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.*

*Whatever be the fact as to wages, the reader will, of course, recognize that higher money wages which merely balance higher living costs, are not to be reckoned as real wage increases. H.G.B

The simple theory which I have outlined (if indeed it can be called a theory which is but the recognition of the most obvious relations) explains this conjunction of poverty with wealth, of low wages with high productive power, of degradation amid enlightenment, of virtual slavery in political liberty.

• It harmonizes, as results flowing from a general and inexorable law, facts otherwise most perplexing, and exhibits the sequence and relation between phenomena that without reference to it are diverse and contradictory.
• It explains why improvements which increase the productive power of labor and capital increase the reward of neither.
• It explains what is commonly called the conflict between labor and capital, while proving the real harmony of interest between them.
• It cuts the last inch of ground from under the fallacies of protection, while showing why free trade fails to benefit permanently the working classes.
• It explains why want increases with abundance, and wealth tends to greater and greater aggregations.
• It explains the vice and misery which show themselves amid dense population, without attributing to the laws of the All-Wise and All-Beneficent defects which belong only to the shortsighted and selfish enactments of men.

The truth is self-evident. ... read the whole chapter

 Rev. A. C. Auchmuty: Gems from George, a themed collection of excerpts from the writings of Henry George (with links to sources)

LET us try to trace the genesis of civilization. Gifted alone with the power of relating cause and effect, man is among all animals the only producer in the true sense of the term. . . . But the same quality of reason which makes him the producer, also, wherever exchange becomes possible, makes him the exchanger. And it is along this line of exchanging that the body economic is evolved and develops, and that all the advances of civilization are primarily made. . . . With the beginning of exchange or trade among men this body economic begins to form, and in its beginning civilization begins. . . . To find an utterly uncivilized people, we must find a people among whom there is no exchange or trade. Such a people does not exist, and, as far as our knowledge goes, never did. To find a fully civilized people, we must find a people among whom exchange or trade is absolutely free, and has reached the fullest development to which human desires can carry it. There is, as yet, unfortunately, no such people. — The Science of Political Economy — unabridged: Book I, Chapter 5, The Meaning of Political Economy: The Origin and Genesis of Civilization • abridged: Chapter 4, The Origin and Genesis of Civilization

WHEN we, come to analyze production, we find it to fall into three modes, viz::
ADAPTING, or changing natural products either in form or in place so as to fit them for the satisfaction of human desire.
GROWING, or utilizing the vital forces of nature, as by raising vegetables or animals.
EXCHANGING, or utilizing, so as to add to the general sum of wealth, the higher powers of those natural forces which vary with locality, or of those human forces which vary with situation, occupation, or character. — Progress & Poverty — Book III, Chapter 3, The Laws of Distribution: of Interest and the Cause of Interest

THESE modes seem to appear and to assume importance, in the development of human society, much in the order here given. They originate from the increase of the desires of men with the increase of the means of satisfying them, under pressure of the fundamental law of political economy, that men seek to satisfy their desires with the least exertion. In the primitive stage of human life the readiest way of satisfying desires is by adapting to human use what is found in existence. In a later and more settled stage it is discovered that certain desires can be more easily and more fully satisfied by utilizing the principle of growth and reproduction, as by cultivating vegetables and breeding animals. And in a still later period of development, it becomes obvious that certain desires can be better and more easily satisfied by exchange, which brings out the principle of co-operation more fully and powerfully than could obtain among unexchanging economic units. — The Science of Political Economy unabridged: Book III, Chapter 2, The Production of Wealth: The Three Modes of Production • abridged: Part III, Chapter 2, The Production of Wealth: The Three Modes of Production

ALL living things that we know of co-operate in some kind and to some degree. So far as we can see, nothing that lives can live in and for itself alone. But man is the only one who co-operates by exchanging, and he may be distinguished from all the numberless tribes that with him tenant the earth as the exchanging animal. . . . Exchange is the great agency by which what I have called the spontaneous or unconscious co-operation of men in the production of wealth is brought about, and economic units are welded into that social organism which is the Greater Leviathan. To this economic body, this Greater Leviathan, into which it builds the economic units, it is what the nerves or perhaps the ganglions are to the individual body. Or, to make use of another illustration, it is to our material desires and powers of satisfying them what the switchboard of a telegraph or telephone, or other electric system, is to that system, a means by which exertion of one kind in one place may be transmitted into satisfaction of another kind in another place, and thus the efforts of individual units be conjoined and correlated so as to yield satisfactions in most useful place and form, and to an amount enormously exceeding what otherwise would be possible. — The Science of Political Economy — unabridged: Book III, Chapter 11, The Production of Wealth: The Office of Exchange in Production • unabridged Chapter 9, The Office of Exchange in Production

WE should keep our own market for our own producers, seems by many to be regarded as the same kind of a proposition as, We should keep our own pasture for our own cows; whereas, in truth, it is such a proposition as, We should keep our own appetites for our own cookery, or, We should keep our own transportation for our own legs.— Protection or Free Trade, Chapter 11: The Home Market and Home Trade - econlib

THE protection of the masses has in all times been the pretense of tyranny — the plea of monarchy, of aristocracy, of special privilege of every kind. The slave owners justified slavery as protecting the slaves. British misrule in Ireland is upheld on the ground that it is for the protection of the Irish. But, whether under a monarchy or under a republic, is there an instance in the history of the world in which the "protection" of the laboring masses has not meant their oppression? The protection that those who have got the law-making power into their hands have given labor, has at best always been the protection that man gives to cattle — he protects them that he may use and eat them. — Protection or Free Trade — Chapter 2, Clearing Ground   econlib

