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Alanna Hartzok will give a teleseminar of the powerpoint she presented at the World Bank Land and Poverty Conference, WB headquarters. The ppt contains key points from her paper titled Socializing Land Rent, Untaxing Production, as discussed on last week’s Renegade Economists show. There will be several discussion periods during the teleseminar.
The teleseminar is sponsored by Commons Action for the United Nations and the Commons Cluster.
For PDF of the full paper and further information on the teleseminar please contact Alanna.
Listening method: Phone + Web Simulcast
Phone number: (206) 402-0100
PIN Code: 090366#
To attend via web only, no need to call in, this is the audio/visual link:
Past viewings of Alanna’s teleseminars on Sustainable Economics in the 21st Century can be seen, heard online.
Renegade Economists 286
This week we speak with Alanna Hartzok, co-director of the Earth Rights Institute, looking at her experiences at the World Bank Land & Poverty conference. We discuss the paper she presented on Socialising Land Rents, Untaxing Production , exploring the deep history of fair land tenure and tax policy as contained in perennial wisdom teachings of both East and West, foundations of economics in the Physiocrats, Adam Smith, Karl Marx and Henry George, up to what Joseph Stiglitz and other Nobel prize winning economists have to say on the theme, and more.
KF: Alanna, why is this such a must-visit event?
AH: This is the place, the conversation on the theme of land and poverty happening on the planet earth. It’s amazing. Last year there were five hundred people. This year there were eight hundred. People from governments, academia, civil society, private, development partners, from 90 countries. Several chief economists from the World Bank, top level people. Even the buzz was reaching the White House from the World Bank. One of the speakers from the last plenary session said that the President was hearing about what this interesting conference was, happening down the street. It’s just amazing, Karl and it really is major. The number of session that look at land-value capture and the kinds of issues that we’re really concerned about, tracking land information, land valuation it’s all happening here.
KF: You gave a paper that was on the first morning of the conference, that must have been pretty competitive to get that spot?
AH: Well, they had 400 people apply to give those papers and they accepted two hundred. So if you can imagine that within the space of four days, there were that many papers presented. If I can just tell you for a second I want to name some of the major sponsors of this conference. United Nations Habitat: Global Land Tool Network , US AID, the Ministry of Foreign Affairs for the Netherlands, France and and Germany, leader is GIS technology ESRI, Landesa, UN’s Food and Agriculture organization, Millenium Challenge Corporation, those are just about half of them, and each year those co-sponsors grow and grow and grow and major partners are coming in.
The keynote speaker last year was Paul Collier.Paul is an Oxford professor, a consultant advisor to IMF and the World Bank for Africa. He’s the author of The Bottom Billion and a number of other important works. Last year in his opening session for this event he talked about the need to socialise land rent. He said mostly the land value grows and it’s captured by a few private land-owners but it’s created by society, it should be captured for the good of society, speaking a message of the new economics of Georgist economics at that first session last year. I never thought I’d hear about socialising anything at a World Bank conference. But that is why I submitted my paper with the title “Socialising land rent and untaxing production”.
KF: That’s a fantastic paper you produced and I’m lucky to have a copy here. I’m very interested to see some of the founding documents for the UN Habitat had this sort of reference to the importance of getting the basics right. If we have a reasonable land price it makes it easier for society to survive.
AH: Well, having come in with the work as a UN NGO representative for the International Union for Land Value Tax, quite a few years ago, my engagement with Habitat and the Global Land Tool Network that is part of Habitat. I guess really I started paying attention to these founding documents way back in 1996 at the Istanbul Global conference. Somehow it was pointed out to me that that founding document from ‘76, from the founding of UN Habitat, has very substantial understanding of just what we’re talking about.
Here’s this statement : “The unearned income increment from rising land values or resulting from change in use of land, public investment or decision, due to the general growth of community must be subject to appropriate re-capture by public bodies,” That’s a mouthful I know but coming with the other sentences into that it’s all describing very, very clearly that they understood land rent and understood what to do about socialising land rent.
So there you have it, which is when, how I came to submit my paper. And I think there was a lot of interesting in the theme of the paper and even an IMF economist Michael Kumhof, who’s now gotten interested in land rent and land value tax. I talked to him on the phone a week before. He came over to the bank just to hear my presentation that morning and to meet me. And he’s begun now a research paper with Professor Nicolaus Tideman on the extent of land rent for the United States. They expect to have that finished in about four or five months. So that’s something exciting to look forward to. And again to see that the turmoil of mainstream economist coming out of the 2008 Global Financial Crisis is resulting in this stir, this search for new paths of economics, at very high levels now, World Bank and IMF economists.
