This article was originally published on Progress and Poverty and can be found here
The late nineteenth century was a period of rapid economic expansion for both the United States and England. This was the period of the Second Industrial Revolution, which lasted from approximately 1870-1914. Technological progress led to swift expansion in transportation networks (notably railroads), factories, steel fabrication and consumer goods production. While this created a massive increase in labor productivity and raw economic power, it also created terrible working conditions for the populace caught in the industrial machine. There was no minimum wage, no workplace saftey laws, no child labor laws, no safety nets, no limit on the number of hours one could work. In the United States, Mark Twain termed the period “the Gilded Age” because beneath the veneer of glittering wealth produced by the booming economy lay the dirt and grime of widespread poverty and misery that powered it. A small group of wealthy men, the so-called ‘Titans of Industry,’ controlled vast portions of capital and land, so laborers had to be content with minuscule wages that were hardly enough to pay for rent on the land which was often rented to them by their own employers. Industrial laborers worked 10 hours a day, in dangerous conditions, and were fired and replaced if injured or killed. These conditions led many people to question the economic and social system in place in the country, leading to the popularization of a number of alternative schools of economic thought seeking to alleviate the conditions of the people suffering under the crushing burden of poverty. Two of these schools of economic thought, Georgism and Distributism, arose on opposite sides of the Atlantic in opposition to the social Darwinism and Malthusianism of contemporary economics. Although they arise from different economic traditions and have historically different emphases, they proposed quite similar solutions to the problems of the industrial capitalism of the Gilded Age. It is my contention that, viewed properly, the economic philosophies of Georgism and Distributism can be harmonized into a single, effective response to the social problems of today.
In the United States, Henry George saw land prices increase and wages fall as the frontier moved westward. A citizen of California, he was startled by the increase in poverty that industrialization and the effective end of the Homestead Act had on San Francisco. The increases in productivity which the factory system and technological innovation brought did not increase wages, as expected—it increased the price of land. During the Gold Rush of 1849, bakers and shopkeepers had seen wages more than a dozen times as high as their counterparts in the east as treasure hunters came from all over the world to search for gold on open public land. Just shortly after, however, workers now faced the specter of destitution in the streets. The discovery of the Comstock Lode, the largest deposit of silver ever discovered in the United States, barely budged local wages—the land had already been claimed and so the existing owners were the main benefactors. In response, George formulated an economic system based on the taxation and equal distribution of land and natural resources, alongside the abolition of taxes on labor and capital—a virtual common ownership of the Earth.
In Europe, the frontier was nonexistent, a circumstance which made the economic effect of land monopolization less apparent but made inequality between a poor laborer and the landed gentry much more salient. Pope Leo XIII answered the question of political economy through his 1891 publication of Rerum Novarum, which promulgated the general economic principles of the Catholic Church—a cooperative economy defined by the proposition that the fundamental purpose of property rights is to serve the common good of man. Drawing on both the rich Catholic tradition of political economy and with the perspective of Englishmen in an economy dominated by landowning nobility, G. K. Chesterton, Hilaire Belloc, and Arthur Penty began to articulate a new economic vision based upon Catholic Social Teaching, which was elaborated upon by the later Pope Pius XI in his 1931 publication of Quadragesimo Anno. Eventually, the works of these diverse thinkers were synthesized into the system of thought which came to be known under the “awkward, accurate”name of Distributism.
Distributism seeks to improve the world through four main principles: the widespread ownership of productive property, the removal of big business, the principle of subsidiarity, and the family as the primary unit of society. These four principles work together to accomplish the primary goal of distributism: a family-based economy where every family can produce what they own and own what they produce.
