Saturday, June 29, 2019

Lion Rock 28, HK as free market, and private property rights

Another good papers from Nick, former Chairman of the Lion Rock Institute (LRI) in HK. Reposting them below, the paper on 'Freedom = Property rights" is clipped, please click the title to see the full paper.

(Letter to SCMP Editor on Aug 9, 2018 by Lion Rock Institute Chairman Nick Sallnow-Smith)

I was dismayed to read your first leader on Monday this week; not because of the subject matter but by the opening sentence (“Greater Bay Area offers a chance for tourism success”, August 6).

You wrote: “In the world of business, one person’s gain is another’s loss”. This statement betrays a worrying misunderstanding of how free markets work.

Perhaps you are confusing profit and loss with income and expense. It is certainly true that one person’s income is someone else’s expense. But a purchase in a free market is an exchange, not a loss. Each party to that free exchange gains, otherwise they would not enter into the transaction. By promoting this fundamental misunderstanding of markets to your readers, you suggest that business is a zero-sum game, like gambling at Happy Valley.

For over 170 years, Hong Kong people have been creating wealth through free market exchanges. Teaching the next generation that business has no net value is a low point indeed for Hong Kong.

2018-09-26 / Nick Sallnow-Smith

The simple truth of my title this month is worth repeating regularly, especially in Hong Kong. It seems, listening to comments on private property rights from many people here, that they have forgotten this vital equation. Note I say “equation”; this is not my opinion or preference. Rather, freedom of the individual necessarily implies private property rights and without them freedom will wither away.  Let me explain my thinking.

The first essential of freedom is freedom to do with your own body as you decide. If you cannot, you are a slave…. The serf seems in principle to own his own body and be free to move around but he may not own (all of) the output of his own mind and body. He has no “private property rights” until he has satisfied the landowners demands. This would be true of a household slave too of course. To have the rights to your own body, and not be imprisoned, provides no useful freedom if everything you produce is taken by others by force. Freedom must include not only owning your body but also whatever your body produces by your actions and effort. In a community with division of labour, this must also include ownership of any money you receive when you sell the output of your mind and body in free trade.

Now, hopefully, you agree so far (if not, please email me where you disagree!). Given these principles, we can see that none of us in so called “developed” societies is in fact fully free. Any system of coercive taxation is partial slavery. It doesn’t matter what the state does with the taxation raised, if you are forced to pay the tax on pain of imprisonment, this is no different from serfdom. You can think of it as your needing to work for the Government for part of the month (depending on the rate of taxation) before you begin working for yourself….

We therefore have a system of “variable-tithe slavery”. No citizen ever knows how much of his output is owned by him.

Very few modern citizens think slavery is acceptable in society. Yet almost all accept what I have described as the partial slavery of modern states. If we had all been born in Classical Greece, I doubt any of us would question slavery. It was part of the fabric of society. Today, almost no one questions the system of taxation for the same reason. We are born into it and accept it, literally without question….

Hong Kong has, literally, been built on private property rights, notwithstanding that the Government is the ultimate lessor of the land. If confidence in those rights is shaken, the basis for our prosperity could be seriously at risk.

Perhaps you can understand now why I posed the title of this piece in mathematical terms. If we lose our grasp of this very simple equation of freedom, we are at great risk. The history of taxation systems shows how, step by small step, freedom to dispose of our own income can be lost almost unnoticed. At each stage the minimal nature of the change (US income tax started at 1%, UK VAT at 5%) and the claim that it is in the “public interest”, are used to calm fears. Then the levels of confiscation gradually rise and the frog is boiled. The most dangerous aspect of this is that the population at large has lost connection with my “freedom equation”. Instead of seeing (as might have been the case 500 years ago) the predatory claims of the state, they see a justifiable modest removal of property rights as being “in the public interest”. Indeed many of our fellow citizens in Hong Kong openly beg the Government to deny private property rights when discussing the so-called shortage of land. Of course those doing so only want the Government to confiscate the property of others, rich people and large corporations. But as I noted, these moves always start in a manner that appears not to touch the mass of people, just the 1%. Yet once the principles of freedom are compromised in order to “strike a balance”, there is no way back.

Whenever you read of so-called justifications for taking back agricultural land from developers, or allowing public entry to private land at recreational clubs, please remember my title. If we don’t argue the case for freedom, can we really expect to keep it.

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