IT is never intimated that the land-owner or the capitalist needs protection. They, it is always assumed, can take care of themselves. It is only the poor workingman who must be protected. What is labor that it should so need protection? Is not labor the creator of capital, the producer of all wealth? Is it not the men who labor that feed and clothe all others? Is it not true, as has been said, that the three great orders of society are "workingmen, beggarmen, and thieves?" How, then, does it come that workingmen alone need protection? — Protection or Free Trade — Chapter 2, Clearing Ground   econlib -|- abridged

WHAT should we think of human laws framed for the government of a country which should compel each family to keep constantly on their guard against every other family, to expend a large part of their time and labor in preventing exchanges with their neighbors, and to seek their own prosperity by opposing the natural efforts of other families to become prosperous? Yet the protective theory implies that laws such as these have been imposed by the Creator upon the families of men who tenant this earth. It implies that by virtue of social laws, as immutable as the physical laws, each nation must stand jealously on guard against every other nation and erect artificial obstacles to national intercourse.— Protection or Free Trade, Chapter 4: Protection as a Universal Need  econlib

TO attempt to make a nation prosperous by preventing it from buying from other nations is as absurd as it would be to attempt to make a man prosperous by preventing him from buying from other men. How this operates in the case of the individual we can see from that practice which, since its application in the Irish land agitation, has come to be called "boycotting." Captain Boycott, upon whom has been thrust the unenviable fame of having his name turned into a verb, was in fact "protected." He had a protective tariff of the most efficient kind built around him by a neighborhood decree more effective than act of Parliament. No one would sell him labor, no one would sell him milk or bread or meat or any service or commodity whatever. But instead of growing prosperous, this much-protected man had to fly from a place where his own market was thus reserved for his own productions. What protectionists ask us to do to ourselves in reserving our home market for home producers, is in kind what the Land Leaguers did to Captain Boycott. They ask us to boycott ourselves. — Protection or Free Trade, Chapter 11: The Home Market and Home Trade - econlib

WHEN not caused by artificial obstacles, any tendency in trade to take a certain course is proof that it ought to take that course, and restrictions are harmful because they restrict, and in proportion as they restrict. To assert that the way for men to become healthy and strong is for them to force into their stomachs what nature tries to reject, to regulate the play of their lungs by bandages, or to control the circulation of their blood by ligatures, would be not a whit more absurd than to assert that the way for nations to become rich is for them to restrict the natural tendency to trade. — Protection or Free Trade, Chapter 6: Trade - econlib

MEN of different nations trade with each other for the same reason that men of the same nation do — because they find it profitable; because they thus obtain what they want with less labor than they otherwise could. — Protection or Free Trade, Chapter 6: Trade - econlib -|- abridged

TRADE is not invasion. It does not involve aggression on one side and resistance on the other, but mutual consent and gratification. There cannot be a trade unless the parties to it agree, any more than there can be a quarrel unless the parties to it differ. England, we say, forced trade with the outside world upon China and the United States upon Japan. But, in both cases, what was done was not to force the people to trade, but to force their governments to let them. If the people had not wanted to trade, the opening of the ports would have been useless. — Protection or Free Trade, Chapter 6: Trade - econlib
 
TRADE does not require force. Free trade consists simply in letting people buy and sell as they want to buy and sell.. It is protection that requires force, for it consists in preventing people from doing what they want to do. — Protection or Free Trade, Chapter 6: Trade - econlib -|- abridged

IF all the material things needed by man could be produced equally well at all points on the earth's surface, it might seem more convenient for man the animal, but how would he have risen above the animal level? As we see in the history of social development, commerce has been and is the great civilizer and educator. The seemingly infinite diversities in the capacity of different parts of the earth's surface lead to that exchange of productions which is the most powerful agent in preventing isolation, in breaking down prejudice, in increasing knowledge and widening thought. These diversities of nature, which seemingly increase with our knowledge of nature's powers, like the diversities in the aptitudes of individuals and communities, which similarly increase with social development, call forth powers and give rise to pleasures which could never arise had man been placed like an ox in a boundless field of clover. The "international law of God" which we fight with our tariffs — so shortsighted are the selfish prejudices of men — is the law which stimulates mental and moral progress; the law to which civilization is due. — Social Problems — Chapter 19: The First Great Reform.

AND will not the community gain by thus refusing to kill the goose that lays the golden eggs; by thus refraining from muzzling the ox that treadeth out the corn; by thus leaving to industry, and thrift, and skill, their natural reward, full and unimpaired? For there is to the community also a natural reward. The law of society is, each for all, as well as all for each. No one can keep to himself the good he may do, any more than he can keep the bad. Every productive enterprise, besides its return to those who undertake it, yields collateral advantages to others. If a man plant a fruit tree, his gain is that he gathers the fruit in its time and season. But in addition to his gain, there is a gain to the whole community. Others than the owner are benefited by the increased supply of fruit; the birds which it shelters fly far and wide; the rain which it helps to attract falls not alone on his field; and, even to the eye which rests upon it from a distance, it brings a sense of beauty. And so with everything else. The building of a house, a factory, a ship, or a railroad, benefits others besides those who get the direct profits. Nature laughs at a miser. He is like the squirrel who buries his nuts and refrains from digging them up again. Lo! they sprout and grow into trees. In fine linen, steeped in costly spices, the mummy is laid away. Thousands and thousands of years thereafter, the Bedouin cooks his food by a fire of its encasings, it generates the steam by which the traveler is whirled on his way, or it passes into far-off lands to gratify the curiosity of another race. The bee fills the hollow tree with honey, and along comes the bear or the man. — Progress & Poverty — Book IX, Chapter 1, Effects of the Remedy: Of the Effect upon the Production of Wealth

