Did Henry George Inspire China's Economic Miracle?

ABSTRACT China's economy began to grow at an unprecedented rate around 1980 because of changes adopted under the leadership of Deng Xiaoping. He called it “socialism with Chinese characteristics.” The policy that launched those changes was the Household Contract Responsibility System (HCRS), which added private incentives to a production system based on social obligations. Viewed in that way, the HCRS bears a striking resemblance to the theory of American economist Henry George, who also sought to combine social responsibility and private initiative into a single system. Under the HCRS system, land belongs to the state, but farmers have the right to autonomous production and disposal of surplus products, greatly improving agricultural production efficiency and farmers' incomes. Under the system proposed by Henry George, land is held privately, but the full economic value of land is captured by the state in the form of a tax, so the net effect is almost exactly the same as a system of state‐owned land. As with the HCRS, George's system allows workers to gain the full value of their labor after their social obligations (payment of the land tax) are met. Although the two systems are different, their deep structure converges around the interaction of social obligation and private initiative. Both are systems designed to solve an ancient problem of how to extract revenue for public services with the least burden on the economy. The main difference between the two systems is that China actually adopted the HCRS—leading to 30 years of astonishing economic growth, whereas Western nations continue to ignore Henry George's ideas and allow their economies to stagnate. Henry George did not inspire China's economic miracle, but the basic principles are the same.