Review of the Book
Wheels of Fortune
by Fred Harrsion
Edward J. Dodson
[2006]
In his new book,
Wheels of Fortune, Fred Harrison has taken the gloves off in
his campaign to stimulate a national dialogue in Britain on how
government raises revenue. The reader learns why Britain's countryside
has succumbed to sprawling development, why land prices have escalated
at the expense of profitability for manufacturing concerns, and that
the nation's planners have failed miserably to recognize and collect
the economic value created by expenditures on public infrastructure.
There is no subtlety to be found in Fred Harrison's oft-expressed
views, and once again he makes use of his journalistic talents to
present a cogent case for his ultimate objective - the elimination of
taxation of incomes derived from the production of goods and the
providing of services, to be replaced by the collection of "rents"
associated with locations. While his perspective is universal in
application, this book takes aim at the constitutional heart of
Britain's socio-political arrangements and institutions by examining
the growth, expansion and troubles of the nation's transit system. He
boldly declares: "A new paradigm is needed for the
post-industrial society.
At its cutting edge would be the
freedom of people to invest in their country's infrastructure."[1]
He means to educate and enrage a citizenry too long victimized by
selective reporting and failed policies.
As I read Wheels of Fortune, another writer similarly
motivated comes to mind - the economist and political philosopher Max
Hirsch. At the pre-dawn of interventionist government, Hirsch warned
in his book Democracy Versus Socialism against the planned
economy as a response to entrenched monopoly privilege:
"The growth of a social organism, like that of all
other organisms, is conditioned by the flexibility of its
structures. Where permanency of structure has been attained, the
growth of the organism ceases; where growth ceases, decline begins.
The permanency and want of flexibility of structures which have been
shown to be inevitable in the socialist State would, therefore, not
only lead to the cessation of all further social progress, but to
the loss of much of the progress achieved in the past. Stagnation,
rapidly to be followed by retrogression, therefore, would be the lot
of the nations, who, lacking the courage to undergo the strenuous
exertion which the wellbeing of the race demands of them, would seek
an inglorious repose in the enervating embrace of Socialism."[2]
From Fred Harrison, the reader is reminded of Britain's chaotic
experimentation with the planned economy, followed by an unleashing of
pent-up market forces following the return of the Conservatives and
Margaret Thatcher. "Planning was supposed to bring order to the
economy, efficiency in the use of resources and equity for those who
had been excluded from the riches of the nation,"[3] he writes.
The actual results were rather different, although, according to Fred
Harrison, altogether predictable. Wheels of Fortune reads like
a mystery novel, with twists and turns in a story that begs to be
told.
Had I the opportunity to review the manuscript in draft form, I would
have recommended to Fred that he include an overview of Britain's
post-Second World War economic troubles. This background information
would be a valuable addition to the story. Readers need to be reminded
that the war left Britain's government essentially bankrupt, the
nation's infrastructure severely damaged and its hegemony among
exporting nations challenged by the industrial might of the United
States. As historian Roy Douglas wrote, "Almost immediately the
war ended the British Government came to the conclusion that it was
vital to negotiate a large loan from the United States."[4] And,
in 1945, a fundamental objective of U.S. foreign policy was to
champion the independence of peoples subjected to Old World -
including British - imperial domination. Britain's situation seemed
desperate. With Franklin Roosevelt dead and Churchill out of power -
and the Soviet threat not yet fully revealed -- U.S. negotiators
pressed on their British counterparts a distinctly American vision of
the post-war world:
"In the debates which ensued in Parliament the
arrangements were challenged by Socialists who contended that they
were incompatible with economic planning, and by Conservatives who
saw them as incompatible with Britain's imperial position."[5]
Wheels of Fortune explains how Britain's leaders could have
reduced the nation's dependency on aid from the United States while
taking a more constructive path toward effective social democracy. The
war established the framework for an activist national government. The
free market economist Friedrich Hayek wrote in 1944 "it
was already fairly obvious that England herself was likely to
experiment after the war with the same kind of policies which
had contributed so much to destroy liberty elsewhere."[6] An
analysis[7] of a government White Paper prepared in 1945 provides the
details:
"Representing a practical expression of
expansionist policy, the White Paper argues that the State must
assume responsibility in the future for maintaining outlay, with the
