Progress and Poverty, notes

20 The rightful basis of property, continued

Self-ownership - the right of a person to his or her body, time, and life.

Thus, one properly owns one's labor.

And therefore one has proper title to the products of one's labor.

One also has proper title to goods that were voluntarily exchanged or given.

But, self-ownership does not extend to what the self has not created.

Therefore self-ownership does not applly to the benefits of what nature has given us.

One needs land in order to apply labor, and so one may properly have rights of possession of land.

But economic efficiency does not require that the title holder keep the economic rent of land.

A major moral premise of ethics is human equality.

As George put it, nature knows no distinction between master and slave.

So we are all here with an equal natural right to what has been given to us by nature, or, if you are religious, by God.

Equality can be implemented by sharing the land rent.

But the value of improvements should be kept by the one who made them.

21 should landowners be reimbursed if the tax on rent goes up.

We don't advocate compensation when income or sales taxes increase, so why land rent?

A difference: rent is capitalized into asset value.

A similar issue with slaves.

When slaves are liberated, should the slaveowners be paid?

US did not; Britain did.

How about compensating the slaves?

If someone bought land just before the tax on rent was increased, he would lose asset value.

George argued against compensation.

If the implementation is gradual, including the time before implementation when the movement is gaining support, the loss of land value will be gradual and not disruptive.

If the implementation is quick, then it could be politically advantageous to provide some compensation.

Taiwan did it with bonds.

Compensation should only be on the net loss. Most people would gain.

Much of commercial land is owned by corporation, and their loss of rent would be offset by untaxing corporate income and dividends.

For those with net losses, the government could issue consols, perpetual bonds.

The interest would also be paid in consols.

The consols would be purchased by the government with budget surpluses.

So there would be no burden during the transition period.

22 Changes wrought in economic and social life.

p. 184, 185

effect on the labor market: 187

Government would become greatly simplified.

Not just tax collection, but also less welfare expense, if any.

The elimination of all subsidies.

23 the master motive of human action

Adam Smith, two books, two aspects of human nature: self-interest and sympathy with others.

Is self-interest the strongest human motive, or is sympathy greater?

Many think greed or self-interest is stronger, and that we need fear of punishment to keep people in line.

Some parents raise their children using punishment and fear for discipline.

The other approach is instilling goodwill, love, and sympathy.

Neoclassical economists usually assume self-interest in their economic theory.

George says the strongest motivation is not self-interest.

Self-interest is indeed a strong motivation, but it is short-sighted to think that it dominates human action

p. 192-3

Consider the protestors at the meetings of the WTO and IMF.

Consider a dinner party, 194

When people are hungry, everything changes: 194, 195

A society that has extirpated poverty and where workers are secure in their employment will be like the dinner party rather than a greedy dog-eat-dog world where people are poor and insecure.

24 The law of human progress

The improvement in living standards comes from the desire of each person to advance his own wealth and happiness.

How can society as a whole advance the fastest?

Many civilizations advanced and then stagnated and collapsed: Egypt, Rome, Mayans, African empires, Arabs, Turks, Mongols, ancient Israel, China.

There must be some general cause and effect, something that causes civilizations to decay.

Usually it has been gross inequalities in power and wealth, having to do with land tenure and taxation.

Great estates ruined ancient Italy.

HG's law of human progress: association in equality.

Not total equality of wealth, but equality of natural opportunities.

25 How modern civilization may decline.

Forms are nothing when the substance has gone.

A decayed democracy can keep the forms and lose the substance, when elections become corrupt or fraudulent.

In a corrupt democracy, the worse float to the top.

A corrupt government eventually corrupts the people.

George asks, whence shall come the new barbarians?

He says, the transformation of popular government into despotism of the vilest and most degrading kind,

that results from economic inequality,

is not a thing of the far future.

Strong, unscrupulous men will rise up and become the exponents of fierce popular passions, and dash aside forms that have lost their vitality.

Was George exaggerating? Did this happen?

Why the German Republic Fell

by Bruno Heilig

George: how civilization may decline.

German Empire unified 1870s.

Had colonies, large size, resources.

After WWI, reparations, inflation

1923, recovery, gold mark.

A democratic republic.

Then democracy and liberty were thrown away. How did it happen?

Afer 1923, business revived.

Industry had been idle during the inflation period.

Now also a huge demand for housing and bildings.

A huge investment boom.

We have learned that much of the gains of a boom go to rent.

In Germany, rent and the price of land soared. Land prices rose by several hundred percent.

Land speculators also benefited from a law that removed 3/4 of the value of mortgages.

When cities bought land, they had to pay not just the current price but what the site would likely be worth after the city had build improvements.

Half the agricultural land was owned by the old nobility, the Junkers.

Besides benefitting from rising land values, the estate owners got farm subsidies.

High tariffs made building materials expensive too.

The old landowners did not like the republic but accommodated themselves to the new political structure.

They controlled the newspapers.

Propaganda swayed public opinion into believing that the interests of the landowners were the interests of the nation.

The Rhur industralists did not like Nazidom but used it to destroy the republic.

The Nazi party was financed by the industrialists and the Junkers.

The landlords bought Nazidom with the the money they received in rent.

The state provided its enemies with the means needed by its enemies for its destruction.

Some observers warned that there would be disastrous consequences, but often they did not fully understand the reasons.

With high rents and taxes, workers pressed for higher wages.

Employers replaced workers with automation, capital goods.

Unemployment rose.

Demand for goods fell.

By 1931, the economy was in a crisis.

Workers were laid off in mass.

Bankruptcies rose.

Speculative land values absorbed much of the gain, leaving workers and enterprise with little.

Merchantgs and industrialists could not pay back their loans and interest.

The banking system broke down.

The Chancellor declared a reduction in wages rates.

But several million Germans were unemployed, 1/3 the labor force.

Progress degenerated into poverty.

The Nazi party made lavish promises.

The members in the Reichstag rose dramatically. Communists were also elected.

In January 1933, Hitler was appointed the Reichskanzler.

It was very much as George predicted: economic injustice leading to a depression,

and then the people falling under the sway of demagogues who took power.

The worst rising to the top.

Civilization really did collapse.

So too in Russia.

It's a story that will repeat over and over until we learn the lesson.
Progress and Poverty, cont.

26 The call of liberty

The equality of political rights will not compensate for the denial of economic justice.

p 227

"liberty" on our coins and speeches, but do we really mean it?

With liberty, we get not just economic prosperity, but the flourishing of art and science.

p. 229: on liberty.

27 Conclusion

Political economy, properly understood, is radiant with hope.

Compassion, competence, and conscience.