J
Joseph Russo
Guest
I am an avid reader ofyour publication. Having married a Dominican woman in 1996, I have taken a keen interest in the political discourse in your beautiful country. Over the years it has become a passion and a frustration. I have come to know many hard working law abiding citizens and have shared in their frustrating search for a secure future. Of course I realize that their search is not unique and answers to improving their condition not simple and easy to come by. Things will change slowly becuse the people will demand of their leaders. The other day, I came across this article which I do believe discusses the kinds of issues faced by a developing nation. I hope you find it intersting enough to share it with your readers.
Thanks.
Joseph Russo
Vancouver Canada
Thursday 4 January 2001
A curb on capitalism Lack of secure property rights keeps poor
countries poor
LORNE GUNTER
Edmonton Journal
The world's wealthiest nations could all double their foreign-aid
contributions. They could triple or even quadruple them. They could
forgive the debt of the 40 or 50 poorest nations. They could honour the
crank solutions to globalization proposed by every window-smashing
anarchist in Seattle, Washington and Prague, and by every United
Nations commission ever. And poor countries would still be poor.
What separates the rich from the poor among nations is something the
increasingly militant global left has never considered, and never will. The
alleged income gap is not the result of a lack of assets - lack of money
and property - nor lack of entrepreneurial spirit nor genetic impairment
among the poor.
The gap results almost entirely from a lack of secure property rights.
Where it is difficult to secure title to one's home, business, ideas and
investments, it will be difficult to secure mortgages, working capital and
buyers for one's shares, according to Peruvian economist Hernando de
Soto, in his stunning new book The Mystery of Capital: Why Capitalism
Triumphs in the West and Fails Everywhere Else.
In Lima, registering title to a home involves 207 separate steps, and
that is a breeze next to opening a legal business.
Long and Expensive
A team of de Soto's assistants "spent six hours a day at it and finally
registered the business - 289 days later." The cost of registering the
one-worker garment shop was $1,231, the equivalent of 31 months' pay
for that lone worker. It's small wonder most Peruvian entrepreneurs
choose to operate their businesses illegally.
In the Philippines, simply registering a title on a home or parcel of land
would "necessitate 168 steps, involving 53 public and private agencies,
and take 13 to 25 years." If the property is in an area deemed
agricultural by the Philippine government, add 45 steps, 13 agencies and
another two years.
De Soto and his colleagues found the same to be true in Haiti and
Egypt. Nearly one in 10 Egyptians lives in an illegal home - is, in effect,
a squatter - because building a legal home to which one may obtain title
takes five to 14 years of bureaucratic manoeuvring, after which time
the next government, or even the next minister within the same
government, can revoke ownership when the policy breeze shifts
direction.
"In the West, by contrast," de Soto writes, "every parcel of land, every
building, every piece of equipment or store of inventories is represented
in a property document," and almost instantly.
The True Marvel
While one might marvel at the technological triumph involved in buying a
stock online, only after reading Mystery of Capital is it driven home that
the true marvel is a legal one. No one but the residents of nations with
firm, equal, democratic property rights would consider buying a stock
instantly via the Internet.
Where property rights are not universally understood and respected,
buying from an online trading house would involve two distinct risks,
rather than one: the risk of the investment itself, and the risk of one
not being able to prove one's ownership of the stock being purchased.
Poor countries are poor because their people, while prepared to risk
their homes and standards of living for a chance at a better life, are
unprepared to risk their homes and standards of living and their claim to
any profits or gains on assets that arise from the first risk.
They are also poor because, nearly always, they could not risk their
homes and lifestyles even if they wished to. "They hold these assets in
defective forms," de Soto explains. Because title is sketchy or because
property rights are mostly disregarded where title can be secured, the
assets of the world's poorest people is "located where financiers and
investors cannot see them."
They are what de Soto frequently refers to as "dead capital."
Mystery of Capital could be the modern Wealth of Nations - that is, the
seminal book for an era of revived thinking about free markets - except
for its insistence the failure of capitalism outside the West is not
cultural in origin.
De Soto spends much of his book arguing the West has so completely
imbibed reverence for property rights that it no longer even sees its
own reverence. People in the West respect each other's property by
rote. That seems the essence of a cultural tradition to me.
Yet that's a small point. If Mystery succeeds in changing Third World
and former-Soviet-bloc thinking on the centrality of property rights to
economic freedom and development, it might yet become an economic
landmark on a par with Adam Smith's famous work.
Click here to recommend this story to a friend.
