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Henry George

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Protection Or Free Trade


By Henry George
Economics

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Henry George

Henry George
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Henry George (September 2, 1839 – October 29, 1897) was an American political economist and the most influential proponent of the "Single Tax" on land. He is the author of Progress and Poverty, written in 1879.

Contents

Biographical Summary

Born in Philadelphia, Pennsylvania, George went to sea, before the mast, at age 15 in April 1855 on the Hindoo. He returned to Philadelphia after 14 months at sea to become an apprentice typesetter before settling in California. After a failed attempt at gold mining he started to work his way up through the newspaper industry, starting as a printer and ending up an editor and proprietor. Some of his earliest articles to gain him fame were on his opinion that Chinese immigration should be restricted. He later retracted those early writings.

On a trip to New York City George was struck by the apparent paradox that the poor in that long-established city were much worse off than the poor in less developed California. This paradox supplied the theme and title for his 1879 book Progress and Poverty, which was a huge success, selling over 3 million copies. In it George made the argument that a sizeable portion of the wealth created by social and technological advances in a free market economy is captured by land owners and monopolists via economic rents, and that this concentration of unearned wealth is the root cause of poverty. George considered it a great injustice that private profit was being earned from restricting access to natural resources while productive activity was burdened with heavy taxes, and held that such a system was equivalent to slavery - a concept somewhat similar to wage slavery. The appropriation of oil royalties by magnates of petrol-rich countries may be seen as an equivalent form of rent-seeking activity: since natural resources are given freely by Nature rather than being products of human labor or entrepreneurship, no single individual should be allowed to acquire unearned revenues by monopolizing their commerce. The same holds true about every other mineral and biological raw resource.

George was in a position to discover this pattern, having experienced poverty himself, knowing many different societies from his travels, and living in California at a time of rapid growth. In particular he had noticed that the construction of railroads in California was pushing up land values and rents as fast or faster than wages were rising.

Policy proposals

Henry George is best known for advocating the abolition of all taxes save those on land value. By doing so, the state could avoid having to tax any other types of wealth or transaction. The clearest statement of this view is found in Progress and Poverty: "We must make land common property." [1]. George formulated a comprehensive set of economic policies. He was highly critical of restrictive patents and copyrights (though he amended his views on the latter when it was explained to him that copyrights do not constrain independent reinvention in the manner of patents). He also advocated the replacement of patents with government supported incentives for invention and scientific investigation and dismantling of monopolies when possible – and taxation or regulation of natural monopolies. Overall, he advocated a combination of unfettered free markets and significant social programs made possible by economically efficient taxes on land rent and monopolies. Modern economists like the 1976 Nobel Memorial Prize winner Milton Friedman agree that Henry George's land tax is potentially beneficial because unlike other taxes, land taxes impose no excess burden on the economy, and thus stimulate more rapid economic growth. Modern day environmentalists have resonated with the idea of the earth as the common property of humanity – and some have endorsed the idea of ecological tax reform, including substantial taxes or fees on pollution as a replacement for "command and control" regulation.

Death and subsequent influence

In 1886 George ran for mayor of New York City, and polled second (ahead of Theodore Roosevelt). He ran again in 1897, but died 4 days before the election. An estimated 100,000 people attended his funeral.

According to his grand-daughter Agnes de Mille, Progress and Poverty and its successors made Henry George the third most famous man in the USA, behind only Mark Twain and Thomas Edison. [2] He was also popular as a speaker, even making several speaking trips abroad to places such as Ireland and Scotland where access to land was (and still is) a major political issue. His ideas were taken up to some degree in South Africa, Taiwan, Hong Kong, and Australia – where state governments still levy a land value tax, albeit low and with many exemptions. An attempt by the Liberal Government of the day to implement his ideas in 1909 as part of the People's Budget caused a crisis in Britain which led indirectly to reform of the House of Lords. Henry George was familiar with the work of Karl Marx – and predicted that if Marx's ideas were tried the likely result would be a dictatorship.

Henry George's popularity declined in the 20th century; however, there are still many Georgist organizations in existence, and many people who do remain famous were heavily influenced by him, such as George Bernard Shaw, Leo Tolstoy, Sun Yat Sen, Herbert Simon [3], and David Lloyd George. A follower of George, Lizzie Magie, created a board game called The Landlord's Game in 1904 to demonstrate his theories. After further development this game led to the modern board game, Monopoly.

Notable is also Silvio Gesell's Freiwirtschaft, in which Gesell combined Henry George's ideas about land ownership and rents with his own theory about the money system and interest rates and his successive development of Freigeld.

