Supply Side University Lesson #7
Memo: To SSU Students
From: Jude Wanniski
Re: Henry George, Guest Lecturer
We have spent so much time on monetary issues this semester, I thought we might take a break with a guest lecture from the celebrated American political economist of the late 19th century, Henry George. When his name appears in college courses on economics, it is generally with one slight reference to his proposal for a "single tax," without much about the broader fabric of his thought. His best known book, Progress and Poverty, was one of the best-selling non-fiction books in America when first published in the 1880s, roughly the era in which the "American system" of profits via risk-taking was taking root. I may be I the only person still left on earth who has read another of his books, Social Problems, but that may be because I identify with his approach to political economics. In this selection, all of Chapter VIII, he writes about the gap between rich and poor, and why there need be no poverty, in ways I've been suggesting long before I stumbled upon this volume at a library book sale. We have in recent years been hearing from liberal Democrats about the wide gap in incomes between rich and poor. I've recently read the interesting approach to this topic Created Unequally by Jamie Galbraith, son of John Kenneth (who celebrated his 90th birthday last week). I of course have disagreements here and there with the economics of Henry George, but surprisingly few, considering a hundred years have passed since this book was published. It occurs to me that you may be able to get a better understanding of some of my lectures by seeing them developed by an unusually fertile mind of a century past. (I expect to be drawing from other Henry George writings for future guest lectures.)
Social Problems by Henry George (First copyright, 1883, New York)
CHAPTER VIII: THAT WE ALL MIGHT BE RICH
THE terms rich and poor are of course frequently used in a relative sense. Among Irish peasants, kept on the verge of starvation by the tribute wrung from them to maintain the luxury of absentee landlords in London or Paris, "the woman of three cows" will be looked on as rich, while in the society of millionaires a man with only $500,000 will be regarded as poor. Now, we cannot, of course, all be rich in the sense of having more than others; but when people say, as they so often do, that we cannot all be rich, or when they say that we must always have the poor with us, they do not use the words in this comparative sense. They mean by the rich those who have enough, or more than enough, wealth 1 to gratify all reasonable wants, and by the poor those who have not.
Now, using the words in this sense, I join issue with those who say that we cannot all be rich; with those who declare that in human society the poor must always exist. I do not, of course, mean that we all might have an array of servants; that we all might outshine each other in dress, in equipage, in the lavishness of our balls or dinners, in the magnificence of our houses. That would be a contradiction in terms. What I mean is, that we all might have leisure, comfort and abundance, not merely of the necessaries, but even of what are now esteemed the elegancies and luxuries of life. I do not mean to say that absolute equality could be had, or would be desirable. I do not mean to say that we could all have, or would want, the same quantity of all the different forms of wealth. But I do mean to say that we might all have enough wealth to satisfy reasonable desires; that we might all have so much of the material things we now struggle for, that no one would want to rob or swindle his neighbor; that no one would worry all day, or lie awake at nights, fearing he might be brought to poverty, or thinking how he might acquire wealth.
Does this seem an Utopian dream? What would people of fifty years ago have thought of one who would have told them that it was possible to sew by steam-power; to cross the Atlantic in six days, or the continent in three; to have a message sent from London at noon delivered in Boston three hours before noon; to hear in New York the voice of a man talking in Chicago?
Did you ever see a pail of swill given to a pen of hungry hogs? That is human society as it is. Did you ever see a company of well-bred men and women sitting down to a good dinner, without scrambling, or jostling, or gluttony, each, knowing that his own appetite will be satisfied, deferring to and helping the others? That is human society as it might be.
"Devil catch the hindmost" is the motto of our so-called civilized society to-day. We learn early to "take care of No. 1," lest No. 1 should suffer; we learn early to grasp from others that we may not want ourselves. The fear of poverty makes us admire great wealth; and so habits of greed are formed, and we behold the pitiable spectacle of men who have already more than they can by any possibility use, toiling, striving, grasping to add to their store up to the very verge of the grave -- that grave which, whatever else it may mean, does certainly mean the parting with all earthly possessions however great they be.
