From: Henry George versus Henry George
by R.C. RUTHERFORD
Here is another sample brick of Mr. George’s logic, taken from pages 240, 241, though one should read a little before and after to fully appreciate it:
“For while the great masses of men want more wealth than they can get, and while they are willing to give for it that which is the basis and raw material of wealth—their labor—how can there be over-production? When with the desire to consume more, their exists the ability and willingness to produce more, industrial and commercial paralysis cannot be charged either to over-production or to overconsumption.”
Whether Mr. George wilfully or ignorantly confounds “demand” with “desire”—the effect is the same upon his argument.
There is some difference between the “desire to consume more” and the ability to get more. Demand, in its politico-economic sense, means desire backed by the purpose and power to purchase. Nor does it require the genius of a Plato, a Bacon or an Adam Smith, to perceive that by “over-production” is not meant more than men want but more than they are able to sell or to buy. “But for this distinction, you could never” point to warehouses filled with goods that cannot be sold,” to “mills closed,” “mines shut down” or “steamers tied up.” The term “over-production” points to the producer—not to the would-be buyer, as Mr. George seems to see it. When the manufacturer makes more than he can sell—more than for which there is “effective demand”—that is over-production, though it may not be a tithe of what the people want. Nor is it an insignificant feature of the phenomenon that the very efficiency of labor, which the machine confers, to multiply commodities and glut the market, re-acts to lessen the return to the laborer’s—the would-be buyer’s pocket.
Mr. George says, on page 241, that speculations which greatly carry up land values are, or —”have been invariably followed by a partial cessation of production, and its correlative, a cessation of effective demand (dull trade), generally accompanied by a commercial crash.”
And a little further on:
“Periods of industrial activity, always culminate in a speculative advance of land values, followed by symptoms of checked productions, generally shown at first by cessation of demand from the newer countries, where the advance in land values has been greatest.”
Is not this putting the cart before the horse?
What are the “symptoms of checked productions”? Is “cessation of demand” a “symptom”? Which generally goes before, “cessation of production” or “cessation of demand”? Will production cease so long as “effective demand” continues? But why “effective”? Is there any other kind of demand, economically speaking?
Mr. George seems to have a knack at selecting words which both misstate the fact, and divert attention from the lurking fallacy. Or is it slovenliness of style that makes him say: “The cessation of demand … which marks the depression of trade,” (p. 242,) when it is the immediate cause of the depression of trade? Is “cessation of demand” a symptom of “checked production,” and a “mark” of “the depression of trade?” And, by the “cessation in the supply of other commodities” is meant only the non-convertibility of “other commodities” into purchasing power, which is the cause of the cessation of demand, followed, not preceded, as Mr. George would have us think, by cessation of production.
“Dealers find their sales declining, and manufacturers find orders falling off, (“notwithstanding” a wide-spread desire (which, with Mr. George, seems to be a kind of “demand” of an “ineffective” sort, however,) for “the things which they have to sell, or stand ready to make.” And which they can neither sell nor will make. Why? Because nobody demands them? Or, because production is checked?
The ”warehouses are full” of everything necessary to meet the “wide-spread desire,” but the wherewithal to buy—the purchasing power—is a “commodity” that the would-be buyer cannot just now lay his hand on, because there has been “a diminution of production” of that article. “This is seen very clearly,” Mr. George tells us, with astonishing naivete, “by storekeepers in a manufacturing town where the mills are shut down and operatives thrown out of work. It is the cessation of production,” he continues, “which deprives the operatives of the means to make the purchases they desire.”
The demand for the storekeeper’s “superabundant stock” ceases because the shut-down mill has ceased to furnish the operatives with the “commodities” or money with which to buy them. In the face of a superabundant stock the operatives cease to buy, because the mills cease to produce more wages. Can any sequence be plainer?
