The Daily Express takes a leaf out of 1984:
This morning they called for lower interest rates:
An 11 per cent increase in sales reflects the enormous benefits to the economy of our record low interest rates, a point that should not be lost on the Bank of England.
A property-owning middle class has been one of the foundations on which our economic success over the past 30 years has been built. Those who urge that interest rates should go up would do well to reflect on the damage it would cause to home-owners and businesses.
Ho hum, that's their opinion. But yesterday they were arguing exactly the opposite when they offered their readers the keys to unlocking letting's rewards:
WITH first-time buyers continuing to struggle to get a mortgage and the number of properties to rent in high demand it’s no wonder the market is booming.
New figures from LSL Property Services show the average asking price for rents reached a record high of £696 in May after four successive months of rises, while the National Landlords Association (NLA) suggests as many as one in five households will rent privately before the end of this decade...
I suppose the only way to square this apparent contradiction is to assume that they envisage a world where the 'middle class' own all the housing and the 'working class' pay rent, which doesn't seem like a 'property owning democracy' to me - I though that democracy means that everybody has an equal say, which applied to land must means that everybody has an equal share - which could only be achieved with a Georgist tax/redistribution system.
And I know it's easy to make fun of The Daily Express, but this kind of Home-Owner-Ist DoubleSpeak is widespread. Remember: if you own a real asset like a TV or a car or if you have valuable experience or qualifications, you are no worse off if others also have such assets*, but there's only an advantage to 'owning' land if there are others who are excluded - or else there'd be nobody forced to buy or rent your land from you, natch, and land would have no value.
So land 'wealth' can only exist if there is an equal and opposite land 'poverty, and land 'ownership' is a zero-sum game at best and a negative sum game in practice.
* if the roads get too crowded, we can build more roads; and provided we have the right mix of experience and qualifications, we are all better off
A grim document
3 hours ago
21 comments:
Good post. Some of us who supposedly benefit from owing our own home would rather see a situation where our grandchildren don't have to wait for us to die before they can afford to joint in.
Oops - should be 'join in' of course.
@AKH
Just been to Glastonbury?
;)
Economies of scale mean that for most goods other people owning similar goods is actually beneficial to you.
" if you have valuable experience or qualifications, you are no worse off if others also have such assets"
I disagree. If I am the only person who knows how to build a stone wall in a fifty-mile radius, I can charge a damn sight more than if I am one of ten people who have that knowledge.
AKH, I liked your first version.
AC1, good point.
B, possibly, which is why I added the footnote.
Remember: if you achieve this monopoly position by raising barriers to entry rather than being genuinely the only person with this skill, then society's loss outweighs your gain.
Slight edit otherwise confusion reigns...
"GeorgistLand Value tax/redistribution system."
It's the privately collected excess taxes/rents that you are redistributing, not the profits from real wealth creation.
L, by definition, yes of course, but I'm trying to set people off in the right direction, they have to work out the answer for themselves.
I disagree with the footnote, too. Experience shows that the demand for road space in places like London is greater than the possibility of building more roads to cater for it. Think about it. Approximately 400,000 work in the City of London. Ideally, each of those people would like to be able to drive from their house to their place of work and all arrive at roughly the same time. If you multiply the number of people by the average area of a car, you find you need an area of road greater than a square mile, which is traditionally the area of the City.
B, which is why London has such a fantastic public transport system which gets half a million people into town and out of town in the space of a couple of hours. So this adds to wealth because people in Zones 1 to 3 don't really need a car.
Don't take it all so literally - quite clearly cars are 'assets' and if a car is destroyed then wealth is destroyed. Nobody gets richer if a car is destroyed.
But land values just follow where people are - if everybody Up North wants to move Down South, then land values Up North fall and land values Down South rise in equal and opposite measure.
"So land 'wealth' can only exist if there is an equal and opposite land 'poverty, and land 'ownership' is a zero-sum game at best and a negative sum game in practice."
Isn't that the point of capitalism though, over socialism. Those who try harder get something for their efforts. In a society where we all contribute on equal measures, the sum product is lessor, because you take away the motivation of getting a bit more.
Whether it's an expensive property or an extra doughnut, it's all an incentive to do more
JQ: "Isn't that the point of capitalism though, over socialism?"
it's more nuanced than that:
1. If I work really hard, invent a new product, do overtime, run a business more efficiently than competing businesses, then it is primarily me who benefits, society as a whole becomes richer (my employees and customers also benefit, for example, and sooner or later my business model is copied etc). That's idealised capitalism.
2. If I work really hard at buying up as much land as possible, then I am merely collecting pre-existing rents. My gain is somebody else's loss. I have added nothing to the wealth of society, and by bidding up the price when I'm buying it, have indebted myself to the bank more than otherwise, so a greater share of wealth goes as passive rents to the banks.
3. Home-Owner-Ism as practised in the UK and USA is far more similar to Soviet socialism than it is to idealised capitalism. Instead of Party Apparatchiks liiving in dachas and riding around in limousines, it's the bankers and landlords living in mansions and riding round in limousines. Neither Apparatchiks nor bankers contribute anything to the economy, they both suck out more than they ever put in.
