Sunday, April 29, 2012
Justice to George - Georgism once again
See Also :http://democracyandclassstruggle.blogspot.co.uk/2009/05/michael-hudson-on-economic-rent.html
This review of Michael Hudson's article is by
Moss, Laurence S.
Article, entitled 'Henry George's Political Critics', is by Professor Michael Hudson, Distinguished Professor of Economics, University of Missouri (Kansas City). The author lists the following twelve criticisms that have been made of George's political positions and strategies:
(1) 'George's Refusal to Link His Proposals with Those of Other Reformers' (p. 8)
Hudson shows how this alienated supporters such as Karl Marx, Edward Bellamy and members of the Labor Party, as well as socialists and other reformers in general. He compares George's 'aloof', 'sectarian', and 'inward-looking' attitude to that of Marx 'who spent much of his time with associates organizing groups to create a following' (p. 9).
There is undoubtedly a large element of truth in what Hudson says, but perhaps the words 'aloof' and 'sectarian' are rather too strong. After all, authors cannot reasonably be expected to combine or cooperate with those who hold antithetical views. Marxists and socialists can reasonably invite land reformers to join them, even if the land reformers do not wish to support a full-blown socialism that aimed for the nationalisation of all the means of production. For Marxists, such land reformers would be a useful ally in the wider struggle. But for George, who was doctrinally opposed to full-blown socialism, any form of cooperation or union with Marxists or socialists would have been, not a means to a larger end, but a contradiction, and a dereliction of intellectual integrity. Whether Henry George was right or wrong, he was no more 'sectarian' than Karl Marx. Each believed sincerely in his own system; each promoted his own sect.
On numerous occasions George declared that he was not a socialist; but his anti-socialism should not be exaggerated.
As Hudson notes, George advocated government ownership of railroads and the telegraph--in itself, a significant socialist policy. And of course his Single Tax policy meant in effect the nationalisation of land values. Hudson states: 'Land remains the largest asset even in today's industrial and high-technology economies. Most "capital" gains are still land-price gains, which substantially exceed corporate profits' (p. 3). Any country that nationalises the main portion of its corporate profits must surely be regarded as mainly socialist.
(2) 'George's Single-Minded Focus on Land Rent Rather than Other Forms of Exploitation' (p. 9)
Hudson argues that another reason for the failure of Georgism to gain long-term popular support is the fact that, although he proposed to abolish private monopolisation of railroads and the telegraph by nationalising them, he did not pursue a policy for abolishing monopolies in other industries. George's view was that, after the Single Tax and free trade are introduced, the forces of competition would cause other monopolies to disappear.
Georgists would have to admit, with Hudson, that this was a brave assumption on George's part, for which no empirical evidence was available at the time. Nor will any empirical evidence become available until such time as a free trade and Single Tax experiment is conducted. It may be that George's assumption will prove to be correct; but a more sceptical view of human nature would suggest that other ingenious methods for the exploitation of man by man would soon be devised, even in a world of free trade and the Single Tax.
(3) 'George's support of Capital Against Labour'
Hudson refers to George's 'almost unconditional support of capital, even against labour' (Abstract, p. 1)--although for the present reader it is not clear whether this is Hudson's own view, or whether he is merely reporting a view held by some of George's critics. The latter would seem to be the correct interpretation, as Hudson later notes that 'George often supported labour' (p. 14). Certainly, it would be quite unwarranted to say that George almost unconditionally supported capital against labour. In addition to the instances cited by Hudson (p. 14), one could cite several instances in the reports of George's Australian lectures where he congratulated the trade unions on the success of their strikes. But, unlike Marx, he did not regard capital and capitalists as the enemy of labour. Under his Single Tax plan, there would be no tax on the profits of capitalists except insofar as they included gains from land and other natural resources. He believed, perhaps naively, that capital and labour could live and work in harmony, after the removal of the injustices and inequalities due to an unequal distribution of the value of natural resources.
(4) 'George's Individualism Rejecting a Regulatory or Planning Role for Government' (p. 16)
Hudson believes that another reason for the political criticism levelled at George was his 'economic individualism' and his rejection of 'a strong role for government' (p. 1). According to Hudson, Single Taxers had 'a highly negative view of government', and George 'sided with free-enterprise advocates whose major objective was to minimize the role of government' (p. 18).
