Money and Monetary Reform
Henry George’s Concept of Money and Its Application to 21st Century Monetary Reform -- Part Three
We are pleased to present the third part of an essay by Stephen Zarlenga of the American Monetary Institute. Zarlenga considers American economist Henry George's views on money and their modern implications. Part One Part Two
For further information, visit the American Monetary Institute web site at www.monetary.org
GEORGE AND McGLYNN
George made a strong alliance with Father McGlynn, pastor of St. Stephens in New York, the most important Catholic Parish in the United States. Like George, McGlynn was a powerful orator, and also shared George’s concern for two moral imperatives. (“Economics being a matter of human relations, it was necessary that these relations be established on a basis of justice and freedom” wrote McGlynn )
Stephen Bell informs us in Rebel Priest And Prophet that the two re-enforced one another and that their average follower was probably more impressed by their oratory skills and calls for justice than by the economic arguments: “(Many) had been won by the eloquence and personal magnetism of the two men but had imbibed little real understanding of what it was all about….”
GEORGE’S POLITICAL MOVES
George normally kept a single-minded focus in promoting his ideas for land reform. He had run for Mayor of New York City more to spread those ideas than to actually become Mayor:
“To (George) a political campaign was merely an opportunity to center the public mind on his proposal and induce study of it. He was glad he had not been elected Mayor of New York…” wrote Stephen Bell.
In George’s view: “Social reform is not to be secured by noise and shouting; by complaints and denunciation; by the formation of parties, or the making of revolutions; but by the awakening of thought and progress of ideas.” and “The great work of the present for every man, and every organization of men, who would improve social conditions, is the work of education - the propagation of ideas. It is only as it aids this that anything else can avail. And in this work every one who can think may aid - first by forming clear ideas himself, and then by endeavoring to arouse the thought of those with whom he comes in contact.” (Soc Pr, 242, 243)
Yet the political establishment was so concerned with his candidacy that a high powered opponent, Abram S. Hewitt was drafted to oppose him. Mason Gaffney wrote:
“In 1876, Hewitt was Tilden’s campaign manager, at the very center of the deal that let Hayes steal the election…. Hewitt was the majority leader. He was Presidential timber himself. The plutocracy threw a crack general into the fight against George, and his mission was clear. He said, ‘I am a candidate for Mayor for only one purpose. I regard the election of Henry George as Mayor of New York as the greatest possible calamity ... . For that reason and that only did I take this nomination.’ Academic historians and economists have gone far towards wiping out our collective memory of the Georgist phenomenon, so even most Georgists have little idea of its force. We may measure that by the force that was marshaled against it.”
Hewitt won with 41% of the vote to George’s 31%; and Teddy Roosevelt got 28%. Louis Post thought George might actually have won; but he was apparently above the fray and relieved at not having to serve as Mayor.
George would say that “What I care for is not how men vote, but how they think.”
But a more balanced approach would have been useful to Henry George, to help him to later demonstrate more adequate political skills and judgment, which were needed to protect his movement.
In 1886, McGlynn and George had formed the new United Labor Party, specifically to focus on the land question. The party grew dynamically until early 1888; what would prove to be the fateful pivot year for Georgism.
To try to understand what he did next, consider that at age 49, George’s economics books were undoubtedly among the most widely read and loved works of his day, but that he and his ideas were never openly mentioned by the educational, economic or political establishments; That he received no credit or recognition for his important accomplishments was clearly painful to him, perhaps more so since he was a self made economist without the psychological comfort that academic degrees might have afforded.
The hurt is evident in George’s discussion of the 1886 change in the way Encyclopedia Britannica handled Political Economy:
“(The article) undertook to review all that had been written about (political economy) …of the writers…from the most ancient times, through a first, a second and a third modern phase…writers of France, Spain, Germany, Italy and northern nations are referred to in utmost profusion, but there is no reference whatever to the man or the book that was then exerting more influence upon thought and finding more purchasers than all the rest of them combined…”(SPE, 205, 206)
Furthermore, the piece was immediately reprinted in book form under the direction of Professor E. J. James, of the University of Pennsylvania; the person and institution that George considered to be at the heart of protectionism philosophy in America. For George, it was too much.
