Trading nations

Mr E is upset by this, and it is a little insensitive for Germans to suggest it, but it seems to me that this is a good idea:

Greece must consider a fire sale of land, historic buildings and art works to cut its debts, two rightwing German politicians said today…
Alongside austerity measures such as cuts to public sector pay and a freeze on state pensions, why not sell a few uninhabited islands or ancient artefacts, asked Josef Schlarmann, a senior member of Angela Merkel's Christian Democrats, and Frank Schaeffler, a finance policy expert in the Free Democrats…
"Those in insolvency have to sell everything they have to pay their creditors," Schlarmann told Bild newspaper. "Greece owns buildings, companies and uninhabited islands, which could all be used for debt redemption."

It is perfectly normal for a company in financial difficulties to sell some assets. So why shouldn’t countries in financial trouble do the same? Economic efficiency requires that assets should go to those best able to manage them. This is trivially true of corporate assets, so why shouldn’t it be true of national ones? I mean, if Cadbury can be taken over by Kraft - without any say-so of its workers - why shouldn’t a few islands be bought and sold by governments?
There is a good precedent here. Two-fifths of the land mass of the US was acquired through market transactions.
For that matter, why is liberal interventionism always regarded as an exercise of military power rather than economic power? I mean, couldn’t the US have achieved its objectives in Iraq more cheaply by just buying the country rather than invading?
What objections can there be to countries trading territories?
Two seem mistaken. One is that it would be unjust to greatly enrich tyrants by buying them out. It is, but it’s also unjust to kill and main tens of thousands of civilians in an attempt to oust them; the doctrine of double effect has always struck me as a little jesuitical.
Another is that such trading violates national sovereignty. But if national sovereignty has any value, then surely it derives simply from the fact that individuals have a right of self-determination. This, though, doesn’t apply to unpopulated islands.  And in the case of populated places, self-determination might also require that territory be transferred to more competent governments. I suspect that millions - billions? - of people would rather live where they are and be governed by the US than by the crooks and tyrants they have.
This said, there are a couple of legitimate objections.
First, buying territories might (further) increase the incentives rulers have to govern badly, as they know they will get a pay-off from a better government.
Secondly, there’s a form hold-up problem. For market-oriented liberal intervention to have succeeded in Iraq, western governments would have had to buy off not just Saddam Hussein, but every two-bit paramilitary. And this would lead to a lot of terrorists springing up demanding a pay-off.  
Are these objections really overwhelming? Or is it instead that our aversion to governments trading territories arises from an irrational belief that, as Charles Crawford says, governments are somehow completely different from individuals.

Comments

[Scratch]

That's a bit of a cheek given the second last time the Germans were insolvent they decided that acquiring extra land was the ideal solution and the last time they'd spent all their cash the Americans had a whip-round for them.

[Luis Enrique]

As with any transaction, it depends on the terms. If the Greeks really don't want to endure higher taxes and spending cuts, and if the protests are any indication, they don't, then leasing a few islands to some German investors for $billions could be a tremendous bargain, especially if the Germans invest in some tourism & other infrastructure on those islands in the meantime.

[Chris Purnell]

When the Americans bought their territory the also incorporated it into their sovereign land-mass. Buying Greek islands still leaves them in Greece and subject to (a potentially hostile) national government. Carting off artifacts is also replete with subsequent ownership challenges. Finally the total amount that is was possible to raise would be in the low tens of billions. Therefore this is just political entertainment.

[chris c]

"Buying Greek islands still leaves them in Greece and subject to (a potentially hostile) national government."

Somehow I don't think they'll be forced to sell to the highest bidder.

Not that Turkey would be allowed into the auction, of course.

[Miguel Madeira]

The question of selling island is a bit confuse, because I think that is not clear if the proposition was to sell the sovereignty over the islands or only the ownership.

[Keith]

I agree that Mr. Obama with a free hand ( no Republican Obstructionism allowed ) would better rule all of Africa and china probably than the actual rulers since "Barry" seems a nice guy. But would Bush and his cronies be better than the politburo in Peking? Which America should rule the world i.e. the Liberal or Reactionary? It makes a big difference after all.

[Monjo]

Sudan has leased large parts of its territory to the UAE, China etc. In fact, land purchasing/leasing is big business in Africa.

The problem Greece faces is that any uninhabited island is probably of little commercial value. Maybe the USA could relocate its military bases there; or the Germans, Scandanavians, brits, turn it into an alternative to Cyprus and Spain - and there could be a real Brit-on-the-Med place (which is actually called Gibraltar anyways).

Perhaps the best use of a Greek island would be as a 'free port' for commercial shipping. Since the island remains soveriegnly Greek - it would allow free trade from Asia, the Americas, and Africa to easily enter the EU.

http://makewealthhistory.org/2009/06/03/africas-land-deals-outsourcing-or-colonialism/

[Chris Cook]

The subject of land/location, and the bundle of rights and obligations which constitutes the property relationship, is an interesting one.

A large part of Hong Kong was only leased from the Chinese, and it was the expiry of that lease which meant that the UK was also obliged, when the lease expired, to hand over the rest of Hong Kong, which was unsustainable without the leased land.

One of the interesting side effects of this was that there was no freehold property in Hong Kong, and not only was property held on long leases, but the Crown charged leaseholders a significant 'Crown Rental' for the privilege.

The outcome of this was extremely beneficial for Hong Kong, since up to 35% of Hong Kong's government income came from this source (and still does), and the income earned by their entrepreneurial population was therefore relatively lightly taxed.

Whether it is called a rental or a tax depends upon the legal and financial architecture used, but IMHO it does illustrate that the taxation of the privilege of exclusive rights of occupation of land/location is a superior form of fiscal policy.

[Jonathan]

"For market-oriented liberal intervention to have succeeded in Iraq, western governments would have had to buy off not just Saddam Hussein, but every two-bit paramilitary."

Obviously they didn't buy off Saddam, but the last bit is not too far off the mark as a description of allied policy in Iraq over recent years.

[ortega]

Beggars can't be choosers.

[Franchises in Africa]

This is really very useful post for me.I would like to say Arbel sums up, the Jews in the sixteenth century were again a trading nation, not merely in their roles as peddlers, small traders, or merchants accompanying their goods, but in their contribution to higher levels of international commerce. The success of the Jewish merchants in the East, as a result of Ottoman encouragement, enhanced their position elsewhere in the Mediterranean, especially in Italy.

[Forex Trading]

I think it would be wise to sell land to privet owners or companies, not countries though. I don't think Greece should do "anything" to raise the money, I think they should do the wise thing in the long term.