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.