This chapter begins the analysis of institutional genes by focusing on property rights institutions for several reasons. First, as an institutional gene, the property rights institution significantly determines the nature of the social, economic, and political systems. It essentially lays the groundwork for the functioning of societies and shapes the dynamics of their interactions. Second, the logic underpinning the evolution of institutions through changes in the property rights institution is relatively simple and clear. By focusing on property rights, we can trace a clear line of cause and effect through the development of institutions. Third, this logic is well supported by historical and archaeological evidence. Ancient Greece and Rome, for example, where private property rights were widespread, were pioneers in developing laws and institutions for safeguarding these rights. This led to them being recognized as the cradles of the rule of law, constitutional governance, and democracy as their institutional evolution was built on this foundation.

Additionally, extensive historical records show that in all countries with well-established constitutional and democratic systems, institutional development has always been supported by relatively dispersed private property rights. On the other hand, in almost all regions where property rights, especially land rights, were concentrated in the hands of a monarch or a small group of oligarchs in antiquity, there has been strong resistance to transitions towards constitutional democracy in the modern era. Ancient Iran, Egypt, and China serve as good examples of this latter trend.

The structure of property rights, be they widely distributed as private property rights or highly centralized, directly determines the foundational rights and powers of property owners. Therefore, ever since the creation of basic property rights, property owners have sought to defend and strengthen their vested interests throughout the process of institutional evolution.

In societies where extensive private property rights were established at the dawn of civilization, the collective influence of numerous such rights holders guides institutions to evolve in a manner that protects other owners like themselves. This process transforms the institution of private property rights into an institutional gene, which then persists throughout many centuries of subsequent institutional evolution.¹

Based on archaeological evidence, this chapter discusses how widespread private property rights became the primary mechanism and driving force for the formation and development of “derivative” institutions for protecting private property rights, including the rule of law, constitutionalism, and democracy. Moreover, these derivative institutions become institutional genes self-replicating continuously because they bear on the interests of the many property owners. Thus, in countries with extensive private property rights, it is more feasible for the rule of law, constitutionalism, and democracy to become self-replicating institutional genes as the system evolves. Institutional evolution itself is, of course, a complex process that is neither seamless nor unidirectional.

Chapter 4 presents the contrasting case of China, where property rights are strictly monopolized and centralized. This situation requires the use of force to maintain. If property rights are highly centralized at the early stages of civilization, the monarch or oligarchs who control these rights will naturally aim to protect their privileges through monopolistic power backed by coercion.

Over time, rebels or conquerors who overthrow the monarch often need to establish and maintain their own monopolistic power through similarly violent means. This process turns the institution of highly centralized property rights into a self-replicating institutional gene, often sparking intense internal conflicts and warfare among monopolists. It also gives rise to institutions designed to protect monopoly powers. Some of these institutions then self-replicate and evolve into institutional genes, often at the expense of individual freedoms and rights.

Today’s constitutionalism and rule of law can be traced back to the institutions and legal systems of ancient Greece and Rome. To comprehend the relationship between private property rights and constitutional governance, it is essential to understand the origins of these legal systems. The earliest corpus of law that emerged in ancient Greece and Rome, where property rights were broadly dispersed, was private law. Private law governs property and personal relationships between individuals, particularly focusing on the rights and duties of individuals. The largest part of private law deals with property rights and the issues emanating from them, such as contracts, torts, private associations, and corporations.

In ancient Greece and Rome, public power, and the public law that regulated it, was based on private law and developed after it. Public power emerged through the empowerment of individuals as agents to carry out the functions of the state. Public power, as it was called, arose through the empowerment of individuals to make them agents for carrying out the functions of the state. The most crucial component of public law is the constitution, the major purpose of which is to guarantee the fundamental rights of citizens, to protect private property rights, and to ensure implementation of the provisions of private law.

In stark contrast, since the creation of the Chinese Empire, the imperial power held ultimate control over all the lands of the empire. This fundamental principle remained in the Chinese Empire. Such a feature of the imperial system, that is to say, its institutional gene for property rights, initially served to eliminate the existing aristocracy and feudal system and subsequently prevented the emergence of a new aristocracy, ensuring the empire’s unrivaled endurance. With a guaranteed monopoly on power, the empire, in its more matured later periods, was able to partially privatize land-usage rights and allow them to be traded on the open market for efficiency gains. But the supremacy of imperial power over market transactions and the interests of the people never changed under the Chinese imperial system.

The nature of land rights in the Chinese Empire has been discussed in depth by Western scholars since the eighteenth century. Up until the mid-twentieth century, these scholars commonly viewed the imperial monopoly of land rights in the empire as a fundamental feature differentiating China’s imperial system from the Western system. However, in recent decades, due to shifting perceptions of property rights (although many scholars might not be necessarily aware of these changes in the legal or economics literature and, merely adhere to the prevailing understanding), some scholars have redirected their focus. Instead of concentrating on the ultimate control rights of land, which are tightly connected with political power, these scholars have singled out partially privatized land-usage rights and their market transactions. Consequently, they interpret China’s imperial land system as one dominated by private land ownership. The implications of this divergent interpretation, resulting from varying conceptual understandings, are extended far beyond the realm of property rights, encompassing a fundamental understanding of China’s institutions. In order to clarify these most fundamental issues, this chapter begins with a discussion of the basic concept of property rights.

3.1 Ultimate Control Rights versus the Bundle of Rights: Differing Concepts of Property Rights

The concept of property rights in this book refers to the ultimate control that an owner has over his or her property. This concept originated in ancient Greece and is the first known concept of property rights in human history. It is based on the belief that individuals have fundamental rights, including the right to control their property. This particular concept of property rights has had the most profound influence on institutional evolution. Regardless of their value judgments, whether it is Locke and Hayek, who advocated for the protection of property rights, or Marx, Lenin, and Mao, who were against it, they all agreed on one thing: property rights are about control rights over property.

