Recently, I read a wonderfully erratic book, #WeAreRent: Capitalism, Cannibalism and Why We Must Outlaw Free Riding by an avowed Georgian, Fred Harrison, after reading an endorsement from Martin Wolf’s summer reads in the FT. The thing that I latched onto in Wolf’s blurb was that pervasive rent-seeking always lurks close behind the collapse of any civilization. That was precisely the conclusion I gleaned from my obsessive research of the Ashikaga dynasty of medieval Japan (also known as the Muromachi period after the area of Kyoto where the headquarters were located) as an undergrad at UCSD. The lesson of that dynasty was that when the public cooperative basis of society degenerates to inter-elite competition over rents within territorial domains, collapse is only a matter of time. I wrote for a course on East Asian studies, interpreting a poem from a Buddhist monk who witnessed the collapse in Kyoto and warned of the pervasive rent-seeking all the way down to the Buddhist temples, “If important actors considered Socho’s precaution about the consequences of the literal and metaphoric “toll” imposed on the Japanese people and society, they may have chosen institutional and legal alternatives to reckless violence. But ultimately, the constellation of interests in the Ashikaga state was such that it could not overcome the forces that would devour the foundation of its rule.”
I certainly benefited from expanding my studies beyond the Euro-centrism of the kind frequently seen in other comparable courses that attempt to rationalize the making of the modern world. The incessant warfare that characterized the end of the Ashikaga dynasty demonstrates the virus of the feudal mentality was not limited simply to Europe. The virus shaped contemporary states in both the East and West in ways appreciated by the famous phrase of the historian Charles Tilly, “States made war, and war made the state.” Likewise, the historian, Kenneth Grossberg, wrote in the authoritative history of the period, Japan’s Renaissance, that the Ashikaga dynasty was “success within failure”. The failure was obvious—the system of cooperative rule known as the kenmon could not restrain inter-elite competition ending in collapse. But Grossberg claimed that the political ideas of the centralizing monarchs of that dynasty as well as their permissive attitude toward commerce laid the foundation for their successors, the Sengoku daimyo and the Tokugawa shoguns.
Along these lines, the traditional interpretation of history would suggest that in both the East and West, constant warfare among territorial domains was a necessary condition to facilitate the transition to a coalesced political settlement favorable to modern state-building. Interestingly, Harrison falls back on a more radical political economy interpretation in implying that even destructive warfare was not sufficient to extinguish the vestigial rent-seeking impulse and that feudal remnants persist though they are cloaked decently in contemporary language of state and market so as to obfuscate their feudal origins.
There is a continuity to history and humanities’ current predicament that cannot be explained in the narrow language of economics or even the pluralistic traditions of political economy and sociological economics, Harrison acknowledges. The anthropological inspiration is apparent in the book. His central argument is that anthropologists know that early hunter-gathers succeeded on evolutionary terms only insofar as they were able to discourage other members of their tribe from cheating. In a similar way, modern humans will only be able to flourish in a similarly sustainable way if we are to scale these norms of behavior on an institutional basis so as to systematically discourage a culture of cheating.
The recurrence of this phrase “culture of cheating” gives you a sense of Harrison’s influences. In a book ostensibly about economics and specifically how to contain out of control land speculation and rent-seeking, there is quite a lot of moral philosophy, returning to the perspective mostly lost on the profession since Adam Smith sparked the Scottish Enlightenment. This return is not incidental as he assigns a formative role to philosophers who had to tools to shape the narrative toward an authentic state of freedom with the benefit of 20th century scientific advances. Likewise, when assessing the legacy of the aristocratic project to enclose the commons in Britain, Harrison believes that controlling minds—inhibiting the capacity to reason so as to deter commoners from resisting—explains the durability of a particular form of political economy based on perpetual rent extraction so as to fortify aristocratic privileges. To the extent that a fortuitous political settlement enabled the co-option of peripheral legal professions and mercantile enterprise, controlling governance and economics may explain why ruling elites came to dominate in a particular time and place, but not their durability.
