Website Newsletter
Books (1971-2012)
Articles, etc (1978-2013)
(The Other Economic Summit
& New Economics Foundation, 1983-2000)
Hard Copy Archive  

Newsletter No. 7 - July 2005

Links to other Newsletters can be found here.



1. The New Economics of Sustainable Development. Text now on the website

2. Sharing Our Common Heritage: Resource Taxes and Green Dividends. Text now on the website

3. Three 2005 Books

(2) Richard A. Werner: New Paradigm in Macroeconomics – solving the riddle of japanese economic performance

(3) James Gibb Stuart: Fantopian Update

4. Some Coming Events

(1) St. Paul's Institute Lectures, St Paul's Cathedral, London

27 September, "Global Poverty: A Challenge from Africa"

10 October, "Global Poverty: A Challenge to the World".

(2) American Monetary Institute – AMI 2005 Monetary Reform Conference, Chicago, Sept. 29 - Oct. 2.

5. Green Economics Institute launched in House of Commons.

6. Tax Justice Network, Summer 2005 Newsletter

7. A Proposed Research Project - any comments?



In the February newsletter I noted that support around the world continues to grow for a shift towards a new world order. Unlike the one we have today, this would be genuinely more democratic – financially and economically, as well as politically and militarily. It would systematically empower people and conserve the planet's ecosystems.

Since then, a disappointing general election in Britain in May failed to engage in serious debate about that or anything else. But voters in France and the Netherlands rejected a further shift towards centralised corporate governance from Brussels, the upsurge of popular pressure from around the world led to a more relevant G8 meeting than previous ones, and this month’s terrorist attack in London has emphasised the need for the G8 and other powerful countries to show genuine determination to lead the way to a juster world, not only for its own sake but to reduce active and passive support for terrorism.

In the 21 years since 1984, when we launched The Other Economic Summit (TOES) as the first serious counter-summit to the G7 (now G8), awareness of the need for radical peaceful change has spread. Although the formal conclusions of this year’s G8 may have been disappointing, Bush is surely the last US president who will proclaim it his prime duty to defend Americans’ present way of economic life regardless of how it affects everyone else. The time may be near when mainstream policy-makers and professionals and academics around the world will see that the serious practical proposals for systemic changes in the global and national political economy, published over the years but so far largely ignored, are relevant to their own careers.

With that in mind, two more texts are now available for free downloading from the Books page of this website. One (see Item 1) is a Briefing for Policy-Makers on "The New Economics of Sustainable Development". I presented it to the European Commission in 1997, but it wasn’t published until 1999 because some of the Commission’s economists didn’t like it! The second (Item 2) is the proceedings of an international conference in Oxford in 1998 on "Sharing Our Common Heritage: Resource Taxes and Green Dividends", in which speakers from a number of countries put forward specific proposals for a new people-centred and planet-centred approach to taxation and income distribution.

At Item 3 the books by Fred Harrison and Richard Werner complement each other wonderfully .

Harrison ’s is about how the pathology of a perverse tax system encourages fluctuating land values and house prices which cause booms and busts. Werner’s is about the pathology of the present perverse way of creating new money which, by encouraging lending for the purchase of assets like land and housing instead of investment in productive activities, also contributes to booms and busts. Together they show that serious study is needed of the links and interactions between tax reform and monetary reform. Item 7 is about that.



1. "The New Economics of Sustainable Development: A Briefing for Policy Makers", 1999. Written for the European Commission's Cellule de Prospective, this briefing was published in paperback - by Kogan Page, London; Editions Apogée, Paris (as Changer d'Économie: ou la Nouvelle Économie du Developpement Durable), and The Office for Official Publications of the European Communities, Luxembourg.

I presented this Briefing to the European Commission's Cellule de Prospective (Forward Studies Unit) in 1997. Opposition from some economists in the Commission delayed its publication until 1999. Marc Luyckx was the member of the Cellule’s staff who commissioned the Briefing, achieved its eventual publication, and wrote the text of the French edition. He is knowledgeable, wise and far-sighted about ethical, cultural, religious, and political aspects of the future - see

I very much appreciated his commitment to getting the Briefing written and published.

