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Welcome to the IVM Podcast Network
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I had a strange dream the other day
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I dreamed I died and went to heaven
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I was met at the gates by Saint Peter
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Dressed in a flowery t-shirt
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And Bermuda shorts with a map of Bermuda on them
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Are you ready for heaven?
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Yes, yes, yes I said breathlessly
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I am very much ready for heaven
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I can't wait to see what it's like
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Saint Peter started laughing
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Even I can't wait to see what it's like
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Surely you of all people know what it's like
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Oh, I live here alright
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But you see we are moving with the times
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Now we customize heaven for you
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You won't get the default version of heaven
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Whatever your idea of heaven is
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What's your idea of heaven?
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I was damn excited by this
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Okay, here's my idea of heaven
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Cool and sunny and breezy
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I want seafood platters everywhere
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I want to see movies all day
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Beautiful music whenever I want
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I want adoring women to fawn over me
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Just as it was back on earth
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Saint Peter scratched his hipster beard
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No one should own anything
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Just like in the John Lennon song imagine
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No need for greed or hunger
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Imagine all the people sharing all the world
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I'm amazed how many people asked for that
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Your heaven is going to be kind of crowded
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And it was exactly as I had asked for
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Seafood platters everywhere with bacon on them
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Amphitheaters advertising
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The best of world cinema
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Circling around looking at me from a distance
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With lust in their eyes
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I decided they could wait though
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For a delectable golden fried prawn
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I picked it up and was just about to put it in my mouth
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When a hand came and snatched the prawn away
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The hand belonged to a naked man
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Who put the prawn into his mouth
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What are you doing? I asked
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No it wasn't said the guy
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Everything here belongs to everybody
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I reached out for another prawn
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Another naked guy grabbed the prawn away from me
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And then a bunch of naked men
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Jumped upon the seafood platter
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What the fuck I shouted
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I want seafood, this is supposed to be heaven
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Why are all of you naked?
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Welcome to the seen and the unseen
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On economics, politics and behavioral science
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Please welcome your host
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Shruti welcome to the seen and the unseen
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Hi Amit, it's really great to be here
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Shruti, let me start by asking you
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What is the right to property
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And why is it so important
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I'll answer that question
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There's a philosophical aspect
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To the right to property
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You know the lock in concept of natural rights
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That individuals should
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Enjoy the fruits of their labor
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So an example of that is
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Say you own a piece of land
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And you grew apples on that land
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Right? You have the right
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To enjoy that land and the apples
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Now this has a natural right
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Sort of aspect to it but it's also
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Very practical and commonsensical
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Cannot flourish or prosper
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If people don't invest their
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You have the right to property
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There is no incentive for anyone to invest their labor
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Really where the concept of the right
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Now the second aspect to it is
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The right to property in the constitutional sense
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Though that's the main goal of it
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It is more a protection
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Arbitrary action by the government
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Your property or take away enjoyment
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Madison in number 51 says
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Empower the state and then you
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Need to create a system where you
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Oblige the state to control itself
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You need particular kinds
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Of state action sometimes that
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Involves regulating property
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Sometimes that might even involve
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Compulsorily acquiring property
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To constrain the state from any kind
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Of arbitrary action and the
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Right to property as a constitutional
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Right provides for that
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So it's that the government has the right to take property
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Of restrictions on that right
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In fact this is a point that is often lost
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In the discourse here in India that the point
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Of a constitution is not
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To grant rights to the people
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But instead to recognize those rights
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Protect those rights and put restrictions
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Regarding what it can do with those
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I feel like the word right
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Has become like a rhetorical
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Not just in the context of property but
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In the context of all rights
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Rights are absolutely meaningless unless
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And I'll give you a little bit of when we're
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Talking about the history of property rights I'll
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Talk about how the founding fathers thought
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About it, the framers in India
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And the founding fathers in the United
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States thought about enforceable
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And non-enforceable rights
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And you're absolutely correct
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If the state doesn't invest
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In actually enforcing that
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Right and protecting the individual
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Saying that one has the right to free speech
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Or one has the right to free assembly
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Is absolutely meaningless. So I'm going to
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Ask you now about the history of property rights
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In India and how our founding fathers looked at
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Them but before that I'd also
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Sort of like to make an additional point that
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In an economic sense a world without
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Property rights is impossible
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Because of scarcity because there is essentially
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A scarcity of everything
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You need property rights otherwise you would have
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Absolutely. So I'd just like to
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Elaborate because I think you raise
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A very valuable point. So when
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I was talking about the apple orchard
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I meant in a very basic
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All systems have to be incentive compatible
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If you don't have the incentive to
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You wouldn't if you couldn't enjoy them at the
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At the end of the growth period
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Then you really wouldn't
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Bother to do it and there would be no apples
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Organize economic activity
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Be contrasted with a system of no
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Property which is socialism
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And the biggest problem with socialism
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Which you correctly pointed out eventually
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Ends up in chaos is if you
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Don't have property rights in a
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World of scarcity and we know that's the
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Reality of the world. We live in a world
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Of scarcity. Without property
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You don't know what the opportunity
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Cost is of each and every
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Action that is taken with respect to that
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Property. Right? So only
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Is better for me to grow
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Apples on a particular piece of land
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Or build a mansion on a particular
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Piece of land. And only I
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Understand that relative
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That idea that relative
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Trade off for oneself or what we call
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Opportunity cost you can't get
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In modern terms are prices
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Right? So I wouldn't know how to
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Whether I should sell that piece of land to you
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Whether I should make a mansion for myself or whether
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I should grow apples. And without
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Any calculation of property
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Which means as a society
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When socialist planners
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If you want to make more apples or
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You want to make more homes. And that's
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Really what ends up in chaos
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So this problem of socialist
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Calculation which is now very
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Very well established in economic
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Science and mainly the demise
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Of communist systems and socialist
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Of that goes back to the
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Right to property. Exactly
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And the whole existence of a market
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And of prices and so on depends
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Fundamentally on the right to property
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And a market is essentially what is
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It. It's the embodiment of
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The voluntary exchanges that happen in
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Society where we all interact with each other
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For mutual benefit. And if you don't have
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The right to property as a fundamental
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Underpinning of that, society breaks down
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The greatest advocate of abolishing
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Hilarious fact is if you were to
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Visit Karl Marx's grave today
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And supporters protested that
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It was revealed was because
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No one has an incentive to maintain
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The site where his grave
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Is if he didn't charge for an
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Admission fee. So even Karl
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Marx's grave cannot be protected
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Without the right to private property
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And without charging for it
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So that tells you something about
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The way the world needs to work. Even the
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Most ardent communist fans
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And not invest if there is
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I'm going to resist the temptation to express my
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Schadenfreude here. Getting on with
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Tell me then what is India's history with the
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Right to property? Did our founding fathers
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The constitution give it due importance
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In your opinion and what was
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Then the general thinking around it?
