By S. Lakshma Reddy,
Director, A.P. Legal Services Pvt. Ltd.
The relationship of law with economics is well known. Both are inter-connected and inter-dependent. Law is connected with sovereign political power and the economics is connected with optimum utilization of one’s given resources for production and consumption of goods and services. A change in one will affect the other. Different terminology is used in expressing this relationship in law and economics. Since both of them are inter-dependent an inter-disciplinary study will help understand the process of dialectical relationship.
Ownership rights connected with the land has always been an emotive issue touching millions of people all over the earth in the history. No magic formula is found by legislators, which satisfies maximum equitable distribution of ownership rights to the maximum number of people as a security to their life and liberty, which at the same time satisfies pareto-optimality of given landed economic resources. There is a crying demand from farmers all over the world whether it is in South-East Asia, South Asia, Central Asia, European parts or African or Latin American countries including highly progressive North American farmers that their agricultural products are not having equal terms of trade in exchange of commodities with other sectors of economy and their property rights in land as an evocation are being depressed and deteriorated to the point of intolerance and to a mood of social unrest. In parts of India, the farmers depressed to the point of despondency and are committing suicides with no remedial avenues left open to them in the system. The farmers of other countries in similar developmental circumstances with small and uneconomic holdings may be following the suit over time as in the case of Indian farmer. These are the affects of global market forces operating against the unorganised farming community as the owners of property in land cultivating themselves as all-in-one. My present exercise is only a thought provoking idea. My ideas are basically guided by the great ideas expounded by Adam Smith and in the later period by Marx through enunciation of the theory of law of value. It is in the nature of an inter-disciplinary study of law and economics as a part of law of development.
I have first tried to analyse relationship between the legal right with the value and price and then to show the possibility of separating the ownership right from other economic rights. I have also pointed out the relationship of division of labour as a part of ones right to manage, carry on the business for maximisation of production and productivity and the affect of consumption of labour either as capital or as revenue from the point of view of economic laws and its importance and then proposed the idea of the model for separation of ownership rights in land viz.a.viz the economic rights of professional managers of the land as an economic resource. There after, I have analysed the Chinese experiences and experiments and the lessons learnt from them in contrast to the present model as well as I also made a short analysis American model and Russian experience to show its compatibility as a feasible solution to the elusive problem.
Ownership, like right, is a power sanctioned in law with a corresponding remedy provided by law. I am the owner of "thing", it is "mine", it is not "thine" is equal to say my power over it is complete and you have no power over it and in case you trespass or breach my power over it, I have remedy provided by law against you. The ownership is encumbered with over riding power of law and one's own consensual transfer of some portion or whole of the power over it to other either in exchange or out of love and affection.
If ownership is a power over a thing, it is not the same as thing in itself. A thing which is not having any economic value of satisfying human need or wants can not be subject matter of any right or ownership claim. Ownership of land as a natural object means that portion of land, which is having economic use value of satisfying any social human need or wants and not the entire land, which is subject to the overriding sovereign power of law. So the power of any right or ownership of person over the any material object or land is always subject to the overwhelming power of sovereign power.
If we analyze a little further, the power of ownership or right over a thing is subject to one more qualification i.e. market power. The power of person increases or decreases with the value of the thing over which he exercises his right, hence the quantum of his individual or social power is dependent on quantum value of the thing in the market and the market monetary expression of such value of the thing is its exchange ability with equal worth of the commodities or money. The value of the commodities is determined by the socially required labour time to produce the same. This socially required labour time fluctuate from time to time depending upon market supply-demand for such commodities to satisfy the human needs or wants of the time, change in the organic composition of capital to labour used to produce the same etc. So the legal right or power over a thing may be remaining constant but the economic content or power of such right as power over it undergoes change. Some times legal right or power over a thing, which ceased to have any economic value also ceased to exist as a power over it. It shows the existence of positive correlation between content of legal right and economic value of such right.
This analysis can be extended to the legal rights or powers of nation to the global exchange and its subjection to global market value-price power.
It is, therefore, but natural that any prudent man will try to maximise the economic value of his legal right or power whether the subject matter of the legal right is property in land or property in goods or services; if there is any law to obstruct or prohibit it, that it shall be modified so as to enable him to exercise his legitimate right.