In 1999 Jean-Claude Thébault, who had become Director of the Cellule, wrote, in his published foreword, “It is because this new economic thought puts the citizen and the common good at the centre of its concerns that we believe that political decision-makers should give it their attention. The ‘new economics’ is based on a vision which could be a source of inspiration for politicians: the systematic development of individual responsibility, the effective preservation of resources and the environment, respect for qualitative and not just quantitative values, respect for feminine values, and the need to place ethics at the heart of economic life.”

The following reflection from the Introduction and Executive Summary will explain why I suspect the Briefing may now seem more directly relevant to policy-makers and people conerned with what policy-makers do than it did when it was first presented eight years ago. "Because it takes time for mainstream opinion to adjust to the new economics, some of its more important policy implications will not yet be acceptable to many of the people who need to consider them. Until compelled to take them seriously, why should policy makers do so in the midst of all the urgent calls on their time and energies? As I know from personal experience with the Central Policy Review Staff of the UK Cabinet in the early 1970s, it is one thing for a forward studies unit to commission studies on future possibilities, and quite another thing to motivate policy makers to pay attention to the findings. Nonetheless, policy makers will do well to be aware of the growing momentum behind the new economics approach, even if they do not yet accept it themselves. Pressure will continue to grow for changes in economic life that will give primacy to the needs of people and Earth, and for changes in economic thought that will provide new concepts of economic efficiency and progress. Policy makers will want to be ready to respond to the implications."

To download the book, click here.


2. "Sharing Our Common Heritage: Resource Taxes and Green Dividends". Conference Proceedings.

An International Conference on this topic was held on 14th May 1998 by the Oxford Centre for the Environment, Ethics and Society. We discussed specific possibilities for a long-term programme of economic reform under which

  1. people would not be taxed on the values they add by their skill, enterprise and work, but on the values they subtract by their use or monopolisation of natural and other common resources, and
  2. all citizens would be entitled to share in the revenue.

These principles will clearly contribute to an economically more just and efficient and sustainable way of economic life than the present one. The time has come to work them out in practice.

The proceedings include summaries of Questions Arising in Discussion and Items for a Follow-up Agenda, and papers by:

Prof. Philippe van Parijs ( - Citizen's Income and the 'New Social Question'

Fred Harrison ( - Ethics and Environment

Prof. Mason Gaffney ( - Red-Light and Green-Light Taxes

Alanna Hartzok ( - Local-To-Global Dimensions Of Ecotaxation, Land Value Taxation And Citizen Dividends

Dr.Tatiana Roskoshnaya ( - Russia: Sustainable Development and Rental Taxation

James Robertson - Resource Taxes and Green Dividends: A Combined Package?

Prof. David Marquand - Concluding Remarks.

To download the proceedings, click here.



(1) Fred Harrison: Boom/Bust: House Prices, Banking and the Depression of 2010: Shepheard-Walwyn, London, 2005, 274 pages, hardback, £25.00.

Also see Item 7 below on the need to explore links between Land Value Taxation and Monetary Reform.

In 1983, in his earlier book The Power in the Land, Fred Harrison predicted the 1992 recession in the UK. It duly happened, following the peak of the 1989 boom in the land and housing markets. Now, in this book, he describes and explains more fully the series of 18-year business cycles that can be traced back in Britain at least to 1776 and arguably as far as 1600 - with the boom and bust of a few years ago as a “mid-cycle recession”. He confidently predicts that the trough of the next recession will be in 2010, eighteen years after 1992.

This book contains a great deal of important factual material. How astonishingly more profitable, under prevailing policies, investing to achieve capital gains in land and existing property has been than investing in new production and construction! When Honda, the Japanese car-maker, revalued its plant site in Swindon it found the value of the land had risen from £6 million in 1985 to £200 million in 2003. Its investment return from buying the land had been much higher than from making the cars. Over a longer term, the rate of increase in the price of houses has hugely eclipsed increases in other products and people’s earnings. A particular 5-bedroom house in Chelsea in London was sold for £1,000 in 1910; ninety years later it was worth £4.5 million, an increase of 450,000%, nearly 37 times greater than the increase in the price of a basket of basic items like bread and potatoes over the same period.

