THE VERY FOUNDATION OF FREEDOM

by Tom Bethell

Rule of Law Property Rights, Prosperity And 1,000 Years of Lessons

Tom Bethell, a Washington correspondent of The American Spectator and author of "The Noblest Triumph: Property and Prosperity through the Ages"

Private property goes back at least two millennia. But the well elaborated rules of property that were the great triumph of Roman law were unknown in any prior legal system.

What we have only recently learned, after a sustained attempt to "build a new society" without it, is that private property will always be with us. It is one of the most fundamental institutions of mankind and there is no workable substitute for it. It is the perennial antagonist of centralized power. Without private property there can be no prosperity, no peace and no freedom. And justice itself will be a haphazard and occasional thing. Private property is "the guardian of every other right," as the 18th-century Virginian Arthur Lee said.

The great legal innovation of this millennium was equality before the law, which first evolved in England. In the courts of common law, all men were seen to be created equal. This had momentous economic consequences. The new equality of status encouraged the freedom of contract and the rise of an exchange economy. The transmission of property became increasingly "horizontal" -- from seller to buyer -- and decreasingly "vertical" -- from father to son. Wealth was democratized. It was acquired by those who, by virtue of their labor and ingenuity, merited it rather than inherited it. Contract superseded status.

Those with small holdings became as secure in their property rights as the owners of broad estates. This is something we take for granted. Yet 18th-century German immigrants in Maryland could marvel that "the law of the land is so constituted that every man is secure in the enjoyment of his property, [and] the meanest person is out of reach of oppression from the most powerful."

This blessed condition became the basis of American prosperity, as in Britain and other West European countries. People were willing to work hard once they knew that their property rights gave them long time horizons. Governments slowly learned to refrain from depriving people of the fruits of their labor. Alas, this forbearance has been rare in human history.

Until recently, as the Nobel economist Douglass North has pointed out, economists have tended to neglect property and related legal institutions. The explanation may be that the most influential economic treatise, Adam Smith's "Wealth of Nations," was written at a time when property enjoyed unprecedented respect. Property rights were held to be "sacred," and sacred things aren't carefully examined. Nor did it seem necessary to specify that secure and freely transferable private property lay at the basis of economic analysis. Smith took that for granted.

Later, Thomas Malthus argued that although security of property "is among the most important causes which influence the wealth of nations," it depended on "the political constitution of a country." That was another field of inquiry, he thought: politics. Ever since, economists have followed Malthus, treating the forms and security of property as political questions. By the time Marx insisted in "The Communist Manifesto" that private property should be abolished, property still had not been well studied. It went from "sacred" to vilified with scarcely an intermediate stage of analysis. By 1890 we find Alfred Marshall, the teacher of John Maynard Keynes, making the astounding claim that the need for private property "reaches no deeper than the qualities of human nature."

Apprised of this comment, Milton Friedman, a Nobel Prize winner, responded: "I would say that goes pretty deep." Those two comments, made 100 years apart, each by the leading economist of his day, perfectly bracket the intervening age of socialism. Starting with the formation of the Fabian Society, and ending with the fall of the Berlin Wall, its ambitious project was the reformation of human nature. Intellectuals visualized a planned life without private property, mediated by a New Man. Western visitors went over to "the future" and returned with optimistic reports. But the attempt ended ignominiously in the Gulag Archipelago.

Something like a taboo surrounded the whole discussion of property in that period. It was not among the 102 "great ideas" indexed in the Britannica's "Great Books"; nor discussed in Oswald Spengler's "Decline of the West," nor in Robert McNeill's "Rise of the West." When empires broke up after World War II, the emerging Third World languished under the planning tyrannies the West itself had encouraged. For decades, Soviet-supplied data was uncritically accepted both by government officials and Western economists, lending credence to the claim that the Soviet economy was growing much faster than ours, and would soon surpass it. In the year the Berlin Wall fell, the Statistical Abstract of the United States reported that per capita gross domestic product in East Germany was higher than in West Germany.

In the decade since, property has come into its own as a respectable topic of discourse. It is the long-hidden key to understanding economic history in the millennium just ending. When something so important has been neglected for so long, new discoveries are inevitable.

Meanwhile, alas, practical men are still listening to defunct economists. To the State Department and the international bureaucracies, the role of property remains mysterious. Aid-givers think it is something that helps the rich, and overlook its indispensability to the poor. (The rich and their money can travel, of course.) Bloated government is still very much with us. Taxes in the U.S. now consume a higher proportion of national wealth than they did at the peak of World War II.

But as world population slowly increases, the need for privatization will grow more pressing. Where property remains insecure, difficulties will endure.

Two examples: In the emerging nation of Palestine, secure property rights have yet to be established. Aid agencies continue to imagine that cash transfers solve economic problems, when all they do is empower heads of state. Property has long been insecure in the Arab world, and if this is not corrected in a Palestine-to-be, the restless energies of its many unemployed young men will seek an outlet in war. In Mexico, people will continue to flood across the border as long as the ejido system of communal land is not reformed. Mexicans, like people everywhere, would rather live in their own country. But they must be able to find jobs.

Private property is the key.

END

Tom Bethell
December 27, 1999

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