Georgism on the Eve of the Great Depression:
Lessons for Today
Edward J. Dodson
[Reprinted from
GroundSwell, November-December 2005]
The troublesome reality is that the once sizeable community of
Georgists spread throughout much of the globe has nearly disappeared.
The time between growth and decline covered no more than three
decades.
Those of us who count ourselves among the Georgist remnant often
agonize over how this great cause could have suffered so severely
after Henry George's life came to an end. After all, George seemed to
believe he had accomplished all that one person might, that the road
to justice had been identified. Now, it was only a matter of time
before the movement reached critical mass. We now know that the
land question would not be resolved during the 20th century.
Georgists would drift from the political fringe to its wilderness,
fighting for a measure of economic justice within the framework of how
landed property is taxed by municipal governments.
A few years ago, Kenneth Wenzer and Thomas R. West collaborated on a
volume examining Henry George's "forgotten legacy." Wenzer
found a letter written in 1932 by J. B. Chamberlain to the widow of
Louis F. Post, in which Chamberlain expresses his great lament at what
had occurred over the preceding three decades:
"Unfortunately I am not only old but very poor and
I get no help from the Old Guard that has deteriorated from Henry
George's ideals to tax reformers. Why reform something that we seek
to abolish?
It is unfortunate that so many people tried to say
it better than Henry George did."
Historian Arthur Dudden concluded that Joseph Fels was instrumental
in keeping "the single-tax movement from collapsing immediately
after George's death." It stands to reason, then, that the
priorities in the mind of Joseph Fels had an enormous impact on the
strategies and actions of those in the movement. This is all the more
ironic because not until after George's death did Fels come to agree
that solving the land question would solve the problem of
poverty, and that the Single Tax offered the best chance to make this
happen.
Once committed, Fels looked for ways to demonstrate the potency of
the Single-Tax doctrine. He provided financial support to the group of
Single-Taxers establishing the community of Fairhope on Mobile Bay in
Alabama - based on principles they described as "cooperative
individualism." He also believed that agriculture - and a return
to the land - was essential to a better future for people living at
the mercy of industrial landlords in the cities. His energy and
financial resources were directed to numerous other causes as well,
including a loan to Russian Marxists he believed at the time were in
the vanguard of a mass movement against despotism.
In those parts of the world where most Single Taxers or devoted
adherents to Henry George's principles lived, the chosen means of
achieving progressive change was non-violent agitation for legislative
reform. Single-Taxers and Georgists struggled to convince members of
mainstream political parties to support of the taxation of land
values. The result, notes Arthur Dudden, were many near misses "repeatedly
compromised by political expediency."
The list of remarkable individuals who came into the movement is
long. There was Tom L. Johnson and Louis F. Post, for example, in the
United States, and Max Hirsch in Australia. Fels survived Hirsch by
only six years. Johnson died in 1911. Although Henry George Jr. served
two terms of office in the U.S. House of Representatives, he died in
1916. The loss of these men was catastrophic for a movement dependent
much more on personalities than on organization and discipline.
As the nations of the world drifted into the First World War, the
Georgist movement stagnated and began to lose its momentum. Fels had
tried to leave the movement on a sound financial future by setting up
the Joseph Fels Fund, but contributions from other wealthy
contributors did not materialize. Even Fels came close to personal
bankruptcy toward the end of his life. After his death, his wife
abandoned the Georgist cause altogether to support Zionists.
Even without Fels and the others, the Georgist movement - absent an
active commitment to the Single Tax -- survived the First World War.
In a paper presented by John J. Murphy at the Fourth International
Conference of the International Union for Land Value Taxation and Free
Trade, held in Edinburgh, Scotland, in the summer of 1929, Murphy
stated "there ha[d] been little effort to affect taxation -
national, state, or local - by legislation" in the United States.
