Property and Trusts: A Modern Project to Create Individual and Collective Personae

Introduction

A trust, a unique English legal concept, serves as a defining feature that distinguishes English common law from the Roman legal tradition of continental Europe. Legally defined as a hybrid of property and contracts (Maitland, 1911: 314), this concept, notably absent in the works of Karl Marx and Max Weber on capitalism, finds an advocate in Frederic Maitland (1911: 314). Maitland argued that the intricacies of capitalism could not be adequately explained solely through the lens of contract; instead, he emphasized the importance of trusts. According to Maitland, trusts profoundly influenced the economy and politics, facilitating joint-stock arrangements and governing trusteeship within imperialistic contexts. However, Maitland predominantly relied on intuition and used the concept to justify the existing social structure. This paper seeks to imbue analytic rigor into this intuitive theory, aiming to position trusts as a central critical concept within critical theory.

Traditional thinkers, including Marx, Weber, and Crawford Macpherson, perceive the transition from feudalism to capitalism as the ascendancy of absolute private property. Challenging this view, the concept of trusts proposes that even in early capitalism, absolute private property coexisted with divisible property rights to future income derived from collective assets. This form of shared ownership, exemplified by instruments like shares and pensions, was prevalent and protected by the laws of trusts during the transition from feudalism to capitalism in late 17th-century England. Contrary to this historical fact, Macpherson (1975: 114) wrongly argued that this shared ownership model emerged later, specifically during the era of welfare capitalism in the 20th century, and supplanted the concept of absolute private property. He posits that these two property forms are fundamentally distinct and potentially conflicting. Nevertheless, the concept of trusts prompts us to acknowledge that the transition to capitalism was not exclusively driven by absolute private property. Instead, it necessitated the incorporation of trusts, encompassing the two property forms.

As social scientists, how do we begin assessing the relevance of trusts in contemporary society? Fortunately, we can draw upon the insights from the social theory of an early modern thinker, John Locke, who delved into unraveling the essence of the modern state through the lens of trusts. In his Second Treatise of Government, Locke articulates the distinct identity of the modern state as a collective person – an entity that, while indebted to its constituents, possesses its own specific rights and responsibilities independent of those of the constituents. According to Locke, this unique manifestation of the collective political entity can be aptly conceptualized as a trust. This conceptualization is possible because Locke treats liberty as a detachable property that individuals can entrust to either the legislature or the commonwealth. In essence, Locke’s effort to establish the modern state as a trust is contingent upon this specific understanding of property. Consequently, to comprehend the discourse on trusts according to Locke’s concepts, we must incorporate his notion of property from the outset of our analytical deliberations.

Locke’s concept of property has faced scrutiny from critical theorists, with Carole Pateman (2002), for example, critiquing Locke’s idea of ‘property in the person’ as a fiction that erroneously treats property, such as labor, as separable from its owner and transferable to another person. However, what critical theorists have not recognized is that Locke’s idea of ‘property in the person’ not only entails a peculiar conception of property but also reflects his endeavor to establish the modern subject – the ‘person’ – as an entity that possesses labor, liberty, life, and land as inherent properties. This modern concept of the subject proposed by Locke represents a departure from the cyclical concept of the self, which had been the dominant form of self-conception from ancient times through the Middle Ages (Eliade, 1954). ¹ To take an example from as far back as Ancient Mesopotamia, consider the Babylonian belief that, on the last day of each year, the god Marduk destroys the world, only to re-create it again on the first day – an illustration of this cyclical worldview. By contrast, in Locke’s framework, the concept of property seeks to shape a unique individual persona who has a linear personal identity, paralleling his effort to establish a distinct collective persona through the concept of trusts. The question arises: why are these personae vital to the formation of capitalism? I argue that these personae serve as the specific foundation required for allocating rights and responsibilities among individuals, particularly in allocating debt obligations.

The emergence of personae in modern society is intricately linked to the increasing stringency of debt obligations. Pre-modern societies, guided by a cyclical worldview, approached debt cautiously, recognizing its potentially destructive impact on civilizations (Eliade, 1954; Graeber, 2011). For instance, in ancient Mesopotamia, the cyclical worldview provided a spiritual basis for periodic debt forgiveness for peasant debts, as noted by religious theorist M. Eliade (1954) and economist M. Hudson (2002). Moreover, the Middle Ages saw the prohibition of usury, which involves debt taken for basic living expenses. However, in modern Western societies that underscore the enduring nature of personal identity until death, periodic forgiveness or usury prohibition is no longer deemed a viable solution to debt crises. Instead, modern society has introduced the concept of a permanent collective entity as a debtor, providing creditors with the means to safeguard their credit rights indefinitely. In pre-modern societies, sovereign debt was the personal responsibility of kings and would cease to exist upon their demise. In contrast, the modern state assumes responsibility for public debt, irrespective of the ruler’s identity. This transformation, wherein individual royal debts are transformed into obligations of the permanent group entity, is facilitated through the mechanism of a trust. Through this mechanism, individual debts, which might otherwise be absolved upon death, are transformed into the obligations of abstract entities, such as the modern state, which are upheld perpetually by replaceable trustees. In this respect, modern humanity grapples with an enduring debt burden, while it enjoys property rights. Thus, the establishment of the two personae – individual and collective persons – serves as the foundational basis for the evolution of a debt society, both ontologically and practically.

To sum up, incorporating trusts into critical analyses of capitalism offers several advantages. It aids in analyzing the distribution of rights and responsibilities, unveils the moral dynamics inherent in capitalist systems, highlights the crucial role of personhood institutions, and contributes to a deeper understanding of why modern society is entangled in debt.

