Front Cover of Poverty is not Natural

Half Title of Poverty is not Natural

Book Title of Poverty is not Natural

Shepheard-Walwyn (Publishers) Ltd

107 Parkway House, Sheen Lane,

London SW14 8LS

www.shepheard-walwyn.co.uk

www.ethicaleconomics.org.uk

A catalogue record of this book is available from the British Library

Typeset by Alacrity, Chesterfield, Sandford, Somerset

Printed and bound in the United Kingdom

by 4edge Ltd

CONTENTS

Acknowledgements

Introduction

1 The Great Enigma of Our Times

2 Justice is the First Quality in the Moral Hierarchy

3 Leo Tolstoy and Henry George

4 The Unflinching Service of a Holy Ecclesiastic

5 Henry George’s Open Letter to Pope Leo XIII

6 The Giving of Alms Cannot Abolish Poverty

7 Christian Socialism and the Labour Party

8 The Inadequacy of Socialistic Remedies

9 The Significance of Land

10 A Remedy for the 21st Century

11 The Way Forward

About the Author

Further Reading

ACKNOWLEDGEMENTS

I WOULD LIKE to express my gratitude to my publisher, Anthony Werner, for his careful editing of the manuscript, and to Kai Dattani for attuning it to the concerns of a younger generation.

INTRODUCTION

IN HIS TRAFALGAR SQUARE SPEECH in 2005 Nelson Mandela offered a challenge, which remains relevant to each one of us today, and a call to action:

Overcoming poverty is not a task of charity, it is an act of justice. Like slavery and apartheid, poverty is not natural. It is man-made and it can be overcome and eradicated by the actions of human beings. Sometimes it falls on a generation to be great. YOU can be that great generation.

The United Nations lists ending ‘poverty in all its forms everywhere’ as its first Sustainable Development Goal. This is a noble and desirable aspiration, but it is questionable whether the IMF’s neo-classical ‘trickle down’ theory or a redistributive tax system and an expensive, bureaucratic welfare state are adequate for the task. The evidence shows that inequality is on the increase both in the developed and developing world, regardless of economic policy, suggesting the existence of a common cause which neither is addressing.

This book picks up the gauntlet that Mandela threw down and offers a completely different approach, seeking first to establish the fundamental cause of poverty worldwide. Drawing on the work of the 19th century American economist, Henry George, whose book, Progress and Poverty, probed the question of why it was that, as the Industrial Revolution increased wealth enormously, poverty was not lessened. On the contrary, the richer the society, the greater the inequality. The position remains the same today as it was in the 19th century, again suggesting a common cause, some flaw in the way in which wealth is distributed.

Adam Smith was in no doubt about the cause:

As soon as land becomes private property, the landlord demands a share of almost all the produce which the labourer can either raise, or collect from it. His rent makes the first deduction from the produce of the labour which is employed upon land.1

This raises a moral issue: is it right that ownership of land should entitle the owner to take the lion’s share of the wealth produced when they may have contributed little or nothing to its production? Indeed, if they have contributed, then their entitlement to a share should be based on their labour, just as it would be for their co-workers, not on their ownership of the land.

In fact, is land ownership necessary for the efficient functioning of an economy? Clearly, nobody is going to sow if they cannot reap the benefits of their work, so some form of land tenure is necessary to ensure that producers get the product of their labour, but the present economic arrangements have created a system whereby a class of people, landowners, are entitled to a share of the wealth produced without having to contribute to its production, thereby depriving the producers of their full reward. This is a man-made system and is not sacrosanct. It can be replaced by a fairer system.

Henry George expressed a steadfast belief in the efficacy of natural law, properly understood and respected, to erase social problems – problems which, indeed, result from society’s denial of natural law. Solving the curse of poverty requires distinguishing what is rightly private property from what is public property, thereby aligning the economy and society with natural law.

This book explores the moral and practical arguments for a major economic reform that would end involuntary poverty by changing the way government is funded. As Nelson Mandela pointed out above: ‘poverty is not natural’ and ‘can be overcome and eradicated by human beings’. He also stressed that ‘overcoming poverty is not a task of charity, it is an act of justice’.

1 Adam Smith, The Wealth of Nations, Bk 1, ch 8.

1

THE GREAT ENIGMA OF OUR TIMES

‘I believe that there is in true Christianity a power to regenerate the world’

Henry George, The Land Question

HENRY GEORGE is best known for his 1879 classic, Progress and Poverty. This sought to explain why poverty tends to increase and deepen, just as human society becomes more efficient at producing wealth. In his Introduction, he described how ‘it was natural to expect, and it was expected, that labor-saving inventions would lighten the toil and improve the condition of the laborer’, and how ‘the enormous increase in the power of producing wealth would make real poverty a thing of the past’. Yet, in George’s day – and even now in the 21st century – all of these productivity-enhancing forces have failed to abolish widespread ‘want and fear of want’.2

Observing that poverty is as much a feature where autocratic government prevails as where political power is in the hands of the people, George inferred that there must be a common cause for this failure. He observed that we find the deepest poverty, the sharpest struggle for existence, and the most enforced idleness, where population is densest, wealth greatest, and the machinery of production and exchange most highly developed.

