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03/25/2007

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Dostoevsky's Poodle

As the Judge half-suggests, this legislation might be nothing more than a signal to Americans and other rich investors: "Your FDI is safe with us. Why don't you consider sending some more?" How much has American FDI in China increased in the last few years?

N.E.Hatfield

I find it somewhat odd coming on the heels of new Chinese legislation granting certain property rights guarantees, that Intel annouces a 2.8 billion dollar investment package for a new chip plant in China. And how many other large scale Western investments are too follow? Could it really be a corporate payoff for investment schemes?

Furthermore, there is another issue, which seems to be a desired technology transfer, on the part of the Chinese, from the West to the East. Will we see the likes of smart bombs and cruise missles showing up in the Chinese arsenal and armories? Similiar to the Soviet nuclear technology transfer program? Beware, the Chinese can be inscrutable and their true reasons for doing something are often well hidden.

N.E.Hatfield

I just completed a quick review of China's new 'Property Rights Law". I especially like, Secc. III, Art. 28 which states, "The establishment, modification, transfer, and lapse of the property rights as a result of the legal amanuensis of the peoples court and the arbitration commission, the expropriation decision of the peoples government shall become effective upon the effective date such legal amanuensis or expropriation decision of the peoples government." Does any one see any Rights guarantees in place in this procedure? Correct me if I'm wrong, but wasn't it the Peoples Court that condemned millions to essential re-education on the farms in the hinterland during the Cultural Revolution while under the direct orders of the Peoples Government? What's changed? Property Rights? They only exist on the whims of the Peoples Court and Government that has a less than sterling reputation. Once again, Beware! ;)

Liyang Hou

"Some economic activities do not require investment, such as hunting and the gathering of wild fruits, nuts, or berries, and so the function of a property-rights system of encouraging investment may be unimportant."

Believen or not, as far as I know, those activities seldom happen in China now. Or you can say they may take place in hinterland, I bet they may be negligible compared with the whole economy of China. Therefore, it at least cannot be a gound of your argument.

F.E. Guerra-Pujol

I think implicit in Judge Posner's pragamtic analysis of the new Chinese property law is that there is no pure 'capitalist' or 'socialist' system. Instead, it would be more accurate to say that all legal-economic systems involve a mixture of both private property rights over some resources as well as public ownership of other resources -- everything depends on the nature of the resources under consideration and the relative costs of creating and enforcing property rights in such resources. This is why, I personally, prefer Demsetz to Epstein!

Haris

Liyang Hou
That was just an example of activities that don't require investments or property rights. I think we're all pretty certain that hunting and gathering happens in very limited amounts anywhere in the world.

n.e.hat

Haris, Actually, "hunter-gatherer societies" were the prime impetus for the development of "property rights" in the first place. Especially in Europe and more specifically in the U.K.. Such things as the Royal Hunting Preserves, Royal Forests, the Forest Laws and the special Forest Courts. All defined the ancient rights and priveleges of the population and ultimately lead to the development of Magna Carta and through it to the U.S. Constitution. Now, if we could get the National Trust to release my family's forest in Essex... ;)

Jack

Hat........ How far back do those "Royals" go? Also it seems they're thought of as preserves for royalty to ride to hounds while peasants starved. The images that come up are not very democratic!

I've thought the rise of farming over gathering was the impetus for private property rights.

Also, I've wondered about the role it may have played in the history of the Jews. Were many of their migrations due to being squeezed out of land holding much as they were excluded from the crafts guilds.

Interestingly, MOST of the world's land is not surveyed and divvied as we take for granted here, and it's a big problem in modernizing many countries. Boundaries in farming areas are often some line of rocks pulled out of the fields or "a dog's bark" distance from a house, etc. It makes raising capital or building costly projects difficult. There's a guy who works at helping nations develop ownership policies and systems.

Ha! in this era one of the problems is that of getting rid of land long held in a family. One wants to keep it....... but not pay any of the associated costs, while others want to cherry pick the parts of it...... none of that working so a forced sale. Long process with MANY attorneys!!

n.e.hat

Jack, How about the 11th century to about the 17th and perhaps later? Hunting, gathering, farming, and ranching all went hand in hand to insure survival in the face of extreme environmental odds. As for modernization, that's one of the advantages of a common law system, it takes into account cultural heritage and customary usages as long as they, as it was said, "be against reason". Failing that, there is the resolution method of "sword and spear", which was what happened at Runnymede. ;)

Jack

Hat..... I guess it's one of those issues where the closer you look and the harder you work at defining it the more elusive it becomes.

Here in Alaska the natives roamed freely for 10,000 years. Well, sort of, as if the tundra guys ventured into forests further south, they became the game. So rudimentary P-property on a large scale.

But farming being the hard work it was makes private property rights "local" and intense as no one wants to plant w/o getting the harvest.

Best of all though is to farm or mine common property at a fraction of the cost of holding private property, making Chevron and a veritable host of foreign corporations our largest and most profitable cattle grazers. So, "hunting and gathering" on the Royal commons, if you've got the juice before the Court of Foggy Bottom!

(Libertarians should be enraged, but they seem so often to side with those most reluctant obtain a fair return for the owners and taxpayers.)


