Monday, February 19, 2007

No Home, No Hope

Bad Night

God is no real estate agent.
If we are really the children of God,
I don't think He would want us to fight over anything.
- Yahya Hendi

For 2000 years the Jews were sojourners, never totally welcome wherever they went. Today some of their descendants are bulldozing their Palestinian brothers and sisters out of their homes. But the problem is not only confined to the Middle East, it is everywhere.

Despite a concerted effort to redistribute land and widespread lawlessness, in South Africa the best agricultural property is still in the hands of a select few. In Zimbabwe white owners are being forcibly replaced, often by supporters of the current regime. Vast tracts of the Amazon still belong to a tiny minority, while some countries are only now starting to construct the legal framework to support land ownership. Even in the USA it only takes a trip to the local Indian reservation to witness the social devastation and hopelessness that resulted from the alienation of indigenous peoples and their land.

Living in the West it is often hard to understand the plight of those who have no place to call home. But in many parts of the world the situation is not as straight forward. Home or land ownership is not a universal right. As result many are at the mercy of governments or individuals who have the means to control where they can or cannot stay. Of course, the rich and the powerful always had the upper hand in this struggle. Various large scale social experiments (e.g. communism) have been tried as remedy. Most of these failed miserably in addressing the underlying problem of inequality. Instead they often replaced one type of injustice with another. Land reform is still a burning issue.

Land Ownership in History

Joseph bought all the land in Egypt for Pharaoh. The Egyptians, one and all, sold their fields, because the famine was too severe for them. – Genesis 47:20

As the quote shows, individual ownership of land dates back to Biblical times. At the same time, historically not all land was owned. Some was collectively owned; other land was not considered to belong to anyone. Nomadic peoples, for instance, often had no concept of land ownership.

The modern (Western) concept of property is based upon the owner being a legal individual. But even in the West many tribal cultures (including some Native American tribes) have a collective form of land ownership. The term “public land” is widely accepted to indicate land owned by governments, which allows unlimited access to everyone. And in some communist and socialist countries land was, and still is, considered to belong to everyone, and the use thereof decided by the state or polity.

Thus far, ownership of land has been related to scarcity and effort, and these factors have been accommodated in the modern concept of property rights, which is central to capitalism. The underlying belief is that that property rights encourage the property holders to develop the property, generate wealth, and efficiently allocate resources based on the operation of the market. This arrangement is seen to produce more wealth and better standards of living.

Current Problems with Land Ownership

But all is not well by the Money Tree. Although there are significant efforts in the West to counter the adverse effects, there will always be people who, for whatever reasons, are unable to effectively participate in the system. Lose your job or become sick and you are in grave danger of losing not only your property, but everything.

Another issue is taxation. Whether your land produces or not, you still have to pay tax on it. Even business is not immune. Excessive taxation can kill the goose that lays the golden egg. Then there is the issue of inheritance tax, which in modern times has caused many families to lose their land, simply because they did not have the means to pay.

Increasing regulatory complexity is also becoming a problem. This drives up transaction costs and increases the chances that buyers can choose the wrong kind of financial instrument to fund their purchase.

Our hard won freedoms are being eroded, and we have trouble recognizing the fact. True enough, in the USA there are valiant attempts being made to reduce taxes, but the tax codes are as unwieldy as ever. Regulation prevents abuse, but stifles innovation. New legislation continues to add to the overall complexity of transactions, and we seem powerless to simplify it. We have built a system that is hard to modify, and is getting progressively harder to live by.

For much of the third world the effects are even worse. Many countries still suffer under the legacy of Imperialism and the inequalities that resulted. In the modern world this is exacerbated by a new reality - colonial oppression has given way to economic exclusion. This was never intended to be so, but is the unfortunate result of a system that favors those with more money, better education systems, and better organized economies.

For these countries the only way out is to play catch-up. However their disadvantage is so large that this could take generations to do. While they expend all their energy trying to do so, the developed countries have time to use their resources to innovate. By the time the third world will get to the end of the rainbow, the pot of gold is bound to have moved out of reach again.

By far the biggest problem both in the West and in the third world is the issue of affordability. In California as well as South Africa the average worker has little hope of buying land close to the major cities. Brazil has the second highest concentration of land ownership in the world, but most of it belongs to the wealthy. (According to one estimate, 60 percent of the farm land in Brazil is idle, while 25 million peasants struggle to survive.) Slowly but surely, affordable land is becoming an obsolete term.

To compound matters, for the small farmer the ability to generate income from land is also disappearing fast. Due to intense competition from sophisticated and mechanized agricultural concerns the market price of certain products are below his production costs, effectively putting these people out of work. In addition, new scientific breakthroughs have made some products obsolete by replacing them with synthetic alternatives.

In a certain sense, we have all become slaves again. We have a new master and he is cruel.

Efforts to Counter Problems with Land Ownership

Whatever one’s opinion on the matter, it is clear that capitalism with all its imperfections is here to stay – at least for the foreseeable future. So instead of trying to come up with an entirely new theory, the prudent way might be to look for ways in which the current system can be reformed. Likewise, the modern concepts of personal property and land ownership will also not go away. Despite their drawbacks, they are rooted in history and answer some obvious needs.

There are increasing efforts in the West to counter some of the current problems with land ownership. To prevent alienation, or to protect sections of land against development, the legal construct of “trust land”, is often used. In order to provide affordable housing, various schemes such as cluster housing, rent-to-own, shared ownership, subsidized housing and more exotic schemes are used. New financial instruments are continuously being developed to assist in these efforts.

