Michael Hudson With a Little History

I found this clip by way of Naked Capitalism.  In it, Michael Hudson discusses the history of the federal income tax in the United States.  With references to Henry George, Adam Smith and John Stuart Mill, I found it fascinating.  What I found most interesting is the dicussion towards the end of the purposeful degradation and mutation of language to "normalize evil."



FYI - The "Tax the Rich" banner shown above appears nowhere in the clip (at least that I can tell).  That was added by the site, presumably to stir up passions.  I actually find that choice of framing counterproductive because what Hudson discusses in the clip is not the "taxing of the rich" per se, but taxing rents and other speculative gains so as to discourage speculation and encourage real capital formation and investment that creates jobs in the United States. 

Henry George Was Very Insightful

I started flipping through George's Progress and Poverty last night, and I was extremely impressed by his thinking in terms of scoping the problem. 

There were a couple of things that caught my eye, and here they are.  First, George seemed to consider speculative land bubbles as a means to increasing rents, not necessarily as an end in and of itself.  Second, George did, in fact, lump speculative gains from the sale of inflated assets as part of rents.  I realize this at least partly undercuts my first observation, but it does not do so where it counts.  His focus was where the classical economists put it, which was on the marginal value of production (i.e., whatever is left after labor works capital to produce something, and capital pays the rent).  When you frame the inquiry that way, of course speculative gains are completely overlooked. 

Remember, though, I gleaned this from a very quick scan of certain sections of the book.

Still, my intiution is that George would have been better served to expand classical economics' labor-capital-rents paradigm to include a separate category for winnings instead of trying to redefine the term "rents," which neoclassical economics ultimately disappeared, thus extinguishing his argument.  This explains the deep problems I have with starting a debate within somebody else's framework, particularly when that framework appears to be built upon layer after layer of lies and obsfucation.  The person who chooses the battlefield most often wins the battle.  Framing matters.

Neoclassical Economics Are to Henry George What Neoliberal Economics are to John Maynard Keynes

I recently learnd about Henry George, a 19th century thinker who figured out in the 1870s that the boom-bust cycle is caused by debt-financed speculation and rent seeking.  At the time, he limited his conclusion to debt-financed land speculation, but that's because the secondary equity and bond markets weren't nearly as established in the 1870s as they were in 1907 and later in 1929.  (Note: there are a number of 19th century investing texts available at Google Books, and they show that the stock exchanges even in the 1890s were nowhere near what they became by the 1920s.  Take a look around there, you'll find it fascinating.)

As Keynes would later do, George proposed his own solution for euthanizing the rentier, which he called the "Single Tax."  (My understanding of George's proposal are admittedly cursory, so I'm not going to try to explain them in any kind of detail.)

The response by the rentiers was to fund political economists to develop a new doctrine of political economy, and neoclassical economics was born (at least, this is what Mr. George believed motivated the establishment of this new doctrine).

The key feature of neoclassical economics was that it treated land as capital.  According to the classical economics of Smith, Ricardo, Say et al., there were three players in (or drivers of) the economy: labor, land and capital.  Essentially, George's Single Tax sought to tax land rents out of existence to leave only labor and capital standing.  The neoclassical economists obliged George by "disappearing" land from their lexicon and treating it merely as another form of capital.

Neoclassical economics came to dominate the scene, and George's Single Tax proposal ultimately went nowhere.

Then we had the Great Depression, and John Maynard Keynes offered his own solution to the rentier problem (although he was politic enough to not explicitly assign blame for the Great Depression to the financial speculators). 

The first step in undermining Keynes was the so-called "neoclassical synthesis," that grafted some of Keynes' ideas onto neoclassical doctrine.

The second step in undermining Keynes was to repeat what had been done to Henry George: the rentiers funded the founding of the neoliberal movement and its economics in the Chicago and Austrian schools. 

Today's "neoclassical" orthodoxy is, in fact, the Chicago School, which is distinctly neoliberal.  Thus, as much as Steve Keen still labels the orthodoxy neoclassical, it is more appropriate to label it neoliberal.

Where neoclassical economics whittled the economic drivers from three (labor, land and capital) to two (labor and capital), neoliberal economics left us with only capital.  There is no labor any longer.  There are only consumers.  And the rentier segment of capital is the only part of it that continues to grow.