Henry George was a US celebrity during the Gilded Age. Now, not so much? If this is a (fair & balanced) critique of 21st-century capitalism, so be it.
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The Obscure Economist Silicon Valley Billionaires Should Dump Ayn Rand For
By Michael Kinsley
TagCrowd cloud of the following piece of writing
So, you’re a Silicon Valley billionaire and you’ve already got the private plane. What you need next is a philosophy, something to live by, and to help finance, and—most important—to use to explain or justify yourself. Don’t just grab the next philosophy to come along. Chances are that will be Ayn Rand and her extreme form of capitalism, which she called objectivism.
Rand has a lot going for her, to be sure. First, you may have actually read her in high school and may have been genuinely influenced. Second, in a nutshell, she rationalizes greed, which you have nothing against. Third, she was into mildly kinky sex—something else you may have in common. Fourth, she was associated in some way you don’t quite follow with Alan Greenspan, who is respectability itself, whatever other Rand enthusiasts may have been up to.
But you’re too late. Ayn Rand, who never was really undiscovered (The Fountainhead [1943, 2005] became a movie (1949), starring Gary Cooper as a heroic architect, a few years after it was published), has by now been thoroughly re-discovered. According to James Stewart (the prominent business journalist, not the even more prominent actor), writing in The New York Times, President Trump says Ayn Rand is his favorite writer and that The Fountainhead, her pulmonary embolism of a book, is his favorite novel. Travis Kalanick, the onetime Übermensch of Uber, is on board, as is (liberal foodies, please note) John Mackey, co-founder and CEO of Whole Foods.
My dear billionaire, you need an economist almost no one has heard of. One who addressed the most pressing problems of today, which do not include the insufficient greed of rich people. But one who was not completely out of sympathy with rich people, either.
May I nominate Henry George (1839–97)—economist, pamphleteer, journalist? Once famous, he is now widely forgotten. He described himself as a man who came out of the great American West, which he did—but only after he got there via Philadelphia, where he was born. He later moved to New York City, ran for mayor, and attracted 10,000 people to a political rally (but lost nonetheless). He made the best-ever short defense of free trade: You wouldn’t fill your harbor with rocks to keep out goods your citizens want to buy, would you? Well, that’s what you’re doing when you slap tariffs on imports.
George’s masterwork, published in 1879, was Progress and Poverty, which set forth to explain how “increase of want” could go hand in hand with “increase of wealth.” Thus George took on precisely the question we face today: not the general question of poverty or inequity, but why specifically are middle-class incomes stagnating, and incomes of people at the bottom falling, while those at the top continue to rise?
George was no vulgar Marxist. You might call him a “supply-side socialist.” All products of the economy, he reasoned, are ultimately derived from three sources: labor, capital, and land. What else is there? Labor and capital are both productive. Put them to work and you end up with more. But land is different. As the man said, “They aren’t making any more of it.” When you work for an hour, you increase society’s wealth (and your own) by an hour’s worth of wages. When you save a dollar rather than spending it, you increase society’s (and your own) wealth by a dollar. But when you buy a piece of land for $10,000 and sell it for $20,000, you haven’t increased the total wealth of society by a nickel. Yet the price of land keeps going up, up, up, as the population increases and society grows richer. Where does that money come from? It comes from the pockets of the other two factors of production, labor and capital.
George distinguished, in other words, between the capitalist who is truly productive and the capitalist who is simply a “landlord.” If you’re a landlord, he wrote, “you need do nothing more. You may sit down and smoke your pipe; you may lie around like the lazzaroni of Naples or the leperos of Mexico; you may go up in a balloon or down a hole in the ground; and without doing one stroke of work, without adding one iota to the wealth of the community, in ten years you will be rich! In the new city you may have a luxurious mansion; but among its public buildings will be an almshouse.”
