Private Property, Freedom, and the Rule of Law

Monday, April 30, 2001

I have long wondered why the course of Russian political history differed so profoundly from that of the rest of Europe, with which Russia shares a common religion, a common high culture, and a common frontier. The periods of freedom and the rule of law in Russia were always brief and precarious—fleeting episodes in the long history of autocratic government in which the country was governed not by law but by the will of its rulers. Some time ago, I concluded that the difference lay primarily in the weak and late development in Russia of private property, especially in agricultural land, which until the last century had provided the overwhelming bulk of its wealth.

Western scholars have traditionally paid scant attention to the function of private property in the means of production because they simply took it for granted. The advantage of approaching Western history from the perspective of a non-Western country, such as Russia, is that you cannot help but notice the enormous role that private property has played in the West’s evolution since the earliest times.

Economic historians such as Douglass North, David Landes, and Tom Bethell have shown recently how critical the institution of private ownership is for the development of the economy. The thesis has been reinforced by Hernando de Soto’s studies of the contemporary Third World, which demonstrate how the absence of clear property rights in these societies inhibits the growth of credit and, consequently, retards economic development.

You can have tyranny with private property, but you cannot have freedom and the rule of law without it.

However, my emphasis here is not on the economic but the political and legal dimension of property rights. My argument is that such rights are a necessary if insufficient attribute of freedom and the rule of law—that is, you can have tyranny with property, but you cannot have freedom and the rule of law without it.

A Tale of Two Nations

A comparison of the political evolution of England and Russia presents as striking a contrast as one can find in European history.

That England is the home of parliamentary democracy needs neither proof nor elaboration. Nor is it necessary to stress that our modern concept of civil rights derives from the English experience. The question that does require an answer is why these institutions and concepts first emerged in this relatively small island off the continental coast.

My explanation has to do with the early emergence in England of land ownership. Recent research has shown that already in the early Middle Ages land was freely bought, sold, and bequeathed in England, even during the feudal period, when nominally all of it belonged to the king. This fact had a profound bearing on England’s political destiny. By 1300 English kings found that they were unable to maintain the court and administer their realm from their own resources, as medieval theory required. As a result, they had to convene the House of Commons, which alone had the power to vote the Crown the required subsidies. For the next 400 years, as the private resources of the Crown steadily diminished through land grants and sales, and its income declined from inflation, the Crown’s reliance on Parliament steadily grew. In return for granting subsidies, Parliament demanded ever new powers from the monarchy. By the end of the seventeenth century, the Crown had become almost entirely dependent for its revenues on parliamentary subsidies and royal authority had declined to the point where the center of power had shifted to the House of Commons. This reality was sealed by the Glorious Revolution of 1689 and the Bill of Rights that accompanied it—the basis of all modern political democracy, our own very much included. As Edmund Burke remarked, the "great contests for freedom [in England] were from the earliest times chiefly upon the question of taxing."

Law, too, is closely dependent on property. Jeremy Bentham correctly wrote that where there is no law there is no property, and where there is no property, there is no law. Already in seventeenth-century England, the courts were mainly occupied with property disputes.

If we look at Russia, we find a very different picture. Medieval Russia knew institutions and procedures very similar to the English. I have in mind the great commercial principality of Novgorod, which in its days of glory in the fourteenth and fifteenth centuries rivaled Moscow. Its wealth was in private hands; its rulers were elected. On taking office, the prince of Novgorod had to swear an oath not to acquire property so that he would be financially dependent on his subjects. Legislative power rested in a popular assembly called the veche. Unfortunately for Russia, in the late 1400s Novgorod was conquered by its militarily more formidable neighbor, Moscow, which was organized on a very different principle.

The rulers of Moscow rose to preeminence among the scattered principalities as agents of the Mongol khans, who employed them to maintain order in their Russian realm and collect the tribute. In this capacity, the Moscow princes ruled ruthlessly and without any controls by the veche, which the Mongols had abolished throughout Russia except in Novgorod and Pskov. As soon as the Moscow princes had emancipated themselves from Mongol control, toward the end of the fifteenth century, they began first to restrict and then to abolish property rights in land.

