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Profiting from the Efforts of Others: Understanding Property-as-Capital


Paddy Ireland is Professor of Law at University of Bristol Law School.

The annual ranking of the world’s richest produced by the business magazine Forbes is most obviously striking for the way it reveals the extraordinary scale of their wealth and the remarkable rapidity of its growth in recent years. The Forbes rankings also, however, highlight the often dramatic and rapid shifts, upwards and downwards, in the net wealth of these elites: annual rises and falls of billions of dollars are commonplace. What do these fluctuations tell us about the nature of the things – the property – these elites own, and about the nature of property in contemporary capitalism more generally?

At first glance, the long-running scholarly debates about the nature of property seem rather arcane and academic. Is property best understood as thing-ownership? Or as a bundle-of-rights? Or as a social relation? There are, however, good reasons for law and political economy scholars to engage with them, for they are of considerable political significance, generating very different understandings and perceptions not only of property but of contemporary capitalism.

Things-Ownership and Bundles-of-Rights

The thing-ownership conception tends to be favoured by those wishing to preserve the property status quo. It identifies property with private property and Blackstone’s famous assertion that property is the “sole and despotic dominion which one man claims and exercises over the external things of the world, in total exclusion of the right of any other individual.” It accords with the common-sense experience of property in capitalist societies where social relations take the form of people exchanging “things” in markets. By distinguishing property rights from other rights and highlighting the centrality of thing-ownership to individual autonomy, self-government, and happiness, it lays the ground for their special treatment. It also encourages the perception of property rights as somehow “natural”, as pre-existing law, and in portraying them as a relationship between a person and a thing, it promotes the idea that property rights grant power over things rather than power over other people. By contrast, both the bundle-of-rights and social relational conceptions of property are potentially subversive of the property status quo, de-naturalising property, foregrounding its malleable, contingent, socially constructed nature, and highlighting, following Wesley Hohfeld, that property rights are about power over other people as well as over things.

The thing-ownership conception of property was problematic even when Blackstone was writing because of the emergence of new forms of intangible intellectual property and intangible financial property (revenue rights) with little or no direct relation to the “external things of the world.” Initially, revenue rights like shares and debt were classified as personal rights, as choses in action and, in principle, unassignable. Over time, however, as commercial practices changed, more and more of them were deemed transferable. As markets for them developed, they came to look more like “things” and were reclassified as “property.” The rise of the bundle-of-rights conception of property was, in part, a reflection of these developments.

The political significance of this shift becomes clearer when a distinction is drawn between property in personal possessions and property in productive resources (the “means of production”). This distinction has been a feature of the property institutions of many societies and has been drawn by many writers. The liberal political philosopher, John Rawls, for example, considered the right to hold personal property to be a ‘basic’ right necessary for personal independence and self-respect, but argued that the right to own certain kinds of property, like means of production, was “not basic.” Similarly, for Hanoch Dagan, although private property is central to individual autonomy, any private authority claimed must not be in excess of what is required for self-determination and must be consistent with the self-determination of others. This leads him to argue that the private authority attached to ownership of means of production must be carefully circumscribed.

It is the power over others conferred by property rights in productive resources that has led to this distinction being drawn. As Thorstein Veblen observed, echoing Marx, in the modern world the amount of material equipment needed for effective and efficient production places those with property rights in such equipment at a “marked advantage” over those without. For Veblen, this was in significant part because those with such rights could “corner” use of the accumulated “technological knowledge” of society, even in the absence of intellectual property rights. This knowledge, he argued, was the collective product of many generations and “far and away the most important and consequential … of the community’s assets.”


Veblen made these points in the context of a discussion of the nature of capital. Capital has been defined in different ways but there seems to be broad agreement that it is, in essence, property, often money, which is used, or “invested,” to produce a pecuniary return. As Marx pointed out, there are various circuits through which capital can pass to achieve a pecuniary gain (he distinguished the circuits of money capital, commodity capital, and industrial capital), often changing form during this process. Thus, to generate pecuniary returns money can be invested in tangible and intangible productive resources, including labour, as part of a productive process or invested in intangible financial property like shares and bonds. The value of property-as-capital is based on a capitalization of the revenue streams that are expected to accrue to it in the future.

