Address to the Melbourne Unitarian Church, January 23, 2005
Metaphysics and Political Economy
The topic of this presentation, Providence and Common Wealth, is one which has overwhelming importance and deserves close scrutiny, far more than this rather limited summary can possibly provide. It touches upon the very difficult point of unity between metaphysics and political economy. By "metaphysics", what is meant is first principles of logic and being, rather than the common conception raised by ritualistic and speculative religions which leads to those inconsequential discussions about how many angels can dance on a head of a pin. By "political economy" what is meant is the interdisciplinary study that draws upon law and political institutions and processes in order to understand how power and ownership alter economics.
Despite the fact that the two areas of study are deserving of initial caution does not mean that they can be ignored. Indeed, every political economy in the world throughout history operates with a metaphysical foundation. For example, traditional European feudalism replicated theological notions of obligations to the divine through through the relationship of the lords, vassals and peasants over a fiefdom. Just as every soul on earth was expected to follow the laws of the LORD (capitals in the original) in the "Kingdom of God", so too every vassal and peasant in the fiefdom was expected to follow the commands of their temporal lord. Of course, the lord in both instances was duty-bound to provide and maintain the land.
It was the radical philosophy of individual freedom of religious conscience, of which the unitarians played a most significant role, that tore asunder the metaphysical foundation, the very basis of belief, in the feudal system. After all, if the laws of the spiritual Lord were to be freely chosen by individuals and subject to individual interpretation, why not the laws of the temporal Lord? Dramatically aided by the rise of the money economy and trade goods over agrarian produce and improvements in knowledge and information technology - of which the role of the movable type printing press is still dramatically under-rated - the political right of individual conscience and the right of individual ownership and freedom of contractual arrangements became both the metaphysic and the political economy.
This was an extraordinarily radical moment in human history, and not one which occurred without extraordinary and often bloody resistance by the temporal lords and the claimed representatives of the spiritual one. They did not give up their privileges and power without a fight, and it is clear by their contemporary actions that they would gladly re-establish their rule if given the opportunity. The political leaders of the time, the rising class of monied and commodity commerce, undoubtably played a most revolutionary role ending the motley fedual relations and the ecstatic religious fervour in favour of materialist rationality and egotistical calculation. Even today, one will discover a genuine commitment from the overwhelming majority of the world's capitalist elite in favour of secular modernism.
The Privitisation of Natural Resources
As the religious state was dismantled it is not surprising that one of the earliest problems that arose was what to do with landed property. Here one comes across a very interesting and critically important split between the philophers of the enlightenment and classical liberalism and the actual practise of the early capitalist and mercantile classes. For the former, the natural world was defined as "Providence", an encompassing term that applied equally whether one thought that the natural world came from either theistic or atheistic origins. As these gifts of nature were neither the result of human labour, or of capital investment, ownership and in particular, ownership in perpetuity, could not be considered justified. All had equal right to the gifts and nature, and because of that equality there was agreement; that usage of natural resources should command a rental fee that would be paid to a collective fund. That is, the use of Providence would provide a Common Wealth.
Documented support for this point of view is evident in writers ranging from John Locke, to the the Baron de Montesquieu, Adam Smith, Thomas Jefferson and David Ricardo. Jean-Jacques Rousseau's "Discussion on Inequality" certainly provides the most evoactive and poetic illustration of the idea;
"The first man, who after enclosing a piece of ground, took it into his head to say, 'This is mine' and found people simple enough to believe him, was the true founder of Civil Society. How many crimes, how many wars, how many misfortunes and horrors would that man have saved the human species, who pulling up the stakes or filling up the ditches, should have cried to his fellow! 'Be sure not to listen to the imposter; you are lost if you forget that the fruits of the earth belong equitably to us all, and the earth itself to nobody'."
However it was the unitarian-deist, Thomas Paine, who best articulated the idea in a practical manner. In his pamphlet Agrarian Justice he commented;
"Men did not make the earth, and though he had a natural right to occupy it, he had no right to locate as his property in perpetuity any part of it; neither did the Creator of the earth open a land-office, from whence the first title-deeds should issue.
"[I]t is the value of the improvement, only, and not the earth itself, that is individual property. Every proprietor, therefore, of cultivated lands, owes the community a ground-rent (for I know of no better term to express the idea) for the land which he holds; and it is from this ground-rent that the fund proposed in this plan is to issue. ...The plan I have to propose ... is, To create a national fund, out of which there shall be paid to every person, when arrived at the age of twenty-one yers ... a compensation in part, for the loss of his or her natural inheritance, by the introduction of landed property ..."
These suggestions however compare poorly with actual events, which are dutifully if bitterly summarised in Karl Marx's first volume of Capital, from chapters 27 to 31. Firstly, there was the massive privitisation of the feudal estates, both church-owned and noble, the usurption and enclosure of the commons and direct seizures without even a pretence of legal process. Then, this class of previously quite well-off landless peasants and independent farmers, the overwhelming majority of the population, were forced to seek employment among the new capitalists and landowners. "Forced" is meant quite literally here, through both circumstances and legislation. Those who were not in employment were flogged, if one refused work they became, by legislation, a slave to the Master who declared the person an idler. Branding (with a 'V' for vagabond or 'R' for rogue), forced labour, whipping and even execution was commonly applied to those who, through no fault of their own, found themselves without the means of subsistence.
