Friday, 26 May 2017

Game of Mates - book review

Game of Mates – how favours bleed a nation
By Dr Cameron K Murray & Professor Paul Fritters
reviewed by Colin Cook

We all like to help a mate – it is just human nature to lend a hand, give a lift or a bit of advice; this book is about cultivating and helping mates with grey gifts – a very different game.

The authors submit the Game is costing us billions every year. They estimate on housing development we lose $11 billion per year, transport infrastructure, two thirds of our costs are lost, but in superannuation, it is only a quarter! Banking costs us $15 billion per year and on and on.

‘Grey gifts’ are the authors’ classification of those favours and presents you can render to a mate, cost you nothing, are valuable to him – will solicit a return of some kind, some time – but which cost the community heaps and heaps, often way into the future. Many examples are given in the chapters dealing specifically with Superannuation, Transport, Banking, Mining and others such as Taxes, Pharmacies & Health, Supermarkets, University Education and Agriculture in the chapter, ‘Other Games, Other Mates’.

But it is the depth of the analysis that is impressive. We are shown the myths that enable us to be ‘sold’ on the virtue of the games, the fundamental human traits that contribute to the recruiting, soliciting and the gaming of/by mates, the conditions that make the Game feasible and, most importantly, what we can do to reduce this enervating, impoverishing drain on our society.

One myth for example that Public Private Partnerships build infrastructure without pushing the State to into debt; the contract may guarantee a fixed return to the investor – which is just like the State issuing a bond to raise the capital for both impose a future liability on the State. Then the State may even lend the investor the money at a favourable rate; this loan would be shown as a State asset -  no debt at all, see! Only liabilities which are not disclosed.

To research the traits fostering the Games, the authors designed a computer-based experiment to observe behaviour, including amongst complete strangers, close up in a laboratory. The result of their rigorous work showed that at least 84% of us would play the Game of Mates, given the opportunity!

‘Grey mateship’ – recruiting and soliciting – often develops through professional contacts and co-operation. Over the years, this is hugely strengthened by the revolving door of appointments; regulators join trade associations, retired politicians become lobbyist, lobbyists are given safe seats and become politicians. An appendix lists many persons coming-and-going through revolving doors.  It is happening before our eyes. 

How is it we stand this robbery? One explanation is that our expanding population conceals the extent of it; we all benefit a bit from the growing population/GDP but not as much as we could because the Mates take a grossly non-proportional share.

The book is written as a tale about James, the Mate, and Bruce, the average Australian. James will fight hard and dirty to retain his positions and influence – and he owns the mainstream media. The authors exhort Bruce to ‘Rise up’; to reclaim the value of the grey gifts for the public, disrupt James’ coordination – jam the revolving door, have citizen juries to make top public appointments – and bust James’ myths. Independent media and journalists are very important for myth busting. And to create publically owned competitors for James and his mates – construction, banking etc

The book has just one short-coming – that there is no reference to the electricity industry. Maybe this would need a whole book to itself!

This really is a must read– not just for grey haired activists but for all students whatever your subject, all mortgage holders, all members of superannuation funds, our local councillors and council staff. Buy one and circulate it widely. Better still, buy two and give one to a ‘small m’ mate. As Professor Steve Keen writes, ‘……essential for all Australians, except the Mates’.

Colin Cook, may 2017

Introductory video

See also Chomsky on the Game of Mates in USA, reported at

Tuesday, 9 May 2017

Benefits of Land Value Taxation

Land Value Tax
Henry George was a strong advocate of this early last century as being the only tax a society should or need levy. His book Progress and Poverty was a land mark publication.  Today……

Land Value Tax can raise revenue and reduce problems of fairness, housing affordability and under-utilisation of land.
But there are a few subtleties often overlooked about LVT – Land Value Tax.

1.    The ‘best-designed’ property tax is the simplest – a flat-rate levy on the unimproved value of the land with no – or very few – exceptions.

2.    The moral justification for such a tax is that if you wish to have a piece of Australia for your exclusive use and benefit, then you compensate us for foregoing that amenity, after all, it is ‘our’ land.

