Posted on 12/08/2010 4:19:34 AM PST by Kaslin
Of the 6 billion people on Earth, 2 billion try to survive on a few dollars a day. They don't build businesses, or if they do, they don't expand them. Unlike people in the United States, Europe and Asian countries like Japan, South Korea, Hong Kong, etc., they don't lift themselves out of poverty. Why not? What's the difference between them and us? Hernando de Soto taught me that the biggest difference may be property rights.
I first met de Soto maybe 15 years ago. It was at one of those lunches where people sit around wondering how to end poverty. I go to these things because it bugs me that much of the world hasn't yet figured out what gave us Americans the power to prosper.
I go, but I'm skeptical. There sits de Soto, president of the Institute for Liberty and Democracy in Peru, and he starts pulling pictures out showing slum dwellings built on top of each other. I wondered what they meant.
As de Soto explained: "These pictures show that roughly 4 billion people in the world actually build their homes and own their businesses outside the legal system. ... Because of the lack of rule of law (and) the definition of who owns what, and because they don't have addresses, they can't get credit (for investment loans)."
They don't have addresses?
"To get an address, somebody's got to recognize that that's where you live. That means ... you've a got mailing address. ... When you make a deal with someone, you can be identified. But until property is defined by law, people can't ... specialize and create wealth. The day they get title (is) the day that the businesses in their homes, the sewing machines, the cotton gins, the car repair shop finally gets recognized. They can start expanding."
That's the road to prosperity. But first they need to be recognized by someone in local authority who says, "This is yours." They need the rule of law. But many places in the developing world barely have law. So enterprising people take a risk. They work a deal with the guy on the first floor, and they build their house on the second floor.
"Probably the guy on the first floor, who had the guts to squat and make a deal with somebody from government who decided to look the other way, has got an invisible property right. It's not very different from when you Americans started going west, (but) Americans at that time were absolutely conscious of what the rule of law was about," de Soto said.
Americans marked off property, courts recognized that property, and the people got deeds that meant everyone knew their property was theirs. They could then buy and sell and borrow against it as they saw fit.
This idea of a deed protecting property seems simple, but it's powerful. Commerce between total strangers wouldn't happen otherwise. It applies to more than just skyscrapers and factories. It applies to stock markets, which only work because of deed-like paperwork that we trust because we have the rule of law.
Is de Soto saying that if the developing world had the rule of law they could become as rich as we are?
"Oh, yes. Of course. But let me tell you, bringing in the rule of law is no easy thing."
De Soto started his work in Peru, as an economic adviser to the president, trying to establish property rights there. He was successful enough that leaders of 23 countries, including Russia, Libya, Egypt, Honduras and the Philippines, now pay him to teach them about property rights. Those leaders at least get that they're doing something wrong.
"They get it easier than a North American," he said, "because the people who brought the rule of law and property rights to the United States (lived) in the 18th and 19th centuries. They were your great-great-great-great-granddaddies."
De Soto says we've forgotten what made us prosperous. "But (leaders in the developing world) see that they're pot-poor relative to your wealth." They are beginning to grasp the importance of private property.
Let's hope we haven't forgotten what they are beginning to learn.
The Mexican farmer has little reason to try to build complex infrastructure because a corrupt politician can take it all away, often using antiquities laws. That keeps productivity low unless they leave the country and head north.
“Huh? Stossel met Hernando de Soto? Wow, he must be really really REALLY old.”
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Or there was a REAL fountain of youth, who knew?
You stay that way because modesty is a virtue?
Very true. We are loosing property rights, both from the state and by the banks (title fraud).
Clearly you are right, the government owns our property forever, through the tax system.
They have nothing better to do, I guess...
Aid mostly decreases death rate, and increases birth rate but does NOTHING to change the economic infrastructure.
Malthus ALWAYS wins that one.
Not exactly true anymore. The government takes so much, its very hard to move up into another tax bracket.
As far as the Third World poor, there are likely many of them with lots of intelligence and drive, and the system makes it very hard for them to get anywhere. The system will not easily be changed because the Elites of those countries like it that way -- they don't WANT business competition from the non-Elite, so they purposefully make it hard for somebody without "connections" to prosper.
But do we really own property when the local government can step in and take it away if we fail to pay taxes on it every year ?
People rant about income taxes, but at least those taxes are only paid once — at the time the income is received. You spend what is left over (after you’ve paid taxes on that income) on property, and then you have to pay taxes on the property every year forever ? Usually with no control over what value some faceless bureaucrat assigns to your property ? To me, that makes property taxes the most evil of all taxes.
The poor stay poor because they have lost the ability to plan for the future or even hope for a future. Everything is in the now—they want instant gratification—if given money they spend it hoping to buy something that will make them happy. A new flat screen TV or a Boob Job, or new toy. It never lasts as things can not give one lasting satisfaction. The Middle Class and Rich know they must sacrifice for the future, to build a life, a business, a dream. Short term pain for long term gain. What is needed is HOPE.
EMINENT DOMAIN
...In my opinion, a very very very bad law.
I’ve had enough ‘hope’, and change, to last a lifetime.
What you want something to succeed you spend tax dollars to support it, what you want to end, you tax. So we give money to the poor and them wonder why it expands and grows as we tax the wealthy and wonder why their numbers grow fewer. Ask yourself this; does Mexico give aid to their poor citizens? Why does Mexico have as many millionaires as the USA? What do they know that we don’t know? Mexicans are some of the hardest working folks out there.
Is there any habitable land on earth that is not taxed?
Bumo
Bump for later.
The IDEA that our Rights come from God, not the government, and are protected by the Constitution, including freedom of speech, gun ownership, property ownership are the reasons that the USA has the been the home of prosperity.
This is the reason the the TEA Party resonates today, the return to the respect for the principles of Constitution.
I would suggest that the native Americans and other native peoples around the world that lived as hunter gatherers were not poor, in fact until they came in contact with the west most were perfectly happy and many probably believed that they had everything.
People always forget that when this country was founder only property owners were allowed to vote.
Things started to go downhill the minute they let “everyone” vote. Voting should be a privilege that has to be earned.
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