As stated above, George's policy for the taxation of the full value of all land and other natural resources represents a very considerable incursion of government into what is now regarded as the domain of
free enterprise. Hudson appears to have neatly summarised George's overall political position as 'economic individualism', and as a rejection of a 'strong role for government'. In his lecture tour in Australia, he several times chided Australians for relying too much on the government, and not doing enough for themselves, as individuals, to improve their towns and cities. If government needs to play a role, George expressed a preference for local rather than state or national government; but he could not be correctly described as anti-government or anarchist on principle. When asked in Australia whether a land-value tax, by deterring the withholding of land, would encourage overdevelopment of some cities or an inefficient dispersal of development, he replied that such things could be prevented by appropriate regulation--which suggests that he recognised the need for some measure of regulation by means of town planning.
(5) 'George's Opposition to Public Ownership of Land'
Although George said we must make land common property, and although his followers often formed societies with names such as Land Nationalisation Leagues, he repeatedly asserted that he did not advocate land nationalisation. As Hudson notes (p. 18), George recognised that nationalisation of land, even if compensation is paid, would involve political trauma and widespread opposition. A further reason for his rejecting nationalisation was that the leasing of publicly owned land would increase the inefficiency and corruption that he had witnessed in government administration. Yet another reason was that a formal act of nationalisation would have strengthened the case for compensation, thus offsetting or nullifying the public revenue to the derived from the lease rents.
(6) 'George's Refusal to Address the Problem of Interest-Bearing Debt'
Hudson provides (pp. 20-4) a fascinating account, based on quotations from a variety of unusual sources, of the opposition to George's failure to recognise that interest on debt is as much a rentier income as rent on land, and as much a form of exploitation. George believed that the Single Tax would solve the debt problem, because, by removing the speculative element in the price of land and removing other taxes, it would make most individuals and businesses more wealthy and abolish the conditions that pushed people into debt. George was unwilling to accept proposals for credit creation by government, partly because he thought it was unnecessary, and partly because, as already noted, he feared the possibilities for corruption and maladministration in big government.
(7) 'George's Ricardian Emphasis on Rural Land' (p. 24)
If George was criticised for placing scant emphasis on urban land, then, on this score at least, his critics were clearly wrong. He repeatedly declaimed against the unearned increments of urban land, and his emotional accounts of life in the slums of great cities show his deep concern for the urban land problem.
It is certainly true, however, as Hudson points out, that George did not seem to realise, or did not give sufficient attention to, the fact that private ownership of home sites was becoming increasingly widespread, and that home owners would combine with real estate agents and developers in political opposition to a land-value tax. As Hudson observes, 'Rent was becoming democratised rather than being an economic gain restricted to a distinct class' (p. 29).
However, although the ownership of land and the enjoyment of its 'unearned increments' have become more widespread than in George's day, at least in Westernised countries, there are signs that the trend is now reversing. The increasing cost of urban land has meant that an increasing proportion of the population--especially among the younger generation--are forced to become renters rather than owners of urban land. The main class conflict in the future is likely to be not between capital and labour, or between aristocrats and serfs, but between the land-rich and the land-poor, between the urban landed and the urban landless, between the urban land-possessed and the urban land-dispossessed.
It is often said, with some truth, that if the majority of voters in a democratic country are landowners, it would be politically impossible for any government to implement a Georgist land-value tax in the fullest sense. But if the majority became landless tenants, and are aware of the tax-free increments in land value enjoyed by the landowning minority, the reverse may be true. It may then be politically impossible not to implement a wider sharing of the value of land and other natural resources.
(8) 'George's Free-Trade Stance' (p. 26)
George believed that protectionism fosters monopolies, but Hudson cites critics who argued that monopolies also occur in free-trade countries, like England, and that some monopolies like the sugar trust in America, have campaigned for free trade. Hudson also points to the environmental costs, such as soil degradation, that have resulted from over-production for export markets under free trade.
During George's lecture tour of Australia in 1890, it was reported that his opposition to protection alienated many who would otherwise have supported his land-tax proposals. In his lectures he invariably linked land-tax policy with free-trade policy, as if it was intellectually and morally impossible to have one without the other.
(9) 'George's Rejection of an Academic Platform to Elaborate Rent Theory and Taxation' (p. 27)
When George was invited to address the University of California at Berkeley, he destroyed any prospect of being considered for a chair of political economy by abusing the economic profession in general. Hudson believes that this anti-academic stance has persisted among Georgists, and has resulted in the disappearance of Georgist ideas from the academic curriculum. In economics textbooks 'land' has become subsumed as a form of 'capital', and rent has ceased to be regarded as an unearned increment, or as essentially different from profit on capital.