Harrison shows that piecemeal attempts to deal with the economic and social problems caused by high house prices are almost always perverse and make the problems worse. For example, subsidising the cost of borrowing money to buy houses in particular areas for public servants like the police or teachers or nurses immediately encourages local landlords to raise their prices, channels the extra money straight into their pockets, and makes it more difficult for other local people to get on to the housing ladder.

For me this book is particularly important for its insights into the pathology of taxation. For example:

  • the effects of existing tax policies are
  • to privatise social income (by failing to tax the profits made by people and businesses from the rising value of common resources like land), and
  • to socialise private income (by taxing earnings from work, skill, enterprise and productive investment);
  • this inevitably biases banks and other lending institutions towards lending for investment in existing assets like land and against lending for investment in productive and creative activities; and
  • understanding these effects must underpin new policies on taxation and monetary control to deal with the cycles of boom and slump, to solve the recurring problem of rising house prices, to finance public investment in infrastructure like hospitals, schools and transport, and generally to move towards a more efficient and socially just economy.

Not everyone will find this book an easy read. But responsible financial and economic leaders around the world should get their staffs to brief them on its policy implications. And many people to whom the future of house prices is a personal or commercial concern may want to ask their financial advisers what they make of Harrison’s prediction of a collapse in 2010.

For further details about the book, click here.

(2) Richard A. Werner: New Paradigm in Macroeconomics: Solving the Riddle of Japanese Economic Performance: Palgrave Macmillan, 2005, 423 pages, paperback, £19.99.

Also see Item 7 below on the need to explore links between Land Value Taxation and Monetary Reform.

I am grateful to Emma Dawnay, Senior Researcher at the New Economics Foundation, for drawing my attention to this book. Its cover carries a recommendation from the celebrated monetary economist Charles Goodhart - “a powerful and important book, which challenges much received wisdom”. A good deal of it is devoted to detailed analysis mainly of interest to specialists on the monetary and banking aspects of macroeconomics - not an easy read for non-specialists. But, as an unconscious complement to Harrison’s approach (he makes no reference to taxation pathology), Werner draws challenging conclusions from Japan’s extraordinary asset boom between 1955 and 1989 – land prices rising by over 5,000%, compared with an increase of less than 500% in the consumer price index – and then the long-drawn-out economic depression and stagnation of the 1990s.

Werner’s main conclusion is that the central bank, the Bank of Japan, failed to control the creation of credit (i.e. bank-account money) by the commercial banks and to regulate the purposes they lent it for. In two very interesting chapters on "Solving the Enigma of Banking and Money" and "Credit, Money and the Economy" he summarises the history of banking and credit creation. He stresses that the special role of banks in the economy is that they “issue additional claims on existing resources. Bank credit creation does not channel existing money to new uses. It newly creates money that did not exist beforehand and channels it to some use”. He notes that new money created by banks out of nothing and credited to their customers’ accounts, becomes indistinguishable from other money in bank accounts; and this enables banks to perpetuate the mistaken but widely accepted view that they are merely intermediaries facilitating the transfer of existing purchasing power from some of their customers to others.

Werner finds wide agreement among researchers that before the 1980s the Bank of Japan successfully controlled the growth of bank credit (i.e. the creation of money by banks) by direct credit controls - known as window guidance, reflecting the traditional visits of commercial bank officials to the 'teller window' or counter of the Bank of Japan to be told how much they should lend for what purposes during the following quarter. From his in-depth analysis of monetary policy alternatives, Werner concludes that reviving some such approach – perhaps with more detailed distinctions between desirable and undesirable uses of bank credit - is likely to be a more successful policy than today’s regulation of the overall interest rate by central banks. That one-size-fits-all policy can obviously do nothing to correct the tendency of commercial banks - for which, as profit-making companies, they cannot be blamed - to lend more profitably for speculative investment in the real estate market than for productive investment in manufacturing and service industries.

Werner emphasises that his proposal to revive the policy of window guidance would apply worldwide, not just to Japan. It would, in fact, represent a paradigm shift away from the school of ‘neo-classical economics’ that has had such worldwide dominance in recent years, “has severely limited the restraints that governments can place on corporations” and has made it “questionable whether democracy can be maintained”.

