Nationbuilding 101: reductionism in property, liberty, and corporate governance.ABSTRACT In this Article, Professor Reed re-examines the importance of property as a formal legal institution. He continues by arguing that central to creating property is the right to exclude others from resources acquired without force, theft, or fraud. In countries where this right has been firmly established, per capita income far exceeds that of countries lacking a strong right to exclude. Professor Reed then asserts the importance to nationbuilders of appreciating the virtual semantic equivalence of the terms "property" and "liberty." Finally, he argues that both the specific and broad senses of corporate governance can be reduced to property issues, making the understanding and implementation of a strong property system an important step toward prosperity, individual freedom, and sustainable peace.
TABLE OF CONTENTS
I. INTRODUCTION
II. PROPERTY AND ITS IMPORTANCE
A. Poverty, Prosperity, and Limited Resources
B. Incentive and Property
1. Property as the Right of Exclusion
2. The Incentive of Property and
the Evidence Linking Property
and Prosperity
C. Other Property Issues
1. Property and Resource Acquisition
2. Property and the Equal Rights
of Others
3. Property Enforcement
D. Property and the Story of Evolved Human
Behavior
III. LIBERTY
IV. CORPORATE GOVERNANCE
A. The Specific Sense of Corporate Governance
and Property
B. The Broad Sense of Corporate Governance
and Property
1. The Right to Pollute as an Object
of Property
2. Worker Health, Safety, and
Non-Discrimination as Objects
of Property
V. CONCLUSION
I. INTRODUCTION Without straining the biosphere or credulity, it is perfectly possible for each person to have as a full a measure of property as Bill Gates has, (1) and having property, one also enjoys liberty, for properly understood, the two terms are virtually synonymous. (2) Indeed, James Madison, the fourth U.S. President and Secretary to the Constitutional Convention, wrote an essay for the Boston Gazette in which he asserted that Americans have a "very dear" property in their liberty. (3) Property is the hub of Western legal systems and the foundation of the modern private market, (4) and the problems of corporate governance that beset not only Russia's emerging economy but also the economies of advanced nations everywhere are little more than enforcement challenges to an effective property system. Nationbuilders, who would grasp the essential basis of Western prosperity and freedom, can do no better than begin with a reductive focus on property. By training, scholars and practitioners who labor in the vineyards of the common law tend to be splitters rather than lumpers. Instead of unifying legal doctrines to promote conceptual understanding, they divide them into exceptions and distinctions, separating contract from property, tort from contract, criminal law from civil law, public regulation from private law, and substance from procedure. What is cohesive about the volumes of common-law particularities is lost in a tangled labyrinth of cases that lawyers have argued--and judges have decided--by distinguishing holdings from dicta and one holding from another in ways often achieving a triumph of result at the expense of clarity of form. (5) How confusing this all must be when nationbuilders attempt to understand what is important about the rule of law, and no wonder that restraint is counseled to nationbuilders in less developed countries lest they attempt wholesale importation of Western legal systems to secure a framework for their own regulation. (6) At the same time there is growing apprehension that something in the interstices of Western legal systems in both common and civil law is materially responsible for the prosperity of Western nations, (7) which, in terms not only of general per capita income but also of per capita income of their poor, creates wonder and envy worldwide. For both humanitarian and practical political reasons, no more burning issue exists in the international community than how to help the world's impoverished nations along a peaceful path toward prosperity. But if this path, insofar as we best know, entails the inculcation of Western legal concepts, then which specific concepts need inculcating and why these particular concepts, assume great importance. This Article argues that reductionism, the reducing of quite complex legal doctrines and rules to an essential principle that societies can embrace with some certainty, carries the maximum potential for producing the greatest wealth of nations. "Property" is that essential principle necessary for generating the likelihood for prosperity, and this Article asserts that prosperity within the recognized constraints of a strong property system also supports liberty and advances the possibility for sustainable peace. Part II begins with a discussion of the human plight of limited resources. This is followed by a development of how Western nations have addressed that plight and become prosperous through the incentive of property, which is defined as a legal exclusion over resources, a definition that is at odds with the deconstructed legal view of property as a bundle of rights. The equal property right of others limits an owner's use of her resources, and the resources protected by property are traditionally subject to eminent domain and taxation. Acknowledging the difficulties inherent in how nationbuilders determine who owns initial acquisitions of natural resources like land, this Section still emphasizes that property's success as a wealth generator depends on its strong enforcement, broad applicability, and general stability. Part II concludes with a story about human nature that argues why the institution of property may naturally foster production of greater new resources than systems based on compulsory sharing with strangers. (8) Part III maintains the close semantic connection between the right of property and the right of liberty, a connection widely recognized during the U.S. colonial period and embodied in the U.S. Constitution. It continues the reductive theme by explaining that both property and liberty are exclusionary terms applying to the protection of one's resources, including the most basic facultative resources of self and suggesting that property is best grasped as a civil right like freedom of speech or religion. (9) Part IV ties in the important issue of corporate governance to the project of reductionism and maintains that the implementation and enforcement of a strong property system is necessary both to protect owners from managers and to secure the resources of the public and of other members of society from the power of large business organizations. (10) At the same time, the system enables the relatively unrestrained use of private resources, subject only to the equal property right of others, that characterizes the framework for maximum new resource generation. Part IV also explains how environmental protection, employment discrimination prohibitions, and worker health and safety regulation fit within the property framework. As broad social prosperity creates perhaps the most substantial likelihood for sustainable world peace, an understanding of the mechanism for prosperity ought to demand the closest attention and debate, and the Article concludes by reaffirming that the reduction of that mechanism to the legal institution of property furthers this debate of utmost importance. Before continuing, one caveat must be noted: in no measure does the Article attempt to engage in philosophizing to justify property as a right, or unequal resource accumulation as a result. It is instead content merely to assert that property is in fact the necessary foundation for maximum resource production and leaving to nationbuilders the decision whether or not, and to what extent, to institutionalize property. II. PROPERTY AND ITS IMPORTANCE A. Poverty, Prosperity, and Limited Resources Poverty is widespread throughout the world. (11) Almost 250,000 children die weekly of poverty-related disease and malnutrition, (12) and the hopelessness and despair that accompany poverty is considered a major impetus to war and terrorism. (13) At the same time, prosperity exists among a minority of the world's nations, (14) creating tremendous income disparity between the world's poorest and richest, with the people of Bangladesh living on one-fifth the per capita income of those in China, (15) who have only one forty-fifth the per capita income of the U.S. population. (16) The discord, jealousy, and suffering inherent where there are vast national disparities of resources makes imperative an understanding of how such disparities have arisen and how poverty can be ameliorated. A variety of explanations have attempted to account for national disparities in wealth. One that has not withstood the test of time is the dependency theory, which holds that exploitation makes some countries prosperous while leaving others poor. (17) Whatever the abuses of colonialism or capitalism to indigenous populations, they do not seem to account for why some colonial nations grew wealthy and others did not, or why the formerly enslaved in some countries eventually prospered while in others those who had been neither enslaved nor colonized remained poor. (18) Nor do better educational systems, greater natural resources, ideal population densities, or superior personal values materially account for why some nations develop and grow rich and others do not. (19) Analysis suggests that the large differences in per capita income across countries cannot be explained by differences in access to the world's stock of productive knowledge or to its capital markets, by differences in the ratio of population to land or natural resources, or by differences in the quality of marketable human capital or personal culture. (20) Mexico and the United States both enjoy fertile, mineral-rich land masses with similar population densities, yet one is relatively poor while the other is quite prosperous. (21) East and West Germany, formerly politically separate but joined by common culture and highly educated populations, nevertheless presented during their years of separation stark contrast in per capita income, as do North and South Korea today. (22) With the world's oldest and most populous social culture, China possesses only a small fraction of the Gross National Income (GNI) of the United States, a country scarcely 200 years old. (23) Defeated nations left with devastated resource bases and infrastructures at the end of World War II now rank among the world's wealthiest, while nations untouched by that war remain mired in historic poverty. (24) Anthropologist Jared Diamond maintains that the broad, relatively unobstructed land mass of Europe permitted the rapid diffusion of new agricultural techniques from Southwest Asia, and that abundant agricultural production accounts for the subsequent specialization and organization of knowledge that enabled Western prosperity to dominate the world technologically and militarily. (25) Although sufficient food does enable specialization and organization, agricultural techniques and fertile land are not in themselves materially adequate incentive to ensure maximum food development and production. (26) They do not explain Japan's prosperous economy in spite of its comparatively weak agriculture, (27) nor do they account for the countries of Europe and Asia that have had agricultural techniques and fertile lands available for centuries but nonetheless remain poor. (28) For much of the past 50 years, the world's wealthiest countries, primarily identified as "the West," have approached less-developed countries as though the answer to weak economies and poverty lay in various technical and financial aid grants. (29) This model for assisting wealth production proceeds from the assumption that modern Western economies are founded on an infrastructure of roads, dams, and energy facilities, (30) and that grants, loans, and technical expertise from the West to provide these advantages should catalyze less-developed populations in creating sounder economies. (31) Alleviation of sickness, hunger, and illiteracy through various forms of aid also fits this model, and, of course, such alleviation often indicates humanitarian impulse while at the same time fostering a healthier, more-nourished, and better-educated human economic resource. Unfortunately, much of this foreign aid has disappeared through corruption or was misapplied or failed in any event to stimulate the development of organic, prosperous economies. Even large aid projects involving dam construction and road building create only short-term job opportunities, and infrastructure, when completed, and technology, when introduced, often by themselves fail to give adequate incentive for investment and risk taking necessary for sustained new resource production and healthy economies. Humanitarian aid is vital, but, in the absence of a growing economic self-sufficiency, humanitarian aid is a temporary answer to world poverty. After 50 years, aid programs have failed to reach the roots of poverty in much of the world, (32) and the result is disillusionment, discontent, despair, domestic revolution, and, recently, international terrorism. Privatization of economies through the marketplace has recently been pushed as an alternative to aid programs, or at least a supplement priming economic growth and ending the poverty of nations. (33) This view sees state planning of resource production as primarily responsible for stagnant, poor economies, and the lack of general productivity in communist and socialist nations as inducing the decline of state planning worldwide in the last years of the 20th century. Free populations will pursue their own economic ends and the private market will emerge, capitalism will coalesce, and a growing prosperity will inevitably follow. In spite of the flexibility and responsiveness of the private market in guiding resource flows, privatization alone, or in combination even with substantial foreign aid, does not seem adequate to create vibrant economies. (34) Following the collapse of the Soviet Union and privatization in substantial sectors of the Russian economy, gross domestic product declined 40 percent in the ensuing seven years while corruption, violence, fraud, and theft flourished. (35) In part, views concerning the causes of poverty and the achievement of prosperity are shaped by the perception that we live in a world of limited resources. (36) Although in some sense the resources of the world are finite, in important ways they are infinite, and to argue the contrary is to miss the importance of human effort and ingenuity as the resource par excellence. For instance, land is limited in its physical dimension, but the uses of land are virtually without limit, and each use is a resource requiring human effort. By