Henry George believed the single-tax would solve two problems. It would end the poverty caused by rising rents by returning these rents to workers. And the single-tax would help end corruption in government by (1) making government more simple and transparent, and (2) create revenue for programs to improve civic virtue. Once improved, workers will want to be good citizens, and government will have become simple enough to make government by the average man possible.

Like the Founders, Henry George hated power and wanted to tame it. He distrusted parties and political conflict. He wanted government to operate as smoothly and automatically as free markets. When markets fail, as in monopoly or harmful speculation, government must devise a corrective, such as the single-tax. The single-tax also tames government by making it so simple that the ordinary man can understand it.

Progressives have always hated politics. They prefer administrative solutions. New rules that make everyone honest. They do not like the idea of progress as a perpetual and uphill battle of ordinary men struggling to make politics serve the common good.

Karl Marx is remembered in spite of Das Kapital. Certainly few have actually bothered to read that turbid book. On the other hand, millions of Americans, and perhaps as many Europeans, have read Henry George's lively and clear Progress and Poverty and have found it exciting and informative. The book explained why things go wrong in modern society, and how to fix these problems in a simple way. The book gave the reader hope. Progress and Poverty was hands down the most popular book on economics ever written. Yet today the book gathers dust in libraries, and few know the name of Henry George.

This essay tries to brush off some of that dust. Henry George's ideas for tax reform still inspire city planners and specialists in finance.[i] A deeper relevance is Henry George's approach to reform. It is distinctly Progressive. It is reform that avoids the messy business of politics: getting voters to polls, making deals, and compromises. Not only is politics messy, there is never a guarantee of success. And it tends to corrupt even the reformer.

Revisiting Henry George reminds us of the progressive impulse to tame politics. To purge from it all power, leaving only good rules and good intentions.

Henry George was greatly troubled by a glaring fact. The more productive a capitalist economy, the more one finds opulence alongside poverty. Adding many paupers is the price of a single millionaire. Why is this so?

The Social Darwinists had an answer. As society advances, it is nature's way for the strong to dominate and trample on the weak.[ii] Henry George thought this was nonsense. Social Darwinism was a feeble attempt to mask privilege. The differences between men are more the result of environment than genetic endowment.[iii]

The Malthusian doctrine was another effort to blame the poor for their own plight. The doctrine claims that the poor are poor because they cannot control their sexual passions and regulate their numbers. The cause of low wages is simply too many workers. The wage-fund theory made this obvious.

The idea of the wage-fund is this. Capitalists must set aside a certain amount of capital, the wage-fund. They use this to advance money to laborers to start the productive process. The fund is a fixed amount. If you increase the number of workers, the share of the fund that goes to each worker must necessarily shrink. In simple words, wages fall. Because of the incessant breeding of a working-class, wages must continually fall and eventually settle at the subsistence level. It is the workers' fault they are poor. The capitalists are exonerated.[iv]

Henry George thought this was the same sort of bunk as Social Darwinism. It was another feeble attempt to mask privilege. For one thing, the wage-fund is a myth. Workers aren't paid before they work. They are paid after they produce, after they have generated the money from which they are paid. They don't need a wage-fund. They create their own wages.[v]

The Malthusians were also confused about excess workers. Additional workers can actually increase wealth. The more workers there are, the easier it is to use the economies of scale and to deepen the division of labor. This increases productivity. Instead of impoverishing society, population growth can increase national wealth, not only in the aggregate but per-capita.[vi]

Yet, if this is true, why is there a constant decline in wages rather than an increase?[vii] The answer was not Malthusian over-breeding. Henry George believed the culprit was rent.

By rent Henry George meant something different than a fee for use. Rent has an economic meaning that goes back to David Ricardo. Imagine two plots of equal size. Plot X has normal fertility and grows 50 bushels of wheat. Plot Y is super fertile and grows 55 bushels. The lease on plot X is $50. The lease on Plot Y is $55. The extra five dollars is for the greater fertility of lot Y. The five dollars is the lot's rent, the amount charged for above average fertility.

