Wednesday, March 21, 2007

Restoring property rights, Protecting People

Fundamental right is not a luxury for the rich, but a necessity for the poor. The rich has the resources to protect their interest by any number of ways, the poor has nothing but the law to fall on. A version of this article of mine had appeared in the Bengali langugage newspaper, the Ananda Bazar Patrika in Calcutta, on 21 March 2007.

A lot is being said about the tragedy of Singur and Nandigram in West Bengal, Parliament has been adjourned, yet not much light has been shed on the real significance of these protests by farmers on the issue of land acquisition. Brand Buddhadeb may have suffered a fatal blow, but despite the ideological melee, an undercurrent of awareness is spreading through the grassroots of society on an almost unheralded issue – protection of property rights.

Political and social activists have been hurling arguments accusations, trying to score points against their rivals. If one wants to stress the need for industrialisation, the other calls for inclusive growth. The self-proclaimed champions of the poor are seen to be hobnobbing with big businesses, while the opposition spectrum from the fringe left to the far right want to be seen to be siding with the rural poor. While business leaders, who have been enjoying the freedom to mobilise capital and want investment opportunities to be sugar coated with a range of privileges and subsidies, from tax breaks to low cost land.

Sixteen years ago India began dismantling the licence and permit raj system. Today it is clear that the reforms have improved the economic environment for many Indian entrepreneurs. Yet the issue of land acquisition in the name of promoting industrialisation or special economic zones (SEZs), shows how deeply entrenched is the sense of political patronage in influential sections of Indian society even today.

Nothing else can explain the desire of so many Indian business houses to ask the government to procure land for their projects. Since these businessmen have been the biggest beneficiary of liberalisation of the capital market, one could have expected them to demand a similar liberalisation of the land market in the country.

If businesses cannot legitimately acquire the necessary land for their purposes, then it is the land market that needs to be reformed. Instead they have sought to eliminate the land market completely by asking the government to act as the middleman and perpetuate the land mafia.

Similarly the opinion among social activists range from those who want land to perpetually remain under agriculture or forests, to others who focus more on an adequate rehabilitation and compensation package. Despite their concern for the poor, most of them fail to realise that property rights is not a luxury of the rich, but a necessity for the poor. The rich can survive in most societies, irrespective of their legal rights, because with their wealth they can mostly buy protection from the powers that be. It is the poor who are left most vulnerable if they are denied the right, because they have no other recourse, except to become political pawns.

Economist Hernando de Soto, and others have shown that poor are trapped in poverty primarily due to their inability to capitalise on their assets, including land.

Today, Indian businesses can raise capital freely at home and abroad, they can buy and sell assets, engage in mega mergers and acquisitions. Yet, most Indian farmers hardly enjoy the freedom to buy, sell, lease or rent land. In most parts of India, farm land is typically regulated under land ceiling laws, and land usage laws. In addition, there are laws that make it very difficult for even changing crop patterns, and restrict movement of produce.

The astronomical rise of real estate prices in urban India is also a reflection of the rigidities that have hobbled our cities. From rent control, to land ceiling, zoning, coupled with a weak legal avenues for enforcing contracts, have all made land in urban India so artificially scarce. All, from the land mafia, to politicians, bureaucrats and businesses have benefited, except the land owner.

Indians had been slowly but steadily surrendering the most fundamental of rights – the right to property – from almost the very inception of the Republic. Nehru began the process with the creation of the Ninth Schedule in 1951, in an attempt to put land acquisition beyond the purview of judicial review. With her populist nationalisation, Mrs Indira Gandhi greatly diluted the scope of property rights protections. And the first non-Congress government took one more step, and amended property rights as a fundamental right out of the Indian Constitution in 1978. Except a few brave souls, hardly anyone mourned the demise of this most of basic right of the individual, the right to property.

It is worth noting that law is quite distinct from legislation. It is easy to write legislation that violates the spirit of the law as commonly understood. So the State passed legislations undermining basic principles of law in the name of helping the poor. First, land was sought to be confiscated from big landlords and redistributed to the poor. And now the same land is being forcefully acquired through the use of eminent domain from the poor to be a given over to big private investors. Once a fundamental legal principle–property rights–is sacrificed, might becomes right, and people are left vulnerable to the coercive power of the State. Since the communists in Bengal lay their first claim to legitimacy on rural land distribution in the name of the landless, it is not surprising that they are now caught between a rock and hard place as they now want to facilitate land acquisition for the sake of industrialisation.

While the intelligentsia, the political leaders and social activists have barely noticed, in the past two decades, there has been a steady and growing demand for greater recognition of private property rights in one form or another.

Twenty years ago, at the height of the agitation against the Narmada dam, the issue was polarised between whether to build the dam, and the quality of the rehabilitation package for the people who lost their property. In the last few years, the tribal rights debate brought to fore the issue of securing property rights for the forest dwellers, although the law greatly constricts the use of land, therefore, suppresses the real value of the property. But at least it brought the issue of land right to the fore.

The violence over land acquisition from Kalinganagar in Orissa two years ago, to the recent tragedy in Nandigram in West Bengal, have added another stone to the long road back to property rights. Barely two months ago, ministers in West Bengal government often repeated that under the land acquisition laws, consent of the land owner was not required. They would then go on to highlight the compensation and rehabilitation packages. Although, the law has remained the same, today the protests in Singur and Nandigram have forced the WB government to announce that no land will be acquired without consent.

A similar sentiment at the grassroots in urban India following the various demolitions and ceiling drives pushed, in this instance, by the judiciary, is forcing the political establishment to recognise the potential political cost of violation of property rights.

Clearly a momentum seems to be building from the grassroots of Indian society. Property rights could be an issue that unites Bharat and India, rich and poor alike. Property rights was eroded because of the intellectual profligacy of the elite in the first three decades of the Indian Republic, the underlying theme of the popular protests in recent years could yet force the elite to recognise the democratic aspirations of the people. The time seems ripe for a broad people’s campaign for the restoration of right to property as a fundamental right. This would empower the people and unleash the much needed second generation reforms by including all sections of society in to the growth path.

75 years ago, Gandhi shook the British Empire by picking salt at a desolate coastal village. The tragedy at Nandigram will not be wasted if the country joins hands for a campaign to restore property rights.

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