Georgism as a Historical Framework: Part I

Can Georgism be more than Public Finance?

If you’re not familiar with Georgism, read this intro before reading this essay:

In a 1997 article, The Theory of Rent Needs a Theory of History, Michael Hudson asks why Marxism rather than Georgism carried the work of political economy forward as an academic discipline. His answer, in part, looks to the failure of Georgism to ground itself in, and make proper use of, statistics. “The proper task of the Henry George institutions,” he writes, “should be to carry forth the legacy of his spirit by translating rent theory into a quantitative statistical format, to explain to the world what is important about the land and other natural resources.”

Of course, a statistical inventory of the damage done by the rampant rentierism wrought by our present form of Land Monopoly capitalism would be vital to any such project. However, it would be arguably more important to develop the overarching historical-political dimension of such a theory.

While Hudson does deal with this in the first three sections of his article, the main thrust of his article deals in the calculable economic implications of rentierism. This is entirely understandable given his background and the apparent condition of the American body politic in 1997. While there were some very early signs of significant trouble ahead, the overall political stability of the American Republic was widely assumed. Any ideological or political challenge to the overall dominance of liberalism in the Western World seemed very hard to take seriously, except as a theoretical matter. At the present moment, as we muddle through (or don’t) the political instability caused, at least in part, by the real estate driven crash of 2008; it is possible to describe more fully the historical-political implications of a Georgist theory.

Georgism vs. Marxism: Observations

Marxism produced a nearly worldwide mass movement based on both economic and historical theory. It is likely productive, as Hudson has, to analyze Marxism and understand how theory was translated into action. Marxism, rooted in the principle of historical materialism, asserts that the structure of economic production shapes the course of history. A natural offshoot of this belief is the oft-cited claim: "The history of all hitherto existing society is the history of class struggles." Marxism’s method of action naturally flows from this principle; once the working class forms a distinct party and clarifies the lines of class struggle, the proletariat will be able to take advantage of capitalism’s contradictions and crises. Similarly, the development of Georgist Historical theory should provide not only a description of the problem and a visceral description of the historical injustice to be remedied, but also at least the first outline of the means to its solution.

Yet unlike Marxists, Georgists have focused not in vast, overarching narratives, but in the tangible intricacies of land and tax policy. Such an approach, grounded and pragmatic, allows the movement a clarity of vision—a projection of a just society which seems imminently achievable; in contrast to the Marxist's dream of a communist utopia which looks vague and likely unworkable. In other words, a Georgist faces an exact reversal of the problem faced by an Orthodox Marxist. For the Marxist, the purpose and method of struggle is well-defined but the practical implementation of the victory condition is left to the future victorious proletariat to work out. For a Georgist, the broad strokes of the actions that a victorious Georgist movement should take are relatively well-defined; it is the dynamics of the struggle and the historical framework of that struggle that are hazy.

This pragmatic focus for Georgist implementation is thus, unfortunately, a weakness as well as its strength. There is an allure to grand ideological narratives that illuminate the dynamics of a conflict. The narrative setup of conflict commands sacrifice and inspires many to act against personal interest, motivated solely by the greater good. Irrespective of one's personal views on Marxist Socialism, the undeniable fact remains that millions of people, from some of the most famous people in history down to unremembered peasants, have willingly subjected themselves to incredible levels of discipline, deprivation, and danger in an attempt to achieve it.

Georgism, on the other hand, has us few earnest disciples who have sporadically mounted attempts at reform with some small results but have often been comprehensively defeated by the applied self-interest of its opponents. This has happened without all that much effort on the part of rentiers beyond the usual humdrum political tricks, a bit of propaganda, and maybe some infiltration of university economics departments. One can't help but juxtapose this with the titanic effort required to check the spread of Communism, an effort that spanned decades, culminating in the early 1990s.

Statistical analysis alone cannot provide the necessary ideological backing for a robust mass movement. In addition, there must be a narrative explanation of the dynamics of history that has obvious implications for the public. Economists and statisticians can draw lessons from numbers, but no one has ever seriously committed to a cause for the promise of adding 0.75% to GDP growth. Given the correct narrative framework, a historically based perspective can link dry theory to the public’s easily perceived present condition.

This narrative explanation, however, is more than the outline of a mere propaganda manual. As the central insight of Georgism is correct, an explanation of history based upon it can provide not only the impetus for action but also at least the broad outlines of a political strategy to end the Land Monopoly. A Georgist theory should have one large advantage over Marxism in that, by setting itself against the present holders of the means of production, Marxism set itself against a class quite well-equipped to resist it. Georgism, one hopes, should be able to create a much more favorable correlation of forces for itself. Our opponents have made obfuscation their method, which reveals quite a bit about their own estimation of their prospects in an open contest. Therefore, a macro-historical Georgist theory ought to not only serve as a motivation for Georgist action but it should also provide, by implication, at least the barebones of a political strategy.

The predictive power of Georgism

Henry George was a journalist by trade, an observer rather than a scholarly researcher. His brilliance lay in deciphering the intricate web of land monopoly. He was present at a most fortuitous moment in terms of history and geography, as he was able to observe the effects of both the industrial revolution and frontier settlement inside of his own country in his own lifetime. His theory combines these observations with his deductions from well-established first principles of political economy. Yet his focus leaned more towards the pragmatic than the comprehensive, possibly also reflecting his distinctively American outlook in contrast to Marx’s unmistakable Germanic qualities. He also seemed to have a good deal of faith, based in the legacy of both the American Revolution and Emancipation, in the eventual capacity of liberal government to end the Land Monopoly. His belief in the clarity of his remedy and his confidence in the capacity of free government to implement it within a classical liberal framework seemed to make illuminating a theory of conflict unnecessary.

