Property as Theft: The Libertarian Socialist Critique of Property (Part 1)

“All anarchists support property rights, including those who
oppose property rights. And all anarchists oppose property rights,
including those who support property rights. Context is everything. So
are definitions.”—Less Antman (Is Property Theft?)

In reading the works of Pierre-Joseph Proudhon, I am always fascinated and astonished by the obscurity and inconsistencies on the one hand and the utter brilliance on the other. Having read Proudhon, I have absolutely no clue as to what sort of system of property he would support. And I’m quite certain that he would not support the same sort of property arrangements that I advocate. Nevertheless, Proudhon’s critique of property is a good place to start if you want to delve into the theory of property, so I am using Proudhon’s critique of property and his dictum “Property is theft!” as a point of departure for this dissertation. I will also be analyzing the ideas of John Locke, Thomas Hodgskin, Friedrich Engels, Karl Marx, G. K. Chesterton, Murray Rothbard, and Henry George, among several others.

I will start by saying that any analysis of the theory of property must be approached anthropologically. Property is a human convention. When we speak of property, we assume that the term is straightforward and simple. We assume that everyone knows what we are talking about. However, there are a multitude of different sorts of property arrangements and each of them has pros and cons. Systems of property may be adapted to “particular circumstances of time and place.” There are many different types of systems of property: allodial, feudal, fee-simple, usufructuary, collectivistic, communistic, geoist, etc. Off the top of my head, I can think of at least five different types of “private property,” so the simplistic dichotomy of private vs public/collective isn’t very useful to someone that really wants to contemplate the theory of property.

Property vs. Possessions

Left-libertarians have often made a distinction between private property and personal possession. Possession is a simple matter of fact. “I am in possession of this.” Property, on the other hand, is a social arrangement established through custom or legal institutions. In other words, possession is objective and clearly defined by the nature of the case, whereas property is relative and established by societal standards. I may have property rights over things that are not in my personal possession. Communists have argued for the abolition of property, but they still uphold the right of an individual to have and control their own personal possessions. If anti-communists could get this simple distinction through their heads, it would go a long way towards helping them understand what the other side is actually advocating. So, when I speak of property in this essay, note that I am referring exclusively to property over which a person might hold a deed or title. Personal possessions like clothing, toothbrushes, and food are not property in the sense that I am using the term.

Capitalism & Capitalistic Property

Proudhon’s critique of property applies primarily to allodial and fee-simple property arrangements. These are the sorts of property arrangements upon which capitalism is based. Allodial and fee-simple systems of property allow the holder to have an almost absolute right over their estate, including the right to exclusive possession, the right to use and abuse their land, commit waste of it, and to transfer ownership through sale or will and inheritance. These types of arrangements can be called capitalistic property. Generally, when people are seriously criticizing “property,” they are referring specifically to this sort of property arrangement.

Capitalism is defined as “a market system with private-ownership of the means of production.” It must be noted, however, that this is a simplified definition. By “private-ownership” is meant private property of an allodial or fee-simple nature. Distributists, Ricardian socialists, individualist anarchists, and mutualists have all advocated market systems with private-ownership, yet none of these free-market ideologies can be viewed as forms of capitalism because they advocate non-capitalistic property arrangements. There are free-market socialist philosophies out there.

As far as I can tell, the term capitalism was first coined by Thomas Hodgskin, a free-market economist and Ricardian socialist. He used the term to refer to the economic system that actually existed during the Industrial Revolution. This system was actually interventionist in nature. Although there was a market, it was not a “free” market. In Hodgskin’s estimation, capitalism is not a “free market” but rather a system in which a small group of capitalists enjoy an oligarchy status. Furthermore, as a Ricardian socialist, Hodgskin advocated usufructuary private property, which he called natural property, but opposed allodial and fee-simple property arrangements as capitalistic artificial property. The chief characteristics of capitalism were (1) the normalcy of wage labor and (2) that the majority of the population was not capitalist but proletarian, i.e. that the vast majority worked for wages and a small minority owned the means of production—and these two characteristics were regarded as a natural consequence of artificial capitalistic property arrangements.