This paper begins by examining Locke’s conception of property, emphasizing its profound influence on shaping the modern subject, the person. Subsequently, it delves into the incisive critique put forth by Friedrich Nietzsche and Alfred North Whitehead regarding the modern subject. Their critiques bring to light a flawed assumption made by early Western philosophers who erroneously equated the linguistic structure with the structure of reality, confining reality within the subject–predicate framework. This critique carries substantial implications, disrupting the prevailing moral rigidity surrounding debt obligations and challenging the ontological foundations that underpin the idea of personal identity for debtors. Nietzsche’s (1998) scathing critique of the modern moral sense of guilt, asserting that this sick morality is rooted in a creditor-debtor relationship, serves as an expression of his broader critique of the modern perception of the self.

Next, the paper examines how Locke used the concept of trusts to conceptualize the state as a collective persona, asserting that the modern state can be viewed as a trust. In response to the autocratic elements in Hobbes’ portrayal of representative government, Locke introduced the concept of fiduciary trust, seeking to legitimize the people’s authority to modify or revoke legislative power. However, this paper argues that this undertaking fell somewhat short of its objective, partly owing to the inherent limitations of the concept of fiduciary trust.

The paper proceeds to examine three examples of trusts: limited liability joint-stock corporations, public debt, and the unconventional governmental borrowing method called quantitative easing. As the discussion turns to quantitative easing, readers might feel puzzled, wondering what connections exist between Locke, property, person, and quantitative easing. However, the rationale behind delving into quantitative easing lies in its ability to illustrate the far-reaching and intricate influence of the trust framework and a strong interconnection between property, debt, and person, even within contemporary practices such as quantitative easing.

Locke and Maitland, pioneers in incorporating the concept of trusts into the social sciences, used it as a fortress to justify their prevailing social structure. In contrast, this article represents a pioneering effort in proposing the concept of trusts into a powerful critical tool, enabling an in-depth examination of contemporary society and stimulating a thoughtful exploration of possible alternative social architectures.

Locke’s Creation of the Modern Subject, the Person

In his Second Treatise of Government, Locke (1960: §27) contends that ‘every man has a property in his own person’. While this phrase has been widely interpreted to mean that every individual has the right to own himself (Day, 1966: 208; Olivecrona, 1974: 223; Tully, 1980: 105), these interpretations tend to overlook Locke’s grammatical nuance in prefixing the word ‘property’ with the indefinite article ‘a’. This linguistic nuance indicates that he is not alluding to an abstract concept of property denoting ‘ownership of’, but rather to ‘a’ tangible object that can be possessed, a nuance often overlooked by contemporary scholars.

Moreover, the term ‘person’ has often been erroneously conflated with the term ‘man’, leading some to interpret Locke’s aforementioned statement as implying self-ownership. However, upon careful examination of Locke’s writings, including both the Second Treatise of Government and An Essay Concerning Human Understanding, a consistent and explicit distinction between ‘person’ and ‘man’ becomes evident (Flew, 1951: 61). For Locke (1823: 69), ‘person’ is a ‘forensic term’, denoting an artificial legal construct and not synonymous with a human being. Locke’s distinction aligns with the modern legal trend of recognizing corporations and modern states as legal persons, distinguishing them from human beings. Here, even by examining Locke’s concept of property, we can uncover that Locke’s concept of person can serve the philosophical foundation for the emergence of collective legal persons, such as limited liability joint-stock corporations and the modern state. Subsequent sections will delve into how trusts play a pivotal role in bolstering the development of these legal personae.

In modern English, the term ‘property’ carries a dual meaning, relating to both attributes and tangible possessions. However, its original connotation solely pertained to the former (Olivecrona, 1974: 219), remaining closely connected to its etymological origins in the Latin word proprius, denoting ‘one’s own or something private or peculiar to oneself’. Hence, in its initial sense, an individual’s property denoted their inherent human attributes, such as life, liberty, and action (Olivecrona, 1974: 219). However, during the first half of the 17th century in England, the definition of ‘property’ expanded to encompass not only human attributes but also an individual’s material possessions (Pipes, 2000: 30–31). This evolution facilitated the development of the ideology surrounding the ‘birthright’ of Englishmen, granting them inherent ownership of both liberty and land. This ideology wielded significant political influence when Parliament adopted it in its confrontation with the Crown.

Locke was among those who offered a theoretical justification for this ideology, articulating a logical argument as follows. Labor, an inherent attribute of a man, is the property of that man. When a man mixes this property with a part of nature, it also becomes their property. This process of creating property does not require the consent of others; the mere act of mixing one’s own property with external nature suffices to establish exclusive ownership. Within this framework, an external object can take on the distinctive quality of becoming an integral aspect of a man. Just as labor inherently belongs to a human being from birth, external objects mixed with labor acquire the same innate property of that human being. Hence, for Locke (1960: §123), the property rights of landowners on land are the birthrights of Englishmen that can deny the Crown’s intervention.

Here, Locke appears to conflate the dual meanings of property as attributes and material possessions. This conflation likely enabled him to conceptualize property in two ways. First, he views the right to possess things as ‘natural’, placing it on equal footing with the right to possess one’s inherent attributes. Consequently, the right to own material possessions would predate the formation of social institutions or consensus. I call this the ‘propertization of things’, where exclusive ownership extends beyond personal attributes to encompass external things.

Another way Locke conceptualizes property is by treating all human attributes, including labor and liberty, as things that a person can own and transfer to other persons. Likewise, I refer to this as the propertization of human attributes. This propertization relies on the notion of the abstract person: once all human attributes have been transformed into a separable and transferable property, what remains is the mere abstract subject, only retaining its identity as the owner of these properties. ² As Roger Cotterrell (1987) suggests, the idea of property contributes to the development of the modern belief in human equality. While property, encompassing both attributes and physical possessions, serves to differentiate individuals from one another, considering these attributes as detachable from individuals themselves leads modern Western law to treat persons as equal and alike. This forms the basis for developing the concept of the person in contemporary philosophy and legal systems, fostering notions of equality among individuals.

