Private Property – does it create free men or lead to revolutions and serfdom?

No more immediate, no more elementary private property can be thought of than that which constitutes my own body. If I am put in chains, imprisoned, or my normal sphere of activity severely restricted, I lose the right to this innate property – my liberty is annulled. Proceeding further on this way you transform free people into slaves, by depriving them of the right to dispose of their own being. The latter is no longer subject to their own will, but to that of their masters. In the ancient world and for a time in the southern states of America slaveholders have made human beings their property, thus increasing their own freedom while annihilating that of their victims.

A basic necessity of man: the disposition over himself and his property

The definition of private property has its starting point here – in the exclusive right to dispose over one’s own body. I am a free man if I may use things – starting with my own body – according to my own will, my own plans and purpose. No one will seriously doubt that it gives a man the deepest satisfaction not to be told by others what he is supposed to do with his own person, as in that case he would be subjected to the will, the plans and purpose of other people. For this very reason, all kinds of collectivization, where people are bossed around from above, have always met with bitter resentment as they curtail a basic need of man: the disposition over himself and over the things which he claims as his property.

Private property – an extension of one’s body

Freedom is, indeed, understood in quite the same way when it extends beyond one’s own body to things of the external world. My house, my garden, my books and implements, all this constitutes my private property – an extension of my own self so to speak – in the sense that by their means I may realize my personal will, my plans, and my purpose in life. Property and freedom are thus inseparably linked to each other. This also applies to the enjoyment which such property provides. ‘Self-realization’ is by no means restricted to one’s own body and mind but likewise concerns the things that surround us, as these manifest themselves as our extended ego. All those limitations and interventions that the state or any other instance exerts on my private property I reject as an intolerable intrusion because they restrict my freedom and produce what Marx called ‘alienation’ with regard to these things. An apartment or a house, which I own, may serve to realize my own plans as to personal ideas of coziness, architectural beauty, or private seclusion, while a rented apartment is subject to the purposes of foreign owners and therefore substantially restricts my own liberty. It is understandable that almost everyone, who can afford it, wants to be an owner rather than a tenant.

Why Nations Fail

So, how can we be surprised that any successful democratization, as well as the most lasting and invigorating effects on the economy, usually result from reforms based on a distribution of property to strata which up to then had to renounce it? Democracies have generally emerged only after revolutions have put an end to the monopolization of property in the hands of the few, be it a feudal or a socialist upper class. I do not know any other book describing the tonic effect of such property redistribution as convincingly as ‘Why Nations Fail’ by Acemoglu and Robinson.*1*

Land is a limited resource

At this point, however, a conflict is invariably seen to arise: the conflict between the basic need of all human beings for freedom in the shape of private property, and the possibility of actually realizing this freedom for a maximum number of them. In each single state as well as on the globe as a whole, the supply of land to be cultivated is limited in relation to the population. If a small number of property-holders own all the land, nothing is left for a majority. Or, in other words, if the right to dispose of land and property is concentrated in the hands of a small number of investors, this naturally means that a majority will never enjoy the same degree of freedom. How may this contradiction be resolved?

When property curtails the freedom of a majority

Property is janus-faced: it presents itself as an instrument of freedom, when I enjoy full authority to dispose of it, but it produces the opposite effect when I am but the user of alien property having to submit to the will, the plans, and the purpose of other men. The capitalist owner, who buys large quantities of land, perhaps without ever putting his foot on it, hugely increases his own freedom, but at the same time he tramples upon the freedom of all those other people, to whom he prescribes what to do and not to do with it. This likewise happens when a collectivist state ‘socializes’ the disposable land, so that all what people may do with it is then strictly prescribed from above. The rampant sabotage in the Soviet-Russian collectivized farms was a consequence of their insurrection against this imposed impotence and lack of freedom. Free peasants, who up to that time could act according to their own will, plans, and purpose, had been transformed into mere human instruments forced to slavishly follow the instructions of an all-powerful bureaucracy. Acemoglu and Robinson have shown how such a lack of freedom – produced by ‘extractive institutions’, as they call it – suffocates economic life and, in the long run, can only be sustained by dictatorships.

Genuine and just property

Successful land reforms, whether directed against concentrated capitalist property in the hands of a few mega-funds or large landowners, or against collectivist (socialized) property in the hands of a communist nomenclature, transform bad private property that only enhances the freedom of the few into good property that promotes freedom for a majority. This is the case if the holders of property may freely dispose of it, but without restricting the freedom of others by using them as slaves, serfs, temporary workers, tenants etc. for their own purposes. Anyone who cultivates a piece of land by himself will, as a result, deal with it as if it were, so to speak, his own body, namely with care and even lovingly. But the same man, who was wont to treat his personal property with utmost regard, does not refrain from robbing or mistreating state property on the collective farms, or let all those tractors and harvesting machines simply rot. As I said before, it is certainly no coincidence that successful land reforms invariably mark the beginning of democratizing, free societies.

The Tragedy of the Commons

Because it is in the elementary interest of every owner to deal with the things he administers as carefully as with his own body, this interaction does not require any external supervision by other people, and certainly no control by the state. The situation is quite different with what is called the ‘commons’, that is common property, to be accessed by all citizens. The commons have always been and still are exposed to the greatest threat (‘the Tragedy of the Commons’). In our times, we see, for instance, that oceans are recklessly overfished or contaminated with plastic and other wastes, while land and rivers are poisoned unless such common heritage is made subject to the strictest control of the community, often represented by the state or international organs. Without constantly practiced monitoring and oversight, everyone tries to get out of it whatever he can regardless of and at the expense of all others or, even worse, he uses the common property as a free sink – as is currently happening with oceans all over the world. Nonetheless the commons are an indispensable institution in certain specific fields (see note 2).

