When Ayn Rand called capitalism "the unknown ideal," she might have meant one of two things: Capitalism is an ideal social system that we have never known; or, capitalism is a social system that we have never known to be an ideal. Both are true. But, as Rand pointed out, nineteenth-century Americans came close to making capitalism real. Americans have not come nearly as close to realizing capitalism is ideal.
Capitalism, in Rand's definition, is "a social system based on the recognition of individual rights, including property rights, in which all property is privately owned" (Capitalism: The Unknown Ideal, 19). To call such a system ideal obviously raises a question: By what standard? Objectivists reply: By the standard of human nature. And as evidence they note that human beings thrive and prosper under even moderately capitalist regimes, while they decline or stagnate under anticapitalist regimes. The twentieth century has offered dramatic evidence of that fact as the result of a rivalry between the mixed economies of the West and the socialist economies of the East.
Yet there is much more of interest that can be said about the matter. In particular, it is interesting to ask: How, exactly, does capitalism promote human life? The complete answer seems to involve three fields: philosophy, politics, and economics. Ayn Rand's work is unquestionably the best resource for the philosophical answer. But the history of other philosophical views concerning property helps to put in perspective her contention that capitalism is an ideal. And, in the fields of politics and economics, her work is usefully supplemented by several recent books and articles.
As Richard Pipes tells the story, Western philosophical thought on the subject of property—from Plato and Aristotle to Marx and Mill—has been a continuing conflict. In particular, it has been a conflict between "idealists," who advocate some form of communal or state property, and "realists," who defend private property as practical.
Greece. Plato began the attack on property with a full-blown assault. In The Republic, he asked: "Is not that the best-ordered State in which the greatest number of persons apply the terms 'mine' and 'not mine' in the same way to the same things?" Aristotle opposed Plato, but, according to Pipes, based on his opposition to common ownership . . . principally on utilitarian grounds. It is impractical because no one takes proper care of objects that are not his. . . . Furthermore, Aristotle argues, possessions enable men to rise up to a higher ethical level by giving them the opportunity to be generous (8).
In short, private property makes people better custodians and better altruists, a rather tepid defense.
Rome. The clash between "idealists" and "realists" was repeated in the Roman Empire. Pipes notes that Virgil wrote of a Golden Age when
Even to mark the land with private bounds
Was wrong; men worked for the common store, and earth
Herself, unbidden, yielded all the more fully.
By contrast, the Stoic conception of natural law allowed Cicero to argue that government could not interfere with private property because government had been created in order to protect private property.
The Middle Ages. When Christianity came to dominate the West, the differences between idealist and realist grew small. Augustine, the Platonist, argued that
a property less society was possible only in Paradise because it demanded perfection—the kind of perfection that since the Fall was beyond he reach of most humanity. . . . [For this world], Augustine viewed property as a responsibility rather than a warrant for license—a kind of 'trust' held by individuals for the public good. (15)
The Aristotelian Thomas Aquinas could not escape entirely from the Christian view that it was "not natural for man to possess external things, because all goods belong to God and are the common property of God's children." Nevertheless, says Pipes, he did argue that "common ownership promoted neither efficiency nor harmony" (16). And he adopted Aristotle's idea that possessions enable a person to engage in charity.
The Renaissance. The discovery of America gave a boost to the collectivist, "idealist" side of the debate. During the Middle Ages, theologians had asked whether there still existed, in some far-off land, an earthly Paradise—which would of course be property-less. Columbus's First report on America emphasized the inhabitants' nudity (which recalled Adam and Eve before the Fall), but he wrote, too, that he had the impression property was held in common. Peter Martyr d'Anghiera, chaplain to the court of Ferdinand and Isabella, drew on the accounts of Columbus and others to publish a description of the New World's inhabitants: "Among them, the land is as common as the sun and water. . . . Mine and Thine (the seeds of all mischief) have no place with them."
Also influenced by descriptions of the New World was the work that gave its name to this line of thought and reshaped it for the worse. Thomas More's Utopia. Because Christians thought Columbus had found a remnant of Paradise, they had naturally stressed the unconstrained nature of the inhabitants. More set utopianism on a new tack: In his work, "as in virtually all imaginary commonwealths written subsequently, the dominant theme is harsh discipline" (23). Thus, the Utopian notion henceforth held that man, as he currently exists, is corrupt. Yet he is basically good and capable of being made virtuous—by the influence of strict laws and education. The logical conclusion was Mao.
