This proposal was not really all that shocking: Such a program would have been consistent enough with the advertised purpose of certain phases of American land policy from 1776 on. American governments handed out land (however acquired) for over a century to veterans, settlers, land speculators, railroads, timber corporations, mining companies, and other parties. (I’ll give you three guesses which groups made out the best). Governments did so as a source of revenue, for geostrategic reasons, to win favor with voters, or to reward a small class of typically American operators who flat-out deserved to be rich.

In a new, revolutionary, and republican society, there was of course much talk about widespread property as the bulwark of republican freedom. But the talk was so general that Federalists and Republicans could share it, while leaving themselves plenty of room in which to create a small class of owners of a disproportionate amount of the public domain. Overall—from the founding land speculators down to 1893, when the frontier allegedly ran out—American land policy resembled in both theory and practice the kind of “privatization” we see under mercantilist Republican administrations. One landmark in the process was Johnson and Graham’s Lessee v. William M’Intosh (1823). Here, Chief Justice John Marshall undertook to write a long essay on the received theory of how property previously stolen by European kings or their agents is best conveyed. As was his wont, Marshall proved entirely too much, in as clear a case of Albert Jay Nock’s “copper riveting” of narrowly focused property rights as we could want. (See my “Albert Jay Nock and Alternative History,” The Freeman, November 2008.)

Southern agrarian Andrew Lytle noted that from the settler’s point of view the whole frontier process represented an attempt to get away from would-be aristocrats and other aspiring land monopolists. Consistent republican ideologists like Thomas Skidmore and George H. Evans agitated from the 1820s into the 1840s in favor of giving homesteaders first claim on the territories. Generally speaking, other claimants prevailed, while the politics of slavery and antislavery further complicated the matter. In the bigger picture, the Homestead Act of 1862 was the exception rather than the rule, as Paul W. Gates showed in a noteworthy 1936 paper (“The Homestead Law in an Incongruous Land System,” American Historical Review).

I cannot discuss here what an ideal policy based on “mixing one’s labor” with resources might have looked like. Suffice it to say that sales of thousands and tens of thousands of acres to individuals, land companies, and corporations were not especially consistent with any genuine republican ideal. The disappearance of most of the best land in California into the hands of a half-dozen individuals in a few decades comes to mind. But large-scale buyers had mixed their money with federal land officers, and that no doubt counts for something.

Meanwhile, the judiciary—state and federal—busily remodeled the common law and shifted the burdens of industrialization onto third parties, extensively modifying the older law of nuisance. Harry Scheiber finds that “law was often, if not to say usually, mobilized to provide effective subsidies and immunities to heavily-capitalized special interests [under] either ‘instrumentalist’ or ‘formalist’ doctrine.” Even existing doctrines of “public rights” and eminent domain came to serve business interests. Finally, federal judges’ discovery in the 1880s of corporate “personhood” in the Fourteenth Amendment perfected the Federalist Party’s original mercantilist program. All these changes importantly influenced just who would benefit from the American State-system of land tenure (to use Nock’s phrase) and its attendant modes of preemption and exploitation.

Land and Independence

Many writers have seen a special relationship between landownership and personal independence. And here we hit on what is perhaps the truest insight of republican theory—one taken up by many classical liberals. Briefly, this holds that a broad “middle class” of property owners is essential to the maintenance of free societies. The point is as old as Aristotle. On the negative side, in decrying the social effects of England’s fabled land monopoly, radical liberals like Percy Bysshe Shelley, Thomas Paine, Thomas Hodgskin, and John Bright implicitly affirmed the republican axiom.

A typical nineteenth-century American “self-help” book aimed at young men did not say, “Get a job working for wages within an increasingly intricate division of labor so as to enjoy a greater variety of consumer goods.” Instead, it said, “Get yourself a competency”—a vision fraught with republican implications suitably modernized. Working for wages, if one did it at all, was a temporary stage—to be endured while learning a skill or trade and abandoned later in favor of real or potential independence. This independence, derided in our time as “illusory,” left one free (within limits) not just from state interference but also from nineteenth-century employers. And if independence is illusory in our time, it is at least partly because the political activities of well-connected elites long since removed the preconditions of independence deliberately and systematically.

One key (but not the only one) to this much-sought-after independence was access to land, a theme taken up by Catholic writers Hilaire Belloc and G. K. Chesterton in early twentieth-century England. Sociologist Robert Nisbet commented that never, after reading Belloc, did he “imagine that there could be genuine individual liberty apart from individual ownership of property.” In any case, as historian Christopher Lasch put it, “Americans took it as axiomatic that freedom had to rest on the broad distribution of property ownership.” Perhaps Americans were wrong to believe such a thing. But let us examine the matter a bit more.

This American axiom receives support from those political economists who believed that the land/labor ratio importantly determines social structure. Edward Gibbon Wakefield somewhat gave the game away in the 1830s by opposing easy access to land in Australia, lest potential wage-earners try for self-sufficiency before spending “enough” years working for others. Marx chided Wakefield for letting this “bourgeois secret” out and was in turn chided by Franz Oppenheimer, Achille Loria, and Nock for not learning the right lesson from Wakefield’s recommendations on rigging the market.

