Thirteen of the British colonies in North America declared their independence in 1776 as the only means of preserving the life, liberty, and property of what was then declared to be the American people. It was generally understood, in light of John Locke’s 1690 Second Treatise on Civil Government (widely recognized in the late-18th century as one of the wisest meditations on government ever published), that any government properly conceived—monarchy, aristocracy, or democracy—must be devoted to the securing of these three inalienable rights.
The right to property, like the rights to life and to liberty, as expressed in our Declaration of Independence (although, in that particular document, “property” was replaced by the words “the pursuit of happiness,” contemporary theorists and state constitutions recognized that happiness could hardly be pursued without the protection of property rights), was a right given to man by his Creator. Thomas Jefferson was the principal draftsman of the 1776 Declaration, and his much-vaunted idea of a nation of “yeoman farmers” relied on the ownership of landed property being widespread. Like most 18th-century political thinkers in America, Jefferson believed that only the widespread ownership of property could provide the independence of mind and the income necessary to create a virtuous citizenry for a republic. This idea was a mainstay of sensible Anglo-American thought because of the work of another great English thinker, James Harrington, set forth in his Commonwealth of Oceana (1656). Harrington believed that the widespread dispersal of landed property made possible the achievements of the Roman Republic, which the American Framers clearly wished to emulate.
Unfortunately, this notion that governments exist to preserve their citizens’ natural rights to property has taken a back seat to the notion that governments exist to redistribute wealth from the rich to the poor, a view underscored by the progressive income tax and the federal estate tax permitted by the 16th Amendment (1913). Since the federal government continues to levy these taxes, it is difficult to conceive that it is particularly concerned with the preservation of property rights. The redistributionist programs that began in the New Deal and are now carried on by the Department of Health and Human Services and many other federal agencies suggest that the Framers’ understanding that no legislature could take A’s property and give it to B (expressed by Justice Samuel Chase in the great 1798 Supreme Court case of Calder v. Bull) has pretty much been lost.
Lip service is still paid by the federal government to the sanctity of private property. The income-tax deduction for mortgage interest, for example, is an untouchable bow to Harringtonian and Jeffersonian ideas about landed property. The Fifth Amendment, believed to apply to both the states and the federal government, forbids any taking of private property for public use without the payment of just compensation, and this might be construed as a mandate to the federal courts (if not the federal and state governments generally) to protect private property.
Still, when we are considering real estate, as common lawyers have understood for hundreds of years, we are considering unique items, and, especially when we are talking about forced sales prompted by state or federal exercise of eminent domain (which the Fifth Amendment implicitly authorizes), it is not at all clear that “just compensation” will result in fair value. Thus, to make all private property of this nature subject to confiscation, even if “just compensation” is available, underscores the tenuous nature of that property and the lack of protections even in the federal Constitution.
There was a flurry of opposition at both the state and federal level when the U.S. Supreme Court, in the Kelo v. City of New London case, held that the Fifth Amendment permits a taking for a “public purpose,” not simply a “public use.” According to the Court, local, state, and federal authorities can seize anyone’s property for “urban renewal” or for any other measure that would increase revenues to government. The old understanding of “public use,” which would have restricted the eminent-domain power to such projects as the construction of public roads or public buildings, gave way to the Court’s decision, which seemed to suggest that the private property of A certainly could be taken and sold or given to B (as long as “just compensation” was paid) if B’s activity would generate more revenue, or accomplish some other public purpose, such as the building of more housing in depressed areas—or even, as one earlier case had held, the dividing of large pieces of property into smaller plots of land so that more people could enjoy the benefits of home ownership. (The latter did sort of smack of Harringtonian republican theory, but also of socialist redistribution.)
If the Court’s Kelo opinion were allowed to stand, private property as we know it might well be eroded to an unacceptable point, but, at both the state and federal levels, efforts were immediately undertaken to pass statutes restricting the eminent-domain power to true “public purposes.” In some states, those measures have already passed, and it is likely that many others will embrace this notion. Federal efforts to undercut Kelo, insofar as they were prompted by desires to protect property—or, at least, homeowners who might vote for certain congressmen—are, alas, more the exception than the rule. At this time, it appears that there is no generally understood obligation on officials of the federal government to put the protection of private property ahead of any other governmental objective.
Even more alarming, the Constitution itself fails to give a ringing endorsement to private property. Its famed Preamble states that
We the People of the United States, in Order to form a more perfect Union, establish Justice, insure domestic Tranquility, provide for the common defense, promote the general Welfare, and secure the Blessings of Liberty to ourselves and our Posterity, do ordain and establish this Constitution for the United States of America . . .
failing to mention one of the principal purposes for which Locke said governments were formed. The only use of the word “property” in the body of the document occurs in Article IV, Section 3, and refers not to the property of citizens but to the property, as it were, of the nation itself and of the states: “The Congress shall have Power to dispose of and make all needful Rules and Regulations respecting the Territory or other Property belonging to the United States; and nothing in this Constitution shall be so construed as to Prejudice any Claims of the United States, or of any particular State.” The only reference in the Bill of Rights is, in pertinent part, that “No person shall . . . be deprived of life, liberty, or property, without due process of law; nor shall private property be taken for public use, without just compensation,” and we have already seen that this may not amount to much. Finally, when we look at the other amendments to the Constitution, we find in the 14th the statement that “No State shall make or enforce any law which shall abridge the privileges or immunities of citizens of the United States; nor shall any State deprive any person of life, liberty, or property, without due process of law; nor deny to any person within its jurisdiction the equal protection of the laws,” but this seems more like permission to the government to deprive citizens of property through “due process of law” rather than a protection of property. There is no mention of the word “property” in any other amendment.
