Is this just eighteenth-century polemics, or is there some profound truth to what Jean-Baptiste Say and other Enlightenment philosophers were preaching? Hernando de Soto, the Latin American economist, writes in his most recent book,
The Mystery of Capital,
that Say and other European economists of the day were right on the money. De Soto asks the question, Why are people so poor in the developing world, especially when “the poor already possess the assets they need to make a success of capitalism?”
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De Soto estimates the total value of just the real estate held by the poor in the third world to be more than $9.3 trillion.
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But, he argues, “because the rights to these possessions are not adequately documented, the assets cannot be turned into capital, cannot be treated outside of narrow local circles where people know and trust each other, cannot be used as collateral for loans, and cannot be used as a share against an investment.”
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What separates the rich from the poor and the developed from the undeveloped worlds, says de Soto, is that America and Europe established “a widespread formal property law and invented the conversion process in that law that allowed them to create capital.”
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De Soto says that Westerners “take this mechanism [a formal property rights regime] so completely for granted that they have lost all awareness of its existence.”
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De Soto and other third-world economists have come to understand that a private property regime is the very source of market capitalism. But for eighteenth-century utilitarian philosophers, it was much more. A private property regime was to be the means to replace the older, theologically inspired utopian vision of the Church with a new materialist-driven utopian dream. Divine salvation in the world to come would become secondary to material salvation here and now on Earth. “Property is human liberty exercised over physical nature,” wrote Raymond-Théodore Troplong, the president of the French Senate between 1852 and 1869.
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Using the scientific method, all of nature could be expropriated, harnessed, and reduced to productive private property. Mixing one’s labor to nature’s resources—making something of it—not only transformed it into man’s property but also made it more productive, thus increasing its value.
The accumulation and exchange of property would make the dream of an earthly cornucopia a reality. At a time when much of the Earth’s surface was still unexploited frontier, the framers of the new vision understandably believed that property accumulation could be expanded almost indefinitely into the future. Eternal salvation slipped from the ascendant position that it had enjoyed for more than eleven centuries in Europe to make room for the radical new idea of material progress. During the French Revolution, the French aristocrat Marquis de Condorcet confidently predicted:
No bounds have been fixed to the improvement of the human faculties . . . the perfectibility of man is absolutely indefinite; . . . the progress of this perfectibility henceforth above the control of every power that would impede it, has no other limit than the duration of the globe upon which nature has placed us.
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Not everyone agreed. The naysayers, and there were many, argued that a society organized almost exclusively around a private property regime and a “mine vs. thine” attitude would be the ruination of civilization. They envisioned a world of unrelenting competition and struggle in which the more powerful would prevail and the rest become indentured or cast aside. Jean-Jacques Rousseau, in his
Discourse on the Origin of Inequality,
published in 1755, wrote:
The first person who, having enclosed a plot of land, took it into his head to say
this is mine
and found people simple enough to believe him, was the true founder of civil society. What crimes, wars, murders, what miseries and horrors would the human race have been spared, had someone pulled up the stakes or filled in the ditch and cried out to his fellow men: “Do not listen to this impostor. You are lost if you forget that the fruits of the earth belong to all and the earth to no one!”
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Nearly one hundred years later, Karl Marx published his
Communist Manifesto.
He attacked the philosophical and historical roots of private capital formation, calling it a scourge on civilization, and beseeched his fellow European countrymen to abolish the privatization of the means of production.
Although Europe was the seedbed for advancing a private property regime, there was opposition from the start. For every follower of John Locke, there were others who preferred to cast their lot with Rousseau. If, for some, private property was the path to utopia, for others it was a dystopian nightmare. Europe was caught between two very different conceptions of society. The older tradition favored a more communitarian approach to organizing economic activity, social life, and political rule. The emerging bourgeois class, however, was more anxious to let every man loose to go it on his own. An entrenched aristocratic class went along with the bourgeoisie. The nobility proved to be quite flexible in adapting to the new republican regimes and were often able to take advantage of their deep pockets and social connections to make their own killings in the marketplace.
Working people, however, didn’t experience much of the material gains promised by the Enlightenment philosophers and their successors. Life in the urban industrial shops and factories was draconian. Dangerous working conditions, long hours of toil at the workbench, and later on the assembly lines, near starvation wages, and squalid and overcrowded living environments were a far cry from the world offered up by Condorcet. Millions of desperate Europeans simply picked up stakes and fled to America in hopes of finding a better life. Of those who stayed behind, many found the socialist critique of capitalism compelling, and more than a few became willing converts. European trade unions, cooperative associations, and socialist political parties gained increasing support among the working class in countries across Europe in the nineteenth and early twentieth centuries.
The idea of a welfare state became acceptable in Europe around this time. It was a grand compromise, a way to appease the rising bourgeois class and the remaining aristocracy on the one hand, and Europe’s working class and poor on the other hand. The idea of a private property regime would be upheld in return for a promise that some of the excesses of unbridled market capitalism would be redistributed, in the form of government social benefits. The welfare state would become a way to balance the books and prevent class divisions from turning into open warfare and revolution in the streets. For the most part, the great European compromise succeeded.
Americans’ Love Affair with Property
America didn’t follow Europe’s example. Socialism never really took hold on American soil. The German economist Werner Sombart laid the blame on the fact that American laborers enjoyed three times the amount of beef as German workers. He wrote, “On the shoals of roast beef and apple pie, all socialistic utopias founder.”
