.


SCI LIBRARY

The Single Tax and the Labor Movement

CHAPTER 1, PART 1

Peter Alexander Speek



[A Bulletin of the University of Wisconsin, No. 878, 1917, pp. 9-23]



Henry George was born on September 2, 1839, in Philadelphia, Pa. His father was of English-Welsh and his mother of English-Scotch blood, both descendants from middle-class stock, from whom Henry George inherited his restless ambitions and enterprising, individualistic spirit.

His schooling went no further than the first four years of the public schools. When fourteen years of age he went to work in a shop as an errand boy. Dreaming of adventures and fortune, he later made a sea voyage to Australia and India as foremast boy. After his return he started to learn typesetting. The following year rumors of marvelous opportunities for fortune in California lured him westward. In the West he tried prospecting for gold and made repeated investments in mining, but always without success. To earn his living he was compelled to set type and finally to master this trade, which gave him, besides daily bread, an opportunity for mental development already stimulated in earlier days by his fondness for books. Several attempts in the newspaper business were without material success, although they were otherwise fortunate for him. Thinking, reading, gathering materials, writing for his papers, and always occupied in the discussion of public questions, he became an intelligent and powerful journalist.

Although he was for many years a wage-earner he never considered himself as belonging to the wage-earning class, of the existence of which as a feature of our industrial system he seemed unconscious. To be a wage-earner seemed to him, and perhaps to the majority of the American wage-earners of that time, only a temporary necessity, a stepping stone toward an opportunity to start an independent enterprise which would lead to fortune. In a paper On the Profitable Employment of Time, which was one of his earliest literary attempts, he speaks of his "longing for wealth," in his eyes the "principal object of life."[1]

His failures in business and speculation were due to obvious causes; he lacked both business ability and capital. His honesty did not allow him to use doubtful methods, and the frontier life in the West, with its free-for-all natural opportunities, was disappearing. The monopolizing power of great business corporations had begun to make itself felt. Mining had so far advanced that it required special knowledge and costly appliances, representing considerable capital. This had led in turn to the appropriation of metal-bearing lands by powerful mining companies, so that few opportunities were left to individual prospectors for "washing out their wages."

The same had happened in newspaper enterprises. In most cases these were at the mercy of the Associated Press and the telegraph companies. The great established papers in combination with the news-gathering agencies seemed able to suppress competition. Henry George had two personal contests with these monopolies and was beaten in both.

His continued failures in getting above the "poverty line" set him thinking deeply about the economic life of society. While in New York in 1869 he was greatly impressed by the sight of its vast wealth side by side with the poverty and degradation of the masses. This observation led him to the pessimistic conclusion that the enormous increase in productive power had had no tendency to lighten the burdens of the toilers.

But what was the cause of such an anomaly? The answer he found mainly in his observations of frontier life in the West, supplemented by reading economic and political literature. He had read John Stuart Mill's Political Economy as early as 1868, but his conclusions were due in the main to his own observations and reflections. The transcontinental railway system had been completed in 1869. As a result of this the western cities expected to achieve rapid development of industries and great increase of population. This expectation provoked inordinate speculation in land. By capitalization of its expected future values, the price rose far above the value measured by the income from the actual use of land, Henry George was greatly impressed by this phenomenon, the consideration of which led him finally to his "great discovery", described by him as follows: "Like a flash it came upon me that there was the reason for increasing poverty with advancing wealth. With the growth of population, lands grow in value, and the men who work it must pay more for the privilege."[2]

Owing to the growth of monopoly and of industrial production on a large scale, the opportunities for wage-earners in mining, farming and manufacturing on a small scale were, in his opinion, greatly lessened. The overland railway brought from the East crowds of settlers seeking fortune. Cheap labor from the Orient continued to pour in. As a result of these conditions wages in the West began to fall. After the opening of the railroad, eastern capital flowed in abundantly, but was invested mainly in acquiring mineral and forest lands and other natural resources, rather than in productive enterprises which might have resulted in a greater demand for labor. This inflow of capital from the East brought down the rate of interest. Henry George ascribed the decline in wages and the fall in the interest rate solely to the rise of land values, and he came to the conclusion that rent rises at the expense of wages and interest. The results of the industrial depression of 1877 in the West tended to confirm this conclusion: rent continued to rise while wages and interest were falling. Thus the singletax theory of Henry George had its inception in his own observations and reflections on the frontier life of the West.

