Those of us who know of Henry George and his “Single Tax” on land values may not know that he was also against tariffs. I didn’t until in 1998 I was appointed Chief Executive at the Henry George Foundation (HGF) of Great Britain and learned that it was part of a federation of such bodies called The International Union of Land Value Taxation and Free Trade (or “The IU” for short). The same year ALTER was founded to revive a Land Campaign in the Lib Dems.
I was reminded how George’s thinking linked tax and tariffs when reading a piece by Jonty Bloom in my favourite weekly journal The New European recently.
I am neither an economist but it seems common sense that tariffs hurt the countries which impose them most. Bloom’s piece reminds us that the inter-war Great Depression was made far worse when America’s action in isolation to impose tariffs was met tit-for-tat by most other trading nations.
In contrast, Trump Mark 1’s tariffs post-2020 were largely ignored by the rest of the world and hence largely only affected America: more jobs were lost there than in countries hit by tariffs.
The reason, according to Professor Michael Gasiorek, is that tariffs raise the imposing county’s domestic price of imports of a product. This allows its domestic producers to increase their price to just below the newly raised price of the imports, assuming the importer doesn’t absorb the tariff. “Capitalist greed”, according to current logic, ensures that prices rise for consumers in the tariff raising country, thereby reducing spending power and/or causing inflation there.
As for the countries subjected to tariff restrictions on those exports, assuming there is demand for the targeted products elsewhere, higher prices and inflation need not arise.
A similar argument applies to taxes on income and employment. Tariffs on material imports are no different to taxes on labour: they increase the cost of inputs to production, i.e. to the “real economy”. Also the cost of administration of taxes and tariffs is entirely non-productive: it doesn’t add value to the sum of growth. It is part of the “red tape” that Trump and most right-wing politicians claim they will cut.
This is largely why Rachel Reeves’ choice of policy measures to achieve Growth are bound to fail in the short term. Increasing NI on employers adds to production costs and hence prices. Although it may cause firms to seek improvements in productivity, that requires capital spending on investment and NI eats into available funds for that – especially for smaller firms that might otherwise be more agile agents for much needed innovation and growth.
Liberal Democrats have most of the answers but we hear too little about them:
- Replace taxes on labour and machinery – the active components of the economy – with taxes on Land (i.e. natural resources), which are entirely passive. This minimizes waste of finite natural capital and maximises production capacity. Such taxes also cost far less to administer.
- Join the expanded Customs Union with our neighbours in Europe, minimizing trade friction and cost in our region and presenting a united economic front to the newly isolationist America, with its huge internal free market.
- Prioritise efforts to sustain and strengthen WTO and other international organisations that foster global order and combat isolationism. Firms cannot confidently plan to grow in Trump’s world of uncertainty.
- Work to re-define what we mean by “Growth”. What is the sense in the Establishment obsession with GDP?! The world needs a better measure of a successful economy: one that places the capitalism in the service of society and not the other way round. See Mariana Mazzucatto & Will Hutton’s latest books.
- Keep explaining why there is no need to choose between tackling the Climate & Ecological Emergencies and Growth.
Unlike the Global Economic System, which is man-made and can be changed, the Global Climate System obeys immutable natural laws. These are increasingly understood and humanity has no rational choice but to work with them. Failure to do so means the end of civilization sooner or later. We must have Green Growth starting now – or there will be no growth.
When my PhD supervisor the late Professor Sarah Sayce signed off my thesis on Land Valuation for Britain, she said that Land Value Taxation (LVT) will only be seriously considered here in the context of Climate Change. But LVT is not the only radical change in economic thinking that we Liberals need to adopt. In this Parliament, we need to come up with ways to reform and humanize our entire thinking about measures of economic success. That is the mission of ALTER.
* Tony Vickers is Secretary and co-founder of Liberal Democrats Action on Land Taxation & Economic Reform (ALTER) and a councillor in Newbury. He spent 20 years researching and lecturing on sustainable taxation: www.landvaluescape.org
Follow @libdemvoice.org on Bluesky
Like us on Facebook
Subscribe to our feed
Sign-up for our daily email digest
The Joy of Six 1339
Kemi Badenoch vs the Conservative Party: how the polling compares - The Week in Polls
F10 is passed overwhelmingly. Now the work begins...
