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[P]
Third-world poverty caused by lack of property rights.

By enterfornone in MLP
Mon May 28, 2001 at 05:53:43 PM EST
Tags: Politics (all tags)
Politics

National Post Online is running an interesting article about Peruvian economist Hernando de Soto who claims that people in third world countries have more than US$9-trillion in assets, but, owing to their lack of private-property rights, these people are unable to turn these assets into business capital.

"The poor inhabitants of these nations -- five-sixths of humanity -- do have things, but they lack the process to represent their property and create capital," he writes in The Mystery of Capital. "They have houses but not titles; crops but not deeds; businesses but not statutes of incorporation. It is the unavailability of these essential representations that explains why people who have adapted every other Western invention have not been able to produce sufficient capital to make their domestic capitalism work."
"The only way to turn this "dead capital" into working capital and to improve the plight of the poor is to institute formal and widespread property laws"


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In the West, we regularly hear that the solution to ending third-world poverty is the elimination of private-property rights. Hernando de Soto seems to have a very convincing argument as to why this idea is wrong.

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Third-world poverty caused by lack of property rights. | 54 comments (53 topical, 1 editorial, 0 hidden)
Just another wealth transfer mechanism... (4.07 / 14) (#1)
by localroger on Sun May 27, 2001 at 10:18:00 AM EST

...from the poor to the rich, that is. What Mr. de Soto fails to mention is that, while many businesses in the West are started with mortgages on personal property, the vast majority of such business startups fail.

The very same people who like de Soto's theory so much (Reagan and Bush Sr. are mentioned in the article) also just eviscerated our bankruptcy laws, so now the risks of turning your house into capital are much greater. If they truly believed in this theory they would want to make it harder to lose your home after taking such a "productive" risk. But what they really want is to take your home away from you.

There is a parallel to this in the way some Indian tribes were deprived of their land. (This is detailed in Jerry Mander's excellent book In the Absence of the Sacred.) Most Native Americans did not consider the land to be "ownable" so, in practical terms, the land ceded to them by the US was owned in common by the entire tribe. This made it very difficult to get land away from them, since the tribe as a whole was generally unwilling to give up land. But by forcing the reservation to be split up into small, individually owned parcels, individuals could be leaned on in various ways to sell their land. Mortgage foreclosure is one excellent way to go about this.

The inevitable result of de Soto's proposal (especially in a land with weak or nonexistent bankruptcy protection) is that after a few generations none of the land would be held in common any more and the poor would be forced to rent out the land now owned by the wealthy elite. And I really think that bringing this about is the real motive driving, if not de Soto himself, then certainly many of the people who are behind him.

I can haz blog!

I don't like this article (4.55 / 9) (#4)
by Simon Kinahan on Sun May 27, 2001 at 12:16:03 PM EST

It is causing too many misunderstandings. People who are interested should really read de Soto's books.

...from the poor to the rich, that is. What Mr. de Soto fails to mention is that, while many businesses in the West are started with mortgages on personal property, the vast majority of such business startups fail.

Well, yes, thats true, but if you read Mr de Soto's book, he's primarily talking about people who are already occupying land and running businesses, and doing so successfully, in the informal economy, on land supposedly either owned communally, by governments or by absentee landowners. The suggestion is not to split up working communal arrangements, which has historically often been a device used by thieves, but to formalise individual ownership were it already exists informally.

The advantages are what you would expect: increased prosperity, proper legal protection and representation, and so on. de Soto argues that this is precisely what happened in the west, and has a detailed case study of the USA in one of his books.

Simon

If you disagree, post, don't moderate
[ Parent ]

That's incredible! (3.33 / 3) (#21)
by daystar on Sun May 27, 2001 at 08:07:23 PM EST

I read the article with interest, curious as to what attack people would be likely to make on it's theme.

<paraphrase>
Giving people property rights is an attempt to deprive people of their property.
</paraphrase>

... is REALLY not one that I expected.

--
There is no God, and I am his prophet.
[ Parent ]

No, the accusation is... (4.00 / 3) (#22)
by elenchos on Sun May 27, 2001 at 08:30:18 PM EST

..."You pretend to be giving people property rights when in fact your intent is to take away their property."

I don't know if that accusation sticks to de Soto, but if he supports the kind of bankruptcy "reform" that we've had shoved at us by the creditor corporations, it makes a certain sense. I would presume that if de Soto's beliefs are consistent with other advocates of things like micorcredit, he probably favors debt relief and easy bankruptcy, rather than the peonage that the poor can fall into if they are never given a clean slate from their bad debts.

So the idea of turning a home into business capital has merit in an environment that allows failed entrepreneurs to keep their homes and thus try again. The flip side of the "most businesses fail" coin is that most successful entrepreneurs fail many times before they finally succeed. Thus, strong bankruptcy protection is in that sense, pro-business.

Say to yourself in the early morning: I shall meet today inquisitive, ungrateful, violent, treacherous, envious, uncharitable men. All these things have
[ Parent ]

I'll say........ (3.00 / 1) (#23)
by daystar on Sun May 27, 2001 at 09:16:32 PM EST

So the idea of turning a home into business capital has merit in an environment that allows failed entrepreneurs to keep their homes and thus try again. The flip side of the "most businesses fail" coin is that most successful entrepreneurs fail many times before they finally succeed.
I'll say that's pro-business. Heck, I'd start a new business every WEEK. "Well, the 'Making money by hanging out at the strip club' didn't work out, maybe next weeks 'hookers-and-booze-dot-com' venture will pay off better. Someone give me another mortgage on my house...."

Now, on a more serious note, maybe I've got my head in the sand: is the united states seeing waves of people made homeless by recent bankruptcy reform? I don't know of this happening, but I might not have been paying attention.

--
There is no God, and I am his prophet.
[ Parent ]

Remember that you choose to loan money. (4.66 / 3) (#24)
by elenchos on Sun May 27, 2001 at 09:42:08 PM EST

Lenders are well aware of the risk they take when they loan money to someone with strong bankruptcy protection. If it were as bad as you imply, that you could just start any dumb business you want and fail with impuinty, then obviouly the lenders would just refuse to loan any money at all.

But even the majority of good business plans fail, and in spite of all the entreprenurship schools that will gladly take your tuition money, the best place to learn to run a business is by getting out there and doing it. An ideal level of bankruptcy protection is one that would encourage exactly that. The payoff is that when they do finally succeed, they succeed big time, and we all benefit from that, and that is what the lenders are in it for. Well, that is what they should be in it for. Making outrageous loans to people who can't pay them back just so the lender can take their homes is exactly not what we want. That just leads to the end of the middle class and exactly the kind of impoverished nation that de Soto is trying to repair.

Btw, what has been happening is that banks and credit card companies have been pushing debt on to people at insane rates. They made a stupid choice to give credit cards and car loans to people who couldn't really afford them, nor the cell phone bills and car payments that came with the whole unsustainable package. They are being driven into bankrupcy and and the creditors don't want to take any responsibility for the outcome, so they got their pals in congress to help them out. Yes, the borrowers are to blame too, but a bankruptcy is not any fun at all, and it takes two to tango, so it is both the lenders and the borrowers who should be lying in the bed they made.

And yes, the result is a declining rate of home-ownership and increased renting, which means a smaller middle class, fewer entrepreneurs and eventoually a worse economy, which is bad for the creditors, but they don't care. It is called short-sightedness.