Locke (1823: 68–69) posits that each individual possesses a continuous and enduring personal identity that extends beyond fleeting moments. This enduring personal identity enables individuals to bear the consequences of their actions, whether in reward, punishment, or guilt. The rationale behind punishing an individual for past wrongdoing lies in considering the person who committed the offense in the past as identical to the one presently facing retribution. This assumption is grounded in the belief that a person remains constant over time. While a person’s attributes, such as abilities and material possessions, may undergo changes over the years, these transient qualities cannot serve as the foundation for establishing identity. In contrast, Locke argues that the abstract and unchanging nature of the ‘person’ aligns seamlessly with the prerequisites for establishing an enduring identity.

A Critique of the Modern Subject

Whitehead (1978: 167) and Nietzsche (1998: 45) offer a powerful critique of the modern subject embodied in the form of the person. They argue that this conception of the self stems from the flawed assumption of early modern Western philosophers, who erroneously assumed that reality shares the same subject–predicate structure as language. Descartes’ famous proposition, Cogito, ergo sum (I think, therefore I am), serves as a notable illustration of this mistaken perspective. While Descartes acknowledged the challenge of directly proving the existence of a subject (the ‘I’), he argued that the act of thinking itself serves as undeniable evidence of that subject. Descartes reasoned that the existence of an action (in this case, thinking) necessitates the existence of a subject (the ‘I’) responsible for the action. This reasoning presupposes a reality structured around a doer and the doing, mirroring the linguistic construct of subject and predicate. However, Nietzsche (1998) countered this, stating that ‘there is no such substratum; there is no “being” behind the doing, effecting, becoming; “the doer” is simply fabricated into the doing – the doing is everything’ (p. 25). Remarkably, Locke’s conceptualization of property appears to have arisen from the same fallacy. Just as language delineates beings and events through the subject–predicate relation, Locke characterizes the ontological essence of human beings through the interplay between person and property, inadvertently embracing the flawed linguistic assumption. Through their insightful critiques, Whitehead and Nietzsche prompt a reevaluation of the foundations upon which our understanding of the self and reality is built.

Whitehead’s philosophical framework transcends conventional dichotomies such as experiencer and experience, the aware and the awareness, and the doer and the doing. He argues that philosophy must abandon the notion of an enduring subjectivity. This paper discusses two reasons put forth by Whitehead in support of this perspective.

The first of these is Zeno’s paradox, which holds that, if a becoming occurs continuously, no least step can ever be completed. According to this paradox, for A to become B, it must first pass through half the process of becoming, but before completing half, it must complete a quarter, and so forth. This endless division results in an infinite regress that renders a becoming with continuity impossible (Whitehead, 1927: 63). To break free from the infinite regress entailed by this continuity, it becomes imperative for us to embrace the notion that acts of a becoming cannot be divided into distinct earlier and later sections (Whitehead, 1978: 68). Whitehead uses the term ‘epochal becoming’ to denote an occurrence that happens ‘as a whole and at once without spatiotemporal division or continuity’.

The second reason for doing away with dichotomies such as subject and object and experiencer and experiences is rooted in the scientific achievements of the 20th century, particularly in quantum physics. Whitehead proposed that the fundamental unit of the universe – an actual entity, in Whiteheadian terminology – would exhibit quantum-physical characteristics. In quantum physics, particles do not exist continuously across time and space. Instead, a particle appears at one spatial–temporal point, disappears, and is succeeded by another particle at the next spatial–temporal point, continuing this pattern. Scholars have offered confusing and erroneous interpretations of this phenomenon, as they assume that a particle appearing at one point is subjectively identical to the one appearing at the next, applying the concept of enduring subjectivity to this discontinuous phenomenon. Whitehead contends that a proper understanding of quantum physics necessitates abandoning the idea of enduring subjectivity.

In a world seemingly characterized by the enduring nature of objects such as trees, rocks, and humans, how does Whitehead reconcile this apparent endurance with his repudiation of the enduring subjectivity of actual entities? According to Whitehead, the answer lies in the fact that while an actual entity becomes itself all at once without spatial–temporal endurance, this very process generates a space–time continuum. Whitehead posits that enduring objects are harmonious societies of actual entities. These actual entities, as they successively generate their space–time continua, facilitate the spatial and temporal continuity of the world (Whitehead, 1948: 129). Moreover, when a group of actual entities form an enduring object like a tree, generating their space–time continua, they successively inherit a specific identity transmitted across a historical route of actual entities (Whitehead, 1948: 111). Early modern philosophies, including Locke’s, erroneously attributed ontological primacy to this iterative repetition of identity, designating it as ‘the subject’ or ‘the person’. However, insights from quantum physics underscore the intellectual fallacy of believing in an idea of personal identity where the subject remains unchanged while undergoing changes.

The embrace of a persistent personal identity in modern ideology coincides with abandoning the traditional practices that nullified peasant debts cyclically or forbade interest accrual on such debts. This ideological shift has enabled the privileged few to capitalize on stringent debt obligations, leading to intensive exploitation of the labor and land of the impoverished, particularly in colonized regions. Historically, the subjugation of colonized populations has routinely involved subjecting them to indebtedness. This typically entailed imposing heavy taxes on the colonized individuals, often denominated in imperial currency. Subsequently, they would resort to borrowing the currency from local bankers, who, in a cascading effect, borrowed from imperial bankers. This intricate web of debt relegated the impoverished inhabitants of the colonies to its bottom rung, compelling them to endure even more arduous labor to settle their debts. In certain instances, they were forced to sell their land or even themselves, their daughters, or their wives into debt servitude if they could not repay what they owed (Graeber, 2011: 319, 349–351). Moreover, capitalism not only ensnares individuals but also collectives in debt. As we will explore further, applying the personal identity ideology to a collective of people has given rise to the contemporary phenomenon of public debt, transforming the entire community into debtors beholden to wealthier members.

