Economic with Justice Lecture Saturday 18th October 2014
John De Val, School of Philosophy and Economic Science, London
A few days after I accepted the invitation to give this talk, I looked at the poster advertising the event and I was struck by the realisation that the title was absurdly ambitious and, since then, the absurdity of the ambition has increased day by day. So if you were anticipating a comprehensive history I am afraid I am going to disappoint you. This history will be very selective. I am going to concentrate on the period of the late 19th century and the first half of the 20th because that covers the time when public revenue without taxation had widespread public support in both Britain and America and its prospects of being introduced looked most promising.
I shall use as my text for today’s talk a statement from the gospel of John Maynard Keynes. Right at the end of his great work, The General Theory of Employment, Interest and Money, Keynes rewards all those who have managed to get thus far with this observation;
The ideas of economists and political philosophers, both when they are right and when they are wrong, are more powerful than is commonly understood. Practical men, who believe themselves to be quite exempt from any intellectual influences, are usually the slaves of some defunct economist. Madmen in authority, who hear voices in the air, are distilling their frenzy from some academic scribbler of a few years back. I am sure that the power of vested interest is vastly exaggerated compared with the gradual encroachment of ideas. Not, indeed, immediately, but after a certain interval’’.
The idea which lies at the heart of attempts to collect public revenue without taxation was most clearly enunciated by Henry George, author of Progress and Poverty. George was far from being an academic scribbler but his idea was very powerful and posed a challenge to some heavyweight vested interests. Here is how he describes the idea;
One tax on land values! We do not propose a tax on land, as people who misapprehend us constantly say. We do not propose a tax on land; we propose a tax upon land values, or what in the terminology of political economy is termed ‘rent’; that is to say, the value which attaches to any land irrespective of any improvements in or on it; that value which attaches to land, not by reason of anything that the user or improver of land does – not by reason of any individual exertion of labour – but by reason of the growth and improvement of the community.
But this was supposed to be a talk on Public Revenue without taxation. How come I am going to be considering attempts to introduce a tax on land values? Well the word ‘tax’ in this context is an unfortunate misnomer. A tax is a compulsory contribution paid out of someone’s property. But consider how rent (or to be more accurate, economic rent), arises. No individual, or even a group of individuals, creates economic rent. It is a product of communities. Remove the surrounding community from a site and its economic rent diminishes, probably to nothing. Remove public services like roads or drains and sites become unproductive. Remove government and organised economic activity breaks down. For economic rent is created primarily by three things; nature, population and public authorities. Hence it is the natural return to the whole community. The collection of a tax on land value is really a matter of landholders simply giving back to the community its own property.
Henry George’s idea was not exclusively his idea. But he was the first to grasp its full potential and its significance as a possible solution to the economic ills of the time. Its genesis and development can be found in the earlier writings of Thomas Paine, the French Physiocrats, Adam Smith, David Ricardo and John Stuart Mill. George developed his vision into a coherent philosophy. But he did more than that. He expressed his ideas in language which the common man could understand. As a result his book, Progress and Poverty was read by millions of people, many of whom became convinced that, if implemented, these ideas could lead to economic and social justice.
It is probable that Henry George had a far greater influence on what is called the left in Britain and America than did Karl Marx. He visited Ireland and Britain during the Irish land campaign and British agricultural depression in the early 1880’s. His ideas spread throughout the British political left; to the Liberal, Labour and Irish parties. Amongst those who enthusiastically championed the cause of land value taxation was David Lloyd George, then a Liberal backbencher but later to become Chancellor of the Exchequer in 1908 in the Liberal government led by Asquith. In the following year Lloyd George had to present his first budget.
The prospects were daunting. A good deal more revenue would need to be raised to meet existing commitments. In the previous year, Parliament had approved the first old-age pension, for which £7 million would be required. While old age pensions were the most important new item of social expenditure, the Chancellor anticipated further spending for invalidity and unemployment insurance. There was also a developing naval race with Germany, which demanded £3 million more for warships. On top of this as a result of an economic recession, existing taxes had produced just over £3million less than the anticipated yield. As everybody at the time firmly believed in the principle of balanced budgets this would need to be compensated for in the current year. In all just over £14 million was needed over the estimates for the previous year, an increase of around 10%.
