Whatever Happened to Henry George?


I very recently finished a pretty darned good book, Henry George's Progress and Poverty from 1879. In it, he asks some serious questions of the class of scholars then known as "political economists," specifically why more people starve where civilization is most developed, and not less.

This association of poverty with progress is the great enigma of our times. It is the central fact from which spring industrial, social, and political difficulties that perplex the world, and with which statesmanship and philanthropy and education grapple in vain. . . . So long as all the increased wealth which modern progress brings goes to build up great fortunes, to increase luxury and make sharper the contrast between the House of Have and the House of Want, progress is not real and cannot be permanent. The reaction must come. The tower leans from its foundations, and every new story but hastens the final catastrophe. To educate men who must be condemned to poverty, is but to make them restive; to base on a state of most glaring social inequality political institutions under which men are theoretically equal, is to stand a pyramid on its apex.

(Henry George, Progress and Poverty, 1879, Book I, Chapter I, Paragraph 5.)

NB: Since Mr. George's book is available online in its entirety, I have decided to reference not the page numbers, but the Book, Chapter and Paragraph to make cross-referencing that much easier.

This might be the first any of you have heard of this connection between progress, also known as the development of civilization, and poverty. But throughout his book George points out example after example supporting his initial observation. Where civilization goes, poverty and want follow.

The reason? The fact that property is allowed to be held in private hands. Take this section from Book X, Chapter V, Paragraph 19: "In the very centers of our civilization to-day are want and suffering enough to make sick at heart whoever does not close his eyes and steel his nerves." Is there something we could do? How about a full-blown miracle?

Dare we turn to the Creator and ask Him to relieve it? Supposing the prayer were heard, and at the behest with which the universe sprang into being there should glow in the sun a greater power; new virtue fill the air; fresh vigor the soil; that for every blade of grass that now grows two should spring up, and the seed that now increases fifty-fold should increase a hundred-fold! Would poverty be abated or want relieved?

Any bets out there how a sudden increase in the harvests would be met by us, we mere civilized people? To George, the answer is clear:

Manifestly no! Whatever benefit would accrue would be but temporary. The new powers streaming through the material universe could be utilized only through land. And land, being private property, the classes that now monopolize the bounty of the Creator would monopolize all the new bounty. Land owners would alone be benefited. Rents would increase, but wages would still tend to the starvation point!

His solution was simple: abolish private property. It's not as radical a suggestion as one might think, though, for George did not propose we take from all private landowners their property, but simply relieve them of the burden of holding this property without a significant land tax. A land tax differs from a property tax; improvements to the land would not be taxed, only the land - specifically the rent the land could and does command.

Here's the kicker, folks, the real reason I waded through this book. I was of course interested in an interesting read. I was far more interested, though, in a book that had been as influential as this one, but that history—no, change that to "historians"—had so thoroughly buried. Here's a bit from the forward to George's book, written by his son in 1905:

In the United States and England it was put into cheap paper editions, and in that form outsold the most popular novels of the day. In both countries, too, it ran serially in the columns of newspapers. Into all the chief tongues of Europe it was translated, there being three translations into German. Probably no exact statement of the book's extent of publication can be made; but a conservative estimate is that, embracing all forms and languages, more than two million copies of "Progress and Poverty" have been printed to date; and that including with these the other books that have followed from Henry George's pen, and which might be called "The Progress and Poverty Literature," perhaps five million copies have been given to the world.

(George, Jr.'s Forward, Paragraph 14)

Think about that number. Today, a publisher runs off a million copies to whet the reading public's appetite. Before the turn of the last century, books were far dearer, needing quite a bit more effort to produce. Only 3,000 copies of Melville's Moby Dick were run before the turn of the last century. Try as I might, I can't find numbers for a better-known American author's works. I think only Mark Twain can boast having published more under his name during his lifetime than Henry George.

Why, then, is it so likely that none of us heard of him?

To answer that question, we need only consider terms that appear, but that are seldom examined. Specifically, I'd like to consider the term "classical economics."

