Capitalism-and-Its-Critics-A-History-From-the

In his introduction to the book, George, like many commentators before him, acknowledged the wonders of the industrial economy:

The forest tree transformed into finished lumber—into doors, sashes, blinds, boxes or barrels, with hardly the touch of a human hand; the great workshops where boots and shoes are turned out by the case with less labor than the old-fashioned cobbler could have put on a sole … the diamond drill cutting through the heart of the rocks, and coal oil sparing the whale  … sheep killed in Australia eaten fresh in England, and the order given by the London banker in the afternoon executed in San Francisco in the morning of the same day.33

The great economic puzzle, George said, was that in “the countries where material progress has reached later stages … widespread destitution is found in the midst of the greatest abundance.”34 He went on: “The ‘tramp’ comes with the locomotive, and almshouses and prisons are as surely the marks of ‘material progress’ as are costly dwellings, rich warehouses, and magnificent churches.”35 It was in the older and richer sections of the Union, such as New York City, that “pauperism and distress among the working classes” was “becoming most painfully apparent.”36 George’s goal, he said, was to find “the law which associates poverty with progress.”37

Having defined the problem of poverty amidst plenty, George dismissed two explanations that orthodox economists had provided: the fixed wage fund theory and overpopulation. “Wages do not come from capital, but are the direct produce of labor,” he wrote. “Each productive laborer, as he works, creates his wages, and with every additional laborer there is an addition to the true wages fund—an addition to the common stock of wealth.”38 As for the threat of overpopulation, which the English economist and cleric Thomas Malthus had warned about at the start of the nineteenth century, George dismissed it as a canard that the rich used to rule out any effort to raise working-class living standards. “I assert that the injustice of society, not the niggardliness of nature, is the cause of the want and misery which the current theory attributes to over-population,” George wrote. “I assert that the new mouths which an increasing population calls into existence require no more food than the old ones, while the hands they bring with them can in the natural order of things produce more.”39

★ ★ ★

What could explain the persistence of poverty and need in a growing economy? George’s answer was the one that had come to him years earlier near Oakland: rising land prices and soaring land rents. As industrial and commercial development proceeded, it steadily raised the demand for land on which to build factories, housing, and offices, pushing up land prices. This price appreciation, in turn, pushed up rents, which crushed workers who needed accommodations and businesses that needed buildable land. But the rising cost of land greatly benefited one group of people who contributed nothing to production and merely exploited their good fortune in possessing some well-situated tracts of nature’s bounty: landlords. This, George argued, was the fundamental division in society. “The antagonism of interests is not between labor and capital, as is popularly believed,” he wrote, “but is in reality between labor and capital on the one side, and land ownership on the other.”40

In carrying out their analysis, economists “should start from land,” George argued.41 As modern societies expanded, landlords were able to extract an ever-increasing share of the “total produce”—i.e., total income— in the form of higher rents.42 In using the term rent, George was careful to point out that his meaning was somewhat different from the colloquial usage: monthly rents paid not merely for the occupation of land but for the use of buildings constructed on that land and other improvements that have been made to it, such as landscaping and drainage. These components of “rent” were more accurately described as interest on the capital that landlords had expended on their property, George said. But another part of rent payments simply reflected the location and scarcity value of the underlying land. This component was the true “land rent,” and it rose inexorably with the progress of economic development.

To help his readers understand his meaning, George presented a simple equation showing how the total produce (or income) gets divided:

As Produce = Rent + Wages + Interest

Therefore, Produce – Rent = Wages + Interest43

This equation showed that “wages and interest do not depend upon the produce of labor and capital, but on what is left after rent is taken out,” George wrote. “And hence, no matter what be the increase in productive power, if the increase in rent keeps pace with it, neither wages nor interest can increase.”44 To George, this was the fundamental law of political economy, and it explained how progress and poverty could coexist. Even as the economy’s total produce steadily increased, much, if not all, of the increment was taken up by payments to landowners. Workers and businesses suffered. “The moment this simple relation is recognized, a flood of light streams in upon what was before inexplicable, and seemingly discordant facts range themselves under an obvious law,” George wrote. “The increase of rent which goes on in progressive countries is at once seen to be the key which explains why wages and interest fail to increase with increase of productive power.”45

★ ★ ★

George certainly wasn’t the first writer to identify rising land values and increasing rents as a serious economic problem. In Britain, David Ricardo had focused attention on the financial windfall that landlords received as the population increased. The privileged position of the landed interest had featured strongly in the great political struggle over repealing the Corn Laws, a protectionist measure that raised prices and benefited landowners. J. S. Mill, George’s onetime correspondent, had proposed taxing the “unearned increment” that landlords received from rising land values through no effort of their own. As he got older, Mill also supported various types of land reform, but he stopped short of endorsing the land nationalization that some radical British groups, including the Land and Labour League, were demanding.46

