Professor Richard D. Wolff: “Let’s Talk About Socialism.”

by Jerry Alatalo

“The worship of Mammon instead of God is a characteristic of socialism as well as capitalism… Socialism in no longer a Utopia or a dream: it is an objective threat, and a warning to Christians to show them unmistakably that they have not fulfilled the word of Christ.”

– NICHOLAS BERDYAEV (1874-1948) Russian religious philosopher

ichard D. Wolff is Professor of Economics Emeritus at the University of Massachusetts – Amherst where he taught economics from 1973 through 2008. He was born in 1942, is 73 years old, and married to Harriet Fraad, a practicing psychotherapist. They have two children.

Mr. Wolff could be described as a heterodox economist, or coming from a school of thought outside of “mainstream economics”, or going beyond neoclassical, orthodox and traditional economic theory. On a personal note, Mr. Wolff comes across as very enthusiastic and full of energy during his talks, something which deserves appreciation for its rarity among economists along with the fact that he’s 73 years old. For this one can describe Mr. Wolff as the epitome of a true teacher, one who is genuinely excited to share his/her knowledge of the subject to students.

Some notable heterodox economists include (Wikipedia, heterodox economics):

Karl Marx

Richard D. Wolff

Thorstein Veblen

Alfred S. Eichner

Piero Sraffa

Joan Violet Robinson

Michael Kalecki

Frederic S. Lee

Ha-Joon Chang

Some heterodox economics schools:

American Institutional School

Austrian economics

Binary economics

Bioeconomics

Complexity economics

Ecological economics

Evolutionary economics

Georgism

Green economics

Gesellian (Silvio Gesell)

Innovation economics

Insitutional economics

Islamic economics

Marxian economics

Mutualism

Neuroeconomics

Participatory economics

Post-Keynesian economics

Post scarcity

Socialist economics

Sraffian economics

Technocracy

Thermoeconomics

Given recent years of global economic downturn, many people are coming to the point where they are thinking about alternatives to capitalism. Professor Wolff reminds his audience that those who think there is only one kind of socialism are experiencing a fantasy, as there are many socialist-related economic theories. However, despite the lack of courses in university economics departments, socialism is one of the alternatives receiving more attention. Evidence of this is found in Vermont Senator Bernie Sanders’ announcement he is running for President of the United States in 2016, and that he is widely known as holding a political philosophy aligned with socialist economics.

Richard Wolff studied history and economics at Harvard, Yale and Stanford, but, because of what he calls “childishness”, in none of his economics courses was he required to read anything written by Karl Marx. During his “Monthly Economic Update”, he tells his audience that saying “let’s talk about socialism” most likely results in a chilling feeling and effect to run through the room, because any American who mentions that (until now) taboo word most likely will become perceived in an extremely negative light or accused of “treason, disloyalty, apostasy” or many other terms that are simply equating with “bad”.

After becoming an economics professor, he was somewhat surprised to find his students viewed the terms communist, socialist, anarchist, and terrorist as synonyms – different words meaning the same thing. As mentioned, recent years of international economic downturn have many people looking at alternative economic schools to find if there’s not one which if implemented will result in better outcomes. As Richard Wolff says at the end of his talk, it’s “better late than never”.

Up until the 41:45 mark of his 1-hour 30-minute talk Mr. Wolff comments on recent events, then the talk focuses on the topic “As Capitalism’s Crisis Deepens, Thoughts of Socialism Return Again”. Some of the current events he comments on include:

Billionaire hedge fund owner gives $150 million to the world’s 2nd richest university in the world – Harvard. The billionaire’s deduction of $150 million from his income will cost the U.S. government $60-70 million in lost revenue.

The New York Times published an article about the American Petroleum Institute, the oil industry’s main trade group, and its opposition to a law requiring older rail cars become retrofitted to prevent oil spills in case of derailment. The Institute feels the law is “too costly, yield few safety benefits”, days before a U.S. train went off the tracks and several people lost their lives.

U.S. is spending the lowest amount on maintaining roads, rails, bridges and other infrastructure in 25 years.

Two of eighteen banks decided to go through a trial instead of negotiate a settlement/enter a plea agreement with the U.S. Department of Justice for financial crimes – one from Japan and Royal Bank of Scotland. The woman judge in those two cases issued a 361-page decision against the banks which said, “The magnitude of falsity, conservatively measured, is enormous”.

