HENRY GEORGE: RESURRECTING A BURIAL?
Written in 1879, Henry George’s “Progress and Poverty” received worldwide acclaim, early readers experiencing the 1893-1897 depression, reasons for which were surgically explained in his equation: production minus privatised economic rent leaves wages and returns to capital untaxed, i.e. P – R = W + I. Hence, the privatisation of land rent into escalating land prices that accompany progress, along with the taxing of incomes and purchases, generates repetitive cycles of boom and bust. (Outrageously, we now call these ‘The natural business cycle’.) The book’s sub-title being “An inquiry into the cause of industrial depressions and of increase of want with increase of wealth … The Remedy”, all that remained was for governments to apply George’s remedy to ensure there would be no repetition of the incredible real estate speculation that had taken place during the late 1880s and early 1890s. These were indeed heady days, later to be labelled The Progressive Era!
Unions and political parties were formed around George’s prescription for the corruption and speculative excesses which occurred during this latter part of the Gilded Age. [George’s fiscal adjustment to capitalism has been buried in favour of that of the then lesser-known Karl Marx’s anti-capital stance. It’s curious that Marx second-guessed his own conclusion (in Book III to capture rent) to launch his attack on capital.]
By the 1920s, Georgist anti-corruption reforms had been put into effect to some extent in several countries, particularly in Australia which applied taxes on land values at all three levels of government. Canberra was established on a 99-year leasehold system to avoid the property speculation that would likely arise in its absence when the nation’s capital territory was established.
Henry George’s thinking threatened powerful interests, of course. He’d faced down their voices during his visits to England in the 1880s where audiences at his speeches were strategically laced with antagonists demanding that their opinions be heard. However, by the time of his three-month tour of Australia in 1890, rampantly speculative world property markets were all too obvious to everyone, so his opponents assumed a more defensive posture. The Adelaide Observer of 26 April 1890 reported George saying to an Adelaide audience: “In the colonies I have been through, the curse of land monopoly and land speculation is over everything. I don’t know of any new country where more striking instances of the absurdity and injustice of our present treatment of land is to be seen.”
Meanwhile, powerful interests decided that steps needed to be taken to kill off this anti-rent seeking incursion once and for all, as land speculation had been the mechanism integral to creating their wealth. The US economist John Bates Clark was recruited for the purpose. He and chosen acolytes conspired to create a new economics that would conflate labour and capital to help address what was seen as a grave threat to socio-economic status quo. They’d also publicly press the case that George was an imposter: he wasn’t university-trained!
The times surrounding George’s Australian visit in 1890 bear a remarkable resemblance to the world’s failing 2024 economies, commentators having alluded to the similarity. Is it possible we’re again three years out from experiencing the damning outcome from long-escalated land prices and the taxing of income and purchases? Using Henry George’s analyses, the cyclical pattern separately demonstrated in rising land values by Australian technical analyst Philip J Anderson and British author Fred Harrison is most compelling.
REFLECTIONS
I’d just completed the real estate valuation course at RMIT in the early 1970s without having once heard the name ‘Henry George’, when I came upon a shop at Hardware Lane in Melbourne. It bore the name ‘The Henry George League’. Working as a newly graduated valuer in the Australian Taxation Office at the time, I noted the front window displayed pamphlets concerning land tax. “What would this little outfit know about land taxes?” opined this callow valuer. Wasn’t I cognisant that real estate outgoings, such as municipal rates and land tax, needed to be deducted so that the net rental could be capitalised into market values? I took some free brochures from the shop and bought a copy of Progress and Poverty. Immediately immersing myself into reading Henry George’s astounding logic, I learnt very quickly of the void in my education concerning the destructive roles of land prices and the taxing of incomes and purchases. Why had I heard nothing about these during my RMIT course? I was later to learn from the president of my professional body, the Australian Institute of Valuers, now the Australian Property Institute, the reason for the omission was that it was “too political”.
