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The Question of Henry George’s Support for a Universal Basic Income

 

Universal basic income is a policy proposal currently receiving a lot of attention among Georgists. The policy proposes to redistribute taxes as cash payments to individuals at a level adequate to cover basic living expenses. Unlike means-tested benefits, universal basic income payments could be distributed to every citizen as a right, regardless of need.

The policy is seen as a remedy for contemporary socio-economic malaise such as unjust wealth inequality and a lack of social mobility.  They say a third industrial revolution, which will take the form of machine learning and automatization, will make these things worse. Supporters believe a universal basic income would facilitate greater social mobility by providing an income for all without the stigma and inconvenience of claiming benefits. Supporters believe it will absolve the big tech companies from the bad press associated with mass unemployment, which they imagine will follow the replacement of the human labour force with digital and mechanical alternatives. They also believe the policy is a way for governments to streamline public spending provision by removing means-testing procedures.

This policy deserves a thorough discussion for two reasons. First, if the idea of sharing out an equal subsistence income for everyone is a simple solution to basic inequality, it serves consideration here, especially since Henry George is considered a proponent. Second, if Henry George is to be honoured as a founder of a school of economic science, not simply as an ideologist or tax reformer, then we must encourage serious analysis and debate within our school. The ability to debate is the difference between an ideology and a genuine science.

Supporters do not often mention the history of such a policy, instead preferring to think that it has never been properly tried. Less trenchant minds, however, do admit that the first modern attempt at a guaranteed minimum income was in Speenhamland, England, in 1795. It was introduced in similar circumstances to those feared now, with the intention to protect citizens from the first industrial revolution. Although administered locally, not nationally, it guaranteed a minimum wage based on the price of bread, for all citizens as a “right to live”. The unforeseen consequence was to reduce wages and keep productivity to a minimum. Employers were incentivised to pay a minimum, since the wage was topped up by the parish, and the labourer likewise had no incentive to increase productivity since his wages would not improve. As economic historian Karl Polanyi explains, ‘Speenhamland led to the ironical result that the financially implemented “right to live” eventually ruined the people whom it was designed to succor’. (The Great Transformation, 1944, p81)

While ignoring this history, supporters also fail to account adequately for present day alternatives to their proposal. The current state benefit regime in Britain provides an important comparison. Here unemployment benefits are provided to everyone who does not or cannot work, and a minimum wage for those in work ensures that the lowest are paid enough on which to subsist. Although people fall through this safety net, most people do not starve or become homeless even if they lose their jobs, have children they cannot financially provide for, or become ill. In contrast to the situation at Speenhamland, there is also a very significant level of publicly funded infrastructure such as health and education freely available for all. So, although recipients of benefits still “get stuck on the rates”, and whole communities can be sucked into the “benefit trap”, government provision of goods and services, including cultural goods, such as the arts, together with charitable and philanthropic work by religious and citizen groups within their communities, recipients of benefits are able to participate in society and have a reasonable expectation of some upward mobility.

Nevertheless, the situation is far from ideal. The benefit system in the UK provides a huge public subsidy to private landlords, thereby further widening the divide between the landed and the landless. The way taxes are presently collected is also problematic. Taxes on everyday items, including food, and at 20% on even the most modest of incomes, means the poorest pay the most tax relative to their income and assets. Like all negative taxes, these make production and exchange expensive, placing a great burden on economic and social activity. On top of this, rent-seeking neoliberal economic policies mean incomes have stagnated for 40 years, despite real increase in wealth. Excepting the very richest, these policies have meant the middle classes and the poorest have together suffered the effects of rent-seeking. The introduction of a universal basic income, attractive as it might seem, would not remedy this situation. On the contrary, it would immediately be absorbed in rent and further widen the divide between the middle classes and the poorest. Meanwhile, the income of those who have to rely on state benefits, such as the sick, single parents and the elderly, would be comparatively reduced, putting the price of necessities further beyond their reach. Ironically, the universal basic income would increase the price of basics beyond the reach of those whom it is supposed to benefit. Ultimately, a universal basic income would have the same harmful effects as at Speenhamland.

Many Georgist supporters of a universal basic income do realise it would be absorbed by rent increases, since rents adjust to the most they can obtain, and so the introduction of a universal basic income would directly benefit landlords and bring no benefit to those on low incomes. Recognising this inevitable outcome, some propose to match a universal basic income to a land value tax. They argue that if funds are raised by a land value tax these could be directly redistributed as a universal basic income, and this would not fall into the hands of landlords. But if the whole revenue was redistributed in this manner, it this raises the question of how all other government expenditure would be met, since George argued that a land tax was the natural revenue for all public provisions, things that can only be administered centrally such as defence, police, and public highways. Clearly, a land tax redistributed in this way could not be implemented as a single tax as George proposed. Taxes would still need to be levied on production and wages, sustaining the same inequalities and burdens on wealth production as before. The benefits of freeing the economy that George predicted through implementing a land tax would not be realised. It would, in fact, convert rent back into private income and so defeat the object of collecting it as public revenue in the first place.

