“Mill is pointing to a driver, perhaps the chief driver of inequality in our economic system. The ‘capital’ that young people today are unable to accumulate is, in fact, land (i.e. location) value.”
“The world is pulsing with unrest. There is an irreconcilable conflict between democratic ideas and the aristocratic organization of society. We cannot permit people to vote, then force them to beg. We cannot go on educating them, then refusing them the right to earn a living. We cannot go on chattering about inalienable human rights, then deny the inalienable right to the bounty of the Creator.”
– Henry George, Progress and Poverty, chapter 43 The Central Truth (1879)
hat ignited today’s radical anti-capitalism and “woke” left-wing cultural politics? According to Douglas Murray, interviewed on his new book, The Madness of Crowds, it started with the economy:
“I trace all of this back ten years. We all understand this historically, when the economics goes wrong, other things go wrong. When the financial crash of 2008 happened it had social consequences too, a loss of confidence by people who were at the heart of what would have been the system because they feel, and not without merit, that the adults screwed up.”
Quillette Podcast (c 31mins)
Specifically, the adults screwed up the housing market:
Interviewer: “We live in a society post the crash where its very difficult to expect young people to be capitalists when they don’t have the chance of having the one form of capital that historically ordinary people have had, which is to own their own home.”
Douglas Murray: “I say this in the introduction, it’s not clear why people who don’t have any ability to accumulate capital will love capitalism…It is clear to me why if you don’t think you ever have a chance of owning a flat, an apartment, you might find an ideology, which claims that it can solve every inequity on earth, has an appeal.”
Interview, Triggernometry (c 10 mins)
Thus, according to Murray, today’s “horrible zero sum” anti-capitalist radicalism is a temper tantrum over “intergenerational unfairness” in housing pricing. But the book, thoughtful and pertinent as it clearly is, does not dwell on economics. Murray shrugs off the crash; we had another failure of “capital accumulation”; we must do better. Look around he says and compare: where and when have we ever had it so good? Nevertheless this shrug jars a little, given the very real concern he voices in nearly every interview: that the poorly thought-out Marxist ambitions of the movement “risk pulling the whole thing apart.”
Murray’s shrug has a specific origin. It is the reigning universal futilitarian paradigm of political economy:
“Today, futilitarian Neo-classical economists have an array of dismal choices for us: equity vs. efficiency; attracting business vs. supporting public services; inflation vs. unemployment; pollution vs. unemployment; equality vs. incentives; productivity vs. full employment; equality vs. saving and capital formation; free choice vs. urban sprawl; etc.
Neo-classical economics makes an ideal of ‘choice.’ That sounds good, and liberating, and positive. In practice, however, it has become a new dismal science, a science of choice where most of the choices are bad. ‘TANSTAAFL’ (There Ain’t No Such Thing As A Free Lunch) is the slogan and shibboleth. Whatever you want, you must give up something good. As an overtone there is even a hint that what one person gains he must take from another.”
Mason Gaffney, The Corruption of Economics, 1994
Futilitarianism is the water in which we swim; it pervades discourse and now seeps into the cultural spheres Murray discusses in his recent interviews. It is the root of our division and derangement. One of the symptoms of our madness, Murray neatly states, Murray neatly states, has been a rejection of epistemological norms: “We are pretending to know about things we don’t know and pretending to not know things we’ve known til yesterday.”
In one recent interview Murray quotes John Stuart Mill on the importance of listening to opposing views. He states it more fully in a Spectator article:
“As John Stuart Mill argued in On Liberty, we must hear contrary opinions. Firstly, because what is otherwise kept from us may be true, or contain a portion of truth, and secondly because if our opinions go unchallenged then truth risks getting divorced from its rational roots and eventually becoming a dogma too feeble to sustain.
As a result of the discussion that right- and left-wing writers and politicians have initiated in recent years, a number of serious errors in our society have been rectified and a number of important principles reiterated. This is a direct result of that freedom.”
