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Industrial Depression

Henry George:  The Land Question (1881)
In this Irish famine which provoked the land agitation, there is nothing that is peculiar. Such famines on a smaller or a larger scale are constantly occurring. Nay, more! the fact is, that famine, just such famine as this Irish famine, constantly exists in the richest and most highly civilized lands. It persists even in "good times" 'when trade is "booming;" it spreads and rages whenever from any cause industrial depression comes. It is kept under, or at least kept from showing its worst phases, by poor-rates and almshouses, by private benevolence and by vast organized charities, but it still exists, gnawing in secret when it does not openly rage. In the very centers of civilization, where the machinery of production and exchange is at the highest point of efficiency, where bankvaults hold millions, and show-windows flash with more than a prince's ransom, where elevators and warehouses are gorged with grain, and markets are piled with all things succulent and toothsome, where the dinners of Lucullus are eaten every day, and, if it be but cool, the very greyhounds wear dainty blankets–in these centers in wealth and power and refinement, there are always hungry men and women and little children. Never the sun goes down but on human beings prowling like wolves far food, or huddling together like vermin for shelter and warmth. "Always with You" is the significant heading under which a New York paper, in these most prosperous times, publishes daily the tales of chronic famine; and in the greatest and richest city in the world–in that very London where the plenty of meat in the butchers' shops seemed to some savages the most wondrous of all its wonderful sights–in that very London, the mortuary reports have a standing column for deaths by starvation. ... read the whole article

Henry George: Thou Shalt Not Steal  (1887 speech)
Crowded! Is it any wonder that people are crowded together as they are in this city, when we see other people taking up far more land than they can by any possibility use, and holding it for enormous prices? Why, what would have happened if, when these doors were opened, the first people who came in had claimed all the seats around them, and demanded a price of others who afterwards came in by the same equal right? Yet that is precisely the way we are treating this continent.

That is the reason why people are huddled together in tenement houses; that is the reason why work is difficult to get; the reason that there seems, even in good times, a surplus of labor, and that in those times that we call bad, the times of industrial depression, there are all over the country thousands and hundreds of thousands of men tramping from place to place, unable to find employment. ...  read the whole article

Henry George: The Wages of Labor
The very robbery that the masses of men thus suffer gives rise in advancing communities to a new robbery. For the value that with the increase of population and social advance attaches to land being suffered to go to individuals who have secured ownership of the land, it prompts to a forestalling of and speculation in land wherever there is any prospect of advancing population or of coming improvement, thus producing an artificial scarcity of the natural element of life and labor, and a strangulation of production that shows itself in recurring spasms of industrial depression as disastrous to the world as destructive wars. ...  read the whole article
Weld Carter: An Introduction to Henry George

In addition, George differentiated sharply between land itself and the products -- or wealth, as he termed them -- which labor made from the land. "In producing wealth, labor, with the aid of natural forces, but works up, into the forms desired, pre-existing matter, and, to produce wealth, must, therefore, have access to this matter and to these forces -- that is to say, to land. The land is the source of all wealth. It is the mine from which must be drawn the ore that labor fashions. It is the substance to which labor gives the form."

George saw, as between land and products, certain elementary differences. "In every essential, land differs from those things which... [are] the product of human labor. ...It is the creation of God; they are produced by man. It is fixed in quantity; they may be increased illimitably. It exists, though generations come and go; they in a little while decay and pass again into the elements."

Having noted these differences, George proceeded to use them as the basis for his examination of related areas of economics, such as speculation. When asked how speculation worked, George responded that a distinction must be made between speculation in land and speculation in products.

Writing of industrial depressions, he said, "When, with the desire to consume more, there coexist the ability and willingness to produce more, industrial and commercial paralysis cannot be charged either to overproduction or to overconsumption. Manifestly, the trouble is that production and consumption cannot meet and satisfy each other .

"How does this inability arise? It is evidently and by common consent the result of speculation. But of speculation in what?

"Certainly not of speculation in things which are the products of labor ...for the effect of speculation in such things, as is well shown in current treatises that spare me the necessity of illustration, is simply to equalize supply and demand, and to steady the interplay of production and consumption by an action analogous to that of a fly-wheel in a machine."  In other words, the tendency of speculation in products is to increase the demand for products and therefore to increase the price of products. This increased price will induce more production, which, increasing the supply, will tend to lower the price. Throughout this cycle, there has been a stimulating effect on production in general.

He continued, "Therefore, if speculation be the cause of these industrial depressions, it must be speculation in things not the production of labor, but yet necessary to the exertion of labor in the production of wealth -- of things of fixed quantity; that is to say, it must be speculation in land." 

How can this be? How can speculation in land cause industrial depression? George explains, "...that there is a connection between the rapid construction of railroads and industrial depression, anyone who understands what increased land values mean, and who has noticed the effect which the construction of railroads has upon land speculation, can easily see. Wherever a railroad was built or projected, lands sprang up in value under the influence of speculation, and thousands of millions of dollars were added to the nominal values which capital and labor were asked to pay outright, or to pay in installments, as the price of being allowed to go to work and produce wealth. The inevitable result was to check production. .." 

The tendency of speculation in land is similar to that of speculation in products; it increases the demand for land and thereby increases the price of land. However, here the similarity ends. The supply of land is fixed; as successive units of land become priced beyond the level at which labor and capital can profitably engage in production, an increasing (though artificial) scarcity of land develops. "The inevitable result was to check production." 

So, according to George, another difference between land and products is that speculation in products tends to stimulate production, whereas speculation in land tends to check production.  ... read the whole article

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Wealth and Want
... because democracy alone hasn't yet led to a society in which all can prosper