The Dissing of Henry George

By Polly Cleveland

 

My father, born in 1910, told me that when he was young every educated person read Progress and Poverty.

Henry George (1839–1897) was a journalist, self-educated economist and philosopher, and eventually prominent politician. In 1879 he published Progress and Poverty, which soon became a worldwide bestseller. George argued, in very brief, that the cause of growing inequality with growing wealth was unequal ownership of land (including all natural resources). His “remedy” was to shift all taxes onto land. George did not invent his analysis or remedy. Rather, he simply lifted ideas from the classical economists including Adam Smith, David Ricardo and John Stuart Mill. But unlike them, George passionately and successfully promoted the land value tax remedy—later known as “the single tax.”

George’s followers played a major role in the early 20th Century Progressive movement. Starting even before George’s death in 1897, in the midst of his second campaign for mayor of New York City, mayors and governors around the US began implementing land taxation. They did this mostly by raising the land component of the ordinary property tax while lowering the building component. In downtown Cleveland, a bronze statue of Tom L. Johnson, Mayor from 1901 to 1909, depicts him holding a copy of Progress and Poverty. California irrigation districts were financed by plain land taxes. Under Governor Al Smith, New York City buildings were exempt from tax from 1920 to 1932. Following the 1913 amendment to the Constitution to allow a national income tax, the tax itself was designed in 1916 by a Georgist Congressman, Warren Worth Bailey, to fall strictly on the very wealthy.

The robber barons were not amused. Holders of vast undeveloped lands, they resented the bull’s-eye painted on their backs. As Mason Gaffney has documented in “Neoclassical Economics As a Stratagem against Henry George”, John D. Rockefeller, Ezra Cornell and others funded departments of economics to refute George. Gaffney quotes Simon Patten, “Nothing pleases a…single taxer better than….to use the well-known economic theories…[therefore] economic doctrine must be recast.” (1908). John Bates Clark (1847-1938) at Columbia University, led the recasting effort. Clark claimed that inequality was justified, because “the share of wealth that falls to any producing agent tends, under natural law, to equal the amount that he creates. A man’s pay tends to equal the value of the product or fraction of a product that can be specifically imputed to him.” (1898). Here began a tradition, alive to this day, of treating George and his supporters as crackpots.

On the right, there were economists like Willford I. King (1880-1962), the founder of national income statistics, and a fanatic for U.S. racial purity. In a 1924 Journal of Political Economy article entitled “The Single-Tax Complex Analyzed”, King writes: “the single taxers are not merely advocates of an economic policy but … they are a religious cult and that their intense devotion to their creed has little connection with logic or reasoning.”

On the left, Marxists whistled the same tune, for a different reason: George after all had proposed to save capitalism by tax reform, making revolution impossible. Thus we find Robert Heilbroner devoting eight snarky pages of The Worldly Philosophers to George. He deems George “messianic” and “naïve” and calls his analysis “superficial and faulty”. (1986)

In the middle, there are serious economic historians like Mark Blaug. In Economic Theory in Retrospect (1996) he presents a jumble of mutually contradictory assertions in a two-page treatment, concluding with a snide run of alternative facts:

Be that as it may, Progress and Poverty, a wonderful example of old-style classical economics, was thirty years out of date the day it was published and the idea of confiscating the income of a leading social class was deeply shocking to a generation bred on Victorian pieties. In consequence, the concept of site value taxation was never seriously discussed, and to this day the only examples of it are to be found among local governments in the United States, Australia and New Zealand.

After he was invited to lecture in Australia, where George is still popular, Blaug published a kinder view of George in an obscure European journal. When I interviewed him in 2002 at his home in Leiden, he commented that “George is threatening to the powers that be,” making it “extremely tempting to put him down.” Also, “Economists don’t want to waste time looking at threatening ideas!” And finally, “There’s an aura of quackiness about George. It is a reputation that is extremely difficult to reverse.” (See my book chapter on Blaug, and my response to the commonest criticisms of George.)

