Epstein: Abuse of Eminent Domain Makes the US Look Like China

Going Red on Property Rights
Richard Epstein
Defining Ideas
October 25, 2011

Earlier this month, I attended a Chinese-American Conference in Beijing on property rights co-sponsored by the William and Mary Law School and the Tsinghua University Law School.  One purpose of the conference was to award in absentia the Brigham-Kanner Prize to retired Justice Sandra Day O’Connor for her contributions to understanding the law of property. The intensive two-day discussions on property rights were open, animated, and cordial. They also revealed deep ironies in both the Chinese and American approaches to property rights.

On the Chinese side, much grand rhetoric spoke of the power and wisdom of the socialist state, which until 1988 had doggedly held that private property was illegal. Even today, Chinese property law does not grant outright ownerships to any of its citizens. Instead, it draws a basic distinction between urban and rural lands. The former are owned by the state on behalf of the people. The latter are owned by collectives that parcel out use rights to its various members. In both of these situations, the individual person in possession of a particular parcel of land has a set of precarious use rights that are respected in any dispute between private individuals, but can be overridden by the action of the state or the collectives (which are themselves under government control).

Yet once we peel away that socialist rhetoric, a more complex reality emerges. The Chinese are deeply committed to real estate development. In Beijing, private development on public lands has for over a decade proceeded at such a furious pace that more than one conference attendee described Beijing as Kelo-on-steroids, a rueful reference to old neighborhoods being ripped apart to make way for the high-rise and office buildings that now dominate the sky line. Without question, these new enterprises fueled China’s economy, which has grown for over a generation at a compound interest rate of around 10 percent. This rapid growth stands in stark contrast to the dismal and chaotic state of affairs during China’s Cultural Revolution which, from 1966 to 1976, laid waste to the nation.

In a strange way, China’s muscular development has been made possible only because of the strong legal position that the state holds over urban lands, where private use rights, as noted, only protect property owners against displacement by their neighbors but not against forcible removal by the state, which enjoys paramount title, or ultimate ownership, over the property in question. To be sure, the Chinese have imported the western practice of providing some measure of compensation to the parties whom they displaced. But it should come as no surprise that compensation does not supply, to use the American phrase, “a full and perfect equivalent of the property taken.” Rather, the entire process is located outside the judicial framework, so that there is ample reason to think that many of the dispossessed are short-changed by the administrative process. Evidently the rule of law is not a prerequisite to sustained economic development, at least to date.

Faculty: 
Richard A. Epstein