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Political Economy is easy for the average person to comprehend
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Political economy is the science which treats of the nature of wealth and the natural laws which govern its production and distribution. The "factors of production" are land, labor and capital. Together they produce "wealth" -- tangible products of labor that are capable of ministering to human desires and have value in exchange.
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The share of the total wealth and services produced that represents the return for the use of land is called "rent." The share of the total wealth and services produced which represents the return to labor is called "wages." The share of the total wealth and services produced which represents the return for the use of capital (meaning business equipment, commercial and industrial buildings and business inventories -- for true capital is wealth used to produce more wealth, or wealth in the course of exchange) is called "interest."
Political economy can also be understood as the science of the economics of society, or the "body politic," as a whole. It is a philosophical field of inquiry which is not dependent for the veracity of its findings upon politics or political considerations and has in fact no necessary connection to politics whatsoever, although its lessons may be beneficently or perniciously applied in the political arena.
The division of the wealth and services produced by society in any given period of time into rent, wages and interest is styled, in political economy, "the distribution of wealth." This division of society's produce takes place naturally and spontaneously and is unsupervised and unadministered by any central authority. (Subsequent to this spontaneous division of wealth among the three factors, the government may, of course, reallocate wealth by fiat, the effects of which can generally be accurately predicted in each case by a true political economy.)
Thus we can see that for any specified period of time,
Rent + Wages + Interest = Total Wealth and Services Produced, which we can call TWSP. And TWSP - Rent = Wages + Interest.
Therefore, the return to labor and capital is the share of newly produced wealth and services remaining after rent has been paid. In other words, rent and wages are inversely related. The same holds true for land prices and wages, for land prices are merely the arithmetically "capitalized" values of actual or potential land rents.
The origin and growth of rent is a phenomenon that occurs naturally with the growth of civilization. (See this site's accompanying web page on The Law of Rent.) Ordinarily, rent, wages and interest should all rise as civilization advances, with rent rising both as a quantity and as a proportion, and wages and interest together rising as quantities while falling as proportions of total output.
Land speculation, however, is the "fly in the ointment" which undermines this benign, nay, beneficent, scenario. Land speculation -- the systemic non-use or suboptimal use of valuable land in expectation of higher future rents and land prices -- artificially drives up rents and land prices by prematurely extending and lowering the margin of production as inferior lands must be used while better land is speculatively withheld from use, thereby driving down wages and interest not merely as proportions of total output but as quantities.
This is why no matter what the level of technological development, and regardless of population size, wages inevitably tend to fall to a level that will give but a bare living. This is the same landlord-dominated process that compels the simple, non-monopoly-holding businessman to operate under the constant threat or risk of bankruptcy while achieving at best only modest economic returns from his enterprise.
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"...California voters approved a 'mere' 55 percent majority to approve bonds for new schools, instead of the
two-thirds mandated by Proposition 13 of 1978. Now it is proposed to let some other local spending pass with just 55 percent.
"Opponents call it a 'disaster' for millions of property owners.
"If you lower the two-thirds vote requirement you are essentially allowing those who don't own property to levy taxes on those who do," said Jon Coupal, President of the Howard Jarvis Taxpayers Association.
-- As reported by Jim Wasserman of the Associated Press from Sacramento, in the Riverside, Calif., "Press-Enterprise," Feb. 1, 2003, p. A14.)
(ARWEP thanks Economics Professor Mason Gaffney of the University of California at Riverside, a long-time Georgist, for sending us this dispatch.)
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Do you believe in real democracy or do you favor government of the landlords, by the landlords and for the landlords? Big landholders and their governmental representatives have an intuitive understanding of the truths set forth on this website. You owe it to yourself to try to grasp the truth about political economy or "economics." There IS some degree of effort required to achieve a reasonable understanding of the fundamental concepts being presented here, but not a great deal. A solid grasp of basic economic principles clears the way to a more profound understanding of sociological as well as interpersonal relationships and opens up vistas of hope for a troubled mankind.
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Check this out! Bear in mind that Henry George spoke in Scotland and throughout the British Isles numerous times in the 1880s and was extremely popular among the Scottish crofters and the Scottish people in general, except the landlords, of course.
February 23, 2003, The New York Times
Land Reforms in Scotland Give Big Estates the Jitters
By LIZETTE ALVAREZ
ORNACH, Scotland, Feb. 20 — Swaddled in the solitude of the Scottish Highlands, Skibo Castle, once the home of the steel tycoon Andrew Carnegie and now a storybook resort for the privileged, is a place infused with an aura of tranquillity and comfort.
The rich and famous travel here to the northern reaches of Scotland to golf, ride, roam about the grounds and attend candlelight dinners. Madonna married Guy Ritchie at the castle two years ago, in full Scottish regalia. Members of Skibo's members-only Carnegie Club enjoy a "unique and private refuge from the hectic world," its Web site boasts.
But last month the Scottish Parliament, a four-year-old institution based in Edinburgh, overwhelmingly passed a land reform bill that fundamentally changes property rights in Scotland and could greatly expand the public's access even to private estates like Skibo Castle.
The new law would give crofters — small-scale tenant farmers who have lived in the Highlands for generations — the right to collectively purchase sections of the estates they live on, whether or not the landowner wants to sell. The law also allows anyone in Scotland the right to roam just about anywhere they please, granting landowners only limited power to eject someone from their property.
