Last time we discussed how - sadly - it is unlikely the world will enact the reforms called for recently by Hernando de Soto, to vest usable property rights in the vast numbers of Third World poor who do own some land, but who cannot now borrow or develop it using capital markets. This seems a wonderfully practical and achievable "right-handed solution" which calls for establishing clear title rights and open, honest banking systems that should benefit everybody.
(This is part of a generalized interest in institutions as facilitators of practical development. According to one of my philanthropy correspondents: "Douglass North, in his recent book Understanding the Process of Economic Change, acknowledges that we just don’t know understand the process of economic change. At the same time, he acknowledges that we have made some substantial progress. Part of the progress that we have made is that we know that institutions matter, but that those institutions are not merely formal institutions such as banking laws and tariffs, but that those institutions include “soft institutions” such as social norms and cognitive styles. It might well turn out to be the case that successful economic development depends on several necessary but not sufficient conditions. Insofar as judicial independence and even property rights enforcement may, at the local level, depend on such soft institutions, it may be very difficult to implement or evaluate the effectiveness of both formal and informal institutions from the outside."
For a different approach to the same issue, see: "Disputation Arenas: Harnessing Conflict and Competition for Society's Benefit."
Nevertheless, it is unlikely that de Soto will be heeded in any meaningful or large-scale way, because we appear to be headed back into an era of class warfare and radicalization that will increasingly resemble Europe in the 1780s and 1840s and Russia at the dawn of the 20th Century. I know this sounds dour for a "Prince of Optimism". But the very same social features that decreased radicalism in the lower and middle classes, during our lifetimes, do seem to be in retreat, while the inequalities and injustices that exacerbate class bitterness appear to be on the rise.
"Property Rights" movements will be stunted because the world's masses will increasingly, across the coming decade, see "propertarianism" as the great mystical push by this generation of aristocrats toward justifying a re-institution of aristocratic rule.
(The similarity in names encourages conflation of two very different concepts. But then, parasites are like that. They are uncreative, so they develop mimicry in order to live off others.)
In order to properly understand "propertarianism" we must take some asides into human history. We'll begin by confronting, directly, a bald fact that our friends on the right are always at pains to obscure.
==The thing that destroys market competition==
We have been told all our lives that socialism is the chief enemy of markets. Hm, well, that was true for a little while, I guess. Indeed, Ronald Reagan was right to call the Soviet Union an "evil empire." But for how long? From 1917 to 1989?
For most of the rest of human history -- 99% of urban cultures -- the great enemy of accountability and market systems consisted of conspiratorial aristocratism. The deliberate collusion of those with power, money and influence to take over the organs of the state and use the state's power to enforce their family privileges. Their right to cheat and own other people. And then to ensure those privileges would be inherited. This happened so consistently, across all cultures, that it must be one of the core human traits that modern civilization is challenged to overcome.
Seriously, conservative friends, look over the paragraph above and try your best to evade it.
There is no way you can. It is the salient fact concerning every human society that achieved metallurgy and agriculture. Big men - assisted by fast-talking priests or ideologues - picked up iron swords and took other mens' women and wheat, then conspired to arrange things so that their sons could do the same. If you cannot start by admitting this was true 99% of the time... and that we are seeing similar aristocratic moves today... then puh-lease, just go back into your holodeck fantasy.
A defining moment: Let me make clear something that I've said many times. Being a wealthy "aristocrat" in today's world does not automatically make you a class enemy of everybody below you. Nor does it mean that you are programmed, automatically, to cheat or repress market competition, now that you've got yours. True, this is the historical pattern. But many of today's wealthy seem to 'get it' about the modern world. Elsewhere I have called them the 'satiables' - or those capable of feeling gratitude and loyalty toward a new style of civilization. One that has given them so much. Satiability does not mean they cease seeking even more money! But they tend to do this with a joyful sense of market participation - creating more goods, services and/or financial efficiency - rather than clamoring for state-protected rents and state-subsidized profits. A good example might be the 'world's greatest investor' Warren Buffett. Newer candidates: Jeff Bezos and Sergey Brin. The new-style aristocrat appears to want the rest of us to become ALMOST as rich as they are, and does not mind if his sons and daughters have to compete a little, showing what they've got inside. This isn't simple goodness; they are also smart enough to see what happened to dismal cheaters, like the Czar. Alas, there remain plenty of the old kind, doing what history says they always do, who are too stupid to see where their long term self-interest lies.
So what about that distinction I made, between a Property Rights Reform Movement and those who might be called Propertarians? It is one more case where superficial left-right differences in dogma are less important than matters of personality.
Property Rights is a movement aimed at pragmatic, modernist reforms that will give poor farmers and tradesmen in the Third World the ability to leverage a bank loan off their collateral in flourishing and creative capital markets. While this concept has been proved and is generating excitement in development circles, it also faces towering difficulties, especially in corruption by local elites. (One reason for my claim that transparency and systems of universal accountability must precede any broad effort to register property titles.)
Propertarianism, in contrast, is a quasi-platonist, quasi-religious, mystical romantic cult with an underlying agenda aimed at destroying markets. The way that aristocratic wealth always destroyed markets, elsewhere and elsewhen.
Go ahead. Ask some of today's "insatiable-style" aristos and propertarian mystics how they can support tax cuts for the rich in good times and in hard times...
...tax cuts for the rich during peace and during war. Tax cuts during huge deficits and tax cuts during surplus...
...tax cuts to "supply side" us into prosperity through investment in research and factories...
... and then -- when the aristocracy demonstrably does not invest their tax gifts in capital -- they switch to "demand side" justifications, calling for yet more tax cuts, so that the aristocracy can spend it all on employment-generating toys.
(Hint, the last thirty years have shown that direct tax cuts to the rich are just about the LEAST effective economic stimulation of any kind. Proportionate to any other social class, they do not spend. (Hence their support of consumption taxes.) And they do not invest in risky factories or startups. (Venture capital languished even as the Bush cuts sent torrents into wealthy pockets.) They most certainly do no research! In fact, they mostly use any fresh infusion of money simply to be richer.)
When you probe through all the contradicting justifications for this universal rationalization of tax cuts for the rich - especially refusing to pay when your country is at war - the surface reasons all unravel and you'll easily get to the reductio answer.
"It's not the government's money. It's my money."
Try it and see. These old-fashioned aristocrats (and their apologist ideologues) are generally pretty honest about it, after a good push, readily admitting that "supply side" and all the other flummeries were just window dressing. To them, "it's our money" is a deeply-felt and indignantly moral position. A platonic essence, grounded on a purely self-referential axiom. And, like all axioms, it is not subject to question or doubt.
Also (like so many fellow hypocrites on the left) they refuse to ever consider how wonderfully convenient it all is. That their principled, moral stand just happens to support their own, personal self interest.
What a coincidence.-
==Continue to Part III or return to Part I