Hilaire Belloc, the distributist, says that capitalism’s “main characteristic is the possession of the means of production, that is land and machinery, by a small number of citizens, while the great majority of citizens remain dispossessed not only of the land and machinery, but of the stores of food and clothing and housing, without which men cannot live.”(Hilaire Belloc, Nationalization) Belloc’s fellow distributist G. K. Chesterton is reported to have remarked, “The problem with capitalism is not too many capitalists, but too few capitalists.” In other words, the problem is that capitalism is an economic system in which most people are not capitalists. Another distributist writer, John Médaille, says, “In capitalist economies, the vast majority of men are not capitalists; that is, they do not have sufficient capital to make their own livings, either alone or in cooperation with their neighbors, but must work for wages in order to live.”(John Médaille, Towards a Truly Free Market, Chapter 5)

Kevin A. Carson, an individualist-mutualist anarchist, says, “Capitalism, as distinguished from a free market, is a system in which the state represents the owners of capital and land and intervenes in the market on their behalf. Its enforcement of special privileges keeps land and capital artificially scarce and expensive in comparison to labor, so that labor must pay tribute for access to the means of production. Let, therefore, the state remove its guarantees of privilege, and let the suppliers of land and capital compete in a free market without entry barriers, and land and capital will cease to draw monopoly returns.”(Kevin A. Carson, Free Market Anti-Capitalism)

If you wish to understand any leftist critique of capitalism, you must understand that their critique is not a rejection of free markets per se because leftists don’t necessarily regard free markets and capitalism as synonymous. (Some leftists also reject markets, but their rejection of markets is distinct from their rejection of capitalism.) The defining characteristic of capitalism is that wage labor is the norm for the majority of the populace and only a small class of capitalists has the ability to survive without selling themselves or their labor for wages. Even Karl Marx adhered to this definition of capitalism as a system where wage labor is standard. The tendency to equate capitalism and markets originated with right-libertarians around the turn of the 20th century. The tragedy is that right-libertarians can’t understand 19th century libertarian, socialist, and anarchist critiques of capitalism because they read their own new definitions into these old texts. Thus, any modern person on the right that reads Marx, Proudhon, or Kropotkin will walk away totally befuddled.

When we talk about capitalism, we are talking about a system that actually exists. We are talking about actually existing capitalism. When right-libertarians talk about capitalism, they are talking about Rand’s capitalism the unknown ideal. These are quite different things and the fact of the matter is that virtually all anti-capitalist literature from Marx to Bookchin is directed at criticizing actually existing capitalism.

Proudhon’s Critique of Property

In criticizing property, Proudhon draws a comparison between capitalistic property and the droit d’aubaine (albinatus jus) in French and Roman law. Under the right of aubaine, the monarch would inherit all the possessions of a foreigner if the foreigner happened to die while inside the nation over which the monarch presides. Property is monarchical. The proprietor is like a little king, sovereign over his land. In England, this really is the way private property is viewed, where the dictum “a man’s home is his castle” is a common proverb. Under capitalism, nearly all homeowners have a mortgage arrangement. This means that the homeowner is in possession of the house but does not hold an allodial claim to it. Instead, the bank that holds the mortgage holds the title or deed for ransom until the mortgage is paid off. Consequently, the arrangement is as if the homeowner were a renter or tenant and the bank were the landlord. This arrangement creates a situation in which the bank acquires a sort of right of aubaine. If the occupant contributes value to the land and then becomes insolvent, that value will be unjustly transferred to the bank when the tenant is either evicted or chooses to leave. If a person secures a mortgage for the purchase of an empty lot and then builds a house upon the land with money out of his own pocket, the ownership of the house will be automatically transferred to the bank as “unearned increase” or aubaine if the person happens to lose his job and find himself unable to keep up with his mortgage payments. Thus, banks have the ability to profit off of foreclosures without actually having to do any productive activity. Insofar as the bank is allowed to confiscate more property than it contributed, or is allowed to confiscate property at a higher value than the property which it originally conferred to the individual, the foreclosure can be viewed as a sort of theft. And Proudhon contends that this sort of unfairness is inherent in the system of property under capitalism.

