A Georgist Theory of History: Work in Progress

by Lindy Davies

One criticism frequently leveled at Georgists that has more truth than most is the notion that our analysis lacks depth — that we’re shake ‘n bake utopians, that we have one simple, magical cure to offer for poverty, depression, oppression, repression and indigestion. Henry George himself was, perhaps, guilty of creating that impression in the apocalyptic tone of many of his final chapters. Georgists fervently preach their One Great Law: “Tax land values and do as thou wilt…” At times, this makes our more sophisticated, credentialed colleagues a tad uneasy. I have seen the urgent for-God’s-sake-sit-down! gestures at conference Q&A sessions. There’s this nagging sense that we’re just not quite up to speed, intellectually. This has sometimes led to a disavowal of certain terms, such as “Henry George,” “Georgism,” “Single Tax,” “Rent,” or even “Land” — as if uttering these words will reveal us as having come in with that discredited band of cranks.

Where such criticism is deserved — and it sometimes is — the problem can be addressed with a dose of good old-fashioned professionalism, and intellectual curiosity. Some of us could indeed do with a bit more “following truth where it leads” and a bit less self-referential insularity.

But I would like this criticism not to be deserved; I would like “being a Georgist” not to be something to be apologetic about. There are plenty of “Marxists” out there who proudly stand as such, despite perhaps not revering every word of Das Kapital as Revealed Truth; there are loads of “Keynesians” who may, or may not, place a “Neo” in front of the term. Good grief, even “Ricardians” publish papers from time to time — so why wouldn’t we admit to being “Georgists”? If we’re scholars, we’d better assert that George’s position in intellectual history (not to mention his relevance to contemporary policy) doesn’t depend on a popularity contest.

The Georgist movement has been, for the most part, more polemical than scholarly, and that is not necessarily a bad thing. Scholarship is as scholarship does, and unfortunately, much of today’s “scholarly” work in economics amounts to self-serving, publish-or-perish journal-fodder. Not that some of it isn’t interesting and insightful — but there’s just so much of it to sift through. Both Neoclassical and Marxist economists have rich lodes of material for this sort of thing; the former have their mathematical models, while the latter have endlessly nuanced interpretations of historical materialism and its socio-psychological effects. But for Georgists (who lack the comfortable support of an academic establishment), the time is always now; they figure they can work out the fine points later.

That could be a mistake. Michael Hudson is one who argues that it is. He notes that Marx’s ideas were incorporated into academic discourse on many levels, whereas George’s were not, because “At the hands of Marx’s followers, historical materialism offered more than just an economic theory or ‘tool’ as such. It offered an explanatory key to the unfolding of history.” Hudson diagnoses the early Georgist movement as suffering from a sort of tunnel vision:

To become a doctrine, economic theory must place itself in the context of the social whole. It must involve a theory of history, of social behavior, and even of intellectual history, for it is natural to think of the whole, and intellectually crippling to think of only the parts…. To become a political doctrine in its own right, the theory of rent would have to involve a view of the economy at large, and indeed to become nothing less than a theory of society and of history. It would explain the progress of rent over time, and how the appropriation of rent (and the land’s breaking free of taxation) has shaped societies for better or worse, affecting the distribution of income and wealth so as to promote prosperity or poverty. By creating a political doctrine… the theory of rent… might have become as fullblown a doctrine in its own right as Marxist socialism became. [1]

Now, this strikes me as an intriguing possibility. Suppose Georgism did offer a compelling, richly elucidative theory of history? Good heavens, that would give us stuff for the journals, wouldn’t it? I’d like to suggest, as something of a jumping-off point, three issues in Henry George’s writings, and our subsequent teaching of them, that point toward an interesting sort of time-consciousness that could, I suspect, grow into a coherent sense, or theory, of history from a Georgist perspective.

What’s emerging here is a picture of a continuum of social development. We might be able to outline its stages — in a glib, sketchy, preliminary way — as follows
Pre-agrarian — traditional societies; communal land tenure; skill overshadows knowledge in production; traditional, tribal government
Agrarian — private tenure recognized, but production tied to the land; commons still important; traditional values and skills still important, but new efficiencies lead to increased surplus; monarchic government
Early Industrial — private ownership assured; division of labor and economies of scale become important; artisanal and small farm production still widely practiced, but decreasing; movement toward democratic government
Full Industrial — workers in proletarian role; industrial power enables great class disparity; knowledge overshadows skill; landless workers bid wages downward; corrupt democratic government leads to revolutionary pressures
Post-Industrial Transition — adjustments made to preserve system; middle class becomes dominant political force; alternative life-styles explored; rebellious social responses to alienation; states respond to economic unrest with social democratic reforms, socialist systems, and/or repressive regimes; mixed economy in which the role of land is hidden
Full post-industrial — environmentalism becomes very important; demographic shifts; information economy; skill and knowledge either integrate or are at war; industrial production is either clean & green, or outsourced to poor countries; the age will be either golden or dark — L. D.

