Sunday, January 06, 2008

ONE STEP CLOSER TO SOCIALISM IN SLOVAKIA

by Martin Rojko

Slovak government soc-storm brigade doesn't come to halt anything in the name of way for brighter tomorrows and achieveing of promises from the dreamland. It wants to connect by highway capital city Bratislava with second largest city KoŇ°ice (on the other side of the country) till the year 2010. Recently passed law by the parliament should give a hand this aim, which as they say will enable to accelerate highway construction in areas, where an owners don´t want to sell their property at price the government says. Yes, they want to march on even at the expense of total blatant derogation by a private property. But finishing highway construction in this deadline is as real as building of broad-gauge railway to east part of Slovakia (to join railway to Moskva).

Legislative act or rather mafia´s ultimatum on non-resisting allows planners building roads on private land plots without agreement with the owners. If these people won´t consist with own property sale for government´s offered price, the state will simply steale it (they call it eminent domain). And to compensate still rightful owner will suffice as far as a road will pass just under his own window. Joke? Scarcely!

If the state should indicate a public interest (what a specific notation) of a kind up to this day, tomorrow it won´t have to. When government simply decides that your house with land plot stands in the way of highway, which pay every taxpayer in the country including those who don´t ride a car, you just drop it. With any immediate and adequate compensation. Better variant is that you learn of it from an official bulletin hanging in front of a local authority building, worse one is you wake up one day on a surprising noise of digger in your living-room.

Bolshevistic bashaws built roads for forty years in such a way. They weren´t interested whose a house, cottage or piece of farmland is. And not a bid any fair compensation. The same communists want now to steal people´s property and they don´t bother about some meaningless private property. A fundamental thing is they are building and giving out. And when the court will confirm the passed law as unconstitutional in a few years? It doesn´t matter, they tried. Government and parliament officials maybe already won´t seat on their chairs by that time and a huge financial compensation to the owners and PPP concessionaires will pay all taxpayers.

Appeal on virtue and conscience of parliament´s or government´s members is like to expect from a thief that he satisfies at a visit of your house with it´s visual inspection. A state constitution is not a contract. It doesn´t oblige anyone for any particular action. It is only a piece of unvalued paper document. The government and parliament simply confirm it by their action.

Author is a journalist of Slovak well-respected business weekly TREND and he runs a blog called „Private Property“ (vlastnictvo.blogspot.com)

10 comments:

denis bider said...

Eminent domain, and its abuses, is common everywhere in Western socialist democracies, not just Slovakia.

On the one hand, eminent domain seems to be a gross intrusion on sacred property rights. On the other hand, it seems necessary if crucial infrastructure, such as highways, is to be built. Otherwise anyone in the path of a highway can try to extort the builder even when everyone else has sold their land. This can delay construction of important infrastructure for years, and cause disproportionate economic damage.

There are other intrusions on individual property rights that are rampant in western socialist democracies. Urban planning. Zoning laws. Building codes. Most of this ostensibly serves to aid the common interest. Prudent planning can make neighborhoods nicer, quiter, and thus more valuable. Enforcement of fire safety laws helps prevent the spreading of fires, which protects all owners from fire catastrophes.

And yet all these laws, codes and requirements are all intrusions on the individual's right to property.

I contend that, if individual property rights were truly and universally respected, and therefore no zoning laws or building codes or eminent domain could be enforced, the result would be that:

(1) where land is fragmented into many small plots with different owners, as is currently the case in most places, the absence of zoning laws, building codes and eminent domain would lead to these areas becoming less pleasant to live in and less desirable;

(2) where large swathes of land are owned by a single entity, this entity could organize and coordinate a pleasant living environment for its tenants, but everyone would rent their houses and apartments rather than own them, and their continuing renting would be subject to the discretion of the landowner.

In effect, each landowner would become their own government with regard to their own land. This would lead to chaos in places where there are many small landowners. Meanwhile, large landowners could provide a pleasant and orderly living environment, where people would prefer to live.