KF: Well, that’s just so refreshing to hear that some major heavy-hitters and respecting your work because for a long time you’ve been in these circles trying to raise awareness of these issues and it sounds like over the last decade or so they’re starting to respect some of these classical economists, this wisdom of the ages that you’ve beautifully summarized in your paper here. Can you take us through some of these wisdoms that you’ve pulled together?
AH: Sure. The paper was really almost painfully challenging because I felt like I need to go pretty deep into what land rent is all about and it’s not a new idea it goes back thousands of years. So I wanted to cover some pretty deep time periods to show that it’s part of what one could called perennial wisdom teaching around economic justice. And then to pull that forward into the foundations of economics with the Physiocrats and Adam Smith and on up through Nobel prize-winning economists of the last hundred years, all speaking about the importance of land value tax, land value capture, addressing the law of rent problem. I felt like I needed to also describe what it is. Rent, the law of rent, classical economics, compared to the neoclassical corruption so I went through some of what to us would be economics 101 but most economists wouldn’t even have gotten this in their training.
KF: Alanna, I definitely would like you to take us through some of these founding thinkers who realised how important earth rights was to encourage earth sharing. Perhaps you could start off there. How do earth rights deliver some form of earth sharing and from that where does the economic justice come from?
AH: I’ve always been interested in ancient history of the idea and I’ve looked at it through the Judeo-Christian and somewhat Islamic threads. Leviticus foundations – not just the debt cancellation and the right of return to land and some of the writings in the Talmud. [Here] the rabbis are actually discussing what about land closer to Jerusalem it’s gonna be easier to get to market and those living further from Jerusalem, how are we going to make that fair, and they just decided that those closer to Jerusalem would pay cash to those further away from the city in order to equalize the return to labour on land of different locational values.
KF: I just love that point, they want to equalize labour rights to locational land value. That’s what we’re talking about here on 3CR’s Renegade Economist with Alanna Hartzok.
AH: I presented that in the paper and I showed one of the charts that Dr. Fred Foldvary had put together. Fred’s chart is a graph showing the law of rent and the margins of production and this kind of thing, but it’s really as if the ancient rabbis had this kind of chart technology, that’s what they were talking about.
And then I also came across this passage, Nicholas Kazana’s work on economic teaching in the Veda’s, now the Vedic philosophy is the foundation for all the eastern religions; Hinduism, Buddhism everything coming out of the east is foundational from the Vedic period, and he really pulled out the economic principles and he said, especially in looking at the Indus Valley, the Indus River Valley civilisation and north-east India area five thousand years ago. He said he was surprised to find they had a land value tax policy. He thought that land value tax is a fairly modern idea, but no. This valley had a pretty impressively stable and highly culture and fair economically just civilisation, it was a high point, on of the the three major civilisations in the world at that time.
This is really exciting to me and I wanted to impress upon the people with this research, that, it goes back pretty far, and then we brought it forward to the Physiocrats who were medical doctors and advisors to the King, right before the French revolution and they were whispering into the King’s ear. They said poor peasants, poor kingdom, poor kingdom poor king! And they came up with this idea of the l’import unique, which was a tax on land that they wanted. They said, just put the tax on the land, take it off the backs of the peasants. The Physiocrats were the ones that coined the term that Adam Smith used of laissez faire. Now, laissez faire we think of “Oh, that’s a free market term, take off all the rules and regulations and just have a go at whatever an individual can do to make money”.
Henry George had a very different understanding and sees it as translating in a different way, that laissez faire means ‘fair field and no favour’. It was a sports term, it was how you started off a sports game played fairly. It had to be a fair field and no favour. What a different way to understand laissez faire and if you link in with this concern for the poverty of the peasants and the focus to have a land tax before the French revolution. That’s what Adam Smith was really learning as a young man when we went and was mentored by the Physiocrats. When he was in Paris he met with and learned from them – foundational for Adam Smith. So I also studied a fair bit from Karl Marx’s book three, Das Kapital Vol 3, which most people may be unaware of how much his focus had begun to be on the land and the land rent problem.