However, the concept of property rights is not universally agreed upon among contemporary economists and legal scholars. In the fields of economics and law, there are three general notions of property rights: control (or residual control) rights, the bundle of rights, and possession and disposal rights. The last concept is often used in mainland China, which is why it is being mentioned here. However, it is not particularly influential in academic circles due to its rather elementary nature. It covers only a few bundles of rights and overlooks many more important ones. As such, it will not be extensively discussed in the subsequent parts of this work.

In a modern society, where contracts are well developed and multiple rights to each asset can be transferred and re-transferred separately or jointly through contracts, contemporary property rights theory contends that the major difference between property rights and other contracts lies in residual control rights. If a contract is seen as a transfer of control over an asset, then residual control refers to remaining control that is not included in the contract. For example, in the event of contingencies not covered by the contract, only the owner of the asset, that is to say, the holder of residual control rights, has the authority to determine the disposal of the asset (Hart, Reference Hart1995; 2017). All rights that can be explicitly stipulated in a contract can be transferred and traded in the market; yet, regardless of how these rights are contractually ceded, residual rights not included in the contract remain with the owner as long as the ownership is not transferred. In other words, ownership defines the ultimate control over an asset. All rights other than the right of ultimate control are derived rights.

According to this concept, the attribution of ultimate control rights determines the nature of ownership. If the ultimate control rights are vested in the government, it constitutes state ownership; if they reside in private entities, it is considered private ownership. In any society, whoever ultimately owns most of the social assets largely determines the relationship between government and citizens, that is, whether the government rules the citizens or the citizens determine the government.

Modern property rights theory focusing on control rights is influenced by John Locke, who argued that private property is a fundamental right inherent in life so that people are born with the right to control their property. The power of the government is derived from citizens consciously relinquishing a segment of their own rights, thereby empowering the government to safeguard their lives and property from violation. This idea underpinned the Declaration of Rights drafted by Locke, a seminal document pivotal in establishing constitutional governance in Britain during the Glorious Revolution. The United States Bill of Rights (part of the US Constitution) and the French Revolution’s Declaration of the Rights of Man and of the Citizen were both deeply influenced by Locke’s thoughts on human rights and property rights.

More than 200 years after Locke, Hayek’s idea that those deprived of property rights would become enslaved also originated from the concept of property control rights. Marx, in contrast to Locke, contended against private property but nevertheless concurred with Locke (and arguably sourced from Locke) the fundamental principle of property rights – that is, ownership equates to the right to control the property. Control-rights-based property rights arose several centuries bce in ancient Greece and stemmed from social practices connected with the region’s already extensive private property rights. The Stoic philosophers of the time refined these practices into fundamental concepts, holding that every individual per se is the rightful owner of their own person and private property (Long, Reference Long1997, p. 15). Stoic thinking and England’s long-standing and secure private property rights together formed the foundation for Locke’s ideas. In ancient Rome, the notion of the individual’s fundamental right of control over their property became part of the tradition of Roman law. This concept of property rights is as essential for a market economy as air and water are for life.

However, in societies where a highly centralized system has been established since ancient times and where the ruler maintains ultimate control over all lands within the respective jurisdiction, the situation is markedly different. Land-usage rights are granted at the discretion of the ruler and can be revoked at any given moment. Therefore, in such societies, there is neither a notion of individual property rights nor an acknowledgment that a person’s property rights should not be violated by either the emperor or the state. The Chinese Empire serves as a prime example of these kinds of societies.

In recent decades, the concept of the “bundle of rights” has become particularly popular in academia.² Under this concept, property rights are seen as a collection of rights, such as the right to possess, the right to use, the right to income, the right to dispose of (to trade, bequeath, and gift), and so on, and all rights to exercise the above rights. Compared with the traditional control-rights-based theory of property rights, this “bundle of rights” view outlines rights operationally, applying specific rights under particular conditions.

Compared with classic control-rights-based property rights theory, the bundle of rights perspective delineates rights operationally, with specific rights applied under specific conditions. This operational approach has laid the foundation for certain theoretical advances, such as defining the boundaries of property rights, which is the starting point for the Coase theorem.³ The so-called boundaries here define the specific contents of a bundle of rights and the specific aspects of property rights that can be traded.

The concept of a bundle of rights can be helpful when the issue of control is not prominent in society. However, it is important to realize that even under constitutional government, where private property rights are adequately protected, the various rights contained in the bundle are not all equally important. The consequences arising from the enforcement or violation of different rights remain distinctive. Moreover, even in a market economy with the rule of law and order, the concept of a bundle of rights may no longer be helpful when contingencies arise beyond the provisions of the contract. In such cases, only the owner retains ultimate control of the property and has the right to decide on its disposal (Hart, Reference Hart1995; 2017).

Bundled rights, other than control rights, are derived from and subordinate to control rights. Assuming that the supremacy of control rights over others in the bundle of rights is fully acknowledged, the two concepts can be viewed as complementary. Given that control rights determine other rights, the concept of a bundle of rights reflects the complex market transactions, facilitating the quantitative study of property rights and the analysis of related trade-offs. However, if the primacy of control rights is overlooked, particularly in a society lacking the rule of law, the mechanistic application of the “bundle of rights” concept can engender fundamental economic, social, and political misconceptions.⁴

In societies without the rule of law, the right to control property is typically monopolized and overrides all other rights in the bundle, including those assigned by contract. This was exemplified by the emperor of the Chinese Empire, who held ultimate control over all the land within the national territory and thus did not need to directly control the other rights associated with land ownership. Especially after the Song dynasty, the subjects of the empire were granted and allowed to trade land-use rights. No one mistook tradable land rights as their natural right or a property right in the sense of control. In principle, the emperor could exercise his control and decide on the disposal of land at any time, subject to tyrannical incentive – compatibility constraints. In practice, moreover, the emperor invoked this power to control the amount and manner in which anyone could use the land, thus preventing independent power arising from control of the land.

