Henry George
Henry George (September 2, 1839 – October 29, 1897) was an American political economist, and the most influential proponent of the "Single Tax" on land.
His Life
Born in Philadelphia, George went to sea at age 16 before eventually settling in California. After a failed attempt at gold mining he started to work his way up through the newspaper industry, starting as a printer and ending up an editor and proprietor. Some of his earliest articles to gain him fame were on his opinion that Chinese immigration should be restricted.
On a trip to New York George was struck by the apparent paradox that the poor in that long-established city were much worse off than the poor in less developed California. This paradox supplied the theme and title for his 1879 book Progress and Poverty, which was a huge success, selling over 3 million copies. In it George made the argument that nearly all of the wealth created by social and technological advances in a free market economy is captured by land owners and monopolists via rents, and that this concentration of unearned wealth is the root cause of poverty. George considered it a great injustice to restrict a man from using natural resources, and believed such restrictions were equivalent to slavery, a concept known as wage slavery.
George was in a position to discover this pattern, having experienced poverty himself, knowing many different societies from his travels, and living in California at a time of rapid growth. In particular he had noticed that the construction of railroads in California was pushing up land values and rents as fast or faster than wages were rising.
His Economic Theory
George developed some of the crucial features of his own theory of economics in a critique of an illustration used by Frédéric Bastiat in order to explain the nature of interest and profit.
Bastiat had asked his readers to consider James and William, both carpenters. James has built himself a plane, and has lent it to William for a year. Would James be satisfied with the return of an equally good plane a year later? Plainly not! he'll expect a board along with it, as interest. The key to a theory of interest is to understand why. Bastiat said that James had given William over that year "the power, inherent in the instrument, to increase the productivity of his labor," and wants compensation for that increased productivity.
George didn't accept this explanation. He wrote, "I am inclined to think that if all wealth consisted of such things as planes, and all production was such as that of carpenters -- that is to say, if wealth consisted but of the inert matter of the universe, and production of working up this inert matter into different shapes, that interest would be but the robbery of industry, and could not long exist." But some wealth is inherently fruitful, like a pair of breeding cattle, or a vat of grape juice soon to ferment into wine, or ... land. Planes and other sorts of inert matter (and the most lent item of all -- money itself) earns interest indirectly, only by being part of the same social "circle of exchange" with fruitful forms of wealth such as those.
His Policy Proposals
Although best known for advocating the replacement of other taxes by land taxes, Henry George formulated a comprehensive set of economic policies. Much like the modern Open Source movement, George was highly critical of restrictive patents and copyrights. George advocated replacement of patents with government supported incentives for invention and scientific investigation and dismantling of monopolies when possible – and taxation or regulation of "natural monopolies". George advocated a combination of unfettered free markets and extensive social programs made possible by taxes on land and monopolies. Modern day economists like Nobel Prize winner Milton Friedman admit that Henry George's Land tax is potentially beneficial because, unlike other taxes, land taxes tend not to affect the prices of consumer products. Modern day environmentalists have resonated with the idea of the earth as the common property of humanity – and some have endorsed the idea of substantial taxes or fees on pollution. Others, notably U.S. economist Nicolaus Tideman and U.S. activist Alanna Hartzok, continue to promote the essential Georgist idea of land value taxation.
Death and Subsequent Influence
In 1886 George ran for mayor of New York, and polled second (ahead of Theodore Roosevelt). He ran again in 1897, but died 4 days before the election. An estimated 100,000 people attended his funeral.
According to his grand-daughter Agnes de Mille, Progress and Poverty and its successors made Henry George the third most famous man in the USA, behind only Mark Twain and Thomas Edison. [1] He was also popular as a speaker, even making several speaking trips abroad to places such as Ireland and Scotland where access to land was (and still is) a major political issue. His ideas were taken up to some degree in South Africa, Taiwan, Hong Kong, and Australia – where state governments still levy a Land Value Tax, albeit low and with many exemptions. An attempt by the Liberal Government of the day to implement them in 1909 as part of the budget caused a crisis in Britain which led indirectly to reform of the House of Lords. Henry George was familiar with the work of Karl Marx – and predicted that if Marx's ideas were tried the likely result would be a dictatorship.
Henry George's popularity declined in the 20th century; however, there are still many Georgist organisations in existence, and many people who do remain famous were heavily influenced by him, such as George Bernard Shaw, Leo Tolstoy, Sun Yat Sen, Herbert Simon [2], and David Lloyd George. A follower of George, Lizzie Magie, created the board game Monopoly in 1904 to demonstrate his theories.
In his last book, Martin Luther King referenced Henry George in support of a guaranteed minimum income.[3] In the 2004 Presidential campaign, Ralph Nader mentioned Henry George in his platform.[4]
A Critique
George's writings have drawn their share of critiques. Austrian school economist Eugen von Böhm-Bawerk, for example, expressed a negative judgment on George's discussion of the carpenter's plane:
- In the first place, it is impossible to support his distinction of the branches of production into two classes, in one of which the vital forces of nature are supposed to constitute a special element which functions side by side with labour, and in the other of which this is not true. [...] The natural sciences have long since proved to us that the cooperation of nature is universal. [...] The muscular movements of the person using the plane would be of little use, if they did not have the assistance of the natural forces and properties of the plane iron.
Bibliography
- Progress and Poverty 1879
- Social Problems 1883
- The Land Question 1884
- Protection or Free Trade 1886
- A Perplexed Philosopher 1892
- The Science of Political Economy 1898