Governing through owners: how and why formal private property rights enhance state power.

Author:Katz, Larissa

INTRODUCTION I. OFFICES AND THE DISTRIBUTION OF RESPONSIBILITY A. Features of an Office B. Mass Producing Responsibility II. THE USE OF PRIVATE RIGHTS TO CONVEY STATE BURDENS: SOME ADVANTAGES A. Commandeering a Preexisting System of Rights B. Vulnerability and State Leverage III. WHY OWNERS? LOCATION, LOCATION, LOCATION A. The Territorial Nature of Core State Functions B. Distributing Burdens to Local Offices IV. STATE-OWNER RELATIONS: A NEW MODEL A. Mutual Dependence B. Exit to the Informal Sector CONCLUSION INTRODUCTION

In recent years, many Western governments and organizations have pressed developing nations to build robust private property institutions and have made large sums available for such property-related projects. (1) One of the central justifications that policymakers and theorists provide for this strategy is that it will increase the economic power and freedom of individuals, thereby making them less vulnerable to the state. (2)

In this Article, I argue that in many cases, precisely the opposite is true: the formalization of private property rights actually makes owners more vulnerable to the state and enhances the state's governance powers over them. (3) When property rights are formalized, the state gains the power to define the scope of those rights. This, in turn, provides the state with opportunities to impose significant burdens on owners. A system of formal private property fights serves as a mechanism through which the state can allocate responsibility to individuals on a mass scale for a wide variety of tasks, including some of the state's core governance functions. (4) Because many of the state's core governance functions are territorially defined (such as maintaining peace and order within the territory, defending the territory from external threats, and providing infrastructure), this phenomenon appears most clearly in the case of private property rights in land. (5) A network of landowners is a useful (and sometimes crucial) tool that lets a state govern locally in the farthest reaches of its territory, even when it lacks the capacity or will to use other more formal tools for governance, such as governing by bureaucracy or license. Thus, it is useful to think of the state's power to define property rights in a manner that includes obligations to carry out core state governance functions as itself a mode of governance. I call this governing through owners.

Governing through owners is an alternative to other more familiar modes of governance. Emerging or weak states that lack the capacity or political will to govern through bureaucracy or license may rely extensively on owners to carry out the state's core functions. But as states rely more and more on bureaucrats and licensees, only vestiges of this phenomenon may remain, serving as a reminder of the vulnerability of owners to the state. (6)

There are numerous examples in developed liberal democracies of governing through owners on a modest scale. For instance, snow laws require owners to shovel or clear snow from sidewalks that border their property. (7) But compliance does not entitle owners to greater rights to the sidewalk (they cannot, for instance, charge a toll or refuse passage) or to special benefits not available to the ordinary sidewalk-user. Sidewalk repair in New York City provides a similar, warmer-weather example of the state pressing owners into its service. The City's Administrative Code makes commercial property owners responsible for keeping the sidewalks in front of their properties in good repair. (8) A recent amendment goes so far as to make owners liable for "slip and fall" injuries that occur on public sidewalks in front of their buildings and also requires them to purchase insurance to cover those damages. (9)

The account I advance here is an important corrective to the idea that formal private property straightforwardly increases private power and limits the power of the state. (10) That idea rests, mistakenly, on a single point of comparison: private versus state ownership. Of course, private power is impaired when the state controls all material resources--in contrast to a situation in which individuals at least have some capacity for self-interested uses of things and the accumulation of personal wealth. However, there is another point of comparison, between formal private property, set out by the state and frequently coupled with responsibality, (11) and informal private property, (12) where both dependence on the state and the state's power to attach obligations to property-holding are diminished or absent altogether. When seen in opposition to informal private property holding, formal private property may increase the extent to which owners are vulnerable to the state. (13)

The phenomenon of governing through owners suggests that the formalization of private property rights often enhances state power, but there is yet a further wrinkle: the usefulness of owners to the state does not always work to the disadvantage of owners. In some cases, it may also empower them vis-a-vis the state. The state's dependence on owners to carry out these governance functions throughout its territory may offset owners' vulnerability to the state. Of course, how much power owners hold by being in charge of state functions depends enormously on the details of the situation. When there are relatively few owners, or when owners are able to coordinate their efforts, the state might find that in order to govern effectively it has no alternative but to give in to some of their demands.

The balance of power between states and owners is thus much more complicated than the models that currently dominate property theory and international development suggest. These models insist that individual owners are least vulnerable to the power of the state where there is a clear and rigorously protected "private sphere" in which owners are free to set self-serving agendas for things and to accumulate personal wealth. But in some cases, at least, owners might be at their most powerful when the state extensively relies on them to carry out core governance functions. At its most harmonious, the state-owner relationship is one of mutual dependence, where the state depends on owners to carry out its core business throughout its territory just as much as owners depend on the state to protect their property rights.

This Article proceeds as follows. Parts I and II explain how and why owners are liable to be used as tools for state governance. My model of state-owner relations emerges from two important conceptual starting points: first, the nature of ownership as an office through which the state assigns burdens; and second, the conditions of a territorially defined state, namely, the establishment of basic governmental functions throughout its territory. Parts III and IV consider what governing through owners means for the balance of power between states and owners. Conventional wisdom is that individuals gain greater power and independence vis-a-vis the state through a clearly defined and protected private sphere. But this view does not account for the vulnerability of owners to the state and the phenomenon of governing through owners. Moreover, it obscures two crucial forms of protection against state predation: mutual dependence of owners and states when states rely on owners to govern and retreat from the state to an informal sphere.


    The core insight of this Article is that a system of formal property rights is a sometimes dangerously convenient mechanism for the state to offload some of the burdens of government onto the shoulders of individuals. (14) Put another way, when the state formalizes property rights, it acquires a mechanism for pressing owners into its service at low marginal cost: it is able to convert an established system of property rights into a network of local offices. Governing through owners is an alternative to governing through bureaucracy or license. All are ways of distributing responsibility for state functions to large numbers of people. (15) Government by bureaucracy or license can be more closely fitted with the jobs that need to get done--but these systems also require the state to set up a second set of offices (besides ownership). A system of formal private property rights enables the state to function beyond the effective reach of its centralized institutions and in the absence of willing licensees. By imposing governance obligations on owners, the state is able to do things locally that are basic to its claims of authority within a given territory: it can ensure that peace and order are maintained, that roads are built, and that frontiers are defended, all by coupling these obligations with the office of ownership.

    In what follows, I present a model of state-owner relations that reveals what makes owners so attractive as a tool for governance and what makes them particularly vulnerable to being drafted in this way. In so doing, I present the balance of power between state and owners in a new light. Why are owners such appealing targets for mandatory collaboration with the state? One reason is the nature of ownership as an office that allows the state essentially to mass produce individual responsibility. (16) A system of formal private property rights provides the framework for states to assign responsibilities to owners, an alternative to governing through bureaucracy or by license.

    1. Features of an Office

      The position of owner invites responsibility for state functions, such as building infrastructure, defending frontiers, and even adjudicating disputes and maintaining peace and order. The reason for this lies primarily in the nature of ownership as an office that shares (or even anticipates) features of purpose-built offices that convey specialized roles in more developed systems of governance. (17)

      By looking carefully at the concept of...

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