Once the theory was created he applied it to the East, to the whole world, and for all time.

In 1871 Henry George published a booklet entitled Our Land and Land Policy in which he first formulated his scheme of reform, viz.: All taxes should be laid exclusively on the value of land irrespective of improvements. As the booklet did not attract any considerable attention and was soon forgotten, Henry George perceived that a more elaborate work was necessary and decided to bring it forth. This work, entitled Progress and Poverty, was begun in the latter part of 1877 and finished in 1879. After this book he wrote a series of works, of which The Science of Political Economy was the most noteworthy. His Progress and Poverty proved to be, in its success in attracting attention, one of the greatest works of modern social reform and political economy. It has been issued in millions, of copies in all important languages of the world. This success, unexpected even to the author himself, is to be explained by several causes: the work appeared at a time when social problems and land reforms were widely agitated; the honest and sincere treatment of the subject, the striking criticism of existing economic conditions and relations, the novel, self-assured and bold conclusions, the popular language and the artistic, fascinating style, all made for its success.

Count Tolstoi,[3] whose taste as a literary artist cannot be questioned, expressed himself on the style of Progress and Poverty as follows: "How I admire his (Henry George's) speech, which is so Christian; his style, which is so clear; and his metaphors, which are so striking."[4] Karl Marx, reading Progress and Poverty, also found that Henry George was a writer of talent.[5]

Progress and Poverty really reads like a poem, especially its introductory chapter and the chapters on the effects of the remedy. In the latter he had unreservedly permitted his rich imagination to soar. "Let Imagination fill out the picture; its colors grow too bright for words to paint."[6] But, nevertheless, his master hand painted a most beautiful, harmonious and happy society which, according to his sincere expectation, would result from the adoption of the singletax. In writing Progress and Poverty he was at the height of his literary powers. This work overshadows all his other writings, in which he either repeats or explains more fully the ideas set forth in it.

Henry George's public activities consisted mainly in agitation for the singletax. He made several successful speaking tours in England and one in Australia, but the most important of his agitations was carried on by him in his native America. Here he reached his greatest success when he led organized labor in its political campaign in New York City in 1886, defeating the Republican party headed by Theodore Roosevelt, and losing by a small margin to Abram S. Hewitt, the Democratic candidate.

In the middle of 1880 he moved from the West to the city of New York and made his permanent home there, earning his living by writing and speaking, and by his connection with a publishing house. He died in New York on October 29, 1897, in the midst of a municipal campaign in which he was again candidate for mayor, and was celebrated at his death as one of the greatest reformers of the 19th century.


METHOD


Henry George's reasoning was dogmatic and his method deductive. He speaks in the preface to the fourth edition of Progress and Poverty as though he had proved his conclusions by induction, but it appears that he simply meant under this term examplifications or "citing of facts of common knowledge." When his friend Dr. Taylor of San Francisco suggested that he use the inductive method in writing Protection and Free Trade, he rejected the suggestion and expressed his preference for deduction, saying: ''What the people want is theory, and until they get a correct theory into their heads, all citing of facts is useless."[7]

First theory, consisting mainly of bare statements, then facts to fit the theory -- facts not in their causal connections nor as an historical analysis, but facts merely in the sense of illustrations; this was the method employed by the economists of the classical school, especially Ricardo, and this was the method which Henry George used.


METAPHYSICS


Henry George's general philosophy was based upon a teleological conception that the first or all-beginning cause is Spirit or God -- the creator of the world of which the all-embracing system or order is personified as Nature.8 Invariable relations of things are the "laws of nature." Being based on the will of God, they are everywhere and in all times the same -- unchangeable and eternal.[9]

Just what Henry George meant by the term "natural laws" he tried to demonstrate by several illustrations from purely physical and biological phenomena -- gravitation, magnetism, the appearance of the chick from an egg, the appearance of teeth at a certain period of infancy, and the like.[10] But "human laws are made by man and share all his weakness and frailties. They must be enforced by penalties called sanctions."[11]

The real object of science, according to Henry George, is to discover the laws of nature. Likewise the science of political economy seeks in natural law the causes of the phenomena which it investigates. ''With human law, except as furnishing illustrations and supplying subjects for its investigations, it (the science of political economy) has nothing whatever to do. It is concerned with the permanent, not with the transient, with the laws of nature, not with the laws of man."[12]

Thus the metaphysical conceptions of Henry George were those of a teleologist and physicist.