It would also be a more conceptually sound and less paradoxical situation than now, when you supposedly "own" land - except that you don't own it.

Effectively, all it would take to kick off a transition into this model would be to recognize individual property rights as inviolable. Then chaos with many small landowners would ensue; there would be large scale inefficiency and discontent with the way things turned; yet over decades, land would accumulate in the hands of a few prudent and large landowners, and over time most people would prefer to rent their real estate in well-managed and well-planned properties controlled by these landowners.

Tomaz said...

I always argue that roads are a vital part of small state and that coercion in this case is justified. However I belive that a fair compensation (current market price) is a way to go for governments when building infrastructure of vital importance such as roads. And the "vital importance" label should really be used carefully.
I would love to hear about a better solution that would work. I hope in few decades when we all have flying cars things will change.

Rocks said...

Very smart and thoughtful. Just take a look at Sweden where there's is a bulk of urban planning and other intrusions. In Northern Sweden, at the edge of Finnish border, urban planning has produced a collapsing and dusty housing where you can see the signs of negative propaganda on the walls. What is important in urban planning and zoning restriction is not merely a hypothetical probability but the fact that urban planning is an intrusion based on asymmetric information. Different urban standards do not neccessarily increase someone's welfare because of his preferences. You want to live by the river and you're ready to embrace the price you negotiate but urban planners suddenly shift to the idea that living by the river would hurt the natural habitat damagingly. I agree that there are some very basic (!) codes that entail a safe and prudent insurance against common danger such as fire safety laws. There is no property right violation if a property owners agrees to sell-off his property at the price he negotiates and gets a property in exchange. But the problem is government's coercion and the possesion of its means that could boost the violation of property rights substantially.

The application of numerous codes and urban planning policies into the practical course, was one of the major reasons for such an unparalleled real estate price bubble in Western World. Urban planning in places such as Amsterdam, Hamburg, Marseilles, Lyon and Milano benefited particular stakeholders and made potential property buyers' welfare worse off. Consequently, property inflation sparked up. And many clear analyses have shown that property price bubble would be less explosive if urban planning are government intervention in housing standards were termed out.

The same is happening in Slovenia. It's central planners argue that common infrastructure substantially aids the economic performance and welfare. I don't think that infrastructure-inflated indebtedness boosts the future welfare. Slovenia's government is explosively involved in highway standards, dictating every pinch of it. However, the EU Commission recently said that Slovenia's highway standard are among the worst in the EU. The essence of minimal state is very important. In relation to housing prices, minimal state rightly guarantees a welfare by lower relative prices. And nevertheless, individual property rights must not be managed by third parties. That would be a total disaster and a huge violation of property rights in general.

Regards,
Rocks

denis bider said...

Rocks, could you clarify?

"However, the EU Commission recently said that Slovenia's highway standard are among the worst in the EU."

What is the factual finding behind 'worst' here - that Slovenia's highway standards are the strictest, or the most lax?

Also, who applied the judgement that the situation is 'worst'? Did an EU officer apply this judgement, or did the EU simply release the facts, and the qualitative judgement 'worst' is your own?

I'm not trying to argue against it; I merely wish to better understand what you meant.

denis bider said...

Rocks - I don't know the full extent of urban planning on real estate prices blowing up. It certainly seems likely that a housing shortage and resulting high prices can be a side effect of overeager regulation.

On the other hand, though, there's nothing like an ugly factory, or neglected houses that are falling apart, in the middle of an otherwise pleasant neighborhood, to reduce the neighborhood's appeal and value.

To an extent, not having an authority that has the power to approve (or not approve) construction can be inefficient.

For example, without restrictions on building, nothing prevents your neighbors from building block-like houses from edge to edge of their properties, leaving you with a spoiled view, and with your garden in the shade.

If there are no building restrictions to prevent your neighbors from doing that, and you want to ensure having a nice view, you have to buy a property that much larger in the first place, in order to protect against your neighbors' expansion. You can't reasonably protect yourself from all kinds of expansion at all. If you want to protect yourself from your neighbors building skyscrapers around you, you would have to buy a property that would be huge.