The power and content of the legal rights is also dependent over the strength of the legal system providing the speedy legal remedies and is positively correlated to non-discriminatory rule of law, and negatively correlated to the anti-thesis of law, arbitrariness.
While the individual will try to maximise his own interest, to exercise his legal right to maximise its economic value, the object of law will be to maximise the aggregate economic power or legal rights of its subjects by maximising the total economic value or power of the nation or globe if there is a global sovereign.
In the light of above overlapping operation administration of law of legal rights over economic laws, I shall now analyse the ownership rights of a citizen or state over land as an important material object of instrument of production of socially useful goods and services viz.a.viz right to possession, management and control over it to maximise the aggregate economic values while enhancing the power or content of legal ownership rights.
This issue has become important in the immediate context of legal ownership of uneconomic land holdings to overwhelming agricultural population of this country or other nations with similar holdings under similar developmental circumstances is becoming not a power but burden and a source of debt trap abetting disparate suicidal tendencies. Once it was symbol of social status and legal power - but now it is a symbol of debt and backwardness. One of the most important reason for this situation being not separating the ownership from the management and possession of land.
As already discussed, the ownership is a legal power over material objects. If the owner of land has no options to exit and has no capital or expertise labour to be employed in land to produce goods or services of such economic value which will be able to return all the advanced capital plus reasonable profit after paying of the interest, rents, wages, taxes etc., then the content of the legal right will become negative in power. The other option open to him to strengthen his legal right is to lease out the land for such rent which will be able to return at least the bank rate of interest after setting off the rise in the value or price of the land. The law of land rent is connected with law of value which again is dependent upon social productivity of capital and labour and surplus value or profit and division of surplus value or profit among the proportionate shares of owners of other factors of production i.e. owners of capital like banks representing actual owners of money capital, owners of labour power like administrative managerial and the providers of labour power, taxes etc. to state as social regulator, profits to actual entrepreneur etc. I find and am of the view that division of labour, advanced managerial practices, and mode of production which is capable of absorbing advanced technology always tend to facilitate or abridge the labour power required to produce any goods or services and this will enhance the economic value or power of exchange of the said means of production to their owners producing goods or services as commodities in any market overtaking the economic value or power of other market competitors.
Adam Smiths 'pin' industry example proving the case of relationship between division of labour and productivity of labour, consequent abridgment of quantity of labour required to produce the pin holds good forever. Advance managerial practices are also an aspect of division of labour given the technical production factors. The mode of production which is capable of absorbing advanced technology, managerial practices, division of labour is that which gives an entrepreneur, complete freedom to maximise the production and revenue and distribute the revenue to the proportionate share of participants of owners of all factors of production including labour. This model presupposes the separation of ownership from management and possession of material means of production. This separation is concomitant feature of law of development but how fast or slow is only the question. The development is smooth in case of manufacturers and service industry as both represent the owners of movable property and both the agents moved forward to corporate mode of production where the separation is complete enabling the corporate managers to absorb the advanced managerial practice, division of labour and technology while owners of factors of production are deriving the economic value of the same through their legal rights to dividends, rents, interests profits on salaries perks etc. Whether such corporate mode of production and management of agricultural land capital as an immovable property separating ownership of land with management and possession is possible in agriculture as in the case of other sectors of economy i.e. manufacturer and service sector to enhance the economic value and power of legal ownership of land on par with capital and labour in a moot question which I answered it as yes.