In Progress and Poverty, George cited Mill numerous times and laid out his own solution to the land issue, which on its face seemed to align him with the British radicals. In a chapter titled “The True Remedy,” he wrote: “There is but one way to remove an evil—and that is to remove its cause. To extirpate poverty, to make wages what justice commands they should be, the full earnings of the laborer, we must therefore substitute for the individual ownership of land a common ownership. Nothing else will go to the cause of the evil—in nothing else is there the slightest hope. We must make land common property.”47

Fighting words, but George didn’t mean them literally. After raising the idea of converting all land to public ownership, he backed away from it: “To do that would involve a needless extension of governmental machinery —which is to be avoided.”48 A much better option, he argued, was to tax land heavily, while leaving in place private landowners. “Let them continue to call it their land,” he wrote. “Let them buy and sell, and bequeath, and devise it. We may safely leave them the shell if we take the kernel. It is not necessary to confiscate land; it is only necessary to confiscate rent. We already take some rent in taxation. We have only to make some changes in our modes of taxation to take it all.”49

This was the proposal that was to make George a household name and create a political movement. It became known as the Single Tax, because George argued that his new tax could replace existing taxes, which were mainly commodity and excise levies. (It wasn’t until 1913 that American state legislatures ratified the Sixteenth Amendment to the Constitution and legalized a federal income tax.) In modern terms, George was proposing a land value tax, the revenues of which would increase in proportion to rising prices of land. George didn’t say what rate the new tax would be set at, but the entire thrust of his argument was that it would be a hefty levy that prevented landlords from reaping the rewards of appreciation in land prices. The benefits of this proposal, George wrote, would “appear more and more important the more they are considered.”50

Although his argument for the Single Tax was primarily a moral one, George also claimed that shifting the tax burden to landlords would stimulate economic growth. The “needle of the seamstress and the great manufactory; the cart-horse and the locomotive; the fishing boat and the steamship; the farmer’s plough and the merchant’s stock, would be alike untaxed,” he wrote. And with “all the burdens removed which now oppress industry and hamper exchange, the production of wealth would go on at a rapidity now undreamed of.” Switching the burden of taxation from workers and businesses to landlords and landowners would be “like removing an immense weight from a powerful spring.”51 In some ways, George’s language foreshadowed the incentive argument that his fellow Californian Ronald Reagan would use to promote tax cuts a century later.

But of course, George, unlike Reagan, was proposing to raise taxes on at least one form of capital, and the wealthy interests who owned it.

Still, passages like this one show that George wasn’t opposed in principle to capitalism and private enterprise. Although he sometimes gets labeled a socialist, he viewed himself as a Jeffersonian individualist railing against the corruption of the competitive free market system by land engrossment and other monopolistic abuses. His basic argument was reminiscent of the one that British radicals had made half a century earlier: workers were not receiving the full product of their labor. But whereas the likes of William Thompson and Thomas Hodgskin had blamed capitalists for taking more than their fair share, George blamed landlords. Introducing the Single Tax would rectify the problem, he insisted: “A new equilibrium would be established, at which the common rate of wages and interest would be much higher than now.”52 Wealth “would be distributed in accordance with the degree in which the industry, skill, knowledge, or prudence of each contributed to the common stock. The great cause which concentrates wealth in the hands of those who do not produce, and takes it from the hands of those who do, would be gone.”53

The benefits of the Single Tax didn’t end there, George argued. The revenue it generated “could be applied to the common benefit, as were the revenues of Sparta.”54 He listed some of the things that the money could be spent on: public baths, public gardens, museums, libraries, music and dancing halls, theaters, universities, technical schools, playgrounds, gymnasiums, and the establishment of public utilities: “Heat, light, and motive power, as well as water, might be conducted through our streets at public expense; our roads be lined with fruit trees; discoverers and inventors rewarded, scientific investigations supported; and in a thousand ways the public revenues made to foster efforts for the public benefit.” In George’s vision, these policies would be enacted at the local level, and the officials who implemented them would be accountable to the local electorate. The former inspector of gas meters was effectively proposing a program of municipal socialism to complement a competitive private sector. “We should reach the idea of the socialist, but not through governmental repression,” he wrote. “Government would change its character, and would become the administration of a great co-operative society. It would become … the agency by which the common property was administered for the common benefit.”55

