An Introduction to the Political Economy
of Henry George
Weld Carter
[A paper written while visiting college and
university economics faculties around the United States during the
late 1950s and early 1960s. This program was funded by the Robert
Schalkenbach Foundation]
An Introduction to Henry George
Henry George, American economist and philosopher, was born in
Philadelphia in 1839 and died in New York in 1897. His major works
are:
Progress and Poverty (1879), The Land Question (1881),
Social Problems (1883), Property in Land (1884), Protection
or Free Trade? (1886), The Condition of Labor (1891), A
Perplexed Philosopher (1892), and The Science of Political
Economy (posthumous 1898).
Of all these works, Progress and Poverty first drew large-scale
attention to George. This is the book to which George Soule alludes in
his Ideas of the Great Economists, when he writes, "By far the
most famous American economic writer, author of a book which probably
had a larger world-wide circulation than any other work on economics
ever written, was Henry George, author of Progress and Poverty
(1879)" 55, p. 81).
What was the basis of the fame cited by Soule? Was George's
contribution transitory or was it lasting? Can it be ignored or is it
an essential part of our economic and philosophic literature? The late
John Dewey has said,
"It would require less than the fingers of the two
hands to enumerate those who, from Plato down, rank with Henry
George among the world's social philosophers. ...No man, no graduate
of a higher educational institution, has a right to regard himself
as an educated man in social thought unless he has some first-hand
acquaintance with the theoretical contribution of this great
American thinker" (Brown 1928, p. 2).
The Importance of Land
George is largely remembered for the single tax. But the single tax
came at the end of a long trail as a means -- the means, he said -- by
which to remedy ills previously identified and diagnosed. Behind the
single tax lay a closely knit system of thought. To understand George,
it is necessary to go behind the single tax and explore that system
for its major characteristics.
Notable in George's work is the emphasis he laid on the relation of
man to the earth. "The most important of all the material
relations of man is his relation to the planet he inhabits"
(1881, rpt. 1953, p. 61).
George might well be called a land economist, indeed, the foremost
land economist. For George, the basic fact of man's physical existence
is that he is a land animal, "who can live only on and from land,
and can use other elements, such as air, sunshine and water, only by
the use of land" (1881, rpt. 1953, p. 4). "Without either of
the three elements, land, air and water, man could not exist; but he
is peculiarly a land animal, living on its surface, and drawing from
it his supplies" (1883, rpt. 1953, p. 132).
So man not only lives off land, levying on it for its materials and
forces, but he also lives on land. His very life depends on land. "...land
is the habitation of man, the store-house upon which he must draw for
all his needs, the material to which his labor must be applied for the
sup- ply of all his desires; for even the products of the sea cannot
be taken, the light of the sun enjoyed, or any of the forces of nature
utilized, without the use of land or its products. On the land we are
born, from it we live, to it we return again- children of the soil as
truly as is the blade of grass or the flower of the field. Take away
from man all that belongs to land, and he is but a disembodied spirit"
(1879, rpt. 1958, pp. 295-96).
Land and man, in that order! These two things are the fundamentals.
They are, for instance, the fundamentals of production. It is said
that without labor, certainly, there can be no production. Similarly,
without land, clearly there can be no agricultural production or
mining production. It was just as clear to George that there could be
no production of any kind without land. There could be no factory
production, no trade, no services rendered, and none of the
multitudinous operations of town and city.
All these processes require land: a place, a spot, a site, a
location, so many acres or square feet of the earth's surface on which
to be performed. "In every form ...the exertion of human labor in
the production of wealth requires space; not merely standing or
resting space, but moving space -- space for the movements of the
human body and its organs, space for the storage and changing in place
of materials and tools and products. This is as true of the tailor,
the carpenter, the machinist, the merchant or the clerk, as of the
farmer or stock-grower, or of the fisherman or miner" (1897, rpt.
1953, p. 359).
The office building, the store, the bank, as well as the factory,
need land just as do the farm and mine. Land is needed as sites on
which to build structures. Likewise, businesses need land as the
locations on which to perform their subsequent operations.
