Tapping The Wealth Of The World's Poor [Archive] - MysticWicks Online Pagan Community and Spiritual Sanctuary

Earth Walker

June 6th, 2001, 04:53 PM

I just got this, and it is something worth sharing with
everyone. It is too long to post, so will give you a brief
synopsis. :)

Peru's Hernando de Soto says citizens of the developing
world could thrive if they had legal proof of their assets.

For every dollar the U.S. has in circulation to fuel its economy,
the most powerful economic engine on earth, the poor of the
world have accumulated assets worth twice as much. They've
managed to squirrel away $9.3 trillion US to invest in homes or
vehicles or tools to make a living.
So, if poor people can save so much money, how come they're
still poor?
Part of the answer is simply that there are so many of them to
share that wealth -- five billion in all. But a second point -- a
tragic one because it need not be so -- is that all those assets
don't do their owners nearly as much good as they should.
Why not? That's the conundrum explored in THE MYSTERY OF
CAPITAL: WHY CAPITALISM TRIUMPHS IN THE WEST AND FAILS
EVERYWHERE ELSE, by Hernando de Soto.
His first book: The Other Path, documents that poor people's
investment in their property and their ability to make money from
it can be expected to increase in the order of nine-fold.
And if it doesn't happen, he says sadly, it's likely that capitalism
will defeat itself just as it defeated communism a decade ago.
Because poor people -- five-sixths of humanity -- simply won't
accept a system that isn't allowed to work for them, too.

To believe what you see is to be deceived.
**********************************
Reject all illusions of social harmony.

Earth Walker

June 6th, 2001, 10:15 PM

This book, published last year by Peruvian economist Hernando de Soto, is fascinating readers throughout North America and
Europe who are interested in government policy. When the author made his first visit to Vancouver last week, he drew an audience of more than 300 -- mostly business people, but also
social activists who are equally as intrigued by his ideas -- to a
$55-a-plate luncheon at the Hyatt Regency Hotel.
But The Mystery Of Capital's impact in rich countries like Canada
is minor compared with the splash it's making in Latin America,
especially Peru. There people turn out by the thousands to buy
copies at special presentations on the streets of the ubiquitous
shantytowns, and it has outsold convential "best-sellers" by a
factor of almost 40.
For the people of the shantytowns, their interest in de Soto's
work is very, very personal.
De Soto quite literally wrote the book on the chronic marginalization they face back in 1989 when he published
El Otro Sendaro (The Other Path). The book documented the
appalling cost of policies that kept 13 million Peruvians from
meaningful participation in the legal economy of their country.
De Soto became a world-wide star -- the leading proponent of
using a right-wing tool, property rights, to accomplish left-wing
goals, democracy and prosperity for the masses. His think-tank,
the Institute for Liberty and Democracy, began a hands-on
program that actually provided legal title for 1.6 million squatters
and more than half a million formerly illegal businesses before
the project was taken over by the government and eventually
became a casuality of political in-fighting.
The formalization process was immensely popular among Peru's
poor. By 1994 inflation had plummeted from 1,600% a year
before the land-titling process began to about 9%, and Peru had
the world's highest growth rate over and above that.
The reason was the number of enterprises that came into the
system during that period. Then, of course, they paid taxes, and
then the government had money to do things -- $1.4 billion US
just from these small enterprises.
De Soto's new book draws on studies his institute conducted
more recently in four other countries -- Egypt, Haiti, Mexico and
the Philippines -- in addition to Peru.
Some cultural manifestations differ from country to country, the
researchers found, but the essential problem is the same.
That is that everybody in the legal economy -- usually a minority
of the population, but the owners of most assets -- has all the
legal conveniences and protections that we in advanced countries
are accustomed to. Everybody else has none.
Yet, "the poor inhabitants of these nations -- five-sixths of
humanity -- do have things," de Soto says. "They have houses
but not titles; crops but not deeds; businesses but not statutes
of incorporation....
"Even among the poorest countries the poor save. The value of
savings among the poor is, in fact, immense -- 40 times all the
foreign aid received throughout the world since 1945."
"In Egypt, for instance, the wealth that the poor have accumulated is worth 55 times as much as the sum of all direct
foreign investment ever recorded there, including the Suez Canal
and the Aswan Dam. In Haiti, the poorest nation in Latin America,
the total assets of the poor are more than 150 times greater than
all the foreign investment received since Haiti's independence
from France in 1804.
"If the United States were to hike its foreign aid budget to the
level recommended by the United Nations 0.7% of national
income -- it would take the richest country on earth more than
150 years to transfer to the world's poor resources equal to
those they already possess."
While this sounds like a lot of money -- and is -- there's a serious
problem, de Soto says. Any asset that isn't formally owned
automatically becomes what he calls "dead capital."
That means it can be sold only to a friend or neighbour who
happens to know through first-hand observation that it really is
the owners' property to sell.
These trillions of dollars worth of informally owned properties
can't be rented to anyone outside that select circle; they can't
be mortgaged to leverage investment capital; they don't even
provide a sufficiently well documented address to allow an owner
to contract for electricity or telephone service.
Nor can an informal business sell shares to get the capital to
expand or, in some cases, even hang out a shingle to tell the
world what it has for sale. Often their owners have to pay
informal associations to look after things like basic police
protection or crude utility services, and they may pay bribes as
well to keep the authorities off their backs.
And the standardized record-keeping systems like those the rich
world has built tto keep track of assets and information go even beyond buying and selling and raising investment capital, de
Soto tells his audience at the Hyatt.
He relates how, when he arrived in Canada a couple of days earlier, our customs and immigration people wanted to know
about him. But they didn't want him to recite his family history;
they wanted to see his passport.
Similarly, the clerk at the hotel where he's staying isn't interested
in character testimonies from people who know him in Lima; they
want an impression from his credit card.
People who don't have access to such documents -- and that's
most of the people in the world -- simply can't travel or do
business in same way as people who do.
The result is that people with informal assets, even substantial
ones built up painfully slowly over time, find themselves
chronically marginalized. They're stymied at every turn as they
try to improve an asset or capitalize on their investment in it.
The Mystery Of Capital details half a dozen policy steps that
underdeveloped countries can take to first record the assets of
their poor citizens in a culturally acceptable way (culturally
unacceptable ways never work, de Soto argues, and that's been
a big problem with past attempts to include the poor), and then
allow these assets to be leveraged as live capital instead of dead.

To believe what you see is to be deceived.
**********************************
Reject all illusions of social harmony.