In a strange echo of legal scholar’s Katharina Pistor’s argument on legal “modules” that perpetuate claims to capital, Harrison’s historical view of the transition of absolute power from the Crown to Parliament assigns a formative role to lawyers. Just as many Muslim minorities are currently being driven from the state of Assam in Eastern India because they cannot prove claims to land or citizenship, the English peasants were driven from the land in a process known as enclosure because only the gentry could prove by legal documents that they had rightful claim to land as mandated by a 17th century act of Parliament.
This tendency for the law to be weaponized for oppression rather than instrumentalized for progress is the source of the disdain for the legal profession so prevalent in popular culture ever since Shakespeare’s’ day. The disdain has deep historical roots because the legal elite in America and in Britain share a common heritage and system of beliefs inherited from the old landed aristocracy that was anathema to America’s “passion for equality”. For this reason, Alexis Tocqueville concluded that, “The more we reflect upon all that occurs in the United States, the more we shall find that the lawyers, as a body politic, form the most powerful, if not the only, counterpoise to the democratic element in the constitution.” By no coincidence, the U.S. and the U.K. are the two countries where the feudal remnants of legal special exemptions expanded to such absurd lengths through the modules Pistor identifies that they are now eroding the law’s legitimacy. Indeed, the long shadow of enclosure looms large over all of contemporary political economy. In an accompanying SmartTalk podcast sponsored by the Henry George School of Social Science, Harrison asserts that both Boris Johnson and Joe Biden will fail to “Build Back Better” on a sustainable New Foundation no matter how sincerely they pursue those efforts, “Because the essential [feudal] legal structure is exactly the same as the one that was planted in the Americas in the 17th century.”
I have previously wondered in past journal entries why political systems around the world appear frozen in time from the onset of the French Revolution, where in any country you can place a politician along the right/left spectrum according to their affinities for inherited privilege. The first two estates sought to protect the privileges they already had so they tended to be natural loyalists to the monarch, while the bourgeois 3rd estate, mostly urban professionals, actively sought out these privileges through venal rent-seeking. Harrison would say history is not dead. Its precisely the expansion of free-riding from a rapacious elite, but one that is narrow in scope and whose deleterious effects can be contained, to a broader class of people that typifies the pressures of a self-devouring society.
So Harrison’s revision to my observation of perennial political divides in spite of their obvious decay in the face of tremendous headwinds is simply that the political system is not merely an anachronism of 1789, but further back in the feudal institution of Parliament. The lesson is easily forgotten because the French body, the Estates general, was not convened for almost two centuries during the monarchical absolutism of the period. Recall that King Louis XIV mostly let his divine power speak for itself, but when he did speak, he was fond of repeating the phrase, “I am the state.” The political scientist Francis Fukuyama is in part correct to emphasize that this tradition of French statism was a radically different course than the one of accountability set for Britain following the Magna Carta, and more decisively, the English Civil War. Harrison interprets this momentous period in British history as a shift and not a rejection of the principle of divine right. Absolute power shifted from the crown to the landlords who sat in Parliament, who were distinct from the 4th estate of unorganized masses, in spite the legal invocation of “popular sovereignty” by Sir Edward Coke.
The feudal remnants within modern legislatures and political parties brings us back to the essential bit of wisdom bequeathed to us from Faulkner that the past is never dead. Writing on Roman history, Cullen Murphy, warned that the claims to rent surrounding the capital engendered an insular and arrogant culture. In spite of all the obvious differences in habits and taste that make Roman Senators seem so alien to us today, we must nonetheless recognize that this alien system of organizing our affairs is the Social Galaxy that we currently inhabit because of the formative influence their ideas had on the Founders, chiefly James Madison. Through lawyers like Thomas Jefferson, Harrison has something similar to say for the feudal mentality. But unlike the feudal era, the consequences of that mentality are far graver as they are merely destabilizing. It does not fit neatly into some yet undiscovered higher purpose of igniting a spark in political development and moral enlightenment so as to not only extinguish political violence but also what the political theorist, Carl von Clausewitz, appropriately recognized as the cousin of that violence, pervasive rent-seeking.
