Essays & Images on Cities, Travel and Contemporary Culture. A web journal of James A. Clapp, Ph.D., an UrbisMedia Ltd. Production

Vol.73.3: THE FORTUNE OF FORTUNE

V073-03_ayn-rand-1957copyI’ll begin with a personal anecdote. Back in 1979 I was on sabbatical in London. My project was to study a piece of the Labor Party’s legislation called the Community Land Act. I would be working with people in the Department of Environment (UK’s equivalent of HUD) to see how applicable might be to the U.S. Up to the point I arrived it was only operating in Wales.

In simple terms the Community Land Act was what we economists called a “recapture of betterment” scheme. The rationale for its was that when government (the public) makes expenditures on public infrastructure it creates value and economic opportunity. Say it builds a new freeway close to your land, with a new interchange. Suddenly your land is worth more because it has accessibility it did not have before. So it was public investment that appreciatedyour property. You could now sell it for more, or build a factory that already had road access to your suppliers and markets—all stimulated by public expense.

This circumstance is also called “windfall profits”; in other words, just damn good luck for you as the landowner. (I am excluding the prospect that you bought access and influence with the legislators who funded the freeway and sited it through your land).

The day I began writing this Gov. Chris Christie of New Jersey speaking at the Reagan Librarymore than intimated that President Obama’s proposal to raise taxes on the rich would be penalizing those who earned their riches through their own efforts to reward those who just don’t work as hard or at all. Christie, the biggest fat ass in American politics since William Howard Taft was playing to those who would like him to throw his tub of guts into the presidential race already filled with idiots the total of which he probably outweighs, but repeat the same disingenuous bullshit about the rich they love to suck up to. They would all regard the Community Land Act or taxing windfall profits as that nasty old “socialism.”

Well, it is. But why shouldn’t we, the public, get something back for financing the infrastructure without which capitalism could not prosper. Our public schools educate capitalism’s workers, our public universities generate all sorts of research and innovation that is turned into products and services by the private sector and our armed forces keep nasty people from messing with our production and trade routes. We taxpayers deserve something back.

Now let’s take things a bit further (into the socialistic dimension). We said above that some people get rich on economic windfalls. But we also have circumstances that are the reverse. Let’s bring up that other nasty word that makes Gov. Christie snack on a dozen corn dogs: regulation. Say your neighbor landowner’s land has a water course through his land that contains an endangered species, or is a flood plain. It might be in the public interest for government to place some regulations on the use of his land, regulations that might keep him from making a profit on his land. Economists call this sort of effect a “wipeout.” So you get a windfall and he gets a wipeout. Maybe even regulating his land makes your even moreprofitable (no competition, and no flooding of your factory).

Still with me? (By the way, I will finish the anecdote about my sabbatical). Maybe your ahead of me if you surmised that it might be the nice (socialistic?) thing to do by taking some of the extra taxes we ask Mr. Rich-guy who got the windfall to pay and use that to compensate Mr. Regulated-guy for enduring a wipeout to make us safer or preserve an endangered species.

Oh my, can you hear the screams coming from Ron Paul screwing his face into a rictus and sputtering Ayn Rand-isms; Bachmann’s bouffant fluttering from the hot blasts from her empty head; Perry pledging to execute anyone who even suggests such an idea; Cain saying that land can’t be divided like a pizza; Santorum worrying that gays might own the land next door, and; Romney saying if Obama is for it then he’s against it.

Of course, anything that is fair and reasonable, such as a recapture/compensation scheme would be ideologically out of bounds for these worshippers of the sainted rich of America. Never mind that they are historically, factually, structurally and analytically flat wrong, they are beholden to their contributors in an death grip to the economy and a death wish for Obama.

For the record, I am not the only economist to weigh in on this point. I have great respect for brilliant Elizabeth Warren, who will be running for the Senate in Massachusetts. I like what she says: “There is nobody in this country who got rich non his own. Nobody. You built a factory—good for you. . . . you moved your goods to market on roads the rest of us paid for. You hired workers the rest of us paid to educate. You are safe in your factory because of the police forces and fire forces the rest of us paid for. You didn’t have to worry that marauding bands would come and seize everything at your factory . . . You built a factory and it turned into something terrific or a good idea—God bless! Keep a big hunk of it. But part of the underlying social contract is you take a hunk of that and pay forward for the next kid who comes along.” Now that will be my kind of senator.

Oh, right, the sabbatical. Well, in the Spring of 1979 I was working away at the Community Land Act with some bright and committed young people at the DOE in London. One Friday (I think it was) Margaret Thatcher was elected Prime Minister. On Monday, when I went in to DOE the Community Land Act people were cleaning out their desks. 
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© 2011, James A. Clapp (UrbisMedia Ltd. Pub. 9.29.2011)

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