There are three factors of production - land, labor, and capital. Of the three, only land is a constant quantity, the only factor whose supply is inelastic. This inelasticity affects the distribution of income. The national income is the sum of the incomes earned by the three factors of production. Interest is the income of capital (money, assets, etc.). Wages is the income of workers. And rent is the income of landowners, the money paid for above-average fertility.[viii]

The relative share of national income that goes to each kind of income is set by the supply and demand for the three factors of production (land, labor, capital). Because the supply of land is fixed, land's share of national income (rent) can increase much faster than wages or interest income. In a growing economy, the best land is quickly bought into production. Then inferior grades are added. The use of marginal (inferior) land increases the value of supra-marginal (high grade) land. Owners can charge more for its use. Rents have suddenly gone up.

It is inevitable that as economic growth increases, ever worse grades of soil are used. The standard for marginal is lowered to a new level. The old marginal soil gets an upgrade to supra-marginal. Its rent is also upgraded. And the rent for prime land reaches a new high. (See Figure 1)

Figure 1

As rent rises, there is less of the national income left over for wages and profits. Society is more productive than ever, yet the income of capitalists and workers steadily decline.

To this point, Henry George has mainly restated Ricardo's theory of rent and its effect on the distribution of national income. But George has his own views too. Ricardo was a Malthusian. He thought a growing population was the ultimate cause of increased rents. More population means more demand for food. To satisfy that demand, additional marginal land is cultivated. Rent grows, gobbling up national income. Eventually, wages fall to subsistence level and the interest on capital falls to zero. At this juncture, there is no point in investment. The economy stops growing and stays frozen in neutral forever.

Henry George agreed with Ricardo that increasing demand for land drives up rent. But George denied that population growth is the only factor that increases demand for land. Land is used for more than farming. It is also used for factories, and shops, and dwellings in the city. And it turns out that as the economy progresses, city land become more valuable than rural land. And urban rents rise even faster than the rent on farmland.[ix]

Another thing Ricardo failed to note is the effect of speculation. It can dramatically drive up rent. Nor was Ricardo able to imagine how productive labor might become one day. Even if population does expand rapidly, workers might become so productive that the economy can afford both higher rent and higher wages. It is not an iron law that as the economy grows, rents must rise and wages fall to subsistence. It is especially important to put a damper on land speculation.

Rising rent encourages speculation. Betting that rent will rise even higher in the future, speculators buy land cheap and hold it until rent rises, and then sell the land dear. Speculators don't work the land. It lies idle while it appreciates. With less land available, sub-marginal land is used earlier than would occur in the absence of speculation. Ironically, the act of speculation makes speculation profitable. Which encourages more speculation, driving up rent.

This has two bad effects. First, by idling supra-marginal land, sub-marginal land is used before necessary, reducing productivity. Second, because speculation artificially increases rent, it prematurely reduces the share of national income that goes to interest and wages. If it were not for land speculation, economic rent might not rise so quickly, even with an expanding population.[x]

Finally, population growth need not lead to the calamities predicted by Ricardo. As we have seen population growth can increase productivity. It permits economies of scale and a complex and minute division of labor, increasing productivity. This can occur at a pace much quicker than the move to sub-marginal land. Wages could then increase faster than rent. At extreme levels of productivity, output might be so high that there can be both higher rent and higher wages.

This should happen, but doesn't. And the cause is speculation. Speculation forces the use of marginal land before necessary, which reduces productivity and artificially increases rent. But if we reduce or eliminate land speculation, wages and population can grow together, and interest will not fall to zero. The economy can hum instead of stagnate.[xi]

Not only was Ricardo wrong about the cause of rent. He also offered the wrong remedy. Ricardo's solution was free-trade in grain so food prices could be held down, removing the stimulus to increase rent.

George saw this was only a stopgap measure. As world population increased, there would be the pressure across the globe to cultivate all the best land. Next, sub-marginal land would be used. Grain prices would rise. And rent would resume its upward spiral. In the end, Ricardo had no real solution to the rent problem. He did not know how to stop once and for all economic stagnation and the impoverishment of workers. He could only delay it.

Henry George believed he could end stagnation and impoverishment permanently. His solution was to tax land for the full amount of its rent. If all rent were taxed away by the state, there would be no incentive to speculate. The speculator would have to pay taxes on land held idle, and the tax would rise as the land's rent value increased over time. The speculator will be forced to sell his land to someone who would put it to use. This would put better land into production and increase productivity.

George had a plan for the tax revenue. He would give it to the workers. After all, rent is unearned income. Only labor produces value. If anyone should get the rent, it should be the workers. For only those who labor deserve income.