H. J. Nieboer argued (1900) that where resources are “open,” few will work for big enterprises, and the latter will (if they can) institute some form of slavery. Evsey Domar writes (1970) that one never finds “free land, free peasants, and non-working owners” together. Why? Because where political leverage allows, aspiring lords and (literal) rent-seekers will eliminate the free land, the free peasants, or both.

Colonial Policies

With this theorem in view, let us survey some colonial evidence. Enterprisers in colonies have always wanted regular supplies of cheap labor for their projects. Although there is no evidence in favor of a “right” to such a thing, these prospective employers were never discouraged. Aided by colonial administrators with the same assumptions, they gradually overcame native economic independence. Land was the key, and neither the colonizers nor the natives doubted it. No matter how hard natives worked on their holdings, colonialists decried their “idleness”—and their uncivilized failure to work for wages.

We may therefore give the overworked English Enclosures time off (for now) and look at some other cases. Consider the Japanese colonial administrator in Okinawa who complained in 1899 that the typical Okinawan held land and therefore had low expenses and few wants. For these reasons, the native saw “no need to undertake any other business, nor to save money.” Since native lands were held informally, they could not be capitalized. Such people and properties did little for the great cause of development and, shortly, the Japanese government (!) denounced Okinawans’ customary arrangements as “feudal” and set out to modernize the island. American occupation later perfected this anti-agrarian revolution. Doubtless, however, much “employment” was created in the post-World War II Okinawan service economy dominated by the U.S. military.

Turning to English colonies in the Caribbean and Africa, we find comparable phenomena. England abolished slavery in the colonies in the 1830s. (Never mind that, as historian Eric Foner comments, “Through a regressive tax system, the British working classes paid the bill for abolition.”) By this time, English policymakers had embraced Adam Smith’s view that positive incentives motivated labor better than fear of starvation or draconian punishments did. But an ocean made all the difference, Foner observes, and new peasantries made up of former slaves were “seen in London, as in the Caribbean, as a threat not simply to the economic well-being of the islands, but to civilization itself.” John Stuart Mill’s famous defense of peasant proprietors “did not extend to the blacks of the Caribbean; their desire to escape plantation labor and acquire land was perceived as incorrigible idleness.”

And so Britain’s former slave colonies put vagrancy and other laws to work and crafted taxes aimed at restricting “the freedmen’s access to land.” As Foner puts it, “Taxation has always been the state’s weapon of last resort in the effort to promote market relations within peasant societies”—that is, to force people into markets in which they were not eager to participate. In Kenya the problem was one of “dispossessing a peasantry with a preexisting stake in the soil,” but colonial legislation proved up to the task. Foner concludes that in “the Caribbean and southern and eastern Africa . . . the free market [was] conspicuous by its absence”—its workings restricted “as far as possible” in the interest of the well-off and powerful.

Historian Colin Bundy has studied the economic rise and political-economic fall of a class of independent African farmers in the Eastern Cape Colony and other parts of South Africa. Various Cape Location Acts (1869, 1876, and 1884) sought to lessen “the numbers of ‘idle squatters’ (i.e., rent-paying tenants economically active on their own behalf) on white-owned lands.” Such peasant farming “conferred . . . a degree of economic ‘independence’: an ability to withhold, if he so preferred, his labour from white landowners or other employers.” Further: “Both the farmer and the mine-owner perceived . . . the need to apply extra-economic pressures . . . to break down the peasant’s ‘independence,’ increase his wants, and to induce him to part more abundantly with his labour, but at no increased price.” In their view, “Africans had no right to continue as self-sufficient and independent farmers if this conflicted with white interests.”

Bundy observes that “Social engineering on this scale took time and effort, but the incentives were powerful.” By way of a “one man one lot” rule under the Glenn Grey Act of 1894, legislators sought to keep African farming within “certain acceptable bounds.” (Here, finally, was a use for John Locke’s famous “proviso” about leaving enough resources for others!) Evictions increased after the Anglo-Boer War (1899-1903). Rents rose (Enclosure defenders, take note), and former tenants stayed on as laborers. Tax pressure on African farmers increased. This “employers’ offensive” from 1890 to 1913 ended successfully in the South African Natives Land Act of 1913, which effectively outlawed the practices under which a particular African peasantry had shown much success.

One supposes, in standard libertarian fashion, that agricultural employment increased thereafter along with land values. But that was the whole point: to proletarianize independent peasants by leaving them no option but to work for wages for Boers and Brits on farms, in mines, and elsewhere. Whether more “employment” was good in itself seems unclear. We can, at least, impute the outcome back to specific political intentions and levers. So much for the colonies, then—and all this without even mentioning the two greatest monuments to England’s defense of free markets: Ireland and India.