(10) 'The Narrowing of George's Theorizing Beyond the Land Question as Such' (p. 30)
Although George deplored poor working conditions, substandard urban housing, and the exploitation inflicted by the private owners of natural monopolies, it is true, as Hudson states, that his political programme did not contain policies that specifically targeted those problems. He did not regard land reform as the only necessary reform, but he believed it was the most fundamental reform, without which all others would be ineffectual. This has meant that he and his followers have not often been at the forefront in articulating policies in areas other than land reform. In particular, they have not developed policies to deal with the creation of credit, and have therefore lost support from those who see the socialisation or social control of credit creation as another necessary and fundamental reform. As Hudson says (pp. 31, 35), there is a direct connection between credit creation and land prices, and between the banking industry and the real-estate industry. Banks regard land as the best collateral for their loans, and their credit creation fuels the land-price spiral--thus prompting the financial sector to give political support to the real-estate industry and to any other organisation that opposes land-value taxation.
(11) 'George's Alliance with the Right Wing of the Political Spectrum' (p. 31)
Hudson recounts how Georgism has become associated over time with different colours of the political spectrum. For property owners and financial interests, Georgism has been seen as socialist. But many socialists have rejected it, because of George's refusal to support the nationalisation of capital. Others see it as anti-socialist and pro-individualist, because of its plan to remove all income tax, even on the wealthy, and because of its glorification of small government.
The history of Georgism thus seems to show that every conceivable political party can find some aspect of Georgism that pleases it, and some aspect that does not.
I would, however, need to have further evidence before accepting Hudson's statements that George's followers lacked 'a quantitative explanation of how government would collect and distribute the flow of rent', and that 'it would take until the end of the 20th century for some of George's followers to propose paying a "citizen's dividend" out of public collection of land and resource rent' (pp. 32-3). It seems to me that George and most Georgists have always been quite clear on these issues. The revenue from their land-value tax would be used to remove all other taxes, and any surplus would be available for free rail transport, or for welfare payments to widows, orphans and the elderly, or as a grant to each citizen. The term 'citizen's dividend' did not appear in Georgist literature until recent times, but the concept is clearly there in 1879 or earlier. Rather than Georgists catching up at the end of the twentieth century with the 'citizen's dividend' concept of the 'libertarian movement', it would be more correct to say that the latter finally caught up with the Georgist vision. This is not to say that the Georgist plan to have all taxation on land value is necessarily convincing or practical; but the plan itself has been given a reasonably clear explanation, even if not with econometric precision.
(12) 'George's Hope that the Single Tax Could be Enacted Gradually Without Radical Confrontation' (p. 33)
Hudson makes the telling point that, of all the major reforms discussed in George's day, the Single Tax was the only one not to succeed. One reason is that it was the most radical reform, 'given the embedded character of land tenure in society's wealthiest and most politically powerful families, and the fact that mortgage lending was becoming the banking industry's major business' (p. 34). Another reason, according to Hudson, is that George and his followers hoped that land-value taxation could be introduced gradually, 'as a merely technical reform with minimum political confrontation' (p. 34).
Hudson largely attributes the political failure of Georgism to George's personal failings--'his self-centered personality', 'his spirit of martyrdom', his sectarianism, and 'his encouragement of increasingly cultish followers'. He describes George as a 'tragic figure', because of 'his self-destructive political strategy'; the 'tragedy of Henry George' was that 'George the politician turned out to be the worst enemy of George the economic journalist and reformer' (pp. 37-9). In Hudson's view:
The political and personal causes suggested by Hudson would go a long way towards explaining the decline in popularity of George's ideas and policies in the period following his death. But I am not convinced that they are the principal reasons for the lack of acceptance and implementation of his policies today. The ideas of George remain the same even after his personal characteristics, and even his name, are long forgotten. Is it possible that the lack of acceptance of the policies is due, not merely or mainly to the vested interests and ideology of the critics, or to his political ineptitude, but to some defects in the theoretical structure behind the policies?
