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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9 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. Leon says:

    This is a very POOR understanding and reflection of even the basic principles of both Socialism and Capitalism. Nevertheless, it saves Georgism as an interesting subject, but not by the quality of this article.

  5. Independent thinker with this in mind about “labor is superior to capital” and in “the fruits of ones labor” when a society can not create enough work to employ everyone. How do you manage the weak in a future society with machines doing most of the work? Seventeen Per Cent…
    The Founders belief in the people must be what for this society to exist?

  6. T. J. says:

    I think that we can define “productive” as being capable of producing things (be they food reserves, land cultivation, new technological products, scientific conclusions, etc.) from doing work (which, in this case, shall be defined as imposing an action upon something – such as writing a book, doing charity for the poor [although this is a counter-example to what I mean], or playing football – to create an effect, which in this case would be the production). In this way, we can easily say what it means to be productive: when a businessman makes a deal and settles it, this is doing work and thus he deserves pay for well he works; when a football player trains and plays games, he is doing work. But even here we see a drastic difference between social responsibilities and productiveness, as it were. Which is more influentially affecting society? Well, probably the businessman over the football player. And so, from this, we can say that the businessman deserves to make more than the football player because, in some way, he/she is doing something that’s having more societal effects than the football player who makes millions for going out onto the field and throwing a few touchdowns. Even though entertainment is important, it also makes us blind to the true economic poverty behind society. Instead of giving football players millions, we should be dividing this money up for those who cannot make even ten thousand a year.

    However, I do see your point about how we would define those who may not be capable of productive means. This is a very good question. I think, though, that this is not a question that has an easy answer at all. Despite the attempts of healthcare providing help for the physically ill and mentally ill, they haven’t been too frivolous at all. Nonetheless, this same situation could go right back to effort and production. Healthcare professionals should be making more money than those who sit and dance their fingers on the keyboard for a couple hours on end, because this institution is saving fellow lives. And if they make more money, then healthcare can hopefully improve by allowing the physically, mentally ill better opportunities for good lives and prosperity in their own ways. But, as for everything, there is always an exception to the rule – and this just happens to be one of them to Georgism.

  7. 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.

  8. Felix says:

    This essay shows a lack of understanding what socialism is. I seems to think it is defined by more than simply what it is not.

    The system it describes as “socialism” is state capitalism. And even if government redistributed wealth there is no reason to suppose it would have to be a planned economy or have any more monopolies or oligopolies than capitalism.

    Georgism is a capitalism that takes classical liberalism to the conclusion that some intervention is good. It can also be characterized as a bourgeois socialism in that it tries to palliate capitalism but in a way that perpetuates it.

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