Karl Marx, Henry George and China


About 150 years ago, Karl Marx and Henry George wrote books which they would hope would greatly influence economics, and ultimately, the history of the world. Now if you had been a betting man at the end of the 19th century, who would you have thought, would have the most influence on world affairs?

The main work of Karl Marx, Capital, was over 1,100 pages long and not very popular. Volume I , only sold 1,000 copies in a five year time-frame after its first publication in 1867. Marx would die 16 years later in 1883. “There were between 9 and 11 mourners at his funeral”. That is what it says in Wikipedia.

In contrast the work of the other author, Henry George, was a real best seller. It was published in 1879. Over 3 million copies of Progress and Poverty were sold in a very short time, and at almost 600 pages it was not a very easy read either, but a lot more digestible than Capital. In fact, after the Bible, Progress and Poverty out-sold all other English language books in the 1890s.

(These sales figures, if right, are pretty impressive, Capital in the 21st Century by Thomas Piketty has only sold 1.5 million copies so far.)

In 1897, fourteen years after Karl Marx’s death, Henry George died. He had tried to run for mayor of New York in that year, but suffered a stroke 4 days before the election. Wikipedia again:

An estimated 100,000 people visited Grand Central Palace during the day to see Henry George’s face, with countless more crowding outside, unable to enter, and held back by police. …

2,000 people accompanied his funeral procession:

The New York Times wrote, “Rarely has such an enormous crowd turned out in Brooklyn on any occasion,” but that nonetheless, “[t]he slow tolling of the City Hall bell and the regular beating of drums were the only sounds the broke the stillness. . . . Anything more impressive . . . could not be imagined.”

As a betting man, you might have thought the more popular book’s ideas by the more popular man would eventually be taken on and shape history. Progress and Poverty made the case for the taxation of land, which was seen by Henry George as the provider of all the resources from which eventually profits could be drawn. It was radical, especially as that tax would be the main source of all government revenue, making all other taxes less important or unnecessary. It would tax wealth, rather than productive capacity of capital and labour. But it was a lot less radical than Capital by Marx, which argued for land and all other means of production to be socialised and brought into public ownership, a main plank in his Communist Manifesto.

From 1917 onwards, with the Russian revolution, it was of course Marx’s view which was the more dominant, and land and factories were indeed expropriated and became part of the state, as he did suggest in his writings. Marx’s statues would stand for decades in communist countries, cities would be named after him. His books, published mainly with the help of Marx’s millionaire friend Friedrich Engels, running into thousands of pages, were studied in minute detail by students in Eastern Europe. But Marx’s ideas were of course influential in the West. When taking a Company Law course at university, I myself learned something about the Propensity of the Rate of Profits to Fall, which the left leaning lecturers thought necessary to include, inter alia, in the syllabus of the law course.

But I had never heard of Henry George, until a few years ago, although his thinking was very influential in the earlier part of the 20th century, when a Land Value Tax law was already part of the UK statue book, only to be repealed by Conservative Prime Minister Chamberlain. Of course, WW2 followed, Land Value Tax has not really been debated since, although the Labour party could well resurrect the idea, which the Green Party has already adopted.

So popular ideas do not necessarily shape history. Karl Marx’ ideas won and Henry George disappeared into relative obscurity.

Arguably, for the mainly feudal societies of Russia and China, the Georgian Land Value Tax would have been a more appropriate tool to empower the proletariat and peasants, rather than the forced colletivisation of agriculture, which in both the Soviet Union and China led to cruel deaths through hunger. And industry would have arguably been better served by entrepreneurship, rather than central planning. But that was never on offer, it was the revolutionary ideas of Marx which were more popular in revolutionary Russia, which in the end won out.

So the Soviet Union and the China were for a very long time the main communist countries, and Marx provided much of the intellectual justification for their communist states. China still is, surprisingly, communist. Whereas long leases of property (such as apartments and factories) are available, the ultimate owner of the land is still the state. Russia has, of course, after 1990 been “privatised”, and the money made from that by individuals now provides finance for UK football clubs, universities, the Conservative Party, and the up-market housing market in London, all of which are supported by Russian oligarchs.