itself, land produces little to sustain human wants and needs, saving only a few fruits, nuts and berries, the occasional edible creature, and trees for firewood and construction; but even these resources must be picked, hunted, and chopped, and to realize them requires application of the further resources of human effort and knowledge. Likewise, to develop the materials under the earth requires locating, drilling, pumping, mining, and quarrying for them to be of any use as resources, and these steps are usually only the initial ones in creating finished or consumable resources. At each stage, the process is dependent on human effort and ingenuity. The achievements of the Information Age, (37) which encompass not only computers and the Internet, but also technological innovations generally, including agricultural advances from the plow to genetically modified foodstuffs, derive not from anything that is limited, but from human effort in the organization, development, and diffusion of knowledge resources. Resources are primarily limited in a moment of time, not over the long span, and their existence, both at any single moment and over time, depends on the effort and ingenuity of people. Economies are not most productively constituted as lifeboats requiring equitable division of ever dwindling physical resources, but as cornucopias whose plenty is induced primarily by the application of unlimited human resources. (38) From these simplistic, but accurate, observations derives a truism: if the social goal is to maximize production of any given resource, society must provide the greatest incentive to stimulating the human efforts and ingenuity that are necessary to producing that resource. The issue becomes to identify and institutionalize that greatest incentive. B. Incentive and Property The way to institutionalize incentive and create the maximum condition for national prosperity begins with the recognition that, before it is possible to understand and predict resource flows in an economy, one must know how the law assigns rights within the economy. (39) The legal system, its implementation, and its enforcement furnish the maximum incentive to human effort required to create modern private markets, engender capital formation, and facilitate trade, but not just any kind of legal system will prompt economic prosperity. It must be a proper or property-based legal system. (40) Only the strong, legal right of property creates potential for the maximum prosperity of nations and materially explains to nationbuilders in less-developed countries the economic success of the West. Before examining the evidence for this assertion, it will be necessary to establish a meaning for the term "property." 1. Property as the Right of Exclusion Many political and legal commentators find the term "property" almost incomprehensible. (41) The Encyclopedia of the Social Sciences calls it "a euphonious collection of letters which serves as a general term," (42) and a prominent legal scholar remarks that "It]he paradigm of a Sanskrit verb of a thousand forms could not approach in diversities the phases of that concept in any single time and place." (43) Yet from the time of Aristotle, "property" has been associated with the incentive to produce new resources. (44) Over and over commentators have observed that property gives an incentive to the inculcation of resources that other ways of approaching resource development do not. (45) This repeated assertion suggests, for these commentators at least, some essence that flows from the understanding of property is continuous through history and may provide to nationbuilders a focus for construction of an economy with the potential for maximum resource development. That essential understanding, however, is not easily found in the usual dictionary definition of property as "things that are owned." (46) In fact, this definition may be responsible for much of the belief that property has no singular meaning. (47) In Roman civil law, property applied only to tangible things. (48) But in common law, perhaps dating to the recognition of the lease right in English feudal land practices, property also applied to intangible things. (49) It is also true that in common and civil law new tangible and intangible things came to be protected by property. For instance Mozart and Beethoven had no property in the copying of their music, (50) whereas today 2 Live Crew and the estate of Roy Orbison do have a property in theirs. (51) If property is whatever things that are owned, and the things that are owned are subject to change and do change, then the concept is a shifting one from which nationbuilders can take little guidance. On the other hand, if the emphasis of property is not on things or resources, but on ownership, then the essential meaning of property relates to a right rather than to things, and, if the right can be elucidated, nationbuilders can grasp the asserted basis for why some nations have a pronounced lead over others in resource production. The difficulty is that much legal analysis of property ownership regards it as a bunch of "stick-like rights" rather than as a single right. (52) Whatever the analytical virtues of the rights-splitting approach to common law legal scholarship, it is misleading to those seeking what, in Western property law, provides the greatest incentive to resource production. The essence of property over time has not been that it is a bunch of stick-like, mostly positive rights but that it is a single right: the right to exclude. (53) Property is the legal right enforced by the state that permits the owner of a resource to prevent others--including also in most instances the state--from interfering with it. (54) If an owner of a resource can legally exclude others from it, the owner can possess it, control it, consume it, destroy it, or exchange it. (55) The single negative right of exclusion unifies the disparate positive rights of property, which can now be thought of as ways of using a resource--one can use it for personal possession, for consumption, in exchange for other resources, as a gift, or to create new or additional resources. The single negative right of exclusion captures the right to exercise all of the positive uses of a resource, (56) and, if the state limits or prohibits some particular use of a resource, it does not mean that no property exists in that resource or that a new or different kind of property exists, for the property is not the resource but the right. For example, if the state prohibits patients who buy prescription drugs from reselling or transferring them, it does not mean that these owners have no property in the drugs. The right of exclusion still applies to keep others from interfering with the owner's consumption or destruction of the drugs; the state has simply removed the right as it would allow the owners to exclude the state itself from interfering with the sale or other transfer of prescription products. Likewise, in an important sense, one has property in one's body in the right to exclude others from interfering with it, and this ownership allows the positive sale of replaceable body parts like blood or hair, but not of irreplaceable body organs like kidneys and corneas. The exclusive owner, however, does control whether or not to pass ownership of a kidney or cornea by gift. The point is not to advocate the selling of body organs, but to explain the nature of property as the right of exclusion, a right that does not change in meaning but only in application when society forbids or limits a certain type of resource development, such as marketplace trade in kidneys and corneas. (57) The sociologist Emile Durkheim sought a cross-cultural criterion for the definition of property and concluded that it was the right of exclusion: "property is the right of a given individual to exclude other individuals and collective entities from the usage of a given thing." (58) Authorities from the U.S. Supreme Court (59) to William Blackstone, (60) Oliver Wendell Holmes, Jr., (61) and Thomas Hobbes (62) have asserted that the essence of property is the right of exclusion. Even if property also connotes things that are owned or a bundle of separable positive rights, its essential meaning understood through Western history is that an owner can exclude others from interfering with owned resources. (63) As Professor Merrill maintains, "[g]ive someone the right to exclude others from valued resources ... and you give them property. Deny someone the exclusion right and they do not have property." (64) Thus, when commentators observe that "property" provides maximum incentive for resource development, they may be understood as referring to the legal right to exclude others from interfering with one's resources, a right that was protected and enforced through the early common-law action for trespass. (65) 2. The Incentive of Property and the Evidence Linking Property and Prosperity The law of property is the deep foundation of the modern private market. (66) The right of exclusion gives incentive to exchanges in the creation, production, and distribution of resources to such a degree that without it, private trade is reduced to face-to-face barter or trade with trusted friends and relatives. (67) Without knowing who owns what, moving resources by exchange from those who have them to those who want and need them the most becomes excessively costly. In his Nobel Laureate address, economist Ronald Coase asserted that the legal system "has a profound effect on the working of the economic system and may in certain respects be said to control it." (68) Not any kind of legal system, however, engenders the greatest resource production but only "an appropriate system of property rights" does. (69) If no legal ownership exists, people constantly have to guard the resources they control from strangers, and, in such an instance, the weaker always have resources subject to the predations of the more powerful. (70) Without the right of property, no laws against theft and robbery protect one's possession of resources. No tort laws provide compensation for wrongful injury to one's resources. No laws of contract ensure that executory agreements for the transfer of resources one controls can be enforced. In the absence of the property right, both the raising of capital for resource development and the private division and subdivision of resources become extremely difficult. (71) It is no exaggeration to state, along with economist Hernando de Soto, that "[t]he hidden architecture of sustainable development is the law [of property]." (72) The incentive that the law of property stimulates has enabled Western prosperity in resourceful productions ranging from agriculture to silicon chips. The empirical evidence connecting the institution of property to national prosperity begins with the recognition that the Western states and a few Pacific Rim countries have both the world's highest per capita incomes and the world's strongest exclusionary property systems. (73) Although the connection could be coincidental, no feasible alternative explanation for such linkage exists except than that strong property law gives maximum incentive for the activities that create new resources which lead to high per capita incomes. Conversely, it is likely that the world's least prosperous nations remain so because they lack adequate property law and its requisite enforcement. A 2002 study of "economic freedom," which is acknowledged to be "an evaluation of property rights, broadly conceived," (74) concluded that nations with "very high protection" of property average $23,769 per capita in 1999 purchasing power parity. (75) Nations with "high protection" of property average $13,027 per capita; "moderate protection" nations average $4,963; "low protection" nations average $3,010; and "very low protection" nations average $2,651. (76) A study of property-strong versus property-weak countries from 1975 to 1995 found that countries that strengthened the property right the most during that period registered a 2.7% annual Gross National Product (GNP) growth, whereas those nations where the property right weakened most significantly averaged 0.6% annual GNP declines. (77) An analysis in 1989 of all studies then available concluded that strong-property nations grew at three times the annual rate and were two and one-half times more efficient than weak-property nations. (78) In explaining why "capitalism triumphs in the West and fails everywhere else," (79) de Soto asserted that the signal difference, especially in the inventions and applications of technology, between the highly-developed and prosperous Western countries and the less-prosperous and less-developed remainder of the world, is that the Western countries have possessed relatively strong property systems for at least 200 to 300 years longer than the rest of the world. (80) Even if the nations of the world started several hundred years ago at income parity, the property-weak countries would fall behind quickly if the property-strong countries grew only at a rate of two percent greater per year. Allowing for disruptions of war and the changing of regimes, one can still see that compounding a two-percent annual advantage in resource production over 200 years could easily account for the ten-fold income disparity that exists today between many property-strong and property-weak countries. (81) Consider that the income disparity also translates to disparity in technology attainment, infrastructure development and food, housing, education, and health resource availability, all of which provide a basis not only for a prosperous life but for even greater resource development. For nationbuilders the lesson seems clear: institute a strong property in any resource to give incentive to its maximum production; to lower production of a resource, reduce the incentive to develop by weakening or eliminating the property right in it through taxation or prohibition. The lack of resources called "poverty" is the disease for which an adequate property system is the long-term cure. C. Other Property Issues Several other issues key to nationbuilders' understanding of property deserve brief treatment. Each issue warrants volumes of discussion, but, in the spirit of reductionism, the treatment here simply places the issue in the context of the exclusionary right. 