Property rights and the rule of law are absolutely vital for the creation of wealth for all, but particularly for the world’s poor.
When even the poor, the least advantaged and often the least connected know that for even them a contract is a contract, that a deed is a deed, that what is theirs will remain theirs wealth can be created. People can begin the road out of poverty.
Economist Hernando de Soto has long made this case. Indeed there are massive amounts of wealth in the world’s slums and backwaters. Places which are poor, but which do not lack economic activity.
What these places do however lack is the rule of law and property rights.
Consider a family in Ecuador (for instance) which has farmed a plot of land for 200 years. It’s their land. They’ve lived on it forever. They’ve mixed their work with the land. No one else has a claim on it. It’s theirs. But then one day someone discovers that under this land there is oil.
Soon the government and the oil companies rush in. The land which has no deed is suddenly “owned” by the oil company. Because the rights of the people who lived on the land are not recognized (and this is often deliberate for the benefit of both companies and governments in many developing – and developed – countries) the native people are tossed off the land. Wells are put in. The land raped.
Where there is no rule of law, where there are no property rights, or where the government can change the rules as cronies want, poverty is the norm. Where people can feel secure in their possessions (and this goes for taxation and all sorts of other things too) wealth is created. Wealth blossoms.
Thing is it’s not good for cronies.
With an average of 11 murders per day, violent crime remains a major problem in Rio, according to figures from Brazil’s Public Security Institute (ISP), a government body.
In favelas like Cantagalo, where people often lack formal documents to prove they own their ramshackle homes, young men are disproportionately impacted by violence, analysts said.
“There is no clear definition of who owns the land in Cantagalo,” said Vinicius Mariano de Carvalho, a lecturer at King’s College London specializing in Brazilian politics.
“A population with a sense of ownership of their homes has more direct communitarian ties,” he told the Thomson Reuters Foundation. “I believe this sense of ownership would reduce the vulnerability to criminality.”