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Time you see any kind of like
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That mimics a constitutional right to private
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In the 1935 Government of India
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Quite similar to the American
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Clause which is you know
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You don't take property without
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And without due process. That's the general idea.
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And it needs to be for public
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Use. Like these are the three main components.
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However it was the colonial
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Government and these weren't
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Fundamental rights and they weren't enforced
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They are in other jurisdictions that are not
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Colonial that did have those rights.
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So it was more of lip service.
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Immediately after that we
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Two things going on with the colonial government.
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One is they were extensively building
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Railways and after that when the war
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Broke out they needed to acquisition and
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Requisition property to go towards
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Even though this article existed
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It really wasn't the kind of protection
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So that's really where it all begins.
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Constituent assembly formed
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Of the Indian Constitution
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Cut from a different cloth
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Than what we see today.
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In that they were familiar
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Political and intellectual history
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A lot of constitutional history.
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There were a number of very eminent
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Lawyers and constitutional experts
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Constituent assembly of India starting with
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Alladi Krishnaswami Iyer,
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So they were really big luminaries.
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So it's not that they weren't
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Or the power of eminent domain was
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To take property, so on and so forth.
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However, they were also living
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In a particular context
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Which had perpetuated and persisted
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We create an equal society
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Asset holding a little more
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The Zamindari system had resulted in.
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Of the population held 99%
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Of the land and that was not a good
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Way forward when you're thinking
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Of a constitutional democracy.
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So this is the trap they were in.
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Socialist leaning members
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Who strongly believed that
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Either there should be no right to private
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Property or it should be extremely
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Power of the government to take property must
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On the other hand, there were members
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Like KM Munshi. KM Munshi
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Probably is the foremost
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When it comes to the debates on property because
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Very rigorously debated and
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It became quite heated and KM Munshi
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Was really what I would
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Like to call the Indian Madison
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In this particular context.
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And he pointed out that
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You absolutely do not want
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To give the government, any
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Government, including the Republic of India
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To have, to use arbitrary
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Force against an individual.
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And he was very far sighted in thinking
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That is present generation at that time
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Extremely public serving
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Governments will have to be constrained.
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Only way to constrain future governments
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From any kind of arbitrary action
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Would be to have some kind
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Of a restriction on eminent
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Domain or the restriction of the
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Government to take private property.
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So that is sort of the brief
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History of what happened in the constituent
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Assembly. Having said that
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We didn't get the Madisonian
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So in the United States
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It's very clear that you can
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So the phrase is public use
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Didn't have a strict public use.
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So public use became public
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Purpose in the original
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Have the phrase just compensation.
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It just became compensation.
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The stand-alone word compensation.
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It was very clear that the intention
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Of this kind of a dilution
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Reform legislation. That was
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Very, very clear. And public
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So that it could dismantle the Zamindari
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System. So give me a brief sense
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A, the right to property being
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Originally written in the Constitution, the way
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And our economy up till the 70s.
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How the 44th amendment came about
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And what it changed and why
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That change was important.
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Okay. So this is going to be a bit
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Of a long answer because we have a very
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Convoluted history with property.
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Was ratified and signed
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We didn't have general elections
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Was a body called the Provisional
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Really the Constituent Assembly of India
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Which had transitioned into what was called
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The Provisional Parliament. Nehru
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Was the Prime Minister and this was pending
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Elections which happened
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In phases in 1951 and 1952.
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Constitution was ratified in January
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To 1951, in that period
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Started passing land reform measures.
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Land reform measures were your typical
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Like, you know, meant to be
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Robinhood, take from rich
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Zameen Dars distribute to poor
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Peasants who were landless but had a
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Very strong tie to that land for a very long
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Time. That was the intention behind it.
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However, the Constitution
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Doesn't allow you to do that without
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Providing compensation.
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So some of these laws ran
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Into trouble immediately in the courts
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Because they didn't provide
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For a suitable compensation
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Mechanism. So for instance
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Rich Zameen Dars only at
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Three times the assessed value
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And poor Zameen Dars at 20 times
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The assessed value, right?
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Equal protection. So these are
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The sort of problems that ran into. So either
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There were laws that were directly violating Article
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31 or they were violating one
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Of the other fundamental rights.
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I must still say in the early 50s
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A very broad reading and
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Almost all the judges were on the same
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Page that you need some kind
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Of land reform and Article 31
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Allows it. But running into
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Trouble with other fundamental rights
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Was very, very problematic. So this is the
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What do we do to save this provision?
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And how do we move forward as a
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Constitutional democracy?
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I'd like to make a brief digression
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Here before you go ahead. It's not really
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The subject of this episode
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Per se, but what do you think of those
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Or conceptually of land reforms per se?
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You know, breaking down the Zamindari
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System and redistributing land?
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So of course, conceptually
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I think the Zamindari system
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Or caste system that is perpetuated
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And it goes against all liberal principles
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Having said that, there are
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Many, many unintended consequences
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Of breaking down the Zamindari system.
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Now you must remember that the Zamindars
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Were extremely sophisticated, rich, and had
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Huge means at their disposal
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To fight the battle legally
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The poor landless peasants were quite
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And in the midst of all this, there are always
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Bureaucrats to act opportunistically.
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So in most states, either
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Land reforms didn't happen
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Or they were extremely unsuccessful in that
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The intended beneficiary
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Didn't actually get the land.
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So there would be a few
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Different types of scams that were running.
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Like you knew that the legislation had been enacted
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Quietly start changing their
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And start showing that the land actually
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Belongs to their wife's
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First cousin, their brother's
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Second son, so on, so forth
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And try to remove any record
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Of the peasant's family from the rose.
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It was fraudulent, but it was an unintended
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Consequence of this kind of legislation.
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The other thing that was going on
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We didn't have very good records
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Of the intended beneficiaries. The intended
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Beneficiaries were steeped in the
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Zamindari system. They never wanted
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To be disloyal to the Zamindar family.