Property-as-capital has a second key characteristic, however. This characteristic was highlighted by the US Supreme Court in Securities and Exchange Commission v W.J. Howey Co in 1946. The question before the court was whether a particular financial instrument was an “investment contract” for the purposes of Federal Securities law. The test, the court held, was whether it “involve[d] an investment of money in a common enterprise with profits to comefrom the efforts of others.” The Court was following an earlier precedent where investment was similarly defined as “the entrusting of money or other capital to another, with the expectation of deriving a profit or income therefrom, to be created through the efforts of others.”

The ways in which passive owners of property-as-capital can profit from the “efforts of others” are many and varied. For example, the possession of property rights in certain resources enables their holders, through their right to exclude, to control access and levy charges for granting access to others: real estate owners can charge rents, intellectual property rights holders can charge licence fees and so on. Ownership of corporate shares, on the other hand, entitles their holders to receive money payments (dividends) derived from productive activities and the employment and exploitation of wage labour. By contrast, debt, which comes in many different forms (corporate debt, public debt, mortgage debt, household debt and so on), sees some make interest payments to others. In all these cases, the owners of property-as-capital directly and indirectly receive, usually in money form, part of the product of the “efforts of others.”

Ownership of these revenue rights (shares, debt and the like) has become ever more concentrated in the hands of those at the very top of the wealth pyramid—the top 0.1-1%—and is now central to wealth and power in contemporary capitalism. These property forms confer on their holders claims over the fruits of the future “efforts of others” and therein lies the key to understanding the rapid rises and falls in the wealth of those at the top of the Forbes rankings. The value of much of their property is based on expectations about the returns that are likely to accrue to it in the future. As such, its value is inherently speculative. Expectations about future returns can not only be fraudulently manipulated (Enron) and/or absurdly over-optimistic ( bubble), they are affected by everything from changes in general economic and market conditions to changes in state policies on labour rights, environmental protection, and the like. As a result, controlling the future, including constraining democratic decision-making, is crucial to the maintenance of the value of these intangible property forms.

Understanding Contemporary Capitalism

Therein too lies also the key to understanding why property – and particularly property-as-capital – must, ultimately, be understood as a social relation. Conceptions of property which centre on thing-ownership downplay the social relational dimensions of property and particularly of property-as-capital. They operate on the surface, taking at face value the “thingness” of intangible intellectual and financial property and the seeming ability of money to make more money by itself. By contrast, the bundle-of-rights and social relation conceptions encourage us to dig beneath these surface appearances. They highlight the socially constructed, contingent, and malleable nature of property and property rights, and show how property rights involve not only vertical power relations between persons and things but horizontal power relations between persons. Crucially, they can help us to grasp the social relational nature of property-as-capital, without which, as Howey demonstrates, it simply cannot properly be understood.

Understanding the social relational dimensions of property-as-capital is central to understanding contemporary capitalism and its dynamics. One of the defining characteristics of the neoliberal era has been the simultaneous enhancement of the rights of the owners of property-as-capital (financial liberalisation) and diminution of the rights of labour (weaker employment protections, reduced trade union rights, declining welfare provision). Multiple, often minor, legal changes have altered the relative bargaining positions of capital and labour, with, as Robert Hale might have pointed out, predictable consequences for the ability of some to “profit from the efforts of others.” At the same time, the protection of investors has been prioritised by policy-makers and by states. To the detriment of democracy, the “new constitutionalism” has seen the expansion of the concept of “taking” and provided financial property owners with added protections from policy changes which might diminish their income streams and the value of their investments. Nowhere has this been clearer than in the responses to the financial crash and the Covid pandemic where the maintenance of revenue rights and asset values has been openly prioritised over the welfare of ordinary people.