224 Economic Theory: An IntroductionHenry George (1839-1897)
Henry George was bom in Philadelphia on September 2,- His formal education ended at age fourteen but he ran
away to sea and his travels stimulated his thinking about eco
nomic matters. The essential question which dominated his
thinking, and later his economic theory was the question, “How
can there be so much poverty among so much wealth?”
Following his experiences at sea, he settled in San Francisco
and worked as a printer and free-lance writer. He also worked for
several different California newspapers. While working for the
Sacramento Reporter he led a vigorous attack on the land grant
policy which gave the railroads a land monopoly. In 1871 he
wrote a pamphlet, Our Land and Land Policy, in which he
detailed his views about the railroad land monopoly and the
resulting boom in California. He concluded that holding of land
by the very rich few, extracting rent from the very poor many,
was the basic cause for the great and unnecessary disparity of
wealth.
His major work, Progress and Poverty, published in 1879, set
forth his observations of the problem and his proposals to solve
it. Simply stated, George contended that those who own the land,
and can afford to hold it, extract unearned income in the form of
rent, and unearned profits that accrue when they sell the land at
an inflated price. His solution was a “single tax” on the value of
land.
Progress and Poverty begins with George disputing two
theories which he felt were not true, although they were in vogue
at the time. The idea that employment was contingent upon
existing capital, George claims, is false. Rather, it is the demand
for consumption, or the needs of the people that really employs
labor. Therefore, the claim that capital employs labor is really
the reverse of the reality. Also, Malthus claimed that poverty was
the result of overpopulation. Once again, George claims foul. It
is observable that famine and underfed people exist in under
populated as well as overpopulated areas. If this is so, then there
must be reasons other than those advanced by Malthus which
cause the problem.
Next, George analyzed the problem of distribution. The three
factors of production—land, labor, and capital, are related to the