the nation's current affairs. The failure to
reform taxation means, for example, that the counter-cyclical
benefits of LVT will continue to be denied to the people. If we
tax wages and savings, instead of "the unearned increment of
land", our enterprises will continue to be savaged by booms
and busts. Our economies weathered the storms caused by land
speculation in the last two centuries, but only because Europe and
North America were top dogs in the global markets. In the 21st
century, we are playing in a different ball game. Unless we
redefine the rules of public finance, the ability to recover from
the waves of recessions will become increasingly difficult,
creating the social stresses which, in the past, led to
revolutions.