1. Property and Resource Acquisition In strong-property nations, how resources are acquired determines whether or not the state recognizes them as property. To be considered subject to the right of property, resources cannot be acquired by coercion, theft, or fraud. (82) The law recognizes a variety of ways to legally acquire resources in a property system, including exchange, gift, accession, confusion, and first possession, but robbers, thieves, and defrauders do not own what they acquire and cannot take the resources of others without suffering the likelihood of criminal and civil consequences intended to protect lawfully recognized owners. (83) Although the institution of a property system is of vital importance in nationbuilding, how resources are acquired in the first instance can be problematic during the creation of the system. In some countries lacking effective property systems, a relatively few individuals or families have come to control much of the land and its resources. What happens to these vast holdings as nations institute effective property systems is not certain nor automatic. Whether these holdings are formalized and protected by the property right or whether some type of redistributive land reform takes place before formalization occurs, economic disruption is likely to result. (84) It is in the amelioration of this disruption in a country that the international community can appropriately assist with various forms of aid, but such assistance should always be linked to the strengthening and stability of a broad-based property system if the goal is to maximize the future potential for resource development and production. When governments rather than powerful families control the resources of a country, a property system can be instituted through sale of the resources, a lottery distribution, a free distribution to all citizens, or some type of claiming system such as homesteading. In the United States, the surveying and distribution of public lands through sale helped hundreds of thousands of citizens to acquire millions of acres of land, (85) which have remained within the property system. On the other hand, the Dawes Act, (86) which failed to give Native Americans adequate property in certain reservation lands, thwarted existing tribal property systems, and created a federal trust on remaining lands that has seriously failed its purpose, (87) hardly provides a model for implementing an effective property system. One suggestion for nationbuilders attempting to place resource acquisition and development under a property system is to build the system from the bottom up rather than the top down. In so doing, primary concern should be focused on ensuring that the vast majority of the people have their resources protected by property. (88) As has been observed, one of the greatest virtues of an equally implemented exclusionary right is that it benefits the poor as much as the wealthy, (89) who, unlike the poor, can more easily protect their resources by force. Building a property system from the bottom up also recognizes that freeing the poor from unnecessary regulatory shackles, which may keep them from exercising the resource they acquire by original possession, is important to unleashing the incentive of property. The studies of de Soto indicate that one way to formalize property in less-developed countries from the bottom up is to allow people to acquire land ownership through local consensus. (90) Land is a basic building block in a private market economy; yet, without formal property recognition, one's land cannot be resourcefully-leveraged or capitalized because few lenders are likely to extend affordable credit secured by the land unless the borrower is an owner formally recognized by the state. (91) De Soto recommends that local consensus works effectively in establishing the boundaries for formal property recognition. (92) That local consensus exists suggests that in many parts of the world a de facto property right is already present whose prosperity-creating incentive can then be unleashed through a state-recognized de jure right. 2. Property and the Equal Rights of Others Property is an exclusionary right that, under the rule of law, applies equally to the resource acquisitions and aggregations of the wealthy and the poor alike. As a right, property is like a blanket that covers everyone, allowing each person to acquire, create, and use resources in ways that produce the greatest potential for resource maximization. Property, however, does permit some persons to accumulate resources that others do not have: because by definition "resources" are what others may need or want, there is some justification for the familiar argument that if X has something in limited quantity that others need or want, X has a type of power over them because she can bend them to her will so they can get what they need from her. (93) Of course they have a similar "power" over her in a property system due to the resources they own, but because property permits unequal accumulations of resources, X may have greater "power" than they have. They may need what she has more than she needs what they have. Still, in the sense that property is a blanket, everyone enjoys an equal right to exclude, and thus Bill Gates in his resources has no more or less property than others in their resources. Importantly, the equal exclusionary right that each person enjoys means that an owner's use of resources has ascertainable limits. (94) Although Blackstone asserted that property was a right of "absolute dominion," he also recognized that an owner's "free use, enjoyment, and disposal" of resources was subject to "the laws of the land." (95) In Entick v. Carrington, Lord Chancellor Pratt wrote that the right of property "is preserved sacred and incommunicable in all instances, where it has not been taken away or abridged by some public law for the good of the whole." (96) These statements may be taken to recognize the legitimacy of taxation of and eminent domain over one's resources, (97) but they also acknowledge that one owner cannot use resources in certain ways so as to interfere with another owner's use of resources, (98) Property has no purpose outside of community, meaning that Robinson Crusoe had no need to worry about whether the fruit he picked or the animals he trapped belonged to someone else. The implication of this is that the very concept of property contains limitation on resource use: in a strong property system, one's exclusionary right is always limited by the equal right of others to their resources. Thus, property can be seen as the hub of Western legal systems with the law of contract and the law of tort as spokes radiating from the hub and establishing limitations protecting the equal property right of others. Contract law sets forth equally enforceable conditions concerning consequences of the breach of an agreement to transfer resources. (99) Tort law and much of criminal law protect resources and establish limits on what one can do with resources that are consonant with the equal limitations placed on others, and these laws provide various compensatory and punitive measures for one's violation of these limitations. (100) Under this analysis, most all other areas of the law can also be reduced to spokes connected to the hub of property. (101) 3. Property Enforcement The concept of property also includes its adequate enforcement. (102) Without the enforcement necessary to implement a property system, a state will not be creating conditions conducive to maximum prosperity. (103) In much of Western political theory, the ultimate justification of the state is to legalize civilly and formally the right of property. (104) But to stimulate the incentive that induces the greatest wealth of nations, the state must also enforce contracts and ensure that corruption, fraud, theft, and coercion not make owners spend their efforts, ingenuity, time, and money defending valuable resources instead of freely using these resources to create, produce, and exchange new resources. Honest police, ethical lawyers, and impartial judges or other dispute resolvers are necessary to accomplish enforcement, and nationbuilders cannot claim to have implemented a strong property system without such enforcement. (105) Prompt foreign assistance targeted at eliminating corruption and focusing on law enforcement might have prevented the economic debacle following the collapse of the former Soviet Union. Rapid but incomplete market privatization coupled with scanty and ambiguous property law in the absence of adequate law enforcement materially caused the Russian economy to decline following the Soviet Union's demise. (106) On the other hand, in China, the move from almost total state planning to partial property and contract recognition, accompanied by the training of new judges and lawyers has provided the conditions for much new economic growth in that country. (107) D. Property and the Story of Evolved Human Behavior The framers of the U.S. Constitution were largely Lockean in their view that ownership was something "natural" to human beings, (108) which was associated with the belief that God had given people dominion over nature and over themselves. (109) This dominion is represented by the concept of "property," which means in this usage, as in other historical usages, the right to exclude others. (110) Although the application of property to various resources has differed through history, the view that property is a natural right, the protection of which civil government was established, continues to this very day and is often viewed as a moral right. (111) Around the time of the American Revolution, it was even called a "sacred" right, (112) and the colonies invoked their natural authority in contending that the British had no right to tax them without representation. (113) Other thinkers and political theorists have argued that although property in no way has the imprimatur of divine providence, it is still the basis for the civil state, and its justification is the "common good." (114) Thus, utilitarian thinker Jeremy Bentham termed property "the noblest triumph," (115) and both natural law and utilitarian theorists have recognized the incentive engendered by the exclusionary right as fostering social prosperity. Whether "property" itself is a natural or purely civil institution, there seems to be something in its legal recognition that people respond to with greater resource production than when resources are state-managed or communal. Nationbuilders from other cultures may reject notions that the efficacy of a property system is based on God's ordinance and may disagree with the ambiguous concept of the "common good." Why, then, does there seem to be such a profound relation between a right to exclude others from infringing on the results of our resourceful efforts and the greatest wealth of nations? Economists argue that individuals act rationally in their "self-interest," (116) but that is not an explanation of why the right of property engenders such resource production. It is only a description of behavior. An explanation, however, exists that, while controversial, fits much of an important new understanding of human behavior: evolutionary psychology. Although this explanation of evolved behavior is unnecessary to appreciating the fact that the exclusionary right in fact seems to engender the condition for maximum resource production, it does tell a story that helps illuminate what it means to say that we act out of self-interest, (117) and it suggests why it is difficult to educate or otherwise persuade people voluntarily to share substantial resources according to the needs of strangers. The story begins with the assertion that basic human behaviors are evolved characteristics, much like an upright posture or the possession of language capacity are evolved characteristics, and that these behaviors have been selected because our ancestors who practiced them were more successful in surviving, mating, and passing on (118) the genes that emphasized such behaviors in the first instance. (119) Those who did not practice such behaviors are not our ancestors--in general they were less successful in mating, and over many generations their genes died out. Although evolutionary psychology has difficulty relating evolved human behavior as an explanation for highly specific human actions, such as driving on the right or left side of the highway, the human concern with resource acquisition, the reluctance to surrender large portions of what one has acquired simply to meet the needs of strangers, and the initiative-dampening effect of coercing acquired resources from people through taxation or otherwise are very general, not specific, behavioral tendencies. (120) They seem related to the fact that human children mature very slowly and require inordinate resource investment, in contrast to the young of other species, and that parental caregivers, as a part of the procreation of their genes, cannot afford to surrender too many limited resources to strangers that their offspring may need, else the offspring may not survive. (121) Females as the primary caregivers tend to look carefully before mating with males who are both able and willing to help provide resources to raise offspring,122 whereas males tend to be assertive in acquiring and displaying resources in order to convince females of their mating worthiness. (123) This story about human behavior is made more complex in that human resource behaviors evolved during the 98 or 99 percent of our existence as a species that was spent in small bands of hunter-gatherers whose "economies" resembled that of the lifeboat rather than the cornucopia. (124) Members of these bands shared extensively with each other, (125) but the bands were quite small and the members were considerably interrelated. In sharing with others, they were helping to perpetuate their own genes, (126) held also by their relatives, and, in any event, they were avoiding conflict with people on whom they depended for cooperative enterprises like hunting and fighting. But their sharing behavior did not extend to potentially large and needy groups of strangers; our distant ancestors may have shared with the occasional stranger, but, if they shared too many of their lifeboat resources with strangers, they did not have enough for themselves and their offspring. Those with the inclination for excessive sharing were gradually eliminated from the gene pool, victims in hard times of their own generosity and, in a sense, of the more selfish, hoarding tendencies of others. In contemporary society, the behaviors that evolved and supported small hunter-gatherer bands in lifeboat economies still prevail in modern humans. (127) The concern about acquiring more resources, the social status and attractiveness for mating of those who have large resource holdings, and the reluctance to share a very significant portion of personal resources with strangers are all still deeply embedded in human behavior. (128) Perhaps, most significantly, foreknowledge of the coerced taking of the resources one produces still depresses human initiative to maximize resourceful effort because the resources so produced are not perceived to benefit the individual nor her family or relatives. (129) Individuals do not appreciate consciously how deeply inclined they are toward these sell interested and offspring-interested behaviors, but inclined they are. The