Productive Property
The control of the production of wealth is the control of human life itself. - Hilaire Belloc, The Servile State
The first principle of Distributism—widespread ownership of productive property—is the principle most often focused upon by distributists and non-distributists alike. According to Hilaire Belloc, the two types of productive property are land (natural resources) and capital (saved wealth used to generate more wealth). Georgists agree, but emphasize the importance of land relative to capital. This is because land is the necessary factor of production for all other wealth—only by combining labor with land can capital be created at all. Furthermore, land, unlike capital, is fixed in supply—it can only be held at the expense of others.
Distributist solutions to concentration of property are numerous, ranging from medieval guilds and family businesses to worker-cooperatives and Employee Stock Ownership Plans. Indeed, distributism’s main criticism of capitalism is that too few own productive property, and its main criticism of socialism is that it worsens the issue by placing just one party—the state—in control of that property.
This widespread ownership of productive property can be readily accomplished through a Georgist land value tax and citizen’s dividend. This consists of enacting a tax on the value of land not counting improvements, and then using that money for both government expenses and a citizen’s dividend which gives the money back to each family. These policies would widely distribute land—the distributist ideal—by lowering its sale price, to a theoretical value of zero with a full tax. The elimination of upfront costs for land make it much easier for people who currently own none to acquire some for business or farming, and the people who currently own land would be incentivized to sell it because of the continual draw on their accumulated capital. The citizen’s dividend would further redistribute wealth by giving it back to the poor and capital-less. Every family would in effect receive an equal share of the country’s land wealth, making it effectively common property. In addition, land at the margin of production will become free of both any up-front cost and rent. Anyone who wanted could simply move a short distance to the margin and live a thrifty but decent life of self-employment on their own land. This would serve as an effective frontier, like that which the United States used to have, giving families a failsafe in case of hardship. This implicit safety net for new or recovering families naturally favors a distributist small-owner model of business.
Evidence that these policies would work already exists. Although the full rental value of land has never been taxed, we can see that partial applications of the Georgist remedy have already been used to break up concentrations of land and distribute it to smallholders. Examples of this include the California irrigation districts which prompted intense economic development alongside the subdivision of land into small farms, Australia and New Zealand where land value taxes were explicitly adopted with the goal of breaking up large landed estates (with much success as even non-Georgists admit), and Denmark where georgist policy was explicitly supported by efficient smallholders eager to gain land for themselves from the grand unproductive estates.
“Abolish the monopoly that forbids men to employ themselves, and capital could not possibly oppress labor. In no case could the capitalist obtain labor for less than the laborer could get by employing himself. Once remove the cause of that injustice which deprives the laborer of the capital his toil creates, and the sharp distinction between capitalist and laborer would, in fact, cease to exist” - Henry George, Protection or Free Trade
Anti-Monopoly
The problem with capitalism is not that there are too many capitalists but too few. - G. K. Chesterton, The Superstition of Divorce
The second principle of distributism—removal of monopolistic businesses—is less controversial and supported by thinkers on all sides of the political economy debate, excepting the owners and beneficiaries of monopolies themselves. Everyone can see the need to break up and regulate large corporations which accumulate the power to obtain wealth and productive property at the expense of the small businesses and everyday people. When large businesses and corporations are broken up, small, local, and family businesses have room to compete and better serve their communities.
Georgist thought takes an even broader understanding of monopoly than classical Distributism. Taking its cues from Adam Smith, who defined monopoly as a market where new entrants cannot increase supply, it points towards the pivotal role of territorial privilege in creating conditions which allow for monopolistic rent-seeking and corporate consolidation. Taxation of production and consumption, tariffs, right-of-way monopolies, patent monopolies, and control over extractible resource sites all allow for actors to increase price by restricting supply. These act as severe breaks upon competition, allowing for the growth of great trusts and the enforcement of private cartels. By removing these privileges, distributists and georgists can prevent monopolies from forming in the first place.
The extraction of wealth from unearned natural opportunities can be dealt with via georgist methods of taxation. The monopolization of land, for example, when taxed and redistributed, becomes a benefit to society. Thus, even where monopolies cannot be removed, they can be transformed through georgist principles into a public benefit. In addition, removing burdensome taxation on exchange, production, and consumption, and the removing of anti-competitive intellectual property laws will decrease monopoly and support the economic flourishing of small businesses.
