December 23, 2016
“Buy land son, they don’t make them anymore”. ‘Tony Soprano’—The Sopranos.
If we were residents of “The Culture”, we would face no scarcity, and I wouldn’t even bother to write this short article. You see, “The Culture” (series by Ian M. Banks) is the fictional post-scarcity, post-human ‘society’ of humanoids as well as artificially intelligent sentient machines. Their economy is maintained automatically by non-sentient machines, and allows it’s humanoid and drone citizens to indulge in whatever they wish without work or worry. The citizens of “The Culture” live in artificial habitats, such as ‘orbitals’ or on ships, the largest of which are home to billions of individuals. ‘Minds’, extremely powerful artificial intelligence, administer the abundance on “The Culture” for the benefit of all. The only economy of abundance and not of scarcity!
In my previous articles and speeches, I had stated that neither Ethiopian scholars nor political parties had provided a clear, concise, and meaningful solution to the problems of land allocation within the Ethiopian context. The issues pertaining to the ownership and distribution of land seemed to have been settled both by the DERG (the military government) as well as the TPLF/EPRDF (the ruling party) with their respective policies. Yet, the debate on the issue seems far from settled for a variety of reasons.
This brief article examines the contributions of the field of economics to the examination of what an economic good is; and based on that, how such goods must be managed (economized); and, if land truly fits in that typology, what the difficulties might be in its allocation and management. Several points of view would be discussed, but the intent of this particular article is to elicit from and prod the intellectual community, practitioners and politicians to contribute to the discussions towards a policy framework of land distribution and management that would see this scarce resource being deployed to its best use throughout Ethiopia.
Theoretical Basis:
What contributions does the science of economics make to the distribution and management of a scarce resource such as land, and what considerations become useful in that understanding? Let us first begin with the consideration of an economic good. Beginning with Carl Menger and then Lionel Robbins, the characteristics that define an economic ‘good’ include four important criteria: 1) it must satisfy a human need; 2) it must have a causal connection to satisfy the need sought; 3) someone must be cognizant of this causal connection; and 4) someone must have command over the good. When all of these four criteria are met or are present, a ‘thing’ becomes a good. And the corollary holds true as well: a loss of any of these criteria results in a good losing its ‘goods’-character. (David Howden).
A fifth criteria would later be added by Bohm-Bawerk, and thus: 5) that the individual must have knowledge of the object’s usefulness in satisfying a want irrespective of his ownership of the good. According to Howden, this final point allows for not only a physical control over the good, but also that someone must have mental ‘ownership’ (i.e. knowledge) of the good’s usefulness.
These criteria are very important in at least two ways. First, they help us constrain the types of objects eligible to be economized; and second, the criterion allow us to distinguish between goods that directly satisfy a want – such as consumer goods – and those that are capable of only doing so indirectly – such as producer’s goods. This last point is critical as all goods are valued according to how well they satisfy an individual’s want. Economists have further concluded that time preferences; the rate of interest and an expected value of a consumer’s good, all interact to determine all sorts of prices through out the economy (Rothbard, 1962). Accordingly, therefore, land would not be an exception in this regard. It is a commodity – a good!
As a consequence, fitting land, all land, into the typology of goods that make distinction into consumers’ goods and producers’ goods makes it apparent that land is also an input factor making consumer goods possible. Furthermore, we can also posit that land confers direct utility to the holder, as a commodity of exchange as well as, and this is key in my opinion, a reservoir of wealth, prestige, and social status.
The reader would immediately note and ask: this is well and good except that this classification limits the categories to which we can classify goods. For example, is it possible that a good could be present or future oriented? If we think of the possibility in those terms, land could satisfy both: at present it is a factor of production, and in the future it could be both a source of wealth, enjoyment as well as a factor of production. What makes land different from all other commodities is that it is limited in supply. For instance, we could produce more corn or vehicles if there is a shortage of these goods. But we cannot produce more land. It is of limited supply, and this characteristic makes the management as well as distribution of it very complicated and controversial depending on the specific orientation or ideology.
Foundational Issues:
The simplest and most straightforward economic definition of a commodity is that it is a marketable item produced to satisfy wants or needs. Often, the item can be replaced by another identical item. So, when one buys land, one is simply exchanging the rights from one person to another so that they can use the land as private property—a sort of zero sum game.
But land is a highly valuable commodity because of the value in the fertile soil, the natural resources below that bring wealth and power, the rivers that supply drinking water, the valleys, forests and mountains that adorn it.
On the other hand, there is the argument that land doesn’t really fit the definition of a commodity because it cannot be produced. No matter what the economic incentives might be, it simply is not possible to produce more land and hold it as private property. In addition, on an initial level all private property declarations on land are innately suspect and questionable.
