Thoughts on economics and liberty

Tag: Property rights and land acquisition

No property rights in India – its most potent indicator of lack of freedom

To Nehru, socialism was to be brought about by ‘the ending of private property, except in a restricted sense’.[i] The interpretation of this ‘restricted sense’ was left to his personal whims, making it difficult to pin down what he had in mind. Property rights are purely freedom-based; this is a capitalist concept. From John Kenneth Galbraith we know that Nehru’s views on property reflected the opinions of Harold Laski, a professor of political science at the London School of Economics. ‘The centre of Nehru’s thinking’, said Galbraith, ‘was Laski’, and ‘India the country most influenced by Laski’s ideas’.[ii] Maybe if we read Laski carefully we will understand what Nehru really meant by  ‘restricted sense’. Laski said:

[…] the existing rights of property represent, after all, but a moment in historic time. They are not today what they were yesterday and tomorrow they will again be different. It cannot be affirmed that, whatever the changes in social institutions, the rights of property are to remain permanently inviolate. Property is a social fact, like any other, and it is the character of social facts to alter.[iii]
Thus, Laski clearly did not recognize freedom as the supreme good. Hobbesian in approach, to him the state was supreme, with our role being to serve it and to be regulated by it. According to Laski, ‘The state […] is the crowning-point of the modern social edifice, and it is in its supremacy over all other forms of social groupings that its special nature is to be found’.[iv] But in the dictionary of freedom, the state is nowhere in that league. It is a creature of our convenience operated by governments paid to do our bidding. The state exists merely for our convenience;for the specific purpose of protecting our freedoms and enforcing the accountability that accompanies freedom. If the state does not guarantee our freedoms and property rights, we have no allegiance to that state – we will make another one, or leave.
 
In that sense, John F Kennedy was wrong when he said, ‘ask not what your country can do for you – ask what you can do for your country’.[v] In a free society, obligations lie with both parties. The state or country, represented by its government, must behave responsibly and defend our freedoms diligently in order to retain our allegiance and participation in dangerous enterprises like the defence of the land. A state loses legitimacy if it destroys the freedoms for which it was created. Laski’s arrogant state that believes it doesn’t have to protect our property rights and freedoms is destined to be a failed state. It will not only be defenceless against external aggression as its best people abandon that state, but even those that remain will rebel and destroy its foundations through corruption and anarchy.
 
Laski turned the primacy of freedom on its head, claiming that property was a mere cultural artefact. That is absurd, but such were the Muses of Nehru and the Indian socialists. Nehru’s younger fellow party-man, Siddhartha Shankar Ray (SSR), similarly argued that while life and liberty are innate natural rights, ownership of property is not. He said that since the right to property and freedom to contract did not pre-exist the Constitution these should be deemed to be of lesser import, presumably to be cast out from our Constitution with the flick of a socialist finger [vi]. Many of our judges also did not distinguish themselves as protectors of our freedom in those primitive times. Justice Hidayatullah of the Supreme Court lowered the stature of his office when he said that ‘it was a mistake’ to have property as a Fundamental Right.[vii] But this fact, that other political leaders in India also shared Laski’s views, does not diminish Nehru’s primary role in promoting these ideas in India.
 
Let us, even for the sake of argument, momentarily agree with SSR’s view that ‘modern’ freedoms and property rights did not pre-exist our Constitution. Was it then not obligatory on the leaders of independent India to ensure that these ‘new’ freedoms were introduced and ‘passed on’ to us? If some freedoms did not exist in a feudal, imperial India, how could that justify our not having them in independent India? Was the purpose of our struggle for independence merely to continue with the limited set of freedoms that the British had allowed us to enjoy? Was our independence merely an occasion to substitute arrogant and brown sarpanchs in place of imperial, white rulers? I must admit that at times I am unable to distinguish clearly between Nehru and his godchildren on the one hand, and the British rulers of India on the other. It is difficult at times to conclude who was worse for India in the end – having to work with totally corrupt Indian Ministers as one’s bosses at work, or having honest but arrogant imperial British rulers in their place.
 
