Political Economy
What is Political Economy?
One dictionary defines it as "The social
science that deals with political science and economics
as a unified subject; the study of the
interrelationships."
Henry George described it this way:
The science which investigates the laws of the
production and distribution of wealth concerns itself
with matters which among us occupy more than nine
tenths of human effort, and perhaps nine tenths of
human thought. In its province are included
- all that relates to the wages of labour and
the earnings of capital;
- all regulations of trade;
- all questions of currency and
finance;
- all taxes and public disbursements
- in short, everything that can in any way affect
the amount of wealth which a community can secure or
the proportion in which that wealth will be distributed
between individuals.
— Henry George, 1877 speech "The Study of
Political Economy"
Henry George:
The Increasing Importance of Social Questions
(Chapter 1 of Social
Problems, 1883)
[18] The evils that begin to appear spring from
the fact that the application of intelligence to
social affairs has not kept pace with the application
of intelligence to individual needs and material
ends. Natural science strides forward, but political
science lags. With all our progress in the arts which
produce wealth, we have made no progress in securing
its equitable distribution. Knowledge has vastly
increased; industry and commerce have been
revolutionized; but whether free trade or protection
is best for a nation we are not yet agreed. We have
brought machinery to a pitch of perfection that,
fifty years ago, could not have been imagined; but,
in the presence of political corruption, we seem as
helpless as idiots. The East River bridge is a
crowning triumph of mechanical skill; but to get it
built a leading citizen of Brooklyn had to carry to
New York sixty thousand dollars in a carpet bag to
bribe New York aldermen. The human soul that thought
out the great bridge is prisoned in a crazed and
broken body that lies bedfast, and could watch it
grow only by peering through a telescope.
Nevertheless, the weight of the immense mass is
estimated and adjusted for every inch. But the skill
of the engineer could not prevent condemned wire
being smuggled into the cable.
[19] The progress of civilization requires that
more and more intelligence be devoted to social
affairs, and this not the intelligence of the few,
but that of the many. We cannot safely leave politics
to politicians, or political economy to college
professors. The people themselves must think, because
the people alone can act.
[21] The intelligence required for the solving of
social problems is not a thing of the mere intellect.
It must be animated with the religious sentiment and
warm with sympathy for human suffering. It must
stretch out beyond self-interest, whether it be the
self-interest of the few or of the many. It must seek
justice. For at the bottom of every social problem we
will find a social wrong.
... read the entire essay
Henry George: The Wages of
Labor
We see in these social and industrial laws so
close a relation to the moral law as must spring from
the same Authorship, and that proves the moral law to
be the sure guide of man where his intelligence would
wander and go astray. This is the reason why our
beliefs tend towards, nay, are indeed the only
beliefs consistent with a recognition of the Supreme
Law which men must follow if they would secure
prosperity and avoid destruction.
This is the reason why to us
Political Economy only serves to show the depths of
wisdom in the simple truths which common people heard
gladly from the lips of the Carpenter of
Nazareth!
Thus, to us, all that is needed
to remedy the evils of our time is to do justice and
give freedom.
It is because that in what we propose –
the securing to all men of equal natural
opportunities for the exercise of their powers and
the removal of all legal restriction on the
legitimate exercise of those powers we see the
conformation of human law to the moral law; that
we hold with confidence not merely
that this is a sufficient remedy for the present
condition of labor, but that it is the only possible
remedy! ... read the whole
article
Henry George:
Progress & Poverty:
Introductory: The Problem
... This association of poverty with progress is the
great enigma of our times.
-
It is the central fact from which spring
industrial, social, and political difficulties that
perplex the world, and with which statesmanship and
philanthropy and education grapple in vain.
-
From it come the clouds that overhang the future of
the most progressive and self-reliant nations.
-
It is the riddle which the Sphinx of Fate puts to
our civilization, and which not to answer is to be
destroyed.
So long as all the increased wealth which modern
progress brings goes but to build up great fortunes, to
increase luxury and make sharper the contrast between
the House of Have and the House of Want, progress is
not real and cannot be permanent. The reaction must
come. The tower leans from its foundations, and every
new story but hastens the final catastrophe. To educate
men who must be condemned to poverty, is but to make
them restive; to base on a state of most glaring social
inequality political institutions under which men are
not fully equal, is to stand a pyramid on its apex.
All-important as this question is, pressing itself from
every quarter painfully upon attention, it has not yet
received a solution which accounts for all the facts
and points to any clear and simple remedy. This is
shown by the widely varying attempts to account for the
prevailing depression. They exhibit not merely a
divergence between vulgar notions and scientific
theories, but also show that the concurrence which
should exist between those who avow the same general
theories breaks up upon practical questions into an
anarchy of opinion.
-
Upon high economic authority we have been told that
the prevailing depression is due to
over-consumption;
-
upon equally high authority, that it is due to
over-production; while
-
the wastes of war,
-
the extension of railroads,
-
the attempts of workmen to keep up wages,
-
the demonetization of silver,
-
the issues of paper money,
-
the increase of labor-saving machinery,
-
the opening of shorter avenues to trade, etc.,
etc.,
are separately pointed out as the cause, by writers of
reputation.
