Johan Fourie's blog

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Land expropriation: learning from the Chinese

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GreatLeapForward.jpg

The complexity of the debate about land expropriation without compensation can ultimately be summarized into two questions: Should land be expropriated without compensation? And, if so, who should own the expropriated land? While much media attention has focused on the first, with the focus often on how such a policy will scare off foreign investment, it is the answer to the second, ultimately, that will determine the success of any attempt at redress and wealth creation.

The two proponents of a policy of land expropriation without compensation in South Africa – the ANC and the EFF – stand on very different sides with regards to answering the second question: the ANC has made it clear that ownership should be in private hands, while the EFF has forcefully and repeatedly made the case that the state should be the custodian of all land. Their policy would see the state expropriate all private farm land and lease the land ‘equally’ to the people of South Africa. Dali Mpofu, National Chairperson of the EFF and a respected advocate, has defended this stance by referring to China in a 2017 tweet: ‘Chinese land is owned … by the state and it has registered the highest consistent economic growth in the world!’

Mpofu’s example is an interesting one, and worth exploring. Indeed, Chinese economic growth over the last four decades has been a historically unprecedented 8% per year. But Mpofu would do well to note that this growth was not a consequence of agriculture. Between 1990 and 2016, the share of agriculture in GDP has fallen dramatically from 26.5% to 8.5%. This was associated with massive urbanization; in 2016, 57.4% of the total population lived in urban areas, a dramatic increase from 26% in 1990. Far fewer people now live off the land, and those that have moved to the (often new) cities, are remarkably better off.

This is because land is not the valuable commodity it once was in the nineteenth and twentieth centuries. As a way to empower people, land is probably the least useful asset nowadays, because it requires significant investment in physical and human capital to make it productive. Even then, the most valuable assets today are intangible – skills, intellectual property rights, data. In the twentieth century, agriculture could only thrive with significant state intervention in the form of marketing councils, favourable tariffs and other measures, measures that came at the cost of the South African consumer. In the 21st century economy, living off the land – without significant capital investment – will limit the ability of those that most need access to good education and health services and opportunities for social mobility that are found in cities.

This is even more true if the expropriated land is owned by the state. Let us return to Mpofu’s country of choice: China. Between 1955 and 1957, 96% of China’s 550 million peasants were dispossessed of their private property rights. This was the largest movement from private to communal property rights in history. As Shuo Chen and Xiaohuan Lan show in a 2017 paper published in the American Economic Journal: Applied Economics, the results of this process of land dispossession was devastating for the peasants, and the Chinese economy. The authors use data of 1600 counties that launched the movement in different years, and find that in the year of the dispossession, the number of cattle declined by 12 to 15%. In total, this was a loss of almost 10 million head of cattle. Why? Because people started killing their own animals to keep the meat and hides as soon as they released that they will lose the property rights to the use of those animals, and they did not trust the state to be able to safeguard what used to be theirs. This loss also affected grain output, which fell by 7%. We now know that Mao was not discouraged by this initial production shock. No, he doubled down. This initial process of land dispossession set the stage for the Great Leap Forward movement of 1958, which led to the worst famine in human history that killed an estimated 30 million people.

China’s process of collectivization should be the example that Mpofu and the EFF leadership study. If they want more evidence of how collectivization collapses an economy, they need look no further than Tanzania’s Ujamaa and Operation Vijiji, a much understudied but enlightening experience. Or ask our Zimbabwean neighbours about their land reform programme. As Tawanda Chingozha, a PhD student in the Department of Economics at Stellenbosch University, shows using sophisticated satellite imaging technology, Zimbabwe’s land reform programme caused a significant reduction in both the quantity and quality of crops harvested, and not only on formerly white commercial farms. The empirical evidence against state-owned land ownership is unequivocal.

Land is an emotive issue because the memories of dispossession, forced removals, and apartheid segregation remain vivid for many. Others are simply unhappy with the slow process of economic progress in the last decade, and see in land a source of safety and security.

But if land is expropriated and private property removed, the hope of economic progress will be nothing more than a mirage. We have smart people in South Africa. Surely we can find a way of redress that actually empowers people – and won’t replicate our disastrous past policies that subjugated the poorest to a life of poverty on the periphery of progress?

*An edited version of this article originally appeared in the 26 April edition of finweek.

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2 Responses

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  1. This is absolutely exceptional. Even though variety of article on this topic, this article carries a number of the treasured points which had been never be read in other articles.

    word of the day

    June 25, 2018 at 16:11

  2. Thanks for a highly interesting article

    The arguments, as far as I can tell, from ANC and EFF are focused on Land Reformation/Expropriation/Distribution. Is this not a rather archaic and much-failed system of reform with, as you show, devastating results? It is not the mere possession of the land asset that will bring equality and wealth, but the utilisation of that asset by the person/corporation most able to extract wealth from it that should be it’s natural possessor and this should be determined by market forces with minimal State intervention. And if that is the case then the government can mechanise some sort of Royalty extraction that will benefit the land-owner AND the local community not unlike what is common in the Mining Sector in Australia for example. Of such royalties 70% of funds will go directly to the local community Trust and 30% of Royalty Funds can be allocated to Statewide Community Funding. In this way the whole country can benefit from the land owners’ capacity to effectively extract wealth from the asset.

    In this way, Land Ownership Laws are not greatly affected and thereby remain attractive to investors both local and foreign.

    Instead of Royalties going to a Federal Government agency local trustee organisations can be set up who represent all stakeholders and would determine how best to spend/allocate resultant funds. The collection of the funds should be administered by the Taxation Authority who is best able to managing the process.

    Farmers can be assisted and incentivised to make the Royalty attractive and not another onerous and crippling tax.

    In my view the EFF and ANC are only looking at short-term political gain in this Land Campaign and have no policy that is of long-term benefit to the populace.

    For the record I am neither White nor a Farmer and have never owned any piece of South Africa land.

    Clyde Rossouw

    June 4, 2018 at 07:21


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