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So they didn't really fight
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For their rights and actually acquire
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The land that was supposed to be distributed
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To them. So these were two things going on.
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So one of the consequences was
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It never really went to the person
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It was intended to go to. The other
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Consequence, which in a broader economic
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Sense was very problematic
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Holdings into small land holdings.
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Small land holdings are not so productive.
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What would have been an ideal
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Way to do things should have been
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Them into other sectors of the economy.
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As opposed to trapping them
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In agriculture with very
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Small land holding systems.
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So because the Zamindar started
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Breaking up land and giving it to their family
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Members to escape this kind of
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Taking from the government and
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Any point when the peasant did get
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The land, it was a very small piece of land
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Agricultural productivity just
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Plummeted in post-colonial India.
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After that, because agricultural productivity
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Plummeted, there were a series of
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Put a floor on the minimum size
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Of land. That is such a bizarre
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Thing. You have a ceiling on the minimum
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Size of land and a floor on the maximum size
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These were sort of the bizarre
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Unintended consequences. You needed to
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Pass more and more legislation
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To make the previous legislation work.
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So you had very small size
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Of holdings and then the government says this is
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Too small, you need to make it bigger.
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If you made it too big, you
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Ran into the Zamindari laws, so they had to cut
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You to size. In fact, we had passed
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Scene-on-scene episodes on how
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On agriculture and how people are essentially trapped
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In agriculture and there was a recent
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Episode I did with Vivek
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On jobs where he made an interesting point that
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A lot of the recent demands
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For reservations, whether it is
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The Partidhar agitation or the
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In Andhra Pradesh, they are all landed
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Classes. They are all landed classes
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And one of the reasons that they are
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Agitating now for reservations and
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Government jobs is because over the generations
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The land holdings have shrunk so much
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That they are simply not profitable
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And yet they are not allowed to sell that land
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For non-agricultural reasons.
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Therefore, you know, in a sense
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Reducing it to debt capital and I'd say that's
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Another instance of the abrogation of the
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Right to property. But regardless
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So we get back on track on the original
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All these laws that Nehru's government
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And the provinces were passing ran into
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Major trouble with the judiciary.
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So Nehru's government was
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In a bit of a conundrum and you know this seems
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Now that we are so far removed from
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It's hard to understand but at that
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Time the constitution was so
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Nacent it didn't have much legitimacy.
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Constituent assembly hadn't been voted in by
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Adult franchise. It was limited franchise.
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Nehru was very worried that if you couldn't
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Do land reform for constitutional reasons
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You would either have a
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Revolution like a Maoist style
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Revolution on your hands or
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People would just toss the constitution out.
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What is the middle path? You want to do
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Land reform. You want to keep the constitution.
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We don't want to delete the right to private property.
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We also don't want to get rid of the judiciary.
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Now all these options were mentioned.
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Some were even debated.
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So the solution, this was
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Partially proposed and supported by
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Ambedkar who was the law minister at that time.
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Let's abridge this right
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A little bit. But the abridging
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Of the right and the exception that we make will
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Only be for Zamindari and nothing else.
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So Article 31A kicks in.
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The Zamindari land reform
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Is the right to hold and dispose property.
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To property. That is the protection against eminent
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Domain. So this is where they landed.
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They introduced another
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Interesting provision on which we could do a whole
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Separate podcast called the Ninth Schedule.
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Where they said any law that
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Goes into the Ninth Schedule is completely
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Protected from judicial review. That is
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The judiciary cannot throw
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That law out. Even if it
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Violates fundamental rights. Now even though
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That's a lot of technical legalese, what
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It basically says is if we put
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A law in that list, it can violate the
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Constitution, specifically the fundamental
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Rights, and there is no problem.
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Thereby rendering the whole process farcical.
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The same time, everyone felt
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And you know, I remember this, I mean
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This is not quoting it verbatim
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But Nehru during the First Amendment
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Parliamentary debates mentioned at one
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Committing a fraud upon the Constitution
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And the country. When he
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Was challenged by people like S. P. Mukherjee
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That this is just too broad
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So these people perhaps genuinely also
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That all politicians are
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Public serving because they all served in the
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Nationalist movement together. They'd
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All been in jail together. They'd all
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Given up a lot of personal benefit and
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Wealth to serve the public
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To be in the nationalist movement and eventually
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In government. So they just assumed
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That people who come to
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These kind of government posts
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Must be the public spirited
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How false that is. I think the cognitive
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Bias that Nehru felt for is called the
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Avability heuristic in the sense
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That because he saw the politicians
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Around him of his generation were so
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Public serving and so on, he
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Assumed that politicians through the ages
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Would remain like that, which of course we know is
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Not the case. Yeah, and you know, one has to
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Remember, like if you think about it, Kameshwar
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Singh, who was the main
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Zabindar fighting all this, you
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Know, he was the guy on the side of property
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Rights that need to be protected, the constitution
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Needs to be enforced. He was
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Extremely flamboyant. I believe
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He owned hundreds of cars.
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Had very, very, very vast land
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Holdings, you know, vacationed in London
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He wasn't really a good poster
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Boy in a public spirited
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Sense, even though the argument
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For protection of private property
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Is fundamentally public spirited.
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Right. So now let's move on
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Through the decades and talk about
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The 44th Amendment. Absolutely.
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So I want to talk about very briefly
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A case called Bela Banerjee
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This was the state of West Bengal
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Versus Bela Banerjee. In
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This particular case, the
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For adequate compensation.
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So the question came up of
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What is sufficient compensation?
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Should compensation be market value?
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This is an American jurisprudential
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Doctrine that you need to be made whole.
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When state takes your property
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Which it has the power to do
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Under the power of eminent domain, it can only
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Do so by providing you compensation.
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And the word compensation
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Means to compensate you for
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Taking that property away. Which means you're
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Left about where you would have been
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Had this property been in your hands
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This particular legislation compulsorily
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Acquired property and it did not
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Provide compensation. So the
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Supreme Court in Bela Banerjee said
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This is inadequate compensation
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And compensation has to make you whole.
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So the government passed the
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Fourth amendment which basically
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Shall be called into question
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For inadequate compensation.
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So they were sort of making up
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The rules as they were going along.
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There was a socialist agenda
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That they needed to unroll.
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Begins with very broad regulation
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Of the economy and therefore regulation
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Of private property. Anytime they
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Ran into this kind of trouble
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It went to the courts and then
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Retroactively they said oh that might
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Have been a bad idea. Now going
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Forward we need to make
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Sure that compensation doesn't become a
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Problem. So that other states don't run into
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The same problem West Bengal ran into.