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The unadulterated European vision of a utopian society formed around the protection of individual property rights found its most enthusiastic supporters in the new world. Geography played an important role. There was so much cheap and free land for the taking. For millions of European newcomers moving on wagon trains west across the Appalachian Mountains and into the fertile fields of the American Midwest and on to the great prairies of the American plains, it certainly seemed like Eden. They wrote home and expressed their amazement about all of the available land. Listen to this description of the American wilderness by one newcomer:
The seemingly interminable line of trees before you, the boundless wilderness around, the mysterious depths amid the multitudinous foliage, where foot of man hath never penetrated, which partial gleams of the noontide sun, now seen, now lost, lit up with a changeful, magical beauty; the wondrous splendour and novelty of the flowers; the silence, unbroken but by the low cry of a bird, or hum of an insect or the splash and croak of some huge bullfrog; and the solitude in which we proceeded, no human being, no human dwelling, in sight.
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From the very beginning, the young republic gave away vast tracts of land to settlers. The Public Land Act of 1796 allowed settlers to buy land at two dollars an acre and provided a year’s credit for half of the total purchase. By 1800, the government was selling off 320-acre sites and allowing the buyer to put down only 25 percent of the purchase, the rest to be paid over the course of four years. For less than $160, a European could lay claim to hundreds of acres of prime land, something out of reach in Europe, except for the wealthiest merchants and aristocrats. By 1811, more than three million acres of land had been sold to farmers.
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The government sale of millions of acres of public land continued throughout the century. There was the Homestead Act of 1862, which provided 160 acres of public land to every farmer. This single act turned over 270 million acres of public land—10 percent of the entire landmass of the U.S.—to settlers. The clarion call of “free land” echoed back East and all the way to Europe. The Homestead Act spawned one of the greatest migrations in history. Easterners, newly arrived immigrants, and freed slaves who were anxious to find new opportunities out West all rushed out onto the American frontier. The homesteaders needed only pay a filing fee of ten dollars to claim the land along with an additional six dollars for the final title, and a two-dollar commission to the land agent. To take final possession, the claimant had to build a home and farm the land within five years of making the claim. If the requirements were met, the title to the land was transferred from the government to the claimant.
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Millions of Americans became property holders. In 1873, the government passed the Timber Culture Act, in 1887 the Desert Land Act, and in 1916 the Grazing Homestead Act.
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In 1890, the U.S. Census Bureau officially announced the close of the American frontier. The Bureau wrote:
Up to and including 1880 the country had a frontier of settlement, but at present the unsettled area has been so broken into by isolated bodies of settlement that there can hardly be said to be a frontier line. In the discussion of its extent, its westward movement etc., it can not, therefore, any longer have a place in the census reports.
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In less than a century, millions of acres of public land had been transformed to private property holdings. Even with the closing of the American frontier and the increasing waves of immigrants arriving each year from all over the world, the ratio of population to land continued to be sparse compared to Europe. In America, we still have far fewer people and far more unused land than Europe. The result is that we feel less crowded and more autonomous, less interdependent and more independent, less communitarian and more individualistic. Even New York City, our most dense urban environment, has only one-third the number of persons per square mile as Frankfurt, Germany.
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The differences in human population relative to landmass have had a profound impact on how we Americans perceive the world around us and how Europeans do. When Americans travel to Europe, we always notice how compact everything is, how narrow the streets are, how close together all of the buildings are, how crowded the cafés are, and how small the portions of food are in the cafés. Even the elevators are cramped. An obese American can barely squeeze into one of them. Everything seems squished, tiny, parsimonious.
Americans are used to more space, much more. We may have officially closed the frontier more than a century ago, but we still live out the frontier spirit. We want to feel free, and freedom for many Americans means expanding the personal space we can control.
In the twentieth century, suburban home ownership became the way to keep the American Dream alive. The idea of living in a detached home, surrounded by wide expanses of garden and lawn was, and still is, rare in the urban residential communities of Europe. In the medieval era, crowding provided a sense of mutual security. As late as the eighteenth century, the Dutch were still building row houses, which had been the custom throughout Europe since the days of the Roman Empire. Even in the United States, early European settlers favored the European housing model. Over 71 percent of the residential population in the nation’s capital, Washington, D.C., still lived in European-style row houses in the 1920s. In many Eastern cities, row-house construction was the norm until the end of World War II.
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The suburbs, by contrast, offered a different kind of security, less communal and more individualistic in bent. After 1870, says sociologist Kenneth Jackson, “the new idea was no longer to be part of a close community, but to have a self-contained unit, a private wonderland walled off from the rest of the world.”
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The suburban home personified the American belief that freedom means autonomy; that is, the right to exclude others and to exercise near total control over one’s immediate environment. European visitors to America can’t help but notice how different America’s suburban neighborhoods are from those in residential areas of Europe, where people huddle much more closely together.
Europeans are surprised by the sheer size of the American home, which, on the average, contains more than twice the floor space of the average European home. The average floor space in American homes is about 2,300 square feet. In France, it’s 946 square feet, in Germany 932 square feet, in Spain 917 square feet, and in Britain only 817 square feet.
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Europeans are even more surprised by the amount of land each home occupies in America. Even with a growing population, we have far less human density today than eighty-five years ago. We are becoming more, not less, spread out. How did we pull this off? By moving out into the countryside and turning farm and pastureland into suburban housing tracts. According to the U.S. Census Bureau Report of 1920, the average density of urbanized areas, which include cities, suburbs, and towns, was a little less than ten persons per acre. By 1990, the number of people had halved to four persons per acre. More important, the average density of all new housing developments in the U.S. since 1960 is a little more than two persons per acre. That’s less than one-fourth the average number of people per acre in 1920. We did this by occupying eight times more developed land than we did more than eighty years ago.
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