Tamper with property rights and it’s the beginning of the end of a country’s economy.
Nothing bears greater weight than the individual’s right to obtain and retain property.
This is the lesson to be learnt from events that happened two decades ago in Nicaragua and which have unfolded over the last ten years in Zimbabwe where economies were heavily affected when these two countries’ governments jettisoned property rights.
After a thorough study of what went wrong in Nicaragua and Zimbabwe, Prof Craig J. Richardson, professor in economics at the Salem College in North Carolina in America, came to the conclusion that property rights are the foundation a country’s economy is built on.
He wrote in an article in the American Enterprise Institute for Public Policy Research that although institutions such as the World Bank and the International Monetary Fund (IMF) provide several reasons for Zimbabwe’s dire state of affairs, it can all be traced back to the day the country curtailed property rights.
He says when property rights were endangered due to farm evictions just as the banks, tourism and the manufacturing sector were, other sectors in the economy – and mining – also deteriorated expeditiously.
He describes property rights as the hidden backbone of a country’s economy and warns other countries, among them South Africa, that shunning the rule of law could lead to the deterioration of a country’s economy. “Property rights are comparable to the foundation of a building that provides support to the whole building, but which is not always visible to the naked eye,” says Richardson.
Richardson says Nicaragua walked more or less the same route as Zimbabwe and offers good evidence of how difficult it is to resurrect a country’s economy after it was engulfed by chaos.
Ten years after the government of Nicaragua re-acknowledged property rights, there are still thousands of disputes over property rights as citizens of the country try to determine who owns what.
Richardson issues specific warnings to SA and Namibia to think twice before abolishing the willing buyer/willing seller principle in an attempt to chase land reform targets.
“The speed at which a country’s economy is able to develop depends on the government’s ability to foster confidence with citizens, the banks and investors by respecting the rule of law,” he says. – Hennie Duvenhage, Sake24
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Yes, this is the problem and handbrake in Africa.
Take away property rights and you take away the ability to get a loan from the bank, as all loans are linked property and not, for eg, gold chains which can be hidden away.
The second problem in Africa is the registration of property rights against which all loans are made.
In Sweden it takes a day or two for the registration, and in parts of Africa it takes years, which is one of the primary reasons why much of Africa is a basket case and remains one. – Martin van Heerden
