Henry George was born at Philadelphia on September 2, 1839. After spending some years at sea, he reached California in 1858, became a printer, and later a journalist and director of the public library in San Francisco. In 1871 he published "Our Land Policy," and this was afterwards developed into "Progress and Poverty: an Inquiry into the Causes of Industrial Depressions, and of Increase of Want with Increase of Wealth," issued in 1879. The book soon acquired a world-wide reputation, not only from the eloquence and beauty of its diction, but from the author's novel theory of land taxation. In 1880 George removed to New York, published a book on the Irish land question, and for some years afterwards undertook a succession of missionary journeys to Great Britain, Australia, and New Zealand, the result of which was the foundation of the English Land Reform Union, the Scottish Land Restoration League, and the legislative adoption by the different Australasian colonies of his scheme of the taxation of land values. Among other economic works he issued were "Protection or Free Trade," "The Condition of Labour," and "A Perplexed Philosopher." George died on October 29, 1897.
I.—Wages, Capital, and Wealth-Distribution
The past century has been marked by a prodigious increase in wealth-producing power. It was naturally expected that labour-saving inventions would make real poverty a thing of the past. Disappointment, however, after disappointment has followed. Discovery upon discovery, invention after invention, have neither lessened the toil of those who most need respite nor brought plenty to the poor. The association of poverty with progress is the great enigma of our time.
I propose to attempt to solve by the methods of political economy the great problem; to seek the law which associates poverty with progress and increases want with advancing wealth.
The inquiry is—why, in spite of increase in productive power, do wages tend to a minimum which will give but a bare living? The answer of current political economy is that wages are fixed by the ratio between the number of labourers and the amount of capital devoted to the employment of labour, and constantly tend to the lowest amount on which labourers will consent to live and reproduce; because the increase in the number of labourers tends naturally to follow and overtake any increase in capital. This argument is inconsistent with the general fact that wages and interest do not rise inversely, but conjointly. My proposition is that wages, instead of being drawn from capital, are in reality drawn from the product of the labour for which they are paid.
The three agents or factors in production are land, labour and capital, and that part of the produce which goes to the second of these factors is wages. Land embraces all natural materials, forces, and opportunities, and therefore nothing that is freely supplied by nature can be properly classed as capital. Labour includes all human exertion, and hence human powers, whether natural or acquired, can never be properly classed as capital.
We exclude from the category of capital everything which must be included either as land or labour, and therefore capital consists of those things which are neither land nor labour, but which have resulted from the union of these two original factors of production. Nothing can be capital which is not wealth; only such things can be wealth the production of which increases, the destruction of which decreases, the aggregate of wealth. Increase in land values does not represent any increase in the common wealth, for what landowners gain by higher prices the tenants or purchasers will lose.
All wealth is not capital. Capital is only that part of wealth which is devoted to the aid of production. It is wealth in the course of exchange, for production includes not merely the making of things, but the bringing of them to the consumer. Wherever we analyse the facts we find that without production wages would not, and could not, be. As the rendering of labour precedes the payment of wages, and as the rendering of labour in production implies the creation of value, the employer receives value before he pays out value—he but exchanges capital of one form for capital of another form. Hence the payment of wages in production never involves the advance of capital or ever temporarily lessens capital.
Nor is it true that the maintenance of labour is drawn from capital, and that therefore population regulates itself by the funds which are to employ it, for that would involve the idea that labour cannot be exerted until the products of labour are saved, thus putting the product before the producer, which is absurd. Capital, therefore, does not limit industry, the only limit to industry being the access to natural material. Capital may limit the form of industry, and the productiveness of industry, by limiting the use of tools and the division of labour. The functions of capital are to assist labour in production with tools, seeds, etc., and with the wealth required to carry on exchanges. All remedies, whether proposed by professors of political economy or working men, which look to the alleviation of poverty either by the increase of capital, or the restriction of the number of labourers, or the efficiency of their work, must be condemned.