Fred Harrison has launched the second of his 10 theses about rent grabbing. This one is about the Cheating State. Share his insights!
I have launched a new initiative for economic justice on www.sharetherents.org This is based on the audit of my performance. I came to realise that there was never a chance of succeeding with the language and strategies that I inherited when I first walked into the London headquarters of the British Georgist movement back in the 1960s. So I celebrate my departure from the past with a homage to the activist who, in the 1880s, successfully launched the first global reform movement.
It was towards the end of a decade-long campaign to help the people of Russia that I realised why we had failed. I identified two reasons. First, the rent-seeking culture had become so deeply embedded that it would never allow fiscal reform anywhere in the world. Second, our tools undermined our ambitions. I share my reflections in case they are of value to others. I have road-tested them in China (last month) and the United States earlier this month). I was left encouraged.
(1) The assumption that ours is a rational society. If I and my colleagues strained hard to explain the integrity of land value taxation to policymakers and the media, reason would ultimately prevail. On the basis of deep historical research, I now understand that under no circumstances can the Georgist paradigm be negotiated into existence. I describe what I call the statecraft of greed in The Traumatised Society and in Ten Theses being serialised on www.sharetherents.org The agents of power have to be bypassed.
(2) The concept of “land value taxation” obstructs progress. I no longer use it. Here’s why:
(i) land: emphasis on this word distracted me from the other half of what people were excluded from when land was enclosed. Rent is the value of the services of both nature and society. People were excluded from society when they were deprived of their rights of access to the commons. By failing to demand the restoration of the right to create an authentic democratic culture, the void was left for other ideologies to fill.
(ii) land value: this term concedes the right to privately own the capitalised value of rent. This strengthened people’s determination to avoid public claims on “their” asset values.
(iii) taxation: “tax” shuts down people’s minds. Denial is the default position. I was embarked on Mission Impossible. And: by threatening a tax on “their” land, I implicitly conceded that government would only recover a part of the rent (a 100% charge would be resisted as confiscation, as a “taking”). I allowed myself to be co-opted by the rent-seeking agenda!
(3) Language By talking about “increases in the value of their land”, I misrepresented economic reality. The value of their land did not increase. It was the value of public services that were further enhanced by tax-funded investments. Derelict governments allowed land owners to capture enhanced rents. I reinforced rent-seeking by endorsing the myth that “their” land increased in value.
(4) Objectivity My books presented an objective account of land value taxation without the passion that is required to reconstruct communities on the basis of freedom and justice. I ought to have offered visions of the future that might flow from the recovery of the community’s rents. Restoration of an authentic democratic culture would lead to ways of living significantly different from those bequeathed by the predators. My objectivity lacked the inspiration needed to overcome the despair and denial which, I now recognise, helps people to cope with the perverse laws of the land. Over the course of four generations, the Georgist paradigm was dumbed down.
(5) The Shift We need a culture shift (facilitated by a tax shift) to control the geopolitical trends that pose an existential threat to humanity. I am exploring ways to mobilise people beyond the methods employed by most NGOs (which seek to ameliorate painful symptoms rather than alter the foundations of a corrupted social system).
Georgists from around the world pitched in to our Russian campaign. It was a wonderful exercise in collaboration. I do not want that effort to have been wasted. Failure to save the people of Russia will not have been in vain if the lessons are learnt. Today, in China, the World Bank is once again pushing to privatise land and rent. Reasoned discourse with the international financial institutions and sovereign governments will not yield change: their mandate is to protect the rent-seeking culture.
We need to foster what Mason Gaffney calls a Great Awakening: a renewal of humanity’s moral/spiritual heritage, the kind that preceded great reforms of the past. The way to achieve this is to excise the mind-bending language bequeathed to us by the culture that was incubated by the predators of the past. Their vitriolic values have all but erased the last traces of decency in our communities.