SOCIAL PHILOSOPHY


Henry George's social philosophy was industrial individualism. He advocated free, unrestricted, and unregulated competition and noninterference of the state -- laissez faire policy. Production, distribution, property rights (except property right to land) and competition were, to him, based upon natural laws, both physical and moral, interference with which was not only useless and harmful, but even impossible in the long run. Speaking of state interference, he believed it to be "evident that whatever savors of regulation and restriction is in itself bad."[13] He opposed government as a "directing and repressing power,"[14] and favored a government as an "administration of a great cooperative society … in which all the coarse passions are held in check, not by force, not by law, but by common opinion and the mutual desire of pleasing."[15]

This shows that the social philosophy of Henry George was tending toward the group of anarchistic philosophies. The chief factors in its formation were American conditions, especially the western frontier at that time, and the influence of the economists of the classical school. Henry George, criticising Socialism, stated that Anarchism was'' much better suited than Socialism to the American genius."[16]

As Henry George recognized state and laws, though only in a mild and simplified form, and taxes, though only in the sense of a tax on land values, and opposed anarchistic tactics, on the whole he cannot be classified with the anarchists proper, but only as having in his social philosophy tendencies toward Anarchism.


ECONOMIC SYSTEM


Henry George's economic system was, in the main, nearest to that of the radical wing of the Ricardian School. The current political economy explained poverty by the Malthusian doctrine of population and the wages-fund theory, both of which doctrines Henry George rejected; the former on the ground that the larger the population the stronger and more efficient its productive power, the latter for the reason that'' wages are not drawn from capital but produced by labor."[17]

He himself sought to explain poverty solely by the private appropriation of the economic rent of land, which, according to the Ricardian theory, accepted by Henry George, consisted in a surplus of the better grades of land over the poorest grades in use. Economic rent was to him unearned increment, which with the advancement of civilization and the growth of population always rises at the expense of wages and interest, these two latter, being in harmony with each other, fall together as land rents rise or rise together as land rents fall. But as the population is always growing and material production always advancing in a progressive state of society, economic rent, which indicates the ground values of land, has a tendency toward constant rise, and wages and interest have a constant tendency to fall. "Rent swallows up the whole gain and pauperism, accompanies progress"[18] was his conclusion in explanation of poverty.

Thus the foundation of his economic system was land, by which be meant "not only the surface of earth, . . . but the whole material universe outside of man himself … all natural materials, forces and opportunities."[19]

In the explanation of the law of wages he seemed to anticipate the theory that wages are determined by the product of marginal labor.[20] According to Henry George, wages are determined by the '' lowest point at which production continues . . . and wages will rise or fall as this point rises or falls,"[21] and "the rate of wages in one occupation is always dependent on the rate in another . . . until the lowest and widest stratum is reached."[22] In the demonstration of his reasonings on wages he always goes to the marginal or non-rent land. In the term labor he included all human exertion, physical and mental, and all human powers, natural and acquired.

Interest on capital he justified by the fact that some forms of capital, like plants and animals, have the power to increase by themselves, and that this "average power of increase which attaches to capital from its use in reproductive modes"[23] determines the relation between wages and interest.

To him capital was only that part of material wealth which was devoted to the aid of production, and he was inclined to treat interest as a kind of wages. The distribution of wealth was to him dual, rather dual than tripartite. ''Capital is but a form of labor, and its distinction from labor is in reality but a subdivision, just as division of labor into skilled and unskilled would be."[24] The real distribution of wealth was, therefore, between the two possessors of the two factors of production, the land owners (rents) and the producers (wages).

He came to the same conclusions in his treatment of pure profits, one category of which comprises monopoly gains, which, in turn, are due to private ownership of land; another, called wages of superintendence, belongs to the category of wages proper and ought to be considered as such; and the third, due to the elements of risk, was profit obtained by stock jobbing, speculation, and all sorts of gambling.

