Georgism on the Eve of the Great Depression:
Lessons for Today

Edward J. Dodson

[ GroundSwell, November-December 2005]

Author's note: While reading Fred Harrison's new book on the coming 2010 economic collapse, I wondered whether in 1929 the leading Georgists were putting out warnings that the global economy was stressed to the breaking point. By chance, I happened upon a volume of the papers delivered at the International Union conference that year held in Edinburgh, Scotland. With some additional research, I sat down to write this essay. My hope is that my essay, as follows, might stimulate further discussion of Fred Harrison's analysis and get us functioning again as a global movement for fundamental changes. Fred Harrison's effort opens the door in a way that has not existed since the days of Henry George's worldwide political tours and lectures.

The troublesome reality is that the once sizeable community of Georgists spread throughout much of the globe has nearly disappeared. The time between growth and decline covered no more than three decades.

Those of us who count ourselves among the Georgist remnant often agonize over how this great cause could have suffered so severely after Henry George's life came to an end. After all, George seemed to believe he had accomplished all that one person might, that the road to justice had been identified. Now, it was only a matter of time before the movement reached critical mass. We now know that the land question would not be resolved during the 20th century. Georgists would drift from the political fringe to its wilderness, fighting for a measure of economic justice within the framework of how landed property is taxed by municipal governments.

A few years ago, Kenneth Wenzer and Thomas R. West collaborated on a volume examining Henry George's "forgotten legacy." Wenzer found a letter written in 1932 by J. B. Chamberlain to the widow of Louis F. Post, in which Chamberlain expresses his great lament at what had occurred over the preceding three decades: "Unfortunately I am not only old but very poor and I get no help from the Old Guard that has deteriorated from Henry George's ideals to tax reformers. Why reform something that we seek to abolish? ...It is unfortunate that so many people tried to say it better than Henry George did."

Historian Arthur Dudden concluded that Joseph Fels was instrumental in keeping "the single-tax movement from collapsing immediately after George's death." It stands to reason, then, that the priorities in the mind of Joseph Fels had an enormous impact on the strategies and actions of those in the movement. This is all the more ironic because not until after George's death did Fels come to agree that solving the land question would solve the problem of poverty, and that the Single Tax offered the best chance to make this happen.

Once committed, Fels looked for ways to demonstrate the potency of the Single-Tax doctrine. He provided financial support to the group of Single-Taxers establishing the community of Fairhope on Mobile Bay in Alabama -- based on principles they described as "cooperative individualism." He also believed that agriculture -- and a return to the land -- was essential to a better future for people living at the mercy of industrial landlords in the cities. His energy and financial resources were directed to numerous other causes as well, including a loan to Russian Marxists he believed at the time were in the vanguard of a mass movement against despotism.

In those parts of the world where most Single Taxers or devoted adherents to Henry George's principles lived, the chosen means of achieving progressive change was non-violent agitation for legislative reform. Single-Taxers and Georgists struggled to convince members of mainstream political parties to support of the taxation of land values. The result, notes Arthur Dudden, were many near misses "repeatedly compromised by political expediency." The list of remarkable individuals who came into the movement is long. There was Tom L. Johnson and Louis F. Post, for example, in the United States, and Max Hirsch in Australia. Fels survived Hirsch by only six years. Johnson died in 1911. Although Henry George Jr. served two terms of office in the U.S. House of Representatives, he died in 1916. The loss of these men was catastrophic for a movement dependent much more on personalities than on organization and discipline.

As the nations of the world drifted into the First World War, the Georgist movement stagnated and began to lose its momentum. Fels had tried to leave the movement on a sound financial future by setting up the Joseph Fels Fund, but contributions from other wealthy contributors did not materialize. Even Fels came close to personal bankruptcy toward the end of his life. After his death, his wife abandoned the Georgist cause altogether to support Zionists.