So, in my powerpoint, which was how most people use powerpoint to present their papers at these World Bank conferences, I put Smith, Adam Smith beside Karl Marx with quotes from each of them saying essentially the same thing about the land problem and the need to socialize the land rent. Then that next slide after that one was Adam Smith next to Milton Friedman, essentially in agreement about the land value tax policy. Then we went into talking about Henry George who saw the whole thing very, very clearly and then we went through seven or eight Nobel-winning economists who were onto the important of the land value tax. So, that’s how I threaded it through to our current times.
The question is why is it so important for most people to understand the law of rent? Most economists have some sense of David Ricardo’s law of rent, which essentially shows us how land value and land rent increases faster than wages. That’s a situation we’re all at now – when housing prices are increasing faster than wages to affordably purchase housing. It’s not the house that’s going up, it’s the land value that’s going up and it’s a perfect illustration of the law of rent. So with all this knowledge there we’ll have to ask why isn’t it more forward in people’s minds this land problem and the solution, and I think we know what happened.
We know that the economics of the truth about how to solve the problem of the distribution of wealth and have a fair wealth distribution and a free market together, a fair free market, was when really a few super-wealthy plutocratic elites corrupted economics by creating neo-liberal economics. They made the earth a subset of capital, so instead of land, labour, capital you’re left with labour and capital and you can’t get a handle on a fair market economy under that paradigm. Nonetheless the main problem seems to be, and it was well illustrated by the person who was the moderator for my panel, Graham Ingram, who’s director of the Lincoln Institute for Land Policy. Recently, just about a week before this bank conference, Irving put it in the Wall Street Journal saying well and good but land rent is only about five per cent of GDP, and there’s our problem there, Karl.
Our problem is, our problem in the United States, less so where you are, because in the United States we can not get a handle on the land rent because those records are not even kept any more. So it’s impossible, it’s very difficult to know the truth about the taxable capacity of land. You guys in Australia with Terry Dwyer’s work, and then the graph that Brian Kavanagh put together shows, clearly shows, that a hundred years of development in Australia with land rent increasing enormously but mostly privatised, the produce coming from labour and productive capital decreasing over a hundred years and taxes on that same labour and capital are increasing. So I had to go quickly though the 80 slides I’d prepared because I didn’t have much time, but when I got to that I said “This is the most important chart, this Bryan Kavanagh/Terry Dwyer chart, in my paper” and to me probably the most important chart in the world, to illustrate the importance of land rent.
We [have] got to shift to land rent and land value tax and land value capture in order to address this maldistribution of wealth. Otherwise we are just increasingly being crushed by this private capture of this unearned income of land rent. So thank you thank you, you guys in Australia are doing such important work for the whole world, in being able to track this from Australia.
KF: We’re in discussion with Alanna Hartzok from the Earth Rights Institute, track her work at earthrights.net and she’s talking about a paper she presented at a World Bank Land and Poverty conference just the other week, Bryan Kavanagh is a regular on the show and really what it [the above graph] shows is that we’re taxing the wrong things, allowing those who make money in their sleep from owning natural resources to not only make that money but then hide their capital in tax havens. We see all these collapsing societies around the world, all these governments on their knees being forced to privatize more and more of their public utilities and fire-sale prices so, really this is why the World Bank is showing so much interest in what we’re on about, this is a cost-free reform, a simple switch of the tax system is what we’re asking. Alright, let’s go back to the interview with Alanna Hartzok.
I’m interested in in particular what’s going on around the world with the hiding of land rent, and to hear that valuers in the city of London have no official public value of the land in their CBD. And so they think it’s almost impossible to value land and around the world this sort of misnomer is being pushed as it being too complex and too difficult to work out but we’re lucky to have a number of land valuers on the ground involved in our organization who say “Look, we have to be able to value the land and then stand up in a court of law to defend that people can actually earn enough from that location to repay their mortgage, to repay the value of that land” versus economists who have that disjoint to the real economy and this is the fundamental disconnect between the reality of our lives and the economic theories that are shoved down the people’s throats. For me, in your paper, one of the light-bulbs that turned on was when I read about [Jospeh Stiglitz's] Henry George theorem characterising the situation where the single [land] tax is not only efficient it is also the only necessary tax to finance public expenditures. This is an astounding assertion.
