Arthur, Before heading off to the Pacific NW for three weeks, I sent this to you.
Doesn't appear to have arrived. Here it is again Harry ---------- Forwarded message ---------- From: Harry Pollard <[email protected]> Date: Fri, Aug 17, 2012 at 6:24 PM Subject: Re: [Futurework] Arthur's 2nd belief To: "RE-DESIGNING WORK, INCOME DISTRIBUTION, EDUCATION" < [email protected]> Cc: Keith Hudson <[email protected]> Arthur, There was a time when economics was easy, or as they once called the study - Political Economy - was easy. Labor (human exertion) produced material products (with exchange value) using Natural Resources (called 'Land') and Capital (material products not for consumption but to take part in production - such as tools, factories and suchlike). >From the final product, "Interest" had to be paid for the use of Capital, "Rent" had to be paid for the use of Land, which left the rest as Wages for Labor. The market worked very well for Labor and Capital. Supply and demand operated well for both of them. Meantime, Labor was happy to pay interest for Capital for the use of Capital multiplied his production. Borrowing Capital was a good deal. Land was different. The highest Rents are in urban locations and they are directly related to locations, so let's use locations to stand in for the Classical term land. Labor needs a location on which to work. The Rent of a location measures the worth it adds to the production of Labor. If Labor pays the free market Rent for his location, he loses nothing from his wages. He gets back the same value as he pays. But, unfortunately, location Rents are not controlled by the free market price mechanism. Demand is continuous but the supply of locations is limited. The holders of locations are not required to supply their locations. There are many good reasons for not selling or releasing them for use (both economic and psychological)! A location is likely to increase in value with an advancing economy. Better to cover it with blacktop and call it a parking lot than lose this potentially very valuable piece of property. There are only so many useful locations. We now have all we will ever have. As Will Rogers succinctly put it "They ain't making no more dirt." The locations may be split, or combined, or some wet ones may be dried out (that's called 'making more land'), but the total ampount remains the same. Also locations can't be moved. We can't bring into central Los Angeles some cheap desert locations to compete with the enormous downtown land costs. Demand needs supply if a market is to do its job effectively, but modern society is encumbered by enormous amounts of productive but unused or underused land - locations that remain pretty stagnant. In response to demand, the price mechanism raises price in order to attract supply to market, but adequate supply of locations doesn't come and location costs go up and up encouraging even greater reluctance to sell among landholders. Theoretically, prices will rise until on working locations any further rise would stop production. At this point, Rents are no longer a measure of the worth of a location to its user. They have become rack-rents - the most that can be squeezed from a tenant. Where does this extra "rent" come from? It can only come from Wages and those at the bottom of the wage pyramid will be forced down to subsistence levels. As rack-rents press down, at the bottom are the people who easily fall sick, who live in overcrowded and substandard accommodation, whose outlook is close tohopeless. Except for some premium wages, all wages above the lowest are determined by those at the bottom So let's give the poor some welfare. All that happens is that rack-rent will rise to sop up the increase, so more will soon be needed - which disappears into rack-rent. This is why last year's welfare is never enough this year. Needless to say, government inspired brilliancies like monetary inflation don't help, but the constant pressure of rising Rents keeps a large part of workers constantly in trouble. Churchill told the story of Southwark Bridge in London. Each day, workers who lived south of the Thames had to cross it to get to their work in the City. It cost them a penny a day toll charge to make the trips across the bridge 6 times a week. A group of good people bought the bridge and ended the toll charges. As Churchill said, in a very short time Rents on the south side of the Thames had increased by sixpence a week. So we know why distribution of wealth is anything but equitable. How did the economics profession deal with this? They removed land from its separate function and made it part of Capital. How something that was here before we were can be mixed in with tools, machines. and factories, that wouldn't be here without humanity beggars description. Then, they broadened the meaning of rent and removed it from its sole meaning as a value that attaches to land. Now it becomes evident why the land-value bubble and crash (for that's what it was) was beyond the comprehension of most economists, who called it a "housing problem". Also. why banks accepted volatile land-values as a large part of their collateral when making loans (something that never should be done). Sorry this is long, Arthur, but going back to those basics must be the first step in getting out of the mess we're in. Don't bet the farm it will happen! Harry \\\\\\\\\\\\\\ On Thu, Aug 16, 2012 at 9:53 AM, Arthur Cordell <[email protected]>wrote: > Hard to know how or when a more equitable distribution will occur. Will > it be peaceable? We hope. But can’t be sure. The longer the gap exists > and the greater the gap and the greater the gap is “perceived”, the less > likely we are to see a peaceable outcome. Who knows.**** > > ** ** > > Arthur**** > > ** ** > > ** ** > > *From:* [email protected] [mailto: > [email protected]] *On Behalf Of *Keith Hudson > *Sent:* Thursday, August 16, 2012 9:19 AM > *To:* RE-DESIGNING WORK, INCOME DISTRIBUTION, EDUCATION > *Subject:* [Futurework] Arthur's 2nd belief**** > > ** ** > > At 21:17 15/08/2012, Arthur wrote: > > **** > > 2. That we have not solved the distribution problem.**** > > > Agreeed . . . but . . . Because we have differentials in wealth and > incomes thrown at us repeatedly in the media, we are much more sensitive > about this matter than ever before in history. The wealth disparity between > the very rich and ordinary folk today is far less than, say 100 years ago > when Carnegie owned most of the steel industry of the US, Rockefeller most > of the oil industry of the US, and Ellerman half of the shipping industry > of the whole world. Go back 200 or 300 years then the great landowners of > Europe were relatively richer still. One family in Poland owned half the > countryside of Poland! > > Wealth only becomes more widely distributed when new power groups muscle > their way into the top layers of society and government and force existing > wealth to be shared. The latest group to do so in Western countries has > been the investment bankers. There are signs that their power is now being > challenged. At the present time it's impossible to say what might be the > next power group. Suffice it to say that a much fairer distribution of > wealth will not be accomplished until the bulk of a country's children have > as good a nursery experience and education as the best quality private > establishment which, at present, produce the wealth making groups. > > Keith > > > > **** > > Keith Hudson, Saltford, England http://allisstatus.wordpress.com > **** > > _______________________________________________ > Futurework mailing list > [email protected] > https://lists.uwaterloo.ca/mailman/listinfo/futurework > >
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