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Why the Inequality Debate Just Goes ‘Round and ‘Round

And here, perhaps lies the problem: the single tax’s indiscriminate generosity is its undoing. You cannot offer both sides what they want without dissolving the distinction between them.”

“What goes up must come down
Spinnin’ wheel got to go ’round
Talkin’ ’bout your troubles it’s a cryin’ sin
Ride a painted pony let the spinnin’ wheel spin”

Shirley Bassey in “Spinning Wheel”

According to Richard Burcik in his recent Merion West essay, he and Matt McManus have been debating inequality now for some time. One point on which they agree is that the central issue concerns capitalism and the relation between labour and capital, which are in permanent conflict.

Burcik looks at inequality through the lens of income and sees nothing. But he does not ask if income is the driver of inequality. McManus looks at inequality through the lens of capitalism, but he does not ask what kind of “capital” is driving inequality. He seeks no guidance from the centuries long struggle to preserve the Commons.

Thus, the inequality debate goes ’round and ’round. No hint is given of a third source of value for society to draw upon. The labor-capital oppositorum is a fixed constellation in our cosmology. Two-party, two philosophy politics is the expression of that cosmology. There is no conceptual space for the third element. Even the most eminent of economists will not be heard when they mention it. From the Left:

“I think most readers of Thomas Piketty’s book (Capital in the Twenty-First Century) get the impression that the accumulation of wealth—savings—is responsible for the rise in inequality…— the accumulation of capital…A closer look at what has gone on suggests that a large fraction of the increase in wealth is an increase in the value of land, not in the amount of capital goods.”Joseph Stiglitz in a December, 2014 interview with AlterNet

According to Stiglitz, Piketty’s book so famously and strikingly titled Capital is really about land. The driver of economic inequality is the land market—and its relation to the state—not capital. Stiglitz made the same point in the presence of Piketty five years ago. 

From the Right:

“The question is, which are the least bad taxes, and in my opinion [pauses, scans the audience, laughs momentarily] and this may come as a shock to some of you, the least bad tax is the property tax on the unimproved value of land, the Henry George argument of many many years ago.” Milton Friedman in discussion.

Friedman was recommending the single tax as an instrument for freeing capital and labor from taxation: partly to minimize the state, partly because it’s efficient to do so. Here, his primary concern was not with inequality, but he knew that Henry George’s entire career was.

“True capital is nothing more than the fruits of labor, and is a natural ally of labor against privilege.”Dan Sullivan inCommon Rights vs Collective Rights”

Ideas such as these point towards a different inequality debate. In the new debate, the relation between capital and labour is de-polarized, and capitalism is no longer the central concern. Instead, the state, specifically the structure of its tax system, now takes focus. The importance of land in the economy is rediscovered.

Stiglitz and Friedman, we are told, are from the “Left” and the “Right.” But the far-reaching policy they both advocate(d) is a direct outcome of the classical liberal theory of inequality. Surprising then is that both the Left and the Right have the single tax in their own traditions. It is not an exaggeration to say that the modern left was born from Georgist populismand that free market conservatives emerged from Georgist libertarianism. But how could this be? The answer is: If the single tax does what it claims, the result would be a pro-worker, entrepreneur-friendly, small-state, free-market meritocracy with very low unemployment, high real wages, low real estate costs, and a tendency to protect the environment by encouraging optimal land use. Add to that a rationally funded Universal Basic Income if desired. No wonder this view attracted so many.

And here, perhaps lies the problem: the single tax’s indiscriminate generosity is its undoing. You cannot offer both sides what they want without dissolving the distinction between them. For the Left and the Right, it is a question of survival.

“You got no money and you got no home
Spinnin’ wheel all alone
Talkin’ ’bout your troubles and you never learn
Ride a painted pony let the spinnin’ wheel turn”

Darren Iversen is an independent student of Georgist history in England. 

6 thoughts on “Why the Inequality Debate Just Goes ‘Round and ‘Round

  1. Darren Iverson,
    I am always impressed by your essays because they make me reconsider my stated positions in order to make certain that my economic claims are still rooted in firm foundations. Your piece made me dash off to Amazon and load up my Kindle. I now have over 600 new pages to read.
    In my opinion, you should add to your reading list “A Farewell to Alms: A Brief Economic History of the World ” by Prof. Gregory Clark.
    Don’t you agree with me that Merion West is the very best online magazine for the exchange of ideas?
    Please stay safe during these uncertain times.

    1. I’m very gratified to hear that you read my essays, and commend your open spirit. May I ask what new reading you have and why you recommend Clark’s book?
      Yes I do agree with you about Merion West.

      1. D Iverson,
        Of course, people read your pieces. You are smart and well-read.
        I suspect that we agree on very little but that is why I want to hear what you have to say. I gain nothing by reading someone who sees eye to eye with me.
        I loaded up on late 19th-century progressive economic theory and I suggested “A Farewell to Alms” because while your knowledge of progressive history is very strong I thought a book on economic history might expand your field of interest.
        I believe that our differences of opinion are likely rooted in a static (by no means incorrect) view of inequality versus a dynamic examination of the growth of overall human well being (economic, life expectancy, mortality, morbidity, etc.) over decades.

        1. Hi Rick
          I don’t really understand the static/dynamic distinction. There either is systemic economic inequality – a process by which workers and businesses are deprived of a proportion of their output – or there isn’t. It is true that vast numbers of people are better off under this hobbled form of capitalism but that’s a separate issue, especially when you look at the direction inequality is going in (up).
          I found a summary of Clark’s book which highlights the hockey stick graph of growth which correlates with capitalism. This prompted me to look at the index, which is viewable on Amazon. Guess what I didn’t find? Oil, gasoline, petroleum. The hockey stick is as much about our discovery of abundant oil as it is about capitalist invention and dynamism. This is another example of attributing to capital what really comes from land.
          I find the term “progressive” very confusing. The “progressive era” is characterized as there era of “anti-monopoly” but the campaigns against land monopoly and the history of Georgism – which peaked at the same time – are not mentioned.

          1. D Iversen,
            As I said we probably agree on very little Your comment about workers being deprived of a portion of their output is a good example. Suppose a farmer tills his fields by hand and gets to keep all of his resulting crops, Now, suppose that he goes to work for a corporate farm that supplies him with capital (a tractor-drawn plow) and this combined effort results in a much larger crop that he and the owner of the tractor and the land split. Importantly, the worker would not accept this arrangement with the owner of the tractor unless he ended up with more, say corn, than if he tilled his own field by hand. Under your theory, the worker is being deprived of some of his output but under my theory, both the worker and the owner end up better off.
            Your comment about petroleum, I believe, has its history reversed. Capitalism began in central England about 1765 [Note: Prof. McCloskey put the date about 100 years earlier in the northern Netherlands but no matter both dates work.] Now Oil was discovered in Pennsylvania, the USA near Titusville in the 1850s about 100 years too late to have been the event that triggered capitalism.
            Any reply to your comment about the progressive era versus the economic theories of Henry George will have to await my further reading. Simply put I read your original piece and realized that I needed to deepen my understanding of Mr. George’s ideas.

          2. Rick hi
            I said “labour AND capital” are deprived of part of their output not labour alone – I always make that explicit. I’m not making the labour Vs Capital argument I’m explicitly rejecting it. Likewise, I never said that oil “triggered” capitalism – that is absurd – I said that it is a large factor in explaining the prosperity we have enjoyed.

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