Although “I saw the cat” as Henry Georgists say (i.e. I had been persuaded to the case), it nevertheless took me several years to join the Henry George League. I needed to read literature out there against the public capture of ‘land’ (i.e. all natural resource) rents before joining what seemed to me to be this small but committed band of Henry Georgists. Although many historical figures had come to the same conclusion as Henry George–ever since the Mosaic injunction that “The land shall not be sold” was overridden by Jew and Christian alike–Henry George’s account is the most formidable and thoroughgoing.
Later, as president of the Henry George League, I successfully pressed for a change of the name to “Tax Reform Australia” to promote the idea rather than to deify the man. Following professional advice several years later, the organisation was again to change its name, to “Prosper Australia”.
Prior to the computerised recording of real estate sales data, it was common for valuers such as me to seek sales evidence from municipal valuation departments. Anything of particular interest I’d discovered during inspection of a property for the Australian Taxation Office (other than the market value of a subject property) was sometimes shared with the municipal valuer as a quid pro quo for having provided the sales data. On one such occasion at a south-eastern Melbourne municipality, a young assistant valuer sought to confirm that I was a supporter of the ideas of Henry George. I replied that I was, and asked whether he knew much about George. He replied something to the effect, “Not really, but why has ‘X’ (his boss, an older senior valuer) told me that I should beware of any follower of the ideas of Henry George?” I mentioned that his particular municipality based its council rates on site valuations, unlike some other Victorian municipalities which struck their rates on the net annual valuations of properties, and that land value taxation was actually a critical requirement for Henry George’s ideas, so that any development in the municipality was not penalised. The valuer clearly had not been aware that Australia had led the world in land value taxation. He inquired further as to why then senior people in the profession appeared to have been warned off getting close to Henry George supporters. I suggested that the campaign may have initially been engineered by economists, not valuers, because the valuers’ professional institute, the Australian Institute of Valuers (AIV), was actually founded by Australian Valuation Office valuers who assessed properties for the 1910 federal land tax. This was news to him also. I left the exchange feeling I may have countered to one person, at least, the background scare about Henry George’s taxing of land rents instead of incomes and purchases.
I wondered whether it was for amusement’s sake that I was later invited to speak about Henry George at an AIV discussion group’s annual dinner. The gathering comprised senior valuers from major city real estate agencies and from areas of banking and insurance. It turned out not to be all together for amusement; the vote of thanks for my address proved to be generous. Apparently, I didn’t have horns growing from my head in putting Henry George’s case to attendees. Most agreed they would roll with the punches if a significant land tax was enacted. The speaker completed his vote of thanks with a very forthcoming comment: “Bryan, you may note that Pat Gill (of McGee, O’Callaghan & Gill, the Catholic Church’s real estate valuation company) is absent tonight. In organizing the event, Pat told me that he would never attend any dinner where a supporter of Henry George was to be the guest speaker!” Eliciting laughter from attendees, the comment acted curiously to warm the cockles of my heart. Not every contact with my professional institute has been as pleasant.
So, here we are now in 2024, likely three years out from another Great Depression, with the income tax regime fining people and companies for working at things they’re doing, and precluding others from doing what they would like to be doing instead. Real estate speculation and gambling has been running rife and tax reform has come to be seen as the most pressing issue. The excellent Australia’s Future Tax System (‘The Henry Tax Review’) has lain dormant following extensive misbegotten advertising by mining companies having acted to defeat the Rudd Government’s attempt to introduce a Resource Super Profit Tax on mining rents; a tax, along with land tax, completely in accord with what’s necessary to free up Australian productivity, competitiveness, and cheaper access for individual companies and individuals to land. Rent-seeking forces, such as neoclassical economists, banking, real estate, media and other monopoly interests will obviously endeavour once again to sell a switch of emphasis from income tax to greater reliance on the goods and services tax as the necessary ‘tax reform’. Having learnt the lesson of the mining tax, let’s hope Australians are now up to defeating this canard, the GST being a more regressive manner of taxing incomes, having no threshold at all, and failing to capture what overseas ‘investors’ owe to the nation. On party lines, politicians beholden to special interests will be difficult to convince, but let’s trust Australians can hold them to account as individuals. We have current land values on all properties in Australia, so within a VIMMLBUTT package perhaps, does an all-in land tax remain such a forlorn hope to allay the upcoming financial depression?