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So that's sort of how they operated.
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After the fourth amendment
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Question kept coming up. This
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Question of inadequate compensation.
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There were like small and large
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Tweak after that came during
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Have you heard the name R.C. Cooper?
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Among those who believe in property
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Plaintiff in the bank nationalization
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During the commanding heights
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When Indira Gandhi decided that
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We need to go towards not like
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Mixed economy kind of socialism
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But full blown socialism
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She slowly started nationalizing all
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The sectors in the economy.
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One of the sectors which is particularly
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Difficult and tricky to nationalize
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Is banks because the flow of funds
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Can happen overnight. So while
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You're passing legislation and so on so
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Forth, banks might just empty
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Their coffers or move the money into
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And things like that. So any kind
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Of bank nationalization when it is
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Done is a complete surprise.
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Law giving validity to the
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Executive order about two weeks later.
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So bank nationalization
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Essentially nationalized
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Private banks in India.
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R.C. Cooper challenged this
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As a shareholder of one of the banks
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Saying that he had not been adequately
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Compensated for taking of
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Property. So nationalization of
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Bank is also a takings.
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Is a very important case
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In Indian jurisprudence because
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Number one, it recognizes
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Including the rights of shareholders
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And debtors, et cetera, as
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Property that comes within
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This Article 31 framework.
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The second thing was R.C.
#
Cooper, the court said in the majority
#
Government did not provide adequate
#
Compensation. It did not make these people
#
Whole. But you must remember
#
That's the precise point of bank
#
Nationalization, right? The government's
#
Treasury is running low.
#
It wants to, one, appropriate the wealth
#
Of the banks, two, have access
#
To a credit system where it can do all
#
These loan waivers and, you know,
#
All sorts of things like
#
Mess around with the credit system and
#
Subsidize credit to favored groups.
#
So that's sort of the intention of
#
Bank nationalization. So
#
Given that that's the intention, there is no
#
Reason why they create a compensation system
#
That will benefit people
#
So let me interrupt you
#
And ask you a newbie question then.
#
How did they determine the compensation
#
That was to be given to the holders of those banks?
#
Well, that's the thing.
#
They left, so depending on
#
Which particular case or which
#
Legislation you're talking about,
#
They left the principles extremely
#
Vague. Sometimes the laws
#
Would say the principles to be determined
#
By the executing authority.
#
The legislation itself will not prescribe
#
Principles. Sometimes it would
#
Just come up with an arbitrary amount,
#
Let's say 100 rupees per share
#
Or something like that, and
#
Not provide any justification or principle
#
Is the compensation that you decided
#
To give when the share was trading in
#
The market for, say, 1000 rupees.
#
So I'm just making up these numbers.
#
These are not actual numbers from the cases,
#
But just to give you a sense of what was going on.
#
Very arbitrary. So what was the ruling
#
In the R.C. Cooper case?
#
So the ruling in the R.C. Cooper case was against the government.
#
So that's the broad thing.
#
There were many, many sub-issues
#
That were discussed in the R.C. Cooper case.
#
The fundamental point being,
#
What is the definition of property?
#
What is public purpose? And what is
#
Compensation or adequate compensation?
#
Now, interestingly enough,
#
Indian jurisprudence has been very,
#
Doctrine on what public purpose is.
#
So this might shock you,
#
But when you look at case after case
#
On the right to property,
#
Or pretty much any other
#
Regulatory power of the state,
#
The Supreme Court has sort of
#
Deferred to Parliament.
#
What I mean by that is, public purpose
#
Is whatever Parliament says is public purpose.
#
So if the legislation says
#
That it is in the public interest
#
To regulate the banking system,
#
Then it is in the public interest.
#
Like, courts won't interfere
#
With what constitutes as
#
Public purpose or public interest policy.
#
They are merely going to see
#
That once you have declared
#
That this is in the public interest,
#
Are you following due process
#
Or like, proper procedure
#
To determine principles of compensation,
#
So on the question of public purpose,
#
Not only was R.C. Cooper weak, but every case
#
In India has been hopeless
#
On that particular issue.
#
And consequently India has no
#
Doctrine of public interest or public purpose.
#
And by doctrine I mean like
#
A principle or a rule that is
#
Consistently applied by courts.
#
Can you contrast this with say
#
The US which does have such a doctrine
#
And you know what the implications of that are?
#
Well, so the US also has
#
Seen very bad times recently.
#
But initially in the United States,
#
Something very close to public goods.
#
Which is you know typically
#
These are situations where
#
One individual property holder
#
Might create a holdout.
#
That is you know one person whose farm land
#
Is affected by the rail line
#
Might hold out and not sell that property
#
To the government or to the rail company.
#
Or the government from laying down
#
A line that would bring a huge amount of
#
Prosperity to the whole region.
#
But obviously one or two people are
#
Bearing the cost. So they hold out.
#
Prevent these kind of gridlocks
#
But it was restricted only
#
To public use. So there are a few types
#
Of goods like say roads or dams
#
Which typically face what we call
#
The collective action problem. A lot of people
#
Need to come together to make that work.
#
A lot of little pieces of land.
#
In India you see this problem
#
Over and over again with dams
#
And the catchment area.
#
The moment you build a dam
#
The catchment area of the river overflows
#
And all the people who have land
#
Are going to be affected by it because their land
#
So you see this problem over and over again.
#
The problem of dams by being a
#
The United States solved that problem
#
Using eminent domain but providing full
#
The Indian government in its
#
They wanted to fulfill these
#
Constitutional principles they didn't have the money
#
To provide the zamindars the full
#
Compensation. It would have also
#
Sort of destroyed the point of the zamindari
#
To public purpose. We moved
#
Away from the idea of a
#
Strict compensation doctrine.
#
So in a sense the difference between our
#
Doctrine back then and what the US's was
#
Was a difference of necessity. Our government
#
Didn't have the coffers in any case to provide just
#
Compensation. So what do you think?
#
I think it was a question of
#
Necessity and I think it was
#
Slightly flawed ideological
#
Think about when you read
#
The federalist papers or when you read
#
George Mason, James Madison
#
Is a deep understanding
#
The idea that power corrupts and absolute
#
Power corrupts absolutely.