Telescopic Land Reform

Colonial bureaucrats and employers saw a definite connection between small-scale landownership and independence, and resolved to cut that independence short. By now we begin to see that “the subsidy of history”—to use Kevin Carson’s useful term—has been very large indeed. A number of libertarians have understood the problem at hand in pretty much these terms. They have tended, however, to dwell on instances far away from our own shores, writing about land reform in Latin America, South Africa, Asia, and other places. In the mid-1970s Murray Rothbard, Roy Childs, and others addressed the matter.

Rothbard wrote that “free-market economists . . . go to Asia and Latin America and urge the people to adopt the free market and private property rights” while ignoring “the suppression of the genuine private property of the peasants by the exactions of quasi-feudal landlords. . . .” In this vacuum, only the local communists appeared to support “the peasants’ struggle for their property. . . .” And so libertarians “allowed themselves to become supporters of feudal landlords and land monopolists in the name of ‘private property.’”

Decades earlier, that very conservative German liberal economist Wilhelm Röpke wrote that German history would have gone better had Prussia undergone “a radical agrarian reform breaking up the great estates and putting peasant farms in their place.” He adds: “Influential Social Democratic leaders opposed the transformation of the great estates in Prussia into peasant holdings . . . as a ‘retrograde step.’” Röpke called for freeing Germany from “agrarian and industrial feudalism” and the ills “of proletarization, of concentration and overorganization, of the agglomeration of industrial power and the destruction of the individuality of labor. . . .” In his view, the typical proletarianized worker or clerk wanted “a small house of his own with a garden and a goat shed, an undisturbed family life without training courses, mass meetings, processions, and political flag days; dignity and pleasure in his work, an independent if modest existence. . . .”

Why Go Abroad?

For Enclosure-like pressures on small-holders closer to home, we need look no farther than states like Kentucky, where courts vigorously enforced the full feudal rigor of the “broad form deed,” thereby ensuring the strip mining of many a mountaineer out of productive existence down to the early 1990s. With the system so long stacked in favor of big landholders and bankers, well subsidized by history, one begins to understand the popularity of those New Deal programs that promoted individual home ownership.

Economist Michael Perelman has confirmed a direct relationship between rural labor without independent means of support and the applied politics of English classical economists. The latter preached a great gospel of “work,” mainly for others, who ought to be doing this work. Except for a narrow class of Dissenting Protestant factory owners, those most vigorously espousing this gospel were not themselves noted for doing a lot of work. Together, however, owners and economists said in effect, “Work for us, join the armed forces, or emigrate, ye doughty Angles, Saxons, Jutes, and Scots.” And emigrate they did, leaving us with an American folk wisdom in which old times in England, Scotland, and Ireland were not that great. (This folk memory may have at least as much heuristic value as latter-day econometric claims that everyone became better off in the new division of labor.)

And so we return to Henry George’s problem: How did Americans manage as a society to seize so much land, incur whatever moral guilt goes with the seizures, and then not bloody have any of it? The chief mechanism was precisely the political means to wealth that Oppenheimer and Nock analyzed. The reason Brisco County Jr.’s “Robber Barons” struck the right note is that there were such individuals. California was a laboratory case, as George well knew, of the successful primitive accumulation of land by a microscopically small class of state-made men. As with ontogeny and phylogeny, Western accumulation recapitulated Eastern accumulation. From such causes arose the famous “end” of the frontier circa 1893. But open land did not so much disappear naturally as succumb to preemption. And then, with perfect timing, the conservation movement put enormous quantities of land beyond the reach of actual settlers.

As for those Americans who currently own property, they typically own it after 20 or more years of bank payments. Is land so genuinely scarce that a bank must always be in the middle? This remains our central question. Certainly, nineteenth-century allocations played a lasting role, and later political interventions added to concentrated property ownership.

And what of the promotion of “easy” home ownership in recent years? It is a product of 1) the widespread delusion, in the wake of Lyndon Johnson’s and Richard Nixon’s inflationary financing of the Vietnam War, that real estate constitutes the ultimate inflation hedge, and 2) the specific dynamics of the expansionist fractional-reserve banking under new rules (“deregulation”) increasing moral hazards for bankers.

There is also the unhappy fact of property taxes—our chief surviving feudal due. Fail to pay those, and the state enrolls a new owner on your former property. This reduces somewhat the fact of private property in land.

Independence, Republicanism, and Liberty

Some classical liberals and libertarians downgrade personal independence. Better to participate in the going order and enjoy a wider array of comforts, they say. But socialists and corporate liberals can play the same game—and have for over a century. It seems to me that those libertarians who join in this refrain rather willfully misconstrue a very simple point: They hail the joys of the division of labor, the higher degree of civilization (that is, more stuff) to be gained from dependence, interdependence, and sundry trickles of income and utility down and up. But already in 1936, Southern agrarian John Crowe Ransom noticed a flaw in this reasoning, writing, “[I]ncome is not enough, and the distribution of income is not enough. If those blessings sufficed, we might as well come to collectivism at once; for that is probably the quickest way to get them.” If greater choice among consumer goods makes up for lost independence, then the case for socialism (or X) would be clinched, provided socialism (or X) could deliver the economic goods (where “X” stands for any political ideology offering us the same stuff/independence tradeoff.)

