Monday, December 7, 2009

The Power of Property Rights

I've been reading Hernando de Soto's The Mystery of Capital and am very impressed. For a good summary of his basic message you can watch this 30 minute talk he gave at conference this past July. His basic message is that getting people legal property rights will go a long way towards lifting them out of poverty. I agree.
The hard part is actually accomplishing this.
When I was working in the Gambia I remember talking with a man who was trying to get his village to work together on a project. For this project they needed some land. As I was living in the village at the time and familiar with project's goals, the guy asked me where I thought might be a good place. I counseled him to pick a plot of land farther from the village because there would be fewer hassles over conflicting property claims if the project eventually ever started making a profit. I had a few other concerns about the project, mostly stemming from its communal nature, which in practice meant that most of the work would fall upon the women of the village who already had plenty to do. But in any case the guy (who was really well-intentioned) basically ignored my advice and together with other villagers decided on a plot that was closer to the village because it would be more convenient for the women.

Within a couple days two families were physically assaulting each other because they both claimed ownership of the land in question.

Thats the problem with informal ownership, which is part of de Soto's point. But formalizing ownership isn't easy. Many, especially politicians, would probably rather let sleeping dogs lie while those who are benefiting from what de Soto calls "extralegality" will actively oppose attempts to shine light on their dark and fuzzy dealings.
Its been nine years since de Soto published his book and his organization, the Institute for Liberty and Democracy, gained a wider audience. I'm looking forward to reading about what progress (if any) they have made in helping developing countries with this formalization process.