Capital Consumption of Labour or Revenue Consumption of Labour
One important aspect of the matter for this analysis is based upon views taken by Adam Smith, later elaborately analysed by Marx. The character of the labour power, whether productive or unproductive depends upon whether same is used to for production of surplus value or product for employer, whether it is fixed on material object which when sold returns with profit as capital or consumed instantaneously as revenue. The same labour power when used by direct consumer is as revenue but when hired by employer to consumer is spent as capital and no employer hires labour unless it returns with some surplus value or profit to him after replacing the capital. The former mode of employing the labour is not mode of production capable of absorbing advanced management techniques or division of labour aimed at producing surplus produce, value or profit and can not compete in economic value terms with capitalist or with corporate mode of production. Such owner-farmer-labour of our rural India is not competing the non-agricultural capitalist or corporate who are selling their goods or services at prices of production with a bottom line cost-prices which included reasonable rate of profit on the total capital advanced by them for the production of the said commodities. The rural owner-farmers, have no such book keeping, not calculating the rate of return on the total capital including the capital advanced for the purchase of the land as material means of production, capital notionally advanced to the family wages, willy-nilly takes the market prices determined by national or global market forces and supply demand factors without any bottom line and without any reasonable option to exit from agricultural professions, but all the products which he purchases or exchanges from non-agricultural sector are unequal because of their practice of capitalist or corporate production and accounting systems and selling at a price over and above their value of their goods with aid of state regulation and law while the farmer-owner not adaptable to such capitalist or corporate production or accounts systems in view of legal restriction on land holdings and non-alienability or transfers on supposed grounds of public interests and are made to sell their product more at a price which is below the value of their produce, transferring the value of their unaccounted labour power to industrial and manufacturing sectors or transfer to foreign global players. This unequal competition is the result of discriminate legal regime against the farmer-owners of agricultural capital in land as immovable property. To remove this discrimination against former-owner's property in land and to bring it on equal terms with other owners of factors of production and to bring the agricultural land as field for free investment and advanced modes of production to increase over all production of goods and services and productivity so as to enable the contents of the legal rights of its citizen with economic power, distributed to all segments of population without state discrimination, proposed the issue of separation of ownership of land from its possession and management. For resolution the issue, whether legal compulsion or with liberty to voluntarily join with land stock asset management company as a shareholder, is an open option for the policy decision. This model is neither Russian or present China or American modern but middle path consistent with right to life, liberty, property and pursuit of one's own happiness.
I have proposed the manner in which this issue of separation of legal ownership of land from its possession and management to be statutorily given effect to in my short open letter under the title "Debate for National Consensus, issues" as follows:
Land Ownership and Management:
1. Land: Complete set of land records with reference to ownership holding with title deeds to be computerized on national level as a mission.
2. Ownership of land and possession and management of land to be separated. Possession and management of land should be entrusted to the asset management companies under the control of respective local bodies.
3. Legal right to property in land, and right to sell right to transfer except possession and management still continue in persons.
4. Asset management company (amc) will auction the leasehold rights, sale of properties and other forms of transfer of rights auction houses subject to such conditions as prescribed by central and local bodies.
5. Land tax to go too central/local bodies. Differential rent out of auction income to go to owners of land.
6. Urban land except to the extent of ceiling hold, will vest with urban bodies as owners and transferred to urban asset management companies except personal occupation, it shall develop and auction the lease hold rights over sale of such property for the public body.
7. Local bodies/Central Govt. shall frame rules of general application for guiding the asset management companies in management and transfer of assets purely on business principles maximizing the returns on assets with minimum costs. Local body shall not meddle with the functioning of AMC"s in executing laws framed by it in accordance with business principles but like a citizen can complain against wrong decision or interpretation of laws before ordinary court of law.