I doubt we are necessarily “better off” merely because of employment. We need to know more, including why particular sets of choices exist in the first place. Back in the ’60s, Selective Service used to “channel” us into the “right” occupations by threatening to draft us. Given the parameters, our choices were “free.” If it’s that easy, then we are always free, no matter the historical and institutional constraints. Similarly, “To Hell or Connaught” was a choice, and never mind that Oliver Cromwell and his army arbitrarily created this particular prisoner’s dilemma. But perhaps I have leapt from choices among goods to choices between ways of life. Why? Let us look into this.

What if proletarianization is not the ideal form of human life? What if a complex division of labor is merely useful or convenient, but not a moral imperative? What if most of us are hirelings, well paid or otherwise, and then we learn what that status amounts to? The post-Marxist socialist André Gorz writes, “Capitalism owes its political stability to the fact that, in return for the dispossession and growing constraints experienced at work, individuals enjoy the possibility of building an apparently growing sphere of individual autonomy outside of work.” Our interest here is the “autonomy” mentioned, which sounds like a near cousin of “independence.” The sentiment seems sound enough, and the partial convergence of Röpke and Gorz is eye-opening.

Now in the view of Quentin Skinner (a modern republican theorist of note), unfreedom arises both from direct, forcible coercion and from institutional arrangements that make people dependent, since the latter always contain the possibility (realized or not) of arbitrary interference and coercion. Such discussions usually center on the form of state. Utilitarian liberals like Henry Sidgwick did not care about forms. If the Sublime Porte, Tsar, or King of England leaves us substantially alone, we are “free,” and that is that. In Skinner’s view, if those worthies can on their own motion change their policy of leaving us alone, we are not free, no matter what they are doing right now. Freedom requires that we not be menaced by latent unknown powers.

Freedom in this sense is liberty—a shared civic or public good. Like many real public goods it is not provided by the state, indeed the state may be its chief enemy. Law and settled custom may provide this public good, and consumer goods—the people’s pottage—do not compensate for abandoning such an order, where it exists. Today, people often work long hours to buy some independence. In another time, they began with some independence, and then chose how hard to work. Now we see, perhaps, the difference between choices among economic goods and past choices between systems structuring our choices.

Widespread landownership long supported a kind of liberal-republican independence. Perhaps we should reexamine the nexus and ask ourselves how, in Donald Davidson’s words, we “let the freehold pass,” and whether that was really for the best.

The first and probably the most important subsidy of history is land theft, by which peasant majorities were deprived of their just property rights and turned into tenants forced to pay rent based on the artificial “property” titles of state-privileged elites.

Of course, all such artificial titles not founded on appropriation by individual labor are completely illegitimate.

As Ludwig von Mises pointed out in Socialism, the normal functioning of the market never results in a state of affairs in which most of the land of a country is “owned” by a tiny class of absentee landlords and the peasant majority pay rent for the land they work. Wherever it is found, it is the result of past coercion and robbery.

Murray Rothbard, in The Ethics of Liberty, explained the injustice of feudal landlordism:

But suppose that centuries ago, Smith was tilling the soil and therefore legitimately owning the land; and then that Jones came along and settled down near Smith, claiming by use of coercion the title to Smith’s land, and extracting payment or “rent” from Smith for the privilege of continuing to till the soil. Suppose that now, centuries later, Smith’s descendants (or, for that matter, other unrelated families) are now tilling the soil, while Jones’s descendants, or those who purchased their claims, still continue to exact tribute from the modern tillers.Where is the true property right in such a case? It should be clear that here . . . we have a case of continuing aggression against the true owners—the true possessors—of the land, the tillers, or peasants, by the illegitimate owner, the man whose original and continuing claim to the land and its fruits has come from coercion and violence. Just as the original Jones was a continuing aggressor against the original Smith, so the modern peasants are being aggressed against by the modern holder of the Jones-derived land title. In this case of what we might call “feudalism” or “land monopoly,” the feudal or monopolist landlords have no legitimate claim to the property. The current “tenants,” or peasants, should be the absolute owners of their property, and, as in the case of slavery, the land titles should be transferred to the peasants, without compensation to the monopoly landlords.

So rather than defending all existing land titles in the name of the “sanctity of property” and protesting when some left-wing government institutes a land reform that transfers feudal land titles to the peasantry, Rothbard favored 1) dividing up Southern plantations and giving freed American slaves “forty acres and a mule,” and 2) transferring the latifundia from Latin American landed oligarchies to the peasants.

In the Old World, especially Britain (where the Industrial Revolution began), the expropriation of the peasant majority by a politically dominant landed oligarchy took place over several centuries in the late medieval and early modern period. It began with the enclosure of the open fields in the late Middle Ages. Under the Tudors, Church fiefdoms (especially monastic lands) were expropriated by the state and distributed among the landed aristocracy. The new “owners” evicted or rack-rented the peasants.