Whitehead’s sharp critique of the notion of an enduring subject challenges the very foundation of strict debt obligations and the robust rights of creditors, which hinge on the assumption of an enduring subject. While rejecting the concept of enduring subjectivity, Whitehead acknowledges that a group of actual entities, existing in a series, do exhibit a tendency to replicate patterns, thereby giving rise to durational organisms such as human beings. Consequently, Whitehead’s philosophy allows for the imposition of durational obligations on individuals, albeit in a less absolute manner than the assumptions prevalent in early modern philosophy that presupposed enduring subjectivity. Nevertheless, from a Whiteheadian standpoint, the imposition of strict debt obligations lacks metaphysical justification, as it is not in harmony with the underlying principles of his philosophy.

The Modern State as the Trust

Locke’s unique concept of property not only contributed to the formation of individual personae but also laid the groundwork for the emergence of the collective persona – the state. According to Locke, the state comes into existence when individuals voluntarily entrust their liberty to the legislative body or the commonwealth. Without treating liberty as a form of property that can be entrusted, the formation of the state becomes unfeasible. Let us delve into the pivotal role of the concept of trusts in the creation of the modern state, as envisioned by Locke.

The radical propagandists of the 1640s passionately asserted that Parliament represented the people. However, Hobbes identified a crucial flaw in their doctrine. According to him, a collective of individuals with vastly different interests cannot be deemed a unified person with a single interest. Thus, there is no inherent personhood of ‘the people’ that Parliament can represent. Hobbes proposed an alternative solution, viewing representation itself as a solution. He argued that the personhood of the people can be constructed through the process of representation in which individuals are willingly transfer their liberty and power to govern themselves to a single person or a small assembly of representatives. Hobbes argued that this transfer unifies the scattered multitude into a single cohesive entity embodied within a single person or a selected assembly. Although the inherent diversity and numerosity among people do not allow people themselves to forge a singular unity, according to Hobbes, the agency of one person or a select assembly can achieve it. Thus, Hobbes (1998 [1651]) argued, ‘[i]t is the unity of the representer, not the unity of the represented, that maketh the person one’ (p. 109). Representation, therefore, transforms diversity into unity, merging differentiated people into a unified entity known as the people. For Hobbes, it is important to note that while decisions made by the representative are considered the decisions of the people, decisions made by the majority of people themselves are not considered the interests of the people, as people as a multitude lack the power to define the interests of ‘the people’. Building on this perspective, Hobbes (1998 [1651]: 117–118) argued that any action by the representative cannot harm their subjects, nor should the representative be accused of injustice because any decisions or acts made by the representative are deemed to be those of the people themselves.

Locke concurred with Hobbes in so far as this line of reasoning went. However, he sought to remedy the authoritarian perspective inherent in Hobbes’ framework by introducing the concept of trusts. In Locke’s theory of public trust, the legislative body assumes legal ownership of sovereignty, conferring upon it the authority to determine the interests of the people and exercise absolute power to govern people in accordance with these interests. Therefore, unless this created interest diverges from the will of the people, the legislative body remains immune to overthrow. However, sovereign power is entrusted by, or borrowed from, its rightful owners – people. Public trustees bear a moral and legal obligation to prioritize the people’s will over their own interests. Consequently, the power to govern people manifests as a hybrid arrangement with double ownership. On one hand, the legislative body possesses the ownership on sovereign power since it exerts the power to decide the people’s interests. On the other hand, this authority to decide is essentially a borrowed power belonging to its equitable owners, people. In this context, the concept of trusts adds a novel dimension – a creditor-debtor relationship – to the existing dynamic between the state and its citizens. By introducing the creditor-debtor dynamic to the state-citizen relationship, the trust conceptualizes the state as a moral debtor to its citizens.

Locke (1960: §149, §240) argues that the concept of a fiduciary trust in the legislature serves to legitimize the power of people to alter or replace the legislature. However, a crucial question arises: can people effectively exercise this power? The challenge lies in their ability to discern whether the current legislature is enacting laws against their interests. Hobbes (1998 [1651]: 109) would argue that they cannot, as a diverse multitude lacks the capacity to identify unified collective interests – a task better suited for the representative. The implications of this Hobbesian rationale are also evident from Locke’s (1960: §95, §134) perspective. Locke argues that the public good, or the interests of the people, are realized when people entrust their liberty to the commonwealth or the legislative body. In Locke’s (1960: §88) view, the legislature, not people themselves, determines the people’s interests. While Locke (1960: §149) supports the power to alter the legislative, he underscores that this power resides in ‘the people’, distinct from ‘people’ as a mere collection of individuals. He interprets ‘the people’ as an incorporated body unified by a political community, whereas ‘people’ without the definite article ‘the’ represents an aggregation of individuals lacking political cohesion. For Locke (1960: §212), ‘the people’ can think, speak, and act solely through the thought, voice, and action of the legislature. Therefore, in Locke’s view, the people’s interests are determined not by people themselves but by the legislature. This implies that people lacking the ability to determine their own interests cannot effectively assess if the current legislative body is enacting laws against them and, consequently, cannot effectively exercise the power to alter it. Recognizing these challenges, Locke (1960: §241–242) ultimately relies on divine intervention for such discernment.