8. Land tax, differential rental income on its land property will go to central and local bodies on agreed base.
9. Auction Houses as agencies of amcs for auctioning land in lots to contract framing.
10. Open auction for lease or management of lands allowing competition to all includes foreign direct investment.
11. Free flow of capital and labour throughout country except sale and purchase of title deeds by or to non-citizens.
12. Capitalist framing on purely business principal.
13. Strict enforcement of contract obligations and defaults entailing transfer back to AMC to auction houses.
14. Reserving 40% of land for forest and environment protection purposes.
The above measures will release the possession of all the urban and rural land other than the land which are used for personal or industrial housing purpose and form as land banks vested in asset management companies under the control of respective local bodies subject to the over all law and guide lines made by the Central Government. The owners of land stock title holders of the respective asset management companies under the local bodies will act as a body of land lords with right to receive proportionate rental dividend against their land stock share like in the case of other company stock holders. They have an equal right to participate policy decision process as an interest group with the managers of the asset management company to carry out the policy decisions of the local bodies as an executive agency to act on purely business principles. A separate body of auction houses shall be formed to transfer the possession for any use by any capitalist or corporate farmers by way of an open auction of lots for fixed periods on the basis of supply demand factors for the production and supply of any commodity. The strict enforcement of the contract obligations and bankruptcy laws shall be enforced and any defaults shall entitle the transfer of land back to asset management companies so as to auction the same to minimize the loss of production and revenue. The revenue generated out of sale of right to possession and enjoyment of the land will go to the asset management company and the same will be distributed between the central government local body and the owners or titleholders of the land stock of the asset management company after deducting operational expenses. Under this model, the possession and the management of the land will be operated through capitalist or corporate farmers and not by owner farmer-labour-rural landlords. The former farmer-owner of the land can offer his services as an unskilled, semi-skilled, skilled or highly skilled, supervisory or managerial services or if he is a professional or technically competent person so to offer his services through an employment call center to the capitalist or corporate farmer and if he has got liquid assets in the form of money or money capital can derive the interest on the capital either in any business, venture capitals or himself acting as a capitalist entrepreneurs hiring other labour for production of any goods or services. In this new model, the income of the new land lord is : i) through rental dividends derived through his land stock share holdings in any asset management, company, ii) the wages or salaries/fee or perks derived by him through offer of his services so also any other interest, income or other profits, derived by him as a venture capitalist. One of the draw back model of owner-farmer-labour and which is now sought to be removed is that now he is freed from the labour of managing his own plot of land on business lines and the plot is now thrown into the pool of land available for auction to any other capitalist or corporate farmer who acts purely on business principle i.e. on the basis of selling his product at a market price which is not less than the cost price which included a reasonable return on all the capital advanced by him in the production of the agricultural commodities or services. This will secure him his title over the land as a part of his right to property, and receive rental dividend income and enable him to register himself in any employment call centers according to his labour skill or technical or professional competence and move him to a place where he will receive the payments against his labour power at competitive rates and not bound to stay as a bonded labour to his land under the owner farmer labour subsistence model. This will enable the state to the development of the national labour market without any restrictions on the basis free mobility subject to the strict enforcement of contract obligations and the consequences there of. This will also enable availability of the land, though an immovable property, as a field for investment of capital with possession and enjoyment on the basis of the competitive rates responding to the supply demand factors for any particular or other agriculture commodities while unleashing the forces of private enterprise, productive forces, which will have the affect of bringing down the value and prices of the agricultural commodities while increasing the wealth of the nation or nations. This will also enable the free flow of capital from agriculture to industry and from industry to agriculture so also from agricultural industrial to service labour industry and vise. versa tending towards a more perfect competitive economy. This will remove all the restrictive barriers of monopoly practices and the role of the state may have to be confined to act as a regulatory authority (in the sense of imposing such simultaneous restrictions on the rights of two or more people so as to produce a greater social use values or its converse minimize the social mischief infringing upon the production or distribution of use values) for preventing any such tendency to market monopoly practices by suitable disentives and punishments. The above model will also be consistent with the fundamental human rights and freedoms of any person in our country, (or any country) satisfying the tests of fundamental rights chapter under the Indian Constitution as well as right to property with all the potential to fulfill the aspirations under its directive principles of state policy.