FIRST THE TRAP
In Dec. 87 President Grover Cleveland proposed eliminating import tariffs, to the delight of both McGlynn and George. George’s book Protection Or Free Trade had been published in early 1886. He interpreted Cleveland’s statement as an important move toward his cherished ideal of free trade and thought it deserved his full support. Perhaps in Cleveland’s move he also saw an opportunity to quickly affect a major national issue. At the time such taxes were the main source of government revenues, but since they often created lucrative privileges for wealthy owners of protected industries, there was a resentment of them.
I suspect that a well thought through trap was laid for Henry George in late 1887, early 88. First a false interview appeared widely in newspapers where George said he wouldn’t run for President and wanted their new United Labor Party to stay out of the fray. He quickly repudiated the interview, but still toyed with the idea of supporting Cleveland. But McGlynn refused to “be led off the trail of ‘the land for the people’ by any call from Grover Cleveland for tariff reform. He quoted what George himself had said in his book about the inadequacy of free trade, and its benefits being absorbed ultimately by the landed interests unless the land question itself were settled, and settled right. This he said was sufficient reason for refusing to abandon the land reform for a fight on the tariff that promised little result”, wrote Bell.
Father McGlynn shared George’s support for free trade, but he and many other supporters passionately warned that the land issue must be their first and foremost concern, Otherwise, as George himself had warned in Protection Or Free Trade, whatever benefits that might possibly be derived from free trade, would soon wind up in the landlords pockets.
THEN THE POLITICAL QUICKSAND
George doggedly resisted, confusing his stubbornness with a stand for principle, and ignored the impassioned pleas of much of the membership. He split with McGlynn, sending him a curt letter of resignation as Vice President of their Anti Poverty Society on February 25, 1888. McGlynn replied with a gracious 2 page letter praising Henry George and expressing deep gratitude for his services. The movement quickly divided. The party floundered and the circulation of The Standard, George’s weekly newspaper, soon fell off, placing George under pressure of constantly worrisome financial straits.
Reading George’s sparse 1888 correspondence , almost all with British supporters, George always placed an optimistic face on events:
4 Letters to Mr. Briggs in London:
Feb. 29, 1888:
“We are going to have the free trade fight here at last in spite of the cowardly politicians and the ignorance of our people…”
March 24, 1888:
“The truth is that these half way people who call themselves tariff reformers in our country and free traders in yours, are afraid of radical men like you and me.”
August 31, 1888:
“…the fight is getting hot here but I think we shall win and make a great advance toward the free trade you want.”
October 15, 1888:
“The good fight is going on wonderfully well…and the free trade idea is making wonderful advances…a free trade party after your own heart will be making the fight in the United States…”
Letter to Mr. Walker
March 17, 1888:
“9/10 of our really intelligent friends…are with us…the Standard is not doing as well as I would like…but it is certain to do better.”
Letter to Wm. Loyd Garrison
March 19, 1888:
“…I am very much pleased with the response of the readers of the Standard to the free trade question. I think fully nine-tenths of the single tax people are with us in believing that our energies ought to be thrown this summer into the free trade fight.”
However the direction was generally downhill after the split with McGlynn. (And McGlynn had problems of his own - being temporarily excommunicated by the Vatican.)
AND FINALLY THE INSULT
That George was treading on political quicksand soon became evident from Cleveland’s campaign slogan, which was clearly a disavowal of George: “Dont-dont-dont be afraid! Tariff reform is NOT free trade.”
Cleveland lost, but ran again 4 years later. Like a bulldog, George supported him again in the Standard for June 29, 1892: “At last, quicker even than we had dared to hope, what we have struggled for and waited for has come to pass, and the two great political parties of the United States stand fronting each other on the naked question of Protection or Free Trade (note - that’s the exact title of his book).”
However, as Louis Post, editor of The Standard (from 1891) later noted: “Cleveland was elected. But… he sidetracked the free trade policy and plunged the country into the free silver contest of 1896 by taking a defiant stand on the gold standard side. In doing that, he “lined up” with the same plutocratic interests which on the tariff issue were devoted to protection.”
Finally George and his friend Tom Johnson, a delegate to the 1896 Democratic convention, both supported William Jennings Bryan’s campaign, having concluded that “a free silver platform…would be the better choice as compared with the ‘gold bug’ policy” wrote Post.
With the benefit of hindsight, supporting free trade in this way must be viewed as a disaster for Georgism. In retrospect Louis Post would write: “When we prove that protection lessens the supply of goods by increasing the work necessary to produce them, what have we proved to men whose greatest anxiety is to get work? …in civilized countries the majority of the people are helpless unless they find someone to give them work.”
