one of its intrinsic characteristics. The private appropriation of the value of land (as opposed to secure individual possession and use of specific sites) is not a necessary condition for the capitalist mode of production. Capitalism entails the accumulation of wealth based on the provision of goods and services to consumers. It is a two-way exchange: consumers produce wealth in order to exchange it with others — to consume. Land monopoly undermines this creative process because it is a one-way relationship. The monopolist secures legal title to the resources of nature, and then claims a portion of the wealth created by others in return for nothing more than the permission to use land. This is the economics of the bandit sanctified by law. The monopolist per se does not contribute to production; he is, therefore, an anomalous feature within an otherwise efficient system.
Unfortunately for the free market, even its champions have not served it well. Now, with the eclipse of Keynesianism, we are back in the philosophical vacuum that has regularly afflicted Western society. The political dangers, as we pass through a recession that equals the one of the 1930s, are well known. We do not believe that it was a coincidence that the Japanese government’s White Paper in 1981 contained repeated calls for greater ‘patriotism’, or that in 1982 Japan began to sanitise her military history as the sun rapidly set on the miracle economy.12
In the desperate search for explanations and solutions, liberal economists have sought refuge in the theory of a Soviet economist, Nikolai Kondratieff. In 1925, he postulated that capitalist economies rise and decline in ‘long waves’ of about 50 years duration.13 The global economy is supposed to be in the trough of the latest such cycle. This view has produced exercises in exhaustive statistical compilation, some of them scholarly,14 others popular treatments which the authors admit could be interpreted by scientists as smacking of the occult.15 The problem with Kondratieff is that he did not offer an explanation for his cyclical phenomena. Yet without explanations it is impossible to equip the politicians with a package of rational corrective policies.
Unlike the mono-causal theory presented here, analysts who have built on Kondratieffs work have come up with a choice of ‘various theoretical explanations’.16 This choice has not convinced the decision-makers that they are now within reach of a practical solution for the major schisms in the growth trends that occur more regularly than every half-century.17 The editor of The Times, the newspaper of the British Establishment, noted with candour in his valedictory message to his readers:
The truth is that nobody knows the best way to manage the worst world slump since the 1930s (for economic historians it is a casebook example of a Kondratiev 50-year recession) in a period of endemic inflation. There is no answer in Keynes or Friedman or Marx or anyone else...18
Not surprisingly, therefore, politicians are today floundering around indecisively. The debate about how to regenerate the global economy is conducted in over-simplified terms. On the right hand, the conservatives advocate a ‘supply side’ strategy: revival through higher investment and output of goods and services. Economic liberals, on the left hand, are moved by desperation to cautiously propose a demand-side strategy: a return to government pump-priming, which brings with it the risk of new inflation.
This debate of the deaf is doomed to ultimate failure. This is predictable, because each side is offering a partial truth, recourse to which in the past has produced the state of disarray in which we find ourselves. Reducing interest rates (to stimulate investment), or increasing public expenditure (to increase demand), may have beneficial short-term effects; the passage of time, however, shows that they are of little more value than the placebos handed out by doctors who do not know the cause of the illness that they are invited to cure, but are too vain to admit of their ignorance to their patients.
It is this piecemeal tinkering with parts of the economy, however, which, cumulatively, has built up heavy income taxes, insupportable government deficits, overwhelming disincentives to the wealth-creating processes and has permitted cyclical collapse of the system. They are all hopeless attempts at mitigating the original problem. For too long, now, ‘managing the economy’ has been a substitute for a radical solution. While it provides power for politicians and jobs for civil servants, it does not create social stability and new wealth. That will be accomplished only when we finally come to terms with the monopoly of land, the one factor which is traditionally omitted from all the equations.
Because we have failed to address ourselves to this major problem, the door has been opened to the extreme left. They triumphantly claim that the capitalist system is about to terminate in one of those epoch-making Big Bangs that constitute the saltatory Marxist theory that history moves in stages, with communism at the pinnacle of human social achievement.
But if, as we claim, land monopoly is not an intrinsic ‘contradiction’ within capitalism, the corrupting influence can be surgically removed without recourse to social transformation. We do not claim that the fiscal reform recommended here will create an economic system at its best and final stage in human organisation. But capitalism would be equipped to ensure full employment and sustained prosperity, and so able to resist its ideological enemies and last much longer than they would have us believe.
Marx regarded capitalism as the last antagonistic form of class society. Fiscal reform would lay the foundations for the removal of the antagonistic elements and enable us to refine liberal democratic society. This is a sweeping claim, the full justification for which is not elaborated in this book. Other works will have to follow. Meanwhile, establishing how the speculative booms and disastrous slumps can be eliminated from the industrial economy is the first and necessary step in the direction of a happier and more prosperous society.
Notes
1 E. F. Denison, ‘Economic Growth’, in Britain’s Economic Prospects, by R.E. Caves and Associates, Washington, DC: Brookings Institution, 1968, p.236.
2 Ibid., p. 251.
3 D. Hagman and D. Misczynski, Windfalls For Wipeouts: Land Value Capture and Compensation, Chicago: American Society of Planning Officials, 1978, p. 123.
4 J. Steindl, ‘Capitalism, Science and Technology’, in C. H. Feinstein, editor, Socialism, Capitalism and Economic Growth, London: Cambridge University Press, 1967, p.200.
5 The Federalist Papers (Introduction by C. Rossiter), New York: The New American Library, 1961, p.79.
6 Ibid, p. 80.
7 Ibid, p. 84.
8 H. George, Progress and Poverty, centenary edn. 1979, New York: Robert Schalkenbach Foundation.
9 G. Gilder, Wealth and Poverty, New York: Basic Books, 1981, p.42.