Blackness Road - 1967 #dundeewestend
Torchwood is now a Cardiff Bay institution
Zachary Adam Barker
tom arms
Neil Hickman
Joe Bourke
18 Comments
“one that places the capitalism in the service of society and not the other way round”
This must the Liberal approach. I’m sure you are aware of Deiter Helm’s book Legacy. What do you think of it?
https://dieterhelm.co.uk/publications/now-available-legacy-how-to-build-the-sustainable-economy/
Re innovation and growth .Our answers must be more widely known. To do that PUBLICITY via ALL Media should be blitzed. Our ideas will not get anywhere if we do not PUSH them.
>” The reason, according to Professor Michael Gasiorek, is that tariffs raise the imposing county’s domestic price of imports of a product. This allows its domestic producers to increase their price to just below the newly raised price of the imports”
Need to be careful about generalisations.
For example, I suggest it is in the UKs interests to have some industries, such as solar panel production, the imposition of 30% tariffs on Chinese panels was considered sufficient to encourage local investment in production. Also the use of tariffs are useful in negating the effects of excessive government subsidies, as practised by China, or the dumping of product due to largescale production (eg. Chinese steel production).
>” Work to re-define what we mean by “Growth”.”
There is an interesting BBC podcast that raises similar questions:
The Prophets of Profit
another highly relevant program is the 2010 documentary “Inside Job”, a timely reminder of what happens when you permit too much deregulation…
Henery George published Protection or Free Trade: An Examination of the Tariff Question with Especial Regard to the Interests of Labor in 1886. George defended what he considered true free trade. For him, this required free trade to be coupled with the treatment of land as common property https://www.truefreetrade.org/pft20.htm
In the UK, the Liberal Party landslide victory of 125 seats over all other parties in 1906 was delivered on the back of a campaign opposing Tariffs. Many working-class people at the time saw tariffs as a threat to the price of food, hence the debate was nicknamed “Big Loaf, Little Loaf”. Most of the newly elected Liberal MP’s were not single-taxers; many supported land nationalisation, but all of them wanted to see the introduction of a valuation mechanism as a precursor to further reforms The Single-Taxers and the Future of Liberalism, 1906–1914
Today we are entering an era that has been described as Technofeudalism where we are transitioning from capitalism to a system where tech companies function like modern feudal lords in a rent-driven, technology dominated society. According to this view, capitalists now primrily rely on consoldated political power and rents to extract capital.
The challenge is to design a system of taxation and redistribution that captures economic rents for the benefit of society as a whole.
“The challenge is to design a system of taxation and redistribution that captures economic rents for the benefit of society as a whole.”
Trouble is – the rich and powerful benefit from that not happening – subscribing to the “There’s no such thing as society” way of thinking.
What we (or at least I) appear to be witnessing is, by subtle and not so subtle means, the gradual realignment by the Labour government of Great Britain plc behind the economic juggernaut of Trumpian USA. Starmer’s adoption of the (verb), baby, (verb) linguistic confection, the love bombing from Messrs Lammy and Mandelson and the recent refusal to sign the AI declaration, are clear signs that our government reckons it knows on which side its bread is buttered. All we need now is another state visit with Charles and co massaging Trump’s ego to strengthen the view that we are becoming, if we haven’t been already since Brexit, a client verging on vassal state of Uncle Sam. That ‘Special Relationship entered its death throes at Yalta in 1945 and finally died a death at Suez in 1956 in some people’s eyes.
The contributors so far have offered sensible erudite explanations and possible solutions, which would be fine if the lunatics hadn’t actually taken over the running of the asylum. In the immortal words of Mike Tyson, everyone starts with a plan until they get punched in the mouth!
The comments of the US today at the NATO meeting probably spell the end of an era and we can seemingly no longer expect/rely of the US to defend other NATO countries, this includes Canada of course. Europe will have to fend for itself and out paltry military contribution will have to be dramatically increased. Bang goes the governments spending plans, urgent revision will be required and a significant increase in personal taxation to cover the future defence budgets.
Meanwhile in the House of Commons what was the major source of Question and Answer from the Conservative Leader, why a Gaza refugee family and a Court decision.
Priorities please, thank goodness for Sir Ed, he was on the real issue.
@theakes
For 2025 read 1938. For Trump read Chamberlain and Daladier. For Putin read Hitler. For Ukraine read Czechoslovakia. For Donbas and Crimea read Sudetenland. Do you get the picture? So, which country in the near future will be Poland in 1939?