But Mr. George omits to tell us why the mills shut down. Possibly he forgot it—possibly it was going a little too far back for his purpose. Yet the question will come up. Would the miller have shut down if the wonted orders had kept coming in—if the demand had not stopped? And why do the orders “fall off”? Because there is any less purchasing power in the world? No, but because the purchasing power does not happen to be in the hands of the men who want the goods. The rich are supplied, and the poor cannot buy. “People want the things … but they do not have as much to give for them.” Precisely so. The orders fall off—the stock is not sold—the mill shuts down, not to start again till the “demand” revives. … In this same connection we are told that trade consists in exchange of commodities, and that dullness in trade arises not from scarcity of money but from want of other commodities. Although the warehouses are full of them. Ah! but they are not of the kind that the would-be buyer can turn into money, nor does that kind happen to be in the would-be buyer’s hand. Nor does Mr. George condescend to tell us what that kind is. There is no lack of money—but there is a certain, undefined commodity somehow wanting, which, if the would-be buyer could get at, and then sell, he could turn it into money with which he could buy some of the commodities of which the warehouses are full. “What the would-be buyers really lack is not money, but commodities which they can turn into money.” (P. 242.) And yet we know that sometimes—in hard times—people have neither the commodities nor the money with which to buy them; and that sometimes when they have plenty of commodities they cannot turn them into money, but never a time when people who have plenty of money cannot turn it into commodities. What sense is there, then, in saying, that “money is not what they lack”? An overweening ambition to appear profound—to outstrip the ”great thinkers,” in his “final analysis,” leads Mr. George into many pitfalls of absurdity, which nowhere more abound than in his chapter on the “Cause of Industrial Depression.”
Here we have it again, on page 243: “Cessation of supply becoming failure of demand.” As if by dint of a perpetual dropping we were to be wearied into accepting as true what we know to be false. While it is impossible not to see, that, with productive power and material intact, there can be no failure of supply till there be failure of demand, Mr. George still persists in inverting the order and taking the effect for the cause. Retiring from the field of exchange the means of purchase, is no nark of a previous cessation of production, though that will likely soon follow. Every member of a community may have, to-day, as much ability to purchase as he had yesterday, and yet, from prudential motives, refrain from using it; thus suddenly stopping the demand while all the wheels of production are in full motion; but which soon thereafter stop, as assuredly as the saw will stop if the dust be not removed.
There is a “some-sort” of a “check in production,” (p. 242,) “somehow,” (p. 244,) “somewhere (it may be at the other end of the world).” “That demand is lessened without want being satisfied, shows that production is somewhere checked.” (P. 242.) It may be a shrewd trick, in Mr. George, to send us “to the worlds end,” “to the antipodes,” “to the farthest inch of Asia,” to find this missing link in the series of checks to be a “checked production”; but it is a trick only, after all: For, when we get there we shall unquestionably find, that the cessation of production of the lacking “commodity” was the result of a lack of demand for it. And we can assure him that though this slip-shod logic of “somesorts,” “somehows” and “somewheres,” may suffice for him, it will not suffice for all his readers.
“We talk about the want of work; but evidently it is not work that is short while want continues; evidently the supply of labor cannot be too great, nor the demand for labor too small, when people suffer for the lack of things that labor produces. The real trouble must be that supply is somehow prevented from satisfying demand, that somewhere there is an obstacle which prevents labor from producing the things that laborers want.” (P. 241.)
Even though the market be stocked—the “warehouses” crammed with them!
There is no want of work—”evidently”! quoth-a. When five hundred or ten thousand men are thrown out of employment, (work,) it is not for the lack of work. There is plenty of that lying round loose “somewhere”—almost anywhere. Work is not “short.” It is the laborers arm that is short, too short to reach beyond the “obstacle,” mark you, “the obstacle which prevents labor [not from working, “evidently” but] from producing the things that laborers want”!
“These vast masses of unemployed men” do not “want work”; they only want “the things that laborers want,” and are lying round idle “for the fun of it.” They just fancy that they are thrown out of work—that “work is short.” They are simply oblivious to the fact that “somewhere there is an obstacle”: “Only this, and nothing more.” There is no “want of work,” all this while; “nor is the demand for labor too small.” But “somehow” they can’t get at each other, on account of the “obstacle.” “Here lies the water, good, here stands the man, good: If the man go to this water, and drown himself, it is, will he, nill he, he goes; mark you that: but if the water come to him, and drown him, he drowns not himself: Argal, he, that is not guilty of his own death shortens not his own life.”
Men are not thrown out of work, but only out of the mills and shops, and are denied “access” to work—of which there is—so long as men’s wants are unsatisfied—”no want” The difference is patent to the fleetest glance, and is like that between dying from starvation and perishing for want of food.