The politics of trusts, embodied in representative government, has been subject to criticism for enabling politicians to conceal imperial ambitions under the pretext of serving the universal interests of the people. A notable instance of this was evident in the 2003 US invasion of Iraq, which persisted under the façade of the US national interest despite opposition to the war surpassing support by the summer of 2005. Postmodern thinkers have raised several critical objections to the idea of a universal interest created through representation. First, they argue that the concept of ‘the people’ as a singular entity with a single interest is flawed, given the inherent diversity among people. Second, the creation of an imaginary entity called ‘the people’ runs counter to democratic ideals. Finally, representative politics was designed to homogenize and stifle the richness of diversity, reducing it to a monolithic uniformity. As postmodernist Simon Tormey (2006) eloquently articulates, ‘“[w]hat The People want”, is not what people want, but rather what it is that someone thinks the people want. It is what the “representatives” of The People’s interests want’ (p. 144). This construction of the people’s interests serves as a means for representatives to project their own class of interests as a universal mandate.

Public Debt as a Trust

Can public debt be considered a trust? The affirmative answer stems from a key aspect of the politics of trusts that we have just discussed: public debt, which presupposes the independent personhood of the state and the state’s indebtedness to its constituents. To gain a comprehensive understanding of the rationale behind this assertion, let us undertake a deeper exploration into the essence of trusts itself.

The trust embodies an extraordinary manifestation of personal identity that transcends an individual’s lifetime, enabling the owners’ intentions to remain in effect even after death. Dating back to the early 13th century in England, the landed gentry used the trust as a shield against death or external interference. This mechanism often served as a means for individuals to avoid creditors, evade felony conviction-related forfeitures, and, most importantly, circumvent feudal obligations and state taxation (Martin, 2001: 8). In contemporary times, the primary incentive for establishing trusts remains tax avoidance (Martin, 2001: 43). The transfer of legal ownership to a group of replaceable trustees, while retaining equitable ownership, enables the evasion of legal obligations.

Used mainly by the affluent, trusts originated from what Sir Edward Coke in 1954 called ‘fear and fraud’ – a means to secure inheritance in tumultuous times and evade lawful obligations. ³ This practice of inheritance, however, contradicted the core concept of feudal land tenure, wherein land tenure contracts were established between a king and a lord rather than between a king and the lord’s family (Macfarlane, 2002: 59–72). Within this framework, land inheritance was deemed justifiable only if the duties and services owed by the tenant lord were seamlessly passed on to their descendants. In instances where no capable heir existed, traditional English law allowed the Crown to claim the land as unclaimed property, termed ‘bona vacantia’ (Martin, 2001: 9). To circumvent this, landowners transferred ownership to feoffees, ensuring that their heirs retained an equitable interest in the property. This strategic transfer ensured that the property remained within the family and prevented it from being subject to the Crown’s legitimate claim.

In the quest for securing exclusive property rights while evading social obligations, a trust employs two distinct schemes: a hybrid ownership scheme and a specific governance scheme, as depicted in Figure 1(a) and (b), respectively. The hybrid ownership scheme entails a fusion of property (pertaining to property rights) and debt (pertaining to contractual rights) (Maitland, 1911: 314). This became evident when medieval lords illegitimately passed land to descendants, thereby transforming it into a property-debt hybrid. It constitutes a property of the trustees, given their assumption of legal ownership of the land, but it also becomes a debt of the trustees as they are obligated to pay dividends to the trust beneficiaries regularly and in perpetuity. Similarly, settlers and beneficiaries, now functioning as creditors, could demand dividends, thereby evading the return of land to the king while retaining equitable ownership. This underscores the trust’s dual nature of property and debt.

OPEN IN VIEWER

Figure 1.

A trust as a (a) hybrid ownership and (b) governance scheme.

The legal concept of trusts distinguishes the English legal system from the Roman law tradition prevalent in continental Europe (Maitland, 1911). Roman law steadfastly upheld the strict separation of property and debt, deeming any amalgamation or hybrid of these sets of rights an criminal act. Consequently, the emergence of trusts can be viewed as a defiance of this fundamental Roman legal principle. In essence, a trust takes on a Janus-faced character, perpetually shifting its focus to reap the benefits and mitigate the costs associated with property, on one hand, and debt, on the other. Furthermore, this hybrid nature establishes a dual ownership framework whereby the trustees enjoy legal ownership while the settlers and beneficiaries retain equitable ownership.

The governance scheme depicted as Figure 1(b), which creates a lasting trust identity and ensures perpetual debt maintenance, finds expression in modern personified entities like joint-stock corporations and the state. Unlike an individual’s debt obligations that terminate upon death, trusts ensure perpetual debt maintenance by assigning them to an imaginary personhood.

Public debt can be understood as a trust, given that it includes the key aspects inherent in trusts. First, it encompasses the aspects depicted as Figure 1(b), as it arises when the state assumes its own distinct identity separate from its constituents and becomes indebted to them. Thus, within the framework of public debt, as Maitland (1911) expounded, the term ‘public’ does not refer to all citizens collectively but denotes a personified entity existing independently of the individual citizens. Second, public debt includes the aspects depicted as Figure 1(a), as it assumes the dual nature of both property and debt of the state. On one hand, public debt bears a maturity date requiring repayment by the government along with interest. On the other hand, simultaneously, an increasing portion of public debt transforms into government property, exempt from eventual repayment. Public debt has been generally regarded as an intergenerational transfer of resources by transferring the costs of current expenditures to future generations. However, in its current form, public debt has already been transformed into permanent loans that future generations cannot and will not repay. Essentially, it has transformed into free money, as the US government will perpetually increase its borrowings. Thus, as long as the government can access more credit, an increasing portion of the loans becomes capital that does not require repayment by the government.