In vain, in gorgeous churches, on the appointed Sunday, is the parable of Dives and Lazarus read. What can it mean in churches where Dives would be welcomed and Lazarus shown the door? In vain may the preacher preach of the vanity of riches, while poverty engulfs the hindmost. But the mad struggle would cease when the fear of poverty had vanished. Then, and not till then, will a truly Christian civilization become possible. And may not this be?
We are so accustomed to poverty that even in the most advanced countries we regard it as the natural lot of the great masses of the people; that we take it as a matter of course that even in our highest civilization large classes should want the necessaries of healthful life, and the vast majority should only get a poor and pinched living by the hardest toil. There are professors of political economy who teach that this condition of things is the result of social laws of which it is idle to complain! There are ministers of religion who preach that this is the condition which an all-wise, all-powerful Creator intended for his children! If an architect were to build a theater so that not more than one-tenth of the audience could see and hear, we would call him a bungler and a botch. If a man were to give a feast and provide so little food that nine-tenths of his guests must go away hungry, we would call him a fool, or worse. Yet so accustomed are we to poverty, that even the preachers of what passes for Christianity tell us that the great Architect of the Universe, to whose infinite skill all nature testifies, has made such a botch job of this world that the vast majority of the human creatures whom he has called into it are condemned by the conditions he has imposed to want, suffering, and brutalizing toil that gives no opportunity for the development of mental powers — must pass their lives in a hard struggle to merely live!
Yet who can look about him without seeing that to whatever cause poverty may be due, it is not due to the niggardliness of nature; without seeing that it is blindness or blasphemy to assume that the Creator has condemned the masses of men to hard toil for a bare living?
If some men have not enough to live decently, do not others have far more than they really need? If there is not wealth sufficient to go around, giving every one abundance, is it because we have reached the limit of the production of wealth? Is our land all in use ? is our labor all employed? is our capital all utilized? On the contrary, in whatever direction we look we see the most stupendous waste of productive forces — of productive forces so potent that were they permitted to play freely the production of wealth would be so enormous that there would be more than a sufficiency for all. What branch of production is there in which the limit of production has been reached? What single article of wealth is there of which we might not produce enormously more?
If the mass of the population of New York are jammed into the fever-breeding rooms of tenement-houses, it is not because there are not vacant lots enough in and around New York to give each family space for a separate home. If settlers are going into Montana and Dakota and Manitoba, it is not because there are not vast areas of untilled land much nearer the centers of population. If farmers are paying one-fourth, one-third, or even one-half their crops for the privilege of getting land to cultivate, it is not because there are not, even in our oldest States, great quantities of land which no one is cultivating.
So true is it that poverty does not come from the inability to produce more wealth that from every side we hear that the power to produce is in excess of the ability to find a market; that the constant fear seems to be not that too little, but that too much, will be produced! Do we not maintain a high tariff, and keep at every port a horde of Custom-House officers, for fear the people of other countries will overwhelm us with their goods? Is not a great part of our machinery constantly idle? Are there not, even in what we call good times, an immense number of unemployed men who would gladly be at work producing wealth if they could only get the opportunity? Do we not, even now, hear, from every side, of embarrassment from the very excess of productive power, and of combinations to reduce production? Coal operators band together to limit their output; iron-works have shut down, or are running on half-time; distillers have agreed to limit their production to one-half their capacity, and sugar refiners to sixty per cent; paper-mills are suspending for one, two or three days a week; the gunny-cloth manufacturers, at a recent meeting, agreed to close their mills until the present overstock on the market is greatly reduced; many other manufacturers have done the same thing. The shoemaking machinery of New England can, in six months' full running, it is said, supply the whole demand of the United States for twelve months; the machinery for making rubber goods can turn out twice as much as the market will take.
This seeming glut of production, this seeming excess of productive power, runs through all branches of industry, and is evident all over the civilized world. From black-berries, bananas or apples, to ocean steamships or plateglass mirrors, there is scarcely an article of human comfort or convenience that could not be produced in very much greater quantities than now without lessening the production of anything else.
