Tagged: Compensation

Land debate: Adopting ideology over pragmatism doomed to failure

THERE is a current in South African politics which sees the land debate as the culmination of the freedom struggle. For these persons, undoing the constitutional guarantees of private ownership and security of tenure, both enshrined by the Constitution, in favour of ‘expropriation without compensation’ and thus custodianship of property under the state, is the magic bullet which will right historical injustice, remove inequality, level the playing field and boost opportunity.

Driven by Marxist texts which espouse the abolition of private property in favour of state control of the land, such persons point to mythical Communist experiences but few real examples where this ideology has actually succeeded in lifting millions of peasants and the rural poor out of poverty. Not only are they just plain wrong on this account, but in all the examples cited, agrarian reform without title-deeds turned out to be a massive failure, requiring corrective action and drastic amendment of prevailing dogma.

It is worth examining two sad examples.

When the Chinese Communist Party assumed control over mainland China in 1949, “it did not follow Russia’s Bolsheviks in immediately abolishing the private ownership of land. In the countryside, a violent land reform movement brought a change in owners, but not in the ownership regime itself;  full collectivisation did not occur until the late 1950s.”

The result was that under Chairman Mao, an estimated 15-30 million people died of starvation during the much vaunted “Great Leap Forward”.  Widespread famine was the order of the day, the result of drastic changes in farming policy which eventually prohibited private farm ownership, and also later extending this to urban areas.  Far from achieving its goals, state seizure of control of the land, resulted in economic mismanagement —  bureaucracy, over-regulation and the absence of economic calculation on the ground. With no incentive to grow food, and with inter-generational knowledge, farming skills and tenure disrupted, authoritarianism produced one of the World’s major agrarian disasters.

This situation was only corrected under the government of Deng Xiaoping who introduced a policy of Household Responsibility, a practice first adopted in agriculture in 1979 and later extended to other sectors of the economy, “by which local managers are held responsible for the profits and losses of an enterprise.” This system partially supplanted the socialist ‘egalitarian distribution’ method, whereby the state assumed all profits and losses, much like the situation within our current SOE system which until now has relied upon annual bail-outs from government.

Far from being a model of communism, the trend in China has been towards private enterprise and individual ownership of property for some time, leading one analyst to suggest the country has restored private property in everything but name and that the open-ended ‘automatic renewal’ of leasehold by government is, by all accounts, a de facto return to the market-lead reforms of the West.

‘If the first 30 years of the People’s Republic saw the gradual erosion of private ownership and the growth of state ownership, the last 20 years have seen the opposite trend. By the late 1980s, the state was looking for ways to marketize land use and raise money, and so — in a process that began experimentally in 1988 and was formalized in law in 1994 — it began selling long-term leases to urban land, known as land-use rights (LURs). LURs for residential use could last for up to 70 years; for commercial use, 40 years; and for all other uses, 50 years.”

Thus in 2007 a new Property Law declared that residential LUR renewals would be “automatic.” The result,  was a paradox, according to Donald Clarke, a paradox, in which the state ostensibly owns all the land, but where de facto private ownership continues.

“This system allowed the state on the one hand to obtain the economy-wide benefits of market allocation of land as well as the revenues from leasehold sales, while on the other hand to maintain that the principle of state ownership of land had not been compromised: after all, buyers got “merely” leaseholds of several decades, not ultimate ownership.”

In contrast the Tanzanian land reform programme known as Ujaama was a similar experiment in collectivisation. “Land reform was viewed as pivotal to the socialist agenda due to the centrality of agriculture in developing economies. Tanzanian president Julius Nyerere initiated one bold experiment in land reform in the late 1960s when he introduced the villagisation process called ujaama .. under ujaama tracts of land were transformed into community-based farming collectives.”

“13 years after its inception in 1967, it is now generally acknowledged that the policy of creating ujamaa villages has failed in terms of what they had been designed to achieve: namely, the building of a socialist society in the rural areas of Tanzania where more than 90 per cent of the population lives,” writes Zaki Ergas

Expropriation of land without compensation, centralisation and seizure of the commanding heights of the economy, all present attractive goals to doctrinaire socialists and communists. With elections around the corner, we ignore the abject lessons of history at our peril. Given our nation’s track-record of pragmatism and problem-solving, it would benefit everyone, if instead of shouting down ones opponents, we rather spent more time listening, opening the debate on land reform to discuss solutions based upon empirical evidence instead of purely ideological concerns.

SEE: Sasha Planting’s response on Moneyweb

Op-Ed published 8 March 2018, Natal Mercury

Op-Ed Natal Mercury 8 March 2018