3.    A Land Value Tax (LVT) converts the costs of useful infrastructure from expenditure to investment. Such infrastructure always enhances land values and a LVT would ensure that this would be reflected in enhanced Government revenue – indefinitely – instead of a capital gain for the property owner.

4.    Conversely, any property owner suffering a loss in value would be automatically compensated by a reduced LVT obligation.

5.    It is fit and proper that the greater the value of the land, the more you will pay ‘us’ because it is our efforts and facilities – that is, the society’s – that give and maintain the value to your asset. The value of a parcel of land depends on the community services that it enjoys by way of defence, policing, transport services, educated manpower, health and recreational facilities.

6.    Because the ‘big end of town’ generally owns a lot of property a flat rate tax would see them pay their proper share towards these community services.

7.    By increasing the cost of keeping blocks undeveloped and houses empty, a LVT would reduce speculation in property ownership and stabilise house and land prices; in the longer term, housing would become more affordable – the opposite of present prospects.

8.    Federal Government leadership could see pressure being applied to the States to adopt a nationally uniform, flat-rate LVT; if States can be pressured into selling income-producing assets, the States could surely be ‘encouraged’ to make full use of their land taxing rights.

9.    That all the valuation and collection systems for a simple, flat-rate LVT are in existence – and that the tax liability cannot be shifted off-shore or be denied are more compelling reasons for LVT to be a priority consideration.

10.                  A unique feature of LVT is that it is in a sense voluntary! If the LVT you are asked to pay does not equate to the value and amenity that you enjoy from the property, then you can get someone else to pay it – by moving elsewhere. Not easy but entirely legitimate!

An ideal scheme would be to start with a very small, nationally uniform, LVT with a planned regular increase so that the land and housing markets have a certain and definite path to transition. In due time, GST could be eliminated and Stamp Duty too.

Unfortunately, ‘the big end of town’ does not want to pay their proper share and use their media to demonise LVT – with headlines about taxing the family home. The fairness of LVT is never featured; for example, at one time, the late Kerry Packer personally owned 14 million acres of Australia; if you owned 14 thousand acres you would still be a big land-owner but for every dollar you paid, KP would have contributed 1000. There was a long case with the ATO and some measly 9 or 10 thousand dollars was finally agreed, if my memory is correct.  

Another easy argument the LVT antagonists promote is the plight of the aging widow who – through no fault of her own – has become asset rich as a result of developments around her humble home but is income poor. How could she cope with a LVT? One solution would be for a Reserve Bank Land Trust to buy her freehold at valuation and for her to live out her days as a totally secure leaseholder – financially well-endowed and surrounded by her newly adoring grandchildren!

·      LVT receives increasing publicity - ACOSS, Grattan Institute, Henry Tax Review are all supporters - but, as yet  nothing like enough to get LVT really ‘on the table’. 
·      ‘Value Capture’ has gathered some recent adherents and publicity is based on some similar considerations to LVT – but it presents many opportunities for mates deals, complicated contracts and loop holes which would disadvantage the taxpayer.
·      LVT regimes have always been designed by the States to favour some sectors, penalise others and be competitive as between States; as stated above a simple, flat rate, nationally uniform tax would be totally fair. If we can have a reduction of Company Tax scheduled over ten years, we could have an increasing LVT scheduled over ten years

Monday, 8 May 2017

Usury does not fuel increased money supply - but....

Interest bearing credit does not fuel increased money supply – but it does a few other things

There is a simple analogy that shows a money lender assisting a gift/bartering society to trade more easily by giving them tokens to use as money on condition that they pay him 10% interest in such tokens per annum. In brief, the story is that at the end of the year not all members of the community have such number of tokens spare to pay the interest; thus the lender has to create and lend out more tokens. 
QED – Charging interest on loans mandates an ever-increasing money supply but ..........

This analogy and variants – some of considerable length, have been widely published and swallowed in recent years – including by myself. But the respected Prof Steve Keen has written that it makes him apoplectic for it is so wrong, so misleading – and he has a mathematical model to demonstrate that!  ‘Interest is a flow, not a stock’, he insists.

