Politics of Development Class Wikipedia

 

assets: An asset is items or objects that have economic value when owned by an individual or corporation. These items of economic value can then be converted into cash. Examples are cash, securities, inventory, office equipment, real estate, a car, and other property. De Soto defines assets as property that has hidden economic value, and when the property is adequately defined, capital is revealed. -Dhara

 

Asset Conversion Process: The process of giving assets economic potential, productivity, and fixed economic and social qualities. The fixing of an asset’s economic potential also gives it the ability to stimulate production. Assets exist in the material world, but a certain piece of paper or document that gives them an existence in the capital world is what converts them from just a thing (like a house) into an asset with potential. Potential gives an asset the possibility of producing surplus. A formal property system or similar structure assigns/formally maintains the value of assets, thus a house is not just a shelter with only personal value but it has a value in the capital world (De Soto p. 6-8, 40-41, especially 46-48, and in general 48-60). -Julie

 

banditti: De Soto describes Banditti as “squatters and small illegal entrepreneurs occupying lands they did not own” in early America (De Soto, 9). In the 1700’s, they lived outside the legal system, similar to the extralegal population of developing nations in the present. America ensured the success of capitalism by integrating the banditti to the existing system and allowing them to participate legally. In the same way, property rights need to be extended in developing countries. A significant number of people in developing nations are forced to live outside the law. A legal system that marginalizes such a large number of people loses its legitimacy. It also wastes the economic potential of its people. Incorporating present day banditti into the formal property system will give them the legal empowerment necessary to create capital. Like what happened in America’s past, a more inclusive system can turn criminals into capitalists. (De Soto refers to the Banditti on page 9. Page 21 is also relevant, as he explains the extralegal sector of the third world economy) -Anuradha

 

Bidonville: A common name for a shantytown in French speaking countries. -Vikash

 

Photo: A "bidonville" or shanty town surrounds ultra modern buildings in Casablanca, Morocco, July 31, 1957. (AP Photo)

 

Braudel’s Bell Jar:  De Soto is a very strong believer that the key to the developing world gaining capital has to be in their accumulation of legal, documented property.  Having documented property will allow them to increase their capital. The only problem, is the bell jar which says that "western capitalism served only a privileged few.  The key problem is to find out why that sector of society of the past, which I would not hesitate to call capilalist, should have lived as if in a bell jar, cut off from the rest" (De Soto, P. 66)  In this definition, the rest are the poor people in the developing countries who have no access to formal property because they can not get their labor represented.  "The bell jar makes capitalism a private club" (De Soto, P. 67).- Chris Rooney

 

 

capital:Capital can be loosely defined as the means of production – this is because capital not only has “the physical dimensions of assets” but also capital has the potential to generate surplus value, therefore capital can also be “immaterial by nature since it is not matter which makes capital but the value of that matter.” – De Soto makes an argument for the transformation of property into capital by having legal claims to it. Therefore, legal title rights to property allow the population to turn their property into collateral, and so capital comes from private property.- Mitchelle

 

De Soto's Definition of Capital: "it is therefore not created by money; it is created by people whose property systems help them to cooperate and think about how they can get the assets thye accumulate to deploy additional production" (De Soto, p. 64-65) -Ryan C.-

 

"Capital, like energy, is also a dormant value. Bringing it to life requires us to go beyond looking at our assets as they are to actively thinking about them as they could be.  It requires a process for fixing an asset's economic potential into a form that can be used to initiate additional production" (De Soto P. 45).  This quote is explaining that for us to increase our capital we must be constantly thinking of new ways to expand our wealth and increase our assets.  The West is very good at doing this and our persuit of increasing our assets helps keep the economy running.  We need to use the assets we have to expand on our economic wealth and capital. - Chris Rooney

 

This image shows the destruction of an illegal home - where the property rights could have been awarded but more important is the image below. This is because my question to De Soto would be - how much value would such a structure have as capital? Does it mean we are only talking about property that may need a further defination?