Utopianism, though, was not the chief theme in West European thinking during the Renaissance. Quite the contrary. Two factors boosted the prestige of property, Pipes says. One was individualism. "Increasingly, the community came to be viewed as an abstraction made up of individuals, and communal well-being as the sum total of individual prosperity" (26). A second factor was the turn toward classical literature and law. This resulted in a reemergence of natural-law theory and natural-law justification of property rights.
The seventeenth century. These two factors worked to bring about a victory for the pro-property outlook.
In the course of the seventeenth century, it became widely accepted in Western Europe that there exists a Law of Nature which is rational, unchanging and unchangeable, and transcends human (positive) laws; that one facet of the Law of Nature is the inviolability of private property; and that sovereigns are bound to respect their subjects' belongings (29).
The capstone of this progression was John Locke, who wrote that "Political power . . . is a Right of making laws . . . for the Regulating and preserving of Property," from which it necessarily follows that "the great and chief end of Mens' uniting into Commonwealths, and putting themselves under Government, is the Preservation of their Property" (35). (By the term "property," Locke says, "I must be understood here, as in other places, to mean that Property which men have in their Persons as well as Goods.")
With Locke, the West came as close to considering private property the ideal as it ever would, prior to Rand.
The eighteenth century. Unfortunately, the tide quickly turned as David Hume undercut property's philosophical grounding.
To what property, he asked, does a man have a right?
Here we must have recourse to statues, customs, precedents, analogies, and a hundred other circumstances; some of which are constant and inflexible, some variable and arbitrary. But the ultimate point, in which they all professedly terminate, is the interest and happiness of human society.
The French philosophes took Hume at his word but drew a different conclusion. If the purpose of law and custom was "the interest and happiness of human society," why not devise laws and customs that would better achieve such an end? Specifically, since the primitives had shown man's "fallen condition" was not inevitable, given the proper circumstances, why not restore man to that perfect condition by giving him the proper circumstances? The Code de la Nature, published under the pen name Morelly, argued in just that fashion.
'Natural' human beings were still to be found among American Indians, who hunted and fished in common and knew nothing of personal belongings. Modern man was thoroughly warped by his cravings for belongings. . . . Morelly outlined a kind of constitution to instruct mankind how to live according to 'nature.' Its opening article reads: 'Nothing in a society belongs uniquely or in property to anyone' (40–41).
The most influential thinker in this line is, of course, Rousseau, who submitted to a contest the essay called Discourse on the Origin of Inequality. It opened:
The first person who, having enclosed a plot of land took it into his head to say this is mine and found people simple enough to believe him, was the true founder of civil society. What crimes, wars, murders, what miseries and horrors would the human race have been spared, had someone pulled up the stakes or filled in the ditch and cried out to his fellow men: 'Do not listen to this imposter. You are lost if you forget that the fruits of this earth belong to all and the earth to no one.'
The nineteenth century. Although the 1800s saw the triumph of capitalism as a system, largely because of the philosophy of John Locke, it also saw the philosophical defeat economic Lockeanism. Pipes quotes Alexander Gray's The Socialist Tradition for this argument:
If property is essential to the development of man's natural liberty, it ought not to be enjoyed exclusively by a few, as an odious privilege; all ought to be owners of property. The same theory of natural rights which consecrated individual property, and for its sake demolished the castle of feudalism, issued in the opposite conception, namely communism. (45)
The anti-property ideas prevalent in France came to England in the person of William Godwin. His Enquiry Concerning Political Justice "so turned the heads of Wordsworth, Coleridge, and Southey that they wanted to proceed at once with the creation of a communistic society" (48–49). For Marx and Engels, who had the same goal, "their chief objection to property was that it dehumanized people, 'alienating' man from himself by making him submerge his identity in money" (52).
Against these forces stood the heir of British liberalism: John Stuart Mill. Distinguishing sharply between the production and distribution of goods, Mill followed Hume in believing that the latter was a matter of custom and law. Even communism, he held, could be "just, workable, and probably congruous with liberty" (56). He also stressed "the overriding importance of an equitable distribution of productive wealth" (57).
