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I'm willing to bet that the real estate market in a shanty town is less than hot.We should always bear in mind that economics is hard. If the real estate market is not liquid, the bank cannot liquidate the property in case of a loan default. De Soto, observing that "the single most important source of funds for new businesses in the United States is a mortgage on the entrepreneur's house", concludes that by providing real estate property titles to poor people, they will have access to the same type of funds from banks.He forgets two important facts:1) Banks take into consideration the credit worthiness of the entrepreneur asking for the loan. A poor person in a shanty town with a business idea of starting a fruit stand will not be considered credit worthy by any commercial bank.2) Banks take into consideration the real estate market liquidity when making a property-backed loan.
A comprehensive plan to implement a usable set of property rights for a third world country. This was backed up with a lengthy example of the formation of property rights in the US. There were several fascinating examples of what goes on in the informal sector. Most political economy books focus on finding problems and are not nearly as forthcoming with solutions, let alone one that is as detailed and real-world based as this one.Overall the book left me with a reason for optimism about the possibility of third-world countries being helped along in their desire to improve their economic condition. It is also a powerful argument against the idea of culture being the limiting factor to growth.2. This is a very good book.
The nature and degree of extralegal activity in third world countries. This explains why it has been so difficult for countries to implement a property system that is usable for the poor.3. The idea that property rights are necessary for economic growth is not especially new territory, but there were three things the book brought to the table that I was not aware of, or was very impressed with. The idea that a set of property rights will need to incorporate the preexisting "social contract" property rights of the informal sector in order to include most or all of the nation. My only complaint is that it tended to be a bit repetitive, but it was a small price to pay for a potentially world changing idea. 1.
I found it very encouraging that there is so much untapped resource available and more than ready.
Don't waste your money, read the comments here and you've basically read the book. By the fourth chapter, you start wondering how he's going to say what he's already said in a slightly different manner. While the author does raise several points, by the 3rd chapter it feels like de ja vu. Yes, you are really into property rights and yes there's a lot of extralegal activities in developing economies, but do you have anything new to say.
Just look at china and how with their economy has exploded with the limited property rights they have granted. Property rights are the key to advance any civilization out of poverty. This book reveals what needs to be done to bring the third world out of poverty. The everyday American does not have a clue about what made America's economy the best in the world.
:) Surely it would be inexcusable to dogmatically hold to the classical Marxist view if there was indeed an alternate, more humane path to development.The Mystery of Capital takes the basically libertarian viewpoint that an extensive and rigidly enforced private property system is necessary for development to occur--roughly in line with the classical Marxist view about the capitalist development stage that must precede socialist planning. It's also a controversial one. Are they absolutely required. Thus, pure free trade provides another stumbling block to development even if private property laws were extensive and thoroughly enforced. Modern sweatshops, all over the world, are like Charles Dickens' London on a massive scale: child labor, starvation wages, dangerous conditions, 16-hour days.
It makes the case rather well. Compare existing and formerly existing socialist states and their efforts at development against the efforts of *comparable* (you don't compare Cuba with the United States, obviously) nations who have followed the liberal capitalist model of development. On the one hand, the classical Marxist argument seems more compelling and more in tune with reality. On the other, there is a strong emotional impetus to accept the revisionists' theories about moving straight to socialism. Is it really necessary to see all this suffering happen again. Sure, developing nations can freely compete and trade their agricultural products and raw materials, but if they do not protect their markets for *industrial* products, they won't ever develop their own industries. Even with extensive private property laws in place, no infant manufacturing industries are able to compete on the global free market with those of the advanced industrialized nations. Hopefully these books also take into account the effect of the crippling American-led embargo, or else their conclusions will be flawed in favor of the libertarian/classical Marxist view.
For a further development of this argument, check out books by Ha-Joon Chang (Kicking Away the Ladder) and Erik Reinert (How Rich Countries Got Rich.Why Poor Countries Stay Poor). Since 100+ reviewers have already summarized the book, I won't. The industrially undeveloped countries must be protectionist about their manufacturing industries until they are sufficiently developed to compete against established global companies. After all, the entire third world is just waiting on my answer about what it should do.