In his last book, Martin Luther King referenced Henry George in support of a guaranteed minimum income.[4] In the 2004 Presidential campaign, Ralph Nader mentioned Henry George in his platform.[5] Congressman Dennis Kucinich has positively mentioned Henry George in speeches. [6]

The Henry George Foundation of America[7], a 501 (c) 4 non-profit foundation, was founded in 1926 by some of the leading lights of the progressive Democratic Party in Pittsburgh, Pennsylvania: Pittsburgh Mayors Scully and McNair, City Assessor Percy Williams, State Senator and Allegheny County Democratic Chairman Bernard B. McGinnis, and Councilman George Evans (driving force behind Buhl Planetarium). Its national office is now located in Philadelphia, where Henry George was born.

The Center for the Study of Economics[8], a 501 (c) 3 non-profit educational foundation, was established in 1980 as the sister organization of the Henry George Foundation of America. Its mission is to research land value taxation, to assist governments in implementation and to study the effect of land based property taxation where used. It suggests implementation where appropriate but does not support political candidates or become involved in the electoral process. The Center also gathers and disseminates articles, studies and monographs on the subject of land based taxation.


The Henry George Foundation of America and The Center for the Study of Economics played instrumental roles in helping nearly 20 Pennsylvania cities transform their local property tax into a revenue source which taxes land value more and improvement value less. As a pilot for a North American Land Value Tax Project, these organizations have created the Maryland Land Value Tax Project[9] has a means of allowing citizens, elected officials and policy analysts to estimate the net property tax change effects of an incremental implementation of Henry George's land value tax.

The Robert Schalkenbach Foundation [10], an incorporated "operating foundation," also publishes copies of George's work on economic reform and sponsors academic research into his policy proposals[11].

George's theory of interest

George developed what he saw as a crucial feature of his own theory of economics in a critique of an illustration used by Frédéric Bastiat in order to explain the nature of interest and profit.

Bastiat had asked his readers to consider James and William, both carpenters. James has built himself a plane, and has lent it to William for a year. Would James be satisfied with the return of an equally good plane a year later? Plainly not! He'd expect a board along with it, as interest. The key to a theory of interest is to understand why. Bastiat said that James had given William over that year "the power, inherent in the instrument, to increase the productivity of his labor," and wants compensation for that increased productivity.

George didn't accept this explanation. He wrote, "I am inclined to think that if all wealth consisted of such things as planes, and all production was such as that of carpenters -- that is to say, if wealth consisted but of the inert matter of the universe, and production of working up this inert matter into different shapes, that interest would be but the robbery of industry, and could not long exist." But some wealth is inherently fruitful, like a pair of breeding cattle, or a vat of grape juice soon to ferment into wine, or ... land. Planes and other sorts of inert matter (and the most lent item of all -- money itself) earns interest indirectly, only by being part of the same social "circle of exchange" with fruitful forms of wealth such as those.

George's theory drew its share of critiques. Austrian school economist Eugen von Böhm-Bawerk, for example, expressed a negative judgment on George's discussion of the carpenter's plane:

In the first place, it is impossible to support his distinction of the branches of production into two classes, in one of which the vital forces of nature are supposed to constitute a special element which functions side by side with labour, and in the other of which this is not true. [...] The natural sciences have long since proved to us that the cooperation of nature is universal. [...] The muscular movements of the person using the plane would be of little use, if they did not have the assistance of the natural forces and properties of the plane iron.

Another spirited response came from British biologist T.H. Huxley in his article "Capital - the Mother of Labour," published in 1890 in the journal The Nineteenth Century. Huxley used the principles of energy science to undermine George's theory, arguing that, energetically speaking, labor is unproductive.

George's theory of interest is nowadays dismissed even by some otherwise Georgist authors, who see it as mistaken and irrelevent to his ideas about land and free trade.

Bibliography

  • Wikisource:Progress and Poverty 1879
  • Progress and Poverty (1912, first published 1879. Definitive, free, searchable on Econlib.)
  • The Land Question 1881
  • Social Problems 1883
  • Protection or Free Trade 1886
  • George, Henry (July 1887). "The New Party". The North American review 145: 1-8.
  • Protection or Free Trade (1905, first published 1886. Definitive, free, searchable on Econlib.)
  • A Perplexed Philosopher 1892
  • The Science of Political Economy 1898

See also

  • Georgism
  • Spaceship Earth


This article might use material from a Wikipedia article, which is released under the Creative Commons Attribution-Share-Alike License 3.0.



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