What the Followers of Henry George
Know About the Cure of Depressions

Joseph Dana Miller

[Reprinted from Land and Freedom, July-August, 1933]

The present depression caught a world without any economic knowledge. We might indeed accept with some excuse the prevailing ignorance in political circles, yet it is not so easy to explain the ignorance of collegiate and university professors. Here shallowness and superficiality have been for a generation almost unbelievable. "Smart" they were, but nothing more: cleverly ingenious in the books and pamphlets emerging from institutions of learning in never ending stream.

The old political economy, despite its imperfections, might have served as a general starting point for a partially coherent science of political economy. Adam Smith and John Stuart Mill had indicated as much of economic truth as was needed for a beginning. Instead of developing from this starting point, so full of promise, ecoonomic truth was left marooned with whatever was fundamental in these philosophies, and a new political economy begun on new lines, in which there were no fundamental principles at all, but just ingenious speculations, social inventions, and regulations and restrictions, all of which have finally developed into what is known as a "planned economy." The socialistic principles have been too strong for these youthful teachers and writers with little traditional background who have taught and written from the chairs of colleges and universities.

The Malthusian theory and the Wage Fund theory have been taught in turn. The Technocrats bloomed for a time and faded out. The regulationists, with Prof. Tugwell at their head, now have the field all to themselves. They vie with suggestions for re-making a God-made world aright. That the processes of production and exchange are natural processes, not dependent upon manmade adjustments, seem not to have occured to them. Indeed such theories are openly repudiated, despite industrial history, and despite, too, the laws for which Smith
and Mill broke ground.

We do not mention Henry George in this connection because he was not until now held in high esteem, his teachings being a direct challenge to all political economy. We speak only of the recognized fathers of the science who would have some difficulty in identifying their offspring in the over-smart, but fearfully shallow gentlemen who now seek to remake society like the child arranges his building blocks, and with as little thought to the laws that govern their arrangement.

Although business men have accepted generally and tentatively the policy of control they can do nothing else. Of course it must not be imagined that anything is settled. Those who accept the monstrous "recovery" measures of the administration do so with the implied understanding that it is entirely experimental. There is nothing in industrial history that gives us ground for anticipating any real success. Business men grasp at it as they grasp at a straw. "We are conscious of the danger that there is so little time to think," says Prof. Moley, doubtfully. And he might have added, "So little ability to think."

Business men have been so long buffeted hither and thither that like a battered prize-fighter they rush into the "clinches" to save themselves from further punishment. To change the metaphor, others have been so long taught to rely on government that they are ready to accept the present programme, though doubtfully. And as the inevitable temporary recovery which might have been anticipated in the absence of any governmental measures, shows signs of appearing, they try to pluck up hope, and whistle as they plod through the dark forest and persuade themselves that there is a faint glimmer of dawn in the distance.

Such temporary revival must always be the effect of inflation or anticipated inflation. It is a method of applying oxygen to the very sick patient. But permanent recovery cannot be artificially induced. What we see is but the articulation caused by an artificial respirant. This we must be prepared for, and while it will be hailed as a triumph of the Tugwell-Moley-Roosevelt experiment, we who know better should be trained to meet the arguments that will be urged for it. We know, that, despite the perpetual smile of our President, which ere long will turn to a grimmace, the whole recovery measure is what Alfred E. Smith calls it in his picturesque language, "bologny." We can watch the outcome with a different kind of confidence than is shared by the administration.

We know the jigsaw puzzle that was handed out by protectionists, which was something like this. We will give you, said the protectionists to the worker, a system that will raise your wages; to you, the manufacturer, a system that will increase your profits; to you, the consumer, a system that will lower prices. The manufacturer was to be benefited by legislation that would force him to lower prices and raise wages. The workingman was to receive this increase in wages from increased profits. And though they told you that cheapness was not desirable, nevertheless to the consumer prices were to be reduced!
The Moley-Tugwell-Roosevelt school being arch protectionists, has a somewhat similar jigsaw puzzle. It starts out to raise wages, but warns against increase of prices "runaway prices," whatever those are, are not to be allowed. We are to put more men to work, but we are to restrict the output, so the solver of the jigsaw puzzle is asked to reconcile the decreased output with more men employed to make things. And speaking generally the poverty of the people is to be decreased, to begin with, by limiting production in nine staple articles!

