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The major industrial nations enter the 1990s in the midst of land
booms offering riches for a few but unemployment for many. Banks in
TEXAS were bankrupted by massive speculation in real estate. Even
embassies had to abandon their offices because they could not
afford the rents in TOKYO. In BRITAIN, the spoils from housing -
the direct result of the way the land market operates - enriched
owner-occupiers but crippled the flow of workers into regions where
entrepreneurs wanted to invest and lead the economy back to
full-employment. Fred Harrison's thesis is that land speculation is
the major cause of depressions. He shows how the land market
functions as a junction box which regulates the power flowing
between Labour and Capital. And how land speculation periodically
throws the switches on the productive power of men and machines,
causing economic stagnation. This theory was acknowledged by
philosophers such as Adam Smith and Karl Marx, and social reformers
ranging from Winston Churchill to Leo Tolstoy, but it has been
forgotten by today's economists and policy-makers. The hypothesis
is tested against the historical facts and the recent booms and
slumps, and is found to offer a powerful explanation for postwar
trends in unemployment and the distribution of income. The Power in
the Land challenges the pessimistic belief, nurtured by the
depressions of the last two decades, that unemployment is now a
permanent feature of late 20th century society. The author
elaborates policies, based on a radical reform of the tax system,
which would banish involuntary unemployment and generate continuous
economic growth. Author Details: Fred Harrison is Executive
Director for the Land Research Trust. He studied economics at
Oxford, first at Ruskin College and then at University College,
where he read Philosophy, Politics and Economics. His MSc is from
the University of London. Reviews: "This is a brilliantly-written
and extremely readable book ... not unduly difficult for those with
no more than an elementary grasp of economic concepts." Journal of
General Management "Harrison's book is a formidable challenge to
the apologists for the status quo which raises, and goes a long way
toward answering, the questions that gnaw at the intellects and
consciences of all thinking men and women." The American Journal of
Economics and Sociology "In his book, The Power in the Land, first
published in 1983, Harrison, correctly forecast property prices
would peak in 1989 as well as the recession that followed it." The
Full Interview with Ed Magnus is available here:
www.thisismoney.co.uk (Financial Website of the Year and part of
the Daily Mail Group)
The author was the first to forecast (in 1997) the events that
ruptured the global economy in 2008 by applying an analysis that
exposes the fault lines in the structure of the market economy.
Now, he extends his analysis to the future of the West, to evaluate
fears from distinguished commentators who claim that European
civilisation is in danger of being eclipsed. He concludes that the
West is at a dangerous tipping point and provides empirical and
theoretical evidence to warrant such an alarming conclusion. But he
also explains why it is not too late to prevent the looming social
catastrophe. Attributing the present crisis to a social process of
cheating, he develops a synthesis of the social and natural
sciences to show how the market system can be reformed. He
introduces the concept of organic finance, which prescribes reforms
capable of delivering both sustainable growth, with a more
equitable distribution of wealth, and respect for other life forms.
To explain the persistent failure to resolve protracted social and
environmental crises, the author introduces a theory of social
trauma. Populations have been destabilised by the coercive loss of
land to the point where they have lost their traditional reference
points. No longer able to live by the laws of nature, they are
forced to conform to laws that consolidate the privileges of those
who had cheated them of their birthright: access to nature’s
resources. Many pathological consequences flow from this tearing of
people from their social and ecological habitats. To recover from
this state of trauma, the author argues, people need to use the new
tools of communication, such as social media, to regain control
over their future destiny through a kind of collective psychosocial
therapy. The author challenges the view that the West can climb out
of depression by applying the financial measures known as
“austerity”. He outlines a new strategy that would restore full
employment and reverse the decline in middle class living standards
in Europe and North America.
