Sun, 26 Mar 2006

What Constitutes a Sale?

Here's an essay for you on property, markets and capitalism, inspired by a ketchup bottle, confirmed by a Coke can and pushed over the top by a real estate covenant as reported by IArarat via Secular Blasphemy. How's that for a chain of causation?

We were eating out in a small pub last month when I grabbed the ketchup bottle on the table to enhance the tasteless rubber on my plate the place [still] called "Freedom Fries". And I noted a small blurb on the label, which in truth I've seen many times before: "Restaurant Package: Not for Resale". And it got me thinking...

On leaving the place, we stopped by the station and filled up on gas. I ran into the c-store and picked up a six pack of soda. Each can bore the same moniker as the ketchup bottle: "Not for individual sale". Now the wheels were really grinding. Here's the question: had a sale actually been completed in either case? That is, had the bar actually bought the ketchup bottle from it's distributor, and had I actually purchased six cans of Coca-Cola from the gas station?

And I was forced to conclude that the answer was no. Did the bar actually own the ketchup bottle? Did I own the Cokes? No, because neither of us could legally dispose of our "property" by resale: ownership requires absolute control, and we didn't have it. There was a condition placed on the sale, perfectly legally, by the way, that constrained our actions with our new "property".

But if the transaction wasn't a sale, what was it? It couldn't be a rental or a lease - at least I hope that neither Heinz nor the Coca-Cola Company would demand a continued fee for my use of the product, and return of the property when I was "finished" with it! It wasn't a gift - money had changed hands.

I think the justification by the companies involved would be that they're selling a service - the bar owner got the ketchup at below retail price, but the company didn't want him opening a ketchup emporium, so they barred resale in return for the "service" of keeping him supplied at wholesale with ketchup. Soda distributors price individual bottles of pop higher at wholesale than they do six packs of bottles (or cans) at retail - one could but a six pack for, say $3.50 and sell each of the bottles for $1 ea., thus bypassing the wholesale volume requirement imposed by the company. Hence the conditions.

But regardless of the justifications, I contend that the transactions were not in fact sales at all: if I do not have the unrestricted use of my new acquisition, there is no sense of the word in which I can be said to own it. I have merely contracted for it's "use". Which is why taxes on such transactions are formally called "sales and use tax", and not just "sales tax".

The item referenced by the other blogs was even more bizarre, and related to another tidbit recently in the news. It seems as though some of our Muslim neighbors wish to live under their Sharia law:

First in Europe and now in the United States, Muslim groups have petitioned to establish enclaves in which they can uphold and enforce greater compliance to Islamic law. While the U.S. Constitution enshrines the right to religious freedom and the prohibition against a state religion, when it comes to the rights of religious enclaves to impose communal rules, the dividing line is more nebulous. Can U.S. enclaves, homeowner associations, and other groups enforce Islamic law? Such questions are no longer theoretical. While Muslim organizations first established enclaves in Europe, the trend is now crossing the Atlantic. Some Islamist community leaders in the United States are challenging the principles of assimilation and equality once central to the civil rights movement, seeking instead to live according to a separate but equal philosophy. The Gwynnoaks Muslim Residential Development group, for example, has established an informal enclave in Baltimore because, according to John Yahya Cason, director of the Islamic Education and Community Development Initiative, a Baltimore-based Muslim advocacy group, “there was no community in the U.S. that showed the totality of the essential components of Muslim social, economic, and political structure.”

Restrictive real estate covenants are nothing new here, of course. Some even mandate the colors of paint you can place on your new house! They're formally part of the sale, too: if you want to purchase this house, you must sign this contract (covenant). Some types are banned outright, for example, those barring certain races or religions from residency. But others are perfectly legal according to the UCC. Zoning laws are a type of governmentally imposed covenant on all "sales" - but they have the same effect as private ones in taking the use of the property from it's "owner".

But in any event, I have become convinced that these covenants obviate the sale: at best they turn it into a lease or rental, at worst they simply steal. Just like the ketchup and Cokes. All of these cases are made possible by legal enforcement of contracts: contracts which effectively negate a sale, even though they constantly refer to sales! It's a bit of absurdity I find rather delicious!

But why am I spending all this time and effort to attack admittedly obscure sales practices? Simply to show my conservative capitalist friends that capitalism is not necessarily the same thing as a free market. This is a decidedly capitalist country, with a very restrained market. In fact, one might go so far as to say we live in a fascist State economy: Benito Mussolini said that "Fascism should more properly be called corporatism, since it is the merger of state and corporate power." Both Fascist Italy and Nazi Germany classically allowed the "owners" to retain title to their "property" but not absolute control. This was once considered a crucial difference between socialism and fascism, and , in my humble opinion, made socialism the more "honest" alternative. At least socialists admit they're stealing your property - fascists maintain the fiction of your ownership while stealing it in fact.

The State uses it's legal props to enforce contracts taking advantages from one party and passing them to others, unilaterally. One rarely "owns" anything these days, without some restrictive "contract" having been forced on the purchasers whether or not the purchaser is aware of it - I daresay that most folks pretty much ignore the warning against resale on ketchup and Coke bottles, until they run a charity bake sale and attempt to actually dispose of their "property", only to find out that they never really owned it at all.

And so it goes in our "capitalist republic", sans a free market, fulfilling Proudhon's comment that "Property is theft."

/Politics | 3 writebacks | permanent link

On 3/27/2006 07:37:10
Arwin wrote

In defense of covenants

On 3/27/2006 08:29:34
Dave H wrote

You make my point ...

On 3/27/2006 09:06:23
Arwin wrote

I made you a libertarian :-)

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