Fair property is not theft, but the exact opposite: it manifests a basic necessity of man

The transformation of genuine, just property, which contributes to human freedom, into morally contestable property, which makes a few men free to the detriment of the freedom of all others, denotes a trend that is as old as its obvious result: human inequality (the history of inequality, which begins after the Neolithic revolution, has been traced through different cultures and eras by Stanford historian Walter Scheidel in a remarkable book, ‘The Great Leveler: Violence and the History of Inequality’). Precisely because freedom, as self-determined disposition over one’s own self and surrounding things, constitutes such an elementary need providing deep personal gratification, most people try to acquire ever more and more of such freedom.*2* In this way they soon get to the point of conflict, where they constantly and increasingly restrict the liberty of others. So obvious, so prevailing, so offensive this tendency may appear that the masses debarred from property may finally regard property itself (and not the monopolists of property) as the true reason of their misfortune. Even great thinkers were and are likely to follow them in this assessment. How could we otherwise explain that social philosophers like Rousseau (“the first who surrounded a piece of land with a fence …”), Proudhon or Marx declared property to be equal to theft? They fully recognized all the havoc wrought upon the majority by the concentration of private property in the hands of the few, but they were strangely blind to the basic need of man for the free disposal of himself and the things surrounding him, which he obtains through genuine and just property.

Henry George

The book ‘Progress and Poverty’, first published in 1879, turned out to be a sensational global success. In English-speaking countries, sales during the 1890s exceeded that of all other books, with the exception of the bible. In this work, Henry George tried to explain the rather discomforting fact that immense poverty coexisted side by side with the most unbelievable wealth precisely in those countries – like for instance his own, the United States of America – that were supposed to be the most developed. According to Henry George, the responsibility for this misery lay with a minority of landowners living parasitically at the expense of the rest of citizens. Even if these owners left their ground unused, they were profiting from the creation of a factory or a village nearby, as real estate rents then steeply rose. In other words, without so much as moving a finger, they profited from the efforts of others. In a state where citizens are supposed to be born with equal rights and duties, it must seem strange that some people may own almost unlimited quantities of a scarce commodity like disposable land, while others – the majority – not only remain excluded from such property but are even forced to pay high rents to the parasitic landowner as compensation for mere idleness. As a remedy to this evil, George proposed a 100% tax levied on real estate, which was supposed to drain all the parasitically generated profits. This tax would not only replace the existing levies on labor and capital, he believed, but would render them absolutely superfluous – which would in turn provide an enormous stimulus to production, the real source of all wealth.

A revolutionary yet not completely satisfying proposal

Henry George regarded private property as a fundamentally unjust institution. His demand for a 100% ‘single tax’ de facto amounts to a nationalization of the soil, since an interest in its acquisition does no longer exist if rents are siphoned off to the degree of 100%. If, however, investors lose all interest in real estate, since they cannot derive any profit from it, the resulting tax is, of course, also reduced to zero. The reform being successful, parasitic rents do no longer exist, but this would be likewise true of the tax supposedly to be derived from them (a tax that is meant to make levies on labor and capital superfluous). Henry George had put his finger on the festering wound of parasitism in rich industrialized countries, but he was not able to give a convincing answer to the problem nor was the ‘single tax’ ever put into practice. It is furthermore striking that George managed to remain blind in one eye. Except for rare periods of zero-rates, the mechanism of interest (dividends, rents, etc.) panders much more to the parasitic concentration of wealth than do rents to be gained from real estate.*3* But this fact was overlooked by Henry George – capital remained inviolable to him.*4*

No distinction is made between just property and property which is dangerous to the public

Apart from such objections, the demand for a 100% taxation of land disregards a distinction of fundamental importance: that between equitable private property, which enhances freedom, and that which destroys it. If we are convinced that every human being has been born with equal rights, then he has an inborn right to a proportion of available land as a finite commodity (as well as of available housing space, which in a given time may not be multiplied at will) that corresponds to a definite fraction of the entire population. This part of fair private property should be considered the due inheritance of every citizen and remain untaxed. It is only when this share is exceeded that tax comes into being and should be progressively applied (see my suggestion in: ‘New fiscalism‘. My thoughts may be seen as a more comprehensive development of George’s basic proposal and which may well be put to practical use). Such a solution does no harm to equitable private property, and thus takes into account the well established fact that it has a highly stimulating and democratizing effect. On the other hand, the accumulation of property in a few hands may be effectively fought, since parasitic income from land and capital is taxed in a progressive manner. Depending on the steepness of such progression, the concentration of property in a few hands may not only be substantially reduced but even completely prevented. So this proposal only affects private property in so far as it diminishes or abolishes freedom thus becoming the motor of growing inequality.

1 A shortcoming of the book is, at most, the fact that, while convincingly proving the invigorating effect of the distribution of private property, it does hardly mention the inverse tendency, namely that societies which were once very close to the democratic ideal and a broad distribution of property (just think of Germany and Britain during the first two or three decades after World War II) tend in the course of time to relapse: they move again towards a concentration of property and political power (see Walter Scheidel’s above-mentioned book).

2 It goes without saying that this satisfaction comes into being only where ownership offers a corresponding scope to self-realization. This is certainly not the case with natural resources such as water, oil, gold, iron ore or any other mineral resources. Here, private ownership only panders to power and monopoly, which run counter to the interests of society. In this sector public ownership should be the rule, at best at the municipal level, in order to prevent the conglomeration of power at the head of the state.

3 See my work, ‘The Economic Manifesto’ (http://www.gerojenner.com/wp/wp-content/uploads/2016/11/The-Economic-Manifest.pdf).

4 See Prof. Dirk Löhr’s informative article (‘Humane Wirtschaft’, 04/2017) and https://mises.org/library/single-tax-economic-and-moral-implications.