At this point, the idealist/realist, collectivist/individualist contest no longer existed, and the fate of property in the twentieth century was sealed.
The Objectivist philosophy demonstrates that life is man's ultimate value and on that basis justifies liberty, including property rights. A rational political science would accept from political philosophy the proposition that liberty (including property rights) is one of man's goals and demonstrate theoretically that property is a valuable means of securing that goal. It would thus validate what a delegate to the Continental Congress, Arthur Lee (1740–1792), declared in 1775: "The right of property is the guardian of every other right." More precisely, political science would show how the right of property is guardian of every right, including itself.
But in the absence of a well-developed political science, the evidence for that assertion must be largely historical rather than theoretical, and that presents a problem. We cannot re-run history, alter a fundamental institution such as private property and observe the effects on political life. Therefore, it is especially fortunate that there arose, on opposite sides of Europe, two nations whose property regimes were diametrically contrary: England and Russia. Property and Freedom traces the history of the laws surrounding property—first in England, then in Russia—and observes their effects on democracy, law, and liberty.
England. The Norman invasion of England brought with it feudalism, under which (theoretically) all property belonged to the king, who distributed it to major tenants in return for quotas of cavalry; these major tenants in turn distributed it to knights, in order to be able to meet the quotas. Yet the king's income came only from the rents on his personal lands, plus custom revenues, and some feudal dues. Tax levies were reserved for emergencies, principally war, and if the king wanted tax revenues, he had to ask for them. That was a key point extracted from King John in the Magna Carta. "The critical step in the evolution of parliament occurred toward the end of the thirteenth century, when the crown, greatly in need of money and unable to procure it from its own sources, invited representatives of knights and burghers to attend special sessions of the feudal council" (128).
The development of that "critical step" is, in essence, the story of why British democracy developed over the next four hundred years. In the 1400s and 1500s, the Tudors, unable to live off their rents and feudal fees, sold crown land to meet expenses, but they still had to call ever more frequent parliaments to plead for additional revenues.
Possessing a much reduced amount of crown land, the early Stuarts, James I and Charles I, were in dire straits. Even more than their predecessors, they were forced to ask parliament for generous subsidies. When the Commons refused to give Charles all he sought, he tried to govern without it. "The trouble, of course, was that nonparliamentary taxation was widely perceived as violating English traditions" (141). The result was civil war and the execution of the king.
Yet this was not simply a power struggle, a point indicated by Pipes's phrase "violating English traditions." Another development that had flowed from the rise of property rights in the late Middle Ages was law. Feudalism, after all, involved a "contract" for land and protection in exchange for fealty and homage, and someone had to say when the contract had been fulfilled and when not. In the period leading up to the civil war, one of England's most prominent lawyers, Sir Edward Coke (1552–1634), declared that the right to interpret English law lay not with the king or parliament but with the courts. That meant
jurists were the ultimate judges of what governments could or could not lawfully do. English courts came early to deal with constitutional issues, passing judgment on the respective authority of the crown and parliament—an authority which lawyers enjoyed in no other country. (132)
Though the English monarchy was restored in 1661, the later Stuarts could not turn back the clock. When the country's leading men feared that the Catholic James II would bring on a Catholic despotism, such as existed in France and Spain, he was removed in what Pipes calls "a classic coup d'état," and Parliament made itself supreme. Pipes notes that when King George III was pronounced incurably insane, in the midst of the war against Napoleonic France, his inability to perform his duties no longer made any difference to the British government.
Russia. The most surprising aspect of Russian history, in the matter of freedom, is not that the country started out backward, but that the course of its history seems to run backward. During the last stages of the Mongol domination of Russia, the late 1400s, nobles were given truly private estates by the princes who served as the Mongol agents in the land. This was "votchina land," meaning it was owned outright and not by feudal tenure. Thus, at that point, Russian property rights stood in advance of English property rights. What happened?
