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.

Donald Devine

Donald Devine, senior scholar at the Fund for American Studies, and the author of America’s Way Back: Reconciling Freedom, Tradition and Constitution, was director of the U.S. Office of Personnel Management during Ronald Reagan's first term.

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  1. gabe says

    “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.”

    And why, sir, should they not do this?
    After all, we do have the *benefits* of an amazing plasticity in our positive law (and our Legislative) which provides a sufficient suppleness to allow for the satisfaction of public greed and envy!!

    I hereby recommend a program designed to *equalize* the level of greed across ALL socioeconomic strata!!!

  2. Scott Amorian says

    Ahh! Another brilliant essay from the Library of Law and Liberty forum. Thank you, Mr Devine.

    The lesson here, I think, is that conscientious government is necessary for the promotion of happiness, and that conscientious government provides effective rules for property ownership. With weak rules the wealthy end up owning more than they should through the use of brute force and the poor become oppressed. With over-controlling rules the wealthy take advantage of the rules and the poor have less opportunity to gain property, and the state is poorer overall for it. Well considered rules for property rights tend to promote peace and prosperity.

    The growing US administrative state produces over-controlling rules, which leads to a greater divide between the wealthy and the poor. Those folks calling for more administration of property ownership as a means to reduce the divide between the wealthy and the poor are really creating the divide between the wealthy and poor, their good intentions not withstanding.

    The problem of peace and fairness, then, is not the problem of creating more rules, rather, it is the problem of how to establish a more conscientious government. Is it not?

  3. nobody.really says

    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.”

    Where is the support for this extraordinary claim? Not in the linked article. Rather, here’s what Cooper does say:

    Laissez-faire ideology regards private property as utterly inviolate, the logical consequence of which is the notion that taxation is theft. But this is incoherent nonsense when you consider that all laissez-faire institutions are, in reality, the creation of the state — nonsense that will be tossed over the side under democratic socialism. Property rights would be subordinated to the general welfare of the polity, as just one concern among many. Those that do not harm society can stay, while those that do will be curtailed or abolished.

    This is not as extreme as it sounds. You’ll still be able to own a computer, clothes, and a home under democratic socialism. But private property that is plainly negative to society, such as extraction rights in buried carbon, will have to be eventually extinguished if the human race is going to survive. The point is that common human welfare is more important than an absolute right to ownership.

    In other words, Cooper (and presumably Sanders) favor the regulation of externalities – which is arguably necessary for the defense of property rights – plus an enhanced social safety net. That’s hardly abolition.

    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….

    Why might the poor be so interested in property rights?

    Are they really asking to receive property rights – or wealth transfers? As far as I can tell, the Karnataka Kolageri Nivasigala Samyukta Sanghatane (KKNSS) advocates for squatters rights – that is, for the appropriation of land from owners to occupants. For example, here’s an article discussing how one KKNSS activist led a “crusade result[ing] in ending collection of land rent from slum-dwellers.”

    In fairness, US real property law also provides for transferring title by adverse possession (basically, by long-term squatting), so you could argue that KKNSS is promoting property rights. But this is not the kind of property rights celebrated in economics textbooks.

    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.

    This is hardly a simple assertion. Indeed, it contradicts the Coates Theorem, which argues that property rights generate social benefits regardless of how property is initially distributed.

    But the examples cited illustrate the idea that fairness in distribution makes a huge difference in the benefits to be generated by property rights. As illustrated by the former Soviet Union, huge disparities in wealth can give powerful forces an interest in suppressing beneficial social policies, including policies supporting property rights. And if your goal is to reduce the propensity of your kids to fight over toys, it is far from clear that mere property rights will do the trick. Try assigning all the toys to one child, and tell me how much conflict this avoids. Peace is achieved not merely through property rights, but through a modicum of equity in property distribution.

  4. nobody.really says

    But to vindicate the value of property rights, go visit Palm Springs. Ok, go visit Palm Springs in any
    event; it’s awesome. And there’s plenty of vacant real estate available.

    Why so much vacant real estate? Early in the city’s development, land was divided between the Native Americans and the railroad. Specifically, land was divided into square lots, and the odd-numbered lots went to one group and the even-numbered lots went to the other. The effect was to distribute the land in a checkerboard fashion.

    The land owned by the railroad was subject to the real estate laws of California, and has since been developed into the Palm Springs we know. The land owned by the Native Americans was subject to the laws of … well, it’s kinda hard to say. And has remained hard to say to this day. And in the absence of reliable property rights, much of this land has remained completely undeveloped, while the land immediately across the street hosts hotels, houses, restaurants, wind turbines, etc.

    It’s amazing to see.

    • gabe says

      well, I can do without the stinkin’ wind turbines – my Seahawks (Ospreys) may get sliced and diced by them (or was that a ground animal that did that -hmmmm!!!)

      Of course, there is still the question of what is “fair” or for that matter what is negative; is Mr. Cooper (above quote) correct that extraction rights for carbon are negative “externalities.” Hmmm! – perhaps, he would prefer to go around unclothed as most of his outfit is no doubt made of, by or with carbon – as is the aspiring tablet I must take whenever I hear of the evils of carbon!!!

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