I am optimistic, for this reason. The next generation of activists will be unique in the history of our species. So far, humans have lived according to the rules of territoriality. This was a necessary evolutionary strategy. Territoriality, however, has been rendered obsolete. Time and space are overcome by clicks on keyboards. Cell phones mobilised tens of thousands of people into the squares of Arab cities, and their sheer numbers was sufficient to overthrow those who exercised monopoly power. But they were not equipped with the knowledge of what it would take to lay the foundations for a better future: hence the re-assertion of rent-seeking in Egypt by the military, the owners of one of the country’s largest landed estates.
Back in the 19th century, Henry George provided a clear exposition which empowered the people of the street. He even animated some policy-makers (who, at the turn into the 20th century, realised that they were faced with the opportunity to change the course of history). We now need a narrative that resonates with the realities of the 21st century. Those realities cannot be adequately articulated in the idioms that pass for economic and political discourse today. My effort to scope out new concepts is but one contribution to what I hope will be a fresh start to redeem the selfless sacrifices of four generations of activists.
If you view this initiative with sympathy, please check out the Cheating Index plan and register your support: http://sharetherents.org/the-cheating-index/
Fred Harrison started to launch 10 theses about rent grabbing. The first is about the dynamics of the statecraft of greed. Share his insights!
To secure votes in the 2013 election, Berlusconi resorted to the time-honoured method of bribing voters. He promised that if he formed the next government he would abolish the property tax and return €4bn which had been levied on owners’ homes. People voted for him in droves. The government has now decided that, to avoid another political crisis, the property tax would be abolished and the revenue raised, instead, through a local “service tax”. And that, as the Financial Times noted (August 30), would further degrade the fiscal system, for “A property tax is harder to avoid and has the added benefit of not weighing on economic activity”.
Italian politics may resemble a pantomime, but the failure of the Italian state renders people vulnerable to organised criminality. That failure is directly related to the contest for control over the nation’s rents.
Italy is bedevilled by networks of self-serving clients. Those networks include politicians at the federal, provincial and local levels; the judiciary, business and corporate officials; civil servants; and speculators, including get-rich investment operators in the banking, finance and property sectors. Their name: “clientelismo.” Clientelismo is the culture of looking after your friends and family by excluding outsiders. Thus, it is unlikely that an unemployed person can secure a job without the right personal contacts. You need to know politicians or have the support of an amiglia importante (important family).
Generally speaking, Italians believe that no-one and no political party can be trusted to deliver a plan for social justice and sound development. To what may we attribute this tragic state of affairs, and what can be done about it?
The Roots of Violence
People are imbued with a cynicism that allows the elites to behave appallingly. Berlusconi, for example, felt no embarrassment about intervening in the court case against the under-aged girl with whom he was accused of having sex. He requested that the case against her for robbery be dropped. People shrug their shoulders in resignation. Tobias Jones (2005: 32) notes that bad behaviour escapes censure because “It is not that mud does not stick (but) that there is so much of it, that it does not matter if it does”. An Italian proverb states: the law is made and then ways are found to get around it.
Italy is bedevilled by an unrelenting quest for power through the use of money. The appearances of this culture may change over time, but the impact on people’s welfare is ultimately the same.
- Fascism originated early in the 20th century to address widespread unemployment and discontent, but become the tool for a new kind of tyranny.
- The attempt to eradicate the Mafia in the inter-war years was nullified when the US Army re-activated the Mafia bosses to help in the fight against the Nazi occupation.
Such episodes flag up the fundamental flaws in the foundations of society, but how deep do the roots of the flaws go? The unification of Italy in the 1860s is cited as the event which saw the emergence of the Mafia, but that diagnosis is based on a superficial understanding of the financial architecture that underpins the statecraft of greed.