A monopoly price was to him a tax levied upon the consuming public by private persons. The power to make such private assessment of consumers was due to grants by the government, and to the aggregation of capital in business, the possibility of which he attributed for the most part to " a maladjustment of forces in the legislative department of government."[25] Public utility business in which free competition is not possible ought to belong to the functions of the state.[26] But he considered all monopolies trivial as compared with monopoly of land[27] -- the real mother of all monopolies, and the cause of industrial depressions, and other socio-economic evils.

This, in outline, is Henry George's economic system, from which he deduced all his reform doctrines.


THE SINGLETAX


The most important and original contribution of Henry George28 is his plan of reform known as the singletax,[29] a summary of which follows:

Everything in the mechanism of the economic life of society is in perfect natural order except one wheel, which is defective -- the private appropriation of land rent. Against this Henry George concentrated his furious attacks, because it was to him the root of all the ills in socio-economic life, low wages, low rates of interest, industrial depressions, monopolies -- in short, the basic cause of poverty. His main arguments were: (a) land, as such, was created by God and given free to all men, consequently land, being nobody's property (res nullius), ought not to be privately appropriated; (b) land in itself has no value, and the value attributed to it, being due to the growth of the community, consequently belongs to the community. The problem of returning the land value to its rightful owner he would solve by confiscation not of the land itself but simply of its economic rents, by means of a tax levied upon the values of land to the full extent of its economic rent, while all other taxes ought to be abolished on the ground that they were an unjust fine or punishment upon the exertions and products of labor. In criticism of existing taxes he went even so far as to state that "customs taxes, and improvement taxes, and income taxes, and taxes on business and occupations and on legacies and successions, are morally and economically no better than highway robbery and burglary, all the more disastrous and demoralizing because practiced by the state."[30]

He defended the interests of producers -- wage-earners, manufacturers, transporters, merchants and bankers. All these were to him in the same harmonious category of labor. If between them there existed some grievances, these were not radical and were primarily due to the unnatural private ownership in land, land speculation and land monopolies. The labor question was to him the land question. No other remedy than the singletax, according to him, would solve the problem of poverty. While greater economy in government would simplify it and put it under more direct control of the people, such reform could not cure existing poverty.[31] Education would be efficient only when the people were relieved from want.[32]

Labor unions could advance wages only temporarily and only at the expense of land rents. So the contest is not between labor and capital, but between laborers and land owners. As the latter are stronger than the former, labor unions cannot make any permanent gains in the struggle. Moreover, the labor unions in their methods are necessarily destructive and tyrannical, destroying individual freedom through organized discipline and wealth through strikes. "These combinations (labor unions) are, therefore, necessarily destructive of the very things which workmen seek to gain through them -- wealth and freedom."[32]

Nor could cooperation afford relief even if it were universal ; "It could not raise wages nor relieve poverty. This is readily seen."[33] Equally futile would be governmental interference, of which the most thorough-going form was to him socialistic. "We have passed out of the socialism of the tribal state and cannot re-enter it again except by retrogression"[34] . . . "All that is necessary to social regeneration is included in the motto of those Russian patriots called Nihilists,[35] 'Land and Liberty!' "[36]

Only the transfer of land values to the public would solve the problem of poverty; but how? Not by a mere redistribution of land, not by equal partitions of land, not by land communalization, municipalization or nationalization -- to all these Henry George objected, because they would require more governmental interference at the expense of individual freedom -- but by the singletax, i.e., by gradual transfer of all taxes to the value of land, exclusive of improvements.

The operation of the singletax would, according to him, result in higher wages and profits; in abolition of the concentration of wealth; in checking the withholding of land from use by landowners and speculators; in encouragement of improvements and industries; in emancipation from industrial depressions; in the solution of the currency problem; in simplification of government and laws; in individual freedom; in development of sciences and arts; in a word, in justice, progress and happiness such as humanity had never yet experienced.[37]



CRITICISM BY ECONOMISTS


As Henry George made his main deductions from premises and postulates like those of the Physiocrats[38] and of the Classical School, all criticisms made by the economists at that time against these two schools were turned also against him. These criticisms were made against his method, his natural rights and natural laws, his individualism and laissez faire policy, his labor theory of value, and the absolutism of his conclusions.