Asquith had been under increasing pressure from a significant number of MPs to introduce a land tax and they did indeed form part of Lloyd George’s budget. But it was clear from the outset that the House of Lords, overwhelmingly made up of landowners, would throw out any Bill which sought to value land, which was the sensible way to proceed before taxing it. If the valuation was included in the Budget the government took the risk that the Lords might break with convention and not pass a Finance Bill. In the end, Lloyd George proposed a modified and somewhat muddled land-taxing proposal which would not have brought in a great deal of revenue. The proposal alienated both the ardent land-taxers who could see that it came nowhere near to Henry George’s ideal of a single tax and also the landowners who saw it as the thin end of a very nasty wedge.
In fact, most of the money to be raised in the Budget was to come from increases in income tax and on death duties, spirits, tobacco, vehicles and petrol. But as expected it was the land taxes that created uproar. There were four elements to the land proposals.
First there was a 20% tax on the incremental value of land when sold. It would only apply to future appreciation from the current valuation which the Chancellor proposed would be made on all land. This valuation was his prime objective for a future, more substantial and coherent tax. Second was an annual duty of a halfpenny in the £ (approximately 0.2%) on the capital value of undeveloped land, but excluding parkland to which the public had access and excluding agricultural land. Third was a mineral duty on the rental value of all rights to work minerals. Fourth was a reversion duty of 10% on the benefit accruing to a lessor from the determination of a lease of land.
The budget became known as the People’s Budget. In presenting his budget statement to the House of Commons, Lloyd George finished his speech with these words;
This is a war Budget. It is for raising money to wage implacable warfare against poverty and squalidness. I cannot help hoping and believing that before this generation has passed away, we shall have advanced a great step towards that good time, when poverty, and the wretchedness and human degradation which always follows in its camp, will be as remote to the people of this country as the wolves which once infested its forests.
Although it was no doubt true that Lloyd George believed deeply in these new forms of taxes, it was also true that he had a not very well hidden agenda in introducing them. He wanted a fight with the landlords, especially those in the House of Lords. He wanted to break their power.
The immediate political and press reactions were more or less predictable. Austen Chamberlain, for the opposition, considered that
‘the cumulative effect…would be to bring about…at no very distant date, a revolution in our country life which would strike directly the well-to-do, but which would , glancing from their shoulders, fall with added weight upon those of the poor and labouring classes’.
The Conservative press was more explosive. To the Morning Post,
‘Henry George, the Socialist, has found in his namesake… the first responsible Minister in any civilised country to embody in a legislative proposal, the peculiar theory associated with his name’.
But before the government could confront the Lords it had to get the Budget through the Commons. This proved to be a monumental task with 70 parliamentary days of debate spread over six months. There were 554 divisions upon specific points of principle and difference. The opposition used every delaying trick that they could think of, including time-wasting debates on whether to continue the debate in late-night sittings.
A Budget Protest League was formed and to counter that a Budget League was set up to tell the people of its advantages. The Budget League had Winston Churchill as its president. Churchill barnstormed the country making speech after speech in brilliant style. Here is a typical and particularly memorable extract;
Roads are made, streets are made, services are improved, electric light turns night into day, water is brought from a hundred miles off in the mountains – and all the while the landlord sits still. Every one of those improvements is effected by the labour and cost of other people and the taxpayers. To not one of those improvements does the land monopolist, as a land monopolist, contribute, and yet by every one of them the value of his land is enhanced. He renders no service to the community, he contributes nothing to the general welfare, he contributes nothing to the process from which his own enrichment is enhanced.