With that in mind, consider a further quotation from Mill from his 1848 work Principles of Political Economy with some of their Applications to Social Philosophy, which goes to the heart of Murray’s economic thesis:
“The ordinary progress of a society which increases in wealth, is at all times tending to augment the incomes of landlords [landowners]; to give them both a greater amount and a greater proportion of the wealth of the community, independently of any trouble or outlay incurred by themselves. They grow richer, as it were in their sleep, without working, risking, or economizing. What claim have they, on the general principle of social justice, to this accession of riches? In what would they have been wronged if society had, from the beginning, reserved the right of taxing the spontaneous increase of rent, to the highest amount required by financial exigencies?”
Mill is pointing to a driver, perhaps the chief driver of inequality in our economic system. The “capital” that young people today are unable to accumulate is, in fact, land (i.e. location) value. Murray conflates land and capital. This is not surprising: foundational to neoclassical economics is the axiom that land is but one form of capital. This is a rare example of a science unmaking a category distinction: that land and capital were fundamentally different was conventional theory in Mill’s day. This is why the land market (by orders of magnitude the largest market of all) nevertheless regularly outwits us and crashes the whole economy. We simply do not see it. And this is how a problem with the land market is consistently mistaken for a problem with capitalism.
This point, then, might very well be “one of those things that we pretend not to know,” which is highly unfortunate, because it just might have caused the 2008 crash.
Mill calls the private appropriation of the rent of land a social justice issue and points at a solution, a non-futilitarian classical liberal paradigm that was advocated by Adam Smith and fully described by Henry George a few years after Mill. If we were to simply shift taxes off of labour and capital and onto land, we would make a significant step—maybe even a quantum leap—towards ending systemic inequality. Henry George came to use the term the Single Tax for this policy. Mason Gaffney uses the term Geofiscalism, such as in his 1998 address “at a meeting of the Land Policy Council, London”:
“Geofiscalism untaxes labor without raising taxes on capital, or capital formation.
Geofiscalism creates jobs without use of inflationary demand stimulus. It stimulates both supply and demand jointly, leveling them upwards. It proffers us “True Fiscal Stimulus,” in contrast to the current shallow usage of “fiscal stimulus” to mean deficit finance and bank expansion.
Geofiscalism makes jobs while abating demands on nature and the environment.
Geofiscalism promotes economy in government. By making jobs, it automatically lowers welfare costs.
Geofiscalism lets us raise tax rates without impairing the tax base: there is no ‘Laffer-curve Effect.’
Geofiscalism effects a radical social and economic reform in a completely non- catastrophic way, working silently through existing institutions and the free market.
Geofiscalism is impervious to tax-avoidance and evasion schemes.”
Separately, in Gaffney’s 1994 work The Corruption of Economics: “Geofiscal reform …would cut the Gordian knot of modern dilemma-bound economics by raising demand, raising supply, raising incentives, improving equity, freeing up the market, supporting government, fostering capital formation, and paying public debts, all in one simple stroke.”
That’s an impressive list of claims. It promises a lot, maybe even enough for today’s revolutionaries. Remodeling the tax system in this way might quench the thirst for social justice, and it would almost certainly reduce real estate costs.
Geofiscal reform allows us to recast the inequality problem as a technical issue, de-fangining it from politics. It gives both Left and Right what they say they want: a pro worker, pro capital meritocracy. It might even give the disaffected a chance to recover (or discover) a belief in capitalism.
But it remains an idea we cannot offer to ourselves. Viewed from inside the futilitarian paradigm, it is an impossibility, a violation of dogma. The last stage of the reform agenda of the nineteenth century is lost to us; classical liberalism has been schizophrened. No wonder the crowds are mad.
Darren Iversen is an independent student of Georgist history in England.
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Note to readers. The Youtube video of Prof Fred Foldvary predicting the 2008 crash in 1997 is, if you listen carefully, in fact from 2007. However, Foldvary did in fact predict the crash in 1997. He was the first economist to do so.