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Property Rights Under Threat

Property Rights Under Threat

Friday 22 Oct 2004

Gerry Eckhof - Speeches - Rural

Speech to Canterbury Federated Farmers; Sir William Pickering Drive, Christchurch; Friday October 22, 2004.

The American humorist P J O'Rourke asked this question in his book Eat the Rich : "Why is it that in Russia people are so cerebral that chess is a spectator sport, however, they boil stones to make soup, yet in Hollywood, the dumbest place on earth, they wallow in gravy"? Why?

Good question. Answers could be: political systems or cultural systems, a lack of entrepreneurial spirit or opportunity, the climate - a whole host of reasons could be offered. At home, why is New Zealand a relatively successful country, yet so many of our Pacific neighbours aren't? Tropical paradises abound in our region. Tourists flock to many of these areas. Real wealth can be created. So why are the people of Fiji, the Cook Islands and Tonga poor by comparison with New Zealanders and Australians?

The simple answer is the lack of property rights. It`s property rights that have enabled New Zealanders to develop as a civil and successful society. Neighbour doesn't war with neighbour as both know their precise boundaries and by and large stick to them. The distribution of a once public asset such as land has been successful and is of course tradable between people. Terms and conditions are laid down and either accepted or rejected. For example, an auction where a highly valuable section is for sale can attract hundreds of buyers to sale day where spirited and often emotional bidding occurs to secure the section or the house. Only one person wins and disappointment can be rife, yet no one challenges the highest bidder's right to the land because the legitimate use of capital is accepted by all, and the means by which property rights are acquired - auction, private treaty, tendering - is also accepted. There is a universal appreciation of this process.

But a property right is nothing more than a phase. It's quite meaningless unless we understand what backs up a property right. Therein lies the secret of our success and so much failure in Africa, the Pacific, Asia, and Eastern Europe - indeed the whole of the Third World.

Our property rights are almost subliminally recognised by the public, banks and commerce. Most importantly, they are a legally enforceable transaction. This legal system is hidden deep within the property rights concept. It's this system that allows us to transform ourselves from mere squatters to landowners, or perhaps more correctly, right owners. The right to occupy and have exclusive use and enjoyment, which includes the right to invite or exclude people and alternative use by others if the owner so chooses. Indeed the owner is entitled to all economic use of their property. That right through purchase also includes the aesthetic value of the property such as the view from the homestead window.

It's these rights to property that are turned into capital that allow us to further purchase, to borrow against, to raise mortgages etc. We take such things for granted. However, a house, crop, or farm, without secure title, is still usable, workable, supplies shelter, food and offers a low form of security, but it cannot be used as security to raise capital to develop or expand. In other words, it's only through the unwritten acceptance and the formalising of property rights by society that property has become the basis of our wealth as a society. Informal ownership does not work anywhere nor does it create wealth. That is exactly what the Labour Government is seeking to impose on rural New Zealand through these nebulous concepts of community control. In reality, community control effectively means a total lack of responsibility.

We in New Zealand have a history of men and women going into the hinterland to create a life based on a prescribed area they carved out for themselves. The protection and security that the unexplained benefits of property ownership brought to the earlier settlers is immense.

They were the people that established the nation's wealth. They, without realising it, relied on that unspoken almost unknown system that took them from relative poverty to relative wealth.

That relative wealth couldn't have occurred by squatters' rights or short-term leases. It occurred because those heroic people leveraged their land with a bank to buy field tiles and lime in Southland and the down lands of Otago, to the fences and rabbit control and super phosphate in these regions of Otago and Canterbury. Secure title was the reason risk was incurred. Productivity only occurs when personalised ownership is present and such ownership is devoid of government control. It's by ownership that people become accountable for their action or inaction. Proponents of state control can rarely point to a success by a government that couldn't be bettered by private ownership and it's that which drives the individual to succeed.

The state lacks the vision that the individual has in spades. The private person can purchase and develop where the state seeks merely to preserve the status quo. Hence the rise and rise of the Conservation Department.

The unwitting decision by too many New Zealanders in placing their economic expectations in the hands of government will inevitably lead to the same disaster facing our indigenous wildlife species.

The system under which we currently live appears to work reasonably well. Few of us bother to check as to why our system has delivered so many economic advantages. If the motor runs, why pull it apart just to understand why it's working? Perfectly reasonable, but we, as rural people especially, must understand what fuels our system and why it works. Essentially it is a tightly interwoven series of legal, commercial, social and official acceptances that a transaction between a willing buyer and seller must stand, despite a rise or fall in the market. That too is accepted by the winner and the loser where the market moves for or against the participants in a transaction.

So the question before rural and peri-urban New Zealand today is how do we protect ourselves against the gradual dissolving of a system that has gained our people a prosperity the Third World can only dream of?

In other words, how can we protect ourselves against the abuse of government without resorting to the violence that occurs elsewhere in the world? Zimbabwe is an obvious example. This government makes the law, yet fails to respect the conventions and protection that law has given us, as a country. The New Zealand courts would, I hope, deliver swift justice to those who seek to take illegally from a neighbour but appear to ignore the law when the government takes from its own people for nothing more than electoral advantage. The well-established principle of no confiscation without compensation is the only safeguard against government excesses.

Is there in New Zealand any surety that delivers justice to the individual against the state? The short answer is very little. The impact of continual appropriation by government through its public access proposals, and the existing RMA abuses, will inevitably lead to a lessening of confidence in the security of land as a means to leverage and grow capital. Nothing could have a greater impact on the farming and rural communities than continence of such abuse by government.

The banks or lending institutions will first look at the security offered before lending. The less the security, the higher the chance of refusal of a loan and higher interest rate. Why is urban housing such an attractive proposition for the banks? The answer? Absolute security of tenure and enforcement of transaction along with a continuing demand from the public as they see housing as New Zealand's most secure investment, despite the fact that it offers a capital gain only but little or no ability to generate income. But few governments would ever dare to diminish the rights of ownership of an urban dweller without full and undiminished compensation.

Rural New Zealand is under threat from this government as never before, despite some attempts by successive governments to undermine property rights. The greatest threat, by far, is the loss of confidence in the security of your property by the financial sector in your ability to increase the capital value of your property - not members of the public walking through your property, not criminal behaviour that is increasingly apparent in rural communities.

As your well-established rights of ownership bought and paid for over the generations become constantly eroded, the threat to property rights becomes reality, albeit in slow and unrecognised ways. Examples include:

· The RMA precluding alternative land use in the public interest

· The Native Forest Amendment Act stopping farmers from felling bush or trees they actually own in the public interest

· District plans precluding the opportunity to diversify

· Swamps, now known as wetlands, are left undrained as a refuge for wildlife, as the landscape value of your property becomes of greater value to the public than the productive use to the owner.

Your property and future are worth fighting for. That's why I am undertaking a tour of rural New Zealand to awaken as many as possible, to understand that the loss of your property right is also the loss of your peace and prosperity in New Zealand for yourselves, your neighbours and importantly: your children.

There has never been a greater peacetime threat than the one we face today - the loss of our property rights.


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