Churchill, who was less tied to the House of Commons, made more public speeches than Lloyd George, who was needed to shepherd his budget through Parliament. But the speeches the chancellor made were effective and, indeed, often more virulent than Churchill’s. His vendetta against the landlords was personal. Here is an example;
The question will be asked, “Should 500 men, ordinary men chosen accidentally from the unemployed, override the judgement – the deliberate judgement – of millions of people who are engaged in the industry which makes the wealth of the country?” That is one question. Another will be, ’who ordained that a few should have the land of Britain as a perquisite; who made 10,000 people owners of the soil, and the rest of us trespassers in the land of our birth? ‘These are the questions that will be asked. The answers are charged with peril for the order of things the Peers represent; but they are fraught with rare and refreshing fruit for the parched lips of the multitude.
The budget started its progress through the Commons in May 1909 and did not finally emerge until October. As expected, the Lords then summarily rejected it by 350 votes to 75. The ‘Peers versus the People’ general election followed in short order. Churchill went tub-thumping around the country in his usual sparkling style. Often he would lead the singing of the Land Song which was sung to the tune of Marching Through Georgia;
The Land! The Land! ‘’Twas God who gave the Land!
The Land! The Land! The ground on which we stand!
Why should we be beggars, with the ballot in our hand!
God gave the Land to the People!
The Liberals won the election with a reduced majority and were still outnumbered in the Lords. However the rejected People’s Budget was reintroduced to the Commons, passed and returned to the Upper Chamber. Under threat of a restriction of their powers, the Lords let it through without a division and it passed through all its stages within a few hours. On April 29 it received the Royal Assent, one year after it had first been introduced and the various taxes, including the land taxes came into effect. But there was a problem with the land valuation. The chief valuer on the board of the Inland Revenue who was personally in favour of land value taxation, later explained the problem;
Far too many questions were asked, many of them quite unnecessary for the valuation. The valuation process, which should have been quick and cheap, proved extremely protracted.
By 1914, the register was still not ready. Then came the First World War. After a General Election in 1918, a coalition government was formed with Lloyd George as Prime Minister but the Liberal Party was at that time in disarray and the new government contained many more Unionists, as the Conservatives were then known, who were antagonistic to land value taxation. On 19 April, the coalition Unionist Chancellor of the Exchequer, Austen Chamberlain, presented his budget proposals. They included the intention to repeal the land value duties, to forego the collection of arrears, to refund the duties paid and to terminate the valuation process. Chamberlain’s main argument was that the duties brought in hardly any revenue and clearly weren’t worth the hassle. In July, the Committee of the Whole House voted in favour of these proposals.
But if support for land value taxes had ebbed away in Parliament, it still maintained a great deal of support in the country and eventually it found its way back to Parliament. In April 14 1930 in his Financial Statement, Philip Snowden, Chancellor of the Exchequer in the Labour government said the following;
I should disappoint not only Members on this side of the House, but also many Members of the Liberal Party and an increasing number of individuals and local bodies throughout the country if I were to say nothing on the subject of land valuation and land taxation……
The Government accordingly propose to introduce forthwith such a separate Bill. We shall thus obtain a basis on which an impost will later be levied. I do not wish at the present time to pre-judge the precise form which that impost should take – whether it be an annual tax for the benefit of the State, or an annual rate for the benefit of local authorities, or both; but the Valuation Bill we shall introduce will provide the basis for both the taxation and rating of land values. I have tried to make it plain and beyond dispute that it is the Government’s intention to use the valuation, for which provision will be made in the Bill, as a means of securing to the community a share in the constantly growing value of the land. This is a Measure equitable in itself, insistently demanded and long overdue. I have never regarded the taxation or rating of land values only as a fiscal instrument. It will be….. a potent instrument of social reform.