budget determined by the employment situation rather than by fiscal
considerations. In pursuit of this program, the Government, it is
contended, will avoid an unfavorable foreign balance by increasing
the volume of exports beyond the level achieved before this war,
limit dangerous swings in expenditure on private investment, plan
the timing and volume of public investment so as to offset
unavoidable fluctuations in private investment, and check and
reverse the decline in expenditure on consumers' goods which
normally follows a reduction in private investment."[8]
The irony is that the analysis offered by Fred Harrison in Wheels
of Fortune was one held in 1945 by a vocal minority who had been
fighting against entrenched privilege and conventional wisdom for more
than half a century. At critical moments in the political debates over
essential reforms, the nation had plunged into long and costly wars,
strengthening the role of the planning establishment when peace
finally returned. The great example of this is expressed in the person
of Winston Churchill, who early in his political career attacked land
monopoly as the fundamental cause of poverty in Britain, but abandoned
this principled campaign to defend the status quo against the
nationalization measures advanced by Labour. Although calls continued
to come from the political wilderness for renewed attention to "the
land question," what emerged after 1945 was nothing close to
enlightened fiscal policy; rather, the British people were subjected
to the Town and Country Planning Act of 1947. "The man apparently
best placed to give practical effort to his views on land matters was
Lewis Silkin, the new Minister of Town and Country Planning,"[9]
wrote Roy Douglas. Mitigation rather than solution was to be the
governmental approach to "the land question."
Somewhat remarkably, an impatient British electorate returned the
Conservatives and Winston Churchill to office in the autumn of 1951.
Yet, the architecture of the planned economy was already very much in
place and accepted as inevitable by the Conservatives. The political
contest was now less about principle than about whose interests would
be advanced by government. As early at 1946, Churchill voiced his
concerns over the Government's actions:
"What rouses our regret and growing resentment is
first, that the Socialist Ministers are so much wrapped up in their
party doctrines that they cannot give a fair chance to our national
interests and prosperity. Secondly, that they pour upon us an
endless drizzle of insult and abuse." [10]
"Look where you will, we are suffering a needless decline and
contraction at a time when we had the right to brighter days.
Nowhere
is there the drab disheartenment and frustration which the Socialist
Party have fastened on Britain."[11]
By 1949, the nation's railways, canals, electricity, natural gas and
steel industries were nationalized and brought under the control of
governing boards. Despite - or, perhaps, because of - these measures,
Britain's economy continued to decline. Nonetheless, in November of
1948, the minister of supply, George R. Strauss, declared in the House
of Commons: "It is unthinkable that we should revert to any
comparable private ownership system. Indeed, responsible leaders of
industry today themselves reject the idea and agree that private
ownership must be tempered by State control."[12] Churchill, who
at least at one time had understood and championed the cause of true
fiscal reform, called for rather conventional counter-cyclical
measures: "a reduction in expenditure, a substantial relief in
direct taxation, widespread relaxation of needless and vexatious
controls and interferences
, the
lifting
of further
nationalization
"[13]
By leaving "the land question" unresolved, Britain
continued to squander its internal resources in a desperate attempt to
delay the dissolution of its imperial presence and to join the United
States and Soviet Union as a possessor of nuclear military power.
Currency devaluations stimulated exports but raised consumer prices at
home. Failed attempts at price controls were matched by ineffective
incomes policies. Heavy taxation on producers of goods and services,
an aging infrastructure, inflexible trade unions and a frustrating
state bureaucracy combined to destroy Britain's competitiveness in a
new global economy.
Long before the publication of Fred Harrison's first book - The
Power in the Land -- in 1983, he had been challenging successive
Governments and their self-described policy experts to come to terms
with the dysfunctional nature of Britain's land markets, caused by the
concentrated ownership of land,[14] caused, in turn, by the private
appropriation of almost all of the rent (i.e., the location value) of
the nation. Fred asked why, after two decades of extensive social
planning, Britain's citizens remained poorly housed. Recessions
returned every twenty years like clockwork, while the price of land
continued to rise and periodically skyrocketed beyond the
affordability of most businesses -- and residents in need of decent,
affordable housing. What was the best that Government experts had to
offer? Land planners championed the taxation of gains in land value
associated with approval of development proposals. In opposition, M.P.
