The Economic Doom Loop is Here
Your friend cannot sell his house. Sales are falling through
across the country. Estate agents are watching their commissions evaporate.
Builders have stopped buying land. The housing market is not slowing down. It
is seizing up.
And here is the devastating truth that almost nobody in
power will say out loud: this is not the usual end of a property cycle. It is
not a dip before the recovery. House prices, in real terms, may not recover for
a very long time. If at all.
I know how that sounds. But the situation demands honesty,
not comfort.
Five Fires. One Room.
What we are living through is not a single crisis. It is
something far more dangerous: a doom loop, in which multiple
civilisational crises interact, amplify, and accelerate one another in ways
that no government on earth currently has the policy framework to manage.
Think about what is already in motion.
Trump’s geopolitical adventurism is cutting off food aid to
sub-Saharan Africa. That hunger becomes migration. That migration becomes a
political crisis in Europe. Meanwhile, the same chaos is strangling global
trade routes and value chains, crushing investment, hammering productivity, and
draining consumer confidence. Which feeds back into falling house prices. Which
traps your colleague who cannot sell his home. Which stalls the economy
further. Which reduces tax receipts. Which forces governments to cut welfare.
Which deepens poverty and mental illness. Which overwhelms a health service
that has already been starved of funds.
Round and round it goes. That is the doom loop.
And we are only at the beginning.
The five existential threats, which have been building
separately for years, are now beginning to collide. Climate breakdown.
Geopolitical fracture. Fiscal exhaustion. Mass migration. And the collapse of
the economic model that was supposed to hold all of this together. Right now
they are interacting at a low level. But as the global economy enters what will
be recognised as freefall before the end of this year, that interaction will
become brutal.
China: The Preview Nobody Wanted to Watch
Look at China it will not escape the doom loop. When
Evergrande, the largest property company on earth, collapsed five years ago,
the Chinese government faced a choice. It could restructure the property
market, take the pain, and begin a genuine recovery. Or it could paper over the
depression by flooding global markets with subsidised goods, keeping the
economy superficially growing and social unrest temporarily suppressed.
They chose the cover-up.
Now, as the global economy contracts and those export
markets shrivel, China cannot find buyers for its subsidised goods. Internal
discontent is rising. Millions of people are already leaving the cities and
retreating to rural ancestral villages where there is no work. The Politburo,
as authoritarian regimes invariably do when facing internal instability, will
reach for the oldest tool in the box: manufacture a crisis against an external
enemy. Taiwan becomes the pressure valve.
This is not speculation. This is the pattern of history
expressing itself in real time.
The Politicians Are Flailing
Meanwhile, the people who are supposed to be governing us
are lost.
Trump is unhinged. Starmer is fighting internal battles
within his own party whilst the country drifts. European leaders are either
unpopular or ineffective. Not one of them has a coherent framework for
navigating what is coming.
And what are the political alternatives on offer?
Farage will tell you to slash public spending and cut taxes.
The Greens will offer a nebulously defined wealth tax that will, they promise,
save us all. Both approaches are dangerously wrong.
Cutting spending in a collapsing economy does not restore
confidence. It destroys it. It strips welfare from vulnerable people at the
precise moment they need it most. It hands the stage to the autocrats. History
has watched this film before and it does not end well.
The wealth tax, meanwhile, is an economic nonsense dressed
up as radicalism. If you tax wealth, you tax the people who are producing the
goods and services that the rest of us buy. You penalise investment,
innovation, enterprise. You punish the very engine of prosperity you claim to
be defending. No wonder it never works.
Neither the left nor the right has the answer. And the
centre? The centre has been actively worse than both, presiding over the slow
construction of the very doom loop we are now trapped inside.
The Real Problem Has a Name. And Nobody in Power Will Say
It.
Here is the thing that politicians will not utter. The thing
that mainstream economists whisper about but will not shout. The thing that
could, if we allowed ourselves to understand it, genuinely transform the
prospects of this country and others.
Our tax system is structured, entirely, back to front.
We tax the things that create value. We tax wages. We tax
trade. We tax investment. We tax enterprise. Every time someone works harder,
earns more, builds a business, creates a job, we punish them for it. Economists
have a clinical term for what this produces: dead weight losses. Disincentives
baked into the foundations of the economy. Entrepreneurs who do not invest
because the after-tax return does not justify the risk. Workers who are paid
less than their labour is worth because the tax wedge between employer cost and
employee take-home is vast.
And all of this is happening whilst an entirely different
kind of wealth accumulates untaxed and largely unexamined.
Economic rent.
Economic rent is the income that flows not from work, not
from investment, not from taking risk or adding value, but simply from owning something
scarce: land, location, monopoly. When your house rises in value by £100,000
because the council built a new school nearby, because the government extended
a railway line, because the whole community grew more prosperous around you,
you did nothing to earn that £100,000. It was given to you by the community. It
is community-created wealth flowing into a private pocket.
And here is the scandal. Right now, that enormous river of
community-created wealth flows straight past the public purse and into the
accounts of landowners, rentiers, and monopolists. Meanwhile, the state asks
nurses and teachers and plumbers and delivery drivers to make up the shortfall
through income tax, National Insurance, VAT, and a hundred other taxes on their
productive activity.
