Keeping the poor in their place - Politicsweb

Gabriel Crouse 
In 2009, Moeletsi Mbeki wrote a book on The Architects of Poverty, namely us – South Africans in general and the state (past and present) in particular.

Using Marxist dialectics, he concluded that in order for us to create wealth on a massive scale the first thing to do was roll out title deeds to half of the country currently deprived. Even among those who received the book well this point was hardly repeated.

Last year, Roelf Meyer spoke at NAMPO, an agricultural fair in the Free State, which happens to be the largest on the continent. He made a similar argument. We have an extremely redistributive fiscal system and extreme wealth inequality. The economy’s shrinking. Things are bad and the orthodox solutions are not enough.

Calls to deprive white citizens of their property arbitrarily are unsurprising from this position. But things are, in a way, even worse than they seem. About 5 million citizens in RDP houses lack proper title, maybe 6.5 million. The state has 4 000 farms that it is just sitting on. Many more millions in the former Bantustans lack title, living on land owned by the state and controlled by traditional authorities.

At the time, Ramaphosa was gearing himself up to lead the country and Meyer seemed to be preparing himself for another grand negotiation with his old partner. This time to protect the constitution. I was thrilled.

A treasury official would later estimate the dead capital’s potential value at R180 billion. Bring the dead to life; that is radical, I thought. That will be the long hoped-for second peaceful revolution.

Meyer and Mbeki’s argument is logical and forceful. The curious thing is that this argument did not enter the mainstream until the ANC vowed to mandate the arbitrary confiscation of property at the end of last year. Since then President Ramaphosa has made a show of handing out a few title deeds.

The same ANC Nasrec conference that vowed to arbitrarily confiscate property also made this resolution; to “accelerate the rolling out of title deeds to black South Africans in order to guarantee their security of tenure and to provide them with instruments of financial control”, and to “democratise control and administration of areas under communal land tenure”.

Sounds like great news. But there is a clash here between the ANC and EFF. Julius Malema recently tweeted that “every title deed will be meaningless and the state will be the custodian of all the land”. And the ANC is also in conflict with itself, unable to take a square stance on title deeds with President Ramaphosa recently promising to leave tribal land untouched. Even at the level of the relatively pro-market Motlanthe High Level Panel Report, there is self-contradiction in the argument both for the roll out of title deeds and against.

In other words, the debate about untitled South Africans is a mess. Calls for title are made clearly and consistently by defenders of universal property rights. The same calls are made by EWC supporters, though the apparent priority is to shut their opponents up. Meanwhile, nearly half of our citizens continue to live without title on state-owned land with little reason to expect change.

The question is why, if they really do want to entitle poor South Africans, the powerful have not done so already, systematically, for decades? To try to find the answer I turned to the elite’s academic base, the “thought leaders”.

Toward the end of last year, UKZN Press released a book on the topic Meyer and Mbeki tried to put on the SA agenda. Untitled: Securing Land Tenure in Urban and Rural South Africa is a fat tome written by some of SA’s top public intellectuals in the land reform arena – Donna Hornby, Rosalie Kingwill, Lauren Royston, and Ben Cousins (among others). They agree on at least one score: a majority of citizens live outside the formal property system. According to a table on page 8, around 10% of these inhabit state-owned RDPs and over 30% (17 million) live in the former “tribal homelands”.

On the very same page, the Untitled authors open a sustained attack, but not on those who keep the untitled untitled. Instead they go for the conception of title itself and an economist named Hernando de Soto, said to be a tool of the World Bank in thrall to a “neo-liberal” agenda that makes claims such as “property rights can make capitalism work for the poor”. The Untitled aficionados think this is the pit of deplorability.

The name De Soto rang some sort of bell, but like most South Africans I had been kept in the dark by educators and commentariat possibly because De Soto is one of the pins that pop SA exceptionalism.