Could there be another simple analogy – which illustrates that Steve Keen has a point? 

Here is my version of such:

A money lender arrives in a community of ten families who have been gifting and bartering to meet each other's needs and share resources. He introduces them to money as a way of making life easier all round; he lends each family $1000 on condition that they pay him 12% interest by each family giving him $10 each calendar month.

One month passes and Mr Big collects $100.  Being now a member of the community, he spends this locally. The money supply is unchanged for the interest has, indeed, flowed back to the community and will be available to circulate and meet interest commitments next month. Obviously this can continue indefinitely.
QED Interest payments are a ‘flow’; usury does not mandate an ever-increasing money supply. Viva Professor Keen!

But this analogy also shows how interest on the credit based money supply ensures that 12% of the community endeavours goes to keeping Mr Big in the style to which he has become accustomed; he now has a nice house on the hill and there is a special room for his money creating machine.

The ten original families would be 12% better off if their community had the money machine and the monthly interest payments went to teachers, nurses, artists. 
QED A community will be enriched by owning their own money creation entity.

Thursday, 9 February 2017

1788 - The biggest enclosure of them all?

The biggest enclosure of them all

Land was the first community asset to be ‘privatised’, taken over for private use and benefit. Way back in the mists of time, long before King Alfred burnt his cakes, long before the British Isles were so named, all the land was common land; none was ‘owned’ by anyone but parts used by small family groups for their subsistence. It would have been the same in Terra Australia. Over centuries in those northern isles, larger, more belligerent groups established areas of exclusive use – and chieftains, war-lords and Lords of the Manor declared such areas as ‘my land’. Thus the concept of private property as opposed to common, or community, land took hold.

As populations increased and society became more sophisticated these concepts of land access were codified by Acts of Parliament – copyhold, tenancies, freehold title, Crown Land – but commons with their age-old rights providing large parts of the population with shelter and sustenance remained. It should be noted that the commons recognised a form of collective ownership of rights; specified persons only had ‘rights of common’.  It was not a free-for-all.

Contrary to the myth of ‘The Tragedy of the Commons’ – as enunciated by W Lloyd in 1833 and promulgated by G Hardin in 1968 - generally commons were well managed by local committees and various courts of manorial jurisdiction to provide the ongoing needs of the community; these elemental communities ‘lived’ sustainability and were not just a band of neo-liberal, economic rationalists each seeking maximum personal benefit as Lloyd and Hardin would have us believe.

Enclosure – social upheaval - 1788
The real ‘tragedy of the commons’ was the vast social upheaval and degradation (Q7) generated by their enclosure. Innumerable Acts of Enclosure passed by the Parliament at Westminster usurped huge areas. These Acts  - enacted with skulduggery((Q3&5) of every description - made it legal for large landowners to privatise what had previously been common land used by many of the lower echelons of society in a variety of ways for their subsistence. This is well documented by the Hammonds in their classic study, ‘The Village Labourer 1760 – 1832’; they report that enclosure meant, ‘the peasant with rights and status (Q6), with a share in the fortunes and government of his village….. makes way for the labourer with no corporate rights to defend, no corporate power to invoke, no property to cherish, no ambition to pursue…….’ (‘corporate’ has different connotations today! CC)

Between  1700-1760, 152 Acts allowed the enclosure of 240,000 acres of common fields and waste, between 1761-1801, 1500 acts, 2,400,000 acres – in 40 years, 10 times more than in the previous period of 60 years - and between 1802 and 1844, 1,100 acts enclosed 1,600,000 acres (quoted by the Hammonds, see adjoining table, figures rounded). Notice that when white Australia was founded in late 18th century, enclosure activity was at a peak. The founding of white Australia and Acts of Enclosure were very closely connected not just in time but also in the prevailing attitudes.

