Henry George's Theories

Alfred Russel Wallace

[A letter to the editor, printed on page three of
The Times (London), 29 January 1884]

The writer of the review of Mr. George's "Social Problems" in The Times of Wednesday last comments with some show of justice on the deficiency of proof of his fundamental position of "increasing want with increasing wealth," and remarks:--"Yet this is what Mr. George really needs to prove. Any one can see that rich men constantly get richer, but assuredly it does not necessarily follow that poor men get, not merely comparatively and relatively, but absolutely poorer."

Now, although I think Mr. George has proved this fundamental position fairly well, yet he has done so in a very discursive manner, and chiefly by illustrations and general historical comparisons; whereas there are other and very powerful arguments which he has altogether omitted. Although to develop these fully would require an elaborate essay, yet their general nature can be briefly set forth, and as the subject is one of the greatest possible interest, I ask permission to state them in The Times, and to show that, when rich men constantly get richer, poor men necessarily get poorer.

Let us suppose, to begin with, a society in which all men are engaged in productive work and there is no great difference of condition. Much wealth would be produced, and, being distributed by free exchange, there would be no poverty and no exceptional riches. But under our present laws and customs inequality would very soon arise, and after a time we should find a certain proportion of rich men who have no need to work and who do not work. Let this proportion at first be small--say, 2 per cent. of the whole population: and the first effect evidently is that the productive labour formerly done by the whole is now done by 98 per cent. of the population, and to that extent each has to work harder. But that is only a very small part of the effect produced; for the rich men, just in proportion to their riches and to increasing luxury, divert labour from productive to unproductive channels. Not only do they employ large numbers of personal servants, but they keep a host of men employed in producing luxuries who before produced necessaries and comforts for the whole population. Showy dress and furniture, horses and carriages, feasting, entertainments, and all the varied forms of wasting money on useless trifles which arise with superfluous wealth, employ an army of labourers who are absolutely unproductive as regards the rest of the community. If in these various ways each rich man on the average employs only eight men in his service, then we have one tenth of the population practically idle; and all the food, clothing, and comforts they require have to be produced by the remaining 90 per cent., who will therefore have to work harder. Now, as wealth increases, not only does the number of those who live in luxury increase, but the amount of individual wealth increases, till millionaires, at first rare phenomena, become common as they are now. With this increase, therefore, the number of those employed unproductively in ministering to luxury increases still more rapidly, because the very servants and dependants of the rich are now themselves rich and live in luxury. Hence the proportion of unproductive to productive labour increases continually, which means in other words that the productive labourers have to work harder than ever and for longer hours, and this they would certainly do only under stress of necessity--that is, of poverty. Poverty, therefore, increases with increasing wealth; and this result is contained in the following passage from Adam Smith, Book II., chap. 3:--"Both productive and unproductive labourers, and those who do not labour at all, are all equally maintained by the annual produce of the land and labour of the country. Accordingly, therefore, as a smaller or greater proportion of it is employed in maintaining unproductive hands, the more in the one case, and the less in the other, will remain for the productive."

The same general result may be reached through another principle laid down by Adam Smith--that wealth is really command over labour or the power of purchasing labour to a practically unlimited extent. It follows that great wealth can only arise when numbers of men are forced to labour by their necessities--that is, when they are poor; and the increase of wealth necessarily implies the increase of those who are obliged to work and create that wealth, not for themselves, but for others.

Combining these two arguments, we see that if wealth goes on continually increasing, as it is admitted that it does, then poverty must go on also increasing, absolutely as well as relatively, because a smaller and smaller proportion of the population have to do the productive work of the whole population, and they can only be forced to do this by the pressure of poverty. There will be a steady progress from a period when all worked and none were either rich or poor--as in all newly-settled countries--to one where half the population are either rich or engaged in ministering to the rich, and the other half forced by poverty to continuous labour, and each step of the progress must intensify the difference. It is therefore almost equivalent to a contradiction in terms to maintain that poverty can be diminished while individual wealth goes on increasing.

I feel only too painfully that I have not put this argument so clearly and convincingly as it might be put; but I feel sure nevertheless that economists will see that it expresses a fundamental truth.