Devilish De Soto and the Better Part of History

All civil identities depend on shared stories, especially origin stories. We South Africans tend to hold two mutually incompatible truths at the core of our origin story. First, the revolution was an armed struggle won by great heroes of war. Second, the revolution was a peaceful miracle where reason and love won over hate and stupidity like nowhere else.

Except Peru. Around the time Mandela was released, “the world” believed that country was also on the brink of civil war. Their economy was struggling and revolutionaries riled unemployed young men with variations on the phrase property is theft so let’s steal. Failing which burn it all. This particular group of anti-property terrorists was called The Shining Path and De Soto beat them without firing a gun or threatening violence.

De Soto wrote a book called The Other Path in which he argued that social conventions in slums and rural backwaters that designated who owns what should be respected by being reflected in the form of government-issued title deeds. Then people would have incentives to improve their dwellings, and billing addresses and real property that could be used as collateral for banks loans to expand their economic horizons.

Trouble continued, but eventually Peruvians said, hmm yes, let’s try that. Their economy started ticking away at nearly 5% GDP growth for 15 years while the “Shining Path” turned into a dirty old joke. Civil war clamped, economic development for the majority. Wait, wasn’t that supposed to be us?

As a very rough comparison, between 1990 and 2016 our economy increased by a factor of 2.5, Peru’s increased by a factor of 7. Using the Gini coefficient as a measure of inequality, the CIA World Factbook ranks us second worst (behind Lesotho) with an upward trend, while Peru’s reduction of inequality has dropped it to 40th place on a downward (better) trend.

De Soto’s story bruises egos further, especially among safe-space authors. While he and his Institute for Liberty and Democracy were researching and advocating in Peru’s slums, they were also under attack. Naturally the Shining Path found him extremely offensive, so they bombed ILD’s offices. Three were killed. De Soto kept going.

In all the Shining Path killed over 30 000, but survivors kept talking, kept saying, ‘Come on guys, De Soto’s idea worked everywhere else – let’s give title a try’. After the great victory, De Soto was celebrated the world over and called upon for advice by over thirty heads of state. This is the kind of thing the Untitled authors don’t mention.

What the authors do say is that De Soto used the term “extra-legal” to demean people. Not so. He used it for fine folk overlooked by law that make up their own property systems. As opposed to “illegal” which is people actively breaking the law for anti-social ends. The Untitled authors write past this and contend De Soto’s terminology cast Peruvian peasants as a “disorganised, even chaotic or anarchic ‘other’”.

Again, no. As a native Peruvian, he didn’t treat anyone as “other” and his underlying anthropological claim is not that poor people are deeply different. Rather he is convinced that they and the rich are intrinsically much alike. He watched his poorer compatriots break sweat and take risks as entrepreneurial capitalists that hit up against low ceilings without collateral or accounts. He also drew from the wider world. Extra-legal depressed economies hobble along in places as culturally different as Latin America, the former Soviet Union and Africa, while titled markets succeed in places as diverse as Japan, Switzerland and California.

The authors have several more linguistic complaints; “form” should be “arrangement” and “traditional” should often be “neo-customary”. What’s in a name? Someone who has a title deed is indeed one point ahead. With title, one has a warrant of ownership to take to banks, insurance companies and courts. To point out that five billion people lack that around the world is not demeaning. It’s the first step to solving the problem; knowing the problem.

What is demeaning is trying to obscure the difference between titled and untitled folk with verbiage and bad poetry. This is a typical escape route also taken by social scientists of the apartheid era who mused between “bantustan” and “tribal homeland”.

Our History and “Theirs”

This is the deep connection between the Untitled authors and the mad scientists of apartheid: a conviction in African exceptionalism. Here, for example, is Lauren Royston: “[I]n Africa power over land is dependent on membership of a social group; access to land hinges on group membership”. Yes, that is true. It is also true on every other continent, sub-continent and island. As De Soto puts it, “property is the manifestation of a social contract” whether formalized or not. While the Untitled aficionados see something exceptional, De Soto sees the same old game.