#
In the Indian nationalist movement. There
#
Is recognition of the idea that men
#
May and when I say men I mean all
#
Humans that individuals
#
May act opportunistically
#
Given the context of the nationalist
#
Struggle they didn't take that very
#
Seriously. Whereas in the United
#
States that idea was taken very
#
Seriously and to its absolute
#
And that's why they had such strong
#
Constitutional constraints that were so
#
Difficult to amend and in India
#
It was slippery. There were
#
Let's get back to the 70s now
#
Now you started getting the drift
#
Problem or the biggest reason
#
That the right to property was under threat
#
Was because the government wanted to
#
Execute socialism. So socialism
#
And the right to property are obviously
#
Fundamentally incompatible. So
#
Even though Nehru wanted to do
#
Not full-blown socialism
#
Not full-blown communism
#
What you essentially get is
#
Something very similar to full-blown
#
Socialism. It just happens
#
It doesn't happen overnight through revolution
#
It happens gradually through legislation
#
So that's what you see happening in India
#
Now we know that in 1975
#
There were a bunch of unexpected
#
Events. Raj Narayan challenged
#
Indira Gandhi's election
#
She invoked the emergency
#
Now during the emergency
#
That to protect the seat of power
#
All the power was concentrated in the
#
Executive and not separated between
#
Executive, legislature and judiciary
#
You needed a sort of constitutional
#
Again, I'm not going into detail
#
Her justification for this kind of concentration
#
Of power in the executive
#
Was that the government
#
Needed to do something for
#
Progress and development
#
So this is things like the Garibi Hatao
#
Abolition of privy purses
#
Of nationalizing all kinds
#
Of industries. So all of these
#
Under Indira Gandhi's agenda
#
Support at the time before
#
The emergency. And a very
#
Amendment was we completely
#
Redraft the fundamental structure
#
Really vest the power with the executive
#
And all the other wings of the government
#
Are just, you know, they'll be secondary
#
She was successful in doing
#
So 42nd amendment is the worst thing that ever happened
#
In the Indian constitution. Immediately
#
After that, however, she called for elections
#
And they decided that they will
#
Undo a lot of the things
#
That the Indira Gandhi government had done
#
Amendment were what I call
#
You know, kind of like a restoration
#
Process. They were trying to make
#
Things go back to the pre-1975
#
They succeeded in all of that
#
Except restoring the right to private
#
Property. And the reason for
#
That was Morarji Desai's
#
Government heavily influenced
#
And supported by Jayaprakash Narayan
#
Than Indira Gandhi's government
#
Who truly wanted to abolish
#
The right to private property
#
The history of this goes back to the constituent
#
Assembly. Jayaprakash Narayan
#
Protested the right to property
#
Even when the constituent assembly had
#
Drafted it. And he had written
#
To B. R. Ambedkar saying
#
The socialist wing of the congress party
#
Is absolutely against this particular
#
Provision. So, needless
#
To say, that is the provision that
#
Hacking of the provision or the deletion
#
Of the right to property in 1978 was just
#
A formality. Because the
#
25th amendment before that, you know,
#
Which was a response to R. C. Cooper had already done
#
A lot of damage. The 17th
#
Amendment, the 4th amendment, the 1st amendment
#
What a protection from eminent
#
Domain power looks like. So
#
This was just a formality. I
#
Will, however, say what it actually did.
#
Say right to property is not a
#
Fundamental right. It is only a
#
The 44th amendment did was
#
It moved the right to property
#
From the fundamental rights chapter
#
That is Article 31 and all
#
The follow ups of Article 31.
#
And it moved it to a provision called
#
The state shall not take property
#
Save for the authority of law.
#
It means that we have zero
#
Protection against any legislation
#
That takes property. We have some
#
Protection if an executive authority
#
Takes property without legislation.
#
What that means is, let's say
#
Tomorrow the government passes a land
#
Acquisition bill. Okay?
#
Need to redevelop the Saath
#
In Saath Bangla area is
#
And they don't give any compensation or they give
#
Very little compensation.
#
Now, in the current scheme of things
#
We have no judicial recourse to that.
#
Because fundamental rights
#
Protect us against actions
#
Article 300A only protects us
#
From the actions of the executive.
#
So as long as legislation was passed
#
Using proper procedure,
#
Now, what does Article 300A
#
Protect us from? It protects us
#
From things like an overenthusiastic
#
Municipality taking over land
#
Without any sort of legislation
#
Many scholars have argued
#
That demonetization was actually
#
A violation of Article 300A.
#
So they say that demonetization
#
Should have had an ordinance
#
Legislation, which the Modi
#
So just passing an executive order
#
And saying 86% of India's
#
Currency is no longer valid
#
Should have run into trouble with Article 300A
#
Had someone challenged it and had
#
I believe a property rights scholar called Namita
#
Wahe made this argument that the demonetization
#
Action was completely unconstitutional
#
Because of Article 300A.
#
So you can see that 300A
#
Will only protect you from the most extreme
#
Of arbitrary action, but
#
Most cases of arbitrary action are now
#
Completely allowed when it comes to property.
#
You know all this talk of amendments
#
Reminds me of the observation that our
#
Constitution is less of a book and more of a
#
I'm sure even if the 44th
#
Amendment wasn't there, it wouldn't
#
Really have made much difference.
#
The right to property would have been constantly
#
Breached over the years anyway, but to get
#
To the crux of the show
#
Then what are the unseen effects
#
Of the right to property being
#
As diluted as it is today?
#
Okay, so there are a few things.
#
I want to distinguish unseen
#
Effects and unintended effects
#
And I'll tell you what I mean by that
#
Though unseen and unintended consequences
#
Are very similar in an economic
#
Sense, sometimes in a constitutional sense
#
You own a printing press, okay?
#
And that printing press is publishing
#
Things against the government.
#
Now you should be protected unless you're doing
#
Something against public morality
#
Or it's publishing pornographic material
#
So on and so forth. Technically
#
Or constitutionally, your
#
Right to free speech is protected
#
By the constitution in India.
#
To free speech only protects
#
Speech, it doesn't protect the press.
#
If the government has the authority to
#
You lose your right to free speech
#
This is why a lot of property
#
Right scholars say that all
#
Rights essentially boil
#
Down to the right to private property
#
Because right to private property
#
Is the way that you get the
#
Action that is protected by all
#
The other rights. Similarly
#
Let's say you own a monastery
#
Or you run a monastery that is held
#
In a trust. If the government
#
Decided that it wanted to build
#
A road where your monastery is
#
Technically be an infringement on
#
Your religious freedoms.
