My friend Rick Lemarr writes ( my [] contain comments) with:
“More proof that the neoliberals, libertarians, anarcho-capitalists, etc. [Pirates & privateers] who have infiltrated the Georgist movement are wrong.”
What he calls “neoliberals, libertarians & anarcho-capitalists” I label simply as privateers. The reason is that the arguments they use, referred to as “economic-royalism” by FDR in the 30s and 40s, valorize selfishness, wealth and property in a way that devalues labor and justifies asset stripping and usurpation of private wealth. Henry George, an economist from the 19th century, developed a school of economics which addressed unearned income starting by explaining that nature's bounty is a common property of all of us and so vital a right, that it should not be an absolute one. He made the distinction by talking about how people have “property in” land, in the product of their labor and capital. And how the person who owns capital as wealth, rather than tools he/she him/herself is using, ought to acknowledge the “property in” rights of workers. Henry George was a champion of the renter over the rentier, and he didn't exclude capitalists from his argument. That is a mistreatment of his writings.
He quotes H. George here:
“Interest from capital, or "capital yield" does not” [should not] “belong to the owner of the capital, or to “capital as capital,” but only to the USER of capital.”
This meditation is part of a series of posts on capital and labor:
Important Matters
Henry George Was explaining some important matters:
“Observe, again: It is not, as is carelessly stated by some writers, the increased efficiency given to labor by the adaptation of capital to any special form or use which fixes this maximum, but the average power of increase which belongs to capital generally. The power of applying itself in advantageous forms is a power of labor, which capital as capital cannot claim nor share.”
What “Labor Comes Before Capital” means
Abraham Lincoln understood this point when he said that “labor comes before capital” is an ontological distinction. That is labor by definition creates capital. Not the other way, except to the extent that capital goods might labor unguided, which would be an entirely new can of worms. Thus the user of capital has a natural interest in the product of that capital. At the same time the presence or absence of capital and raw materials creates the thresholds for production of food and services necessary to the well being and survival of both labor and those rentiers who style themselves capitalists. The following examples illustrate:
“A bow and arrows will enable an Indian to kill, let us say, a buffalo every day, while with sticks and stones he could hardly kill one in a week; but the weapon maker of the tribe could not claim from the hunter six out of every seven buffaloes killed as a return for the use of a bow and arrows; nor will capital invested in a woolen factory yield to the capitalist the difference between the produce of the factory and what the same amount of labor could have obtained with the spinning wheel and hand loom.”
An Inalienable right or Interest in Capital
Labor has an inalienable right to property in, “Interest” the capital goods it uses
“William when he borrows a plane from James does not in that obtain the advantage of the increased efficiency of labor when using a plane for the smoothing of boards over what it has when smoothing them with a shell or flint. The progress of knowledge has made the advantage involved in the use of planes a common property and power of labor. What he gets from James is merely such advantage as the element of a year’s time will give to the possession of so much capital as is represented by the plane.”
Custodial versus Use Property
One can think of capitalists as the custodians of capital. They govern a set of (one or more) properties, that they employ others to use to produce wealth and services in return for exchange. The people who use capital have an interest in that capital as well. Something owners often pretend not to be the case. To hear the creators of giant monopolies like Amazon or Facebook tell it sometimes, labor and users had nothing to do with their creations. They did it all themselves. They will claim that a contract can legally quit completely the ownership of the person who created a thing or used a tool to create with. That that kind of sweat equity is inalienable is demonstrated by the effects that such attitudes, laws and contract enforcement have on creators, users and employees. A person has a natural interest in his or her associations. And that interest is tied to the fundamental inalienable right to pursue happiness. Stealing wages may be legal (hence my term privateering), but is oppression and inequity. Catch 22 contracts may be legal, but they are still unjust.
Fair Treatment is a Basic Human Right
Economists like Ernst Wigforss, Keynes, and post-marxists profit from this basic human rights argument because it doesn't rely on demonizing capitalists or making workers into heroes. It's not inevitable that workers should "seize the means of production." There is a role for management and private government of business, as long as it is done respecting the interests of those being governed. This is also why Keynes and Wigforss were successful when Marxists like Lenin, Stalin, Trotsky and Mao were not. It is easy to use sloganeering to talk about everyone being equal. But a persons interest in capital is specific and most competencies are too. A man who can wield a blowtorch, has the same basic ability to use reason as the man wielding a pen, but they have specialized. Thus it is appropriate for the man wielding a blowtorch to be consulted and have a say in how the company employing him and his blowtorch are used, and the society that employs the company. But he usually doesn't even want to run the company or the country. Just fair treatment related to his interest in it. It is fair treatment that is the basic human right. And workers have a basic right to their share of capital interest. What goes to the company managers and nominal owners is derivative of their labor. As Henry George noted, a certain amount reflects “the labor of intendancy.” The rest is unearned.
Marx came up with broad generalizations and advocated for revolution that would somehow put workers in charge of running their own businesses and specified that eventually the state would melt into anarchy. This never made sense. It is why H. George could refer to Karl Marx as "that muddlehead." I think many of his modern “disciples” could be described as equally muddleheaded. That is why Ellerman, said:
“Marx, Lenin, and the Russian Revolution have set back the Left for over a century. More like a century and a half. [Talk-PDF]
The point is that income from sales of a thing or service, produced by “mixing labor with capital”, for example operating a dentist drill to fill a tooth cavity, belong primarily to the dentist, or other person operating the thing. Henry George would not want to expropriate property belonging to one dentist borrowed by another. But he would have been fine with taxing the "interest" from that capital appropriated from a hired dentist and not paid to him. Because unearned interest is really a form of economic rent.
Earned Interest
Still technically both the dentist using the drill, and the dentist who bought it, have an interest in that drill, or more importantly, in the revenue from charging the patient for a dental procedure. That interest from labor is a basic right because the laborer otherwise is denied full value and sufficient resources for his/her own survival. The interest from capital is also a right, but not an inalienable one. It is to be protected as long as it is reused as capital to fix, update or replace drills, keep the shop open and pay the dentists. It is property in capital acquired by sweat equity. It is also "interest" in capital. Income from capital and labor are so important that labor compensation should be privileged in taxation and capital reused as capital as well. Additionally things like retirement compensation and savings represent earned income for those who were privately taxed and/or provided the savings. A soldier has an inalienable interest in the country he fights for. A worker an inalienable interest in the business he works for. Denying such interest is a wrong, even when corrupt laws protect it. Hence my term privateering for the behaviors labeled "capitalism" by unscrupulous actors. And as Ellerman and Wigforss maintained, these are basic rights.
Unearned income and interest
Conversely when a person (or private government corporation) employs workers, the employer has a legitimate interest in the income from the capital he/she protects. That interest ought to be protected by the tax code as capital goods require constant replacement, refreshment & maintenance. But since not all of it is earned by the labor of the capitalist, not all of it deserves complete protection. And much of the value of an enterprise comes from labor. When such interest is sold or taken out as loot, it becomes unearned rental income and an unearned interest in the enterprise. It should be taxed progressively.
Henry George, Progress and Poverty (1879), Book 3, Chapter 5, Paragraph 3, The Law of Interest
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