Tag Archives: Hernando de Soto

Property rights needed for post-Mugabe Zimbabwe

Determining who owns the land is a necessary step to development and democratisation in Zimbabwe. Nearly all Zimbabweans who benefited from Mr. Mugabe’s land reform policy lack titles, or legal ownership of their property — leaving them at the mercy of the politically powerful. Titles are necessary if landowners are going to secure bank loans and without these loans farmers cannot buy the equipment needed to move on from a subsistence farming environment and their dependence on the government for aid etc.

Government officials, aware of the situation, have urgently started to survey the 6,000 farms that were seized after the fast-track program (where white farmers were forced off their land by the pro-Mugabe ‘Zimbabwe National Liberation War Veterans Association’) in the late 1990’s. This move will hopefully mean that Zimbabwe can now qualify for badly needed loans from international creditors like the International Monetary Fund and the World Bank.

Mr. Chaparadza, the village leader, said that as part of any resolution of the land issue, the new government should compensate white farmers.

“Even if they come back, that’s fine as long as they give us another place,” he said. “We won’t deny them. What we need is only some land where we can survive — and title to the land.’’

Property rights and Hernando de Soto

Peruvian economist Hernando de Soto sees a main obstacle to the development of markets and capitalism within developing countries being linked with the lack of property rights. The result of this is that most people’s resources are commercially and financially invisible. Nobody knows who owns what or where, who is accountable for the performance of obligations, who is responsible for losses and fraud, or what mechanisms are available to enforce payment for services and goods delivered. Consequently, most potential assets in these countries have not been identified or realized; there is little accessible capital, and the exchange economy is constrained and sluggish. However in the West, where property rights and other legal documentation exist, assets take on a role of securing loans and credit for a variety of purposes – building capital with capital.

De Soto estimates that about 85% of urban parcels in Third World and former communist nations, and between 40 and 53 % of rural parcels, are held in such a way that they cannot be used to create capital. The total value of the real estate held but not legally owned by the poor of these countries is at least $9.3 trillion. This is approximately twice as much as the total circulating U.S. money supply and nearly as much as the total value of all the companies listed on the main stock exchanges of the world’s twenty most developed countries. The lack of such an integrated system of property rights in today’s developing nations makes it impossible for the poor to leverage their now informal ownerships into capital (as collateral for credit), which de Soto claims would form the basis for entrepreneurship. However, in reality, it cannot be seen as the panacea. Titling must be followed by a series of politically challenging steps. Improving the efficiency of judicial systems, rewriting bankruptcy codes, restructuring financial market regulations, and similar reforms will involve much more difficult choices by policymakers. Zimbabwe seems to be in need of Hernando de Soto’s ideas. His book The Mystery of Capital: Why Capitalism Triumphs in the West and Fails Everywhere Else is a good read.

Source: New York Times – 20th January 2018

Below is are two great clips from the ‘Commanding Heights’ series with Hernando de Soto talking about property rights. The second one has an interview with a Tanzanian coffee farmer and asks the question – “who owns the land around here?”