Years later Michael Flurscheim, one of George’s earlier protégé’s who emigrated to New Zealand helping to raise the land question there and in Australia, noted : “The intermixture of tariff legislation and land reform has thus done a great deal of harm, especially in the United States and the British colonies.”
And Flurscheim perhaps unfairly, but vividly expressed the free trade issue in this way:
“It is all very well for the wolf to preach to the sheep that the free right of mutually devouring each other is one of the most sacred adjuncts of free individualism among animals, so long as the case only lies between him and the sheep…” Flurscheim’s last word on Henry George was to call him: “A great Genius who unfortunately fell into the Smithian trap” in free trade.
And Flursheim’s judgment was not just hindsight. In an October 19, 1888 letter, he expressed his high esteem for George and wrote: “You still continue attacking at the wrong place…the cause of my irritation. You are the general and I am forced to follow. How happy you would make me if you would allow me to point out the best point of attack for your splendid sword - Single Tax!”.
McGlynn too had shown this foresight, and many other supporters as well.
For Georgism to move forward meaningfully, Georgists must learn from both their successes and their mistakes; this error of leadership and its origin in applying an overly theoretical methodology to political activity has to be faced, understood and corrected. And that’s why I’ve discussed it at such length.
GEORGE VISUALIZED A UNION OF ENGLISH SPEAKING PEOPLES
Having received a warm and in some ways more respectful reception in England (even if sometimes in the form of serious criticism) and perhaps because of his ancestry, George seemed to have had a special place in his heart for his British followers. He even entertained a generalized concept of the eventual establishment of a union of the English speaking peoples:
“…we see in the future…that great republic that some day is to confederate the English speaking people everywhere that is to bring a grander ‘Roman Peace’ to the world….in meetings such as this…I feel an earnest (presentiment) of the coming time when we of one blood and one speech are also to be one…What we want today is to bring us all together is , not union under one government that shall assume to govern, but that absolute freedom of intercourse that shall entwine all interests, that absolute freedom of intercourse that shall establish a daily ferry from this side of the Atlantic to the other …” (Standard, August 10, 1889)
As the Standard went into decline, the first serious attack on George from the Catholic Church came in 1889, when Father Victor Cathrein labeled George an agrarian socialist. Professor Gaffney has characterized Cathrein as not really wanting to solve the problem of poverty, because he thought the rich need the poor in order to test their character by giving them chances to perform Christian charity!
In 1891 much larger troubles came in the form of Pope Leo XIII’s encyclical, Rerum Novarum, On The Condition Of Workers, the Catholic Church’s initial effort at spiritual guidance in modern (industrial) socio/economic matters. While much of the encyclical calls for a better treatment of working people by both employers and the state, without directly naming him a section of Rerum is aimed at George and other reformers, and workers are warned “not to associate with vicious men who craftily hold out exaggerated hopes (#30)”. Without clearly presenting George’s viewpoint, it is erroneously lumped together with socialism and even the negation of private property altogether.
Prof. Gaffney points out that the Vatican was careful not to draw attention to George’s works by mentioning him or openly banning them; and they never put Progress And Poverty on the list of banned books. Although the Church’s error was evident to Catholics familiar with George, still the Encyclical further pressured him.
While Rerum Novarum called for justice to workers, certainly a goal shared by Henry George, it gave the matter no teeth and its tone ended up more concerned with protecting the status quo of property rights and the social order. Remedies were to be left mainly to charity. But Quadragesimo Anno issued by Pius XI in 1931 after the great stock market crash (on Rerum’s 40th anniversary), was another matter. Though it profusely praised Leo XIII and “re-affirmed” Rerum, when one reads its language, very significant changes are apparent. First the category of “reformers” is enlarged beyond the universally vicious:
“Some were seeking the overturn of everything, while others, whom Christian training restrained from such evil designs, stood firm in the judgment that much of this had to be wholly and speedily changed (sect. 4).”
Again, George is not named, leaving the possibility he is to be included among such Christians. Quadragesimo also made significant advances in other areas. While it noted the importance of charity and of changing the moral attitude of men, it significantly recognized the importance of juridical actions and reforms; how the state must regard among its duties the economic protection of citizens, especially the poor and weak (e.g. sections 25, 28, 30, 49, 62, and 77-80).
