Georgism, Capitalism, and Socialism

Some people have mistakenly called Henry George either a capitalist or a socialist, but he was not either, at least not in any simple sense.  One might say that George’s philosophy mixes capitalism and socialism, but it is more accurate to say that it is a distinctive philosophy that is neither capitalist nor socialist.

The central principles of capitalism in its purest form are

1) free exchange of goods in an unregulated market;
2) limited taxes to pay for limited government, and
3) private ownership of property.

The central principles of socialism are

1) government control or regulation of the market;
2) high taxes to pay for expanded government services; and
3) government ownership of major industries (particularly large industries that are prone to monopoly control).

The central principles of Georgism are

1) free exchange of goods in markets, with limited regulation of commerce;
2) no taxes on labor; high taxes on certain kinds of property;
3) private ownership of property, but fully offset by taxes that virtually eliminate unearned wealth.

Georgists agree with socialists that capitalism has failed to reconcile fairness with efficiency.   Whereas capitalist policies increase national income, they also cause extreme inequality.

Georgists agree with capitalists that socialism is inefficient because government monopolies are rarely any better than private monopolies.   Most policies to help the poor by equalizing incomes have the negative side effect of reducing the productive power of the economy.   That is why China and Russia shifted from socialism to capitalism in recent decades.

Georgists believe it is possible to unite fairness and efficiency by taxing away the rewards of privilege so that people can earn money only by being productive.   Since much of the power of modern corporations derives from those privileges, proper taxes could reduce that power.

In simplified form, those are the characteristics of the three systems of economic philosophy.  If you had to choose them, which system would you choose?  Why?  Do you think it is possible to combine them in some way?

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4 Responses to Georgism, Capitalism, and Socialism

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  2. Joseph says:

    I’ve been thinking about this topic for a while.
    … What about an economy based on public good served, or utility provided?
    As one possibility, this could be based on how productive one is being, specifically with regard to creating good for the community or society.

    I think we’ve seen enough of capitalism to see that productivity for the sake of productivity — or growth for its own sake… does not necessarily create any (economically or otherwise) sustainable or lasting good…

    …. And, in a wise man’s words:
    “Growth for the sake of growth is the ideology of a cancer cell.”

  3. Susan Mercurio says:

    What about people who can’t be “productive”—the elderly, children, mentally or physically ill people? How do we take care of them? And who gets to decide what “productive” means?

  4. Frank says:

    @Susan: Georgism is about breaking up monopolies, the most significant of which is land. Breaking up the land monopoly would necessarily involve sharing land’s rental value, which means a “Citizens’ Dividend,” a type of basic income.

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