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    Lt. Col. Karen Kwiatkowski..., 2004-02-21 17:15:41 | Main | FPF says that Milosevic may ge..., 2004-02-23 21:23:56

    how to sell land reform to a capitalist:

    apparently you first establish that you're more of a capitalist than the mark, who you deride in the subtext as an elitist crony who doesn't actually believe in capitalism, before explaining that the process of legalizing organized land invasions by disparate anti-capitalist movements will encourage entrepreneurship and real estate development. If only I was so clever.

    "At the time of the fall of the Berlin Wall, we all decided to take the capitalist route. Right now it's quite obvious that about 80 percent of the people in developing and former communist nations have not benefited from the system. The fact that there's no alternative around for the moment doesn't mean that one cannot be created. It's obvious that people are trying to find other ways. ...

    In Latin America, we found that in at least five opportunities, all our countries put together since the 1820s, when we found our freedom from Spain, [have] actually tried to follow the U.S. model or the Western model. We've privatized railways and we have lowered our tariffs to zero and we've opened ourselves up to foreign investment, and five times we've had to go back because it made sense for a very small [group] among of people at the top of the pyramid, but for the majority it didn't work.

    So our thesis is, basically, the reason it doesn't work for the majority is because the system can only work with property rights. Markets and capitalism are about trading property rights. It's about building capital or loans on property rights....

    I don't know why it is that everybody expects that when you go and you talk to rich people throughout Latin America or Asia or the Middle East you are in touch with people who have the same libertarian principles that you do. You don't. The real constituency is below, and until the people who consider themselves real capitalists realize that they're not real capitalists, they're talking about the systems of privilege that existed way before popular capitalism was in place."

    That's Hernando de Soto in an interview a few years ago on PBS. He was the personal adviser to Peru's Alberto Fujimori during the brief period of his elected presidency, resigning a few months before Fujimori's self-coup, and populist frontman for the ILD. He apparently has, roughly counting, one program for reforming third world economies: give the informal economy formal paperwork. There's no reason to disagree, whatever your general persuasion; collective economic organization - if you're, say, an indigenous or religious commune - can operate just fine within a system of formal property rights, sometimes too well, if you're, say, an intolerably successful and eccentric Hutterite colony. The idea isn't particularly new, either, De Soto is just a particularly popular advocate of land registration, which isn't, among other things, a stand-alone solution for third world poverty reduction:

    Indeed, when poor households hold land, they still face constraints which frequently either prevent them from fully benefiting from it or losing it altogether through distress sale. A number of studies have noted that in the absence of inter-temporal markets, especially in credit and insurance, poor farmers are left without a risk coping mechanism, making them highly vulnerable to distress sales, and putting them back into the ranks of the landless (Deininger and Feder, 1998). ...

    While the literature discussed above lends strong support to the notion that reforming land and real estate can produce benefits to the poor, such a conclusion bears important qualifications. A number of studies covering both urban and rural areas have questioned the effectiveness of specific instruments, such as land registration, housing finance, or formalization of tenure in squatter settlements, as a panacea to poverty and productivity issues. Plateau (1995) questions the conceptual underpinnings for doing land registration in Sub Saharan Africa. He argues that property rights and demand for such institutional arrangements have not evolved enough to warrant the supply of land registration systems. Varley (1987) questions the relationship between tenure legalization and housing improvements and argues that such improvements are more the result of provision of services, which often accompany legalization of tenure. Razzaz (1991, 1993) finds no significance of titled over untitled peri-urban land in Amman, Jordan, where the threat of eviction is minimal and formal credit is unavailable. In rural areas, Bruce and Migot-Adholla (1994) do not find any consistent link between robustness of property rights (proxied by the extent of transfer rights) and agricultural yields in eight African countries. They speculate that the relative abundance of land and the lack of development in factor markets (labor, capital) and farm produce may account for such findings. Similarly, Atwood (1990) and Carter and Weibe (1990) find no increase in investment where credit markets are not available. In a study of the relationship between owners and tenants with usufruct rights in Niger, Gavian and Fafchamps (1996) find no significant difference in investment levels. In this case, the authors suggest that the usufruct holders held sufficient medium-term tenure security over the land and therefore exhibited similar investment behavior to that of the land owners. It is also important to note that in studies from Honduras and Paraguay (Lopez, 1995; Carter and Olinto, 1996), while titled land gave some land-holders greater access to existing credit markets and investment opportunities, the poorest (smallest land holders) were still rationed out of participation.