• The structure itself contains little value, however the land it occupies may be valuable depending on its location and market factors of supply and demand. -Vikash

 

“city of the dead”: Cairo is referred to as the "city of the dead". Outside of Cairo some really poor people living in absolute poverty in an area of old tombs called the "city of the dead". But a lot of districts and areas in Cairo can be called dead, because of dead capital. There is a lot of capital that is available but is not being used. So, the resources are not being tapped and maximized according to its potential. The institutions that actually tap capital to use it are absent in the area. Hence Cairo and the general area is called the "city of the dead" because of its dead and untapped resources (De Soto, 16; see also BBC's "Tomb with a View"). -Ayoti

 

Photo: City of the Dead by Vikash Yadav.

 

dead capital: Dead capital is the term used to describe assets that lack legal representations and thus are unable to generate surplus value/capital apart from their apparent physical value. Converting dead capital into active capital requires a legal integrated representation property system which explores, identifies and regulates properties. Based on statistical evidences, the majority of wealth in developing countries are in the form of dead capital. De Soto, to his credit, argues that the reason for capitalism success in the West and its failure up-to-date everywhere else lies in the ability to convert dead capital into active forms. However, he has not been able to devise a feasible and specific plan for such conversion.(See De Soto, pp. 6, 32, 76, 194, 211). -Dieu

 

DeSoto Hernando: Peruvian economist who champions property rights. He is the head of the Institute for Liberty and Democracy (See interview for "Commanding Heights" series on PBS - DeSoto Interview - Link opens Windows Media Video). - Vikash

 

Photo: Russian President Vladimir Putin, right, greets Peruvian economist Hernando de Soto during their meeting in the Kremlin in Moscow Friday, July 13, 2001. (AP Photo/Ivan Sekretarev)

 

English common law - Common law is the prevailing law system in England and the majority of it's ex-colonies, including the United States. Common Law derives itself from precedent – previous decisions set down by judges/jurists, rather than relying entirely specific statutes/codes to be interpreted by a judge, as in Civil or Roman Law. - Shara and Anharada

 

extralegality:being beyond the province or authority of law: There were only extralegal recourses for their grievances." (as defined by Dictionary.com) In developing countries, the rural/urban wage disparity results in high levels of migration to cities. The legal systems are unable to cope with the influx, often being out dated and built to maintain the status quo. When the legal system cannot, and will not accommodate the influx, the people create their own ad hoc extralegal system outside of the “Bell Jar” (pg 93). De Soto estimated that 68% of Haiti’s real estate, 92% of Egypt’s city real estate and 83% of rural land are held extralegally. Because no official record of these dwellings exist, the government loses the potential revenue to be made from taxes. Given the uncertainty of an undefined extralegal system, those involved are not able to take full advantage of the capital their home/store provides, as their realm of trade is limited to those they feel they can trust. De Soto argues that countries must absorb the extralegal sector of their economies, or ‘perpetuate legal anarchy’ where legal and extralegal systems will compete with one another. (p92)

 

favelas: In the third world, it is nearly impossible to legally own property and create a new legal business. Aspiring business entrepreneurs have to take many bureaucratic steps to gain lawful property. As a result, markets vanish to extralegal communities. In Brazil, these communities are called favelas. Favelas are areas that “operate outside the highly regulated formal economy and function according to supply and demand.” (de Soto 2000: 21) In favelas, rent is paid in U.S dollars and those who do not pay on time are evicted. This efficient market brings in a lot of profit yielding a high supply of housing. In Latin America, eighty percent of all real estate is held illegally. (de Soto 2000: 85) Due to the bureaucratic steps citizens have to hurdle through to become and stay legal in the formal market economy, there has been “an explosion of extralegal activity in the third world.” (de Soto 2000: 86) In Peru extralegal communities are called pueblos jovenes, in Venezuela they are called ranchos, and in Mexico they are referred to as barrios marginales. (de Soto 2000: 86) -Jessica

 

Photo: Brazilian favelas by Shara Evans.

Photo: An aerial view of one of Sao Paulo's biggest slums, Favela Morumbi, bordering with one of the city's riches neighborhoods, also by the name of Morumbi. Sao Paulo has some 1.1 million people dwelling in 2,018 officially designated favelas. Another 400,000 live in 1,648 tenements. (AP Photo/Alexandre Meneghini)

 

fungible assets: Fungible assets are goods or commodities that are categorized to enable transactions. For example, if a farmer has wheat that s/he wants to sell, s/he needs to categorize the wheat by weight and price so that it can be sold on the market. This transforms the wheat from a raw material into a good with potential value. Now that his/her assets have been categorized, the farmer can transform his/her wheat into capital and engage in further transactions in the market (purchases and investments).

