NEGATIVE GEARING
IT’S SCATHING, BUT IT’S TRUE!
“Australia: Four banks and a mining company.” – Lindsay David, LF Economics, 3 December 2015
LETTER IN “THE AGE” TODAY
Hmmm …. the last sentence of my letter was ironic. I trust The Age’s heading is also:-
A little more, please
In the troubled wake of having sold off our gas and electricity, we should have learnt that getting rid of our public assets can be fraught. It is an indictment on its short-term thinking that a Victorian government now launches another cash grab from rent-seekers for parts of the bay and the Port of Melbourne, instead of retaining those rents for a steady income.
The government is again reduced to selling off our heritage because it is too chicken-hearted to use the taxing powers granted to it by the constitution. No doubt Victorian governments of all persuasions will continue to extend a begging hand for extra funding from the federal government. A greater amount of GST perhaps?
Bryan Kavanagh, Mount Waverley
YES, MICHAEL PASCOE – YOU’VE COME A LONG WAY!
No, Alan Mitchell, no! (Your AFR economic analyses are usually pretty good!)
GAFFNEY ON WALLACE
Alfred Russel Wallace’s Campaign to Nationalize Land
Mason Gaffney
Alfred Russel Wallace rose to fame with Charles Darwin: they independently found the principle of natural selection. Wallace later focused on reforming Great Britain’s land tenure system, under which a few owners had come to control most of the land, while most citizens had little or none of their own. In Land Nationalization (1882) Wallace proposed for the state to acquire all land, with limited compensation. The state would then lease it by auction, but to actual users only. Wallace saw his kinship with Henry George, and opened doors to help George tour Britain as a speaker. For years their ideas were linked by friend and foe, and together had great impact on British politics.
A.R. Wallace would have bolted upright to see a 1987 article on side-effects of vaccination. Pierce Wright, Science Editor of The London Times, reported that a WHO researcher found smallpox vaccination to be spreading AIDS in Africa (11 May 1987).
One hundred years ago, Wallace (1823-1913) had questioned what he saw as the uncritical vogue for smallpox vaccination, chic and “scientific” in his day. He analyzed data to show it was likely to do more harm than good, and publicized his claims. For this Political Incorrectness he was attacked and ridiculed. Whether he was right then, or now, is not the present subject nor my expertise. It just shows the kind of man he was: his own man, inner-directed, collecting his own data and interpreting them himself, unswayed by cheering or jeering from the crowd. We may surmise he might dislike the oppressiveness of modern peer review, too, although he was on intimate terms with his own peers in his own profession.
Who was Alfred Russel Wallace that we should be mindful of him? He was the independent co-discoverer of the principle of natural selection, and co-author of the theory of evolution. He and his friend Charles Darwin announced these simultaneously, and published their independent findings in the same proceedings in 1858. Many believe that Wallace was first, but he was not one to press such a claim, nor to give it any importance. He was a simple, modest man with no ego problems.
He was a man who jumped disciplinary lines – critics would say “like a grasshopper,” but we will see he landed on economic policy with the thud of a 400 pound gorilla. As Darwin’s peer (and possible predecessor), his opinions were widely sought and heeded in many fields by social leaders. He mingled with Brahmins in Boston, Robber Barons in California, and a U.S. President in Washington. The success of natural selection gave natural scientists new authority to prescribe rules of social conduct.
Wallace also leapt into political economy. His invasion was probably a good thing. Political economy has benefited from many interlopers. Quesnay was a physician; Adam Smith a philosopher; Ricardo a broker and sometime MP; Mill a customs official and sometime MP; Malthus and Wicksteed, clergymen; Marx a sometime journalist and professional revolutionary; von Thünen a Baron; Henry George a journalist; Böhm-Bawerk a bureaucrat; Francis A. Walker a General; William Vickrey a mathematician.
Today, economists have become isolated even from each other, many of them deep in their private pigeonholes paltering over pointless paradoxes with a few pals prating in their own peculiar patois. Francis A. Walker in 1886 already was complaining about isolation and narcissism within the profession, yet his contemporaries were Renaissance men compared with many economists today. Ironically, at the same time, some emerge from their cubbyholes to become imperialists who flatter themselves with such titles as “The Expanding Domains of Economics” (friendship and admiration stay me from naming the author).
The years have taught me that economists are difficult. They want to rule you by messing with your minds, but at the same time keep you at a distance with bafflegab. To get some forward motion, outside stimuli help. Wallace applied a strong one.
Wallace invaded political economy (as it was then called) along a route he knew well: land economics. Like George Washington and Anthony Wayne, he had been a surveyor. As a zoologist he was best known as a zoogeographer (The Geographical Distribution of Animals, 1876). He had drawn the “Wallace Line” through the Makassar Straits: crookeder and trickier than the Mason-Dixon Line, and marking a more ancient, enduring separation (that between Indo-Malayan and Austro-Malayan fauna). Wallace’s insights were not just into man and nature, but man and nature in relation to land.
