Individual policies

Housing, banking, trade, enterprise and the distribution of wealth

LANDA market in land would work well if it favoured use over asset value. The distinction can be seen in the case of a building plot, when the grant of planning permission increases the asset value but does not, of itself, bring the land into productive use. That only happens when a house gets built, and can be lived in. Before that, the land’s owners may hold on to it, restricting availability to keep land value high.

An effective land policy will ensure that the asset value is retained collectively, creating a market in the use rather than the ownership of land. Many proposals have been made that go in this direction, among the longest-standing of which is Land Value Tax, a proposal associated with the economist Henry George that provides a disincentive to hold land as an asset by taxing the undeveloped asset value. Among U.K. groups campaigning for more affordable housing, Generation Rent has a proposal for a secondary housing market, in which the underlying value of the land is fixed at a low rate. More detailed plans to combine community land ownership with productive and commercial activity have been developed by economist Shann Turnbull in his Co-operative Land Bank proposals.

MONEYThe purpose of money is to facilitate the effective working of markets. But banks have turned it into an asset that they trade to make themselves rich. They can do this because they create new money whenever they make an interest-bearing loan, and that loan is an asset that can be traded.

Many loans, and therefore much new money, goes to purchase assets such as property and financial instruments, rather than being invested in productive wealth-creation. Banks prefer this because it reduces the risk of their lending, but also contributes directly to asset inflation. In the U.K. Positive Money is campaigning to take the right to create money away from banks and re-establish it as a social asset. Through the International Movement for Monetary Reform they have linked to sister-organisations in 21 countries. In the U.S., the American Monetary Institute has a similar agenda.

TRADETrade is useful when it allows people to share goods and skills. But much trade today is merely exploitative, taking advantage of differential pay rates and living conditions around the world. The effect of such trade is to destroy real value for both producers and consumers, annexing as much trade wealth as possible to intermediaries. This is the reverse of productive trade, which brings producers and consumers closer together to the benefit of both.

The movement for productive trade embraces both Fair Trade, which helps producers to access markets while retaining a higher proportion of the value of their labour, and campaigning groups such as Global Trade Watch in the U.S. and the U.K.-based Global Justice Now. In Europe, 450 organisations are collaborating to challenge the terms of bilateral trade agreements that threaten to increase opportunities for exploitive trade, while in the U.S. 2,000 organisations are working to a similar end.

ENTERPRISEEffective competition requires equality of risk, but the law gives big privileges to corporations, including limited liability. Those privileges make sense if the company is taking risks to create new, real wealth, but when the focus is on asset value, accumulating shareholder value at the expense of others, they merely distort the market and make it harder for individuals and smaller groups to compete.

The principle of Social Enterprise is now well established in many parts of the world. It seeks to develop new business models that favour the distribution of wealth through all stakeholders, rather than its accumulation in the hands of investors. Investigative and campaigning groups such as Corporate Watch (U.K.-based) and CorpWatch (U.S.-based) work to expose abuses of privilege by large corporations. In addition, many campaigning groups, including trades unions, are challenging the way in which corporate structures facilitate rising inequality and the erosion of producer/workers’ rights. As yet, however, the question of entitlement to limited liability has received little attention.

PARTICIPATIONCompetition may help to create wealth, but it does so best in conditions of relatively equality. Otherwise, the more powerful may win by crushing their competitors by creating monopolies rather than having better ideas. Market regulation has done a poor job of preventing this. Uninhibited market freedoms eventually undermine themselves unless a mechanism is in place to prevent it.

Regulation does not work because the market can manipulate it, just as means-tested and other contingent social benefits create distorting market forces. The solution lies with the Basic Income, a corrective mechanism whereby everybody is entitled to a certain proportion of money wealth to enable them to participate on more equal terms in the market, using their wealth-creating capacity to greatest effect. This approach, which is attracting increasing interest, is promoted by the Basic Income Earth Network, among many others.

MEASUREMENTWhat single policy initiative connects all these themes? With the focus on maximising real, productive value instead of inflating asset prices, the key is to measure wealth output in a way that encourages that. The universal measure of wealth production to which governments work at present is GDP, which, by including only money transactions irrespective of their usefulness, has the opposite effect. Because it is much easier to inflate asset wealth that to increase real, productive wealth, government policies worldwide favour the former as the quickest route to GDP growth.
The movement to go “Beyond GDP” to a measurement of true wealth has gained wide support in academic circles, in international bodies such as the United Nations and the European Union, and in various national governments. What is lacking, however, is a popular, citizen-based campaign. The time is ripe to build this campaign as a unifying thread, drawing support from people and organisations working in all the these fields.
POLICY – THE LONG READ