Mr. Henry George:

An Examination of Mr George's position as a
Systematic Economist and a Review of
the Competitive and Socialistic Schools of Economy

Robert Scott Moffat

[Book V / Chapter II / 1885]

CHAPTER II / MR. GEORGE'S RICARDIAN THEORIES

We have now only to take a parting glance in its entirety at the problem with which Mr. George has endeavoured to deal. It is impossible, as I have said, to deal satisfactorily with the distribution or wealth, whether actual or contingent, independently of the distribution of labour. No one has dealt with this question more methodically than Ricardo. A believer in the Malthusian theory of populations, Ricardo, like Mr. George, believed that rent was destined gradually to absorb nearly the whole proceeds of industry, and it is from Ricardo that Mr. George has borrowed the grounds of this belief.

So plausible are the grounds on which Ricardo has based this hypothesis that it has been accepted by nearly all his successors. The method of Ricardo's reasoning has also obtained a firm hold on the minds of subsequent economists. I have already explained what that method is, and what admirable results Mr. George has parodied by the process of elimination systematized by so that Mr. George after stating many economical facts of great value has been able to … his aerial conclusions in utter disregard of [unreadable]. Mr. George has thus performed upon the economical system of Ricardo an operation similar at which Hume performed on the philosophical work of Berkeley, when following the method by which Berkeley had eliminated matter, he likewise eliminated mind.

Before examining the doctrine of Ricardo directly, it may be desirable to say a few words more of Mr. George's development of it. In speaking on the laws on the distribution of wealth of "the improvement of the arts" Mr. George uses a very [unreadable] term. Of course he means industrial arts, of these there are two kinds which, in relation affect distribution differently: 1st. Improvements in agricultural arts, or in the raising of material generally; 2nd. Improvements in the relating to manufactures, or the processes of acquiring raw material for use. The primary [unreadable] of the former class is to lower rent; for [unreadable] the same amount of produce to be raised on land, it throws a part of the land that would, otherwise be occupied upon the market, and introduces competition among owners for the sale or lease of their land. Ultimately the loss will be lowered; but this arises not from the agricultural improvements directly, but from another factor, the growth of population that results from [unreadable], and when rent rises from this cause Mr. George fails to see that it does not necessarily rise relatively to aggregate revenue. Improvements in the manufacturing arts liberate labour for the production of raw material, and have thus a tendency, apart from the growth of population, to raise rents positively, but by no means necessarily in the ratio of the actual increase of production. They have a more distinct tendency to give an apparent rise of rent in another way. By lowering the cost of production of manufactures relatively to agricultural produce, on which the value of rent primarily depends, they enable rent to purchase more of them; but this is an increase relatively to the former purchasing power of rent, not relatively to the present aggregate of produce.

When there is an increase in manufacturing facilities, there also arises a demand for more elaborate products. Suppose at a given stage of industrial development that for every labourer employed in producing raw material, three are employed in preparing it for use. Let a great improvement take place in the economy of labour, whether manufacturing or agricultural, and it will be found that with it will arise a demand for more elaborate and better commodities of all kinds. This will tend to arrest the tendency of manufacturing improvement to increase population and to increase the consumption of raw material. That this effect is produced in a high degree by the improvement of manufactures, will be seen if we consider that the finishing processes required for the preparation of food from raw material vary comparatively little, and the demand for food varies only with the population; but with the demand for mannufactures there arises a demand for all kinds of commodities which require little labour compared with food for raw material. If, then, agriculture share moderately, as it commonly does, in the improvement, the probability is that the demand for manufacturing labour will exceed the demand for agricultural, so that in the advanced stage four labourers instead of three will be required to work on the raw produce provided by one. This is in accordance with the experience of progressive communities, and, as already shown, it would necessarily give an increased value to finished productions relatively to raw material, and thus cause a relative decline of rent. But to put an end to Mr. George's speculation it is only necessary to take a more precise view of the possible extent to which improvements, unaided by growth of population can possibly advance rent. Let us then take Mr. George's illustration of a stationary population. Let us assume that the improvements are exclusively manufacturing, that being, as shown, the only kind tending to increase rent. Let us for the sake of convenience assume that the improvement is equal to 10 per cent, on manufacturing industry alone, not on the entire industry of the country. Then the raw produce remaining the same, 90 per cent. of the existing manufacturing industry would suffice to work it up, and there would only be 10 per cent, left for all new enterprises. Suppose the labour of preparing raw produce for use to require three men for one required to produce it,, then the whole additional demand that could go to raise rent would be one-fourth of the available labour. But, as any rise in rent implies a rise in the price of raw produce, in so far as rent rose, part of the surplus of wages and capital available for increased production would be absorbed by it. Therefore the additional demand for raw produce could not possibly extend to a full fourth of the saving, unless the landlords who gained what the capitalists and labourers would lose, should spend their whole gain on commodities. But this is not the natural course. The landlords, finding their gains increase, would add something to their capital, in order to spend it in improving the source of their gains. Now capital spent in agricultural improvements, while it tends to increase the gain of the particular improver, tends to lower rent generally. This illustrates the futility of Mr. George's attempt to deal with the distribution of wealth independently of tbe distribution of industry.