The World War has Begun

In a speech in Buenos Aires last May I warned that we were heading for a world war.

Fanciful? Alarmist? According to Andrew Haldane, a top director at the Bank of England, world war had already begun. He told the BBC on December 3 that the British economy had endured a battering that was “as bad as a world war. That is the scale we are talking about”.

The UK suffered a huge drop in growth in 2008. And yet, other European countries have fared even worse, with unemployment in some regions now topping 50%. The war spanned Europe and it is still raging in the US and Asia. This was the first phase of a global conflict which, as I explain in The Traumatised Society, assumes many forms. Currency wars. Water wars. Trade wars. These, and others, are emerging to create a conflagration like not seen in history.

Is it inevitable? No. I spell out the one change that would divert the course of history away from what is otherwise going to happen. Readers of this blog already know the solution. We need to stop using “land” as a weapon. That weapon is used to enrich the few by abusing the rest. The only solution is to turn the rents that we pay for the use of land and natural resources into the revenue for funding public services. This would make it possible to abolish taxes on wages and consumption, which is the nation-state’s way of waging war against its citizens.

But this won’t happen if the British government’s Chancellor of the Exchequer, George Osborne, has his way.

What Osborne Didn’t Reveal to Parliament

In Osborne’s Autumn Statement on December 5, all prospect of shifting taxes off wages and on to land was buried.

The Coalition government’s Liberal Democrat partners had hoped for a “mansion tax”: a special property tax levied on houses worth (say) £2m. This would have been one way to shift some of the burden on to the very rich. Osborne was having none of that. His speech in the House of Commons revealed all that is hypocritical about the doctrine of taxation. He gave three reasons for rejecting the proposal.

(1) It would require re-valuation of property. Under UK law, property is supposed to be re-valued regularly. The Cameron government has decided to flout that law. This has upset many commercial property owners whose property tax is based on values achieved at the end of the last land boom. Equity requires that all property in Britain should be re-valued. But the government is not interested in fairness between taxpayers.

(2) A mansion tax would be “intrusive”, according to Osborne. Intrusion into people’s intimate affairs is acceptable to the government if you happen to be claiming welfare benefits, are a self-employed wage earner or a corporation trying to expand business… But if you are a home owner, heaven forbid that we should enquire into the value of the services which you receive, which sets the value of your locations.

(3) A levy on a £2m house, according to Osborne, would create in future governments the “temptation to bring ever more homes into the net”. In other words, the tax system should have no sense of symmetry about it. The higher the value of the property, the lower the tax burden. So the full force of the property tax falls most heavily on the lower end, the cheapest properties which people struggle to rent out of the lowest wages.

All of this from a politician who claims that, in the midst of an economic world war, “we are all in this together”. Another of his perverse value judgments: multi-national corporations should pay their “proper share of taxes”. This is a minister of the nation’s finances who has no sense of what is fair or proportionate, who exploits loaded words to keep the lid on people’s minds. What’s he hiding?

Don’t Call it a Conspiracy

The full thrust of policy in Britain, as elsewhere, is designed to favour the owners of land. The process by which this occurs is camouflaged. Even professional economists fail to deconstruct the twists and turns in the economy to arrive at a realistic appraisal of the outcomes of the legally sanctioned biases in taxation.

Osborne has again frozen the municipal property tax. He has cut the corporation tax. Increased personal tax allowances, extended relief to some enterprises that pay the commercial property tax, provided more money to protect houses built on flood plains…The cumulative effect is that the price of land rises to mop up all of these benefits. But there is no analysis of this in the mountains of paper churned out by HM Treasury in support of the Chancellor’s Autumn Statement.

As for the independent Office of Budget Responsibility, which is supposed to provide objective analysis of the nation’s finances and public policies – silence. And so, the government has now re-launched the property cycle on its 14-year trajectory towards the boom that will bust in 2026. But that forecast assumes the cycle is not driven off course by the impact of world war.

Osborne repeats the economist’s favourite mantra: “There are no miracle cures”. I regret to say that he is lying. But, at the same time, he is ignorant of the class action he is taking on behalf of landowners. He is their agent, acting like a robot, following the rules of an intrusive game that began centuries ago when the people were ejected from the commons of England.

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