Book VI:
"The Remedy"

Chapter 1: "Insufficiency of Remedies Currently Advocated
Chapter 2: "The True Remedy"

Chapter 1:
"Insufficiency of Remedies Currently Advocated"

1. Into what six classes does George array proposed remedies for review? 300

Economy in government, education, unions, cooperatives, governmental interference, and wider land distribution.

2. Would labor gain from economy in government? 301.

No. Do you fully agree? Most readers think he overstates the point. Good government should raise the productivity of labor at the margins, and raise wages.

3. How would economy in government affect the margin of production?

Extend it. George likens economy in government to an advance in the arts, which he says is labor-saving. (We have taken issue with that point, in commenting on his chapter on "The effect of advance in the arts," because these advances may also be land- saving.) However, what if government disgorges surplus landholdings, so idle land can be put to use by private people? What if economy in government allows a reduction of destructive payroll taxes, and taxes on buildings, machinery, furniture, and fixtures? These economies in government will raise the margin for labor, and investment too.

4. How was "Boss" Tweed's popularity affected by his prison sentence? 302

He was cheered. The proletarians felt he had not robbed them. He was a Robin Hood to them. Can you think of later such cases? How about Ferdinand and Imelda? There is still the Daley machine in Chicago. In parts of Oklahoma, Arkansas and Tennessee an honest man could be in danger. The Mafia is reputed to control garbage pickup, gambling, trucking, and other things in some cities.
In modern California the main business of plucking cities has gone middle and upper class, and grown more sophisticated, professional, and respectable. It is done now through bond sales, investment bankers, law firms, engineering consultants, construction firms, redevelopment agencies, Chambers of Commerce, civic boards, and land developers. Most of the persons involved are main line Americans: Elks, Kiwanians, Rotarians, Shriners, and patrons and monitors of charities, hospitals, churches and universities.

5. How does George use China to illustrate his point about the effect of education on wage rates? 305, 308

Widespread education simply made employers take education for granted. It did not prevent wages' falling to a subsistence minimum. Cf. Ireland today, where McDonald's in Dublin is staffed entirely by college graduates.
Today we might compare Japan, where the life of students is living hell from an early age. Students are trained to cram for weeks on end with 4-5 hours of sleep a night. Exams are used not so much to encourage learning as to test endurance and docility. Suicide rates are high. The suicide rate is a pretty good index to how people evaluate their own lives. Natural savages may suffer high death rates, but not by their own choice. So far the system "works," in spite of the misery it brings, but who gains? The value of land in Tokyo rises to $10,000 per square foot, about 10 times the maximum found in major American cities. Not much incentive to hara-kiri if you fall into a piece of that action, but quite an incentive if you have to buy your way in.

6. How does George use Ireland to illustrate his point about the effect of cheap food on wage rates? 306

Introducing the potato in Ireland let the Irish live on less land, so they bid up rents. But since potatoes are land-saving it would seem something more is needed to complete the explanation. Land-saving technology lets rent rise on the lands where it is used, but should release marginal land and thus raise wage rates at the margin. What is the missing chapter in this story? There must have been clearances and enclosures that offset the otherwise benign influence of the land-saving potato.

7. What would George say about two-income families? 306

Where it becomes habitual for wives (and children) to work, wages are driven down so that subsistence is impossible without whole families working. He might have added that "lower wages" also take the indirect form of higher prices for housing.

8. Which is cause and which is effect: personal character, or the material conditions of life? 309

The material conditions of life determine personal character. Raise the conditions and character improves. Do you agree? One is tempted to question this view by looking at how much harder immigrants work than native Americans do; how much harder New Yorkers study than Californians do. But before interpreting the evidence this way, read George closer. He says that higher wages act to improve the character of "the laboring classes." Much of the dissipation and idleness we observe among rich American kids may be the result of their parents' rent income, and/or the futile emulation of the rent-taking rich by wage-earners who lack the unearned incomes needed to ease the path to luxury.
How about this? The children of wealthy people must be trained to conserve that wealth, or they will lose it. If the wealth is in land, the income flows in effortlessly, and the need for character, training, and self-control are at a minimum. If the wealth is in capital, on the other hand, it wears out and turns over and must constantly be reinvested and managed. In a society with low rents, or socialized rents, the possession of wealth would be only the possession of capital, not land. Thus is would require more character, self-discipline, and ability, not less. It is the ability to receive unearned income in perpetuity that spoils people, both those who receive it and those who observe it and grow cynical or emulative. Capital, on the other hand, must be intelligently redirected each time it turns over.
In Kuwait, the high oil rents are divided among all Kuwaitis as a social dividend. The result is that Kuwaitis import Palestinians and other landless people to do the hard work.
The upshot? It's not as simple as George says, but he steers us to issues of real consequence and suggests deep answers. This time, perhaps, he took on more than he could handle in a few words; but George was not one to dodge the big questions, and that keeps him interesting.