What we want is full competition. What we want to do is to abolish monopolies, and it is to these monopolies, and not to the earnings of capital, that the great fortunes to which my opponent has alluded are due. - Henry George, The Great Debate: The Single Tax versus Social Democracy
Subsidiarity
A community of a higher order should not interfere in the internal life of a community of a lower order, depriving the latter of its functions, but rather should support it in case of need and help to coordinate its activity with the activities of the rest of society, always with a view of the common good. - Pope St. John Paul II, Centesimus Annus
The third principle of distributism - the principle of subsidiarity - is less well known, but deserves just as much treatment as the other principles. Simply stated, the principle of subsidiarity is that the government ought to act on the lowest level which is competent enough to resolve the issue. The lowest levels of government ought to have more power than higher levels, since they are closer to the people they serve. This is the fundamental democratic principle of distributism, which applies the recognized fact that self-governance is best when it remains closest to the people.
While Georgism does not have a philosophy of governance, it can easily be harmonized with distributist ideals. In many governments today, especially the United States, there is a substantial bureaucracy which creates red tape rather than solving problems. This bureaucracy tends to absorb funding and acts as a rent-seeking institution in many ways. A Georgist-influenced conception subsidiarity would seek to eliminate institutional rent-seeking, and only provide funding to those institutions and agencies in each level of government that people actually use. This allows for naturally shrinking the government, permitting it to fluctuate to fit the needs of the people.
To prevent government from becoming corrupt and tyrannous, its organization and methods should be as simple as possible, its functions be restricted to those necessary to the common welfare, and in all its parts it should be kept as close to the people and as directly within their control as may be. - Henry George, Social Problems
Family Policy
This triangle of truisms, of father, mother and child, cannot be destroyed; it can only destroy those civilisations which disregard it. - G. K. Chesterton, The Superstition of Divorce
The fourth principle of distributism - the family as the primary unit of society - is the least mentioned and least elaborated upon of all of distributist thought. This principle states that in economics, a child cannot be divided from their family, nor a mother from hers, nor a father from his. Distributism asserts that each individual obtains its essential economic meaning within the family community that they participate in.
Georgist policies provides for a number of ways to support the welfare of the family unit. Making the citizen’s dividend start at conception, for example, acts as a child subsidy, encouraging families to have children by helping to pay for their expenses, many of which come in prenatal care and birth. With Georgism’s land value tax comes reduced housing costs, making it much more affordable to raise a family, while promoting strong communities and local enterprise which make it easy for families to prosper and flourish both economically and socially.
While Henry George—steeped in the individualism of the American West and the frontier—did not emphasize the family as a societal foundation, it is not difficult to reconcile the philosophies. Indeed, this is one of the instances where Georgism’s acceptance of classical economics’ Homo Economicus can be significantly helped by distributism’s humane economics. Distributism has a more holistic view of human nature—it recognizes that people need more than simply economic opportunity to flourish. It is within the context of family that work gains meaning and value. Accordingly, a healthy society may require keeping nurturing relationships at the cost of economic efficiency. Distributism affirms that family is not an expense to be accounted for, but the sacred reason for which we work and produce wealth.
A New Vision
This synthesis of Georgism and Distributism presents a unified vision that both sides can support. The common ownership of the Earth and its resources provides the economic basis for a more just society, one which promotes human dignity and self-governance and the welfare of the individual, the family, and the community. Such a society would not only be more equal and more just, it would also, through the elimination of the burden of unjust taxation, be far more efficient and prosperous than our modern society. It would be a society in which all wealth is accumulated only by contributing to the common good, and not by the extraction of rent. This is a vision which ought to appeal to both distributists and Georgists—one which we all can join in advancing.