When the first edition appeared in 2005, the consensus among
forecasters was that the boom in house prices would cool to an
annual 2 or 3% rise over the following years. As predicted by the
author, however, prices continued to rise by more than 10% well
into 2007. Basing his argument on a study of property markets over
the last 200 years, Harrison warns of the danger to banks, business
and jobs of ignoring a remarkably regular 18-year cycle. Recent
events have proved the accuracy of his prediction. He accuses
Gordon Brown of giving people a false sense of security by his oft
repeated claim, last made in his 2007 Budget speech, that 'we will
never return to the old boom and bust'. Alan Greenspan in the US
encouraged a similar belief which led to the risky sub-prime
mortgage spree. The reason for the instability, Harrison explains,
is not the housing market itself but the land market on which all
buildings stand. Land is in fixed supply - as Mark Twain noted:
'They're not making any more of it'. Therefore, as the demand for
land for new homes and offices rises with population growth and
economic expansion, market forces, which normally increase supply
to reduce prices, have the reverse effect: prices rise. This
encourages speculation, with banks lending more against escalating
asset values and reinforcing the upward spiral. Under existing
government policies, the only way land prices can be brought back
to affordable levels is a slump, undermining the banking system and
causing widespread unemployment and repossessions. This is what
happened with the collapse of US sub-prime mortgages. The author
argues that monetary policy and bank regulation only have a
marginal impact on land speculation. The only way of neutralising
the boom bust cycle and creating conditions of economic stability
is a fundamental reform of the tax system.
Understanding the territorial basis of political power and wealth
is the pre-requisite, the author argues, for making sense of issues
as diverse as genocide, narco-gangsterism, terrorism and fascism.
Fred Harrison draws on global-wide case studies to show how the
violent birth of nation-states, whether the result of territorial
conquests or colonialism, splits the population into two classes,
victors and vanquished. This division is perpetuated and
legitimated through the system of land tenure. The pathological
consequences - as diverse as failed states, organised crime
(mafia), religious fundamentalism and the re-emergence of piracy -
are the result of the violent uprooting of the original inhabitants
from their homelands. The struggle over land and resources,
Harrison contends, is at the root of all of today's global crises.
Some attempts are being made to restore land to those in need,
ranging from the offer of land in Afghanistan to the Taliban as an
inducement to set aside their violent strategies, to the sharing of
the rents of oil in Nigeria to entice eco-warriors into mainstream
politics. But these piecemeal tactics fail to synthesise the
conditions for peace and prosperity. "The Predator Culture"
provides a framework for truth and reconciliation in what has
become a violent world that is slipping dangerously out of control.
'...without a knowledge of [the law of rent], it is impossible to
understand the effect of the progress of wealth on profits and
wages, or to trace satisfactorily the influence of taxation on
different classes of the community' David Ricardo. When New Labour
came to power it was on a wave of enthusiasm, based on the belief
that, by abandoning Clause 4 and embracing humane market economics,
they could usher in a more equitable social order - Blair's 'Third
Way'. After three terms in office, they failed. The reason,
Harrison reveals, is a hidden flaw in the market economy, which
means that governments of all parties, who rely on the present tax
system, transfer money from people on the lowest incomes to
asset-rich investors. This was not the intention of the designers
of the Welfare State: 'progressive taxation' was supposed to
equalise people's life-chances. The reality emerges as the author
traces the effect of taxes used to pay for public services. The
process has remained unrecognised because the transfer operates
unseen through the 'invisible hand' of market forces. Harrison
exposes how this works by analysing the property market. Owners of
high-value homes recoup what they pay in taxes through rising
property prices. Much of this increase is the result of tax-funded
state spending on infrastructure and public services - good state
schools, for example, can add GBP20/30,000 to house prices.
Lower-income earners, living in less desirable locations, and
families who rent their homes, do not share this windfall. This is
why the gap between rich and poor, and rich areas and poor areas,
continues to widen, defeating the best intentions of governments.
This outcome is not the result of market failure, as many argue,
but the failure of governance. Economists and policy-makers choose
to ignore the Law of Rent, also known as Ricardo's Law after the
economist who provided the first scientific explanation of how it
works.
It is often assumed that government intervention is required to
bring to fruition large scale infrastructure projects because the
large initial capital outlays such projects require must be funded
from the public purse. In "Wheels of Fortune", Fred Harrison shows
that large scale infrastructure projects can be made self-funding.
Infrastructure projects almost always bring about a large increase
in the value of adjoining land. For example, it is estimated that
the London Underground Jubilee Line extension increased adjoining
land values by close to GBP3 billion. When such infrastructure
projects are funded by government, they therefore involve a
substantial transfer of wealth from a large number of taxpayers to
a small number of property owners. Harrison argues that a fairer
and more efficient means to fund infrastructure projects is to
capture and use the increases in land values that they bring.
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