At first the economists did not recognize Henry George as an economist at all. Alfred Marshall thought that there was nothing new or true in Progress and Poverty, and that Henry George had not understood a single author whom he had undertaken to criticize. Marshall refrained from censuring him, however, as he considered this lack of understanding to be due to lack of special training.[39]

One of the earliest critics of Henry George among the American economists was Professor Richard T. Ely, who published a series of articles entitled "Land, Labor and Taxation" in the Independent in 1887. He pointed out the difficulties of the realization of this theory, its injustice from an ethical standpoint, and that the expected results of such reform were exaggerated by Henry George. This criticism was recognized by the latter as fair, though he disagreed with it.

All criticism by economists Henry George met with counter-criticism; he called economists Scholasticists, saw in many of them a mild kind of Socialists, and attacked their "confusion of terms and ideas.''

At a meeting of the American Social Science Association on September 5,1890, the singletax theory was attacked on different points by several economists; especially by Professor Edwin R. A. Seligman, who believed that the singletax would not lower rent in the cities but would only transfer rent to the government. In answer, Henry George, turning to the professors of political economy, said:

"You men of light and leading ... if our remedy (the single-tax) will not do, what is your remedy? It will not do to propose little goody-goody palliatives, that hurt no one, help no one, and go nowhere. . . .You must choose between the singletax or socialism."

He then warned the professors against the danger of the latter, which would bring more interference and more "bars to the liberty of citizens."[40]

At present the importance of Henry George is recognized by economists. The singletax has become more prominent in the discussion of land reform. There is hardly a standard textbook of political economy for college studies in which the singletax theory of Henry George is not treated in one way or another.

J. B. Clark, in the preface of his Distribution of Wealth, p. viii, acknowledges his indebtedness to Henry George, L. H. Haney, in his History of Economic Thought, p. 516, states that Henry George's Progress and Poverty ''aroused an interest and provoked such debate that we of a later generation still hear its echoes, while hardly realizing its intensity." Professor William A. Scott, in an article on Henry George, New World, March, 1898, pp. 87-102, criticizing the deductive reasoning of Henry George, his extreme pessimism in regard to economic tendencies, and his economic system, admits in his introductory remarks that Henry George was a "strong and inspiring personality and a great power in the civilization of our day."


CRITICISM BY SOCIALISTS


As the materialistic interpretation of history, industrial collectivism, the abolition of the wage-system -- that is, a complete transformation of existing economic order and the class struggle tactics -- as all these doctrines of the Socialists were diametrically opposed to those of Henry George, the main battle was fought between him and the Socialists, both sides having been, almost to the same extent, self-assured and bold in their reasonings and conclusions. In this conflict the sharpest clash occurred on the question of the relation between labor and capital. The Socialists claimed that the economic interests of the wage-earners and those of the capitalists were antagonistic. This claim was denied by Henry George, who held that such conflict of interests exists only between land owners and producers, including in the latter term both laborers and capitalists.

Karl Marx, criticising Progress and Poverty, found Henry George theoretically entirely behind the times -- ''total arriere"[41] -- ignorant of the nature of "surplus value", and belonging to a class of those "bourgeois economists" who would allow the wage-system and capitalist production to remain, under the delusion that, if the ground rents through taxes should be taken into the treasury of the state, all the faults of capitalistic production would disappear.[42]

Friedrich Engels criticized Henry George in the same way, pointing out that "what the Socialists demand implies a total revolution of the whole system of social production; what Henry George demands leaves the present mode of social production untouched."[43]

Henry George attacked socialism along all lines for not having a religious basis, for confusion of land with capital, for not understanding the term labor, for revolutionary tactics, for arraying class against class, for the destruction of individual freedom -- making the people the slaves of the state, and so forth. As he was opposed to anything which savored of interference (except the confiscation of the economic rent of land) he saw socialism in such movements as charity," prohibition, protection[45] and the like.


CONCLUSION


From an objective standpoint hardly anything can be said either for or against Henry George's metaphysical views, because they were a matter of his ultimate belief or religion. His doctrine of industrial individualism as a basic point in his social philosophy is suffering under the recent tendencies of our industrial life. The interference of public authority -- governmental control and regulation -- is developing both extensively and intensively. The differentiation of industrial classes and groups, all of which he included in the same category of harmonious producers or laborers, has become an obvious and generally recognized fact in our time.

