mr. zilla goes to town

Sunday, September 14, 2003

Unsolved Mysteries Of Capital

Hernando De Soto's basic question in The Mystery of Capital is: why is capitalism caning in the west and producing massive amounts of wealth, but fcuking people over everywhere else?
And his answer is that poor people in the 3rd world aren't really poor. They have a shedload of assets - mainly extra-legally held land and its improvements, which are upto 20 times the size of the entire formal economy. The problem is these assets are not centrally and uniformly legally recognized by government/financial institutions, and thus are non-fungible, inaccessable to the wider market, and therefore they are unable to leverage these (physical) assets - into (conceptual, economic) wealth-generating capital.

His solution is politically driven legal reform program to discover and meld the existing extra-legal, local-level social contracts around these assets with the formally recognised capitalist system "ball jar" that the elite already has access to. He undertakes a reading of 19th Century US development of unfied stable legal property rights as the key historical example of where and how this actually took place in the west. Notes that no one has really noticed or understood because the process of property creation only had the creation of capital as an incidental undercurrent, not a primary goal.

He's kind of come full circle to the 'modernization with temporal displacement' camp that was the paradigm in the 1950s but I think with a more sound empirical grounding. The book does get slightly repetitive on the main themes (as in he seems to have pulled sequential but independent articles together into one book).

However in the entire book I only caught one oblique reference addressing indigenous land rights and traditional collective forms of ownership. Admittedly the major focus of his attention is the urban slum-dwelling poor, but this seems to be a gap in his theory.

Inside our modern West we define ourselves by our labour; in Bougainville people define themselves by their ples (village, place). Villages may not have formal title to their land, but they do consider much of it non-transferable and non-riskable. Any capitalizing leverage system surely implies a degree of risk over property ownership, and while we may argue that the risks are small and the benefits great, try arguing that to people who've seen the mountain of their ancestors destroyed forever and believe the CIA is poised to invade. Even under the Native Title Act in Aus (or its Howard-begotten spawn, the miscellaneous and many Native Title Amendment Acts of 1998) I'm not sure such capitalisation of indigenous rights or title was possible. I could be wrong there though.

Still it seems that unless you want to tear down the structures and beliefs of a whole society, and increase its vulnerability to whatever global or regional player next decides to move in, dig mines, go fishing, vertically integrate their cocoa chain or lop forests, the De Soto property paradigm isn't suitable for application in somewhere like Bougie. I think I fall into the "culture matters" camp - more in agreeance with Michael Edwards who came to an after work chat last friday for the New Rules For Global Finance Coalition.


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