A discussion of ownership and property.
This essay was first written in 2005. Edited versions were published in Resurgence magazine in March 2006, and Land and Liberty in Autumn, 2008. Apart from some minor amendments, the version here is un-abridged. On re-reading I believe the points made are still relevant; very little has changed; all the basic economic processes and structures are still in place.
The underlying premise of this essay is that economic power is exercised through ownership.
Ownership may be recognized directly through the possession of property, which is understood here to include all forms of material wealth, goods, money etc. Ownership may also be recognized indirectly through control over the access to such wealth. The extent of our ownership of either or both these elements determines our economic power. The economic power of governments, for instance, is dependent on their ability to extract, through taxation, a proportion of the nation’s wealth to finance their projects. This of course depends on the degree of control they have over the populace.
The proposition of this essay is that the ownership of property, may be either legitimate or illegitimate.
Whether property is legitimate or illegitimate, is, I suggest, determined by its means of acquisition, which can only be through work, gift or theft. Legitimate ownership arises from work or gift, illegitimate ownership arises from theft. It is necessary therefore to establish, as far as we are able, definitions of what are ‘work’, ‘gift’ and ‘theft’. We are dependent on definitions for the continuing conduct of our everyday affairs.
‘Work’ I would define as that activity leading to a result that is socially beneficial.
We then have to go on to define what is meant by ‘socially beneficial’ and so on, but the fact remains that the necessity for agreed definitions is important. This is demonstrated for example in the fine distinction that is made between tax avoidance and tax evasion, between legality and illegality. It is something that is argued back and forth between lawyers and accountants striving to interpret ever changing government legislation, until a settlement is finally agreed. It is often just a matter of degree and many business practices employ lawyers simply to keep themselves within the law. Thus it may be that the distinction between legitimate and illegitimate work will depend on a similar consensus view. In this sense the fraudster, who may expend great effort skill and diligence in his activities does not ‘work’. Equally the failure of an enterprise may not be due to lack of work. Many factors may be involved, not least of which is luck. It may be a matter of incompetence. But incompetence, although unfortunate, is not illegal. We must often accept an honest intention of usefulness. Initially of course the purpose of work is to benefit the individual. Very few of us work for the benefit of others. We do it for ourselves. But if this work is conducted within the legal constraints and ethical standards imposed by society, then it is also of benefit to society. In doing legitimate work for ourselves we work for society, and this form of work merits reward in the form of material wealth or its substitute money. Such wealth is legitimately owned and is legitimate property.
The acquisition of property by gift would generally appear to be fairly straightforward except where the gift is of high value, as with bequests in a will. Society would appear to set a limit to the amount of wealth that can be passed on to one’s friends or family before suffering a deduction for tax. It is as though there is a stigma attached to the acquisition of wealth other than through work, and society demonstrates this by imposing a tax on the inheritance of wealth that has not been earned. On the other hand gifts to charities are viewed with approval and consequently merit an additional contribution from society in the form of tax relief.
There is one form of acquisition that does not readily fall within the category of gift, and that is when something of value is found or discovered. If this is of small value, or something that cannot be identified as another’s property, then the social custom allows that the item may become the legitimate property of the finder. If however there is some evidence of identity or personal value to another, then retention of the item would be seen as a form of theft. There is an interesting variant on found property where national heritages are concerned. Ancient monuments such as Stonehenge or the Pyramids are now seen as national treasures that generate enormous revenues through tourism. But their value was only realised through the advent of archeology as a subject of study during the Renaissance in Europe. Prior to that time they had no value other than as curiosities or quarries for building stone. Arguably they could be seen as gifts from our ancestors. The same applies to the artifacts from treasure trove, which with the development of the metal detector and the underwater robot, has now become quite a lucrative industry. The reward allowed to the treasure seekers arises from the work done in the process of detection and recovery; the artefacts themselves still remain a gift to society from past generations; claims to individual ownership are generally not allowed and national governments claim possession on behalf of society.
Where theft is concerned a definition is far more problematic and requires much sensitive investigation, for it raises questions of basic morality; we are forced to examine our own beliefs and the generally accepted notions related to property.
Wealth and power derive mainly through ownership. Historically this has always been so. No matter how hard a man of modest means might work the resultant increase in his overall wealth might be small in comparison with the increase arising from a slight adjustment in the affairs of a rich man. Whether such adjustment can be described as work is extremely difficult to determine. The rich would of course say yes, for they may devote a great deal of their time and effort to just such activity, and it is quite apparent that in the rarefied world of international finance such adjustments can gain or lose millions of pounds within seconds for the fortunate or hapless owners of funds. We cannot deny the exercise of great skill, even of courage, but whether such financial manipulations are socially useful is open to question. It is certainly an established part of economic life to which there appears no collective will to change at the present time; too many of us already benefit from it, or hope to do so in the future. In any judgment as to whether this activity is work I resort to the definition of work as having to be ‘socially beneficial’. It is certainly beneficial to the individual owner of funds, who may make a good profit, but it is difficult to find out how it is beneficial to society at large. The fund owners would argue that they are investing in industry or facilitating trade, but few of them would know which industry, which trade. The argument usually degenerates to the ‘trickle down’ theory, which is really a way of saying that the only way of helping the poor is by helping the rich.