Now I will take up how it is in contrast with the other models existing in the America, Russia during the Soviet regime and the present experiments in land reforms in China. First, I take up the China. It appears that the land reforms are being experimented in Rural China since early years of founding of Peoples Republic in 1949, they have expropriated the land from the land lords and distributed the same to the landless peasons to achieve the goal of land to the tillers. The second stage reform was to adopt the Soviet model of a collective ownership and unified collective management and operation. To achieve the same, the individual farmers were compelled to give up possession and join in the collectives called communes. The ownership of the land as a property right is not recognised in the farmer, but vested in the collective body or commune. The management and agricultural operations were conducted on collective decision making with no individual freedom to possession and enjoyment of the land on ownership basis. The agricultural produce was sought to be divided on some unworkable egalitarian principle called labour principle and the rights of an individual viz.a.viz the commune as well as the provincial or central government were not defined and this destroyed the private initiative of working peasant as well as his other freedoms including fundamental aspiration of right to property as a security to his life and liberty. This led to a second stage land reforms to change over to family based contract system or what they called house-hold responsibility system in which though the ownership rights are still vested with the commune or local body, the right to possession and enjoyment of the landed plots were given to individual families based on their family size and with a restriction not to employ the hired labour. Though it is not a restoration of ownership rights as a right to property in land but only a limited right to operate some plot of land on the basis of not as owner farmer-labour-model but as a farmer labour model i.e. restricting the farmer to employ own labour power resulting in the average cultivated area per house-hold was 0.466 hectors fragmented to 5.85 plots each plot on an average 0.08 hectors (Ministry of Agriculture of China 1993). A further restriction that the agricultural produce should be sold to the state through state procurement system and not through open free market was imposed. These measures and restrictions have the affect of distorting the natural formation of average market social values or prices called market values or market prices with all the potential for formation of general rate of profit and for the state to practice of inequality and discrimination by interventions against any individual farmer or other bodies on the supposed grounds of planning and public interest. Though it is an improvement over the collective ownership and unified operation under the Soviet model where the persons have no individual freedoms, but still the separation of ownership possession and management with freedom to the contract hired labour which act as a catalyst for inducing natural division of labour were missing. His limited right to possession and enjoyment of the land as a farmer-labour and restricting him to self-cultivate the same has completely hindered development of the productive forces in agriculture infringing upon the fundamental human rights and freedoms of its subjects. Though this has partially released some private initiative to competition to that of its earlier model but still reform has not met the conditions for the free development of the productive forces. This difficulty was realized and there was a demand for modification of the rights to property in land and related operations. It appears to be the trend from at a later stage of 1980s onwards and the different communes as local bodies were given certain freedom to experiment subject to the over all guidance and control of the state. As per the paper published by the sustainable development, Department (SD) Food and Agricultural Organisation of the United Nation (FAO) posted on September 1999 by Prof. Deputy Dean, College of Economics and Trade, South China Agricultural University, Guangz Hou, China, Mr.Fuchen, Dr.Liming Wang, Research Fellow, Center for Rural Studies, Queens University of Bellfast, U.K and John Devis, Direct and Research Fellow, Center for Rural Studies of the same University of Bellfast, U.K. They have underlined the theoretical debate on further reform by various groups of Academicians and economists and the debate centered around which form of ownership and possession and management of the farmland should be adopted for conferment of any right or property to any individual or corporate bodies. They also focused on the role of state procurement and state commercial institutions viz.a.viz the free market competitive economy. While the debate has excluded the possibility of full individual ownership and free market concept under the present political regime, they have discussed other options; They have discussed idea of farm land nationalization in their sense, state ownership and came to the conclusion that it was not likely to find any public acceptance. They have found that Rural China are imbued with the idea, though hazy, of collective commune ownership with equal right to all the people under the commune to such land as a joint property as in the case of Indian Hindu undivided joint family properties with rights of survivorship are not willing to accept the transfer of the said collective ownership rights in favour of state ownership without financial compensation as such, not feasible and also found that the said measure may involve social and political risks to the government and there will be a lot of opposition from public to return their present quasi-private ownership rights in the commune system as against their wish to a direction towards restoration of some form of private ownership rights as a security to their right to life and personal freedoms. The other idea to break the communal ownership and conferment of individual ownership rights or private ownership and this was found to be another route to restoration of the capitalism and was not appropriate solution to the existing land problems in China i.e. fragmentation of land by metes and bounds and this also involved social and economic risk and the people did not show much enthusiasm for land privatization. In a survey conducted only 13.5% of the sampled peasons agreed with the idea and 79% expressed a negative attitude and the remaining did not