Because it creates institutional uncertainty, predation (the violation of property rights) is one of the main sources of stagnation and poor economic performance. Public predation in all its forms (especially tax and regulation) has been a major theme in James Buchanan’s work. In Why Perestroika Failed? Peter Boettke studied the failure of the early transition period in Soviet Russia showing how promises made and promises broken undermined the reform process and fostered public predation.
There is plenty of state predation going on around us in one form or another. States regularly renege on their promises and predate on people. It happens in the developing world but also in countries that once were among the richest on earth, such as Argentina.
The Argentine Congress has to ratify a bill that was signed by President Kirchner to nationalize private pension funds. This would transfer into the government’s coffers assets representing around US$30b of private savings accumulated over 14 years by individuals.
Allowing people to opt out of the public pension system was a failed experiment explained some official, and it is now time to rescue “from uncertainty… future pensioners and those who are currently in the (private) system.” (See here and here.) Not everyone agrees, especially those who saved for 14 years. Argentina witnessed a massive rally in Buenos Aires against the plan. Some signs read “No Plundering” or “Freedom, Freedom” (see here).
State predation creates a lot of regime uncertainty. It is not the first time that Argentina completely reverses its policy reform process. It sends the signal that because the fiscal situation of the government is unsustainable any asset can be seized by the government. It is unlikely that this latest move will help Argentina regain its past glory.