The Real Quagmire

Haitian death toll: 2,400. “Haiti Street Gangsters Attack Aid Envoys.”

GONAIVES, Haiti (AP) - They mob aid convoys, break into homes to steal food and shoot anyone who gets in their way. Street gangsters have put aid workers squarely in their sights and are subjecting weary storm survivors to life-threatening delays in getting food and water.

There is definitely a deep divide between the richest and poorest nations on this earth and you have to ask the question, "Why?" Why do some nations seem to be stuck in the mortality-laden quagmire of centuries past, locked in a stasis of death, misery, and pulverizing poverty?

One theory I will discard upfront is that this misery is "caused by imperialist domination, especially by the U.S." My theory is more that the opposite is true. The lack of classical liberal values and the rejection of the prerequisites of capitalism in particular cause most of the poverty and thus misery of the third world.

We as Americans forget that the process of creating the wealth of this country happened over an extended period and without an explicit plan per se. The number one problem holding back third world nations from becoming engines of prosperity is the lack of a legal structure of property and property rights that would allow the poor and noble entrepenuers to 'capitalized' the assets they have.

Most of the third world has no legal ownership to their property. Even families who have held land for generations have no title recorded publicly to say that they own their land. Thus they cannot borrow against their property to buy equipment to farm more efficiently or build new structures. They cannot leverage the assets they have.

On top of that the governments of the third world are almost always run by an elite who follow the worst sort of governmental doctrines, often cloaked in socialist rhetoric, that effectively makes it impossible to do business legally unless you are one of the elite who run the government. In this sense it is true that the rich in these countries stay rich and the poor stay poor. The irony is that the elite would be even richer if their whole country were richer and the poor would be able to start businesses and pursue opportunity that until now seems reserved for the west.

Peruvian economist, Hernando De Soto, details in his book, The Mystery of Capital: Why Capitalism Triumphs in the West and Fails Everywhere Else, the kind of effort a entrepreneur in a third world nation has to make in order to start a legal business. He or she would be required to go back forth to various government agencies and officials hundreds of times, with a (legal) fee associated with each visit, and in some cases additional 'grease the wheels' kind of fees as well. Most entrepreneurs don't even try to comply with such regulations. Thus they are forced to avoid their government 'catching them' doing business illegally and are bereft of the use of the legal system in addressing grievances as well.

Is it any wonder why there is poverty in these nations?

I believe it is possible for the third world to become nations of wealth and prosperity just as the 'first world' is. It is not an issue of race or culture, because genetically we are all the same, we are all human with the same potential and the same inheritance of intelligence and talent. No, it is a problem of governance and ancient despotic economic theory.

[For anyone interested here's an interview of Hernando De Soto in an Egyptian newspaper which sort of ties this whole issue into the middle east as well.]

Posted by Eric Simonson at September 29, 2004 1:36 AM