Haters of Mankind

The Grubby Basement

Why has capitalism "triumphed" in the West, but languished in most other nations around the world?  Doubtless the reasons are many, but one in particular stands out.  Western nations have developed and deployed systems of universal recognition of property, and sanctioned them with property law and rights of ownership.

One reason this has occurred in the West, but not elsewhere, is a consequence of  the Christian faith.  Property, according to the Christian world-and-life view, is not just sanctioned by the eternal omnipotent God: it is protected by His holy law.  To the extent that a society does not comply with the rights of ownership, of private property, and attendant due penalties against theft and covetousness, property ownership will be undermined and under attack.

One consequence of such beliefs is the necessity of registering title to property, which in turn requires accurate and widely recognised definitions and descriptions of the property in question.  Think motor-vehicle registers, along with number or registration plates for example.  Or reliance upon serial numbers, for another.  It is hard--impossible--for private enterprise and capitalism to develop in nations which have no way of representing, defining, and describing what is owned by whom.

As De Soto puts it:

Recognizing Who Owns What Essential to Economic Growth

What's Yours is Yours; What's Mine is Mine

The sanctity of property and property ownership is established and protected by two commandments: the eighth and the tenth--

Thou shalt not steal
Thou shalt not covet.

Since these fundamental commandments are inscribed into the heart of every human being, it is not surprising to find that in most human societies that exist for more than a few generations there is a respect for, and recognition of, the sanctity of private (that is, not-government owned) property.  This respect can take many forms but they all fundamentally boil down to a recognition by a community that "John Doe owns that field there, and Anne Smith owns this dwelling here."

When property ownership becomes formally codified within a country or jurisdiction the potential for economic development and the creation of wealth increases exponentially.

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?

The Potency of Title

Civilisation is Skin Deep

Sometimes the most profound realities stare us in the face every day and we fail to see them for what they are.  Property and property rights are one of these profundities.  In the West, we take them for granted.

When ordinary people have few or no property rights, they are stripped, vulnerable, and naked--subject to the slings and arrows of outrageous fortune--and to the depredations of tyrants.  A recent movie which illustrates this most powerfully is Leviathan,  Set in Russia, it is one of those masterpieces which haunt you for weeks afterwards.  Central to its plot is the issue of property rights, or the lack of them in Putin's Russia.

Westerners live in societies so grounded in fundamental and derived property rights that we scarcely think of them.  It takes an outsider to point out what we all take for granted.

The Mystery of Capital

Of Course!

We have just completed reading Hernando De Soto's The Mystery of Capital: Why Capitalism Triumphs in the West and Fails Everywhere Else (New York: Perseus/Basic Books, 2000.)  It is a seminal piece of work and deserves wide readership.

De Soto's thesis can be summarised in a series of seven propositions (which he sets about establishing in the book).

1.  The existence of capital is inextricably related to establishing a system of legal title for property.

2. Once legal title is established, property can be transformed into other forms of wealth.  Land to which one has legal title, for example, can be used as collateral for a bank loan.

3. Long before a system of legal title is established in a country or state, an informal system of ownership usually exists which recognises (amongst the participants) a person's title to property.