Tags: Financial Markets | copernicus | ptolemy | roosevelt

Henry George Knew How to End Economic Inequality

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Tuesday, 13 March 2018 01:01 PM Current | Bio | Archive

Adam Smith (1723-1790) and Karl Marx (1818-1883) were extremely influential economic philosophers. Both remain secular patron saints today, Smith for capitalists, and Marx for communists. (Some critics jest that atheistic communists believe "there is no God, and Marx was his true prophet.")

Smith and Marx had much to say but have been ill-served by uncritical followers. Marx complained, quoting Heinrich Heine, that "I have sown dragons' teeth and harvested fleas."

The most unfortunate thing about them today is that they deflect attention from an American whose ideas deserve serious attention.

Henry George (1839-1897) was well known in his day. His 1879 book "Progress and Poverty" was widely read. He ran for mayor of New York City in 1886, finishing second while future president Theodore Roosevelt came in third. When George died, crowds turned out to mourn. People debated whether his was the largest funeral in New York history or just the biggest since Abraham Lincoln's. Yet today he is virtually unknown.

"Progress and Poverty" starts with the apparently paradoxical fact that countries enjoying the most material progress also have the most intolerable poverty, "[T]here are in the heart of our civilization large classes with whom the veriest savage could not afford to exchange."

According to George the "cause of inequality in the distribution of wealth is inequality in the ownership of land." By "land" he did not mean just mean the earth's surface. He used the term to refer to "all natural materials, forces, and opportunities . . . everything that is freely supplied by nature." In today's world, George's "land" would include things like the immensely valuable electromagnetic spectrum through which TV and cellphone signals travel.

In less developed, thinly populated societies, land was abundant. No able worker was denied access to the resources needed to produce anything. Progress destroys this happy circumstance while increasing labor specialization increases interdependency. Thus, "The efficiency of the whole body of laborers is increased at the expense of the independence of the constituents. . . . [By contrast] The aggregate produce of the labor of a savage tribe is small, but each member is capable of an independent life."

George concluded that both capitalists and workers would benefit if we could abolish the inevitably unequal private ownership of land. He proposed a society where value added to natural resources by labor would be distributed as wages, while the value contributed by natural resource scarcity would be "distributed as public benefits to all its members."

Knowing that exertion or talents will not be equal, George didn't call for equal wages. He also rejected proposals for equal division of the land, which would reduce total production in a world where large scale enterprises were increasingly efficient. Nor did he seek to abolish private property in the means of production, which would also reduce production of the social "pie" to be divided up.

Rather than confiscating land from current owners, George proposed instead a high enough property tax on land — but not on improvements — to capture all of the value contributed to production by natural resource scarcities. Since he felt that the captured "rents" could finance all government operations, he advocated abolishing all other taxes. George thus became known as advocating a "single tax" on land.

George's distinction between value produced by labor and value ("rents") deriving from natural resource scarcity was reasonable. Natural resources are like manna from heaven. No one has a greater claim on them than anyone else, since they are not created by human labor.

So why didn't George's ideas catch on? Nicolaus Copernicus (1473-1543) was a genius whose sun-centered replacement for Ptolemy's (100-168 AD) earth-centered solar system worked poorly until Johannes Kepler (1571-1630) tidied him up by replacing his circular planetary orbits with ellipses. Perhaps Henry George needed a Kepler to point out his unnecessary assumption that total rents would exactly equal governmental costs and that the benefit of these rents should be enjoyed collectively.

A better approach, consistent with George's basic analysis, would be to finance government with taxes on anything except land. Land rents captured by government would not go into the government treasury. They would be placed in a trust fund, as I suggest in "The Metaconstitutional Manifesto: A Bourgoeis Vision of the Classless Society."

Trust fund money would be distributed equally — substantially reducing economic inequality — to all individual members of the public as an Alaska-like social dividend, rather than flowing to people collectively as services.

With economic inequality an increasing problem in the United States (and elsewhere), it is a pity that Henry George is not getting more attention today. His ideas were not only ahead of his time, they are still ahead of our time.

Paul F. deLespinasse is Professor Emeritus of Political Science and Computer Science at Adrian College. He received his Ph.D. from Johns Hopkins University in 1966, and has been a National Merit Scholar, an NDEA Fellow, a Woodrow Wilson Fellow, and a Fellow in Law and Political Science at the Harvard Law School. His college textbook, "Thinking About Politics: American Government in Associational Perspective," was published 1981 and his most recent book is "The Case of the Racist Choir Conductor: Struggling With America's Original Sin." His columns have appeared in newspapers in Michigan, Oregon, and a number of other states. To read more of his reports — Click Here Now.

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Henry George (1839-1897) concluded that both capitalists and workers would benefit if we could abolish the inevitably unequal private ownership of land. Value added to natural resources by labor would be distributed as wages.
copernicus, ptolemy, roosevelt
Tuesday, 13 March 2018 01:01 PM
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