And while professors thus disagree, the ideas
-
that there is a necessary conflict between capital
and labor,
-
that machinery is an evil,
-
that competition must be restrained and interest
abolished,
-
that wealth may be created by the issue of money,
-
that it is the duty of government to furnish
capital or to furnish work,
are rapidly making way among the great body of the
people, who keenly feel a hurt and are sharply
conscious of a wrong. Such ideas, which bring great
masses of men, the repositories of ultimate political
power, under the leadership of charlatans and
demagogues, are fraught with danger; but they cannot be
successfully combated until political economy shall
give some answer to the great question which shall be
consistent with all her teachings, and which shall
commend itself to the perceptions of the great masses
of men.
It must be within the province of political
economy to give such an answer. For political
economy is not a set of dogmas. It is the explanation
of a certain set of facts. It is the science which, in
the sequence of certain phenomena, seeks to trace
mutual relations and to identify cause and effect, just
as the physical sciences seek to do in other sets of
phenomena. It lays its foundations upon firm ground.
The premises from which it makes its deductions are
truths which have the highest sanction; axioms which we
all recognize; upon which we safely base the reasoning
and actions of every-day life, and which may be reduced
to the metaphysical expression of the physical law that
motion seeks the line of least
resistance--viz., that men
seek to gratify their desires with the least
exertion. Proceeding from a basis thus
assured, its processes, which consist simply in
identification and separation, have the same certainty.
In this sense it is as exact a science as geometry,
which, from similar truths relative to space, obtains
its conclusions by similar means, and its conclusions
when valid should be as self-apparent. And although in
the domain of political economy we cannot test our
theories by artificially produced combinations or
conditions, as may be done in some of the other
sciences, yet we can apply tests no less conclusive, by
comparing societies in which different conditions
exist, or by, in imagination, separating, combining,
adding or eliminating forces or factors of known
direction.
I propose in the following pages to attempt to solve by
the methods of political economy the great problem I
have outlined. I propose to seek the law which
associates poverty with progress, and increases want
with advancing wealth; and I believe that in the
explanation of this paradox we shall find the
explanation of those recurring seasons of industrial
and commercial paralysis which, viewed independent of
their relations to more general phenomena, seem so
inexplicable. Properly commenced and carefully
pursued, such an investigation must yield a conclusion
that will stand every test, and as truth will correlate
with all other truth. For in the sequence of phenomena
there is no accident. Every effect has a cause, and
every fact implies a preceding fact.
That political economy, as at present taught, does not
explain the persistence of poverty amid advancing
wealth in a manner which accords with the deep-seated
perceptions of men;
-
that the unquestionable truths which it does teach
are unrelated and disjointed;
-
that it has failed to make the progress in popular
thought that truth, even when unpleasant, must
make;
-
that, on the contrary, after a century of
cultivation, during which it has engrossed the
attention some of the most subtle and powerful
intellects, it should be spurned by the statesman,
scouted by the masses, relegated in the opinion of
many educated and thinking men to the rank of a
pseudo-science in which nothing fixed or can be
fixed--must, it seems to me, be due not to any
inability of the science when properly pursued, but
some false step in its premises, or overlooked
factor in its estimates. And as such mistakes are
generally concealed the respect paid to authority,
I propose in this inquiry take nothing for granted,
but to bring even accepted theories to the test of
first principles, and should they not stand the
test, to freshly interrogate facts in the endeavor
to discover their law.
I propose to beg no question, to shrink from no
conclusion, but to follow truth wherever it may lead.
Upon us the responsibility of seeking the law, for in
the very heart of our civilization to-day women faint
and little children moan. But what that law may prove
to be is not our affair. If the conclusions that we
reach run counter to our prejudices, let us not flinch;
if they challenge institutions that have long been
deemed wise and natural, let us not turn back. ...
read the entire chapter
Reducing to its most compact form the problem we have
set out to investigate, let us examine, step by step,
the explanation which political economy, as now
accepted by the best authority, gives of it.
The cause which produces poverty in the midst of
advancing wealth is evidently the cause which exhibits
itself in the tendency, everywhere recognized, of wages
to a minimum. Let us, therefore, put our inquiry into
this compact form:
Why, in spite of increase in
productive power, do wages tend to a minimum which
will give but a bare living?
The answer of the current political economy is,
that wages are fixed by the ratio between the number
of laborers and the amount of capital devoted to the
employment of labor, and constantly tend to the
lowest amount on which laborers will consent to live
and reproduce, because the increase in the number of
laborers tends naturally to follow and overtake any
increase in capital. The increase of the divisor
being thus held in check only by the possibilities of
the quotient, the dividend may be increased to
infinity without greater result.