CONSIDER the effect of such a change upon the labor market. Competition would no longer be one-sided, as now. Instead of laborers competing with each other for employment, and in their competition cutting down wages to the point of bare subsistence, employers would everywhere be competing for laborers, and wages would rise to the fair earnings of labor. For into the labor market would have entered the greatest of all competitors for the employment of labor, a competitor whose demand cannot be satisfied until want is satisfied — the demand of labor itself. The employers of labor would not have merely to bid against other employers, all feeling the stimulus of greater trade and increased profits, but against the ability of laborers to become their own employers upon the natural opportunities freely opened to them by the tax which prevented monopolization. — Progress & Poverty — Book IX, Chapter 1, Effects of the Remedy: Of the Effect upon the Production of Wealth

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Mark Twain   Archimedes

Louis Post: Outlines of Louis F. Post's Lectures, with Illustrative Notes and Charts (1894)

2. THE PRODUCTION OF WEALTH

When considered in connection with primitive modes of production, the vital importance of this truth is self-evident. 55 If those modes prevailed, involuntary poverty would be readily traced either to direct enslavement through ownership of Labor, or to indirect enslavement through ownership of Land. 56 There could be no other cause. If both causes were absent, every individual might, if he wished, enjoy all the Wealth that his own powers were capable of producing in 'the primitive modes of production and under the limitations of common knowledge that belonged to his environment.57

But in the civilized state this principle is so entangled in the complexities of division of labor and trade as to be almost lost in the maze. Many, even of those who recognize it, fail to grasp it as a fundamental truth. Yet it is no less vital in civilized than in primitive modes of production.

a. Division of Labor

The essential difference between primitive and civilized modes of production is not in the accumulation of capital which characterizes the latter, but in the greater scope and minuteness of its division of labor.58 Capital is an effect of division of labor rather than a cause. Division of labor, by enhancing labor power and relieving man from the perpetual pursuit of mere subsistence, utilizes capital and makes civilization possible.59

58. It is his failure to realize this that accounts for the theory of the socialist that laborers in the civilized state are dependent upon accumulated capital as well as upon land for opportunities to produce. See ante, note 49, and post, note 81.

59. Here are two men at a given point. Each has an errand to do a mile to the east, and each has one to do a mile to the west. If each goes upon his own errand each will travel a mile out and a mile back in one direction and the same in the other, making four miles' travel apiece, or eight miles in all. But if one does both errands to the east and the other does both to the west, they will travel but two miles apiece, or four in all. By division of labor they free half their energy and half their time for devotion to other work, or to study, or to play, as their inclinations dictate.

The productive power of division of labor may be illustrated by considering it as a means for utilizing differences of soil and climate. If, for example, the soil and the climate of two sections of a country, or of two different countries (for the effects of division of labor are not dependent upon political geography 60), differ inversely, one being better adapted to the production of corn than of sugar, and the other, on the contrary, being better adapted to the production of sugar than of corn, they will yield more wealth in corn and sugar with division of labor than without it.

6o. No more than are the effects of a healthful climate. Protectionists who argue that there should be free trade between villages, cities, counties and states in the same nation, but protection for nations, thus making the effect of trade to depend upon the invisible political boundary line that separates communities, are like the colored woman who, when her house, without being physically removed, had been politically shifted from North Carolina to Virginia by a change of the boundary line, expressed her satisfaction in the remark that she was very glad of it, because she "allus yearn tail dot dat yah Nof Kline was an a'mighty sickly State," and she was glad that she didn't "live dyeah no me'!"

Let us imagine a Mainland and an Island, which, as to the adaptability of their soil and climate to the production of corn and sugar, so differ that if the people of each should raise their own corn and their own sugar they would produce, with a given unit of labor force, but 22 of Wealth — 11 in corn and 11 in sugar. Thus: [chart]

Production in that manner would ignore the opportunities afforded by nature to man for utilizing differences of soil and climate; but by such a wise division as Labor would adopt in similar circumstances, if unrestrained, the same unit of labor force almost doubles the product. Thus: [chart]

Nor is it alone because it utilizes differences of soil and climate that division of labor is so effective. Its effectiveness is enhanced in still higher degree by its lessening of the labor force necessary to accomplish any industrial result, whether in mining, manufacturing, transporting, store-keeping, professional employments, agriculture, or the incidental occupations. Minute division of labor, instead of accounting for poverty in the civilized state, makes it all the more unaccountable. ...

b. Trade

But division of labor is dependent upon trade. If trade were wholly stopped there would be no division of labor; 61 if it be interfered with, division of labor is obstructed. 62 In the last preceding chart, which illustrates the effect of division of labor without trade, the Mainland gets 20 of corn, but no sugar, and the Island gets 20 of sugar, but no corn. Yet each wants both sugar and corn; and if they freely trade, their wants in these respects will be better satisfied than if each raises its own corn and sugar.

61. Men who devoted themselves to specialties, unable to exchange their products for the objects of their desire, which alone would be the motive for their special labor, would abandon specialties and resort to less civilized methods of supplying their wants.

62. Division of labor, whether adopted to take advantage of the different varieties of land or to secure the benefits of special skill in labor, cannot continue without trade; and to the degree that trade is impeded, to that degree division of labor will languish. It is only under absolute free trade between all people and in respect of all products that division of labor can flourish. Any interference with it is economically an enslavement of labor in a degree proportioned to the degree of interference.