AH: This is quite strange because he just wrote the book on inequality, and Stiglitz talks a bit about rent-seeking and he doesn’t talk that much about land rent-seeking, we wish he would have talked a little more about it. So it’s like he got it with the Henry George theorem and yet he didn’t! It’s a puzzle I don’t completely understand but I will say at least he’s going into the ballpark where he’s seeing the rent-seeking problem. You do hear that term being used more and more, but you know what he may have gotten it right at that point. I think the problem is Stiglitz himself hasn’t seen the information that really supports, even though it makes almost intuitive sense to him, he doesn’t have the facts because we don’t have the facts in this country to back it up because they’re been obscured. It’s been obfuscated, the government doesn’t even keep those records any more about land rent.
But some good news came out from the last plenary session of this bank conference and that is that Michael Anderson who is right now working with UK Prime Minister Cameron on the upcoming G8 conference and he told us they’re going to include a major focus, they’re pushing to include a major focus on transparent land registration. UK is very poor on keeping those land records, even worse than the United States, but they’re going to start pushing for the UK and world-wide. Once you have the map, once you see who owns what land, where and you start putting valuation numbers on it I think the games going to be up, because it’s going to be so obvious who’s making this unearned income, who the big rent-seekers are. Then we can start modelling how to start capturing those land rents back for the people and untaxing production and untaxing wages. I mean, it just seems like we’re headed in that direction. Something’s driving it that way, because we’re in such a crisis right now we’re moving towards something that has a deeper truth to it.
KF: I suppose when you look back through your paper and you see that the Chinese had an understanding of this four thousand years ago, the Indians as well, and you know there’s all sorts of indigenous stories through Asia. The Javanese understanding that those who live closest to the fertile land near the river, near the centre of the land had enough of an advantage over someone living in the rocky outskirts of the city. That really is an interesting point that different cultures discover this natural law, this primal truth, all on their own accord and it doesn’t really require a theory because it can be naturally understood by observing society.
AH: It’s two things; it’s the observation and it’s relying on the human being inherent sense of fairness. I mean, in a healthy family structure people are fair. They make sure everybody’s basic needs are met. They don’t throw out the old people, they make sure the old people are taken care of, the children are taking care of. You don’t have to just work to be taken care of. Neoliberal economics almost says you have to be a worker, you have to work, to contribute otherwise you’re just lazy or something, but these societies, where there’s policy based on fairness and just like you said the observation, they come up with it over and over again, then they forget that, consciousness is such that a few become powerful by seeking more than others, others get on that bandwagon. There’s just been this use of brute-force to conquer and control resources. And so it’s either going to be forced or fairness, and we gotta get back to fairness because just using force is going to get back to ending up hurting us all, or killing us all.
KF: Alana in your paper you talk about Hong Kong and their ability to generate considerable government reserves, and it’s getting to be a bit of an embarrassing fact that they’re getting so much of a surplus but so many other nations and states and cities are verging on the failed state model. How is Hong Kong doing this?
AH: I’ve known for years, as those of us who study this, most of us are aware that Hong Kong has a land lease system, and they have been capturing a significant amount of land rent for public purposes, the reason it wasn’t a privatized market, fully individualized titles, was because the British got control of the island and they didn’t want to alienate any of the land. That’s when they decided to lease it. The consequence was they they captured a fair amount of land rent. But then about 15 years ago, 20 years ago they did not keep moving forward on land rent and they started capturing more of their taxes from labour and other forms of production and then I found out something that I haven’t been aware of, that they have one of the world’s worst rich-poor gaps, wealth inequality in Asia, I think the worst. So here we have two years of government surplus they’re well in the black and yet this impoverization and, yes, wage-slavery. They even give a small citizen divided back to individuals. What I see is this: they’re only collected about 30% of the land rent now. They need to collect closer to 100% of the land rent and then they need to give back a very substantial basic income, citizen dividend cheque back to everybody in Hong Kong. I think that’s going to go a long way towards increasing the purchasing capacity of housing, which has become problematic for many, many people who live in Hong Kong. So that citizen dividend, since they have more than enough to pay for their own public needs and their government needs, they’re still not collecting anything near the full capacity of land rents. And with the wealth inequality there, that’s where you gotta capture closer to the full 100% land rent and start giving out citizen dividends. Does that make sense?
KF: Alana you’ve got a May 6th seminar to sign up to?
AH: Okay, so we wanted to give it a title that would be attractive, so we’re calling it Earthsharing, your favourite phrase, Earthsharing and New Economics, and we’ll have a solid 90 minutes to go, much more leisurely through the power-point that accompanied my World Bank Land & Poverty paper. We’re going to have three or four sessions in there for conversations and Q&A so it should be a lot of fun.