George adds: "But it may be said, as I have often heard it said,
'We do not all want land! We cannot all become farmers!' To this I
reply that we do all want land, though it may be in different ways and
in varying degrees. Without land no human being can live; without land
no human occupation can be carried on. Agriculture is not the only use
of land. It is only one of many. And just as the uppermost story of
the tallest building rests upon land as truly as the lowest, so is the
operative as truly a user of land as is the farmer. As all wealth is
in the last analysis the resultant of land and labor, so is all
production in the last analysis the expenditure of labor upon land"
(1883, rpt. 1953, pp. 136-37).
The railroad needs land, not just for its terminals and depots but
for its very roadbeds; whoever uses the railroad uses the land that
the railroad occupies, as well as the improvements the railroad
affords. The State needs land not only for parks and reservoirs but
for schools and courts, for hospitals and prisons, and for roads and
highways with which to link its residents together.
Our homes require land, whether the home is a country estate, a city
apartment, or a room in hotel or tenement. Our diversions require
land, whether for a ride in the country, a round on the golf course, a
seat at the theatre, or a chair in the library or before the
television set. "Physically we are air-breathing, light-requiring
land animals, who for our existence and all our production require
place on the dry surface of our globe. And the fundamental perception
of the concept land -- whether in the wider use of the word as that
term of political economy signifying all that external nature offers
to the use of man, or in the narrower sense which the word usually
bears in common speech, where it signifies the solid surface of the
earth -- is that of extension; that of affording standing-place or
room" (1897, rpt. 1953, p. 352).
In George's view, man's dependence on land is universal and endless, "...for
land is the indispensible prerequisite to life" (1897, rpt. 1953,
p. 256). "What is inexplicable, if we lose sight of man's
absolute and constant dependence upon land, is clear when we recognize
it" (1883, rpt. 1953, p. 133).
Here then is the main element, the distinctive characteristic, of
George's work. In George's view, man's relation to the earth is his
primary material relation. All other influences, therefore, must be
appraised as to how they affect, or are affected by, this basic
relation. It is perhaps this to which Soule refers when he says, of
Progress and Poverty, "This book expounded a theory
developed with superb logic" (1955, p. 81).
Land vs. Products: Their Differences
In addition, George differentiated sharply between land itself and
the products -- or wealth, as he termed them -- which labor made from
the land. "In producing wealth, labor, with the aid of natural
forces, but works up, into the forms desired, pre-existing matter,
and, to produce wealth, must, therefore, have access to this matter
and to these forces -- that is to say, to land. The land is the source
of all wealth. It is the mine from which must be drawn the ore that
labor fashions. It is the substance to which labor gives the form"
(1879, rpt. 1958, p. 272).
George saw, as between land and products, certain elementary
differences. "In every essential, land differs from those things
which... [are] the product of human labor. ...It is the creation of
God; they are produced by man. It is fixed in quantity; they may be
increased illimitably. It exists, though generations come and go; they
in a little while decay and pass again into the elements" (1883,
rpt. 1953, p. 204).
Speculation
Having noted these differences, George proceeded to use them as the
basis for his examination of related areas of economics, such as
speculation. When asked how speculation worked, George responded that
a distinction must be made between speculation in land and speculation
in products.
Writing of industrial depressions, he said, "When, with the
desire to consume more, there coexist the ability and willingness to
produce more, industrial and commercial paralysis cannot be charged
either to overproduction or to overconsumption. Manifestly, the
trouble is that production and consumption cannot meet and satisfy
each other.
"How does this inability arise? It is evidently and by common
consent the result of speculation. But of speculation in what?
"Certainly not of speculation in things which are the products
of labor ...for the effect of speculation in such things, as is well
shown in current treatises that spare me the necessity of
illustration, is simply to equalize supply and demand, and to steady
the interplay of production and consumption by an action analogous to
that of a fly-wheel in a machine" (1879, rpt. 1958, p. 267). In
other words, the tendency of speculation in products is to increase
the demand for products and therefore to increase the price of
products. This increased price will induce more production, which,
increasing the supply, will tend to lower the price. Throughout this
cycle, there has been a stimulating effect on production in general.
