Special Report

Do It for the World’s Poor

A sobering report on the state of property rights protections worldwide.

By 3.26.09

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One of the favorite mantras of the left is the need to protect people rather than property. But very often the best way to protect people is protect their property. Those with power and influence can steal what they want. Only when property rights are protected do average people have a shot at both liberty and prosperity.

There are two major indexes of economic liberty -- Economic Freedom in the World (from a group of think tanks, led by the Fraser Institute) and Index of Economic Freedom (from the Heritage Foundation) -- of which property rights protection is a part. But for a long time there was no comprehensive index of property rights around the world. Then the Property Rights Alliance stepped into the void. It recently released its latest report.

The question of property ownership goes far back into human history. Individual sovereignty over land was alien to hunter-gatherer societies, but they died out because they were "unsustainable," in current parlance. Larger populations required greater productivity, which required some form of property rights, even if by a tribe or some other group. The latter could sustain a certain level of life, but as peoples ancient through modern have discovered, collectivizing production inevitably limited available food and other goods. Rulers in a strong empire might succeed by plundering everyone else, but civilizations were unlikely to develop without a system of ownership which rewarded those who invested in developing and improving property.

The right to private property evolved out of a basic moral notion. While one could argue endlessly about how to initially distribute unowned property -- Locke's picture of mixing one's labor with land was particularly influential in Britain and the American colonies -- land acquired through purchase and improved through work or expenditure embodied value based upon one's own efforts. Property owners also use knowledge, insight, and vision to enhance the worth of their assets.

Property ownership assumes the right to exclude others and to employ one's resources as one sees fit. Writes Anne C. Dedigama, who conducted the Alliance's 2009 study: "A person is deemed to be the owner of the property has this right of freedom of enjoyment of his property. Thus, private property rights are the hallmark of liberty."

Although land and chattel long were the most important forms of property, today intellectual property has assumed much greater significance. The productive value of human creativity has expanded from hands to minds. The software programs on a computer, not the physical components of a computer, are that instrument's most productive property. Which means that real protection of property rights requires the proper definition as well as effective defense of property.

Getting property "right," so to speak, is not just a convenient option. It is vital to promote free and prosperous societies. "Property rights in land are critically important for the functioning of societies. Stability and certainty of property rights form the foundation of financial and political security," writes David Stanfield of the Terra Institute, a contributor to the latest Index. The most obvious imperative is to "improve security by which land is held," he writes, but that is not enough. Given the prevalence of environmental degradation throughout the developing world, another objective should be to "protect land and water resources." Finally, the left is right to point to pervasive injustice in the Third World. But such injustice normally results from the lack of property rights. Thus, the goal should be, writes Stanfield, to "provide access to land by the disadvantaged."

Property as an intellectual concept is interesting, but has practical value within a particular social context. To achieve Stanfield's three goals requires striking a complex balance within the political and legal regimes. Different countries might strike the balance differently. The International Property Rights Index, explains Stanfield, is intended to help promote the "continual strengthening of the capacity for this successful balancing," which not only promotes prosperity but "is fundamental to a vibrant, just and sustainable global economic and political system."

Any cross-national comparison will have limitations, of course, and the Index is able to include only 115 countries, but they account for roughly 96 percent of global GDP. The Index focuses on ten major variables which affect both the definition and protection of property rights.

Under legal and political environment the Alliance assesses judicial independence, confidence in the rule of law, political stability, and corruption. Under physical property rights the Index covers legal clarity and judicial protection of property rights, ease of property registration, and loan access. Under intellectual property rights, the Index measures confidence in IP protection, strength of patent protection, and copyright piracy.

Although some of the specific ratings may surprise, the general results are predictable. For the third year in a row Finland came in at number one. Denmark and the Netherlands tied for second. Australia, Singapore, and New Zealand join six more European countries in rounding out the top ten (which actually numbers 12 because of ties).

The U.S. falls in the next ten, along with Hong Kong and several European states. The next bloc of ten mixes European nations with South Africa, Chile, and a couple of Middle Eastern countries. The next highest-ranking African country is Botswana at number 43. The next Latin American country is Costa Rica, falling in a three-way tie at 46 with Kuwait and India.

The last of 115 -- the worst disasters, such as North Korea, are not rated -- is Bangladesh. Angola is 114. Tied at 109 are Chad, Venezuela, Guyana, Burundi, and Zimbabwe. Also in the bottom 20 are five European (Bosnia, Albania, Moldova, Serbia, and Macedonia), three Latin American (Paraguay, Bolivia, and Nicaragua), and three African (Nigeria, Ethiopia, Cameroon) countries, along with Azerbaijan and Armenia.

The rest fall in between in no particular order. Poland and Turkey fall in (along with two others) at 53. Mexico is at 62. China and Brazil rate 68. Vietnam comes in at 77. Russia hits 87. Pakistan is a 90. Unrated countries include Afghanistan and Iraq.

America's relatively weak showing reflects a particularly anemic rating for its legal and political environment. In contrast, the U.S. ties for second worldwide in intellectual property protection.

The broad correlations are clear. Western industrialized states and newly industrializing Asian countries do the best. Developing nations and former communist states do the worst. Obviously, property rights protection is not a perfect indicator for economic growth, but most countries that have poor property rights records have had difficulty achieving self-sustained economic growth. The Index finds a strong correlation between IPRI scores and per capita GDP. The average per capita GDP per IPRI quintile goes from $39,991 at the top to $4,341 at the bottom.

Yet, while the practical benefits of a strong property rights regime are obvious, many countries have been retrogressing. Most of the top thirty, including America, improved their rating this past year, though a few of them, such as Germany, remain below their 2007 levels. But beyond the best performers retreats outnumber advances. Most of the bottom twenty got worse. Lowest-ranking Bangladesh improved in 2008 but has since fallen back below its level of 2007. And the news there keeps getting worse: a mutiny by units of the border guards has created renewed political instability.

Of course, as Bangladesh tragically demonstrates, the lack of property rights protections makes other liberties less secure. Many of the countries which fare badly on the IPRI also rank poorly when it comes to political and civil liberties. There's Zimbabwe, a nation in almost total collapse. Venezuela, with Hugo Chavez attempting to create a legal dictatorship. Bosnia is a fake country that exists only in the eyes of European social engineers. Azerbaijan is one of the authoritarian remnants of the old Soviet Union. Nigeria is Africa's oil-fueled kleptocracy. And so on.

Secretary of State Hillary Clinton entered office promising even more foreign aid on top of the trillions of dollars wasted over the last half century. The International Property Rights Index demonstrates that we all would be better off if Americans concentrated on helping poor countries create the right legal and policy frameworks for economic growth. That includes protecting property rights, among the most fundamental of human rights. Taking more of Americans' good money to toss after bad is no answer, especially in the midst of an economic crisis and massive deficits as far as the eye can see.

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About the Author
Doug Bandow is a senior fellow at the Cato Institute. A former Special Assistant to President Ronald Reagan, he is the author and editor of several books, including The Politics of Plunder: Misgovernment in Washington (Transaction).