A century ago, Switzerland was a modular country that included German, French, Italian and Romanish tribes. Systems of ownership were modulated according to membership of sub-national (ethnic/racial/language) groups. Then a national register was developed which respected these social contracts by reflecting them in commensurable forms of title. This bridged markets, expanded finance and bolstered democratic unity in what is now one of the richest countries in the world. I’m no fan of Switzerland (too long a tax haven), but this is impressive given that the country’s most abundant natural resource is snow.

Here is De Soto on his favourite case: “In California just after the gold rush of 1849 there were some eight hundred separate property jurisdictions, each with its own records and individual regulations established by local consensus” or as the authors would prefer “social groups” on whose membership land ownership hinged. Then what?

“Throughout the US, from California to Florida, claim associations agreed on their own rules and elected officers. It took more than one hundred years, well into the late nineteenth century, for the US government to pass special statutes that integrated and formalized US assets. By enacting more than 35 pre-emption and mining statutes, Congress gradually managed to integrate into one system the informal property rules created by millions of immigrants and squatters. The result was an integrated property market that fuelled the US’s explosive growth thereafter”.

The US’s explosive growth has several nefarious strands, but why pretend that evil is the only source of progress? The world’s largest economy by country stands contiguous with the world’s largest old, formally titled, real estate market. I would think the Untitled aficionados might find that noteworthy.

Another example De Soto draws on is Japan. As in Switzerland, the formalization process was fast, kicking in after WWII, and the economic boom that followed was so dazzling it got called the “economic miracle” of the last century. As always, “miracle” overstated things and Japan, together with the recent US-induced global recession, forces lessons against overleveraging the housing market. Since I find myself punting De Soto, I must note that there can be too much of a good thing – mortgage bonds – though we’ve got the opposite problem in half the country.

This is all ignored by the Untitled authors. They prefer to believe that the lives of the poor are not blighted by the lack of formal social contracts, as currently conceived title deeds are an oppressive, alien “edifice”. They also believe that “African” concepts of communal land ownership blind to banks and the national registry are profoundly spiritual in a patronizing way. What comes with mawkishly patting African-ness on the head with one hand? Effectively hiding title with the other.

The Risk of Title

The Untitled book does not discuss GDP, GNI, capital stock, gross average and mean household stock, savings rates and the ratios between them. De Sotoans claim that South Africans struggle to accumulate capital because half of us can’t use our land as invested assets or collateral. These national account indicators should be seriously considered in this regard. But the Untitled authors content themselves with half a story.

You see, formal land ownership is to the economy as repeatable experiments are to science. Experiments allow us to do and know much more, for better and worse. Lethal experiments happen by accident and by design. That is the Untitled authors’ focus, the bad done with title.

A drunken gambler repays debt by hocking the titled property his family lives on. Inheritance disputes lead to nasty battles for control of titled land. People use their title deeds to raise loans to start businesses that fail. People avoid the title system to avoid these risks or to trade RDP houses illegally which causes confusion.

Yes, such things happen. But they do not in themselves discredit De Soto’s ideas, which are vindicated by overlooked success stories. Individual entrepreneurs, net effects that can only be seen at the level of national accounts, and broader history are the other side.

Tenure versus Title

The authors’ positive focus is tenure rather than title and they are full of ideas on how to expand tenure to all. By tenure they usually mean the right to stay in one place for life or even longer. One of them, Rosalie Kingwill, argues for tenure through an infinitude of time, what she takes to be the “African” way. Their paternal concern is reducing to zero the risk of no longer having a place to stay, or having to move, and their proposals in this regard are ingenious.

The authors are perfectly correct to say that title increases risk. That is the point of it. Title opens the way to more trade and trade is inherently a risky business, like experiments. Trade is also on balance a good thing for two reasons.

First, the sum of evidence shows that trade allows specialization and increased productivity.