Compare the first chart of this series with the following: 63 [chart]

The comparison 64 illustrates the advantage to each individual, community and country, of division of labor and trade over more primitive modes of production. It is like the difference between raising weights by direct application of power, and by means of block and tackle.65

63. It will be seen from this chart that the people of the two places, by dividing their given expenditure of labor in such a manner as to utilize the natural advantage peculiar to each place, secure a clear profit of 18. And this is a substantial profit, consisting not merely of figures upon paper, but of real wealth — artificial external objects which serve to satisfy human desires.

64. The people of the Mainland have now sent 10 of their corn to the Island, and the people of the Island have paid for it by sending 10 of their sugar to the Mainland.

For simplicity. the cost of effecting the trade is omitted. It does not affect the principle. If the cost were so high that more sugar and corn could be got without division of labor than with, division of labor would be abandoned as unprofitable; if low enough to admit of any profit at all, the trading would go on, unless restrained, precisely as if it involved no cost. It may be well to state, however, that the nearer we get to no cost in trading, the better are we off. Hence, any tariff on trading, whether domestic or foreign, like railroad and shipping rates for freight, is prejudicial; for tariffs add to the cost of trading just as freight rates do. Protection has that for its object. When it does not add enough to the price of a foreign product to prevent importation it fails of its purpose. And though revenue tariffs have no such object they produce the same effect, only in minor degree.

65. If every man were obliged, unassisted by the co-operation of others, to supply his own needs directly by his own labor, few could more than meagerly satisfy even the simplest of those desires which we have in common with lower animals. Though each labored diligently the aggregate of wealth would be exceedingly small compared with the necessities of those who wished to consume it, while in variety it would be very limited and in quality of the poorest kind. But by division of labor, which has been carried to marvelous lengths and is still developing, productive power is so enormously increased that the annual wealth products of the present time, in quantity and quality, in variety, usefulness and beauty, almost appear to be the work of giants and fairies.

And what this series of charts illustrates regarding two places and two forms of wealth, is true in principle of all places and all forms of wealth. That every one is better served when each does for others what relatively he does best, in exchange for what relatively they do best, is as true of communities and nations as it is of individuals. Indeed, it is true of communities and nations because it is true of individuals; for it is individuals that trade, and not communities or nations as such.66

66. Mankind as a whole may be likened to a great man, with eyes to see, brain to invent and direct, nerves for intercommunication, and various muscles for various actions. As different parts of the bodies of men do different things, each part contributing co-operatively to a general result, so it is with the body politic, whose different parts — individual men — contribute in different ways to the common good. Trade is to the body politic what digestion is to the physical body. To prohibit it is to deprive the great man of his stomach; to restrict it is to give him dyspepsia.

Says Emerson in the "American Scholar," an oration delivered at Cambridge in 1837: "It is one of those fables which out of an unknown antiquity convey an unlocked-for wisdom, that the gods, in the beginning, divided man into men, that he might be more helpful to himself; just as the hand was divided into fingers, the better to answer its ends."

Reflection upon the labor-saving power of trade makes it clear that the notion of protectionists that free trade is prejudicial to home industry has no foundation. It would interfere with "home industries" that could be better conducted elsewhere; but by that very fact it would strengthen the industries that belonged at home.

When we decide to buy foreign goods we do not thereby decide to employ foreign labor instead of American labor; we decide that the American labor shall be employed in making things to trade for what we buy, instead of making the things that we buy. And we get a better net result or we wouldn't do it.

Free trade and labor-saving machinery, which belong in the same industrial category, increase the aggregate wealth of the country where they flourish. Whether or not they tend to impoverish individuals or classes, depends upon the manner in which the increased wealth is distributed. If they do so tend, the remedy surely does not lie in the direction of obstructing trade and smashing machines so that less wealth may be produced with given labor, but in altering the conditions that promote unjust distribution.

c. The Law of Division of Labor and Trade

Now, what is it that leads men to conform their conduct to the principle illustrated by the last chart? Why do they divide their labor, and trade its products? A simple, universal and familiar law of human nature moves them. Whether men be isolated, or be living in primitive communities, or in advanced states of civilization, their demand for consumption determines the direction of Labor in production.67 That is the law. Considered in connection with a solitary individual, like Robinson Crusoe upon his island, it is obvious. What he demanded for consumption he was obliged to produce. Even as to the goods he collected from stranded ships — desiring to consume them, he was obliged to labor to produce them to places of safety. His demand for consumption always determined the direction of his labor in production.68 And when we remember that what Robinson Crusoe was to his island in the sea, civilized man as a whole is to this island in space, we may readily understand the application of the same simple law to the great body of labor in the civilized world.69 Nevertheless, the complexities of civilized life are so likely to obscure its operation and disguise its relations to social questions like that of the persistence of poverty as to make illustration desirable.

67. The term " production" means not creation but adaptation. Man cannot add an atom to the universe of matter; but he can so modify the condition of matter, both in respect of form and of place, as to adapt it to the satisfaction of human desires. To do this is to produce wealth.

"Consumption" is the ultimate object of all production. We produce because we desire to consume. But consumption does not mean destruction. Man has no more power to destroy than to create. His power in consumption, like his power in production, is limited to changing the condition of things. As by production man changes things from natural to artificial conditions to satisfy his desires, so by consumption he changes things from artificial to natural conditions in the process of satisfying his desires.

Production is the drawing forth of desired things, of Wealth, from the Land; consumption is the returning back of those things to the Land.

"All labor is but the movement of particles of matter from one place to another." — Dick's Outlines, p. 25.

