This is one of a series of columns that were produced for Moneyweb Investor in which Stuart Theobald explores the intersection of philosophy of science and finance. This followed an earlier series for Business Day Investors Monthly on the same theme. This column was first published in February 2017. 

In South Africa’s fractious political atmosphere, land ownership looms large. “Give back the land” is a common rallying call. Today’s calls are part and parcel of economic redress for Apartheid, which compounded colonial dispossession and led to today’s massive skew in economic resources. But as economies shift increasingly into services, the arguments over land have become increasingly out of touch with actual economic activity. Consider that 80% of US GDP is generated from services rather than activity in which land is a key input. The figure is 68% for the world at large. In South Africa, the figure has risen from 61.3% at the end of Apartheid to 67.8% in 2014. The trend is clear: increasingly, economic activity is in services rather than manufacturing, agriculture or resources extraction. It follows that in debates about redistribution, land is increasingly less important.

Land stands out as a critical issue in seismic political shifts throughout history. Certain historic examples, such as the American and French revolutions, led to democratic republics with a much fairer distribution of resources. However, other revolutions such as China’s Cultural Revolution or Hugo Chavez’s Bolivarian Revolution in Venezuela led to bad economic outcomes. So revolution and the dispossession of historic land owners is not a sufficient cause of better economic outcomes. The details of the post-revolutionary state matter, and clear property rights, including the right to trade that property, seem important. The tension we see in modern South Africa is how to create a state in which people can rely on their property rights in order to confidently invest in creating infrastructure and new assets, while simultaneously redressing the skewed distribution of resources inherited from our past.

Philosophers have long argued about property rights and the distribution of land. One group of arguments focuses on welfare effects, that we should ensure land is distributed in such a way that the maximum possible benefit is derived by society at large. Another group focuses on questions of justice, over who has a just claim to property. Questions about justice often focus on property rights. These are argued to be valid because they result from voluntary exchanges between individuals, while dispossession is always involuntary. These two arguments are hard to reconcile because they are about different things. Given the wording often used in SA, “give back” then land, it seems to be the question of justice that is paramount, and therefore it is an argument about restoring previously just property rights. Often one hears the response that general welfare, including food security, is better protected leaving the distribution as it is, or leaving it to the market to redistribute. Both of these points of view may be true, that land may be illegitimately owned, but that redistribution would be damaging to social welfare (Zimbabwe is often quoted). There are no easy answers to what should be done in such cases.

Then there is a third type of argument that focuses on inequality, that anything but an even distribution of land is unjust. Redistribution is usually about violating property rights rather than restoring them, so restitution and redistribution are inconsistent objectives. Redistributionist arguments, however, often point to illegitimate initial distributions as a way of weakening claims to property rights protections today, but usually see land’s only legitimate distribution being when it is held in common or held equally by everyone.

What is clear is that as the services component of the economy grows, the arguments over land will shift. Restitution arguments, while no less legitimate, may not be advanced so vigorously when land is a relatively less valuable resource compared to others available. The arguments that need a deeper rethink, however, are those about equality. For those arguments, land will become increasingly irrelevant as it shrinks as a proportion of economic assets, and some of the premises used historically will no longer apply. Appealing to an unjust initial distribution of land will not be a good argument for the redistribution of things that have nothing to do with land, such as the intellectual output of a computer programmer. While computers certainly require some natural resources, for computers must be made of some stuff, in the economics of computer programming, the value added is all in the intellectual property end of the chain rather than the input of physical resources. Even if those physical resources were obtained through some unjust expropriation of land, the claim over the computer programmer is shrinking as the value added accumulates in the non-physical sphere. This is true of all economic activity.

Egalitarians might then continue to insist on redistribution, but instead of land the focus will be on wealth. One of the arguments for redistribution of land will no longer be available, that it is based on an initial unjust distribution. The assumption was that the initial ownership was based on some form of wrong, that the owner was not the legitimate beneficiary of the asset. Some people are born gifted and able to use those gifts to create valuable computer programmes. No one seems to have been dispossessed in this, and in fact we are all benefitted by the fact that the computer programme exists when it otherwise might not have. There is, nevertheless, an argument that it is unfair that the computer programmer has these talents while I do not. By appealing to this unfairness, I might be able to demand some form of redistribution of his wealth to me. Something like this argument is used to explain why we should invest in providing facilities for the disabled, like parking bays or purpose-designed lifts to access public buildings. We accept that it is unfair that disabled people are less able to access these otherwise. We accept that equality of outcomes is important. Maybe this is also true in services-based economies where the inequality consists in the distribution of talent.

This, however, leads us into trouble. Philosophers from Marx to Kant accept that “self-ownership” is important, that we have an inviable right to our own bodies and minds. Demanding that I have a right to a portion of the computer programmer’s wealth seems to be a demand to his talents, a demand to exploit him for my benefit. Self-ownership is surely a stronger claim to ownership than any physical property right, over land or any other physical thing. There would be something unjust about dispossessing people of their talents, even if we accept that there is something unfair about the initial distribution of talents.

These are arguments are very hard to settle, which is why we tend to end up with awkward compromises, recognising that individuals should have property rights, but should also be taxed to support some level of equality. What should be clear, though, is that the evolution of our economies into services will shift these debates, particularly when it comes to the distribution of land and other natural resources. The premise that we all have an equal claim to natural resources will become increasingly irrelevant when natural resources are a shrinking proportion of the economic pie.