9. Who was "Bunyan"? 310

John Bunyan, author of Pilgrim's Progress, a widely read moralistic tract in George's time. Not to be confused with Paul Bunyan.

10. How do unions affect wages? 310

Unions raise wages in the affected trades, at the expense solely of rent. "The rate of profits" (MROR) is not reduced. Here, George evidently means the rate of return on investments of capital, which he had originally resolved to call "interest." He also clearly means returns to new capital; he notes that "fixed capital" (evidently meaning sunk capital) sometimes be milked by a union.
He denies that unions lower wages in other trades. But on p. 312 he seems to contradict this indirectly when he says that the amount of work called for in the unionized trade might diminish. That would tend to raise prices and shunt workers into other trades. Both of those would tend to reduce real wages in other trades.

11. How does "fixed" capital circulate? 311

It is "only somewhat" less mobile than circulating capital, meaning it wears out fast and yields a surplus from which it is replaced. Here, as elsewhere, George makes capital out to be highly plastic and accommodating.
Ricardo had noted that the distinction between fixed and circulating capital is a difference only of degree. All capital circulates; "fixed" capital simply circulates more slowly. However, Ricardo, unlike George, also noted that the difference might be very great. Some capital yields back this surplus only very slowly, and the freezing of much capital in fixed forms can seriously deplete a country's fund of circulating capital with which real wages are paid. There may be, as Haberler said, a "glitch" in the market mechanism for recovering or liquidating sunk capital in times of severe need.
George would have done well to pick up on this point from Ricardo: he might have used it to support his explanation of business cycles, discussed later. The missing link in George's explanation of crashes is his overlooking this Ricardian point. He could have used it as follows. High land values stimulate land-saving and land-linking investments. Such investments are more "fixed" than labor-saving investments, i.e. they circulate or turn over slower. Thus, high land values make liquid capital freeze and clog the macro-economic pipelines.

12. How would it affect the product mix to double wages in a nation? 312

George says the country would continue to import and export the same things as before. This is based on the silent assumption that wages constitute the entire cost of production. But in fact that is wrong, factor mixes vary extremely from firm to firm in any industry, and from industry to industry too. George may have been a pioneer marginalist, but he backslid badly here to the classical labor theory of value.

13. What is a "compositor"? 312

A typesetter or printer. George was a member of the printers' union, and remained a member even later, when he had become an editor, publisher, and author. Those were times of natural democracy. Robert Schalkenbach, a printer, showed his appreciation by founding the Foundation that still publishes George's books.

14. What does it mean "to stand out"? 313

To hold out, i.e. to forego income in order to bring others to terms.

15. Why does land win struggles of endurance with labor? 313-14

"... what is inconvenience to them (landholders), is destruction to capital and starvation to labor."
Both sides have of course developed advanced skills in this warfare. Farm labor, for example, sometimes gains an edge by striking at harvest time when employers are vulnerable. On the other hand employers have responded by converting land to less intensive, less vulnerable crops, and substituting machinery for labor (with help from research supported by taxpayers at the University of California).
Some industries welcome strikes in order to help them restrict output and use their monopoly power. Some employers build networks of branch plants around the world so they can close down struck plants. Landholders continue to hold the high cards.

16. How is George using the word "farmers"? 314

In the English sense, where a "farmer" is a capitalistic but landless businessman who rents land from a landlord and hires workers, thus standing between the two.

17. What lets landholders combine easily? 315

The fixed and definite nature of land. Also, speculation produces the effect of combination even without combination. One could add more. Much land is in large holdings, employing many men, so already you have one employer dealing with many employees. Then there is Veblen's cogent point, that corporations in their very nature are combinations. But the law, dominated by landholders, has habitually exempted corporations from the rule against combinations and conspiracies, while labor unions were long held illegal as combinations in restraint of trade.
People come and go, but the large landholdings of today are in considerable measure the same as those of 1935. The owners have had generations over which to build up networks of mutual interest and aid: a "comity of property." For specifics, see notes on "Who Owns Southern California?"

18. Why are unions inherently tyrannical? 315-16

Because a strike is a warlike act, so unions come to be organized like armies. It is not that businesses are so democratic, except by comparison. It seems the unions are organized so militaristically and hierarchically that they could not or would not let any rep participate in a free discussion.

