[FOUNTAIN]Property rights are critical to prosperity

According to an analysis by distinguished economic historian Angus Maddison, the real income of mankind barely increased until 1500 A.D., then showed a gradual increase between 1500 and 1820, before Europe and the United States recorded dynamic levels of growth after that time. What was the reason for the timing of economic prosperity and why was it limited to Europe and the United States? William Bernstein, the author of “The Birth of Plenty,” explains that it wasn’t a coincidence. He notes that the four essential factors for prosperity are property rights, scientific rationalism, capital markets, and the development of transportation and communication, and that the two regions began to satisfy those conditions around this period.
Among the four factors, Bernstein emphasized the importance of property rights. Francis Fukuyama defines freedom as personal rights, especially property rights, which are protected by the nation. Guaranteeing property rights leads to the proposition that “there is no taxation where there is no representation.” It’s because taxation without representative consent cannot ensure fair taxation and might make it difficult to protect property rights. The United Kingdom’s Magna Carta and the U.S. Revolutionary War were all efforts to guarantee that right.
The meaning of fair taxation varies, depending on the times and the economic situation. Until now, the common belief has been that the graduated tax, which requires those with high levels of income or assets to pay more taxes, is fair. Due to the normally small number of wealthy people, the graduated tax system always receives the support of the public. But it isn’t easy to decide exactly how rich a person has to be to pay more tax, and at what levels. This is why suggestions that a single tariff would be more effective are gaining support these days. Its supporters say that the system can improve the morale of workers and investors without reducing tax collection.
By declaring a war on real estate speculation, it seems that the government is set to raise real estate-related taxes. The government added that it would make it difficult for individuals to possess real estate by steeply increasing property taxes. It also emphasized that it would not recognize speculative income and has made it more difficult for owners of old housing units to profit from redevelopment projects. Due to the negative effects of past jumps in real estate prices, the new plans have received the support of the general public. But some have pointed out that they infringe on private ownership rights. It would be troubling if the government neglected the fact that ensuring property rights is more important then receiving the public’s support for the nation’s prosperity.

by Lee Se-jung

The writer is an editorial writer of the JoongAng Ilbo.