Henry George was born at Philadelphia on September 2, 1839. After
spending some years at sea, he reached California in 1858, became a
printer, and later a journalist and director of the public library
in San Francisco. In 1871 he published "Our Land Policy," and this
was afterwards developed into "Progress and Poverty: an Inquiry
into the Causes of Industrial Depressions, and of Increase of Want
with Increase of Wealth," issued in 1879. The book soon acquired a
world-wide reputation, not only from the eloquence and beauty of
its diction, but from the author's novel theory of land taxation.
In 1880 George removed to New York, published a book on the Irish
land question, and for some years afterwards undertook a succession
of missionary journeys to Great Britain, Australia, and New
Zealand, the result of which was the foundation of the English Land
Reform Union, the Scottish Land Restoration League, and the
legislative adoption by the different Australasian colonies of his
scheme of the taxation of land values. Among other economic works
he issued were "Protection or Free Trade," "The Condition of
Labour," and "A Perplexed Philosopher." George died on October 29,
1897.
_I.--Wages, Capital, and Wealth-Distribution_
The past century has been marked by a prodigious increase in
wealth-producing power. It was naturally expected that labour-saving
inventions would make real poverty a thing of the past. Disappointment,
however, after disappointment has followed. Discovery upon discovery,
invention after invention, have neither lessened the toil of those who
most need respite nor brought plenty to the poor. The association of
poverty with progress is the great enigma of our time.
I propose to attempt to solve by the methods of political economy the
great problem; to seek the law which associates poverty with progress
and increases want with advancing wealth.
The inquiry is--why, in spite of increase in productive power, do wages
tend to a minimum which will give but a bare living? The answer of
current political economy is that wages are fixed by the ratio between
the number of labourers and the amount of capital devoted to the
employment of labour, and constantly tend to the lowest amount on which
labourers will consent to live and reproduce; because the increase in
the number of labourers tends naturally to follow and overtake any
increase in capital. This argument is inconsistent with the general fact
that wages and interest do not rise inversely, but conjointly. My
proposition is that wages, instead of being drawn from capital, are in
reality drawn from the product of the labour for which they are paid.
The three agents or factors in production are land, labour and capital,
and that part of the produce which goes to the second of these factors
is wages. Land embraces all natural materials, forces, and
opportunities, and therefore nothing that is freely supplied by nature
can be properly classed as capital. Labour includes all human exertion,
and hence human powers, whether natural or acquired, can never be
properly classed as capital.
We exclude from the category of capital everything which must be
included either as land or labour, and therefore capital consists of
those things which are neither land nor labour, but which have resulted
from the union of these two original factors of production. Nothing can
be capital which is not wealth; only such things can be wealth the
production of which increases, the destruction of which decreases, the
aggregate of wealth. Increase in land values does not represent any
increase in the common wealth, for what landowners gain by higher prices
the tenants or purchasers will lose.
All wealth is not capital. Capital is only that part of wealth which is
devoted to the aid of production. It is wealth in the course of
exchange, for production includes not merely the making of things, but
the bringing of them to the consumer. Wherever we analyse the facts we
find that without production wages would not, and could not, be. As the
rendering of labour precedes the payment of wages, and as the rendering
of labour in production implies the creation of value, the employer
receives value before he pays out value--he but exchanges capital of one
form for capital of another form. Hence the payment of wages in
production never involves the advance of capital or ever temporarily
lessens capital.
Nor is it true that the maintenance of labour is drawn from capital, and
that therefore population regulates itself by the funds which are to
employ it, for that would involve the idea that labour cannot be exerted
until the products of labour are saved, thus putting the product before
the producer, which is absurd. Capital, therefore, does not limit
industry, the only limit to industry being the access to natural
material. Capital may limit the form of industry, and the productiveness
of industry, by limiting the use of tools and the division of labour.
