In the Tribune of November 29th Andrew Allen recommends more stringent regulation through changes to the foreign investment policy regarding private property. It is appropriate now to remind our readers that property rights underlie a free market, the most humane, the most productive, and the most benign system of human economic arrangements.
If we accept the idea that owning property is a privilege bestowed by government, then we would agree that government has the final say regarding ownership and use of all property.
However, if we agree that every individual has the right to his life, including the right to those things necessary to sustain life, property rights then belong to the individual, not the government. Having agreed to this principle the role of government is clear; it is as the protector of private property. Therefore it follows that the decision to buy and sell belongs to the individual, not to the government.
Property Rights are the foundation of a free society, and there can be no personal or political freedom without freedom in the use of one's property. Furthermore, prosperity and economic growth are directly related to the free exchange of property without which standards of living cannot improve.
Limiting one kind of freedom, limits all freedoms and the freedom to buy and sell property cannot be compromised for any altruistic outcome, or to benefit any particular group. When bureaucrats become the arbiters in the property market, socialism has succeeded in replacing economic freedom and economic decline is inevitable.
The Tribune journalist states that a "liberalized second home market" has pushed land prices beyond affordability that is "not sustainable and not acceptable". He recommends restrictive laws making property sales to foreigners more difficult in order to lower prices. He writes, "If something is not done to give Bahamians a sense of control over the rate of foreign acquisition of Bahamian real estate, then a backlash to pre 1993 will occur".
When government determines who can sell what to whom, the "sense of control" has already been lost to the individual who owns the property.
The pre 1993 decline of the economy had its roots in the Immovable Property Act – the intent and effect of which was to control sales in the property market. The effect may have been to keep property prices low, but where is the value in "low" property prices in a declining economy when everything else is being degraded and devalued?
Altruism as a pretext for protection from high consumer prices has a cost, one that no one would willingly agree to. It is loss of freedom. Once granted the power to prevent the use (sale) of one's property, little remains over which government would not have power. Lord Acton's epic warning comes to mind – "Power corrupts and absolute power corrupts absolutely".
Economic freedom in the Bahamas has steadily declined since 1976 when the country was ranked 7th in the world. By 2002 we have dropped to 68th place in the ranking of 123 countries. All other aspects of the study being equal, further restrictions on property will result in an even lower ranking in the future. This is a warning signal to potential investors that property rights are not secure in the Bahamas.
The anticipated crisis is based on an erroneous assumption that only buyers are affected by prices. Not considered is the fact that proceeds from real estate sales do not disappear in some mysterious way. The foreign buyer gains a tangible asset, but the compensation to the seller goes into creating other assets that the seller believes will have a higher risk adjusted rate of return.
If there is a crisis it will not be due to high property prices. More fearsome is the prospect of devaluation due to government's use of its power to "control" the market.
Andrew Allen's recommendations fit Thomas Sowell's description of the classic visionary in "The Vision of the Anointed". Dr. Sowell describes four key elements of the crisis mentality calling for government intervention to avoid a catastrophe. They are:
1. Assertions of a great danger to the whole society, a danger to which the masses of people are oblivious.
2. An urgent need for action to avert impending catastrophe.
3. A need for government to drastically curtail the dangerous behaviour of the many in response to the prescient conclusions of the few.
4. A disdainful dismissal of arguments to the contrary as either uninformed, irresponsible, or motivated by unworthy purposes.
To support his argument for more government control of Bahamian property the writer concludes that more open economies in "adopting classical laissez-faire liberalization" result in "exploitation and denuded resources". This is simply wrong.
A trip to Havana Cuba would persuade our visionary to reconsider his proposals. He will see what remains of the former splendour of a once beautiful city now reduced to crumbling roads and buildings. They are the "denuded resources" of a country whose citizens lost their property rights over forty years ago.