Public debt, a distinctly modern concept, originated in Western Europe and notably lacked presence in ancient Greece and Rome (Hamilton, 1947: 118). This concept stood in contrast to the traditional view of sovereign kingship, wherein rulers resisted incurring debts to their subjects, fearing a challenge to their absolute authority. Consequently, medieval English monarchs, as well as their counterparts in other Western regions, preferred borrowing from foreign financiers over seeking loans from their own subjects. The genesis of public debt can be traced back to the 12th-century Italian city-states, marking a significant turning point in political theory with the introduction of the state’s corporate personhood. Legal scholars of that era, such as Bartolus of Saxoferrato and Baldus de Ubaldis, envisioned the state as an abstract entity distinct from its government or citizens (Canning, 1983: 23–24).

However, while substantial, Italian corporate city-states’ indebtedness to their citizens differed from the modern conception of public debt. During that era, the rights and obligations of a republic and its citizens were intertwined. Consequently, in instances of a republic facing insolvency, its creditors wielded the authority to demand repayment from a select cohort of its affluent citizens. Furthermore, the republic often compelled its citizens to invest in public debt.

In contrast, England pioneered the comprehensive development of a distinct collective identity for the state. The evolution of private property rights, initiated in the late Middle Ages and formalized by the Bill of Rights following the Glorious Revolution, limited creditors’ ability to demand repayment from individual citizens. Instead, the onus of debt obligation was explicitly assigned to the state itself. This pivotal shift in England’s legal framework laid the groundwork for the state to assume sole responsibility for its debts, thereby insulating its citizens from direct liability.

Here, a critical correlation emerges between two foundational modern concepts: property and trusts. The realization of public debt as a trust is accomplished by implementing the modern concept of property. The establishment of the state as an abstract entity, distinct from its citizens, hinges on its ability to independently shoulder the burden of debt obligations, free from any entanglement with individual members. This distinct responsibility of the state finds reinforcement in the concept of property, which upholds the sanctity of private property rights for each citizen, preventing any intrusion or encroachment.

As previously noted, trusts have been wielded predominantly by the affluent and influential, drawing a parallel with the concentration of public debt ownership among a privileged few. An illustrative case is evident in the US public debt, where the top percentile held 56% of the household sector’s public debt in 2013 (Hager, 2016: 42). Over the past 35 years, the average yield on 10-year US Treasury bonds has been 5.5%. This high yield has resulted in a substantial allocation of federal government expenditures, specifically 10.3% in the 2nd quarter of 2023 (equivalent to 3.6% of the gross domestic product (GDP)), directed toward interest payments on government securities. ⁴ These payments, primarily benefiting the affluent individuals who own the debt, come at the expense of government spending on critical areas such as public education and public health.

If public debt can be understood as a trust, can the nature of quantitative easing also be characterized as a trust? The answer affirms this proposition along two dimensions. First, notwithstanding its unconventional nature, quantitative easing remains a form of government borrowing, constituting a type of public debt. Consequently, it operates within the framework of trusts, analogous to the concept depicted as Figure 1(b), wherein the state assumes its unique identity and becomes indebted to its citizens. In the case of quantitative easing, the creditor is a central bank, that is, a corporate entity whose shareholders comprise private commercial banks.

Second, similar to the concept depicted as Figure 1(a), it establishes a hybrid of property and debt. On one hand, the money borrowed from a central bank constitutes a debt technically owed by the government to the central bank. On the other hand, simultaneously, it metamorphoses into government property, absolving the government from the obligation of eventual repayment. To accomplish this alchemy of transforming debts into property, quantitative easing employs a metaphysical maneuver that delineates distinct personhood between a central bank, such as the Federal Reserve Board, and a government entity, such as the US Treasury. Exploiting this demarcation, quantitative easing assumes the external semblance of a creditor-debtor relationship between these two entities, with the former ostensibly lending to the latter. Remarkably, by April 2021, these apparent loans in the United States amounted to a staggering 22.3% of the GDP. In reality, however, these transcend mere loans and resemble more of a gift to the Treasury. The reasons behind this are twofold.

First, the debtor, the Treasury, is effectively exempt from paying interest to the creditor, the Federal Reserve. Legally mandated, the Federal Reserve must transfer to the Treasury the entire income it accrues from loaning Federal Reserve notes. Consequently, any interest paid by the Treasury to the Federal Reserve constitutes part of this interest income and is mandated to be returned to the Treasury. As depicted in Figure 2, from 2018 to 2020, the Treasury received 1.6 times more money from the Federal Reserve than it expended on interest payments. This peculiar arrangement diverges from the norms of a typical creditor-debtor relationship and strongly implies that the purported loan is, in fact, not a genuine debt.

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Figure 2.

The creditor pays interest to the debtor.

Second, in practice, the Treasury is exempt from repaying an increasing portion of the principal to its creditor, the Federal Reserve. The colossal US public debt has soared to staggering levels, reaching 121% of GDP in 2022, ⁵ surpassing the government’s capacity for complete repayment, even if it desired such repayment. The Congressional Budget Office projects its continued growth in the years ahead, foreseeing an astounding 202% of GDP by 2051. ⁶ Given this mounting burden, quantitative easing emerges as a crucial mechanism for the US government to alleviate the overall weight of interest payments. Consequently, any attempt to repay a significant portion of its debt to the Federal Reserve would jeopardize the stability of government finances. In the long run, the Federal Reserve is compelled to escalate quantitative easing on a larger scale. As long as the Treasury continues to borrow extensively from the Federal Reserve, an ever-increasing portion of the loan transforms into capital requiring no repayment. Furthermore, as the United States increasingly relies on quantitative easing, it presents an opportunity to effortlessly resolve its exceptionally high levels of public debt by abolishing its largest creditor, its own central bank. By doing so, a substantial portion of its debt obligation evaporates.