In time, all Russian nobles had to serve the monarch: they held their land in conditional possession only as long as they served him to his satisfaction. Because he owned all the productive resources of his realm, the tsar had no need to convene representative bodies—he could tax at will. Nor did he have to concede his subjects any rights: until late in its history, Russia knew only duties, not rights. The ruler was both sovereign and owner of the country, a type of regime for which political sociologists have coined the term patrimonial. Russia closely resembled the ancient Oriental despotisms such as those in Mesopotamia and pharaonic Egypt, where the rulers were the exclusive owners of all that lay within their domain.

In the modern world the main enemy of freedom is not tyranny but the striving for equality—equality interpreted not as equality of opportunity or equal treatment by the law but equality of reward.

By juxtaposing the historical evolution of England and Russia, the historian becomes aware of the importance of private property for the emergence of political and civil rights. The owner becomes a co-sovereign: his assets limit the power of the state, partly because they are outside the reach of the ruler’s authority and partly because the ruler depends on them for fiscal solvency.

The Modern Era: Totalitarianism and the Welfare State

Now let us turn to the twentieth century and show how unfavorable it was to both property and freedom. Communist Russia is, of course, an obvious example. Within two or three years of seizing power, Lenin abolished, in favor of the state, all private property except small landholdings. Ten years later Stalin completed the process by "collectivizing" agriculture (i.e., nationalizing all land and turning farmers into state chattel). On the eve of World War II, some 98 percent of all the productive wealth of the Soviet Union belonged to the government or, more precisely, the Communist Party. The effect this had on the political and civil rights of Soviet citizens requires no elaboration: they were totally wiped out.

The same applies, though to a lesser degree, to fascist Italy and Nazi Germany, which are often erroneously depicted as "capitalist" societies. True, both Mussolini and Hitler tolerated private property in the means of production but only as long as it served the state. In the early 1920s Hitler explained to a journalist his views on the subject:

I want everyone to keep the property he has acquired for himself according to the principle: the common good takes precedence over self-interest. But the state must retain control and each property owner should consider himself an agent of the state. . . . The Third Reich will always retain the right to control the owners of property.

And indeed, this right the Nazi state asserted when it came to power by controlling dividends, interest rates, and wages. In regard to agriculture, it reserved to itself the authority to expropriate any farm that did not produce foodstuffs to its satisfaction. So what we had here was property in a very limited sense, more like a trusteeship than ownership in the true meaning of the word.

Finally, let us consider the modern welfare state. The Western democratic state, I believe, while upholding the principle of property rights, nevertheless subtly violates them. I am troubled by the fact that through taxation and the pursuit of wealth distribution, the welfare state gains control over an ever greater share of the nation’s wealth. In the United States, the federal, state, and local governments manage approximately one-third of GDP. In Europe the situation is still worse: the British government disposes of 42 percent of GDP and the German government more than 50 percent. By contrast, the seventeenth-century British and French governments controlled a mere 7 percent of their respective national products.

This growing share of the nation’s wealth at the state’s disposal naturally enhances its powers correspondingly. Through the Civil Rights Act of 1964, for example, Washington has been able to determine who is hired in much of industry and in nearly all universities, violating the contractual rights of its citizens. Through legislation such as that affecting wetlands, it can prevent owners of land from using it as they see fit. In fighting drug crimes, it takes advantage of forfeiture procedures, confiscating properties that happened to have been involved in drug use or trade.

In general, I argue, in the modern world the main enemy of freedom is not tyranny but the striving for equality—equality interpreted not as equality of opportunity or equal treatment by the law but equality of reward. Because people are unequal in their talents and ambitions and thus acquire worldly goods in unequal measure, they can be made to share what they have only by coercion—and this coercion not only abolishes freedom but precludes equality as well. For in order to enforce coercion, the state needs an appropriate coercive apparatus—and the people who are in charge of it quite naturally demand privileges of all sorts for their services.

The Soviet Union sought to institutionalize economic equality among its citizens in the most determined and ruthless manner ever attempted. And yet after 70 years of unprecedented tyranny costing the lives of millions, it produced a state that was not only unfree and miserably poor but socially highly lopsided, with an elite that enjoyed a Western standard of living and masses that lived on a Third World level.

Rather than pursue the phantom of perfect equality, we should make certain that people are given every chance to improve themselves, while ensuring a minimally decent living standard for the less fortunate. This will not stifle liberty; nor will it create the conditions that prevailed in every communist country: general apathy and hopelessness.