In current thought this doctrine holds all but
undisputed sway. It bears the indorsement of the very
highest names among the cultivators of political
economy, and though there have been attacks upon it,
they are generally more formal than real.* It is
assumed by Buckle as the basis of his generalizations
of universal history. It is taught in all, or nearly
all, the great English and American universities, and
is laid down in textbooks which aim at leading the
masses to reason correctly upon practical affairs,
while it seems to harmonize with the new philosophy,
which, having in a few years all but conquered the
scientific world, is now rapidly permeating the general
mind....
read the entire chapter
Rev. A. C. Auchmuty: Gems from George, a themed
collection of excerpts from the writings of Henry
George (with links to sources)
Social Study
I BELIEVE that in a really Christian community, in a
society that honored, not with the lips but with the
act, the doctrines of Jesus, no one would have occasion
to worry about physical needs any more than do the
lilies of the field. There is enough and to spare. The
trouble is that, in this mad struggle, we trample in
the mire what has been provided in sufficiency for us
all; trample it in the mire while we tear and rend each
other. — The Crime of
Poverty
WHOSE fault is it that social conditions are such that
men have to make that terrible choice between what
conscience tells them is right, and the necessity of
earning a living? I hold that it is the fault of
society; that it is the fault of us all. Pestilence is
a curse. The man who would bring cholera to this
country, or the man who, having the power to prevent
its coming here, would make no effort to do so, would
be guilty of a crime. Poverty is worse than cholera;
poverty kills more people than pestilence, even in the
best of times. Look at the death statistics of our
cities; see where the deaths come quickest; see where
it is that the little children die like flies —
it is in the poorer quarters. And the man who looks
with careless eyes upon the ravages of this pestilence;
the man who does not set himself to stay and eradicate
it, he, I say, is guilty of a crime. —
The Crime of
Poverty
SOCIAL progress makes the well-being of all more and
more the business of each; it binds all closer and
closer together in bonds from which none can escape. He
who observes the law and the proprieties, and cares for
his family, yet takes no interest in the general weal,
and gives no thought to those who are trodden
underfoot, save now and then to bestow alms, is not a
true Christian. Nor is he a good citizen. —
Social Problems —
Chapter 1, the Increasing Importance of Social
Questions
WE cannot safely leave politics to politicians, or
political economy to college professors. The people
themselves must think, because the people alone can
act. —
Social Problems —
Chapter 1, the Increasing Importance of Social
Questions ...
"Wise" and "Babes"
IT is as bad for a man to think that he can know
nothing as to think he knows all. There are things
which it is given to all possessing reason to know, if
they will but use that reason. And some things it may
be there are, that — as was said by one whom the
learning of the time sneered at, and the high priests
persecuted, and polite society, speaking through the
voice of those who knew not what they did, crucified
— are hidden from the wise and prudent and
revealed unto babes. — A Perplexed
Philosopher
(Conclusion)
THAT thought on social questions is so confused and
perplexed, that the aspirations of great bodies of men,
deeply though vaguely conscious of injustice, are in
all civilized countries being diverted to futile and
dangerous remedies, is largely due to the fact that
those who assume and are credited with superior
knowledge of social and economic laws have devoted
their powers, not to showing where the injustice lies
but to hiding it; not to clearing common thought but to
confusing it. — A Perplexed
Philosopher
(Conclusion)
POLITICAL economy is the simplest of the sciences. It
is but the intellectual recognition, as related to
social life, of laws which in their moral aspect men
instinctively recognize, and which are embodied in the
simple teachings of him whom the common people heard
gladly. But, like Christianity, political economy has
been warped by institutions which, denying the equality
and brotherhood of man, have enlisted authority,
silenced objection, and ingrained themselves in custom
and habit of thought. — Protection or Free
Trade, Chapter 1
econlib
HE term Land in political economy means the natural
or passive element in production, and includes the
whole external world accessible to man, with all its
powers, qualities, and products, except perhaps those
portions of it which are for the time included in man's
body or in his products, and which therefore
temporarily belong to the categories, man and wealth,
passing again in their reabsorption by nature into the
category, land. — The Science of Political
Economy —
unabridged: Book III, Chapter 14: The Production of
Wealth, Order of the Three Factors of Production
• abridged:
Part III, Chapter 10: Order of the Three Factors of
Production
THAT land is only a passive factor in production must
be carefully kept in mind. . . . Land cannot act, it
can only be acted upon. . . . Nor is this principle
changed or avoided when we use the word land as
expressive of the people who own land. . . .
That the persons whom we call landowners may contribute
their labor or their capital to production is of course
true, but that they should contribute to production as
landowners, and by virtue of that ownership, is as
ridiculously impossible as that the belief of a lunatic
in his ownership of the moon should be the cause of her
brilliancy. — The Science of Political
Economy
unabridged: Book III, Chapter 15, The Production of
Wealth: The First Factor of Production — Land
• abridged:
Part III, Chapter 10: Order of the Three Factors of
Production
I AM writing these pages on the shore of Long
Island, where the Bay of New York contracts to what is
called the Narrows, nearly opposite the point where our
legalized robbers, the Custom-House officers, board
incoming steamers to ask strangers to take their first
American swear, and where, if false oaths really
colored the atmosphere the air would be bluer than is
the sky on this gracious day. I turn from my
writing-machine to the window, and drink in, with a
pleasure that never seems to pall, the glorious
panorama.
"What do you see?" If in ordinary talk I were
asked this, I should of course say, "I see land and
water and sky, ships and houses, and light clouds, and
the sun drawing to its setting over the low green hills
of Staten Island and illuminating all."
