There would be no “social” in Europe’s “social market economy” without the strictly market-friendly rules essential for economic efficiency.
Bernie Sanders, It's the Poor Who Need Property Rights the Most
Bernie Sanders has put the abolition of private property back into public debate. At least that is what Ryan Cooper at The Week thinks, although he softens the blow by remarking: “This is not as extreme as it sounds. You’ll still be able to own a computer, clothes, and a home under democratic socialism.”
Of course, Karl Marx himself would exempt some personal items too. His main point was that property had already been abolished.
You are horrified at our intending to do away with private property. But in your existing society, private property is already done away with for nine-tenths of the population; its existence for the few is solely due to its non-existence in the hands of those nine-tenths.
That is, capitalism eliminated real property rights. Capitalist property rights are to protect the rich, right? That is what capitalism is all about, no? The Gallup Poll has asked Americans whether the government should “redistribute wealth by heavy taxes on the rich” since 1940 and for the past five years a majority has said “yes.” The Pew Research Center in 2015 found that 60 percent believe that “the economic system in this country unfairly favors the wealthy.”
Yet, it was Marx himself who made the argument that the take-off to the historical stage of development he called capitalism began when the medieval serfs wrested their property step by step from the landholding lords in order to increase the wealth of both. He demonstrated that by the14th Century serfs had become land owners in spite of their legal status and were in fact free from those feudal bonds. Coercive anti-property enclosure laws forcing labor into factory work merely accelerated a process that was already well advanced naturally. Indeed the freedom that property allowed enabled the new capitalists to become employers and the former poor serfs to become wage laborers.
Poor people seeking property rights are not unique to medieval times. Recently, the Indian newspaper The Hindu reported:
Members of the district unit of the Karnataka Kolageri Nivasigala Samyukta Sanghatane staged a dharna outside the Deputy Commissioner’s office here on Wednesday, demanding issuance of property rights to slum dwellers in the city. The agitators took out a procession from Dr. B.R. Ambedkar circle, which passed through the main streets of the city and ended at the Deputy Commissioner’s office. They also raised slogans against the State government and district administration for not fulfilling their demands even after repeated pleas.
A local columnist in Uganda’s New Vision recently reported:
effective statutory laws protecting land, inheritance and property rights of women including the widowed, divorced, separated or those in co-habitation are critically missing [in Uganda]. Generally, there is lack of clear laws to address equality in land ownership, divorce and marriage which affects women’s capacity to enjoy equal rights with men, and this affects their women’s health, economic and social rights.
Why might the poor be so interested in property rights? Emeritus economics professor at the University of California, Los Angeles, Armen A. Alchian, put it this way: “The fundamental purpose of property rights, and their fundamental accomplishment, is that they eliminate destructive competition.” Instead, “well-defined and well-protected property rights replace competition by violence with competition by peaceful means.”
Private property rights are the rights of humans to use specified goods and to exchange them. Any restraint on private property rights shifts the balance of power from impersonal attributes toward personal attributes and toward behavior that political authorities approve. That is a fundamental reason for preference of a system of strong private property rights: private property rights protect individual liberty.
When property rights are well defined and protected by the state, free, market transactions can take place. An agreed upon price can benefit both buyers and sellers and even outsiders can compete by offering lower prices. For example, in trying to convince a majority group landlord who might prefer a member of his own race to rent an apartment, a poor minority person can outbid a majority racial person to make it in the owner’s interest to prefer him.
The poor do not have power or the resources to pay for the violence needed to protect one’s property without such rights. The rich can defend their own property by high walls, secure safes, burley guards, soldiers and the rest of what money can buy.
The basic principles are simple. Janet Beales Kaidantzis reports how in the Sesame Street Parent’s Guide Katherine Hussman Klemp tells how she created peace among her family of eight children by assigning property rights to toys. When she brought toys into her house she did not normally assign rights to them to a particular child. “Upon reflection, I could see how the fuzziness of ownership easily led to arguments. If everything belonged to everyone, then each child felt he had a right to use anything.” So she introduced property right procedures of ownership. Rather than promoting selfishness, the rules actually promoted sharing. The children were secure in their ownership and knew they could always get their toys back. “‘Sharing’ raised their self-esteem to see themselves as generous persons.”
Property rights must be designed and enforced fairly to be beneficial. In studying the privatization of property following the fall of the Soviet Union in the 1990s, Konstantin Sonin discovered that if property rights regimes are set up ineffectively, the rich and powerful will resort to private means to protect it themselves. Once they set up their own private protective devices the rich gain an interest in a poorly operating legal property system for everyone else. The rich oligarchs become active “natural opponents of public property rights” so that growth and income are stunted for the rest. Being more powerful, they bias the law to stifle competition and create a dangerous feedback that retards future growth.
Hernando de Soto’s The Mystery of Capital demonstrates how perverted property rights burden poorer nations. His thesis was that the major inhibition to growth in third world nations was the lack of fair property rights, primarily by burdening the recording of and access to documented legal ownership. Such unreported, unrecorded property makes it difficult for de facto owners to obtain credit, to expand, and to sell small businesses since they cannot protect property from predation in court without legal ownership. The existence of restricted access to legality generates two parallel economies, legal and extra-legal. An elite minority enjoys the economic benefits of the law and the trade it allows, while the majority of entrepreneurs are stuck in poverty, where their assets—adding up to more than US$10 trillion worldwide, according to de Soto—languish as “dead capital” rather than being available to the poor for productive use.
De Soto gives specific examples. In Peru he and his research team set up a small garment business with one worker and proceeded to turn it into a legal business. It took his sophisticated team 289 days at the incredible cost of $1,231 for desperately poor people to make it legal. They then sought legal authority to build a house on this unused government land that took six years and eleven months and required 207 interventions before 52 agencies. To obtain legal title to that land required 728 steps. In the Philippines if a person wanted to build a house on state or private land he would have to form an association with his neighbors, take 168 steps before 53 agencies over from 13 to 25 years to obtain legal title. In Egypt, to register a lot on state owned desert land took 77 interventions before 31 agencies over five to 14 years to obtain ownership.
The rich and powerful do not need property rights. They have brute power to protect their property and/or can manipulate the law to make it difficult for the less powerful to compete with them. Fair property rights are an economic necessity only for those without power. When fair, private property rights are indeed one of the more popular aspects of capitalism. When they are not, they explain why capitalism is so often treated as a dirty word.