One of the problems with the economic progress in the transition countries from socialism to market economy is the state of property rights. You can improve business environment, trade, or monetary systems but never progress if the property (rights) is not protected well.
There is no evidence that success of property protection is or has ever been a result of a political decision. It was always a decision of a free society, in which everyone feels obliged to respect and protect other’s properties.
Several surveys and studies show there are leaders and outsiders of the transition from communism to market economy. Figures show that the biggest problems for the nations in transition is the property rights. While some of the nations of transition score high (like Czechs or Estonians), others face deep problems.
There cannot be an ideal measurement of the current state of the property rights. Different indices have different methodology. Those methodologies are based on available neutral sources and this shrinks their capacities to include all needed and important issues.
On the one hand, there is a strong necessity of comparable data to be sure every nation is treated neutrally. You cannot rely on surveys and opinions.
On the other hand, we see that most of the nations of transition are lagging behind the Western nations. It can be about enforcing contracts, independence of judiciary, political interventions, and abuse of regulations and taxation. But still this is about the current state, not about the reasons behind these.
There are many studies trying to find out why some, even ancient, nations are underdeveloped while others are not.
Some think this is due to a religious factor, some deny this strictly; some think this happens because of the natural resources, but evidence shows many nations are prospering without them.
One thing is obvious: all the highest-level nations are very strong with property rights. Transition was easier in the countries which:
were held by communists for shorter periods, which means that at the end of socialism, still, there was a generation who remembered the life with property rights, contacts, disputes, etc; this generation of people helped new generations with their experience and knowledge.
neighbors better nations who never abandoned private property, thus, they could directly and quickly learn from them about what is good for business.
In the 19th century, British economist William Forster Lloyd explained that there is a so-called Tragedy of Commons, which means that everybody tries to overuse the common (collectively owned) resources. Socialism (or communism), which is based on state ownership of resources, is the most perfect example of the Tragedy of Commons. This can be public parks or beaches, etc.
In the Soviet Union, factory or collective farm workers would never miss an opportunity to waste and steal the resources that belonged to the state – or, in fact, nobody. The factory guards would never make any barriers to this – just trying to collect bribes. People were addicted to stealing anything that could be found on the floor in a factory.
You can always observe similar phenomena everywhere, but this was much stronger in the socialist countries and there can be many reasons for this.
For instance, Soviets killed the property owners. This was not only that a) there was nobody anymore to represent the property rights ideas, or b) it was dangerous to try to represent it.
What was most important was that the stories of ethical behavior lost their meaning.
An old Georgian proverb says: It is better to break your head than your word. This means the property ethics in Georgia has had a very strong ground for many years.
I believe there was a similar situation in most of the countries of transition before the communists killed the property owners and destroyed this ethical system. What kind of impact this could have on the society? This is a truly complex story. There were different experiences, for instance, collective farming didn’t work in Poland.
Now let’s return to the Tragedy of Commons. This problem arises in the situations where the ownership of resources is collective – and all try to get as much as possible from them.
But let’s imagine where this problem can be stronger: in the free market (with private property) or socialism (without private property)?
In the free market, everything is based on personal freedom and personal responsibility. Your prosperity depends on the state of property rights and voluntary cooperation, not because someone ordered it to be so, but because you understand this is beneficial for you and others. I respect and protect your property (rights) because I expect you will also do the same. I/we prosper because of cooperation, because everybody else’s property is well-protected.
There cannot be any progress without understanding of this important feeling of necessity of such a cooperation. Otherwise, the business of robbing and stealing would prevail. After several hundreds and thousands of years (of civilization’s existence), people realized that the cooperation – respecting and protecting the property (and contracts) of others is as important as of their own property.
As a result, people have habits, traditions, laws, and legislation related to the rules and their responsibilities. Any individual understands (in the free market) that he/she needs to respect other’s property. So, when he/she sees a property, he/she has understands that this property belongs to another individual and either respects this right or will need to take responsibility to any damage made to the said property.
But how such an individual behaves when he/she sees the public (collective, state) property – their instinct is still here, he/she is aware of the responsibility held. But he/she also mentions that this type of responsibility can be much weaker as there is nobody to say “This is mine , don’t touch it”.
So, the Tragedy of Commons can exist in the free markets too, if there is still anything in the collective ownership (like parks, beaches, forests, etc.)
But let’s now think about the socialist countries, where property is prohibited, and property rights don’t exist.
The feeling of an individual that he/she needs to respect a property even though it doesn’t belong to him/her or anybody is simply gone. No property, no protection, no respect, no responsibility, no cooperation – everything is gone.
Having no property with no rights and responsibilities, the problem of the Tragedy of Commons can become a much larger, and the longer people live in such a situation, the larger the problem can become – the new generations can grow without studying or experiencing the property rights ethics but simultaneously observe some tangible benefits of stealing of the unintended resources.
Such a system can demotivate the people to work but can create incentives to steal and waste. In contrast to a free market, nobody can have an incentive to sue you for this – there is no responsibility imposed.
So, how can we achieve improvements of property rights? In the countries of transition, people tend to think that improvement of judiciary and better justice can be achieved if we have right politicians and government. I think this is also a kind of a mistake.
We can return to the ethics of the property rights (like in the Georgian proverb above) through a new experience – we need to study and believe in this.
First, improvement can come if most of the properties are private and they are used without restrictions, and, second, everyone must wear “iron shoes” to achieve justice like Otari’s widow decided in the famous novella of Ilia Chavchavade, a 19th-century Georgian writer and thinker.
This means, never give up. Fight for your property and justice – go to the court as many times as necessary to defend your property.
So, the improvement of the property rights and, consequently, of the living conditions depends on the permanent attempts of individuals to achieve justice. Justice is no free lunch.