There are several "schools" of economics, groups of like-minded thinkers that get clumped together by era or method or bias. For example, Adam Smith is the most celebrated of the Classical thinkers in political economy (more on that term later). His 1776 book The Wealth of Nations took a strong turn away from the dominant school of political economy of the time, the French Physiocrats. Chief among these thinkers was Francois Quesnay:

Quesnay had an agricultural background and, through his studies, acquired substantial expertise in a wide range of studies including biology, medicine, warfare, international trade, political theory and to some degree even wildlife management. As for raw French politics, one could hardly have a better vantage point than Quesnay had in the king's court, where he was called "The Thinker."

(Brian Czech, Supply Shock, New Society Publishers, 2013, p. 54.)

With his agricultural background, Quesnay declared that land was the source of all wealth. The later classical political economists maintained it was a combination of land, labor and capital that created wealth, again, starting with Adam Smith.

Into that waded Henry George. George took a few years off, reading every book on political economy that he could find.

That political economy, as at present taught, does not explain the persistence of poverty amid advancing wealth in a manner which accords with the deep-seated perceptions of men . . . must, it seems to me, be due not to any inability of the science when properly pursued, but to some false step in its premises, or overlooked factor in its estimates. And as such mistakes are generally concealed by the respect paid to authority, I propose in this inquiry to take nothing for granted, but to bring even accepted theories to the test of first principles, and should they not stand the test, freshly to interrogate facts in the endeavor to discover their law.

(George, ibid, Book I, Chapter 1, Paragraph 20.)

From this reading and examination, he undertook with Progress and Poverty a point-by-point take-down of the classical scholars, pointing out and undermining every missed logical step, every overlooked reality. An amusing example:

An English economic writer of high standing, Mr. Wm. Thornton, begins an elaborate examination of the relations of labor and capital ("On Labor") by stating that he will include land with capital, which is very much as if one who proposed to teach algebra should begin with the declaration that he would consider the signs plus and minus as meaning the same thing and having the same value.

(I.2.15.)

And after he found the errors, after he pointed out the logical progressions they had missed, did George blame the leading scholars in political economy for their missed steps? Not really. Consider what George found as the true Law of Wages:

And it is impossible to read the works of the economists who since the time of Smith have endeavored to build up and elucidate the science of political economy without seeing how, over and over again, they stumble over the law of wages without once recognizing it. Yet, "if it were a dog it would bite them!" Indeed, it is difficult to resist the impression that some of them really saw this law of wages, but, fearful of the practical conclusions to which it would lead, preferred to ignore and cover it up, rather than use it as the key to problems which without it are so perplexing.

(III.6.27)

Why be fearful of those "practical conclusions?" It is simply because the wealthy fund schools. The wealthy publish books. If enough of the wealthy decide you are unfit to advise the children in the universities or publish their textbooks, you will no longer do so.

George's book threatened the very edifice of wealth, and wealth was not long to respond.

We've already defined "classical" political economists. What are the "neo-classical" thinkers? Ah, here's the rub. According to Mason Gaffney, these were the dogs of war unleashed by the wealthy on Henry George himself. After all, George "had studied the classical economists and used their tools to dissect the system."

Neo-classical economics arose in part to fill the void, to squeeze out such radical notions, and be sure nothing like the Georgist phenomenon could recur.

Are we imputing to much weight to a minor figure? We are told that Georgism withered away quietly with its founder in 1897. That, however, is warped history. One of the great derelictions of American historians is to have neglected the single-tax movement, 1901-24. It is also a warp view of "The Single Tax" as a discreet, millennial change, a quantum leap away from life as we know it. . . . Pure Georgism never "took over the whole hog," but no single philosophy ever does. Modified Georgism, melded into the Progessive Movement, helped run the USA for 17 years (1902-19) working through both major political parties. Local property taxation was modified on Georgist lines even as it rose in absolute terms. The first Federal income tax law was drafted by a Georgist (Congressman Warren With Bailey of Johnstown, Pennsylvania) with Georgist goals uppermost. Real concessions were made: the politicians heard the voters. Historians of the Populist Party and movement often note that its ideas succeeded even though the Party failed, because its ideas were cooped by major parties. Georgism was a strand of American populism, later wrapped into Progressivism.