specify their ideas, so that option was found not a practical idea in the Chinese context. The third idea was not to over emphasize on the idea of ownership right but to redefine the right with reference to interests and obligations among the participants sharing the asset and it was called land use rights system so as to faster the production incentives and to prevent further farm land fragmentation. While the first two ideas are, either politically, economically or socially not feasible the experimentation is being done in the third idea. Among the experiments conducted as per the paper, three models have emerged. One(i), a two-land system as per which, the total cultivated land in the village was divided into two parts, food land and contract land. The food land is for family consumption and the contract land for commercial farming. While the every peasant household have a right to have their own food land from out of the collective commune land on the basis of their right to equal share, it was opened to them also to take a contract land for commercial farming. The commercial forming land is made available on competitive bidding system, but the produce of the commercial farm has to be sold only through state procurement system and further the ceiling on the cultivated area is imposed between 0.33 to 1 hectors per labour unit in the household family subject to the availability of the land in locality. According to Chinese Ministry of Agriculture, about 26.9% of the Chinese total villages and 38.2% of the total cultivated land (where the household responsibility system was implemented) has come under this to-land system. In the year 1990 and by 1994, though the percentage of the villages under the to-land system has decreased slightly to 31.5%, but the land area has increased to 47.8%. The 2nd model was collective form and this has emerged in some rural areas close to urban centers and some coastal provinces in China in the late 1980s, it was found as profitable in view of their close proximity to the centers of industrialised cities as many of the rural people sought employment in township enterprises. According to survey, 60% of the rural workforce have abandoned farming and treated the forming as a part time employment with a view to not to return their family rights or entitlements against the commune collective land ownership. As the contribution of agriculture in the total household income declined the farmers lost enthusiasm for farming and most of the part time farmers even wanted to return their entire land entitlements to the village cooperatives and this has led to the growth of collective farm concept in 1986 to achieve the more optimum scale operation and the management. The agriculture in the commune was entrusted on contracted period to collective farms (registered as enterprise of the village) who employs the labour for wages rather than the working points of the old commune system and after the contract period, the dividends were distributed to the employees on the basis of their performance, the remainder as farms profit set aside as a common accumulation fund. The people who have migrated to cities in lieu of returning their land use rights to the villages are given the privilege to purchase grain at lower prices for their own consumption. This model is akin separation of ownership of land and labour. The grain output per agricultural worker between 1986 and 1994 has dramatically increased to eightfold. Though, this has increased the agricultural productivity dramatically, this has not developed as a national model since its success is dependent upon the success of its neighboring industrialised centers and liberalizing the controls of the state under its state procurement system and defining the rights of the farmers or their entitlements in the commune collective farm.
The 3rd model known as NANHAI farm land share holding cooperative system initiated in the end of 1992 on an experimental basis has emerged as one of the major growth model. The reason for its emergence was shifting of rural labour particularly young educated workers to non-agricultural sectors while leaving the house-hold responsibility farm land to be undertaken by the elderly families and even children to keep their landed property rights in the commune. According to the system, the first step was valuation of the farm land and then distribute the land shares to individual peasants with children entitled to half shares. The farmers receive their shares - paper entitlement without any payments. When the land shares are allocated, there is no actual distribution of physical plots. After receiving the land shares, farmers return their land use right to the natural village to which they belong. The natural village then offers the land entitlements to the administrative village to which it belongs. The administrative village will be in-charge of the land use. An agricultural company subordinated to the administrative village will be founded and it becomes responsible to the agricultural land. An agricultural company contracts with the individual specialist farmers or farming teams based on bidding process. The shareholders get the share dividends and they promote their interest at shareholder meetings. This shareholding cooperative system is said to be still in the experimental stage and effects were found to be encouraging, and was welcomed by the local people. Agriculture is much improved introducing large-scale farming made possible. By 1993, the cultivated area for labour unit in NUNHAI has increased to 7.6 hectors, 10 times more than before the system was introduced. It is said that in Xiabai, the birth place of the system, grain production has been contracted to a group of 30 farmers, they manage the farm independently and provided the main source of grain for local consumption. The administrative villages are stated to have made comprehensive land use plans taking account of the needs of the three main land use areas namely agriculture, industry and city construction. The study has found this system has likely to emerge as a catalyst for rural industrialisation and urbanisation because of more efficient use of land and labour. It is further stated that the rural land was in the hands of natural villages, the basic unit in the rural China, but the natural village was too small to manage it effectively. The administrative village, a higher-level rural organisation, had the capacity was but not the landowner. In an attempt to resolve the conflicts, the farmland share holding cooperative system, a kind of land, as a stock system, was initiated.
