Henry George - the Thomas Piketty of the 19th Century
Henry George, an American political economist and journalist, who died 120 years ago, on 29 October 1897, was the Thomas Piketty of his day. Both he and Piketty published books which sold in their millions worldwide. Piketty’s “Capital in the Twenty-First Century” drew on enormous amounts of data, going back to George’s time and before, to show how a rate of return on capital being greater than the rate of nation’s growth inexorably leads to increasing levels of inequality.
George’s “Progress and Poverty”, published in 1879, probably sold more than any American book had done before. In it, George investigates what he saw as a puzzle: visible technological and economic progress were generally accompanied by increasing inequality and poverty among those who worked for a living.
George’s suggested remedy, a land value tax designed to socialise natural resource endowments, closely parallels Piketty’s proposal for a tax on capital. George gained enormous support from millions of people both within and outside the labour movement. At the same time, he provoked considerable enmity among many professional economists. As is the case with any work of scholarship which challenges orthodoxy and seeks to break a mould, Piketty’s work has also been criticised.
Piketty identifies the rentier class, from the time of Jane Austen’s novels to this, who make money out of their capital, with little need to exert themselves. George puts it like this:
“Take now... some hard-headed business man, who has no theories, but knows how to make money. Say to him: "Here is a little village; in ten years it will be a great city—in ten years the railroad will have taken the place of the stage coach, the electric light of the candle; it will abound with all the machinery and improvements that so enormously multiply the effective power of labor. Will in ten years, interest be any higher?" He will tell you, "No!" "Will the wages of the common labor be any higher...?" He will tell you, "No the wages of common labor will not be any higher..." "What, then, will be higher?" "Rent, the value of land. Go, get yourself a piece of ground, and hold possession." And if, under such circumstances, you take his advice, you need do nothing more. You may sit down and smoke your pipe; you may lie around like the lazzaroni of Naples or the leperos of Mexico; you may go up in a balloon or down a hole in the ground; and without doing one stroke of work, without adding one iota of wealth to the community, in ten years you will be rich! In the new city you may have a luxurious mansion, but among its public buildings will be an almshouse."
George was influenced by such figures as John Locke, Thomas Paine, John Stuart Mill and David Ricardo. But he notes that conversations with ordinary people were very formative in his thinking:
“I asked a passing teamster, for want of something better to say, 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.”
His work has influenced political figures such as David Lloyd George and both presidents Roosevelt, the writers H G Wells and George Bernard Shaw and economists Milton Friedman and Joseph Stiglitz.
Stiglitz wrote that, “One of the most important but unappreciated ideas in economics is the Henry George principle of taxing the economic rent of land, and more generally, natural resources.”
The passage of time means that George may not leap to mind among prominent and influential economists. An Evangelical Protestant throughout his life, George’s influence on nations, their leaders and their economies, would almost certainly reward detailed study.