The Corruption of Economics
The Corruption of Economics Why Most Are Blind to What They Need to See
In the 1880’s Judge James G. Maguire of the Superior Court of the city and county of San Francisco gave a speech to the New York Anti-Poverty Society in the 1880s. He said…
‘I was one day walking along Kearney Street in San Francisco when I noticed a crowd in front of a show window... I took a glance myself, but I saw only a poor picture of an uninteresting landscape.
As I was turning away my eye caught these words underneath the picture: 'Do you see the cat?' ...I spoke to the crowd, "Gentlemen, I do not see a cat in the picture; is there a cat there?" Someone in the crowd replied, "Naw, there ain't no cat there! Here's a crank who says he sees a cat in it, but none of the rest of us can…. Then the crank spoke up. “I tell you,” he said, “there IS a cat there. The picture is all cat! …
…. and then, there it was! Sure enough, just as the crank had said; But now that I saw the cat, I could see nothing else in the picture!...and I was never afterwards able, upon looking at that picture, to see anything in it *but* the cat.”[i]
Maguire’s story was intended as a parable for land’s role in the economy. Like the cat in the picture, it is blindingly obvious once it becomes clear – so obvious in fact, it is hard to see anything *but* the land.
The Man Who Electrified the World
Maguire had been inspired by a passage in the 19th century political treatise ‘Progress and Poverty’ the American journalist Henry George wrote. One of his famous passages was… ‘That as land is necessary to the exertion of labour in the production of wealth, to command the land which is necessary to labour, is to command all the fruits of labour save enough to enable labour to exist.’[ii]
George had no formal education to speak of. He had left school at the age of 14, drifting in an out of poverty until securing steady employment as a typographer for the newly created San Francisco Times – later going on to edit his own newspapers.
However, George was an avid reader. He had studied the great classical economists such as David Ricardo and Adam Smith. He understood the relationship between the three factors of production – land, labour, and capital - and he used these tools to dissect the system.
Take now... some hard-headed businessman, who has no theories, but knows how to make money. Say to him:
"Here is a little village; in ten years it will be a great city—in ten years the railroad will have taken the place of the stage coach, the electric light of the candle; it will abound with all the machinery and improvements that so enormously multiply the effective power of labour.” “Will in ten years, interest be any higher?"
He will tell you, "No!"
"Will the wages of the common labourer be any higher...?"
He will tell you, "No the wages of common labour will not be any higher..."
"What, then, will be higher?"
"Rent, the value of land!” Go, get yourself a piece of ground, and hold possession!" And if, under such circumstances, you take his advice, you need do nothing more...’[iii]
The book started as a potential magazine article written to address the paradox of why ‘poverty’ rises in tandem with ‘progress.’ When it was published 17 months later in 1879 during an industrial depression, George’s ideas electrified the world. He had not only identified the underlying cause of the boom and bust cycle, George also provided a practical remedy...
The book was an international bestseller. It was translated into Chinese, Danish, Dutch, French, German, Hebrew, Hungarian, Italian, Norwegian, Portuguese, Russian, Spanish, and Swedish.
At its epoch, it was rumoured to have outsold even the Bible.
Seven years later, Henry George beat Theodor Roosevelt to almost get elected as Mayor of New York City - the financial capital of the nation. Henry George gravesite, Greenwood cemetery, New York.
Chrystia Freeland, a current Canadian Liberal member of parliament, wrote this recently…(iv)
‘George ran for mayor of New York again in 1897, but died four days before election day. He was given a statesman's send-off -- his coffin lay in state at Grand Central Station, where more than 100,000 people came to pay their respects. It was the largest crowd of mourners since Abraham Lincoln's funeral in 1865.’
The Corruption of Economics
Henry George didn’t have the modern tools of today’s economists. So why after 135 years don’t economists once again ‘see the cat’?..
(To read more of this post - sign up to Cycles, Trends and Forecasts - Australian economist and market cycle expert Phillip J Anderson) [
i] The Prophet of San Francisco, Chicago, 1904 - Louis F. Post
[ii] Progress and Poverty, 1879 p210 Henry George
[iii] ibid – ch.19 “The Basic Cause of Poverty
[iv] "The Problem Of Plutocrats: What a 19th Century Economist Can Teach Us About Today's Capitalism