On the 1,000’s from North Africa and the Middle East who’ve perished trying to cross the Mediterranean, Mr. Wolff said: “If you had an economic system, in our case capitalism, that systematically organizes extreme disparities between wealth in one part of the world than another, here comes a real shocker: people are going to want to leave the part of the world that the system drowns in poverty and move to the part that isn’t affected like that. This has been going on roughly 10,000 years; it shouldn’t come as a big shock. If you don’t want migration, if you don’t want unsafe migration, murderous migration, deadly loss of life, then don’t organize and don’t accept an economic system that produces the disparities which are the beginning of all of this anyway. An honest approach would begin to say let’s ask why this happens. Why would people rip up their lives, leave their homes, their families, their communities, their languages, and go to a whole other part of the world at enormous cost, at enormous risk to life and limb to themselves, their children, their spouses? Why would people do that if they weren’t desperate? Nine times out of ten it’s about economic disparity”.

On recent elections, the conservative victory in Britain is the “bad news” and the New Democratic Party’s victory in Alberta, Canada is the “good news”. Mr. Wolff describes “us against them” tactics used by David Cameron in Britain and Governor Scott Walker of Wisconsin as the “scapegoat economy” – in Britain “them” meaning immigrants and the poor, in Wisconsin “them” meaning teachers, firefighters, police, etc. in the public sector.

Recent Gallup polls show that 63% of Americans for 30 years (1984-2015) have believed that distribution of wealth has been unfair, while during the same thirty years members of Congress have taken steps to make inequality worse.

Then, at around the 41:45 mark of the talk, Richard Wolff gives an amazing historical account on major world transformational events of political economy. “We are a strange country in more ways than one, but one of the strangest things about us is the weird taboo we have lived under for the last half century. What’s the taboo?We can’t talk about socialism. We can’t talk about socialism; we can’t talk about socialism and compare it to capitalism – we can’t do it. It’s too scary. No, that’s out”.

In America during the 1930’s, socialists and communists were “OK”, similar to societies across Europe today. In America during that time it was hard to demonize socialists at the family picnic when your “Aunt Mary was one”. That changed in the 1940’s when demonization of communists routed them out, converting them from militant leftists to “agents of a foreign power”, then socialists: “Socialists are just like communists, they just spell it differently. It’s all the same. They all carry bombs in their left back pockets, they’re hiding underneath your bed, and they mean you – and your puppy – lots of harm. So you should really watch out for them, and keep away”.

Mr. Wolff then goes on to share the history of change in political economy beginning with feudalism. Perhaps this writer is too easily impressed, but, the outstanding part of this talk by Richard Wolff  – about great socioeconomic changes through history, and the little known details – is brilliant.

****

(Thank you to RichardDWolff at YouTube)

Economist Dr. Ravi Batra.

by Jerry Alatalo

rom 1945 until 1980 and the election of Ronald Reagan as President of the United States, there was balance between the nation’s productivity increase and wage increases. This was attributable to the strength of unions in America, until Ronald Reagan, who, according to Dr. Ravi Batra was “tired of paying high taxes”, convinced the American people “supply side” economics and large tax breaks for the wealthy were good for everyone. Since then supply side economics has become called “trickle-down” economics.

Dr. Batra points out that the Reagan tax cuts weren’t really tax cuts because while lowering them for the wealthy, poor and middle class people saw a rise in payroll, social security, excise, and gas taxes, decreasing their purchasing power in the process. During the time of Reagan, unions began losing power in America, so wages began falling behind growth in productivity, with the result being lack of demand, layoffs, and a trend toward pushing down labor – the poor and middle class – in the country.

At the same time, instead of the wealthy who received large tax cuts investing and creating jobs, because of lack of demand those corporations and wealthy people invested in government debt run up to increase demand and stimulate the economy. Combined with deregulation, ignoring enforcement of anti-trust laws, larger and larger mergers leading to more layoffs, the export of jobs and capital overseas for higher profits, and Americans going into debt to purchase goods they could no longer afford, the wealthy made more money on those debts.