But if the question refer to the terms of political
economy, I should say, "I see land and wealth." Land,
which is the natural factor of production; and wealth,
which is the natural factor so changed by the exertion
of the human factor, labor, as to fit it for the
satisfaction of human desires. For water and clouds,
sky and sun, and the stars that will appear when the
sun is sunk, are, in the terminology of political
economy, as much land as is the dry surface of the
earth to which we narrow the meaning of the word in
ordinary talk. And the window through which I look; the
flowers in the garden; the planted trees of the
orchard; the cow that is browsing beneath them; the
Shore Road under the window; the vessels that lie at
anchor near the bank, and the little pier that juts out
from it; the trans-Atlantic liner steaming through the
channel; the crowded pleasure-steamers passing by; the
puffing tug with its line of mud-scows; the fort and
dwellings on the opposite side of the Narrows; the
lighthouse that will soon begin to cast its
far-gleaming eye from Sandy Hook; the big wooden
elephant of Coney Island; and the graceful sweep of the
Brooklyn Bridge, that may be discovered from a little
higher up; all alike fall into the economic term wealth
— land modified by labor so as to afford
satisfaction to human desires. All in this panorama
that was before man came here, and would remain were he
to go, belongs to the economic category land; while all
that has been produced by labor belongs to the economic
category wealth, so long as it retains its quality of
ministering to human desire.
But on the hither shore, in view from the window, is a
little rectangular piece of dry surface, evidently
reclaimed from the line of water by filling in with
rocks and earth. What is that? In ordinary speech it is
land, as distinguished from water, and I should
intelligibly indicate its origin by speaking of it as
"made land." But in the categories of political economy
there is no place for such a term as "made land." For
the term land refers only and exclusively to productive
powers derived wholly from nature and not at all from
industry, and whatever is, and in so far as it is,
derived from land by the exertion of labor,
is wealth. This bit of dry surface raised above the
level of the water by filling in stones and soil, is,
in the economic category, not land but wealth. It has
land below it and around it, and the material of which
it is composed has been drawn from land; but in itself
it is, in the proper speech of political economy,
wealth; just as truly as the ships I behold are not
land but wealth, though they too have land below them
and around them and are composed of material drawn from
land. — The Science of Political Economy
unabridged: Book IV, Chapter 6, The Distribution of
Wealth: Cause of Confusion as to Property •
abridged
...
The Laws of Social Life
TAKE now some hard-headed businessman,
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 stagecoach, 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 common labor be any higher; will it
be easier for a man who has nothing but his labor to
make an independent living?"
He will tell you, "No; the wages of common labor will
not be any higher; on the contrary, all the chances are
that they will be lower; it will not be easier for the
mere laborer to make an independent living; the chances
are that it will be harder."
"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 to
the wealth of 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.
—
Progress & Poverty
— Book V, Chapter 2: The Problem Solved: The
Persistence of Poverty amid Advancing Wealth
THERE may be disputes as to whether there is yet a
science of political economy, that is to say, whether
our knowledge of the natural economic laws is as yet so
large and well digested as to merit the title of
science. But among those who recognize that the world
we live in is in all its spheres governed by law, there
can be no dispute as to the possibility of such a
science. — The Science of Political
Economy —
unabridged: Book I, Chapter 14, The Meaning of
Political Economy: Political Economy as Science and as
Art • abridged:
Part 1, Chapter 12: Political Economy as Science and
Art
THE domain of law is not confined to physical nature.
It just as certainly embraces the mental and moral
universe, and social growth and social life have their
laws as fixed as those of matter and of motion. Would
we make social life healthy and happy, we must discover
those laws, and seek our ends in accordance with them.
—
Social Problems
— Chapter 22: Conclusion
POLITICAL economy is not a set of dogmas. It is the
explanation of a certain set of facts. It is the
science which, in the sequence of certain phenomena,
seeks to trace mutual relations and to identify cause
and effect, just as the physical sciences seek to do in
other sets of phenomena. It lays its foundations upon
firm ground. The premises from which it makes its
deductions are truths which have the highest sanction;
axioms which we all recognize; upon which we safely
base the reasoning and actions of every-day life, and
which may be reduced to the metaphysical expression of
the physical law that motion seeks the line of least
resistance — viz. that men seek to gratify their
desires with the least exertion. Proceeding from a
basis thus assured, its processes, which consist simply
in identification, and separation, have the same
certainty. In this sense it is as exact a science as
geometry, which, from similar truths relative to space,
obtains its conclusions by similar means, and its
conclusions when valid should be as self-apparent.
—
Progress & Poverty
— Book I, Chapter 1, Wages and Capital: The
Current Doctrine of Wages — Its
Insufficiency
WHETHER it proceed from experience of the irksomeness
of labor and the desire to avoid it, or, further back
than that, have its source in some innate principle of
the human constitution, this disposition of men to seek
the satisfaction of their desires with the minimum of
exertion is so universal and unfailing, that it
constitutes one of those invariable sequences that we
denominate laws of nature, and from which we may safely
reason. It is this law of nature that is the
fundamental law of political economy — the
central law from which its deductions and explanations
may with certainty be drawn, and, indeed, by which
alone they become possible. It holds the same place in
the sphere of political economy that the law of
gravitation does in physics. Without it there could be
no recognition of order, and all would be chaos. . . .