Expropriating from the Peasantry

The Restoration Parliament of the seventeenth century carried out a series of land “reforms” that abolished feudal land tenure altogether—but only upward. There were two ways Parliament could have abolished feudalism and reformed property. It might have treated the customary possessive rights of the peasantry as genuine title to property in the modern sense, and then abolished their rents. But what it actually did, instead, was to treat the artificial “property rights” of the landed aristocracy, in feudal legal theory, as real property rights in the modern sense; the landed classes were given full legal title, and the peasants were transformed into tenants at will with no customary restriction on the rents that could be charged. The most important component of this “reform” was the Statute of Frauds of 1677, which nullified rights of copyhold by making them unenforceable in royal courts.

Finally, the Parliamentary Enclosures of the eighteenth and early nineteenth century robbed the peasantry of their rights of common. The propertied classes of England saw the economic independence provided by the commons as a threat, first to an adequate supply of agricultural wage labor on the landed oligarchy’s own land, and later to an adequate supply of factory labor willing to work the long hours and low pay demanded by the owners. The literature of the propertied classes of the time was quite explicit on their motivation: the laboring classes would not work hard enough or cheaply enough so long as they had independent access to the means of subsistence. They had to be made as poor and hungry as possible so that they would be willing to accept work on whatever terms it was offered.

A version of the same phenomenon took place in the Third World. In European colonies where a large native peasantry already lived, states sometimes granted quasi-feudal titles to landed elites to collect rent from those already living on and cultivating the land; a good example is latifundismo, which prevails in Latin America to the present day. Another example is British East Africa. The most fertile 20 percent of Kenya was stolen by the colonial authorities, and the native peasantry evicted, so the land could be used for cash-crop farming by white settlers (using the labor of the evicted peasantry, of course, to work their own former land). As for those who remained on their own land, they were “encouraged” to enter the wage-labor market by a stiff poll tax that had to be paid in cash. Multiply these examples by a hundred and you get a bare hint of the sheer scale of robbery over the past 500 years.

Contrary to Mises’s rosy version of the Industrial Revolution in Human Action, factory owners were not innocent in all of this. Mises claimed that the capital investments on which the factory system was built came largely from hard-working and thrifty workmen who saved their own earnings as investment capital. In fact, however, they were junior partners of the landed elites, with much of their investment capital coming either from the Whig landed oligarchy or from the overseas fruits of mercantilism, slavery, and colonialism.

In addition, factory employers depended on harsh authoritarian measures by the government to keep labor under control and reduce its bargaining power. In England the Laws of Settlement acted as a sort of internal passport system, preventing workers from traveling outside the parish of their birth without government permission. Thus workers were prevented from “voting with their feet” in search of better-paying jobs. You might think this would have worked to the disadvantage of employers in underpopulated areas, like Manchester and other areas of the industrial north. But never fear: the state came to the employers’ rescue. Because workers were forbidden to migrate on their own in search of better pay, employers were freed from the necessity of offering high enough wages to attract free agents; instead, they were able to “hire” workers auctioned off by the parish Poor Law authorities on terms set by collusion between the authorities and employers.

Legalized Discrimination Against Laborers

The Combination Laws, which prevented workers from freely associating to bargain with employers, were enforced entirely by administrative law without any protections of common-law due process. And they were only enforced against combination by workers, not against combination by employers (such as blacklisting “troublemakers” and collusive setting of wages). The Riot Act (1714) and other police-state legislation during the Napoleonic Wars were used to stem the threat of domestic revolution, essentially turning the English working class into an occupied enemy population. Such legislation criminalized most forms of association.

Even fraternal associations for mutual aid, burial and sick benefits, and the like operated in the face of hostility from the state, according to historians of the friendly-society movement such as Bob James and Peter Gray. Under the terms of the Combination Act, friendly societies were subjected to close judicial supervision lest direct craft production be organized for barter among the unemployed, or the societies’ benefits cross the line and function as de facto unemployment insurance for striking workers. The Corresponding Societies Act, passed around the same time, prohibited all societies that administered secret oaths or were federated on a national scale.

So the Industrial Revolution was, in fact, built on a system of legal peonage in which employers were directly implicated. The form taken by the factory system surely reflects this history. In a Britain composed of peasant smallholders, with no restraints on free association, workers would have been free to mobilize their own properties as capital through mutual credit institutions. Absentee ownership and hierarchy would likely have been far, far less prevalent, and the factory system where it existed far less oppressive and authoritarian.

A similar process occurred in the colonization of settler societies like America and Australia, by which the colonial powers and their landed elites attempted to replicate feudal patterns of property ownership. In such colonies, the state preempted ownership of vacant land and restricted working people’s access to it. Sometimes they gave title to vacant land to privileged land speculators, who were able to charge rent to those who homesteaded it (the legitimate owners).

E. G. Wakefield, an early nineteenth-century British theorist of colonialism, advocated just such preemption on the same grounds that the propertied and employing classes of Britain had supported Enclosure: it was easier to hire labor on favorable terms to the employer. In England and America, he wrote:

In colonies, labourers for hire are scarce. The scarcity of labourers for hire is the universal complaint of colonies. It is the one cause, both of the high wages which put the colonial labourer at his ease, and of the exorbitant wages which sometimes harass the capitalist. . . .