Quadragesimo also attacked the concentration of wealth as an “unanswerable argument” on the unjust distribution of the products of industry (e.g. sections 58-62). But its strongest language is reserved for condemnation of the emergence of an economic “dictatorship”:
“(105, 106) …It is obvious that not only is wealth concentrated…but an immense power and despotic economic dictatorship is consolidated in the hands of the few…This dictatorship …since they hold the money and completely control it, control credit also and rule the lending of money...and have so firmly in their grasp the soul, as it were, of economic life that no one can breathe against their will.”
Remember this was just two years after the Great Crash, and a year or two before the worst of the Depression. Perhaps Quadragesimo encouraged Cardinal Mundelein of Chicago to write in 1938:
“The trouble with us in the past has been that we were too often allied or drawn into an alliance with the wrong side. Selfish employers of labor have flattered the Church by calling it the great conservative force, and then called upon it to act as a police force while they paid but a pittance of wage to those who worked for them. I hope that day is gone by. Our place is beside the working men. They are our people, they build our churches, our priests come from their sons.”
Thus while the Church moves very slowly; in my view it would be an error to write it off as a potential force for reform, and to ignore efforts in that direction; and that is why I’ve devoted a full page to these encyclicals.
THE SCIENCE OF POLITICAL ECONOMY AND GEORGE’S EARLY DEMISE
It was at this low point in 1891 that George began a long and arduous project, which may have been ultimately responsible for his early death in 1897 at only age 58. This grand task which he felt compelled to selflessly devote himself to was to research and write his last book, THE SCIENCE OF POLITICAL ECONOMY. If we but listen carefully to what George tells us about this process, you will see why I suggest that “economics” killed him:
“In all the dreary waste of economic treatises that I have plodded through, this (by J. S. Mill)… is the best attempt I know of to explain…the laws of distribution.” (SPE, 432)
“…Schopenhauer speaks of the destruction of the capacity for thinking which results from the industrious study of a logomachy made up by monstrous piecing together of words which abolish and contradict one another. But of this very thing, Schopenhauer himself with all his strength and brilliancy is a notable example...His industrious study of Kant had evidently reduced him to that state of mind which he speaks where ‘hollow phrases count with it for thoughts’”. (SPE, 346)
And I am suggesting that George too became such a victim; not of Kant but of “Political Economy”.
An example of this process, in Book V (SPE, 497-503), where George faithfully tries to make sense of Adam Smith’s obfuscation regarding labor determining the value of money, but it is in vain, as it must be. A century earlier, Smith’s contemporary, Thomas Malthus had noted that Smith’s assertions on the constant value of labor: “haven’t convinced anyone, so in no works of political economy is it considered the measure of value”, and Malthus pointed out that Smith himself had used corn prices, not labor, as a measure of silver’s value.
Finally in this weakened state, when Tom Johnson warned Henry George that the pressures of running for Mayor of New York City again in 1896 might prove fatal, his almost wistful reply was:
“Wouldn’t it be glorious to die that way”.
George passed away on October 29, 1897; his longtime friend and supporter Tom Johnson at his side. His old ally Father McGlynn delivered the funeral oration to a vast throng gathered at Greenwood Cemetery in Brooklyn: “As truly as there was a man sent of God whose name was John, there was a man sent of God whose name was Henry George. …God…took this lad Henry George, a lad with so little schooling…and made him the instrument for good which he became, the messenger of a great truth”
This is from one who knew and understood him; fought with him, yet loved him dearly. McGlynn continued: “Why is this vast gathering assembled here today… why is it that vast multitudes have come from early morn…to gaze mournfully and lovingly on his face, and to contemplate again the noble character of the man? It is because he was a man sent of god, - and his name was Henry George.”
The “killer” book was finally published posthumously by his son. It offers some excellent and important clarifications and expansions, such as on Adam Smith’s selfishness assumption. At great personal cost, George fulfilled what he considered a solemn duty, to cover the whole field of political economy. That it did not result in new ground breaking advances as he had made in Progress And Poverty, at age 40, is not really a criticism - that would be expecting too much. The last section of the new book dealing specifically with money, discusses credit in important ways foreshadowing some present day developments. But these discussions don’t rise to the great political clarity evident in George’s monetary and banking discussions in Social Problems, written at age 44.
With this abbreviated background of Henry George’s thought, values and method, we are now better prepared to examine his monetary views.
Next week: Henry George's Monetary Views
Stephen Zarlenga has published 20 books on banking, politics and philosophy. In 1996 he helped to found the American Monetary Institute dedicated to the independent study of monetary history, theory and reform. His newest book is The Lost Science Of Money.
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