Even without Fels and the others, the Georgist movement -- absent an active commitment to the Single Tax -- survived the First World War. In a paper presented by John J. Murphy at the Fourth International Conference of the International Union for Land Value Taxation and Free Trade, held in Edinburgh, Scotland, in the summer of 1929, Murphy stated "there ha[d] been little effort to affect taxation -- national, state, or local -- by legislation" in the United States. Thanks to the efforts of Georgists such as Percy Williams, one significant exception was the City of Pittsburgh. During 1912, Georgists brought in the movement's heavy-weights -- Henry George, Jr., Frederic C. Howe, Louis F. Post, Joseph Fels, Lawson Purdy, and others -- to speak to Pittsburgh's civic leaders on the virtues of what became known as "the graded tax plan." The result was passage of a bill by the Pennsylvania legislature in 1913 enabling Pittsburgh to put the plan into effect in five stages ending in 1925. A year later, Georgists established The Henry George Foundation of America with its headquarters in Pittsburgh.

Although the successful campaign to bring Pittsburgh (and a second second-class city, Scranton) in a Georgist direction provided a base from which the Henry George Foundation could promote "the Pittsburgh plan" throughout Pennsylvania, Murphy's assessment was all too accurate. As he surveyed the situation in the United States, Murphy reported:

"I wish I could present a more optimistic picture. A nation inflated with universal prosperity, which, according to our present Secretary of Labour, James J. Davies, means 14 per cent rich and 86 per cent living on wages below the computed cost of living, has no time to think about economic political reforms based on justice and fair dealing."

This gathering of Georgists in Scotland occurred just three months before the crash of the stock market in the United States. Somewhat surprisingly, few of the papers delivered at this conference warned of the coming economic problems, despite the fact that so many signals were evident to those holding a Georgist perspective. One writer, Carl Marfels, asked rhetorically, "Why cannot demand and supply be brought into touch with each other?" He then offered the reason why societies desperately needed to know:

"The answer to this question is of extraordinary urgency as the discontent among the masses in all civilized countries is assuming alarming proportions; and not only in the ranks of wage-workers, but also in the ranks of self-supporting manufacturers, tradesmen and merchants. ...General discontent and crime are increasing to such an alarming extent that even the middle classes, driven to despair, no longer shrink from Bolshevist ideas, and the legislator stands impotent in the face of all that has been described."

The one person who might have offered a detailed forecast of the world economy but who did not make the trip to Edinburgh was Harry Gunnison Brown. In his 1925 book, Economic Science and the Common Welfare, Brown observed that one serious threat to economic stability -- the run on banks by depositors -- could be addressed in the United States by the Federal Reserve's power to increase the supply of currency and get needed "Federal Reserve notes to solvent member banks whose customers are demanding their money." Provided businesses still enjoyed demand for their products and services, credit could also be made available through additional Federal Reserve loans to member banks. Brown noted that the effect would be much better if the Federal Reserve maintained reserves for these purposes rather than simply issuing new notes. Focusing on the international monetary system, he added:

"The United States in co-operation with a few of the other large industrial and commercial countries could do more. It may be desirable, eventually, to supersede the gold standard as we now know it with a more stable standard of value; but a more intelligent control of credit, by itself, would accomplish very much indeed for business and price stability. A dollar redeemable in varying amounts of gold accordingly as gold fluctuated in value relative to other commodities would, however, make possible a more complete stabilization of prices in the long run, even in the absence of foreign cooperation. It would tend, somewhat, to prevent undue bank credit expansion and it would tend to keep business conditions constant. But if the best results are to be secured, proper control of bank credit ... should supplement the changing of the weight of gold in which the paper dollar might be made redeemable."

