Progress and Poverty | Henry George

Summary of: Progress and Poverty: An Inquiry in the Cause of Industrial Depressions and of Increase of Want with Increase of Wealth… The Remedy
By: Henry George

Introduction

Progress and Poverty delves into the paradox of increased poverty alongside technological advancements and wealth growth. It uncovers the hidden factors contributing to this phenomenon, discussing the role of land rent, land ownership, and the distribution of wealth in perpetuating poverty. The book sheds light on the historical and economic forces that influence income inequality and the consequences of adopting misguided policies. With an engaging and accessible approach, the summary unravels the complexities around the nexus of wealth and poverty, providing readers with an insightful understanding of the underlying mechanisms.

The Paradox of Technological Advancements

Despite technological advancements increasing prosperity, poverty continues to persist and grow. The wealthiest economies often have the greatest deprivation. The reason for this paradox lies in the flawed understanding of political economy. The definition of wealth is rooted in exchange value; assets that satisfy human wants. With labor, these assets produce wealth, with the value determined by the amount of labor put in. Capital, a subset of assets, aid in creating more wealth. Wealth is distributed to landowners, laborers, and investors in the form of rents, wages, and interest. As wealth grows, so does rent and the proportion allocated to wages and interest decreases, thus perpetuating the cycle of poverty.

The American Homesteading Dream

In the 19th century, the American West saw a massive influx of settlers seeking cheap land and the chance for prosperity. Compared to the Eastern US and Europe, wages for pioneer workers were much higher, making moving west a route to success for many. While the wilderness and sparsely populated areas were seen as opportunities for homesteaders to reap the benefits of their labor, the cities held people in abject, helpless, and hopeless conditions, where even a small patch of land was worth a fortune.

The Pressures of Settlement

Settlers face economic pressure when land productivity increases. As more people occupy the farmland, cooperation is necessary for improved welfare. Specialization leads to the establishment of towns and the advancement of agricultural practices. However, as landownership concentrates into fewer hands, landlords raise rents, leading to poverty for laborers. In the end, landlords capture most gains from community progress, inducing abject poverty. This is evident in the higher squalor levels in New York City than in San Francisco in 1879. The extractive wealth and rising rents explain how material progress can lead to poverty.

Capitalists and Rent-seeking Behavior

The belief in the natural antagonism between labor and capital is prevalent in society, but few differentiate between tangible investments and passive income. The economic progress of western American states was aided by railway investment, which involved capitalists risking their money to drive progress. Rent, which is a creation of the whole community, belongs to the whole community, not just landlords. However, some railroad barons demanded bribes and colluded to extract easy monopoly rents, feeding off progress built by the wider community. Capitalists who provide tangible assets used in wealth creation are just as much at the mercy of the landlord as the laborer is.

The Corruption of Democracy and the Role of Landownership

The concentration of wealth and power in the hands of a few landowners can undermine democracy. This is especially true when the poor lack economic power and follow simplistic leaders. Ancient societies and the early US republic suffered from similar problems caused by monopoly landownership and excessive rents. The young republic failed to ensure economic equality by blindly adopting the same attitudes to landownership as the class-ridden regimes of the Old World. Speculative bubbles in land values can pave the way to economic depressions. Consequently, wages and interest tend constantly to fall, rent to rise, and the rich to become richer at the expense of the poor.

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