He continued, "Therefore, if speculation be the cause of these
industrial depressions, it must be speculation in things not the
production of labor, but yet necessary to the exertion of labor in the
production of wealth -- of things of fixed quantity; that is to say,
it must be speculation in land" (1879, rpt. 1958, pp. 267-68).
How can this be? How can speculation in land cause industrial
depression? George explains, "...that there is a connection
between the rapid construction of railroads and industrial depression,
anyone who understands what increased land values mean, and who has
noticed the effect which the construction of railroads has upon land
speculation, can easily see. Wherever a railroad was built or
projected, lands sprang up in value under the influence of
speculation, and thousands of millions of dollars were added to the
nominal values which capital and labor were asked to pay outright, or
to pay in installments, as the price of being allowed to go to work
and produce wealth. The inevitable result was to check production. .."
(1879, rpt. 1958, p. 275).
The tendency of speculation in land is similar to that of speculation
in products; it increases the demand for land and thereby increases
the price of land. However, here the similarity ends. The supply of
land is fixed; as successive units of land become priced beyond the
level at which labor and capital can profitably engage in production,
an increasing (though artificial) scarcity of land develops. "The
inevitable result was to check production" (1879, rpt. 1958, p.
275).
So, according to George, another difference between land and products
is that speculation in products tends to stimulate production, whereas
speculation in land tends to check production.
The Incidence of Taxation
Another area in which George applied these inherent differences
between land and products was the field of taxation. To determine the
incidence of taxation, George had to know what was to be taxed,
products or the value of land. In each case he traced out the effect
from the essential nature of the thing to be taxed: "...all taxes
upon things of unfixed quantity increase prices, and in the course of
exchange are shifted from seller to buyer, increasing as they go.
...If we impose a tax upon buildings, the users of buildings must
finally pay it, for the erection of buildings will cease until
building rents become high enough to pay the regular profit and the
tax besides. ...In this way all taxes which add to prices are shifted
from hand to hand, increasing as they go, until they ultimately rest
upon consumers, who thus pay much more than is received by the
government. Now, the way taxes raise prices is by increasing the cost
of production, and checking supply. But land is not a thing of human
production, and taxes upon...[land value] cannot check supply.
Therefore, though a tax on...[land value] compels the land owners to
pay more, it gives them no power to obtain more for the use of their
land, as it in no way tends to reduce the supply of land. On the
contrary, by compelling those who hold land on speculation to sell or
let for what they can get, a tax on land values tends to increase the
competition between owners, and thus to reduce the price of land"
(1879, rpt. 1958, pp. 415-16).
Here, then is another derivative difference between land and
products, according to George: taxation on products causes an increase
in the price of products; taxation on the value of land causes a drop
in the price of land.
Taxes: Their Effects on Production
However, what is the effect on production of taxes levied on products
and of taxes levied on the value of land?
Of taxes levied on products, George said: "The present method of
taxation operates upon exchange like artificial deserts and mountains;
it costs more to get goods through a custom house than it does to
carry them around the world. It operates upon energy, and industry,
and skill, and thrift, like a fine upon those qualities. If I have
worked harder and built myself a good house while you have been
contented to live in a hovel, the taxgatherer now comes annually to
make me pay a penalty for my energy and industry, by taxing me more
than you. If I have saved while you wasted, I am mulct, while you are
exempt. If a man build a ship we make him pay for his temerity, as
though he had done an injury to the state; if a railroad be opened,
down comes the taxcollector upon it, as though it were a public
nuisance; if a manufactory be erected we levy upon it an annual sum
which would go far toward making a handsome profit. We say we want
capital, but if anyone accumulate it, or bring it among us, we charge
him for it as though we were giving him a privilege. We punish with a
tax the man who covers barren fields with ripening grain, we fine him
who puts up machinery, and him who drains a swamp. How heavily these
taxes burden production only those realize who have attempted to
follow our system of taxation through its ramifications, for, as I
have before said, the heaviest part of taxation is that which falls in
increased prices" (1879, rpt. 1958, p. 434).