The control-rights-based concept of property rights is crucial for understanding the general attribution of property rights in a society, as it is related to social attributes that determine the nature of society. In contrast, the bundle-of-rights-based concept of property rights is more relevant for resource allocations and efficiency and allows for easier quantitative measurement of private property rights. However, it is important to note that only ultimate control reflects the fundamental nature of property rights in society. In a private system, citizens ultimately control most of the property in society dispersedly. At the same time, this means that citizens, with their resources, collectively constrain the government. So universal private property rights form an institutional gene that drives society to move towards constitutionalism. In contrast, when the government monopolizes control over most property, whoever rules the regime controls the property. Autocratic rulers often attempt to consolidate and expand state ownership, resulting in its evolution into an institutional gene. Under this institutional gene of state ownership, any attempt to move towards constitutionalism is likely to encounter significant difficulties due to the government’s unconstrained power.

In addition to the two main concepts of property rights described above, the protection of property rights is another popular concept. It originated from Adam Smith and was taken up and further developed by Douglass North and his followers as a measure for property rights institutions. It is common practice to measure the protection of property rights by looking at them as a bundle of rights and measuring the protection of each part of them. While useful operationally, this approach cannot replace the basic concept of control as it disregards or fails to consider the attribution of ultimate rights. Focusing on the operational aspects whilst neglecting the basic social consensus on property rights can be misleading. In Imperial China, the emperor held ultimate control rights to the land, while peasants, landowners, and high officials only held the use rights of the land granted by the emperor. For generations, people always understood the emperor’s ultimate power over their land, regardless of operational details.

3.2 Private Property Rights as an Institutional Gene

As previously discussed, the term “property rights” in this book refers to the ultimate right of control over property and “private property rights” is defined as the individual’s ultimate right of control over their property. “Private” here encompasses family or household, as well as the individual (private ownership in antiquity was mostly a matter of household ownership). It is ownership recognized not only by the owners but also by social consensus. Archaeological discoveries confirm that private land ownership was already widespread across much of Greece from 1100 to 700 bce (Finley [Reference Finley, Shaw and Saller1981], Glotz [Reference Glotz2013], and Toutain [Reference Toutain1930], cited in Pipes [Reference Pipes2000, p. 100]). In the norms of Greek polytheism, there were explicit rules to protect private property rights. In the early tribal system implemented in ancient Greece, religious practices stipulated that each family in the tribe had its own property rights and they were protected. On the basis of private property rights, all property owners were citizens, which gradually led to the development of Athenian citizen governance.

Archaeological findings and ancient Greek documents suggest that private land rights, which originated in ancient Greece, laid the groundwork for the world’s first democracy. Owing to the unwavering determination of private owners, institutions in these societies evolved to safeguard property rights. As a result, property rights became the institutional gene that spurred the enduring institutional evolution towards constitutional democracy in such societies.

The reforms enacted by Solon in the early sixth century bce played a pivotal role in the establishment of Athenian democracy. These reforms stipulated that a citizen’s political power was determined by his property, in line with existing social practices (Athenaion Politeia, Aristotle [Reference Aristotle1988]). Land ownership and citizenship became intricately linked: only citizens could own land and only landowners were recognized as citizens. Later, with the reforms introduced by Cleisthenes in 509 bce, democracy as we understand it today was established in Athens. The rights of citizens were expanded from controlling their land to collectively exercising sovereignty through voting and assembly.

Two hundred years after Athens established a sustained system of private property rights and democracy, Stoic thinkers introduced the concept of the indivisibility of fundamental human rights and private property rights, positing that private property rights form the basis of civil society. The Stoics proposed that each human individual is, by nature, the rightful owner of their property and it is inherent to human nature that individuals accumulate property rights and interact with one another as owners within a structured society. This “structured society” is the prototype for our current civil society. Locke’s ideas, which form the foundation of modern democratic constitutionalism, originated from the Stoics (Long, Reference Long1997).

The question arises as to why Stoicism had such an enduring and extensive impact in societies where capitalism originated, yet faced consistent resistance and even active suppression in nations like Russia and China. My explanation is that it depends on the institutional genes in society, particularly how property rights are distributed. Civil society has taken shape in societies where private property rights are widespread and form part of the institutional genes and where the majority of the people are property owners. Stoic-Lockean ideas are compatible with the prevailing incentives of such a society. Therefore, not only will Stoic–Lockean ideas be accepted but they will also become part of the social consensus and the institutional genes.

The opposite is true in societies without private property rights or where most people are deprived of property rights. In such societies, resisting or even outlawing Stoic–Lockean ideas is compatible with the incentives of rulers who monopolize property rights. At the same time, since the vast majority of individuals did not have property rights, there was no awareness of private property rights as individuals’ natural rights in society. Consequently, there was no consensus on private property rights and no motivation to protect one’s own property rights.

In the Greek and Roman systems of private ownership, the concept of property rights implied absolute control of property by the owner. Correspondingly, within Stoic–Lockean thinking, private property is an inherent and inalienable natural right. Since the Declaration of the Rights of Man and of the Citizen, which emerged from the French Revolution, all constitutional democracies have described the right to property as “sacred and inviolable” in their constitutions, reflecting the absolute and fundamental nature of that right.⁵ Marx labeled these “pure private property rights,” free from state influence (Marx and Engels, Reference Marx and Engels2012, p. 212).

