The Moral Economy: After we recover physically and mentally from Covid-19, we have a real opportunity to reform the economy to one which offers everyone economic justice along with a healthy and green environment. One that offers people well-paid jobs, truly affordable homes and properly funded public services; one that recognises the worth of all people and recognises the importance and power of controlling our natural resources and natural resource wealth in tackling the damage we have done to our planet. The Problem: Worsened and highlighted by coronavirus, we can observe that unemployment is growing; more high street shops lie empty; the skills and talents of many are lost to society; homes are unaffordable for many with homelessness growing; many public services are underfunded and our environment is so damaged that unless urgent action is taken, our planet, as we know it, will die. The Solution: To shift to “The Moral Economy” we need a fairer and green economy. We need a fundamental structural change, with a shift from distortive, avoidable/evadable taxes on production and trade to taxes on land values, other natural resources and pollution thus enabling economic prosperity and environmental sustainability. To stimulate the economy after the Covid disruption we need to expand and develop pollution reducing changes that have happened because of the coronavirus including more working from home, fewer business meetings using planes and cars etc. But if we don’t change the underlying faults with our economic system, we will continue to have poverty, an increasing rich/poor divide, homes unaffordable to rent or buy, economic booms and busts and all the other social and environmental ills that affect our society. First, we need to properly understand how the economy works – as we get richer and more productive, the limited amount of land and other natural resources we use will increase in value and therefore in price – simple economics of supply and demand. What we need to do is to stop our natural resources being depleted through bad and over-production and for there to be a pricing mechanism that charges users of land and other natural resources the economic value of these precious natural gifts to limit their use whilst providing a public income to be used to maintain and develop our public services that generate so much natural resource value in the first place. A relevant example we could learn from, is the actions taken after the San Francisco 1906 earthquake. Property owners pleaded with the City Leaders that as their buildings had been destroyed, they should be relieved of their property taxes. The politicians replied that there would be no taxes on their buildings but as the property owners still owned their sites, the land value would continue to be taxed, albeit at lower values because of the earthquake. With virtually no subsidies from Federal or State Government the taxing of land values in San Francisco actually stimulated new building to provide homes and business premises. This steady source of income allowed the City Mayor to invest in much improved new public infrastructure, and San Francisco was rebuilt and the population expanded, all within a few short years. Policies to Explore: We all need access to land to survive – for our homes, food, public services, businesses, transport, leisure, raw materials etc which means those who claim ownership to land (and all other natural resources) have immense power both in terms of how land is used and in who receives land wealth which is only created from our combined demand for its use – not from owning it – and which is currently worth over £5.3trillion, ie over 51% of the UK’s net worth. Most Economists have forgotten the basic economic law of rent: there are three factors of production – labour, capital and land (which includes all natural resources); the return to labour is wages, to capital is profit and to land (ie all natural resources) is “economic rent” which is the excess income left after the costs of labour and capital have been made. However, the increasing understanding and acceptance by governments, campaigners, journalists and concerned communities of the damage we have done and are continuing to do to our environment is seeing a rise in initiatives to reduce pollution and to stop the over-consumption and destruction of our natural resources – the root cause of this breakdown of our natural systems. (eg see The Economics of Biodiversity: The Dasgupta Review) This submission argues that we need Natural Resource Rents to be the basis of our tax system – not distortive and unfair taxes on wages and capital – the underlying tool needed to effectively control the use of our natural resources. A tool to return the economic rental income of natural resources we do use for the benefit of the whole of society and not as unearned income for those who claim ownership of them. For example, if there was a move to replace our current bad and distortive taxes with an annual Land Value Tax (LVT), we would end land speculation. Empty and underused homes and commercial buildings and idle development sites would be brought into use. Residential and commercial properties will become more affordable to rent or buy and there would be less demand to build on green land in our towns, cities and countryside. LVT is an annual levy on the value of every site according to its optimum permitted use. As natural resource wealth taxes are introduced there should be abolition of the current inefficient property taxes and abolition of or at least a reduction in distortive and harmful taxes including income tax, national insurance, VAT and corporation tax. These and most other taxes (except behavioural and green taxes) actually depress the economy and do not allow other positive economic and social policies to be properly implemented. We have an opportunity to move to a moral and green economy that benefits all of us today and in the future and not just benefit the super-rich.
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