Thursday, August 23, 2012

Private Property in the Arctic

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As Prime Minister Harper wraps up his week-long tour of the Arctic territories, the emphasis has been on balancing economic development with environmental sustainability. While those on the Left criticize the Conservative's environmental record, the establishment media seem more concerned with an "ATV-debate" than reporting any actual news. But what are the facts of the trip? While most Prime Ministers never venture too far North, Harper has made it an annual trip. In fact, a large aspect of the governing Conservatives have been their emphasis on reclaiming the once neglected Arctic. Obviously the commodities boom has sparked this interest, once again making the word "Yukon" synonymous with gold mining. Not surprisingly, the recent Conservative budget changed the rules for assessing natural resources projects. “Northern development must mean northern prosperity,’ Harper said during a speech in the Yukon, “We need thorough, balanced science-based assessments conducted on a timely basis according to the principle of one project, one review,” which is doublespeak for: we need to increase the size of the federal government in the Arctic economy.

Northerners, according to Harper, are posed to benefit from resource extraction and economic development. Meanwhile, in an effort appease the more environmentally-conscious, the new Naats'ihch'oh National Park will protect just under 5,000 square kilometres of land from development. "One of our objectives is to make sure we protect our environment and also allow for economic opportunity here," Harper told the press.

Although it all sounds rosy and favourable, a reminder that the federal government is a monopoly of violence with the power to tax should set off some alarm bells. The federal government should have little to no role to play in the Arctic and instead allow the region to develop according to the individual sovereignty inherit in a free market of private property ownership.

Simply, the Arctic should be privatized.

Privatizing the vast polar region of the Yukon, Nunavut and the Northwest Territories is no easy task. Since most of the land is considered "Crown land," proper ownership is nebulous under the false assumptions that "we" own the land or that it rightfully belongs to the state. The process of privatization is apt to be ridden with state interferences and thus fail to adhere to the kind of privatization libertarians support. However, Hans-Hermann Hoppe offers a solution for the transition from "public" to private property, using streets as an example,

Accordingly, streets should be regarded as these taxpayers' property. The former taxpayers, in accordance with their amount of local, state, and federal taxes paid, should be awarded tradable property titles in local, state, and federal streets. They then can either keep these titles as an investment, or they can divest themselves of their street property and sell it, all the while retaining their unrestricted right-of-way.

The same essentially applies to the privatization of all other public goods, such as schools, hospitals, etc. As a result, all tax payments for the upkeep and operation of such goods stop. The funding and development of schools and hospitals, etc., is henceforth solely up to their new, private owners. Likewise, the new owners of such formerly "public" goods are those residents who actually financed them. They, in accordance with their amount of taxes paid, should be awarded saleable property shares in the schools, hospitals, etc.

Since each individual Canadian is taxed, it's fitting to give each Canadian tradable property titles for a bit of Arctic land. Obviously, the residents of the territories would receive more or larger property titles since they pay additional taxes to their respective territorial and municipal governments.

However it is done, it's obvious that the privatization of the Arctic would keep economic decisions from being politicized. With the entire region consisting of private property owners, economic development and environmental conservation could better serve individual interests. In addition, a strong enforcement of private property rights would hinder and eventually reverse the so-called "externalities" of resource extraction.

Any objections to private ownership versus state ownership can usually be answered via the economic calculation problem.

The economic calculation problem was first presented by Ludwig von Mises to the socialists of the early 20th century. Essentially, Mises argued that without market prices (arising from individual valuations and voluntary exchange), central planners can not allocate resources in any rational way. Given the subjective nature of individual actions and the intricate complexities of the market, without prices no individual or single agency can possess such vast knowledge as to how best to meet consumer (or citizen) demands. This applies just as well to a monopolistic firm in the market, or a government that merely intervenes in the market rather than taking it completely over. However, the advantage (or disadvantage, depending on your worldview) of an intervening state is that it can look to the market as a guideline. Soviet economists admitted this after the fall of the USSR. For most of its history, Soviet planners studied Western prices to determine the "value" of goods and services in their economy. Of course, they were free to disregard this method, and they often did, but without a market economy to compare to the Soviet planners were groping in the dark.

Since market prices can only develop when human beings are free to act and exchange voluntarily, the only rational solution to property conflicts (which is what Arctic development boils down to) is to look to the price mechanism of the free market. How else can one determine society's best interests? Although value is subjective for each individual, voluntary exchange among individuals gives rise to an objective price mechanism that indicates the costs of each action.

Although Harper can use the market as a guideline, there really is no way of telling whether the resource projects the Conservatives are streamlining are in Canadians' best interests. Likewise, the size and location of conservation areas is arbitrary. Naats'ihch'oh, the new National Park, took six years of negotiations with the Sahtu Dene and Metis people of the region. Even Harper admits that, "I know this continues to be an item of discussion and park boundaries are reviewed from time to time." Imagine how different the situation would be if the indigenous people were the property owners!

The job of an economist isn't to condemn the Conservative Government's Arctic policies. Resource projects are neither good nor bad, nor are the conservation parks a good or bad thing. The projects may create jobs and wealth and the conservation areas may promote tourism and environmental sustainability, but because all this was done via taxation and central planning by governments, as opposed to the voluntary action of individuals in a free market, the reality is is that none of these initiatives will truly reflect individual interests. Whether the demands of individuals are superior to the central plans of bureaucrats is not for an economist to decide. That role belongs to the individuals that are being taxed to finance these projects.

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