Say to yourself in the early morning: I shall meet today inquisitive, ungrateful, violent, treacherous, envious, uncharitable men. All these things have
[ Parent ]

Well, that's just not true... (3.00 / 2) (#26)
by daystar on Sun May 27, 2001 at 10:23:54 PM EST

And yes, the result is a declining rate of home-ownership and increased renting, which means a smaller middle class, fewer entrepreneurs and eventoually a worse economy, which is bad for the creditors, but they don't care. It is called short-sightedness.
Home ownership is higher than ever. Of course, it probably too soon to get any decent numbers (since the bankruptcy deregulation was so recent), but that just means that the phenomenon you are concerned about exists only in your own pretty head.

--
There is no God, and I am his prophet.
[ Parent ]
Yes, it was a prediction. What did I say? (4.00 / 1) (#27)
by elenchos on Sun May 27, 2001 at 10:32:58 PM EST

Oh, I did say "is" not "will be", didn't I? Oh well. Oops.

The theory is sound, still. Some of the ingredients for capitalism to work for the poor is title to their land, money for them to borrow and bankruptcy protection (at some reasonable level) for those who don't hit the jackpot on the first try.

Say to yourself in the early morning: I shall meet today inquisitive, ungrateful, violent, treacherous, envious, uncharitable men. All these things have
[ Parent ]

I would agree..... except (3.00 / 1) (#32)
by daystar on Mon May 28, 2001 at 01:27:12 AM EST

.. that that would provide a powerful incentive AGAINST loaning money, wouldn't it? As you say, it takes two to tango, and if it's not profitable to loan money, then noone's gonna do it.

Unless you protect lenders from loss by some kind of government insurance program, but then you're putting a pretty huge load on the economy, and THAT rarely manages to stimulate anything. About the only thing that does not inhibit the rest of the economy, but provides a basis for the building of wealth is (surprise!) property rights.

And so, we come full circle.

--
There is no God, and I am his prophet.
[ Parent ]

Against bad loans, yes. (5.00 / 2) (#33)
by elenchos on Mon May 28, 2001 at 01:42:59 AM EST

Loaning money to several entrepreneurs with good plans is a good bet. A few will make it and pay you off, and the number that go bankrupt will not eat enough of your profits to make the whole scheme unviable. And ideally, the ones who went bankrupt the first time around will be back to try again and someday make it.

But letting several fools go into heavy debt at high interest rates to buy consumer goods that they don't really need and that are guranteed to depreciate rapidly is short sighted and harmful for everyone, in spite of the near-term boost in consumer spending. None of them are going to create wealth with their purchases like the entreprenurs are, they are just having a good time in the present. Then when the bubble bursts, the creditors are just hoping they made such profits off their horrendous interest that they don't really need to be finally paid off to have made a profit. So the creditor made a little money, and their customers are ruined, and probably won't be back to try again. Especialy now that the creditors got their bankruptcy law that lets them squeeze a little more out of their victims and makes it even harder for them to ever borrow again.

So yes, strong bankruptcy protection discourages foolish lending, because it makes the creditors less able to make money off loans that they can plainly see will never be paid off. Taken too far, and yes, then the entrepreneurs can't borrow any money either, but in the US we're hardly in any danger of that.

Say to yourself in the early morning: I shall meet today inquisitive, ungrateful, violent, treacherous, envious, uncharitable men. All these things have
[ Parent ]

Patronising (3.00 / 1) (#41)
by Paul Johnson on Mon May 28, 2001 at 09:26:57 AM EST

So, to summarise, you want to stop people being able to sell, mortgage or rent out the land they live on because you think it would be bad for them.

This attitude is typical of many people who advocate land reform. That the current situation is inequitable is not in doubt. But the idea that we can best help the poor by restricting their freedom to act in their own best interests seems to me to be horribly patronising.

Do you own your own property? If you did, would you like to have it entailed so that you could never sell it or mortgage it? If not, why do you want to impose these restrictions on those less fortunate than yourself?

Paul.
You are lost in a twisty maze of little standards, all different.
[ Parent ]

I'm not exactly an economist... (3.63 / 11) (#2)
by Estanislao Martínez on Sun May 27, 2001 at 10:35:09 AM EST

...but I think I see big holes in his argument.
For instance, in The Mystery of Capital, published last year, Mr. de Soto estimates some four billion people in the Third World and former communist countries hold real estate worth more than US$9-trillion. But because most of this land is on squatter settlements, outside the formal sector of society, these assets are, in his term, dead capital.
Ok, so I can imagine that he looked at the property owned by a typical poor person in several different countries, looked at how much they could get for it in average were they capable of selling it, and multiplied by the number of poor, right? But what about the situation where large amounts of poor start selling off their property simultaneously for some reason (e.g. such a deregulatory program)? How would the price they could command there compare to what they could get if the sales happened in total isolation? After all, the "price" of a good is not logically given, it arises from the interaction of economic actors in the market.

And anyway, of much of this land is where they have their dwellings, where the hell are they going to live afterwards? Don't they have to find a new living arrangement? And assuming that the poor live in the cheapest housing available, wouldn't they money they "win" inevitably be respent in either the same kind of housing, or more expensive one?

The one concrete idea he mentions about how to carry this out is by taking out mortgages on theit homes. But I am seriously skeptical any bank will want to offer a mortgage on a house in a shantytown-- for the simple reason that they have a definite tendency not to last long! Houses in shantytowns, after all, are typically built with the cheapest materials available, by people who are certainly not architects and/or engineers; the houses are likely not to have any utilities; etc.

But even assume that a bank will give them a mortgage. What if they fail in their enteprise? They just might happen to go up against competitors in the market, you know, who have far more resources than them: bigger corporations both at the national and multinational level, who are driven by a desperate need to expand. Not to mention that these enterprises by the poor would have to compete between themselves. You'd just have to expect that either only a small amount of them take the risk, or otherwise, that large numbers of people will end up losing their home out of debt.

Which leaves us with the idea that the money should be spent on the stock market. Let me paraphrase this scenario: "Poor people wouldn't be poor if they were allowed to sell their slum homes and land to corporations, and spend the money on corporate stock!" Eh, who do you think ends up winning big in this scenario?

If you ask me, the whole thing is ridiculous just on the face of it.

--em

Suggest you read the books (4.66 / 9) (#6)
by Simon Kinahan on Sun May 27, 2001 at 12:29:06 PM EST

This article doesn't seem to explain the actual policy recommendations too well.

And anyway, of much of this land is where they have their dwellings, where the hell are they going to live afterwards?

Nononono. Thats not the idea at all. The idea is to formalise the poor's property rights so that they can claim proper legal protection, enter into legal contract, and above all else, borrow money on reasonable terms.

The one concrete idea he mentions about how to carry this out is by taking out mortgages on theit homes. But I am seriously skeptical any bank will want to offer a mortgage on a house in a shantytown-- for the simple reason that they have a definite tendency not to last long! Houses in shantytowns, after all, are typically built with the cheapest materials available, by people who are certainly not architects and/or engineers; the houses are likely not to have any utilities; etc.

Actually you'd be surprised at several things. The processes for registering property in the developing world are often so cumbersome that even quite well off people still live in the informal economy. Several of Peru's government ministers were found to have homes built on land they did not legally own, for instance.

