Tuesday, August 15, 2006

Role of Private Property

Recently, some members of Maoist-affiliated Trade Union ANTUF(R) physically assaulted a local businessman when he tried stopping them from writing graffiti on his private boundary wall. Instead of respecting the owner's right to exercise his private property rights, the Maoists indulged themselves in a brawl. What appeared even more disturbing is that the Maoists fined the owner and forced him to apologize for exercising the right that is granted by the law of the land.

Freedom in its entirety cannot be fully realized without private property rights. Of many reasons why communism failed was the inability to acknowledge the need of private property. It fails to reward those who excel, and fails to punish those who lag behind. There is no incentive for greater effort, neither in creativity, entrepreneurship or hard work.

Capitalism thrives because it rewards ingenuity, capability, and hard work. In a capitalist society, individuals that are capable and hard working thrive while those who are lazy or unable to conform to the demands of society are less successful and lag behind.

Private property is in the best interest of a democratic society because it gives meaning to the very concept of freedom and libertarian principles of justice. Freedom and property rights are very closely related to each other. The right to do as you please with your private property is an integral part of ones' personal freedom. Thus, in a free democratic society each person is free to acquire property and do whatever he wants with it without any interference, as long as stretching of his arms doesn't hurt someone else's nose.

Secured private property rights provide the legal certainty necessary for individuals to commit resources to ventures. The threat of plunder or confiscation greatly undermines confidence in market activity and tremendously limits investment possibilities.

Secured property rights are extremely important for the exchange and the extension of ownership to capital goods. They help foster the development of financial markets that are prerequisite for economic growth and development. Since the inception of peoples' war, the Maoists have forcibly grabbed thousands of hectares of private land in an attempt of creating utopian society and haphazardly distributed among the poor like Robert Mugabe's henchmen did in Zimbabwe.

Haphazard distribution of someone else's property is a sheer violation of property as well as basic human rights. Wealth should be gained through fair competition rather than conquest. Conquest cannot be a legitimate basis for rights, because conquest is a denial of rights.

In addition, what the Maoists fail to understand is that distribution of land that is locked in the form of dead capital is not the solution to the mass poverty and backwardness that exists in Nepal. The poor will be unable to make the best use of the newly gained land and generate further wealth in the absence of capital that is required to buy seeds, fertilizers, pesticides, and farm equipment.

If the Maoists want to be the champions of the poor in a real sense, they should respect individual property rights and encourage ingenuity, hard work, and fair competition in the society. The poor in Nepal or for that matter anywhere in the world do not need land to lead financially secured life and break out of the vicious cycle of poverty. The poor already have innate skills to survive. All they need is capital to put their skills into practice. They should be provided with some capital so that they can put their skills into practice.

It is extremely necessary to remove the borders to trade so they are free to trade their most important property-labor with those who want it.

Despite the constant influx of development aid for the last five decades, approximately half of the country's population is still languishing at the bottom of the pyramid. The solution to the existing mass poverty that exists in Nepal does not rest on the availability of more aid from the West, but the introduction of policies that can integrate the wealth that already exists into the formal legal system and thereby into the global economy. So far, the ruling elites have failed to turn the despair of the people into hope and their uncertainty into a promise. Foreign aid myopia seems to have blind-folded politicians of our times. In the midst of our own poorest neighborhoods, crowded urban centers and remote hinterland, there are millions of dollars locked in the form of dead capital. What we lack is the way to grasp the means to unravel the mystery of how these assets can be transformed into capital.

The real problem lies in a kind of political blindness, which has kept politician from seeing what the real source of wealth is: Real property, or sound property rights? Once a society has a sound and well enforced property rights, it is bestowed with the secret of capital. The assets stored in the form of dead capital can then be used to generate loans and credit which in turn can create the much needed wealth. Nowhere in the globe has an economic system that is characterized as respectful to private property failed to lift the status of its citizens.

It was well-defined property right laws that helped Western countries convert informal property systems into formal ones and move from the Third World to their present First World status in the late Nineteenth and twentieth centuries. These countries prospered mainly because private property rights allowed citizens to use their property to create capital.

The challenges Nepal is facing as a nation are therefore to replicate this history. Thus, well-enforced property rights are the need of the day to create a new economic order providing the right incentives for massive economic growth to occur. It is of utmost importance because it acts as a mediating device that successfully captures and stores the mechanisms that are necessary to run a market economy.

One of the many challenges confronting the post-April revolution that Nepal pumped up with unmatched enthusiasm is to uphold private property rights and enforce these rights effectively. Inability to do so can seriously hinder the increase in productivity from available resources and in increasing the value of things that we possess. In the case of Nepal, it is not resources that are too scarce to lift the status of the poor and downtrodden. It is rather the political and economic institutions based on secure property rights and the rules of law.

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