The Economic Facts of Life

Edward C. Harwood

[Reprinted from the Henry George News, August, 1956]

The student who begins his reading of Progress and Poverty soon encounters these assertions:

"Now, however, we are coming into collision with facts which there can be no mistaking. From all parts of the civilized world come complaints of industrial depression; of labor condemned to involuntary idleness; of capital massed and wasting; of pecuniary distress among business men; of want and suffering and anxiety among the working classes."(p.5)

"And, unpleasant as it may be to admit it, it is at last becoming evident that the enormous increase in productive power which has marked the present century and is still going on with accelerating ratio, has no tendency to extirpate poverty or to lighten the burdens of those compelled to toil."(p.8)

"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. From it come the clouds that overhang the future of the most progressive and self-reliant nations." (p.10)

If the student is a young man or woman whose adult experience includes only the years since 1941 or 1942, he may throw the book aside in the belief that it deals, at best, with circumstances that may once have existed but have long since been changed. Even if the student is of middle age or older, his personal experience of the Great Depression (1929-1933) may not have been such as to make him aware of any serious economic difficulties.

At worst during the depression years, about 25 per cent of those willing to work were unemployed. Many of the remaining 75 per cent were better off than they had ever been before because of the great decrease in the cost of living. In all probability, relatively few both comprehend the effects of the Great Depression and in addition have any reason to believe that similar developments may occur again.

Of course, millions of the current labor force in the United States are existing at or near the subsistence level today. As recently as April 1952, nearly 20 per cent of the employed men in the United States received less than $1,500 per year, according to U. S. census reports. One need only visit the slum area of any large city or the rural "slums" in numerous backwoods areas of the northern United States or the sharecroppers' homes in the South and West to realize that many families in our own country are much nearer the subsistence level than are the automobile workers in Detroit, the steel workers in Pittsburgh, and numerous others.

However, the fact remains that few prospective readers of Progress and Poverty today can be expected to believe that Henry George's work is still up to date. As for the college seniors and graduates who are being so assiduously sought by prospective employers, surely no one should expect them to think that Henry George was writing about conditions in their nation.

The foregoing should make clear the first major point of this discussion, which is that the problem described by Henry George is not even recognized as a problem by most educated people in the United States today.

After discussing what he calls "The Laws of Distribution," Henry George concludes ". . . that the increase of productive power not increase wages is because it does increase the value of land. Rent swallows up the whole gain and pauperism accompanies progress." (p.224) But today's readers have learned from seemingly authoritative sources that real wages in the United States have increased greatly in recent decades. For example, nearly everyone knows that wages in the steel industry doubled in the last 10 years, although the cost of living rose only 50 per cent, and even more striking gains in real wages for a large portion of the labor force have occurred since the turn of the century.

Fortunately for those attempting to use Progress and Poverty in learning the economic facts of life, George did insert such explanations as that on page 216 where he says, "Perhaps it may be well to remind the reader, before closing this chapter, of what has been before stated -- that I am using the word wages not in the sense of a quantity, but in the sense of a proportion. When I say that wages fall as rent rises, I do not mean that the quantity of wealth obtained by laborers as wages is necessarily less, but that the proportion which it bears to the whole produce is necessarily less. The proportion may diminish while the quantity remains the same or even increases." However, even after allowing for such supplementary explanations, many readers of Progress and Poverty remain unsatisfied with Henry George's explanation of economic events.

That the basic relationships between land and labor have been correctly described in Progress and Poverty, few men capable of understanding this book have ever denied. To an increasing extent one finds educated people all over the world agreeing that poverty in India, China, the Philippines, Japan, Egypt, much of Europe, nearly everywhere in South America and elsewhere is traceable to the fact that most of the people of those areas are a disinherited proletariat doomed to virtual slavery as long as existing land tenure arrangements remain unchanged.

But the increasing clarity with which observers in the United States as well as elsewhere see the underlying causes of poverty elsewhere in the world only serves to emphasize the importance of this question: How does it happen that, in spite of the long-run tendencies described by Henry George, here in the United States we ate enjoying prolonged prosperity and distribution of an increasing proportion (as well as an absolutely greater amount) of currently produced wealth to those who work for a living? Obviously, if a satisfactory answer to this question is not provided in Progress and Poverty, many of the keenest students will conclude, in fact already have concluded, that Henry George's explanation of economic events is either erroneous or incomplete.

One of the more able students of economics who reached this conclusion was Henry George himself, or so I assume in view of his subsequent efforts and unfinished book, The Science of Political Economy. We should remember that Progress and Poverty was written in the closing years of the nation's greatest depression, at least the most prolonged one if we accept the findings of the National Bureau of Economic Research. The depressed circumstances that had continued so long as to seem almost permanent were soon thereafter replaced by a period of prolonged prosperity. I assume that the contrast of those later years was one of the reasons why Henry George sought to investigate other aspects of economics than those dealt with in Progress and Poverty.

Although the discussion of money and credit in The Science of Political Economy was barely begun, Henry George did note that "As a matter of fact the most important use of money today is not as a medium of exchange, though that is its primary use. It is that of a common measure of value, its secondary use." (p.395) Thus he clearly saw that various purchasing media were being substituted for money! To an even greater extent is this true today.

To cut a long story short, manipulation of purchasing media has become one of the most significant economic developments of our times. For example, by means of that process the United States in the past 15 years has transferred more than $160,000,000,000 of real wealth from holders of life insurance, savings bonds, savings deposits, etc., to others including organized labor, owners of equities of all types, and various others.

In addition, the claims of land holders on currently produced real wealth have been greatly reduced for the time being in those instances where the land holders' right to rental income was fixed in dollar amount. The relatively reduced takings of monopoly privilege have temporarily freed a larger share of current production to be shared among all who labor with resulting stimulating effects similar to those that Georgists believe would result from substantial application of the single tax.

To anyone who understands what has happened, the case for Henry George's remedy is strengthened by recent developments, but to those who do not understand, developments of recent years seem to make George's proposed remedy a quaintly outmoded notion.

Perhaps it is too much to hope that this brief and inadequate discussion will convince many Georgists that they should seek what Henry George was seeking when he died, a more complete understanding of economic developments. However firm a portion of the foundation may have been provided by Henry George, the fact remains that the superstructure and perhaps some of the foundation as well remains to be done. Until more progress is made this task, there is reason to believe that most other citizens capable of being educated on this subject will not even agree with the Georgists on the nature of the problem that confronts our civilization.