The Economic Facts of Life
Edward C. Harwood
[Reprinted from the Henry George News,
August, 1956]
The student who begins his reading of Progress and Poverty
soon encounters these assertions:
"Now, however, we are coming into collision with facts which
there can be no mistaking. From all parts of the civilized world come
complaints of industrial depression; of labor condemned to involuntary
idleness; of capital massed and wasting; of pecuniary distress among
business men; of want and suffering and anxiety among the working
classes."(p.5)
"And, unpleasant as it may be to admit it, it is at last
becoming evident that the enormous increase in productive power which
has marked the present century and is still going on with accelerating
ratio, has no tendency to extirpate poverty or to lighten the burdens
of those compelled to toil."(p.8)
"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." (p.10)
If the student is a young man or woman whose adult experience
includes only the years since 1941 or 1942, he may throw the book
aside in the belief that it deals, at best, with circumstances that
may once have existed but have long since been changed. Even if the
student is of middle age or older, his personal experience of the
Great Depression (1929-1933) may not have been such as to make him
aware of any serious economic difficulties.
At worst during the depression years, about 25 per cent of those
willing to work were unemployed. Many of the remaining 75 per cent
were better off than they had ever been before because of the great
decrease in the cost of living. In all probability, relatively few
both comprehend the effects of the Great Depression and in addition
have any reason to believe that similar developments may occur again.
Of course, millions of the current labor force in the United States
are existing at or near the subsistence level today. As recently as
April 1952, nearly 20 per cent of the employed men in the United
States received less than $1,500 per year, according to U. S.
census reports. One need only visit the slum area of any large city or
the rural "slums" in numerous backwoods areas of the
northern United States or the sharecroppers' homes in the South and
West to realize that many families in our own country are much nearer
the subsistence level than are the automobile workers in Detroit, the
steel workers in Pittsburgh, and numerous others.
However, the fact remains that few prospective readers of Progress
and Poverty today can be expected to believe that Henry George's
work is still up to date. As for the college seniors and graduates who
are being so assiduously sought by prospective employers, surely no
one should expect them to think that Henry George was writing about
conditions in their nation.
The foregoing should make clear the first major point of this
discussion, which is that the problem described by Henry George is not
even recognized as a problem by most educated people in the United
States today.
After discussing what he calls "The Laws of Distribution,"
Henry George concludes ". . . that the increase of productive
power not increase wages is because it does increase the value of
land. Rent swallows up the whole gain and pauperism accompanies
progress." (p.224) But today's readers have learned from
seemingly authoritative sources that real wages in the United States
have increased greatly in recent decades. For example, nearly everyone
knows that wages in the steel industry doubled in the last 10 years,
although the cost of living rose only 50 per cent, and even more
striking gains in real wages for a large portion of the labor force
have occurred since the turn of the century.
Fortunately for those attempting to use Progress and Poverty
in learning the economic facts of life, George did insert such
explanations as that on page 216 where he says, "Perhaps it may
be well to remind the reader, before closing this chapter, of what has
been before stated -- that I am using the word wages not in the sense
of a quantity, but in the sense of a proportion. When I say that wages
fall as rent rises, I do not mean that the quantity of wealth obtained
by laborers as wages is necessarily less, but that the proportion
which it bears to the whole produce is necessarily less. The
proportion may diminish while the quantity remains the same or even
increases." However, even after allowing for such supplementary
explanations, many readers of Progress and Poverty remain
unsatisfied with Henry George's explanation of economic events.
That the basic relationships between land and labor have been
correctly described in Progress and Poverty, few men capable
of understanding this book have ever denied. To an increasing extent
one finds educated people all over the world agreeing that poverty in
India, China, the Philippines, Japan, Egypt, much of Europe, nearly
everywhere in South America and elsewhere is traceable to the fact
that most of the people of those areas are a disinherited proletariat
doomed to virtual slavery as long as existing land tenure arrangements
remain unchanged.
But the increasing clarity with which observers in the United States
as well as elsewhere see the underlying causes of poverty elsewhere in
the world only serves to emphasize the importance of this question:
How does it happen that, in spite of the long-run tendencies described
by Henry George, here in the United States we ate enjoying prolonged
prosperity and distribution of an increasing proportion (as well as an
absolutely greater amount) of currently produced wealth to those who
work for a living? Obviously, if a satisfactory answer to this
question is not provided in Progress and Poverty, many of the
keenest students will conclude, in fact already have concluded, that
Henry George's explanation of economic events is either erroneous or
incomplete.
One of the more able students of economics who reached this
conclusion was Henry George himself, or so I assume in view of his
subsequent efforts and unfinished book, The Science of Political
Economy. We should remember that Progress and Poverty was
written in the closing years of the nation's greatest depression, at
least the most prolonged one if we accept the findings of the National
Bureau of Economic Research. The depressed circumstances that had
continued so long as to seem almost permanent were soon thereafter
replaced by a period of prolonged prosperity. I assume that the
contrast of those later years was one of the reasons why Henry George
sought to investigate other aspects of economics than those dealt with
in Progress and Poverty.
Although the discussion of money and credit in The Science of
Political Economy was barely begun, Henry George did note that "As
a matter of fact the most important use of money today is not as a
medium of exchange, though that is its primary use. It is that of a
common measure of value, its secondary use." (p.395) Thus he
clearly saw that various purchasing media were being substituted for
money! To an even greater extent is this true today.
To cut a long story short, manipulation of purchasing media has
become one of the most significant economic developments of our times.
For example, by means of that process the United States in the past 15
years has transferred more than $160,000,000,000 of real wealth from
holders of life insurance, savings bonds, savings deposits, etc., to
others including organized labor, owners of equities of all types, and
various others.
In addition, the claims of land holders on currently produced real
wealth have been greatly reduced for the time being in those instances
where the land holders' right to rental income was fixed in dollar
amount. The relatively reduced takings of monopoly privilege have
temporarily freed a larger share of current production to be shared
among all who labor with resulting stimulating effects similar to
those that Georgists believe would result from substantial application
of the single tax.
To anyone who understands what has happened, the case for Henry
George's remedy is strengthened by recent developments, but to those
who do not understand, developments of recent years seem to make
George's proposed remedy a quaintly outmoded notion.
Perhaps it is too much to hope that this brief and inadequate
discussion will convince many Georgists that they should seek what
Henry George was seeking when he died, a more complete understanding
of economic developments. However firm a portion of the foundation may
have been provided by Henry George, the fact remains that the
superstructure and perhaps some of the foundation as well remains to
be done. Until more progress is made this task, there is reason to
believe that most other citizens capable of being educated on this
subject will not even agree with the Georgists on the nature of the
problem that confronts our civilization.
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