Tuesday, May 12, 2009

Michael Hudson on Economic Rent - or proving the Old Man Right

Thanks to Renegade Economist for this video http://www.youtube.com/user/RenegadeEconomist

I cannot watch this video without thinking of Henry George and his solution to the ills of capitalism the single tax on land rental income.

What is interesting is that Henry George's ideas always seem to surface in a crisis of capitalism and of course Hong Kong capitalism is a classic version of Henry George's ideas in practice, the Hong Kong government generates more than 35% of its revenue from land taxes, and keeps its other tax rates low.

There is nothing inherently socialist in Henry George's ideas just like with John Maynard Keynes utilising the capitalist State to preserve capitalism has nothing to do with socialism.

"Last Ditch" that was that perceptive old man Karl Marx's remark after reading Henry George's Progress and Poverty and just maybe the resurrection of Georgeism by Renegade Economist and Michael Hudson at this moment in global capitalism's systemic crisis may prove the old man right.

Nickglais 13/5/2009


dilbertgeg said...

While Michael Hudson gives some credit to the ideas of Henry George,


in other essays he critiques Henry George's followers.

George's followers let the social dimension of Progress and Poverty be stripped away, narrowing his idea from a doctrine of collecting rent to fund public budgets, to the status merely of a (micro-) theory of price formation, exiled from the core economics curriculum to the academic wastes of land economies'. Singling out rent theory to the exclusion of all other dimensions of political economy, sociology and history turned George's idea into a narrow theoretical point.

Instead of building on the classical economic tradition by doing for urban land prices what Ricardo did for the value of farmland, the followers of George have removed the theory of economic rent from its historical context. Marxism has thus been left alone to claim the mantle of classical political economy.

By creating a political doctrine based on grounding taxation on the land's rental value, the theory of rent had an opportunity to mount a challenge to become the Economics of the Future. It might, in short, have become as fullblown a doctrine in its own right as Marxist socialism became.

To achieve this broad political appeal, it would have had to place the taxation of land in the context of overall fiscal policy, by calculating the volume of revenue available to be taxed. It also would have traced what landlords did with the rent they received. For if they used it to build new factories and employ labour so as to expand productive activities, they would have been vehicles for economic welfare. But as Ricardo, John Ramsey McCulloch and John Stuart Mill observed, landlords tended to dissipate their rental income by hiring unproductive labour (such as servants). The problem with rentier income was that it ate into investment, substituting a parasitic overhead for underlying economic growth. Under existing conditions, the monopolization of land rent threatened to grind prosperity to a halt.

This perception provides a key to understand today's post-industrial land bubble.


I think! MH criticized HG somewhat for an anti-progressive (anti-progress) P.O.V. in his LATER life, in another article, but I can't find it now.

dilbertgeg said...
This comment has been removed by the author.
dilbertgeg said...

found: Critique by Michael Hudson

Abstract. Twelve political criticisms of George were paramount after he formed his own political party in 1887: (1) his refusal to join with other reformers to link his proposals with theirs, or to absorb theirs into his own campaign; (2) his singular focus on ground rent to the exclusion of other forms of monopoly income, such as that of the railroads, oil and mining trusts; (3) his almost unconditional support of capital, even against labor; (4) his economic individualism rejecting a strong role for government; (5) his opposition to public ownership or subsidy of basic infrastructure; (6) his refusal to acknowledge interest-bearing debt as the twin form of rentier income alongside ground rent; (7) the scant emphasis he placed on urban land and owner-occupied land; (8) his endorsement of the Democratic Party's free-trade platform; (9) his rejection of an academic platform to elaborate rent theory; (10) the narrowness of his theorizing beyond the land question; (11) the alliance of his followers with the right wing of the political spectrum; and (12) the hope that full taxation of ground rent could be achieved gradually rather than requiring a radical confrontation involving a struggle over control of government.

Anonymous said...

And Henry Henry George predicted that if Marx's ideas were tried, the likely result would be a dictatorship.
Unfortunately he was right.