Brown's biographer, Christopher K. Ryan, records that "[a]fter 1930 Brown published sparsely in the field of international trade and finance." Given the times and his commitment to public policy advocacy, his choice is difficult to understand. Other commitments certainly kept him focused elsewhere. In addition to his teaching assignments at the University of Missouri, he was working on a second book, The Economic Basis of Tax Reform, which appeared in 1932. We must remember there was no Georgist school of economists working together on national and international issues. There was no research institute publishing papers and holding conferences to effectively enter the "public dialogue" and to challenge conventional wisdoms. Edward C. Harwood's venture into this realm -- the American Institute for Economic Research -- was not established until 1934. Two years earlier, Harwood's book, Cause and Control of the Business Cycle, attempted to explain to a shell-shocked public -- and to economists trained in Neo-classical theory -- why production and employment had come crashing down. He recalled an exchange with the eminent economist Irving Fisher:

"...Fisher apparently believed that there was no inflation in 1928 and 1929 because the commodity price-level did not rise in those years."

Harwood suggested that Fisher and other economists direct their attention to the securities and land markets, where speculation caused runaway price inflation: "In the case of securities, [the check against commodity price inflation provided by foreign competition] ... cannot act. In the absence of any outside check, the situation is similar to the famous tulip speculation which occurred in the Netherlands, or even to the ill-fated Florida land boom."

Other than this brief mention, however, Harwood passed over the dynamics of land markets and the impact of government's methods of raising revenue on the business cycle. Another Georgist of note absent from the 1929 conference was Francis Neilson, although from the records I have seen he did not attend, even though he had taken "an active part in the land campaign" of 1912 in Britain. During the Depression years, Neilson worked on the book Man at the Crossroads, examining his own economic principles, which was published in 1937. Although his own investment losses during the early 1930s were significant, he managed to recover better than most.

"I succeeded in laying ... a financial foundation which, in a few years, helped to retrieve seventy-five per cent of my losses. How this was accomplished I do not know."

His familiarity with Henry George's analysis of business cycles did not prevent him from holding stocks too long when the speculative fever of 1929 was in full swing. It is also worth noting the financial fortunes of another writer who had spoken and written extensively on the land question -- Winston Churchill. Not that Churchill would have accepted an invitation to speak to International Union members that year (he was by this time firmly in the Conservative camp), but he had departed on the 3rd of August for a vacation in North American, first to Canada and then the United States.

"On the Atlantic coast he paid a courtesy call on Herbert Hoover; toured Civil War battlefields, ... and was in New York ... when the market crashed," writes William Manchester (The Last Lion, 1983). He actually visited the New York Stock Exchange on the 30th of October. He later wrote:

"No one who has gazed on such a scene could doubt that this financial disaster, huge as it is, cruel as it is to thousands, is only a passing episode in the march of a valiant and serviceable people who by fierce experiment are hewing new paths for man, and showing to all nations much that they should attempt and much that they should avoid."

Personally, Churchill lost a good deal in the market as an active speculator. His prolific writing now became essential to keep his financial affairs from collapsing. By the time he returned to England, he would realize the scale of economic contraction unfolding.

Philip Snowden, Britain's new Chancellor of the Exchequer, wrote to the conference planners:

"It will not be possible for me to attend the International Conference which is to be held in Edinburgh at the end of this month, but I send you just a few words to express the hope that the Conference will be useful in stimulating international interest in the co-related questions of Land Values and International Free Trade."

The Labour Government formed by Ramsay MacDonald already faced the problems of high unemployment and an industrial recession linked to severe problems in the coal industry. Very little of significance was accomplished before the full brunt of the Great Depression was felt. What could have been an international conference of enormous importance in examining the global state of affairs and warning of the coming Depression instead concentrated on the various efforts to promote the taxation of land values in the countries of attending countries.

Henry George's most important contribution to the science of political economy -- his explanation for the cause of industrial depressions -- received no attention. Only one presenter, Chester C. Platt, investigated the hyper land speculation that occurred in the State of Florida during the 1920s; however, even Platt failed to connect these events with the larger national and international picture.

Some of the same signals present in mid-1929 are with us again. The question for us is whether -- even though there are far fewer of us engaged -- we are better prepared to send out a warning to our countrymen. Fred Harrison's research, detailed in his new book, Boom Bust: House Prices, Banking and The Depression Of 2010, provides the details. What we need, now, is a concerted strategy to bring this perspective to the fore in every country where we still have a functioning presence.

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