We have built a system that steals from workers to subsidise
landowners. And we have done it so thoroughly, for so long, that most people
cannot even see it.
The Botswana Lesson Nobody Will Apply
The solution is not theoretical. We can watch it working in
the world right now.
Botswana, when it became independent, did something
extraordinary. It negotiated with the diamond extraction companies to retain a
substantial share of the rental value of its natural resources. The corporation
extracted and profited. Botswana kept the rent and used it to build schools,
hospitals, and infrastructure. Today Botswana is a functioning, relatively
prosperous, relatively low-corruption state in a region defined by dysfunction
and poverty.
The rest of sub-Saharan Africa, sitting on mineral wealth of
extraordinary value, remains in poverty because that rental value is stolen by
local elites, siphoned off by Western corporations, and diverted anywhere
except into the public goods of the nations that own it. An African finance
minister wrote in the Financial Times this week that natural resources feel
like a curse. He is right. But the curse is not the minerals. The curse is the
failure to retain the rental value of those minerals and use it to build a
society.
And here is the political trap that locks our own
governments into paralysis. If Britain, or France, or Germany were to go to
sub-Saharan Africa and honestly explain how to capture resource rents for
public benefit, those African governments would immediately ask the obvious
question: if this is such a brilliant idea, why on earth are you not doing it
yourselves?
We cannot answer that question. So we say nothing. And the
migration continues. And the doom loop tightens.
What the Solution Actually Looks Like
Let me be direct, because this argument is too often left
frustratingly vague.
Stop taxing wages. Stop taxing trade. Stop taxing investment
and enterprise. Scrap the entire rotten edifice of taxes on productive human
activity.
Instead, capture the economic rent. Tax the unearned
increase in land values. Tax the rental value of monopoly positions. Recover
for the community the wealth that the community itself created.
There is more money there than the Treasury currently raises
in tax. Not a little more. A lot more. And crucially, unlike taxes on wages and
enterprise, a tax on economic rent creates no deadweight loss. You cannot
outsource land to a tax haven. You cannot offshore a location. You cannot work
less hard to avoid a land value tax the way you can avoid income tax by working
fewer hours. The land simply sits there, and the value accrues to whoever holds
it. Capturing that value for the public purse is not punishment. It is justice.
Under such a system, workers keep what they earn.
Entrepreneurs invest without being penalised for success. Pension funds invest
in productive activity rather than property speculation. Communities become
more resilient. And the enormous pressure to inflate house prices, which has
distorted the entire British economy for fifty years, dissolves.
People sometimes say: but I bought my house. I have a right
to the gains. And psychologically, that is understandable. But what you
actually bought was a location, and the value of that location was created by
everyone around you: the neighbours who built a community, the government that
built the roads and the schools, the millions of workers who made the local
economy worth living in. You did not earn the land value appreciation. It was
created for you. The question is only whether it flows into your private pocket
or back into the common pool.
Scandinavia Is Happy. Why Aren’t We?
The happiest nations on earth, year after year at the top of
every index, are the Scandinavian countries.
Their citizens pay up to half their incomes in tax. And they
are not complaining. They know that if you want decent hospitals, schools with
enough teachers, and roads without craters, you pay for them. But they do not
feel penalised the way British workers do, because their systems are less
riddled with the kind of regressive, anti-productive taxation that turns work
into an exercise in futility.
We are rich enough. Britain, and the world, contains more
than enough wealth to fund everything we need. The problem is not scarcity. The
problem is that the revenue system has been constructed, generation after
generation, to divert community-created wealth away from the community and into
private pockets. We have been hoodwinked by the left and the right and the
centre alike, all of whom operate within a paradigm so thoroughly broken they
cannot see the exit even when it is pointed out to them.
The Only Way Out
The doom loop will not be stopped quickly. It has too much
momentum now. The crises are already colliding. The chaos is already here. And
it will deepen before it improves.
But here is what can change the trajectory.
Not another election. Not Farage’s slash and burn. Not a
vague wealth tax. Not a return to New Labour triangulation or Conservative
austerity rebranded.
What can change things is people becoming informed. Really
informed. Not doom-scrolling, not partisan rage, but genuinely understanding
how the tax system works, what economic rent is, why capturing it rather than
taxing productivity is the pivot point on which everything else turns.
And then getting angry. Productively angry. Talking to
neighbours. Writing to MPs. Mobilising communities. Demanding that politicians
confront the one reform they have spent generations refusing to contemplate.
Because there is a solution. An elegant, historically
proven, economically coherent solution. The tragedy is that the politicians who
could implement it are too intellectually captured by the existing paradigm to
even utter it.
That is not inevitable. It is a choice. And choices can be
changed.
The doom loop is real. But so is the exit.
Start looking for it.
Further reading: 📚 Read Fred's full thesis
at www.sharetherents.org
📖
Pre-order Fred's new book "Cheating" now:
https://shepheardwalwyn.com/product/cheating-the-human-project-and-its-betrayal/
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