Centuries before the Stoics, the Jewish Bible (known in Christianity as the Old Testament), which arose over a thousand years bce, already clearly provides for the protection of private property rights. Among the Ten Commandments recorded in the Old Testament are prohibitions against a person coveting their neighbor’s house, wife, servants, oxen, donkeys, or anything that belongs to the person’s neighbor.

Moreover, the Old Testament articulates an early version of the idea of protecting property rights by constitutional rule to prevent autocratic rule. The Book of Samuel records that when the Israelites were establishing a state in the Holy Land and seeking to appoint a king, the prophet Samuel warned that a ruler could violate people’s property rights and seize whatever they owned: “And he will take the best of your fields … he will take a tenth of your sheep.”

However, after Christianity was adopted as the state religion of the Roman Empire, it was exploited for imperial politics. The state Church of the empire then unprecedentedly monopolized the right to interpret the Bible and restricted the faithfuls’ right to read it. It also deliberately disregarded the connection between autocracy and property infringement mentioned in the Old Testament. For several centuries before the Reformation, this hindered the dissemination of the consciousness of protecting property rights in the Bible and encouraged the autocratic infringement of private property rights by the Roman Empire and later feudal monarchies.

From the sixteenth century onwards, the Reformation revitalized the belief among the faithful in the inseparability of property rights and a person’s fundamental rights. The Bible was translated into the vernacular and published for a mass readership for the first time, enabling its core ethos to become more widely understood. The role of the Reformation in this respect alone has established some of the foundations for capitalism. However, there was no Reformation of the Russian Orthodox Church and the active spread of Christianity was officially prohibited in China most of the time. Jesuit activities in China during the Ming and Qing dynasties were limited to charitable activities such as running hospitals and schools but large-scale evangelism was not allowed.

Private law, with property rights at its heart, is the foundation of judicial systems in all countries with the rule of law. Property rights law in most countries today, including China and Russia, is rooted in Roman Law.⁶ China enacted its first private law in 1906 based on the principles of Roman law (through the influence of Japanese–German law, about which, see further in this section and in Chapter 9), while Russia’s private law was largely transplanted from German law as part of the reforms in Tsarist Russia. However, in societies where neither property rights nor private law was part of the institutional genes in the system, transplanted private law was often little more than words on paper and it was hard for it to have much impact.

The foundations of Roman law can be traced back to the Roman Republic (509–27 bce) with the official name of “The Senate and the Roman People” (Senatus Populusque Romanus, abbreviated as SPQR). To this day, “SPQR” can still be found on Rome’s coat of arms, municipal facilities, and public buildings. During the Republican period, citizens voted for the Senate, which governed the Republic. As early as the beginning of the Republic, citizens with legislative powers promoted the Law of the Twelve Bronze Tables to safeguard their rights. It is the earliest written record of systematic Roman law, which was centered on private law regulating private property rights (e.g., possession and ownership of houses and land) and also included elements of related public law such as criminal law and litigation law.

Despite the Roman Republic being replaced by the Roman Empire in 27 bce, laws safeguarding private property persisted, ensuring continued protection for citizens’ property rights. Although significantly weakened, the Senate maintained certain authority, providing a degree of checks on the emperor’s power. The foundation of commercial society is citizens with private property rights and of direct and immediate concern to citizens are property rights and the civil law that governs them. The government has no legitimate power to violate private property rights.

The philosophical or ideological principles regarding the essence of Roman law, with private law at its heart, can be traced back to the Stoic principle of natural law and even to the Hebrew Bible (the Old Testament), which suggests that people are born with equal rights and freedom to dispose of their property freely.⁷ This spirit reflected the consensus among the ancient Greeks and the early Israelites. From ancient Greece to ancient Rome, private property rights and associated legal systems matured into institutional genes. Over the subsequent evolution of institutions spanning two millennia, while the Roman Republic has been undermined, the institutional genes of property rights have not only survived but also spread throughout Central and Western Europe, as well as to some European colonies due to the joint efforts of property owners protecting their own interests and the impact of the Roman Empire and Christianity.

From the time when law first arose in ancient Greece and Rome through to Roman Law, the Napoleonic Code, and the modern legal system, the core of which is private law (civil law), the fundamental mission of the law has been to protect private property rights from infringement. But the enforcement of private law (civil law) requires government and public authority. In jurisprudence, it is accepted that a civil code is the heart of the entire legal system (Watson, Reference Watson1992, p. 191), which implies the need for other laws aside from civil law. Complementary to private law is public law, which regulates public power; central to this is the constitution, which establishes the principles of public power.

To ensure the enforcement of private law and to thwart government overreach and infringement of private rights, the basic constitutional principle (the UK has a constitutional rule without a written constitution) is to limit the power of government so that it does not infringe upon citizens’ rights. Originating in the era of the Roman Republic, constitutionalism has been unwavering in its focus on preventing dictators from subverting the basic republican institution (Straumann, Reference Straumann2016). Constitutionalism’s approach to limiting government power is rooted in the principle that the law is supreme, transcending the authority of the government, any individual, and any institution. The rule of law’s primary tenet of the supremacy of law derives from the institutional gene of private property rights.

3.3 China’s Traditional Legal System: An Instrument of Dominance

The so-called law in the Chinese imperial system was essentially an instrument of the emperor’s rule. This represents a fundamental departure from the international concept of law, especially as conceived in Roman Law. The principles and institutions addressing legal matters in the Chinese imperial system were divided between Confucianism and Legalism (Fajia 法家). Confucianism prioritized ritual and propriety and supplanted codified laws with a moral code, while Legalism underscored prohibition and punishment.

In the traditional Chinese legal system, there was no distinction between civil and public law. Both legislative and judicial powers were conferred upon the executive branch at all levels of government, descending from top to bottom and culminating in the hands of the emperor, who wielded the law as a tool of governance. Administrators at all levels of government acted as agents of the emperor and were accountable to him; they did not possess rights or powers independent of the emperor.