In his discussion with Henry George Scholl of Social Science President Andrew Mazzone, Ravi Batra went on to talk about the 16th Amendment establishing the American tax system, when taxes replaced tariffs on foreign imports as the revenues to finance government operations. His view is that economic theorists who advocate for so-called supply side (trickle-down) are offering an economy that is self-serving.

His recommendations include:

Reversing the tax cuts which started in 1981

Active enforcement of already existing anti-trust legislation

Breaking up existing monopolies to increase competition

Put and end to outsourcing of jobs across U.S. industries

Balancing the national trade deficits instead of creating more of them

Re-institute strong regulations like Glass-Steagall

Tax poor and middle class people less and push the nation’s tax burden up and more on the rich

In Dr. Ravi Batra’s view, for the economic health of America “we have to get rid of monopoly capitalism”.  For example, he believes that if Barack Obama accomplished just one of his recommendations – an FDIC-managed bank charging 5% on credit cards instead of 15-30% – he would effectively guarantee the Democratic party’s winning back the House of Representatives and Senate in 2016.

****

An interesting and “outside-the-box” discussion of economics.

http://www.amazon.com/End-Unemployment-Now

For more information: www.henrygeorgeschool.org

(Thank you to Henry George School of Social Science at YouTube)

Economics Awareness Vital For Democracy.

by Jerry Alatalo

“Settle the economic question and you settle all other questions. It is the Aaron’s rod which swallows up the rest.”

– WILLIAM MORRIS (1834-1896) English writer, artist

ECONOMICS
(Photo: video.mit.edu)

rofessor of Economics at the University of Cambridge in London Ha-Joon Chang is the kind of teacher everyone who’s taken an economics course wish they had. The one economics course this writer took in university was an introduction and focused only on the ideas of so-called free-market guru Milton Friedman. This reflected the economics theory preferred by the professor, but Ha-Joon Chang’s book “Economics: The User’s Guide” (2014) would have been much more informative and valuable.

So, it wasn’t until years later, after getting a computer and exploring the internet, that the idea there were many schools of economic thought and theory came into awareness. Had that introductory course been based on a text/study of a range of theories like “Economics: The User’s Guide”, instead of the narrow view of one man Mr. Friedman, the intervening years would have been fuller with respect to understanding world events and how economic decisions factored into them. So, in that one sense Professor Ha-Joon Chang in writing the book deserves a lot of credit. His intention is to increase men and women’s awareness of economics and understanding of how it matters in the real world.

If one were to sum up his book effort in a single statement, it could go something like: “Economics can be easily understood by everyone, is not the domain of “gurus” or “high priests”, and when more people become knowledgeable about the subject, the stronger democracy becomes”. Before Professor Chang took part in a six-part series on the Real News Network recently, his name and economic perceptions were limited to seeing him speak on a documentary about alternative economics. In that small amount of association with Mr. Chang over the internet, he comes across as a straight-speaking, likable man who has obviously travelled down many economic theory highways.

Spending time on an economics focused blog “Real World Economics Review” a number of comments on articles there have pointed out what some see as a problem in university economics departments: the range of theories covered/taught are very limited. Professor Chang is keenly aware of this problem in teaching college economics, and, once again, deserves a lot of credit for exerting himself intellectually and addressing it. It seems he has reached the point where he’s disturbed by the unnecessary situation where the world’s citizens are allowing a so-called economic “guru priesthood” to take advantage of their naïve, unfounded belief that economics is best left to the “experts”. His efforts continue while citizens could – with an easily obtained understanding of economic theory – become informed and involved in discussions/debates, and make a real difference in determining their particular government’s eventual policies.

Not having purchased and read “Economics: The User’s Guide” as yet, there was one sentiment expressed by a reviewer of the book at amazon.com that stood out: “What impressed me the most was his genuine concern for the well-being of humanity. He covered the problems faced by people from the richest and poorest countries”. That reviewer’s comment just about says it all for people wondering if Professor Chang’s book is worth reading. Ha-Joon Chang is saying that university economics curricula suffer from lack of intellectual diversity, and that if department heads took action to make them more pluralistic, a “cross-fertilization” of ideas would result in greater understanding by students.

He sees increasing average citizens’ knowledge of economics as an important project for raising democracy around the world to a higher, stronger and more relevant, effective level. His vision is one where economists are no longer “impervious to outside scrutiny” – where there is little to no public debate on their proposals and decisions. Ha-Joon Chang’s vision is one where citizens are very well-informed about economics, regularly take part in discussions on important economic issues, then positively influence the futures of their nations. The futures of their fellow citizens.