As far as China and Marx is concerned, last week Naked Capitalism published a very good analysis, a lecture given to the School of Marxism, at Beijing University by Michael Hudson. It is worth a read and it picks up on the relationship between Karl Marx Capital Volume I, II and III; and Henry George.

China has largely solved the “Volume I” problem – that of expanding its internal market for labor, investing the economic surplus in capital formation and rising living standards. It is confronted by Western economies that have failed to solve this problem, and also have failed to solve the “Volumes II and III” problem: finance and land rent. Yet few Western Marxists have applied his theories to the present downturn and its rentier problem. Following Marx, they view the task of solving this problem to be solved by industrial capitalism, starting with the bourgeois revolutions of 1848.

Already in 1847, Marx’s Poverty of Philosophy described the hatred that capitalists felt for landlords, whose hereditary rents siphoned off income to an idle class. Upon being sent copies of Henry George’s Progress and Poverty a generation later, in 1881, he wrote to John Swinton that taxing land rent was “a last attempt to save the capitalist regime.” He dismissed the book as falling under his 1847 critique of Proudhon: “We understand such economists as Mill, Cherbuliez, Hilditch and others demanding that rent should be handed over to the state to serve in place of taxes. That is a frank expression of the hatred the industrial capitalist bears towards the landed proprietor, who seems to him a useless thing, an excrescence upon the general body of bourgeois production.”

As the program of industrial capital, the land tax movement stopped short of advocating labor’s rights and living standards. Marx criticized Proudhon and other critics of landlords by saying that once you get rid of rent (and usurious interest by banks), you will still have the problem of industrialists exploiting wage labor and trying to minimize their wages, drying up the market for the goods they produce. This is to be the “final” economic problem to be solved – presumably long after industrial capitalism has solved the rent and interest problems.

Hudson goes onto say and finishes his lecture:

China has solved the “Volume I” problem. But it still must deal with the West’s unsolved “Volume II and III” problem of privatized finance, land rent and natural resource rent. Western economies seek to extend these neoliberal practices to use finance as a lever to pry away the economic surplus, to finance the transfer of property at interest, and to turn profits, rent, wages and other income into interest.

The failure to socialize banking (or even to complete its industrialization) has become the most glaring economic tragedy of Western industrial capitalism. It became the tragedy of post-Soviet Russia after 1991, letting its natural resources and industrial economy be financialized while failing to tax land and natural resource rent. The commanding heights were sold to domestic oligarchs and Western investors buying on credit with their own banks or in association with Western banks. This bank credit was simply created on computer keyboards. Such credit creation should be a public utility, but it has broken free from public regulation in the West. That credit is now reaching out to China and the post-Soviet economies as a means of appropriating their resources.

The eurozone seems incapable of saving itself from debt deflation, and the United States and Britain likewise are limping along as they de-industrialize. That is what leads them to hope that perhaps socialist China can save them – as long as it remains free of the financial disease. asset stripping and debt deflation. Western neoliberal economists claim that this financialization of erstwhile industrial capitalism is “progress,” and even the end of history. Yet having watched China grow while their economies have remained stagnant since 2008 (except for the One Percent), their hope is that socialist China’s market can save their financialized economies driven too deeply into debt to recover on their own.

Michael Hudson, is, of course right.

Now, on the day China’s President starts his state visit to the UK, it is indeed rather ironic that we are not only to a large extent turning to China to save our “financialized economies”, but also our electricity crisis, by asking them to build nuclear power stations..

In fact, it is worse than that, our “financialized economy” in the UK seems to be unable to provide finance to the build Hinkley C power station, unless the UK gives state indemnities to the finance providers.

So we have no engineers with expertise to build a nuclear power station by ourselves, we have no government which wants to borrow at preferential financial rates, we have no private finance sector which is willing to shoulder the risk, and no commercial construction company capable of such projects by themselves.

So we are turning to a country which has 1/5th of the UK’s GDP per person, China, to do all this for us, borrow the money for us, and build the power stations.

In turn we are offering China the chance to intensify trading its currency in London or to co-operate with the Shanghai stock exchange, as if that was a remedy for our inability to provide our energy ourselves. And as if China was vaguely interested in that stuff.