Property, then, in the capitalistic sense, is the privilege of unearned increase or usury. Benjamin Tucker, the individualist anarchist, saw usury as a diabolical trinity of profit, rent, and interest. By granting a monopoly privilege to the proprietor, it allows them to unjustly tax the non-proprietor. The proprietor is a little sovereign or king—a monarch ruling over his private property. Capitalistic property is monopoly privilege, the granting of an exclusive privilege to the proprietor alone. Neither a tenant, nor a neighbor, nor even the community can have any claim over the property and its use.

The classical justification of property comes from John Locke and is rooted in the theory of self-ownership. A man owns himself and his body. Labor is something that he does with his own body. The product of his labor, therefore, ought naturally to belong to him. A man is entitled to the product of his own labor. This was the basic philosophical justification for property. If labor is the justification of property rights, shouldn’t the labor put forth by the mortgagor in renovating and maintaining a piece of property confer some degree of ownership upon them? Why should the mortgagee (the bank) be able to evict a mortgagor and keep all the improvements that the mortgagor made upon the property? The bank can foreclose upon the property and sell it for more than what the debtor owed and just pocket the excess. If the homeowner built an addition on the house and improved the property in such a way that it quadrupled the value of the property, shouldn’t the bank that forecloses on the house have to sell the house at market value and keep only the amount that the debtor still owed and give the profits that resulted from the mortgagor’s improvements back to them as reimbursement. Why should the bank be allowed to make profits off of the improvements to the property made by someone else? If the mortgagor builds a new addition through his own labor, and labor is the theoretical justification of property, doesn’t it follow that the addition built on to the house rightfully belongs to the mortgagor and not to the mortgagee. It seems that there is a sort of injustice inherent in ordinary capitalistic property arrangements. Thus, Proudhon concluded, “Property is theft!”

It should be noted that capitalistic property arrangements not only involve implicit theft but also incentivize banks to make bad loans. There are profits to be made on foreclosures under capitalism. Consequently, it is not necessarily in the interest of the bankers to ensure that they only give loans to people who will be capable of keeping up with the payments. The banks might actually find it in their interest to make loans to people who will not be able to keep up with their payments. Provided that the mortgagor is able to keep up with the payments for a while, the mortgagee (bank) will be able to make a profit off of foreclosing on the house and selling it again. Suppose the mortgagor gets a thirty-year mortgage and is able to keep up with the payments for ten years. The debtor has already paid a third of the debt and has given the bank 30,000 dollars. In all fairness, he ought to have one-third ownership of the house. If the bank forecloses now, they ought to have to reimburse him the 30,000 dollars that he already paid or else give him a third of the money they receive when they sell the property. However, this isn’t how capitalism works. The bank simply forecloses, sells the house again at full price, and pockets the excess as profits. The mortgagor has contributed 30,000 dollars and maintained the property for a decade while the bank sat back and made money, and the foreclosure leaves the mortgagor with nothing while the bank profits greatly off of the foreclosure.

Thus, banks can often make more money by giving bad loans. They can make more money by lending to people that they don’t think will be able to pay off the mortgage than they could make by lending to people who are guaranteed to be able to pay off their mortgages. The capitalistic system of property encourages risky speculative investments and causes the economic system to be inherently unstable. Capitalism goes through booming phases where easy credit is available and everyone can secure a mortgage and buy a house, followed by a bust when mortgagors start to become insolvent and the banks start to foreclose on houses. A boom-and-bust cycle in real estate results from the capitalistic system of property itself. Thus, economic instability is inherent in the system. At the same time, the disparity of wealth between rich and poor grows and inequality increases with every new foreclosure. Each recession leads to less money in the hands of ordinary folks and more money in the hands of banks and their shareholders. As capitalism progresses, bankers and rentiers continue to accumulate massive amounts of money without ever producing anything. The system tends to concentrate ownership of capital and the means of production into the hands of the few. The small group that owns capital and the means of production is the capitalist class. The rest of the populace lacks ownership of capital or productive property and must, therefore, sell themselves and their labor to the capitalists—they have no way of surviving except through wage labor.

Capitalistic property arrangements are allodial/fee-simple. These arrangements lead to injustice, economic instability, a disparity of wealth between the rich and poor, and guarantee that the vast majority of the populace will remain in wage-slavery while a small minority will live in extreme luxury and never have to work for a living. We live in an imperfect world, so injustices will certainly be unavoidable. However, we ought to strive for a system of property that minimizes injustice and approximates justice to the greatest degree possible. The task, then, will be to devise alternative property arrangements that are more equitable.

