State control a fatal error

Peter Meakin points to the 1991 letter from economist Franco Modigliani and others to president Mikhail Gorbachev to the effect that the Russian state should retain all land and lease it out at its economic value. Meakin believes this would produce huge revenues, and income and other taxes could be reduced or eliminated. We should therefore follow the Modigliani concept and transfer all land to the state.

There are three problems with this. First, at the time of glasnost Russia was coming from a position where all land was already held by the state. It would have been relatively simple to continue with this system and introduce economic rentals. In SA, most land is privately held. Second, Russia did not accept the economic rental approach and has allowed private ownership of land, agricultural and urban.

Third, no country has introduced the Modigliani model. There must be reasons for this reluctance. One reason is provided by the Indian experience, where the country moved away from state control of land due to the corruption it spawned. Private ownership is subject to competitive forces and is more transparent.

The mind boggles at the corruption that would ensue here if the state owned all land and leased it to farmers, home owners and commercial and industrial developers. This would make our last 10 years seem like a golden era of clean government.

Willem Cronje

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