Even actual shantytowns often do have utilities, although these are often retrofitted after the settlements springs up, and the houses are often of reasonable quality. Even if banks won't lend money on these homes, then show me were to get a banking license :) More seriously, if there is a problem getting banks to lend, formal ownership will allow people to set up mutual lending organisations.

As to multinationals, I think this is a red herring. The businesses we're talking about here are very small. Local food stores, bars, lodging houses, machine shops, truck drivers, the owner of the local phone, and so on. The biggest are light manufacturing enterprises. Plenty of such businesses exist in the west, and in the developinng world, already, even where they have to exist in the informal economy. They seem to survive pretty well against the "relentless need to expand" of the multinationals.

Simon

If you disagree, post, don't moderate
[ Parent ]

Why would someone build a shantytown? (3.66 / 6) (#10)
by Wondertoad on Sun May 27, 2001 at 12:43:18 PM EST

Let's go backwards. Why would someone not put a lot of effort into their house? It's where they live - why would they build someting that will fall over? Are they lazy? Are they dumb?

No, they're maximizing their own utility - because without property rights, anything well-built can be stolen or nationalized overnight. Doesn't make sense to have a good home if, without a title, you can't prove that it's yours.



[ Parent ]
Your scenario is illogical. (3.25 / 4) (#28)
by Burrito Supreme Dictator on Sun May 27, 2001 at 10:35:39 PM EST

Ok, so I can imagine that he looked at the property owned by a typical poor person in several different countries, looked at how much they could get for it in average were they capable of selling it, and multiplied by the number of poor, right? But what about the situation where large amounts of poor start selling off their property simultaneously for some reason (e.g. such a deregulatory program)? How would the price they could command there compare to what they could get if the sales happened in total isolation? After all, the "price" of a good is not logically given, it arises from the interaction of economic actors in the market.

Lemme get this straight: according to your scenario, deregulation occurs, the value of the land skyrockets, the poor notice they're sitting on much more valuable land than before, and because of the higher price they can command, "they" (some? all?) decide to sell it. Because of this mass sell-off, the formerly skyrocketing price goes down, making land more affordable, and less profitable to sell.

That's all well and good, but where your scenario loses plausibility is at this point, you assume that the poor will continue a mass sell-off of their land, after it is no longer hyper-profitable to do so.

The way people act in the real world is more reasonable: they notice the price is starting to go down, and a good number of them sooner or later decide that their farm or land is more valuable to them then the lower quantity of money they'd get from selling it. Because the hypothetical mass sell-off starts dying down at this point, the price does an extraordinary thing, a phenomenon that's been observed time and time again: it stabilizes. And with proper title to their land, the poor will probably end up with their property more valuable before, property which the government cannot reallocate on a whim.

At this point, plot by plot, person by person, you can see how an entire nation can eventually pull itself out of poverty.

That is the essence of capitalism.

[ Parent ]

Possibility of foreclosure as opportunity (4.50 / 2) (#46)
by sigwinch on Mon May 28, 2001 at 09:00:17 PM EST

Ok, so I can imagine that he looked at the property owned by a typical poor person in several different countries, looked at how much they could get for it in average were they capable of selling it, and multiplied by the number of poor, right? But what about the situation where large amounts of poor start selling off their property simultaneously for some reason (e.g. such a deregulatory program)?
The liquidation value of a property is a measure of how many man-hours were used to create it. The liquidation value of all property in a nation is thus a measure of how many man-hours the nation has available for industrial and commercial endeavors. Nobody is recommending that all property be simultaneously liquidated.
But I am seriously skeptical any bank will want to offer a mortgage on a house in a shantytown-- for the simple reason that they have a definite tendency not to last long! Houses in shantytowns, after all, are [ill constructed and low-value].
Banks are concerned with 1) clear title to the security, 2) forclosure sale price of the security, 3) ability of the debtor to repay, and 4) the ability to make a profit on a loan.

Without strong property laws, #1 and #2 don't affect the situation. Only #3 is relevant. All loans are 'signature loans', which are extremely risky instruments for creditors. The only way to manage this risk is to loan just as much as the debtor can easily repay in the near-term future. This drastically limits the amount of capital available.

With strong property laws, #1 and #2 drastically reduce the risk of lending, and thus increase the availability of capital to property owners. This drastically reduces the importance of #3, which allows the property owner to attempt ambitious long-range projects.

The absolute value of the property is of little concern, as long as it is much larger than transaction costs. As long as a shanty or cheap building can be sold for significantly more than the cost of paperwork, the transaction will be attractive to banks. As long as the risk is managed and there is profit potential, banks will loan on anything. $500 Ford LTD car? No problem. $50 rusted-out Pinto? No, transaction costs would eat any profit. Junkyard full of $50 rusted-out Pintos? No problem.

You'd just have to expect that either only a small amount of them take the risk, or otherwise, that large numbers of people will end up losing their home out of debt.
The latter, of course. Prosperity means many businesses, and that means many failed businesses. Whether it's rockets or farms, every spectacular success is preceeded by several spectacular failures you don't see. That's simply the way life works. Unless you have a magic wand that guarantees success, the only way to eliminate failure is to eliminate opportunity.

--
I don't want the world, I just want your half.
[ Parent ]

unwarranted editorial conclusion (4.04 / 23) (#3)
by eLuddite on Sun May 27, 2001 at 10:36:35 AM EST

In the west, we regularly hear that the solution to ending third world poverty is the elimination of private property rights. Hernando de Soto seems to have a very convincing argument as to why this idea is wrong.

Oh, for crying out loud. Is there some reason for sullying the good name of socialists in order to justify a failure of despotic state mercantilism? The reality isnt nearly as complex as your festering libertarian paranoia and I dare say what you "hear" is actually a din of voices in your head determined to shout down anything that isnt phrased in the form of a platitude.

(1) Peru is ruled by a despotic government which assumed autocratic powers through a coup d'etat. (2) Peru's private sector exists on the basis of competiting for this government's favors, contracts and economic privileges. (3) This private sector, in concert with the despotic government, excludes and marginalizes competition. (4) They do this through bureaucracy, legislation and legal coercion intended to prevent the the full acknowledgement and exercise of property law.

So, duh, equitable property law is an improvement over despotic state mercantilism. However, socialism never enters this picture, does it? So how the heck can you conclude that the transition from despotic state mercantilism to property law is a conclusion against socialism when neither has been given the chance to work? As a further point of interest, socialism is not incompatible with property law and a socialist economy could easily turn out to be an improvement over de Soto's vision for Peru.

Finally, ever try to start a business in Peru or Russia? Neither has the IMF, apparently, because it doesnt seem to have a problem lending money to either country. I wager dollars to useless libertarians that these loans favor both the Russian and Peruvian economies to a lesser degree than they favor the West. A fairly mysterious set of circumstances, wont you agree? I can only conclude that the IMF is a fucking paragon of socialism.

---
God hates human rights.

unwarranted? (4.14 / 7) (#11)
by F8alist on Sun May 27, 2001 at 01:41:11 PM EST

From the writeup:
In the west, we regularly hear that the solution to ending third world poverty is the elimination of private property rights. Hernando de Soto seems to have a very convincing argument as to why this idea is wrong.