We might easily, but wrongly, infer that he entered political economy as an élitist eugenicist, a 19th Century Garrett Hardin. His peers did. His friend Darwin was a cousin of Francis Galton, an early eugenicist, and credited his inspiration to Thomas Malthus, the original and most dismal of dismal scientists. Malthus had prescribed famine, pestilence, warfare and other instruments of death as remedies for poverty, somewhat as Hardin wrote understandingly of the need to push excess people out of overcrowded lifeboats.
Other contemporaries moving parallel to Darwin, like Huxley and Sumner and Spencer, had reinforced that impression. Spencer, who coined the unfortunate term “survival of the fittest,” had also said society can progress only by slow race improvement that results from eliminating the unfit. Unfitness was manifested by poverty: this was recycling John Calvin into the new secular theology of evolutionism. Huxley devoted chapters in several books to defending the concentrated control of land in England, and attacking the egalitarian land reformer, Henry George. Huxley’s ideal was nature “red of tooth and claw.” William Graham Sumner of Yale used Darwin to buttress Malthus. Sumner subordinated all values to acquiring property, which in his view was the highest virtue (Bannister, p.112).
People came to call the élitists “social Darwinists,” although Darwin himself stayed discreetly mum on such matters. He stuck to his last and kept his reputation as a scientist (in spite of his odd belief in inheritance of acquired traits). He did not, however, disown the term “social Darwinism,” so perhaps he deserves being stuck with it, for better or worse. It was his name, after all, and a man has certain rights over his own name.
One can unearth scattered evidence in Spencer, Huxley and Sumner that they would temper the harshness of their doctrines. I suggest dismissing most of the temperance as double-talk. One may interpret the forked tongue of ambiguity by finding the bottom line. What all three did was devote major effort to defending concentrated ownership of land, even in the radically extreme and novel form it took in England after the vast enclosure movements of the early 19th Century.
For them, the relationship of man and nature must be filtered through pre-existing socio-political arrangements. This meant that “Nature” belonged to a tiny fraction of the population. “Natural selection” among humans, thus, was not for each generation; the results of earlier strife, politics and predation were to be frozen, sanctified, and held fixed through all generations. This “acquired characteristic” was to stay within families. Under English law, this took an even more extreme form than simple inheritance. Estates went solely to the eldest son, in trust for his eldest son, and so on. Land was to be free of tax on either inheriting or holding it.
Wallace was different, at the other pole from Huxley et al. It says a lot for the civility and tolerance of Victorians and scientists that Huxley and Wallace remained personal friends and mutual fans. They were able to dispute social policy, even at the gut-wrenching level discussed here, and remain loyal and supportive. May their honorable example instruct us.
Unlike the three “social Darwinians,” Wallace saw mental, social and spiritual factors guiding human evolution. He put his scientist’s prestige on the popular side of social issues.
Land policy was at the focus of social controversy. Wallace objected to the clearances of the times, and past enclosures, and Irish landlordism, and Dickensian slums where desperate evictees went for refuge, however dismal. In The Malay Archipelago (1869), a book on natural science, he digressed to describe the natives as more truly civilized than his own people at home – a commonplace, perhaps, among anthropologists today, but a rude shocker in Victorian Britain.
John Stuart Mill turned increasingly towards land reform in his later years, 1871-73. He formed and led the Land Tenure Reform Association, and sought Wallace out to join it. Mill was brilliant, penetrating and understanding, but ever-cautious – he built for later radicals the stage on which he himself was uncomfortable performing. He limited his policy objective to taxing away only future increments of land value (or perhaps of rent). Wallace deferred to Mill, the veteran economist and social leader. Mill was the great and the good “Saint of Socialism,” who scrupled at the wrong he might do in undoing other wrongs inherited from the past, gross and recent as these were. Wallace had no problem playing second fiddle, as he did earlier for Darwin, and later for Henry George.
After Mill died, however, Wallace grew more importunate. The Irish land agitation especially moved him. In 1880 he criticized Parnell’s program for Irish peasant proprietorship as not abolishing privilege, but merely reshuffling some land titles from a smaller to a larger minority. Wallace sought more thoroughgoing and lasting systemic change.
In 1881 Wallace took the lead. He formed The Land Nationalization Society on his lines, with himself as President. In Land Nationalization (1882) he laid out his program. The state was to assume title to all land. To meet a conservative debating ploy, he would compensate present landowners. However, he ingeniously minimized the amount in a manner that tells us he knew the nuts and bolts of his subject. Compensation was to be an annuity limited to the duration of lives in being. It was to be based only on the net income actually being derived from the land before nationalization – i.e. not from the highest and best use, and not from future higher uses.
All men and women (Wallace, like Mill, was also a feminist) could now bid to lease parcels from the state for actual use. In the socio-biological terms in which he thought, this would consummate the natural relation of man to nature. It would also let men alternate between industry and agriculture as Wallace, a loving gardener, himself did.