Other Georgist supporters of a universal basic income propose the cost of essential public services should be deducted from the land value tax income, before any surplus is redistributed as a universal basic income. They claim Henry George advocated for this policy. However, they overlook that for George land monopoly is the cause of low wages, and that a land tax would free labour to receive the full product of its effort. They are poor only because a portion of their wages are being absorbed elsewhere as unearned income, either through rent or various market monopolies. If all were able to keep the full product of their labour, their actual wages, there would be no need for a universal basic income. But also, if all essential public services were taken from land value tax, the sum remaining for a universal basic income would be arbitrary, and therefore not a natural match for basic needs. And who is to say what ‘essential public services’ are?

 

Automation for the People?

A key issue in discussions of a universal basic income is the threat posed by the latest forms of automation, such as machine learning. It is argued that future technological progress will bring mass unemployment, even to professions and skilled services such as those in medicine and administration. However, the general problem of labour-saving technology and increasing poverty has been comprehensively dealt with by George in Progress and Poverty. George clearly demonstrates that poverty is not caused by technological progress, but by rent seeking, which confiscates the inevitable productivity gains from work enhanced by technology. The new forms of technological advancement do not change this economic law.

Research shows George was right. The Gini indices for EU countries in 2011 show inequality has increased in some countries while reduced in others.  In the UK, where political choices since 1979 have limited redistribution and encouraged rent-seeking, wealth is far more unequal than all other European countries, despite equivalent technological advancement. Historical evidence presented by Joseph Stiglitz has shown that during 1950-1980, a period in which there was massive automation, political choices in the UK and the USA limited unjust inequality and created unparalleled progress.  During these times, high wealth taxation and massive public spending on public infrastructure and research programs produced egalitarian and creative societies. According to Stiglitz and many others, such as Ha Joon Chang, equivalent political choices are needed today. Both claim such policies are more effective and more just than a universal basic income.

 

Rent is not a Wage

For George the questions of efficiency and justice are likewise definitive. His claim that rent-seeking is an injustice which causes great inefficiencies is proven by the complementary claim that work is the most just and most efficient means of acquiring personal wealth. So long as one can work, it is no more just to receive a tax funded basic income than it is to receive earnings from rent as a landlord.

Since rent arises independently of individual effort, it cannot be reduced to an individual’s productive output. Accordingly, the individual has no right to claim as his what he did not produce. Wealth produced in every community has two distinct origins, one public (“ours”), and one private (“mine” or “yours”). Private wealth is “distributed in wages and interest between individual producers” (Progress and Poverty, Book 9 Chapter 2). Wages are the most efficient and most just source of personal income because they reflect the productivity of the wealth creator.

Nonetheless, their remains the “problem” of what to do with surplus economic rent.

Surplus rent arises because investment in public services increases the value of land by more than the expenditure of the investment. Martin Adams is one among many Georgists who claim Henry George “advocated for a Basic Income to be drawn from economic rent.” In support of this claim he has compiled a list of quotes from George.  One is the following from the speech The Crime of Poverty delivered in 1885:

“To take land values for public purposes is not really to impose a tax, but to take for public purposes a value created by the community. And out of the fund which would thus accrue from the common property, we might, without degradation to anybody, provide enough to actually secure from want all who were deprived of their natural protectors or met with accident, or any man who should grow so old that he could not work. All prating that is heard from some quarters about its hurting the common people to give them what they do not work for is humbug. The truth is, that anything that injures self-respect, degrades, does harm; but if you give it as a right, as something to which every citizen is entitled to, it does not degrade.” 

George is not advocating for a basic income. He is attacking those who argued against providing the poorest and weakest people in society with a meaningful last resort. This is not advocacy of a universal basic income either. It is a means tested state benefit available to all, but only given to those physically unable to work. The idea that no one should be left to die on the street is not equivalent to the idea that everyone should have a share of land values deposited in their bank accounts. Conflating the two is a mistake. It is worth noting here that when George says “All prating that is heard from some quarters about its hurting the common people to give them what they do not work for is humbug” he is speaking of those such as Herbert Spencer who argued that help for the poor leads them to indolence and moral degeneracy.

In another quotation, Adams selects these two sentences by George from The Irish Land Question which could give the impression George supported a universal basic income.

“For, appropriate rent in this way, and there would be at once a large surplus over and above what are now considered the legitimate expenses of government. We could divide this, if we wanted to, among the whole community, share and share alike.”