From your comment:
Oh, for crying out loud. Is there some reason for sullying the good name of socialists in order to justify a failure of despotic state mercantilism?

And:
As a further point of interest, socialism is not incompatible with property law...

So, by attacking a system that is incompatible with property rights, you assume he is directing that attack at socialism even though you claim socialism isn't incompatible with property rights?

I don't see anything in the writeup that is directed at socialism, though the article does state that the author's findings were "direct challenges to Marxism", a system that is very much incompatible with property rights.

Libertarianism: The absurd notion that an individual is capable of running his own life, and that the government has anything but his best interests at heart
[ Parent ]

i have inside information (3.66 / 6) (#14)
by eLuddite on Sun May 27, 2001 at 02:08:02 PM EST

So, by attacking a system that is incompatible with property rights, you assume he is directing that attack at socialism even though you claim socialism isn't incompatible with property rights?

He's a libertarian and I've audited as well as participated in a few threads with enterfornone where he's come out disdainfully against socialism. It doesnt matter. Peru *does* have private property. What it doesnt have is formalized property. Enterforone wrote "in the west, we regularly hear that the solution to ending third world poverty is the elimination of private property rights." Okay, who in the west is calling for the elimination of property rights? Capitalists or socialists?

---
God hates human rights.
[ Parent ]

Lib-speak (4.25 / 4) (#17)
by Simon Kinahan on Sun May 27, 2001 at 04:47:56 PM EST

<P><I>So, by attacking a system that is incompatible with property rights, you assume he is directing that attack at socialism even though you claim socialism isn't incompatible with property rights? </I>

<P>Well, it all depends on the socialism, doesn't it ? At one extreme, genuine communists really do oppose private property. At the other, social democrats and mutualists (like Ben Tucker, who libertarians hark back to), don't.

<P>Unfortunately, the article above was definitely written by a libertarian, as noone else would say something like:

<P><I>In the west, we regularly hear that the solution to ending third world poverty is the elimination of private property rights.</I>

<P>In an apparently unironic manner. When was the last time you read anything about the elimination of property rights ?

Simon

If you disagree, post, don't moderate
[ Parent ]
Socialism vs. libertarianism vs. corpratism (2.50 / 4) (#12)
by Nyarlathotep on Sun May 27, 2001 at 01:43:31 PM EST

I have not read this book, but the one member of this discussion seems to have read his book (Simon) hints that de Soto's book says about the same thing you are saing, i.e. lack of basic individual freedoms creates poverty. Restoring, asic freedoms could mean taking land away from the rich or it could mean reducing governemnt controls on what the rich do with their money.. or both. It all depends on what problems the society has developed. BTW> There is a diffrent between libertarians and corpratism supports, though many corpratism supporters claim to be libertarians. Libertarians are an idealistic bunch who think that removing governemnt restruictions and incentives from buisness will help things, i.e. a real libertarian would necissarily oppose the limited liability that stock holders of corperations enjoy and would support punnishing the stock holders for the corperations actions. Corpratists on the other hand are much closer to fashists and feal that governemnt should help corperations whenever it can and ignore them the rest of the time. Unfortunatly, our world seems to be increasingly run by corpratists (or fashists in the case of Peru).
Campus Crusade for Cthulhu -- it found me!
[ Parent ]
Ba-doom-boom (1.00 / 2) (#45)
by Robert Hutchinson on Mon May 28, 2001 at 07:11:59 PM EST

Is there some reason for sullying the good name of socialists in order to justify a failure of despotic state mercantilism?
I've got a good name for socialists ...

Robert Hutchinson
Despots are despots are despots.
No bomb-throwing required.

[ Parent ]

All of which begs the question... (3.75 / 8) (#5)
by marlowe on Sun May 27, 2001 at 12:21:58 PM EST

why don't these third world countries have property rights?

-- The Americans are the Jews of the 21st century. Only we won't go as quietly to the gas chambers. --
Well (5.00 / 5) (#9)
by Simon Kinahan on Sun May 27, 2001 at 12:41:50 PM EST

At least as de Soto puts it, universal property rights came about in the history of the west as the end point of a long historical process, which included battles between tenant farmers, "squatters" and landowners, and the industrial revolution. They can't be magicked into existence.

The development of the developing world has been distorted by colonisation, so the property rights of native populations were often not recognised, and the distorted structure of land ownership carried over into post colonial times, with those who formally own land often not using it, and those who used it often not owning it. Where traditional structures of land holding remain in place, there is often no formal system of title. At the same time, developing world populations have flocked into the cities, creating what is essentially a mirror image of the west's industrial revolution.

The cities expanded onto land that was either owned by the government, by landowners, or part of communal arrangements supposed to support "traditional" communities, without the land actually changing hands formally, because the legal obstacles are usually too cumbersome.



Simon

If you disagree, post, don't moderate
[ Parent ]
The real question is: why do we? (4.57 / 7) (#19)
by Paul Johnson on Sun May 27, 2001 at 05:43:06 PM EST

As another poster pointed out, western-style property rights have a long and complicated history. This means that the real question is not so much why 3rd-world nations don't have property rights as why we do.

We take the concept of personal property so much for granted that its easy to forget what a strange concept it once was. We arrived at the concept more or less by accident. The resulting economic explosion drove a phase of empire building during which we (i.e. Europe) invaded and occupied much of what is now the "Third World".

Where property rights don't exist you usually find that property is held at the pleasure of some local lord or Big Man, with the serfs tied to the land and paying part of there produce to the Big Man in return for the right to use the land. This is known as feudalism.

When European invaders arrived they bought their idea of property rights, but they didn't recognise existing entitlements. In effect they merely replaced the local Lords and carried on the system as before, writing title deeds for each other which gave them the property rights and now charging rent instead of tithe.

Then the empires collapsed, leaving these new property rights in some disarray. In some places the feudal system reasserted itself, usually under the guise of Land Reform and communalism. In other places (such as Zimbabwe) the descendants of the imperial invaders had their property rights recognised by the new government, at least for a while.

From the point of view of most people all this was pretty irrelevant: you held your land on the say-so of the local Lord, and if you crossed him or failed to pay him his rent/tax/tithe then you got kicked off or killed. The colours of the faces changed, but the basic system was always the same.

So now we have this radical idea: why not let people own their own land. They can sell it, mortgage it, buy more, rent it out, or whatever they want. They are free to decide.

Paul.
You are lost in a twisty maze of little standards, all different.
[ Parent ]

... the answers (some of them) (5.00 / 3) (#31)
by Apuleius on Sun May 27, 2001 at 11:45:03 PM EST

1. Absence of the Anglo-Saxon legal tradition. Those English peasants were the first to establish firmly the idea that a man's home is his castle.
2. Absence of much of any legal tradition. Latin America's royalist colonial traditions leave much to be desired, for example.
3. Persistent racism. A man's home is his castle, but only if he has the right skin coloration. Big problem in places like Mexico, where for decades your title to your home wasn't worth much if you were a measley mestizo.
4. Communism. In many of these countries you have the right wing, which kicks peasants off their homes to form large plantation (everyone, on three, say "thanks, CIA!"). So forget property rights on the right wing. But the left, being composed with the likes of the Sandinistas, was no better. They had rhetorical concern for the peasants, but all the Third World communists offered for helping the peasants was pie-in-the-sky ideals, and collectivization that only made it easier to screw the peasants yet again, next time the right wingers took over.




