Populationist Pressures Unravelled

Karl FitzgeraldArticles, Commentary, InternationalLeave a Comment

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Creative Commons License photo credit: notsogoodphotography

Can land tenure reforms eliminate the neo-Malthusian poverty-environment trap?

High birth rates predominantly occur where health and education is low. This in turn results from a negligent revenue raising system. Check the United Nations World Population Prospects report list of population growth rates by country and you will see a dominance in the higher echelons of poorer countries.

Ethiopian farmers have 8 kids because they know only a few will survive. When resource rents are recycled amongst the people rather than into the deepest pockets of the wealthiest, respectable health and education funding is possible.

This critique of Malthusianism by no means discounts the immense challenges we face with desertification, water scarcity or wilting crop yields. We are interested in opening up the discussion to the wider market imperfections that lead to higher populations, the ignorance of eco-systems AND the speculative lure of commodity markets.

Whilst cultural and religious aspects may impact on population growth rates, the effect of the wealth gap dominates. The health olympics is a worthy study which re-iterates that regardless of the health spending, unless the over-riding economic policy encourages opportunity and equality, health efforts will be undermined. We need to be able to put food on the table to remain healthy.

With this in mind, analyse the population growth rankings of Western (anglosphere) nations. From the above wiki list we see that Ireland is the first of the anglosphere countries to be listed in the population growth stakes at number 69. Ireland’s Catholic culture could explain why its birth rates are so high. Over on the CIA World Factbook (that many see as the most accurate information source) Australia comes in at no. 98, the highest anglosphere nation re birth rates. Our disastrous baby bonus and double the long term immigration rate are to blame. The baby bonus is the easiest play in the economic stimulus playbook. Immigration too pump primes the economic growth rate.

The Human Development Index is a more rounded look at the wellbeing of a country. It analyses life expectancy, literacy, education and standards of living. Poor countries with high birth rates do not feature in the top rankings. Of the top 10 highest birth rates in the CIA World Factbook, only 2 states also appear in the HDI upper echelons – at 29 is Kuwait and 31 is United Arab Emirates. These states share their oil wealth with the people, not just shareholders. The remaining other 6 countries (the Democratic Republic of Congo and Mayotte aren’t included in the HDI study) feature at the bottom end of country rankings from no 130 through to 176.

Social welfare is enhanced through better economic systems. By recycling resource rents such as those generated in oil, land, gold or carbon (soon), the people can get a natural share of the land bounty.

But why do people want to move countries?

Resource Rents recycled?
Our taxes fund infrastructure and services that make land in prime locations more valuable. Those in the know, know this! Property speculators are a hangover from neo-colonial times. Land dominance is the key to securing a relatively risk-free income stream (if you bought at the right time).

If instead these windfall gains were recycled back into the people’s hands via the government, a stable income source would assist opportunity rather than entrench privilege. This is the basis of a Resource Rentals system. Better yet, we could use his land bounty to remove painful taxes such as GST, payroll, stamp duty and income taxes.

The latest scaremongering by populationists that we need a 1 child policy is concerning.

Populationists the pawns of the pyramid purveyors?
Strong words yes, but high birth rates have always been used as a means for the wealthy to blame the poor for their own plight. ‘You have too many kids. You don’t wash your hands. It’s your fault you’re poor.’

This in turn deters poor, insecure and over-worked people from analysing the cause itself – the economic system. A tax system that penalises people for working but yet rewards those for speculating on the value of natural resources is what should be in focus. People need to look beyond banks and beyond capitalists or unions to recognise that the most valuable thing we have is the planet itself.

Unfortunately neo-classical and now neo-liberal economics does all it possibly can to ignore the value of the planet.

Diverting attention away from economic policy and blaming poor people for their own plight has been an effective diversionary tactic for too long.

The scarcity of natural resources means that land, gold, water or the electromagnetic spectrum are always going to increase in value. Economists call this scarcity rent or economic rent. This privatisation of what should be the birthright of all is the greatest injustice on this planet.

We need to switch taxes off wages and place them on resources so they are used sparingly, rather than hoarded for massive profits. We have 125 taxes in Australia. A Resource Rentals system scales taxes and compliance back. Would you like to pay (at most) half your present income tax? Would you like your tax mix to include an environmental reminder every time you pulled out your wallet?

How does this change behaviour?
Resource Rentals (RR) sees urban density rather than sprawl. The speculative vacancies held off the market to fabricate capital gains will no longer be economic. This will see an increase in the supply of land, pushing down the price. Cheaper land leads to higher employment and wages. RR’s usher GFC inspiring land speculators out of the land market and into productive work. The boom-bust nature of modern economics is downgraded. Stability is enhanced. Steady-state economics becomes possible.