Henry George's tax on land came to be known as the single-tax. George meant for his land tax to replace all other taxation. George's land tax is used in parts of Australia and several other countries even today, and some economists still see merit in the tax for promoting better land use in urban areas.

George's plan for the tax revenue was as radical as the tax itself. He wanted it to go to the workers. But not directly as a negative tax, or as a Christmas bonus from the government.

He wanted the tax money to be used for public goods: schools, libraries, parks, and the like. It seems an odd way to solve the problem of decreasing wages. But wages would be increased by the tax. By ending speculation, it would lower rent and leave more of the national income for wages. Second, since the single-tax would replace all other taxes, workers would have more after-tax income. But the main reason George did not want to return the revenue of the single-tax directly to workers is that he believed quality of life is as important as higher wages. With more parks, libraries, and better schools, the life of workers would improve. There would be progress without poverty.

Henry George was ambivalent about government. The pessimistic George thought of politics as an unnatural way for humans to relate. Politics perverts human relationships. We behave more naturally as economic or social beings. Government is built on these more basic forms of human interaction. At its best, the most government can do is fulfill the promise of our social and economic relations. At its worst, government will manifest the worst elements of these relations.[xii]

When Henry George thought of reform he often thought first and foremost of changing what was more fundamental than politics „ our social and economic relations. He believed if you reform these things, government will automatically adjust.

George was wary about tinkering directly with government. Political changes were almost always for the worse. It was because government power was most used as a tool to reward the privileged. This was to be expected. Capitalism encourages selfish thinking. Even workers learn to think only of their selfish interest. They can't be trusted any more than a CEO or land speculator to do the right thing. Yet America is a democracy. And democracy only works when the average voter has a sense of the public interest. This makes a capitalist democracy a contradiction. Democracy teaches us to think large, to embrace more than our own selfish narrow interests. Capitalism makes us think small, to rivet on the selfish and narrow.[xiii]

But that is the pessimistic Henry George. The optimistic George had a use for government. He understood the pathologies of modern capitalism - the drift to toward concentration and monopoly and the abuses that accompany them. Free markets are not an automatic corrective. Government will have to step in to control these excesses.[xiv] And government will have to provide the public goods that markets will never produce (public schools, fire, police, army, navy, utilities, water systems, interstate highways, bridges, dams etc.). If society is to be civilized it must have parks, educational and recreational facilities, and many other things to make life more humane and less a single-minded striving after material wealth. George believed that it is only with a liberal dose of public goods that average men overcome their selfish and narrow views and develop a concern for the public interest.[xv]

As much as George mistrusted government, he was absolutely certain that free markets do not take of themselves. There must be regulation and the provision of public goods. George hoped that these same public goods, especially public education, might enlarge the views of ordinary men so they could be trusted with the power of government. That in the equation of capitalism and Democracy, greater weight would be given to democracy and the public good.

Which brings us to the larger issue of what is really important. Henry George did not approve of the drift of modern economics. There was a growing tendency to substitute the economist's notion of marginal utility for the traditional idea of self-interest. Economic value is simply making a dollar go as far as possible. But the value of something is not what it costs, or how cheaply it can be bought. It is whether it satisfies basic human needs. A buyer may bargain hard and come home with a full basket. But if a basket full of trinkets satisfies only fleeting preferences instead of deep and abiding needs, it is not much of a deal.[xvi]

Humans have a built-in defect. Animals desire only what they need. Humans are able to create artificial desires. We really need food and shelter. Yet we learn to want status and luxury, or whatever is the hot item of the moment. Part of becoming fully human is to acquire the wisdom to sift through the heap of our desires and separate the wheat from the chaff. The market is no help. In fact, it is the principal cause of endlessly piling one heap of chaff onto another, burying us in trinkets and baubles.[xvii] The distinction between a real need and a mere preference is irreconcilable.[xviii] Nor do we escape the trinket trap by adding our neighbors' baubles to the pile. The public interest is not the aggregate preferences of individuals. Trinkets are still trinkets, no matter how much they are multiplied.

The ultimate economic worth of a trinket is in the end the amount of labor needed to make it.[xix] This is as objective as the value of a preference can get. Mark had latched onto this idea to squeeze a few drips of moral truth out of muck of free markets. Mark made labor the touchstone of all value, making the workers, since only they labor, the true sovereigns of the economy and society. Henry George did not take this path. He did not see labor as the touchstone of value and morality.