The Contradiction of Capitalism: Socialized Production/Private Appropriation

Under medieval mercantilism, production processes were individualistic. One individual could produce his product in relative isolation. He could own his own means of production. Cottage industry was the norm. Small crafts were common. The whole idea of property was based on the notion of self-ownership or individual sovereignty. A man owns his own body and is therefore entitled to the product of his own bodily labor. That which he produces is rightfully his own private property. If an individual makes quilts out of materials that they personally own, and they produce these quilts in their own house, then it is only fair that all the wealth acquired from the sale of these quilts should go into the pocket of that individual alone.

With the Industrial Revolution, everything changed. The mode of production ceased to be individualistic and became socialistic. Under industrial capitalism, everything is produced on a collectivistic or socialistic basis. The production process does not just involve a single individual working with some means of production that he himself has ownership of. Instead, production under industrial capitalism involves a collective effort. Yet, the institution of private property remains as an atavistic remnant of medieval institutions. Consequently, the means of production (the land, the factory, the machines) are monopolized as the private property of an individual, but the mass of workers are dispossessed of any means of production and, consequently, are forced to work for someone else—they must work for wages in the labor market. Thus, as Friedrich Engels pointed out in Socialism: Utopian and Scientific, everything is now produced on a collectivistic basis, but the form of appropriation remains individualistic. We now have socialized production for private profit.

Now, I would remind you that capitalism has a tendency to ensure that the majority are dispossessed and forced to work for someone else in order to survive. Under capitalistic property arrangements, there is a boom-and-bust cycle in the economy—a cycle of easy credit followed by insolvency—and this cycle leads to wealth being concentrated into the hands of one class and the vast majority of the populace becoming dispossessed and being forced to work for the ruling class as wage-slaves. An obvious example of this tendency is the real estate market. Banks lend out money to individuals for houses, then foreclose on the houses. The banks keep all the mortgage payments that were already made and sell the houses again at full price. With every new recession, more and more people become dispossessed as more and more wealth accumulates into the hands of the capitalist class. And this dispossession of the masses and accumulation of capital at the top is what makes wage labor become the predominant means of sustaining oneself under capitalism. The only people who have any other option are those who have the accumulated wealth that stems from capitalistic property arrangements. The wealth of the capitalist class is the result of capitalistic property arrangements, not the result of labor or ingenuity on the part of the capitalists.

The old school socialists, like Proudhon, Marx, and Engels, pointed out that there are certain tasks that can easily be done in combination that are impossible in isolation. There are production processes that cannot be accomplished on an individualistic basis at all. A particular production process may require the combined labor of six individuals. Due to physical limitations, a single individual would not be able to complete the task even if they were granted an infinite amount of time. Social or collective effort does not just save time but allows for the completion of tasks that are impossible to accomplish by the labor of isolated individuals alone.

Proudhon observed that there is a surplus value created by such socialistic production. The addition of a new worker may cause an exponential increase in the total labor value. The labor value doesn’t necessarily increase in direct proportion to the number of workers. Six workers in combination produce more value than the same six workers would if they were working in isolation. Their collective effort produces a surplus value. And this surplus value is the product of their collective labor. Nevertheless, the individualistic form of appropriation allows the capitalist to siphon off the surplus value and pocket it as private profit. This conflicts with the rationale for private property. Private property is justified on the basis that an individual is entitled to the product of his own labor. Consequently, the socialists concluded that the surplus value produced by the workers collectively ought to belong collectively to the workers. The capitalist has no right to appropriate the product of the workers’ labor as his own profit just because he happens to own the means of production. The profits of the capitalists constitute theft! Capitalistic private property, or individualistic appropriation of the value produced by collectivistic modes of production, is tantamount to theft. And this is a major contradiction and injustice of capitalism: socialized production for private profit—the individualistic appropriation of wealth produced by collectivized production.

