Progress and Poverty Progress and Poverty Why there are recessions and poverty amid plenty — and what to do about it! Henry George Edited and abridged for modern readers by Bob Drake Robert Schalkenbach Foundation Henry George Progress and Poverty Why there are recessions, and poverty amid plenty — and what to do about it! Edited and abridged for modern readers by Bob Drake Book and cover design by Lindy Davies ISBN 0-911312-98-6 Library of Congress Control Number: 2006928337 First Edition Copyright © 2006 by the Robert Schalkenbach Foundation 149 Madison Avenue, Suite 601 New York NY 10016 Contents Publisher’s Foreword by Cliff Cobb IX Editor’s Preface by Bob Drake XII Author’s Preface to the Fourth Edition XV Introduction: The Problem of Poverty Amid Progress 1 First Part: Wages and Capital 1. Why Traditional Theories of Wages are Wrong 8 2. Defining Terms 17 3. Wages Are Produced By Labor, Not Drawn From Capital 28 4. Workers Not Supported By Capital 41 5. The True Functions of Capital 46 Second Part: Population and Subsistence 6. The Theory of Population According to Malthus 51 7. Malthus vs. Facts 57 8. Malthus vs. Analogies 69 9. Malthusian Theory Disproved 75 Third Part: The Laws of Distribution 10. Necessary Relation of the Laws of Distribution 83 11. The Law Of Rent 89 12. The Cause of Interest 95 13. False Interest 102 14. The Law Of Interest 106 15. The Law Of Wages 111 16. Correlating The Laws of Distribution 120 17. The Problem Explained 123 Fourth Part: The Effect of Material Progress on the Distribution of Wealth 18. Dynamic Forces Not Yet Explored 126 19. Population Growth and Distribution of Wealth 128 20. Technology and the Distribution of Wealth 137 21. Speculation 142 Fifth Part: The Problem Solved 22. The Root Cause of Recessions 145 23. The Persistence of Poverty Despite Increasing Wealth 155 Sixth Part: The Remedy 24. Ineffective Remedies 165 25. The True Remedy 180 Seventh Part: Justice of the Remedy 26. The Injustice of Private Property In Land 182 27. The Enslavement of Labor 192 28. Are Landowners Entitled to Compensation? 198 29. History of Land as Private Property 203 30. History of Property in Land in the US 211 Eighth Part: Application of the Remedy 31. Private Property in Land is Inconsistent with the Best Use of Land 219 32. Securing Equal Rights To Land 223 33. The Canons of Taxation 226 34. Endorsements And Objections 236 Ninth Part: Effects of the Remedy 35. The Effect on Production 242 36. The Effect on The Distribution of Wealth 246 37. The Effect on Individuals and Classes 250 38. Changes in Society 254 Tenth Part: The Law of Human Progress 39. The Cause of Human Progress 263 40. Differences in Civilizations 270 41. The Law of Human Progress 275 42. How Modern Civilization May Decline 287 43. The Central Truth 295 44. Conclusion: The Individual Life 300 Afterword: Who Was Henry George? by Agnes George de Mille 304 Index 311 Publisher’s Foreword  IX Publisher’s Foreword WE OWE Bob Drake a debt of gratitude for this meticu- lous condensation and modernization of Henry George’s great work. The original version had an elegance that evoked a passion for social justice among millions of read- ers in the nineteenth and early twentieth centuries. How- ever, by the beginning of the twenty-first century, George’s complex prose stood in the way of that intention for large numbers of people. Now his ideas can once again be widely accessible. What were those ideas and why are they still impor- tant today? When Progress and Poverty was published in 1879, it was aimed in part at discrediting Social Darwin- ism, the idea that “survival of the fittest” should serve as a social philosophy. That ideology, developed by Herbert Spencer, William Graham Sumner, and others, provided the intellectual basis for 1) American imperialism against Mexico and the Philippines, 2) tax policies designed to reduce burdens on the rich by shifting them onto the poor and middle class, 3) the ascendancy of the concept of ab- solute property rights, unmitigated by any social claims on property, 4) welfare programs that treat the poor as failures and misfits, 5) racial segregation in education and housing, and 6) eugenics programs to promote the “supe- rior” race. The intellectual defense of racism is in abey- ance, but the economic and political instruments of domination have changed little. The renewed defense of X  Progress and Poverty taxing wages and consumer goods rather than property holdings, expanded intellectual property rights, and vast imperial ambitions are indications that Social Darwinism is back in full force. The revival of Social Darwinism continues to justify social disparities on the basis of natural superiority or fitness. Progress and Poverty, by contrast, reveals that those disparities derive from special privileges. Many econo- mists and politicians foster the illusion that great for- tunes and poverty stem from the presence or absence of individual skill and risk-taking. Henry George, by con- trast, showed that the wealth gap occurs because a few people are allowed to monopolize natural opportunities and deny them to others. If we deprived social elites of those monopolies, the whole facade of their greater “fit- ness” would come tumbling down. George did not advo- cate equality of income, the forcible redistribution of wealth, or government management of the economy. He simply believed that in a society not burdened by the demands of a privileged elite, a full and satisfying life would be attainable by everyone. Henry George is best remembered as an advocate of the “single tax” on location values. (I say “location” rather than “land” to avoid the common confusion that George was primarily interested in rural land. In fact his attention was focused on the tens of trillions of dollars worth of urban land that derives its value from location.) Yet, for George, wise tax policy was merely a vehicle to break the stranglehold of speculative ownership that effectively limits the opportunity to earn an decent living and participate in public life. Perhaps the image that best captures George’s ultimate intention is the final scene in a popular science fiction [...]