There is a time and a place for everything, and it's called college. (The South Park chef)
[ Parent ]
the other side (4.30 / 10) (#7)
by akb on Sun May 27, 2001 at 12:31:22 PM EST

Land in Latin America is an incredibly difficult issue, you don't really get that sense from the article. I haven't read any of de Soto's work so I don't know if his position is more complex than is presented but any discussion of land in Latin America is incomplete without mentioning the incredible inequity in the distribution of land ownership.

To merely propertize large amounts of land would result in further entrenching this inequity. Previous land reform initiatives when popularly demanded are usually manipulated to the same effect, I guess this would be more efficient in that it would skip an intermediate step.

To merely say that land that is not easily capitalized is not useful does not capture the reality on the ground. Often land rights are invested in the hands of communities, and is an integral part of the occupants history, culture and indeed, autonomy. To join NAFTA Mexico was required to change its constitution to repeal the provisions granting communities nontransferable land rights. This is cited by the Zapatistas as one of the main reasons that they rose up. These rights were enshrined after the Mexican revolution to address the very issue of inequity in land distribution. This repeal is analogous to repealing one of the articles of the Bill of Rights.

Brazil is currently the flashpoint of the land rights struggle in Latin America. The MST is an active group for land rights.

Collaborative Video Blog demandmedia.net

Autonomy for whom? (3.00 / 5) (#18)
by Paul Johnson on Sun May 27, 2001 at 05:28:02 PM EST

Often land rights are invested in the hands of communities, and is an integral part of the occupants history, culture and indeed, autonomy.

Who gets the autonomy then? "The Community" generally translates into the local Big Man who parcels out use of the land to people he likes. If you use a piece of this land you do so at the pleasure of the Big Man, or Area Committee, or whoever is empowered with this decision, so you had better keep on their good side. You can't mortgage it, so you can't get a loan for equipment or seed which would improve your productivity. If you want to go somewhere else for a few months in pursuit of work then when you come back you find they have allocated the land to someone else. In effect your only escape is to walk away from your biggest asset. If you had title to the land then you could sell it and take the money with you. This makes people more mobile and less subject to the local Big Man.

Granting land to "communities" simply turns the local Big Man into a feudal lord, especially if "the community" is not allowed to sell it either.

Paul.
You are lost in a twisty maze of little standards, all different.
[ Parent ]

consensus process (4.00 / 2) (#30)
by akb on Sun May 27, 2001 at 11:25:01 PM EST

The Zapatista and MST communities operate using concensus process that involves the entire community. This is the traditional decision making process under which many indigenious communities have operated for quite some time. That's not to say that the Big Man pathology doesn't occur, sure it does. But, on the ground, what these groups have accomplished is extremely impressive. NAFTA and land capitalization schemes won't benefit the community residents, they'll just wind up working for shit wages in a city, renting their labor and losing the power that comes with land.

The power relationship that you refer to more often occurs when there are scraps of centralized power to be handed out, as is seen with the Mexican patronage system, see also other threads in this discussion regarding Peru.

Collaborative Video Blog demandmedia.net
[ Parent ]

Power from land? (4.00 / 2) (#34)
by Paul Johnson on Mon May 28, 2001 at 03:06:29 AM EST

NAFTA and land capitalization schemes won't benefit the community residents, they'll just wind up working for shit wages in a city, renting their labor and losing the power that comes with land.

What power? It gives no economic power because it cannot be mortgaged or sold. The worst personal abuses of feudalism may not always occur, but for individuals the same problem is still there: if they want to be anything other than peasant farmers they can only do so by walking away from their biggest asset. Entailed land is not empowerment, its a ball and chain.

Why is land without the power to sell it better than land with the power to sell it?

Paul.
You are lost in a twisty maze of little standards, all different.
[ Parent ]

It all depends on circumstances (5.00 / 2) (#37)
by Simon Kinahan on Mon May 28, 2001 at 07:02:05 AM EST

In very poor communities the power you get from land is the power to feed your family. That matters, because with it comes freedom from undue pressure from those who control your means of survival. Often traditional agricultural techniques are not effective unless there is a complete community of people participating, and in many cases these techniques are more productive on marginal land than modern agriculture. Where traditional communities still exist, then, it is often better to leave them intact than to parcel up the land and give it to the individuals. Very often this is what land reform schemes end up doing, and it can end unhappily with most of the new owners having to sell their land to the local boss and become tennant farmers.

The cases where de Soto's theories apply are where individual land ownership already exists in local common law, but is not recognised by the state. Sometimes this is on theoretically common, tribal, or state owned land that has been squatted. He's recommending taking those existing de facto property rights and giving them the protection of the state.

One of my concerns about de Soto's theories, if they become a new development authodoxy, as seems likely, is that they will be taken in much the same way as enterfonne has taken them, as an endorsement of individual land ownership over communal regardless of who owns the land or how the system comes into being.

Simon

If you disagree, post, don't moderate
[ Parent ]
Its entailed or communal land that is the problem. (3.00 / 3) (#40)
by Paul Johnson on Mon May 28, 2001 at 09:15:06 AM EST

I've no objection to landless people being given unused land, and still less to existing informal occupation being given legal recognition. This would seem to answer your points about empowerment through land.

What I do disagree with is the idea that by removing the right to sell the land, or handing the land to a "community trust" or similar arrangement, its new owners are somehow empowered or protected. Maximum empowerment from owning the land comes from the right to do with it as you will: to sell it, mortgage it, rent it out or just leave it fallow for a couple of years.

You argue that when land is given to individuals then they often "have to" sell the land to the local boss and become tenants. Leaving aside the possibility of coercion (which no scheme of land reform can solve), the new land owners don't have to do anything. If their individual plots would be better worked collectively then they can form a partnership and do so. If their community can administer the land fairly then it can administer a collective of smallholders just as well. This carries all the benefits of collective farming with the additional benefit that any landowner who decides to leave is free to sell their plot and go.

Paul.
You are lost in a twisty maze of little standards, all different.
[ Parent ]

Scaling of collectivism (5.00 / 3) (#47)
by sigwinch on Mon May 28, 2001 at 09:17:00 PM EST

What I do disagree with is the idea that by removing the right to sell the land, or handing the land to a "community trust" or similar arrangement, its new owners are somehow empowered or protected.
They do have a point: collectivism is probably the most efficient and humane possible solution for small agrarian communities, particularly in a harsh climate. The problem is that collectivism relies on interperonal relationships and shared knowledge. With too many people, or knowledge that is too specialized, it totally breaks down and despotism tends to fill the resulting vacuum. A large industrial city with semiconductor foundries and antibiotic synthesizers simply cannot meet and achieve consensus.

--
I don't want the world, I just want your half.
[ Parent ]

Please go and read the book (4.33 / 9) (#8)
by Simon Kinahan on Sun May 27, 2001 at 12:34:59 PM EST

Its well written, makes its case well, is easy to read, and not nearly as ideological as the write up above makes it sound.

The National Post article doesn't include most of the supporting evidence - concering the development of the west, and the current state of the developing world - that the book does, and appeals a bit to the "magic" of free markets, that de Soto does not do. Several people have made criticisms based on the write up that would not be made, or at least not be made in the same way, by someone who had read de Soto's books.

