Thesis: Poor are worse off because they don't have a proper system of legal property and judicial courts. ( )

The premise is deceptively simple yet apparently a groundbreaking piece of thought in development economics. The failure of the convergence hypothesis is here blamed on the failure of developing and ex-communist nations to convert their private assets into fungible capital, and in that regard, development policies and advice from the west have missed out on barking up one all-important tree. De Soto and team survey the inadequately-emerging world and tot up the staggering total of USD 9.3 trillion in "dead capital"--assets which are owned locally and managed as best they can be, but without proper title and therefore without the fungibility necessary to access trust, credit and the wherewithal to leverage into capital goods--goods which provide the means to generate cash flows, claims on the same, and investment growth.

The legal routes to doing this are revealed in a few case studies for all their insurmountable obstacles: legally registering a small (one employee) garment workshop in Lima takes almost a year and 31 months of minimum wage earnings; obtaining title to an urban dwelling in the Phillippines would take 13-25 years, and so on. Faced with this, citizens have no choice but to opt for "extralegal" ownership, critically damaging the prospects for expanding out of subsistence and spontaneous local trade.

Why is this so? Apparently because smart lawmaking has been overlooked, and few people know how to do it, or have any idea of how it was done in the convoluted histories of developed countries. Thus begins an examination of how this "bell jar" of formal legality within extralegality was lifted in the post-colonial United States, semi-conscoiusly and over many decades. Through this tale, the author highlights the implicit social contracts between people on the ground, and the observation that legitimate property rights and contract laws only gained traction and served the emerging US society and economy where they embraced and encoded social norms. Not when they were crafted on the entitlements of foregoing English law, or otherwise made up on ivory tower drawing boards for the purpose of imposition. The political awareness of this development is severly lacking because it was not documented and is not in the history books--at least not concisely. The globalisation brigade thereby completely misses this mark in its stabilisation and adjustment recommendations. And that is precarious too--not too long ago, we are reminded, the edifice of capitalism was looking tenuous, with perhaps the US and England its sole adherents, and it could have fallen away for good.

De Soto eschews failed attempted reforms from both right (private property rights through mandatory laws) and left (pooling poor citizen's land in government collectives) as both failing to give the people they try to help what they want, or need. "Property" is not "assets"--it is a construct for fixing assets as fungible (tradeable) items--encouraging investment, repelling theft, and transmitting accountability.

Brilliantly illuminating. This reviewer had not had these ideas outlined in any coherent way before, and she very much hopes to discover more about this.

Francesca ( )

http://www.paganvigil.com/C1874472463... ( )