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Saturday, April 1, 2017

Tricky Politicians Privateers and Land Value

Picture captured from Wikipedia Article

We like to think of our current governmental dysfunction as something new. But it's not. What is going on now is actually the continuation of issues and troubles that have plagued this country since it's beginning. This post refers to Henry George Junior's biography of his father [], which I was able to put a PDF version on my nook, my computer and even my cell phone, so I can read it at my leisure. The book is excellent. Henry George's son was a good son. What he writes about the electoral politics of the 1870's and 1880's could be said about today.

When I first ran into Henry George I found him captivating. But most of what was quoted from him turned out to be from highly edited derivative works, except progress and poverty which makes perfect sense.

Progress and Poverty

Henry George's book "Progress and Poverty" was aimed at providing a solution to the specific problems of the World in the 1880s. It laid out, with logic and reason the case for focusing taxation on unearned rents, and not taxing labor compensation or actual capital. Henry George ensured that his terms were defined and that his arguments were clear and forceful. They were so forceful that a movement gathered around him that wound up being international. Henry George would nearly be arrested in Ireland, be received to crowds and acclamation in Britain, Europe and Australia. His ideas also evolved. Indeed he wanted to write a second book on economics but was sidelined by a stroke in 1891.

Earned Income versus unearned income from Privilege

In Henry George's world, if a person earned a million dollars, he should keep that million. If he was wealthy due to privilege, only that part of his wealth that he actually earned should be his. But if you inherited land, that land is something you got from privilege. When I first read him, some internal alarm bells went off at his support for the giant industrialists of his times, and I had some questions about the wisdom of his "Single Tax" notions on the Land Value tax. But as I dug I realized he was talking about unearned income and not simply a new form of property tax. The more I read him the more he wins me over on the general principles. At the same time I came to realize his modern avatars were not always exactly teaching what he was talking about. Henry George was a man of his times, and in the context of his younger period a land value tax would have been the best way to go after unearned wealth.

Taxes should not fall on Wage Compensation

His critiques of alternative paths were spot on. He warned against the income tax because in practice it would fall on wages. Which it wound up becoming. However, by the time he died the details of how to implement a tax on unearned incomes was becoming more feasible thanks to his work with a man named Thomas Shearman. [more: Shearman]

Unsound Followers

As I studied George most of what I found myself criticizing seemed to me more a critique of his modern followers than of him. He called such followers in his own time; "unsound followers". Henry George was after what we call "unearned income", rent seeking and the LVT tax was a means to an end. He also believed that goods like rails, communications, electricity should be managed in the public interest and owned by Government. I found that in 1892 his followers started ignoring him. And over time Georgism has come to look nothing like what George would have wanted it to be. The result is that people criticize LVT ideas with a false idea of what they are criticism.

For more on H. George late in life, read:

Slick and Tricky Criticism

People like Murray Rothbard can't criticize Henry George's actual positions so they create strawmen.

I started to write this post before I wrote that one, but I started reading Rothbard's criticisms while considering this subject and I had to invoke Holte's law and analyze his dreck for the diamonds of truth within. It's not really my law. it's what dissidents use to understand tyrannical regimes everywhere. The one thing one can rely on oligarchs to do is to fight one another. And so the only time one hears the truth about someone is when one of their enemies is trying to destroy someone and doesn't have the power to just lie about him. One can use logical tables to dig the truth out vast amounts of information. Liars frequently contradict themselves as they mix truth in with their lies to make a case. Tricky Humans is not a new thing. I'm reading about the treachery of Grover Cleveland and other 19th century politicians.

Rothbard's place in economics:

Criticism of Rothbard's Strawman criticism of Henry George

Privateering Versus ???

The reason I came back to this Post is that it introduced the subject of the distinctions and relative value of commodity money versus accounting or paper money. I have a lot to say on the subject, but at the basis of all the problems is the spirit of piracy still prevalent in societies around the world.

Like the modern Day Vons and Vans of the Austrian School, those with money wealth want the money they own to be an absolute physical good and not just be a token for exchanging goods or their value. Not because that is better for society, but because they want to be able to hoard their money and have it preserve its value. The wealthy always advocate for a Gold Standard, coupled with private ownership and control of vital resources, money, banking and debt. They have economists who shill for them and reject theories that might actually work. Some argue that a society where people are productive and actually can play in the markets is somehow "chaotic." Yet when there is both paper money and gold, the Gold gets hoarded and the paper money gets speculated with.

Managing Vital Goods in the Public Interest

They argue that managing vital public goods in the public good would somehow be unrealistic or chaotic. And usually they create straw arguments that pit bureaucratic Government against idealized corporations when the reality is that both tend to be bureaucratic, hierarchical and optimized for those at the apex of their management hierarchy. For example Rothbard rightly claims?:

"Nationalization would not eliminate ownership by individuals; it would simply transfer this ownership from producers to bureaucrats"

But private ownership transfers ownership to Oligarchs, as we've seen in Russia and our own Country. So he is half right. Unless we preserve republican forms in commons management we wind up with hierarchy and aristocracy all over again. Individual ownership has led to bureaucratic control too. The best way to manage a monopoly is as a public utility run in the interest of all the people. Indeed Henry George himself refutes Rothbard (see the meme):

"Privateering doesn't eliminate bureaucracy, just eliminates any checks, controls or balances that employees, users, consumers might have over a vital resource, reduces the power of the people to govern their own resources, and arrogates those powers to the hands of monopolists and oligarchs." [me]

Elinor Ostrom would offer a better way to manage a vital common good:

Elinor Ostrom on Managing Vital Public Goods
More on Public Goods:

Privateering Modern Versus Ancient

In the olden days soldiers would go to war, and one of the functions of an army was to systematically loot the lands it conquered. The same would go with warships. They would be legal pirates. Under Cover of war they were known as Privateers. As economies developed, the privateers gravitated to banking and war-profiteering.

As General Smedley Butler says about World War I:

"The normal profits of a business concern in the United States are six, eight, ten, and sometimes twelve percent. But war-time profits -- ah! that is another matter -- twenty, sixty, one hundred, three hundred, and even eighteen hundred per cent -- the sky is the limit. All that traffic will bear. Uncle Sam has the money. Let’s get it."

And it has ever been such. At one time soldiers made their wealth by looting and killing. Nowadays merchants make their money from building robots, rockets, bombs, armor and charging outrageous prices for them. And this was as true about the Civil War as about World War I, and many wars before and since, including World War I and II.

"Of course, it isn’t put that crudely in war time. It is dressed into speeches about patriotism, love of country, and "we must all put our shoulders to the wheel," but the profits jump and leap and skyrocket -- and are safely pocketed.

The same story could be said about the Revolutionary War, War of 1812, Mexican American War and Civil War.

I have a lot more to say on this.
This was part of a series on Land Value Taxation and money compared to other ideas
Rothbard's dishonest rendering of LVT:
** note Shearman actually promoted an income tax in the end. LVT folks don't like that.
Postal Banking:
This post was started on 4/6/2015. It was nearly ready for putting out at that time, but I needed to edit it. I'm cleaning up my econ posts so I figured I'd finish it so I can cite it. I had to take out comments related to when I was writing it. It's a bit rambling and incomplete. But I hope to tie these all together at some point.

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