Implementing his whimsical arguments about property rights, Nehru launched his assault by enacting land ceiling acts, called, euphemistically and misleadingly, ‘land reforms’. After Nehru’s passing away, Congress leaders strengthened this attack. The argument they made to support their attack was that ‘rights’ of the society were more important than our freedoms. Mohan Kumaramanglam said, ‘The clear object of this amendment [25th] is to subordinate the rights of individuals to the urgent needs of society’ (bold italics mine). This was in relation to the 25th amendment of the Constitution in 1971, which removed the concept of compensation upon acquisition of people’s lands,[viii] yet another destruction of property rights. But except in situations of war when the overall need of the society arguably predominates that of an individual, the freedom of individuals cannot be subordinated in a free country. This was not a war-related withdrawal of freedoms.
 
The socialist flood was now nearing its fullest season. All stops had been pulled out. There was the monopoly of loss making public sector businesses, there was the nationalization of privately operated businesses, there was land acquisition without market compensation and there were land ceiling laws. ‘In the months after the [25th] amendment […] coal, coking coal, and copper mines were nationalised, along with steel plants, textile mills, and shipping lines – totalling hundreds of nationalisations’.[ix]
 
This plunderous socialist rampage was fully supported by all political parties in India except the Swatantra. After Swatantra shut down in 1974, these principles continue to be supported today by all major parties in India; none of them has suggested returning our freedoms to us.The biggest blow to property rights was therefore not administered by Nehru or by his Congress party, but by a rag-tag bunch of socialist factions calling themselves the Janata Party, in 1978 (this included Bharatiya Jana Sangh, the predecessor of the current socialist group called BJP). While we remain indebted to this motley bunch for reversing some of the more blatant impositions against freedom by Indira Gandhi’s Emergency, they simply added one more nail to the coffin of freedom in India. By the time the Janata Party formed the government, only a sliver of property rights was still left in India.
Land reform legislation had already not only been enacted but had been placed under the Ninth Schedule of the Constitution, sheltering it from judicial review. However, the risk, no matter how remote, of a constitutional challenge to these laws prompted the Janata Party to abolish the right to property through the 44th Amendment of 1978. In particular, Article 19(1)(f), that had till then, even through Nehru’s time, guaranteed to the Indian citizens a right to acquire, hold and dispose of property, was repealed.
 
No sensible reason was offered. To assuage people’s fear, it was announced that property, ‘while ceasing to be a fundamental right, would, however, be given express recognition as a legal right, provision being made that no person shall be deprived of his property save in accordance with law’.[x] This is an extraordinarily weak protection. The law is a malleable thing in comparison to the Constitution. Citizens of a free country should not have to depend on the whim of their ruling governments for the defence of their freedoms, and thus of their property. Socialists have never understood why they can’t do such things when they still stick with the word ‘liberty’ in our Preamble.
 
This is an extract from my book, Breaking Free of Nehru.
 

[i] In Singh, V B, ed, Nehru on Socialism, Government of India, Ministry of Information and Broadcasting, Publications Division, Delhi, 1977, pp.56–7, cited in Roy, Subroto, Pricing, Planning and Politics, The Institute of Economic Affairs, London, 1984, p.35.

[ii] Cited in a review of Harold Laski: A Life on the Left by Isaac Kramnick and Barry Sheerman in Washington Monthly, November 1993, by Arthur M Schlesinger, Jr.

[iii] Laski, Harold J, (1960), A Grammar of Politics, cited in Austin, Granville, (1999), Working in a Democratic Constitution: A History of the Indian Experience, Oxford University Press, Delhi, 2003 paperback edition. Footnote at p.77.

[iv] Laski, Harold J, An Introduction to Politics, Unwin Brothers, London, 1931, p.15.

[v] In his 1961 inaugural address as President.

[vi] Ray’s views cited in Austin, Granville, op. cit., p. 244.

[vii] Ibid., p.205.

[viii] Ibid., p.254.

[ix] Ibid., p.253.

[x] [http://indiacode.nic.in/coiweb/amend/amend44.htm].