The system commonly referred to as law in contemporary international society is fundamentally grounded in private property rights. As the English jurist and philosopher Jeremy Bentham succinctly put it, “Property and law are born together, and die together. Before laws were made, there was no property; take away laws, and property ceases” (Bentham, Reference Bentham1843, p. 309).

Conversely, China has never developed a legal framework based on private property rights, let alone a rule-of-law system where law is supreme and underpins constitutionalism. “Law,” as understood in ancient China, originated with the Legalist doctrine of governance, which emerged during the Spring and Autumn and Warring States periods (770–221 bce) and was fully practiced during the subsequent Qin dynasty. Legalists asserted that stringent laws were the sole means of maintaining social order and that rights existed only to satisfy the needs of the ruler (Fairbank, Reference Fairbank2013, p. 42). From the Han dynasty (206 bce–220 ce) onwards, elements of Confucianism, which replaced law with morality, also influenced the legal tradition. The traditional Chinese legal system was a system of rule by law, in which the law was the instrument of governance, devoid of fundamental principles or provisions relating to individual rights, freedoms, and interests. In contemporary jurisprudential terms, the ancient Chinese legal system, or ruling instrument, was centered on administrative and criminal law.

There is therefore a fundamental difference between “law” in the traditional Chinese sense and “law” as it is commonly understood internationally. Civil matters such as marriage and contracts came under public jurisdiction in an imperial system with no distinction between executive authority and the law. Until the end of the nineteenth century, China had neither concepts nor a vocabulary for private, public, and constitutional laws. Liang Qichao, a leading advocator of constitutional reform in China, wrote in 1904, “One of the most unfortunate things about our legal system is the complete absence of private law … The law has flourished here for 3,000 years, producing countless codes, but there is virtually no provision for private law” (Liang, Reference Liang1989, pp. 52–53).

Decades later, a Western-trained jurist remarked that legal terms and concepts such as “civil law” and “criminal law” were all imported to China from the West. If we follow internationally established concepts, by nature, all Chinese imperial laws dealing with civil legal matters belong to criminal law but not to civil law. Concretely,

Contemporary Chinese jurists also recognize this fundamental issue: “Civil rules were periodically applied in Imperial China, historically, but they were never organized, summarized, analyzed and codified … There was no such attribute that can be called as ‘civil law’ or ‘private law’” (Yu, Reference Yu2003, p. 11).

Not until the early twentieth century, when facing a crisis, did the Qing Empire decide to introduce civil law for the first time in Chinese history, in accordance with international practices. One of the external factors motivating the Qing Empire was the series of demands of the British, Japanese, and Americans. Their troops had previously occupied Beijing in response to the Boxer Rebellion and they pledged to relinquish their consular jurisdiction in China if China could establish laws and courts that were compatible with their own. Subsequently, the Qing government tasked Yuan Shikai and Zhang Zhidong with identifying specialists who were “proficient in both Chinese and Western law” to revise China’s legal statutes. In 1902, the Bureau for the Compilation of Law was established to translate foreign laws and Shen Jiaben was appointed as the Minister for Law Compilation in 1906. However, due to the absence of an independent civil law norm or doctrine in China, Shen had no choice but to rely on Japan’s codification of civil law (Zhang, Reference Zhang2004, p. 82). The Draft Civil Code of the Qing dynasty was developed by Japanese advisor Yoshimasa Matsuoka and his team over seven years, drawing heavily from the Japanese Civil Code (which itself was influenced by the German Civil Code during the Meiji Restoration) and German and French civil codes. This Draft Code subsequently formed the basis of civil law in the Republic of China.

The fundamental reason for China’s lack of an internationally accepted legal system, which includes the absence of private law and a constitution, is that it never developed the institutional gene of universal private property rights. Without this institutional gene, there would be no systematic private law, nor would there be a comprehensive legal system, inclusive of constitutional law or constitutionalism, with private law as its cornerstone. In the case of the unsuccessful constitutional movements of the Hundred Days’ Reform and the 1911 Revolution, the reformers and revolutionaries were mainly focused on the governance structures of political power. Unfortunately, but perhaps not surprisingly, without the prerequisite institutional genes for constitutionalism, they did not pay attention to the ultimate goal of constitutionalism, which is to protect private property rights and human rights.

3.4 Property Rights and Sovereignty in the Chinese Empire

A fundamental institutional characteristic of China’s imperial system was the emperor’s supreme and comprehensive power. This included the ultimate control over all lands within the empire, implying that the emperor held the title to all land. As such, “All legislative, executive, and judicial powers belonged to him.”⁸ It was natural and unquestionable for the emperor, with ultimate political power and control over all lands, to possess the sovereignty of the empire. Sovereignty, as discussed in this book, concerns the social roots of a state’s political power rather than international politics. The emperor’s power was so evident that the concept of sovereignty did not necessitate discussion within the Chinese Empire. Indeed, “sovereignty,” like the concept and vocabulary of human rights, is an import into Chinese. There are no traditional notions of these ideas in China and confusion persists about the relationship between human rights and sovereignty in China to this day.

To a large extent, the relationship between property rights and sovereignty under different systems reflects the nature of those systems. Before we delve into their relationship, it is worth noting that in societies whose institutional roots can be traced back to ancient Greece and Rome, private property and civil law regulating property rights were established first, followed by the emergence of public law to ensure the enforcement of civil law. Sovereignty was therefore established as a foundational concept of public law after the establishment of private property rights and civil law.

Before discussing how the two are related, it is worth noting that in societies drawing their institutional heritage from ancient Greece and Rome, the inception of private property and private law pertaining to property rights took precedence, with public law emerging later to ensure that private law could function. Thus, sovereignty, one of the fundamental concepts of public law, appeared after private property rights and private law.