Simon

If you disagree, post, don't moderate
de Soto's failings (4.87 / 8) (#13)
by eLuddite on Sun May 27, 2001 at 01:52:57 PM EST

de Soto's insight is that the market value of real estate in even depressed nations such as Peru is several times greater than the combined foreign aid they've received over a period of decades. He argues that these countries will not successfully capitalize their native assets until their property relations have become formalized through property rights.

However, to put it simply, you cannot establish just property relations merely by writing a few laws. Of course it worked for the USA, Americans had a useful european heritage of common law property relations to draw upon. The idea that you can graft the wild west onto Peru smells like the white man's burden all over again. (USA + property rights) != (Peru + property rights) for the simple reason that Peru is not remotely like the USA for a vast number of complex social differences.

The simple fact of the matter is that law can be extremely oppressive in the wrong hands and the practice of government and capitalism in Peruvian history doesnt merit the optimism to presume against an extremely effective corruption made possible by its legal sanction. Maybe its better to live on informal property than it is to defend against a formal writ of seizure. What good is formalized property if that property never gets a chance to attain its potential value?

---
God hates human rights.
[ Parent ]

Good points (5.00 / 6) (#16)
by Simon Kinahan on Sun May 27, 2001 at 02:15:11 PM EST

And I agree with most of them, as I imagine would de Soto. He emphasises repeated that attempts at land reform based on "writing a few laws" (and buying expensive GIS systems) tend to fail. I get the impression he thinks the trick is to identify the "real" property rights that people in a community actually respect and encode those in the law. Certainly that is what I reckon would be best.

I think you are overly pessimistic about the possibilities for places like Peru. I agree the USA was perhaps a slightly special place, but if you look at England (in particular, not Britain), the property law there - the first capitalist country in the world - arrived in its current state somehow, after going through many of the same experiences as the developing world has gone through more recently, including problems over land ownership, and mass migration to the cities. I see no reason to suppose that path cannot be followed again.

It is, of course, true that law in the wrong hands is an instrument of oppression, but in the right hands it is also an insrtument of liberation. With property rights, the way to tell the difference is by looking at the potential distribution of land: who could buy the land to feed themselves if they wanted to. At least according to de Soto, the distribution in the developing world has favoured the elite through a mixture of intended and unintended obstacles placed in the way of the poor.


Simon

If you disagree, post, don't moderate
[ Parent ]
property laws out of extralegal social contracts (none / 0) (#54)
by mami on Wed May 30, 2001 at 02:33:28 AM EST

He argues that these countries will not successfully capitalize their native assets until their property relations have become formalized through property rights. ...However, to put it simply, you cannot establish just property relations merely by writing a few laws.

I think in his main thesis he says that one needs to understand that it is not a matter of just creating or implementing property laws (he argues that most underdeveloped and former communist nations have formal property systems already in place) , but to recognize that up to 90 percent of the population lives upon their own extralegal rules and conventions and those- however minimal or informal (sometimes oral agreements only symbolized by rituals) - include some form of arrangements to protect the property of that (poor) population.

His main goal is to convince the reader that when creating a mechanism to formalize property laws, that these laws must evolve out of the property arrangement, which the local population has already expressed extralegally in their own social contracts.

He devotes a whole chapter to explain exactly that just writing property laws from the top down will result in failure. For example he quotes that "in Peru the government has formalized property rights twenty-two times in four hundred years since the Spanish conquest and had a success rate of zero." So, I wouldn't think that he says that "you have just to write some property laws."

He continues saying that "a social contract has to precede real ownership, that all property rights spring from social recognition of a claim's legitimacy." He continues stating "to be legitimated, a right does not necessarily has to be defined by formal law; that a group of people strongly supports a particular convention is enought for it to be upheld as a right and defended AGAINST formal law." (I added caps)

He quotes even a German saying "The law must come from the mouth of the people".

He says that in almost all Third World countries the majority of the population arrange their lives through social contracts in the extralegal sector. These social contracts imply social obligations that can be inferred from the societal behaviour of the people. They are also arrangements which are often explicitly documented by - sometimes only orally and expressed in rituals - sometimes in written format or otherwise.

He says for example clearly, that " government programs to give property to the poor have failed over the past 150 (in Peru) wether they followed the bias of the right (private property rights through mandatory law) or of the left (protecting poor people's land in governemnt-run collectives)." He says plainly "these people move out of the law not because the law has privatized or collectivized them, but simply because the law doesn't address what they WANT. ... If the law does not help them, then they will help themselves outside the law."

His conclusion is to research with what kind of arrangements the population helped itself and to formulate and integrate these arrangements in formal property laws.

That's creation of property law from the bottom up and NOT from the top down.

[ Parent ]

MLP (4.50 / 2) (#20)
by Simon Kinahan on Sun May 27, 2001 at 07:26:58 PM EST

The think tank of which Hernando de Soto is president - the Instituto Libertad y Democracia, founded in 1982 - has a website, which contains a lot of writing about the history and substance of their work in Peru. Hopefully it will answer some of the concerns people have raised about fitting the reforms into the exisiting society.

Simon

If you disagree, post, don't moderate
not so simple (4.00 / 2) (#25)
by danny on Sun May 27, 2001 at 10:23:00 PM EST

The formalisation of property rights often ends up shafting the poor people - those who are literate and already have access to resources do well out of it, while the poorest lose out.

Also, the imposition of western systems of ownership is often totally inappropriate - our land tenure systems work badly, if at all, with communities reliant on nomadism, pastoralism, or swidden agriculture. And imposing our property systems often destroys traditional culture.

A brief intro to land titling (from the aid/development organisation I do volunteer work for).

Danny.
[900 book reviews and other stuff]

Indeed (5.00 / 4) (#36)
by Simon Kinahan on Mon May 28, 2001 at 06:49:53 AM EST

I'm beginning to wish I had voted this story down, and written a review of de Soto's book myself. Far too many people are getting the wrong idea here. I just hope those trying to put the theory into practice in other countries do a better job of understanding and explaining it.

Its best to look at de Soto's proposals not as land reform or land titling in the normal sense, but as an effort to turn the grey economy - those not doing anything illegal, but not registered with the authorities - white. The vitally important point, which he stresses over and over again, and which bearly gets mentionmed in the article, is to examine the existing conventions of land ownership, as actually practiced by people, and encode those in the law. This is not intended to apply in those parts of the developing world still practicing traditional agriculture, but in those where individual ownership of land and businesses is the norm, but is not being recognised or protected by the state.

Simon

If you disagree, post, don't moderate
[ Parent ]
please do write a review! (4.00 / 1) (#39)
by danny on Mon May 28, 2001 at 08:50:43 AM EST

It sounds like something I should read and review myself, but I've got way too much to read at the moment.

Danny.
[900 book reviews and other stuff]
[ Parent ]

yea, write a review (4.00 / 1) (#48)
by sayke on Mon May 28, 2001 at 09:35:43 PM EST

it's tough enough having a good discussion on economics without worrying about starting from misinterpretations...


sayke, v2.3.1 /* i am the middle finger of the invisible hand */
[ Parent ]

Living in a third world country. (5.00 / 7) (#29)
by maquina on Sun May 27, 2001 at 10:51:46 PM EST

Disclaimer: I live in a third world country, so I will speak according to what I have seen in my country. I dont pretend to apply these principles to all third world countries, I will just say what happens in my country, and then I hope that someone else judges on the extent on which these observations are true on the other third world countries.