According to De Soto, without fungible assets (he uses property as his example), it is very difficult for individuals to gain access to capital and loans, which are necessary for investment, further economic growth and development (De Soto, 56, 73, 87). -Alison

 

GIS : Geographiacl Information System (p 203). A technology for mapping land and analyzing the data. Used by many governments to record property. De Soto argues that this technology is unable to record the extralegal sector or truely map property. He theorizes that until the extralegal sectors agreemens are formalized technology will be unable to record this property (p 204)– Sofia & Ellie

 

Green v. Biddle: In 1821, the U.S. Supreme Court ruled against Kentucky’s occupancy law. The case dispute involved the heirs of John Green, a large landowner, and Richard Biddle, a squatter who had illegal claimed part of Mr. Green’s territory. The ruling favored those who detained an official title to the land they occupied. The court argued Kentucky’s occupational law unjust because the, “lawful owner is compelled to pay, not merely for the actual ameliorations in the land, not its increased value only, but the expense incurred by the occupant in making pretended improvement.” (De Soto 2000: 131) Two years later, a Kentucky judge noted that Green v. Biddle could not be followed because only three out of seven judges decided the case. By 1856, Missouri, Alabama, Aransas, Michigan, Iowa, Mississippi, Wisconsin, Minnesota, Oregon, Kansas, and California adopted similar laws to the Kentucky law. (De Soto 2000: 134) These states opposed the Supreme Courts decision against Kentucky in 1821, which prohibited squatters to settle land illegally. -Dhara & Jessica

 

Heavily Indebted Poor Countries (HIPC): is a classification set up by the IMF launched in 1996 which consists of all of the poorest of the poor countries.  This classification is seen as an acknowledgement that these countries will never be able to repay their debt, or as Sachs states cannot repay their debt and still achieve the MDG's (280).  Furthermore, "HIPC was a recognition that the structural adjustment era had failed to deliver its provises of economic development and growth to the world's poorest nations" (Sachs, 342).  Sarah Holvey

 

Homestead Act: Homestead Act: The Homestead Act of 1862 was a United States federal law that gave a family legal ownership to a piece of land provided they had been living there for five years and had improved on the land by building a house around 12 by 14 feet. Another alternative was for the family to buy the land for around $1.25 per acre after six months (Wikipedia). The argument that DeSoto makes in his book is mainly about how the poor face a loss of potential capital because they don't have ownership on the land they occupy. He explains that this problem is solvable only if the governments of developing countries give the 'squatters' property rights. According to DeSoto's chapter 'The Missing Lessons of US History', explains that even developed countries went through the process of giving squatters land rights. For example the Homestead Act of 1862 was passed in order to legalize squatters claims to the land they had been residing on. DeSoto argued that even then most squatters had already claimed their lands and had been living on it long before the act was passed. But getting the law passed not only gave the land potential capital it made the country richer. "Having thus changed their laws to accommodate existing extralegal arrangements, US officials left the assets of the American settlers and miners primed to be converted into capital"(DeSoto Page 106) Therefore DeSoto used this example to strengthen his point that developing countries should give squatters legal rights on the land they occupy because it will give the squatters more legal ownership which they can turn into capital thus making developing countries better off. DEVIKA AND MINHAIL.