It is no more affected by the selfishness or
unselfishness of our desires than is the law of
gravitation. It is simply a fact. — The
Science of Political Economy —
unabridged: Book I, Chapter 12, The Meaning of
Political Economy: Fundamental Low of Political
Economy • abridged:
Chapter 10: The Fundamental Law of Political
Economy IN the economic meaning of the term
production, the transporter or exchanger, or anyone
engaged in any subdivision of those functions, is as
truly engaged in production as is the primary extractor
or maker. A newspaper-carrier or the keeper of a
news-stand would, for instance, in common speech be
styled a distributor. But in economic terminology he is
not a distributor of wealth, but a producer of wealth.
Although his part in the process of producing the
newspaper to the final receiver comes last, not first,
he is as much a producer as the paper-maker or
type-founder, the editor, or compositor, or press-man.
For the object of production is the satisfaction of
human desires, that is to say, it is consumption; and
this object is not made capable of attainment, that is
to say, production is not really complete, until wealth
is brought to the place where it is to be consumed and
put at the disposal of him whose desire it is to
satisfy. — The Science of Political
Economy
unabridged: Book III, Chapter 1, The Production of
Wealth: The Meaning of Production • abridged:
Part III, Chapter 1, The Production of Wealth: The
Meaning of Production
PRODUCTION and distribution are not separate things,
but two mentally distinguishable parts of one thing
— the exertion of human labor in the satisfaction
of human desire. Though materially distinguishable,
they are as closely related as the two arms of the
syphon. And as it is the outflow of water at the longer
end of the syphon that is the cause of the inflow of
water at the shorter end, so it is that distribution is
really the cause of production, not production the
cause of distribution. In the ordinary course, things
are not distributed because they have been produced,
but are produced in order that they may be distributed.
Thus interference with the distribution of wealth is
interference with the production of wealth, and shows
its effect in lessened production. — The
Science of Political Economy —
unabridged Book IV, Chapter 2, The Distribution of
Wealth: The Nature of Distribution • abridged
Part IV, Chapter 2, The Distribution of Wealth: The
Nature of Distribution
OUR inquiry into the laws of the distribution of wealth
is not an inquiry into the municipal laws or human
enactments which either here and now, or in any other
time and place, prescribe or have prescribed how wealth
shall be divided among men. With them we have no
concern, unless it may be for purposes of illustration.
What we have to seek are those laws of the distribution
of wealth which belong to the natural order —
laws which are a part of that system or arrangement
which constitutes the social organism or body economic,
as distinguished from the body politic or state, the
Greater Leviathan which makes its appearance with
civilization and develops with its advance. These
natural laws are in all times and places the same, and
though they may be crossed by human enactment, can
never be annulled or swerved by it. It is more needful
to call this to mind, because, in what have passed for
systematic treatises on political economy, the fact
that it is with natural laws, not human laws, that the
science of political economy is concerned, has, in
treating of the distribution of wealth, been utterly
ignored, and even flatly denied. — The
Science of Political Economy —
unabridged: Part IV, Chapter 1, The Distribution of
Wealth: The Meaning of Distribution •
abridged: Part IV, Chapter 1, The Distribution of
Wealth: The Meaning of Distribution
THE distinction between the laws of production and the
laws of distribution is not, as is erroneously taught
in the scholastic political economy, that the one set
of laws are natural laws and the other human laws. Both
sets of laws are laws of nature. The real distinction
is that the natural laws of production are physical
laws and the natural laws of distribution are moral
laws. . . . The moment we turn from a consideration of
the laws of the production of wealth to a consideration
of the laws of the distribution of wealth, the idea of
ought or duty becomes primary. All consideration of
distribution involves the ethical principle, is
necessarily a consideration of ought or duty — a
consideration in which the idea of right or justice is
from the very first involved. — The Science
of Political Economy —
unabridged: Book IV, Chapter 4, The Distribution of
Wealth: The Real Difference Between Laws of Production
and of Distribution • abridged:
Part IV, Chapter 3: The Distribution of Wealth:
Physical and Moral Laws
Co-operation and
Competition
MANY if not most of the writers on political economy
have treated exchange as a part of distribution. On the
contrary, it belongs to production. It is by exchange,
and through exchange, that man obtains, and is able to
exert, the power of co-operation which, with the
advance of civilization, so enormously increases his
ability to produce wealth. — The Science of
Political Economy —
unabridged: Book III, Chapter 11, The Production of
Wealth: The Office of Exchange in Production
• unabridged
Chapter 9, The Office of Exchange in
Production
THEY who, seeing how men are forced by competition to
the extreme of human wretchedness, jump to the
conclusion that competition should be abolished, are
like those who, seeing a house burn down, would
prohibit the use of fire.
The air we breathe exerts upon every square inch of our
bodies a pressure of fifteen pounds. Were this pressure
exerted only on one side, it would pin us to the ground
and crush us to a jelly. But being exerted on all
sides, we move under it with perfect freedom. It not
only does not inconvenience us, but it serves such
indispensable purposes that, relieved of its pressure,
we should die.
