Fred Harrison’s Expert Comments tackles the issue of sustainable funding for infrastructure. Analyzing the history of the Roman Empire, he suggests that Europe is now facing similar existential threats that might point to the decline of modern civilization. But he offers us hope: land rents can be used to fund public services. This shift will require governments to take stock of land values, to assess rents, and to use this information as the basis of tax reform for the sake of the well-being of all citizens.
Civilisation became possible when people learned how to produce more than what they needed for subsistence. The net income was used to fund what evolved into the infrastructure of urban settlements. That infrastructure, in turn, generated more than its costs of production – the surplus, or net income, which classical economists called ‘economic rent’. The earliest cities flourished so long as those rents were recycled back into funding the growth of urban culture. When the rents were privatised, problems arose, which, as they accumulated, became existential threats that foredoomed the civilisations to catastrophes and eventual collapse.
Classical economic theory identified rent as the most efficient way to fund public services. But theory collided with political practice, and the modern world was constructed on a system of taxation that burdens people who work and invest in value-adding enterprise. One outcome is the shift in wealth to the richest 1% of the population; another is the deep-seated discontent in European and American societies today.
Comparison with classical Rome suggests that Europe is now facing existential threats of the kind that might presage the decline of modern civilisation. But social renewal is possible. Governments need to restore the optimum revenue system. Reform, however, is predicated on a popular mandate, which will not emerge without an informed debate. To inform people of what is at stake, the government needs to:
- compile a cadastre of urban and agricultural land and its value;
- assess the rents generated by natural commodities; and
- estimate the ‘deadweight losses’ arising from current taxes on wages and profits.
This information would lay the foundation for tax reform, which would heighten social solidarity and manifest itself in new levels of spiritual, psychological, and material well-being.
The views and opinions expressed in this publication are those of the original author(s) and do not necessarily represent or reflect the views and opinions of the Dialogue of Civilizations Research Institute, its co-founders, or its staff members.
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