Annie, get your Guccis. (exploitation of land-use laws by major corporations)

http://www.encyclopedia.com/doc/1G1-12514447.html


Excerpt: Newmont Mining Corporation used satellites, not pans, to prospect for gold, bulldozed huge pits in the Nevada earth, soaked more than 150 million tons of excavated din with a cyanide solution, extracted 1.68 million ounces of gold in 1990, and walked off with $342 million in net income. European financiers Jacob Rothschild, Sir James Goldsmith, and associates, who own 49 percent of the corporation, paid no royalties to the U.S. government for the gold and no rent on the land--which the federal government sold to them for a filing fee of between $2.50 and $5 an acre.

Pouring cyanide solution over low-grade ore, known as "heap leach" mining, is responsible not only for the resurgence of the mining industry in the United States over the last decade, but also for scarfing the arid western landscape and contaminating its groundwater. So much for little homes and peach trees.

The mining statutes aren't the only federal subsidy helping Newmont bilk America. The company also enjoys the benefits of a below-cost federal grazing program, originally designed to help keep family-owned sheep and cattle ranches in business. Newmont wholly owns the Elko Land and Livestock Co. in Battle Mountain, Nevada, adjacent to its mining lands. The ranch controls 73,347 acres of public rangeland. Last year, Newmont paid the government $24,114 to graze its cattle. Grazing the same head of cattle on subleased private land would have cost Elko anywhere from $85,687 to $118,248, according to various government and independent estimates.

Not only is Elko getting a fat break, but the government is actually losing money on the deal. Just to break even on the grazing fee program, the federal government would need at least $35,000 from Elko, according to conservative Forest Service estimates. That means the government is effectively paying Elko to use public lands.

If Newmont and Elko represent eighties' welfare for the rich at its most outrageous, they have plenty of corporate company. Today, thanks to outdated laws and lax federal oversight, a cozy power elite controls a huge amount of America's valuable natural resources and vanishing open spaces.

Among those benefiting from the grazing laws are Getty Oil, Texaco, Chevron, Anheuser-Busch, Utah Power and Light, John Hancock Life Insurance, Metropolitan Life Insurance, Japanese-owned Zenchiku Land and Livestock, and the Mormon Church. Among the individual owners are George Gillett, who built his broadcasting, beef-packing, and real estate empire with junk bonds; billionaires David Packard and William Hewlett, of Hewlett-Packard computer fame; and J.R. Simplot, an Idaho millionaire who made his fortune supplying McDonald's with potatoes for french fries.

Who are the winners under the mining laws? Eighteen of the top 25 gold mines in the United States are either wholly owned subsidiaries of foreign companies or have at least 40 percent foreign ownership, and none pays royalties or rents on public lands, even though the total value of gold production in the United States in 1990 reached nearly $3.7 billion. Ten large mines now account for 66 percent of U.S. hardrock mineral production and 75 percent of all U.S. mineral reserves.

n.e.hat

Jack, Just another case of "public" ie. private property rights at work in the good ole U.S.. It all stems from the concept (legal and otherwise) that productive land use is better than land sitting idle and non-productive. Not too mention, general mis-management by the Interior Dep't. and a lack of oversite by the GAO over the years. The idea that "this land is your land, this land is my land", is just a sophisticated PR campaign to get everyone to turn their heads so the shell game can continue.

Bill

The distinction between "firm" and "market" organization, which his become central to the theory of the firm following R. Coase's famous essay on that subject, is really more useful than capitalism/socialism OR state ordering/private ordering. Of course, there are big differences between U.S. and Chinese forms of "firm ordering". But the understandings of property and contracts that inform economic theory are for the most part not sensitive to these differences. If we're going to really understand the differences between the two national economies (and others) we're going to have to have to look at the legal pretensions of both societies as to the relationship between firm and market and see how these correspond or fail to correspond to economic realities.

Some would say that, so long as the state refrains from "interfering", the resulting private ordering will always be better than any one where there is more state "interference". This is not a helpful framework for discussion, however. We should work from the premise that it's the KIND OF government policy not the QUANTITY OF state "interference" that will help us comprehend any economic ordering. Once we make that shift, we will be in a position to consider the possibility that private orderings can give rise to "firm" structures that are less efficient than a more "market" ordering that could be achieved with (more and?) different forms of state involvement.

Jack

Hat. Yup! And the oversight you mention should include an insistence on a bidding process.

The big Alaska issue of "opening ANWR" is "sold" as big bad government getting in the way of private enterprise when in fact what's at stake is a massive gift of our (US and AK) public resources to a foreign corp. Brit Pet for the most part of (most likely estimate) 10 billion bbls of oil. Assuming (and even this is a stretch!) that the costs of drilling and spudding in 70 miles of pipe to link to the (fully depreciated) AK pipeline costs $10/bbl, even adding $8 for shipping there is still $30 plus for a whopping gift of $300 billion. Nice Christmas, eh?

Even better than Congress giving existing broadcasters two new digital channels (on which direct internet-style buying will be common) for each analog channel for the one time price of swapping out the electronics. Very juicy! Even such as Bob Dole opined that the new bandwidth should be auctioned. Worth? Estimates are in the $100 billion range. A shame no one stood up for holding back 10% for "town hall" ie. free time for political campaigns and discussion of our local and national issues. It's a good thing Lincoln and Douglas didn't have to pay for stage time!

China Law Blog

There is going to be a big conference in SFO in early May on China Real Estate at which Shanghai lawyer, Steve Dickinson, will be speaking on China's new property law, and, in particular, its likely impact on foreign investors. More on this conference can be found here: http://www.americanconference.com/rei-china.htm.

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