This farmland share holding system has all the necessary ingredients of separating the legal right to ownership from possession and management of the land and the shareholding system as a kind of land, - as - stock system with shareholders right limited to receive the rental dividends of the legal ownership while the possession and management is entrusted to capitalist or corporate farming system. But as the Chinese political system is not permitting free market economy and free entry and exit, capital and labour into land and also not permitting the sale and purchase of land and labour power as a commodity and the state controlled fixation of market prices, it has all the distortions against the law of determination of market prices on the basis of law of value as propounded by Adam Smith and Marx. In spite of all the drawbacks, it has still the potential to become as one of the major growth model because of its separation of legal ownership from the possession and management of the land making it possible to absorb advance technology, managerial practices, division of labour resulting in the higher productivity and production of the agricultural produce.
From the above analysis and the findings arrived at by the expert economists stated above, it is clear that wherever there is no separation of ownership from possession and management of the farms like in the case of above household responsibility system where the ownership, possession and management are united in the same farmer, the growth of production was stulted and system where ownership is separated as in the case of 2nd and 3rd models, in the 2nd model where collective ownership but separating possession and management and in the 3rd model, individual ownership in the farm of shareholding but separating the ownership with the possession and management where land is given to contract farming on open bidding basis, the output per unit labour as well as the output per unit land has dramatically increased. This is proving the proposition that separation of ownership from possession and management of the land is necessary concomitant for introduction of advanced mode of production which is capable of absorbing advanced technology, managerial practices and division of labour so as to maximise the production and revenue and distribute the revenue to its subjects.
The America economic political system is more closer to the model of landed property where ownership is separated from the possession and management. When the colonial governments have occupied the American Continent and established their own legal systems with right to private ownership as a rule and land was abundant, the governments themselves encourage the rule of private ownership of land of un-occupied public lands by way of sale of lands such as under the Homestead Act where under any present or prospective citizen can buy an extent of 160 acres of land as a lot with a mule at a nominal price and land was not and even now is not a constraint. So the demand for ceiling on land holdings by the private individuals or equitable re-distribution of the same as in the case of populated countries over the other continents of the globe was not to be seen. There was a full sway of free enterprising market economy and any restraints from the colonial governments were resented, this attitude on the American settlers have developed into a cultural trait unlike the experience of the other populated countries. Here, the people fight against any restraints whereas in other countries the people demand for freedom from controls. Both people demand freedom from restraints for opposite reasons. The common element of all the people being the individual freedom and liberties and both are dependent on the institution of personal property as a foundation, wealth of nations and just distribution of rights over the wealth of nations.
In America, we find that the land has developed as a market commodity and is the subject matter of purchase and sale of ownership rights as well as rights over it. Big corporations, railroad joint institutions and other public corporations or bodies have purchased huge extent of lands sometimes running over millions of acres of land as in the case of plum creek, railroad companies and operating as private landlords. This concentration of land in private corporate bodies is not comparable to private landlord / jamindari holders of land developed as feudal lords over the history in other parts of the world controlling the production and distribution of agricultural health. The corporate body, as the modern management Guru Peter Ducker puts it, is not an individual, but an institution of volatile flexible body of private individuals who have a limited legal right or control over such institution and its properties as owners. The body itself in law acquires its own identity as an artificial person with no natural death. Here, unlike the institution of ownership of small holding or small scale cultivation of natural private individuals with deaths and births fragmenting the land holding time and again where all in one situation i.e. owner-farmer-labour exists hindering the Adam Smith’s natural perfect division of labour as a specialist professional of a particular operation in a productive system, the corporate ownership and possession where ownership is not coming the way hindrance to the Adam’s natural perfect division of labour in agriculture. But still the large scale corporate ownership by a group, though limited, of private volatile flexible, have the potential of using this monopoly power over people who are not members of such group because of the nature of property in land being immovable and a limited endowment by god. Hence such power need regulation by sovereign public power not to allow or break any such monopolistic practice in the interest of general public. The interference of sovereign public power to be limited, an institution such as Asset Management Company under the general control of central/local bodies, while the auction house under the control of Asset Management Companies to auction the available land for open bidding basing in a non-discriminative manner is proposed and this measure will bring perfection of separation of ownership from possession and management by breaking the monopolistic tendencies in corporate bodies because of unified right or power over the land as an immovable property to the detriment of the general public and against the free flow of capital and labour into land as a field for investment. The sovereign public power of the country or in the future the global sovereign, may bring equitable distributions of ownership rights among the public without disturbing the possession and management of the land on some acceptable principles within the free market competitive economy operating on the basic principles of law of value. The distortion that has kept in against the law of value by the theories of public ownership of the means of production by theories of socialist with other state ownership of means of production and distribution as an aberration and a blunder has to be rectified. The management Guru Peter Ducker has explained the mistake in thinking of Marxist’s in not analyzing the institution of corporate bodies as institutions of public and not to treat them as purely private capitalist owners and concentration of capital in the corporate bodies as concentration of capital in private individuals. They have missed the essential element of separation of ownership from the possession and management and its impact on the development of the productive forces and the consequent distribution of entitlements to the owners of the factors of production which in turn has enriched the each persons right to life, liberty and pursuit of one’s own happiness.