Turning to taxation levied on the value of land, George went on to
say:
For this simple device of placing all taxes on the value of land
would be in effect putting up the land at auction to whosoever would
pay the highest rent to the state. The demand for land fixes its
value, and hence, if taxes were placed so as very nearly to consume
that value, the man who wished to hold land without using it would
have to pay very nearly what it would be worth to anyone who wanted to
use it.
And it must be remembered that this would apply, not merely to
agricultural land, but to all land. Mineral land would be thrown open
to use, just as agricultural land; and in the heart of a city no one
could afford to keep land from its most profitable use, or on the
outskirts to demand more for it than the use to which it could at the
time be put would warrant. Everywhere that land had attained a value,
taxation, instead of operating, as now, as a fine upon improvement,
would operate to force improvement (1879, rpt. 1958, p. 437).
A few pages before this he had told us that, "It is sufficiently
evident that with regard to production, the tax upon the value of land
is the best tax that can be imposed. Tax manufactures, and the effect
is to check manufacturing; tax improvements, and the effect is to
lessen improvement; tax commerce, and the effect is to prevent
exchange; tax capital, and the effect is to drive it away. But the
whole value of land may be taken in taxation, and the only effect will
be to stimulate industry, to open new opportunities to capital, and to
increase the production of wealth" (1879, rpt. 1958, p. 414).
In other words, according to George, taxation of products checks
production, whereas taxation of land values stimulates production.
The Ethics of Property
Any discussion of Henry George should include a consideration of his
ethical ideas, for throughout his works the question of right and
wrong is dominant. In Progress and Poverty, for instance, he struck
this keynote:
'...whatever dispute arouses the passions of men, the conflict is
sure to rage, not so much as to the question 'Is it wise?' as to the
question 'Is it right?'. ..I bow to this arbitrament, and accept this
test" (1879, rpt. 1958, p. 333)
George wrote as a social philosopher. Therefore his preoccupation in
the field of ethics was with the relations of man to man, rather than
with man himself -- with stealing rather than with thriftlessness.
This necessarily involves the matter of property and ownership.
Once again, the student will find George's analysis to be based on
the differences inherent in the two categories of land and products. "The
real and natural distinction is between things which are the produce
of labor and things which are the gratuitous offerings of nature.
...These two classes of things are in essence and relations widely
different, and to class them together as property is to confuse all
thought when we come to consider the justice or the injustice, the
right or the wrong of property" (1879, rpt. 1958, p. 337).
What is the moral basis of property?
Is it not, primarily, the right of a man to himself, to the use of
his own powers, to the enjoyment of the fruits of his own exertions?
... As a man belongs to himself, so his labor when put in concrete
form belongs to him.
And for this reason, that which a man makes or produces is his own,
as against all the world -- to enjoy or to destroy, to use, to
exchange, or to give. No one else can rightfully claim it, and his
exclusive right to it involves no wrong to anyone else. Thus there is
to everything produced by human exertion a clear and indisputable
title to exclusive possession and enjoyment, which is perfectly
consistent with justice, as it descends from the original producer.
...(1879, rpt. 1958, p. 334).
Here is a justification for private property in products. But what of
land, which is not produced by man? Is there any other basis from
which a justification for private property in land might be derived?
In addition, is there anything in the right of private property in
products which precludes the right of private property in land?
George explains, "Now this [the right of the individual to the
use of his own faculties] is not only the original source from which
all ideas of exclusive ownership arise ... but it is necessarily the
only source. There can be to the ownership of anything no rightful
title which is not derived from the title of the producer and does not
rest upon the natural right of the man to himself. There can be no
other rightful title, because (lst) there is no other natural right
from which any other title can be derived, and (2nd) because the
recognition of any other title is inconsistent with and destructive of
this" (1879, rpt. 1958, pp. 334-35).