Second, the freedom to trade is essential to human dignity. Protecting people from trade is a lot like protecting them from the vote. Some voters abstain while others elect bad leaders. Happens all the time. But does it follow that voting should therefore be withheld? For freedom’s sake, no.

“Western” Banking

While the authors oscillate between expanding tenure and bringing the law home to ineffable custom, Dr Donna Hornby writes the foremost case for keeping the untitled untitled. One of her mistakes is failing to understand credit.

The rural Zulus Dr Hornby spoke to wanted title partly so they could get credit for their agribusiness, just as De Soto found around the world. Hornby managed to get her research subjects to record the boundaries between them – to sign pieces of paper agreeing that my land ends at the stream while yours runs from the stream to that thorn tree. The state still owned the land but Hornby asked a lawyer, “Won’t these records improve people’s access to credit because they tell finance institutions where people are and that they are indeed on a piece of land?”

The poor lawyer replied, “Yes, maybe, probably not”, before being shouted at by Hornby (according to her own account) for giving the morally wrong answer.

Hornby seems to think that creditors are like helicopter moms who just want to know where their precious debtors are at all times. There are such creditors, but they’re usually called loan sharks.

Sorry to repeat the obvious, but banks care much more about what you have to trade. You have proof you sleep in your boss’s office, well, the bank does not give a shekel. However, if you have immovable property to trade then they might give you a cheap loan on the condition that the property becomes the bank’s to trade if you don’t pay back the money. That’s the risk of mortgage and how many adults would prefer to be protected from it by a state that owns their home?

Dr Hornby has a PhD from UWC, but she clearly doesn’t understand the first thing about collateral. This did not prevent her from landing a gig that involved explaining and evaluating the connection between title deeds and finance in rural KZN. After that she enjoyed an illustrious career in the “development” field, topped by becoming co-author of Untitled, to the best of my knowledge the book on title deeds, drawn from decades of research and the insights of eight authors. Dr Hornby and her co-authors are also extensively quoted by the ANC’s High Level Panel Report.

The Real Problem with “Western” Concepts of Ownership

Poetry is what is lost in translation. De Soto’s book, The Mystery of Capital, is about something not lost in translation. Property. His key claims are a) that property is everywhere and always the manifestation of a social contract, b) that trade is trade by any name and c) that risk is key to entrepreneurship. Being social, the terms of property can be translated. Really they can be commensurated into any language or, if you prefer, into a universal language. Banks talk this language from Beijing to Belgrade to Bogota.

Besides trying to shield poor people from risk, the key claim of the Untitled authors in today’s debate is that African conceptions of property are essentially poetic.

So Dr Hornby, for example, claims that in homeland custom it is possible for four non-incorporated owners to own the same property. The layers she focuses on are the state, the chief, the family and relatives, the core family hosts. This leads her and her colleagues to conclude that “African” forms of ownership can be layered in ways that simply cannot be translated into “Western” law, so a new conception of legal ownership is needed.

To explain this, Dr Hornby says that African ownership is “nested” in a context that cannot be expressed in contract. “Nestedness is in the first place a social concept and only thereafter a spatial-legal one” she writes. “As such it does not equate with terms such as owner/landlord, (non-rent paying) tenant or sublet.”

Hornby justifies this, as do the authors in their co-written introduction, by supposing that “African” property ownership is social while “Western” property ownership is merely legal. Social, legal … two different kinds of ownership with differences so categorical you cannot translate from one to the other. It almost makes sense.

De Soto says no. Legal ownership is just the same kind of thing as the extra-legal. Both are based on social contract. A title deed manifests the very same social agreement across the state and the state is nothing but social contract writ large.

How can the authors reasonably contest that “social” contracts and “legal” contracts are such deeply different kinds of thing? And more to the point, how do they justify the claim that South African law is “foreign” to South African citizens?