With less tax paperwork, the creative rebels out there can start their business without having to employ nerdy accountants. People can then look after themselves. Demand for labour increases with the rise of small business, pushing up wages and re-tilting the playing field back towards equality of opportunity. With a RR system we can also afford to remove indirect taxes as well. The price of goods and services will fall by 20 – 40% when the accompanying deadweight costs are removed, making it easier for cash strapped start-ups to get their head above water.

By switching taxes off labour and onto natural resources, the price of water or pollution would be more reflective of it’s value. Some may say ‘aha this is regressive, why should the less privileged pay more than the wealthy?’. Wealthy people generally live in closer proximity to the CBD, to natural beauty, to infrastructural services. Thus they pay higher land rents than the rest of us do. This balances the regressive nature of eco-tax like charges.

If a 1-child policy was implemented, this would only free up the remaining natural resources for gluttonous consumption by the lucky few within a country’s borders. A RR system ensures that over-consumers pay more than the frugal. Polluting products face a pricing penalty. Many of the eating disorders come from the fast paced world we live in. We work so many hours in such unfulfilling jobs in order to …pay the rent!

Short term commodity speculation is threatening global food security. The G8 are making noises. Food riots and wilting food supply issues are certainly a disturbing trend and hint at the need for the more efficient use of resources.

One of the other common critiques of developing countries is to blame their peril on the ‘resource curse’. The genuine problem is the urgent need for a decent tax system with no loopholes and transparent accountability. It’s the lack of resource rentals captured from those lucky enough to ‘own’ a piece of the earth that hands the free lunch to mining or property speculating companies. The potential of these countries is limited by a poor tax system. Fred Harrison spells this out in The Silver Bullet – a must read. Transparency International has many useful resources for good governance. East Timor is proving that oil wealth can be invested wisely.

Cheaper land and higher wages could restore our connection with family and community. We would have less stress at home with the reduced pressure to keep a roof over our heads. This would give us the opportunity to be better educated under the free education system now possible. Many reports have been written on this topic including:

In Kerala, female literacy is the highest (65%). And at 3.4 children/women, it has 1 of the lowest fertility rates. For the 14 states studied, the total fertility rate was 5.0 children/woman, the child mortality rate was 126/1000, and the female literacy rate was 22%. In contrast in Rajasthan where female literacy is 11% (the lowest of the 14 states studied) fertility is the highest at 6.0 children/woman.

Tying this in with free condoms as part of the public health program would have a drastic effect on birth rates. More must be done to educate on cultural taboos regarding birth control.

Importantly, this system of RR smooths out the imbalance felt between rural and city dwellers, curtailing the urban drift phenomena. Under the present system, a property owner in central Melbourne earns massive capital gains in their primary residence during a boom. Their land (and house …but remember that houses depreciate, land appreciates) price inflates due to no effort of their own. This windfall gain can offset a lifetime of income taxes in just a few years, if sold at the correct time.

However, rural locations face lower windfall profits due to their distance from prime locations. Thus the subsidy they receive from capital gains in their family home is lower than in the city. Watch Ricardo’s Law for more on this or read the book from our bookshop.

A RR system sees all landowners pay an equal percentage. The percentage function is adept at dealing fairly with locations that had high rainfall for eg, compared to those farms that didn’t.

How many wars are fought over land? If we have the better locations paying more to the government, in effect compensating those land owners who don’t farm next to the river, this reduces the pressure for war. Such land rent payments must seem fairer than what we presently endure. With less war, there will be less refugees. War in Africa for example has become a rapid fire way to cleanse traditional owners off the land to make way for neo-colonial investors interested in maximising their own food security. Listen to a fascinating audio story by Philip Adams on such land cleansing.

With more homegrown employment possible due to the overall lower land price and reduced paperwork, the re-localisation of community is possible. Urban mega cities then aren’t pressured. With less slums in urban areas, there’s less pressure for proud people to leave their country as refugees.

Certainly the property industry are in co-hoots with the high immigration levels. Download the Property Developers Guide to Sydney (13MB) to see how influential the rent seekers are there too. But we are looking at a holistic reform. With regulation we can barely patch up one dike before another bursts.

If we went to the source of the issues – upside down tax systems and poor transparency, the population growth rate currently stretching Melbourne would be much lower. With cheaper land in both Australia and the rest of the world, more cool, hip communities with decent health and education systems (that reflect the care we should genuinely show each other) would flourish. With more competition there would be less demand to move to Melbourne.

Australia’s continental size, stable political system and affable nature will prove increasingly attractive in this age of drastic climate shift. We must ensure that speculators do not profiteer from the mass of environmental refugees looming on the horizon. The hills around major ports will become very valuable. Why should speculators benefit from the largest overhaul of society in living memory?

Recycling land rents won’t solve everything, but it certainly will give sovereign countries a synergistic mechanism for people to work together, rather than to exploit each other. Population growth rates can be checked by a fairer revenue raising system that incorporates a true cost pricing mechanism. We must go to the source of the problem to address these important pressures.

Listen to the Renegade Economists podcast covering land rent issues weekly.

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