But Adams has cut three quarters of the statement. The next sentence of the same paragraph continues:

“Or we could give every boy a small capital for a start when he came of age, every girl a dower, every widow an annuity, every aged person a pension, out of this common estate. Or we could do with our great common fund many, many things that would be for the common benefit, many, many things that would give to the poorest what even the richest cannot now enjoy. We could establish free libraries, lectures, museums, art-galleries, observatories, gymnasiums, baths, parks, theatres; we could line our roads with fruit-trees, and make our cities clean and wholesome and beautiful; we could conduct experiments, and offer rewards for inventions, and throw them open to public use.”

Reading the full statement, it becomes clear that George is considering three possibilities, in order of ascending merit. He starts with the least beneficial use of a fund created out of surplus rent, and ends with the best and most beneficial. Although he alludes to an unspecified shared surplus which could be shared among the “whole community”, he does not go into any detail. The brevity with which he considers the idea, and by contrast, the detail given to the policies immediately following, suggests he only mentions it to arouse interest in the possibilities which await a more just and fruitful society. The second option, to provide “a small capital, dower or pension” to qualifying persons, seems slightly more preferable to George. As with the shared surplus proposal, he only allows it one sentence, but the idea is accorded the honour of greater detail because it represents a need met. These first and second ideas are interesting because they appeal to human desires which animate political discussion, and which are often found to be in conflict. The first appeals to our self-interested desires, the second to our natural generosity towards those in need. The third idea is the summit of the whole statement, not only because it comes last and occupies the majority of the paragraph, but because it fulfils both the self-interested and the benevolent desires, transfiguring them into something substantially better than each is alone.

Again, far from advocating for a universal basic income in cash, George actually advocates for providing the community with actual wealth in the form of great public works. It is a vision of a healthy modern community. It is a place where cash payments from the state would hardly be necessary because every citizen would be able to benefit from the vast array of civilized pursuits, without the need to pay for anything. In fact, money would almost entirely be taken out of the realm of culture and community. People would no longer be denied access to education on account of wealth or age. Retraining would be easy and natural. An individual’s education could continue as needed and as desired to the benefit of everyone. The floodgates of human creativity would be unlocked to the benefit of all. This is clearly George’s preference for the most universally beneficial use of public funds.

The Role of Government

“Geolibertarians” such as Fred Foldvary have supported the universal basic income policy because they believe that government would be reduced to a level sufficient only to protect the rights of individuals (Land&Liberty May – June 1981 p53). A reduction in the participation of government in everyday life is perceived as beneficial to the cause of liberality because libertarians believe government is essentially an impediment to the free actualisation of full individuality. They claim George was also of this opinion. As we have seen, George was not in favour of a universal basic income. But in order to refute the validity of associating Georgian political economy with libertarian anti-government sentiment, we should examine George’s philosophy of government, and what he proposed government should do with the revenue which arises naturally in society.

Book 9, Chapter 9 of Progress & Poverty reveals that George sought a compromise which moves beyond the individualism we call libertarianism and the collectivism he called socialism. George describes how a single tax society would achieve:

“the ideal of Jeffersonian democracy, the promised land of Herbert Spencer, the abolition of government. But of government only as a directing and repressive power. It would at the same time, and in the same degree, become possible for it to realize the dream of socialism.”

For George, governments in unjust societies were repressive and inefficient only because they lacked a clear policy on what to do with natural monopolies. Government is not in itself repressive, as Foldvary and the libertarians believe. The lack of a clear understanding of the ethical and economic significance of land compromises government and makes it beholden to powerful interests. The influence of these interests inhibits an administration’s ability to serve the common good. In contrast, as George continues, government would mean:

“We should reach the ideal of the socialist, but not through government repression. Government would change its character, and would become the administration of a great co-operative society. It would become merely the agency by which the common property was administered for the common benefit.”

Government as George conceives it would no longer have to mitigate the deleterious effects of monopoly rent-seeking. A process of “simplification” would see “government as a restricting and repressive power”, replaced with government as a liberating and creative power. Thus restored, it could take on many more responsibilities:

“…All this simplification and abrogation of the present functions of government would make possible the assumption of certain other functions of government which are now pressing for recognition. Government could take upon itself the transmissions of messages by telegraph, as well as by mail; of building and operating railroads, as well as of opening and maintaining common roads. With present functions so simplified and reduced, functions such as these could be assumed without danger or strain, and would be under the supervision of public attention, which is now distracted. There would be a great and increasing surplus revenue from the taxation of land values, for mastering progress, which would go on with greatly accelerated rapidly, would greatly increase rent. This revenue arising from the common property could be applied to the common benefit, as were the revenues of Sparta. We might not establish public tables – they would not be unnecessary;…”