★ ★ ★

To promote Progress and Poverty, George left his family in San Francisco and moved to New York, where he took a cheap apartment in a run-down neighborhood. The book’s appearance didn’t garner much immediate attention, and George was lonely and discouraged. Things began to change when the New York Sun hailed his work as a serious one that demanded attention. The Nation subsequently ran a lengthy review, and The Atlantic Monthly assigned it to two different reviewers, whose articles took up eight pages. As George’s arguments began to gain traction, the defenders of economic orthodoxy felt obliged to respond. In the highbrow journal Scribner’s, an eminent Yale economist, William Graham Sumner, wrote a scathing review. George wrote delightedly to a friend: “The thing begins to draw fire.”56

Interest in Progress and Poverty wasn’t restricted to intellectuals. One of its first champions was The Irish World, the leading Irish newspaper in America, which was highly critical of English landlords in the home country. The editor of The Irish World republished an article George had written, “The Irish Land Question.” George met with Michael Davitt, the firebrand leader of the Irish National Land League, who was visiting New York. Davitt agreed to promote his book in Ireland. George’s call for workers to receive the full fruits of their labor also drew the attention of New York’s labor unions, which grew rapidly during the decades after the Civil War. His progressive spending program appealed to many reformminded members of the middle class. And his proposal for a hefty land tax gained support from some industrialists, including A. B. Du Pont, a Cleveland-based scion of the prominent family, and Joseph Fels, a Philadelphia soap manufacturer.

Toward the end of 1880, Appleton, sensing it had a hit on its hands, put out a popular edition of Progress and Poverty priced at one dollar instead of two. Publishers in Britain and Germany eagerly purchased foreign rights. George was invited to give paid speeches, and a reformist Democratic congressman, Abram S. Hewitt, engaged him as a research assistant. The improvement in George’s personal finances enabled him to move his family to New York, into a comfortable house on Kingsbridge Road in the Bronx. George was becoming a public figure.

In late 1881, The Irish World paid for him to go to Ireland, where the British authorities had imprisoned some nationalist leaders, including Davitt and Charles Stuart Parnell. From their prison cells, the Irish leaders issued a “No Rent Manifesto,” in which they told the Irish tenant farmers not to pay their landlords. George was squarely on the side of Irish rebels. “This is the most damnable government that exists today outside Russia,” he wrote to a friend shortly after arriving in Ireland.57

George also visited London, where the publisher Kegan Paul had put out a British edition of Progress and Poverty. He was invited to the Marylebone townhouse of Henry Mayers Hyndman, a wealthy businessman who had converted to socialism and founded Britain’s first avowedly leftwing political party, the Social Democratic Federation. Hyndman was also the author of England for All, an 1881 book that translated into English the basic ideas of Marx and Engels. Although he and George both supported the Irish resistance, they didn’t see eye to eye on economics. Hyndman subsequently said his visitor was “as exasperating as Kropotkin,” the Russian anarchist. For his part, George complained that Hyndman had surrendered completely to the “mental influence” of Marxian dogma.58

Marx himself happened to be traveling in Germany during George’s visit. A meeting between the two probably wouldn’t have gone well. In a letter dated June 20, 1881, to Friedrich Adolph Sorge, a German communist who had moved to America, Marx said he had received three copies of Progress and Poverty, two of which he had given away. “Theoretically the man is utterly backward!” he wrote of George. “He understands nothing about the nature of surplus value and so wanders about in speculations which follow the English model but have now been superseded even among the English.”59 Marx dismissed George’s proposal for a tax on land values as a “transitional measure” that would “leave wage labour and therefore capitalist production in existence.” He went on: “The whole thing is therefore simply an attempt, decked out with socialism, to save capitalist domination and indeed to establish it afresh on an even wider basis than its present one.” Marx did allow that George was a “talented writer,” albeit one who displayed “the repulsive presumption and arrogance which is displayed by all panacea-mongers without exception.”60

★ ★ ★

When George got back to the United States, in October 1882, New York’s Central Labor Union feted him with a dinner at Cooper Union, a no-fee college that the philanthropist Peter Cooper established. The Central Labor Union had been founded as an umbrella group during his absence, and had adopted as one of its founding principles the Georgian statement “The land of every country is the common inheritance of the people.”61 The unions had also created a new political party, the United Labor Party, but in elections held in 1882 and 1883, the ruling Tammany Hall Democratic machine swept aside its candidates. Labor activism revived in 1886, when workers demanding an eight-hour day took part in strikes and demonstrations across the country.