John Marriott comments ” …we are becoming, if we haven’t been already since Brexit, a client verging on vassal state of Uncle Sam.
Angus hanton has recently published Vassal State: How America Runs Britain
“Hanton highlights the 5,000 railway arches, home to thousands of small businesses, that Philip Hammond (as transport secretary) compelled Network Rail to sell at a very affordable price to the US private equity giant Blackstone. Rents promptly doubled, putting many small companies out of business and destroying jobs, but Hammond was satisfied to have created decisive change: the civil servants who had previously managed the commercial property were, he told Hanton, “hopeless people” who were “bureaucratically unable to ever get anything done”. Lord Hammond is now a partner at the private equity firm Buckthorn and a person with significant control of seven property development companies.”
The New Stateman article concludes “It is time, Hanton writes, to see this relationship for what it is, and to write new rules that favour British work over the financial interests of American investors. This involves rethinking the tax system, regulating takeovers and aggressively supporting the growth of businesses and skills that are incentivised to sell shares in London rather than New York. Hanton writes with admiration and fondness for America; he is “not arguing for nationalism”, he writes, “but against abject dependency”.
Judging by the Weimar statement issued today by Germany, France, Poland, Italy, Spain, the United Kingdom, the European External Action Service and the European Commission; military Keynesiasim in the form of major increases in goverment spending on defence budgets entailing rapid recruitment of military personnel and munitions workers do appear inevitable.
“We are ready to enhance our support for Ukraine. We commit to its independence, sovereignty and territorial integrity in the face of Russia’s war of aggression.
We share the goal to keep supporting Ukraine until a just, comprehensive and lasting peace is reached. A peace that guarantees the interest of Ukraine and our own.
We are looking forward to discussing the way ahead together with our American allies. Our shared objectives should be to put Ukraine in a position of strength. Ukraine and Europe must be part of any negotiations. Ukraine should be provided with strong security guarantees. A just and lasting peace in Ukraine is a necessary condition for a strong transatlantic security.
We recall that the security of the European continent is our common responsibility. We are therefore working together to strengthen our collective defense capabilities.”
Fascinating. The link to ALTER doesn’t work. Can you activate it?
@Peter Wrigley – thanks for the notification. Now working.
US Secretary of State Pete Hegseth gave NATO big wigs chapter and verse today. Time to wake up and smell the coffee. If you value your form of democracy you will ALL have to pay your share to defend it. You can’t rely on Uncle Sam to bail you out any more. It ought to be a wake-up call for us on this side of the Atlantic. However, before we all start paying 5% of our GDP we should make it clear that what we are supporting is a society that cares for the individual. where hard work brings its rewards and where power resides with the people and not with a relatively few rich individuals and corporations.
“before we all start paying 5% of our GDP we should make it clear that what we are supporting is a society that cares for the individual. where hard work brings its rewards and where power resides with the people and not with a relatively few rich individuals and corporations.”
Seconded
………..US Secretary of State Pete Hegseth gave NATO big wigs chapter and verse today. Time to wake up and smell the coffee. If you value your form of democracy you will ALL have to pay your share to defend it. You can’t rely on Uncle Sam to bail you out any more. It ought to be a wake-up call for us on this side of the Atlantic……..
Let us, on this side of the Atlantic, remember his words the next time Uncle Sam comes calling for another Iraq style adventure…
@expats
Couldn’t agree more. Two postwar PMs had the intestinal fortitude to say no. Wilson refused to send troops to Vietnam and Heath refused to cuddle up to Nixon, although his government did support the latter’s so called ‘War on Drugs’, which has hardly been a massive success. If you want to read more I can recommend Gaby Hinsliff’s excellent piece on today’s Guardian Journal.
re “Increasing NI on employers adds to production costs and hence prices. ” – the OBR estimate that three quarters of the cost of increasing NI on employers will be passed on to workers, in the form of lower wages, rather than in price rises or cuts to profits.
@Tim Leunig. We have had a simultaneous rise in minimum wage. This means that some sectors with a high percentage of workers on minimum wage will see little of the cost passed on in lower wages and there will be a lot of redundencies. Other sectors will see a much higher percentage passed on to workers initially. I think the OBR estimate are short term. In the medium term, formerly higher paid workers who now find themselves on the minimum will seek to restore differentials and companies will have to raise prices.