#
Eminent domain power, which we have
#
So I'm not saying that courts
#
Have not been reasonable. Whenever
#
These kind of cases have come up, the courts have read it
#
Broadly. And they've talked about
#
The indirect effect and so on and so forth.
#
But you do understand through these
#
Examples just how crucial the
#
Right to property is. It's not
#
Right if you're a capitalist or a
#
Zamindar or if you run a business
#
It's an important right for any
#
Individual, any citizen in
#
India who wants to live their life
#
And express themselves. So that's
#
The fundamental crux of what we mean
#
Now there are two different kinds of effects.
#
Of diluting right to property is
#
Things like it's going to start infringing on
#
Other rights, which you didn't
#
So if the government decides
#
Build a road where monasteries used to exist
#
Decides, you know, you see
#
These little temples and mosques
#
In like street corners in India?
#
If the government decides that it's
#
In public purpose to widen the street and it
#
Knocks down one of these temples
#
Now where do you go from there? So that
#
Is one sort of unseen effect
#
Of diluting the right to property
#
Suddenly in jeopardy. And that was
#
Consequences much broader
#
And so much more perverse.
#
And here I really want to focus on
#
The word intention. Now
#
Given that we've discussed the history of property
#
Rights in India, you know
#
That a very large part of the initial
#
Dilution came because of the
#
It did was it opened up
#
The constraints that we have on the state.
#
So as you know, nowadays
#
All the punchline of every
#
Government is that we want development
#
We want foreign investment
#
We want domestic investment, we want
#
Industry to come into the state, so on so forth.
#
And to attract industries
#
To come and set up in the state
#
Governments need to provide those industries
#
Pieces of land. It's really
#
Hard to acquire land in India and we'll
#
Discuss that in a little more detail
#
In a bit. But let's just say it's hard
#
To acquire land privately
#
In India. And now the government
#
Has started using this power of eminent
#
Domain to take land from
#
Farmers and give it to large
#
Companies. So if there is
#
A tribal group which is occupying
#
Rich natural resources underground
#
Then the government nationalizes
#
That land, takes away all the rights of
#
The tribal group and gives it to
#
Like a big mining company.
#
A few years ago there was a
#
Tata's wanted to set up
#
The Tata Nano Factory in
#
Shingoor in West Bengal. Mamta
#
Banerjee who was in opposition at the time
#
Created huge protests and got them
#
Thrown out. But what was
#
Happening in Shingoor and what led to the protest
#
Was that the government was
#
Farmers, not providing them
#
Market compensation and
#
Putting together the land in large parcels
#
So this is really an unintended
#
Consequence like all the
#
Framers must be turning in their
#
Graves because this is the precise
#
They intended for the beneficiaries.
#
This is actually a redistribution from the
#
I call this reverse Robin Hood.
#
That's exactly what it is.
#
So you take land from the poor and you
#
Give it to the rich and they are the
#
Poor even though they are the landed poor
#
For various other reasons of how
#
We have shackled agriculture
#
In India. But that's really
#
What is going on right now. So you see
#
The time against these big companies
#
Government focuses on how
#
It is now a capitalist or
#
A market friendly government.
#
But they are still violating the same principles.
#
They are taking land from the poor now.
#
They are giving it to the rich instead of taking land from the rich and giving
#
It to the poor. All without compensation.
#
So let's take a step sideways
#
And talk about agriculture. I mean if you
#
Think about it one of the big reasons agriculture
#
Is in such a mess today is that
#
People are essentially trapped
#
In agriculture without an escape route
#
And one reason for that is the right to property.
#
They are not allowed to sell agricultural
#
Land for non agricultural purposes.
#
Liberalization of agriculture is a
#
There are lots and lots of restrictions
#
That came into the agricultural
#
Sector under the guise of protecting
#
Farmers. But what they did was
#
That they really messed up agriculture.
#
I want to focus on one or
#
Two of these kinds of regulation as opposed
#
To talking about the entire agricultural
#
A number of restrictions on
#
So you have restrictions in many
#
States that you can't sell agricultural
#
Land to someone who is not a farmer.
#
Anytime you want to use
#
Agricultural land for any other use
#
You need something called
#
A change of land use certificate.
#
Sometimes it's a single certificate.
#
Sometimes it's a number of
#
Licenses. So this is a state
#
Subject so it varies from state to state.
#
Let's say you're a farmer
#
And we know that if you have a
#
Size in India as a farmer
#
You're not doing very well.
#
Or a bad season or let's just say
#
You're sick of being a farmer. You don't want to do
#
That anymore. You think there are more opportunities
#
Which have nothing to do with agriculture.
#
What would you logically do?
#
You would take your farm land
#
You would hope to sell it
#
Get the money from that. Either invest it
#
In your next venture or put it away
#
As savings while you retrain or
#
Retool yourself to merge with the
#
The laws that say you cannot sell agricultural
#
Your asset and when they
#
Shrink the market for your asset they basically
#
Of where your asset can be priced.
#
Demand and supply. If there were 30 people
#
Who could buy your land the price would have
#
Gone up. If there are only three people
#
Who can buy your land the price goes down.
#
We must remember that a lot of other
#
Farmers are in the same situation as
#
Agriculture. They barely
#
Make their agricultural
#
Enterprise work let alone buy
#
The neighbor's farm. So you
#
Really sort of restricted the market
#
So much you've almost made it irrelevant.
#
Agriculture. Now let's say
#
I can't exit agriculture
#
But I have my land maybe I can't sell
#
It but maybe I can use my land for something
#
Else. Okay. Now there's
#
A problem with that also. You need
#
To go to the government and request a
#
Change of land use certificate.
#
Of your seen and the unseen. Every
#
Time there's a regulation what kind of corruption
#
And rent seeking it encourages.
#
Right. So I don't really need
#
To go into detail for you or the listeners
#
On what a change of land use
#
Certificate licensing requirement might do.
#
There are a lot of middlemen a lot
#
Of bureaucrats who try to take that cut.
#
In a position where he can neither sell his land
#
Land to a different use like a small
#
And breakfast or something else.
#
So this is what I mean by agriculture
#
Is shackled and agriculture and farmers
#
Are trapped in a very low
#
Risk environment. So that's where we
#
Want to digress a little bit at this point.
#
A difference between regulatory
#
Takings and actual takings.