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?2000 The contents of this website are protected by copyright. All rights are reserved
and commercial use is prohibited. To make use of this material you must first obtain
the permission of the owner of the copyright. For further information on reuse of
Gazette material in non-electronic form, please contact P. Beaulieu in writing at The
Gazette, 250 St. Antoine W., Montreal, Quebec, H2Y 3R7.
Thanks.
Joseph Russo
Vancouver Canada
Thursday 4 January 2001
A curb on capitalism Lack of secure property rights keeps poor
countries poor
LORNE GUNTER
Edmonton Journal
The world's wealthiest nations could all double their foreign-aid
contributions. They could triple or even quadruple them. They could
forgive the debt of the 40 or 50 poorest nations. They could honour the
crank solutions to globalization proposed by every window-smashing
anarchist in Seattle, Washington and Prague, and by every United
Nations commission ever. And poor countries would still be poor.
What separates the rich from the poor among nations is something the
increasingly militant global left has never considered, and never will. The
alleged income gap is not the result of a lack of assets - lack of money
and property - nor lack of entrepreneurial spirit nor genetic impairment
among the poor.
The gap results almost entirely from a lack of secure property rights.
Where it is difficult to secure title to one's home, business, ideas and
investments, it will be difficult to secure mortgages, working capital and
buyers for one's shares, according to Peruvian economist Hernando de
Soto, in his stunning new book The Mystery of Capital: Why Capitalism
Triumphs in the West and Fails Everywhere Else.
In Lima, registering title to a home involves 207 separate steps, and
that is a breeze next to opening a legal business.
Long and Expensive
A team of de Soto's assistants "spent six hours a day at it and finally
registered the business - 289 days later." The cost of registering the
one-worker garment shop was $1,231, the equivalent of 31 months' pay
for that lone worker. It's small wonder most Peruvian entrepreneurs
choose to operate their businesses illegally.
In the Philippines, simply registering a title on a home or parcel of land
would "necessitate 168 steps, involving 53 public and private agencies,
and take 13 to 25 years." If the property is in an area deemed
agricultural by the Philippine government, add 45 steps, 13 agencies and
another two years.
De Soto and his colleagues found the same to be true in Haiti and
Egypt. Nearly one in 10 Egyptians lives in an illegal home - is, in effect,
a squatter - because building a legal home to which one may obtain title
takes five to 14 years of bureaucratic manoeuvring, after which time
the next government, or even the next minister within the same
government, can revoke ownership when the policy breeze shifts
direction.
"In the West, by contrast," de Soto writes, "every parcel of land, every
building, every piece of equipment or store of inventories is represented
in a property document," and almost instantly.
The True Marvel
While one might marvel at the technological triumph involved in buying a
stock online, only after reading Mystery of Capital is it driven home that
the true marvel is a legal one. No one but the residents of nations with
firm, equal, democratic property rights would consider buying a stock
instantly via the Internet.
Where property rights are not universally understood and respected,
buying from an online trading house would involve two distinct risks,
rather than one: the risk of the investment itself, and the risk of one
not being able to prove one's ownership of the stock being purchased.
Poor countries are poor because their people, while prepared to risk
their homes and standards of living for a chance at a better life, are
unprepared to risk their homes and standards of living and their claim to
any profits or gains on assets that arise from the first risk.
They are also poor because, nearly always, they could not risk their
homes and lifestyles even if they wished to. "They hold these assets in
defective forms," de Soto explains. Because title is sketchy or because
property rights are mostly disregarded where title can be secured, the
assets of the world's poorest people is "located where financiers and
investors cannot see them."
They are what de Soto frequently refers to as "dead capital."
Mystery of Capital could be the modern Wealth of Nations - that is, the
seminal book for an era of revived thinking about free markets - except
for its insistence the failure of capitalism outside the West is not
cultural in origin.
De Soto spends much of his book arguing the West has so completely
imbibed reverence for property rights that it no longer even sees its
own reverence. People in the West respect each other's property by
rote. That seems the essence of a cultural tradition to me.
Yet that's a small point. If Mystery succeeds in changing Third World
and former-Soviet-bloc thinking on the centrality of property rights to
economic freedom and development, it might yet become an economic
landmark on a par with Adam Smith's famous work.
Click here to recommend this story to a friend.
Do you have an opinion about this story?
Share it with other readers in our Discussion Forums
[home] [privacy]
?2000 The contents of this website are protected by copyright. All rights are reserved
and commercial use is prohibited. To make use of this material you must first obtain
the permission of the owner of the copyright. For further information on reuse of
Gazette material in non-electronic form, please contact P. Beaulieu in writing at The
Gazette, 250 St. Antoine W., Montreal, Quebec, H2Y 3R7.