The process of transforming [votchina] property into tenure conditional on state service began in earnest in the reign of Ian III at the end of the fifteenth century, by which time the Golden Horde had disintegrated and Russia had, for all practical purposes, become a sovereign state. During the next two hundred years, all votchiny on the territories of the great princes of Moscow were, to employ modern terminology, nationalize. . . . Private property in land disappeared. (169)
Even so, one might think this left Russia not much different from England under the Normans. In both, land was held by a conditional tenure, deriving ultimately from the monarch. But two things were very different, and the first was attitudinal. In England, land was given by the king to his chief vassals in return for swearing fealty and doing homage. It was a system of mutual honor and obligation. In Russia, princes adopted the political attitudes they had learned while serving as agents for the Mongols: they treated their people as vanquished subjects, devoid of any rights.
There was also an institutional difference: The land held under conditional tenure in Russia was less property than a temporary holding that could be exploited only at the sovereign's pleasure. It is telling, Pipes says, that West European aristocrats identified themselves by place, "using such prefixes as 'of,' 'de,' or 'von' followed by the name of their domains, which had since the early Middle Ages been heritable possessions or property. Russian nobles identified themselves by their Christian names and patryonomics (177). And he adds:
How extreme was the hostility of the Russian monarchy to private property can be seen from the fact that it refused to acknowledge as inviolate private property even personal belongings, recognized as such by the most primitive societies. (179)
With this absolute system in place, the tsar had no need to plead for revenue as the English king did, and thus no consultative bodies arose that provided the foundations for a democratic parliament. Peter the Great (who reigned from 1682 to 1725) introduced a "soul tax" on all adult male commoners. "The tax was calculated by taking the amount of money needed or the upkeep of the army and navy and dividing it by the number of adult male commoners. No one was consulted in the matter" (188). This, be it noted, was at the time of England's Glorious Revolution, which deposed James II and installed parliamentary supremacy over taxation and expenditures.
As for the development of law in Russia:
Without the feudal contract, there was no need for courts to adjudicate such feudal disputes. In Russia under the Old Regime, one of his earlier works, Pipes wrote:
Russia knew nothing of independent justice. Justice was a branch of the administration, and as such its foremost concern was enforcing the government's will and protecting its interests. Nowhere is the undeveloped sense of the public order more evident in Russia than in the tradition which up to the very eve of the contemporary age treated crimes perpetrated by one private person against another or of an official against a private person as matters of no public concern. (288)
Eventually, some measure of liberty, including property rights, did come to Russia. If one had to put a date on the first stirring, the likeliest choice would be 1785, 570 years after the nobles of Britain wrested their rights and privileges from a reluctant king at Runnymede. In 1785, the nobles of Russia received a Charter of Rights granting them property in their landed estates and also civil rights. But this charter came as a free gift of the sovereign, Catherine the Great.
Throughout the nineteenth century, more rights were granted to more classes, including the serfs. And in the twentieth century, a parliament (duma) was instituted in the hope of heading off a revolution. But the revolution came anyway. "Russia's experience," Pipes writes, "indicates that freedom cannot be legislated: it has to grow gradually, in close association with property and law" (208).
Comparing the historical effects of property rights in England and Russia demonstrates one way such rights protect human liberty. In England, we see, property rights meant that the government was dependent on the willingness of the people to provide it with funds. That protected democracy. By means of democracy, the people further secured their property rights, their right to be consulted by the government, and other freedoms as well. In Russia, a relative absence of property rights meant the government did not need the consent of the people to obtain funds. Free of restraint, the government used its power to demolish property rights and democracy, producing complete autocracy. Doubtless, there are other ways in which property has historically protected liberty, but this appears to be the main one.
Just as political science should not take liberty as a given end and demonstrate how property rights help achieve it.
Unfortunately, Tom Bethell's book The Noblest Triumph seems to assume that, because property rights are a means to wealth, protecting them is a matter of arbitrary choice. He tells of a speech he gave in 1990 to staff assistants from both the World Bank and the International Monetary Fund.
I said that if the countries they dealt with want to achieve the level of development that has been reached by the United States and a few other countries, they would have to adopt legal regimes that gave security to private property. It would be understandable if some countries preferred to retain their traditional character or to avoid the ceaseless striving and upheaval that accompanies the free-market system. But they should be clear about both means and ends. If it was real growth and modernization that they wanted . . . their legal and political systems would have to be brought more closely in line with those of the Western world. (1) [Emphasis added]
That is a bad beginning philosophically, but it does not undermine Bethell's efforts to demonstrate that economic freedom has promoted prosperity in a number of contexts.