The Bill was introduced in the House later that year but because of the pressure of other business made no progress. So Snowden was on his feet again the following year with another Financial Statement. After referring to the delay, he said;
This year we are going to deal with the matter. Since that time I have given considerable thought to the whole subject, and I now propose to include in this Year’s Finance Bill provisions for the taxation of land values; i.e. provisions for the necessary and preliminary step of valuation, together with provisions for the imposition of a tax on land values upon the valuations thus obtained. I think it will be obvious from the experience of the scheme of land value taxation introduced by my right hon. Friend, the Member for Caernarvon Boroughs (Lloyd George), that it would be unwise, if not impracticable, to attempt to value and tax concurrently.
The valuation is the first and, indeed, the essential step to any scheme under which a contribution to the needs of the community can be levied on land values. I propose that the valuation should be substantially completed before the tax begins to be levied. Thus the impost will not become operative during the financial year….the valuation will, I hope, be completed within a period of two years from the passing of the Bill. It will thus be available, subject to periodical revision, as a basis upon which to charge an annual tax for 1933-4 and subsequent years. That tax, for which provision will also be included in the Bill, will be at the rate of 1d in the £ on the capital land value.
Snowden concluded his speech with these words;
The present system stands in the way of social and economic progress, inflicts crushing burdens on industry and hinders municipal development. When we have carried this Measure, as I am sure we shall, and as we are determined to do, we shall look back upon the Budget of this year as a landmark on the road of social and economic progress, and as one further stage towards the emancipation of the people from the tyranny and the injustice of private land monopoly.
There were still considerable difficulties to overcome, not least in his own Labour Party. The land value debate was concurrent with the Great Depression and many in the Labour movement grew impatient with a tax that needed years to implement and which they did not really understand. However the Bill finally passed, Snowden was jubilant.
His jubilation was short-lived. In August a financial crisis broke out triggered initially by the collapse of an Austrian bank. The knock-on effect affected the City and gold began to leave the Bank of England. Confidence had to be restored. Before they would pledge their support, foreign banks, including the New York Federal Reserve wanted evidence of fiscal discipline. The drive was for a balanced budget and in a time of national stress, cruel cuts, including a cut in unemployment payments, were forced on the Government. Ramsay MacDonald, the Labour Prime Minister faced rebellion from his own party and with his government in disarray went to see the King and was eventually persuaded to head a national Government of all parties. The price of solidarity with the Conservatives was that the land clauses in Snowden’s budget had to go. They were eventually disposed of in 1934.
The 2nd World War shortly followed and land value taxation disappeared from the political agenda. Andrew MacLaren, the father of the founder of this School and a Labour MP during the inter-war period was a passionate and eloquent campaigner for land value taxation. Writing in 1970 he had this to say looking back over the first half of the century;
Under the cruel heel of war and unemployment men came to value security more and freedom less. The emphasis in social advance shifted to the massive provision of public benefits and the increasing intervention of the State in almost every area of
human activity. The two World Wars and the great depression between them had to a great extent severed the line of liberal thought that had developed over the previous century.
During the 19th century and early 20th century another momentous development had been happening. A series of electoral reform acts meant that by 1928 all men and women had the right to vote irrespective of whether they owned property. Up until this point in our British history government was firmly in the hands of those who owned property. This change presented the Conservative party, still largely the party of choice for the landowners, with a problem in the 1920s and 30s. How could they appeal to the non-property-owning classes and particularly the newly enfranchised women, and prevent them from voting for the fast growing party of the working classes, the Labour Party? An idea, first aired in the 1920’s, gradually gained traction. This idea was that of the ‘property owning democracy’ a concept dreamt up by the peer, Lord Skelton, a close colleague of Harold Macmillan. In essence this idea meant, in practice, that having been driven off the land as a result of the Enclosure Movement, the people would be encouraged to buy it back it again – with interest. The property owning democracy concept really got wings after 1953 when Harold Macmillan was PM and again during the 1980s under Mrs Thatcher’s government. In 1918, 23% of households owned their own property. By 1971 the figure had risen to 50% and it reached a peak of 69% in 2001. A large number of new landowners have been created whose gut reaction to a land value tax would be negative. One can almost see the headlines ‘Now they want to tax your home!!’.