Production consists merely in changing things — Ely's Intro., part ii, ch. i; Mill's Prin., book i, ch. i, sec. 2.

"As man creates no new matter but only utilities, so he destroys no matter, but only utilities. Consumption means the destruction of a utility." — Ely's Intro., part v. ch. i., p. 268.

Production means "drawing forth." — Jevons's Primer, sec. 17.

"Man cannot create material things. . . His efforts and sacrifices result in changing the form or arrangement of matter to adapt it better for the satisfaction of wants." — Marshall's Prin., book ii, ch. iii, sec. i.

"It is sometimes said that traders do not produce; that while the cabinet maker produces furniture, the furniture dealer merely sells what is already produced. But there is no scientific foundation for this distinction." — Id.

"As his [man's] production of material products is really nothing more than a rearrangement of matter which gives it new utilities, so his consumption of them is nothing more than a disarrangement of matter which diminishes or destroys its utilities." — Id.

"In like manner as by production is meant the creation not of substance but of utility, so by consumption is meant the destruction of utility and not of substance or matter." — Say's Trea., book ii, ch. i.

"All that man can do is to reproduce existing materials under another form, which may give them a utility they did not before possess, or merely enlarge one they may have before presented. So that in fact there is a creation not of matter but of utility ; and this I call production of wealth. . . There is no actual production of wealth without a creation or augmentation of utility."— Say's Trea., book i, ch. i.

68. It is highly significant that while Robinson Crusoe had unsatisfied wants he was never out of a job.

69. Demand for consumption is satisfied not from hoards of accumulated wealth, but from the stream of current production. Broadly speaking there can be no accumulation of wealth in the sense of saving up wealth from generation to generation. Imagine a man's satisfying his demand for eggs from the accumulated stores of his ancestors! Yet eggs do not differ in this respect from other forms of wealth, except that some other forms will keep a little longer, and some not so long.

The notion that a saving instinct must be aroused before the great and more lasting forms of wealth can be brought forth is a mistake. Houses and locomotives, for example, are built not because of any desire to accumulate wealth, but because we need houses to live in and locomotives to transport us and our goods. It is not the saving, but the serving, instinct that induces the production of these things; the same instinct that induces the production of a loaf of bread.

Artificial things do not save. No sooner are the processes of production from land complete than the products are on their way back to the land. If man does not return them by means of consumption, then through decay they return themselves. Mankind as a whole lives literally from hand to mouth. What is demanded for consumption in the present must be produced by the labor of the present. From current production, and from that alone, can current consumption be satisfied.

"Accumulated wealth" is, in fact, not wealth at all in any great degree. It is merely titles to wealth yet to be produced. A share in a mining company, for example, is but a certificate that the owner is legally entitled to a proportion of the wealth to be produced in the future from a certain mine.

Titles to future wealth may be both morally and legally valid. This is so when they represent past labor or its products loaned in free contract for future labor or its products; for example, a contract for the delivery of goods of any kind today to be paid for next week. or next month, or next year, or in ten years, or later.

They may be legally but not morally valid. This is so when they represent the product of a franchise (whether paid for in labor or not) to exact tribute from future labor; for example, a franchise to confiscate a man's labor through ownership of his body, as in slavery, or a franchise to confiscate the products of labor in general through ownership of land.

Or they may be both legally and morally invalid, as when they are obtained by illegal force or fraud from the rightful owner. ...

The poverty of Food-makers as to clothing is thus removed. They are working all they care to at food-making, their own chosen employment, and they are paid in clothing, their own chosen compensation. So long as Personal Servants withdraw food and Clothing-makers supply clothing, Food-makers cannot be poor. With them business will be brisk, labor will be in demand, and wages will be high. That all the other workers may enjoy the same prosperity we shall see in a moment. Clothing-makers pour clothing into the commercial reservoir because they wish to take something out, and know that in this way they can get a larger quantity and better quality of what they require than if they undertake to make it themselves. They are skilled in making clothing; they are not skilled in other ways. Accordingly they utilize the claim against Personal Servants, which has passed to their credit in exchange for clothing, by drawing from the commercial reservoir the particular commodity they desire. Suppose it to be shelter. They proceed as Personal Servants and Food-makers have already done, and so set Shelter-makers at work. Shelter-makers in turn utilize the claim against Personal Servants which has now been credited to them, by taking luxuries out of the reservoir. This sets Luxury-makers at work. Luxury-makers then pass the claim over in exchange for services, and Personal Servants redeem it by rendering such services as Luxury-makers demand.72 Everybody is now paid for his own products with the products of others; and by demanding more food, Personal Servants may perpetuate the interchange indefinitely.73 And Personal Servants will continue to demand more food until their wants as to food are wholly and finally satisfied.74

72. The mechanism of these exchanges should be explained.

Personal Servants upon demanding food may pay money for it. The retailers might thereupon pass the money along, and it would ultimately return to Personal Servants. Or the Personal Servants may give notes payable at a future time, which being endorsed over would at last be redeemed by them in services. Or they may give checks on banks, which assumes previous work done by them or the discounting of their notes by the banks. As the world's exchanges are almost wholly adjusted by means of checks, and other commercial paper which is in economic effect the same as checks, let us illustrate that mode by a series of charts adapted from Jevons.

We will begin with two traders, A and B. They have no money, but every time that one demands anything of the other he must offer in exchange something that the other wants. There must be what is called "a double coincidence" of demand and supply; each must want what the other has. This is primitive barter. It may be represented by the following chart :

In the civilized state, even in its beginnings, primitive barter must be obstructive to trade, and it gives way to the use of currency — some common medium which is taken for goods not because the taker wants it but because he knows that be can readily exchange it for the goods that he does want. With currency in use, when A wants anything of B he is not obliged to find something that B wants. All he needs is currency. Thus currency reduces the friction of trading.