As a sample of Mr. George’s logic, and to show that we have dealt fairly with it, we give the context: (pp. 243, 244:)
“We talk about the supply of labor and the demand for labor, but, evidently, these are only relative terms. The supply of labor is everywhere the same—two hands always come into the world with one mouth, twenty-one boys to every twenty girls, and the demand for labor must always exist as long as men want things which labor alone can produce. We talk about the “want of work,” but, evidently, it is not work that is short while want continues; evidently, the supply of labor cannot be too great, nor the demand for labor too small, when people suffer for the lack of things that labor produces. The real trouble must be that supply is somehow prevented from satisfying demand, that somewhere there is an obstacle which prevents labor from producing the things that laborers want.”
“Take the case of any one of these vast masses of unemployed men, of whom, though he never heard of Malthus, it to-day seems that there are too many people in the world. In his own wants, in the needs of his anxious wife, in the demands of his half-cared-for, perhaps even hungry and shivering children, there is demand enough for labor, Heaven knows!” (Pp. 243, 244.)
Is it not a little singular that a man who dives so much deeper, sees so much clearer, cuts so much cleaner, and spins so much finer than Adam Smith, Ricardo, Mill and others of that ilk, should fail to distinguish the difference between demand for labor and demand for work—between a laborer seeking an employer and an employer seeking a laborer? Mr. George uses a word in one sense when it can possibly serve his purpose only by being taken in another. Five hundred pairs of empty hands clamoring for work and bread is not a spectacle to illustrate what Political Economy calls a demand for labor. If there were the demand for labor in the sense in which Mr. George would have you understand it—yet not in the sense in which he uses it—the five hundred pairs of empty hands would be set to work, and the clamoring mouths stopped with bread,” Heaven knows!”
So Mr. George equally confounds “want” of the products of industry, (p. 244,) or the need of them, with “demand” for them, while the term “demand for production” means want accompanied with the ability and purpose to take—”effective demand,” as Mr. George himself calls it in several places. (Pp. 242-246.)
Read pages 25o to 253 to see what a long way about the exigencies of Mr. Georges theory compel him to go to fetch a reason, and a mere “fetch” at that, while the true one lies under his nose. He puts a girdle round about the whole globe of exchanges, and goes to the end of the earth—or rather, sends his reader there—to find proof of the assertion that dull times are not initiated by lack of “demand” but by lack of production. “Somehow” he seems to have taken “some sort” of a miff at the word (demand) and means to scout it altogether. But we still think that, with it, the current theory makes the better case. Let us see:
Lured by a prospective rise in values the speculator makes his investments—sometimes staking all he has and all he can borrow. He sets his selling mark so high, and holds on so hard and long, that the would-be-buyer wearies out and turns back. Now the speculator has come to the end of his rope—he must take his turn and wait, when he expected to sell and reap. Interest and numerous bills are due, but his only answer to drafts is: “No funds.” His falling brick hits the next, and so the tumble goes the length of the line.
It is only the crash of a plank, but the panic is the same as if it had been the fall of a gallery. The disappointed speculator has nothing with which to pay for the fine things which he meant to get and which the manufacturer expected him to buy, and so the “demand” ceases. The warehouses groan with their uncalled-for stores, perishing for the want of a buyer, and the advances of the manufacturer are swamped, too, and so the tide moves on.
The commodities are there in plenty, and
— “the people want the things the manufacturer makes [or has made?] as much as ever, just as the operatives want the things the storekeeper has to sell.” But they do not have as much [what?] to give for them” (Pp. 242, 243.)
Production has somewhere been checked, says Mr. George, and “propagating itself through the whole framework of industry” shows itself here in the form of “cessation of demand.”
“This check to production beginning at the basis [wherever that is] of interlaced industry, propagates itself from exchange point to exchange point, cessation of supply becoming failure of demand, until, so to speak, the whole machine is thrown out of gear, and the spectacle is everywhere presented of labor going to waste while laborers suffer from want.”
Which they certainly would not do if they could “produce” the buying power. It is the “production” of cash that is “checked” with them—preceded by a check in the “demand” for their labor—because that had been preceded by a check in the demand for the things which their labor produced. It is that, not the “lack of production,” that stops the wheels of industry, (production,) shuts up the shops, and closes the mills and turns the operatives out to starve.