Ulpian, a jurist of the Roman Empire, was arguably the first scholar to propose sovereignty as a jurisprudential concept. Although a jurist of the imperial period, Ulpian’s thought still reflects the institutional gene of private property rights and human rights developed during the Roman Republic.⁹ He claimed that the empire’s sovereignty came from the people and was granted by them to the emperor (Hinsley, Reference Hinsley1986). On the other hand, Ulpian’s interpretation of sovereignty, which mirrored the political realities of his era in the Roman Empire, violated constitutional principles. He contended that the decisions of the Roman emperor constituted law by virtue of his sovereignty and the emperor was not subjected to any law.

The modern concept of sovereignty was developed by Jean Bodin (1530–1596), a French scholar of the Reformation era. He created the theory of sovereignty to bolster the French monarch.¹⁰ He posited that the sovereignty of an absolute monarch was a divine right, which was absolute and perpetual in nature; the monarch was accountable only to God. Bodin contended that while the monarch was not bound by laws enacted by others, he was nevertheless constrained by natural law and the constitution. Furthermore, Bodin argued that the absolute monarch’s sovereignty was restricted to the realm of public authority and that the monarch could not infringe on private rights. This implies that even under an absolute monarchy, private property rights in Western European societies maintained an important position as an institutional gene.

During the English Civil War (1642–1651), before the Glorious Revolution (1688), the English philosopher Thomas Hobbes (1588–1679) proposed a doctrine of popular sovereignty based on the social contract theory, according to which the monarch’s sovereignty was derived from the people. Although he opposed the constitutional separation of powers and advocated indivisible and unlimited sovereign powers to prevent violence and maintain order, Hobbes maintained that sovereignty does not entail a right to interfere in the non-violent activities of the people.¹¹ As for the relationship between sovereignty and property rights, Hobbes contended that, on the one hand, sovereignty defines property rights, implying that an individual cannot acquire property rights without the recognition of sovereign authority; on the other hand, certain property rights precede sovereignty and cannot be violated, otherwise, the people would be justified in revolting (Lopata, Reference Lopata1973, pp. 203–218). Both the latter point and the notion of popular sovereignty are reflections of the institutional genes of private property rights in England.

All modern constitutional states adhere to the constitutionalist principle of popular sovereignty. According to this principle, the inherent and inalienable natural rights of individuals are the source of a country’s sovereignty. The people of a country entrust a portion of their power to the government through a social contract. This government, consisting of representatives elected by the people, uses a decentralized system of governance to protect the basic rights of individuals, including private property rights, and to maintain the public interest. This popular sovereignty principle, arguably, was first summarized by John Locke. According to Locke, private property rights, as well as other natural rights of man, predate the state and sovereignty, both of which were created to protect private property rights and the fundamental rights of man.

In summary, it is clear that from Ulpian to Locke and from ancient Rome to the Glorious Revolution, despite differences in views on the source of sovereignty and the principles of constitutional governance, there was general agreement on the relationship between private property rights and sovereignty. Western thinkers from various eras for over a thousand years have consistently viewed property rights as a natural right, largely independent of sovereignty and inviolable by sovereign power. This reflects the enduring existence of property rights as an institutional gene in societies whose systems have roots in ancient Greece and Rome. It also indirectly indicates that strong, longstanding private property rights form the institutional gene that ultimately paves the way for constitutional rule.

In Western thought, any ideas fundamentally opposing constitutionalism must represent a significant departure from the Greco-Roman system and traditional conceptions of property rights. A pioneer in this regard was Rousseau (1712–1778), who emerged before the French Revolution. While Rousseau’s theory ostensibly focused on popular sovereignty based on the social contract, its essence was based on opposition to private property rights. First, Rousseau denied that property rights were natural rights predating the state and the law. He asserted that private property rights were products of violence and sources of inequality – a viewpoint that Marx later inherited and developed. Rousseau argued that property rights emerged only from collective authority, individual land rights were subordinate to the community, and the aim of the social contract was to establish equality in a society fraught with inequality rather than to protect property rights. He asserted that since the state represents the general will, its power is unlimited: “The social compact gives the body politic absolute power over all its members.”¹²

Rousseau contended that law is derived from the general will of the people, signifying that legislative power, as the sovereign embodiment of that general will, cannot be alienated nor delegated. Consequently, executive and judicial powers should be integrated with law-making. Any attempt to separate these powers infringes on popular sovereignty and is thus unlawful.¹³ Moreover, Rousseau considered the principle that partitions sovereignty among executive, legislative, and judicial branches to be fundamentally flawed. Accordingly, numerous theories opposing democracy, including Marxism, have drawn influence from his ideas.¹⁴ In contemporary times, autocracies often cite Rousseau’s theory of popular sovereignty and his rejection of the separation of powers as a justification for their consolidation of power.

The ideological divides mentioned above have been in existence since ancient times. Why would a given ideology have a profound effect in some societies but not in others? Why has Rousseau–Marx ideology significantly impacted social systems in Russia and China, rather than in France, Germany, and Britain, where its ideas arose? The analytical framework of institutional genes, as proposed in this book, posits that the influence of a specific ideology on a society is contingent upon its compatibility with the existing institutional genes of that society. An ideology stands a better chance of profoundly impacting a society if its incentives align with the society’s institutional genes. Conversely, ideologies that do not align with these institutional genes may struggle to exert significant influence. Further, if an ideology does have a substantial effect on a society, it might become a part of the societal consensus and, subsequently, be integrated into the institutional genes of that society.