But as the volume of trade augments, demand for currency increases; and because it is scarce, or troublesome or dangerous to transmit, or all together, easier means of exchange are resorted to, and bookkeeping takes the place of currency as currency took the place of primitive barter. At this stage, when A wants anything of B, B charges him; and when B wants anything of A, A charges him. Their mutual accounts being adjusted, the small balance is paid with currency. Thus the demand for currency is greatly lowered by bookkeeping, and the friction of trading is correspondingly reduced.

Now let us bring in two more traders, C and D:

Though all four of these traders keep mutual accounts, the settlement of balances requires more currency than before, and scarcity of currency, together with the danger and expense of transmission, evolves an extension of bookkeeping. A common bookkeeper, called a "Bank," is employed, and all need for currency disappears:

Balances are now settled by checks, and all accounts are adjusted in the central ledger at the bank.

But the introduction of another group of traders, another community, renews the demand for currency, and another bank appears. Thus:

And now the two banks are in the same position that A and B were in before any bank came. They keep mutual accounts, but they must have currency to settle their balances. And if we bring in more communities the demand for currency further increases. Thus:

Now the four banks are in the same situation that A, B, C and D were in before there were any banks. This evolves a bank of banks — a clearing-house.

All necessity for currency once more disappears.

These charts illustrate the principle by which mutual trading is effected. In practice, the need of currency is never wholly done away with, but the tendency is constantly in the direction of doing away with it. And it is said that over ninety per cent of the trading transactions of the world are adjusted in this manner, and less than ten per cent by means of currency.

The clearing-house principle extends over the civilized world. In illustration of this, observe the following chart:

These five cities are like the five banks. The bookkeeping of each city is conducted by local banks and clearing-houses, and the central bookkeeping by those of the market town of the world, which at present is London.

In this way the mobility of labor is in effect enormously increased. Labor in every corner of the world is brought into close trading relations with labor everywhere else, so that only war, pestilence, protection, and land monopoly interfere with the full freedom of its movement.

73. Personal Servants, on the basis of their employment by Luxury-makers, demand more food, which keeps Food-makers at work; Food-makers demand more clothing, which keeps Clothing-makers at work; Clothing-makers demand more shelter, which keeps Shelter-makers at work; Shelter-makers demand more luxuries, which keeps Luxury-makers at work; Luxury-makers demand more services, which keeps Personal Servants at work. And so on indefinitely.

If now we add progressive invention, so that every one produces more and more wealth with less and less labor, instead of finding poverty upon the increase, instead of being harried by periodical "hard times," we shall find business brisk and every one becoming richer and richer. That is to say, though all labor less than before, each obtains better results from others while giving better results in exchange.

And should we improve the verisimilitude of the illustration by bringing in the fact that all workers in civilized society are specialists in a much more minute degree than the division into Clothing-makers, Food-makers, etc., would imply — that every one who works does over and over some one thing in one of these branches, as the making of shoes or the baking of bread, or even only part of a thing, as the cutting of shoe soles, and that while giving out a great deal of his own product he demands in pay a little of every other kind of product — the same effect would naturally result.

Every man who demands anything for consumption thereby determines the direction of labor toward the production not only of that thing, but also of all the artificial materials and implements, from the simplest tool to the most expensive and complex machine, that are used in its production. The actual process is much more intricate than that of the charts, but the charts illustrate the principle so that any intelligent person who understands them can apply — it to the most complex affairs of industrial life.

"This principle is so simple and obvious that it needs no further illustration, yet in its light all the complexities of our subject disappear, and we thus reach the same view of the real objects and rewards of labor in the intricacies of modern production that we rained by observing in the first beginnings of society the simpler forms of production and exchange. We see that now, as then, each laborer is endeavoring to obtain by his exertions the satisfaction of his own desires; we see that although the minute division of labor assigns to each producer the production of but a small part, or perhaps nothing at all, of the particular things he labors to get, yet, in aiding in the production of what other producers want, he is directing other labor to the production of the things he wants — in effect, producing them himself. And thus, if he makes jackknives and eats wheat, the wheat is really as much the produce of his labor as if he had grown it for himself and left wheat-growers to make their own jackknives." — Progress and Poverty. book i, ch. iv.

74. There is no end to man's wants.

"The demand for quantity once satisfied, he seeks quality. The very desires that he has in common with the beast become extended, refined, exalted. It is not merely hunger, but taste, that seeks gratification in food; in clothes, he seeks not merely comfort, but adornment; the rude shelter becomes a house; the undiscriminating sexual attraction begins to transmute itself into subtle influences, and the hard and common stock of animal life to blossom and to bloom into shapes of delicate beauty." — Progress and Poverty, book ii, ch. iii.

A labor agitator was arguing the labor question with a rich man, the judge of his county, when the judge as a clincher asked:

"what do workingmen want, anyway, that they haven't got?"

Promptly the agitator replied with the counter-question

"Judge, what have you got that you don't want?"
...

Let us now complete this chart. When we began it a distinction was noted between Personal Servants, who render mere intangible services, and the other classes, who produce tangible wealth. But essentially there is no difference. By referring to the chart and observing the course of the arrows, Food-makers are seen working for Personal Servants precisely as Personal Servants work for Luxury-makers. We may therefore abandon the distinction. This makes it no longer necessary to mention particular classes of products in the chart; it is enough to distinguish the different kinds of labor.76 Thus:

76. "This, then, we may say is the great law which binds society — 'service for service.' "— Dick's Outlines, p. 9.