point of this story is that "property" is the legal institution that best accommodates hunter-gatherer resource behaviors in modern mega-societies of strangers. "Property" also gives maximum incentive to resourceful productions because this right allows individuals to exclude others from what they acquire so that they can direct it toward their own survival, mating, and the survival of their offspring and relatives. Because people in strong property states live not in lifeboat economies but in cornucopia economies that allow them to produce far more than they or their families can consume, they specialize and trade for mutual advantage in what becomes the modern market. As the supplies of resources increase, competition arises, and the prices of resources decrease. People can acquire more while spending less and prosperity flowers, (130) a prosperity, however, that depends on the incentives of a legal exclusionary right that allows people to determine what happens to the resources for which they have worked or risked. The story of evolved resource behavior contains no moral justification for selfishness, legal recognition of gender differences, or oppression of strangers or the poor. It merely emphasizes that educating, cajoling, and coercing people to produce according to their abilities and to share according to the needs of strangers cannot create the potential for resource-maximizing economies. Nationbuilders may preach compassionate sharing and study creative ways of taxing cornucopia resources so as to minimize the perception of resource coercion, but they must also enforce a strong property system that accommodates rather intractable human behavior in order to grow the greatest wealth of nations. Thus, the case for property "is borne of human nature, not seventeenth-century philosophy." (131) III. LIBERTY One commentator worries that the West has forgotten the connection between property and prosperity. (132) Numerous recent references urging nationbuilders to frame their economies with a strong property system suggest that the memory was not forgotten but merely repressed, and that once again it is emerging into consciousness. (133) On the other hand, the connection between property and liberty is still deeply buried for most, but in the spirit of reductionism, this memory, too, needs refreshing. Nationbuilders should want to know of the similarity of these concepts in history so they can help construct free and peaceful as well as prosperous societies. Although the Greeks and other ancients may have enjoyed considerable freedoms, they lacked the grasp of a term equivalent to "liberty." (134) In Western history one of its earlier accounts of liberty--defined roughly as the right to be left alone by the state if one is not engaging in behavior that harms others--appears in the enumerations of the Charter of Liberties, better known as the Magna Carta, or Great Charter. (135) Central to the Charter of Liberties and the next 800 years of constitutional liberty in England and its colonies is the 1215 version of due process: "No freeman shall be arrested, or detained in prison, or deprived of his freehold, or in any way molested; and we [the King, the State] will not set forth against him, nor send against him, unless by the lawful judgment of his peers." (136) Note that the liberty an owner has from being arbitrarily deprived of a right to land is given equal significance with the liberty not to be arbitrarily arrested and imprisoned. By 1225, the Charter of Liberties had added to its enumerations a provision that foreshadows modern protections against uncompensated takings: "No Sheriff or Baliff of ours, or any other, shall take the horses or carts of any man to make carriage, except he pay the old price limited, that is to say, for carriage with two horse x.d. a day; for three horse xiv.d. a day." (137) To secure the citizenry against arbitrary state takings by requiring compensation deserves the name "liberty" just as to free people to use their resources by allowing them legally to exclude others from interfering with these resources warrants the name "property." Both terms express the right of exclusion against the state, and although liberty today generally refers to the right of private persons to exclude the state from interfering with resourceful faculties such as speech and freedom of movement and property is usually used in reference to exclusive non-facultative resources, the two are virtual synonyms in their exclusionary connotation. Further, if the resources of the self, including speech, movement, and free direction of effort and ingenuity, are considered the basis of non-facultative resource creation, then the liberty right to direct the resources of self and the property right to direct non-facultative resources become inextricably related. What must be remembered is that outside of the economic lifeboat, where the main issue is resource division, people generate additional, prosperity-engendering resources through their efforts, and although raw materials are important to resource generation, they do not by themselves often represent consumable, useful resources. They become consumable or useful only after the application of human faculties, the liberty and property of which give greatest incentive to resourceful production. That liberty and property are interconnected is suggested not only by the Charter of Liberties, but also throughout English constitutionalism. Five hundred years after the Charter of Liberties, Blackstone in his famous Commentaries on the common law identified three "absolute" rights "inherent in every Englishman." (138) They were: (1) "personal security," or "a person's legal and uninterrupted enjoyment of his life, his limbs, his body, his health and his reputation;" (139) (2) "personal liberty," or "the power of locomotion, of changing situation, of removing one's person to whatsoever place one's inclination may direct; without imprisonment or restraint;" (140) and (3) "property." (141) The resemblance of these rights to the familiar triune "life, liberty, and property" is a strong one, but Blackstone adds that these rights are usually summed up in one general application and denominated "the natural liberty of mankind." (142) That property is a subset of natural liberty is unmistakably asserted. Not long after Blackstone wrote, James Madison turned around this assertion and maintained that liberty is a form of property. Acknowledging that in its "particular application," property refers to the dominion that one "claims and exercises over the external things of the world, in exclusion of every other individual," (143) Madison also argued that "[i]n its larger and juster meaning" property includes one's "opinions and the free communication of them," the "profession and practice" of one's religion, the "free use" of one's "faculties and free choice of the objects on which to employ them," and "the safety and liberty" of one's person. (144) Defining property as Madison does, as a right "in exclusion of every other individual," (145) leaves little semantic difference between property and liberty. Legal historian John Phillip Reid has made the broad claim that "[t]here may have been no eighteenth-century educated American who did not associate defense of liberty with defense of property." (146) Professor Reid also states that "[t]oday we think of their emphasis upon property as a defense of the material and tend to forget how much the concept of liberty in the seventeenth and eighteenth centuries depended upon property.... [I]t is sometimes forgotten that liberty itself was spoken of and thought of as a property." (147) As a colonial American wrote in 1768, "[l]iberty and [p]roperty are not only join'd in common discourse, but are in their own natures so nearly ally'd, that we cannot be said to possess the one without the other." (148) Securing "the blessings of liberty to ourselves and our posterity" (149) was, after all, primarily about ensuring that the state would not be able to take without consent or compensation what belonged to the citizens, including their facultative freedoms, and, along with Madison, they believed that even as one "is said to have a right to his property, he may be equally said to have a property in his rights." (150) Both the genesis of the American Revolution and of the Constitution lie in that which is similar in both liberty and property. Conceptually, the near indistinguishability of the rights of liberty and property is found in the works of John Locke and repeatedly in his Second Treatise on Government, which may have had greater philosophical impact on the American Revolution than any other political work. (151) Locke asserts that one has a property in the facultative rights to oneself. (152) This concept of self ownership equates property and liberty, for both terms refer to one's right to exclude the state and others from facultative and non-facultative resources alike. Currently, it may be fashionable to separate the concepts of liberty and property, but the entire legal basis for colonial America's argument against the British state was that the most basic exclusionary principle of English constitutionalism and common law was being taken from the colonists by taxation without due process representation. (153) The Lord Mayor of London acknowledged that "if we can tax the Americans without their consent [i.e., their representation in Parliament], they have no property, nothing they can call their own," (154) and this deprivation was the taking of liberty itself. For nationbuilders who wish to grasp what about the underpinnings of prosperity and freedom in the United States is most essential, the key is to appreciate the interconnected meaning of liberty and property as the general right to exclude the state and others from the broadest range of resources, with self-ownership as the generative basis for maximum production of new and additional resources. That not everyone was free to enjoy the right of exclusion is not an indictment of the importance of liberty and property in colonial America or 16th and 17th century Great Britain. That women had no right to vote and had a more limited property right than men and that Africans were enslaved in the New World and had the sell ownership right enjoyed by others stripped from them does not contradict the premise that the exclusionary right is the hallmark both of freedom and prosperity. It does show the horrendous consequences of failing to extend equal liberty and property to all persons within the jurisdiction of the state, however, and it illustrates that the ideals of liberty and property fall short of perfect accomplishment in even the freest and most prosperous nations. The lesson for nationbuilders is that it is not enough to proclaim the words "liberty" and "property," but that the exclusionary right underlying these terms must be equally and generally applied under the rule of law, and that the resources to which it applies must be recognized in the widest terms. Further, the more resources to which liberty/property applies, the stronger the system and the freer and more prosperous the citizenry. The caveat is always that, although it may be easy to say the words "liberty" and "property," it can be difficult to enforce them in practice with regard to the equal exclusionary right of others. (155) The final Part considers how those who run giant businesses can ignore the equal exclusionary right of others. The issues of corporate governance are pressing, and they illustrate well the difficulties of implementing the enforcement of a strong system of liberty/property ("property") in order to create freedom, prosperity, and peace. IV. CORPORATE GOVERNANCE Specifically, corporate governance refers to the legal relationship among the owners of a business organization and between them and the managerial agents who run it. (156) In a broader sense, corporate governance relates to the general limits that society places on economic actors, the very biggest of which are transnational corporations. Whether in its specific or broad sense, the issues of corporate governance can be reduced to the exclusionary right as it is limited by the equal right of others. The operation of a strong property system does not free economic actors to do anything they wish, but rather it protects the resources of the weaker against the predations of the more powerful. It secures the equal right of all. A. The Specific Sense of Corporate Governance and Property Some of the very worst abuses of corporate governance in the specific sense can today be found in Russia where "strong man" domination of the formerly communist manufacturing sector of the economy prevails. Former Soviet managers often continue to control companies with little nod to their new outside owners; accounting procedures are weak and firm decision-making lacks minimal transparency; and extremely low market values of company stocks reflect investor conviction that corruption, mismanagement, fraud, and theft are the norm. (157) Merrit Fox and Michael Heller assert that many Russian managers "refuse to register share purchases by outsiders, refuse to recognize board directors properly elected by outside shareholders, dilute stock in ways that freeze out outsiders by issuing shares to insiders for inadequate consideration, or engage in false bankruptcies that wipe out shareholders' interests." (158) One manager installed guards to keep shareholders out of a gypsum plant and ignored dozens of court decisions against him over several years. (159) This list of corporate governance horrors can be reduced to the egregious failure to institute, implement, and enforce a strong property system. For a private market to function, the state must enable business owners to exclude others from interfering with business resources, and "others" certainly include the fiduciary agents employed by the owners. In part, the sad lack of corporate governance in Russia is attributable to International Monetary Fund (IMF) economists who encouraged Russia in the months following the Soviet Union's collapse toward market fundamentalism, (160) the belief that privatization itself can alleviate the inadequacies of state planning and set a developing country on the road to economic growth. A more measured, bottom-up approach like China is taking, which allows the development of smaller private companies within a growing commercial law framework, (161) would have worked better for Russia. By 1997, however, when Federal Reserve chair Alan Greenspan described "the rule of law, ... property, ... contract, ... and judicial review and determination" as "the essential infrastructure of a market economy," (162) it was too late for Russia. The average per capita income had declined dramatically below that of the Soviet era. (163) To inculcate the values of fiduciary obligation into business managers requires not only that