Property Rights do exist in my country (Guatemala) and they are formally established. I do not think that we poor inhabitants of these countries posses this incredible amount of land that Mr De Soto seems to bestow upon us. What I have observed in my country is that poor people do not posses *any* land at all. And what is worse is that they lack the opportunities to buy any. Most of the land of my country is owned by a few people who seem to control everything. Poor people are only tenants of these big land owners.

Most of the poor people in my country rent the houses they live in, if they live in the city. If they live on the country they usually work as farmers for someone else. The land that Mr. De Soto seems to talk about is the land that poor people invade. These invaded lots of land are called "asentamientos" in my country.

This "asentamientos" are usually worthless pieces of land that nobody uses and nobody lives in them, reason by which poor people are able to invade them. Many times the government kicks them out of there, some times it doesnt.

I think the way to go is for the government to provide subsidized land so that it will be more easy for the people to own land in the first place




Irving
Any corrections will be greatly appreciated

bad writeup, not bad theory (5.00 / 5) (#35)
by samth on Mon May 28, 2001 at 04:00:53 AM EST

It's unfortunate that people are getting a bad impression of this reputedly excellent book based on enterfornone's writeup. De Soto is not advocating stricter enforcement of the unequal property rights currently existing in third world countries. Instead, he wants to formalize the existing informal property relations, so that people who have houses and farmland can use it to borrow money against, in large part.

So, my reccomendention is to read the book, and not the writeup. By all accounts, the book is much better.

Given a choice between Libertarianism and ravenous martian spores, I ask you, do I look good in this Bernaise sauce? -- eLuddite
[ Parent ]

Definitely read the book (4.80 / 5) (#43)
by mami on Mon May 28, 2001 at 01:50:15 PM EST

DeSoto focusses mainly on how previously un-owned land, which is only used by native population incidentically to dwell on without materializing a formal piece of evidence of ownership of that piece of land, represents "dead capital or dead asset" for the population living in such manner on that land. He researches and provides lots of statistical evidence how this dead captial is turned into "live capital" by the act of creating a "title of ownership to property".

DoSoto goes into details to show how a piece of documentation of ownerhsip of a piece of land (or anything you can build and produce on the land) to a person starts the process of creating live capital out of dead capital, as a catalyst to use land for being traded, used as collateral for as a share against an investment.

How true his thesis is, you can see, if you look at the fact that the Freedom Bank, of which Frederick Douglass was sitting in the board for a while during his lifetime, couldn't generate loans to blacks, because the 40 acres of land and a mule, which the freed slaved were promised, never got titled to most of them. No loans could be created and no live capital created for blacks, because of the failure to give them titles to the land they were promised.

It is most probably not really known how much land is "unowned" in subsaharan African countries, but his thesis is very compelling and convincing on first glance. It would have been interesting to have researched a case in such a country, where previously untitled land in an African village becomes an issue, when gas or any other uranium or oil is discovered.

In what way the previously untitled land is then owned, when it gets developed and exploited with funds provided by a conglomerate of loans from the WorldBank and secured by the IMF, after IMF approved the credit worthyness of the government's financial policies implemented.

In such a case the process of titling land and the just distribution of the potential creation of capital among the people who will be owners would reveal the connections between creating just property rights and the creating of live capital socially acceptable to the country's population even more clearer.

But DeSoto does not discuss this in his book. DeSoto does not go into discussing any situation, where land has already been owned and has to be redistributed more fairly among the population not owning any land and governmental, landlords or corporational land owners.

He does not speak about writing fairer property laws, he speaks about creating the foundation to write those laws in providing a mechanism to create land titles. That mechanism is not yet implemented in a fashion in many Third World countries, which would then allow to think about more just distribution of capital.

The book is also compelling, if you would compare the relationship between a title of land and how it creates the potential to create live capital to the relationship of an IP license or a patent to create live capital out of intellectual property and how the GPL is a specific "title" for the IP, which specifically prevents the creation of live capital as a means to promote the redistribution of live capital, which was already distributed (perceived unjustly) through the IP of closed software.

It seems that the GPL somewhat proves deSoto's thesis right, though just faintly. DeSoto shows how titling unowned land creates live capital, the GPL shows how a "GPL'ed title" to IP (in opening the source and allowing usage and change and redistribution) creates ownership and property rights, but prevents creating live capital directly to the owner.

Now then you can start discussing if the promotion of sciences and art through GPL'ed IP is creating "live capital", just not in monetary terms directly as a monetary progit to the creator of the IP. But that's off topic with regards to this story.

You definitely should read the book. A non technical person and a person not being an economist can easily understand the thesis, as you can conclude from my comment.

It jumpstarts a lot of thinking about analogies between titles to land property and titles to intellectual property and their roles in creating "live capital". I wished I had a better legal and economic background to express myself more clearly.

[ Parent ]
the Homestead Act (4.66 / 3) (#42)
by anonymous cowerd on Mon May 28, 2001 at 10:31:49 AM EST

...I think the way to go is for the government to provide subsidized land so that it will be more easy for the people to own land in the first place.

You appear to be describing the 1862 Homestead Act, a product of Abraham Lincoln's wartime administration, an attempt to counterbalance expansion of the slave-state holdings but more important a bribe to the working class in the North. What else could have motivated the Yankee proles, hopeless, property-less, slum-dwelling laborers whose bosses made them put in exhausting seventy-hour work weeks, to sacrifice themselves on Civil War battlefields in a conflict between the Southern slave oligarchs and their own local bank and factory oligarchs?

Rather than laissez-faire nurturing a middle class, the natural tendency of any capitalist society is to sharply concentrate wealth and to liquidate that middle class. To see this tendency in action today glance at the distribution of vendors of peecee software from, say, 1985 through 2001; an almost perfectly complete concentration of power, a ruthless weeding-out of the small vendor, to the point where if one wants to compete against the giants, one is forced to give one's products away for free. How, given that natural tendency, did this country, seemingly so devoted to the laissez-faire concept, ever come to have a middle class numbering millions of citizens who each own his own house?

Well, strange things happen during wartime. The Homestead Act, in a pen stroke, created that property-owning middle class all across the midwest, by means of a vast giveaway via legislative fiat. In other words, it was pure, undiluted socialism! (Shhh, don't tell the schoolkids that!) And it took another sixty-five years of systematic conspiratorial effort (including at least one stolen Presidential election) for the factory owners, railroad investors and banking interests to take most of that vast wealth back from that freshly created middle class.

Yours WDK - WKiernan@concentric.net

stint grits
darts file
gratis ways to fit tins
dapper angle
ill apple
-Barbara Baracks

[ Parent ]

"Ownership": Land is not Capital! (4.66 / 3) (#44)
by chickenhead on Mon May 28, 2001 at 02:28:32 PM EST

What I have observed in my country is that poor people do not posses *any* land at all. And what is worse is that they lack the opportunities to buy any. Most of the land of my country is owned by a few people who seem to control everything. Poor people are only tenants of these big land owners.

This is consistent with everything else I've read and heard on the subject.