For simplicity the workers have been divided into great classes, and each class has been supposed to serve only one other class. But the actual currents of trade are much more complex. It would be practically impossible to follow them in detail, or to illustrate their particular movements in any simple way. And it is unnecessary. The principle illustrated in the chart is the principle of all division of labor and trade, however minute the details and intricate the movement; and any person of ordinary intelligence who wishes to understand will need only to grasp the principle as illustrated by the chart to be able to apply it to the experiences of everyday industrial life. All legitimate trade is the interchange of Labor for Labor.77

77. In the light of this principle how absurd are some of the explanations of hard times.

Overproduction! when an infinite variety of wants are unsatisfied which those who are in want are anxious and able to satisfy for one another. Hatters want bread, and bakers want hats, and farmers want both, and they all want machines, and machinists want bread and hats and machines, and so on without end. Yet while men are against their will in partial or complete idleness, their wants go unsatisfied! Since producers are also consumers, and production is governed by demand for consumption, there can be no real overproduction until demand ceases. The apparent overproduction which we see — overproduction relatively to "effective demand" — is in fact a congestion of some things due to an abnormal underproduction of other things, the underproduction being caused by obstructions in the way of labor.

Scarcity of capital! when makers of capital in all its forms are involuntarily idle. Scarcity of capital, like scarcity of money, is only an expression for lack of employment. But why should there be any lack of employment while men have unsatisfied wants which they can reciprocally satisfy?

Too much competition! when competition and freedom are the same. It is not freedom but restraint, not competition but protection, that obstructs the action and reaction of demand and supply which we have illustrated in the chart.

... read the book

Nic Tideman:  A Bill of Economic Rights and Obligations

When the principle that the value of government-assigned opportunities should be received by the public treasury is violated, the result is "privilege," which from its Latin roots means "private law," that is, law that permits one person to do what others are not permitted to do. Thus what we stand for is an end to privilege.

Numerous examples of privilege are incorporated in our institutions.

• Farm legislation restricts the growing of tobacco to those who have been assigned acreage allotments.
• For numerous commodities, trade legislation limits shipments from individual countries to specified quotas.
• In many cities, only persons who have been given permits are allowed to operate taxis, and new permits are not issued.
• To operate a radio or television station requires a license, and there are no opportunities for new licenses to be issued.
• In most cities, construction of commercial or multi-family residential structures requires zoning permission that is granted to some and not to others.
• But the single most important category of privilege is land titles.

This list of examples of privilege, which is by no means exhaustive, contains some privileges, such as acreage allotments and import quotas, that would be best reformed by eliminating restrictions and permitting all to do what now only some may do. For other privileges, such as broadcast licenses and land titles, great productivity results from the social understanding that a specified individual will have the use of a given resource. For these privileges, the best reform is the introduction of the requirement that any person who is assigned such an opportunity must pay to the public treasury an annual fee equal to what the opportunity would be worth to someone else.  ...  Read the whole article

Of taxes levied on products, George said: "The present method of taxation operates upon exchange like artificial deserts and mountains; it costs more to get goods through a custom house than it does to carry them around the world. It operates upon energy, and industry, and skill, and thrift, like a fine upon those qualities. If I have worked harder and built myself a good house while you have been contented to live in a hovel, the taxgatherer now comes annually to make me pay a penalty for my energy and industry, by taxing me more than you. If I have saved while you wasted, I am mulct, while you are exempt. If a man build a ship we make him pay for his temerity, as though he had done an injury to the state; if a railroad be opened, down comes the taxcollector upon it, as though it were a public nuisance; if a manufactory be erected we levy upon it an annual sum which would go far toward making a handsome profit. We say we want capital, but if anyone accumulate it, or bring it among us, we charge him for it as though we were giving him a privilege. We punish with a tax the man who covers barren fields with ripening grain, we fine him who puts up machinery, and him who drains a swamp. How heavily these taxes burden production only those realize who have attempted to follow our system of taxation through its ramifications, for, as I have before said, the heaviest part of taxation is that which falls in increased prices" (1879, rpt. 1958, p. 434).

Turning to taxation levied on the value of land, George went on to say:

For this simple device of placing all taxes on the value of land would be in effect putting up the land at auction to whosoever would pay the highest rent to the state. The demand for land fixes its value, and hence, if taxes were placed so as very nearly to consume that value, the man who wished to hold land without using it would have to pay very nearly what it would be worth to anyone who wanted to use it.

And it must be remembered that this would apply, not merely to agricultural land, but to all land. Mineral land would be thrown open to use, just as agricultural land; and in the heart of a city no one could afford to keep land from its most profitable use, or on the outskirts to demand more for it than the use to which it could at the time be put would warrant. Everywhere that land had attained a value, taxation, instead of operating, as now, as a fine upon improvement, would operate to force improvement (1879, rpt. 1958, p. 437).

A few pages before this he had told us that, "It is sufficiently evident that with regard to production, the tax upon the value of land is the best tax that can be imposed. Tax manufactures, and the effect is to check manufacturing; tax improvements, and the effect is to lessen improvement; tax commerce, and the effect is to prevent exchange; tax capital, and the effect is to drive it away. But the whole value of land may be taken in taxation, and the only effect will be to stimulate industry, to open new opportunities to capital, and to increase the production of wealth" (1879, rpt. 1958, p. 414).