To what extent do private property rights--dividing up the earth among individuals, making everything a commodity which can be bought or sold--facilitate economic development. Overseas development can only help working people in the first world: as other countries develop, their wages rise, and Western capital stops going overseas to exploit super-cheap labor, so more jobs stay here in the West. For them, development of industries in the undeveloped countries represents merely a loss of cheap labor and a bunch of new competitors.Finally, what about the revisionist Marxist view, that of Trotsky, Che Guevara and others. Private property rights must be granted and protected by the government, development must take place under the "guidance" of capitalists (they are really just seeking their own individual self-interest, but in the aggregate they guide things), productive capital must become ever more concentrated into fewer hands, until eventually the forces of modern production are too large and too concentrated to be held by any one person in a society that considers itself democratic, and control of them must be taken away from individuals and given to society as a whole.Like any honest Marxist, although I'm convinced of the need for a planned economy in any highly industrialized society, I'm torn on the question of third world development. An Indonesian car is not going to be able to compete on the free market with Japanese and American ones.
For we live in a different age than the one in which classical Marxism was born. Could a planned economy manage to guide development, perhaps with (nearly) as much speed, but a lot more consideration for humanity.This is an important question for Marxists as well as others. Many books have been written on the Cuban case, putting it in comparative perspective against Latin American nations with similarly undeveloped economies who have followed the capitalist model, and looking at whether Cuba's policies can potentially serve as an alternative path to development. New and unique obstacles therefore face those who wish to industrialize in today's global economy. Needless to say, this will require a political battle by common working people of the first world against the economic elites of their own countries. To continue with the same example, protectionism would allow an Indonesian car maker to grow to the point where it was providing cars for the entire Indonesian domestic market. However, Western economic elites--by which I mean to refer to that select group of people who are in a position to personally profit from lack of development overseas, the owners of the capital that is benefiting by exploiting cheap foreign labor--will continue to try and make free trade, which is an impediment to development, a condition of Western loans and aid. I personally haven't read any of these books on comparative development in Latin America, but I plan to do so soon.
In terms of legal systems, they believe it is possible to bypass a system of private property and free enterprise, moving directly from feudalism (landlords and peasants) to socialism (collective ownership of the means of production, distribution and exchange) without capitalism (the private ownership and building up of small businesses into giant capitalists industries, aka the MoP).Classical Marxism--represented by Marx himself, most Marx scholars, and politically speaking, by (for instance) the Russian Mensheviks--holds instead that every society must pass through a long period of capitalist industrialization before it is ready for socialism. It nicely rounds out De Soto's hypothetical argument about what is required for the *future* development of the third world.Even if the argument of De Soto/libertarians/classical Marxism is correct, no one should think that legally-enforced private property is all that is necessary for development today. It is possible to empirically check up on that line of thinking: just examine the record of states which have attempted development under capitalist and socialist legal systems. Adherents of Trosky's theory of Permanent Revolution (Bolsheviks more generally, in fact), and of Che Guevara's theory of peasant-based rural guerrilla rebellion, insist that it is possible and desirable to make the transition directly from an underdeveloped, largely agrarian society to an advanced, industrial capitalist economy under the auspices of socialist planning. At this point, it would be robust enough to have at least a fighting chance should the Indonesian government open up the automobile market to free trade, allowing foreign companies to sell cars in Indonesia and the Indonesian company to sell cars in foreign countries. Today there is an unprecedented development gap between the industrialized and undeveloped world, something that wasn't faced by the early industrializers (Britain, Western Europe, and America). Must all of humanity really pass through the ugly period that the West experienced while capitalism was developing here. Instead I'll suggest reading De Soto in conjunction with Law and the Rise of Capitalism by Michael Tigar, which documents the *actual* role that libertarian (bourgeois) property rights had in the *actual* development of capitalism in the West.
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