10 Years After the Crash is an events series bringing together a global network of partner organisations to reflect, a decade on from the financial crisis, on three key questions: what lessons have we learned from the crash; have we taken the necessary steps to reform our economic systems in response; and how can we develop a wider understanding of what is needed to deliver a fairer, more resilient and sustainable economy?
As UK Chancellor of the Exchequer, Alistair Darling was involved at the highest levels from the outset of the financial crisis, through the heart of the storm, and played a leading role in restoring stability to global financial markets.
10 years on from the collapse of the Northern Rock bank, an early signal of the global crash to come, he reflects on what we have and haven’t learned from the crisis, how vulnerable we remain, and what we have to do next to shape a fairer future prosperity.
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The cause of the crash has been described as being due to the ease of borrowing money from banks, and the associated low interest rates payable. In my opinion this is only part of the cause for two reasons: a) we cannot properly understand how our social system of macroeconomics works when we examine only part of it (in this case the money side) and b) in fact the other cause can and has been seen and was clearly due to speculation in land values.
Not everyone would agree with this and many who for political reasons deliberately try to place the emphasis on avoiding another crash on better and stronger controls on how banks are able to do business. They add to this a theory which is not much better than when J.M. Keynes first began to look at the situation of money as a means for controlling the progress of the macro-economy.
Unfortunately this latest version called Modern Money Theory or MMT is not the proper way for understanding how the crisis was caused nor how it can be prevented, because it can be seen that land prices are now recovered and beginning to rise again, Indeed land value speculation is rife at home and in many parts of the world. You have only to look at the Trump speculation in New York hotel lands to appreciate this fact.
It was the combination of speculation in land values that created the bubble that burst in 2007 and as of today there seems to be very little attempt to stop it happening again. A not well-known school of social science named after Henry George, has claimed, with some historical justification, that this phenomena occurs every 18 years and that the next crisis in land values (if not in banking businesses) will occur in 2025, when once again the land prices will become so high that no building activity will be feasible and this important aspect of national activity will halt. The building trade has an effect on its many suppliers well distanced from the building sites themselves.
The solution to thsi dilemma was first proposed by Henry George in 1879 in his seminal book "Progress and Poverty" which is still in print and has sold at least 3 million copies. He proposes the introduction of what he calls a "Single Tax", to replace all others. Today his followers call it Land Value Taxation. This does describe it but it is not really a tax at all because it does not have the effect of slowing down production as do most of the other current ways of taxation of today. There is lots of information about this on the "Georgist" websites and (hopefully in my essay which I am adding as a second comment below.