Sunday, March 04, 2007

The Missing Proletariat

As some of you may know I'm a big fan of Economist Hernando DeSoto. I covered some of his thinking in Property. Which is all about the historical origins of property. Of course the origin of the desire for property is biological. What property rights do is minimize the fighting about property. Making the owner more secure.

Economic development expert Peter Schaefer says we have a property problem in Iraq.

Vietnam sparked Schaefer’s interest in economic development. I spoke to him yesterday (March 2) on the phone. Pete told me: “I couldn’t get my mind around the fact that the Vietnamese people were so smart and industrious and yet they were just so damn poor. The (destructive effects of the) war didn’t answer that for me. Why would someone choose Mao over Jefferson?”

Schaefer concluded the Vietnamese Communists pursued a calculated land reform policy, one that leveraged Vietnamese villagers’ traditional recognition of property rights.

He also looked at World War Two. “One of the crucial pieces of what we did in Japan was to give property rights to peasants who didn’t have them,” Schaefer said. “That was fifty percent of the population, approximately. General MacArthur (on the advice of his staff) gave the peasants their land and almost overnight created middle class. It was a brilliant move.”

In the 1990s, Schafer noted, Peru turned the “land reform” tables on the Communists. Property right reform helped defeat Peru’s “Maoist” Shining Path guerrilla movement.
OK. That was the wind up. How about the pitch?
“The Third World is not populated by proletariats, it’s populated by entrepreneurs– successful small business people,” Schafer said. (And that is what I’ve seen in the time I’ve spent in developing nations.) He added: “If you are someone who is surviving and raising a family by taking a bunch of bananas from out the city and bringing it in (to sell) you are an entrepreneur. You understand business —by low sell high And if you come to them and say you want to extend credit to them they understand that.”

In Schafer’s view, property right reform gives Iraqi Prime Minister Nouri al-Maliki’s government a very powerful political weapon, one that has war-winning potential.

Schafer supplied some fascinating evidence. According to Schafer, less than five percent of Iraq’s cultivatable agricultural land is “freehold” (owned with clear title). 95 percent of the cultivatable land in Iraq is therefore “dead” (illiquid) and cannot be used as security for a bank loan. “Iraqi farmers who lack clear title can’t get (bank) loans,” Schaefer said. That limits economic creativity, particularly in a population demonstrably successful at small business operations. Schafer believes that 95 percent of family homes in Iraq also lack clear, secure title.

“Prime Minister Maliki needs to go on television,” Schaefer advised, “and say “Citizens of Iraq, 95 percent of the property in this country is not legally in your name. You don’t have title to your own land or your own houses. We’re going to change that right now.””
The article gives lots more reasons for doing property reform. So go read it all.

H/T Instapundit

Cross Posted at Classical Values and at The Astute Bloggers

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