Continue Reading

Assured private property as the foundation of civilisation

It is unfortunate that just a few days after I've managed to lay my hands on the printed edition of Ludwig von Mises's book, Human Action, I find it very difficult and painful to either read or write due to severe eye strain. That also means I must cut down dramatically my interaction on this blog lest this problem worsen and make even my normal occupation difficult. 

The conversion from PDF (55MB) to Word (5MB) is never easy but I've done the first step for Human Action – a raw data dump – and uploaded it here for my convenience. I will, in due course, subject to recovering good health, do a more rigorous job – so one can readily cut and paste from it. There is no point in keeping the message of freedom hidden away inside dense books. It must be extracted and spread widely – and seeded in the wind: the internet.

At the moment, let me just highlight this wonderful extract that I randomly chanced upon:

===EXTRACT===

What is called human civilization has up to now been a progress from cooperation by virtue of hegemonic bonds to cooperation by virtue of contractual bonds. But while many races and peoples were arrested at an early stage of this movement, others kept on advancing. The eminence of the Western nations consisted in the fact that they succeeded better in checking the spirit of predatory militarism than the rest of mankind and that they thus brought forth the social institutions required for saving and investment on a broader scale. 

Even Marx did not contest the fact that private initiative and private ownership of the means of production were indispensable stages in the progress from primitive man's penury to the more satisfactory conditions of nineteenth-century Western Europe and North America. What the East Indies, China, Japan, and the Mohammedan countries lacked were institutions of safeguarding the individual's rights. The arbitrary administration of pashas, kadis, rajahs, mandarins, and daimios was not conducive to large-scale accumulation of capital. The legal guarantees effectively protecting the individual against expropriation and confiscation were the foundations upon which the unprecedented economic progress of the West came into flower. These laws were not an outgrowth of chance, historical accidents, and geographical environment. They were the product of reason. 

..

Investment and lending abroad are only possible if the receiving nations are unconditionally and sincerely committed to the principle of private property and do not plan to expropriate the foreign capitalists at a later date. It was such expropriations that destroyed the international capital market.

Continue Reading

Property rights and land acquisition

The following article was published in Freedom First, December 2008. http://freedomteam.in/mag/

Sanjeev Sabhlok

This month I’d like to begin by exploring the concern a reader has raised about the urban governance model I had suggested in my November article. Noting that ‘elected representatives are equally corrupt and non-accountable’ and that ‘persons of integrity stand little chance of getting elected’, the reader thinks that the model I proposed won’t work, at least not before other things happen first, such as speedy trials of corrupt people.

It is true that a large number of interconnected reforms are needed in India. But to avoid getting lost in this complexity, I suggest that we look at each area in isolation and determine the best policy for that area. We want policy compatible with freedom; policy that will deliver accountability while being mindful of human nature. This set of best policies can then become a blueprint of reforms that we can aim to, together, deliver to India through political organisation.

The local governance model I proposed last month works without corruption in many parts of the world. Therefore I can’t see any major reason why it won’t work in India. Let us insist on local governments where council CEOs can be hired and fired by elected representatives. Separately, let us explore policies to expedite court trials of the corrupt. I will review the policies of justice in a separate article.

Origin of property

The defence of our property is critical to our continuing freedom. Freedom and justice are of one piece, and, as David Hume noted, ‘[t]he origin of justice explains that of property’. In each of our transactions we leave a memory of relevant accountabilities and attributions. Attribution, namely, who it is that owns a particular consequence, determines the ownership of property during and after a transaction. Some transactions leave a physical residue we call goods; others, being a service or intellectual property leave behind the memory of an experience or thought.

Socialist aversion to property

Socialists differ sharply from liberals in their conception of property. The socialists’ main aim is to achieve economic equality by robbing Peter to pay Paul. They aim to do this by abolishing private property and vesting it in the state. But even if they succeed in abolishing private property for an instant, new private property and inequality springs to life like a Houdini springing out of his cage. A pen, paint brush, or a good voice can generate untold wealth and upturn utopian socialist goals.