In other words, according to George, taxation of products checks production, whereas taxation of land values stimulates production.  ... read the whole article

If wealth be a good thing; if the country be a prosperous country — that is, increasing in wealth — well, surely, if we propose to restrict trade at all, the wise thing would he to put the taxes on the men who are taking goods out of the country, not upon those who are bringing goods into the country.

We Single Tax men would sweep away all these barriers. We would try to keep out small-pox and cholera and vermin and plagues. But we would welcome all the goods that anybody wanted to send us, that anybody wanted to bring home. We say it is stupid, if we want more wealth, to prevent people from bringing wealth to the country. We say, also, that it is just as stupid to tax the men who produce wealth within the country.  Read the entire article

This imperfect policy of non-intervention, or laissez-faire, led straight to a most hideous and dreadful economic exploitation; starvation wages, slum dwelling, killing hours, pauperism, coffin-ships, child-labour -- nothing like it had ever been seen in modern times ... People began to say, if this is what State abstention comes to, let us have some State intervention.

But the state had intervened; that was the whole trouble. The State had established one monopoly--the landlord's monopoly of economic rent--thereby shutting off great hordes of people from free access to the only source of human subsistence, and driving them into factories to work for whatever Mr. Gradgrind and Mr. Bottles chose to give them. The land of England, while by no means nearly all actually occupied, was all legally occupied; and this State-created monopoly enabled landlords to satisfy their needs and desires with little exertion or none, but it also removed the land from competition with industry in the labor market, thus creating a huge, constant and exigent labour-surplus. [Emphasis Nock's] --Albert J. Nock, "The Gods' Lookout" February 1934 ... Read the whole piece

Judge Samuel Seabury: An Address delivered upon the 100th anniversary of the birth of Henry George

WE are met to celebrate the 100th anniversary of the birth of Henry George. We meet, therefore, in a spirit of joy and thanksgiving for the great life which he devoted to the service of humanity. To very few of the children of men is it given to act the part of a great teacher who makes an outstanding contribution toward revealing the basic principles to which human society must adhere if it is to walk in the way which leads to freedom. This Henry George did, and in so doing he expressed himself with a clarity of thought and diction which has rarely been surpassed.

... The second principle to which I wish to refer is Henry George's advocacy of freedom of trade among the nations — not free trade introduced overnight, but freedom of trade as an end toward which the nations should move. When he wrote his great work on "Protection or Free Trade," he demolished the protectionist argument and in chapter after chapter he showed the absurdities to which the protectionist principle led if carried to its logical conclusion. But even he, penetrating as his vision was, could not foresee that mankind was heading for a world order of economic nationalism and isolation, based upon the principle of protection carried to its utmost extreme. And yet that it is precisely the doctrine which is now currently accepted. If it becomes general, it can serve only to sow the seeds of destruction of that measure of civilization which we now have and force a lowering of the standard of living throughout the world.

There are two ways by which the people of one nation can acquire the property or goods of the people of another nation. These are by war and by trade. There are no other methods. The present tendency among civilized people to outlaw trade must drive the states which prescribe such outlawry to acquire the property and goods of other peoples by war. Early in man's struggle for existence the resort to war was the common method adopted. With the advancement of civilization men resorted to trade as a practical substitute for war. The masses of men wish to trade with one another. The action of the states alone prevents them from so doing. In prohibiting trade, the state gives an importance to territorial boundaries which would not exist if freedom of trade existed. In accentuating the importance of mere boundary disputes, rather than assuring the right of peoples to trade with one another, the nations put the emphasis upon the precise issue which is, itself, one of the most prolific causes of war.

All the great modern states are turning away from freedom of trade, and indeed, from trade itself, and forbidding their people the right to earn their own livelihood and to associate freely with one another in industry. In order to accomplish this end they are compelled to regiment the lives of their people under state bureaucracies and this can be accomplished only by a despotic state. If the powers of the modern states are to be augmented by conferring upon them the right to run all industry, despotism is inevitable. A dictator may, by reducing the standard of living and regimenting the people, run all industry within the state over which he rules, but a democracy, which, if it is to be true to itself, must preserve individual initiative, can not do so without transforming itself into a dictatorship. ... read the whole speech

Henry Ford Talks About War and Your Future - 1942 interview

Albert Jay Nock — Henry George: Unorthodox American

George was moreover the terror of the political routineer. When the Republicans suddenly raised the tariff issue in 1880 the Democratic committee asked him to go on the stump. They arranged a long list of engagements for him, but after he made one speech they begged him by telegraph not to make any more. The nub of his speech was that he had heard of high-tariff Democrats and revenue-tariff Democrats, but he was a no-tariff Democrat who wanted real free trade, and he was out for that or nothing; and naturally no good bi-partisan national committee could put up with such talk as that, especially from a man who really meant it.

Yet, on the other hand, when the official free-traders of the Atlantic seaboard, led by Sumner, Godkin, Beecher, Curtis, Lowell, and Hewitt, opened their arms to George, he refused to fall in. His free-trade speeches during Cleveland’s second campaign were really devoted to showing by implication that they were a hollow lot, and that their idea of free trade was nothing more or less than a humbug. His speeches hurt Cleveland more than they helped him, and some of George’s closest associates split with him at this point. In George’s view, freedom of exchange would not benefit the masses of the people a particle unless it were correlated with freedom of production; if it would, how was it that the people of free-trade England, for example, were no better off than the people of protectionist Germany! None of the official free-traders could answer that question, of course, for there was no answer. George had already developed his full doctrine of trade in a book, published in 1886, called Protection or Free Trade — a book which, incidentally, gives a reader the best possible introduction to Progress and Poverty. ...read the whole article