These three issues seem nit-picky, mere marginalia in the grand sweep of George’s thought — but they stick with the careful reader like pebbles in a shoe. All seemed perfectly sensible, unremarkable things to say in the 1880s, yet for a writer who took as much pride in logical and definitional consistency as Henry George did, they are, nevertheless, a wee bit troubling. They are: 1)Wealth and Services; 2) Growth and Progress; 3) Skill and Knowledge.

Wealth and Services

There has been a long-running debate among Georgist teachers over whether services should be considered as part of production in political economy. George said no. Georgist curricula have for many decades defined political economy as “The science which deals with the nature of wealth and the natural laws governing its production and distribution.” Services have no material product, therefore they are not part of production. However, that definition of political economy is incongruous, because labor receives payment, which we call “wages,” for providing services, and wages is defined as that part of aggregate wealth that is distributed to the factor we call “labor.” If service is not part of production, then the compensation for services has to come from some sub-distribution; some portion of wealth must be set aside to pay for “non-productive” services. [2] Thus, unlike the provision of pet rocks and snow globes, things like legal or financial services are deemed non-productive.

This leads to pointless complication — yet George resolutely argued it. He was on familiar ground. John Stuart Mill was clear that the science was about the production and distribution of wealth (though he spent many pages considering how the “natural law” part of the definition worked itself out). [3] Ricardo was on the same wavelength, stating that “the principal problem in political economy” is determining the laws that regulate the distribution of “the produce of the earth” among the three factors of production. [4] Henry George inherited this traditional conception of things, and it fit in nicely with his paramount concern that wealth (physical products of labor) must be distinguished from land (natural opportunities). This was important enough that a niggling little inconsistency in the definition of production (and hence the definition of political economy itself) seems trifling — but there it is. Although the Henry George School’s introductory course traditionally defines the science of political economy as stated above, I think it’s noteworthy that Henry George himself didn’t attempt to define “political economy” in Progress and Poverty.

He did so in The Science of Political Economy, where the issue of wealth and services resurfaces, in a most interesting way. He felt the need to include a chapter titled “Why Political Economy Considers only Wealth.” [5] He starts by saying that the traditional definition of political economy is sufficient, but then proceeds to call that statement seriously into question:

…wealth is not the only result of human exertion, nor is it indeed the final cause of human exertion. That is not reached until wealth is spent or consumed in satisfaction of desire. Wealth itself is in fact only a halting-place or storehouse on the way between prompting desire and final satisfaction; a point at which exertion, journeying towards the satisfaction of desire, remains for a time stored up in concrete form, and from whence it may be called forth to yield the satisfaction which is its ultimate aim. And there are exertions aiming at the satisfaction of desire which do not pass through the form of wealth at all.

George recognizes that the cause of economic activity is the satisfaction of desire, not merely the production of material goods. So why stick with the incomplete definition? Convention. If he didn’t, people might not have known what he was talking about. He concludes that “Political economy has a duty and a province of its own. It is not and it cannot be the science of everything….” Fine, but that fails to explain why political economy should not include functions that, by George’s own explanation in this very chapter, clearly fall within its purview.

This minor definitional inconsistency wasn’t a big deal, though, even as late as 1897. Material progress was still the important thing. That was what was making the great fortunes and supplying the potential for such miraculous improvements in society. Of course political economy was about the production of physical wealth — what else would it be about? Although more and more people were joining the ranks of the proletariat, a great many people still worked on farms, or crafts, or in small stores or businesses. The march of concentration had not yet proceeded to the level of consolidation that would, one day, render people alienated not just from the fruits of their labor but from the very meaning of what they do. Henry George didn’t see alienation as part of industrial production itself, as Marx did, but rather as a result of unjust restriction of the workers’ economic opportunities.

The Science of Political Economy was left unfinished, and we can’t know how he would have revised it, but in writing this chapter (following truth where it led), George was recognizing and exploring (albeit tentatively) an inconsistency which he had inherited from his predecessors. It might have made sense in the mid-19th century to exclude services from the definition of production, but George was seeking natural laws — and on that level, errors can’t hide forever.