I would like now to turn to America, Henry George’s home territory. A widespread view is that George’s ideas, often referred to as Georgism, withered away quietly in America with George’s death in 1897. Professor Mason Gaffney calls this warped history. Here is what Gaffney says;
One of the great derelictions of American historians is to have neglected the single-tax movement during 1901 to 1924. It is also a warped view of the ‘The Single Tax’ as a discrete, millennial change, a quantum leap away from life as we know it. Pure Georgism never took over the whole hog, but no single philosophy ever does. Modified Georgism, melded into what became known as the Progressive Movement helped run the USA for the 17 years 1902-1919 working through both major political parties. At the local level, it continued through the early 1920s…..Real concessions were made; the politicians heard the voters….
During this period, most American states and Canadian provinces required separate valuations of land for tax purposes. Professional valuers, responding to the general interest, were routinely valuing land separately from buildings, and developing workable techniques to handle the occasional tricky case. But opponents to George’s ideas were not inactive – no more so than in economic academia where a large number of economists were lining up to take a pot shot at George’s big idea. I would like to focus on two of them to illustrate some of the ways they went about this.
So first step forward John Bates Clark, an economist at Columbia University. Clark’s bibliography includes at least 24 works directed against the teachings of Henry George over a period of 28 years from 1886 to 1914. The gist of one of his arguments went as follows;
The atmosphere as a whole, showers or breezes minister transiently to whomsoever they will, and, in the long run, with impartiality. Therefore they are not wealth. Those who appropriate them create wealth by so doing…..
The implication was that those who seize land and exclude others thereby produce its value.
His major contribution, however, in undercutting George’s attack on landed property was to erase the classical economist’s distinction of land from capital. He did this first by distinguishing between capital goods and capital. Here in his own words he sets out the argument, or one might say, the conjuring trick; (from ‘The Distribution of Wealth: A Theory of Wages, Interest and Profits’)
…capital is perfectly mobile; but capital-goods are far from being so. It is possible to take a million dollars out of one industry and put them into another.. It is, however, quite impossible to take bodily out of one industry the tools that belong to it and to put them into another. The capital that was once invested in the whale fishery of New England is now, to some extent, employed in cotton manufacturing; but the ships have not been used as cotton mills. As the vessels were worn out, the part of their earnings that might have been used to build more vessels was actually used to build mills. The nautical form of the capital perished; but the capital survived and, as it were, migrated from the one set of material bodies to the other. …
….We may think of capital as a sum of productive wealth, invested in material things which are perpetually shifting—which come and go continually—although the fund abides. Capital thus lives, as it were, by transmigration, taking itself out of one set of bodies and putting itself into another, again and again. The more frequently it casts off one set of forms and takes on another, other things being equal, the more actively business operations are proceeding, and the more vitality there is in the fund itself.
Land of course is also deathless. So it was a small step for Clark to lump it in with capital. Eventually he then produces the following rabbit from his hat;
Rent is the aggregate of the lump sums earned by capital-goods; while interest is the fraction of itself that is earned by the permanent fund of capital.
So the link between land and rent is completely obscured if not denied. According to the American economist Donald Dewey, Clark’s treatment of rent ‘has been followed by an admiring Paul Samuelson in all of the many editions of his widely used textbook ‘Economics’.
Another prominent critic of Henry George was Richard T Ely, the founder of the American Economic Association in 1885. Ely produced many books and articles over a long, versatile career, whether solo, with collaborators or as editor. Besides founding the AEA he founded the academic discipline of land economics. Until he came a cropper in 1929 he was also a successful land speculator. He also did well selling textbooks. His book ‘Outlines of Economics’ was the bread-and-butter text from 1893 to about 1930. Ely’s early career as an academic economist was rudely jolted in 1894 while working at the University of Wisconsin. He was effectively ‘tried’ at the University for allegedly preaching socialism and fomenting strikes. His colleagues rallied round and saved him. But Ely got the message. After the trial, he denied any connection between his social philosophy and that of Socialism. A useful means to that end was to disparage Henry George, whom he had earlier labelled approvingly as a ‘revolutionary’ socialist.