Where land is cheap and all men are free, where every one who so pleases can obtain a piece of land for himself, not only is labour very dear, as respects the labourers’ share of the product, but the difficulty is to obtain combined labour at any price.

Consequently, “[f]ew, even of those whose lives are unusually long, can accumulate great masses of wealth.”

Wakefield’s disciple, Thomas Merivale, wrote of the “urgent desire for cheaper and more subservient labourers—for a class to whom the capitalist might dictate terms, instead of being dictated to by them.”

Land preemption was a major element of colonial policy in early American history. Gary Nash, in Class and Society in Early America, described land grants in colonial America comparable to those of William I in England after the Conquest. In New York, for example, the largest estates granted by the British colonial administration (after the New Netherlands was acquired in the Dutch Wars) ranged from the hundreds of thousands to over a million acres. Governors continued to grant tracts of land in the hundreds of thousands of acres to their favorites, well into the eighteenth century. Under Governor Fletcher, some three-quarters of available land was granted to 30 persons.

Albert Jay Nock, in Our Enemy, the State, argued that “from the time of the first colonial settlement to the present day, America has been regarded as a practically limitless field for speculation in rental values.” Many leading figures in the late colonial and early republican period were prominent investors in the great land companies, including George Washington in the Ohio, Mississippi, and Potomac Companies; Patrick Henry in the Yazoo Company; Benjamin Franklin in the Vandalia Company, and so forth.

In The Ethics of Liberty, Rothbard condemned such preemption (“land-engrossing, where arbitrary claims to virgin land are used to keep first-transformers out of that land”) on the same grounds that he criticized feudal landlordism. He called for voiding all current titles to vacant and unimproved land, and opening it up to free homesteading. In addition, in cases where current mortgage holders and landlords trace their title to state grants of land, the proper claim lies with those who first homesteaded the land, or their heirs and assigns.

The Homestead Act of 1862, an apparent exception to this general trend, was really just another illustration of it. The majority of land, rather than being claimed under the terms of the Homestead Act, was auctioned to the highest bidder. Even for land covered by the Act, according to Howard Zinn, the $200 fee was beyond the reach of many. As a result, much of the land was not homesteaded on Lockean principles at all, but initially went to speculators before being partitioned and resold to homesteaders. And compared to the 50 million acres covered by homestead legislation, 100 million acres were given away as railroad land grants during the Civil War—free of charge! In other words, the privileged classes got the gravy, and ordinary homesteaders got the bone.

Keeping the System Going

What I have described here are only the initial acts of coercion and robbery on which our existing form of industrial capitalism was founded. Of course it didn’t stop there. Once the system was up and running, it depended on the state’s ongoing efforts to maintain a legal structure of privilege, based on artificial property rights and artificial scarcity: enforcement of absentee titles to vacant and unimproved land; entry barriers for the banking industry to make credit artificially expensive and scarce; the artificial property rights of patent and copyright; and more. And starting in the late nineteenth century the modern form of corporate capitalism depended on even more massive state intervention: subsidies to long-distance shipping to make market areas and firm size artificially large; the cartelizing effects of patents and tariffs; regulatory cartelization; and entire industries and sectors of the economy either brought into existence or guaranteed a taxpayer-funded market by the post-1941 perpetual war economy.

Contrary to popular mythology, the New Deal was not a departure from some preexisting idyllic state of “laissez faire.” There never was anything remotely approaching laissez faire. Capitalism—that is, the existing historical system as it actually developed—has had very little to do with free markets and a great deal to do with robbery and coercion.

This is not to say that all avenues to economic advancement through independent entrepreneurship have been closed off. But it’s much more of an uphill struggle than it would be in a free market, and the field is unfairly tilted in favor of the big players.

In seeking to institute a genuine free market, libertarians shouldn’t lose sight of these facts. What lessons are libertarians to learn from the previous historical account?

First, there is nothing “libertarian” about the instinctive tendency to rally to the defense of existing property titles without regard to justice. As Karl Hess said in The Libertarian Forum, back in 1969,

[L]ibertarianism wants to advance principles of property but . . . it in no way wishes to defend. . . all property which now is called private. Much of that property is stolen. Much is of dubious title. All of it is deeply intertwined with an immoral, coercive state system which has condoned, built on, and profited from slavery; has expanded through and exploited a brutal and aggressive imperial and colonial foreign policy, and continues to hold the people in a roughly serf-master relationship to political-economic power concentrations.

Second, in advocating free-market reform, we must consider the role of this historical legacy of injustice (the subsidy of history) in determining the winners under the present system. A “free-market reform” that simply locks in the beneficiaries of past robbery and privilege, and ratifies the past theft from which they benefit, will merely reward injustice and secure its ill-gotten gains.