In the developed countries (especially the USA), nonprofits are increasingly becoming involved in addressing the problem of affordability, but most of these efforts are focused on local markets.

The rich countries are trying to assist poorer countries in growing their economies (via the World Bank and the IMF). Sometimes these efforts were successful, sometimes they had disastrous effects. Currently there are talks on a major debt reduction program to the third world but the verdict is still out on that one. In addition, several organizations are trying to address specific issues in developing countries.

Unfortunately, on the issue of land these efforts pale against the magnitude of the problem.

Future Trends and their Potential Effects on Land Ownership

Current efforts to address the issue of land often stare themselves blind against the situation as it is today. We often forget that the world is now on a fast track for change due to enormous investments in innovation globally.

Here I will try to paint a few scenarios, which if they become true will dramatically alter existing equations. Please understand that the future cannot be known, it can only be guessed at based upon current trends. Therefore, what follows here are a collection of somewhat rosy projections, and should be taken with the necessary amount of salt.

Due to the secondary effects of new technology, the current state of affairs is about to change in unexpected ways. Even today, the open source and open patent initiatives, and new social networks are pointers to what might be possible.

Over the next 100 years:

The farm will move to the factory. Steaks will be grown synthetically without the need to have livestock. We will manufacture crops, and those that cannot be done yet will be grown indoors in high density controlled environments. Quality control will increase efficiency, while prices will drop even further due to the automated nature of these endeavors.

Energy and transport will become cheaper. Because of advances in reversible fuel cell and solar technologies, electricity generation will become decentralized. Even though the net unit price will fall, electricity networks will become two-way and people will be able to buy and sell electricity on demand. (This is already happening on a small scale). In a sense, energy will become the agriculture of the future.

Due to wireless high speed Internet technologies, people will be able to work over much larger distances, communications will become both cheaper and more powerful, and reach remote areas. As a result, work will become much more decentralized and a significant percentage will take place from home.

(Coupled with new technologies such as software radio, the cell phones of tomorrow will be able to link directly to each other, forming peer-to-peer networks, and relay information across vast distances without the need to go through a communications company. In these cases communications will become entirely free of charge.)

In fact, the very nature of work will change. As social networks grow into prosumer networks, people will be able to buy and trade with each other as easily as they can share photos now. Most work will be much more collaborative and rewards will gravitate closer to the value provided, versus the current pay-for-time arrangement. At the same time, solutions will be found to translate intangible value into real money (which is intangible anyway).


The downside to such developments will be significant for existing farmers. However, for the disenfranchised, there will be an enormous upside potential insofar as these developments will have a dramatic effect on the price of land.

As the farm moves to the factory, traditional farming will become obsolete and vast tracts of agricultural land will become available. It will create an oversupply, significantly reducing the price of agricultural land - until the investment community can find other uses for it.

This could present a huge window of opportunity to readdress the land issue. Although it now will not be possible to work the land for agriculture, except for specialized niche products, it will allow a whole generation of new landowners, each able to afford a few acres.

Current efforts by foundations and other nonprofits will be bolstered by this development, as they will be able to acquire vast tracts of land for redistribution to those whose forefathers have been subjected to injustice.


Is this realistic, or are we talking science fiction? Most probably both. However, in this section I am not attempting to be right. Instead, I am trying to fire up the imagination and invite ideas.

Correcting the Past

Many countries still struggle with the lingering effects of injustice. But although this situation can be seen as unfair, it cannot be corrected by simply taking the land away from its current owners. To do so would punish a select few for the mistakes of our common history. So what now?

If the future scenarios painted above materialize it would be a tremendous help. But even though the future might assist us in correcting the injustices of the past, it is not guaranteed to do so. Therefore, it does not absolve us from our responsibility to do something now.

In various countries such efforts are already underway. These attempts have to be supported. At the same time, care should be taken to avoid the mistakes of the past. We cannot replace past injustices by creating new ones.

Unfortunately, the way in which current governments (and even business) are developing strategy falls far short. Too often, the strategy formulation process becomes imprisoned by our limited understanding, is heavily influenced by political concerns, dominated by untested theories, or hijacked by strong personalities. So, we have to find ways to become self-critical, to question our deepest held beliefs, and to deal with reality as is, which is not necessary the way we see it.

Keeping this in mind, the best way best way to go about the matter is still to support the organizations (and governments) that are currently working on this problem. We need to create a special dispensation to assist these efforts by removing legal barriers, creating tax breaks for companies willing to help fund these efforts, and by establishing incentives that will entice the current owners to sell at a discount. Above all, the process should be transparent and fair.

Another requirement - land redistribution has to be tied to responsibility and to performance. We must recognize that agriculture could suffer as a result, and that redistribution of land does not guarantee that the new owners will be successful in working the land. Therefore, training programs will have to be established and there should be oversight after the land has changed hands to assure that productive land does not turn into wasteland.

Perhaps it would be prudent to lease the land for a nominal sum to the new owners first, and they might be required to prove their mettle before they can claim full ownership. To do otherwise would remedy the injustice at the expense of the whole society, a situation that is clearly untenable.

In the last instance, the new owners will need financial assistance. Programs will have to be designed, perhaps even new financial instruments, to help them realize their full potential.

This essay was originally posted here.

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