First published in Canvas: May 17th 2012
On rare occasions, alternative theories of capitalism have emerged to influence new ways of thinking in economic policy. Famous examples include John Maynard Keynes’ The General Theory of Employment, Interest and Money, revolutionised the way in which governments formed economic policy, by utilising public spending to stave off the worst excesses of the economic cycle: and Frederick Hayek’s The Road to Serfdom influenced a generation of free market economists to stridently defend the capitalism system in the face of post war communist successes in eastern Europe. However, there are other theories, once hugely influential, that have been largely forgotten by history. None fits this example more perfectly than Henry George’s Progress and Poverty.
In the years shortly after its publication in 1879, Progress and Poverty sold more than three million copies, and over the next decade it was outsold in America only by the bible. Hugely influential worldwide, its advocation of a ‘Land Value Tax’ envisioned an alternative capitalism that would allow all men and women to enjoy the fruits of their labour to the fullest extent. But despite impressive sales, and the continued existence of societies advocating Georgism, his ideas have rarely, if ever, been put into practice as policy at country wide level. This seems odd for a man who Leo Tolstoy once said, “People do not argue with the teachings of Henry George,” Leo Tolstoy once claimed, “they simply do not know it. He who becomes acquainted with it cannot but agree.”1
The main tenet of Georgism is the belief that people should be allowed to own the product of their labour, but that things found in nature, particularly land, belongs equally to all humanity. A self-educated political economist who experienced abject poverty in 1850s Philadelphia, he moved to California, where he managed to gain employment as a printer. It was there, on a warm day in 1871, that he took a fateful horse ride.”I asked a passing teamster…what land was worth there. He pointed to some cows grazing so far off that they looked like mice, and said,’I don’t know exactly, but there is a man over there who will sell some land for a thousand dollars an acre.’ Like a flash it came over me that there was the reason of advancing poverty with advancing wealth. With the growth of population, land grows in value, and the men who work it must pay more for the privilege.”2
The concept of a land value tax had circulated since the days Adam Smith. “Ground-rents,” Smith claimed, “are a still more proper subject of taxation that the rent of houses. A tax upon ground-rents would not raise the rents of houses. It would fall altogether upon the owner of the ground-rent, who acts always as a monopolist, and exacts the greatest rent which can be got for the use of his ground.”3 However, it was George who popularised the idea. “We have traced the unequal distribution of wealth which is the curse and menace of modern civilization…We have examined all the remedies, short of the abolition of private property in land, which are currently relied on or proposed for the relief of poverty and the better distribution of wealth…There is but one way to remove an evil — and that is to remove its cause. We must make land common property.”4
Georgism reached the peak of its popularity in Britain in the early 20th century. The 1906 Labour Manifesto claimed that “The slums remain, overcrowding continues whilst the land goes to waste. Shopkeepers and traders are overburdened with rates and taxation whilst the increasing land values that should relieve the ratepayer go to people who have not earned them.’ The 1909 Liberal Party manifesto echoed this sentiment, which received high praise from Winston Churchill, at that time a Liberal MP. “Roads are made;” he stated, “electric light turns night into day; water is brought from reservoirs a hundred miles off – and all the while the landlord sits still?…He contributes nothing to the process from which his own enrichment is derived.”5
Though Labour persisted with some form of land tax into the 1930s (there had not been time to implement it during the Labour government of 1923) the issue of the land tax quietly dropped from view. However, since the 2008 financial crash, his policies have once again come back into fashion, as political leaders, particularly those in Britain, look for radical solutions to the economic crisis. In September 2010, in a speech at the Liberal Democrat conference, Vince Cable announced broad support for the idea of a land tax. “It will be said that in a world of internationally mobile capital and people it is counterproductive to tax personal income and corporate profit to uncompetitive levels. That is right. But a progressive alternative is to shift the tax base to property, and land, which cannot run away, [and] represents in Britain an extreme concentration of wealth.”6
Both the Liberal Democrats and the Labour Party have campaign organisations dedicated to advocating the idea of a land tax. The Labour Land Campaign “campaigns within the Labour party and the broader movement for “a more equitable distribution of the Land Values that are created by the whole community” through an annual tax on land values.”7 The Liberal Democrat ALTER (Action for Land Taxation and Economic Reform), panel includes Chris Huhne, Nick Clegg, Ed Day and Vince Cable “There is a popular belief,” a recent ALTER report claims, “that income tax is the fairest tax, since it reflects ability to pay. This is a misapprehension. Income tax is easy to extract, and for the very wealthy is relatively painless: but it does not truly reflect ability to pay. Unless politicians find the courage to tax wealth, conservative minded middle income earners will continue to complain bitterly that their taxes are too high, and they will be right.”8
There is even growing support within the Conservative Party. In the 2012 Macmillan Lecture, Nick Boles MP proposed a series of ideas to improve Britain’s economic competitiveness, including a land tax. Traditionally the preserve of the libertarian right and the socialist left, Boles suggested that a land tax would be the most legitimate way to raise new revenue. Using the New South Wales’ Land Tax (one of the few applications of Georgism in existence) as an successful example – it raises roughly 2 billion Australian dollars a year – Boles suggested that a UK Land Tax on similar terms could raise over £5 billion a year – and it would encourage productive use of under-utilised development land.
These are therefore, interesting times for those who support a Land Tax. Like Marx and Das Capital, which has experienced a renaissance in recent years, Progress and Poverty may once again have its day. It is interesting to note that neither one of them was appreciative of the other Though they never met, Marx considered George incapable of understanding the theory of surplus value, while George considered Marx “the prince of muddlehead’s.”9 Perhaps it is best to use the words of Albert Einstein, who wrote in 1934, “Men like Henry George are are rare unfortunately. One cannot imagine a more beautiful combination of intellectual keenness, artistic form and fervent love of justice. Every line is written as if for our generation.”10
2Wenzer, Kenneth C., An Anthology of Single Land Tax Thought: Volume 3, (University of Rochester Press, 1997)
3Smith, Adam, The Wealth of Nations, Book V, Chapter 2, Article 1: Taxes upon the Rent of Houses. (1776)
9Genovese, Frank C., “An Economics Classic and Plutology,” The American Journal of Economics and Sociology Vol. 43, No. 4 (Oct., 1984), p. 455