It is, however, somewhat early to draw a final conclusion concerning his specific scheme of reform, -- the singletax. Although there is no one spot on earth where the singletax is realized to the extent proposed by its author and which would justify the term singletax, still the theory itself is gaining in popularity as an ingenious plan to encourage the improvement of land and to check the withholding of land from use. There is a marked tendency, especially in the cities, to tax unimproved land higher than improved.


NOTES AND REFERENCES


  1. The Life of Henry George, New York, 1904, p. 156.
  2. Ibid., p. 210.
  3. It is worthy of note that Tolstoi, as a religious Anarchist opposing the state and all kinds of taxes, accepted the indictment of the existing order by Henry George, but instead of the singletax Tolstoi advocated land communalization.
  4. The Standard, Dec. 15, 1888, p. 1.
  5. Briefe und Auszuge aus Briefen von Joh, Phil. Becker, etc. Stuttgart, 1906, p. 177.
  6. Progress and Poverty, 25th Anniversary Edition, New York, p. 469.
  7. The Life of Henry George, New York, 1904, p. 448.
    8. Henry George, The Science of Political Economy, New York, 1898, p. 54.
  8. Ibid., p. 59.
  9. Ibid., pp. 55 and 56.
  10. Ibid., p. 60.
  11. Ibid., p. 64.
  12. Progress and Poverty, 25th Anniversary Edition, New York, p. 317.
  13. Ibid., p. 457.
  14. Ibid., p. 563.
  15. The Standard, Nov. 19, 1887, p. 1.
    17. Progress and Poverty, 25th Anniversary Edition, New York, p. 49.
  16. Ibid., p. 222.
  17. Ibid., p. 37.
  18. J.B. Clark, The Distribution of Wealth, New York, 1908, p. 106.
  19. Progress and Poverty, 25th Anniversary Edition, p. 203.
  20. Ibid., p. 210.
  21. Ibid., p. 202.
  22. Progress and Poverty, 25th Anniversary Edition, p. 203.
  23. Ibid., p. 193.
  24. Ibid., p. 410.
  25. Ibid.
  26. Although many writers on economic subjects before Henry George had advocated a singletax, and sometimes a special tax on land values in different degrees and for various reasons, for example, John Locke, Some Considerations of the Consequences of Lowering the Interests and Raising the Value of Money, 1691; Marshal de Vauban, Project d'une dixme royale, 1707 ; Jacob Vanderlint, Money answers all things, 1734; Turgot, Reflections sur la formation et la distribution des richesses, 1766; Adam Smith, Wealth of Nations, 1768 and John Stuart Mill, Political Economy, 1848, still none of his predecessors had made the singletax so imperative with such high claims for its consequences. The emphasis given to this theory by Henry George and the methods by which he arrived at his results make his originality unquestionable.
  27. The term singletax was first used by Henry George in his Progress and Poverty (Book VIII, ch. IV) but its general use began in 1887 by the suggestion made by Thomas G. Shearman. George himself was never satisfled with this term, on the ground that it designated rather his method than his philosophy. (The Life of Henry George, p. 496.) In this monograph the term singletax is, however, used both for the specific plan of reform and for its underlying philosophy.
  28. A Perplexed Philosopher, New York, 1904, p. 243.
  29. Ibid., p. 301.
  30. Ibid., p. 314.
  31. Ibid.
  32. Ibid., p. 318.
  33. Russian radical-rationalists in the sixties.
  34. A Perplexed Philosopher, New York. 1904, p. 319.
  35. Progress and Poverty, Book IX, ch. I-IV.
  36. Benedict Friedlaender (Die vier Hauptrichtungen der modernen soziaten Bewegwtg, Berlin, 1901) calls Henry George a Neophysiocrat, and his speciflc singletax theory a kind of speculative scheme -- "Schematismus".
  37. The Life of Henry George, New York, 1904, pp. 435 and 436.
  38. Journal of Social Science, October, 1890.
  39. Briefe und Ausziige aus Briefen von Joh. Phil. Becker, etc. Stuttgart. 1906, pp. 176. 177.
  40. Ibid.
  41. Friedrich Engels, The Condition of the Working Classes in England, 1884, Preface.
  42. The Life of Henry George, p. 568.