Harrison has set himself on a Sisyphean task that is both unbearably difficult and imminently achievable. The difficulty comes principally on two fronts—the first is cognitive and linguistic and the other is political. The cognitive and linguistic barriers have succeed in indoctrinating a critical mass of middle class residents throughout the industrialized West that the only reliable way to a middle class life is to climb the property ladder. The scope of this indoctrination is so vast, that we fail to see, when it is not accompanied by taxing the Ground Rent that Adam Smith theorized as essential i.e. the portion of housing that is distinct from other forms of capital because it is immobile and nobody contributes to it, that enables a culture of free riding that harms all the contemporary equivalents of feudal serfs who are unable to climb the dizzying escalator of asset inflation. The beneficiaries grow accustomed to free riding and the associated capital gains. More revealingly, those shut out from the culture of cheating are also Dreamers that they may some day benefit in spite of all the evidence to the contrary. The philosopher David Hume, seems eerily relevant to the psychology involved:
Nothing appears more surprising to those who consider human affairs with a philosophical eye than the easiness… with which men resign their own sentiments and passions to those of the rulers.
That brings us to the more formidable political barriers of the ruling class, who are the main beneficiaries of free riding. Their influence is so strong that, in spite of energetic attempts to implement a Georgian policy vision in transitional states of Russia as an alternative to shock therapy and post-Apartheid South Africa, the culture was so dominant it had an irresistible way of asserting itself, according to Harrison’s narrative account of the failures of his policy advocacy during that critical juncture. Harrison acknowledges now that he played a role in that failure in neglecting to appreciate the public aversion to the idea that taxing Ground Rent was “just another tax” to an already tax burdened public. In the book, he attempts to remedy that failure by emphasizing the way the current model of taxation reflects the original elite project to shift the tax burden to those who add value. As a consequence, the current tax system is distortionary as it dissuades laborers and productive enterprise from enjoying the fruits of their investments. The tax system is also captured by elite interests that were responsible for devising it, as special exemptions reveal. Adam Smith emphasized the absurd hypocrisy of excise taxes in Britain, which were taxed on commoners on the grounds that alcohol ruined their morals, but the aristocracy were exempt because it served a purpose for entertaining.
If only the prior cognitive and linguistic barriers to understanding could be overcome, the distortionary and hypocritical elements of the captured tax code could be the foundation for a broad right/left “populist” coalition for productive action. Harrison notes the “crazy language” on the right and left presents an opportunity for a gifted activist to bring this language in step with reality:
Politicians on the right… are silent on the fact that the tax cuts [they advocate] are translated into higher rents and governments have to reduce what they spend on public services. [Meanwhile] Politicians on the left… do not audit the way in which their taxes inflect losses on the working population.
The Georgian proposal Harrison supports and Smith was the original proponent is to eliminate all distortionary taxes that degrade the life of working people, and support a single land value tax that taxes the land portion of housing stock into oblivion. I can see real appeal for that proposal, even though I think I would step away from Harrison’s claim that home ownership in its current form is a culture of cheating as a matter of political framing. These political misgivings notwithstanding, land speculation is emphatically a form of cheating that upsets the balance of the Social Galaxy.