From a libertarian ethical standpoint, the standard model of “privatization” (selling off state property to a large, politically connected private corporation, on terms most advantageous to the corporation) is therefore highly dubious. That’s especially true considering that much of the property was created in the first place—at taxpayer expense—for the primary purpose of subsidizing the operating costs of big business. Much of the state-owned utility and transportation infrastructure in the Third World was created, at the behest of transnational financial elites, as a precondition for profitable Western capital investment. And the odious debt thus incurred, often by corrupt dictatorships acting in collusion with global finance, is then used by the World Bank to blackmail those countries into selling off their infrastructure to the very same transnational corporations it was created to benefit—usually at pennies on the dollar.

An Appropriate Model for Privatization

Rothbard’s model of privatization is far superior: to void state titles to property and treat it as unowned, subject to immediate homesteading by those actually mixing their labor with it. That would mean that state universities would be transformed into the property of their students or faculty, as consumer or producer cooperatives. Government-owned utilities would become consumer cooperatives owned by ratepayers, and state-owned factories would be handed over to the work force and reorganized as worker cooperatives.

We must also be wary of pseudo-Coasean arguments that it “doesn’t matter” who the property was originally stolen from, because it will end up in the hands of the “most efficient” owner. That’s essentially the same argument used for eminent domain. Regardless of whose hands the property winds up in, the rightful owners and their descendants—who never received compensation—are out the value of what was stolen from them. And even the most inefficient ways of organizing production are pretty “efficient,” comparatively speaking, when you have the competitive advantage of working with stolen property.

Besides, there is no such thing as generic “efficiency”; efficiency depends on the owner’s purpose. The most efficient technique for subsistence farming on a small plot—economizing on land by building soil and adding intensive labor inputs—is entirely different from that for a feudal oligarch producing cash crops with access to more stolen land than he could possibly use, and often holding a majority of his stolen land out of use altogether. In any case, the rightful owner would no doubt find it far more “efficient” to be feeding himself on his own land, than starving in a shantytown because he can’t afford to buy even the cheapest food from those “efficient” plantations occupying his stolen land.

The actual system of political economy that so many corporate apologists refer to as “our free market system” has in fact been characterized from the beginning by robbery. We must beware of “free market reforms” carried out by the robbers. They amount in practice to allowing the robbers—hands still full of loot—to say: “All right, no more stealing, starting . . . now!”

In the battle over economics, the victory of the market seemed decisive. It had not been easy. Since the days of Adam Smith, the world economy had to cross the turbulent waters of colonialism, mercantilism, socialism, fascism, and communism before liberalization, globalization, and privatization became accepted as part of our general vocabulary. But even before the process of consolidation is over, it now seems that free market ideas are faced with insidious threats as never before.

Indeed, the popular appeal of socialist ideas was not primarily based on economic principles but on ethical and political ones—an egalitarian world view. (Discussions rarely focused on the morality of the methods that would be necessary to create such a world order.) On the other hand, many advocates of the free market rarely went beyond economics and utility, and generally ignored the moral basis of the marketplace.

This is best reflected in the criticism of the market that has inevitably followed as the so-called “transition” economies in eastern Europe, Russia, and Latin America have run into rough weather. This criticism has gained considerable credibility after the turmoil in the currency markets in Asia over the past year. Not surprisingly, “liberalism with a human face” has become the new mantra.

No one today epitomizes this sentiment more than Amartya Sen, the Indian-born 1998 Nobel laureate in economics. In a congratulatory message the president of India, K. R. Narayanan, said, “You have brought to bear upon the science of economics a compassion for the ordinary human being and a vision of an egalitarian world society.”

Empowering the Poor

Sen’s recipe for inducing long-term sustained growth involves empowering of the poor through education, health, entitlements, and removal of gender disparity. His method for delivering these services is democracy. And he mainly rests his case on the evidence that independent democratic nations have been more successful in eliminating famines than others.

There is much more than a grain of truth in Sen’s arguments. However, grains are necessary but not sufficient for a balanced diet. Democracy may be a necessary condition for alleviating poverty, but it is not a sufficient condition. Otherwise, India, the largest democracy, would not have remained in the club of poorest nations of the world.

Let us take a closer look at a few of Sen’s propositions in broad context.

Democracies, with periodic elections and a free press, keep elected representatives on their toes and the government more responsive to the population. In times of large-scale tragedies, such as famines or floods, when opposition parties and the media are on the lookout for opportunities to discredit the authorities, representatives work overtime to get as much relief as possible to their constituents.

Indeed, so successful has this process been that, today, whether in the United States or India, politicians continually vie with each other to declare some of their constituents victims of one disaster or another—famine, flood, fire, cyclone, earthquake, crop failure, indebtedness, bankruptcy, job loss, child neglect, old age, to name just a few. Pork-barrel politics is the natural outcome of such an approach. After all, if the benefits can be appropriated to a few and the cost distributed among the whole population, it would be irrational not to try to corner as large a share of the “public pie” as possible.

Apart from the social and economic damage it may cause, this approach legitimizes state intervention through control and expropriation, even if only in the “social sectors.” Once that approach to governance is accepted, it becomes almost impossible to draw a line, since all such intervention is always justified by some alleged social good.