The UK elite, effecting and benefitting from the enclosures, really only took any notice of those who could make themselves heard; persons of some substance or influence. The illiterate cottager who simply enjoyed the various rights of common that his father enjoyed stood no chance (Q4) against an Act of Enclosure; dissenters were required to provide written chapter and verse of their rights and argue them in front of Commissioners. Indeed such lowly citizens were barely considered in the deliberations in Westminster. The attitude of the ruling classes according to the Hammonds was, ‘….the wider the sphere brought into the absolute possession of the enlightened class, the greater would be the public gain (Q1).’ An early ‘trickle down’ proposition! So it is not surprising that when Westminster’s expedition arrived here in 1788, the concept of Enclosure came with them; the idea of commons and persons using the land just for living were of no consequence (Q2).

Settlement  mind-set
Thus at the beginning of white settlement of Australia the ‘Establishment mind-set’ was one of ‘enclosure’ – the concept of ‘commons’, where land is not owned by any but used by many, was in their view outdated, bad, inefficient, if indeed they thought about it at all. From my understanding, Australia then was like a vast, continent-wide, agglomeration of Aboriginal Commons – the land not ‘owned’ at all but used, shared, nurtured and venerated by the numerous tribes of the indigenous population according to their needs and culture. White man did not see this at all, it was  ‘terra nullius’ and the commoners were ‘brushed aside’, much as in England. Henry Reynolds has written of this in his ‘Frontier’ (Allen & Unwin 1996); Dr Reynolds examines the close parallels between the conflicts in Europe and the British settlement of Australia; ‘the Aboriginal experience can be profitably compared to those of the squatters on the shrinking commons, the foresters and men of the fens who struggled to maintain a traditional economy in opposition to the ever growing commitment to absolute property rights.’

Tasmania was different
Van Diemen’s Land would seem to be the one place where the concept of ‘the commons’ did flourish for a few years. ‘Van Diemen’s Land was aught but a vast common’ quotes James Boyce, p70, Ref32, in his very well researched history, Van Diemen's Land (Black Inc. 2008), Ironically, many had been sentenced to transportation because they had been caught using the commons of England in traditional ways – trapping and snaring game, ways that had been made illegal under the Game Laws and Acts of Enclosure. Boyce’s Introduction contains many references to the convicts’ acceptance of sharing resources with Aboriginals and each other – land, water, game – and their adaptability to go bush, to obtain ‘the essentials of life from the new land’. The early chapters contain many specific references to Van Diemen’s Land as a common and its effect on the early settlers, how the free access to the natural resources led to much entrepreneurial activity and even ideas of independence and democracy; anathema to the authorities, birth-right concepts for the ‘Village Labourer’ if the Hammonds, were correct (Q6). Such moves were stamped out – almost but not entirely - by Governor Arthur to produce a servile population to meet the needs of the increasing number of free settlers on their large land grants.

Aboriginal philosophy
A deeper connection between the idea of commons versus enclosures was brought to mind a year ago at a Fedtalk by Aboriginal academic and activist, Dr Mary Graham, QUT. She spoke about Aboriginal philosophy in comparison to ‘western’ modes of thought saying that Aboriginals had no difficulty in holding to different concepts simultaneously. In contrast, western views were ‘either or’, ‘this or that’, ‘alive or dead’. This is an exact parallel as between enclosures (this is mine, not anybody else’s) and common land that has many users and uses. This is also shown in the western, legalistic ‘Native Title’ when ‘Aboriginal Common’ would have been more representative of traditional status. Dr Graham’s talk may be viewed here.
Much is to be learnt from Aboriginal philosophy and traditional respect and reverence for the land.

In short, Australia was founded with the concept of enclosure foremost and this preeminence continues to this day; the concept of commons – owned by none, used by many in various ways – is not part of modern Australia’s DNA. Laudable ambitions to ‘reclaim the commons’ here need to recognize the challenges this presents. 

Was 1788 the biggest act of enclosure of them all?  
When the date becomes ‘free’, should we commemorate Enclosure Day on 26th January?

Colin Cook
Commoner of Ashdown Forest, (1964 – 1981)
Sussex, UK