 

Hoovervilles: A term describing an American shantytown. Hoovervilles appeared during the Great Depression throughout the United States. -Vikash

Photo: World War I veterans in financial dire straits begin throwing bricks and rocks, July 28, 1932 as General Douglas MacArthur's army advances to destroy their shanties and drive them from Washington, where the veterans have been camping out since May. Hoover vetoed the Patman Bill in June, which would have provided some immediate relief by granting the veterans their wartime bonuses early. (AP Photo)

Photo: Shacks and shanties serve as home for men and women in this little village of "Hooverville" in Seattle, Wash., on March 20, 1933 during the depression. (AP Photo

 

Human Capital: Initially came from the Chicage School of Thought in a book written by Gary Becker stating that an investment in an individuals education and training is similar to a business investment.  According to Becker (1993), investing in human capital is investing in the quality of the work force.  Human Capital: health, nutrition, and skills needed for each person to be economically productive (Sachs, 244). Sarah Holvey

 

Inclusive Capitalism: Inclusive Capitalism is the approach used by many development economists like De Soto and Yunus Khan, etc. It is an approach that encourages or rather recommends the use of Capitalism. On page 42 of DE SOTO book he says “Capital was the magic that would enhance productivity and create surplus value”, shows us that he is really in favor of capitalism In other words inclusive Capitalism creates more capitalists by promoting a system that encourages ownership among the masses. A good example of this is Yunus lends money to the poor through Grameen bank to buy assets so their productivity will increase and they will make surplus value. They can use that surplus value to repay the loan and buy assets for their home, send their children to school or etc. This is an example of how he encourages poor people to become capitalits. -Minahil

 

Jubilee 2000: Was a "campaign to drop the debt" that grew out of the "realization that the world's poorest countries were suffering under the crushing weight of debt repayments to international and bilateral leaders" (Sachs, 342).  This campaing was resisted by the donor countries and the Bretton Woods institutions such as the World Bank and IMF because they don't see an "urgency" in debt cancellation.  Sarah Holvey

 

Micro-finance:

 

Millennium Challenge Account (MCA):

 

Millennium Challenge Corporation (MCC):

 

Millennium Declaration: The Millennium Declaration was made up by the eight Millennium Development Goals.  The declaration attacked thie issues of "extreme poverty, pandemic disease, environmental harm, war and civil conflict.  The document moved from a panoramic view of these great challenges trhough a powerful diagnosis of their root causes to a set of recommendations on how these challenges could be met through globan cooperation and action" (Sachs, 211).  The declaration puts a target year for which the 8 goals should be met. -Chris Rooney

 

Millennium Development Goals (MDG): "The eight goals that all 191 UN member states unanimously agreed to in 2002 by signing the United Nations Millennium Declaration" (Sachs, p. 25).  The goals are targets set by the UN that each developing country has agreed to try and meet by 2015.  The goal is to cut extreme poverty in half by that year.  The only problem with these goals is that their was no obligation for the developing countries to give a certain amount of time and energy to achieve these goals.  Another problem is that the eight goals were just a contiunation of past goals made by the UN.  These goals had not been met in the past and people argued that they will continue to go ignored in the future(Sachs, 211).- Chris Rooney

 

Meta-rights: Meta rights are the entitlements to access property rights (page 106). De Soto uses an image of a jar to describe capitalism – so people within the jar have property rights but people outside the jar are locked out of the system and cannot get rights to their property –therefore they have no meta-rights.-Manna & Mitchelle

 

Metcalfe’s Law: Applications of Metcalfe's Law may include recent social phenomenon such as Blogging, Youtube, Wikipedia, MySpace and other bottom-up media resources -Ellie -Dieu

 

microbusinesses: Micro-businesses, logically, are small businesses. While never mentioned by name, DeSoto discusses the existence of microfinance, “informal business” and the extralegal sector, citing Mexico as an example. In Mexico, “the private sector has become increasingly conscious of the extralegal phenomenon and actively involved in doing something about it…for every formal business, there are two informal businesses” (78-79). Most importantly, DeSoto focuses on why business and entrepreneurship in pre-capitalist countries rarely become more than micro. He explains how the poor “cannot make profitable contracts with neighbors, cannot get credit, insurance, or utilities servies: they have no property to lose" (56). They are "taken seriously as contracting parties only by their immediate family and neighbors” (56). Without formal property system, the “entrepreneurial ingenuity” of the poor and their “enterprises” (34, 37) are restricted from entering into larger economic ventures. This is because property representations in “developed” countries precipitate simulations of business strategies which could allow micro-businesses to grow and build capital. DeSoto explains how the poor are moving away from micro-businesses that have consolidated their public and private space into one entity. He sees a “move away from life organized on a small scale to life organized on a large one" (70). The poor are "fleeing self-sufficient and isolated societies in an effort to raise their standards of living by becoming interdependent in much larger markets” (70, 73).-Courtney

 

money: Money is one of the physical forms of capital. It provides a standard by which to measure and express the value of objects. Items can be exchanged for their monetary value, allowing the owner of the item to put his or her capital into the physical form of money, which then makes it easier to exchange that item for another item, through the medium of money (De Soto, bottom of 43 – top of 44). -Sofia

Note that property precedes money in De Soto's theory. He argues that the central bank issues money in relation to property (De Soto, pp. 63-64).