India’s initial Constitution was largely liberal and allowed for substantial property rights, but socialist Nehru soon enacted land ceiling legislation to confiscate lands above a certain size, and sheltered these illiberal laws under the Ninth Schedule of the Constitution. Later, through the 25th Constitutional amendment of 1971, Indira Gandhi removed the Constitutional requirement to compensate people for their land compulsorily acquired by government. An unspecified ‘amount’ was now deemed sufficient in lieu. State theft was thus fully institutionalised.

The biggest blow to property rights was administered by the Janata Party, a rag-tag bunch of socialist factions, some of which have later formed the BJP. The Janata Party abolished the right to property through the 44th Constitutional amendment of 1978. In the past, Article 19(1)(f) had guaranteed Indians the right to acquire, hold and dispose of property. This was repealed. We therefore have no Constitutional property rights today. Property is merely a legal right revokable by simple majority in Parliament.

The utopian system of socialism always attracts the most evil people. Even as they have publicly pursued populist socialist policies to undermine property rights, our socialist politicians have exported unimaginable public wealth from India into their Swiss bank accounts. This fraud has been facilitated by not maintaining accurate and transparent land records. The free West, on the other hand, has developed technologies to strongly protect people’s titles in land, which has facilitated new investment and economic success.

Compulsory land acquisition and land re-zoning

The main reason we form a nation through a social contract is to maximise our security and freedom. National security is, in many ways, a precursor of freedom. Where national security so requires, we agree to exchange our property rights in a particular piece of land with comparable land elsewhere. So, for example, if I own land on top of a hill but the army needs to build a fort on it, then I agree to hand over my land in lieu of just compensation. Similar arguments apply to major roads such as the Golden Quadrilateral which can expedite troop movement in India during a crisis, or to roads in border areas.

But what about compulsory acquisition of land for ordinary economic infrastructure: things like small roads, local dams or sewers, or land for schools and universities? And what if a local government rezones our land from residential to non-residential, potentially reducing its value? Are such actions of elected governments compatible with our freedom? Yes – they are, provided a genuine public interest is met and just compensation paid.

Validation of the public interest can be done through local governments through public consultation including small referendums, in addition to the necessary declarations of public interest from the state or central governments. Compensation can then be determined by an expert panel headed by a retired High Court judge to ensure that not only taxpayers get good value out of this acquisition but the property rights of those whose land is being acquired or re-zoned are protected. The panel should, in the first instance, aim to acquire land only though voluntary consent.

Our current methods to determine compensation (‘amount’), being primarily based on figures from registered sales, are flawed since sale prices are under-reported in India to save stamp duty. In addition to this basic information, innovative ideas including those from experimental economics should be used to assess values. Economic modelling and experimental markets can assist in arriving at the optimal value proposition for everyone. In principle, if a net present value of Rs. 10 is created from the infrastructure, then up to Rs. 5 should be available for sharing with those whose land is being acquired, either as a one-off payment or a long-term annuity.

What about compulsory acquisition of land for purely private purposes – say, when Tatas want to build a factory in Singur? That is clearly out of bounds: coercive acquisition of land to benefit the shareholders of Tatas or for any other purely private purpose is repugnant to a free society. Game playing may well occur between Tatas and its competitors in consequence, potentially preventing the quick private acquisition of land, but that cannot be used as an excuse to use the state’s coercive powers. Markets must find their own solutions to competition.

Freedom Team of India

The above discussion has barely scratched the surface of property rights and policies to protect these rights. But I do hope that such discussions will sufficiently motivate you to consider joining the Freedom Team to deliver such policies to India (see http://freedomteam.in). The point to remember is that the policies of freedom won’t get adopted and implemented in India with out a major political battle to be fought by the liberals. Let us ‘Arise, awake, and stop not till the goal is reached’ (Vivekananda).

Contact Sanjeev at sabhlok AT yahoo DOT com

ADDENDUM

 

Knowledge problem’ of land debate by Vipin P Veetil LiveMint, 6 June 2011

Continue Reading
Social media & sharing icons powered by UltimatelySocial