So it is with competition. Where there exists a class
denied all right to the element necessary to life arid
labor, competition is one-sided, and as population
increases must press the lowest class into virtual
slavery, and even starvation. But where the natural
rights of all are secured, then competition, acting on
every hand — between employers as between
employed, between buyers as between sellers — can
injure no one.
On the contrary it becomes the most simple, most
extensive, most elastic, and most refined system of
co-operation that, in the present stage of social
development, and in the domain where it will freely
act, we can rely on for the co-ordination of industry
and the economizing of social forces.
In short, competition plays just such a part in the
social organism as those vital impulses which are
beneath consciousness do in the bodily organism. With
it, as with them, it is only necessary that it should
be free. The line at which the state should come in is
that where free competition becomes impossible —
a line analogous to that which in the individual
organism separates the conscious from the unconscious
functions. There is such a line, though extreme
socialists and extreme individualists both ignore it.
The extreme individualist is like the man who would
have his hunger provide him food; the extreme socialist
is like the man who would have his conscious will
direct his stomach how to digest it. —
Protection or Free Trade, chapter 28
econlib
... go to "Gems
from George"
Frank Stilwell and Kirrily Jordan: The Political Economy of
Land: Putting Henry George in His Place
Land is the most basic of all economic resources,
fundamental to the form that economic development
takes. Its use for agricultural purposes is integral to
the production of the means of our subsistence. Its use
in an urban context is crucial in shaping how
effectively cities function and who gets the principal
benefits from urban economic growth. Its ownership is a
major determinant of the degree of economic inequality:
surges of land prices, such as have occurred in
Australian cities during the last decade, cause major
redistributions of wealth. In both an urban and rural
context the use of land – and nature more
generally – is central to the possibility of
ecological sustainability. Contemporary social
concerns about problems of housing affordability and
environmental quality necessarily focus our attention
on ‘the land question.’
These considerations indicate the need for a
coherent political economic analysis of land in
capitalist society. Indeed, the analysis of land was
central in an earlier era of political economic
analysis. The role of land in relation to
economic production, income distribution and economic
growth was a major concern for classical
political economists, such as Smith, Ricardo
and Malthus. But the intervening years have seen land
slide into a more peripheral status within economic
analysis. Political economists working in the Marxian
tradition have tended to focus primarily on the
capital-labour relation as the key to understanding the
capitalist economy.1 Neo-classical
economists typically treat land, if they
acknowledge it at all, as a ‘factor of
production’ equivalent to labour or capital,
thereby obscuring its distinctive features and
differences. Keynesian and post-Keynesian
economists have also given little attention to
land because typically their analyses focus more on
consumption, saving, investment and other economic
aggregates.
However, there is an alternative current of
political economic thought for which ‘the land
question’ is central. This is the tradition based
on the ideas of Henry George. This article seeks a
balanced assessment of the usefulness of George’s
ideas in the modern context. It outlines how insights
derived from Georgist thinking can help in dealing with
contemporary economic, social and environmental
problems, while noting deficiencies and additional
concerns. Following a general summary of Georgist ideas
and policy proposals, six themes are addressed:
-
the moral issue,
-
wealth inequality,
-
housing affordability,
-
environmental concerns,
-
urban development and
-
economic cycles.
In each case it is argued that Georgist insights
provide a valuable but incomplete basis for analysis
and policy. ...
The Moral Issue
Georgism has a distinctive ethical basis. So a
review of the contemporary relevance of Georgist
political economy can usefully begin by making this
explicit. The key moral issue is the private
appropriation of public wealth. As George recognised,
land is a ‘gift from nature’ and, as such,
is rightfully a community resource. Hence, those
deriving benefits from the private ownership of land
should recompense the community for the privilege. This
principle has strong echoes of the idea of
‘usufruct’, a pre-capitalist term denoting
a person’s legal right to use and accrue benefits
from property that does not belong to them. In return,
the user is obliged to keep the property in good repair
and pay all costs as a ‘ground rent’
(‘Lectric Law Library, n.d). The concept of
‘usufruct’ has fallen out of common usage,
so one hesitates to try to revive it. Moreover, as
Richards (2002) notes, ‘it is difficult to image
how this word could be employed, or brought back into
circulation, in the modern world, since we live in a
world in which people tend to be remarkably
unsympathetic to the property rights or claims of
others’.
However, the principle of ‘usufruct’
goes to the heart of the question of how best to
balance collective and individual rights and interests.
George’s solution of a tax on the value of land
squarely addresses this issue. By returning a
proportion of the land value to the community in the
form of taxation revenue, restitution would be paid for
the use of a community resource. This is an ethical
justification for land taxation.