So evident is this that many people think and talk and write as though the trouble is that there is not work enough to go around. We are in constant fear that other nations may do for us some of the work we might do for ourselves, and, to prevent them, guard ourselves with a tariff. We laud as public benefactors those who, as we say, "furnish employment." We are constantly talking as though this "famishing of employment," this "giving of work," were the greatest boon that could be conferred upon society. To listen to much that is talked and much that is written, one would think that the cause of poverty is that there is not work enough for so many people, and that if the Creator had made the rock harder, the soil less fertile, iron as scarce as gold, and gold as diamonds; or if ships would sink and cities burn down oftener, there would be less poverty, because there would be more work to do.
The Lord Mayor of London tells a deputation of unemployed working-men that there is no demand for their labor, and that the only resource for them is to go to the poorhouse or emigrate. The English government is shipping from Ireland able-bodied men and women to avoid maintaining them as paupers. Even in our own land there are at all times large numbers, and in hard times vast numbers, earnestly seeking work-the opportunity to give labor for the things produced by labor.
Perhaps nothing shows more clearly the enormous forces of production constantly going to waste than the fact that the most prosperous time in all branches of business that this country has known was during the civil war, when we were maintaining great fleets and armies, and millions of our industrial population were engaged in supplying them with wealth for unproductive consumption or for reckless destruction. It is idle to talk about the fictitious prosperity of those "flush" times. The masses of the people lived better, dressed better, found it easier to get a living, and had more luxuries and amusements than in normal times. There was more real, tangible wealth in the North at the close than at the beginning of the war. Nor was it the great issue of paper money, nor the creation of the debt, which caused this posterity. The government presses struck off promises to pay; they could not print ships, cannon, arms, tools, food and clothing. Nor did we borrow these things from other countries or "from posterity." Our bonds did not begin to go to Europe until the close of the war, and the people of one generation can no more borrow from the people of a subsequent generation than we who live on this planet can borrow from the inhabitants of another planet or another solar system. The wealth consumed and destroyed by our fleets and armies came from the then existing stock of wealth. We could have carried on the war without the issue of a single bond, if, when we did not shrink from taking from wife and children their only bread-winner, we had not shrunk from taking the wealth of the rich.
Our armies and fleets were maintained, the enormous unproductive and destructive use of wealth was kept up, by the labor and capital then and there engaged in production. And it was that the demand caused by the war stimulated productive forces into activity that the enormous drain of the war was not only supplied, but that the North grew richer. The waste of labor in marching and countermarching, in digging trenches, throwing up earthworks, and fighting battles, the waste of wealth consumed or destroyed by our armies and fleets, did not amount to as much as the waste constantly going on from unemployed labor and idle or partially used machinery.
It is evident that this enormous waste of productive power is due, not to defects in the laws of nature, but to social maladjustments which deny to labor access to the natural opportunities of labor and rob the laborer of his just reward. Evidently the glut of markets does not really come from over-production when there are so many who want the things which are said to be over-produced, and would gladly exchange their labor for them did they have opportunity. Every day passed in enforced idleness by a laborer who would gladly be at work could he find opportunity, means so much less in the fund which creates the effective demand for other labor; every time wages are screwed down means so much reduction in the purchasing power of the workmen whose incomes are thus reduced. The paralysis which at all times wastes productive power, and which in times of industrial depression causes more loss than a great war, springs from the difficulty which those who would gladly satisfy their wants by their labor find in doing so. It cannot come from any natural limitation, so long as human desires remain unsatisfied, and nature yet offers to man the raw material of wealth. It must come from social maladjustments which permit the monopolization of these natural opportunities, and which rob labor of its fair reward.
What these maladjustments are I shall in subsequent chapters endeavor to show. In this I wish simply to call attention to the fact that productive power in such a state of civilization as ours is sufficient, did we give it play, to so enormously increase the production of wealth as to give abundance to all — to point out that the cause of poverty is not in natural limitations, which we cannot alter, but in inequalities and injustices of distribution entirely within our control.
The passenger who leaves New York on a trans-Atlantic steamer does not fear that the provisions will give out. The men who run these steamers do not send them to sea without provisions enough for all they carry. Did He who made this whirling planet for our sojourn lack the forethought of man? Not so. In soil and sunshine, in vegetable and animal life, in veins of minerals, and in pulsing forces which we are only beginning to use, are capabilities which we cannot exhaust — materials and powers from which human effort, guided by intelligence, may gratify every material want of every human creature. There is in nature no reason for poverty — not even for the poverty of the crippled or the decrepit. For man is by nature a social animal, and the family affections and the social sympathies would, where chronic poverty did not distort and embrute, amply provide for those who could not provide for themselves.
