 SUMMARY OF THE
ARGUMENT
OF THE BOOK
PROGRESS
AND POVERTY AND THE
CEIHG's "COMPRENDER
LA ECONOMÍA" COURSE WHICH TEACHES HENRY GEORGE's ANALYSIS OF THE CAUSE OF
POVERTY IN THE MIDST OF PROGRESS AND THE ECONOMIC REMEDY FOR THIS PROBLEM.
 Versión en
Español - con visuales del curso CE
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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?
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First, we see that everyone naturally expects that
"progress" is taken to mean economic
improvement for the whole community.
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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."
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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.
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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.
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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.
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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.
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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.
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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.
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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.
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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.
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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.
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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.
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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.
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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.
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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.
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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.
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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.
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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.
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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.
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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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