Wednesday, 9 November 2016

The Potency of Title

Civilisation is Skin Deep

Sometimes the most profound realities stare us in the face every day and we fail to see them for what they are.  Property and property rights are one of these profundities.  In the West, we take them for granted.

When ordinary people have few or no property rights, they are stripped, vulnerable, and naked--subject to the slings and arrows of outrageous fortune--and to the depredations of tyrants.  A recent movie which illustrates this most powerfully is Leviathan,  Set in Russia, it is one of those masterpieces which haunt you for weeks afterwards.  Central to its plot is the issue of property rights, or the lack of them in Putin's Russia.

Westerners live in societies so grounded in fundamental and derived property rights that we scarcely think of them.  It takes an outsider to point out what we all take for granted.
  In the West . . . every parcel of land, every building, every piece of equipment, or store of inventories is represented in a property document that is a visible sign of a vast hidden process that connects all these assets to the rest of the economy.  Thanks to this representational process, assets can lead an invisible, parallel life alongside their material existence.  They can be used as collateral for credit.  The single most important source of funds for new businesses in the United States is a mortgage on the entrepreneur's house. [Hernando De Soto, The Mystery of Capital: Why Capitalism Triumphs in the West and Fails Everywhere Else (New York: Basic Books, 2000), p. 6.]
The same is true in New Zealand.  The family house is not just a place to live. It is a store of wealth which can be used to gain access to capital for business development.  The title of ownership protects the asset from might-makes-right theft and expropriation.  Title of ownership also means that the asset can be used to gain access to further capital.
These assets can also provide a link to the owner's credit history, an accountable address for the collection of debts and taxes, the basis for the creation of reliable and universal public utilities, and a foundation for the creation of securities (like mortgage-backed bonds) that can be rediscounted and sold in secondary markets.  By this process the West injects life into assets and makes them generate (further) capital. [Ibid.]
We in the West take all these things for granted, and rarely think about them, if at all.  Yet, without them, poverty would come upon us like a vagabond.  Of course there is no guarantee that Western property systems and institutions will remain in existence forever.  The past fifty years have seen property rights eroded markedly, as the state exerts more and more control over what owners can and cannot do with their assets.  Envy is the bedrock ethic of all socialism, and the West is now awash with socialist regimes.  The state wants to appropriate and redistribute more and more from ordinary citizens.  The fetid stench of envy--long suppressed by the two commandments which protect all property rights (Thou shalt not steal, and, Thou shalt not covet)--has oozed forth once more from the swamp.

Yet many nations and most occupants of the planet are far, far removed from these fundamental rights and privileges of ownership.  Consequently, they are unable to enjoy the privileges and power of access to capital.
Third World and former communist nations do not have this representational process . . . . The poor inhabitants of these nations--five sixths of humanity--do have things but they lack the process to represent their property and create capital.  They have houses but not titles; crops but not deeds; businesses but not statutes of incorporation.  It is the unavailability of these essential representations that explains why people who have adapted every other Western invention, from the paper clip to the nuclear reactor, have not been able to produce sufficient capital to make their domestic capitalism work. [De Soto, op cit., p.6f.]
Ownership, fenced and protected by titles and property law, is something most in the West take for granted.  But dismantle these "abstractions" and our wealth, our prosperity, and our productivity would quickly crumble to dust.  The tender mercies of Leviathan would rapidly become our lot.  And we ought be in no doubt, Leviathan is stirring, taking shape, and emerging throughout the West.

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