Another convention that Henry George inherited was the labor theory of value. The term “value” is ubiquitous in Progress and Poverty, yet no definition is offered. The concept of value does get fully — and ingeniously — analyzed in The Science of Political Economy. Unfortunately, though, the latter book was unfinished, didn’t appear during George’s lifetime, and over the years has been read by far fewer people than Progress and Poverty — so, the understanding of “value” that people associate with Henry George is definitely the one put forth in P & P. That’s unfortunate, because it is expressed there in muddled language that contributes, I suspect, to lingering misconceptions about what Georgist political economy is about.

Generations of P & P students have dutifully answered study questions that Henry George’s remedy would give workers the full reward of their labor, and capitalists the full return of their capital. They say this because George says it, again and again, in Book IX — but what kind of malarkey is this? George says that laborers and capital owners have not been getting their full rewards, because of the robbery of land monopoly. Now, to be sure, the pre-remedy situation is unfair to workers and capitalists. But the implication is that there exists an amount of wealth, a “full reward” that workers and capitalists are not getting. If this “full reward” exists as a phenomenon in the economy, one would assume that it is calculable — as, indeed, it would be, were the labor theory of value, as propounded by Ricardo (and, later, Marx) to hold true.

Furthermore, if there is such a phenomenon as labor and capital’s “full reward,” there has to be a similarly indentifiable “normal” or non-speculative “rent line,” to which the speculative premium is added. This has led some Georgist theorists to separate rent into two components: “rack-rent,” an unnaturally high premium on natural opportunities, and “normal” rent, which would remain even after land speculation stopped.

I submit that such lines of reasoning are fruitless and misleading, and spring from a misconception caused by George’s momentary carelessness in using the terms current in his day. George goes on to explain how poverty happens, in market-based language of which any modern economist would approve. He notes that the supply of workers is unnaturally increased by the land monopoly’s withholding of natural opportunities, and this bids the price of labor down to its marginal cost, which, for workers lacking unusual skills or other bargaining power, is bare subsistence. [6] The raising of wages under the Georgist remedy requires no mythical “full reward” — it is entirely market-based, and will end up where it ends up. The same is true of the “rent line” — indeed, post-remedy rent levels would be further complicated by dynamic forces caused by the remedy itself, processes which George describes powerfully in Book IX of Progress and Poverty. [7]

Henry George inherited the labor theory of value, but by the time of The Science of Political Economy he had disavowed it, affirming that value is not intrinsic, and depends entirely on the higgling of the market.8 He does believe in a labor theory of property, however — but that is an entirely different thing, which bears on George’s concept of the natural laws of distribution, not on the nature of value.

Growth and Progress

The second issue in our study is closely related to the first. However, the key insight here comes not from George’s mistakes, but from a point about which I think he was far ahead of his time. The point is George’s refutation — “modification” is probably more accurate — of Adam Smith’s assertion that selfishness is at the root of economic behavior. George writes, rather grandiosely,

Shortsighted is the philosophy which counts on selfishness as the master motive of human action. It is blind to facts of which the world is full. It sees not the present, and reads not the past aright. If you would move men to action, to what shall you appeal? Not to their pockets, but to their patriotism; not to selfishness, but to sympathy. (Book IX, Chp. 4)

Here, I think, George’s fervent style obscures a truly brilliant piece of analysis that merits scrutiny in today’s economic debates. He is saying that economic behavior is properly understood as human beings’ efforts to satisfy their desires — whatever those desires may be. We’ve already discussed how desires are unique to each individual, and how their satisfaction need not be in material form. Here, George adds a sociological note to his basic axiom of economic behavior — a note that leads directly to his conception of what constitutes progress in society. For Henry George, it is “want and fear of want” that causes so much of the negative behavior that plagues society and creates a misanthropic view of human nature. He illustrates this by comparing the behavior around two very different dinner tables: one at a charity soup-kitchen where the food is close to running out, the other in a gracious, comfortable, civilized household. Which example illustrates the norm for human table manners?

The clear implication of this is that if society moves toward a more just and prosperous social order (as it simultaneously maximizes, in George’s terms, its association and equality), the kinds of desires that people seek to satisfy will shift in beneficent ways. We already see some evidence of this in certain kinds of self-reinforcing demographic or cultural shifts. It’s widely documented, for example, that birth rates decline as living standards and educational levels improve. There are also strong correlations (both positive and negative) between regional prosperity and successful habitat and wildlife conservation. This leads us to suspect that a society that eliminated involuntary unemployment would be transformed in many subtle ways, far beyond the sphere of mere “economics.” Jeff Smith envisioned such a shift, in an article provocatively titled “The Protestant Work Ethic vs. the Polynesian Play Ethic.” Noting that a nose-to-grindstone approach to making more and better stuff served us well, perhaps, through the industrial revolution, but now, “when we need to shift gears and take advantage of the mechanical miracles we have wrought, a play ethic suits us better.” There is a model for such a “play ethic” in Polynesian societies where food is abundant and climate mild:

As much as provide food, men were needed to provide love, to nurture as well as to labor. People esteemed the bearer of glad tidings, the easy-going person with the ready smile for everyone. The quick wit with a joke or story for every occasion earned the respect of his fellows. The one eager to break into song or dance was the one whom others followed. And children were a pleasure. Were a workaholic possible, he would be considered crazy. [9]

The march of material progress — to which Progress and Poverty was a direct response — made possible a living just as easy as that of the Polynesians (but, of course, with infinitely more varied possibilities). Realizing this potential would shift our economic behavior — in terms of quantity, to be sure, but, more interestingly, in terms of quality.

We have a neighbor here in Maine who is an organic farmer. He and his wife sell the meat and vegetables they grow at farmers’ markets. They try to minimize their cash flow, but occasionally they take paying jobs when they must. This farmer has a gigantic, beautiful Belgian horse, an animal that is bred to work, and who needs to work to stay healthy. For the last few years, the farmer and the horse have mowed, raked and hauled hay, which the horse ate during the winter. In the winter, the horse has pulled a snowplow to clear their driveway. Now: to what extent can this be meaningfully described as economic behavior? The farmer is, like everyone else, is “satisfying his desires with the least exertion.” And, regularly clearing a long driveway of heavy Maine snow is a valuable service (lacking a horse, we pay cash to a guy with a rig). However, can the value of that snow-plowing be computed in terms of the opportunity cost of the market value of this guy’s labor? Certainly not; certainly a large part, most, in fact, of the effort our neighbor expended on haying and plowing (and feeding, and hoof-cleaning) has had the character of things he did for his own satisfaction. And yet — and here’s where our “Georgist sense of history” starts to come in — he was using the horse to plow his driveway, and that was something that had economic value. Note that I’ve been describing this activity in the past tense. This year he hasn’t been plowing the driveway with his horse. At some marginal point, alas, it became preferable to simply buy hay with a little bit of his cash earnings, and use a truck for plowing. But, although the man’s cash flow (and national GDP) increased, his quality of life decreased.

It seems likely that in a more prosperous economy, there would be many more examples of this sort of blending of economic and personal concerns in the choices people make. This sort of blending is manifestly not a feature of industrial society. It is a post-industrial phenomenon. It contains, probably, a harking-back to a romantic conception of simpler times — but without the endless, backbreaking toil. Remember that the wage-slaves of 18th-century textile mills took those jobs, in many cases, because they seemed better then working on farms. Only recently has it become both possible and widely desirable for people to use modern technology to enable them to enjoy the work of farming. The spiritual and ecological pitfalls of industrial farming have started to come home to people. Local, labor-intensive small farming is becoming not only feasible but fashionable. But it is seldom, in strict terms of the bottom line, profitable. It is “profitable” in more ambiguous, personal terms — possibilities that general prosperity allows more people to explore.

Skill and Knowledge

Some years ago, I was brought up short by a question in the Henry George School’s course in Economic Science, which asked, “Which of the two (knowledge and skill) is more important in the development of civilization?” The reading, in The Science of Political Economy, admitted a definite answer to that question, in George’s words: “It is not in skill, but in the knowledge that can be communicated from one to another, that the civilized man shows his superiority to the savage.” (Book I, Chp. 6) That is a very interesting sentence from a 21st-century perspective. For one thing, there are lots of thoughtful, well-read people who don’t think the accomplishments of “the civilized man” stack up so well against “the savage” at this point in history. But, we shouldn’t put this down to a mere lack of political correctness. George goes on to explain in this chapter that “savages” (say, aboriginal people) regularly display skills of various kinds that “civilized man” (say, European colonists) hold in awe. The implication is that modern people, because of their having taken advantage of the results of stored knowledge, have less need to develop skills. Very interesting! This chapter hints at, but ultimately rejects, an important insight. Indeed, George has been down this interesting path before, in the passages discussed above, among others. But here, in his attempt to nail down the eternal nature and processes of civilization, he couldn’t let his imagination run free.