Wallace’s Land Nationalization was individualist, not collectivist. Individual lessees were to have secure tenure, and tenant rights to improvements. Rents to the state would be used, not to engross the state, but to obviate taxes. These rents would be based on the assessed “inherent value” of land, dependent only on natural and social conditions. As a surveyor and a biogeographer, Wallace readily distinguished “inherent value” from man’s improvements to land, which he saw as transitory. Tax assessors in most American states and other former English colonies distinguish land and improvements routinely today, and many did then, too, although in England itself the concept was somewhat novel.
Present holders would lose the right to sell; to bequeath; and to let land. They could only hold what they occupied and used themselves. Wallace the evolutionist saw land inheritance as a dysgenic factor giving an artificial advantage to unfit heirs, both individually and in their collective power to control social evolution. Wallace struck at the roots of ancient British aristocracy – a heady but hazardous move. Gilbert and Sullivan could do it through comedy and win a knighthood, at least for the musician of the pair; but Wallace was deadly serious and impossible to misunderstand. He met with traducement and loss of name.
Wallace held that man’s mind overrode the action of natural selection on his body. The mind understood and controlled natural forces. Without inheritance of land, said Wallace, natural selection would be based more on individual merit. Universal education would delay marriage; social reform would lower male death rates. Female choice of mates would then take over natural selection, and replace Malthusian frightfulness as Nature’s plan to improve the race. This wonderful yet awful truth was perhaps the crowning blow to male illusions, and the traditional British primacy of “the eldest son.” George Bernard Shaw put it on stage (Man and Superman) and preached through comedy – who could say if tongue was in cheek? – but Wallace was deadly serious. It was a bitter pill for male pride and self-confidence in courtship. Wallace evoked some spite, although he was only the messenger who brought the news to others of his gender.
Wallace’s view of land reform was obviously kindred in spirit to Henry George’s Progress and Poverty (1879). Wallace had less regard than George did for the free market, but both saw mankind as needing land, and saw social organization as interwoven with the relation of men to land. Charles Stewart Parnell brought them together: they both disapproved of his temporizing in Ireland. Both submerged methodological differences to further their common concept. Wallace used his Land Nationalization Society to give George a platform when George toured Britain.
Wallace modestly played second fiddle to George, the spellbinding orator, but it was possibly repressed jealousy that made him cast George as simply a theorist who confirmed Wallace’s inductive argument. It was and is a small matter, but perhaps for once Wallace, a man of noblest character, was unfair. Even a saint may lapse. George was not “just” a theorist. He had been a journalist; his first book, Our Land and Land Policy (1871), was based on original investigative reporting of high quality, and as such is still praised by historians.
In Britain, for many years, George’s Single Tax and Wallace’s Land Nationalization were closely linked and identified. To Liberal Prime Minister Herbert Asquith, a friend, they were two arms of a pincers. “Tax or Buy” was his slogan. If valuation was too low, Buy! If too high, Tax! Like Wallace, he was deadly serious.
In later years Wallace became more sympathetic to socialism, while George moved the other way. Still, Wallace selflessly continued to support George’s Single Tax movement which, in spite of George’s death in 1897, dominated land reform efforts in Britain from 1895 to 1914, and even beyond. But British land reform, when it finally came in the Town and Country Planning Act (1947), evinced more Wallace than George. George would not have owned it; his followers condemned it. Chances are that Wallace would not have liked it, either. Like George, he was looking for something much more sweeping and egalitarian and, in his own Shavian sense, eugenic.
Wallace as both a natural scientist and a social thinker is enjoying a revival today (Fichman, Clements), and deservedly so. Wallace showed one can be a social Darwinist without being schrechlich like Dr. Strangelove. His specific ideas about land reform were timely, well-considered in grand concept, and well thought out in practical details. He treated his adversaries with courtesy and respect. He pursued his humanitarian goals with a selflessness and sincerity all too rare in his times and, alas, in ours.
BIBLIOGRAPHY, Re Alfred Russel Wallace
Bannister, R.C. 1979. Social Darwinism. Philadelphia:
Temple University Press.
Clements, H. 1983. Alfred Russel Wallace, Biologist and
Social Reformer. London: Hutchinson.
Durant, John R. 1979. “Scientific Naturalism and Social
Reform in the Thought of Alfred Russel Wallace”. British Journal
for the History of Science 12:31 58.
Fichman, M. 1981. Alfred Russel Wallace. Boston: Twayne
Publishers.
Gaffney, Mason. 1987. “Alfred Russel Wallace.” In Eatwell, John; Peter Newman, and Murray Milgate (eds.) The New Palgrave Dictionary of Political Economy (London: The Macmillan Press, Ltd.
Lawrence, E.P. 1957. Henry George in the British Isles.
E. Lansing, Michigan: The Michigan State University Press.
Wallace, A.R. 1869. The Malay Archipelago. 2 vols.
London: Macmillan and Co.
————– 1876. The Geographical Distribution of Animals.
————- 1882. Land Nationalization. London: Swan
Sonnenschein and Co., Lim.
1905. My Life: A Record of Events and
Opinions. 2 vols. London: Chapman and Hall, Ltd.