The Productive Revolution and the Lost Link

Juan Carlos Zuccotti

[An Open Letter to President Menem, June, 1990]

The ARGENTINE MOVEMENT FOR A POLITICAL ECONOMY OF NATURAL ORDER (Movimiento Argentine por una Economia Politica del Orden Natural -- MAEPON), due to the actual terminal permanent crisis in Argentina, considers that the Market Economics applied in the country -- called today "popular market economics" and years ago "social market economics" -- can't function in a society plagued with monopolies, oligopolies and privileges, as natural laws can't too because Economics, as a science, obeys to natural laws.

The most malign is the monopoly of the land economic rent, at urban and rural level, which is the increasing value that land gets day after day due to density of population and its activities. Therefore, is a social value or value of obligation and not a value of production. Being the community who creates the rent, it must return to the community following the natural order carried by the law of distribution of richness (land economic rent, labor wages and interest of capital). In other words: the richness (material goods created by the man through his work in order to satisfy his necessities) that result of the three factors of production: land, labor and capital. According to estimates the amount of that rent (urban and rural) for all the argentine territory, is actually over 60 billion dollars, related the great part to urban level because 85% of the national population live in cities and towns.

Moreover, the land economic rent -- being the law of distribution a moral law -- follows the society as the shadow to the human body. Therefore, any economic program that omits that rent will have not success. Economic rent is the true determinant of the production (making it to go up or down) and of the wages level too, as also is the root of inflation and the origin of poverty. In other words: the last cause of the inflationary phenomenon using philosophical terms. This is the reason that the argentine permanent economic crisis is fundamentally moral and based on the "sin structure" represented by the mentioned monopoly.

Economic programs of rationalistic base (Keynesian style) that since year 1935 are being applied in Argentina, can do nothing and will not have success. They omit the land as a factor of production. They consider land as capital and labor as derived from capital. Following the natural order, capital is richness used for creating more richness, and land is Nature and not richness. In the encyclica "On Human Labor", by John Paul II, is explained that the origin of capital is labor and that labor has the primacy. It is important to remember that land -- using words of the same John Paul II -- is the "property of God". Therefore, if Carlos Marx is a "piece of museum" -- according to President Menem -- it is necessary to add that Keynesianism is too and its application in Argentina and throughout all the world has produced and will produce frustration.

It is important to return to the secular fountains of the nationality. Our patriots that made the Revolution of 25 May 1810 (liberation from Spain) knew these natural economic basics, -- as the famous lawyer and Army general Manuel Belgrano, the creator of the argentine flag blue and white -- as other great men that followed them until year 1935 when the obnubilization started with the introduction of Keynesian theories in the country. In other words it is necessary to complete that Revolution in its economic and social aspect, following the natural and physiocratic order.

When this occurs -- as soon as possible -- the change will give priority to an Integral Tax Reform that built in this natural order will carry inexorably to the elimination of taxes (the total if possible) that actually fall on production, investment, labor, sales and creation of richness in general. They must be replaced by a single contribution on land, at urban and rural level, proportionally to the market real value of land. This contribution is not a tax. It is the return to the community of what belong to the community: the land economic rent. Municipalities could obtain it preferently using the actual "territorial contribution" (contribution territorial) system where the improvement assessment would have to be eliminated or reduced gradually.

The municipal level could give participation in the benefit to provinces (States) and the Nation (national or federal level) whose duty -- as the municipal level -- must be to eliminate or reduce all taxes at the same time, and also to pardon all taxes that contributors owe to that levels. To look forward must be the target, leaving free the way for the creation of richness in liberty. With this system the community will recover what belong to all people: the land economic rent, which means millions of dollars that could be applied to public necessities and services through a natural way and not by the incessant increasing of taxes, artificial creation of money and foreign debt. Inflation will be_ defeated at his root and the economic shock of these measures will be translated in the reduction of cost of life, prices, building costs and rentals, and the inflation rate properly. It could be the starting of the Argentine economic miracle where production would recover together with the apparition of new jobs and better wages.

The Government is trying to dismantle the overdimensioned administrative system of the State whose mission, of course, ought to be subsidiary and suppletory, giving emphasis to the private activity in order to create richness and conduct services. But without a tax reform as the explained the Government is creating the conditions of its failure. It can dismantle the administrative public system -- the so called "older son monopoly" or "army of occupation" -- but leaving alive the land economic rent monopoly -- the mother of that and of all monopolies --, inflation, poverty, unemployment, decay, dependency and all sequels of underdevelopment will go on increasing in Argentina.

We have said before that the amount of the land econmic rent for all Argentina, at rural and urban level, is over 60 billion dollars at present. In the city of Buenos Aires, for instance, it represents more than 500 millions because the city has the largest population density in the country. In the other side the Argentine money deposited in foreign Banks overseas is around 50 billion dollars and the great part land economic rent. In other words: money of the people. "The land is essentially a common inheritance whose fruits (economic rent) must be for benefit of all men. … It is unjust that few privileged go accumulating on superfluous goods, wasting available resources, when a great multitude of people live in miserable conditions (John Paul II, Peace World Day, year 1990). In relation to our foreign debt (more than 60 billion dollars up today) is not the fundamental cause of the crisis and it could be paid in the short time according to a sincere political decision.

Really, to the so called Productive Revolution is lacking a link as the explained in these lines. Of its application will depend on the success of that Revolution, the destiny of the country and its economic independence.