Nowadays, this process has played itself out; we’ve come all the way around to the other side of the question. Society’s reliance on applied knowledge has brought about vast levels of abstraction (and all manner of labor-saving gadgetry). But it has left people disempowered. Modern life is seen as a collection of specialties. One aspires to learn a specialty in order to make a good living, which enables one to hire other specialists — to prepare frozen food, fix faulty wiring and treat emotional problems. Left on our own, having worked for years to master a specialty, we find ourselves so without skills that we must depend on roadside assistance, summoned via cell-phone, should a tire go flat, or fuel run out. Our farmer neighbor was compelled by hard economic realities to trade a satisfying activity that demanded a wide range of well-practiced skills for a mind-numbing daily stint in a retail establishment. And what’s the first thing many hard-working middle-class people do when they retire? Why, they take up a hobby — or resume an artistic pursuit that they’d set aside in order to make a living. They do something, in other words, which requires the oh-so-satisfying acquisition of skill.

These little anachronistic snippets Henry George’s thought are worth our attention for a couple of reasons. For one, they afford an interesting perspective on how our thinking about these elements of economic life change over the years. What’s more important for our study, though, is how they rebound in ways that strengthen the basic Georgist thesis. Nikki Giovanni once whimsically proclaimed, “I am so hip even my errors are correct” — and in a sense this is true of these little “errors” of Henry George’s. Yes, services are rightly understood as part of production — and, by golly, look what aspect of production becomes progressively more important as society reaches an advanced stage of material progress!10 Knowledge can perhaps be seen as more important to civilization than skill — but only for a certain stage in the history of material progress, after which skill begins to come into its own once more. And it’s only too clear that economic growth cannot, any longer, simply mean a piling-up of stuff — but, rather, an ever-more subtle and intricate satisfaction of desires.

The evolution of land tenure systems plays a key role in the historical process, too — but that is so clear in George’s writings and in Georgist thought generally that it need only be mentioned here. In early times, when traditional societies roam over plenty of land, and skills are economically paramount, communal land tenure is the order of things. Feudalism, in various forms, marks a transitional stage, in which the economic utility of exclusive tenure of land starts to be understood, but common rights are still widely held. With industrialism comes absolute private property in land, the financial manipulation of its rent, and the dire social and economic pathologies that ensue.

And in the post-industrial society? Perhaps civilization will fail, and a new dark age will ensue. That is by no means impossible — but I see no need to waste time envisioning it, because, among other reasons, Henry George describes it quite sufficiently (See P & P, Book X, Chp. 4). However, George didn’t give us an adequate picture of a successful post-industrial society. That’s for us to work out. I hope I’ve made an intriguing preliminary case, at least, for how a Georgist notion of history can be a guide toward creating a sane set of options for civilization’s future.

Endnotes

1. Michael Hudson, “The Theory of Rent Needs a Theory of History,” Land and Liberty, Winter, 1997

2. George intimates this in a footnote in Progress and Poverty, Book 1, Chp. 3, in the context of his refutation of the wages-fund theory, saying that the payment for a service, such as that of a shoe-shine, comes not from capital, but from wealth one devotes to one’s own satisfaction. (One can nevertheless observe that the payment for the shoe-shine is not charity; it it is given in exchange for a desirable thing. Since George defines exchange as part of production, the service would seem to fall in that category.)

3. Mill, John Stuart, Essays on Some Unsettled Questions of Political Economy, Second Edition, Batoche Books, Kitchener, 2000

4. Ricardo, David, On the Principles of Political Economy and Taxation, at http://www.econlib.org/library/Ricardo/ricP.html

5. Book II, Chp. 28, in the original edition (Robert Schalkenbach Foundation, 1992); Part II, Chp. 14 in the abridged (RSF, 2004)

6. The market for unskilled labor in a non-Georgist modern economy is the only true example of the theoretical ideal that economists call “perfect competition.” See www.politicaleconomy.org/competition.htm

7. Some — notably, Michael Hudson in the article quoted above — have argued that an accounting of the magnitude of rent in the current economy would be a powerful tool for Georgist advocacy, and that significant resources should be devoted to creating such studies. However that may be, Henry George explains clearly, in Book IX of Progress and Poverty, how and why the aggregate rent in a Georgist economy would be very different than it is today, and would change in complex ways that are impossible to predict in advance.

8. He contends that the value of a thing is universally measured in terms of the irksome toil, or labor, it saves its possessor — but, since each individual’s idea of what constitutes “labor” is subjective, the economic value that depends on that measure is also subjective.

9. Paper delivered at the Eastern Economic Association conference in New York, 2005

10. Although “services” are conventionally thought to be a function of labor, labor is not the only factor that can provide the direct satisfaction of human desires. Land and capital can, as well. For example, the economic role of “ecosystem services” has become an important area of study and advocacy in recent years.

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