Control and Management of Monopolies
What Are “Monopolies Other than the Monopoly on Land” and Why Must Government Not Only Control, but Manage Them?
January 13, 2019
Rick DiMare
Attorney

When Henry George spelled out his official agenda in the first Georgist national Platform of the Single Tax League of the United States in 1890, a huge controversy erupted over his use of the simple words “and managed” in the 11th and final paragraph of the Platform:

“With respect to monopolies other than the monopoly on land, we hold that where free competition becomes impossible, as in telegraphs, railroads, water and gas supplies, etc., such business becomes a proper social function, which should be controlled and managed by and for the whole people concerned, through their proper governmental, local, state or national, as may be.” - Henry George, Paragraph 11, Platform of the Single Tax League of the Untied States

In short, banking, utility and railroad corporations did not want Congress managing their “monopolies other than the monopoly in land” like, for example, Congress was then managing the postal service or military. The shareholders of these corporations cried “socialism,” as they would today (but at least in 1890 they agreed that government should have some regulatory control over them).

Nevertheless, Henry George stood his ground and insisted on keeping his original wording. Congress was to have both the power to control natural monopolies AND to manage them.

At some point after George’s death the entire Paragraph 11 was removed from the Platform, but Joseph Fels restored it around 1910.

What’s the big deal? What is a “monopoly other than the monopoly in land”? And why must it be both controlled AND MANAGED by Congress? And where George says, “where free market competition becomes impossible,” to which kind of industries is he referring?

In short, the words “and managed” were repugnant to the elite of 1890 because they were concerned that it gave Congress power to dictate their wages and salaries, whereas mere regulatory “control” arguably did not.

In other words, those who own and operate these kinds of monopolies don’t want to be regarded as monopolists in the first place, but if they are found out, they don’t want government to have power to dictate or limit their income.

In Paragraph 11 George listed some of what he regarded as natural monopolies in 1890: “telegraphs, railroads, water and gas supplies, etc.” but as I’ve stated elsewhere, to modernize George’s list, today we could expand:

(1) “telegraphs” would now include telephone, cell phone, internet, satellite, cable service etc.;

(2) “railroads” would now include interstate highways, air and space travel routes, sea lanes, etc.;

(3) “water” would now include clean air, sewer systems, water treatment plants, electricity, etc.;

(4) “gas supplies” would now include gas, oil, nuclear supplies, etc.; and finally

(5) George didn’t mention anything about medical services and health care in 1890, but many modern health care industry businesses and professions are also “monopolies other than the monopoly in land,” such as drug companies, hospitals, funeral and burial service providers, dentists, ambulance services, etc.

Seligman’s Input

To this debate, it’s important to add the insight of Professor Edwin Seligman, from Chapter 6 “Taxes on Wages” of his book “The Shifting and Incidence of Taxation” (1899).

I provide a link to Seligman’s book below, but in short, he adds to George’s concerns about monopolistic industries and explains why, unless closely scrutinized, the wages of certain professionals should not be regarded as the personal property of the wage-earner, but instead as, at least in part, artificially high “quasi-rents.”

This relates to the health care debate today because Seligman puts overpaid doctors and lawyers (as well as overpaid actors and artists) in the category of wages which should be managed by government because, as Seligman states, “the price of labor in professional occupations, in short, is not competitive, but is either customary or monopolistic.”

Seligman states: “Even if we regard these [professional] classes from the purely economic standpoint, we cannot say that their recompense bears any necessary proportion to common wages. The earnings of the liberal professions are not dependent on the cost of production. It is only by a perversion of words and of facts that we can consider the time and efforts spent in educating a member of a profession as a capital which must earn interest. . . . The forces which keep the price of labor in general at a certain level do not operate with equal effect in this field. The price of labor in professional occupations, in short, is not competitive, but is either customary or monopolistic.” (https://archive.org/details/shiftingandincid015798mbp)

Conclusion

To conclude, most health care related services that exist today are “natural monopolies” which should be both controlled AND managed by Congress, which means Congress must have power over how much the employees of these monopolies are paid, to assure that their wages and salaries are truly competitive, just as it does now with the salaries of postal workers, military personnel, and other government employees.

Only after such wages are deemed reasonable, and subject to public scrutiny, should a property right in these wages be recognized by law, and not be regarded as “quasi-rents” which are the product of monopoly.

Of course, this still leaves numerous industries and wages subject to free market forces, over which Congress should have no right to either control or manage.

Footnote #1: The socialization of natural “monopolies other than the monopoly on land” mentioned in  paragraph 11 of the 1890 Platform of the Single Tax League of the United States was apparently something Henry George had been thinking about, even as he was writing Progress and Poverty (1879), more than a decade earlier:

“With this abolition of want and the fear of want, the admiration of riches would decay, and men would seek the respect and approbation of their fellows in other modes than by the acquisition and display of wealth. In this way there would be brought to the management of public affairs, and the administration of common funds, the skill, the attention, the fidelity, and integrity that can now be secured only for private interests, and a railroad or gas works might be operated on public account, not only more economically and efficiently than as at present, under joint stock management, but as economically and efficiently as would be possible under a single ownership. The prize of the Olympian games, that called forth the most strenuous exertions of all Greece, was but a wreath of wild olive; for a bit of ribbon men have over and over again performed services no money could have bought.” Henry George, Progress and Poverty, Book 9, Chapter 4, Paragraph 19.

Footnote #2: Regarding Paragraph 11, Shearman expanded the list of utilities and other industries which should be both controlled and managed by government in Section 12 of the 1893 "Just and Practicable Income Tax" (See here for the entire 21-page proposal before Congress).

Shearman states: “[We should tax] all the profits of corporations owning railroads, canals, transportation privileges, telegraphs, telephones, pipe lines, mines, quarries, gas works, electric-light plants, steam-heating pipes, and, in short, all corporations that have EXCLUSIVE PRIVILEGES of any kind whatsoever. In other words, we should TAX ALL THE INCOME WHICH IS DERIVED FROM MONOPOLIES, WHETHER NATURAL OR ARTIFICIAL. I am making no complaint about monopolies, and certainly for present purposes have no desire to enter upon a crusade against them. There is no question of their destruction involved . . . ." (emphasis by Shearman)

And of course with the invention of modern internet and communication services, air and space travel, nuclear energy, etc. the list of industries that should be a "social function" would be expanded still further.

Know secrets.
Inside information on economics, society, nature, and technology.
Rick DiMare
Attorney

Rick is a self employed attorney from Boston, Massachusetts. He graduated from Boston College and studied law at the Massachusetts School of Law at Andover. He also administers the Facebook group called Common Wealth Tax, which seeks to explore the (currently obscure) link between modern income tax laws and the Land Value Tax (LVT) advocated by political economist and “Greenbacker” Henry George (1839-1897).