The latter half of the 19th century and the twentieth century simply represented, in the main, more of the same theme but on a grander scale. Having monopolised as much as was possible of natural resources in their own lands, this new, monied version of feudalists (it is difficult and unfair to call them capitalists for they don't actually invest in capital per se) sought foreign lands to plunder, thus inaggurating the rise of imperialism which, at one stage, led to Europe's ruling classes owning the entirety of the globe by 1914 with the exceptions of Ethiopia, Siam and the Americas - in the latter case, a new version of economic and indirect political imperialism was developing in its own right.
Such a distribution of power was explosive. Rousseau's comments concerning crimes, misfortunes, wars and horrors arising from ownership of the earth would prove to be haunting as the world lurched from the imperial world war, to the Great Depression, the rise of, and world war against Nazism, to the wars of national liberation - all largely over natural resources and who gets to "own" it. Inevitably exceptions arose from these events. In the Soviet Union, for example, natural resources became the property of the State which unfortunately used command directives rather than a market-mechanism to derive common income. Douglas MacArthur ensured that resource rents were incorporated into the Japanese constitution thus providing a firm foundation for its post-war recovery. Recognising this success (and notably following the recommendations of Sun Yat-Sen), Hong Kong and Singapore also derive a significant portion of their public monies from resource rents and correspondingly have very low levels of taxation. In Alaska, oil royalties are paid annually to every citizen equally and regardless of age, amounting to roughly $1000 USD per annum.
Contemporary Views and Possibilities
Today, nearly every economist in the world, whether liberal, conservative or radical, agrees that public finances should be largely derived from resource rents. The radical capitalist Milton Friedman argues that "In my opinion the least bad tax is the property tax on the unimproved value of land", whereas the neo-Keynesian Paul Sameulson argues that "pure ground rent is in the nature of a 'surplus,' which can be taxed heavily without distorting production incentives or reducing efficiency". The conservative Robert Solow has claimed "For efficiency, for adequate revenue, and for justice, every user of land should be required to make an annual payment to the local government equal to the current rental value of the land he or she prevents others from using", whereas the radical antifascist Jewish refugee and economist Franco Modigliani stated "It is important that the rent of land be retained as a source of government revenue". Finally, the maverick socialist William Vickery claims "While the governments of developed nations with market economies collect some of the rent of land, they do not collect nearly as much as they could, and they therefore make unnecessarily great use of taxes that impede their economies - taxes on such things as incomes, sales, and the value of capital goods."
Each of the people just quoted are Noble laureates in economics. One can reasonably make the assumption that they have some idea of what they are talking about. If that is insufficient evidence however, consider that in 1991 no less than thirty five of the top economists of the United States - all either Noble prize winners, professors, or deans and across the political spectrum - wrote to to the then President of the Soviet Union Mikhail Gorbachev urging him in the transition to a market economy to retain public ownership of land and to derive a market-based common income from land-rents. Unfortunately, in the replacement of Gorbachev by Boris Yelstin the latter capitulated to demands to a cheap sell off natural resources, the results of which are empirically and readily available; mass impoverishment and even malnutrition in what used to be the second most powerful nation on earth.
A little closer to home, consider the following; the GDP per capita in Australia has, from the period 1951 to 2000, increased by an average 2.8% per annum. Real housing construction costs (labour and materials) from 1950 to 2000, has actually fallen by 0.66%. From 1950 to 1997, taxes per capita rose by 2.95% per annum. Yet capital land value has increased by 6.37% compound per annum. As can be expected with any natural resource, something which is requisite for life itself and in fixed supply, private ownership makes some people very wealthy indeed without doing any labour or productive investment, whilst others who do labour, or do investment in machinery, genuine entrepreneurship and so forth, pay the cost. Perhaps it is not surprising to discover that whilst it is bad enough that the top twenty percent of Australia receives 48.5% of the national income (and the bottom fourty percent earns 13%), that the top twenty percent of asset holders hold 63% of national household assets, whereas the bottom fifty has a mere 5%.
What would happen if the current taxation system, which in itself is biased towards taxing labour and consumption, was entirely replaced by a resource rental system? The most obvious question is whether enough public revenue could be generated. The answer to this according to detailed research by Terry Dwyer, visiting fellow to the Asia Pacific School of Economics and Management at the Australian National University, is the affirmative; all existing taxes, fees, charges and rates could be replaced with resource rents. There would of course be significant savings to administration costs and compliance as well. Site valuations are simple to calculate and "tax avoidance" becomes a non-issue under such a scheme. Rents, it must be added, would not change. Social welfare in the form of citizen's dividend's would, free of the administrative burden, would increase. Investment, both corporate and personal, would shift from seeking monopoly over resources into capital investment and labour and in that investment real attempts would be made to minimise the amount of natural resources used - with clear and obvious benefits to the environment.
Unitarians have long held that religion and reason are actually one and the same and that there is no need to engage on nonsensical speculations and artificial rituals. The natural world and the human spirit is sufficiently impressive in itself. Therefore it should not surprise us that the most fair and efficient method of raising public revenue and securing the welfare of the people is actually the one that is best grounded in realistic metaphysical principles. Likewise, the most unfair method of raising public revenue is to tax labour, labour-derived investment and consumption and the best means to impoverish the world's population is to allow the private monopolisation of the earth's resources. Of course, powerful individuals and institutions will seek this. Owning the earth is a very easy way to make a great deal of money through very little effort. It is our duty to ensure that this does not happen. The earth, Providence, belongs to no-one and we all have equal, Common, right to its Wealth.