The Mafia as Rent-seekers
With the collapse of the Roman Empire, people fled the cities to work on the land and seek the protection of local Strong Men. Plantation owners hired stewards to look after their estates. Some poorly paid stewards helped themselves to part of the rents that they were supposed to collect and deliver to the feudal lords of the land. Those rents supplemented the wages of family members. The “mafia” family was born. It survived through the centuries as a domestic network that coalesced around the household economy. The self-help ethos eventually mutated into organised criminal networks that retained the language and ethos of the family. The way to secure protection and preferment was to be a member of such a family. Today, those families prey on the rents of society either directly, or by capturing contracts from the public sector on privileged terms.
The important point is this: criminality flourishes when society fails to ring-fence its rents for the benefit of the common good. When rents are privatised, they are fair game for whoever can apply the fiercest force (Harrison 2010). The privatisation of socially-created rents occurs through the legalised ownership of land, through corporate rent-seeking in its many forms and the activities of extra-state fraternities that extract rents by “offering” protection services (and charging pizzo).
Thus, privatised rents are the root incentive for socially significant forms of pathological behaviour. Individuals or firms (or “families”) that seek privileged access to power and money do so by seeking a share of rents, either directly (land owners) or indirectly (politicians, bureaucrats, corporate executives, and so on). The objective is to create links to people with decision-making powers over society’s net income – rent.
The Pathology of Cheating
Can a corruption-free society be constructed? What would such a society look like? It is easy to list features of such an ideal system:
- Political elites must be transformed into public servants.
- The state must be disciplined by an authentic democracy.
- The integrity of communal life must be restored.
But such a list is so much verbiage, if the pre-condition for a justice-based system is not enforced.
The pathologies that afflict modern society are the consequence of legalised and institutionalised “cheating”. That cheating is driven by a misaligned financial system that socialises people’s private incomes (through taxation) and privatises people’s social income (through the failure of governance to fund public services out of rents).
The breakthrough to systemic transformation is contingent on people drawing – and enforcing – the distinction between what is mine, what is yours, and what is ours.
So in economics, if Italians want full employment they would need to enforce the principle in the public sector which they abide by in the private sector: “paying for benefits received”. Enforcing this principle would automatically result in socially-created rents being paid into the public purse. Rent generated by the services of nature and society would be democratised. This would have a transformational effect on social psychology, for the payment of rent would be recognised as
(a) voluntary: not fixed by politicians or civil servants, but freely negotiated by the prospective users of the services provided by nature and society; and
(b) transparent: all transactions would be logged on cadastral records that were accessible to citizens. This results in accountability over how the revenue is collected and spent.
Once the rents were measured and tracked through the budgetary system, Italy’s clientelismo culture would atrophy. Corruption would wither. Thus, the precondition for reforming (for example) the corrupt banking sector is not ever-more complex regulations and bureaucratic enforcement agencies, but the democratisation of the public’s finances. The integrity of public institutions would be automatically enhanced, as the structural violence (Gilligan 2000) ebbed away.
Outcomes would be both moral and sociological.
- Ethical sensibilities reawakened: people empowered through access to resources which hitherto funded narcissistic lifestyles of the elites.
- Politics responds to people’s needs. Funding, tailored to the preferences of people who paid rent (that’s everyone), would discipline politicians to serve the common good.
- Institutions adapt to people-centred preferences, rather than the logic of the predator culture.
This is a pragmatic scenario that requires the renegotiation of the social contract. Marx misplaced his faith in the “dictatorship of the proletariat”. We actually need an inclusive democracy that embraces everyone. This can only be achieved by terminating the legalised cheating that blights people’s lives.
Dinmore, Guy (2013), “Berlusconi appeal thrown out”, Financial Times, August 2.
Gilligan, James (2000), Violence: Reflections on Our Deadliest Epidemic, London: Jessica Kingsley Publishers.
Harrison, Fred (2010), The Predator Culture: The Roots and Intent of Organised Violence, London: Shepheard-Walwyn.
Jones, Tobias (2005), The Dark Heart of Italy, London: Faber & Faber.
Mit freundlicher Erlaubnis von Fred Harrison (see: http://fredharrison.com/articles/italy-high-finance-incubates-mobsterism/)