corporate governance laws exist but that education and social culture support the right of property. When American settlers traveled the Overland Trail westward and were often beyond the law's enforcement by any jurisdiction, the respect for the property right was still such that "the concept of private property remained largely inviolable, even when conditions were trying and people desperate. (164) In circumstances of dire need, travelers continued to contract for others' resources, rather than stealing them, (165) and there were virtually no recorded instances of forceful taking of what one had that another wanted or needed. (166) In the new century, however, when some do not recognize the rule of law and legal systems as foundational to the study of business, (167) the problems of corporate governance in the United States are on the rise. Scandals at Enron, WorldCom, Tyco, Adelphia, ImClone, Qwest, and Global Crossing all represent corruption and fraud in business managers' acquiring or impairing the resources of their companies' investor-owners--corporate governance failures that reflect not only weak laws guaranteeing the equal rights of others but also the absence of the values that respected the right to exclude on the Overland Trail. Adequate corporate governance requires both laws that secure the property right of business owners against their managerial agents and the social commitment to the values of property that is ideally supported by an educated understanding of the property system. (168) The intent of this Article is not to articulate the rules necessary for adequate corporate governance, which, in any event, may vary from culture to culture, but is instead to place corporate governance conceptually within the property right of exclusion, which is necessary to attain the maximum potential for resource development. As the next Section contends, the broader sense of corporate governance as regulating the relationship between economic actors, especially the more substantial ones, and society also is contained within the appreciation of a property system. B. The Broad Sense of Corporate Governance and Property A whole host of groups comprise the anti-globalization movement that demonstrates at the meetings of the World Trade Organization. Environmental groups, labor unions, and various groups concerned about the environment and the health, safety, and wages of workers in less-developed nations make up the bulk of demonstrators, (169) and their concerns can be met through adequate implementation of a single concept: property. Further, because the issues that concern the anti-globalization movement are generally those that involve the potentially adverse affects that large businesses may have on the resources of those who live in lesser-developed countries, the broad sense of corporate governance is implicated. The following two sections reduce these corporate governance issues to a debate over property and who should be able to exclude whom from what. The discussion will not resolve the debate but will rather focus it. 1. The Right to Pollute as an Object of Property Environmentalists (and some labor unionists) fear that businesses are leaving the United States and other Western states that have relatively comprehensive environmental protection laws and are moving to less-developed countries that have little or no environmental protection. (170) What they do not usually grasp is that the issues raised in such moves are better framed not by appeals to vanishing rainforests and atmospheric warming, but by assertions of corporate governance failure and the need for strong property systems. When companies flee environmental protection laws and seek out countries with inadequate environmental regulation, they threaten resources like the air and water that are common to all, and thus they violate the equal right of all to use these resources. This right can be conceptually reduced to a property right, and the implementation of an equal right to exclude is central to a strong property system. Admittedly, even in the West, it is not usual to think of private persons as owning the air and water, but broadly speaking, they do insomuch as they can legally exclude others from certain interferences with these resources, such as polluting them, and they have a right to enjoin or seek remedy against those who injure these resources. Just as tenants in common can sue other co-owners who lay waste to the common resource, (171) so also when private persons are able to exclude others from injuring a right that each has to unpolluted air and water, an exercise of property takes place. That what constitutes an infringement on one's ownership of air and water has to be defined by law, and, because courts will usually lack the expertise to set such environmental standards, they will need setting by public legislative or administrative action. Courts can and already do interpret and apply such standards when disputes arise. In the United States, any citizen whose interest in unpolluted air and water is directly affected can sue to enforce Clean Air Act and Clean Water Act pollution standards. (172) Standing to sue is recognition of property in the sense asserted here because it triggers the right to exclude others from interfering with one's resource. That many of the other traditional incidents of ownership are not associated with the property indicated by the Clean Air Act and the Clean Water Act may doctrinally concern common-law legal scholars, but the right of exclusion is the sine qua non of property, and environmental laws do allow for citizens to exclude companies or others from injuring the air and water, as measured by the rules set by the Environmental Protection Agency. Environmentalists demonstrating at the World Bank meeting, and nationbuilders in developing countries, should realize that both the maintenance of clean air and water as well as of long-term sustainable prosperity involving their use can be conceptualized through the framework of an exclusionary property system. (173) Consider what might happen if the right to pollute the world's air and water resources were truly brought within the property system. For instance, if everyone on earth legally owned proportionate shares to pollute the world's air and water, (174) these shares could be sold to those who need to pollute according to safe standards for total pollution amount set by international treaty. If 60 billion pounds of a certain atmospheric pollutant is the level considered safe to emit on an annual basis, then each person in the world could have a property in 10 pounds of this pollutant. To reduce transaction costs, individuals might not have to trade their individual shares; rather, the appropriate international agency could auction off these rights to polluters periodically, and the proceeds could be distributed to the countries of the world on a population-proportionate basis. One approach could be to agree by international treaty to specify the use of such funds for national investment purposes like education, health, disaster relief, and infrastructure. Eventually and ideally, each individual might personally receive her share from the pollution auction or get a tax credit. The point is not that such a property creation is likely in the current economic and political climate, but that environmental corporate governance concerns can be reduced for debate to issues of property, which, as has been previously asserted, is the central hub of Western legal systems (175) and the catalyst for maximum resources generation. 2. Worker Health, Safety, and Non-Discrimination as Objects of Property The most basic resource that people have is the one that they have in themselves--their potential for effort and ingenuity, supported by their physical integrity, a resource historically protected by the right to exclude others. (176) When workers have their health impaired because of poor working conditions or their personal safety abridged by employment-related injury, the property in their most essential resource is infringed. In property-strong countries, health and safety statutes and systems of tort and worker's compensation help secure the resources that workers own in themselves, but in property-weak nations unhealthful and dangerous working conditions can imperil both the personal and economic futures of their populations. Thus, broad corporate governance laws that limit uninhibited business activity around the globe seem appropriate on both health and safety grounds and are fully consonant with the regime of property. Companies may respond that even as a property system allows them to take risks with their resources, it also holds them to losses when poor choices are made and that the same risks and losses are inherent in employment. As long as employers and employees risk their resources voluntarily, the state should not skew the voluntary exchange of resources, which produces the greatest social prosperity. Although efficiency is indeed defined by the voluntary exchange of resources in a strong property system, market imperfections, such as transaction costs that defeat compensation when an employer has caused injury to an employee and asymmetries of information between contracting parties in the employment context, (177) make market fundamentalism a less compelling social option than adequate corporate governance in all countries of the world. In poor, property-weak countries, the absence of an adequate tort system or safety and health statutes and the lack of established contract law with doctrines of duress, incapacity, undue influence, mistake, and unconscionability weaken the merits of the voluntary-exchange argument when balanced against the need to strengthen the equal property right of others through broad corporate governance. Whether domestically or internationally instituted, corporate governance to prohibit invidious discrimination against qualified workers due to race, gender, age, and other inherent characteristics can also be couched in property-related terms. The main issue concerns where the state assigns the right of property. (178) Does it recognize the property of the employer to exclude others from interfering with the employer's free use of resources in the choice to hire and fire on any basis, including various discriminations based on inherent racial or other characteristics? Or does it acknowledge the property right of the employee and job applicant to exclude the employer from discriminating based on such characteristics, effectively recognizing certain non-discrimination as an individual resource? In analyzing these questions in the context of property, recall that property is a right of exclusion, not tangible or intangible things, and that the state should assign, or not assign, the exclusionary right to a resource according to whether it wishes to produce more or less of the resource. Recognizing an exclusionary right of discrimination in the employer gives incentive to discriminate and, in all reasonable likelihood, will lead to greater discrimination from employers who desire to discriminate than when the job-applicant or employee can legally exclude the employer from discriminating, in which case more non-discrimination will probably be generated. (179) Although it is not usual to think of the actions of discrimination and non-discrimination as objects of the property right, neither was it common at one time to consider the copying of literary and musical works or the protection of inventions, trade secrets, and business goodwill as the objects of property. (180) In terms of corporate governance, however, it is illuminating to reduce the specific relationship of business managers to business owners and the general relationship of business enterprises to employees and society to application of the exclusionary property right. Some managers will likely always misappropriate the resources of corporate owners, and globalization and anti-globalization forces may never entirely come to agreement, but in order to understand the maximum potential for prosperity, the term that frames the debate should be "property"--the right to exclude others from limited resources. V. CONCLUSION Property is not found in the informal tenets of Western culture, nor does it derive from the genes of our hunter-gatherer ancestors, although it may be an expression of both. Rather, it is a formal, constitutive principle of political, legal, and economic life that seems to accommodate the resource-oriented behaviors of states of strangers in a way that encourages people to become more prosperous and to feel freer than either the state-planning system of socialist coercion or the market fundamentalism of economic laissez-faire theory. At its heart, property is the legally-instituted right to exclude others, including the state, from resources that are originally owned or are acquired without force, fraud, or theft. Because property is a way of ordering resources in a community, the individual's exclusionary right in a strong system is always limited by the equal exclusionary right of others. This limitation is the same one that limits liberty, for property and liberty are merely two sides of the same coin; it is a limitation that emphasizes that an adequate property system in its very meaning does not allow the few to use their resources to abuse the many. And, although property/liberty may answer the question of how to produce a prosperous, free community, it does not address how society should morally respond to the individually poor, infirm, and unfortunate among us. An appreciation, however, of the natural incentives to production that the institution of property maximally encourages does tell us that if the state excessively coerces resources from those who have to meet the needs or wants of others who lack (or the state cannot effectively prevent private persons from coercing the resources of others), both prosperity and freedom are weakened. As a formal legal institution rather than a moral imperative, property does not specify the scope of resources to which it should (or should not) apply. The right to exclude is merely a neutral principle that powers resource increase by protecting the expression of natural tendencies of resource creation, acquisition, and display connected to mating and child care, connected so that to deprive persons of the increase from the exercise of these tendencies can significantly depress incentive to resourceful activity in ways that neither education nor coercion can effectively overcome in a society. All societies apply private exclusion to at least some resources, but the issues of which resources property should protect and how deeply to tax private resources to provide a common infrastructure and to assist those in exigent need without killing the goose that lays the golden wealth of nations, still remains unresolved. That the legal institution