Brian Easton says property rights are critical to an economy

This is a re-post of an article originally published on pundit.co.nz. It is here with permission.

Property rights – which enable decisions over tangible and intangible assets – are critical to an economy as Why Nations Fail pointed out.

Not just private property rights for, as we shall see, they are more complicated than that. Neoliberals argue that private property rights lead to the maximum economic prosperity; they used that to justify privatisation. Certainly, ambiguous property rights are likely to result in poor quality outcomes. But community property rights can be effective, as economic orthodoxy acknowledged when Elinor Ostrom was awarded a Nobel laureateship in 2009 for showing that the use of exhaustible resources by groups of people can be rational and prevent their depletion without either state intervention or markets with private property.

Pre-market Māori demonstrated that too. The seas around Northland were teaming with fish, even in the 1850s. The local hapu had various measures which sustained them. Following the breakdown in hapu authority, the seas became fished out.

The neoliberal misunderstanding was evident in the original formulation of ACT’s treaty principles proposal. Its second principle stated that the government should ‘protect all New Zealanders’ authority over their land and other property’. This was intended to be an updating of Article II of Te Tiriti, which actually stated that the Māori rangatiratanga would be preserved for ‘ratou wenua o ratou kainga me o ratou taonga katoa’, which might be translated as ‘their lands, their villages and all their treasured things’.

Two things. Minor for the purposes here, ‘ratou taonga katoa’ (all their treasured things) is wider than just property. Did ACT intend to downgrade the standing of te reo, despite the highest courts in the land determining that it is a taonga under Article II?

But second, the notion of rangatiratanga is not just about individual authority. Pre-market Māori did not have a notion of individual ownership of land and other resources. Those property rights were exercised communally.

This was barely understood by the first Europeans and led to many early misunderstandings, some of which persist to this day, for we are always tempted to anachronistically interpret the past by current standards. (The misunderstandings are well explored in the scholarly literature; I tried to summarise them in Chapters 4 and 5 of Not in Narrow Seas.)

(Those of a conspiratorial frame of mind may think that ACT was not ignorant but was trying to sneak into legislation a clause which the courts could interpret as upholding the principles in ACT’s Regulatory Standards Bill.)

Clearly, ACT’s second principle will not do, and sober official advice changed its manifesto promise to

          Rights of hapu and iwi Māori — the Crown recognises the rights that hapu and iwi had when they signed the Treaty/te Tiriti. The Crown will respect and protect those rights. Those rights differ from the rights everyone has a reasonable expectation to enjoy only when they are specified in Treaty settlements.

(ACT has lost interest in this revised second principle but is proceeding with the Regulatory Standards Bill.)

This still does not capture the essence of Article II of Te Tiriti. I’d have thought that the rights existed from the time of signing and that treaty settlements only recognised the existing rights rather than created them.

There is also a deep complication about what property rights refers to. It is not peculiar to Te Tiriti, so I begin with a contemporary example.

Suppose there was a proposal to establish a KFC in a suburban shopping centre. Even a neoliberal living, say, 100m away might object to its impact on the neighbourhood and join in the objection to its establishment. (In the case in mind, they were successful and the KFC was never established.) There is nothing among a property owner’s legal rights which entitles them to block the proposal. The opportunity to object arose from town-planning provisions such as in the Resource Management Act. But presumably the neoliberal thought there was some existing moral right to block a neighbour’s peaceable, if detrimental, activities.

(You can see why proposed changes to the RMA and the proposed fast track legislation are difficult. While they are intended to reduce the transaction costs of making decisions, they will also reduce some people’s ‘property rights’ while increasing those of others.)

We frequently see Māori claiming kaitiakitanga (guardianship) in their rohe, despite its ownership having been legally alienated. They are arguing that the rangatiratanga of Article II of Te Tiriti included stewardship rights and mana whenua was not alienated when ownership was transferred (whether justly or unjustly). They are not alone in their belief of kaitiakitanga rights. Greenies frequently invoke it; we are all greenies on occasions (as with the raising of the level of Lake Manapouri, even if we had never visited it and lived miles away).

ACT does not seem to have thought through these issues in its proposals, or perhaps neoliberals do not think they should be attended to (unless it’s about a KFC in their neighbourhood). But others do.

ACT has opened up a can of worms. The biggest worm in the property rights can is to what extent their existing distribution is just. (This is not quite the same issue as the inequality of the property rights.)

The respected libertarian philosopher Robert Nozick pointed out that if a distribution is ‘just’, the distribution of rights remains just following voluntary transactions. But what if the original position is not just, what if transactions are not voluntary? How can we treat the existing distribution as acceptable?

Was the distribution of land just even on 6 February 1840? As a reult of the Musket Wars much land involuntarily changed its rangatiratanga. Oral traditions report that there were involuntary land transfers following conquest even earlier. Was there ever a time when the distribution of land was just? Arguably the proto-Māori seized the land from the existing animal inhabitants, when they first arrived.

A practical resolution might be to say that the distribution on 6 February 1840 was acceptable in the governance of New Zealand. Even so, much of the subsequent alienation was not voluntary.

The tendency is to highlight the consequences of the New Zealand Wars – we do love heroics. Arguably, the 1865 Native Lands Act was far more destructive. It created the Māori Land Court, which converted Māori customary title into a title recognisable under law. Māori were not consulted about this legislation. British law was unable to deal effectively with collective (customary Māori ) ownership, so Māori practices were converted to individualised ownership. The creation of a commercial title with its individualisation pitted Māori against Māori, undermining the integrity of hapu. (Woody Guthrie sang ‘some rob you with a six-gun/some with a fountain pen.’) Here is a salutary reminder that property rights influence the way we organise society.

Nozick is ruled out. So how are we settle on an acceptable distribution of property rights? ACT’s Treaty Principles Bill is not an answer.

*Brian Easton, an independent scholar, is an economist, social statistician, public policy analyst and historian. He was the Listener economic columnist from 1978 to 2014. This is a re-post of an article originally published on pundit.co.nz. It is here with permission.