In my opinion, as argued elsewhere (Pullen 2005), there are several aspects of George's theoretical system that need to be reconsidered. One is the fact, rarely adverted to in the pro-Georgist literature, that his proposed annual tax on the land values of owner-occupied residential land is a tax on an unrealised value or unrealised gain, and therefore is likely to cause widespread hardship and political opposition because of inability to pay. Deferment or postponement of the tax until the owner reaches or regains a sufficient income stream, or dies, is not a politically acceptable solution in a society where home ownership is widely dispersed. A capital-gains tax, as normally imposed, is not levied until after a capital gain is realised. George's annual land-value tax is a land-gains tax that would be levied before the land gains on residential land are reached. Both the morality and the feasibility of such a tax must be questionable.
A second questionable aspect of George's theory is the argument that land-value tax is the only morally justified tax, because all other taxes are taxes on labour or capital; and because the products of work or saving should belong totally to the producer. In asserting this theoretical principle, George seems to have carried his economic and political individualism to an unwarranted extreme position. He understates the role played by others in the life and work of the individual. The labourer's product is produced by the labourer, but is not produced by the labourer alone. It is produced by the individual labourer supported by all the hereditary, educational, social, cultural and environmental influences that have contributed to his or her productivity. Since others have contributed to the productivity of the individual, it would seem perfectly logical and justifiable, on the Lockean or labour theory of property employed by George, for others (or society in general) to claim through income tax a portion of the labourer's output.
A third questionable aspect of George's theory is his belief that, where the land value of private landowners is taken away by the state, their legal title to their land is transformed from 'private property' to 'private possession'. As argued above, this would seem to be a totally unnecessary theoretical distinction. It is surely one which alienated, and continues to alienate, all for whom the institution of private ownership of land is an aspiration, and for whom 'land hunger' is a normal and desirable emotion. There seems to be no reason for declaring that privately owned land that is subject to land-value tax should not still be described as privately owned.
I suggest that theoretical issues such as these need to be addressed before the Georgist policy of land-value taxation can achieve feasibility and political acceptance. George held that if a theory is correct, the policy that it leads to must be feasible. The reverse is also true; if there are flaws in the theory, the policies that flow from it cannot be feasible.
The informed and fascinating survey in this book of criticisms that have been levelled at George covers as much as any reader could reasonably expect within one book. Two further Georgist themes that could be considered in a more extensive survey are: the principle of equal rights to natural resources conceived as a moral issue, and the principle of equal sharing or distribution of the value of natural resources considered in its macroeconomic and utilitarian implications. These two principles are, in my opinion, the most essential and most enduring aspects of George's system. Other aspects of his system--such as the singleness of the Single Tax, the legitimacy or otherwise of taxes on income, and the distinction between private possession and private property--have unfortunately occupied the dominant position in both the pro-Georgist and anti-Georgist debates in the past, and will no doubt continue to engender vigorous debate. But even if an unlikely consensus were ever agreed that George was mistaken on all of these other issues, there remains the fundamental question: would a nation be better off or worse off if the value of all its natural resources was shared equally amongst all its members? Many critics have rejected the moral principle that we all have equal natural rights to land, mainly because they deny the existence of natural rights of any kind; but it would be interesting to learn from Professor Hudson, or from any other reliable source, whether any critics have ever proved conclusively that society would become better off, or worse off, by an equal distribution of the value of its natural resources. Disproof of George's other theories and policies does not in any way disprove that an equal sharing of the value of a nation's natural resources would promote the economic well-being of its members, jointly and severally.
Hudson concludes his well-researched and challenging article with a statement, which the present reviewer would heartily endorse:
George, H. 1879 . Progress and Poverty. New York: Modern Library.
Keynes, J.M. 1944. 'Obituary of Mary Paley Marshall 1850-1944', Economic Journal, 54(214), pp. 268-84.
Pullen, J. 2001. 'Henry George's land reform: the distinction between private ownership and private possession', American Journal of Economics and Sociology, 60(2), pp. 547-56.
Pullen, J. 2005. 'The philosophy and feasibility of Henry George's land-value tax: criticisms and defenses, with particular reference to the problem of the land-rich-and-income-poor', in J. Laurent (ed.) Henry George's Legacy in Economic Thought, Cheltenham, UK: Edward Elgar, pp. 177-95.
Stigler, G.J. 1969. 'Alfred Marshall's lectures on Progress and Poverty', Journal of Law and Economics, 12(1), pp. 181-4.
John Pullen, Honorary Fellow, School of Business, Economics and Public Policy, University of New England, Armidale NSW 2351, Australia. Email: firstname.lastname@example.org.
Posted by nickglais at 7:16 AM