To substantiate the first reason he further said,
Nature acknowledges no ownership or control in man save as the result
of exertion. In no other way can her treasures be drawn forth, her
powers directed, or her forces utilized or controlled. ...All men to
her stand upon an equal footing and have equal rights. She recognizes
no claim but that of labor, and recognizes that without respect to the
claimant. If a pirate spread his sails, the wind will fill them as
well as it will fill those of a peaceful merchantman. ...The laws of
nature are the decrees of the Creator. There is written in them no
recognition of any right save that of labor; and in them is written
broadly and clearly the equal right of all men to the use and
enjoyment of nature; to apply to her by their exertions, and to
receive and possess her reward. Hence, as nature gives only to labor,
the exertion of labor in production is the only title to exclusive
possession (1879, rpt. 1958, pp. 335-36).
As to the second reason he said:
This right of ownership that springs from labor excludes the
possibility of any other right of ownership. ...If production give to
the producer the right to exclusive possession and enjoyment, there
can rightfully be no exclusive possession and enjoyment of anything
not the production of labor, and the recognition of private property
in land is a wrong. For the right to the produce of labor cannot be
enjoyed without the right to the free use of the opportunities offered
by nature, and to admit the right of property in these is to deny the
right of property in the produce of labor. When nonproducers can claim
as rent a portion of the wealth created by producers, the right of the
producers to the fruits of their labor is to that extent denied (1879,
rpt. 1958, p. 336).
Private property in land, according to George, is unjust because it
lets owners of land refuse access to land, and thereby threatens
livelihood and life itself. Private property in land is also unjust
because it enables owners of land to levy toll on production for the
use of land; therefore it is robbery. So another difference between
products and land, in George's view, is that private property in
products is right, and private property in land is wrong.
The Ethics of Taxation
It was but a short step from the ethics of property to the ethics of
taxation. George's position here was that as labor and capital
rightfully and unconditionally own what they produce, no one can
rightfully appropriate any of their earnings; nor can the State. On
the other hand, land value is always a socially created value, never
the result of action by the owner of the land. Therefore this is a
value that must be taken by society; otherwise, those who comprise the
social whole are deprived of what is rightfully theirs. Furthermore,
to charge the owner for this value, in the form of taxation, is only
to collect from him the precise value of the benefit he receives from
society.
As to the justice of taxes on products, George spoke of "...all
taxes now levied on the products and processes of industry -- which
taxes, since they take from the earnings of labor, we hold to be
infringements of the right of property" (1881, rpt. 1953, p. 8).
Of the justice of taxes on land values, he said, "Adam Smith
speaks of incomes as 'enjoyed under the protection of the state'; and
this is the ground upon which the equal taxation of all species of
property is commonly insisted upon -- that it is equally protected by
the state. The basis of this idea is evidently that the enjoyment of
property is made possible by the state -- that there is a value
created and maintained by the community, which is justly called upon
to meet community expenses. Now of what values is this true? Only of
the value of land. This is a value that does not arise until a
community is formed, and that, unlike other values, grows with the
growth of the community. It exists only as the community exists.
Scatter again the largest community, and land, now so valuable, would
have no value at all. With every increase of population the value of
land rises; with every decrease it falls. ...
"The tax upon land values is, therefore, the most just and equal
of all taxes. It falls only upon those who receive from society a
peculiar and valuable benefit, and upon them in proportion to the
benefit they receive. It is the taking by the community, for the use
of the community, that value which is the creation of the community.
It is the application the common property to common uses" (1879,
rpt. 1958, pp.420-21).
The Single Tax
To recapitulate at this point: man is always dependent upon land for
life and living, both as the source of raw materials for his products
and as the place on which to fashion, trade, service, and enjoy these
products. Private property in land is inexpedient, for by inducing
speculation in land in good times, it brings on bad times; however,
private property in products is expedient because it provides the
incentive to produce. Private property in land is morally wrong, first
because it denies land to mankind in general, and second because it
provides a primary way for nonproducers to levy toll on producers.