19. How does George's breakdown of "cooperation" into two parts differ from the breakdown in common use today? 316 ff.

George has two kinds, cooperation in supply, and in production. Cooperation in supply means displacing middlemen. This is what we mean by a "Cooperative" today, and two main kinds are recognized: consumer coops, which are retailers; and producer coops that market for organized suppliers. George's cooperation in production refers to participation in risk, and includes sharecropping, selling on commission, profit-sharing, etc. These arrangements are called " participation" today. They are very common in most trades, and may reach high levels of complexity and (perhaps) sophistication, as in cinema distribution contracts.

20. What forms of participation are common today?

Farm sharecropping; mineral royalties; commercial rents which include a cut of sales; commissions; ESOPs; profit-sharing; etc.

21. Are they always geared toward promoting abundance?

They are exempt from prosecution under the anti-Trust Acts, thanks to the Capper-Volstead Act of 1922. They often act like any other monopoly, dividing and exploiting markets, controlling output, and destroying what they call "surpluses."

22. What is the "colonial or metayer system"? 317

Metayage is French for share-cropping; a metayer is a share-cropper. The words are used in Europe.

23. What was a "lay" (in 1879)? 317

A percent of the whaling catch, given in lieu of other wages. Social pressure, and the camaraderie of a crew on a long journey, took care of slacking.

24. Why does George not expect sharecropping to improve the lot of tenants? 318

It is just another way of collecting rent. If it is more attractive to the renter than the equivalent cash rent, it will simply raise rents, and force cash rents up too, to compete.

25. How does George regard income taxes? 320

Negatively. He foresees "a large number of officials clothed with inquisitorial powers; bribery, perjury, evasion, and demoralization of opinion, a tax upon conscience and a premium upon unscrupulousness, a lessening of incentive to accumulate wealth." Pretty good forecast.

26. Was he right to treat income taxation under the heading of "Governmental Direction and Interference"?

It's worked out that way, hasn't it? In some textbooks income taxes are called "neutral," that is, a way of raising revenue without distorting incentives. That is wishful thinking: George’s insight was more on the mark.

27. Did the Jesuits really cover themselves with glory in their governance of Paraguay? 320

Not if we judge by the modern result, the bloody tyranny of Alfredo Stroessner.

28. What role for religion does George see in public affairs? 320

George, the only economist who routinely quotes Scripture with sincere intent, notes that the success of socialism would presuppose a strong religious faith, which is "wanting and is daily growing less."

29. What does George mean, "Society is an organism, not a machine"? 321

Society lives by the individual life of its parts, meaning the people in it. They would be stifled and suppressed if regimented. Again, this turned out to be a good forecast of events in Eastern Europe, even though socialists claim this is not "really" socialism.

30. What was "free trade in land"? 321-22

A British movement to free land from all restrictions on sale and use, in the belief that the market would then allocate land to its best use. British land had long been subject to primogeniture and entail and other restrictions on alienation, known collectively as mortmain (dead hand) provisions because they were imposed by persons now dead on persons now living.
"Free trade in land" was the conservative version of land reform. It followed the views of the "Manchester School," who believed free markets are a panacea, the golden key to solve all problems. Today in the USA, the same ideas are identified with "The Chicago School," libertarians, etc.

31. How does George criticize free trade in land?

It merely allows "the ownership of land to assume more quickly the form to which it tends," i.e. the form of concentration. If the objective were to equalize the distribution of economic power, free trade in land would not help.
The United States has practiced virtual "free trade in land" for over 200 years. Concentration has indeed risen to very high levels. Free markets tend to equalize distribution of land in the presence of substantial tax rates on landownership; otherwise not.

32. How does George criticize census data that show mean farm sizes falling? 322-23

a. Value per acre is rising faster than acres per farm are falling, so in value terms the mean size is rising.