(Mason Gaffney, Neo-classical Economics as a Stratagem against Henry George, p. 6.)

Gaffney's work traces the money thrown into the battle with the progressive (and Progressive) forces motivated by George to unseat the wealthy and return that wealth to the country in a more equitable distribution. Whole schools were founded, such as the University of Chicago with its new School of Economics. Not, mind you, School of Political Economics. The difference?

At the dawn of formal economic studies, economics and politics were considered inextricable. The pioneers of economic study were really engaged in the study of economics and politics, or "political economy," but in the history books they are called "classical economists." These classical economists . . . combined not only economic and political affairs in their studies; they also tended to have a working knowledge of many of the related sciences.

(Brian Czech, ibid.)

The "political" in the term firmly denoted the discipline as one of the "soft" sciences. Why? Because it is.

Economics is a tradesman among the sciences. It has little romantic appeal. It does not shatter atoms or weight stars: it does not beat despairing wings in the tenuous air of high philosophy. It it drab: it is plebeian.

(A.C. Pigou, Economics in Practice, Macmillan & Co., 1935, p. 2.)

However, by removing that term and simply calling the discipline "economics," the practitioners were hoping to elevate their scribblings and lecture hall ramblings into more of a "hard" science, or at least give it the imprimatur of a hard science.

Because people listen more to the hard scientists. And by redefining the science and getting people to listen, they might be able to overcome that hurdle that Pigou noted:

Now in economics proper the word ought has no place. Its business is to study what tends to happen, to trace the connection between causes and effects, to analyse the interplay of conflicting forces. It is a positive science, not a normative science. It is concerned, like physiology, to discover what effects various drugs will produce, not, like medicine, to prescribe what drugs ought to be taken. So soon as an economist begins to prescribe remedies and palliatives for social evils he is quitting the narrow boundaries of his science.

(Pigou, ibid, p. 107,)

It gets worse.

Quick pop quiz: Who can tell me the prizes Alfred Nobel endowed in his will? No use guessing: Let's just read its English translation:

"The whole of my remaining realizable estate shall be dealt with in the following way: the capital . . . shall constitute a fund, the interest on which shall be annually distributed in the form of prizes to those who, during the preceding year, shall have conferred the greatest benefit on mankind. The said interest shall be divided into five equal parts, which shall be apportioned as follows:

one part to the person who shall have made the most important discovery or invention within the field of physics;
one part to the person who shall have made the most important chemical discovery or improvement;
one part to the person who shall have made the most important discovery within the domain of physiology or medicine;
one part to the person who shall have produced in the field of literature the most outstanding work in an ideal direction;
and one part to the person who shall have done the most or the best work for fraternity between nations, for the abolition or reduction of standing armies and for the holding and promotion of peace congresses.

Notice anything missing? Yep. The Economics Prize offered on the same stage as the others Alfred endowed is not one of his making, but one started in 1968 by . . . The Bank of Sweden.

And now a brief history of the "Nobel" Prize for economics, which was established by the Bank of Sweden in honor of Alfred Nobel, who may be, according to his family who wants the prize abolished, now rolling in his grave with disgust. An activist family member calls the prize a public relations coup by economists aiming to put their field on a higher footing than it deserves. True, the prize has gone to some valuable thinkers. . . . But the committee has gotten into the habit of handing out Nobel Prizes to those who "bring rigor" to the process with pseudoscience and phony mathematics.

(Nassim Nicholas Taleb, The Black Swan: The Impact of the Highly Improbable, Random House, 2007, p. 277.)

Generally, the "pseudoscience and phony mathematics" that gets the award tends to be "pseudoscience and phony mathematics" that upholds the business practices and profits earned by established banks and investment houses. No kidding. Taleb goes into great detail on this point in his book, too much to relate in this already-long post.

This detail, though, is lost on a public unfamiliar with the history of The Sveriges Riksbank Prize in Economic Sciences in Memory of Alfred Nobel (the proper name for the award). So someone bearing such an award instantly achieves gravitas, perhaps recognition he or she simply does not deserve.

And since many of these prize recipients align themselves with the school of economic thought designed and built initially to thwart those simpletons who read a book starting in 1879, these prize winners will no doubt reinforce the buttress of opinion against this upstart Henry George.