The functions of capital are to assist labour in production with tools,
seeds, etc., and with the wealth required to carry on exchanges. All
remedies, whether proposed by professors of political economy or working
men, which look to the alleviation of poverty either by the increase of
capital, or the restriction of the number of labourers, or the
efficiency of their work, must be condemned.
The argument that wages are determined by the ratio between capital and
labour finds its strongest support in the Malthusian doctrine, and on
both is based the theory that past a certain point the application of
capital and labour yields a diminishing return. The Malthusian doctrine
is that the tendency to increase in the number of labourers must always
tend to reduce wages to the minimum on which labourers can reproduce.
When this theory is subjected to the test of straightforward analysis,
it is utterly untenable. In the first place, the facts marshalled in
support of it do not prove it, and the analogies drawn from the animal
and vegetable world do not countenance it; and, in the second place,
there are facts which conclusively disprove it.
There are on every hand the most striking and conclusive evidences that
the production and consumption of wealth have increased with even
greater rapidity than the increase of population, and that if any class
obtains less than its due share, it is solely because of the greater
inequality of distribution. The denser the population, the more minute
becomes the subdivision of labour, the greater economies of production
and distribution, and hence, the very reverse of the Malthusian doctrine
is true.
_II.--The Law of Wages_
To discover the cause which, as population increases, and the productive
arts advance, deepens the poverty of the lowest class, we must find the
law which determines what part of the produce is distributed to labour
as wages, what part to capital as interest, and what part to landowners
as rent.
Rent is the price of monopoly arising from the reduction to individual
ownership of natural elements which human exertion can neither produce
nor increase. Interest is not properly a payment made for the use of
capital. It springs from the power of increase which the reproductive
forces of nature and the (in effect) analogous capacity for exchange
give to capital. The principle that men will seek to gratify their
desires with the least exertion operates to establish an equilibrium
between wages and interest.
This relation fixed, it is evident that interest cannot be increased
without increasing wages nor wages lowered without depressing interest.
The law of interest is that the relation between wages and interest is
determined by the average power of increase which attaches to capital
from its use in its reproductive modes. The law of wages is that they
depend upon the margin of production, or upon the produce which labour
can obtain at the highest point of natural productiveness open to it
without the payment of rent. This law of wages accords with and explains
universal facts, and shows that where land is free, and labour is
unassisted by capital, the whole produce will go to labour as wages.
Where land is free, and labour is assisted by capital, wages will
consist of the whole produce, less that part necessary to induce the
storing up of labour as capital. Where land is subject to ownership and
rent arises, wages will be fixed by what labour can secure from the
highest natural opportunities open to it without the payment of rent.
Where natural opportunities are all monopolised, wages must be forced by
the competition among labourers to the minimum at which labourers will
consent to reproduce. Nothing can be clearer than the proposition that
the failure of wages to increase with increasing productive power is due
to the increase of rent.
The value of land depending wholly upon the power which its ownership
gives of appropriating wealth created by labour, the increase of land
values is always at the expense of the value of labour. And, hence, that
the increase of productive power does not increase wages is because it
does increase the value of land. It is the universal fact that where the
value of the land is highest civilisation exhibits the greatest luxury
side by side with the most piteous destitution.
The changes which constitute or contribute to material progress are
three: increase in population, improvement in the arts of production and
exchange, and improvement in knowledge, government, and morals. The
effect of increase of population upon the distribution of wealth is to
increase rent, and consequently to diminish the proportion of the
produce which goes to capital and labour in two ways. First, by
lowering the margin of cultivation; and second, and more important, by
bringing out in land special capabilities otherwise latent, and by
attaching special capabilities to particular land. The effect of
inventions and improvements in the productive arts, including division
of labour between individuals, is to save labour--that is, to enable the
same result to be secured with less labour, or a greater result with the
same labour, and hence to the production of wealth.
Without any increase in population, the progress of invention constantly
tends to give a larger and larger proportion of the produce to the
owners of land, and a smaller proportion to labour and capital; and,
therefore, to decrease wages and interest. And, as we can assign no
limit to the progress of invention, neither can we assign any limits to
the increase of rent short of the whole produce. Another cause of the
influence of material progress upon the distribution of wealth is the
confident expectation of the future enhancement of land values which
arises in all progressive countries from the steady increase of rent.
