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The vindication of Ray Crotty: Ireland 2012

Forgotten economist advocated land tax, massive reduction in government and subventions and a basic income for allRoger Garland 

 

Sometimes it is useful in times of crisis to look backwards to see how we got into this terrible impasse. Raymond Crotty’s book ‘Ireland in Crisis’ published in 1986 is a salutary lesson in how we got things wrong.

He considers the early eighties, a time of familiar gloom, of high unemployment, emigration and a crippling National Debt.

Crotty’s solution to these problems was the substitution of a land tax for all existing taxes on income or consumption (VAT), thus vastly reducing labour costs, boosting exports and reducing imports. All land – including agricultural and buildings – would be taxed. Strangely he made no reference to the 1974 Kenny Report which advocated giving local authorities the power compulsory to acquire land at agricultural prices plus 25% to provide land for development of both public and private housing. This was much less radical than Crotty’s ideas but even this modest and reasonable proposal, which would have surely prevented our property bubble, was a step too far for our politicians. There were mutterings of a communist conspiracy, a communist attack on property rights. Kenny was a High Court judge and certainly no revolutionary!

Even stranger was Crotty’s omission of any reference to that great 19th-Century American economist, Henry George, whose ideas on land tax were very similar to Crotty’s. His seminal work ‘Progress and Poverty’ spells out very clearly the ethical basis for a land tax.

Crotty called for a tax-take based on the rental value of land. The tax would be based on the undeveloped site value. Hence nowadays land tax is sometimes called ‘site-value tax’. Regrettably this government seems on the verge of rejecting it for a property tax.

Crotty called for a very different approach to Government expenditure: a ‘national dividend’ or ‘Basic Income’ paid to everyone in the state, to those who are employed, unemployed, business people or retired. No social welfare payments would be made. This would allow people to move seamlessly to and from part-time working and so-called nixers’. It would, of course, eliminate the poverty trap and there would be no need for a minimum wage. But the really radical part of Crotty’s vision for Ireland was the virtual shut-down of Government to facilitate it. He recommended that Government expenditure, other than the cost of the national dividend, would be reduced to a remarkable 20% of its present level. Put very simply, this would mean the shut-down of the Departments of Fisheries, Forestry, Agriculture, Industry and Commerce, Transport and Energy and severe reductions in Health, Education, and Environment and Local Government.

I have not attempted to re-cost Crotty’s proposal but it is obvious that a very substantial dividend would be payable enabling people to pay for their own health and education. This would not be Thatcherite or Tea Party economics, cutting taxes to the rich and cutting services to the poor.

What Crotty proposed would result in a society which would give people the control over how they spent their money. Schools would be parent-controlled. Everyone would have sufficient income to buy health insurance.

Feather-bedding of farming, industry, tourism and so forth would cease.

Crotty was fully aware that his ideas were an anathema to what he called the “buro-politicians”. The simplicity and transparency of the new regime would collapse the numbers in the civil service and the service, which politicians offer constituents to negotiate the bureaucracy.

It would imply withdrawal from the EU and the euro. The latter may happen anyway. Crotty was, of course, opposed to the EU and campaigned against it principally because he recognised that it would wipe out indigenous labour-intensive industry like textiles and hoe-making. This, of course, has happened.

Crotty’s ideas need some updating to factor in environmental considerations like the depletion of the world’s resources and increased pollution so that in addition to a land tax, resource and energy taxes should be levied. In view of the ever-increasing gap between the highest and lowest paid, a case can be made for an income tax on salaries over a certain amount. For social reasons excise duty on tobacco, alcohol and petrol should be retained.