... warehouses, and magnificent churches Unpleasant as it may be to admit, it is at last becoming evident that progress has no tendency to reduce poverty The great fact is, poverty, with all its ills, appears whenever progress reaches a certain stage Poverty is, in some way, produced by progress itself 4 Progress and Poverty Progress simply widens the gulf between rich and poor It makes the struggle for existence... States than in England, and in the Pacific rather than in the Atlantic States In California, when wages were higher than anywhere else in the world, interest was also higher Later, wages and interest in California went down together Consider the economics of “good times” and “hard times.” A brisk demand for labor (and good wages) is always accompanied by a brisk demand for capital (and high interest... those XIV Progress and Poverty teachers and students at the Henry George Schools in Chicago, New York, and Philadelphia who provided suggestions and encouragement Many thanks to Terry Topczewski, Bob Jene, the late Roy Corr, and Chuck Metalitz for their help and encouragement at various stages; Wyn Achenbaum, Herb Barry, Cliff Cobb, George Collins, Josh Farley, Damon Gross, Heather Remoff, and Tom Smith... his larger vision of justice and genuine freedom Progress and Poverty stands the test of time It contains profound economic analysis, penetrating social philosophy, and a practical guide to public policy Those who read it today will find in George’s work a great source of vision and inspiration Cliff Cobb, Program Director Robert Schalkenbach Foundation XII Progress and Poverty Editor’s Preface THOSE... Foundation board for their editorial reviews; and George M Menninger, Jr., John Kuchta, Scott Walton, Sue Walton, Bruce Oatman, and Steve Zarlenga for their moral support Particular thanks to Lindy Davies and Mark Sullivan for their assistance in the final stages of editing and text preparation Thanks also to the Robert Schalkenbach Foundation and the Center for the Study of Economics for institutional... implications For whatever determines the part of production that goes to landowners must necessarily determine what is left over for labor and capital Nonetheless, I independently deduce the law of interest and the law of wages Investigation shows that interest and wages rise together when rent falls, and fall together when rent rises Therefore, rent, wages, and interest are all determined by the margin... some verbal errors and adding this preface, this edition is the same as the previous ones.* Henry George New York, November, 1880 Modernized and abridged, 2006 * George subsequently made one modification, regarding patents and copyrights See page 228 XX Progress and Poverty Author’s Preface XXI To those who, seeing the vice and misery that spring from the unequal distribution of wealth and privilege,... higher social state and would strive for its attainment San Francisco, March, 1879 XXII Progress and Poverty The Problem 1 Introduction The Problem of Poverty Amid Progress THE NINETEENTH CENTURY saw an enormous increase in the ability to produce wealth Steam and electricity, mechanization, specialization, and new business methods greatly increased the power of labor Who could have foreseen the steamship,... problem of poverty; those who finish it may also find some cause for hope For the great gift that Henry George gave the world was a systematic explanation—logical and consistent—of why wealth is not distributed fairly among those who produce it But he did not stop there—he also gave us a simple yet far-reaching plan for a cure It was, and still is, a plan for peace, prosperity, equality, and justice Progress. .. justice Progress and Poverty is an enduring classic It has been translated into dozens of languages; millions of copies have been distributed worldwide Why, then, the need for a modern edition, and an abridged one at that? Simply put, Henry George, like many late-19th century authors, wrote in a style that modern readers may find unduly complex As editor, I have endeavored to break long and intricate . Progress and Poverty Progress and Poverty Why there are recessions and poverty amid plenty — and what to do about it! Henry George Edited and abridged for modern readers by Bob Drake Robert. Foundation Henry George Progress and Poverty Why there are recessions, and poverty amid plenty — and what to do about it! Edited and abridged for modern readers by Bob Drake Book and cover design by Lindy Davies ISBN. privileges. Many econo- mists and politicians foster the illusion that great for- tunes and poverty stem from the presence or absence of individual skill and risk-taking. Henry George, by con- trast, showed