of a strong, well-enforced property system, however, supports both freedom in the facultative resources of the person and national abundance from the marketplace exchanges of nonfacultative resources seems significantly settled. For nationbuilders concerned with a prosperity and liberty that nurture the hope for sustainable peace, this reductionism is the beginning. (1.) Property is a legal right like freedom of speech rather than a collection of things or resources; thus in the United States everyone has equal property rights just as they have equal freedom of speech rights. See infra notes 52-64 and accompanying text. (2.) See infra notes 135-51 and accompanying text. (3.) Quoted in JAMES MADISON, THE WRITINGS OF JAMES MADISON 101 (Gaillard Hunt ed. 1906). (4.) See infra note 66. See generally O. Lee Reed, Law, the Rule of Law, and Property: A Foundation for the Private Market and Business Study, 38 AM. BUS. L.J. 441 (2001). (5.) See, e.g., Steven D. Smith, Believing Like a Lawyer, 40 B.C.L. REV. 1041, 1043 (1999) (observing that "legal thinkers have learned to treat standard law talk dismissively" and that even contending parties in jurisprudential debates agree "on the inefficiency of conventional legal reasoning"). Legal thinkers, too, sometimes muddy the waters of understanding, often in order to promote their implicit policy goals. Nowhere in law is this more evident than in the literature of property that seeks to deconstruct that term's core into mere legal relations of power over limited resources, which deconstruction can then provide a basis for democratically redistributing such resources in a more socially equal fashion. This literature asserts that in the last couple of centuries what it means to have property has been essentially redefined. See, e.g., Kenneth J. Vandevelde, The New Property of the Nineteenth Century: The Development of the Modern Concept of Property, 29 BUFF. L. REV. 325 (1980). To the contrary, the position of this essay is that the central appreciation of property has always been that one can exclude others from limited resources. The application of property to intangible resources, like trade secrets and good will, as well as tangible resources, like land and the family jewels, reflects only a developing economy and the slow accretion of case-law interpretation, rather than, according to Vandevelde, that "the meaning of the term 'property' has changed radically." Id. at 325. (6.) See Amy Chua, Markets, Democracy, and Ethnicity: Toward a New Paradigm for Law and Development, 108 YALE L.J. 1 (1998). Related to the cautioning of restraint in the adopting of Western legal systems is the implication that these systems are idiosyncratic to Western culture and values and thus may not be appropriate for people from non-Western cultures. Id. The Author does not deny the important role of culture in framing economic development, because culture matters tremendously. See, e.g., CULTURE MATTERS: HOW VALUES SHAPE HUMAN PROGRESS (Lawrence E. Harrison and Samuel P. Huntington eds., 2000). Rather, whatever the cultural differences among countries, an effective formal property system, broadly defined, is a material requirement for the maximum conditions of Western-style prosperity and freedom. Worldwide, poor nations lack strong property systems and prosperous nations have them. See infra notes 73-81 and accompanying text. (7.) See infra notes 73-81 and accompanying text. (8.) See infra notes 116-28 and accompanying text. (9.) See infra notes 52-64 and accompanying text. (10.) See infra notes 154-78 and accompanying text. (11.) According to the World Bank in 2000, 54 countries of the world had per capita Gross National Income (hereinafter GNI) of less than $2.00 a day. WORLD BANK, WORLD DEVELOPMENT INDICATORS 18-20 (2000). At least seven additional countries where figures were unavailable likely also fell below $2.00 a day. Id. (12.) It is estimated that children suffer 30,000 such deaths every day; over 200,000 a week, or more than ten million annually, die from largely-preventable causes. Soundbites, NEW SCIENTIST, July 27, 2002, at 8 (citing the UN Human Development Report that "[e]very day more than 30,000 children die of preventable diseases"). (13.) E.g., Allan Gerson, Peace Building: The Private Sector's Role, 95 AM. J. INT'L L. 102, 102 (2001) ("[T]oday there is new agreement about one basic point: the scourge of intrastate war will not be contained unless the vicious cycle of poverty, economic injury, and political grievance is broken."); David Hendee, Expert: Hunger Feeds Desperation, Terrorism, OMAHA WORLD-HERALD, Oct. 12, 2002, at B6 (quoting Per Pinstrup-Anderson, the director-general of the International Food Policy Research Institute that the "underlying causes of terrorism" are "poverty, hunger and hopelessness"); Alan Wechsler, New Era, New Battles for McGovern, TIMES UNION, Oct. 8, 2002, at B4 (quoting George McGovern: "The basic cause of the spread of terrorism in the world is misery and poverty and hunger."). Cf. World Bank, M2 PRESSWIRE, July 9, 2001, LEXIS, Nexis Library, News Group File (quoting World Bank President James D. Wolfensohn: "Only with poverty reduction will peace be possible: an unequal planet will be a planet of war and violence. What we are discussing ... is the basis of peace itself."). (14.) In 2000, 19 nations had per capita GNI of $20,000 or more. WORLD DEVELOPMENT INDICATORS, supra note 11. (15.) In 2000, China had $840 of GNI per capita; Bangladesh had $370. Id. at 18. Twenty-nine countries had GNI per capita lower than that of Bangladesh. Id. at 18.20. (16.) The United States had a 2000 per capita GNI of $34,100. Id. at 20. Three countries had higher per capita GNI. Id. at 18-20. (17.) Such exploitation includes removal of resources from the developing nations through outsider investment and trade even after the end of colonial domination. See, e.g., TIMOTHY J. YEAGER, INSTITUTIONS, TRANSITION ECONOMIES, AND ECONOMIC DEVELOPMENT 13 (1999) (stating that "[i]n its simplest form, dependency theory argues that poor countries are poor because rich countries are rich"). (18.) See, e.g., id. at 16-17 (summarizing four weaknesses of dependency theory, which add up to the fact that inadequate internal economies of poor countries contribute far more to their poverty than do trade relations with wealthier, more developed nations). For the important effect of an internal national economy on a people, consider the situation of African-Americans, who were enslaved in the United States until 1863 and who continue to be discriminated against in many of the private economic opportunities afforded by the marketplace, but who live in a relatively strong property system, had in 1997 a per capita income of $12,351. Press Release, Number of African Americans in Poverty Declines While Income Rises, Census Bureau Reports (Sept. 24, 1998), available at http://www.census.gov/Press-Release/cb98-176.html. On the other hand, Russians, who have been neither colonized nor enslaved (except by communism), but who live under a weak property system, had in 2000 a per capita GNI of $1,660. WORLD DEVELOPMENT INDICATORS, supra note 11, at 20. (19.) See generally Mancur Olson, Jr., Distinguished Lecture on Economics in Government, 10 J. ECON. PERSP. 3 (1996). (20.) Id. at 19. (21.) The U.S. 2000 GNI per capita was almost seven-times that of Mexico. WORLD DEVELOPMENT INDICATORS, supra note 11, at 19-20. (22.) South Korea's 2000 GNI income per capita was $8,910. Id. at 19. North Korea's was not available but could only be a small fraction of South Korea's. (23.) See supra notes 15-16. (24.) For example, Germany, Austria, Italy, and Japan are all among the world's wealthiest nations in GNI per capita annual income whereas many countries of South America and Africa were almost untouched by World War II yet still remain impoverished. WORLD DEVELOPMENT INDICATORS, supra note 11, at 18-20. (25.) See generally JARED DIAMOND, GUNS, GERMS, AND STEEL: THE FATES OF HUMAN SOCIETIES (1999). E.g., id. at 92 (maintaining that "the availability of domestic plants and animals ultimately explains why empires, literacy, and steel weapons developed earliest in Eurasia and later, or not at all, on other continents"). Availability of these items was related to the long, relatively uninterrupted, east-west axis of Eurasia, which made the spread of agriculture go faster than elsewhere, and around "[t]hat faster spread of Eurasian agriculture ... turned the fortunes of history." Id. at 191. (26.) Professor Diamond's thesis is a powerful one, but the development of the West into its vast position of economic superiority in the last several hundred years in a very basic way required the recognition and institution of a strong formal property system supported by the beliefs in the system. See generally Douglass C. North, Why Some Countries Are Rich and Some Are Poor, 77 CHI-KENT. L. REV. 319 (2001) (stating that property rights enforced under the rule of law and coupled with the informal beliefs in the system is what produces the incentives that make a country rich). (27.) What explains Japan's current position of prosperity in the world is its strong property system, which changed from a "feudal regime" at the end of World War II. Economic Development and Integration as a Catalyst for Peace: Hearing Before the House Int'l Relations Comm., 107th Cong. (2002) (testimony of Hernando de Soto), LEXIS, Nexis Library, News Group File. (28.) Consider for instance the relative poverty of Albania, Kyrgystan, and Ukraine. WORLD DEVELOPMENT INDICATORS, supra note 11. China and Russia have somewhat higher per capita GNI, but could also be placed in this group when contrasted with the considerably more prosperous populations of much of Europe. Id. (29.) WILLIAM EASTERLY, THE ELUSIVE QUEST FOR GROWTH 25-44 (2002) (chronicling the direction of foreign aid for the last 50 years). See also Richard A. Slaughter, Poor Kyrgyzstan, NAT'L INTEREST, Summer 2002, LEXIS, News Group File. (30.) Slaughter, supra note 29 ("There are four principal arrows in the ['international foreign aid,] quiver: privatization, loans, direct grants and technical assistance."). (31.) EASTERLY, supra note 29, at 29 (stating that the "idea that aid-financed investment in dams, roads, and machines would yield growth goes back a long way"). (32.) EASTERLY, supra note 29, at 29 (asserting that the "aid-financed investment fetish has led us astray for growth for fifty years"). Contra Gregg Easterbrook, Safe Deposit, The Case for Foreign Aid, NEW REPUBLIC, July 29, 2002, LEXIS, Nexis Library, News Group File (acknowledging that although 1.2 billion people in the world still live on a dollar or less per day in spite of the trillion dollars spent on foreign aid since World War II, there have been some improvements in living standards among the world's poor). (33.) The emphasis on rapid privatization is also termed "market fundamentalism." (34.) Instead, privatization alone creates a host of corporate governance problems. E.g., JOSEPH E. STIGLITZ, GLOBALIZATION AND ITS DISCONTENTS 220 (2002) ("Privatization without necessary institutional infrastructure in the transition countries led to asset stripping rather than wealth creation.... By contrast, privatization accompanied by regulation, corporate restructuring, and strong corporate governance has led to higher growth."). (35.) According to a U.N. report, the Russian Federation's gross domestic product (equivalent to GNI) fell by 41% between 1990 and 1997. HERNANDO DE SOTO, THE MYSTERY OF CAPITAL 215 (2000). As for corruption, see Michael McFaul, Russia's Stalled Democracy, WORLD AND I, Mar. 1, 2000, LEXIS, Nexis Library, News Group File (stating that "crime and corruption [in Russia] ... are still rampant"). (36.) E.g., Conference to Focus on Vital Forestry Issues, W. MORNING NEWS, Aug. 27, 2002, LEXIS, Nexis Library, News Group File (comment of the conference committee chair of the National Forestry Conference urging "the construction industry to buy British timber instead of other products which use up Earth's limited resources"); Failure Is Not an Option, JAPAN TIMES, Aug. 31, 2002, LEXIS, Nexis Library, News Group File (stating that "the World Summit on Sustainable Development ... is a touchstone that indicates how serious the international community is about reconciling its needs with the world's limited resources"); William R. Hawkins, Outside View: Dangers of a Zero-Sum World, UPI, Sept. 3, 2002, LEXIS, Nexis Library, News Group File (asserting that "dangerous are the implications of a world with limited resources"). (37.) Many may associate the Information Age with computers, or at least with the development of the printing press, but the Author moves its beginnings back at least to the development of agriculture, which led to the specialization of function, enhancement of trade, development of writing, and, in general, to human material progress. From this perspective, material growth is always based on the incentive-best captured in the interstices of formal property--to create and implement new information about the world. (38.) That plenty is induced primarily by human effort is what Locke meant when he said that of the resources "useful to the life of man ... ninety-nine hundredths are wholly to be put on the account of labour." JOHN LOCKE, TWO TREATISES OF GOVERNMENT 385, 387 (P. Laslett ed., 1967) (1690). From this view, which is the more accurate one, Thorsten Veblen was wrong in asserting, "The accumulation of wealth at the upper end of the pecuniary scale implies privation at the lower end of the scale." DINESH D'SOUZA, THE VIRTUE OF PROSPERITY 72 (2000) (quoting Veblen and concluding, "Traditionally the debate about inequality has been conducted as if the acquisition of wealth were a zero-sum game."). For nationbuilders the difference between the image of resources as deriving from a cornucopia rather than a lifeboat is vital to the understanding of property as stimulating maximum resource potential. At the same time, the cornucopia image does not deny that oil may be a limited resource and that the atmosphere, waterways, and oceans cannot forever withstand the assault of unbridled pollution. It does suggest that the solution to limited natural resources is not lifeboat equalitarian rationing but cornucopia propertitarian effort and innovation that could, for instance, create a viable property system out of the commons of atmosphere and water that might benefit the people of all nations. See infra notes 170-71 and accompanying text. (39.) In other words, before economists can make predictions about a market economy, they must know under what conditions one can own the resources transferable in that economy. See Ronald H. Coase, The Institutional Structure of Production, in NOBEL LECTURES IN ECONOMIC SCIENCE, 1991-1995, at 11, 17 (Torsten Perrson ed., 1997) (maintaining that "what are traded on the market are not, as is often supposed by economists, physical entities but the rights to perform certain actions and the rights which individuals possess [i.e., property] are established by the legal system"). (40.) Cf. HERNANDO DE SOTO, THE OTHER PATH: THE INVISIBLE REVOLUTION IN THE THIRD WORLD 178 (1989). Contrary to the belief widespread in Latin America, the economic importance of property rights is not that they provide assets which benefit their holders exclusively, but that they give their owners sufficient incentive to add value to their resources by investing, innovating, or pooling them productively for the prosperity and progress of the entire community. Id. (41.) For example, the Restatement of Property does not define a singular meaning of the term but, rather, explains it as Hohfeldian rights, powers, and duties, an approach difficult for law students to grasp and virtually useless to nationbuilders. See RESTATEMENT (THIRD) OF PROPERTY (2000). Common also to law professors, the Restatement's approach leads nationbuilders to such unhelpful conclusions as "[o]wnership is best described in terms of the complex relationships established by the legal rules amongst various participants." CURTIS J. BERGER & JOAN C. WILLIAMS, PROPERTY, LAND OWNERSHIP AND USE 15 (4th ed. 1997). (42.) 