Historical evidence. One of his most interesting efforts is an attempt to show that the industrial revolution occurred first in England largely because that country secured property rights.
As noted earlier, English fiefs had always been heritable and the sale and trading of fiefs had become common by the 100s. On this basis, Bethell questions whether it is correct to say feudalism existed in England. He cites Alan Macfarlane as believing: "'England was as "capitalist" in 1250 as it was in 1550 or 1750.'" And Bethell adds:
Developed markets and both geographical and social mobility existed by the earliest of these dates. The law had given rise to individual, as opposed to group or family, ownership, and these changes had occurred far earlier than most researchers have realized—perhaps in the twelfth century. Farm and family were separated, land was bought and sold, and full private ownership was established. Rational accounting and the profit motive were widespread. (78)
The activity in property required laws and courts to adjudicate disputes. In Origins of the Common Law, Arthur Hogue writes: "The common law of the twelfth and thirteenth centuries is in large part the law of land and tenures, the law of property rights and services together with rules of procedure for the administration of justice." (Origins of the Common Law, Bloomington, IN: Liberty Fund, 1985, 112). Now, according to Bethell,
The feature of the law that is most conducive to the modern market system is equality before the law. . . . For if what one person can do to another is limited to what can be done to him, the security and privacy of all will be respected and transactions will be by consent. (80–81)
And to a large extent, Bethell asserts, just such equality before the law was achieved under the common law. "All free men, including the nobility, were in the main equal before the law" (81).
Another step toward the industrial revolution was taken, Bethell believes, with the enclosure of the commons, which occurred in the latter half of the eighteenth century. This was
a systematic privatization in which open fields and common areas were fenced and divided among those who had enjoyed either communal or private rights to them. Problems of free riding and of 'externalities' were much reduced. (88)
The result was increased investment in land improvement, such as drainage, and in new farming methods, such as crop varieties and animal breeding. "They added up to an Agricultural Revolution that was not entirely separate from the Industrial Revolution" (89).
In summation, Bethell quotes Max Hartwell's The Industrial Revolution and Economic Growth:
'Perhaps the most distinctive and unique national characteristic that distinguished England from the Continental countries in the eighteenth century, in the century also of England's unique lead in industrialization, was English law.' (91)
Contemporary evidence. One might expect that Bethell's book would give us not only historical evidence that property produces wealth but also contemporary evidence. After all, his book is subtitled Property and Prosperity through the Ages. But though Bethell has many intriguing refutations of anticapitalist approaches to wealth-creation, his contemporary evidence for property is restricted largely to the case of mainland China. Now, unquestionably, rapid economic growth has been created there, and the book Bethell recommends—Kate Zhou's How the Farmers Changed China—is well worth reading. But the outcome of the Chinese experiment is probably in graver doubt than Bethell allows.
A better, shorter look at how property and prosperity correlate, on a global scale, is "The Scope of Government and the Wealth of Nations," by James Gwartney, Randall Holcombe, and Robert Lawson. After examining numerous countries, the authors' findings are straight-forward: (1) "It is clear that the core functions of government can be provided with less than 15 percent of GDP"; (2) "The growth maximizing level of government expenditures is no more than 15 percent of GDP"; and (3) A 10 percent increase in government expenditures as a percentage of GDP results in approximately a 1 percentage point reduction in GDP growth."
Though the books under review here are strongest as history, they do offer a few thoughts in the realms of political science and philosophy. How valuable are these?
Political science. Richard Pipes contributes the interesting formulation that property rights render the individual a "co-sovereign." Because of this, he writes,
in the Western world since antiquity and until the twentieth century, regular (as distinct from emergency) direct taxation was regarded as unlawful except for subject peoples; [and therefore] when imposed domestically, it carried the stigma of social inferiority. (238)
A government that needed revenue, therefore, had to ask the people for money, and that promoted democracy. Unfortunately, as Pipes also notes, democracy once achieved undermines this restraint.