****

Professor Ha-Joon Chang’s book “Economics: The User’s Guide” on Amazon:

http://www.amazon.com/Economics-Users-Guide-Ha-Joon-Chang

(Thank you to TheRealNews at YouTube)

Land Value Taxation: True Economic Salvation For Nations?

by Jerry Alatalo

“Let no man imagine that he has no influence. Whoever he may be, and wherever he may be placed, the man who thinks becomes a light and a power.”

– HENRY GEORGE (1839-1897) American economist, single tax proponent

he concept of land value taxation (LVT) is largely sourced from Henry George’s 1879 book “Progress and Poverty”. American educator Henry Steele Commager said the following about George’s most famous book: “Few other American books and certainly no other economic treatise exercised a comparable influence in the world at large”.

It’s somewhat embarrassing to admit not having read “Progress and Poverty”, but Mr. Commager’s statement and very positive quotes about Henry George from historic figures Leo Tolstoy and Albert Einstein have certainly increased interest in doing so. Equally embarrassing is having to admit less-than-average awareness of perhaps the most relevant economic strategy for today that Mr. George proposed some 130 years ago: land value taxation.

Given that decades of extensive tax evasion by corporations and wealthy people, facilitated by the world’s largest accounting, legal and banking firms, has led to a worldwide combined loss of tax revenue by governments estimated at $1 trillion annually, it was exciting to learn that, since land is immovable and can’t be hidden in offshore accounts, any nation which establishes land value taxation completely eliminates tax evasion. For that one reason alone, politicians from nations around the Earth need to very seriously consider studying and implementing LVT.

Workers in any nation which begins a LVT system can expect to pay a much lower amount in taxes, perhaps eventually paying zero income taxes at all. Such a transition would clearly benefit economic conditions when most people have a significantly greater amount of money for purchases or savings. Implemented LVT systems replacing most nations’ complicated, time-consuming tax laws would be fairer, more efficient, and simplify everyone’s life to a great extent.

Having an embarrassingly low, less-than-average awareness of LVT we’ll let the rest of this post, consisting of information re-posted from websites run by men and women with much higher-than-average knowledge on land value taxation, get into more detail. Let us just say that the concept of LVT seems to have a profound potential for truly creating beneficial societal results, is a “win-win” proposition, and, even after only getting one’s toes wet, has resulted in becoming a big fan.

Let’s put it this way. If the man responsible for the idea of land value taxation – Henry George – received great respect and admiration from the giants Tolstoy and Einstein, well, isn’t that about all one needs to know? 

****

Cross-posted from www.taxingqofland.org – producers of the 30-minute documentary “The Taxing Question of Land” (video below).

—-

Today’s blog focuses on a variety of journalists from all sides of the political spectrum who have written in favour of Land Value Tax and also considers the barriers inherent in party politics.

Simon Wilson highlights the case for LVT in Money Week

There are Left wing notions that LVT is fair and just. This is important, but what about the economic arguments?

Free-market capitalists and mainstream economists, such as the FT’s Martin Wolf and Samuel Brittan, have both argued the case in favour. Whereas left-liberals argue for land/wealth taxes on grounds of fairness and equality, free-marketeers tend to argue that the rapid accumulation of unearned property wealth over the last 15 years has made us all fat, lazy and unproductive. Tax wealth, so this theory goes, and we will be spurred into competing with fast-growing emerging markets. Right-wing libertarians also argue that wealth taxes are the least bad option because – paradoxically – they do the least to distort or depress wealth-creating economic activity.

We have here a policy that highlights the valuable elements of our political landscape. Left wingers highlight equality and fairness, while Right wingers value wealth creation and economic activity. If Land Value Tax achieves this then why is there a lack of political will to bring this forward?

Sam Brittain, of the Financial Times and an advocate of LVT, explains that party politics stands in the way of genuine reform that betters society:

Many chancellors have said that they would jump at a tax that had no disincentive effects on work or enterprise but had a strong redistributive element. The problem was that the amount of preliminary work required would take more than one parliament and any credit for the measure would redound to their successors.