To justify this last claim, we have to define what private property really is: it is a lawfully enforceable monopoly on the use of a certain item. To expand further, the claim to private property arises through two important mechanisms. The first is through the creation of something, and the second, by acquisition through a just transfer. Your vehicle and your personal belongings are acquired through one of these mechanisms. However, land cannot be created or produced, and as such, is very different than all the other commodities. To be sure, you can acquire land by means of a just transfer, but at some point in the history of ownership, this was not the case. And in Ethiopia, as is the case in many countries, this chain had broken down multiple times through generations. At some point in the past, all land was public land. It became private land when detached descendants walled it off, declared it private, and chose to enforce the monopoly using armed forces (Ssekandi). {For a detailed analysis of social, political aspects of land in an African setting and property rights, please see “Social, Political and Equity Aspects of Land and Property Rights”, by Francis M. Ssekandi, undated.}
The Romans knew that when they declared ‘commons’ as resources that belonged to all, never to be owned by a few. They stated, “By the law of nature these things are common to mankind—the air, running water, the sea and consequently the shores of the sea”. Indeed, the Romans didn’t want one to become rich from owning the land, but rather to gain the means for an independent life from it.
What should be Land Policy in Ethiopia?
Given that we have two fundamental problems, namely: someone has to own the available land, and there is a limit to the land that can be owned, what should land policy in Ethiopia consist of?
The Derg nationalized all land, and created farm cooperatives to improve both production as well as political control. The TPLF/ERDF, when it took power in 1991, essentially adopted the Derg policy but allowed for user rights through a lease system in which inheritance to the land is possible. In both cases, land is owned by the state, and while there have been slight improvements in output, it is not entirely clear whether that improvement is as a result of higher land productivity, more land being brought into production or both. At any rate, there are reputable Ethiopian economists (including two of my friends) who insist that the Ethiopian farmer specifically, and Ethiopian society in general, would be better off if land were completely privatized as private property. They site all the arguments for a private property system and the advantages it would bring to society through the market mechanism.
Among the strongest of these arguments is the claim that the public interest is best served by maximizing the use of land, which is done best by a system of private ownership and exchange rather than public ownership and distribution. In this view, the free market system is preferable because once the land has been fully allocated, competition will emerge in which transfers of land occur where the inefficient sell their land and the efficient buy it from them. Furthermore, a system that simply gives land to the inefficient imposes huge costs to all of society because someone else is not using the land, or for some other purpose.
Finally, contrary to popular belief, free market proponents argue, that it is not necessary for everyone to have access to land in order to benefit from it. For example, many around the world don’t own land in Ethiopia, but drink its wonderful coffee and eat teff injera. Many in Ethiopia also live in apartment buildings and don’t need to own the land. They can access the land through the markets and consume the values that the land offers—it is these values, not the land itself, that is the real economic goal and benefit.
A Right to All Humans:
The alternative view is that land should be thought of as a common, a right to all humans. Because land is a source of livelihood for many around the world, rights to land directly impact numerous human rights. People all over the world relate their identities to the land on which they live. Their land defines their culture, and when land rights are not respected, poverty rises, humanitarian catastrophes ensue, and economic development is retarded. As a consequence, the UN declared, land not just as “…a mere commodity, but an essential element for the realization of many human rights.”
In this view, land is seen as a necessity, which is why it’s imperative that everyone has access to it and not just the people with the most capital. Indeed, when the former Prime Minister of Ethiopia, Meles Zenawi, was asked about this same question, he essentially stated that he did not wish for only capitalists to be landowners in Ethiopia, and that land policy has been done and dusted for all times.
I am not a land economist, and have only studied the old land tenure system in Ethiopia confined to a Master’s thesis on land reform in that country decades ago. And as can be expected, this brief essay is short on new prescriptions for a successful land distribution and management policy. What is clear to me, and I think would be obvious to all, is that to completely change the system of land rights as they exist today would be an exceedingly daunting task with a huge chance of something going horribly wrong and a definite period of societal upheaval. I am not certain that anything, any system, is worth that cost. I am convinced, however, that solutions within the current societal ownership structure, buttressed by democratic imperatives that lead to a system of reforms to distribute and manage land in Ethiopia is worth the effort. These new reforms could include considerations of ecological and environmental disasters in the making, for instance.
In the end, we are where we started. I contend that neither the system of private ownership nor state ownership of land would solve the essential problem of scarcity of this essential resource; particularly in the face of a mushrooming population that puts more pressure on the available land as is the case in Ethiopia today. What is desired or hoped for are policies that put available land to its best use so as not to impose an inordinate social cost through mal-distribution or mismanagement. Perhaps that is more of a governance issue as opposed to just a systems problem.
Teshome Abebe, who has served as Provost and Vice President for Academic Affairs at two institutions, is currently Professor of Economics, and may be reached at: teshome2008@gmail.com.
Source – EthioMedia