Economics/Class Relations

Henry George, The First Progressive

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Henry George(1839 – 1897) is a progressive hero that has been largely forgotten by time.  In his heyday, he was one of the most famous living Americans in the World.  Surpassed by only Thomas Edison and Mark Twain.  His most famous book was translated into dozens of languages and sold 3 million copies in his lifetime.  He was invited to speak and lecture all over the country and world, and his writings appeared in newspapers across the nation.  At his funeral in 1897, 200,000 paid their respects by filing past his casket(as a comparison, when President McKinley was assassinated 4 years later, only about 100,000 people filed past his casket.  So how did a 19th century printer, living in San Francisco , with no more than a 7th grade education become so famous?  And why was he forgotten?

Henry George went on a quest to find out why there is poverty among so much progress and wealth.  The result of his quest was a book called Progress and Poverty.  He started writing in 125 years this month.  Except for some anachronisms, the book could be mistaken for being written in any decade between then and now.  If you read it today, you could easily think it was written last year .  All the problems he describes are still problems today.  All the excuses that he debunks as causes for these problems are still repeated today.  Here is the opening ofProgress and Poverty.

THE NINETEENTH CENTURY saw an enormous increase in the ability to produce wealth. Steam and electricity, mechanization, specialization, and new business methods greatly increased the power of labor.  Who could have foreseen the steamship, the railroad, the tractor? Or factories weaving cloth faster than hundreds of weavers? Who could have heard the throb of engines more powerful than all the beasts of burden combined? Or envisioned the immense effort saved by improvements in transportation, communication, and commerce?…[snip]

…Yet we must now face facts we cannot mistake. All over the world, we hear complaints of industrial depression: labor condemned to involuntary idleness; capital going to waste; fear and hardship haunting workers. All this dull, deadening pain, this keen, maddening anguish, is summed up in the familiar phrase “hard times.”

Does that not sound like it could’ve been written last year?  Change the century and replace the inventions with more recent inventions like robotics and computers, and this could be an Op-Ed in yesterday’s New York Times.Henry George described the conditions of the poor as, in many ways, worse than ancient man.

Nevertheless, no one who faces the facts can avoid the conclusion that — in the heart of our civilization — there are large classes that even the sorriest savage would not want to trade places with. Given the choice of being born an Australian aborigine, an arctic Eskimo, or among the lowest classes in a highly civilized country such as Great Britain, one would make an infinitely better choice in selecting the lot of the savage.Those condemned to want in the midst of wealth suffer all the hardships of savages, without the sense of personal freedom. If their horizon is wider, it is only to see the blessings they cannot enjoy. I challenge anyone to produce an authentic account of primitive life citing the degradation we find in official documents regarding the condition of the working poor in highly civilized countries.

Today, conservatives berate the poor for having cell phones and TVs.  They use it as evidence thatpoverty is not a problem in America.  Henry George had an insightful response that is still relevant to this day.

Yes, in certain ways, the poorest now enjoy what the richest could not a century ago. But this does not demonstrate an improvement — not so long as the ability to obtain the necessities of life has not increased. A beggar in the city may enjoy many things that a backwoods farmer cannot. But the condition of the beggar is not better than that of an independent farmer. What we call progress does not improve the condition of the lowest class in the essentials of healthy, happy human life. In fact, it tends to depress their condition even more.

Henry George was very progressive when it came to other cultures.  At the time, it was common to blame poverty on nature or racism.  For instance, the Irish were too dumb when they depended so heavily on potatoes, India and China were overpopulated.  These were popular myths for why these countries were or had so many poor.  Henry George demolished all of them.  All he had to do was point out how well off the elites were in each of these countries.Another popular explanation of why the poor were poor, was based on good old fashionedclassism.  That is, the poor are poor because they are lazy, criminally inclined, or just generally rude(sound familiar?).  Henry George had a great retort for these people too.