Thanks to the efforts of Georgists such as Percy Williams, one
significant exception was the City of Pittsburgh. During 1912,
Georgists brought in the movement's heavy-weights - Henry George, Jr.,
Frederic C. Howe, Louis F. Post, Joseph Fels, Lawson Purdy, and others
- to speak to Pittsburgh's civic leaders on the virtues of what became
known as "the graded tax plan." The result was passage of a
bill by the Pennsylvania legislature in 1913 enabling Pittsburgh to
put the plan into effect in five stages ending in 1925. A year later,
Georgists established The Henry George Foundation of America with its
headquarters in Pittsburgh.
Although the successful campaign to bring Pittsburgh (and a second
second-class city, Scranton) in a Georgist direction provided a base
from which the Henry George Foundation could promote "the
Pittsburgh plan" throughout Pennsylvania, Murphy's assessment was
all too accurate. As he surveyed the situation in the United States,
Murphy reported:
"I wish I could present a more optimistic picture.
A nation inflated with universal prosperity, which, according to our
present Secretary of Labour, James J. Davies, means 14 per cent rich
and 86 per cent living on wages below the computed cost of living,
has no time to think about economic political reforms based on
justice and fair dealing."
This gathering of Georgists in Scotland occurred just three months
before the crash of the stock market in the United States. Somewhat
surprisingly, few of the papers delivered at this conference warned of
the coming economic problems, despite the fact that so many signals
were evident to those holding a Georgist perspective. One writer, Carl
Marfels, asked rhetorically, "Why cannot demand and supply be
brought into touch with each other?" He then offered the reason
why societies desperately needed to know:
"The answer to this question is of extraordinary
urgency as the discontent among the masses in all civilized
countries is assuming alarming proportions; and not only in the
ranks of wage-workers, but also in the ranks of self-supporting
manufacturers, tradesmen and merchants.
General discontent and
crime are increasing to such an alarming extent that even the middle
classes, driven to despair, no longer shrink from Bolshevist ideas,
and the legislator stands impotent in the face of all that has been
described."
The one person who might have offered a detailed forecast of the
world economy but who did not make the trip to Edinburgh was Harry
Gunnison Brown. In his 1925 book, Economic Science and the Common
Welfare, Brown observed that one serious threat to economic
stability - the run on banks by depositors - could be addressed in the
United States by the Federal Reserve's power to increase the supply of
currency and get needed "Federal Reserve notes to solvent member
banks whose customers are demanding their money." Provided
businesses still enjoyed demand for their products and services,
credit could also be made available through additional Federal Reserve
loans to member banks. Brown noted that the effect would be much
better if the Federal Reserve maintained reserves for these purposes
rather than simply issuing new notes. Focusing on the international
monetary system, he added:
"The United States in co-operation with a few of
the other large industrial and commercial countries could do more.
It may be desirable, eventually, to supersede the gold standard as
we now know it with a more stable standard of value; but a more
intelligent control of credit, by itself, would accomplish very much
indeed for business and price stability. A dollar redeemable in
varying amounts of gold according as gold fluctuated in value
relative to other commodities would, however, make possible a more
complete stabilization of prices in the long run, even in the
absence of foreign cooperation. It would tend, somewhat, to prevent
undue bank credit expansion and it would tend to keep business
conditions constant. But if the best results are to be secured,
proper control of bank credit
should supplement the changing
of the weight of gold in which the paper dollar might be made
redeemable."
Brown's biographer, Christopher K. Ryan, records that "[a]fter
1930 Brown published sparsely in the field of international trade and
finance." Given the times and his commitment to public policy
advocacy, his choice is difficult to understand. Other commitments
certainly kept him focused elsewhere. In addition to his teaching
assignments at the University of Missouri, he was working on a second
book, The Economic Basis of Tax Reform, which appeared in
1932. We must remember there was no Georgist school of economists
working together on national and international issues. There was no
research institute publishing papers and holding conferences to
effectively enter the "public dialogue" and to challenge
conventional wisdoms. Edward C. Harwood's venture into this realm -
the American Institute for Economic Research - was not established
until 1934. Two years earlier, Harwood's book, Cause and Control
of the Business Cycle, attempted to explain to a shell-shocked
public - and to economists trained in Neo-classical theory - why
production and employment had come crashing down. He recalled an
exchange with the eminent economist Irving Fisher:
"
Fisher apparently believed that there was no
inflation in 1928 and 1929 because the commodity price-level did not
rise in those years."