Boyd-Carpenter argued that the solution to Britain's housing shortage
"lies in a radical reform of the planning system so as to
expedite it in its work so that land is not sterilized in the
interstices of the planning machine, but is brought forward in
adequate supply to meet the demand, and in that way and in that way
only, will we succeed in getting the price of land held, and perhaps
reduced."[15] As Fred Harrison concludes in Wheels of Fortune,
"[t]he calculations of planners rely on leaps of faith disguised
by a spurious statistical precision."[16] The underlying problem
is their unwillingness to invest energy where most needed, namely in
the study of land markets and the economic consequences of different
policies of taxation. What Fred Harrison delivers is the evidence
indicting government as the protective agent of entrenched, landed
wealth:
"Taxes on wages and savings are regressive tools
for transferring money from people at the bottom end of the income
scales (who tend not to own land) to people in the middle and higher
income brackets (who tend to own land). This is the process of
transforming earned income into windfall wealth via investment in
infrastructure."[17]
A primary vehicle for achieving this transfer of wealth in Britain
has been the taxation of the general public to pay for the extension
and maintenance of the nation's transit system. Fred Harrison provides
a detailed plan to remedy this destructive and unfair approach to the
funding of public goods. "The way in which a community uses and
distributes the rent of land is the key to achieving optimum
efficiency and the solution to problems that have hitherto defeated
governments,"[18] he declares. This reviewer, who has spent over
thirty years working in the real estate finance and development field,
agrees fully. The mistakes of the past must not be continually
repeated. Wheels of Fortune is a primer for citizens on how to
reverse the ill effects of more than half a century of wrong-headed
policies. The solutions put forward by Fred Harrison are long overdue.
NOTE: The publisher of Wheels
of Fortune, The Institute of Economic Affairs, was one of the
leading "think-tanks" supporting the privatization
program advanced by the Thatcher government during the 1980s.
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REFERENCES
1. Fred Harrison. Wheels of
Fortune (London: The Institute of Economic Affairs), p.174.
2. Max Hirsch. Democracy Versus Socialism (New York: Robert
Schalkenbach Foundation, fourth edition, 1966. Originally published,
Melbourne, 1901 ), p.276.
3. Harrison, Wheels of Fortune, p.45.
4. Roy Douglas. World Crisis and British Decline, 1929-56
(London: The Macmillan Press Ltd., 1986), p.166.
5. Ibid., p.167.
6. Friedrich A. Hayek. The Road to Serfdom (Chicago: The
University of Chicago Press, 1944), p.iii.
7. Mary E. Murphy, "British Postwar Planning." American
Journal of Economics and Sociology, Vol.4, No.4 (New York:
American Journal of Economics and Sociology, Inc., July 1945),
pp.211-229.
8. Ibid., p.217.
9. Roy Douglas. Land, People & Politics (London: Allison &
Busby, 1976), p.212.
10. Speech by Winston S. Churchill before the Conservative party
annual conference, Blackpool, 5 October 1946. Reprinted in: Great
Britain, The Lion at Home, Vol.IV, edited by Joel H. Wiener (New
York: Chelsea House, 1974), p.3345.
11. Ibid., p.3348.
12. Speech by George R. Strauss, 15 November 1948. Reprinted in: Ibid.,
p.3396.
13. Speech by Winston S. Churchill before the House of Commons, 28
September 1949. Reprinted in: Ibid., p.3608.
14. A study of land ownership in Britain made in 1966 by the Wilson
government reported that 750 persons owned one quarter and 4,500 owned
one-half of the total acreage of England. During the debate on the
Land Commission Bill in the House of Commons, Frederick Willey (the
Minister of Land and Natural Resources) quoted Winston Churchill, as
follows: "The land monopolist renders no service to the
community, he contributes nothing even to the processes form which his
own enrichment is derived
the land monopolist has only to sit
still and watch complacently his property multiplying in value
without either effort or contribution on his part
the unearned
increment in land is reaped by the land monopolist in exact proportion
not to the service but to the disservice done." Reprinted in:
Ibid., p.3810.
15. Ibid., p.3834.
16. Harrison. Wheels of Fortune, p.56.
17. Ibid., p.57.
18. Ibid., p.104-105.
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