Land Value Taxation Campaign

Both in the US and Europe, there is much talk of bank regulation to stop another boom and bust. It will not work. The time will come, perhaps fifteen years from now, when economies will seem to be on a path of steady growth. People will say, yet again, that this time the growth is sustainable. There will be pressure to remove the regulations, which will be seen as unduly restrictive. Politicians will concede. In any case, regulations can always be worked-around, through the invention of ingenious schemes not envisaged when the regulations were devised. Like all its predecessors, growth will turn insidiously to boom followed by bust.

Bank regulation cannot prevent the process which underlies all major boom-busts: the advance of credit for land purchase, usually concealed inside “assets” such as housing or company shares, using the value of those same assets as security for the loans. This leads to the prices of these assets advancing far beyond the value of the revenue streams which they can yield, to the point that the interest and repayment of the debt cannot be reliably covered. At that point the “asset values” (land values) are a bubble which is primed to burst. The slightest shock to the economic system brings collapse.

We are not saying that banks should not be regulated, but it is an illusion to think that it will prevent a recurrence of the events of the past two years. The only way to do that is for governments to collect the rental value of land and use it as its principal source of revenue, abolishing existing taxes as they do so. This will prevent land price bubbles from developing in the first place, because land ownership will be a tax liability.

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