Property rights: the reality vs. the ideology of it

Our idol worship is condemning future generations to indentured servitude. We must get past ideology and embrace clear thinking.

ALEX KRAINER

Earlier this week a friend sent me an article by one Martin Hutchinson, publisher of the "True Blue Never Stains" newsletter. This was the first time I'd ever read Mr. Hutchinson, who is apparently well respected among his readers... However, almost until the end of his article, I was convinced that I was reading satire.

Hutchinson writes that, "When the Third Reich invaded the last part of Czechoslovakia in March 1939, the Bank of England returned Czechoslovakia's gold and sterling reserves to the German government... That was only proper; the Bank was respecting the property rights of the Czechoslovaks, and the fact that in international law those rights had passed to the new government of Czechoslovakia, by right of conquest."

China bad!

Hutchinson contrasts the admirable propriety of the BOE with Communist China's contemptible disregard of property rights. He offers no concrete examples or cases of this disregard, but he doesn’t need to: "Politically, China is officially a Communist country, so the political wishes of its leaders will always trump any theoretical concerns about property rights, which in any case have little meaning in the Chinese system." China is communist so, say no more - we don’t need no stinking cases or examples.

Hutchinson's prose is remarkable in that it packs almost more errors than words. I believe that the reason for all this confusion is that the question of private property is so profoundly ideologized in the west that even very learned writers (I assume Mr. Hutchinson is one) end up lost among the concepts, labels and ideological precepts.

Private property in the communist world

I may have an unfair advantage over Mr. Hutchinson in that I’ve lived on both sides of the ideological divide. Before I came to the capitalist west, I grew up in the communist world. Its ideology was rooted in Marxism (which I had already rejected by the time I was 17). Nevertheless, we did have private property.

While the communist ideology strove for an abolition of private property, in practice, property rights were recognized and inviolable (I am sure there were exceptions, but I am not aware of any). People owned land, homes, cars, boats, tractors, bars, shops and private businesses of all sorts. We did not have any billionaires, but there were wealthy people among us and their wealth wasn't up for grabs according to "the political wishes" of our leaders. Only, this didn't work in the same way it does in the west.

For example, my parents owned a family home and a summer house. They had contracts for the sale/purchase of these properties and beyond this, nobody disputed that this was their property. This was normal: many of our friends and neighbors owned their homes as well as plots of land outside the city where they grew fruits and vegetables and spent their weekends. Generally, everyone understood what belonged to whom even though no land office of any sort existed. In other words, property rights were recognized among community members. The bureaucracy only got involved if there were disputes, but this was very rare.

Government came to help with ‘freedom and democracy’

It was only after 1991, when Croatia started systematically copy-pasting all the western innovations into our legal code that the land office came into being. What changed was that the property rights were now recognized, not by your community of peers, but by a government bureaucracy. For a few years, people were actually quite vexed to have to register their property and obtain all the papers. Contracts for the sale and purchase of properties was no longer a private affair between the buyer and the seller (it only had to be notarized), but also involved the bureaucracy which only made the whole process more complex and more expensive.

Properties owned in families now had to be precisely carved up and these divisions officially registered and certified. Today, it is not possible to sell a property unless it is "one in one," as they say (a single property owned by a single individual). In the old system a family patron could sell his family property and the contract would be valid. If it created a dispute within a family, it was the family's own internal affair to sort out.

The effect of our embrace of western standards is that the government is now much more involved in many small aspects of people's lives. But the bureaucracy's respect for private property has not improved - if anything, it got a lot bossier and ordinary people feel much less secure in their property ownership. Furthermore, a system where ownership is recognized informally by the community through purchase and usage, is unsuitable for absentee ownership rights (if you don't use it, you might lose it).

Communists didn’t levy property taxes

Property taxes remain a political hot potato in Croatia to this day, but it is probably only a matter of time before we 'copy-paste' that one into our laws too. Under communism, we never had property taxes. In the western world, property taxes are pervasive and unquestioned even though they are in fact a negation of private property rights.

For example, if your family falls on hard times and you are unable to pay these taxes, your property can be taken away from you. This implies that you only enjoyed it with your government's indulgence. In the United States, where taxes are assessed against a property's market value, hundreds of thousands of people lost homes and lands that were owned by the family for generations if their ability to pay taxes couldn't keep up with the price bubble. 

Is amassing stolen property also perfectly proper?

But here's a bigger question: how are private property rights respected if assets can be purchased with counterfeit money? Acquisition of property against counterfeit purchasing power is the opposite of respect for property rights - it is piracy. Nonetheless, the practice is at the foundation of the western economic, legal and political system.

This may be a hard red pill to swallow, but consider what took place in Japan over the last 23 years: first, the Bank of Japan made money free in 1999 (setting interest rates at zero) and pioneered quantitative easing in 2001. It's used that money to buy up Japan’s economy (the justification remains that it’s only done that way to ‘save’ the ecoomy). By today, the BOJ owns about half of all debt outstanding and around 15% of Japan's stock market.

We are allowing industrial-scale piracy under our own noses

Public debts are mortgaged by the future productivity of the Japanese economy. In other words, the children of Japan will have to toil away their lifetimes to pay back these debts to the bankers. And it’s not just Japan’s children - it’s all our children whom we are condemning to indentured servitude.

Across the western world today, the central banks are applying the very same model, acquiring larger and larger chunks of society's wealth with purchasing power they conjure from thin air. What can possibly justify such industrial scale wealth transfer? If you or I did the same, we would rightfully be accused of theft, yet central banks do this as a matter of course, legally and their  right to own stolen assets remains unquestioned.

Idol worship vs. clear thinking

Hypnotized by ideology, we allow this to continue, if only we can apply “free market capitalism” label to it. It’s nothing more than idol worship and lazy thinking. In resolving these issues, we must transcend the false dichotomies of ideology. For true blue Mr. Hutchinson, the "fact" that China is Communist and Britain isn't, is good enough: everything labelled "communist" is an abomination and everything we can label "capitalist" is automagically right and proper.

We'll have to start from a blank sheet and ponder the meaning of simple concepts like value, ownership, wealth and property rights. It's not complicated, but it does require sober, clear thinking. Without that, we risk perpetuating and compounding the system's errors and abuses until we really find ourselves owning nothing, as the ostensibly capitalistic World Economic Forum has planned for us. 

Source: Alex Krainer's TrendCompass