If politicians really want to think about the unthinkable, as they sometimes claim, here is a place to start.

Surely it is time politics grew up or is the UK really being held hostage to the inability of our parties to be able to congratulate and thank each other for what they agree on?

It is worth highlighting exactly what we are discussing and I’ll turn to Martin Wolf, also of the Financial Times, who explains Land Value Tax in terms of infrastructure. Martin Wolf explains we should finance infrastructure costs by raising revenue from the people who benefit, the beneficiaries. In the case of infrastructure this will be landowners:

Consider a simple example. In a busy town the average house price is £300,000, of which half is the cost of building (or replacing) the house and the rest the value of the land. Some way away is an isolated village. Here the identical house costs £200,000, of which just £50,000 is the land value.

Consider what would happen if a road were built, for the first time, between the town and the village. Residents of the town would want to move to the village to take advantage of the cheap houses and the amenities. Assume, for simplicity’s sake, that the benefit of the village’s amenities to the marginal movers offsets the cost of the extra time they would spend travelling. The price of village houses must jump by £100,000.

Owners of the village housing will capture the benefit of taxpayer-funded road-building. To them this will be a massive windfall gain. In general, the rise in the price of land will account for most, if not all, of the capitalised value of the surplus of benefits over costs to users of the infrastructure.

Thus, increases in land values give not only a good indication of the benefits of infrastructure investments, but also provide an efficient and just way of financing their costs. It is efficient to tax these values because the tax would reduce the size of a windfall, while other taxes used to pay for infrastructure reduce effort, penalise the division of labour or discourage capital accumulation. It is also just, because the chief beneficiaries would bear the cost.

He goes on to discuss the benefit to local authorities:

A simple way of financing local infrastructure would then be via a tax on site values. The revenue could go, in whole or in part, to the relevant local authorities. If the latter were also deprived of the right to vary the rate, they would have an incentive to make investments that raise land values and increase their revenue.

At present, however, the lack of any easy means of raising finance is proving a huge obstacle to desirable investments. Then, when investment does take place, as with the Jubilee line, it merely pours vast windfall gains on landowners at the expense of taxpayers. The result has been a long history of inadequate investment and undue reliance on inherently damaging and unjust taxation. The UK is choking on the inadequacy of its own infrastructure. The time to make a change is now.

With thanks to Martin Wolf, this highlights another important argument of our times. How do we give power to our local authorities and give them the tools necessary to create and raise their own revenues to deliver and develop public services? The localism agenda is at the forefront of politics today, well known for the reforms in social housing over the last few years but also is at the heart of Conservative politics. Heseltine himself writes in ‘No Stone Unturned’ October 2012:

2.14 For the UK to face up to the challenge of increasing international competition, we must reverse the long trend to centralism. Every place is unique. Local leaders are best placed to understand the opportunities and obstacles to growth in their own communities. Policies that are devised holistically and locally, and which are tailored to local circumstances, are much more likely to increase the economy’s capacity for growth.

Another current discussion about land and property taxes is the mansion tax. As there has been no discussion about revaluing our properties, the Mansion tax will still be based on the outdated Council Tax valuations made in 1991. As such, money raised will be small and will still be regressive. Regressive taxes means that poor tax payers subsidies rich tax payers. While Progressive taxes mean that neither the rich nor the poor subsidise each other.

Will Hutton writing for the Guardian in March 2012 suggests that Osbourne bring in a land value tax at 0.6% on every property which would result in homeowners with homes of up to £250,000 paying less than they do now– which will create something truly progressive. He also argues the case for business rates:

The British pay council tax on property values unrevised since 1991 – with New Labour typically never finding the political courage to launch a revaluation and thus higher, unpopular council tax bills. A mansion tax is all very well, but if it is based on 1991 valuations it will hardly bring in any revenue. Instead, Mr Osborne should announce a revaluation of the country’s entire housing stock and levy a tax paid in proportion to the new valuations; council tax should be renamed as the housing services tax. To raise sufficient revenue, it would be pitched as an annual 0.6% tax on every property; as a result, homes below £250,000 would pay less tax than now, taking the political sting out of the revaluation.

