Review: The Corruption of Economics

Mason Gaffney And Fred Harrison. London: Shepheard-Walwyn Ltd., 1994. 271 Pp.

By Francis Peddle (reviewer)

Henry George was a nineteenth century American social philosopher and economist who saw the monopolization of land and other natural resources by a privileged few as the ultimate source of homelessness, poverty, and war. His Progress and Poverty (1879) has a wide following.

The Corruption of Economics contains four essays. I shall confine my comments to the one by Gaffney, who shows how the philosophy of Henry George was deflected so as to protect the landed establishment from an intellectual assault that was more accurate than Marxist critical analysis.

Neo-classical economics is a reaction against Georgism. George asserted that appropriation of community-created values by private interests, such as the monopolization of land values, is the ultimate source of socio-economic conflict. He seeks to reconcile social interests and allow them to achieve a complementary place in a just society.

Our boredom with politicians frequently turns to outrage when they give away the public patrimony, such as recently happened in the U.S. with the new Telecommunications Act, which hands over the electro-magnetic spectrum to private TV broadcast interests. This cost the U.S. Treasury $100 billion, which will be made up by further income and excise taxes or cuts to government programs.

George's "remedy" for industrial depressions, business cycles, and other perennial economic torments is simple enough, though its implications are intricate and subtle. Natural resources can be shared more equitably if we recapture for the operations of government the surpluses that accrue from the productive activities of individuals in civil society. Our current systems of public finance allow such accruals to remain in the hands of private interests. In the absence of such a recapture, governments generally tax productive activity in the economy: labor income, business exchanges, and any transactions that give the appearance of an "ability to pay." As a result, taxes fall primarily on the economic activities of the lower and middle classes. Gaffney charts the sordid history of our century-long exercise in fiscal self-delusion.

One anti-Georgist, J.B. Clark, tried to undercut George's attack on the private monopolization of natural resources by erasing the classical economic distinction between land and capital. Relying on Clark's blurring of this distinction, E.R.A. Seligman developed the modern day income tax. Tax eligibility now treats income from property and from wages as uniform. Gaffney points out that the economic absurdities crafted to counter George's assault on landed vested interests still inform most tax discussions today - such as the "level playing field" assumptions of the U.S. 1986 tax reform.The Corruption of Economics is a powerful indictment of prevalent economic thinking.Gaffney's work contains a positive message: that a re-examination of our systems of public finance can reduce conflict in our society and between nations.

Reviewed by Francis K. Peddle, Ph.D., an Ottawa lawyer working with the Canadian Research Committee on Taxation.

Peace Magazine Jul-Aug 1996

Peace Magazine Jul-Aug 1996, page 28. Some rights reserved.

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