And how is all this talk of leperos and almshouses relevant today? You’ve got to think of “land” as a metaphor for all unproductive forms of capitalism. Much of the financial industry, for example: hedge funds, private equity, IPO’s and IRA’s. Some might defend finance as an industry that makes the making of what other industries make more efficient. But when you read that Goldman Sachs is getting some enormous fee for fuck-all or that two companies are merging that unmerged a few years ago and will unmerge again in a few years, you gotta wonder.
Take a look at the Forbes 400 list. The No. 1 slot has been occupied for many years by Bill Gates, co-founder of Microsoft. As it happens, Microsoft and Gates are a notable exception: Gates grew rich the traditional way, producing real products that people were willing to pay for. But, as Forbes admits, 93 of the Forbes 400 made their money by just playing with money: “All together this group is worth a combined $491 billion—20% of the Forbes 400’s total $2.4 trillion net worth.”
Government licenses confer monopolies all over the economy, but no place more than in the media. Start with Comcast, the beloved cable company. Real estate itself—which, remember, they’re not making any more of—represents $129 billion of the wealth in the Forbes 400. Simple inheritance (the most efficient method of becoming rich) is a non-trivial source of wealth. The members of the Walton family on the list—heirs of Walmart’s founders—are by themselves worth $123 billion.
Henry George believed that the landlord’s share of wealth that all of us have helped to accumulate is inherently illegitimate and should be confiscated. He wouldn’t send in the National Guard to seize people’s property. He would instead confiscate the value of unimproved land—that is, land that had not been improved by, say, building on it—by taxing its annual value at a rate of 100 percent.
“But,” you’re thinking, “that would make the property itself worthless.” (“That’s not what I’m thinking,” says Arianna, mysteriously.) Well, you’re right. Making the property worthless is the whole idea. Society gets the value of the property. Taxes on the other factors of production—labor and capital—can be reduced, or even eliminated. This is why people who are dedicated to promoting George’s ideas are known as “single-taxers.”
The landlord will have little choice but to put the property to its “highest and best use.” This raises another difficulty with George’s idea: we no longer believe—or at least we no longer assume—that the “highest and best use” of a piece of land is to throw up another reflective-glass skyscraper. “Highest and best use” is a legal term that doesn’t distinguish between “use” that is the most profitable and “use” that is best for society. Jane Jacobs won that battle. And, anyway, today’s landlords probably paid full price for their monopolies. The people who originally benefited from the monopoly have long since disappeared with their ill-gotten gain. So there would be practical problems figuring out what is taxed, and by how much.
But George got the main things right. Free markets are best (provided they are really free). A lot of markets that masquerade as free really aren’t. And we often tax the wrong things—ignoring wealth that accomplishes nothing while taxing labor and capital that are actually productive. After his book came out, Henry George was the most famous economist in the world for a while. The Thomas Piketty or John Kenneth Galbraith of his time. An intellectual with star quality, and total conviction of the rightness of his argument. He probably thought he would be famous forever. He was wrong about that. # # #
[Michael Kinsley has become a career gypsy since the advent of online journalism. in 1995, he became the founding editor of its online journal Slate and — after leaving Slate because of health difficulties (Parkinson's Disease) — Kinsley next moved to the Los Angeles Times as the Editorial Page Editor. He left the LA Fishwrap in 2005 and returned to writing a weekly column which appeared in The Washington Post and Slate. In 2006 he served briefly as US editor of The Guardian. He later became a regular columnist for Time magazine. In May 2009, Kinsley revealed in a story reviewing a new issue of Newsweek in The New Republic that he had been fired by Time. In January 2013, Kinsley joined The New Republic as editor-at-large and then — a year later (January 2014) — Vanity Fair announced that Kinsley would become a contributing editor and write a monthly column. Michael Kinsley received a BA (government) from Harvard University and was awarded a Rhodes Scholarship to Oxford University's Magdalen College. He returned to Harvard for law school and in his third year (L3?), took a job at The New Republic in DC. Kinsley was allowed to finish his Harvard JD via courses at the evening program at The George Washington University Law School.]
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