It is certainly an interesting observation that many physicists who are drawn to the study of the natural world for the same reasons as the ancient Greek philosophers are also often inspired by Georgian ideas to rebalance body politics, namely Albert Einstein. But you don’t have to be an Einstein to see why the metaphor Harrison employs—the forces of the Social Galaxy— are clearly out of balance. At the precise moment when the syndrome of secular stagnation set in, the trend for capital stock as a percentage of GDP for productive investment became almost entirely flat, while the component of housing attributable to improvements is only up modestly. Both of these trends are entirely explained by land speculation. Why invest in the real economy or as an enlightened landlord when you can invest in riskless land as a slumlord? Another sign that something is seriously off kilter is a distributional perspective of the U.S. savings glut. Scholars of the Great Convergence/ Divergence won’t be surprised that savings as a percentage of national income were almost equal for rich, affluent professionals, and everyone else for the period prior to 1980. Then there was a great divergence where the bottom 90% became massive debtors, the practical meaning of which is spelled out by Harrison, “The vast majority of people have to borrow from the 1% in order to live: the majority are financial hostages to a handful of elite citizens.”
For residents of Western nations frustrated by the sense that things are not quite working for people who work for a living and without access to generational wealth, it may not be apparent on how to restore balance to the forces of the Social Galaxy so society does not devour itself as medieval Japan and Europe did during their periods of collapse. But the pinnacle of political development, what Francis Fukuyama calls “getting to Denmark”, offers lessons on how to move forward if only we can replicate Denmark’s path to the happy steady state of prosperous social democracy. Keynes called this state “ethically tolerable, but not economically intolerable”. Fukuyama’s general argument in his macrohistory, The Origins of the Political Order, is that ideas are hugely influential in locking in particular political constellations at critical points. For Denmark, he argues that the peculiarities of the Protestant Reformation there in the 17th century had the effect of educating and organizing the 4th estate of the peasantry, which we have already noted was largely disorganized and illiterate in other countries. Therefore, the progressive tendency of smallholders was already locked in long before the reign of enlightened despotism of Frederick VI, who emancipated the serfs inspired by Adam Smith’s ideas. This fits in with Fukuyama’s inclination to search for the “ghosts of dead religions”, such as that which animates many of the Japanese salarymen he writes of in The End of History.
Though the unique political position of literate agrarian farmers remains central, Harrison fixates on a different peculiarity of Danish history further along its political development. The search for deep cultural reasons for why particular countries have engendered a spirit of social solidarity ignores some of the details of how that particular culture may have been frustrated by periodic conservative attempts if the social welfare state was not shored up more recently in the 20th century. Reactionary political movements to repeal the old Danish land tax may have proven successful if it were not for the Danish equivalent of John Dewey, Nikolai Gundtvig’s, vision to acculturate Danish farmer-citizenry to constant life-long learning necessary for the mastery of authentic democratic freedom. Instead, these folk schools pushed for a land value tax directly inspired by the ideas of progressive reformer Henry George’s tract, Poverty and Progress. While this land tax did not quite tax Ground Rents into oblivion as mandated by Henry George’s theory and therefore raised only a small proportion of Danish tax revenue, the cultural shift in Danish society was so decisive in a manner reminiscent of Bo Rothstein’s “big bang” evolution of anti-corruption that no conservative ascendancy could jeopardize the political economy of value creation.
The full scope of Danish history casts doubt on the commonly held assumptions of political economy that incessant warfare driven by territortized elites whether in Europe or East Asia were desirable in that they were the sine qua non of modern state-building. No, the example of Denmark shows that an educated population of ordinary citizens is the hope to reclaiming authentic freedom.
That hope should ignite a spark in the rest of humanity since there is no such thing as productive violence against the planet that we all inhabit. The neoconservative temptation that violence unleashes death and destruction in its wake, but there is a progressive logic to the project of rebuilding may be correct as a matter of history, but certainly does not apply for the future of humanity. The only sane course is to take the vision set forth by Bertrand Russell to make man happy and sane through liberal education. That is simply another way of articulating the message that in the long-run, there is no alternative but for the entire world to “get to Denmark”. Denmark, not so much the country but the abstract model of development that serves as a useful guidepost, is what the enlightened society looks like. That enlightenment could alleviate the moral foundations of the political, economic, and social problems that have set in the culture of cheating that plagues most of the industrialized Western world.