Centro Educativo Internacional Henry George
Managua, Nicaragua --- ceihgceihg.org

Versión en Español - con visuales del curso CE

  1. There is a problem that has brought us to this course. The socio-economic illness that imposes itself on all of us in various ways. What is the cause of this problem? Does a solution exist?

  2. First, we see that everyone naturally expects that "progress" is taken to mean economic improvement for the whole community.

  3. But then, by studying the facts, we see that the reality is to the contrary, that general progress always brings with it an unequal benefit for the minority and increasing poverty for the majority of the community. This is "the great enigma of progress."

  4. Thanks to the science of political economy, which clearly defines its premises (human beings always seek to satisfy their desires with minimum of effort) and its terms (wealth, production, land, labor, capital, etc.), we can investigate and determine the cause of this phenomenon.

  5. Before we proceed with our analysis, we consider two of the most common theories that impede us in seeing the real cause of poverty in the midst of progress. One theory says that labor is dependent upon capital for its salary, that is, that poverty is the result of a lack of wealth; the other says that poverty is the result of an excess of population. We see that these two theories are false, that labor always creates its own salary, and that in equality of circumstances, the country with the larger and more dense population is always more wealthy.

  6. We then see that we have to seek the cause of poverty in the laws that determine the distribution of wealth. The Law of Rent and the Law of Salary and Interest (combined because capital is only a form of labor) reveals to us how the functional distribution of wealth is determined; that rent always claims a major proportion of the wealth produced, and that the proportion of wealth claimed as salary is determined not by the quantity of available capital, nor by the number of workers, but by the quantity of salary that labor can demand at the margin of production.

  7. We then observe that the natural process of development (progress), defined by growth in population, improvements in the productive technologies, and the advancement of government efficiency and cooperative civil customs, raises rent while depressing salary and interest according to the growth of demand for certain land which acquires strategic value resulting from the same socio-economic progress.

  8. From there, we see that wherever land is treated as private property, the natural progress of a community engenders land speculation in which the best land becomes overvalued in hope of increasing future prices. This process effectively denies access to the best land for labor and capital investment, raises the cost of production, and obliges producers to seek credit to pay their higher costs as well as forcing them to raise the prices of their products and services. When consumers can no longer afford to pay increasing prices, demand begins to drop for certain products and services. This causes a drop in production in some areas, which in turn lowers demand in others, and so on, in a vicious circle. During this process, we see increasing unemployment, bankruptcies due to incapacity to pay off accumulated debts, erosion of productive activity and acquisitive power, all symptomatic of recessions which can deepen into prolonged depressions until the speculation in land retreats or until productive power begins to advance more rapidly than said speculation by means of new inventions or discovery of new natural resources that permit increased opportunities for earnings by labor and capital investment.

  9. Having analyzed the effect of progress and speculation in land on the distribution of wealth, it becomes clear that the cause of the unequal distribution of wealth is to be found in the unequal control of property in land.

  10. Before proposing an unfamiliar solution to remedy the cause of poverty in the midst of economic progress, we first examine the traditionally proposed solutions and we see that none of them are satisfactory because most only increase productive power thus raising rent without raising the basic level of salaries, and others cause social conflicts without touching on the root the cause of the problem.

  11. After discarding the six false solutions, we arrive to the remedy of Henry George, which proposes that society declare land, in all its forms, common property. George proposes to realize this by means of a fundamental reform that is just, feasible, that harmonizes with general social tendencies, and support other reforms for justice: that the rent of land be collected by the community by means of a single tax on the value of land and that at the same time all other taxes upon productive activities be abolished.

  12. We evaluate the single land value tax, comparing it, by means of Adam Smith’s Canons of Taxation, with the current system of multiple taxes on productive activities. We see that the single is totally superior according to these norms.

  13. Then we see that since the time of the French Physiocrats to the time of George, the majority of economists that had considered the land value tax were in agreement that it was effective in its goal. We see that the reason for which this innovative tax system has remained largely ignored is because consumers can only organize themselves politically with great difficulty and are generally unconscious of the huge tax burden they carry due to the diversity of taxes on the goods and services they purchase. On the other hand, there are huge commercial interests who enjoy preferential market advantages in the current tax system, as well as the interests of landowners who act as a political block to defend their control over land rent.

