Defeating Global Poverty

I wrote previously about an insightful book by Hernando de Soto called The Mystery of Capital which argues for the importance of legitimizing land rights for the poor as a key in breaking poverty. By not having legal right to property, the poor people's property is effect "dead capital" as it cannot be used as collateral, sold or inherited.

The Economist recently published an article called The mystery of capital deepens which follows the progress of an interesting land rights situation in Argentina. On the outskirts of Buenos Aires, a number of squatters outlasted various governments until a new government expropriated the land and gave it to the squatters. But some of the squatters didn't like the terms, so there are now two groups side-by-side -- land owners and squatters.

Summary of results: [Here is a more in-depth study.]

• secure land rights encourage the poor to improve their residences/living conditions
  
• [poor] titled landowners have no better access to financial services

This demonstrates the continued need for alternative financial services for the poor -- e.g. microfinance. The large, traditional bank sector continues to have little appetite for serving the poor.

Labels: de soto, economist, poverty, property rights

I think it is pretty much unanimously agreed to by most economists that in order to unleash the full potential of the wealth creation process of capitalism that a nation needs to have a reasonable and predictable methodology for defining and managing property rights.

Desoto heads up a Peruvian economic think tank. In this book, he describes the historical development of property rights in the developed world and how property rights work today in the rest of the world. He argues for property right reform as a critical component to economic development in 2nd and 3rd world nations.

Read full book review

Labels: book reviews, de soto, poverty, property rights