Moreover, this governance becomes extremely short-sighted, moving from one opinion poll to another, from one election to the next. Such a government is hardly ever in a position to concentrate on programs that require a much longer time frame, for example, education or health, two of Sen’s principal concerns. On one hand, he laments the failure of the leftist forces in democratic India to capitalize on their natural constituency among the poor by stressing these two most basic of “entitlements.” On the other hand, he points to the success of the non-democratic, socialist economies in those areas, implying an astonishing lack of regard for the methods that were adopted by these countries to achieve that “success.”

There is no doubt that education and health care are the two basic tools with which an individual can improve himself. So Sen’s concern for those who apparently cannot secure these, and his fear that they may not benefit from a liberalized and globalized economy, need to be addressed.

The Power of Vested Interests

As Sen consistently points out, the performance of the Indian state in primary education and health has been dismal. Indeed, the power of vested interests and pork-barrel politics in the field of education is distinctly visible. For instance, in a country where almost half the population is considered illiterate, higher education is most heavily subsidized! Or at a time when provincial governments can only try to ensure at least a primary school within a reasonable distance of every village, students in Delhi travel almost free to their colleges and universities. Icing on top of their cheap education cake! Another problem is that the content of education has been completely politicized.

Furthermore, there is no real evidence that opposition to liberalization comes from the millions of illiterate, low-skilled workers, an overwhelming majority of whom are engaged in the informal and unorganized sectors of the economy. They provide a range of goods and services—from collecting garbage to manufacturing vehicles—which either the state has failed to deliver despite promises or which the formal sector has been unable to provide. (There is no welfare to speak of.) Clearly, then, the basic problem is not lack of education, but almost total lack of employment opportunity in the formal sector.

According to official estimates, barely 30 million of India’s work force of 400 million are in the organized sector. Not surprisingly, it is this small but entrenched minority, who fear the loss of their unearned privileges, that are at the forefront of the anti-reform group. Their share of the national pie is best indicated by the fact that since the 1970s, while the consumer price index increased by about 750 percent, per capita emoluments rose by a whopping 1,600 percent—a remarkable demonstration of the power of vested interests. The only other explanation is an amazing increase in their productivity. No wonder that the quartet of politicians, bureaucrats, organized labor, and businessmen who have benefited from state patronage and thrived in a protected environment are so keen to defend the status quo.

By adopting the “socialist pattern of development” since the 1950s, the Indian state has been very successful in choking the economy and thereby wasting the most precious of all resources, the spirit and enterprise of her people. As P. T. Bauer, the other development economist deserving of the Nobel Prize, has said, it is policy not poverty that keeps people poor.

The result of Indian socialism has been rampant underemployment, and consequently there seems to be little rational basis for the illiterate to demand better education. Is it any surprise that despite an enrollment of over 90 percent at the primary-school level, the dropout rate after five years ranges between 35 and 40 percent.

Land Reform

Another issue Sen has stressed is land reform. But even the much talked-of land reforms in states like West Bengal have not been able to stimulate growth. Forcible land distribution has led to fragmentation of holding, and productivity has not improved much as a result. This has led to the rise of political brokers in the countryside and forced people to stay on the land. Lower labor mobility has permitted the state government to ignore the virtual collapse of the industrial sector. Bureaucrats are more concerned about preserving the privileges of the existing work force than about increasing employment opportunities. Clearly, land reform in West Bengal has, perhaps unintentionally, helped slow the pace of urbanization, industrialization, and, consequently economic growth. Seen in this light, it should not surprise anyone that West Bengal, which peaked in those respects in 1947, has been sliding over the past decades.

Land reform is necessary. But this cannot be isolated from general economic policy. Today, the state is the largest landlord and is increasingly involved in disputes with indigenous people, whose title to their traditional land is not recognized. Rural communities are being torn apart by contentious litigation and frequent violence. Maintenance of land records by state governments is pathetic and open to rampant manipulation and corruption. Also, land reform cannot be a one-way street to land distribution. There is an urgent need to recognize that productivity, efficiency, and economies of scale are as relevant in agriculture as they are in other sectors of the economy. By obstructing consolidation of landholding in the name of land distribution, India has been spectacularly successful in making agriculture unviable, sealing the fate of the 70 percent of the population that lives in perpetual poverty in our countryside.

To successfully move away from this self-destructive course, a new vision is required. Sen’s concern for the poor, the hungry, and the deprived runs very deep. But there is a need to go beyond good intentions, which, though necessary, cannot be sufficient for the alleviation of India’s ills. Sen deserves credit for highlighting the need to re-establish the relationship between ethics and economics. However, the ethical premise may have to be quite different from the one Sen proposes.

The Morality of Free Exchange

It must be recognized that voluntary exchange in the marketplace is infinitely more moral than expropriation under the sponsorship of the state. It has to be acknowledged that the best way to empower the poor is to allow the market to operate unhindered so that even the poorest have the widest range of options.

The world has taken over two hundred years just to begin to appreciate the power of Adam Smith’s “invisible hand” in economics. Let’s hope we don’t take another two hundred years to appreciate the morality of the marketplace. It will be a tragedy if after winning the battle over economics, the war is lost on ethics.