He just doesn’t get that other people have chewed over these problems before him and that they also had some useful insights. This isn’t written by Snippa but he endorses it:
The first thing to understand is that land is not like other forms of capital in the economy: it has unique qualities which have to be understood. Land is finite – there is a limited supply of it – and it is permanent – it does not depreciate.
This means it is a uniquely desirable type of capital; as long as populations continue to rise it is likely to rise in value too. As Mark Twain said over a century ago, “buy land, they aren’t making it anymore”.
Land therefore plays a very different role in market economies to capital: whereas Apple will produce more iPhone’s to meet demand, more land cannot be produced to meet housing demand.
This gives land and property owners special power in the economy: their monopolisation of the fixed supply of land can mean they extract the surplus value produced by growth in the economy through charging rent on use of their land.
Sigh, this is just Ricardo on rent. Everything just ends up as land rent in the end. Something which we now know to be empirically wrong. Because we do make more land, by trading with it. The steamship, the railway and the opening up of the prairies and steppes did more to destroy the great aristocratic fortunes than anything else, certainly more than any tax or government intervention. It’s even in the Saez and Zucman work on the subject.
Remarkably, the unique role of land in the economy is ignored in mainstream economics:
Bollocks, it has been endlessly chewed over.
From the late 1970s and early 1980s to today, a great transformation has taken place in housing – land and property values have gone through the roof. The rise in property value has significantly outstripped rises in incomes and growth.
This has created a surge in wealth inequality between property owners and renters, and is the central finding of Thomas Piketty’s globally renowned book, Capital, which used historical data to show that asset price inflation now outstripped profit, making capital investment in the real economy a loser for any business man or woman compared to rentier exploitation.
Twattery. One of the great failures of Piketty’s thesis is that he doesn’t account for the rise in property wealth at the household level.
This transformation has been driven by financialisation – the turning of social goods into financial assets. UK banks’ main role used to be as lenders to businesses. While lending to non-financial corporations has remained fairly static, mortgage lending directly to workers has surged, from 20 to 60 per cent of GDP.
Mortgage lending is now the main function of British banking. Once again, mainstream economics is unequipped to understand the role of financialisation in the modern economy.
Banks’ role is seen as recycling savers’ money to borrowers as credit for productive investment, oiling the wheels of the economy. But what the banks do with mortgage loans has little to do with investment, and even less to do with existing money in circulation.
Idiocy. The “Anglo Saxon” financial system uses public markets, equity, to fund business, not bank loans as with the Continental system. Sure, we can argue about which is better but not to note this is just idiotic.
First, it’s important to understand not all of the world is like Britain. While rising house prices has been a global trend, in countries like Japan and Germany house prices to earnings have been in decline since the 1970s, the reverse trend of the UK.
Germany is a society where most people still rent in a well-regulated sector, the mortgage market has more strict limits on it and most banks are public or co-operative owned and do not engage in land speculation.
The point is that there is different ways to do things, and if we want things to change we have to be open to thinking fundamentally differently about how we do things in Britain. Tweaks will be insufficient.
Fuckwittery. Germany and Japan have “can build” planning systems. Want to build a house on your land? Go ahead. Make the British system like that and we’d be settled. What’s the one thing they don’t advocate? Freer planning permission. Fuckwittery.