Nonetheless, with the benefit of further historical experience, the necessity of such a theory has become obvious. Georgism should have an equal or greater claim to such a grand and encompassing theory of conflict that could generate enthusiasm both on the street and in the ivory tower. Historical Materialism has a certain plausibility, as far as it goes; but the fundamental error that Marxist economics makes is to classify Land (in the Georgist sense, meaning all finite opportunities provided by nature) as capital or, at the very least, to downplay the continuing importance of land in an industrial society. This error makes the entire construction of Marxist thought an impressive but brittle edifice.

Turning to neoclassical economics, removing Land from capital (or its minimization of the importance of land and/or the importance of the distinction) has even worse implications for that school. Once this confusion is cleared up this school of economics appears almost consciously designed to serve as the ideological justification for the economic transformation we’ve been living through during these past few decades. That is, it allows the transformation of a dynamic, if somewhat unforgiving, system of free market capitalism into a regime that could plausibly be described as market feudalism (or neo-feudalism, if you’d like) with every bit of the unearned privilege supported by stolen labor that this term implies.

At first glance, the very development of neoclassical economics appears to validate Marxist theory; as capitalism generates its self-interested ideological justifications and continues the immiseration of the masses, and birds go tweet. Indeed, an orthodox Marxist would view Henry George’s star-spangled faith in the eventual ability of a liberal democracy to arrive at the correct answer to the land question as laughable naivete. Of course the “committee for managing the common affairs of the whole bourgeoisie” would not be able to turn down the quick buck to be made off of the proletariat from ground-rents, no matter how the committee was chosen! Indeed, such a historical materialist analysis would easily predict the observation of Hudson’s, “In the century since Henry George elevated land rent to a central political focus in Progress and Poverty (1879), the perception of land's importance has become marginalized even as its actual role has grown.”

Subsequent history, however, has given Marx at least as much agita as it has George. Marx predicted that a capitalist system would continue to be driven by ruthless competition and continued innovation. Further he predicted that this process would immiserate and alienate workers as the treadmill of the free market kept intensifying. Marx’s vision for capitalism was that the proletariat would be forced by markets, disconnected from actual human needs, to move with ever increasing speed for ever-shrinking returns until the risk and cost of rebellion simply became insignificant compared to those of continued compliance.

Marx’s prediction of continued near-exponential capitalist development lay in his confidence in the ability of the bourgeoisie to restrain and eventually eliminate its aristocratic rentier predecessors. However, in this respect, recent experience has vindicated George. We’ve seen the resurgence of rentierism; riding, as any Georgist would expect, on the coattails of neoclassical economics. Rentiers’ unfettered ability to engage in the asset stripping of previously profitable enterprises using real-estate driven strategies is merely a very small elaboration of Georgist theory. In an article in 2015, Hudson reached similar conclusions:

“History has not worked out the way Marx expected. He expected every class to act in its own class interest. That is the only way to reasonably project the future. The historical task and destiny of industrial capitalism, Marx wrote in the Communist Manifesto, was to free society from the “excrescences” of interest and rent… that industrial capitalism had inherited from medieval and even ancient society…If capitalism had achieved this destiny, it would have been left primarily with the crisis between industrial employers and workers discussed in Volume I of Capital: exploiting wage labor to a point where labor could not buy its products… [However,] instead of banking being industrialized as Marx expected, industry is being financialized. Instead of democracy freeing economies from land rent, natural resource rent and monopoly rent, the rentiers have fought back and taken control of Western governments, legal systems and tax policy.”

Indeed, we find that in the Western world, all but the wealthy are tending towards poverty through senescence and stagnation. Rather than reaching some pinnacle of capitalist development at an appalling human cost, we’re getting an appalling human cost without any commensurate development. It turns out that the opiate of the masses is actually just opiates (and infinite scrolls on social media), rather than anything that would support the maintenance or increase of capitalist development and/or production. (We aren’t going to entertain the idea that the use of social media somehow produces actual wealth of any sort). The economic system of the previous era has generated an upper class that, its position now secure, finds it in its interest to keep most any from moving at all without paying a frightful toll. What are nimbyism, political gridlock, needless red tape, lobbyists, and litigiousness if not the outward, stalking-horse expressions of vicious rentierism? Even if we accept the Marxist framing in assuming the inevitable transformation from capitalism to socialism (which most Georgists, including this one, do not believe), it would seem that capitalism has generated the antidote to this by managing to freeze (and perhaps even set back) its own development.

With the benefit of George and hindsight, we can see how this could have been predicted. To use some Marxist terminology, the vested interest of rentiers, which acquires the means of its maintenance and increase without much exertion will eventually simply nearly always have more resources at its disposal than the interests of productive capital and labor. Whereas the capitalist and worker can only profit when the results of their exertions exceed their costs; those cost that must be paid to the land rentier, no matter the results of the struggles of capital and labor. Year in and year out, the success or failure of an enterprise has only an attenuated effect on the revenue of its landlord. Land Rent is simply a tax that must be paid irrespective of ability to pay. As any good Georgist understands, without the restraint of rentierism, every benefit of advancing technology, increases in productivity, and even improvements in governance will eventually be claimed by the holders of Land. The structural benefit that this gives them in terms of political muscle and therefore historical direction, should be obvious.