The same notion of co-sovereignty promotes liberty by creating an autonomous sphere in which neither the state nor society can encroach. As James W. Ely, Jr. writes
The framers did not distinguish between personal and property rights. On the contrary, in their minds, property rights were indispensable because property ownership was closely associated with liberty. "Property must be secured," John Adams proclaimed in 1790, "or liberty cannot exist." (43)
In light of this background, Ely believes that
the Fifth Amendment explicitly incorporated into the Constitution the Lockean conception that protection of property is the chief aim of government. . . . [And] it was thus natural for judges steeped in the Lockean common law tradition to view due process as a substantive check against the arbitrary and unreasonable exercise of government power. (54–55)
Certainly, that was one common reading of the "due process" clause up until the New Deal broke the Supreme Court.
Philosophy. On the philosophical level, the books here reviewed range from suggestive to misguided.
Pipes's arguments for the "fit" between property and human nature are speculative but interesting. He finds the deepest roots of this relation to lie in the relation between territory and animal. Animals, he says, require a defined territory for nourishment and breeding, the size of the territory correlating with the species' needs. In addition, he avers, animals maintain two kinds of distances: from other species and from individuals of their own species, with larger animals generally requiring a greater distance to feel secure, though landlocked animals seem to require more than shore animals.
Turning to primitive peoples, Pipes finds that all societies condemn and punish theft, at any rate within their own community, and thus testily to their respect for property (77). The primitive possession of land, however, frequently does lack certain features of modern property, and that may be why so many have thought primitive people lack property altogether. The ownership in land that is familiar to us probably did not emerge until the beginnings of cultivation, when the constant, long-range labor required by cultivation transformed crops into the belongings of a strictly limited kinship group.
Of course, Pipes is aware that what is true of animals may not be true of humans and what is true of primitive people may not be true of people per se (70). Therefore, to demonstrate that human acquisitiveness is innate and not a learned trait, he considers studies of communistic kibbutzim carried out by Melford Spiro and Bruno Bettleheim. Though every effort was made to discourage a sense of possessiveness, Spiro says: "[T]he data suggest that the child's early motivations are strongly directed toward private ownership." Only later was indifference to personal ownership inculcated, and then at a psychological price. Israelis brought up in that environment made excellent soldiers but experienced great difficulty making an emotional commitment to any one individual (75).
In contrast to Pipes, Bethell's attempt to state the "fit" between property and human nature is Augustinian:
For over a thousand years, in the Western world, the institution of property had been upheld by the doctrine of the Fall of Man, which was thought to have embedded a flaw deep within human nature. The new belief that mere legislation could make all the difference to this natural imperfection would have seemed absurd and childish, not to say impious and heretical, to the old thinkers. But once these revolutionary ideas began to spread, as they did after the French Revolution, property came under attack. (17)
In fact, as noted earlier, it was a very pious and orthodox lawyer—Thomas More—who introduced this "revolutionary" idea into Western thought.
Interestingly, both Pipes and Bethell quote Rand favorably, and do so twice. But they seem unwilling to accept the grounding Objectivism provides for property rights. Bethell, as we saw, advocates property rights for countries that want to be wealthy, although conceding that some may wish to remain traditional. But the very purpose of property rights is to guarantee that a government cannot decide its citizens will "remain traditional."
Richard Pipes comes much closer to the truth when he advocates property rights for countries that want to be free. After quoting Tocqueville's fear that Americans would end as "a flock of timid and industrious animals, of which the government is the shepherd," he asks: "Is that what we want?" But the very purpose of property rights is to guarantee that people cannot decide that is what we want.
Objectivism's philosophical basis for property rights proceeds from neither the pursuit of wealth nor the pursuit of liberty but directly from the pursuit of life. David Kelley has put it thus:
If human life and happiness are values, then so is production. But production is a long-range, rational process. It requires continuous, connected activity, in the service of a plan, over lengthy periods of time. It requires technical judgments about the best means to achieve a given end, and economic judgments about the ends best served by a given set of means. People disagree about such judgments. People differ in the way they value the possible products, they differ in the way they prefer to spend the income from production, they differ in the terms of cooperation they find acceptable. If production is a value, then the ability to act upon these judgments—the ability to carry out long-range plans involving physical resources, without having to seek the permission or agreement of everyone else—must be highly weighted. And it is precisely the freedom to act in this way that ownership rights protect. (117)