Progress and Poverty: A Suppressed Economics Classic

Progress and Poverty

by Henry George (1879), edited and abridged by Bob Drake, Robert Shalkenbach Foundation (2006)

Downloadable as free PDF:Progress and Poverty

Book Review

Progress and Poverty is an economic classic which has been suppressed in the US owing to its subject matter: the elimination of poverty and economic inequality by restoring the Commons. Written over 130 years ago, the book provides uncanny insights for the current difficulties capitalism faces (i.e paralyzing recession, massive public and personal debt and growing income inequality). Internationally George’s economic theories are regarded as comparable to those of Marx, Keynes and Galbraith. Yet despite being the third most famous American in 1879 (after Edison and Mark Twain), George’s work remains largely unknown outside of Australia, New Zealand, Hong Kong and Taiwan.

Why Development Always Produces Poverty

George’s goal in writing Progress and Poverty is to explain, in economic terms, why material progress (i.e. economic development) is always accompanied by poverty and increasing inequality. Employing Adam Smith’s classical definitions of labor, capitol, wages and interest and Ricardo’s Law of Rent, he argues that development must always produce poverty and inequality so long as a privileged elite holds an exclusive monopoly on the ownership of land and basic resources.

George starts from the premise that land and natural resources are the source of all wealth, though wealth itself can only be created through human labor. According to George, the relative monopoly the elite hold on land allows them to capture all increases in productivity and production as “rent” increases.

The History of Land Privatization

George’s approach is relatively unique for political economists in his emphasis on the role ideology plays in the economic theories that gain popular acceptance. In contemporary society, no one questions the right of a privileged elite to monopolize land and natural resources for their own benefit. However private land (and resource) ownership is a relatively new concept originating in seventeenth century Britain with The Enclosure Act.

About a third of Progress and Poverty traces the historical evolution of private land ownership. In all human societies, the common right of all people to use the earth to support themselves has been sacrosanct. The concept of individual land ownership only emerged as societies advanced and either concentrated power in privileged classes or seized land and slaves through military conquest. Prior to the rise of Greek and Roman civilization, all land was communally owned and the notion of an individual claiming a patch of land as his exclusive possession was unthinkable.

Henry George sees the mass seizure of land by the nobility (in Rome this was referred to as the latifundia) as responsible for the death of democracy in these early societies and the ultimate collapse of both civilizations.

After the Roman Empire fell, feudalism was characterized by systems of communal and private property rights that operated in parallel. A feudal estate was considered to belong to society at large. The king, as the chief representative of the people, merely granted its use in trust to church leaders and military officers in return for services rendered to the commonwealth. Churches were expected to provide for the care and welfare of the sick and poor. For their part, feudal lords were expected to defend the king’s military interests.

Because they allowed the British system of private land ownership to persist in the US, George accuses the founding fathers of failing in their efforts to establish a true republic. Despite abolishing heredity titles and establishing the right to vote, they failed to reestablish the communal property rights that enabled the Greek and Roman democracies to flourish. He contends that political equality, when coexisting with wealth inequality, must always lead to either dictatorship or anarchy.

Restoring The Commons Through a Land Tax

George proposes that the wealth inequality, recessions and numerous other evils commonly attributed to the capitalist economic model could be totally eliminated by restoring public ownership of land and resources.

Rather than advocating outright government seizure of private land, he proposes to accomplish this by imposing a tax on unimproved land roughly equivalent to its rental value. Such a system would allow landholders to preserve their right of tenure, while discouraging them from speculating by holding land and resources out of production. While ending land speculation and recessions, this type of tax would simultaneously expand land and resource access for workers and capital investment. Any productivity increases (beyond interest on capital), would accrue to the government, rather than private landholders.

According to George, the government could use revenue from land and resource taxes to abolish taxes on wages and capital (which discourage production) and to pay down public debt.