    The de Soto inspired program in Peru, COFOPRI, got under way nationally in the late 90s. The World Bank has a large 2003 comparative study [pdf, 13M] which identifies continued mass migration into Peruvian urban centers as a problem, and because of a 3 hectare limit on land rights half the farmers in the country remain excluded in part or whole from the formal system. Peru's major policy dilema happens to be the continuing pervasiveness of rural and indigenous poverty, and COFOPRI was primarily engineered to target the urban poor occupying public land (that is - legalizing organized land invasions after the fact) Whether it will have a long-term positive impact isn't set in stone, and remains dependent on other policies, the symptoms of which can be measured by whether people are able to retain their newly (re)-recognized assets (globalize this discusses this in more detail), whether continued migrants into urban populations can find affordable housing (titling land tends to increase property values, and therefore rents), and if the newly acquired titles result in the sort of real estate boom associated with financial meltdowns.

    Is it a universal solution? Is a system of formal property rights for the poor going to help landless farmers who are really landless? Not without your National Confederation of Indigenous Nationalities or Movimento dos Trabalhadores Rurais Sem Terra to organize the land invasions, in which case De Soto's paperwork isn't sufficient, but necessary. It also doesn't do anything about international agricultural markets, the IMF/WB push for privatization of public assets such as water infrastructure, corporate welfare, or, generally speaking, the host of issues the global justice movement types tend to rail against. It has the potential to expand the revenue base for funding public works or for transferring wealth to elites, depending on other policies.

    At the same time de Soto has been embraced by the right and neoliberals as the solution to all their problems in pushing the same old agenda - not altogether a bad thing. For the one it's a way of arguing against welfare-oriented poverty reduction programs - which it doesn't: owning a home when you're unemployed doesn't put bread on the table. For the more cynical his stump speech can be used to blame third world problems entirely on the third world, which, sure: the cooperative, Western and Soviet-backed elites of third world countries did what they could to prevent a system of democratic capitalism that would lead to competition for political and economic power from the unruly masses. That was the half the point of supporting them in the first place. The neoliberals offer De Soto up as a sort of figleaf for their good intentions, and seem to ignore his rather vociferous criticism of their grandiose, generally continuing, failures elsewhere. Probably a good idea if you want to gain some traction with a particular policy, but he gets oversold for what is a limited program to attempt to resolve a particular disparity in legal protections that, if solved, is a perfectly fine step in a positive direction that engenders equal protection under the law, and is neither here nor there when it comes to ideological battles over capitalism, socialism, free trade, or so many other disputed naming conventions.

    Egypt is just beginning a COFOPRI-like program, it's expanding throughout Latin America (similar programs have been part of Chavez's program in Venezuela, among others, for some time). Jack Kemp and Bill Clinton are calling De Soto's ideas "revolutionary". What is revolutionary, one suspects, is that Western elites are advocating what is a program of de-facto voluntary land reform for the third world, something I don't think we've seen since the New Deal establishment caved in on itself long ago (e.g. Japan, and rather more temporary programs in the Philippines to get rid of the Huks - failed reform in the longrun that was repeated in some fashion or another once a decade for 30 years, before the latest program became more or less permanent because the other problems haven't been dealt with). From a bunch of people who've been pushing for the rights of foreign investors in these countries for decades, often violently, it's about time they started advocating the rights of the people living in them.


:: posted by buermann @ 2004-02-22 19:36:48 CST | link





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