What Is Property?
This is a long extract from Chapter III of David Bazelon's, The Paper Economy. The author presents the case for a change in our vision of what is property following the huge importance assigned to liquidity (paper money) and other pieces of paper "like stock certificates and bonds, representing certain direct entitlements to such property."
This is a very stimulating text that should lead as to reconsider many conventional notions about the capitalist economy and the right to property.
The venerable Blackstone remarked in his handbook (which educated generations of lawyers): “There is nothing which so generally strikes the imagination, and engages the affections of mankind, as the right of property. . . .” He hardly had to remind the profession of this, since lawyers have always served as the maîtres de chambre in the eternal love affair between men and things. Indeed, in the service of the client's passion they have created fabulously intricate and elaborate objects of desire, that is, forms of property. There are wonderful examples of this in that period of history when the ingenuity of lawyers was called upon to adapt feudal forms of property tenure to the uses and purposes of the emergent bourgeoisie. The lawyers perhaps even more than the political representatives of the rising merchant class (many of whom were also lawyers) played midwife to the birthing of the modern world. The politicians served as ambassadors of the new class, but the lawyers were the true heads of state. And I rather think they were the type of practitioners old J. P. Morgan was looking for when he said, “I don't know as I want a lawyer to tell me what I cannot do. I hire him to tell me how to do what I want to do.”
The formal structure of American society is more or less the product of the legal mind. Both Edmund Burke and Alexis de Tocqueville commented on the major role of lawyers in the early years of the Republic. Lawyers have in fact been the dominant professional element in our state legislatures and in Congress throughout our history. But their greatest achievement in fashioning American society has been the invention of the corporate system – which is considerably more important to our way of life than that eighteenth-century rationalist document, the Constitution.
Indeed, the American legal profession managed for some crucial decades to make of the Constitution a kind of carte blanche endorsement for the corporate system they were then engaged in building.
This was accomplished under “the contract clause” – which brings us back from the subject of the creators and caretakers of the property system to the idea of property itself. Because the generic form of property is a contract, an agreement, a promise. I won't bother going into the textbook definition of a contract – let it suffice that contracts are made up of mutual promises, with the added proviso that in law a man may “promise” by his course of conduct, without opening his mouth and uttering that ringing law-school phrase, which still raises the hair on my neck, “I accept!”
The right to enter into contracts “freely” is the substance of the free market concept – the latter being the place, or the habitual pattern by which contracts of purchase and sale are supposed to be entered into freely. Economists have always been blinded by the glamour of the equilibrium of the free market; but when you look at the same phenomena from the point of view of freedom of contract, the lawyer's point of view, you are much more apt to see this freedom for the lopsided license to steal that in large part it was. This point is substantiated by the fact that freedom of contract rather than the free market was the first grand bastion of defense to be raised by business and then to fall in the course of the popular onslaught against unbridled capitalist plunder in the nineteenth century. Freedom of contract justified almost any predatory practice; the free market serves mostly to justify unfettered pricing power.
The main reason that freedom of contract has never been as free as advertised – and it is a painfully obvious reason – is that sellers and buyers are not equal in bargaining power. So the terms of sale will simply reflect the power, or lack of it, that each party brings to the market place. So a market is also a financial slaughterhouse, where the strong chop up the weak.
The right of the dominant seller or buyer to his dominance in the market place is enforced by the state. Indeed, this is one of the chief functions of the state under capitalism. This big fact has been obscured in a big way by the historical circumstance that the bourgeois state supplanted autocratic monarchies, and in this struggle the bourgeoisie developed a non-state or anti-state, almost anarchistic, ideology. For the early bourgeois ideologists, final governmental power was always something the other fellow had. So their ideology had not much positive place, theoretically, for the role of the state. But when control of the state had been achieved, and the “other fellow” was nowhere to be found, the new ruling class did not pursue its own anarchistic principles (to say the least). It used the state power it had finally inherited – and used it not just negatively, although negative use too can be as much of an effective power-play as any other: “A system of property is an abridgement of the liberties of the persons excluded.” If the state does nothing but enforce the exclusion, it has wielded its power mightily.
But the state in the service of private property did much more. It created the whole system which was based on the effective power of the state because the state recognized, defended and enforced the millions of “interests in” which made up the system. Adam Smith was quite candid about the matter: “Till there be property there can be no government, the very end of which is to secure wealth, and to defend the rich from the poor.” [The statement continues : “In this age of shepherds, if one man possessed 500 oxen, and another had none at all, unless there were some government to secure them to him, he would not be allowed to possess them.” Adam Smith, Lectures on Jurisprudence, 1766]
Or Jeremy Bentham, much to the same effect: “Property and law are born together and must die together. Before the laws there was no property; take away the laws, all property ceases.” It is a shameful bit of sophistry to argue, as it is still done today, that there is a choice between private property or the state. It is not a “little” government that ensures that property interests, and primarily property interests, shall rule men's lives. It was necessary that the middle classes create the modern nation state as a condition of their private property system. (Morris R. Cohen: “Modern property exists only in the modern state.”)