Indeed, one could say that the term
‘tax’ is a misnomer because what is really
involved is value created by the community being
retained by the community rather than being
appropriated by private landholders. For example, under
current arrangements landowners receive
‘windfall’ gains when the market value of
their land rises as a result of publicly provided
infrastructure being built nearby, or when local
government zoning decisions reclassify their land as
appropriate for further development. In this way,
individual landowners stand to reap huge benefits at
the expense of community-generated processes. Such
arrangements create an odd incentive: allowing
landholders to appropriate the unearned wealth
generated by rising land values, thereby rewarding this
unproductive activity, while taxing productive
endeavour. The Georgist land tax ‘remedy’,
by contrast, would eliminate such perverse incentives
and thereby more effectively align private and public
interests in the use of society’s resources.
However, the Georgist position cannot claim to
provide a fully comprehensive solution to the moral
issue of balancing individual and collective rights.
While land tax addresses the private appropriation of
wealth from land, it does not address the appropriation
of wealth from other sources. The characteristically
Georgist focus on land as the source of the
maldistribution of wealth is limiting in this respect.
Political economists have long argued that the
accumulation of capital also arises from the
exploitation of labour, for example. Whether the
exploitation of labour is systemic, as Marx argued, or
exceptional is properly a matter of debate. Either way,
the point is that an ethical basis for the economic
system, and for the tax system in particular, needs to
take account of both land-related and other sources of
unjustifiable wealth appropriation. The moral issue
thereby links with a second concern of more explicitly
economic character – the sources of inequality in
the distribution of wealth.
Wealth Inequality
Georgist analysis strongly emphasises landownership
as a principal source of inequality. Because land is a
strictly limited resource, its private ownership
necessarily excludes large sections of the community
from its benefits. A landowning class thereby gains
political economic power. In George’s own time
the social identity and power of this landowning class
was distinctive. Those who could not afford to buy land
were forced to pay rent to the wealthier few who could.
By taxing the value of land, George posited that
publicly created wealth could be recouped from the
private landowners and redistributed throughout the
community more equitably in order to address social
goals. ...
Conclusion
Enthusiastic proponents of Henry George’s
ideas have often presented them as a panacea for the
economic, social and environmental problems that beset
contemporary society. Indeed, the Georgist analysis
does have much to offer. By more adequately addressing
land as a unique economic, social and ecological
resource, it can help to reveal underlying causes of
currently pressing issues such as declining housing
affordability, growing economic inequality, and
environmental decay.
The Georgist land tax ‘remedy’ can also
play an important role in the redress of these
problems. However, there are limitations to the modern
application of George’s ideas, as outlined in
this article. While a uniform land tax is a necessary
component in addressing contemporary political economic
problems, it is not sufficient. It needs to be set in
the context of a broader political economic analysis
and policy program, also addressing public housing,
urban and regional policies, environmental taxes and
regulations, ‘floors and ceilings’ to limit
income inequalities and macroeconomic
stabilisation.
While the Georgist analysis redresses the general
neglect of land in modern economic orthodoxy, it is
important not to go too far to the other extreme. In
other words, the important emphasis on land should not
come at the expense of attention to problems associated
with labour and capital and to the complex forms of
government policy necessary for the balancing of
contemporary economic, social and ecological concerns.
The Georgist analysis needs to be integrated into a
comprehensive political economic analysis of
contemporary capitalism.
So what does ‘putting Henry George in his
place’ entail? It means recognising the political
economic importance of land and the potential social
gains from the extension of land taxation. Equally, it
means recognising the necessity of relating Georgist
ideas and policy prescriptions to a broader canvas of
modern political economy, including the analytical
traditions associated with Karl Marx, J. M. Keynes, and
J. K. Galbraith, and modern environmental economics.
Henry George’s place is in good company. read the whole
article
Nic Tideman:
The Political Economy of Moral Evolution
This paper argues that a liberal theory of the
resolution of disagreements about the requirements of
justice must include the possibility of secession. When
such a possibility is allowed, it can be predicted that
there will be changes not only in the character of
disputes about the requirements of justice, but also in
the patterns of taxes and public expenditures. There
will be a greater propensity for seeing the other
side's point of view in disputes about the requirements
of justice, and a greater tendency to support public
activities by efficient taxes on the beneficiaries of
public expenditures. ...
read the whole article
The message of the Gospels is that our sins
are forgivable, that death is not to be feared because
our true lives are spiritual rather than physical, and
that participation in the kingdom of God -- a new and
better life in this world as well as the next -- is
accessible to all who orient themselves to
God.
Drawing on the Old Testament, Jesus taught
that our first commandment is that we love God with all
our heart, and all our soul, and all our mind, and all
our strength, and that our second commandment is that
we love our neighbor as ourselves.1 When asked who
our neighbor is, he replied with the parable of the
good Samaritan, implying that anyone we encounter is
our neighbor. 2 Jesus taught an ethic in which
there are no bounds on our obligations to others:
...
When asked by Peter, "Lord, how oft shall my
brother sin against me, and I forgive him? till seven
times?" Jesus replied, "I say not unto thee, Until
seven times: but, Until seventy times seven." In
other words, we are to forgive
indefinitely.
This unbounded obligation to others is
reconciled with the need to survive through the
introduction of the idea that it is not through our own
anxious efforts, but through God's provision for us
that we survive: ...
