Henry George re-visited

American Journal of Economics and Sociology, The,  Nov, 2005  

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That any individual should be in a position to profit from controlling the availability of a naturally provided resource was in George's view an indefensible anachronism that frustrated productive employment and conferred unearned wealth on the possessors of land. Argued in these terms, George's proposition offered a potentially persuasive solution to the perceived shortcomings of capitalism and the paradox of poverty amidst progress.

Yet in spite of the world-wide attention that George's writing attracted and the enthusiastic endorsement of many eminent adherents, Georgism did not inspire mass political action. Fortuitously, on the critical question of the relationship between land, labour and capital, the practitioners of Marxism diverged.

Henry George was, consistently and repeatedly, an avowed exponent of a genuinely competitive free market economy in the classical tradition. For him its operation was flawed by the private appropriation of community-created land values. For Marx, on the other hand, capitalism was fatally flawed by what he saw as the inherently unequal and irreconcilable conflict between capital and labour for the rewards of productive enterprise. Choosing to overlook the fact that, historically, capital was the product of labour, Marxism in practice, notwithstanding Book 3 of Das Kapital, chose not to recognise that capital and labour were jointly aligned against land, and that the enemy of both was the private landowner who could manipulate the supply of a natural resource and reap unearned land value profits as a result of the productivity of capital and labour.

For the purposes of political action, Marx's disciples found the image of the plutocratic capitalist a more readily assimilable incitement to revolutionary fervour than that of the rent-seeking landowner whose role was less easily discernible (and who could in any case be loosely lumped together with capital owners under the pejorative appellation of capitalist). In the event, although its derivative tyrannies have since proved disastrous in practice, Marxism inspired mass political action. Georgism did not. One is left to speculate about the consequences for world history in the 20th century if Marx had not diverged in favour of a plausible but flawed revolutionary cause and had endorsed Georgist philosophy instead.

Another much earlier circumstance illustrates how--again fortuitously--conventional economic wisdom evolved antipathetically to Georgist philosophy in one critical respect. What may be the genesis of conditioned opposition to Georgism can be located within the monumental work of Adam Smith. The genius of Adam Smith identified the role of the "invisible hand" in the interaction of supply and demand, and established the rationale and theoretical framework for a free market economic system, which would subsequently accommodate the Industrial Revolution and survive effectively intact to the present day. A century earlier than Henry George, Smith spelt out the relationship between the factors of production and recognised the subversion of competition by monopoly landholding. He asserted that land values were "peculiarly" suitable for taxation. Land could not be hidden, land values were readily measurable at modest cost, and a tax on land caused least distortion to the operation of commerce and industry. Yet Adam Smith explicitly exempted vacant land (on the grounds that, while it was unused, it was not providing its owner with an income).