11 ENCYCLOPEDIA OF THE SOCIAL SCIENCES 528 (1937), quoted in J. GORDON HYLTON ET AL., PROPERTY LAW AND THE PUBLIC INTEREST 68 (1998). Compare J.E. PENNER, THE IDEA OF PROPERTY IN LAW 1 (1997) (stating that many commentators consider property "a bundle of other concepts, a mere chimera of an entity" and "a quivering, wavering, normative phantasm"). (43.) Francis S. Phillbrick, Changing Conceptions of Property in Law, 86 U. PA. L. REV. 691, 696 (1938). See also Thomas C. Grey, The Disintegration of Property, in PROPERTY: NOMOS XXII 69 (J. Roland Pennock & John W. Chapman eds., 1980) (arguing that "property" refers to so many different rights that the term contains little specific meaning). (44.) Aristotle wrote, "Property should be ... as a general rule, private; for when everyone has a distinct interest, men ... will make more progress, because everyone will be attending to his own business." Aristotle, Politics, in 9 GREAT BOOKS OF THE WESTERN WORLD 458 (Robert Maynard Hutchins ed., 1952). (45.) Some select examples of this common assertion include CHANCELLOR SIR JOHN FORTESQUE, DE LAUDIBUS LEGUM ANGLIAE 143 (Francis Gregor trans., Robert Clarke & Co. 1874) (circa 1464-70) (the Lord Chief Justice and Chancellor under Henry VI asserting that because in England "every inhabitant is at his liberty fully to use and enjoy whatever his farm produceth," including the improvements "of those he retains in his service ... hence it is, that the inhabitants are rich in gold, silver, and in all the necessaries and conveniences of life"); ARTHUR TWINING HADLEY, ECONOMICS 2 (1897) (stating that the property right "is the chief modern motive to labor, to care, and to avoidance of waste and destruction"); RICHARD SCHLATTER, PRIVATE PROPERTY, THE HISTORY OF AN IDEA 242 (1951) (quoting David Hume that "whatever is produced or improved by a man's art or industry ought, for ever, to be secured to him, in order to give encouragement to such useful habits and accomplishments") (emphasis omitted); id. at 246 (quoting Jeremy Bentham "that in order to incite men to work the law ought to secure to each man the results of his industry"); ADAM SMITH, THE WEALTH OF NATIONS 592 (Edwin Canan ed., Modern Library 1994) (1776). That security which the laws in Great Britain give to every man that he shall enjoy the fruits of his own labour is alone sufficient to make any country flourish.... The natural effort of every individual to better his own condition, when suffered to exert itself with freedom and security, is so powerful a principle that it is alone, and without any assistance ... capable of carrying on society to wealth and prosperity.... Frederic Bastiat, Property and the Law, in CLASSICAL FOUNDATIONS OF LIBERTY AND PROPERTY 191, 193 (Richard A. Epstein ed., 2000) (stating that one "will not perform any labor if he is not sure of applying the fruit of his labors to the satisfaction of his wants"). Cf. U.S. CONST. art. I, [section] 8 (authorizing Congress to secure "to Authors and Inventors the exclusive Right [i.e., property] to their respective Writings and Discoveries" in order "[t]o promote [give incentive to] the Progress of Science and useful Arts"). (46.) Grey, supra note 43, at 69. Compare James Grunebaum, Property, in THE OXFORD COMPANION TO PHILOSOPHY 723 (Ted Honderich ed., 1995) (defining property as "what is owned"). (47.) Nationbuilders should appreciate that the meaning of property has a common essence and not believe that the incentive property produces is based somehow on a concept without fixed meaning; however, if they confuse property with the things or resources to which it applies, they will have difficulty grasping its fixed meaning. Consider when Henry Maine writes of "new forms of property" and "forms of propriety right distinctly new." SIR HENRY SUMNER MAINE, ANCIENT LAW 244 (Dorset Press 1986) (1861). If he intends that property is somehow mutating from an exclusionary right to something else, then the meaning of property itself is changing, but if he intends only that the exclusionary right is being applied to new or different things, the meaning of property has not changed, rather it is merely likely that as the economy develops, disputed instances arise concerning who owns what new intangible resource and courts are called upon to determine how property applies. In any event, this process is gradual, operates primarily on the cusp of economic development, and should not be taken as effecting dramatic upheaval in the general understanding of property. (48.) PETER STEIN & JOHN SHAND, LEGAL VALUES IN WESTERN SOCIETY 216 (1974) (explaining that because of the Roman view, civil law countries even today tend "to identify ownership with the thing owned"). In spite of the civil law's orientation, all civil law countries today recognize the right to exclude in relation to contract rights and various forms of financial instruments, and thus they recognize property in intangible things according to the most essential meaning of property. Even when "property" is used to mean "things," it is not synonymous with every kind of thing but only with things that are owned, making "ownership," not "things," the semantic essence of "property." (49.) By the reign of Edward I, the king's court had largely extended to lessees the right of property through exclusionary in rem protection "against the world at large." F.W. MAITLAND, THE CONSTITUTIONAL HISTORY OF ENGLAND 36 (H.A.L. Fisher ed., 1963) (1888). For an anthropologist's view, see Alan Macfarlane, The Mystery of Property.' Inheritance and Industrialization in England and Japan, in PROPERTY RELATIONS, RENEWING THE ANTHROPOLOGICAL TRADITION 104, 113 (C.M. Hann ed., 1998) (asserting that feudal lawyers saw that the rights to a thing "were almost infinitely expandable"). Like many others, Macfarlane equates property with a singular thing. A better view recognizes property as a singular exclusionary right and the resources of an object being "infinitely expandable," with each new resource developed from other resources also being protected under the rule of accretion by the state-instituted property right that allows owners to exclude others from that resource. But Macfarlane is correct that feudal lawyers applied property not just to the land itself but also to various possible uses of the land, like leasing, which the Author regards as "resources" of the land. Remember that in this essay the point is not to explain the perplexities of common-law or civil-law property language to nationbuilders but to give them a basic appreciation of what it is about Western legal systems that explains the maximum condition for resource generation. (50.) Mozart, for example, died financially strapped and in spite of his continuing reputation had to be buried in a pauper's grave, in part because his music lacked "the protection of any form of copyright law ..." THE LAROUSSE ENCYCLOPEDIA OF MUSIC 242 (Geoffrey Hindley ed., 1971). Most classical composers earned their livings primarily by charging audiences for performances of their work and they enjoyed patronage or both. (51.) The reference is to Campbell v. Acuff-Rose Music, Inc., 510 U.S. 569 (1994) (determining that the court of appeals erred in presumptively concluding that 2 Live Crew had infringed on Roy Orbison's copyright of "Oh, Pretty Woman"). (52.) Legal scholars often think of property "in terms of bundles of rights, obligations and interpersonal relationships" that "have nothing in common except they are exercised by persons and enforced by the State." STEIN & SHAND, supra note 48, at 216. Accord BERGER & WILLIAMS, supra note 41, at 4 (stating that lawyers and judges are "near unanimous" on the bundle-of-rights concept of property). The mostly positive rights in the bundle include the rights to possess, to use, to manage, to generate income, to consume or destroy, to alienate, and to transmit through devise and bequeath. See A.M. Honore, Ownership, in OXFORD ESSAYS IN JURISPRUDENCE 107, 113 (A.G. Guest ed., First Series, 1961). These various "rights," however, are themselves resourceful uses that can be split off from a larger resource and be protected by property, such as when a lessee possesses and can exclude others from land for a time although the lessor retains a reversionary property in it. When property is understood as a right rather than as the resource, one can appreciate that the right protects not only the resource but also the subdivisions and accretions of the resource. (53.) PENNER, supra note 42, at 72 (stating that the "exclusion thesis is a statement of the driving analysis of property in legal systems"). See generally Thomas W. Merrill, Property and the Right to Exclude, 77 NEB. L. REV 730 (1998). Professor Merrill develops further the right to exclude as encompassing the essence of property in The Landscape of Constitutional Property, 86 VA. L. REV. 885 (2000), although he also illustrates the difficulty of interpreting property through its exclusionary meaning as a substantive due process right when it is not clear that the state has previously acknowledged a specific resource (e.g., contract rights) as property. This difficulty, which relates to the fact that property does not really apply to a resource until the court or legislature specifies that it does in spite of the judicial propensity to "discover" rather than "apply" property in actual constitutional cases, need not concern nationbuilders in developing countries who seek a reductionary understanding of Western law as an engine for prosperity and liberty. (54.) The following is a more complete definition: Property is the right of persons to exclude others, including the state, from any resource originally possessed or acquired without force, theft, or fraud, which right is limited by the equal right of others. Taxation and eminent domain, of course, also limit the right of property, but they are external limitations and are not part of the definition. On the other hand, that the right to exclude others from interfering with what one does with resources is subject to the equal right of others (e.g., X cannot by right drive her car on Y's land when Y may wish to exclude her from doing so) is integral to the meaning of property, as is regulation (e.g., environmental rules) that protects the equal rights of others. (55.) Merrill, Property and the Right to Exclude, supra note 53, at 740 (asserting that "if one starts with the right to exclude, it is possible to derive most of the attributes commonly associated with property through the addition of relatively minor clarifications about the domain of the exclusive right"). (56.) Thus, "[t]he right to possess ... may be understood ... simply as the right to exclude others from the use or other benefits of the thing." LAWRENCE C. BECKER, PROPERTY RIGHTS, PHILOSOPHIC FOUNDATIONS 19 (1977); PENNER, supra note 42, at 74 (maintaining that "the owner's power to share and even transfer his property is part and parcel of the right of exclusive use"); DE SOTO, supra note 40, at 159 (stating that property permits owners to exclude others from interfering with the enjoyment, disposition, and use of something). Cf. WILLIAM MARKBY, ELEMENTS OF LAW 157 (6th ed. 1905). Markby asserts that, [t]he owner of land has not one right to walk upon it, and another right to till it; the owner of a piece of furniture has not one right to repair it, and another right to sell it: all the various rights which an owner has over a thing are conceived as merged in one general right of ownership. Id. (57.) Compare MARGARET JANE RADIN, CONTESTED COMMODITIES (1996) (advocating that the state not institute property in body parts), with Lori B. Andrews, My Body, My Property, 16 HASTINGS CTR. REP. 28 (1986) (urging recognition of property in one's body). The Author does not advocate for or against property in particular resources, but does strenuously observe that if nationbuilders wish to increase maximally resources in quantity or amount over a broad economy, they should institute a strong property in them. (58.) EMILE DURKHEIM, PROFESSIONAL ETHICS AND CIVIC MORALS 142 (Cornelia Brookfeld trans., 1957). (59.) E.g., Coll. Sav. Bank v. Fla. Prepaid Postsecondary Ed. Expense Bd., 527 U.S. 666, 673 (1999) (stating that "[t]he hallmark of a protected property interest is the right to exclude others"). (60.) 