In Chicago, the protests turned violent. On May 3 police shot and killed two strikers outside a plant owned by the McCormick Harvesting Machine Company. The next day, when police tried to break up a protest by workers and anarchists at Haymarket Square, someone tossed a homemade bomb in their path. At the end of the ensuing melee, seven policemen and at least four protesters were dead. The authorities put on trial eight anarchists—six of German heritage and one British immigrant—on charges of conspiracy. Despite the fact that some of the defendants hadn’t been present at Haymarket Square, they were all convicted. Four of them were hanged, and one committed suicide.62

New York witnessed no violence or retributions on this scale. But during the first half of 1886, there were a number of boycotts and strikes, including one by streetcar drivers who were forced to work fourteen- or sixteen-hour days with no breaks. Faced with opposition from the owners of the streetcar lines, the police, the courts, and corrupt Tammany Hall politicians, the strike ended in an inevitable defeat, but it energized the labor movement.63 The Central Labor Union revived the United Labor Party and resolved to challenge Tammany in the upcoming November 1886 elections. As its candidate for mayor, it settled on George.64

Initially, he was reluctant to accept the challenge. But after a Tammany official tried to warn him off, telling him he couldn’t win but could only raise hell, he changed his mind, saying: “I do not want the responsibility and work of the office of the Mayor of New York, but I do want to raise hell!”65 After being formally nominated at a United Labor Party conference in September 1886, George gained the support of a coalition of workers, middle-class reformers, and do-gooders. As his opponent, the Democrats selected Abram Hewitt, the congressman for whom George had worked years earlier. Hewitt campaigned in the manner befitting a Tammany candidate: barely at all. George barnstormed across the city, appearing at union meetings, reform clubs, and ethnic associations. He spoke at street corners from the back of a horse-drawn wagon. The labor unions provided campaign workers and donations; they even launched a daily pro-George newspaper, the Leader.

Although he was backed by organized labor, George promised to govern for all New Yorkers and rid the city of its corrupt leadership. As he had in Progress and Poverty, he also attacked the city’s economic elite, particularly landlords, for leeching off the populace. The campaign platform of the United Labor Party had Georgian elements: it demanded the abolition of all taxes except a tax on land, which would be assessed at its full market value. Tammany and its allies, which included the local hierarchy of the Roman Catholic church, sought to portray George as a dangerous class warrior. In his acceptance speech for the nomination, George gave his response: “If this is a class movement, then it is a movement of the working class against the beggar-men and thieves … It is a movement of the masses against robbery by the classes.”66

Ultimately, George’s energetic campaigning and populist platform weren’t enough to carry him to victory. On the Sunday before the election, the vicar-general of the New York archdiocese, which had strong ties to Tammany Hall, warned Catholic churchgoers that George’s proposals were “unsound and unsafe, and contrary to the teachings of the church.”67 As the ruling party, Tammany also had election inspectors and vote counters on its side. When the votes were tallied on election night, November 2, they showed Hewitt with 90,552 votes, George with 68,110, and the Republican candidate, a young Teddy Roosevelt, with 60,435. George had officially finished in second place, but he would go to his grave convinced he had been cheated out of victory. A couple of months after the election, he wrote to a friend: “On a square vote I would undoubtedly have been elected.”68

After the excitement of the New York mayoral run, George’s political career fizzled. The following year he participated in a failed effort to launch a national United Labor Party. Thereafter he largely retreated to writing and promoting his policy agenda, which had now expanded beyond the Single Tax to include proposals to tackle monopolistic abuses by big businesses throughout the economy, not just landowners. In a collection of essays published in 1883 under the title Social Problems, George had written: “The big mill crushes out the little mill. The big store undersells the little store till it gets rid of its competition.”69 Passages like this one echoed Marx’s warnings about the rising concentration of capital, but George still coupled them with a defense of competitive private enterprise: “Capital is a good; the capitalist a helper, if he is not also a monopolist.”

The “truth in socialism,” George went on, was that to make the economy work for everyone, the state would have to play a bigger role.70 Expanding the arguments he had made in Progress and Poverty, he called for the public ownership of essential utilities, including water companies, electricity suppliers, and telegraph communications. Many of the services that these utilities provided should be free of charge, he argued. In an 1885 article, he suggested that some of the revenues from his Single Tax could be used to finance public pensions and disability insurance, and perhaps even “the payment of a fixed sum to every citizen when he comes of a certain age.”71 Some modern Georgists have seized upon this scheme as an early proposal for a universal basic income, although it actually resembled more closely the idea of a universal basic capital grant.

In any case, some of George’s ideas were well ahead of their time. By calling for a land value tax, he was effectively proposing an annual tax on unrealized capital gains, an idea that would come back into vogue in the early twenty-first century. George’s tax would have been restricted to land rather than applied to wealth in general, but in the context of his time this made some sense. In 1880, according to modern estimates, federal, state, and local government spending combined came to only about 3 percent of GDP.72 Shifting the tax burden to land would have been far more viable then than it would be today, when government spending in advanced countries— including national and local spending—typically accounts for more than a third of GDP. Even punitive taxes on land and rents wouldn’t come close to raising that amount. (In 2020, according to the US national income accounts, total rental income came to about \$750 billion, or 3.5 percent of GDP.)73