The protection of property was understood to be among the foremost purposes of government at the time of the framing of the Constitution; nonetheless, the Framers could have done a better job of making this clear in the document itself. And, at the present time, it certainly can be said that the raising of revenue and its use for purposes other than the protection of property now characterize the federal government. Furthermore, government’s concern over the safety of the industrial worker, expressed by such federal agencies as the Occupational Safety and Health Administration (OSHA) of the Department of Labor, has imposed costly regulatory burdens on American business, as have federal environmental laws, federal flood-plain restrictions on what can be built in areas even under only remote threat of floods, and the construction requirements of the Americans With Disabilities Act (ADA), which essentially mandate that all buildings, sidewalks, and bathrooms must be constructed so that they are accessible to the wheelchair-bound. Our civil-rights laws also indicate that, if a citizen wants to use his own property to offer services to the public, he cannot freely choose whom he will serve, thus further restricting what were formerly recognized as absolute aspects of property ownership.
There is a concept of a “regulatory taking,” calling for the payment of just compensation when regulations—say, environmental regulations, or the protection of wetlands, or the Migratory Birds Act—limit or virtually eliminate the use of one’s property, but this doctrine is only sporadically and inconsistently recognized by the state and federal courts and may not offer much substantial protection.
As we have moved away from a Jeffersonian society characterized by rural agricultural pursuits, and as the possession of land as a means of generating income has been replaced by commercial, manufacturing, and professional enterprises, the idea of protecting property—at the federal level, at least—has been superseded by the pressure to regulate, presumably in the public interest. And—it must be conceded—some of these regulations do actually enhance the protection of other forms of property, such as investments in stocks and bonds. The federal rules regarding new issues of securities, proxy voting, insider trading, and tender offers, with their twin goals of disclosure and the prevention of fraud, have, through the promise of transparency, made American securities markets the envy of the world.
Because of the widespread investment in American securities through mutual funds as well as trust funds, pension programs, and university endowments, in which virtually all Americans have a stake, individuals directly or indirectly have ownership interests in the entire American economy. This has occasionally been characterized as socialism through the back door, but it could also be viewed as the creation and augmentation of forms of private property that might not exist except for governmental policing of the markets. Because much, if not most, of our wealth is now in the stock market rather than in landed property, the Securities and Exchange Commission (SEC), which administers the securities laws, may now be fulfilling what amounts to the role of a Harringtonian republican guardian of property. Similarly, the fact that state and federal courts can be used to enforce contracts (which transfer property from one person to another) is a means of augmenting private property, since such transfers are presumed to be a means of moving property from lower- to higher-valued uses.
Nevertheless, the zeal to regulate, particularly at the federal level, can still impose costs that may exceed any benefits. This may be the case with OSHA and the ADA, and it is certainly true of the recent passage of the Sarbanes-Oxley Act. That extraordinarily misconceived piece of legislation, prompted by a public outcry against perceived excesses by the executives of WorldCom, Enron, and Arthur Andersen, has imposed such potentially heavy costs, particularly on small businesses, that many of them have taken themselves out of the public market for securities, defeating the act’s intended purpose of offering protection to those who invest in that market.
Sarbanes-Oxley sets up detailed requirements that each publicly traded corporation must meet, involving the creation of new internal minibureaucracies to monitor the intimate workings of corporations, ostensibly to prevent fraud and corruption, but probably generating reams of information that few will be in a position to use or evaluate. No one has ever successfully proved that regulation and monitoring do a better job of protecting investors than does the operation of the stock market itself (which disciplines firms by lowering their share price if they are perceived as being run inefficiently or wrongly). Insofar as the SEC mandates disclosure of material information on the running of the company, the interests of the investor are served, but, even before Sarbanes-Oxley, the existing federal reporting requirements were adequate, if not already excessive.
The costs of compliance with Sarbanes-Oxley will run at least into the billions, and may well reach hundreds of billions. This money will ultimately be paid by shareholders—which means all of us, thus diminishing the value of our property. True, Sarbanes-Oxley has increased the amount of money flowing to accountants, lawyers, and software designers, creating wealth for them, but this sort of redistribution probably does not redound to the benefit of the general public. And what can be said of Sarbanes-Oxley can also be said of litigation against many other corporations, including asbestos manufacturers, drug companies, tobacco companies, and internet start-ups. All of these have been the targets of plaintiffs’ lawyers who were ostensibly championing the “little guy” caught in the clutches of big business but who, in reality, were imposing costs on and injuring the “little guys” who, directly or indirectly, own stock in those corporations. There have been some proposals and some successful legislation to cabin some of these abuses of the court system, but there has yet to be a widespread national recognition that the “litigation explosion” and the “tort tax,” which now amounts to hundreds of millions of dollars per year, injures the property of nearly all of us. This could change, but only if the electorate begins to understand the historic importance of the protection of property rights and both the old and the newly emerging forms of private property that need protection.