I think it is time to respond to the calls of the Papal Encyclicals, namely CARITAS IN VERITATE, EVANGELII GAUDIUM, LAUDATO SI on the issue of inequality. This has been a root of the many global economic problems, ending in poverty for billions of people in the world. I would like to stress on two economic sectors, which are intertwined: Real Estate and Banking.
The land price in Germany in 1970 was 12 times the price in 1950, while the ratio of consumer goods price between 1970/1950 was only 1.57 times. The property value of Tokyo Large Area in 1989 was equal to THE WHOLE PROPERTY VALUE for the United States. The rise in land price in 6 prime location in Jakarta between 1983-1996 was averagely 14 times, in a span of time less than in Germany but with the higher rise of land price in the 6 prime location in Jakarta. The case of the US is also the same: the capital gains in real estate is greater than the whole profits of the corporations/firms, which is really the creator of needed goods for the society. The idea of Post Industrial Society, stressing the primacy of services in comparison to the manufacturing is suspected to be the roots of Current Account Deficit in the US, especially the net trade deficit since 1974.
From the other side, the fractional banking system authorize the private banking system to print money, which should be the public goods. History states that the original money printing was under the auspices of the public authority, either the cult authority or the public authority. In the case of Indonesia, the state budget of Indonesia in 2013 was less then the M2, which was created by the banking system in the country.
These are: Real Estate and Banking system which is the source of economic distortion, especially the economic inequality inside a country. The thesis of Piketty, where he identified one important source of the economic inequality was from heritage wealth. Yes it is OK, but according to my analysis, it could be originated in the distortion of product distribution between labor and capital due to the wrong economic theory. (The macroeconomic assumption of the constant return to scale, CRS, while in reality it is an increasing return to scale, IRS, and by that the product distribution by the price/wage = marginal product principle). Either the Piketty’s thesis and my thesis I think have been in tandem to increase the economic inequality.
In relation to that, I would like to invite those among us who are interested to raise these two issues in the general public, in the mass media or social media. The camp of fight is on the conceptual field: Money printing should be by the STATE and the income from that used to substitute most of the taxes, especially the general low income. The land market must be regulated (it is a human heritage from our LORD) so that it will not attract more capital and profits, distorting the productive economy.
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