Monday, March 14, 2005

Why some countries stay poor

An interview with Peruvian economist, Hernando de Soto, founder and President of the Institute for Liberty and Democracy (ILD) in Lima.

…in business, it takes you 549 days to get a license to operate a bakery in Egypt and that is with a lawyer. Without a lawyer, it takes about 650 days. In Honduras, it costs an individual entrepreneur 3.765 dollar and 270 days to legally declare, register, and start up a business. To create a mortgage in Mexico it takes 2 years. It takes 17 years to get a title on a house in Egypt; in Peru it used to be 21 years before we corrected that, and in the Philippines it’s 24 years. These are but a few examples of complicated ownership legislation. The procedures for getting official authorization to build are so formidable that people chose to build without authorization. The entire phenomenon forces poor people into illegitimate and informal negotiations. It forces them to create extralegal means to gain access to a home or a business.

With those kinds of obstacles it’s amazing that they get anything done. It also explains why a lot of them want to come to the US. And for a reason to study history:

The reason I study the 18th and 19th centuries of Europe and North America is not because I like the past, but because they provide me with lead to understand the present with regards to developing countries. There is a sense that individualism becomes clearer with the Renaissance. Before, people could not envisage themselves as being anything other than part of a whole. That phenomenon of individualism is now starting to take shape in Latin America. In Mexico, for example, where we are currently doing our biggest project, one of the areas we have to focus on is the ejido, which is an indigenous collective property system. We found out that the average age of the Mexican farmer is 65, which means that most of the young people have already left to the city and are becoming individuals. In other words, we are at that stage of individualization that you in Europe were at a couple of centuries ago. Europe’s 18th and 19th centuries intellectual debate are very relevant to developing countries informer Soviet Union nations in the 21st century.

I found this via Arnold Kling


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