Monday, 5 December 2016

Western Riches

Who Owns What?

If We Don't Know And Can't Tell, Poverty Beckons

One of the more challenging aspects for the Western reader of Hernando De Soto's book, The Mystery of Capital is to be confronted with how much we all take for granted.   We are privileged to have inherited a system of title to property, the end result of which is to set us free from serfdom.

There are few serfs left in Western countries.  In New Zealand, those that are serfs are kept in that position by oppressors, acting criminally.  We have had instances of migrant labourers being kept in a state of slavery as their "owners" seize their passports, pay them a pittance in cash under the counter, and work them to exhaustion.  We have foreign fishing vessels working in our national waters being crewed by slaves.  So serfdom continues, in a few extreme cases, but it requires criminal intent and action to exist.

How did we escape the life of a serf?
 Few today even ask the question, let alone think about it.  Property ownership and capital accretion just is.  How it came to be is never taught, nor considered.

The bottom line is that Western nations have a legal system that recognizes property and registers who owns what.  The register of ownership is a title to property, which means that the owner is entitled us use it as capital.  He or she can sell the asset, use it as collateral to raise more capital, or deploy it so as to earn an income, and so forth.

Without such a formal register of title the asset has little intrinsic value.  The ability to exploit its value to earn an income or create more value does not exist or at the very least is very difficult to do.
Without such a system, any trade of an asset, say a piece of real estate, requires an enormous effort just to determine the basics of the transaction: Does the seller own the real estate and have the right to transfer it?  Can he pledge it?  Will the new owner be accepted as such by those who enforce property rights?  What are the effective means to exclude other claimants?  [Hernando de Soto, The Mystery of Capital: Why Capitalism Triumphs in the West and Fails Everywhere Else (New York: Basic Books, 2000), p.47.]
Ironically, in New Zealand we have a throwback ownership system which illustrates all of these problems.  Significant swathes of land are owned by Maori tribes.  This system of ownership has proved extremely problematic.  Because the tribe owns the land, no-one individual or family does.  Individuals do not have title.  In some cases this is gradually being broken down but it has, and is, taking a long, long time.

Former Communist countries face a similar problem, as do many developing third-world countries.
For most goods, there is no place where answers (as to who owns what) are reliably fixed.  That is why the sale or lease of a house may involve lengthy and cumbersome procedures of approval involving all the neighbours.  This is often the only way to verify that owner actually owns the house and there are no other claims on it.  It is also why the exchange of most assets outside the West is restricted to local circles of trading partners.  [Ibid.]
The existence of such such no-title conditions creates an enormous barrier for poor people to raise their standard of living.  In Western countries it used to be that way; now not so.  Over centuries systems of documenting property ownership developed.  This, more than anything else, indirectly provided a means for the poor to escape impoverishment.

We are confident that the "Western system" of property ownership did not come into existence out of a vacuum.  It was built upon the bedrock of two divine commandments ("Thou shalt not steal" and "Thou shalt not covet.") both of which require or presuppose a system of property ownership and titles.   The sanctity of private property and its accompanying system of ownership and titles is one of the most glorious benefits of the Kingdom of God.  

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