In a global economy driven by industry, 75 percent of the world’s energy resources are controlled by governments and 12 percent of global wealth is owned by sovereign wealth funds—a version of government-led investment portfolios. On both fronts, government activity is expected to increase in the near- and long-term. Uncle Sam in America now sits on the Board of Directors for Citigroup, Bank of America, General Motors, and other brands of American capitalism known in households the world over. And, it is China, a country Communist in conscience, with car sales up 90 percent in August and expected yearly GDP growth of 8 percent.
But even in an era of big-government the individual and his or her property rights are still important, and it is helpful to understand how they are conceptualized and enforced today as a way of understanding where the global economy is headed. To do that, consider the respective philosophies of the last century’s greatest economic power, the U.S., and the next century’s most important economic players, China and India. In general and in order, India, the U.S., and China allocate the strongest and weakest land rights to tenants and that has impacted significantly the trajectory of their respective economies.
China’s Beijing is the world symbol for what “state-capitalism” can do. China’s stimulus package, largely focused on infrastructure development and job creation, is credited with making China perhaps the first country to emerge from the global recession. Sit through a four dimensional video tour of future Beijing in China’s glossy Urban Planning Commission building, and watch the farms and factories that once comprised Beijing be replaced by criss-crossing Metro lanes, massive metallic structures, and high-end fashion city parks. A taxi ride around the city reveals few flaws in urban-planning: roads are wide and bicycle lanes are clear; buildings fit appropriately wherever they are placed; garbage is off of the sidewalks. Yet, China’s method for developing Beijing so quickly is by issuing eviction notices wherever and whenever the government believes alternative development is preferable. Consequently, hutongs (tiny communities that used to form the basic architecture of pre-modern Beijing) are denounced dead with a simple white Chinese character for “get out!” written on the side. If the people choose not to leave, the tractor will still arrive, and that home will inevitably become host to a central government-led development endeavor. China’s approach has helped it become the world center for manufacturing as the government continues to accommodate foreign investors by developing appropriate infrastructure.
By comparison, the U.S. of the 20th Century was perhaps known best for its formalized system of individual ownership, with contracts forming the backbone of law and a philosophical understanding of property rights. Each individual, with a “net-worth” based on catalogued assets and a local bank nearby and available to store his or her liquid assets attained a degree of financial literacy that unquestionably impacted American culture. The financial recession, more specifically the housing bubble, can be explained in some ways as property rights gone wild, with any individual having access to leveraged liquid capital (credit) and any bank able to create new financial products based on complex configurations and interpretations of new ways to describe what is and is not “owned.” However, what separates India and China from the U.S. is the American Constitution’s Fifth Amendment, which states that no one can “be deprived of life, liberty, or property, without due process of law; nor shall private property be taken for public use, without just compensation.” The first part of the clause enshrines the right of property as a basic American right and the latter allows the government, through a policy known as “Eminent Domain,” to take private property for public use as long as “just compensation” is provided. The result is an environment that predictably protects property while allowing the government to step in and allow for the building of stores and factories in areas where people would otherwise suffer from slums and urban sprawl. Consequently, in terms of infrastructure, no American city can be compared to the heterogeneous, partially developed New Delhi, nor can it be compared to the homogeneous and almost fully-developed Beijing.
Stories abound of court houses cluttered with far too many claims and cases in India create a de facto framework of informal property rights. A landholder in Delhi, if he or she can produce a deed, may in fact have some kind of power with local police authorities, but far too much paperwork seems not enforceable as bribes and connections often undermine formalized protection of land rights. For years, one of Mumbai’s greatest challenges to development remained the property law that essentially allocated the renter, not the owner, with the choice of if and when to leave an area. As long as some payment was provided for in accordance with some original lease, no eviction was even formally possible. The result can be seen from North to South Mumbai, with areas like Bandra—home to film stars that live next to slum areas and the center of global Bollywood, Film City, being built around arrays of informal homes of the homeless that cannot be replaced. The inability for policy and law to protect formalized property claims can often explain the deleterious state of infrastructure development in India and the corresponding fact that telecommunications and software, industries that do not require proper roads or places, form the symbol of a triumphant elephant-size, 1.1 billion large Indian economy now expected to grow up to three percentage points beyond the World Bank initial estimate of four percent.
So while the U.S. economy continues to contract, the Chinese and Indian economies will lead the world out of the recession, but they will do so on completely different terms. Poor Indians will continue squatting, middle-class Americans will continue leveraging, and a powerful Chinese state will continue developing. In doing so, India will maintain growth beneath its potential and China will continue to demolish the people’s property; yet, much of the world’s wealth will still find home in the questionable though still most capable financial markets of America, the market still preferred for a reasonable protection of property rights.
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