Posted by: erichosemann | September 30, 2009

Hernando de Soto and The Power of The Poor

This looks to be a promising program: The Power of the Poor, airing October 8th at 10pm on PBS (check your local listings), features Peruvian economist Hernando de Soto investigating the extra-legal institutions of exchange developed by poor people throughout the world. Reference to de Soto’s earlier work along these lines can be found in Tom Bethell’s The Noblest Triumph.

What institutions can enable the world’s poor to realize their power and achieve prosperity?

Based on what I’ve read in The Noblest Triumph, the institutions of private property and sanctity of contract, concomitant with due process and equality before the law, have the best chance of helping the world’s poor out of poverty.

Imagine the amount of power unleashed once the world’s poor knew their property was free from plunder and their efforts to exchange it were backed by sturdy contract law.

Imagine the prosperity generated by the world’s poor trading with each other and the world at large, knowing they can rely on robust and impartial legal systems to defend their rights.

The roots of a people’s self determination and fulfillment lie in their ability to freely use and exchange their own property.  Self-determination depends on property rights, sanctity of contract and due process. Those things, taken together, create a passport to the future in the form of credit.  If a person cannot count on their property being safe from the jealous hands of their government or their fellow citizens, they cannot make plans for the use of that property, and they certainly cannot borrow against that property to expand their life options.

There is a deep irony in the idea that private property exists as a physical gateway to the future. Other ideologies, those that disavowed private property for communitarian arrangements, were supposed to represent the future of human progress and social evolution. This turned out not to be the case.  A friend of mine, an immigrant from a country that was once part of the Soviet Union, told me that private property and credit are for him two of the defining characteristics of freedom in the United States. “Credit means people can plan for the future,” he proudly told me.  Planning for the future is next to impossible if you aren’t allowed to own anything, or if that ownership is continually under siege by bandits and capricious bureaucrats.

If the world’s poor gain access to the institutions of private property and sanctity of contract, they will realize their power by planning their own prosperous futures.

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