In society as presently constituted, people are greedy for wealth because the conditions of distribution are so unjust. Instead of each being sure of enough, many are condemned to poverty. This is what causes the rat race and the scramble for wealth. An equitable distribution of wealth would exempt everyone from this fear. It would destroy greed for wealth, as greed for food is destroyed in polite society.On crowded steamers, manners often differed between cabin and steerage, illustrating this principle of human nature. Both had enough food. However, steerage had no regulations to insure efficient service, so meals became a scramble. In cabin, on the contrary, each was assigned a place, and there was no fear of not getting enough to eat. There was no scrambling and no waste. The difference was not in the character of the people, but simply in the arrangements. A cabin passenger transferred to steerage would participate in the greedy rush; a steerage passenger transferred to cabin would become respectful and polite.

In other words, the negative behavior attributed to the poor is not the reason they are poor.  Rather, the behavior is a result of being poor.  This argument, and all other arguments boiled down to a refutation of Social Darwinism.  The crude theory that the poor are poor because they suck, and the rich are rich because they are awesome.  Henry George expertly busted this mythology that the elite told themselves.Finally, the reason I call Henry George the “First Progressive” isn’t just because he argued against Social Darwinism.  The reason is because he was the first popular figure to do so, that didn’t blame capitalism and turn to a marxist solution to solve the problem.  From his preface to the fourth edition to Progress and Poverty.

What I have done in this book is to unite the truth perceived by Smith and Ricardo with the truth perceived by Proudhon and Lassalle. I have shown that laissez faire—in its full, true meaning—opens the way for us to realize the noble dreams of socialism.

He blamed what he called the “Land Monopoly”.  The details, and his solution, to the problem are too long for this already long post.  Just to give you an idea, he redefined the class fight from being capitalists VS. workers as Marx did, to Land(and other) Monopolists VS.  “real capitalists”workers.  His book is an easy read and is free on the web and as a pdf.  I think you’ll enjoy it if you give it a chance.(my only recommendation is to skip chapter 5 in book III – it’s a little convoluted)As for why he has been largely forgotten, I can only speculate.  Maybe because he billed himself as an “economist” yet he expounded on classic political economy.  At the time of his writing, the world of economics was moving onto the “neoclassical” economics that we are more familiar with today.  Maybe the elite wanted us to forget about him.  Unlike figures like Adam Smith and Thomas Jefferson, they couldn’t “rehabilitate” his legacy to make him appear as a conservative.  Perhaps it is as innocent as later economic figures like John Maynard Keynes over shadowing his legacy.

Whatever the reason for Henry George being forgotten, it certainly isn’t because his work is no longer relevant, nor is it because his proposed solution was a bad idea(ever city, state, or province that has tried it has had enormous growth).    Here’s to remembering a man that deserves to be remembered.

Categories: Economics/Class Relations

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  1. THEODOR HERTZKA’S CONCEPT OF LAND REFORM

    Many reformers have clearly argued for the equal right of all to the use of the earth. Disagreements exist only concerning the methods to realize it. ­Most concrete proposals offer only partial solutions and are based on coercion and expropriation. As far as I know, Hertzka’s proposal is the only literal application of the equal right to the use of the earth which would not infringe any human rights or grant additional power or money to any administrative body.

    “Hertzka combines in a unique way the demand for an abolition of private landholding with a complete economic liberalism. He wants to keep the productive associations which are to be the pillars of economic activities completely open, permitting everybody to join any of them any time. Thereby work for wages as well as exploitation becomes impossible. Even the differences in rent due to fertility and position of agricultural land would vanish in Hertzka’s system. Associations working an especially good soil would be joined by many and would therefore have to share their earnings among a greater number of cooperators than the less favoured associations.” – Translation from the article “Bodenreform” in “Woerterbuch der Volkswirtschaft”, edited by Prof. Elster, Fischer, Jena, 1898.

    Hertzka wanted all exclusive possession of agricultural lands abolished, even temporary ownership by the highest bidder. Only thus would the right of all to the use of the Earth be realized. Every other system would at least temporarily exclude some, a few immediately and many, because of the increasing population, in the future. All other proposals would only minimize but never abolish the evil.

    His reform would mean in practice that if any site of land would be claimed by one person only then he could use it alone for the time being. If later on another and finally several claimed it, then they would have to share the same land with the original user, not by subdividing it into smaller and finally uneconomic parcels but by cooperating in the cultivation of the total. The profits would have to be distributed among them according to the work and capital each has invested. If none of the participants would get more than the benefits due to his added labour and capital then the original user and later comers would not be wronged. All would profit from the more intense use of the land and a further division of labour.