He acknowledged that wealth had been greatly increased by technological progress and the average standard of living had been raised with labour-saving devices making all manner of everyday tasks less toilsome, but in this the poorest did not share.

I do not mean that the condition of the lowest class has nowhere nor in anything been improved; but that there is nowhere any improvement which can be credited to increased productive power. I mean that the tendency of what we call material progress is in nowise to improve the condition of the lowest class in the essentials of healthy, happy human life.

In illustration of this, George offered an image that has been widely quoted:

The new forces, elevating in their nature though they be, do not act upon the social fabric underneath, as was for a long time hoped and believed,3 but strike it at a point intermediate between top and bottom. It is as though an immense wedge were being forced, not underneath society, but through society. Those who are above the point of separation are elevated, but those who are below are crushed down.

Unfortunately, Henry George’s explanation of the cause of this phenomenon, and the solution he proposed, have received less attention. By and large, history has looked upon Henry George’s Progress and Poverty more as a stirring call to justice than as a source of rational understanding of social problems, or as a practical means of addressing them. But he warned:

This association of poverty with progress is the great enigma of our times. It is the central fact from which spring industrial, social and political difficulties that perplex the world, and which statesmanship and philanthropy and education grapple in vain. From it comes the clouds that overhang the future of the most progressive and self-reliant nations. It is the riddle which the Sphinx of Fate puts to our civilization and which not to answer is to be destroyed.

Virtually every attempt to solve this riddle has conceived the problem in either/or terms: either society must remorselessly embrace free markets, though under present circumstances many are inevitably left behind, or it must confiscate and redistribute wealth to enforce fairness, though waste and fraud are the inevitable concomitants. Henry George rejected this dichotomy, recognising that under the right conditions labour and capital worked hand in glove.

The problem, George realised, lies with the way economics is taught as he stated in the concluding chapter of Progress and Poverty:

Political Economy has been called the dismal science, and as currently taught, is hopeless and despairing. But this, as we have seen, is solely because she has been degraded and shackled; her truths dislocated; her harmonies ignored; the word she would utter gagged in her mouth, and her protest against wrong turned into an indorsement of injustice. Freed, as I have tried to free her – in her own proper symmetry – Political Economy is radiant with hope.

This remains the case: today’s mainstream views on political economy, particularly as they inform public policy, recognize no such ‘symmetry’. In George’s view, this symmetry revealed that the natural way to fund government was from the rent of land rather than from taxation, and that, in doing so, a major cause of poverty would be removed so that all would share equitably in the wealth produced.

2 Progress and Poverty (1879), Henry George, Robert Schalkenbach Foundation, 1992.

3 President Kennedy suggested that progress was like ‘the tide that lifts all boats’.

2

JUSTICE IS THE FIRST QUALITY IN THE MORAL HEIRARCHY

‘The principles that guide us, in public and in private, as they are not of our devising, but moulded into the nature and the essence of things, will endure with the sun and the moon’

Edmund Burke

HENRY GEORGE saw, just as Mandela did, that it is only possible to overcome poverty through an act of justice. In writing ‘justice is the highest quality in the moral hierarchy’, he would have been familiar with St Paul’s famous statement ‘… now abideth, faith, hope, love, these three: and the greatest of these is love’ (1 Corinthians 13:13). George does not say that justice is the ‘greatest’, but that it is the ‘highest’. He continued:

That which is above justice must be based on justice, and include justice, And be reached through justice. It is not by accident that in the Hebraic religious development, which through Christianity we have inherited, the declaration “The Lord thy God is a just God” (The essence of Isaiah 45:21) precedes the sweeter revelation of a God of Love. Until the eternal justice is perceived, the eternal love must be hidden. As the individual must be just before he can be truly generous, so must human society be based on justice before it can be based on benevolence.

This, and this alone, is what I contend for – that our social institutions be conformed to justice; to those natural and eternal principles of right … and this I contend for – that who makes should have; that he who saves should enjoy. I ask on behalf of the poor nothing whatever that properly belongs to the rich. Instead of weakening and confusing the idea of property, I would surround it with stronger sanctions. Instead of lessening the incentive to the production of wealth, I would make it more powerful by making the reward more certain.4

If ever a scripture has been bent to the Devil’s service, George wrote, it was ‘the poor ye have always with you’ (Matthew 26:11, also Mark 14:7 and John 12:8). Despite the huge productive capacity of modern economies, these words continue to soothe the conscience into acceptance of human misery and degradation. Primarily, it bolsters the denial of Christ’s teaching, suggesting that an all-wise and merciful Father has decreed that some of his creatures must be poor in order that others should have the good things of life, or in George Orwell’s analogy: ‘Some pigs are more equal than others.’

George argued that just as man masters material nature by studying its laws, we must discover the great moral laws that govern human relations, and live in accordance with them in order for society to function harmoniously. Thus economic and social policy cannot be framed without careful consideration of natural law. Only in this way can a solution be found for the vice and misery that spring from the inequitable distribution of wealth.

While George believed that ‘there is in true Christianity a power to regenerate the world’, it must be ‘a Christianity that attacks vested wrongs, not that spurious thing that defends them. The religion which allies itself with injustice to preach down the natural aspirations of the masses is worse than atheism.’5 We can only faintly imagine the