Personally, I don’t terribly like the idea of giving central bankers responsibility, under democratic supervision, for directing where commercial banks should channel their lending. I prefer the simpler alternative of

(1) transferring to the central bank - as an agency of the state - responsibility for actually creating new money in accordance with monetary objectives decided and published by the elected government, and
(2) requiring the central bank to credit the new money to the government to spend it into circulation along with other public revenue from taxes, etc.

That would not, of course, discourage commercial banks from lending already existing money for speculation in the rising value of assets like real estate. But that would be dealt with by a fiscal reform – you guessed it! the tax shift advocated by Fred Harrison and others.

With that reservation, I applaud Werner’s view that, "once the facts of credit creation and its potential are more widely known, democratic processes can be used to decide upon the goals… Not only recessions, unemployment and boom-bust cycles, but also poverty and destitution can be eliminated". I warmly recommend this book for its important new thinking in this field.

For further details about the book, click here.

(3) James Gibb Stuart: Fantopian Update: Ossian Publishers (268 Bath Street, Glasgow, G2 4JR), 2005, 112 pages, paperback, £6.00 (inc p+p).

The fable of Fantopia conveys the absurdity of the present money system, by which governments allow commercial banks the privilege of creating money as profit-making loans and then borrow it themselves from the banks at great expense to taxpayers and citizens and the National Debt. The fable also illustrates the pressures from bankers and their allies on politicians, journalists, economists, academics and others to prevent this absurdity being widely understood and questioned.

It isn’t just an absurdity, of course. If virtually the whole supply of public money which everyone has to use is created by banks as interest-bearing loans, the burden of debt and indebtedness within and between nations inevitably continues to grow, as does the wealth and power of the banks. This is a serious cause of the economic inefficiencies and injustices in the world, and a serious threat to the competence and credibility of political democracy.

This new, updated version of the fable ridicules the UK government’s Private Finance Initiative (PFI), which allows it to raise high-cost private sector finance to invest in public infrastructure while keeping the huge resulting liabilities to taxpayers off the government’s accounts. It also includes a number of useful supporting texts, including recent Early Day Motions in the House of Commons which call on the government to commission an independent review of the benefits of increasing the proportion of publicly created money in the economy.

The book can be ordered here. Further information can also be found at the Prosperity website.



(1) St. Paul’s Institute Lectures, London

27 September, St Paul's Cathedral, 6.30pm

Global Poverty: A Challenge from Africa - The Most Revd Njongonkulu Ndungane, Archbishop of Cape Town and Metropolitan of the Anglican Church in Southern Africa.

Respondent:  Dr Daleep Mukarji, Director, Christian Aid. 

10 October, St Paul's Cathedral, 6.30pm

Global Poverty: A Challenge to the World - Professor Jeffrey Sachs, Director of the Earth Institute at Columbia University, New York, and Special Advisor to the Secretary-General of the United Nations.

Respondent: Rt Revd Peter Selby, Bishop of Worcester, author of Grace and Mortgage: the Language of Faith and the Debt of the World (DLT 1997) and formerly William Leech Professorial Fellow in Applied Christian Theology at Durham University. 

Both lectures are free and no tickets are required. Seating is on a first come, first served basis; doors open 6pm. 

Further details from

(2) American Monetary Institute – AMI 2005 Monetary Reform Conference, Chicago, Thursday Sept. 29 - Sunday Oct. 2.

This conference could mark a very important breakthrough in the United States. Full details from



A new Green Economics Institute was launched in the House of Commons on 12 July 2005.

Details from



The lead article by Richard Murphy in TAX JUSTICE FOCUS, the quarterly newsletter of the Tax Justice Network, Summer 2005 Vol 1, No 2, is on tax justice and the major accountancy firms. It quotes a report on Tax in the Boardroom issued by KPMG International in March 2005. Although that report’s accusations of emotional and inaccurate comment are false, it makes it crystal clear that TJN has been having a very big impact on large corporations and the big accountancy firms that help them to cheat the taxman. This is what KPMG says:

“Tax has changed dramatically in recent years. Its public profile has become much more conspicuous, it has acquired moral, ethical and social dimensions that have never been discussed before and, for these reasons, the business management issues associated with tax have become more complicated, more subtle, more steeped in risk and much more challenging.