In traditional Imperial China, the systems of property rights and sovereignty differed significantly from those of their European counterparts. The most distinctive aspect of this system was the dominant power of the emperor, coupled with the lack of a tradition or concept of private property rights as inherent human rights. Marx provided a description of state power within China’s imperial system, “The state is then the supreme lord. Sovereignty here consists of the ownership of land concentrated on a national scale. But, on the other hand, no private ownership of land exists, although there is both private and common possession and use of land.” The state “stands over them as their landlord and simultaneously as sovereign, then rent and taxes coincide, or rather, there exists no tax which differs from this form of ground-rent” (Marx and Engels, Reference Marx and Engels1993, vol. 3, chapter 47, section 2).

Marx’s observations on the relationship between sovereignty and land rights in the Chinese Empire, as well as his depiction of China’s imperial system, are influenced by both Western conceptions of property rights and sovereignty and Western perceptions of Eastern autocracies. As early as ancient Greece, Aristotle and Herodotus analyzed the autocratic systems and the monopolized land rights of Egypt and Persia. From the seventeenth century onwards, numerous Western scholars systematically studied the governance structures of Egypt, the Ottoman Empire, Persia, the Mughal states, and China. They coined the term “Oriental despotis” to collectively describe these systems (Wittfogel, Reference Wittfogel1957; Anderson, Reference Anderson2013).

Much like Imperial China, the Ottoman Empire lacked a hereditary aristocracy. The English philosopher and statesman Francis Bacon (1561–1626) commented on the Ottomans, stating, “A monarchy, where there is no nobility at all, is ever a pure and absolute tyranny … For nobility tempers sovereignty.”¹⁵ The crucial point here is that, in a monarchy without an aristocracy, no one but the monarch has control rights over the land.

English political theorist James Harrington and French physician and traveler François Bernier elaborated on their understanding and observations of Eastern despotism, underscoring the disparities between Eastern autocracies and European monarchies. Both Harrington and Bernier inferred that the absence of private land ownership was a cornerstone for despotic rule.

These observations significantly influenced Montesquieu, who argued in his treatise The Spirit of the Laws (1748) that the lack of a traditional aristocracy constituted the foundation of Eastern despotism (Anderson, Reference Anderson2013, p. 464).

Fundamental ideas about institutions in any society are shaped by the characteristics of pre-existing institutions in that society. The notion of property rights as natural human rights, distinct from sovereignty, mirrors institutional genes that have been present since ancient Greece and Rome. In contrast, China did not cultivate such concepts due to the absence of these same institutional genes.

In the Chinese Empire, when all lands and political power, ranging from land control rights to state sovereignty, were vested in the emperor, the concept of sovereignty became superfluous. The authority exerted by Chinese emperors, who governed every aspect of the empire, greatly exceeded the sovereignty of European monarchs.

Before the foreign term “sovereignty” was introduced into China, there was neither a discourse on sovereignty nor a corresponding vocabulary, let alone a conceptual understanding of it. Individuals did not have natural rights; they only had those bestowed by the emperor’s benevolence. As such, under the Chinese imperial tradition, there were neither concepts of property rights as natural individual rights nor notions of sovereignty. Public power and private rights were so intertwined that sovereignty and property rights could not be distinguished. This has repercussions even in contemporary China, where human rights are generally deemed subordinate to sovereignty.

The state dominion over land rights in China has roots dating back to the pre-Qin era. Concerning ultimate control, the land property rights of the nobles in the Zhou dynasty were similar to those of the current township authorities in today’s China. They had nominal title to their land but, in practice, they only had rights to use and trade the land, not ultimate control over it.

According to the Royal Regulations of the Liji (礼记) (Book of Rites), the Zhou nobles were prohibited from selling arable land without the king’s permission. In other words, they did not have complete disposition rights over granted lands; they only had usage rights and a partial right of disposition.

A prominent saying of the time declared, “All under the sky is the king’s land, and all within the four seas are the king’s subjects.” For some scholars, this underscores the monarch’s ownership of all the land in the empire. For others, it declares the monarch’s sovereignty over the empire.¹⁶

However, these different interpretations are not mutually exclusive. They reflect the Zhou dynasty monarch’s simultaneous control of sovereignty and land rights from different angles. They represent different facets of the unity or conflation of sovereignty and property rights.

Since the establishment of a unified imperial system under the Qin dynasty, the power of the nobility, which was derived from their fiefdoms, was effectively abolished. All power emanating from the land belonged to the emperor, which resulted in the imperial system of land power (the land state system) (Hou, Reference Hou1954). Under this system, the emperor held ultimate control, primarily to thwart the potential resurgence of a landed aristocracy.

While China’s imperial system maintained imperial power over land for two millennia, specific land policies varied during the dynasties. The institutional reforms of Shang Yang in the state of Qin played a pivotal role in establishing China’s first unified empire. The heart of these reforms involved placing all land within the state under direct, central government control (Fairbank, Reference Fairbank2013, p. 46). This laid the institutional groundwork for the junxian (郡县) system, through which the nobility was gradually weakened and ultimately eradicated.

From the perspective of modern jurisprudence and political science, the monopolization of political power by controlling land rights implies that land rights were an integral part of the emperor’s sovereignty. Given that the emperor held ultimate control over the land while eradicating the nobility, individuals during the optimal periods of the Chinese Empire, such as the Song dynasty and afterwards, were granted only usage rights to the land and the ability to trade these usage rights.

Unfortunately, some scholars, unconcerned with control rights or the intricate relationship between property rights and political power, misinterpret those partial rights as private property rights. When partial property rights to land are treated as the ultimate control over land, the emperor’s power to repossess or confiscate land is overlooked. More importantly, without recognizing the inseparable connection between property rights and political power, one cannot fully understand the basis and evolution of the Chinese imperial system.