b. The share of the population owning land is falling.
A few years later George did a more thorough job on this point, in an article called "The March of Concentration." He was challenged and put down somewhat condescendingly by (retired) General Francis A. Walker, Director of the Census, President of MIT, and Founder and First President of the American Economic Association—a formidable figure indeed. George replied in a heated debate in which he refuted Walker by inventing what is now called the Lorenz Curve, a means of expressing concentration as dispersion around the mean, rather than simply the mean itself. Walker was embarrassed, but was big enough later to moderate his views.
This debate may be found as an appendix to most editions of George's later book Social Problems.
Since that time the Census has reported on farm size by ranking farms according to size and telling us what percent of the farms contain what percent of the land, the way George said they should. The trend of concentration has been generally upwards from then to now, especially after 1930, when farm property tax rates took a deep fall. George's analysis and forecast were sensationally right. This is illustrated and documented in M. Gaffney, "Falling Property Tax Rates and Rising Concentration," available for this course. (Don't attempt this one unless you want numbers.)
George, like Marx, was impressed by economies of large scale machinery and firm organization. He maintains that operating economies of scale, rising with the size of machinery, are what make farms get larger. On this point, George and Marx have much in common. They were subject, after all, to the same influences, writing at roughly the same time.
Others, like Veblen (The Instinct of Workmanship) and E.F. Schumacher (Small is Beautiful), see more real economic efficiency in smaller productive units. Veblen, in Absentee Ownership, holds that landholding units grow larger for speculative reasons: people buy excess land as a store of value, without regard to operating economies. To Veblen, these bloated landholding units are what make operations grow larger.
Veblen's position is consistent with, and a logical extension of George's observations about "half-tilled acres" held by speculators. He was, in this respect, "more Georgist than George himself." Who was right? We could argue for months over that, and many people have. The point about George, however, is that it doesn't matter. Let the most efficient operator outbid others for land, says George: then tax land on the basis of the values thus set.
Geoclassical economist believes that Veblen and Schumacher were right about this; Marx and George were wrong. See "Falling Property Tax Rates and Rising Concentration" and "Land Reform through Tax Reform."

33. George cites California farms of 5,000 to 60,000 acres; and Dakota farms of 100,000 acres. Since 1879 which have gotten larger, Dakota farms or California farms?

Today we find several California farms larger than 60,000 acres; Boswell's is about 200,000 acres, and SP, Irvine, Newhall, Salyer, Tenneco, Rancho California (Kaiser-Aetna), Mission Viejo, Texaco, Arco, Chevron, Shell and others are right up there. But in (North and South) Dakota, where the value of land is much lower per acre than in California, there is no farm of 100,000 acres. There is also much less dispersion around the mean than in California. Dakota is not exempt from the trend toward concentration, but in California the trend is much stronger. Are there greater economies to scale of operations in California than the Dakotas? Not likely: Dakota is flat, flat land where small grains and sugar beets are the best use. But the speculative value of farmland in California is much higher: climate and location are ideal for high-valued crops, cheap subsidized irrigation water supplies keep increasing, and urbanization is ubiquitous. When we are trying to understand why this drift toward concentration is so strong and persistent, Veblen's speculative holdings may explain more than George's operating economies—and in a more consistently Georgist manner.

34. What were the "3 Fs"?

"3 Fs" were the demands of Parnell and other "moderate" reform leaders in the British Isles. They were Fair Rent; Fixity of Tenure; and Free Sale (of the tenant's interest). The basic idea was to carve out of the landholder's estate a separate interest for the tenant, which he could regard as his property and even sell to others.
3 Fs was also called "Ulster Tenant Right," which is what George calls it, p.324.
It is something like the way residential rent control in New York City, Los Angeles, San Francisco, Santa Monica, and other cities has evolved in our times.

35. How did George evaluate rent control, i.e. things like the "3 Fs"? 324

"... the tenants of the first landlords, who would become landlords in their turn, would profit by the increase."
In recent years Chicago-type economists have published many books attacking rent controls, yet they say little more than George says here on p.324. Again we see George anticipating thinking that has become commonplace since he wrote.

36. What is "plottage," and how would George feel about it? 323-24; 327

George does not use the word plottage, but the idea. Plottage is a real estate term for the increment in value per square foot (or acre, etc.) that is realized by assembling small parcels into larger ones. Plottage is positive only when larger parcels are more economical to develop and operate. George clearly believes that plottage is generally positive, so that laws against land assembly do more harm than good. By clear inference he would also oppose laws forcing subdivision.
George may be missing two points here, an economical and a political one. Economically the small farms have proven much more viable than the believers in scale predict, and the forces leading to concentration are more like those described by Veblen than the operating economies of scale here stressed by George.
Politically, small farmers in settling the American west have often organized to face down and tax the large ones and thus create more small ones. The Homestead Act of 1862 did not prevent most of the public lands' being given away in sweetheart deals to land barons; but it did plant enough homesteaders around to organize counties and various public improvement districts that, in some areas, succeeded in taxing those lands.