  14. We then consider the history of property in land and we see that originally all societies treated land as common property, and that the transition to exclusive private property in land came about through a process of conquest and development of privileged social interest until all social responsibility pertaining to common property in land was transferred to the productive sectors of society, thus creating the extreme socio-economic inequality that deteriorated even the greatest empires until they stagnated or fell in ruin.

  15. We then put George’s remedy to the test of ethics and justice. We consider the justification of private property and determine that the only just title to private property derives from the exclusive right of the producer to the fruit of their own labor, and that private property in land cannot be just because it violates the true right of private property of the producer. We see that the incentive for the best use of land is not dependent upon private property in land, but instead upon the guarantee for the producer to the fruit of his labor realized upon land. We see that there is no conflict between the individual right to private property of produced wealth and the common right to access to land, and that the idea that some people have an exclusive private right to land for reasons of priority of occupation is absurd.

  16. Even accepting the argument of efficiency and justice in favor of the Georgist remedy, some would argue in favor of a compensation for landowners who would lose the value of their speculative investments as a result of the application of the remedy in question. We see that there is no need nor justification for paying a compensation for the value of lost rent because the value of land is 100% common property and the fact that the community has permitted its private expropriation for many years does not create any right for the owners of land to continue doing so.

  17. We then consider the multiple economic benefits resulting from the Georgist remedy. We see that with increased access to land as a result of the abolition of land speculation, production of total wealth would increase enormously for the benefit of all and the costs of production, consumer prices, and public costs of government and infrastructure would decrease. With new economic opportunities opened, labor and capital would receive their just compensation and there would be ample employment opportunities for everyone, as well as enormous opportunities for profitable self-employment. The government would always have a growing fund to pay for public works; its structure would be greatly simplified and its activities much more efficient.

  18. Next, we see how the change to a Georgist macro-economic system would change society from one of insecurity and irrational egoism to one of security and generalized nobility because economic justice would free people from the fear of poverty and humiliation, would decrease crime and corruption, and would permit a social harmony in which the most noble human aspects would be able to develop. We see that human beings are always unsatisfied and that with the general security and capacity to progressively satisfy human desires, society would be that much more motivated to progress by means of the liberation of mental power in all members of the society.

  19. Then we go on to discover the Law of Progress that determines how and when a civilization may advance. We see that the evolutionist theory does not work for explaining the growth, stagnation and decline of civilizations, and because a civilization cannot grow old, that real cause of its destruction is to be found in its own development process. We see that the difference between civilizations is not in their physical evolution, but in all their cultural aspects. In reality we are the same as all human beings past, present and future. We see that what we have achieved in our civilization is not guaranteed by genetic evolution; it can be passed to the next generation via social institutions, or completely lost. We see that mental power is the motor of progress, that this power is limited in quantity and can realize great works or be squandered in sterile conflict. We conclude that the Law of Progress is association in equality. Wherever a society works in a compact form under conditions of justice and liberty, there we will find progress. We observe that civilizations that permitted slavery and the institution of unjust distribution of wealth stagnated and declined, as in the case of Rome and other great empires throughout history.

  20. This leads us to consider the possibility that our civilization may decay and destroy itself because there is no guarantee of advancing apart from the law of progress. We see that it is possible that a civilization decay without the people realizing it, because the process of decay can occur so gradually that the people adapt to each step and even interpret the decline as signs of progress. We see that in conditions of justice, a particular political form cannot impede the decline of a civilization, and even the democracy can be perverted into the most horrible form of despotism.

  21. We conclude the study of progress and poverty and its solution by recognizing that liberty is calling us to participate in the raising of our civilization, that we have the possibility and responsibility to structure the macro-economy in a way that puts human laws in agreement with the natural laws the determine progress or decline of our civilization. We see that the Georgist remedy has been employed with success in various countries of the world, that there is a well studied technology that is used today to calculate the value of land in all its forms. We offer for the consideration of our students that, if they agree that the Georgist remedy is feasible, the next step would be that the government study the Georgist theory and realize feasibility studies on the application of the Georgist remedy in Nicaragua.

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since Julio 2011