The Corruption of Economics
The electoral fraud that was used to cheat Henry George and the world of his stewardship of New York City, and the earlier silencing of his voice when the railroad barons bought his newspaper, gives an idea of the kind of forces that were marshalled against him during his lifetime.
So, naïve as we were, we were coming to more easily imagine how, after his death, his legacy was covered over so that it doesn’t even exist as a footnote. Yet it remained extraordinary to us that an analysis, so clear and so obviously true, could possibly have been completely ignored by academics.
Mark Braund, in The Possibility of Progress, addressing the academic avoidance of the classical economists, (Smith and Ricardo, whose work Henry George completes) says:
Ricardo’s law of rent is little considered by the practitioners of the neo-classical economics which holds sway today. Perhaps modern day economists find it too difficult to get to grips with; or perhaps they prefer to sacrifice their intellectual integrity, rather than confront an essential law of economics, the implications of which are profound and far-reaching, directly threatening the balance of wealth and power in the world. The law of rent is not difficult to understand, but it is essential to understanding how the economy works, for it precisely explains why the free market consistently fails to distribute wealth equitably as Adam Smith had hoped it would.
And as Henry George describes how it would. Perhaps it’s just as John Dewey says:
In the case of the author of "Progress and Poverty" the failure has doubtless been accentuated in academic circles by the fact that Henry George thought, wrote, and worked outside of them.
Adam Smith, along with David Ricardo, John Stuart Mill, and John Locke earlier, and others, are of the school of thought known as Classical Economics, the warping and perversion of which is known as Neoclassical Economics. Henry George expresses his ideas in terms set out by classical economists, principally Smith, Mill and Ricardo. More about all of this stuff in future pages, but these are observations Henry George made about Smith and Ricardo.
It is impossible to read the works of Adam Smith and other economists without seeing how, over and over again, they stumble over the law of wages without recognizing it. If it were a dog, it would bite them! Indeed, it is difficult to resist the notion that some of them actually saw it, but were afraid of its logical conclusions. To an age that has rejected it, a great truth is not a word of peace, but a sword!
And of Ricardo:
Ricardo's statement of the law of rent has been accepted by every reputable economist since his day. Like an axiom of geometry, it only needs to be understood to be accepted. The laws of interest and of wages, as I have stated them, are necessary deductions from the law of rent.
Please don’t be put off by this talk of economists and schools of thought and axioms of geometry. We know we can’t stop saying this, and we’ll never stop saying it, but when you read Progress and Poverty, everything becomes clear, it is all very obvious, it is obviously true. It only needs to be understood to be accepted.
Leo Tolstoy, the acclaimed Russian reformer and writer of the 19th century, said:
People do not argue with the teachings of Henry George; they simply do not know it. He who becomes acquainted with it cannot but agree.
That’s exactly how we feel about it, once you know this, you cannot but agree. We’ve never read any Tolstoy, but we’re inclined to one day. Tolstoy also said:
The chief weapon against the teaching of Henry George was that which is always used against irrefutable and self-evident truths. This method, which is still being applied in relation to George, was that of hushing up ....
And that’s what’s happened in the century and so since his death, he was hushed up.
Mason Gaffney, in The Corruption of Economics speaks about the imperative to put down Henry George and uncovers the precise methodology and history of the neutralising of Henry George’s ideas.
The inevitable counterattack came to be called "neo-classical economics" (NCE), as though it were simply a natural development and improvement of tried-and-true classical economics. Rent-taking had to be made to appear useful in functional economic terms. The classical underpinnings of George had to be undone in a fairly subtle way, to seem simply evolutionary. There had to be some legitimacy of apostolic succession, while also nodding to the cult of progress. "Neo-classical" was an inspired stroke of public relations, suggesting modernity coupled with continuity of tradition. It is not, however, an accurate description. It was a radical paradigm shift. The task was to vandalize the stage Mill had set for George, torch the old furnishings, and reset the stage permanently in ways to discomfit George and frustrate future Georgists.
After reading Poverty and Progress, we’ve been drawn a little further into it, becoming particularly interested in just how Henry George was hushed up.
We found a bit that shows that Henry George saw this starting to happen:
'Progress and Poverty' has been, in short, the most successful economic work ever published. Its reasoning has never been successfully assailed, and on three continents it has given birth to movements whose practical success is only a question of time. Yet though the scholastic political economy has been broken, it has not been, as I at the time anticipated, by some one of its professors taking up what I had pointed out; but a new and utterly incoherent political economy has taken its place in the schools.
Gaffney describes a succession of scholars who worked on changing the landscape of economics, introducing almost mystical notions of capital, capital seeping into the land, the blurring of fundamentals, that would influence policy that gradually shifted more of the tax burden onto wage earners.
The followers of George very well knew their way around classical economics, so the terms of economics had to be obfuscated, warped out of understanding. Academic courses were funded specifically to subvert Georgism. Academics teaching Georgist economics tended to lose their jobs.
Neoclassical economics prevailed, of course, and has brought us to this place. Eventually people could only relate to the economics question in terms of the false ideologies they were indoctrinated in; and if it didn’t represent anything that made any sense, that would be because it’s a specialist subject for experts. This couldn’t have happened with Henry George in the pool of public knowledge.
Mason Gaffney says:
George showed that a tax can be progressive and pro-incentive at the same time. Think of it! An army of neo-classicalists preach dourly we must sacrifice equity and social justice on the altar of "efficiency." They need that thought to stifle the demand for social justice that runs like a thread through The Bible, The Koran, and other great religious works. George cut that Gordian knot, and so he had to be put down.
On just one small point ever will we take issue with Mason Gaffney, where he talks of Henry George cutting the Gordian Knot; we don’t think he cuts it, we think he unties it. Alexander the Great, presented with the problem of this knot, slashes through the Gordian knot with his sword, with the arrogance and entitlement of the god he believes himself to be; but Henry George carefully unties the knot, leaving the pieces unharmed (and as the local myth had required.)
At least Henry George didn’t share the fate of poor Adam Smith, who surely didn't deserve how he has been represented and could well be spinning in his grave.
The discovery of Adam Smith’s work had inspired a young Henry George. Smith is the moral philosopher who gave economics the notion of the invisible hand of the market, describing the mechanism by which human exchange generates wealth for society (again, ideas completed by George’s analysis.) Adam Smith had said in The Wealth of Nations a century before, in 1776:
Both ground-rents and the ordinary rent of land are a species of revenue which the owner, in many cases, enjoys without any care or attention of his own. The annual produce of the land and labour of the society, the real wealth and revenue of the great body of the people, might be the same after such a tax as before. Ground-rents, and the ordinary rent of land are, therefore, perhaps the species of revenue which can best bear to have a peculiar tax imposed upon them.