Karl Marx had another theory of surplus value. His analysis was limited by the primitive economic thought of his time, but the gist of the analysis remains valid. There is a difference between the objective value of a thing (i.e. the cost of production) and the subjective value of it (i.e. the price it will sell for on the market). The market price for any commodity is set by the subjective valuations of consumers. And consumers are generally willing to pay more than what the product costs to produce. The surplus value that results from the difference between cost of production and the price at which the final product is sold is pocketed by the capitalists as profit. This surplus value is the result of the efficiencies of the social and economic system in which buying and selling happens to be taking place. The market system is a product of social order, and this type of surplus value is generated by market processes, so it might rightly be regarded as social wealth. Social wealth that is here produced by the functioning of the socio-economic system is appropriated by the capitalists who happen to own the means of production. Instead of social wealth being appropriated by society, it is appropriated by a parasitic class of capitalists. Why should the capitalists be allowed to appropriate the wealth produced by the efficiencies of society as a whole?

The Blunder of John Locke

The classical theoretical justification for the institution of capitalistic property comes from John Locke. Locke’s argument in favor of private property has two parts. First, he argues for private property on the grounds of scarcity. Locke observes that land is scarce. Two individuals can’t use the same piece of land for two different and conflicting purposes at the same time. I can’t construct a building on a plot of land without preventing you from being able to plant corn in the same spot. Even if there is an abundance of land, each plot of land is scarce. The supply of this particular plot of land is always limited to one. This scarcity of resources makes it necessary for societies to devise some system of property rights, either through law or through custom, that will determine which of multiple individuals will be given the privilege of taking precedence over others in the determination of how a piece of land is used. The second part of Locke’s argument hinges on the notion of self-ownership. Your body belongs to you and is part of your own person. Consequently, the product of your bodily labor naturally belongs to you. Each individual is entitled to the entire product of their own labor. Thus, Locke argues that the individual who is the first to “mix their labor” with the land is the one who ought to be given precedence over all others in decision-making and control of a plot of land. A man can stake his claim upon the soil by “mixing his labor with it”—i.e. he can contribute to the re-creation of the place by working the land or tilling the soil, and thereby establish his own personal right to hold the land as private property.

Socialists, whether libertarian or authoritarian in orientation, have contended that Locke has failed to sufficiently justify existing property arrangements. He has demonstrated the necessity of giving someone precedence over others in the determination of how a resource shall be used, but he has failed to demonstrate the necessity or justice of everything else implied in allodial/fee-simple capitalistic property. As I have pointed out before, property implies the privilege of use, abuse, exploitation, and profit. It may be pragmatic, perhaps even necessary, for us to grant some sort of privilege of precedence in decision-making over a piece of land to one individual above all others, but this does not logically justify the right to exploit the natural resources thereof to amass private profit at the expense of everybody else.

You have a natural right to the product of your own labor, but you don’t have any right to exploit natural resources for personal gain. Land and natural resources are not the product of human labor, no matter how much labor you contribute to them or “mix” with them. Ownership of land is a human convention. It is customary rather than natural. Private property is a privilege conferred on us by custom or law, not a natural right. A fundamental fallacy of the apologist for capitalism is the mistaking of a privilege for a right. Property is a privilege granted by society or government, not an unalienable right conferred by nature and rooted in natural law.

Externalities and Such

Another problem with capitalistic property rights is that it has a tendency to allow for the privatization of profits alongside the socialization of costs. For instance, all the major stores—Walmart, Home Depot, Kohl’s, Target, et al.—ship their products long distances using semi-trucks. These trucks use public roads. The costs of construction and maintenance of public roads is socialized. The large semi-trucks do much more damage to the roads than regular automobiles do, but the cost of repairing wear and tear on the roads due to trucking and distribution for industrial and commercial purposes is subsidized by the entire community. Plus, these companies need the roads to exist. They rely on the roads to transport their employees to and from work, to allow customers to come to their stores, and to ship their products from the factory to the stores. Corporations use a lot of public resources in order to acquire their private profits, but the costs of the public resources are socialized. The nation or municipality always ends up subsidizing the corporations.