But why the quackiness? Why not attack George the way opponents attacked Marx, as an alien threat? A colleague suggests it’s the hyper enthusiasm of George’s followers. I doubt it. Every intellectual leader has his or her groupies. Look at the followers of Ayn Rand! Rather, George was as American as apple pie. He appealed to the American sense of justice, he supported a reformed and fair capitalism, his remedy was easy to understand and apply, and he was immensely popular. You can’t dismiss a leader like that as an alien threat. But you can liken him to another familiar American figure: the snake oil salesman.

The latest attack on George happens right here in the January/February 2017 issue of Dollars & Sense. In a review of James Galbraith’s new book, Inequality, Steven Pressman condescendingly puts down the author’s case for land value taxation. Bob Heilbroner must be smiling up there.

5 thoughts on “The Dissing of Henry George”

  1. Conventional economics has never sought to address the exclusion of land from the normal rules. Land is attributed an unwritten set of rules that puts it in a deeply cherished class of property where wealth can be salted away unassailed by usual taxes and claims.

    There seems to be a psychological-cultural need for those who have some wealth to place it is a safe place where it is more protected from erosion, a safe haven where it is open to accuel but not costs. Until we can challenge this attitude that allows wealth to sit safely beyond the day-to-day operation of capitalism, only to be placed out there when wanting to take a risk, and protected from tax and risk during inclement weather, it will always remain the domain of those who have wealth, like the family silver, which puts those with land at an eternal advantage – by access to mechanisms of capitalism and rent – and over those who do not.

    This privilege that creates a landarchy is entirely artificial but still deeply rooted in a cultural attitude to wealth and the state’s duty to preserve it. If we ask everyone to pay a ‘national ground rent’ to society the negative response is almost entirely one of cognitive dissonance, because the state is there to exclude private wealth from normal discourse and should never make such a direct claim in return for that protection.

    You have illustrated how right and left of conventional economics deftly ignore the trait of landarchy and baronism that runs through all societies.

  2. Love this! I find that unfashionable thinkers of the Victorian era often have a lot to offer us contemporary progressives if we can get past a whiff of the musty. I find a similar appeal in the theological writings of FD Maurice, whom I assume no self-respecting contemporary theologian would ever bother with these days, but who has a surprisingly supple spirituality to him. Thanks for bring light to this long-almost-forgotten figure.

  3. I think that the dynamics of local government created an obstacle to Geologist site value taxation. Local officials have to get reelected and they need a mechanism to rely on when challenges occur and they need campaign cash. Property taxes are ideal for this. Real estate owners are acutely aware that their future net income depends on having some control over taxes. What we have evolved into is an ongoing situation where investments in new building are routinely accompanied by “tax abatements” or (a major aspect of the current building boom in NYC) “payments [much lower] in lieu of taxes (PILOTs)”. This combines Georgist thinking with political reality. It’s the Mother’s Milk of Donald Trump’s ascent. The Grand Hyatt is based essentially on his negotiating a tax break for renovation of the Commodore Hotel, and his shopping the tax break around until Hyatt gave him the deal he needed. The Grand Hyatt’s tax abatements don’t expire until 2020.

  4. Henry George made a whistlestop to my little town of Katoomba, an hour and a half out of Sydney. This was in 1890. The Australian Government had a leading Georgist, Clyde Cameron, as part of its ministry from 1972-75. In this talk, economist Bill Mitchell gives some of this history. Though in describing George as a free trader he challenges his Georgist audience (see https://www.youtube.com/watch?v=t4KQocnphw0). Here is the website of the Sydney Georgist society (http://www.associationforgoodgov.com.au/library/book/Henry+George+in+Australia-24.html). I have come to this site through links to a recent book, “Game of Mates” which discusses land rezoning and the theft of the public benefit from this rezoning. The case is made that only our national capital operates on Georgist principles to tax this rezoning as a public good. In the rest of the country it is a free for all to take what you can. It should come as no surprise that Australia has a major speculative bubble which is locking young people out of the housing market in our capital cities. Thanks for a great blog. Your blog was mentioned in one of the promo pieces for the book.

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