Mr. George is never more unreliable than when he is most positive—and never more positive than when his argument is weakest. “When we speak of labor creating wealth” he says, (p. 245,) “we speak metaphorically.” Man creates nothing-— not the “tiniest mote” or “atom.”
We grant the mote or atom, but traverse the wealth. If the raw material, the “preexisting matter,” acquires, from the touch of the human hand, a value that neither had apart; if, by his labor, man impresses on matter the character of wealth; (p. 167;) if capital, which is a part of “wealth, be nothing” but labor impressed upon “matter,” (p. 1 79,) then “man creates” that value—and that value is wealth. We have Mr. Georges authority for it, that land is not wealth.
The human hand is not wealth. But the hand moulds the matter, and smites the rock, and lo! the wealth of the world. There lies the ore, here stands the man—yet there is no wealth. But let the man go to the ore, or let the ore come to the man, and he “fashions” it into wealth. The fashioning is the cause of the wealth. And that is the work of the man. So man is the creater of the wealth which is neither “motes” nor “atoms.” Again, if Mr. George will consult the dictionary he will find authority for this use of the word. But not in his sense—will he say? So much the worse for it, since then it has no place in a treatise on Political Economy, however suited to chemistry or natural philosophy. It is of little consequence, anyway; save as an illustration of Mr. George’s slatternly way of thinking, and writing.
Where men ordinarily would say that they “cannot find work,” Mr. George would say they “cannot find opportunity.” (P. 245.) And much of his argument turns on the difference—whatever that is—between shutting labor out of work and shutting work out of labor. (P. 245.) “It may require a grasp of first principles to see this” but upon seeing it depends your estimate of the validity of Mr. George’s argument.
We are told on page 246 that San Francisco, “though not yet thirty years old, has had for some years an increasing number of unemployed men.”
Why don’t they go to work? There is no “want of work,” “nor is the demand for labor too small.” So says Mr. George. But—”there is an obstacle somewhere.”
“The means to pay”? (P. 246.) Precisely! First give them work, then wages; then they will have the means to pay; then comes “effective demand,” and very soon thereafter the commodities to meet it. And that is the order of the generation of these things. Take away the work and the wages, and the demand (so far as it depends on the laborer) stops, and production ceases. And that is the order of their degeneration.
The inferences that Mr. George would have us draw from his account of the appropriation of new lands and the great advance in prices, in San Francisco, in view of the prospective opening of the Pacific Railroad, do not seem to be warranted by his own statements. (Pp. 248, 249.) It does not appear that any land was withdrawn from cultivation, but only that new lands were not brought into cultivation—or that there was any demand for it, since “the anticipated rush of immigrants did not take place.” (P. 249.) Though this might have prevented increase, (of production,) how can it be spoken of as “checking production”? The ground already occupied need not produce any less—might produce more—would be forced to produce more, had there been demand for more. And if there were less, it was doubtless because there was less demand. But George will not see that this is the law of the order of these things, so long as it is essential to his theory to keep the cart before the horse.
On page 250 occur these words: “And hence, a world-wide depression of industry commerce, begotten of a world-wide material progress.”
The right way to dispose of this, is simply to say, (and in saying it we dispose of much of Mr. George’s book,) that it is a contradiction in terms, which neither does nor can state a fact. Mr. George might as well have undertaken, by deliberate and serious argument, to show the affairs of the world are “advancing backwards.” How “a world-wide depression of industry and commerce.” can result from any “material progress” is a problem that no one but Mr. George has ever felt called upon to solve. And we imagine that it would bother Mr. George somewhat, with all his vaunted skill in making things sharp and clear on their verges, to inform us in what sense “progress” is “material,” in which “industry and commerce” are any less so.
Every advance in human affairs is followed by a pause, a rest, and, often, something of a recoil. The appliances and industry necessary to a given work are laid aside when the work is accomplished. The stir and bustle, clatter and hammering, and carrying to and fro, attending the construction of a house, will cease when the house is built and the scaffolding and rubbish removed. And that is a cessation of industry and commerce for so much—unless there be a demand for another house. The “industry and commerce” and “progress” go, pari passu, hand in hand.
Continued: Wealth, Poverty, Rent