Thursday, January 20, 2011
Do people need to own land in order to be motivated to work it? Or to find more efficient or profitable ways to do so? Million dollar questions. I am currently working on several papers based on the Uzbek experience, and these questions come back over and over again.
Many economists, especally in the American tradition, assume or 'prove' that ownership, expressed and codified in strong, almost absolute property rights, is the only way forward, the only path to economic development. Many of those assume that simply changing formal property arrangements will push an economy forward.
Many anthropologists direct the attention to the disturbance of endogenous, often highly complex arrangements for sharing the land, its resources, its products, when formal property regimes are imposed. Economies can collapse, in stead of develop, and the rule of law can be wiped out, in stead of reinforced. They would also point out, together with a number of geographers and political scientists, that the move from one property system to another one can be exceedingly difficult and extremely hard to keep transparent and fair.
The transaction costs, in other words, can be very high and unpredictable, and the transition itself can make it harder to re- establish a semblance of a market afterwards. They would also argue that the new rules of the game, and the implicit rules to make gains at the outset of the game, are known to only a small elite, either western, or controlling the transition. Knowledge is an asset then, distributed unevenly, knowledge on rules and taking positions, but also knowledge on the exact pathway of transition, on the situation at any given moment. And power is an asset, the power to establish and define a new regime, and certainly the power to enforce the new rules in the old environment. By elites imposing property reforms, the rhetoric of development, of scientific improvement and of progress, are usually combined.
What to do then? And what to think? First of all, I think it is useful to look at property rights as a specific bundle of use rights and a specific bundle of limits to that use. This is also true in the States. Also, even in the States, cooperative property and collective property are possible, and spatial planning is possible. Thus, the serf in the Russian empire (See map), and the kolkhoz worker in the USSR had officially no property, and sometimes worked under conditions we could call 'oppression', but certainly not all the time. Through a web of other rules and shared understandings, they had an input, and could not be forced to do whatever elite members wanted them to do. Everyone familiar with older Rusian literature, will recognize that.
Secondly, formal property rights only mean something if they have implications. Much research on post- Soviet land privatization has revealed that the participation of most locals in decision- making on land use is less substantial now, while new local and regional elites amassed power. Owning a piece of former kolkhoz means nothing at all, if local governments, in league with only superficially 'private' farners, make it impossible to use it, to extract profit.
Thirdly, one can observe that uncertainty has a double face. Uncertainty can inspire risk- taking, innovation, and high profits for smart entrepreneurs, but there are always limits. If uncertainty is too high, risks too unpredictable, and if it does not look like the profits can be enjoyed or reinvested at will, then the incentives are not there. In that sense, the American economists seem right; property rights can clarify the rules of the game, can smoothen transactions (e.g. of land), and can protect against sudden intrusion of different rule- sets or expectations. On the other hand, if those rules are mostly paper rules, they will make the game of land use and profit extraction only more complex and thus opaque.
What does this say about Uzbekistan? We would argue that privatization as such is not necessarily a solution there. Rather, unpredictability seems to be the problem. If land can be taken away, if profits can disappear from bank accounts, if water can materialize or not, the incentives to work hard, to innovate and to invest are indeed slight. Rather than privatization, simplification of the rules seems in order, as well as a consistent effort to reduce the distance between the paper rules and what is really expected and possible. Even an informal codification, of rules to apply the rules, would help.