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EDITORIAL - Unlock the wealth of the poor
Published: Tuesday | February 10, 2009
Nearly a decade ago, the Peruvian economist and thinker Hernando de Soto placed persuasively before the world something community activists in developing countries already understood: that the world's poor were not all that poor. What they lacked, particularly poor people in Third-World countries, were the mechanisms to translate their wealth into workable capital with which to create additional value.
Or, as de Soto articulated it in his book, The Mystery of Capitalism - Why Capitalism Triumphs in the West and Fails Everywhere Else, having stepped out of an obviously materially endowed environment in a developing country into the apparent poverty beyond, "what you are really leaving behind is the world of legally enforceable transactions on property rights".
Put another way, poor people in poor countries tend to hold resources "in defective forms: houses built on land whose ownership rights are not adequately recorded, unincorporated businesses with undefined liability, industries located where financiers cannot see them".
Still relevant
De Soto's argument, we believe, remains as relevant now as at the start of the decade and ought to have special relevance in Jamaica, as the country scrambles for responses to the global economic crisis. So far, expectations for recovery have largely been hitched to the projected fortunes of the developed world - particularly the United States - which is not unreasonable.
But what has been unfortunately lacking is creative thinking on how to unleash the country's pent-up entrepreneurial energies, especially at those segments where people are eager and looking for opportunities to lift themselves out of poverty.
In concert with Hernando de Soto's concepts, the Bruce Golding administration might wish to consider two related ideas, with which past Jamaican administrations have skirted, but primarily for their political attraction rather than their economic possibilities. One of Mr Golding's recent predecessors, P.J. Patterson, especially understood the deep psychological urge of Jamaicans towards land ownership, which he exploited with his Operation PRIDE shelter project. People could buy government land and then, by working cooperatively and investing sweat equity, develop their homes. Unfortunately, Operation PRIDE became mired in corruption and mismanagement.
Useful resources
The concept, though, remains sound. And the Jamaican Government controls an abundance of land, useful for both agriculture and housing development. It would seem to us that a carefully crafted transparent and accountable programme of land distribution, incorporating elements of Operation Pride and other land-lease projects, could help to unleash the economic potential among people who daily demonstrate keen entrepreneurial skill.
But, this effort would, critically, have to be underpinned by an aggressive programme of reform of the public bureaucracy to make it easier to transact business, and the recording and registering titles, including those for land. It is shameful that after three decades of a land-titling projects undertaken by successive administrations, so much remains to be done. It would also make sense that, as part of this project, the administration supports title insurance schemes of the type launched last year by one private group.
What such a system would do, by affording people legally defined collateral, is unlock capital for transactions. A decade ago, de Soto estimated the value of untitled real estate in the Philippines at US$133 billion, four times the capitalisation of the 216 listed companies. We wonder what would be the comparable data for Jamaica.
Published: Tuesday | February 10, 2009
Nearly a decade ago, the Peruvian economist and thinker Hernando de Soto placed persuasively before the world something community activists in developing countries already understood: that the world's poor were not all that poor. What they lacked, particularly poor people in Third-World countries, were the mechanisms to translate their wealth into workable capital with which to create additional value.
Or, as de Soto articulated it in his book, The Mystery of Capitalism - Why Capitalism Triumphs in the West and Fails Everywhere Else, having stepped out of an obviously materially endowed environment in a developing country into the apparent poverty beyond, "what you are really leaving behind is the world of legally enforceable transactions on property rights".
Put another way, poor people in poor countries tend to hold resources "in defective forms: houses built on land whose ownership rights are not adequately recorded, unincorporated businesses with undefined liability, industries located where financiers cannot see them".
Still relevant
De Soto's argument, we believe, remains as relevant now as at the start of the decade and ought to have special relevance in Jamaica, as the country scrambles for responses to the global economic crisis. So far, expectations for recovery have largely been hitched to the projected fortunes of the developed world - particularly the United States - which is not unreasonable.
But what has been unfortunately lacking is creative thinking on how to unleash the country's pent-up entrepreneurial energies, especially at those segments where people are eager and looking for opportunities to lift themselves out of poverty.
In concert with Hernando de Soto's concepts, the Bruce Golding administration might wish to consider two related ideas, with which past Jamaican administrations have skirted, but primarily for their political attraction rather than their economic possibilities. One of Mr Golding's recent predecessors, P.J. Patterson, especially understood the deep psychological urge of Jamaicans towards land ownership, which he exploited with his Operation PRIDE shelter project. People could buy government land and then, by working cooperatively and investing sweat equity, develop their homes. Unfortunately, Operation PRIDE became mired in corruption and mismanagement.
Useful resources
The concept, though, remains sound. And the Jamaican Government controls an abundance of land, useful for both agriculture and housing development. It would seem to us that a carefully crafted transparent and accountable programme of land distribution, incorporating elements of Operation Pride and other land-lease projects, could help to unleash the economic potential among people who daily demonstrate keen entrepreneurial skill.
But, this effort would, critically, have to be underpinned by an aggressive programme of reform of the public bureaucracy to make it easier to transact business, and the recording and registering titles, including those for land. It is shameful that after three decades of a land-titling projects undertaken by successive administrations, so much remains to be done. It would also make sense that, as part of this project, the administration supports title insurance schemes of the type launched last year by one private group.
What such a system would do, by affording people legally defined collateral, is unlock capital for transactions. A decade ago, de Soto estimated the value of untitled real estate in the Philippines at US$133 billion, four times the capitalisation of the 216 listed companies. We wonder what would be the comparable data for Jamaica.