The emergence of pressure groups such as the Tax Justice Network in the UK is further evidence of the higher profile of tax on the wider business stage. Tax management has been the target of some emotional and, arguably, inaccurate comment in an increasingly heated debate about whether corporations are paying their "fair share" of taxes. The main point is not that the accusations are often unjustified, but the fact they are made at all.

Tax has news value now and, although often unfounded, "naming and shaming" attacks on alleged tax avoiders can damage their reputations in the eyes of important stakeholders, which can lead to sharp short-term share price falls and the unwelcome attention of more than one taxing authority.”

My own view is that we need a shift away from the taxes on personal incomes and business profits which rich people and businesses can now avoid by transferring those incomes and profits to tax havens, on to taxes on the value of common resources which rich people and businesses now freely enjoy but couldn’t transfer to tax havens if they were taxed. Meanwhile, all success to TJN with its good work.



It is striking how well the books by Fred Harrison and Richard Werner (see Item 3) complement each other, though neither author seems to be aware of the other’s work.

Harrison's is about the pathology of a tax system which encourages fluctuating land values and house prices which cause booms and busts. Werner’s is about the pathology of a way of creating new money which, by encouraging lending for the purchase of assets like land and housing instead of investment in productive activities, also contributes to booms and busts - and explains Japan’s long drawn out economic stagnation.

Reading the two together brings home the need for serious study of the links and interactions between proposals for dealing with these two pathologies –

(1) by replacing taxes on productive activities with taxes on the value of land (and other common resources), and
(2) by transferring the creation of money from commercial banks to the state.

Support for both of these is growing, but so far separately among two different sets of academics, professionals and activists. The two approaches have much in common.

  • Both will help to smooth out the peaks and troughs of economic cycles due to house price booms and busts, and banking booms and busts. When land values are taxed, continual rises in the capital value of land - that now encourage banks to keep the vicious spiral going by offering bigger and bigger loans for land and housing purchases – will be reduced. When banks are no longer allowed to create new money, money will no longer flow immediately at birth into speculative investment in rising land and house prices.
  • Both will make it possible to reduce distortionary taxes that now damage the economy, replacing them by public revenue collected in one case from the society-created value of land and and in the other from the value of creating the public money supply.
  • Both will distribute more fairly the publicly created value of resources that should be shared in common, and remove the ‘free lunches’ now enjoyed by the landowners and banks, business corporations and rich individuals, who are now allowed to 'enclose' the value of those resources for private profit.
  • Both will open up opportunities for enterprise and work to people now excluded from them.
  • Both will discourage environmentally damaging activities, or at least stop encouraging them; and
  • Both will make the tax system and the monetary system more transparent, allowing the electorate, politicians, economists and other professionals of many kinds to see more clearly how these systems work and how to improve them.

A research project is needed on the links and interactions between the two approaches, in order to clarify the necessary reforms in tax policy and monetary policy.

It is relevant that partial applications of the two proposals have recently been or are currently being explored. For example:

(1) Capturing Growing Land Values. Local government agencies, including the Greater London Authority, are studying whether increases in property values created by rail and road transport development could provide the money to finance it, and how that could be done.

(2) State Creation of New Money. A proposal was put to the US Congress a year or two ago that the federal government should put newly created money into circulation in the form of interest-free loans to local government for infrastructure investment; and it has been proposed in several recent House of Commons Early Day Motions that the Bank of England should create money for the government to lend interest-free for public infrastructure projects, replacing loans via the much more expensive Private Finance Initiative (PFI).

The proposed research should include the following questions: would such partial approaches be useful stepping stones towards full acceptance of the basic principle that publicly created land values and the value of creating the national money supply should be sources of public revenue, not private profit? or would they risk obscuring that basic principle, and possibly even discrediting it if for local reasons some partial scheme should fail?

Click here to email me comments or suggestions on this proposed research project.


James Robertson

21st July, 2005

The Old Bakehouse, Cholsey
Oxon OX10 9NU, UK
Tel: +44 (0)1491 652346


Back to top