All individuals are desirous of profit or gain and the above example is used to illustrate that in the pursuit of gain, production of artefacts (or the provision of a service) cannot compete with the manipulation of wealth; wealth being measured in terms of possession, either of actual or monetary property. It was very well stated by the economist J K Galbraith who said:
‘… in the modern world it is more advantageous to own things than to make things’.
It seems obvious that it is more advantageous to be rich, and having achieved that desirable state to spend no little effort in maintaining it. Again whether such effort can be described as work is questionable, for its usefulness is only of benefit to the rich; the owners of excessive wealth. The question being posed here is whether such ownership is legitimate or illegitimate? Probably the oldest and most venerated form of ownership is that of property in land. The ownership of land has bestowed great power and privilege on the owner and continues to do so to the present day, albeit in a more disguised form. But property in land is probably the most blatant act of theft perpetrated by society on itself. It is stated in this way for the whole of society is culpable. Very few question the validity of property in land, even the dispossessed believe such a concept is legitimate. But a little serious thought shows that legitimate ownership of land is impossible. The land was there before societies existed and will no doubt still be there when we and all our works are gone. It could only have become possessed by theft. (In the sense used here the term ’land’ must also encompass all the natural resources of the planet, the oil and minerals in the ground, the natural forests, the fish in the sea. None of this may be ‘owned’). We are the trustees and if we claim ownership we break that trust.
There is no question that everyone needs land, but this applies to all equally. Even farmers who cultivate and husband the land can have no right of ownership. They have the right to security of tenure and the product of their husbandry. They have a right to sell the value of its fertility for which they have worked, perhaps at a great profit, but they are selling the product of their work and that of their forbears, they are not selling the land. They are, as we all are, no more than custodians. This is an example of the difficult distinction that must be made between legitimate and illegitimate property, a distinction that has become blurred over time and eventually lost, to the great advantage of landlords and land speculators who have been able to amass great fortunes through land transactions and rents on the spurious claim of ownership. The origins of their ‘ownership’ must have begun with appropriation either by guile or force and no amount of subsequent legal ratification can alter that fact.
Another important factor in the exercise of power through ownership is in the area of shareholding, a cornerstone of the capitalist system. The injustices of the ‘rentier’ system that arose from the absentee ownership of land in the 18th and 19th centuries are perhaps reflected again in the current system of share ownership, where whole industries are owned by shareholders who are largely indifferent towards or ignorant of the nature of the industry they supposedly own.* Their sole interest is that the return on their shareholding should be profitable. As with the absentee landowners of the past this represents a form of power without responsibility. However, the system is now entrenched in everyday life and the buying and selling of shares, regardless of what industry they represent, is carried out on behalf of anyone with a savings account in any institution. We are all absentee owners either directly or indirectly. Ownership necessarily entails responsibility and if these responsibilities are neglected great social injustices will ensue. Where enterprises are successful and prosperous everyone is happy to take a share in the wealth created, but when the enterprise runs into difficulties the owners, the shareholders?, accept no responsibility. On the contrary they will try to sell their shares or complain to the professional managers that their profits are down; the managers that they themselves put in place. The power of large corporations and concentrations of ownership, if left unchecked, will eventually work against the principle of fair distribution of the wealth produced for they inevitably become responsible only to themselves. It is here that one may reconsider the issue of legitimacy.
* I use the adjective ‘supposedly ‘ here because the commonly accepted idea that an industry or corporation is owned by its shareholders has been challenged in recent years:
In 2012 Lynn Stout, a professor of corporate and business law, published a book entitled The Shareholder Value Myth: https://www.amazon.fr/Shareholder-Value-Myth-Shareholders-Corporations/dp/1605098132 in which she shows that there is no law requiring companies to ‘maximise shareholder value’.
In 2021, in an article for PQ magazine Prem Sikka, professor of accounting and finance at Sheffield university, states that ‘shareholders are not the owners of corporations…’
The exercise of power by private organisations is a very different matter to the exercise of power by public organisations––that is governments. The former have no obligation towards the public good, whereas the latter will claim to make this their first consideration. Such claims may of course be illusory but at least there is a pretence towards a moral obligation. No such pretence exists with private organisations. They are accountable only towards their own self interest. There are of course private benefactors who finance trusts and charities, but the welfare of society should not have to be dependent on these. Equally there are corrupt national governments that are no more than self- serving oligarchies, which are able to exploit their own unfortunate populations far more effectively than any private organisations. Private trade has always been a legitimate activity, the abiding principle being to buy at a low price and sell at a higher, and thereby make a living. The trader makes a profit and society is served by a facilitation in the access to goods and services. The activity is useful work. It is another cornerstone of capitalism. There would appear to be no limit to the extent to which a product may be traded and re-traded. As long as there is opportunity for a profit, someone will see it.
