Proper Property Rights

It’s a nice, warm feeling to finally buy that something you always wanted to have. Provided, of course, that you can be sure it’s now really yours, that you can actually keep it. That’s why solid property rights are so important. In fact, they have laid the foundation to every developed country’s economic modernization.

But not every country seems to regard such a right as quite central to the economic well-being of its citizens. A DICE Visual Story depicting the level and evolution of property rights in a number of countries over the past two decades shows both progress and retreat.

Back in 1995, some ten countries scored 90 out of 100, 90 meaning that "private property is guaranteed by the government, the court system enforces contracts efficiently, the justice system punishes those who unlawfully confiscate private property, corruption is nearly nonexistent, and expropriation is highly unlikely." The virtuous club included Australia, the USA, Japan, Canada, the UK and Germany, among others.

The next batch, the "70s" (“Private property guaranteed by the government, the court system subject to delays and lax in enforcing contracts, corruption possible but rare, and expropriation unlikely”), was the most numerous among the countries examined, and included France, Spain, Italy, Mexico and, somewhat surprisingly, Sweden.

Next came the "50s" ("Court system inefficient and subject to delays, corruption may be present, the judiciary may be influenced by other branches of government, and expropriation possible but rare”), which included Russia, Brazil, India and Poland.

The sample was closed by the "30s" ("Property ownership weakly protected, court system highly inefficient, corruption extensive, the judiciary strongly influenced by other branches of government, and expropriation is possible”) and consisted of China and Romania.

Fast forward to the year 2000. The sample now includes many more countries, and the virtuous 90s represent the largest group. It includes many northern countries, as well as the southern hemisphere’s northern-grade ones, Australia and New Zealand. The one remarkable exception continues to be Sweden, still stuck in the second, more southerly batch, accompanied by France, Italy, Spain and Turkey, among others. (Sweden graduated to the virtuous 90s only the following year.) The 50s and the 30s, in turn, don’t show much change, except for the larger number of countries now in the sample.

By 2002, Russia had slid down to the 30s, joining China, Romania and Serbia. The top league was almost unchanged, except that now Japan had lost the hallowed status and was bringing up the rear in the 70s batch.

By 2010 the survey had become more fine-grained, the scale including 95s, 55s and so on. The most respectful of property rights were New Zealand, which led the pack, and Sweden, who seemed to have left its past shame behind. The rest of the top and middle ranks were pretty much unchanged. At the bottom, however, Russia had slipped to 25, ahead only of China, which scored 20. Both fell within the category of "Private property weakly protected, court system so inefficient and corrupt that outside settlement and arbitration is the norm, property rights difficult to enforce, judicial corruption extensive, and expropriation common.” Vladimir Putin had been at the helm of his country for more than a decade by then. Yukos and all that.

Today, Russia and China are still at the bottom of the rank. Small wonder, with property rights in China still meaning primarily state rights and intellectual property rights tenuous at best. But at least in China the changes in individual property rights legislation being discussed and enacted point in the right direction.

Russia, on the contrary, is going backwards. Now it does not even respect the property rights of neighbouring countries.

Text is the responsibility of the editor and does not necessarily represent the opinion of DICE, Ifo, CES or CESifo