Whether yer average worker or entrepreneur suffers under the yoke of Communist planning or a Eurooean-style tax and regulatory burden is only a question of degree.
I see your point now, agreed. Coming at it from an 'it adds nothing to GDP' perspective, you're right that it's worse than sum zero. Dividends in banks make their way out, external investors 'growth' makes it out, only where the latter is negative can society win....but that's probably unlikely on any great scale
JQ, or to put it another way, if we all want to make a living by going out to work, then we can.
But if we all want to make a living by becoming landlords, then at most half will succeed, and that successful half will effectively become welfare receipients who can sit round at home all day watching telly.
Actually, high interest rates wouldn't make the slightest difference to home-owners.
They might affect home-buyers a bit though.
Speaking as one of the former group, I'd be delighted if the interest on my savings matched the rate at which the State is debauching the currency, but I'm not holding my breath.
Agree with the post in general, but
"There's only an advantage to 'owning' land if there are others who are excluded - or else there'd be nobody forced to buy or rent your land from you, natch, and land would have no value."
That's true in a sense, but is really just the definition of an "asset" or "property". The advantage to owning land is the ability to use it - whether that be to grow wheat, to site a house or just to sit in the garden and enjoy. Yes, that implies the exclusion of other people's right to use that land, just as my owning my car implies the exclusion of other people's right to use it.
Yes, I could rent my land to somebody else to use, but I could do the same with my car.
Ownership = exclusive right to use, if you like. That applies not just to land but to ALL assets. You could argue as some have) that "property is theft" but personally I don't agree with that. I earn money by working; whether I choose to spend that on exclusive possession of a car, or exclusive possession of some land, is really my business.
AC: "just as my owning my car implies the exclusion of other people's right to use it."
I knew that somebody would say that.
a) For sure, you lock your car when you park it, but that is inherent in the car. There are some societies where there simply is no crime and people don't lock their cars. The ability to lock your car does not give the car its value, it's just a bonus on top. But with land, the only ingredient you need to create the value is the right to exclude others.
b) There's plenty of stuff where ownership = possession, i.e. if you leave your umbrella or iPod on the train, that's it, you don't get it back. That does not mean that an iPod or an umbrella is worthless.
c) There is plenty of steel, plenty of factories etc, you buying a car does not in any way exclude others from owning a car (you merely deny others the right to use YOUR car, the one which you paid for); those that create the cars apply labour and skills to raw materials to create the value and they exchange it for stuff which you have created. It is a mutually beneficial transaction which increases overall wealth of mankind.
d) The location value of a plot of land depends entirely on what other people do ("Location, location, location"). The value of a car or an iPod does not increase because it's near a good state school or because a new station is opened in the area.
e) I never said that 'property' is theft, I said that 'land ownership' is theft. As is taxation - so make the punishment fit the crime.
f) " I earn money by working; whether I choose to spend that on exclusive possession of a car, or exclusive possession of some land, is really my business."
If you want a car, you pay money to the people who created the car. That's absolutely fine. But as I am intellectually consistent about these things, I also believe that if you want exclusive possession of land, then it is right and proper that you pay money to the people who created the location value, i.e. 'society in general'.
I can understand why you would object to increases in land values being enjoyed by land owners. But the value of my land comprises not only increases in its value since I bought it, but also WHAT I PAID FOR IT with money I earned by working.
Imagine I buy a car and keep it for 50 years until it becomes a valuable vintage car. Do you object to the fact that it is now worth more than I paid for it?
AC: "the value of my land comprises not only increases in its value since I bought it, but also WHAT I PAID FOR IT with money I earned by working."
Which is why some people prefer JS Mills' "Sentinel Tax" which would be LVT on increases above and beyond today's value. Nonetheless, whatever the Homey objections, it is better to tax your land value than to tax your future income.
"Imagine I buy a car and keep it for 50 years until it becomes a valuable vintage car. Do you object to the fact that it is now worth more than I paid for it?"
No, I do not object in the slightest. The chances are that the bulk of that increase is the running repairs you have to make to it, and even if not, such gains are certainly not a suitable subject for taxation (being impossible to police, being very low value compared to the whole economy, and the only person who created that value by lovingly storing and repairing the car for 50 years is YOU and you alone).
OK, well that's why I prefer capital gains tax on first residences, which amounts to the same thing!
:)
AC, CGT is a bad tax for the same reasons as Stamp Duty. It discouarages sales, so by and large would tend to concentrate land ownership even furhter (you're better off renting out your old house than selling it).
Further, the revenue maximising rate of CGT (as has been observed in several countries on many occasions) is about ten per cent, so the revenues would be laughably small.
HMRC estimate that annual yield, assuming no behavioural changes would be £8.8 billion, so let's call it £4 billion a year at most. That's carely more than the TV licence fee and a hundred times as distorting.
Far better to tax the rental value as you go along - the benefit that the family at Number 1 get from living there is exactly the same as the benefit that the family at Number 3 next door get. The fact that one family bought their house donkey's years ago for £10,000 and the other bought theirs last year for £150,000 is irrelevant.
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