Therefore, a slight modification of American system of present land ownership may have to be moved forward in tune as suggested by me towards separation of this ownership even in the case of corporate bodies from the possession and management of the same so as to advance the general cause of the humanity.
Soviet Experience - Lessons
Now I deal with the Soviet experience during the period of communistic regime. The Soviet Government has on the first day of its take over of the power has issued a decree of nationalization of land perhaps meaning the nationalization of ownership of land in the state while not disturbing the possession. There after, they have expropriated the possession of bigger landlord and then distributed the same to the working peasons. This measure is continued by prohibition of employment of hired labour and also sale of agriculture produce except to the state procurement organs. This has stultified the operation of the free market economy and there was ever recurring conflict between the peasons private interest with the supposed public interest of the state run by the Soviet Communist Government. This conflict was sought to be resolved by negating the possessory right by introducing cooperative or collective farm organizations where the individual initiative is subordinated to the collective management on large scale-farm cultivation techniques. This has aggravated yet another dimension of sharing of the fruits of their collective labour i.e. the agriculture produce or services by some equitable principle, which was found to be elusive in view of diverse conditions of land, labour and capital and political objective. In the absence of any such equitable principle of sharing the fruits of collective labour, the large scale-farm mechanization and mass production supposed to bring higher productivity and production did not bring the desired result. The problems of maintaining accounts and accountability and the role of individual and his right to choose his own interest in accordance with the circumstance of his case were found lacking and there was total disarray resulting in imposition of many more restraints on the rights and freedoms of individual to the point of jeopardizing his right to life and human dignity itself at the instance of the communistic managers. The absence of right to ownership of land or other material objects in the means of production of an industry or business including non-existence of right to sell his own labour power as a commodity in his own interest according to his own circumstance have led to a situation of subordination of individual to the point of slavery with no rights to personal freedoms but only duties to state and public, in effect, to the persons in power and the managers. This situation is brought about as a result of vesting of all power in some individuals or body of individuals with all power of ownership, possession and management of all the factors of means of production and with no rights to people as an individual against any one of those factors or means of production. Though the separation of ownership in the state with possession and management, operated on business line, is possible under the Soviet model provided the ownership did not come in conflict with the possession and management but still the problem of sharing of the benefits of collective possession and management could not have been found except with the operation of free market economy where each individual should have freedom to make an enforceable contract with others and also should be able to freely move and settle at a place of his choice i.e. with rights to exercise his fundamental human rights and liberties including right to express himself. Marx or Lenin or even the present communist rulers in some parts of the globe have not thought that the state ownership, possession and management is not consistent with the basic theories propounded and expounded by the Adam Smith and Marx i.e. the theory of law of value. It is not too late for present Russian to recoup its old glory by falling in line within the market economy under this model without undergoing the process of parceling out of land into small legal ownership holdings with right to possession and management. Therefore, there is now need for rethinking to correct themselves from the path of aberration that has crept in Marxism from Adam Smith and come to the natural path of social development i.e. where the social laws are in harmony with the natural laws.