Capitalism’s Change Agents

Karl FitzgeraldTrue Cost EconomicsLeave a Comment

January, 2007

With climate change finally front and centre on the political agenda, we are at a unique point in time to assess our ability to change.

When capitalism began there was an abundance of nature and a shortage of goods. It made sense to prioritise the means of production. However today, with our rollercoaster summer taking us from 18 to 36 degree days, our growth fetish could soon become a famine.

Corporations and consumers must be brought back into balance with nature.

The Insurance Industry is on the front line to nature’s warnings. How long will it be until remote bush property in North-Eastern Victoria is un-insurable? Time is marching for million dollar coastal property and rising sea levels.

The big question is – can we rely on our present system to change behaviour quickly enough?

The European Emissions Trading System is facing a steep learning curve, allocating too many carbon credits in its’ initial 2005 – 2007 time phase, giving companies approval to pollute with a free conscience. Subsequently, prices per carbon credit plummeted 60%.

The dominance of smokestack CEO’s in Howard’s Climate Change panel is compounded by the short-term parameters that quarterly dividends impose on CEO thinking. Quarterly dividends must be reformed in favour of annual or even bi-annual returns.

The ‘New Westminster’ system we promote as democracy sees hundred of thousands of dollars in political donations soon returned as hundreds of millions in profits from a new loophole or government contract. One vote, one value has been replaced by one dollar for one decision.

This system of Lobbyocracy will eat itself and our planet in self-interest if we are not careful. It is imperative for change’s sake that public finance provides all the campaign money political parties require.

The market’s ability to change is limited by these economic and political factors. Big Business has become so dominant, so top heavy, that vested interests are hindering society’s ability to change.

Perhaps the biggest threat to change is the trend towards tax systems favouring speculation. Speculating in the gifts of nature has become second nature.

A recent ANU report by Leith & Simon found that the top 1% of the economy earn just 20% from salaried work.

Negative gearing and low capital gains taxes have given the thumbs up to skyrocketing property prices, encouraging the destruction of urban fringe forests and simultaneously curtailing the potential of small business and wage earners alike.

Inefficient tax regimes see endless urban sprawl and little social infrastructure. However, there is always a place for a gambling outlet. Typically the struggling middle to poorer classes move out to these McMansion-ville estates on the urban fringe, sapping their energy in drive-time traffic jams. When it comes to shopping they are too exhausted to remember their hessian bags, let alone walk or cycle to the shops. The rapid expansion of city borders gives government little capacity to fund the necessary public transport, further adding to the carbon wave.

For those of us lucky enough to own a home, the extra hours we work to pay off our hyper-inflated mortgages rob us of the full potential to live sustainably. Even with two wage earners per household, it’s hard to find time to behave responsibly. We need to reclaim our time to give us the headroom to re-train our behaviour.

This can best be done by reducing the lump sum on our mortgages.

True custodians of the future would transform our taxation system to a True Cost Economics system, with public revenue raised through a Resource Rentals system. Resources soon become precious when we are penalised for wastage. As a gift to all living beings, resource-based profits are now shared amongst the community, not just the shareholders.

Alaska’s Permanent Trust Fund delivers a citizen’s dividend paid from their oil wealth. It is the only US state to have reduced the wealth gap over the last decade.

The endless housing affordability crisis shows the crucial role of cheap access to land. The UN’s Global Land Tools Network is promoting a land value capture mechanism to recycle community created land rents (naturally increasing property prices) back into public hands. After all, society underwrites long-term property growth rates in the taxes they pay for new roads and schools. Spin offs from this reform include urban infill, self-financing public transport and a considerable drop in tax compliance.

Our current system subsidises wealthy property investors to hoard land. A land value capture mechanism such as a Site Rental ensures this crucial resource is used more efficiently. The yearly fee reduces the ability to sit on land, with the increased supply pushing mortgage prices down.

Calculations from the Land Values Research Group show that earth based revenues from land, water, oil, coal and the electromagnetic spectrum are sufficient to replace all taxes. With a yearly Resource Rental fee paid, hoarding of water permits for example, is discouraged.

This turns speculative money away from gambling on the planet and towards productive means.

Reinforcing this, a system of Environmental Trusts should be empowered to look after environmental treasures. An environmental bond for miners will ensure they leave the house in order. Free from political influence, these Trusts will be legally responsible to future generations.

Environmental Trusts can oversee our citizen’s personal carbon allowance. The embedded carbon in each purchase made will be deducted via a debits card from our yearly allowance. Corporations will continue the trading of carbon credits. However carbon credits must be bought within a marketplace, not allocated as Europe has done. With the carbon ceiling continually lowering, pollution becomes more costly and cleaner products favoured. Polluters also face a higher Resource Rental (ie for polluting water), further reinforcing the move to cleaner production.

The longer we rely on international agreements hamstrung by undemocratic structures and self-interest, the harsher will be our judgment in the annals of history. Each country needs to take the future of its’ people into its own hands. The reforms to Lobbyocracy and quarterly dividends will enhance long term decision making, whilst the improvements in taxation will provide an environmental reminder every time we pull out our wallets. We will also have time to think and behave responsibly with the speculative pressure taken out of the property market. Then we can all turn down the heat as quickly as possible.

Karl Fitzgerald

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