Property Rights and Peace
Nov 30, 2023
On April 27, Russian President Vladimir Putin signed a decree that provides a path to Russian citizenship for people living in the parts of Ukraine which are under Moscow’s control. Those who opt out face the prospect of losing their property rights, and risk being displaced from their homes.
The decree covers four Ukrainian regions that Russia has occupied: Donetsk, Luhansk, Kherson, and Zaporizhzhia. Individuals holding ‘passports’ issued by the self-proclaimed Luhansk People’s Republic and Donetsk People’s Republic will be considered foreign nationals if they fail to obtain Russian passports by July 1, 2024. Oleksandr Pavlichenko, the executive director of the Ukrainian Helsinki Union for Human Rights, claims that those who fail to register will be removed, resulting in the loss of property ownership: “This property ownership right can be declared invalid. It can be revoked, meaning they will lose their rights to that real estate.” Russia’s full-scale invasion of Ukraine and the ensuing war has had a massive impact on civilian property and energy infrastructure, to say nothing of other human rights concerns in the country.
Secure rights to land are critical to the development of economic activities, capital accumulation, food security, and a variety of other socioeconomic benefits. These, in turn, lead to increased investments in land and, as a result, greater agricultural production, wealth generation, and development. On a macro level, land rights are a pillar of individual liberty that create political accountability and, as a result, encourage economic policies that facilitate broad economic growth rather than narrowly benefitting elites.
The realization of these rights eliminates violent competition for control of economic resources, replacing war and conflict with competition by peaceful means. Lawlessness and the absence of ownership rights may take many forms including legalized eviction, discriminatory policies, land confiscations, land speculation, crowding, drastic tenure insecurity, and mismanagement in court procedures and court access. Grievances over land and property, and long-term land insecurity and inequality, often result in violence and terror.
Property and stability
The studies of Hernando De Soto, a Peruvian economist, have revealed that the vast majority of property in the Middle East and Africa is unregistered. As a striking example, only 5% of Egypt’s property is officially registered, according to a government statement. Egypt’s International Property Rights score is 88. In “The Ballad of Property Registration in Egypt,” Senator Mohamed Farid states that “the challenge of property registration continues to pose a barrier to the facilitation of business activities in Egypt.”
Registering a property—providing that the individual is in possession of all of the necessary documents—can take up to six months or more, which Farid notes as contributing to the “proliferation of corruption and bribery within the registration system.” However, he argues that the newly introduced title deed insurance policy document by the Financial Regulatory Authority (FRA) will be an “insurance policy against the risks of not proving ownership” and will enhance transactions in real estate financing activity for foreigners who wish to buy or sell property in Egypt. This change could be the beginning stages of establishing secure Egyptian property rights.
According to a USAID study published in 2016, an estimated 70% of land in developing countries is unregistered or “perceived to be insecure.” These alarming figures reflect a fundamental impediment for the impoverished to succeed in overcoming their most pressing challenges: poverty, conflict, violence, poor governance, and the absence of economic opportunity. After examining the reality of global terrorism in the Middle East and the Arab world, De Soto is convinced that the violence stems not from religion, but rather poverty, economic insecurity, and a lack of rights.
Only 30% of the global population has legally registered rights to their land and homes. The other 70% who lack those rights are unable to leverage their resources to make their own wealth, and their assets become “dead capital” which do not generate growth. As a result, the poor are hedged in and their unregistered assets may be stolen by powerful interest groups. Land and property disputes are often at the center of violent conflicts. The frustration, isolation, and hardship that can come from losing land, housing, access to resources, and other property may also contribute to pushing people toward violent extremism, “as does the predatory desire to control resources or territory in order to establish separate political entities or fund conflicts,” according to USAID.
Evidence shows that resolving land disputes can help reduce tension, bring about stability, and set the stage for economic growth and investment. Creating formal, recognized systems of land ownership which are protected by the government will encourage peace and deter terrorism. This provides security for the marginalized, thereby winning their loyalty for the government. Land protection is a peacemaking tool in areas blighted by war or terrorism, conversely, the failure to attend to ignore property inequities will only exasperate conflicts.
Peace in Peru
In the 1980s, Peru was plagued by poverty and the terrorism of the Shining Path, a revolutionary organization that endorsed Maoism and employed violent, guerilla tactics. It gained control of poor rural and urban districts in central and southern Peru, attracting sympathizers by empowering the native population at the expense of Peru’s Spanish-speaking upper class. As advisor to Peruvian President Alberto Fujimori, Hernando de Soto, a renowned economist, worked to bring impoverished Peruvians out of the shadow economy, unbridling their potential for the accumulation of wealth. For his efforts, de Soto became the second winner of the Milton Friedman Prize for Advancing Liberty.
By the 1990s, Peru’s property rights system was in crisis as a result of the land redistribution policies of the ‘60s and ‘70s. The policies divided up vast haciendas, creating cooperatives or individual holdings while disallowing the sale of land or its use as collateral. Legal registration of redistributed land was nearly impossible, and property was owned by whoever worked it. Duplicate property claims exponentially increased in number, and resolution of claims took nearly a decade. A Peruvian wanting to register a title or execute a contract for the sale of property was overburdened with red tape, and engaging with corruption was the only path to title property or resolve a claim.
Rather than register people under that dysfunctional system, the reformers in the Peruvian government founded a new system in the early 1990s. The government rescinded the laws disallowing the ownership or sale of land, and began to register property based in part on a registry developed by de Soto, who had founded the Institute for Liberty and Democracy. An initial pilot program registered 88,000 properties, primarily in urban areas. The success of the pilot convinced property owners that the new system was trustworthy and fair. As formal property registration took off into the late 1990s and the early 2000s, collateral-based lending skyrocketed. Newly formal property owners were at liberty to pursue earnings opportunities away from their property without the dire experience of losing it to another claimant. Peru’s IPRI score increased by 0.111 to 4.37 placing it 12th in the Latin America & Caribbean region and 87th in the world.
The battle for property rights continues in Peru. Peru’s physical property rights subindex decreased by -0.068 to 4.053 in recent years. Europe has also seen better days: Putin’s decrees come with infringements to ownership rights. More than ever it is important to remember that the foundational requirement of a free-market economy is a strong system of property rights. The realization of these rights eliminates violent competition for control of economic resources, replacing war and conflict with competition by peaceful means.
This article originally appeared in the European Conservative, November 30th, 2023. Please see link:
https://europeanconservative.com/articles/analysis/peacemaking-and-property-rights/