Ely moved from Wisconsin to John Hopkins University, the first American university to specialize in graduate training. From 1876-1892, it was virtually alone in turning out American Ph.D’s in economics, who in turn took over much of the future profession. The person who hired Ely was the first President of John Hopkins, one Daniel Gilman. When Ely was young, even more than today, the way to promotion and pay was through a patron. Gilman was Ely’s patron. Gilman who had also been the first President of the University of California, was a major founding and funding father of American higher education, highly adept at drumming up financial contributions and grants. He had arrived at John Hopkins because he had been forced to leave the university at Berkeley in California following a popular crusade against corruption in the Berkeley administration. This crusade was led by a financial journalist, then running the San Francisco Daily Evening Post. The name of the journalist was Henry George. So there was no love lost between Gilman and George.
It was at Gilman’s request that Ely founded the American Economics Association still a leading association of professional economists today. At least in the early years, the Association was controlled by an undemocratic Council so as ‘to prevent our organisation being captured by some economic sect or group of reformers’ –a coded reference to the Georgists. Non-reformers apparently were acceptable and businessmen were ‘entirely welcome’.
In 1920, at the age of 66, Ely began a new career, founding the Institute for Research in Land and Public Utility Economics. It was more than a new career; he founded a new field ‘land economics’. In 1920, people were turning away from Progressivism. The Progressive movement was the name given to the effort to cure many of the ills of American society that had developed during the great spurt of industrial growth in the last quarter of the 19th century. Amongst its goals were the removal of corruption and undue influence from government through the taming of bosses and political machines and a greater role for government in solving social problems and establishing fairness in economic matters. In 1920 there was a reaction. After the social instability and sharp economic depression that emerged in the wake of World War I many Americans in the 1920s began to see business and city growth as foundations for stability. The promotion of a distinctive American identity was seen as crucial in the face of rising fears of communism. Henry George’s ideals and ideas became unfashionable.
Ely caught the turning tide and used it to raise funds for his Institute. Much of his funding came from the big railroad companies who were the largest landowners in America. These were the public utilities in the title of his Institution. Rights of way terminals and railyards were, as they are now, rail’s major assets. Ely’s new Institute played an important part in directing attention away from George’s ideas. Here is how Mason Gaffney describes his contribution;
‘Ely did not rely, like Clark, on removing ‘land’ from the lexicon of economics; ‘land’ was in his new name. That did not stop him denying that land has unique qualities, but his strategy was rather to pre-empt the work of those more applied economists – farm economists, real estate sellers, valuers, lenders, urban economists, resource economists, transportation and public utility economists- who had not learned better than to use four-letter words like ‘land’. He guided them away from ideas that might lead to taxing it, and used their money to guide others away’.
Here is a sample of Ely’s contribution to economic thought;
- Considered as property yielding income, land and capital are on exactly the same footing….
- Land is indistinguishable from capital and so we should not tax separately the value of land
- Nobody works harder for what he gets…than the landowner; and he usually gives a big return to society.
- Rising land prices are a payment for continuous toil
- It is really an insult to the working man to treat him as a tax exempt person.
Ely did not invent many of these and similar ideas, but he did give them academic endorsement. He was also exceptionally well connected. In a few years his ideas were preached from the top by the economic ruler of America, Andrew Mellon, Treasury Secretary under three Presidents from 1921-1931, and by his successor Ogden Mills. Both Mellon and Mills were major owners of the national resources that Ely would relieve from taxation. They lost control of Washington in 1933, but Ely’s ideas moved ahead rapidly in the states. The policies championed in his book Outline of Land Economics, 1922 began taking over state governments in the 1930s and, according to Gaffney, have counter-revolutionized state and local government finance in the last 60 years.