The provisions, expected to be signed into law by the queen later this year, have set off a fury among Scotland's rich estate owners, who have labeled it a brand of Marxism and likened it to the seizures of white-owned land by President Robert Mugabe of Zimbabwe.
"The only countries in the world left with this kind of thing are North Korea and Cuba," said Peter de Savary, the flamboyant entrepreneur who turned Skibo Castle from a private home into the Carnegie Club in 1995. "The Scottish legislation is ill-conceived, has not been thought out and is particularly inane. There is nothing to commend it at all."
Landowners fear their land may be sold out from under them or, in the case of sporting and leisure clubs, the members worry about losing privacy. They also argue that the bill may ultimately hurt local economies by cutting into tourism.
Supporters of the bill, which passed by a vote of 101 to 19 with only 2 abstentions, shrug off the criticism, saying change was overdue in Scotland, where half of private land is in the hands of just 343 landowners and only half of Scotland's land has gone on the market in the past century.
"The reason we are doing this now is because we haven't done it in 200 years," said Andy Wightman, author of "Who Owns Scotland."
Mr. de Savary said he was most distressed over the "right to roam" section of the bill, which would make it next to impossible to bar someone from his land. "I'm not sure they can't walk all over the golf course and get hit on the head by a ball and be killed," he said. "And the owner of the golf course will be liable."
Other landowners, most of whom vigorously lobbied against the bill, are particularly aghast over the provision that gives crofting communities the right to buy an estate's common grazing grounds, including its fishing rights, regardless of the landowner's desire to sell. If the majority of crofters in a community decide they want to buy, the property's value is determined by an independent assessor and may be bought using lottery money that goes into a government fund.
"This is about the haves and have-nots," said Gordon Robertson, who manages Balnagown, the Easter Ross estate of Mohamed al-Fayed, owner of Harrods department store [By the way, wasn't Mr. al-Fayed the father of Princess Diana's "boyfriend" who perished with her in the fatal car crash?]. "The decision appears to be political, looking at the past, and it lacks a basic understanding of how rural Scotland works."
Several landowners, through the Scottish Landowners' Federation, hope to challenge the law before the European Court of Human Rights. They say the bill is scaring off potential investors, who would not want to risk money on estates that could be bought out from under them.
"It's a revenge job for something carried out 150 years ago and more," said John Mackenzie, whose family has owned 50,000 acres on the Isle of Skye for more than five centuries.
To many people, though, the bill is viewed as a belated effort to address a deep imbalance in property ownership in Scotland and a chance to remedy the wrongs committed by powerful landowners 200 years ago, during the Highland Clearances. At the time, crofters were pushed off the land and their huts were burned to enlarge estate holdings and, often, to make way for sheep. Many left for the United States, Canada and Australia. The crofters living in Scotland today can trace their lineages back to those who were pushed on to the margins of the big estates.
The British government ignored the issue for decades, partly in deference to the House of Lords, which is stocked with wealthy landowning aristocrats. But when the Scottish Parliament was created four years ago, it seized on the issue.
"This is the first major challenge to the institutional power that landowners have enjoyed in the political process," Mr. Wightman said.
In the Highlands, where the bill most resonates, fewer than 100 landowners — aristocrats, celebrities, foreign investors, sheiks and offshore companies — own more than half the land. Some are absentee landlords. Others, though, run the estates at a loss and invest millions to maintain the grounds, run lodges and keep rivers pristine, all of which helps local economies.
Many lawmakers and crofters argue that landowners are panicking unnecessarily. The most contentious provision in the bill — the crofting communities' right to buy — affects only 7 percent of all Scottish land, and many crofters have no intention of taking advantage of the offer. Those who do want to buy must surmount a number of hurdles, including holding a local referendum and withstanding a legal appeal.
"In one sense, it is revolutionary," said Jim Wallace, deputy first minister of the Scottish Parliament who helped steer the bill through the legislature. "It's a simpler way of giving crofting communities the right to buy land. But the heavens aren't going to fall in."
In some cases, the buying and selling of land will be done amicably, as is currently happening with the Dundonnell Estate of the lyricist Sir Tim Rice, who is negotiating the sale of part of his 33,000 acres of Wester Ross land to a group of crofters.
Several other crofting communities, though, are moving ahead with plans to confront their landlords and assert their right to buy. Hugh Mac- Lellan, 42, a crofter who has occupied the same land his family was squeezed into some 200 years ago, is already setting plans in motion to purchase 2,300 acres of the Durness Estate, which is owned by Vibal SE, a corporation licensed in Liechtenstein. Mr. MacLellan, an oyster farmer and owner of a bed and breakfast in northwest Sutherland, hopes to revitalize the village of Laid, which he says has languished through neglect.
The owners, he said, want to hold on to the property for its mineral rights. He hopes to buy it and turn parts into a heritage trail, maybe set up a shellfish processing plant or a wind farm to produce electricity.
"The landlord has had it for 20 years and done nothing with it," Mr. MacLellan said. "As far as I know, the owners have never been here. We hope, if we take it over, we can create developments."
Copyright 2003 The New York Times Company
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