We must express surprise at the supine attitude of the press of the country. There is scarcely a prominent paper anywhere that has fought this monstrous departure from the old and wholesome traditions. The Times and Herald-Tribune of this city have very mildly expressed their disagreements, but not with the vigor we might have anticipated. Imagine, if you can, how Dana and Watterson would have levelled their lances against the medicine men who with strange incantations and "codes" are endeavoring to create prosperity!

It is our opportunity. We must not ignore the issue that is presented. It is enough that Congress has abdicated, that business men, because they must, have accepted this government over-lordship over all industry. It must fail of course. Even if it should succeed temporarilly every gain would be absorbed by speculative land rent. But it will not even succeed temporarilly. Government must break down under the strain put upon it. The whole recovery plan will collapse because it is based upon false economics. Already we are informed by the press of the country that the administration is exercised over the "apparent reluctance of industry to cooperate."

It is not reassuring to read the pronouncements of those concerned with the administration of the Recovery Act. General Hugh Johnson, the chief administrator, stated the problem, if not completely yet forcibly, and indeed with a fine sympathy for those who are victims of the depression. A kindly man, but no better informed than his associates. He says the trade associations become under the Act "almost a part of government."

Daniel E. Richberg, who is general counsel to the Industrial Recovery Administration, is more candid, perhaps we should say more thoroughgoing, for he is quite explicit in his statement that the industries if they will not willingly cooperate will be forced to do so, and thus boldly announced his conclusions:

"Unless industry is sufficiently socialized by its private owners and managers so that great essential industries are operated under public obligations appropriate to the public interest in them the advance of political control over private industry is inevitable."

Indeed, it is inevitable. The government has taken the first step toward state socialism. Frightened at Mr. Richberg's address the partisans of the President have hastened to voice their disclaimers. It is no use. If Mr. Richberg is more frank than General Johnson it is because he sees clearer that socialism is the haven for which all sails are set. It is not that Johnson would preserve some semblance of democracy, or that Richberg wants the socialism he pictures as inevitable. The important thing is that there is only one possible outcome. Unless we reverse our course we are heading for the extreme of socialism.

And where the path of freedom is so plain!

"I do not go all the way with him," said the President of Henry George. That means, as we said, that he goes part of the way with him. Does he not realize that to go even part of the way with him is to reveal the insufficiency of codes and incantations. What is needed to effect recovery and to make the country really and permanently prosperous is to get back the earth from the small proportion of the people who now own and control it. General Johnson talks about the "employers." The earth is the employer. Men do not employ other men; they employ themselves. Capital is not an employer; capital is merely the associate with labor in the work of production. This, is elementary economics. We ask General Johnson's pardon for assuming that he is unfamiliar with it. He talks as if he were.

Senator Bailey of North Carolina, in the contents of an excellent speech against the Recovery Act, speaking of the causes of the depression: "I do not confess to comprehend the situation." He proved it by his opening remarks when he said that "the number of men employed is determined absolutely by the amount of capital invested in productive enterprise." This is not true at all, but there was no Senator present who was prepared to controvert him. There are many school boys who could have enlightened him.

Adam went to work in the Garden of Eden. He met nobody before him naturally who had invested any capital. When the pilgrims landed from the Mayflower they employed themselves for the most part with no eye to invested capital. They went to work on the land.

If all capital invested were swept into the sea, and all land were available and free for use, everybody would be employed regardless of invested capital. Surely the genesis of production should prove the fallacy. Labor must have begun somehow without capital being previously invested. Our pioneers went out into the forest and built themselves homes which homes finally grew into cities. They had no invested capital and were not dependent upon it. They did not care a hoot about the amount of capital that Senator Bailey so confidently says determines the number of men employed. Our Senator from North Carolina, who sees some things so clearly, is grievously at fault in his political economy. What he puts forward as incontrovertably true, comparing it to the law of gravity, is simply not so. And no one corrected him, as we have said. Poor Senators!

Capital is only useful as it aids labor. Wealth springs from the magic union of labor and land. So does all capital, invested or not. Labor employs capital; otherwise capital rots. To all intents and purposes it is capital that knocks at factory doors and petitions labor for employment. Under normal conditions this would be plain to see. What deceives us is that labor, being deprived of access to land, causes the true position to be reversed; labor is made to appear as the slave, not the master of capital. But in the last analysis it is labor that gives capital employment, and it would be more correct for Senator Bailey to have said that the number of men at work determines absolutely the amount of invested capital and the number of capitalists gainfully employed.