4 WILLIAM BLACKSTONE, COMMENTARIES *1 (defining property as being "in total exclusion of the right of any other individual in the universe"). (61.) Int'l News Serv. v. Associated Press, 248 U.S. 215, 246 (1918) (Holmes, J., concurring) (asserting that "[p]roperty depends upon exclusion by law from interference"). See also id. at 250 (Brandeis, J., dissenting) (explaining that "[a]n essential element of individual property is the legal right to exclude others from enjoying it"). (62.) THOMAS HOBBES, LEVIATHAN 297 (C.B. Macpherson ed., Penguin Classics 1985) (1651) (stating that "[t]he Propriety [property] which a subject hath in his lands, consisteth in a right to exclude all other subjects from the use of them"). (63.) Important to the understanding of nationbuilders is that even though in contemporary times the state may tax land to support public education, or that even though in feudal times land ownership had certain duties of military service and support attached to it, "property" has not changed its essential meaning as the right to exclude. However, as the state increases taxation on a resource or levies heavier duties against it, the resource shrinks and at some point the incentive to initiate further resource development is weakened. (64.) Merrill, Property and the Right to Exclude, supra note 53, at 730. Cf. A. JAMES CASNER ET AL., CASES AND TEXTS ON PROPERTY 4 (4th ed. 2000) (stating that "[w]herever and whenever property rights have arisen, one of their central features is a right to exclude others"). A short explanation is warranted here concerning how the exclusionary right applies to property's familiar division into "private," "public," and "common" usages. Private property is the exclusionary right persons have in their resources; it represents the dominant usage of "property" and provides the primary connotation that nationbuilders need to grasp. Public property is the exclusionary right that the state exercises over resources, and the state certainly excludes private citizens from many uses of the resources it holds. Common property as it refers to resources like the atmosphere or oceans is largely a misnomer due to the fact that one cannot usually exclude others from using these resources; more accurately, the reference is to common "resources," thus avoiding the confusion of property with resources. However, as suggested infra notes 169-73 and accompanying text, if the state were to recognize everyone's right to exclude others from polluting common resources, it would be appropriate to term this right as "property," even as co-owners of land have the right to exclude each other from wasting its resources. (65.) Trespass is the "fertile mother of actions." F.W. MAITLAND, THE FORMS OF ACTION AT COMMON LAW 48 (A.H. Chaytor & W.J. Whittaker ads., 1963) (1909). It is the basis of modern tort law. William J. Bowman & Patrick F. Hofer, The Fallacy of Personal Injury Liability Coverage for Environmental Claims, 12 VA. ENVTL. L.J. 393, 411 (1993) ("[T]o examine the history of trespass is to explore the history of all torts, for it evolved into the forms of redress for all civil wrongs.... Trespass to land was but one of these wrongs."). Trespass recognizes a sphere of private resources related not only to land and other non-facultative resources but also to the faculties and body of an owner who can exclude others from interfering with (trespassing on) this sphere. (66.) ADOLF A. BERLE, JR. & GARDINER C. MEANS, THE MODERN CORPORATION AND PRIVATE PROPERTY 8 (1933) (stating that "[p]rivate enterprise, which has molded economic life since the close of the middle ages, has been rooted in the institution of private property"); FRANCIS FUKUYAMA, TRUST: SOCIAL VIRTUES AND THE CREATION OF PROSPERITY 128 (1995) (describing property as an "indispensable" institution "for creating a modern market-oriented economic system"); Greenspan Speech, infra note 162 and accompanying text (describing property as an "essential infrastructure of a market economy"). See generally Reed, supra note 4. (67.) In other words, "without the right institutional environment [i.e., property and contract], a country will be restricted to trades that are self enforcing." MANCUR OLSON, POWER AND PROSPERITY 185 (2000). (68.) Ronald H. Coase, The Institutional Structure of Production, in NOBEL LECTURES IN ECONOMIC SCIENCE, 1991-1995 11, 17 (Torsten Persson ed., 1997). (69.) Id. (70.) This includes the power of the state, which is always greater than the power of the individual. (71.) Reed, supra note 4, at 451-52 (discussing how property creates security for capital borrowing and investment, provides incentive to improve resources, and identifies and protects resources that can then be used for further resource development). See generally DE SOTO, supra note 35. (72.) Making Sustainable Development Work, FDCH Fed. Dept. & Agency Docs., July 12, 2002, LEXIS, Nexis Library, News Group File (quoted by Sec'y of State Colin Powell). (73.) The converse is also true: countries with no formal property systems are the poorest in the world. The empirical studies that justify these statements are found infra notes 74-78. (74.) GERALD P. O'DRISCOLL, JR. ET AL., 2002 INDEX OF ECONOMIC FREEDOM 37 (2002) (75.) Id. at 40. (76.) Id. (77.) JAMES GWARTNEY ET AL., ECONOMIC FREEDOM OF THE WORLD: 1975-1995 (1996). (78.) Gerald W. Sully, The Institutional Framework and Economic Development, 96 J. POL. ECON. 952 (1989). (79.) The quoted phrase is the subtitle of DE SOTO, supra note 35. (80.) Id. at 177 (asserting that the "importance of property rights has been emphasized by various economic historians who believe that the boom in technological innovation in the West, and the massive investment that made it possible, began only at the end of the eighteenth century, when property rights were perfected and made independent of politics"). Thus, for at least two hundred years, property has been "the most important legal conception" in Western culture. TONY HONORE, MAKING LAW BIND 161 (1987). Yet unfortunately "today, few are aware of the tremendous edge that formal property systems have given Western societies." DE SOTO, supra note 35, at 224-25. (81.) The figures cited supra notes 75-76 and accompanying text are the basis for this approximate figure. The per capita income differences between the very wealthiest, strong-property nations and the very poorest, weak-property nations can vary from 10- to 100-fold. Cf. WORLD DEVELOPMENT INDICATORS, supra note 11. At an annually compounded two-percent increase, a nation's economy will double every 34.5 years, or increase 64-fold in 206 years. (82.) Cf. JOHN STUART MILL, PRINCIPLES OF POLITICAL ECONOMY 370 (Donald Winch ed., Penguin Classics 1988) (1848) ("According to the fundamental idea of property, indeed, nothing ought to be treated as such, which has been acquired by force or fraud, or appropriation in ignorance of a prior title vested in some other person...."). That one cannot acquire resources "dishonestly" and then have them protected by the property right is part of ensuring this right in others. Cf. MARKBY, supra note 56. ("It [that one is 'the absolute and exclusive owner'] does not mean that he may exercise his ownership in accordance with his uncontrolled fancy.... I cannot exercise my rights in such a way to infringe the law or the rights of others."). (83.) Because property organizes social order in relation to the distribution and production of resources, it necessarily is sensitive to the community's interest that one not become an owner through coercion, theft, or fraud (technically, fraud creates voidable ownership) and thus violate the equal property right of others. Criminal and tort law are spokes radiating from the central conceptual hub of property in Western legal systems, spokes that generally serve to enforce the equal property right of others or else compensate for its infringement. (84.) Note that the initial assignment of the property right to X or Y is not dictated by some inevitable arrangement, and the argument can be made that vast resource holdings acquired outside of a formal property system are not protected from redistribution, but once the assignment is recognized within a formal property system that protects the equal exclusionary right of all persons, reassignment will be strongly resisted and if it occurs may produce substantial weakening of incentive because of the uncertainty felt concerning the further reallocation of resources. Facing uncertainty about where the right of property lies--or is likely to lie in the future--people will tend to keep their assets concealable and easily movable. They will also be unlikely to risk them in fixed locations in ways productive of additional resource growth. (85.) The basic act was the Homestead Act. 43 U.S.C. [subsection] 161-64, repealed by Federal Land Policy and Management Act of 1976, tit. 7, [section] 702, 90 Stat. 2744, 2787. (86.) General Allotment (Dawes) Act, ch. 119, [section] 1, 24 Stat. 388 (1887) (current version at 25 U.S.C. [subsection] 334-358 (2002)). (87.) See generally Kenneth H. Bobroff, Retelling Allotment: Indian Property and the Myth of Common Ownership, 54 VAND. L. REV. 1559 (2001). (88.) In other words, the state should focus on the broad enforcement of the property right, such that common citizens feel secure in theft persons and possessions and have recourse for resource infringement and injury. However, when the focus is on privatizing large industrial and mining enterprises, getting ownership adequately into the hands of outsiders who can prevent insider corruption and looting can be difficult. See generally ROMAN FRYDMAN & ANDRZEJ RAPACZYNSKI, PRIVATIZATION IN EASTERN EUROPE: IS THE STATE WITHERING AWAY?. (1994) (chronicling the experiences of a Polish economist and lawyer in helping privatize state enterprises through a voucher system). On Russia's attempts to privatize industry, which has led to a corporate governance crisis in ownership, see Fox & Heller, infra note 157. (89.) E.g., TOM BETHELL, THE NOBLEST TRIUMPH: PROPERTY AND PROSPERITY THROUGH THE AGES 202 (1998) (observing that "if property laws are applied equally they will work above all to the advantage of the poor"). Thus, the United States may still have poor individuals, but it hardly has the level of poverty that exists in most areas of the world. (90.) Local consensus does not mean informal ownership; rather, it refers to how formal ownership protected by the state should be determined--namely, by local agreement that is then recognized by the state. It is a way of "adapting the law to the social and economic needs of the majority of the population." DE SOTO, supra note 35, at 106. In this way law is "made to serve popular capital formation and economic growth." Id. Another example of a bottom-up, property-based approach to economic development involves the micro-lending activities of the Grameen Bank, which provides unsecured business loans to the poor in the developing world. See generally MUHAMEED YUNUS, BANKER TO THE POOR, MICRO-LENDING AND THE BATTLE AGAINST WORLD POVERTY (1999). (91.) DE SOTO, supra note 35, at 60 ("Without the tools of formal property, it is hard to see how assets could be used for everything they accomplish in the West. How else could financial organizations identify trustworthy borrowers on a massive scale?"). (92.) De Soto is referring to property determination by local consensus when he describes informal resource boundaries as marked by barking dogs. Id. at 162. De Soto argues, Any government that is serious about reengineering the ruling informal agreements into one national formal property social contract needs to listen to its barking dogs. To integrate all forms of property into a unified system, governments must find out how and why local conventions work and how strong they actually are. Id. He continues, "What governments in developing countries have to do is listen to the barking dogs in their own communities and find out what their law should say." Id. at 168. (93.) JENNIFER NEDELSKY, PRIVATE PROPERTY AND THE LIMITS OF AMERICAN CONSTITUTIONALISM 260 (1990) (asserting that "the myth of property is pernicious because it hides a structure of power and insulates it from democratic debate"); Morris R. Cohen, Property and Sovereignty, 13 CORNELL L.Q. 8, 12 (1927) (stating that if"somebody else wants to use the food, the house, the land, or the plow which the law calls mine, he has to get my consent. To the extent that these things are necessary to the life of my neighbor, the law thus confers on me a power, limited but real, to make him do what I want."); Kenneth R. Minogue, The Concept of Property and Its Contemporary Significance, in PROPERTY: NOMOS XXII 3, 5 (J. Roland Pennock & John W. Chapman eds., 1980) (stating that "ownership of Wildfell Hall [Blackacre], it often seems, is a form of power that allows us to exploit other people"). The focus on property as power has a strong Marxian flavor. Sheldon S. Wolin, On Reading Marx Politically, in MARXISM: NOMOS XXVI 79, 89 (J. Roland Pennock & John W. Chapman eds., 1983) (noting the "persistence with which he [Marx] judged each theory according to the standard of power"). Ultimately, power is not an analytically useful concept in contrasting property versus re-distributionist resource systems. In any society whoever controls vast resources has "power" in the sense of the citations of note 93, and this especially includes the state, which has power over both those from whom it takes resources and those to whom resources are redistributed and who must obey the state in order to obtain further resources. In fact, in a strong property society there will be more needed resources available privately to everybody than in a redistributionist society, and this in a real sense reduces the power that the state is capable of exercising over one. Because people on average tend to be much more prosperous in a strong property society that has many sources for inexpensive resources available, wealthy individuals also generally do not have undue power over others on account of unequal resources. For instance, 99.9% of the population in the United States can publically proclaim "fie on you Bill Gates" without concern that the world's richest man can exercise any power at all over them. (94.) Further, these limits are part of the definition of property. If the rich can use their resources to injure or coerce the resources of the poor, it indicates a weak property system, usually one lacking an adequate enforcement of the property right. E.g., Felix S. Cohen, Dialogues on Private Property, 9 RUTGERS L. REV. 357, 362 (1954) ("[I]f any property owner could really do anything he pleased with his own property, the rights of all of his neighbors would be undermined.... In fact, private property as we know it is always subject to limitations based on the rights of other individuals in the universe."). (95.) 2 BLACKSTONE, COMMENTARIES, supra note 60, at *138. (96). Entick v. Carrington, 19 Howells St. Trials 1029, 1066, 95 Eng. Rep. 807, 843 (1765). (97.) Taxation is necessary even under the strongest of property systems for public goods like roads and military defenses. Resource exchanges among individuals do not generate public goods well because of excessive transaction costs, "free riders," and "last-holder" problems. Adequate humanitarian assistance also requires taxation. (98.) It is vital to emphasize to nationbuilders that perhaps the most important and least recognized features of a strong property system is that it respects the equal property right of others. Without such respect, engendered by the state through impartial, timely enforcement of the exclusive rights of all citizens, property cannot create the kind of prosperity and liberty that exists in Western nations. See Robert C. Cooter, Organization as Property.' Economic Analysis of Property Law Applied to Privatization, J. LEGAL ECON., Dec. 1992, at 77, 78. (99.) Without contract the promise to transfer resources in the future would be meaningless, and Professor Nichols identifies the recognition of contract law as the most salient characteristic of an economy that is ready for international trade. Philip M. Nichols, A Legal Theory of Emerging Economies, 39 VA. J. INT'L L. 229, 294-95 (1999). Underlyin |