One final point. We often hear of Karl Marx, but never, it seems, of Henry George. Why? Gaffney believes it was the shock of the 1917 Russian Revolution.

George's ideas and the allied Progressive Movement fell, not from failure to deliver, but to the Great Marathon Red Scare that has dominated much of the world from 1919 to 1989. This panic marshaled and energized rent-takers everywhere; by confusion, some of it deliberate, its victims included Georgists. It inhibited them until their message lost its vigour and excitement and became just a minor local tax reform.

Gaffney, ibid, p. 11.)

Which, ultimately, is enormously sad. When Marx died, other than family members, only 7 people attended the grave site ceremony. By contrast:

An estimated 100,000 people attended his funeral at Grand Central Palace, with countless more crowding outside and lining the streets of the funeral procession. . . . Commentators disagreed on whether it was the largest funeral in New York history or the largest since the death of Abraham Lincoln.

With that funereal contrast in mind, you tell me which was the more influential book in these United States.

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Comments

To be fair, a number of Nobel Prize winning economists (or rather, Nobel memorial prize from the Bank of Sweden) has espoused George's position, and from across the political spectrum.

e.g.,

Paul Samuelson - Winner, Nobel Memorial Prize in Economics, 1970

"Our ideal society finds it essential to put a rent on land as a way of maximizing the total consumption available to the society. ...Pure land rent is in the nature of a 'surplus' which can be taxed heavily without distorting production incentives or efficiency. A land value tax can be called 'the useful tax on measured land surplus'."

Milton Friedman - Winner, Nobel Memorial Prize in Economics, 1976.

"There's a sense in which all taxes are antagonistic to free enterprise -- and yet we need taxes. ...So the question is, which are the least bad taxes? In my opinion the least bad tax is the property tax on the unimproved value of land, the Henry George argument of many, many years ago."
Herbert Simon, Winner, Nobel Memorial Prize in Economics, 1978

"Assuming that a tax increase is necessary, it is clearly preferable to impose the additional cost on land by increasing the land tax, rather than to increase the wage tax."
Herbert Simon

James Tobin - Winner, Nobel Memorial Prize in Economics, 1981

"I think in principle it's a good idea to tax unimproved land, and particularly capital gains (windfalls) on it. Theory says we should try to tax items with zero or low elasticity, and those include sites."

Franco Modigliani, Winner, Nobel Memorial Prize in Economics, 1985

"It is important that rent of land be retained as a source of government revenue. Some persons who could make excellent use of land would be unable to raise money for the purchase price. Collecting rent annually provides access to land for persons with limited access to credit."

James Buchanan Jnr., Winner, Nobel Memorial Prize in Economics, 1986

"The landowner who withdraws land from productive use to a purely private use should be required to pay higher, not lower, taxes."

Robert Solow - Winner, Nobel Memorial Prize in Economics, 1987

"The user of land should not be allowed to acquire rights of indefinite duration for single payments. For efficiency, for adequate revenue and for justice, every user of land should be required to make an annual payment to the local government equal to the current rental value of the land that he or she prevents others from using."

William Vickrey - Winner, Nobel Memorial Prize in Economics, 1996

"Economists are almost unanimous in conceding that the land tax has no adverse side effects. ...Landowners ought to look at both sides of the coin. Applying a tax to land values also means removing other taxes. This would so improve the efficiency of a city that land values would go up more than the increase in taxes on land."

Interesting. I would like to see a list of sources for these quotes.

And, to continue the fairness, the Fauxbel Prize Committee is probably more interested in obfuscating the banking issue (ie. money creation through lending) and not the land tax issue. Pretending that banks are sacrosanct and indispensable really helps bolster a central bank's role.

Most of the quotes I believe can be sourced from the School of Cooperative Individualism

http://www.cooperative-individualism.org/georgism_01.htm

I neglected to add Stiglitz to the list as well.

"Not only was Henry George correct that a tax on land is non-distortionary, but in an equilibrium society ... tax on land raises just enough revenue to finance the (optimally chosen) level of government expenditure."