However, private property in products is morally right, deriving as it
does directly from the right of a man to himself. The taxation of land
values is expedient because it stimulates production whereas the
taxation of products is inexpedient because it checks production. The
taxation of land values is naturally right, for through it the
community levies on the precise values community has created. However,
the taxation of products is morally wrong because it deprives labor
and capital of their just earnings.
This chain of reasoning, demonstrating that both justice and
expediency called for the same course of action, inevitably led George
to a "simple-yet sovereign remedy" (1879, rpt. 1958, p.
405). That remedy was: "To abolish all taxation save that upon
land values" (1879, rpt. 1958, p. i). This is the single tax,
with which George's name is so largely associated.
Some Implications of the Single Tax
As is already evident, the single tax was more than a mere fiscal
reform, because it dealt with questions of primary social morality,
and with matters that permeated the entire economy. Yet George saw
even broader implications than these.
If the conclusions at which we have arrived are correct, they will
fall under a larger generalization.
Let us, therefore, recommence our inquiry from a higher standpoint,
whence we may survey a wider field.
What is the law of human progress? (1879, rpt. 1958, p. 475).
George saw ours alone among the civilizations of the world as still
progressing; all others had either petrified or had vanished. And in
our civilization he had already detected alarming evidences of
corruption and decay. So he sought out the forces that create
civilization and the forces that destroy it.
He found the incentives to progress to be the desires inherent in
human nature, and the motor of progress to be what he called mental
power. But the mental power that is available for progress is only
what remains after nonprogressive demands have been met. These demands
George listed as maintenance and conflict.
In his isolated state, primitive man's powers are required simply to
maintain existence; only as he begins to associate in communities and
to enjoy the resultant economies is mental power set free for higher
uses. Hence, association is the first essential of progress:
And as the wasteful expenditure of mental power in conflict becomes
greater or less as the moral law which accords to each an equality of
rights is ignored or is recognized, equality (or justice) is the
second essential of progress.
Thus association in equality is the law of progress. Association
frees mental power for expenditure in improvement, and equality, or
justice, or freedom -- for the terms here signify the same thing, the
recognition of the moral law -- prevents the dissipation of this power
in fruitless struggles (1879, rpt. 1958, p. 508).
He concluded this phase of his analysis of civilization in these
words: "The law of human progress, what is it but the moral law?
Just as social adjustments promote justice, just as they acknowledge
the equality of right between man and man, just as they insure to each
the perfect liberty which is bounded only by the equal liberty of
every other, must civilization advance. Just as they fail in this,
must advancing civilization come to a halt and recede..." (1879,
rpt. 1958, p. 526).
However, as the primary relation of man is to the earth, so must the
primary social adjustment concern the relation of man to the earth.
Only that social adjustment which affords all mankind equal access to
nature and which insures labor its full earnings will promote justice,
acknowledge equality of right between man and man, and insure perfect
liberty to each.
This, according to George, was what the single tax would do. It was
why he saw the single tax as not merely a fiscal reform but as the
basic reform without which no other reform could, in the long run,
avail. This is why he said, "What is inexplicable, if we lose
sight of man's absolute and constant dependence upon land, is clear
when we recognize it" (1883, rpt. 1953, p. 133).
References
Brown, Harry G., ed. 1928.
Significant Paragraphs from Progress and Poverty. New York:
Doubleday, Doran.
George, Henry. 1879. Reprint 1958. Progress and Poverty. New
York: Robert Schalkenbach Foundation.
George, Henry. 1881. Reprint 1953. The Land Question. New
York: Robert Schalkenbach Foundation.
George, Henry. 1883. Reprint 1953. Social Problems. New York:
Robert Schalkenbach Foundation.
George, Henry, 1897. Reprint 1953. The Science of Political
Economy. New York.
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