KF: There we have Alana Hartzok, again we have Earthsharing and New Economics teleseminar that anyone can sign up to via the earthrights.net website, there’ll be details on earthsharing.org.au, sponsored by the Commons Action for the United nations and the Commons Cluster where Alana will be running through the paper you just heard an overview of.
Renegade Economists 284
Leading economics – energy – environment commentator Nicole Foss joins to discuss the state of finance. She is in Australia on an extensive speaking tour. Support her work and your economic literacy by attending!
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KF: Nicole, in terms of systems thinking, how does The Automatic Earth function?
NF: Well, basically the idea is to look at as many different subsystems of reality as possible and understand how the system works – what the time constants for change are in that particular system, and that allows you to prioritize which systems are going to be the key drivers at what time. Then the idea is to integrate those subsystems and get a picture of reality. We prioritize finance because finance has the shortest time constant, so it is going to be hurdle number one over the next few decades. Then, we would look at energy as being hurdle number two. Then we would look at resource shortages, carrying capacity, population, pollution, climate, psychology, realpolitik and all manner of other things – so the idea is to have the biggest possible “big picture” so people can navigate their way through a time of uncertainty and upheaval.
KF: In more detail, explain why finance is first cab off the rank.
NF: Because the world of finance is mostly virtual, and the time constant for change in virtual systems is really short. So what happens is when you reach a limit in finance – and these limits are endogenous, you don’t need to trigger an event – you reach a limit in finance, and the changes can be extremely rapid. So if you look at what happened in Cyprus for instance, in two weeks they went back 50 years – they went from being a modern economy to having the banks closed, the ATMs empty, the shops shelves mostly empty, a cash-only economy, capital controls, and the value of these banks went from their full value down to next to nothing in a very short space of time. And so when you have the value of human promises suddenly disappearing, you crash the system.
So the money supply is mostly credit – the vast majority of it is credit, which just means human promises to repay – these have value as long as we believe the promise. As soon as we stop believing the promise, the value goes away all at once. Then you can end up with a tiny fraction of what was previously your money supply. Then because there is no money in circulation, – and money is the lubricant in the engine of the economy, like motor oil is the lubricant in the engine of your car, -because there is no lubricant, the engine seizes up on you. You can’t collect buyers and sellers, producers and consumers, and you have an economic depression. So, because this can happen so fast and it is a very large impact, it amounts to crashing the operating system. When you crash the operating system, you can’t do anything with your resource base until you reboot the operating system. That’s really what these periods are, and this is why it’s the first hurdle because it simply happens so quickly.
KF: How then can we look to reform the finance system when we’ve essentially forfeited democracy to these banksters?
NF: I don’t think you can reform it – I think it’s beyond anybody’s control and history teaches that we have these large structures that rise and fall all the time. This is just our form of empire – our form of economic imperialism, and we’re going to see that collapse and then we will do something different. But, I don’t think it is a question of reforming what is already there – I think it will collapse all by itself. We don’t really have to do anything about that, we just have to concentrate on building something that comes out of the other side.
So it is “how do we reboot the operating system?” – there is no point trying to build a better dinosaur, let’s be mammals. The dinosaurs are going extinct anyway, no matter what anybody does. So let’s concentrate on building new systems of government from the bottom up – new systems for money, new operating systems. That tends to be my focus – I would say that all the large scale things will not work when you have a very large scale economic contraction, because trust determines effective organisational scale. You lose trust when the economy contracts – you lose political legitimacy at that high level of organisation, so those things over time go away anyway, and then you need to work at an effective organisational scale that’s much smaller and reboot the operating system from there.
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Renegade Economists Show #279
It’s time for an overview of the current state of the residential property market in Australia. Two words can describe it, says Dr Gavin Putland, “suspended animation”. Interest rate reductions have not made any substantial difference to housing affordability. First home buyers are even less inclined to buy now than last year. This limited change has been facilitated by record-low interest rates.
Renters have no encouragement to buy, and nor should they, says David Collyer, while the costs of buying are so far from long term averages. Stamp Duty, says Dr. Putland, is simultaneously penalising home-buyers for wanting to move. A land tax would make this huge financial burden redundant.
The “Don’t Buy Now” campaign continues to grow, encouraging renters to avoid a lifetime of record mortgage debt. No other generation has been forced to pay 40% of their income on somewhere to live, let alone being told its ‘perfectly normal’.