    If the optimum or limits in this respect were reached then nobody would join any more. H. foresaw that in some cases working time and income would thus be reduced, at least temporarily.

    To obtain the influx of new labourers and capital desirable to “socialize” monopoly profits and to repel an excess of labour and or capital, there should be full publicity and no secrecy whatever concerning the economic activities of these associations.

    Thus a relatively small but almost continuous movement of capital and labour would prevent those exploiting a natural monopoly like land from earning much more or much less than the normal price they would obtain for their labour and capital on a free market.

    To prevent chicanery against new members and temporary monopoly pricing, these enterprises should be “open” in still another way: Everybody interested should be free to join in and to have a vote in their general meetings.

    This could not be harmful itself or seriously abused for the exploitation of the working members because, if an injustice were obviously done to them, they could either call in another, still larger general meeting pleading their rights in it or they could give notice and join other associations where they could earn a normal reward for their efforts. Thus they could avoid their exploitation by a temporary majority.

    Some productive associations would, due to the position and great fertility of the land they use, obtain an extra large profit even if they demanded only the market price for their products. To demand much less would lead to rationing with all its evils. In these cases the above described system on its own would lead to an extra large influx of labour and capital, reducing working time and earnings of the members perhaps too much. (The short working time may act as an additional attraction to some.) If the members wanted to avoid this, then they would have to oblige themselves, for some time in advance, to dedicate their excess profits to some charitable or common weal institution. Thus they could ensure that their jobs and investments would not become too popular and they would still get the normal return for their labour and capital which the market allows.

    I would prefer this more or less voluntary offering of unearned site rent for welfare purposes, which the members themselves approve of or determine, to an forced site rent collection by some government body, for some government purposes which are more or less in disagreement with the opinions and liking of those from whom it was collected. Under this system it would not be unlikely that such special monopoly earnings would be voluntarily invested in other enterprises which would help to break this monopoly.

    We have here something like a compromise between Henry George’s and Theodor Hertzka’s ideas which seems acceptable to me.

    H. wanted to apply this continuous socialization scheme based on individual freedom and initiative not only to agricultural land but to mineral resources and positional monopolies like electricity plants and railways, too. His demand to extend the principle of openness to all enterprises was closely tied up with his proposal of a central bank and clearing house supplying all capital at cost and need therefore not be dealt with here.

    I believe that full employment brought about by freedom for the issue of private money without legal tender quality, would make every worker welcome in every enterprise anyhow.

    H. did not propose to confiscate any land presently held. He wanted to introduce and demonstrate his system in a so far unsettled country in inner Africa. An attempt of over enthusiastic followers failed because of lack of funds. They thought that a new start would have to be made in a so far unsettled land because they assumed that the rent around successful enterprises based upon this system would increase and thus prevent the spread and general application of this reform. Franz Oppenheimer discovered the error in this assumption.

    I believe that H.’s plan could be realized anywhere, starting with small scale experiments. In many countries land for such experiments can be freely bought. When there are no currency restrictions and manipulations, it could be bought on long terms, using bonds as means of payment. From such small beginnings, demonstrating the rightfulness and efficiency of this system, it could gradually spread over the whole country, first by purchases only and later on by gifts. (Vinoba Bhave has so far received over 7 million acres of land for re­distribution to India’s landless peasants.) I think it would survive the free competition by all other tolerant land reform experiments.

    The alternative to purchases, force, to realize the right to the use of the earth immediately, generally, against the prejudices of the majority, would most likely lead to failure but at least to much unnecessary and unjustified bloodshed.

    Hertzka’s reform depends, though, on the successful realization of other reforms, e.g. the prevention of depressions and inflations and the abolition of closed national markets. It cannot be realized immediately, either, in a country which is in the throes of a civil or national war. But even in such situations its sincere propagation would help to bring about peace, provided it is proposed. only for volunteers and for purchased land. Its tolerance towards other reform attempts would, particularly in revolutionary times, be among its major attractions. Indirectly, it would more or less force other movements to accept tolerant programs, too and thus it would help to bring about the panarchic peace.

