Mao must be screaming from his petty-bourgeois hell. In the
People’s Republic of China’s greatest leap forward yet, the Chinese
parliament is moving to protect private property rights by amending
the country’s constitution. By March 14 the process should be
complete.
To understand the size of this development, imagine if the U.S.
were to replace the federal income tax code with a genuine flat tax
or a national sales tax. Or if Congress were to treat the
Constitution as a brake on questionable legislation. Now imagine
that these reforms occurred in a country with four times as many
people as the U.S.
A market economy has been growing in China since the halting
reforms of Deng Xiaoping. But its legal position has been
precarious. On the one hand, there was no great desire to return to
the terror famines of Mao & Co. On the other, this was, after
all, an officially Communist country. However, the growing private
economy has put pressure on China’s leaders to build a solid
framework for property rights.
The language likely to become law is mercifully straightforward,
lacking the legalese favored by modern jurists. A draft of the
Chinese amendment plainly states that “legal private property is
not to be encroached upon.” While the state will retain “the right
to expropriate urban and rural land” (think “eminent domain”), it
will be required to “give compensation” when it does so.
The amendment goes beyond the protection of private real estate,
meaning that the Chinese will be allowed to own, according to the
Xinhuanet news service “lawfully-obtained capital goods and
invisible capital such as intellectual property rights” and “living
materials and properties such as estate and bank deposits.” Imagine
a nation of 1.3 billion investors.
IF THE AMENDMENT PASSES in something approaching its current form,
Chinese businessmen will have a motivation that they’ve never had
before: the incentive to work even harder because they know their
rewards will be safe from the grabby hands of the state. That
should help not only them, but also the hundreds of millions of
poor Chinese they will have to employ in a burgeoning economy.
It will also be of immense benefit to the Chinese peasants who
have suffered through restricted land ownership laws. In a more
severe form, these collective measures led to horrific food
shortages. Turns out, when compensation is equal among everyone in
the group and is not tied to productivity, incentives shift toward
dodging work as much as possible.
Property ownership will fix that every time, however. China
proved this after Mao’s demise, when reformers began to allow
peasants to lease parcels of the collectives. Eventually the
leasing program turned farmers into de facto owners. Full
recognition and protection of property rights should take this to
the next level. Within a generation, China could move from enduring
occasional food shortages to being a mass exporter of food.
Throw in the foreign investment delineated property rights will
bring and the coterie of hard-Communist Party members will have
some trouble on their hands. As China’s economy matures, its people
will find themselves less dependent on, and in some cases opposed
to, the state.
THAT THIS IS EVEN being openly debated is remarkable, because
China’s Communist elite is connected, by history and, often,
biology, to Mao’s ruling class. And this same elite is about to let
a million flowers bloom, for real this time.