For Henry George the touchstone of morality is morality itself. Ethics is the ultimate standard and economics is never enlightened if it does not conform to the demands of ethics.[xx] The essential point is that economics cannot go off in any direction it likes and place its wares at the disposal of those who are willing to pay the highest price for its use. Economics must not be like the markets it studies, for sale to the highest bidder. If economics can be used for ends that work against the common good, then it is a faulty economics. Economics must be shot through with a concern for objective values. This is why George cannot rest satisfied with the Ricardian analysis of rent. It abandons society to a state of progress with poverty, where justice is denied to those who toil and receive little reward for their labor. Where those who do not work receive the rewards of labor without the slightest effort. If economic analysis cannot point a way to get out of this intolerable impasse, then it has failed in its job.

There is much in Henry George's writings that strikes a responsive chord. George is certainly correct that wealth is always the result of applying labor (physical and mental) to the substance of nature. Economic growth has raised per capita wealth to dizzying heights. We have the form of government and social organization to redistribute this wealth, if we wish. This would bring relative abundance to all. If this is in our power, why haven't we made it happen? Poverty still plagues us. So far, academic economic analysis has not shown a way out of the enigma of poverty amidst plenty. This is why George did not budge on the priority of objective values in economic analysis. Ethics has precedence over economics. This is simply a fact, not an argument. In the sense, there is nothing utopian at all about George's view. He only asks that we consult the moral ideals we already possess, and ask the economy to measure up wherever that is possible. This is a remarkably pedestrian view. And really more conservative than utopian.

So economic analysis must begin with and ultimately serve ethical ends. At times it may even be necessary to use government to regulate the economy. It is obvious that only government has the power to correct the abuses of monopoly capitalism. Still, power tends to corrupt, and the power of democratic government is no exception. Yet George believed his single-tax plan was the exception. It could transform the nature of government so that it would no longer pose a threat to freedom or the public good.

George believed two things could check the tendency of government to become corrupted by special interests. First, citizens must care about the public interest. Second, they must be able to understand what is in the public interest. George admitted that the average citizen of his day failed on both counts. American society had grown progressively unconcerned with the public interest. And government had become so complex that it seemed beyond the understanding of the average man. Neither developments boded well for democracy.

George did not give up hope. He thought if poverty could be eliminated and education improved, ordinary citizens might rediscover the public good and develop a sense of public duty to pursue it. What gave George hope was his belief that it is the struggle for survival that pits neighbor against neighbor. It is not because man is inherently selfish. It is the contest, the struggle, that narrows his views, prevents him from cultivating a sense of duty to the public interest.[xxi]

The inequality of wealth also narrows our focus. It makes the many dependent on the the will of the powerful and wealthy few. Ironically, the average man is made to cooperate in his own domination by a corrupt government.[xxii] This is why political reform is so difficult. Why the American public seems unconcerned with the well-being of n society. The obvious solution to this problem is to reduce the inequality in wealth. To remove the terror of want and pauperism from the life of the ordinary man. Remove inequality in wealth and you reduce the dependence of the many on the few. Eliminate the fear of want and the gaze of the average man will rise from his own needs to the greater good of the needs of society.

Yet even if ordinary men suddenly cared about the greater good, how would they know how to get it? They must first understand government, how it works, all of its complexities, before they can make politics work for the common good. For this reason it is imperative that government be streamlined and simplified. Then ordinary men can understand how it works. And ordinary citizens can play a role in politics, and do so intelligently.[xxiii]

Henry George believed the single-tax was the key to making these reforms possible. First of all, the tax on rent would eliminate unearned income. Every man would have to labor to survive. This would rapidly equalize fortunes and make men less dependent on the will of others.[xxiv] Second, if the revenue from the single-tax were used as a fund for social improvement - for parks, libraries, schools, and the many public goods that make for the good life -people would not need wealth to live well.[xxv] Third, the work of government at the state and local level is mainly law enforcement. The police, courts, and jails are expensive. The more crime, the more expensive. George believed, like progressives generally, that the principal causes of crime are poverty and ignorance.[xxvi] Revenue from the single-tax would reduce poverty and fund education. In other words, it would eliminate the causes of crime. We would need fewer police, courts, lawyers and prisons. Once the traditional business of the state, it would become small and easily manageable. We would need fewer experts and could rely on the judgment of average citizens. Finally, since the single-tax is so easy to understand, and property values difficult to hide, there would be very little wiggle room in the tax system for corruption.[xxvii]

The result of the single-tax is that the coercive machinery of the government will be greatly diminished. Government will be simplified and streamlined. And the primary focus will become the well-being of the public. The single-tax reduces obscene inequalities in wealth. It makes democratic government possible. And with more money for schools, parks, and libraries the single-tax enlarges the general welfare. It moves the economy in the direction of the good society. And all because of the single-tax.