So that is a little glimpse into the ways that George’s ideas were undermined in America. Ely and Clark were not on their own. But rather than consider further evidence from America, it is interesting to turn to Britain again and to consider whether the same process was at work here.
The two most influential economists during this period were undoubtedly Alfred Marshall and John Maynard Keynes. Marshall did in fact have a run-in with Henry George at a notorious public meeting in Oxford in 1884 which George described as the ‘most unruly he had ever attended’. Marshall was familiar with Henry George’s work . The previous year he had himself delivered three lectures in Bristol on George’s book Progress and Poverty. In these lectures, he accused George of not being a scientific thinker, saying that by nature, George was a poet and that the real value of his work lay not in the treatment of questions which required hard study, but in the freshness and earnestness of his views of life.
He disagreed with the assertion in the sub-title of Progress and Poverty that there was an increase of want with increase of wealth. Whilst he agreed that there was still much want, he did not think the statistical evidence backed up George’s argument. Marshall argued that progress had temporarily worsened the plight of the poor but was now dramatically improving their lot along with that of the rest of the society. He was also unimpressed by George’s remedy for alleviating poverty, the land value tax. Again, using statistics, he asserted that it would not bring in enough revenue.
Now is not the time to discuss Marshall’s solutions to poverty. But it is worth stating that he was not against land value taxation in principle. He apparently supported Lloyd George’s budget. In his magnum opus ‘‘Principles of Economics’, first published in 1891, he acknowledges that a tax on agricultural land would not inhibit production and he also lays out the concept of what he calls the ‘public value of land’. Marshall’s public value is what George means by ‘community-created value’, the joint result of nature, location, public works and services, settlement and urban linkages. Marshall observed that urban values were outgrowing rural values, and he provided an appropriate concept.
George and Marshall wrote for wide but disparate audiences. George’s readership was basically non-academic; his purpose was to persuade the public to adopt his policy recommendations. Marshall spoke almost exclusively to the economics profession, modestly hoping to “put in one brick just where it should be in the slowly rising economic edifice”. By saying this, he was being unduly modest. He established an Economics Tripos at Cambridge, with economics the major subject and politics the minor. This Tripos was designed to educate not just potential economists but potential legislators, civil servants, higher managers, country gentlemen and philanthropists. In this ambition he has not been entirely unsuccessful. Marshall was very influential but land value tax wasn’t a prominent part of his legacy.
It was Marshall who persuaded John Maynard Keynes to take up economics and for a while he was a pupil of Marshall. It is probably wrong to say that Keynes completely ignored land, but if he didn’t that fact is pretty well hidden. In an article in the 1983 edition of Land and Liberty, entitled The Economic Consequences of John Maynard Keynes, John Allen observes;
One of the great puzzles of Keynesian economics is its total failure to grapple with questions of taxation, notwithstanding the enormous importance of taxation in the modern economy, both in Europe and the United States.
It seems strange that the principles of taxation laid down by Adam Smith, applauded by Ricardo and endorsed by Henry George, should be so completely ignored. They are hardly mentioned by Marshall and, needless to say, by no economist since his time.
Modern taxation is therefore guided by no principle whatever except that of exaction and impost. This is part of the heritage of Keynes. Keynesian theory has no answer to the problems of rising unemployment and inflation. It cannot produce these answers because it has no theory of taxation.
If I was to summarise the different attitudes of the economic profession in America and in Britain towards the principles of public revenue without taxation over the period covered this afternoon, I would say that in America it was marked by hostility and distortion, in Britain by benign neglect.
So, in conclusion how does this history bear out Keynes assertion that ideas are more powerful than vested interests. On the face of it vested interests won the day. But they not only used their power to obstruct, they used ideas to fight, obscure and confuse. The concept of public revenue without taxation is still alive and showing renewed signs of vitality. But it has an even more powerful idea to contend with and that is the idea that land can be owned privately without any corresponding obligation. To trump that idea will require energy, passion, perseverance and eloquence. It will also require no little subtlety.