This metamorphosis from loan to gift takes place thanks to the metaphysical trick that creates separate personhoods between the Federal Reserve and the federal government. The federal government, when requesting the transfer of interest income from the Federal Reserve, strategically justifies this action by claiming that the Federal Reserve is an integral part of the federal government. While the Federal Reserve owes its existence to an act of Congress and its Board of Governors operates as a presidentially appointed agency accountable directly to the US Congress, the federal government, when aiming to maintain the illusion of borrowing from the Fed and repaying its debt with interest, emphasizes that the Federal Reserve is a private corporation, effectively distancing it from the federal government. This paradoxical duality establishes a trust, where the money lent to the federal government assumes a hybrid nature of property and debt. On one hand, it represents the federal government’s debt to the Federal Reserve, and on the other hand, a growing portion of it remains permanently in the hands of the government, thus becoming the federal government’s property.

Modern Corporations as Trusts

In the evolution of the distinct legal persona of private business groups separate from their members, in England, trusts eclipsed corporations in popularity. The Bubble Act of 1720 imposed a strict ban on all unauthorized joint-stock corporations, effectively suppressing their existence. In this context, trusts stepped into the limelight, assuming the role of joint-stock companies until the 19th century when general incorporation became legally attainable. Traditionally, corporations served as instruments of state governance, employed in the Middle Ages to regulate civil activities such as trade, with their group personhood bestowed from the top down by the Crown. In sharp contrast, trusts offered an avenue for individual freedom, were formed as a means of evading the state’s interference, and were thus autonomously organized from the bottom up by private property owners themselves. However, a transformative shift occurred with the enactment of the Companies Act of 1862, allowing the formation of business corporations without the necessity of a state charter. This legislation effectively transformed the traditional form of corporations into trusts, blurring the lines between the two frameworks.

Earlier, we established a crucial link between property and trusts within the concept of public debt as a trust, wherein the distinct personhood of the modern state is fully realized through implementing the modern property concept. Similarly, the Lockean ontology of property is preserved and elevated within a trust. Let us explore how this unfolds.

A trust not only offers the potential for enduring group personae but also exceeds the limited lifespan of tangible property. The inherent transience of material possessions, susceptible to decay or destruction, limits the longevity of the aforementioned Lockean person–property relationship. However, the trust fund emerges as a remarkable solution, enhancing the durability of property (Cotterrell, 1987: 85). In a trust fund, the assets held at any given moment merely represent the abstract value of property that the trust seeks to safeguard and nurture. Thus, as depicted in the formula in Figure 3, the person–property relationship assumes a more abstract form in the trust fund. It manifests as a relationship between the abstract person, personified by replaceable trustees who execute the settler’s intentions, and the abstract realm of things, where the investment in specific assets aims to promote the intangible value of the fund itself. This formula not only includes but also extends the Lockean formula of person–property, a framework that rationalizes individual exclusive private property. Trusts find their origins in the principle that individuals possess absolute freedom to transfer their property as they desire, regardless of the will of their family or other inheritors (Langbein, 1997: 184). In this context, the formula depicted in Figure 3 elucidates the harmonious coexistence of two seemingly contradictory forms of property in capitalism: exclusive private property and divisible property rights pertaining to future income generated from a collective asset. The shareholders of the trust company no longer own the specific funds they have invested in; instead, they are entitled to claim expected future earnings generated from the collective asset. Therefore, in this intricate system, the pursuit of securing private property rights, as championed in the Lockean formula, is further amplified, resulting in the seamless integration of the two ownership forms – exclusive private property and divisible property rights tied to future income from collective assets. Contrary to Macpherson’s perspective, these two ownership forms had no distinct historical transition.

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Figure 3.

The person–property relation in the trust.

The principle of shareholder irresponsibility in corporate law closely mirrors that of a trust. Legally defined as a collective person with shareholders as its members, a limited liability joint-stock corporation is also a non-collective person with its own personality distinct from that of its members. This paradoxical treatment is made possible by the law’s ambivalent classification of shareholders as both proprietors and creditors. On one hand, the law treats shareholders as the property owners of the corporation, ⁷ endowing them with voting rights at general meetings. On the other hand, the law has increasingly treated shareholders as creditors of their corporations. The landmark case of Bligh v. Brent from 1837 established the complete transfer of legal ownership of capital from shareholders to the corporation (Ireland, 1991). This decision has significant implications: shareholders are no longer co-owners of corporate property, thus absolving them of any responsibility for the corporation’s wrongdoings. In addition, the introduction of limited liability for shareholders through the Companies Acts of 1855–1862 further transformed their legal status, akin to that of creditors.

This dual treatment of shareholders, depicting them both as co-owners and as creditors, unveils a peculiar paradox. Creditors are treated as outsiders who only bear the risk of losing their loaned money in the event of the debtor’s bankruptcy, absolving them of responsibility for the debtor’s unethical use of the money. In contrast, co-owners are regarded as insiders who share assets, duties, responsibilities, and risks within a group, resembling a partnership, without transferring ownership of their funds to each other. How can a person be both an outsider and an insider simultaneously? This self-contradictory duality finds its essence in the concept of a trust, where a hybrid between property and debt is manifested.

As trusts are largely employed by the affluent and influential, corporate share ownership is also highly concentrated. For instance, in the United States, the top percentile holds a staggering 53.9% of corporate equities and mutual fund shares as of the fourth quarter of 2021. ⁸

The concept of personhood has been strategically employed across various societal domains as a popular means of enjoying specific rights while evading the corresponding responsibilities. An illustrative example is the establishment of corporate entities in tax havens by the affluent to circumvent tax obligations, concealing their true identities behind a veil. Furthermore, the widespread practice of outsourcing since the 1990s has served as a metaphysical ploy to evade responsibility or reduce labor costs. The legal framework treats the outsourcing corporation and the outsourced corporation as separate legal persons, shielding the former from liability even in the event of loss of life within the latter. These instances are facilitated by modern law, employing the modern concept of person as a formal tool for ascribing rights and responsibilities to a specific person, often disregarding substantive reality. While ostensibly emphasizing an individual’s responsibilities, the concept is frequently exploited as a means to evade them. To escape accountability, one can establish a hollow legal entity and deftly shift one’s burdens onto it.

