Business
Depression
Business depression effects everyone. If we knew of a way to eliminate or
largely smooth the "business cycle" — which enriches a
few on the way up and impoverishes many on the way down — shouldn't
we investigate it fully and enact
it?
Henry George: Causes of
Business Depression (1894)
By business depression we mean a
lessening in rapidity and volume of the exchanges by which, in our
highly specialized industrial system, commodities pass into the hands
of consumers. This lessening of exchanges, which from the side of the
merchant or manufacturer we call business depression, is evidently not
due to any scarcity of the things that merchants or manufacturers have
to exchange. From that point of view there seems, indeed, a plethora of
such things. Nor is it due to any lessening in the desire of consumers
for them. On the contrary, seasons of business depression are seasons
of bitter want on the part of large numbers of want so intense and
general that charity is called on to prevent actual starvation from
need of things that manufacturers and merchants have to sell.
Protection ...
Free trade ...
Money ...
The lessening of "effective demand," which is the
proximate cause of business depression, means, therefore, a lessening
of the ability to convert labor into exchangeable forms means what
we call scarcity of employment. These two phrases are, in fact, but
different names for different aspects of one thing. What from the
side of the business man is "business depression," is, from
the side of the workman, "scarcity of employment." ...
What is employment? It is the expenditure of exertion in the
production of commodities or satisfactions. It is what, in a phrase
having clearer connotations, we term work. For the term employment
is, for economic use, somewhat confused by our habitual distraction
between employers and employees. ... Even in a
narrow view there are only three ways by which men may live -- by
work, by beggary, and by theft; for the man who obtains work without
giving work is, economically, only a beggar or a thief. But on a
larger view these three come down to one, for beggars and thieves can
only live on workers. It is human labor that supplies all the wants
of human life as truly now, in all the complexities of modern
civilization, as in the beginning: when the first man and first woman
were the only human beings on the globe. ...
Now employment or work is the
expenditure of labor in the
production of commodities or satisfactions. But on what? Manifestly
on land, for land is to man the whole physical universe. Take any
country as a whole, or the world as a whole. On what and from what
does its whole population live? Despite our millions and our complex
civilization, our extensions of exchanges and our inventions of
machines, are we not all living as the first man did and the last man
must, by the application of labor to land? Try a mental experiment:
Picture, in imagination, the farmer at the plow, the miner in the ore
vein, the railroad train on its rushing way, the steamer crossing the
ocean, the great factory with its whirring wheels and thousand
operatives, builders erecting a house, linemen stringing a telegraph
wire, a salesman selling goods, a bookkeeper casting up accounts, a
bootblack polishing the boots of a customer. Make any such picture in
imagination and then by mental exclusion withdraw from it, item by
item, all that belongs to land. What will be left?
Land is the source of all
employment, the natural element
indispensable to all work. Land and labor — these are the two
primary factors that, by their union, produce all wealth and bring
about all material satisfactions. ... Where labor is shut out
from land it wastes. Desire may
remain, but "effective demand" is gone. Is there any
mystery in the cause of business depression? Let the whole earth be
treated as these lots are treated and who of its teeming millions
could find employment? ... Read the entire article
Henry George: The Great
Debate: Single Tax vs Social Democracy (1889)
The cause of
industrial depressions is not too much production, but it is the
speculative increase in the value of land, and throwing idle men back
to compete with each other for work. (Applause.) That is the cause.
(Hear, hear.)
Henry George: Progress & Poverty: Introductory:
The Problem
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. ... read
the entire chapter
Henry George: Progress & Poverty: The
Current Doctrine of Wages — Its Insufficiency
For instance, of $100,000 devoted in an old country to manufactures, $80,000
would probably be expended for buildings, machinery and the purchase of materials,
leaving but $20,000 to be paid out in wages; whereas in a new country, of $30,000
devoted to agriculture, etc., not more than $5,000 would be required for tools,
etc., leaving $25,000 to be distributed in wages. In this way it is explained
that the wage fund may be comparatively large where capital is comparatively
scarce, and
high wages and high interest accompany each other.
* "Some Leading Principles of Political Economy
Newly Expounded," Chap. 1, Part 2.
In what follows I think I shall be able to show that this explanation is
based upon a total misapprehension of the relations of labor to Capital — a
fundamental error as to the fund from which wages are drawn; but at present
it is necessary only to point out that the connection in the fluctuation of
wages and interest in the same countries and in the same branches of industry
cannot thus be explained. In those alternations known as "good times" and "hard
times" a brisk demand for labor and good wages is always accompanied by a
brisk demand for capital and stiff rates of interest. While, when laborers
cannot
find employment and wages droop, there is always an accumulation of capital
seeking investment at low rates.* The present depression has been no
less marked by want of employment and distress among the working classes than
by the accumulation
of unemployed capital in all the great centers, and by nominal rates of interest
on undoubted security. Thus, under conditions which admit of no explanation
consistent with the current theory, do we find high interest coinciding with
high wages, and low interest with low wages - capital seemingly scarce when
labor is scarce, and abundant when labor is abundant.
* Times Of commercial panic are marked by high
rates of discount, but this is evidently not a high rate of interest, properly
so called, but a but rate of insurance against risk.
All these well known facts, which coincide with each other, point to a
relation between wages and interest, but it is to a relation of conjunction,
not of opposition. Evidently they are utterly inconsistent with the theory
that wages are determined by the ratio between labor and capital, or any
part of capital.... read the entire chapter
H.G. Brown: Significant
Paragraphs from Henry George's Progress & Poverty,
Chapter 5: The Basic Cause of Poverty (in the unabridged: Book
V: The Problem Solved)
The great problem, of which these recurring seasons of industrial depression
are but peculiar manifestations, is now, I think, fully solved, and the social
phenomena which all over the civilized world appall the philanthropist and
perplex the statesman, which hang with clouds the future of the most advanced
races, and suggest doubts of the reality and ultimate goal of what we have
fondly called progress, are now explained.
The reason why, in spite of the increase of productive power, wages constantly
tend to a minimum which will give but a bare living, is that, with increase
in productive power, rent tends to even greater increase, thus producing a
constant tendency to the forcing down of wages.
Land being necessary to labor, and being reduced to private ownership, every
increase in the productive power of labor but increases rent — the
price that labor must pay for the opportunity to utilize its powers; and
thus all
the advantages gained by the march of progress go to the owners of land,
and wages do not increase. ... read the whole chapter
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