There is a lesson here. George is eager for us to understand what it teaches. There would have been no single-tax if George had not penetrated the mysteries of RENT. Rent explained why poverty accompanies progress. Ethics told George that only labor deserves reward. This insight pointed the way to the solution. Tax away Rent and return the unearned income to the deserving workers. Next, the democratic ideal inspired George to do more. Instead of putting single-tax revenue into workers' pockets, he realized it should be used to improve citizens. To prepare them to do their duty as citizens „ become involved in politics and run the country. The thinking that led to the single-tax gives us a clear model for relevant economic analysis. It is the union of economic theory and ethics.

The single-tax presents a bold vision. Government will become less coercive. There will be a new image of government. In the place of the policeman wielding a nightstick, we will substitute the librarian, park ranger, and teacher. When George thought of corruption, he thought of the coercive side government. With the coercive side of government reduced, George believed corruption would naturally wither away. The power of government would no longer be oppressive. Instead it would empower and nurture.

Is this true? Would corruption really disappear?

George thought it must. The single-tax will simplify government so that ordinary citizens can run things. And because of education, they will be good citizens. What could go wrong?

What George failed to realize is that his reforms would make government more complex. Citizens will have to decide where to put the new parks and libraries. Where to build the schools. Ordinary citizens will have to decide who will staff these new institutions, and how much will they be paid. Who will have authority over the libraries, schools, and parks? Local government? State government? Federal government? Shouldn't we worry about monopoly if authority is concentrated in one body? Under his reforms, George would have government operate, or at least regulate the railroads, postal system, public highways, gas and water works, etc. Does this not provide more room than ever for corruption and the abuse of power? George preferred the power of the state to be mainly lodged in local government. It was closer to the people. And small enough so that ordinary citizens could participate and manage.[xxviii] But local government is too feeble to take on monopolies. It's also lacks jurisdiction. Not only for monopolies, but for interstate commerce, the rails and highways.

The more one tugs and pulls at George's transformation of government to cities and counties building schools, making parks, and erecting libraries the more it comes apart at the seams. George desperately wanted to replace corrupt politics with something simple and pure. With a government that could be run with only minimal understanding. With government that thought only of the public good. Where there would be no parties, no politics, no compromises with the public interest.

What George longed for is what John Rawls called "perfect procedural justice." It is where we are perfectly clear about what we want to achieve. And we are able to design some arrangement or institution that automatically produces this end.[xxix]

George admired free markets. They worked automatically. People bought and sold, sending signals throughout the economy. Seamlessly, capital and labor were shuttled to areas of high demand. When markets failed, George wanted government to step in. The ideal was for government to perform this service with the efficiency of free markets, when they work. Somehow government should regulate itself, automatically and without the use of power.

For Henry George, ideal national government is an administrative state. Bureaucrats follow rules. A watchful public keeps them in check. Below, there is vigorous local government. Citizens participate more or less directly. There are no parties or political organizations, or the clash of group interests. National government is above politics because it is filling out forms and filing reports, and always following rules. Real politics is local. And it is the idyll of Jeffersonian democracy.[xxx]

This is the progressive ideal of politics. Progressives fear power in the abstract. They want politics without power. They believe this can happen if, wherever possible, free markets replace government. And when it cannot, politics is local and close to the people. National government is distant from the people. It is powerful and corrupt. Somehow it must be tamed, either with free markets, or localizing its functions.[xxxi]

The Founders of our republic were the first progressives. They believed constitutional government could mute politics, prevent excesses and factions, and lead to more or less automatic results that serve the national interest. Later, after the creation of free market ideology, progressives sought ways to substitute markets for politics. Henry George played with these themes and gave them new clothing. The story is the same. To avoid power and conflict, trust to other devices for conducting society's affairs. The sad fact is that power pops up everywhere and is exercised without accountability because it is passed off as something else, as economics, as administration and managerial expertise. Yet, it is still power, and affects the public interest, even if we do not want to call it by its real name.