2 The essential Henry George - Part I: prolegomena

American Journal of Economics and Sociology, The,  Nov, 2003  by Louis Wasserman

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I agreed to undertake this assignment from motives practical and pedagogical, though not entirely without a touch of sentiment. There was an occasion in my undergraduate days when my academic progress depended upon a forty-minute report concerning an American philosopher. Through one of those fortuities that illumine the paths of even the dull-witted, I stumbled upon Henry George. Thereupon, as I remember, lights shone and bells rang. I proceeded to make myself the advocate of the single tax, and--since no one in class had heard of it before--my report was a resounding success. That was in the 1930s, and I have learned since how to temper my enthusiasms and moderate my aims. But such moments of discovery are to be treasured; they come far too seldom in academic life. Perhaps, then, the following summary of Progress and Poverty may serve to shine a light or to ring a bell for some student of this present generation.

It was the role of land in society that constituted the massive pre-occupation of Henry George, and the fact that the publication of his major work in 1879 generated sympathetic rumblings throughout much of the world indicated that he had touched upon a fundamental theme of political economy. It is strange, then, that the subject of land economics, particularly in its theoretical aspects, receives such scant attention at present. Perhaps this is because of the inertia that attends upon a long-institutionalized social arrangement, as differentiated from the otherwise fluid elements of an industrial economy. But it may also be that economists have simply neglected that which seemed to George of such paramount concern: the relationship of land rent to fiscal policy and the impact of both upon industrial development, income distribution, urban growth, and the like.

The land, according to both Genesis and geology, preceded the advent of man into the world, and there is no doubt that landed wealth has enjoyed a more persistent history than any other form. Even today, when a sophisticated economics has transmuted every kind of wealth into some variety of liquid capital, the land has continued to play its unique role. It is the very assumption upon which human existence is based, and the taken-for-granted foundation of all productive activity; it can be modified by man, but not created or destroyed except in tiny patches, and its essential qualities are impervious to either boom or depression.

If--as the dictum prescribes--a book should be so written that its message can be presented in a single sentence, the argument of Progress and Poverty might be stated thus: that the natural land ought everywhere to be regarded as a community, rather than as a private, resource and that its rental value should accordingly be recaptured as public revenue by the community, thereby eliminating the need of any taxes upon productive enterprise.

It is by no means adventitious that this statement combines an ethical proposition with an economic prescription. Henry George was primarily a social philosopher (the greatest this country has had, according to John Dewey) rather than a professional economist. But it was precisely the core of his conviction that the two realms of man's life, the moral and the material, must be brought into harmony, If men are degraded by the conditions of their labor, if their wages can buy no more than animal existence, or if some part of their effort is appropriated by nonproducers, then how, George asks, can such an economic system accord with either natural or human justice? He is confident that it is possible to find rational, and therefore just, principles that can be made to govern the production and distribution of wealth in society.

It is the search for such economic principles that George undertakes in his Progress and Poverty. In the course of nearly 600 pages he makes an exhaustive analysis of the principal economic categories of his time: wealth, value, labor, capital, interest, and land. His writing, it may be observed, shows evidence not only of an immense erudition but of an uncommon capacity for inductive observation and creative synthesis. His emphasis on the role of land resources in wealth production was not original--it had been formulated often since biblical days--but he gave to that theme perhaps its definitive statement. It would be difficult to discuss any aspect of land and its treatment today without touching upon the issues he raised.

The "sovereign remedy" that George proposed as the way to end poverty was to shift the entire burden of taxation from the products of labor and capital to the socially created rental value of land. Such a simplistic scheme was bound to repel many sober minds, and this fact doubtless contributed to consigning George's writings to near oblivion in economic circles. If so, it was an untimely fate. The full single tax is not a serious fiscal proposal today, if only because there are no political prospects for its adoption anywhere on a national scale. But George's central principle--that the incidence of taxation should bear on the value of land rather than upon productive enterprise and improvements--remains a lively issue of fiscal reform. Under the generic title of "land-value taxation" this principle has received wide application in such forms as the following: taxation of the land at a higher rate than the improvements thereon; full or partial exemption of improvements, the lost revenue being made up by an increased levy on the land; a surtax on absentee land-ownership; and, in the effort to reduce speculation, a high rate of tax on the profits derived from land sales. Such practices are common in Australia and New Zealand, with scattered local applications to be found in Western Canada, the Union of South Africa, and elsewhere. Denmark provides generous exemptions on improvements, offsetting this by both a higher rate on the land and a national tax on the increment of land values. (1)