Harwood suggested that Fisher and other economists direct their
attention to the securities and land markets, where speculation caused
runaway price inflation:
"In the case of securities, [the check against
commodity price inflation provided by foreign competition]
cannot act. In the absence of any outside check, the situation is
similar to the famous tulip speculation which occurred in the
Netherlands, or even to the ill-fated Florida land boom."
Other than this brief mention, however, Harwood passed over the
dynamics of land markets and the impact of government's methods of
raising revenue on the business cycle.
Another Georgist of note absent from the 1929 conference was Francis
Neilson, although from the records I have seen he did not attend, even
though he had taken "an active part in the land campaign" of
1912 in Britain. During the Depression years, Neilson worked on the
book Man at the Crossroads, examining his own "economic
principles, which was published in 1937. Although his own investment
losses during the early 1930s were significant, he managed to recover
better than most:
"I succeeded in laying
a financial
foundation which, in a few years, helped to retrieve seventy-five
per cent of my losses. How this was accomplished I do not know."
His familiarity with Henry George's analysis of business cycles did
not prevent him from holding stocks too long when the speculative
fever of 1929 was in full swing.
It is also worth noting the financial fortunes of another writer who
had spoke and written extensively on the land question -
Winston Churchill. Not that Churchill would have accepted an
invitation to speak to International Union members that year (he was
by this time firmly in the Conservative camp), but he had departed on
the 3rd of August for a vacation in North American, first to Canada
and then the United States. "On the Atlantic coast he paid a
courtesy call on Herbert Hoover; toured Civil War battlefields,
and was in New York
when the market crashed," writes
William Manchester (The Last Lion, 1983). He actually visited
the New York Stock Exchange on the 30th of October. He later wrote: "No
one who has gazed on such a scene could doubt that this financial
disaster, huge as it is, cruel as it is to thousands, is only a
passing episode in the march of a valiant and serviceable people who
by fierce experiment are hewing new paths for man, and showing to all
nations much that they should attempt and much that they should avoid."
Personally, Churchill lost a good deal in the market as an active
speculator. His prolific writing now became essential to keep his
financial affairs from collapsing. By the time he returned to England,
he would realize the scale of economic contraction unfolding.
Philip Snowden, Britain's new Chancellor of the Exchequer, wrote to
the conference planners: "It will not be possible for me to
attend the International Conference which is to be held in Edinburgh
at the end of this month, but I send you just a few words to express
the hope that the Conference will be useful in stimulating
international interest in the co-related questions of Land Values and
International Free Trade." The Labour Government formed by Ramsay
MacDonald already faced the problems of high unemployment and an
industrial recession linked to severe problems in the coal industry.
Very little of significance was accomplished before the full brunt of
the Great Depression was felt.
What could have been an international conference of enormous
importance in examining the global state of affairs and warning of the
coming Depression instead concentrated on the various efforts to
promote the taxation of land values in the countries of attending
countries. Henry George's most important contribution to the science
of political economy - his explanation for the cause of industrial
depressions - received no attention. Only one presenter, Chester C.
Platt, investigated the hyper land speculation that occurred in the
State of Florida during the 1920s; however, even Platt failed to
connect these events with the larger national and international
picture.
Some of the same signals present in mid-1929 are with us again. The
question for us is whether - even though there are far fewer of us
engaged -- we are better prepared to send out a warning to our
countrymen. Fred Harrison's research, detailed in his new book, Boom
Bust: House Prices, Banking and The Depression Of 2010, provides
the details. What we need, now, is a concerted strategy to bring this
perspective to the fore in every country where we still have a
functioning presence.
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