Additionally, abuses of private property often negatively affect others. For instance, if a corporation in a city dumps toxic waste into the soil on its own property, that waste will seep into the water supply and pollute the public drinking water. This is actually a fairly common practice in America. Corporations dump waste wherever they can to save money, often into a creek or a river. This saves the corporation a lot of money, since it would have cost them much more to dispose of the waste properly. By just dumping toxic waste into the nearest river, corporations can save a ton of money and increase their profit margin. The community, then, has to assume the costs. The municipal government will now have to tax its residents in order to cover the cost of cleaning and filtering the polluted water. If the water in question is part of the municipal water supply, the community needs the water to be clean in order for people to drink it. If the water is part of a river that runs through the city, the municipality will need to ensure that the water is cleaned enough that it is relatively safe for the fish and animals that drink from the river. If the water is too polluted, fish and wildlife will start dying and the decaying bodies will stink up the city. If the air quality in the city is being polluted from exhaust fumes from factories and from automobiles, capitalistic property arrangements require a laissez-faire approach that would allow the pollution to continue. We can couple this tragedy with the fact that a city would allow the destruction of its last remaining forest area, in spite of already having problems with air quality, just because the remaining forested area is on land that is owned by people who wish to cut down the remaining trees. Under capitalistic property, the prerogatives of the property owner outweigh the rights of the community. Even if it is in the interest of the community to have more trees, the property owners shall be allowed to do whatever they want. They can cut down the trees, a cost to the community, but construct something in their place to bring in revenue for themselves. More socialization of costs alongside the privatization of profits.

The flipside of this is that the value of land being held as private property is almost entirely due to the community. Without society, land would have no market value. If Mr. McSpeculator buys a piece of land in the middle of nowhere, he can buy it pretty cheap. Then he just has to wait for a decade or so, until the surrounding area is developed. The municipal government will put in roads, utility lines, gas and electric, traffic signals, sidewalks, schools, and such. Entrepreneurs and corporations will put in grocery stores, gas stations, drug stores, restaurants, bars, etc. People will build houses on the surrounding properties. The town that develops may have a local festival that brings in tourists and helps local businesses make more money. All of these things drive up the value of Mr. McSpeculator’s property. He can then rent the property out at a high price or sell it at a high price. The value of his property is likely to have risen by 10,000% or more just because the surrounding area has developed with the progress of society. Is it right for Mr. McSpeculator to be allowed to make a 10,000% profit without having to do any productive labor? The added value of the land was not the product of his own labor, but the product of the labor of the community. This was the great observation of Henry George. His land’s increase in value is the product of society, but he will pocket the product of societal labor as private profits. If the value of my property increases because of the actions of my neighbors or because of the services provided by the municipal government, then shouldn’t that increase belong to the community according to Lockean principles? Capitalistic property is a system of property that allows one person to unjustly appropriate the value produced by the labor of others.

The theoretical argument in favor of capitalistic property is a two-part argument. First, it is noted that some sort of privilege of exclusive use of land (or some sort of privilege of precedence in controlling land) is necessary because of scarcity. Second, it is argued that each person is entitled to the product of their own labor. The conclusion drawn from these premises is that the privilege of precedence or exclusive use ought to be given to the first person who “mixes their labor” with the land. This argument is used by proponents of capitalistic property, from John Locke to Murray Rothbard. But starting with the premises of Lockean property theory, it is hard to see exactly how existing property arrangement actually follow from the premises. Does the existence of scarcity really justify me being allowed to do whatever I want with my property, even if it harms the surrounding community? Does the existence of scarcity really justify me profiting off of other people’s labor just because their labor happened to drive up the market value of my property? Does my natural entitlement to the product of my own labor justify me being allowed to profit off of the increase in the value of my property that results from my neighbors’ labor? Does me being entitled to the product of my own labor somehow imply that I ought to be allowed to do whatsoever I want with my land, even if it harms my neighbors?

Conclusion:

There are various ways in which the dictum “property is theft!” happens to be true. We define theft as the illegitimate confiscation of the personal possessions of another person or the stealing of what rightfully ought to belong to another. Capitalistic property constitutes theft by allowing banks to confiscate more value through foreclosure than is actually owed on the remaining mortgage; it constitutes theft insofar as it allows private appropriation of the product of collectivistic production; it constitutes theft by allowing corporations to obtain higher profit margins by socializing costs and privatizing profits; and it constitutes theft by allowing speculative investors to get rich by appropriating as private profit the value added to their property by the contributions of their neighbors or of society.