Speculation has always been accepted as an inevitable part of trade and commerce, and is often the starting point of an individual enterprise. We cannot make a moral judgment about the initial motivation but only the final outcome. Speculative gambling on the stock market and with international currencies has long been a part of ‘free’ capitalism, and is tolerated, even encouraged in times of prosperity, but when the cycle turns down, in large part due to this unrestrained speculation, we tend to cry foul. In the last market decline the phenomenon of ‘short selling’ of shares to make a profit when a company is in difficulty, raised the question amongst many commentators of its legality. Trading in financial matters will always attract unscrupulous characters who are oblivious to any notions of ethical behaviour, hence the need for a controlling authority which has to define and impose the rules of conduct. The London stock exchange was established in 1688 but already by 1697 a licensing law had to be passed to inhibit insider trading and market rigging. Has very much changed? The current rules state that open insider trading is permitted but secret insider trading is illegal; the debate continues.
The point of all this is that we cannot avoid regulation and the regulators cannot avoid definitions. In the financial industry a definition of what constitutes work is very difficult to pin down where a great deal of activity is concerned with manipulating money in order to gain some immediate personal profit. I would maintain that a definition of genuine work should recognise an outcome of useful social benefit. Where this is absent then the activity is not work and the private benefit that arises from it, whether as property or money is illegitimate. What is legal and what is illegal has to be spelt out and the legislators have to be two steps ahead of the sharp practitioners instead of three steps behind. Where the social good is concerned there is economic activity that is individually and socially beneficial and there is other activity that is individually beneficial but socially damaging. Those therefore who gain a living from the latter (and it is often a good living) which results neither from work nor gift must be engaged in a form of theft. The main cause of poverty in the contemporary world is the growth and maintenance of ownership in large powerful concentrations that take from society more than they give. It is a form of theft for it is not gained in isolation from society but by virtue of its very existence. All real wealth is produced from the application of real work and those who have an excess of wealth who have not gained it through their own work have gained it through the work of others. In this sense the act of theft is gradual and insidious but is no less real. We see the gradual transition from legitimate to illegitimate property, legitimate to illegitimate power. The primary cause of poverty is an economic system that promotes those selfish motivations that result in excessive concentrations of wealth and illegitimate ownership. In simple terms the fundamental cause of poverty is greed.
One is not arguing for the confiscation of wealth or even for equality of result. There is of course a case for equality of opportunity but not for what we make of it. The idea of economic equality has fostered much illusion. The reality is that we devote a great deal of our energy striving to be as unequal as we can. In any chosen activity we are proud of being excellent not average. Of course our dreams are seldom realised, but that does not alter the basic hope. It is futile to rail against self-interest or even greed. They cannot be eliminated by legislation. Attempts to do so in the past have resulted in the imposition of brutal tyrannies which try to compel people to conform to some moral code devised by the rulers. We should concentrate less on the issue of equality and more on that of justice. It is a great human virtue that we are all able to recognise justice and fairness; in that sense at least we are equal. If justice and fairness became the guiding principles in our economic affairs the issues of equality and inequality would resolve themselves.
Political economy is not just about production and wealth creation, it is about morality, and the first moral law is that the strong owe a duty towards the weak. There are enormous social injustices even within the prosperous developed world, to say nothing of the gross injustices of a half starving developing world. Of course, remedial activity is constantly being carried out to alleviate the worst consequences of poverty but it can never get to the root cause of the problem, which is a social and economic world so organised as to facilitate concentrations of excessive wealth and the safeguarding of illegitimate property. The major challenge is to face up to the issue of ownership. But this can only be done when the existence of a problem is recognised, especially by the rich and powerful, for only they have the power to effect a peaceful change. Any reform of the situation will require a re-definition of ‘work’ and of ‘ownership’ with their attendant rewards and responsibilities.
In the complex world in which we live gradualism is essential to any reform. The present situation is the result of slow evolution over many centuries. The gordian knot that we have made for ourselves has to be painstakingly unpicked. The heroic idea of severance at a stroke, favoured by revolutionaries, causes more problems than it solves. The challenge in the future for society lies in being able to devise a socio-economic system which recognises the difference between legitimate and illegitimate property, between work that is socially beneficial and work that is not, and a system which incorporates appropriate incentives to promote the former at the expense of the latter.
Ian Hopton, March 2020