In the beginning there was a theory of private property which appeared in some degree to bypass the power of the state. That was the natural rights theory, most closely identified with the name of John Locke. At the end of the Seventeenth century, just after the Glorious Revolution, he gave the ascendant bourgeoisie the ideological package for which they had apparently been waiting. Relying on the “property” in one's own person and labor power in a state of nature (not at all a new idea), he found a natural right to property which it was the duty of the state to recognize, protect, leave alone, interfere for, and so on. He said, “ . . . labour, in the beginning, gave a right to property.” The fact that he was talking about an imagined early state of nature, and that he recognized that property in society had to be based on convention and law, was conveniently forgotten. The property-based merchants had what they wanted – a justification of their possessions and their activities, derived from nature rather than the state, People have always described what they want as a natural right when they are struggling against the established order to get it. But also the established order itself is tempted to derive its right and prerogatives from nature (usually at the height of its self-confidence, as when old John D. Rockefeller said God had given him his money). So for a while they had it both ways.
But all this turned out to be an untenable burst of enthusiasm by a newly victorious class. It could not last much longer than that eighteenth-century hiatus when the property owner also worked in the counting-house or was a kind of foreman in the factory. Because the right to property was tied, by the theory, to the right to the fruit of one's own labor. That served the merchant (soon to evolve into a capitalist) and the craftsman (soon to become a factory-owner and industrialist) well enough in his battle against feudal prescriptions; but it quickly became clear that the idea that the laborer had a right to the product of his labor could become a severe embarrassment to the propertied classes. So the whole bundle of natural rights theory was dropped by the powers-that-were at about the same time that it was picked up by the more radical-minded members of society.
In the nineteenth century, it was Marx who used the labor theory in his radical attack on private property. The capitalists who bothered to justify what they were doing came more and more to rely on Bentham's utilitarianism: “Rights are ... the fruit of law, and of the law alone. There are no rights without law – no rights contrary to law – no rights anterior to law.
The property system was justified because it fostered the accumulation of capital, on which progress depended, and therefore worked out to the greatest good for the greatest number. “Free enterprise” in America still claims this beneficence for itself. But today the more important argument is that something called Private Property has been once and for all welded, by pro-property steam-fitters, to something called Liberty.
I don't quite understand all the holiness currently connected with Jefferson's ideas about private ownership and its intimate kinship with individual security and liberty as against the state. He was talking about farmers. Today, farmers are the sickest, most feckless business element in the whole economy. It costs billions a year just to keep the whole enterprise from going under: American farming has been much too successful in production, and as a consequence has been socially bankrupt for decades. It lives on handouts. Is this the ideal image of men solidly plunked down on the glorious institution of Private Property? They wouldn't even be much of a political force if it were not for the political atavism which enforces a nineteenth-century distribution of power based on a nineteenth-century farm population which has long since moved to the city. And even so, it was Jefferson who, in choosing the words for the Declaration of Independence, decided to Americanize the European slogan of “life, liberty, and property” by having it read, “life, liberty, and the pursuit of happiness.” And you know, as I understand America, he may have been right after all.
In comprehending the demise of the private-property system, it is helpful to remember to think of property as being of two kinds – “thing-property” and “right-property.”
The former would be the plants, machines, railroads, buildings, etc., most of which are units. The latter would be pieces of paper, like stock certificates and bonds, representing certain direct entitlements relating to such property. Now we have to complicate the picture a little by indicating a third, hybrid form of property – liquid capital organized in huge blocks, mediating between corporate thing-property and personal rights-property.
A clear example would be the $ 20 billion-plus in mutual funds. The point here is that a mutual fund would be capable of exercising ownership control over thing-property, but no one could exercise ownership control over a big mutual fund. The same would hold true of many banks, insurance companies, and pension trusts.
Now, as a consequence primarily of the raw fact that corporations and big-money funds get bigger and bigger, there is observable an increasing fragmentation of rights-property and an increasing accumulation and concentration of thing-property (and hybrid-property). Rights-property remains private, but it is just paper – somewhat like money, except that it earns and more radically changes in value. Most thing-property is not private, because it is not owned by private persons and, as we shall see, it does not exist, in the last analysis, for private purposes.
But we still favor a Robinson-Crusoe view of property, although in a material way it has been some time since this continent could be conceived as anything like a desert island. This primitive sentiment is exactly wrong in that it assumes property to be things, and it assumes that ownership is always accompanied by control. We own paper, but the only things we control are consumables. The world of productive things is largely not owned at all – it is merely controlled and administered by its controllers and administrators, its managers.
To continue in our circumstance to speak of private property as meaningful and even fundamental, much less as the only basis of our liberties, is clearly an intellectual scandal. Most of us are job-holders, paper-holders, and consumers – we control nothing by property-ownership. And our present powerlessness is based on and daily reinforced by the idea that we do. As a consequence, we are trying quite unsuccessfully to deal with a runaway technology within the framework of an archaic business-profit system. The result, we will see, is under-used and misused plant capacity, a circumstance covered over – just barely – by a puerile public relations culture which is almost impossible to bear, even by its beneficiaries. And lost opportunities piled one upon the other into an infinity of disgust.
Business and money are based on a fantasy. No active people has ever taken as seriously as we have the childish idea that each individual can be self-concerned to the final degree, and that such devoutly pursued indulgence will end up creating the best of all possible worlds. It is the present system of paper that enthrones this presumption. And the children among us, including many Leading Citizens, really believe it. We have created our image of society on this basis; and we seem fully prepared to continue to mess things up in order to demonstrate just how firmly and faithfully we subscribe to it. This childish know-nothing egoism is the Rock of Unreality on which our world stands.
We have sown a dream, and are reaping a whirlwind of paper.