Progress and Poverty

The chief objective of Book 5 is to explore economic depressions and their causes. An economic depression is a significant downturn in the economy, leading to business failures and unemployment. George examines the main explanations thereof and finds them insufficient. His investigation is meant to establish a direct relationship between private land ownership and economic instability.

First, for George, there are several negative consequences of private land ownership, its increasing value, and its rent. These consequences include the stifling of industrial production and the reduction in earnings both for labor and capital. In turn, the reduction and ultimate halt in production also have a negative impact on other related areas, such as the growing disconnect between production and trade, throwing supply and demand out of balance and, ultimately, causing economic depressions.

In the 21st century, economic depressions are typically explained by psychological factors affecting investors and consumers. For instance, the standard explanation links a drop in consumer confidence to lowered demand that negatively impacts businesses. Historically, depressions have also been linked to problems with the monetary supply and monetary policy in general and bank panics. The boom-and-bust cycle of capitalism is generally accepted, in which the common recessions and the less common and more severe depressions, are viewed as a necessary evil. Central banks oversee monetary policy, especially in the realm of inflation or private bank failure.

Neither the common contemporary view nor the author’s explanations question the nature of capitalism itself. George does not believe that there is a conflict between labor and capital because both are harmed by the rising land rent. He believes the main problem is rooted in private land ownership, “That as land is necessary to the exertion of labor in the production of wealth, to command the land which is necessary to labor, is to command all the fruits of labor save enough to enable labor to exist” (292). George also suggests that economic depressions last until labor becomes more efficient. For the author, the land rent explanation is a theory that unifies many seemingly inexplicable aspects of industrial society. For instance, it explains why both interest and wages are higher in new communities rather than in old ones, or why technological advancement does not reward labor or capital. These conditions result in “virtual slavery in political liberty” (285). The theme The Link Between Private Land Ownership and Uneven Wealth Distribution provides additional guidance.