But if we will not use the intelligence with which we have been gifted to adapt social organization to natural laws — if we allow dogs in the manger to monopolize what they cannot use; if we allow strength and cunning to rob honest labor, we must have chronic poverty, and all the social evils it inevitably brings. Under such conditions there would be poverty in paradise.
"The poor ye have always with you." If ever a scripture has been wrested to the devil's service, this is that scripture. How often have these words been distorted from their obvious meaning to soothe conscience into acquiescence in human misery and degradation — to bolster that blasphemy, the very negation and denial of Christ's teachings, that the All-Wise and Most Merciful, the Infinite Father, has decreed that so many of his creatures must be poor in order that others of his creatures to whom he wills the good things of life should enjoy the pleasure and virtue of doling out alms! "The poor ye have always with you," said Christ; but all his teachings supply the limitation, "until the coming of the Kingdom." In that kingdom of God on earth, that kingdom of justice and love for which he taught his followers to strive and pray, there will be no poor. But though the faith and the hope and the striving for this kingdom are of the very essence of Christ's teaching, the stanchest disbelievers and revilers of its possibility are found among those who call themselves Christians. Queer ideas of the Divinity have some of these Christians who hold themselves orthodox and contribute to the conversion of the heathen. A very rich orthodox Christian said to a newspaper reporter, awhile ago, on the completion of a large work out of which he is said to have made millions: "We have been peculiarly favored by Divine Providence; iron never was so cheap before, and labor has been a drug in the market."
That in spite of all our great advances we have yet with us the poor, those who, without fault of their own, cannot get healthful and wholesome conditions of life, is our fault and our shame. Who that looks about him can fail to see that it is only the injustice that denies natural opportunities to labor, and robs the producer of the fruits of his toil, that prevents us all from being rich? Consider the enormous powers of production now going to waste; consider the great number of unproductive consumers maintained at the expense of producers — the rich men and dudes, the worse than useless government officials, the pickpockets, burglars and confidence men; the highly respectable thieves who carry on their operations inside the law; the great army of lawyers; the beggars and paupers, and inmates of prisons; the monopolists and cornerers and gamblers of every kind and grade. Consider how much brains and energy and capital are devoted, not to the production of wealth, but to the grabbing of wealth. Consider the waste caused by competition which does not increase wealth; by laws which restrict production and exchange. Consider how human power is lessened by insufficient food, by unwholesome lodgings, by work done under conditions that produce disease and shorten life. Consider how intemperance and unthrift follow poverty. Consider how the ignorance bred of poverty lessens production, and how the vice bred of poverty causes destruction, and who can doubt that under conditions of social justice all might be rich?
The wealth-producing powers that would be evoked in a social state based on justice, where wealth went to the producers of wealth, and the banishment of poverty had banished the fear and greed and lusts that spring from it, we now can only faintly imagine. Wonderful as have been the discoveries and inventions of this century, it is evident that we have only begun to grasp that dominion which it is given to mind to obtain over matter. Discovery and invention are born of leisure, of material comfort, of freedom. These secured to all, and who shall say to what command over nature man may not attain?
It is not necessary that any one should be condemned to monotonous toil; it is not necessary that any one should lack the wealth and the leisure which permit the development of the faculties that raise man above the animal. Mind, not muscle, is the motor of progress, the force which compels nature and produces wealth. In turning men into machines we are wasting the highest powers. Already in our society there is a favored class who need take no thought for the morrow — what they shall eat, or what they shall drink, or wherewithal they shall be clothed. And may it not be that Christ was more than a dreamer when he told his disciples that in that kingdom of justice for which he taught them to work and pray this might be the condition of all?
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What I'd like you to take away from this reading is the sense of promise in the world a century ago, after an extended period of non-inflationary growth that followed the Napoleonic wars. Also remember that Henry George wrote this from San Francisco in the boom years that followed our return to the gold standard in 1879. The monetary deflation was behind us, the future seemed limitless, to a point where serious minds might begin contemplating a world without want. Then came the wars and depressions of the 20th century.