To inhibit the emergence of large landlords as aristocrats, these landlords were granted only possessory rights to the land, not ownership rights. The scope of their land possession and use was stringently limited. They had to adhere to the emperor’s rules, which dictated the terms of “possession” and imposed other “limitations” (Chai, Reference Chai2007, pp. 53–56). Similarly, peasants solely held usage rights and the taxes they paid to the state were essentially rents (Hou, Reference Hou1954).

During the Han dynasty, the share of state land swelled to 94 percent as the imperial system was cemented, leading to a gradual reduction in private usage rights. Following the Han dynasty, the Chinese Empire implemented the “equal-fields” system (juntian 均田), in which the emperor allocated and managed land-use rights while retaining ultimate control. This policy lasted for several centuries, spanning from 485 (Northern Wei dynasty) to the early years of the Tang dynasty in 780. Some literature misinterprets the juntian system as an egalitarian form of private ownership.

Particularly after the Northern Wei dynasty and under the re-established empire of the Sui dynasty (581–618), the emperor’s main focus was on preserving the unity of the empire and avoiding the missteps that had led to the decline of the Eastern Han dynasty. The essence of this system was that the emperor utilized the equal distribution of the usage of “state-owned” land as a means to further restrict the gentry, control society, and secure tax revenues.

Under this system, peasants distanced themselves from their wealthy overlords and registered as state taxpayers. The system mandated that land was allocated and taxes were levied based on the labor headcount, with people prohibited from moving freely and required to cultivate the assigned land and pay taxes. Essentially, this system mirrored the state serfdom practiced in Russia hundreds of years later.

Starting from the Song dynasty (960–1279), the Chinese Empire commonly separated land ownership and land-use rights, while the emperor maintained ultimate control over the land. This partial privatization of use and disposal rights led to the blossoming of a vibrant land market, giving rise to various contractual instruments that facilitated the granting, leasing, renting, pawning, mortgaging, taxing, donating, and transferring of land.

Nevertheless, this flourishing land tenure market merely mirrored a policy decision made by the imperial authorities. At no point in any dynasty did the emperor forfeit ultimate control rights. The emperor’s power superseded the results of any contract or market transaction. The emperor’s approval and benevolence served as the foundational source of the rights of ordinary individuals. These realities are both historical facts and the social consensus that were established and carried forward generation after generation under the Chinese imperial system.

To forestall the emergence of a de facto landholding aristocracy and other forms of local power, emperors across all dynasties instituted restrictions on the amount of land that could be possessed by the affluent. They actively suppressed the efforts by the wealthy gentry to accumulate more land. Furthermore, they maintained the ultimate authority to reclaim and redistribute any land, even those held by high-ranking individuals such as princes and dukes.

The imperial court of the Song dynasty serves as an illustrative example of how such control was exerted, particularly in its careful regulation of a group of wealthy households known as the xingshi hu, or special households. This group consisted of the families of successful officials at all tiers of government as well as the leading local gentry.¹⁷ It is documented historically that the imperial court held the authority to confiscate land from anyone.¹⁸ As noted in the historical records, “since the Song dynasty … it was not an uncommon occurrence for the government to confiscate or seize property from the populace” (Zhao, Reference Zhao2005, p. 31).

Besides political motivations, the imperial power also maintained control over land for economic reasons. During financial crises, such as the one that took place during the Southern Song dynasty (1127–1279), the government relied on its authority to reclaim and reallocate land. It sold large tracts of state land to raise funds. When the situation improved, the government obliged the wealthy to sell the land back to the state, at reduced prices.

Another illustration of the emperor’s ultimate control over land is evident during dynastic transitions. New emperors often reallocated land-use rights to bureaucrats, landowners, and peasants in accordance with their political objectives. For instance, during the early years of the Yuan dynasty (1279–1368), land was primarily managed through an expansive state-run system of military cantonments. However, later, the use and partial disposal rights of most state land were privatized.

Then, when the Ming dynasty (1368–1644) took power, the emperor redistributed land to landless peasants as a way to curtail the influence of the rich and powerful. In fact, this practice was used repeatedly throughout Chinese history, becoming one of the defining characteristics of imperial rule. Each successive emperor exercised his ultimate authority over land to tailor land ownership and usage according to his political strategy.

Since ancient China, there has not been any social recognition of the right to private property or of property owners. Consequently, there was no private law that naturally emerged among property owners to manage the relations concerning their property. As the imperial power held ultimate control rights over all land, property rights and land contracts were essentially matters between the government and private individuals, belonging to public law issues as we understand them today. In fact, Chinese imperial power traditionally employed criminal law to handle these matters.

For example, disputes over property rights were treated as criminal offenses under the legal code of the Qing dynasty,¹⁹ the fundamental principles of which were inherited from the statutes of the Sui and Tang dynasties (see Chapter 4 for a detailed discussion). This code emphasized sentencing and imposing severe punishments. For instance, unlawfully farming on state-owned land could result in a punishment ranging between 60 and 160 lashes (Pu, Reference Pu2003, p. 335).

The imperial monopoly on land was the foundation of China’s imperial system since the inception of the empire. Throughout the lengthy evolution of the Chinese imperial system, even though many peripheral elements underwent changes, the ultimate control of land by the imperial authority remained a constant, shaping the institutional framework surrounding land or property rights. One of its most notable features was the indistinguishability between state sovereignty and land rights.

This institutional characteristic has been crucial in shaping China into a totalitarian regime, where state ownership constitutes a central component. It has also significantly impacted China, both ideologically and institutionally, up to the present day. The reason why a series of fundamental principles of universal values – such as the primacy of human rights over sovereignty, property rights being a component of human rights, and the inalienability of private property rights – are either not accepted or are even considered heretical in contemporary China – is deeply linked to this institutional gene. Similarly, the reason why total state ownership of land cannot be challenged or discussed after years of reform and opening-up is also closely tied to this long-standing and deeply ingrained institutional gene.