#
This is more a distinction
#
In the United States jurisprudence
#
This distinction really doesn't exist in
#
India. Given that we barely
#
Have any protection from actual takings.
#
But the idea of regulatory takings
#
Is the government has brought
#
Police power to regulate the economy.
#
So some of these regulations
#
Zoning laws saying that you
#
Can't have an industry which
#
Or which has a lot of pollution
#
To be in the middle of the city.
#
So certain laws that regulate
#
The use of property are considered
#
If you regulate the use of properties
#
Such that you deprive the
#
Most or all of the economic
#
Benefit then it's called a
#
Regulatory taking. What that means
#
Is that the legislation didn't
#
Actually physically take the land away
#
But they created regulation
#
Or restrictions such that it's almost
#
As if they took the land away.
#
In American cases would be something like
#
Trees planted on your property
#
Before you build a house.
#
Now if your property is only
#
Interfers with your enjoyment of your property.
#
There's no way you can build a house on that property.
#
So that would be an example of
#
There are similar examples for beachfront
#
A lot of it has to do with environmental regulation
#
Let me try to illustrate your point by
#
Coming back to the Indian farmer.
#
Sorry I'll just finish this and then
#
You can jump in. So in the Indian case
#
That a land cannot be used for
#
And right now non-agricultural use
#
Emanating from that land
#
Agricultural use is extremely depressed
#
Either because that land is no longer
#
Productive or that what you're growing
#
Is no longer valuable or the size
#
Of the holding is too small so on so forth
#
The regulation is almost
#
As if you took the land away without
#
Actually taking the land away.
#
So the change of land you certificate
#
In some places which are
#
Where you know you're kind of semi
#
Rural going into sort of some
#
Kind of small urban transition
#
When you're talking about places
#
Surrounding big cities like
#
Like outskirts of Gurgaon
#
A change of land you certificate can
#
Yield up to 40x the value
#
Of the original piece of land
#
For its farm use. That is the difference
#
That we're talking about. So let me
#
Illustrate this for my listeners by
#
Taking a hypothetical farmer. Let's say
#
I'm a hypothetical farmer and I own a small
#
The market was open and I could sell it to
#
Anybody for anything would be worth
#
40 lakhs. But because the market is
#
Restricted and I can't sell it for non
#
Agricultural purposes and I can only sell it
#
To another farmer. It's not
#
Worth 40 lakhs. It's worth 1 lakh
#
Gave me. So what therefore happens
#
Is that if I was allowed
#
To sell it to anyone a Tata who wanted
#
To set up a nano factory would come to
#
Me and offer me 40 lakhs.
#
But here what is happening is because they are not
#
Allowed to do so the government
#
Becomes almost a necessary
#
Intermediary by the existence of
#
This law. So the government has to
#
Acquire the land from me and while
#
They should give while the just compensation
#
In real terms would be the notional 40
#
Lakhs I would have got from Tata directly
#
Price per se because the market has been
#
So restricted is 1 lakh. So the
#
Government can give me 1 lakh call it just
#
Compensation and give that land
#
Worth 40 lakhs to Tata and all
#
The value is captured by that intermediary
#
Which is basically theft. Yeah
#
Another layer to what you just said
#
So it might seem like Tata
#
Are getting a great deal out of this
#
On the face of it it's like oh Tata
#
Would have had to pay 40 lakhs for the value of land
#
Now they just have to pay 1 lakh
#
Look at how terrible the law is. It supports
#
The rich capitalists against the farmer
#
But the problem is that Tata
#
Also cannot acquire land in
#
A reasonable way in this kind of an economy
#
So let's say Tata start acquiring land
#
The first few pieces of land go for 1 lakh
#
They are the most desperate farmers right
#
But Amit Verma is smart
#
Amit knows that if he holds out long
#
Enough then Tata would have acquired
#
Enough land that his piece of land is
#
Now suddenly even more valuable than 40
#
Or right in the middle of it or something like that
#
We are haggling over price there are
#
Holdout problems but a holdout
#
Problem when you have this kind of
#
So now there is basically
#
No sensible way of pricing that
#
Asset even before the holdout
#
And after the holdout you are in big trouble
#
So what happens is even large
#
Capitalist firms become very
#
Soft targets when they are
#
Trying to assemble land in this kind
#
Of a system. So India is
#
Really funny. We are trapped in
#
A world where farmers are
#
Dying to sell their land and get out
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And we are in a world where
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Developers, corporations are dying
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We can't agree upon the price of land
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That seems really weird
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Indians are very good at haggling
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Why is it that we can't agree upon the
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Price of land? The reason is
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There is a dual pricing system
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One system before you get the
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Certificate, one system after
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You get the certificate. So
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Of the problem that you described
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So it's really interesting that while in a
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Free market you would have a positive sum game
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The farmer would sell it at the market price to
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The industrialist, the farmer would benefit, the
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Industrialist would benefit. But here
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Instead you almost have a negative sum game where
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Both the farmer and the industrialist
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Are losing value and that
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Value is going to the middleman
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Who could these middlemen be?
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They are typically people who have a lot
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Of political clout and influence
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And who actually have access
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To get that change of land use certificate
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You are the farmer. You're a very
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Entrepreneurial farmer. You're trying to get
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Out of farming and do something else. You try to sell
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Your land. The selling of the land
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Doesn't work. You try to go to
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All the babus and get the change of land use
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Certificate. It doesn't work because they
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Want so much in bribes that it's
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You just don't have the ability to pay them
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And you can't raise credit
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From the banks because the
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At the bottom most price, right?
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So it's not like your land is actually worth 40
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Lakhs. So you can raise that money
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With using the land as collateral
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Now you just have your land at one lakh
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No one's going to give you money even for bribes
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So that's the situation you're in
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Now what's going to happen is
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Anyone who has a lot of political
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Sure of his ability to get the change
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Of land use certificate can actually
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And I don't know if you remember
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That was going on in Gurgaon
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So Robert Vadra who belongs
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To the Nehru Gandhi family
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He is married to, he's Sonia Gandhi's
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He had a firm called Skylight
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Limited would do, it was running many many
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Operations. I just want to
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Zero in on one of them. So what
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Skylight Corporation was doing was it
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Was having very strange transactions
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With DLF which is the largest
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Developer in Gurgaon. When you
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Start looking into those transactions
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What you see is DLF would
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Skylight to buy a piece of
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Land. Skylight would buy that
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Piece of land. Within four to
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Six weeks of buying the piece of land
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The value of that land would just shoot up
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That piece of land back to DLF for a
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So what you see is let's do this with numbers
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Let's say there was a piece of land
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That Robert Vadra's company
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Is given as a loan from
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DLF to Skylight. Skylight buys
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The property at one crore.