The problem is that it is not just you. Most people would prefer to have a nice view. Most people would prefer to have sunlight in their garden. If there are no building codes to prevent people's neighbors from building mansions edge-to-edge, then everyone (except those inclined to risk) needs to buy properties large enough to hedge against that risk.

Without building codes, everyone needs to have a significantly larger property, which means that humans need to dedicate significantly larger areas for settlement. This means more resource usage for the same effect. That is inefficient.

Then there's the problem of infrastructure. But infrastructure is not just the roads. There's also cables, and water, and sewage. The efficient way to do this things is many times to dig through someone's garden, violate their property rights if need be, and compensate them "fairly" for it - where "fairly" might be something that most people would agree to, but not necessarily the guy whose garden was dug up to lay the pipe.

Again, I don't think that this is necessarily an argument in favor of government coercion. If everyone's property rights were considered sacred and could not be violated for the "common good", this would impose the inefficiencies I describe above, but on the other hand large landowners could avoid these inefficiencies on their own ground. The result would be multiple "governments" (large landowners) with various "building codes" (specific to each land owner, but not enforceable across landowners because of the sanctity of property rights).

A person could then choose to rent housing in whichever neighborhood is controlled by the more component landowner. Or, if the person is rich enough, they could just buy a suitable large tract of land for themselves.

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verbatim said...

When they are building highways in EU, they never pay market price or fair price. They always include compensation. And still there are people which don't accept 4 times more money than it is market price of their property. In my vicinity they are building highway and people were very happy with an offer for their properties. Some even got 10 times more of their market value.

Zoning laws are required, especially in Slovenia (from practice experience). Our municipalities are having huge problems because of non-existing laws in the past. Let's say one has a house in the middle of corn field (or on a small hill etc.), 3 km from main road. There are no other houses from road to his house. Yet he still wants sidewalk (although no one will ever use it) and public lighting (no one will ever walk here at night). On the end in most of our municipaliets we have public lighting in middle of nowhere and sidewalks which will never be used, just to keep people quiet. With strict zoning laws people will live in close communities and there will be less demand and political extortion for this kind of unneeded infrastructure. Our municipalites instead of investing money into profitable business are now forced to almost exclusively build this nonsense which has no real effects on quality of people's lives.

Tomaz said...

It seems to me that the solution for the fool on the hill is to have better laws about sidewalks and public lightning instead. Strict zoning laws are subject to corruption and they reduce the supply. What we need is minimal building regulation and a rule of law to be able to protect our interest and our freedoms using legal means. Something to increase the supply and reduces the prices. And zoning laws are doing exactly the opposite. In Slovenia this model is failing for 16 years now. It's time to call it a day.

Martin Rojko said...

Denis - I can´t accept argumentation based on „delay of important infrastructure“. What is important infrastructure? Well, maybe we in this blog can agree on what is important – highways, technical infrastructure, .... But when the state determines what is essential, limits are very uncertain. Today it could be highways, tomorrow government buildings, or some private objects.
By this way you can also say that taxing people less would lead to delaying or canceling important government measures.

A problem with zoning laws, land-use regulation and building codes I see from aspect, that it limits free entreprise, artificially increases property prices and decreases housing affordability. Solution is based on private contracts in communities or other way said private zoning laws.

verbatim said...

tomaz: theoretically I agree with you (my comment was based on practical experiences and those were used as a base for stricter zoning laws). But your theory is based on wrong assumptions -> in reality people are stupid. Try to work one week in your local municipality. There is no way you could stop (and no law) this people from their stupid demands. People don't really listen skilled people/experts anymore.

You won't believe but they are even demanding STOP signs for exits from their house/backyards.

At the end, your proposal in practice will lead that almost all municipalities (as there are no actual competition between municipalites for money) will have to be spending their money on asphalting roads and building public lighting (and then use a lot of their budget for electricity) indefinitely.