The right approach, not just for poor countries but for everyone, is to ensure private property rights in Capital while freeing Land to anyone who can use it.

In Guatemala, a few rich families own practically all the Land. By holding it all, they build great fortunes (which is not so bad by itself) but also prevent others from making an independent living.

Land ownership is inherently monopolistic. When a few families literally own Guatemala or any other place, everyone else lives there at the whim of the landlords. It's the ultimate natural monopoly.

Landlords, like anyone else, want to maximize their own wealth, so they price land rental as high as they can. But a Guatemalan citizen has to live somewhere so he or she has to deal with the landlords. It's not an equal situation.

The struggle isn't Labor vs. Capital, as both Capitalists and Communists will try to tell you. It's Labor vs. Land. The concept of Capital only makes sense as it represents stored-up Labor power. Both Capital and Labor are squeezed by all-devouring Land rent.

This happens everywhere but is most marked in poorer countries like Guatemala where land ownership is so concentrated.

Henry George did some great writing on this subject. Take a minute to check out henrygeorge.org and The Progress Report.

[ Parent ]

Extreme MLP (5.00 / 8) (#38)
by samth on Mon May 28, 2001 at 08:28:55 AM EST

Of course, our first link has to be to the NY Times review of De Soto's book.

Reason Magazine is populated mostly by libertarians, but they did this interesting interview with De Soto.

A critical review by a progressive site.

An interview by the Center for International Private Enterprise.

An interview with De Soto in RealAudio.

Two columns on De Soto by the same man, one from 1987 and the other from 2000.

A review of the book.

An interview with De Soto by Christianity Today.

This mailing list thread on the Progressive Economists List.

An article by De Soto at the IMF web site.

A review critical of De Soto, which praises customary law.

The Indian Express also has a review.

Another libertarian site, this time free-market.net, has a review.

A speech by De Soto to the Canadian International Development Agency.

A review by Business Week.

The New Statesman has a review.

The American Enterprise Institute's Michael Novak talks about De Soto's book, and another book on culture.

An interview with the Jewish World Review.

An interview by the Foreign Policy Centere.

The Hernando de Soto Resource Page at policylibrary.com.

A review in Contra Mundum, which bills itself as "a reformed cultural review".

Benjamin Reeve reviews the book for the Ethical Spectacle.

Slashdot has a less than exciting review, and lots of dumb comments. Shock.

A review by the Foundation for Enterprise Development.

An interview transcript with De Soto on PBS's NewsHour.

A scholarly paper that looked into De Soto's conclusions, and found them wanting.

A "virtual think tank" (a mailing list) discusses the book, and De Soto generally.

This description of the book gives about the most superficial analysis possible.

The excellent legal site findlaw reviews the book.

A review in Time magazine. Not that high quality, like all of Time.

The American Prospect reviews the book.

There. That's 31 links at last count. Have fun.

Given a choice between Libertarianism and ravenous martian spores, I ask you, do I look good in this Bernaise sauce? -- eLuddite

Another Link (4.00 / 2) (#49)
by Tachys on Tue May 29, 2001 at 12:01:59 AM EST

Article he wrote for reason

[ Parent ]
I wished (none / 0) (#51)
by mami on Tue May 29, 2001 at 02:22:48 PM EST

that every alien resident, before he becomes U.S. citizen, would have to read this article (adapted from chapter 5 of the book). It is impossible to understand the U.S. constitution without this background information for a modern day (non British) European immigrant (someone who doesn't come because he is poor or looks for pulitical asylum).



[ Parent ]
The value of a value (none / 0) (#50)
by jd on Tue May 29, 2001 at 12:56:58 PM EST

Nothing is statically-priced, and everything is valued according to how available it is, and the conditions of that availability.

Let's say that the 3rd World, in total, as it stands, is worth $10 trillion, precicely because there are no property laws.

Now, let's say that some African nation strikes a huge oil reserve, slaps on property rights that would give the sickest dictator alive goosebumps, and demands the firstborn of every family on the planet, plus $1,000 a barrel.

How has the value changed? Nobody in their right minds is going to touch the oil. It's much cheaper, easier and less restrictive to go elsewhere. It'd almost be cheaper to drill for oil on Mars.

The value suddenly goes down. There's no profit in the unprofitable, and the indicators would suggest that further resources would also become unprofitable.

A single "property law" =could= destroy the African economy. The potential exists. I'm not saying it's likely, just that "property laws" are a whole lot more fickle and two-edged than some economists would like you to believe.

Ok, so "property law" can reduce value, potentially. (However unlikely.) Can it increase it?

Nope. Real estate in America is substantially cheaper than similar properties in the UK, despite the fact that the UK has no law of trespass, and the US gives owners the right to shoot on sight.

Interesting, that. Property prices being HIGHER in a country with looser property laws and less violent enforcement.

The bottom-line is simple. Property rights are only useful if they're sufficiently loose as to not strangle the market they're intended to defend. At which point, since the market can grow indefinitely, no property rights at all become the only long-term useful solution.

huh? (none / 0) (#53)
by eightball on Tue May 29, 2001 at 08:28:12 PM EST

There is so much baloney in this, I can't believe nobody has taken it to lunch.

What exactly are "property rights that would give the sickest dictator alive goosebumps"? If you mean, even a sick powerful individual could do nothing against property owners, your situation is a wash because eventually property owners would cash in. In this particular case, they don't even need to sell the land, just the oil rights, or even just the land.

The value of the land may not increase if there is some potential that is untapped, but it does not necessarily go down unless after being inflated by the presumtion of being able to tap those resources. I would bet that the $10 trillion in worth did not include speculation that some places would contain unfound enormous wealth. If it were known now and it was in that 'no property laws' country, you can guarantee a multinational has made a deal with the government for relative peanuts to take advantage of that situation. Otherwise, it is found wealth, not lost wealth if the owners are stupid or not capitalist minded (hey, I can see why you wouldn't want to sell even if it were in your best interest).

Now, you try to compare the US and the UK. I wish I had an encyclopedia to give real numbers, so I'll have to guesstimate based on my education. You are comparing a country that has 1/5th or so of the population and 1/40th land mass and trying to compare land prices!! That would make population density 8 times greater in the UK vs the US. And what do tresspass laws have to do with ownership. The bank doesn't say: "you let someone cut a corner through your property, therefore, they own it and I can't give you a loan", do they?

I really, really hope you were trying to be subversive w/ your comments and I too sensitive.

[ Parent ]
this story has done de Soto a disservice (5.00 / 1) (#52)
by zooko on Tue May 29, 2001 at 05:49:17 PM EST

Wow. I just read seven comments by apparently thoughtful and concerned readers who thought that de Soto was advocating a kind of simple-minded libertarianism, and were trying to show flaws in such an approach. Every one of these posts made points that de Soto himself makes in his book!

In fact, in many cases they were arguing for the very core of de Soto's thesis! Those people need to read the book. It is very easy and readable, and I think it will be an important book in the future that people will expect you to have read.

I think that the author of this story (who apparently has not read The Mystery of Capital himself), has done a disservice to de Soto, and possibly even to the poor people whom de Soto is championing, by inaccurately portraying him as a narrow-minded idealogue.

Regards,

Zooko



Third-world poverty caused by lack of property rights. | 54 comments (53 topical, 1 editorial, 0 hidden)
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