The natural public revenue would stay in the public realm for the “common benefit”. The administration of these benefits would be simple, transparent and democratically accountable. Citizens would easily be able to see how much rent was raised and on what public goods it was spent. The centralised provision of public works and services would be efficient and extensive. Such benefits could even include publicly funded restaurants with free food, but they would not be needed. Untaxed incomes would mean individuals could easily provide these and other personal needs for themselves. George’s list of government institutions created for the public benefit extends far beyond those envisaged by Geolibertarianism:

“…we could establish public baths, museums, theatres, universities, technical schools, shooting galleries, playgrounds, gymnasiums, etc. Heat, light, and motive power at public expense; our roads be lined with fruit trees, discoverers and inventors rewarded, scientific investigations supported; and in a thousand ways the public revenues be made to foster efforts for the public benefit.”

Unlike the supply of a universal basic income, most, if not all, modern governments have in fact taken up the administration of many of the services described by George. Despite the injustices of rent-seeking, which still divide government against itself, extensive publicly funded services and sophisticated public goods have greatly improved many millions of lives, in just the way George saw was the purpose and essence of civilisation.

It is often held that Henry George and his followers preside over the history of a failed reform. Notable exceptions aside, they say, his land tax has not been “implemented”. It is easy to forget George wanted to introduce his reforms in order to make the world a better place, not merely to introduce a more efficient tax. One criticism of George is that he may also have mistaken the purpose of his political interventions in the same way. Nonetheless, even if his ideal method of funding services for the common good has not been realised, and the character of government has not been totally transformed, many of the practical ends of the reforms he proposed have been achieved. However, as Peter Bowman has shown, land taxes, including land value taxes at different levels, have been adopted and in various parts the globe today, and have been in use for at least 4000 years. In addition, as Mark Wadsworth has shown, various tax collecting measures, including sales and income taxes, were combined with legislative initiatives, such as rent controls, to supply funds for the provision and maintenance of the common good. These and other fiscal and legal means compensated significantly for the negative effects of land monopoly in the conditions appropriate for a culture which calls itself a “property owning democracy”. The reforms have been imperfect, but they were also relatively successful. But civilisation depends for its existence on these successes, so any success is vital. The reforms were successful because they worked in harmony with British culture.

 

Why do Georgists Support UBI?

It is wrong to claim George supported a universal basic income. It is true he recognised the possibility, but he saw it as the least beneficial use of public revenue. Instead, he demonstrated that wages were the best and most just way for the individual to acquire a personal income, and that the community should centrally administer its own public good, with funds drawn from economic rent. Furthermore, the evidence shows the laws George cited to explain the causes of unjust inequality amid advancing technology have not changed. Automation poses no new threat a universal basic income is required to remedy.

George thought the individual’s right to the property pertaining to citizenship could be best fulfilled by the establishment of a commonwealth of publicly accessible goods and services, which could not be owned by any individual, nor reduced to a monetary value. He rightly recognised that the value of these public goods was not really economic at all. They were the best means of procuring the community, learning, health and happiness required for the flowering of humanity which is properly called freedom. Libertarian Georgists wrongly construe a “right to life” as a percentage entitlement to economic rent, the denial of which can and should be compensated. In this they follow Thomas Paine’s idea of fiscal justice. He also wrongly assumed that exploitation of the commons could be compensated by cash payments. According to him, any person or organisation has the right to appropriate natural resources for profit, as long as they give some of their profit to others “in lieu of their natural inheritance”(Agrarian Justice 1796, p. 611). But the ‘natural inheritance’ is not economic rent, it is civilisation. Economic rent is only that natural revenue which provides the resources necessary for the maintenance of the institutions which are coextensive with the existence of civilisation.

Libertarian and Georgist supporters of the universal basic income apparently assume cultural and political life can be adequately expressed in reductive financial terms, as merely contractual relations, and that money is wealth. But wealth is the possession and consumption of the goods or services for which money aids the procurement. A people are wealthy only when they have access to expansive public services and comprehensive resources that account not only for basic material needs, but also for the needs of the mind and the soul, such as figure in the full spectrum of healthy human life.

Consciously or unconsciously, Georgists who support a universal basic income do not adequately recognise the theoretical significance of George’s political economy. Reducing the institutions a healthy social order in human culture to fiscal or contractual transactions between individuals, they once again act as if human relations were merely “economic”. At the same time they inadequately recognise the real-world success of his favoured compromise between individualism and socialism. This is because libertarian supporters of universal basic income do not recognise the difference in kind that social existence has from individual existence, even though this recognition is the epistemological ground of George’s political, ethical and economic considerations.

 

 

This article was inspired by discussions in the Land Value Tax Facebook forum. It is dedicated to those who debated there. 

Author: Simon McKenna

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