Distributism and Henry George

Before reflecting on the relationship between Distributism and Georgism, a few observations about Henry George himself are in order. Economic historians tend to conveniently forget that, with the possible exception of Adam Smith, he was the most popular of all the modern economists. By any standards, his books were bestsellers and made economics accessible to the public. One measure of his popularity is the fact that at his death, over 100,000 people filed past his coffin, and thousands were left outside, unable to get in. It would be difficult to imagine such an outpouring of grief for the death of any other economist. Yet, this very popularity was the cause of resentment on the part of “professional” economists, who have, in the main, attempted to marginalize George, if not to ignore him entirely.

But this hostility is difficult to understand. There is nothing in George that is incompatible with Smith or Ricardo or Mill, or even with most of neo-classical economics (the one economist he really takes to task is Thomas Malthus.) Indeed, there is no particular part of Georgism that is original to Henry George; rather, his genius consists in taking what was already out there and drawing out the implications. Smith had already favored the land tax (see Taxes: Advice from Adam Smith), Ricardo had developed the Law of Rents, and even Walras and Marshall, founders of neo-classicism, recognized the special status that land had in economic theory. What George did was to base his political economy on the fact, a fact not really disputed in economic theory, that land derives its value not from the landlord but from the community. No reasonable economist disputes this. Yet, all the values created by the community are appropriated by the landlord. It is the classic example of economic rent, a value paid but not earned.

Socialism recognizes only public values of land, and capitalism recognizes only private values, and hence both provide an incomplete description of land, which has both public and private values. George's solution is elegance itself: he socialized ownership of land while privatizing its development. By “taxing” the full value of ground rent, he made speculation unprofitable. At the same time, the use of land, that is, improving it by farming, mining, or building, gets its full value without any taxation at all. In other words, the community gets what the community creates, and the individual gets what the individual creates.

Nor is Georgism without precedent in history, or even the present moment. Indeed, before the advent of the modern capitalist and socialist nation-state, land taxes tended to be the main support of the state. As Adam Smith noted, the “customary rents” of the English feudal land system functioned more as taxes than as rents, that is more as amounts paid for services to the property, and less as Ricardo's “economic rent.” Moreover, there are modern states which attempt to be Georgist. In Hong Kong (under the British) all the land was owned by the government and leased out to developers. In Singapore, the government owns 76% of all the land using the same system. Taiwan, Korea, and Japan, are all, in one degree or another “Georgist” and they are all successful economies. (The popularity of Georgism in the orient traces to the fact that Sun Yat-sen, the father of Chinese Nationalism, was a disciple of Henry George.) So we are not dealing with a mere abstract theory, but one with precedent and example.

However, it should be noted that none of these states are examples of pure Georgism, and therein lies the key to the relationship between Georgism and Distributism. In theory, in a free-market economy, it should be easy to determine the ground rent of any piece of property. But in practice, in places where there are vast concentrations of ownership, this task becomes impossible. Large landowners use any number of subterfuges to hide the true value of the land, since this is the basis of their taxes. Hence, in the modern world, actual Georgist states tend to consist of half-measures and compromises.

Distributists and Georgists have often exhibited a certain hostility towards each other, as if they were pushing rival theories. But they are not. In fact, the theories are complimentary. Rather, it is a question of priorities, which comes first. In my opinion, (being a distributist), a system of well-divided property is prior, and without this Georgism cannot really and truly be implemented. But in a system of well-divided property, a land tax is needed to ensure that the worker gets the full value of his work and to maintain the division of property. This is to say that Georgism requires Distributism for it implementation, while Distributism requires the land-tax, or else property will merely re-accumulate. As a further point, Georgism provides Distributism with access to a sophisticated political economy and tools of economic analysis, for which we do not have to apologize to the “orthodox” economists; in fact, the analysis and the tools are much better.

It would be better for both views to have a better understanding of each other, as they are complimentary theories, and each adds something that the other tends to lack.