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Income Inequality

Henry George:  The Land Question (1881)

IMAGINE an island girt with ocean; imagine a little world swimming in space. Put on it, in imagination, human beings. Let them divide the land, share and share alike, as individual property. At first, while population is sparse and industrial processes rude and primitive, this will work well enough.

Turn away the eyes of the mind for a moment, let time pass, and look again. Some families will have died out, some have greatly multiplied; on the whole, population will have largely increased, and even supposing there have been no important inventions or improvements in the productive arts, the increase in population, by causing the division of labor, will have made industry more complex. During this time some of these people will have been careless, generous, improvident; some will have been thrifty and grasping. Some of them will have devoted much of their powers to thinking of how they themselves and the things they see around them came to be, to inquiries and speculations as to what there is in the universe beyond their little island or their little world, to making poems, painting pictures, or writing books; to noting the differences in rocks and trees and shrubs and grasses; to classifying beasts and birds and fishes and insects – to the doing, in short, of all the many things which add so largely to the sum of human knowledge and human happiness, without much or any gain of wealth to the doer. Others again will have devoted all their energies to the extending of their possessions. What, then, shall we see, land having been all this time treated as private property? Clearly, we shall see that the primitive equality has given way to inequality. Some will have very much more than one of the original shares into which the land was divided; very many will have no land at all. Suppose that, in all things save this, our little island or our little world is Utopia – that there are no wars or robberies; that the government is absolutely pure and taxes nominal; suppose, if you want to, any sort of a currency; imagine, if you can imagine such a world or island, that interest is utterly abolished; yet inequality in the ownership of land will have produced poverty and virtual slavery.

For the people we have supposed are human beings – that is to say, in their physical natures at least, they are animals who can live only on land and by the aid of the products of land. They may make machines which will enable them to float on the sea, or perhaps to fly in the air, but to build and equip these machines they must have land and the products of land, and must constantly come back to land. Therefore those who own the land must be the masters of the rest. Thus, if one man has come to own all the land, he is their absolute master even to life or death. If they can live on the land only on his terms, then they can live only on his terms, for without land they cannot live. They are his absolute slaves, and so long as his ownership is acknowledged, if they want to live, they must do in everything as he wills.

If, however, the concentration of landownership has not gone so far as to make one or a very few men the owners of all the land – if there are still so many landowners that there is competition between them as well as between those who have only their labor – then the terms on which these non-landholders can live will seem more like free contract. But it will not be free contract. Land can yield no wealth without the application of labor; labor can produce no wealth without land. These are the two equally necessary factors of production. Yet, to say that they are equally necessary factors of production is not to say that, in the making of contracts as to how the results of production are divided, the possessors of these two meet on equal terms. For the nature of these two factors is very different. Land is a natural element; the human being must have his stomach filled every few hours. Land can exist without labor, but labor cannot exist without land. If I own a piece of land, I can let it lie idle for a year or for years, and it will eat nothing. But the laborer must eat every day, and his family must eat. And so, in the making of terms between them, the landowner has an immense advantage over the laborer. It is on the side of the laborer that the intense pressure of competition comes, for in his case it is competition urged by hunger. And, further than this: As population increases, as the competition for the use of land becomes more and more intense, so are the owners of land enabled to get for the use of their land a larger and larger part of the wealth which labor exerted upon it produces. That is to say, the value of land steadily rises. Now, this steady rise in the value of land brings about a confident expectation of future increase of value, which produces among landowners all the effects of a combination to hold for higher prices. Thus there is a constant tendency to force mere laborers to take less and less or to give more and more (put it which way you please, it amounts to the same thing) of the products of their work for the opportunity to work. And thus, in the very nature of things, we should see on our little island or our little world that, after a time had passed, some of the people would be able to take and enjoy a superabundance of all the fruits of labor without doing any labor at all, while others would be forced to work the livelong day for a pitiful living.

But let us introduce another element into the supposition. Let us suppose great discoveries and inventions – such as the steam-engine, the power-loom, the Bessemer process, the reaping-machine, and the thousand and one labor-saving devices that are such a marked feature of our era. What would be the result?

Manifestly, the effect of all such discoveries and inventions is to increase the power of labor in producing wealth – to enable the same amount of wealth to be produced by less labor, or a greater amount with the same labor. But none of them lessen, or can lessen the necessity for land. Until we can discover some way of making something out of nothing – and that is so far beyond our powers as to be absolutely unthinkable – there is no possible discovery or invention which can lessen the dependence of labor upon land. And, this being the case, the effect of these labor-saving devices, land being the private property of some, would simply be to increase the proportion of the wealth produced that landowners could demand for the use of their land. The ultimate effect of these discoveries and inventions would be not to benefit the laborer, but to make him more dependent.

And, since we are imagining conditions, imagine laborsaving inventions to go to the farthest imaginable point, that is to say, to perfection. What then? Why then, the necessity for labor being done away with, all the wealth that the land could produce would go entire to the landowners. None of it whatever could be claimed by any one else. For the laborers there would be no use at all. If they continued to exist, it would be merely as paupers on the bounty of the landowners! ... read the whole article

 

 

Jeff Smith: What the Left Must Do: Share the Surplus

A surfeit of jobs, the consequence of recovering rents, goes nicely with the flagship goal of a life of leisure, the consequence of sharing rents. Further, when jobs seek people instead of vice versa, not only can workers hold out for higher wages – as in the tech industries in the 1990s – but they also gain the leverage to metamorphose corporations into co-ops, long an ideal of the Left.  Having to pay government for limiting its liability or to operate under full liability, corporations would want to share risk, giving labor leverage to negotiate not just higher wages, but also co-manage, and eventually erase the distinction between management and worker, which is a co-op.

An entry point for proposing an extra income for everyone is the income gap, highlighted by outrageous CEO pay. With society soaking up rents, leaving little excess in corporate coffers, and with a more participatory management and directorship – one including employees and stockholders – directors would no longer have either the means or the motive to lavish pay and benefits on CEOs, that breed of salesman with excellent old-boy connections and superbly apt at schmoozing. The new managers and directors, acting on behalf of the greater good, would redirect profit from CEO aggrandizement to dividends paid to the growing class of shareholders, which would include workers, moving society closer to Louis Kelso’s ideal of universal stock ownership. Read the whole article

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