Tuesday, March 17, 2009

China Can Learn from Native Americans

China's collective land ownership system seems odd to most Americans, but we have something very similar here in the United States--the Native American tribal reservations. A March 16 piece on the Wall Street Journal's opinion page by Terry L. Anderson of Montana State University provides a window on the inefficiency of land use when nobody in particular owns it.

The situation on tribal reservations is remarkably similar to that in rural China--underutilized empty land, a deeply ingrained culture of poverty and hopelessness. Fleeing to the city is the only way out. The land ownership and legal system behind it is also similar to that of rural China. Mr. Anderson argues that 19th-century laws that put Native American lands under the trusteeship of the U.S. Dept. of Interior's Bureau of Indian Affairs prevents lands from being sold, used as collateral, or passed on through inheritance. I understand that Native Americans were not given ownership because authorities thought they might sell it off for a pittance and be left with nothing.

Mr. Anderson cites an accidental experiment that demonstrates the value of well-defined ownership. Some tribes took back control of their lands and prospered as a result. He notes that the rule of law was strengthened in some reservations when they were placed under state jurisdiction in 1953. Anderson documents faster economic growth and lower rates of loan rejection on reservations where they have discarded the weak federal system.

The situation is very similar in rural China and tribal reservations--a paternalistic authority protects the powerless from themselves by depriving them of ownership of their most valuable asset. Left poor and powerless, the authorities drip in enough welfare benefits and programs to keep residents barely surviving in their rural enclaves (and keep them from congregating in cities).

Give Chinese farmers (and Native Americans) ownership, rule of law, and economic power!

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