37. If land were divided in equal shares, who would be left out? 325

The increase of population. This was indeed the history of New England in the 17th century. The Puritans came from English villages where much land was held in common, and they applied the same system in New England, only more so. The New England "village green" or commons (like the well-known Boston Commons) is a vestige of what was originally a universal system. At first the old settlers welcomed newcomers and shared land with them. They needed friends and neighbors and soldiers to withstand Indian attacks. But in time the old settlers, feeling more secure, converted the lands to private holdings and let the newcomers come as second-class citizens. This movement accelerated after 1692, when William and Mary, the new English monarchs, decreed that the religious test for voting be replaced with a property qualification.
"Newcomers" include not just immigrants from Europe, but immigrants from the future, i.e. children. Families of 12 to 15 were the norm at that time and place, and most of them got left out. Too, there are always Scarlet Letter children, seldom less than 10% of any population. They are people too. Add also the orphans and widows and cripples and war casualties: in any system there are plenty of ways that insiders beget outsiders.
Utah, whose founders were steeped in New England traditions, is still going through a similar evolution today. Brigham Young's system of land-sharing had a lot in common with that of William Bradford.

38. What is morcellement? 326

Division of land into small holdings or "morsels." The word is French because the practice is French and Belgian. The Code Napoleon mandates French testators to divide their lands equally among all their children—the reverse of the English nobility's land covenants mandating primogeniture.
French practice went even further and mandated parcellement as well. Parcellement means each heir must receive an equal quantity of each class of land: village land, plowland, pasture, and woodland. Thus each holding consists of several separate parts, and in some areas farmers spent much of their work days traveling from parcel to parcel. George, observing or predicting this kind of problem, did not favor such "equity in kind," or "French equity" (as we may call it). He favored using the monetary mechanism to achieve the same equity without losing efficiency.
In recent times the French have tried to reassemble scattered holdings into more rational units. They do this through expensive subsidy programs at the expense of the general taxpayer, the working people. Not much equity in that.

40. What is "rack-renting"? 326

A pejorative description of charging a market rent.

41. Why, according to M. de Laveleye, do largeholders need smallholders? 327

As a "rampart and safeguard for the holders of large estates." Accordingly, statesman in other respects conservative or reactionary have been known to push programs to support smallholders. Otto von Bismarck and Adolph Hitler come to mind in Germany; Theodore Roosevelt in the USA. J.B. Clark, George's arch-critic, and founder of neo-classical economics, favored this, too.
American homesteaders were often more radical. The difference may have been their relative youth, and the method by which they acquired their holdings. Homesteaders were required to reside on their farms, often undergoing severe privations. They came into sharp conflict with large landowners, whom they regarded with deep hostility.
It is striking today, however, how little the "masses" require from the "classes" to enlist their support; and amazing how grudgingly the classes allow them that little.

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Chapter 2:
"The True Remedy"

1. How does George phrase the true remedy? 328

"We must make land common property." George was not one to pussyfoot. Most people would have avoided the shock effect of that phrase, whose connotations go beyond what George really intends when he gets down to implementation.
George knew what he was doing. Like Mill, George believed in taking an extreme position in order to make it easier for others to achieve moderate results. That was his chosen role. He played it well: his name has become a synonym for the policies he espoused.

2. What does George mean, "The laws of the universe are harmonious"? 329

The specific reference is to justice: if our remedy "is the true one, it must be consistent with justice."
More generally, George's effort is to identify and work with transcendent, lasting and universal principles. Like Washington, Jefferson and Franklin, George is a deist in spirit, a believer in the rationality and consistency of the universe.
George was also speaking the language of the times, even though those times and that language were passing. People believed there was a "natural order," in which all interests could harmonize. They could see they were losing it. George said, here is how you can retrieve the harmonious "natural order." He knew his audience, and what strings to touch.
More specifically, George refutes the commonplace idea that we must choose between equity and efficiency. That is simply a smokescreen to keep us from achieving either. George identifies a policy that brings us both at once. In his view, the natural harmony reconciles many other superficial opposites, as well. It:

? Stimulates both the demand side and the supply side.
? Is both micro and macro.
? Is both local and national.
? Downtaxes both labor and capital at the same time, without lowering public revenues.
? Stimulates both investing and saving.
? Stimulates both consuming and investing.
? Controls urban sprawl without interfering with the market.
? Reconciles common rights with private rights.
? Attracts capital, and encourages capital formation, without giving away the store or untaxing the rich.
? Lubricates the land market while extracting more tax revenues from it.

The dismal trade-offs we are told we must make are just ways to control and exploit us. The natural order means "we can have it all"! It's a compelling vision. Is it too good to be true? Read on.

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