Before concluding this paper, it is essential to highlight the role of propertization – a concept previously discussed in our study of Locke – as the link between property and trusts. A trust, in essence, can be characterized as a form of propertization. In a trust arrangement, beneficiaries act as creditors, transferring legal ownership of property to trustees and thereby relinquishing their direct property rights. In return, they receive payments akin to interest (dividends). However, these creditor-like beneficiaries also become equitable owners, exercising controlling power over the use of the property – constituting a form of propertization. This propertization is evident in both limited-liability joint-stock corporations and public debt. In limited liability joint-stock corporations, shareholders’ responsibilities are reduced to roles reminiscent of creditors, while their rights undergo propertization, as the law still recognizes these creditor-like shareholders with property rights, such as voting rights. In the realm of public debt, the state assumes the role of debtor. Nevertheless, as public debt burgeons without significant repayment, a growing portion of the debt also undergoes propertization.

Conclusion

The modern ontology of person and property extends beyond an analytical tool for understanding society; it serves as a dominant means of constructing society. Within this framework, the boundaries between epistemology and ontology blur as individuals shape the world in the way that they have interpreted it. Locke’s philosophical and political project establishes an ontology of person–property, wherein a ‘person’ is endowed with the exclusive privilege of property rights. This privilege is assumed to be inherent and independent of others’ agreement, not contingent upon implicit or explicit consensus. In exchange for this privilege, the ideology of person–property places upon individuals the significant responsibility of bearing the indelible records of their guilt and debts. The abolition of medieval usury laws and the imposition of stringent debt repayment obligations for consumer debt ushered in the modern era. However, human beings, being inherently imperfect, neither merit excessive property rights nor can bear full responsibility for the enduring burdens of guilt and debt. Trusts appear to have been devised by the affluent and influential to overcome this predicament distortedly. They have orchestrated institutional mechanisms to avail themselves of the extraordinary privileges of property rights while circumventing the associated responsibilities. These mechanisms are the strategic maneuver of person, property, and debt, that is, creating fictitious group persons, exemplified by the modern state and limited liability joint-stock corporations, to which they incur debt. Through their substantial influence in electing representatives for these group entities, the rich and powerful exert control. Furthermore, the identities and obligations of these group persons endure indefinitely, ensuring the perpetuity of their debt obligations to the affluent. However, when the affluent are confronted with the prospect of assuming responsibility for their rights, they conveniently become creditors, thereby shielding themselves from social obligations through the mechanism of trusts.

Incorporating the concept of trusts into a critical tool stimulates a thoughtful exploration of possible alternative social architectures. Although a comprehensive exploration of these alternatives is beyond the scope of this article, I briefly outline the direction of my future research for the alternatives, expecting engagement and interest from fellow researchers.

Given that trusts are the dynamic interplay between property and debt, the alternative we can think of would be to break up the hybridity of property and debt. For example, since the shareholders of a limited company are only creditors in terms of their responsibilities, the hybrid nature of shareholders’ rights can be dismantled by leaving the shareholders with their rights as creditors, such as the right to receive dividends, but depriving them of their property rights, such as the right to vote in general meetings. In the case of the hybrid relationship between the state and its people, the hybridity can be dismantled by eliminating the debtor-creditor relationship between them. Just as Nietzsche criticized the absurd notion of an individual indebted to the community, the idea that the community itself is indebted to its members is equally flawed.

Furthermore, because trusts are the strategic maneuver of debt, person, and property, then a fundamental remedy also resides in deconstructing these very concepts.

Debt, when viewed as a distorted extension of reciprocity, could potentially be re-established as a reciprocal entity. This can be achieved by drawing upon a long-standing tradition of distinguishing between productive and unproductive debts and treating them differently. Productive debts entail investments by borrowers intending to generate profit, historically labeled as ‘commercial loans’ due to their typical use in trade (Hudson, 2002). Given the profit potential, debtors generally encounter no issues in repaying such debts, and even in cases of unprofitable ventures, creditors often share the losses. In contrast, unproductive debts, commonly known as ‘consumer loans’, involve funds required for daily living expenses, such as purchasing essentials or covering rent (Hudson, 2002). As these debts do not yield profit, debtors often struggle to repay them. Historically, affluent creditors have exploited impoverished debtors through these unproductive debts, exacerbating inequality and eroding reciprocity and community solidarity. Many civilizations favored productive debts, deeming them beneficial for society’s well-being, while unproductive debts were annulled periodically or prohibited. In medieval Europe, ‘usury’ laws specifically targeted unproductive debt, safeguarding the interests of the underprivileged without intervening with productive debt. I propose a reevaluation of this age-old distinction.

With regard to the concept of an independent group personhood distinct from its members, an alternative approach could involve restricting its usage solely to non-profit organizations that are actively involved in providing social welfare services.

Given that modern theories of property rights have erred in emphasizing private exclusivity, an alternative approach involves restoring a balance between the individual and communal aspects of property. The dominant property systems of the 20th century, namely, capitalism and communism, have both exhibited a deficiency in achieving this balance. To rediscover it, valuable insights can be gleaned from the ancient wisdom of Plato’s (2006) ‘klēros’ and Mencius’s (2009) ‘well-field’ system, both designed to render the main means of production both individual and communal. These systems proposed two key principles: the equitable distribution of resources, such as land, among members of society and the protection of these resources from creditors, even in instances where owners held substantial debts. Modernizing these age-old property schemes by fusing them with democratic work organizations – producer cooperatives – has the potential to bring about more balanced and harmonious property dynamics in contemporary society.