How our economy really works : a radical reappraisal

This book is a response to the fundamental questions that have confronted the UK economy for decades which successive governments of the right and the left have failed to deal with adequately. Some of these questions are obvious, such as ‘Why does poverty still beset a large number of people, whilst others are grossly well-off?'; ‘Why are house prices continuously rising much faster than inflation, so that more and more people are left without a house of their own, or are borne down by the weight of a mortgage?'; ‘Why does UK productivity remain persistently low, despite constantly improving technology?'. Other questions are less obvious, or are ignored through a belief that they arise from the natural order of things, such as ‘Why do the majority of workers find themselves as employees in jobs that give them little real sense of fulfilment?'; ‘Why is there awful traffic congestion, despite heavy expenditure on transport infrastructure?'; ‘Why does the tax system fail to bring about greater equality, despite progressive rates of tax on incomes?'. These questions have confronted the UK economy for decades without resolution by governments of the right or left. It is the failure of economics, the author argues.Economists have long asserted that three factors of production lie at the root of their subject: land, labour and capital. Yet in the development of the subject into theories and practical applications there has been a thorough analysis of labour and capital but a grievous omission of the factor of land. This is reflected in the minimal place it holds in modern textbooks, in popular discussion and political debate. Much of the argument about major issues, like industrial policy, the distribution of wealth and income and government policy reverts to a polarised struggle between two antagonists, labour and capital. The third factor, land, hides in the background unacknowledged yet exerting a major influence on the outcome of the whole economic process. This book is a response to the fundamental questions that have confronted the UK economy for decades which successive governments of the right and the left have failed to deal with adequately. Some of these questions are obvious, such as 'Why does poverty still beset a large number of people, whilst others are grossly well-off?'; 'Why are house prices continuously rising much faster than inflation, so that more and more people are left without a house of their own, or are borne down by the weight of a mortgage?'; 'Why does UK productivity remain persistently low, despite constantly improving technology?'. Other questions are less obvious, or are ignored through a belief that they arise from the natural order of things, such as 'Why do the majority of workers find themselves as employees in jobs that give them little real sense of fulfilment?'; 'Why is there awful traffic congestion, despite heavy expenditure on transport infrastructure?'; 'Why does the tax system fail to bring about greater equality, despite progressive rates of tax on incomes?'. These questions have confronted the UK economy for decades without resolution by governments of the right or left. It is the failure of economics, the author argues. Economists have long asserted that three factors of production lie at the root of their subject: land, labour and capital. Yet in the development of the subject into theories and practical applications there has been a thorough analysis of labour and capital but a grievous omission of the factor of land. This is reflected in the minimal place it holds in modern textbooks, in popular discussion and political debate. Much of the argument about major issues, like industrial policy, the distribution of wealth and income and government policy reverts to a polarised struggle between two antagonists, labour and capital. The third factor, land, hides in the background unacknowledged yet exerting a major influence on the outcome of the whole economic process. The Author Argues That The Recurrent Economic Ills Which Beset Modern Industrial Economies Are The Result Of The Failure Of Orthodox Economic Theories. Economic Thought And Policy Making For Most Of This Century Has Been Dominated By The Twin Ills Of Unemployment And Inflation, The Demand-side School Concentrating Their Efforts On Eradicating Unemployment, The Supply-side On Eradicating Inflation. But, As Dr Burgess Points Out, 'these Schools Describe One-sided Views Which Distort What Is In Reality A Coherent Whole ... In The Sphere Of Government, Policy Prescriptions Derived From Half A Theory Mislead Both Politicians And Their Electors. Throughout The World Governments Have Been Misled Into Pursuing Policies Which Have Led From A Slump To An Inflation And On To A Combination Of The Two - Slumpflation.' At The Heart Of The Problem Lies A Lack Of Understanding Of The Harmful Effects Of Taxation On A Trading Economy. Governments Must Raise Revenue To Finance Their Operations, But It Has Been Assumed That Taxation Is The Only Means. Dr Burgess Maintains That This Is An Error Which Has Distorted The Efficient Operation Of Modern Trading Economies And That There Is A Natural Source Of Government Revenue, Natural In The Sense Of Arising From The Nature Of A Trading Economy. Having Argued His Case By Reference To Classical, Neo-classical And Modern Economists, He Indicates How Reform May Be Introduced With A Minimum Of Disruption, So That Politicians, With An Eye To The Next Election, May Reap Some Results Within The Life Of A Parliament.--book Jacket. 1. Introduction -- 2. The Failure Of Economics -- 3. The General Theory Of Employment -- 4. Tax Analysis -- 5. Tax And Inflation -- 6. Tax And Unemployment -- 7. The Physiocratic Tradition -- 8. Neo-classical Arguments -- 9. Public Revenue -- 10. Towards Reform. Ronald Burgess. Includes Bibliographical References And Index. These questions have confronted the UK economy for decades without resolution by governments of the right or left. It is the failure of economics, the author argues. Economists have long asserted that three factors of production, land, labour and capital, lie at the root of their subject. Yet in the development of the subject into theories and practical applications there has been a thorough analysis of labour and capital but a grievous omission of the factor of land. This is reflected in the minimal place it holds in modern textbooks, in popular discussion and political debate. Much of the argument about major issues, like industrial policy, the distribution of wealth and income and government policy reverts to a polarised struggle between two antagonists, labour and capital. The third factor, land, hides in the background unacknowledged yet exerting a major influence on the outcome of the whole economic process. What needs to change, the author argues, are deeply embedded features, which have generally been established for a very long time. They are principally the taxation system, the land tenure system, and the banking system. This can be initiated through a reform of taxation. Based on a three-year course prepared by Leon MacLaren for the School of Economic Science in London in the late 1960s, this book reassesses the first principles of economics. Leon MacLaren (19101994) was a barrister, politician, philosopher, and the founder of the School of Economic Science. In his view, science is a study of laws that exist in nature, while economics is a study of the humanities with the interaction between human nature and the natural universe at its heart. With original subject matter from his economic course and introducing more recent examples and statistics from Australia, Canada, New Zealand, the UK, and the United States, the study examines the major characteristics of the modern economysuch as banking, taxation, and international tradeand considers the role of the government in economic affairs. It concludes with an examination of society's structure as a whole, the part economic activity plays in the bigger picture, and the social and cultural influences that shape the production and distribution of wealth. This book, as relevant today in the Coalition era as when it was first published in the early 1990s, challenges the need for governments to resort to practices which undermine the economy and the integrity of the political process, such as sneaking in new taxes in a desperate attempt to extract more money from reluctant taxpayers. Leon MacLaren considered the true goal of economics to be the discovery of the conditions which allow every individual to find a fulfilling life. He observes that all material wealth is ultimately derived from land, and, where goods are exchanged, the first requirement is trust, or a system of credit. This book argues that deeply embedded systems, which have generally been established for a very long time, require fundamental reform. They are principally threefold: the taxation system, the land tenure system, and the banking system. All three require root and branch reform.