If anybody needed any further proof that this current Consevative Government only follows the thinking of the finance sector, that is surely it. We are entangling ourselves in an expensive project (Hinkley C) which could be a quarter cheaper (if government financed) or indeed be completely free (if PQE financed). But these options are not discussed.

We are getting further into debt, with Hinkley C being the most expensive PFI contract ever, twice as expensive as the one which delivered scores of new or refurbished hospitals under the PFI initiative from Labour. Jounalists were surely talking the Micky when they called this running to the Chinese with our begging bowl the “Osborne doctrine” this morning on Radio 4. There is a case to be made for a nuclear power station, but the financing of it under the “Osborne doctrine” should be subject to immediate scrutiny by Labour as the opposition party, and the National Audit Office. Labour and the NAO should state whether the proposed financing is adequate, or if any other financing options would indeed provide better value for money.

Both Karl Marx and Henry George would be flabbergasted. What President Xi might think of the competence of British government politicians, who act as if puppets to the private finance sector, rather than looking after the interest of their people would be interesting.

China is at a juncture, is it to follow the West’s capitalist model, with its over-dependence on finance, as Michael Hudson seems to fear, or will it concentrate on improving the wealth of all its citizens? Hopefully the Chinese will see sense, and continue to put finance into second place, well behind real infrastructure projects such as railways and power stations.

If it ignores finance, and keep it largely state-owned, China will be able to afford to build more of its own power-stations and high-speed railway lines without going with a begging bowl to another country. The highly financialised economy of the UK cannot. Despite being 5 times richer.

It is the UK which should put finance in its proper place, and use it to serve all of us, rather than just the privileged few and the Conservative Party. Time for a change. Roll on 2020.


2 thoughts on “Karl Marx, Henry George and China

  1. Waiting around until 2020 in the hope that a Government which pursues a radically different approach will be elected does not seem to offer a reasonable solution to what is happening.

    In the first instance the PFI deal with the Chinese will, by then, be locked into place. Secondly, given the size of the neo liberal cadre within both the Labour Party and the Lib-dems it seems likely that BAU will continue, either with the re – election of another Conservative administration following a brutal civil war in the Labour Party, or with a recaptured neo Blairite Labour administration.

    Factor in the strong liklihood, despite opposition from what is effectively an informed minority of the population, of the adoption of TTIP; a potential exit from the EU as the British Establishment either follow the US pivot to Asia or reconfigure their “Special Relationship” with last century’s fast fading big power (the US) in favour of the current century’s emerging dominant economic, political, diplomatic and military force ( China); and the very real breakdown of the regeneration dynamics of Capitalism as initially identified by the former Soviet economist Kondratiev, and the stage looks set fair for an emergence of what might best be described as neo feudalism.

    Continuing to play the game by the current rules appears to be accepting the program and does not seem to offer a viable way out of the emerging and planned rentier based feudalist system, in which rentier value extraction from land through to in perpetuity medical, plant and human DNA patenting, along with digital copy writing becomes all economic activity, and where trade rules eliminate any and all public interests or provisions in favour of the private interests of the 0.1% across all transactions. Imagine the feudal penalties of killing the King’s deer applied wholesale across anything and everything such a concept can be applied to.

    The heriditary Establishment which is the British State has always looked down on and been disdainful towards those who got their hands dirty producing things, even as it individually and collectively benefited from Capitalism and industrialism. Rentier based finance was always the favoured system of those recreating and maintaining the feudal hierarchical relationships of extraction from the serfs for the benefit of those at the top of the created social pyramid. The new Capitalist ‘ s may well have disdained the rentier class (es) and their preference for finance but those who were and are part of the hereditary Establishment have merely bided their time.

    Osbourne and those around him know exactly what they are doing. Which is what the British Establishment have been doing for centuries – using others, regardless of geographical location, ethnicity, class or productive form, to directly and indirectly corrall all surplus value from whatever contemporary conditions exist at any one time or period. They are more than comfortable shitting on what they consider to be British serfs by using others, in this case the Chinese, to direct the surplus value available, letting us pick up the tab.


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