One way to fill in the blank is by concluding that the authority of our written law has a race and its race is alien, white.

That is a bad mistake.

Let’s look at the Ingonyama Trust. It has a king, subordinate chiefs, and several million subjects. There is an owner, his supervisors and tenants. These terms are universal insofar as they are shaped by the concept of trade and South African insofar as they form part of common law. So say I.

If one says instead that the king is owner, the chief is the owner and the rest are owners, too, then one needs to explain what that means in terms of trade. And if one demurs from that by saying, look, you’re just asking me to talk in spacial-legal terms but the customary nestedness is social not legal, then I say this with De Soto: Legality is a social construct just like extra-legality. If one then says, whatever, one’s “Western” (white), the other’s black “African”, then one makes the mistake of believing that concepts of ownership are essentially racial when they’re as racial as the number pi.

Hop over the trap of pitting white, “Roman-dutch”, “Western”, “foreign” South African Republic legalese against “African” social authority and our problems become legible. Extra-legal property must be commensurate with the national register, a process not of oppression but of translation. The trouble with the Ingonyama Trust becomes clear too.

The Trust holder (king) issues very short-term leases through its supervisors (chiefs) to most of its poor lessees (subjects). That makes the inhabitants renters and the king a rentier. In principle, this is a perfectly acceptable model, because competing rentiers are incentivized by the market to provide according to the demands of their clients. But the king has an artificial monopoly over 2.8 million ha, so the mechanism of free trade cannot operate. The Zulu king is a monopoly capitalist in any language you like.

The debate about the Ingonyama Trust, at least as it has been framed by President Ramaphosa and King Zwelithini, is about whether this monopoly will be expropriated by the state or not. This totally misses the point, which is not who controls the monopoly but that there is a monopoly in the first place. The question is how to break up the monopoly while preserving the enshrined (and to my mind awesome) Zulu kingdom?

I think the answer starts here. The royal family is already very wealthy, culturally entrenched and likely to thrive in a more productive kwaZulu. The monopoly can only get away with selling short-term leases because its buyers lack bargaining power. The national assembly should bargain for them, for the sale of 99-year or 999-year leases, effective title deeds that will allow the accumulation of generational wealth if nothing else.

This kind of proposal has sailed the land indaba by and if it were raised you now know what Dr Hornby and the brains trust would say. In Zulu custom the king is the owner, the chief is the owner, the subject is the owner and there is no way to translate that into lessor, supervisor and lessee arrangements because the latter ideas are “Western”, white, colonial.

This problem is not isolated to Ingonyama Trust. Artificial real estate monopolies held directly by the state and in its trust are inhabited by 17 million South Africans.

Conclusion

Racially essentializing the concept of monopoly is dangerously mistaken. So is thinking that monopolies are bad per se. The question to ask of any monopoly is whether it reduces efficiency and production. Usually they do, precisely by decreasing risk and trade. I believe the Untitled authors, local commentariat and leading politicians support real estate monopolies for exactly this reason, because they believe that the first priority must be to protect poor black people from trade.

Racially essentializing this country’s legal authority is another apartheid hangover unconfined to aficionados of the land indaba. Remember the most distressing revelation of the IRR’s 2017 survey, which otherwise indicated that ordinary South Africans have all the common sense our thought leaders lack. Between 21% and 29% of all races agreed with the statement “SA is now a country for black Africans and whites must take second place”. That’s not what the law says, so the law must be alien.

The bloody irony is that this way of thinking keeps the better part of history hidden. It keeps social contractualists like Mbeki, Meyer and De Soto in the shadows. And it keeps 18 million black South Africans “safe” in last place.

This is the first in a two part series. 

Gabriel Crouse is a writer commissioned by the Institute of Race Relations (IRR), a think tank that promotes political and economic freedom. If you agree with what you have just read then click here or SMS your name to 32823.   

http://www.politicsweb.co.za/opinion/keeping-the-poor-in-their-place