“Land tax assists with affordability because it imposes a cost on holding the land and hence it imposes a cost on sitting on the land waiting for the price to rise,” says Dr Putland.
Meanwhile, another secret subsidy has been revealed for Victoria. Land inside the urban growth zone (but outside the Precinct Structure Plans) has been deemed agricultural by default, exempting land-owners from Land Taxes. David Collyer has uncovered this remarkable news and explains the consequences on the show.
Locally, Melbourne is due to see another sky-scraper emerge. Dr Putland and Collyer discuss what this means for Victoria now and in the future.
Podcasters also can hear an assessment of the effect of Cyprus’ bailout conditions and alternatives.
Renegade Economists Show #279
This week on Renegade Economists we’re talking to Michael Hudson, economics research professor at the University of Missouri Kansas City, prolific writer and author of half a dozen books on the United State’s economy.
Michael’s been paying close attention to China as they prepare their speculative report on the next 30 years. Land taxation, a passion of ours at Earthsharing, is high on the agenda, according to Michael. The government are developing the infrastructure in the Western and Southern regions, and are looking to change the taxation system to make the increasing value of the land pay for these developments. “It’s what followers of Hengry George used to dream about!” Micheal says.
We’ve already had a bit to say about Chinese reforms around property, such as the doubling deposit buyers need to purchase their second home from 30% to 60%.
Meanwhile the United States is seeing record corporate profits, but is it an illusion? These profits, Micheal Hudson says, are financial profits not based on industry or any tangible creation of value. The employment sector is still failing with an unemployment rate of 9%. Shops and malls are empty and half of the population of Detroit has left, once the fourth largest city in America.
If you haevn’t caught this once yet, here’s a great clip about Micheal Hudson, a fount of knowledge – this interview covers a lot of the hot economic topics for the year: peer-to-peer banking, Wall St, American taxation policy, German gold repatriation. Don’t miss it!
Karl Fitzgerald (KF): It’s seems that the most exciting things happening around the planet are not happening in a democracy, they’re happening in China. The new Premier there Xi Jinping has a real reformist agenda.
Michael Hudson (MH): I think there’s a whole new generation coming in. I think they do things collectively in China, and then I was there a few years ago I was really happy to see how there’s a feeling of, uh, there are people in their 20s and 30s that they can really change society. That they really can get the reforms that they want to make it a really fair and prosperous society and I haven’t seen that degree of optimism in any other country. When I go to Russia for instance all the people could say is “Can you get me out of here? Can you get me to the United States?”. When I go to Germany they’re very down. But in China they’re very optimistic that they can change the whole structure of the system. And they just announced they’re publishing something later this month called “China in the next thirty years” where they have my article leading off, I’m told, and it’s about the need now to begin to tax land. The one thing that they haven’t done so far is address the tax problem.
What are you going to do to prevent Chinese putting all their money into real estate and just turning China away from a productive factory-based economy producing things into a speculative economy like the United States? They realise that’s what they’re trying to avoid. There’s been a shift in emphasis away from Shanghai which was sort of Thatcherite Marxism, if you can imagine that, towards Beijing and towards the west and there’s an attempt now to begin reviving or building up the western regions and the southern regions and they realise they don’t want this to become just a real estate promotion project, they want it to enrich the entire people and they want the tax basis basically to fall on the value of the land the government is building up by it’s enormous expenditure on transportation, it’s capital investment in roads and railroads, in new buildings. And so it’s what the followers of Henry George used to dream about! And in fact in China they’re aware of the fact that it goes back all the way to Sun Yat Sen, although they’re doing it they realise in the last hundred years there’s been a symbiosis between banking and real estate. And they certainly don’t want real estate to be bid up in prices by borrowed money and just meaning more debt and more debt for society as occurs in the western nations.
KF: Well they are opening up their financial sector there and there has been some concerns about these new developments. What do you see there?
MH: I don’t see them opening it up. There’s talk in America, the accusations by the Obama administrations that China has artificially been keeping its currency down and urging them to open their capital markets. But there’s so much liquidity in China, so many savings that if China did open there would be a huge outflow, of a diversification of investment outside of China, especially away from Chinese real estate into Western stocks and bonds, real estate, mining and Chinese currency – the RNB – would actually go down, rather than rise. So I don’t see their loosening these controls any time soon.
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