What if Marx Got It Wrong?

Progress and Poverty is an economic classic which has been suppressed in the US owing to its subject matter: the elimination of poverty and economic inequality by restoring The Commons. Internationally George’s economic theories are regarded as comparable to those of Marx, Keynes and Galbraith. Despite being the third most famous American in 1879 (after Edison and Mark Twain), George’s work remains largely unknown outside of Australia, New Zealand, Hong Kong and Taiwan. Up until a month ago, I would have called myself a Marxist. Since reading Progress and Poverty, I have converted to Georgism.

Written over 130 years ago, the book provides uncanny insights for the current difficulties capitalism faces with our current paralyzing recession, massive public and personal debt and growing income inequality. Given the simplicity and clarity of the concepts George lays out, I find it extremely baffling that his theories have been eclipsed by Marx’s, which in 1879 had yet to be translated into English. The book is a must read for anyone with a serious interest in reducing economic inequality – despite my personal skepticism a land tax would work in the absence of monetary reform. The massive financialization of the global economy over the last three decades has given the ruling elite a monopoly over the money supply, as well as land and resources. Thus for George’s land tax to be fully effective, it would also be necessary to restore public control over money creation.

Why Development Always Produces Poverty

George’s goal in writing Progress and Poverty is to explain, in economic terms, why material progress (i.e. economic development) is always accompanied by poverty and increasing inequality. Employing Adam Smith’s classical definitions of labor, capitol, wages and interest and Ricardo’s Law of Rent, he argues that development must always produce poverty and inequality so long as a privileged elite holds an exclusive monopoly on the ownership of land and basic resources. He starts from the premise that land and natural resources are the source of all wealth, though wealth itself can only be created through human labor. According to George, the relative monopoly the elite hold on land allows them to capture all increases in productivity and production as “rent” increases. He gives numerous historical examples demonstrating that the continual increases eases in land value and rent that accompany development always come at the expense of workers. In fact, increases in productivity almost always result in a relative decrease, rather than increase, in wages

Maybe Capitalism Isn’t the Problem

The book also makes an extremely eloquent case that boom and bust cycles (such as we’re currently experiencing) aren’t the inevitable result of capitalism itself but of land privatization. Again with examples, he demonstrates how the monopoly the rich hold on land and resources allows them to engage in speculation by holding them out of production to increase their value. This, in turn, creates the speculative bubbles which cause episodes of “industrial paralysis” when they burst – commonly known as depressions and recessions.

The History of Land Privatization

George’s approach is relatively unique for political economists in his emphasis on the role ideology plays in the economic theories that gain popular acceptance. In contemporary society, no one questions the right of a privileged elite to monopolize land and natural resources for their own benefit. However, private land (and resource) ownership is a relatively new concept originating in seventeenth century Britain with The Enclosure Act.

About a third of Progress and Poverty traces the historical evolution of private land ownership. In all human societies, the common right of all people to use the earth to support themselves has been sacrosanct. The concept of individual land ownership only emerged as societies advanced and either concentrated power in privileged classes or seized land and slaves through military conquest. Prior to the rise of Greek and Roman civilization, all land was communally owned and the notion of an individual claiming a patch of land as his exclusive possession was unthinkable. Henry George sees the mass seizure of land by the nobility (in Rome this was referred to as the latifundia) as responsible for the death of democracy in these early societies and the ultimate collapse of both civilizations. In the case of Rome, he points to the inherent advantage German barbarians had as part of a system in which every family was entitled to a share of common land. In George’s view, this egalitarianism translated into character strengths of initiative, creativity and flexibility that made it possible for small bands of individuals to overrun the once great Roman Empire.

After the Roman Empire fell, feudalism was characterized by systems of communal and exclusively private property rights that operated in parallel. A feudal estate was considered to belong to society at large. The king, as the chief representative of the people, merely granted its use in trust to church leaders and military officers in return for services rendered to the commonwealth. Churches were expected to provide for the care and welfare of the sick and poor. For their part, feudal lords were expected to defend the king’s interests militarily. As of 1879, France still held almost ten million acres of communal land. Moreover despite enclosing (privatizing) over eight million acres between 1710 and 1879, at the time Progress and Poverty was written, England still maintained two million acres as commons (though most was unsuited for agriculture).

Because they allowed the British system of private land ownership to persist in the US, George accuses the founding fathers of failing in their efforts to establish a true republic. despite abolishing heredity titles and establishing the right to vote, they failed to reestablish the communal property rights that enabled the Greek and Roman to flourish. He contends that political equality, when coexisting with wealth inequality, must always lead to either dictatorship or anarchy. He also highlights the steady social decay (crime, insanity and increasing prison populations) that always accompanies increasing income inequality.

Restoring The Commons Through a Land Tax

George proposes that the wealth inequality, recessions and numerous other evils commonly attributed to the capitalist economic model could be totally eliminated by restoring public ownership of land and resources.

Rather than advocating outright government seizure of private land, he proposes to accomplish this by imposing a tax on unimproved land roughly equivalent to its rental value. Such a system would allow landholders to preserve their right of tenure, while discouraging them from speculating by holding land and resources out of production. While ending land speculation and recessions, this type of tax would simultaneously expand land and resource access for workers and capital investment. Any productivity increases (beyond interest on capital), would accrue to the government, rather than private landholders.

With this approach, everyone whose interest as a worker or capitalist (i.e. investor) exceeds their monopoly on land would also experience direct gains. Employers would be forced to increase wages because workers would have easy access to land and self-employment opportunities. Workers, in turn, would no longer fear the technological advances (e.g. automation) that increase productivity as they would share directly in the rewards.

The government, in turn, would use revenue from the land tax to pay down debt without resorting to austerity cuts that dampen productions and to abolish taxes on wages and capital, which also discourage production.

Dr. Bramhall is a retired American psychiatrist and political refugee in New Zealand. She has published a free, downloadable non-fiction ebook 21st Century Revolution. Her first book The Most Revolutionary Act: Memoir of an American Refugee describes the circumstances that led her to leave the US in 2002. Email her at: stuartbramhall@yahoo.co.nz. Read other articles by Stuart Jeanne, or visit Stuart Jeanne's website.