He should also introduce a land value tax on business and agricultural property; the principle is that as land becomes more valuable because of its business use, so it should attract more taxation. As a partial quid pro quo, suggests Mirrlees, the chancellor should abolish both stamp duty on property transactions and business rates. Business would thus pay tax on the genuine increase in the value of the property and land it is using; home owners on the real value of the housing services they consume – and the Treasury would still be ahead.

The Institute of Fiscal Studies published the Mirrlees Review – Reforming the tax system for the 21st Century. It is well worth a read. In the conclusion we are told to consider what a good tax system should entail:

1. We should consider the overall system – elements can be more or less green, progressive etc but The overall system should encompass all of these.
2. Neutrality, treat similar economic activities in similar ways to make the tax system simple and transparent.
3. Achieve progressivity as efficiently as possible

The report also highlighted 7 major flaws in the current UK tax system, number 6 is:

Taxation of land and property is inefficient and inequitable. There is a tax on business property – a produced input – but not on land, which is a source of rents. Taxation of housing involves both a transaction tax and a tax based on 20 year old valuations.

The report goes on in section 20.2.5 to talk about how to deal with business taxation. They propose replacing the current system of business rates with a land value tax.

“Business rates are not a good tax – they discriminate between different sorts of business and disincentivise development of business property.”

To read more about the benefits of the tax please turn to Chapter 16 – The Taxation of Land and Property

To summarise,

We have the words of a variety of columnists who support Land Value Tax. We can see that this issue fulfils the Left wing value of being progressive, the Right wing value of incentivising wealth creation and also the Economists value of efficiency. Surely the best tax reform policy for our nation is the one that is supported by both Right and the Left, and also by the greatest Economic minds in the country? If this is true, then what will provide the political courage?

Will we be stuck behind the immaturity of being unable to credit our political opponents with the courage to do what is best for us all? Or perhaps we are at the dawn of a new age, a mature age where we can work together to achieve what we already agree on?

I say, let us focus on what we have in common; together we can educate ourselves and raise awareness. Let us stand together and say proudly, “this is our time and together we will bring about fundamental change that will benefit us all.”

**********

Cross-posted from: –  ‘about’ page at www.henrygeorgefoundation.org

The Henry George Foundation of Great Britain Dedicated to promoting principles expounded by Henry George in the conviction that they offer the only true basis of Economic Freedom and Social Justice, and that their application will remove involuntary poverty, promote industrial and international peace, and make all other reforms easier of accomplishment, and generally contribute to the welfare of humanity. People do not argue with the teachings of Henry George; they simply do not know it . He who becomes acquainted with it cannot but agree. Count Leo Tolstoy Men like Henry George are rare, unfortunately. One cannot imagine a more beautiful combination of intellectual keenness, artistic form and fervent love of justice. Every line is written as if for our generation. Albert Einstein The Foundation was established in January 1929, to administer a Trust Fund for spreading a wider knowledge of the social and economic teaching of Henry George as set forth in his books – Progress and Poverty, Social Problems, Protection or Free Trade, The Condition of Labour, A Perplexed Philosopher, The Science of Political Economy and other writings. The motive for establishing and maintaining the Foundation is the conviction that the principles expounded by Henry George offer the only true basis of Economic Freedom and Social Justice, and that their application will remove involuntary poverty, promote industrial and international peace, and make all other reforms easier of accomplishment, and generally contribute to the welfare of humanity. The Foundation supports educational courses, meetings, research, and publications directed at promoting a better understanding of George’s ideas and developing them to address the economic issues of the day. Details of our current programme may be found on the web site and by leaflets available at 11 Mandeville Place, WIJ 3AJ or by telephone: 0800 048 8537. Our main publication is the journal Land & Liberty which has chronicled world events for over 100 years and aims to explore how our common wealth should be used – and to demonstrate that this is the key to building the bridge of sustainability between private life, the public sector and our resources – between the individual, the community and the environment. It aims to put the laws of nature and people at the heart of economics. Land & Liberty is made available free of charge to anybody who registers interest with us on this web site where you can also read recent articles and the latest edition of Land & Liberty. The Foundation depends upon the voluntary efforts of members, supporters and friends to provide the publications and services we offer and active participation is always welcome.

For more context, perceptions on Land Value Taxation, see the following in-depth article by LVT advocate Fred Harrison:

http://www.sharetherents.org/thesis/mortal-taxes-life-liberty/

(Thank you to TaxingQofLand at YouTube)