    Let me sum up Hertzka’s main idea: The right of free movement, settlement and work anywhere should be extended. He suggested freedom of movement into monopoly enterprises combined with a right to work in them. The “open” associations thus established were to have at any time free access to all natural resources, particularly land and minerals. The free access and open membership clauses were to eliminate without touching property rights based on labour and investments the evils of exclusive or monopoly possession of natural resources, which must be expected even from cooperative societies when they are “closed”.

    Some of Hertzka’s relevant books are: Die Gesetze der sozialen Entwicklung, Leipzig, Duncker & Humblot, 1886, Freiland, Dresden u. Leipzig, Piersons’s, 4. Auflage, 1890, Eine Reise nach Freiland, Leipzig, Reclam, 1893, Das soziale Problem, Berlin, Reimer, 1912.

    FRANZ OPPENHEIMER’S SETTLEMENT PLAN

    Oppenheimer shared most of Hertzka’s land reform ideas but did not think it necessary to make a new start with a community set up in the wilderness. 0. realized that land rent around an area where H.’s ideas are successfully carried out would not rise but rather decrease. To the extent that the “open” association would be joined by farmhands of the district, desiring to work harder but for a correspondingly increased income, other enterprises in this area would be deprived of their labourers. The wages of farmhands would thus go up and rent would be lowered accordingly. Furthermore, when the cooperative association proves to be more efficient and successful in free competition, because it makes full use of the profit motive of all participants, not only that of the owners, then the rent for “closed” land in this district will be further reduced. Thus land could be purchased cheaper and cheaper for the extension of the first association or the setting up of new ones. Gradually the purchase price for land not improvements would be reduced to naught. In the end many would join such a cooperative, offering their land title as a gift, or would “open” their land merely to obtain the labour necessary to make full use of their investments or to get the full cooperation of their remaining labourers. Only a few very able or small scale farmers and people cultivating land cooperatively, because they belong all to one family, would be able to stand the competition of the above free associations. The very able farmers would soon find out, though, that they would still be much better off and would be very welcome as managers or directors of cooperatives.

    This new freedom of movement would soon lead to still another increase of productivity – by ensuring that each association and the land it cultivates would in a free and natural way approach and stay close to its optimal size.

    Why was this reform program not yet realized anywhere? Apart from the difficulties to make any reform idea sufficiently known, even to a minority, this particular reform requires for its certain success the accomplishment of other reforms.

    Long-term credit can only be obtained easily and cheaply when there is no danger of inflation (caused by legal tender quality and monopoly of state paper currency).

    Internal and external sales of agricultural products will only be free and easy to achieve when there are no artificial currency famines any more and no national trade barriers. (Large scale unemployment would flood the first such enterprises with too many and often very unsuitable labourers. Tariffs and other restrictions of international trade would lead to unsold surpluses and bankruptcies.)

    The possibility of purchasing large enterprises not with cash but obligations gradually redeemed out of the proceeds of future production is not yet sufficiently known.

    The human element is important, too. The mentality to be either master or slave has been ingrained for thousand years and is still prevailing. Therefore, the frictions associated with every teamwork will, in the beginning, allow a successful cooperation in this field only among a few selected people. But there are practically no limits to the spread of this system in peaceful and tolerant competition with others once it is successfully demonstrated anywhere. In 1930, that is in the middle of the world depression, when not free production and the right to the use of the earth but the sale of the products was the problem, 0. had finally succeeded to establish a model settlement. But under these conditions it could not grow. Three years later the Nazis came to power and they did naturally not tolerate any social experiments. Even 0.’s books were prohibited and public libraries had to burn them. 0. managed to escape but died, in 1943, before another attempt could be made.

    0ppenheimer published a pamphlet. “Freiland in Deutschland” in 1894. His memoirs, first published in 1931, have recently been re published: “Erlebtes, Erstrebtes, Erreichtes. Lebenserinnerungen”, Joseph Melzer Verlag, Duesseldorf, Germany, DM 24980 obtainable from Erlesenes Redaktion, K. H. Zube, 6283 Freilassing, Georg Wrede Str. 7, Germany.

    http://lib.convdocs.org/docs/index-231503.html

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