The message of the Gospels denies the
validity of concern for material scarcity. This is made
particularly clear in the accounts of the feeding of
the multitudes with just a few loaves and
fishes.
comprehending this counterintuitive idea,
that material scarcity is not to concern us, is brought
out by the accounts of how even Jesus' disciples did
not understand the message: ...
Without a concept of material scarcity it is
difficult to construct an economic theory, as material
scarcity is central to economic theory. And yet, even
without a concept of material scarcity there is an
allocation problem to be solved--the allocation of our
efforts.
In the parable of the talents we are told
that we will be expected to accomplish something with
the resources that are put into our hands. 8 This parable
is followed in Matthew by a teaching that may be taken
as an indication of what constitutes accomplishment:
...
In other words, every person is a
manifestation of God, and anything that we can do to
help anyone is to our credit. There
is thus an unlimited task for each of us. No one of us
will ever be able to say, "I have done every last thing
that might be required of me. I have no further
obligations." But neither are we to be concerned that
that which we have left undone might be held against
us. For if we refrain from judging others, we ourselves
will not be judged:
...
With this message of the Gospels in mind,
turn now to the problem of political economy, the
problem of what principles ought to govern the
organization of the production of goods and their
distribution.
One might first ask whether the requirement
that we abandon concern for scarcity would preclude
production. The answer is no, it is not production that
we are cautioned to avoid, but anxiety. There are any
number of reasons why we might allocate some of our
time to production, without being anxious about our own
material requirements. We feel called to undertake a
particular kind of work, so we do it, trusting that any
material needs we may have will be satisfied. If we
want to undertake our productive activities in
conjunction with others, that's fine, too. Associating
with others provides us with opportunities to be useful
to them.
Among those who are close to us there is no
need for prices and markets, because we can see easily
enough how we can be of service to them. But human
discernment is limited, and prices and markets help us
to be aware of what is valued by people who are less
close to us. ...
Refraining from the use of force is a
recurring theme in the political economy of the
Gospels. We are called to refrain from the use of force
in defense of property. We are called to refrain from
the use of force in financing public activities. We are
called to refrain from the use of force in providing
for those who might otherwise lack. And we show our
love for those who do not wish to participate in our
political economy by leaving for them the same per
capita value of land and natural resources that we
claim for ourselves.
Consider now how this framework bears on some
traditional questions of economic ethics. Take first
the problem of the just price. This simply is not an
issue. If two people have the opportunity to trade--to
cooperate--on terms that are mutually agreeable to the
two of them, it is not for us to say that they ought to
be trading on other terms. Between people who love one
another, the problem of settling on the terms of trade
is no more difficult than the problem when friends eat
lunch together of deciding who will pick up the tab, or
how it will be split. That those
outside a relationship are not called upon to prescribe
its terms is supported by a passage from Luke:
...
Relations between employers and employees are a
special case of relations between traders.
...
The problem of worker management is not a
problem either. ...
Corporate responsibility may be more of an
issue for a Gospel-based political economy. The
corporate form of organization permits us to
participate in the establishment and management of
firms while knowing very little about the other people
with whom we are involved or the actions that are taken
on our behalf. If this leads us to support implicitly
actions of managers in their concern for the bottom
line that we could not in good conscience take
ourselves, then there is something troubling about our
participation in corporations. We need to find ways of
managing the resources under our control that do not
lead us to endorse implicitly and to profit from
actions that we would not endorse directly or take
ourselves.
The grand question of economic ethics, the
question of whether capitalism or socialism is the more
appropriate form of political economy, is another
non-question from the perspective of the Gospels.
Everyone who wants to live under socialism should be
free to live under socialism, and everyone who wants to
live under capitalism should be free to live under
capitalism. In whichever group we fall, we will want to
insure that those who want to organize their lives by
different principles of political economy have their
share of land and natural resources with which to do
so.
A political economy based on the Gospels is a
political economy based on love. As the First Epistle
of John says, "There is no fear in love; but perfect
love casteth out fear."17 To construct a political
economy of the Gospels we must be free of fear: free of
fear that others may rob us; free of fear that others
may not contribute to the provision of public goods or
to provision for those who might otherwise lack; free
of fear that our incomes will be too low or the prices
we face too high; free of fear that if we don't do
something, someone will be exploited. Only when love
has replaced all fear in our hearts will we be able to
construct the political economy of the Gospels.
Read
the whole article
Mason Gaffney: For Want of a
Landlord
In 1620 the Mayflower landed at Plymouth Rock
with its intrepid band, and supplies and provisions for
the first winter. These Pilgrims were of the working
poor, ready and able to turn their hands to labor. They
had carpenters, masons, joiners, bakers, farmers,
chandlers, boatsmen, fishers, hunters, and other useful
types. ...
Yet all their hard work and frugality and
mutual aid and shrewd trading availed them nought, God
did not prosper their ventures. Poverty and distress
prevailed; crops withered; timbers rotted; stores
spoiled; women sued for divorce; discontent ran riot.
The Elders pondered. As luck would have it, one
bachelor had packed along a book on Political Economy
for the lonely evenings. Studying one night he suddenly
cried "Eureka! Political Economy will save
us!"
"What! What could it be?" cried the Elders
all together. "Tell us, prithee, before the vision
leaveth!"... read the
whole article
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