This leads to speculation, or the holding of land for a higher price
than it would otherwise bring. It is a force which constantly tends to
increase rent in a greater ratio than progress increases production, and
tends to reduce wages, not merely relatively but absolutely.
_III.--The Common Right to Land_
The fact that the speculative advance in land values cuts down the
earnings of labour and capital, and checks production, leads
irresistibly to the conclusion that this is the main cause of those
periodical industrial depressions to which every civilised country seems
increasingly liable.
Robbed of all the benefits of the increase of productive power, labour
is exposed to certain effects of advancing civilisation which, without
the advantages that naturally accompany them, are positive evils, and of
themselves tend to reduce the free labourer to the helpless and degraded
condition of the slave. As land is necessary to the exertion of labour
in the production of wealth, to command the land is to command all the
fruits of labour save enough to enable labour to exist. But there is
also an active, energetic power--a power that in every country, be its
political form what it may, writes laws and moulds thought--the power of
a vast and dominant pecuniary interest. The great cause in the
inequality of the distribution of wealth is the inequality in the
ownership of land. The ownership of land is the great fundamental fact
which ultimately determines the social and political, and consequently,
the intellectual and moral condition of a people. The tendencies and
measures at present relied on or advocated as calculated to relieve
poverty and distress among the masses are insufficient. The true remedy
is to substitute for individual the common ownership of land.
As man belongs to himself, so his labour when put in concrete form
belongs to him. As nature gives only to labour, the exertion of labour
in production is the only title to exclusive possession. When
non-producers can claim as rent a portion of the wealth created by
producers, the right of the producers to the fruits of their labour is
to that extent denied.
The equal right of all men to the use of land is as clear as their equal
right to breathe the air--it is a right proclaimed by the fact of their
existence. The right of individual proprietorship of land is the denial
of the natural rights of other individuals--it is a wrong which must
show itself in the inequitable division of wealth. Again, the ownership
of land will always give the ownership of men, to a degree measured by
the necessity, real or artificial, for the use of land. And when that
necessity is absolute, when starvation is the alternative to the use of
land, then does the ownership of men involved in the ownership of land
become absolute. Private ownership of land is the nether millstone.
Material progress is the upper millstone. Between them, with an
increasing pressure, the working classes are being ground. Historically,
as ethically, private property in land is robbery. It has everywhere had
its birth in war and conquest, and in the selfish use which the cunning
have made of superstition and law.
_IV.--The Remedy for Social Ills_
Private property in land is inconsistent with the best use of land. What
is necessary for that is security for improvements. Where land is
treated as public property it will be used and improved as soon as there
is need for its use and improvement, but, being treated as private
property, the individual owner is permitted to prevent others from
using, or improving, what he cannot, or will not, use or improve
himself. I do not propose to purchase or to confiscate private property
in land. The first would be needless, the second unjust. It is only
necessary to confiscate rent.
The sovereign remedy which will raise wages, increase the earnings of
capital, extirpate pauperism, abolish poverty, give remunerative
employment to whoever wishes it, afford free scope to human powers,
lessen crime, elevate morals and taste and intelligence, purify
government, and carry civilisation to yet nobler heights, is to
appropriate rent by taxation, and to abolish all taxation save that upon
land values. The great class of taxes from which revenue may be derived
without interference with production are those upon monopolies,
temporary or onerous. But all other monopolies are trivial in extent as
compared with the monopoly of land. Taxes on the value of land not only
do not check production but tend to increase it by destroying
speculative rent.
The whole value of land may be taken in taxation, and the only effect
will be to stimulate industry, to open new opportunities to capital, and
to increase the production of wealth. A tax on land values does not add
to prices, and is thus paid directly by the persons on whom it falls.