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As soon as it buys the property we know
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That Robert Vadra must have a lot of political
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Connections. He legitimately
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Gets the change of land use certificate
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Change of land use certificate kicks in
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The value of the property becomes
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He sells that property back
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To DLF for forty crores
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And DLF writes him a check.
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So now you have two checks. One is a loan
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For one crore. One is a payment
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For land for forty crores.
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Thirty-nine crores is the profit
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That is taken up as pure
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Rents by a political entrepreneur
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Which in this case is Robert Vadra
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Because very very well politically connected.
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And this is just a famous scam
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We've heard of but this is typically what
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Happens across the country and... Exactly
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Am not trying to blame a particular
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Individual or a political party
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A lot of people are doing this
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I'm not even sure it's a scam
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Really. I don't think it's
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Illegal. I mean some of the transactions
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Have been fraudulent but I don't think it's
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Illegal to take advantage
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Of a change of land use
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Right? Anyone who has access to that
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System has created these
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Monsters. Yeah that's right
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Which is perversity which is enabled by bad
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Regulation. Exactly. So if
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It weren't for this particular
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Instance of a good IAS officer
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Like Keenka and a politically
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Connected person like Robert Vadra who we know
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Because it's so high profile. It could be anyone
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It could be Amit and Shruti
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And it would be the exact same result
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Because someone has to be a middleman
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In fact I would go as far as saying
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We almost need these middlemen
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Otherwise how would you actually move
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Towards urbanization and development
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In a country which is so shackled by regulation?
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There would be no lubrication
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In the system and it bugs me so much when people
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Conflate this kind of crony capitalism
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With capitalism. They are completely
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This is actually not even
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Capitalism. This is crony
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Socialism. Exactly. You have
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Terrible socialist regulation which has
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Not yet been repealed. You like to
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Say make in India and you want
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India to be the manufacturing hub
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And the services have been so and so forth
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You want to rapidly move into a market
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And capitalist system but you
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Have no legs to stand on because
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Capitalist system is the right to private
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Property. So if you don't have that
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You are going to get all this kind of perversity
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So I want to quickly sum up some of the unseen
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Effects that you have spoken about
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Number one, infringing the right
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To property or not protecting it sufficiently
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Impacts all other rights because
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The point I keep trying to make is that
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Every right depends on the right to property
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You can say I have the right to free speech
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But where do you express the speech
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If the government nationalizes all
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Printing presses and owns all the media
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Then it's pointless. So
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To protect the right to free speech you need
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To also protect the right to property
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That's unseen effect number one. All other rights
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A form of theft in the sense that
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As you showed in the case
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Of the farmers who are suffering from the regulation
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That he can't sell his land, the land
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Of the farmer which should be worth say forty
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Lakhs becomes one lakh. It's not exactly
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Debt capital but it's comatose capital
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It's very close to debt capital and he's
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Lost all that value because
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And furthermore it amounts to theft
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Because even when it's not
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Indirectly through regulation
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It's directly through just the
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Government taking the land for a much
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Lower price than what would really
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Just. And I would add a fourth
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Often when the original
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Legislation or the constitutional
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Amendment was intended to benefit farmers
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Now it actually goes against
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Farmers. The broader point being
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The moment you give the government
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It could be used against anyone and tomorrow
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It could turn against you.
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In fact what I've seen is all the regulation
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Which is made with the intention
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Of helping the poor usually ends
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Up redistributing wealth from
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The poor to the rich. This being
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A classic example. So looking
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Hopeful? Are things ever going to
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Change? Are we going to start taking the right to property
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Seriously and more importantly is it
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Ever going to be an issue which can animate
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The masses so that the demand
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I mean that is the only way anything changes in
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Politics right if there's demand
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Future in the following
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Sense that I think there are
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Many instances of countries in the
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Which don't actually have what we
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Call a de jure right to property
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Which is you know on paper
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Constitutionally protected but
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Which have very good de facto right
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To property that is the government understands
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How important right to property is
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And it respects that. So there are
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Many cases even where you have a
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Constitutionally messed up system or no
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System at all that you could actually
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Get a robust system of property
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Rights bottom up. So in that
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That makes me optimistic is that
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The more wealthy an economy
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And activists you have for the right
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To property. Now remember who
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Was fighting all these cases in the 1950s
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It was the flamboyant Sir
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His property was threatened right
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He wasn't a public spirited person
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He was a self-interested person who
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Was fighting to keep his land
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So as India becomes more prosperous
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Through some other mechanisms
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Going to big businesses so on so forth
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I'm hopeful that more and more
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People would become advocates
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Of property because they're no longer living
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On handouts of the government or a redistribution
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Economy but they actually
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Need their property to survive
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Land has been taken away and given
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To the big bad capitalists
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Make for a great poster
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Child and rhetorical device
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Than Sir Kameshwar Singh did. So
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I'm hopeful that going forward in the future
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I anticipate a lot of taking of land
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Maybe that will lead to a new
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In favor of property. So those are the things
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What makes me pessimistic is
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Any kind of reform in India
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And right now if you have
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The money you can escape a lot of
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The bad loopholes of the system and
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Carry on. So the only people who
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Are truly affected by this terrible system
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In an everyday sort of sense
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And it's really hard for the poor to fight
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Their regular economic battles and then also
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Fight legal and constitutional battles.
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So some kind of a tension
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Between these two forces socially
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Will eventually take us where
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We're going to end up. But I am partially hopeful.
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Shruti it's been really illuminating
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Talking to you. Thanks so much for your time.
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Thank you so much Amit. This was great fun.
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If you enjoyed listening to the scene and the unseen
#
Check out another show by IVM Podcasts
#
Which is hosted by my good friends
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Lorraine, Chuck and Sriketh
#
You can download it on any podcasting network.
#
Good evening ladies and gentlemen.
#
This is your captain speaking. Sorry to say
#
But there's been a slight delay due to
#
The apocalypse having suddenly begun.
#
As you can see there's death, destruction and chaos
#
Taking place all around us.
#
But don't you worry food and drinks will be
#
Served shortly and I would recommend checking out
#
To get some of your favorite Indian podcasts.
#
We'll keep you going till this whole thing