Land is not a thing of human production, and taxes upon rent cannot
check supply. On the contrary, by compelling those who hold land on
speculation to sell or let for what they can get, a tax on land values
tends to increase the competition between owners, and thus to reduce the
price of land.
A tax on land values, while the least arbitrary of taxes, possesses in
the highest degree the element of certainty. It may be assessed and
collected with a definiteness that partakes of the immovable and
unconcealable character of the land itself. It is the most just and
equal of all taxes, because it falls only on those who receive from
society a peculiar and valuable benefit, and upon them in proportion to
the benefit they receive. The division of land now held on speculation
would much increase the number of landowners. A single tax on the value
of land would so equalise the distribution of wealth as to raise even
the poorest above that abject poverty in which public considerations
have no weight, while it would at the same time cut down those overgrown
fortunes which raise their possessors above concern in government.
_V.--Effects of the Remedy_
The effects of the remedy would be to lift the whole enormous weight of
taxation from productive industry. It would open new opportunities, for
no one would care to hold land unless to use it, and land now withheld
from use would everywhere be thrown open to improvement. The selling
price of not merely agricultural, but all land, would fall. The bonus
that wherever labour is most productive must not be paid before labour
can be exerted would disappear. Competition in the labour market would
no longer be one-sided. Rent, instead of causing inequality, would
promote equality. Labour and capital would receive the whole produce,
minus that portion taken by the state in the taxation of land values,
which, being applied to public purposes, would be equally distributed in
public benefits. The equalisation in the distribution of wealth would
react upon production, everywhere preventing waste, everywhere
increasing power.
Simplicity in the legislative and executive functions of government
would become possible. It would at the same time and in the same degree
become possible for it to realise the dream of socialism, not through
governmental repression, but because government would become the
administration of a great co-operative society, merely the agency by
which the common property was administered for the common benefit. Give
labour a free field and its full earnings, take for the benefit of the
whole community that fund which the growth of the community creates, and
want, and the fear of want, would be gone.
If the conclusions at which we have arrived are correct, they will fall
under a larger generalisation. However man may have originated, man, as
man, no matter how low in the scale of humanity, has never yet been
found destitute of the power of improvement. Everywhere and at all times
he has made some use of this power. The varying degrees in which the
faculty is used cannot be ascribed to differences in original capacity.
These are evidently connected with social development. A survey of
history shows diversities in improvement, halts, and retrogression; and
the law which will explain all these is that men tend to progress just
as they come closer together, and by co-operation with each other,
increase the mental power that may be devoted to improvement.
But just as conflict is provoked, or association develops inequality of
condition and power, this tendency to progression is lessened, checked,
and finally reversed. As society develops there arise tendencies which
check development. The process of integration, of the specialisation of
functions and powers, is accompanied by a constant liability to
inequality, and to lodge collective power and wealth in the hands of a
few, which tends to produce greater inequality, since aggression grows
on what it feeds.
The reform I have proposed accords with all that is politically,
socially, or morally desirable. It has the qualities of a true reform,
for it will make all other reforms easier.
Behind the problems of social life lies the problem of individual life.
Properly understood, the laws which govern the production and
distribution of wealth show that the want and injustice of the present
social state are not necessary, but that, on the contrary, a social
state is possible in which poverty is unknown, and all the better
qualities and higher powers of human nature would have opportunity for
full development. Further than this, when we see that social development
is governed neither by a special providence, nor by a merciless fate,
but by law at once unchangeable and beneficent, a flood of light breaks
in upon the problem of individual life. If we look merely at individual
life we cannot see that the laws of the universe have the slightest
relation to good or bad, to right or wrong, to just or unjust. By a
fundamental law of our minds we cannot conceive of a means without an
end. But unless man himself may rise to, or bring forth something
higher, his existence is unintelligible. For it is as certain that the
race must die as it is that the individual must die. What, then, is the
meaning of life absolutely and inevitably bounded by death? To me it
only seems intelligible as the avenue and vestibule to another life.