 

Official development assistance (ODA): ODA deals with direct financial aid to poor countries (Sachs, 213). "ODA plays an essential role as a complement to other sources of financing for development, especially in those countries with the least capacity for attractive private direct investment.... For many countries such as Africa, ODA is still the largest source of external financing and is critical to the achievement of the development goals (MDG)" (Sachs, 217-218). What is important to remember about ODA is that it should be used as a complement to other forms of aid, it is not sufficient enough to be the only source of aid and should be used to help LDC's develop their domestic wealth (Sachs, 339).

-Chris Rooney

 

People’s Law: Extralegal social contracts (de Soto, 164) or agreements (p. 179) that are mutually created and adhered to by groups of people and/or society outside of the formal legal system. For example, de Soto writes about "tomahawk rights," "cabin rights," and "corn rights," as the people's law that American migrants established to substitute for legal property rights (116).

De Soto argues that if lawmakers, in countries where “people’s law” predominates, examine, structure, and incorporate into the legal system the “law” that already exists, they would create a legal system that could and would include people and practices that currently only exist extralegally. -Julie and Alison

 

Poverty trap:

 

Precapitalist Social Contract: Precapitalist social contracts are also known as extralegal social contracts. In a situation without an enforced formal legal system, customs or rules, a society will form based on the beliefs of the local people that will apply well in a specific area because they are built from the ground up. These rules and customs will generally be enforced by a kind of public pressure, either a constructed body with that specific purpose, or through more informal kinds of pressure, such as peer pressure. The “contracts” come in the form of both verbal and physical documents outlining the perimeters and characteristics of a piece of property. A way to figuring out the borders, as De Soto noted, was to observe the dogs of each owner, and to see where they stopped on a piece of land, marking the end of their territory. Many times, these social contracts form because of the government’s inability to enforce the formal laws. According to De Soto, the only enforceable law is that which is natural to the area. (Pg. 161-164, 175-179) –Heather & Rachel

 

Preemption Preemption is, according to De Soto, the principle solution to the widespread problem of squatting. Based on the notion that improvements made on land can also be considered as evidence for property rights, preemption allowed a settler/squatter to recover the value of improvements or buy the land he improved before public sale. Preemption also became a source of revenue for states with little money, by charging squatters for surveying the land improved by them and for the issue of a legal title. From its beginning in the 1642 colony of Virginia to the early republic period, preemption law was constantly expanded and changed to benefit squatters and strengthen the rights of lower squatters. It thereby became key to the integration of extralegal property arrangements in American law. Preemption allowed the squatter to become a benefactor to the state rather than being seen as a trespasser. It is a prime example of the law accomodating to existing social contracts in order to spur capital formation and economic growth. (pg.119-120: origin,definition and benefits; pg.135: further legal acceptance and sophistication; pg. 140: application during the Gold Rush)– Dieu & Antonella

 

semi-formal housing: Semi-formal housing is a prime example of the recent relationship development between a country's government and its extralegal settlers and illegal enterprises. With semi-formal housing, the homes are constructed on illegal agricultural land plots. The government, however, is involved in the process (they initiated the development and encouraged the practice to temporarily help deal with the housing crisis in and around the cities). The government converts the land from illegal agricultural plots to residential, allowing the new "owners" to acquire the land through an informal process (pg. 90). - Rachel

 

shantytowns:

Photo: The highrises of Sandton, where the leaders from all over the world will meet for the World Summit on Sustainable Resources, backdropps the underdeveloped shanty town of Alexandria, in Johannesburg, South Africa, Tuesday Aug. 20, 2002 (AP Photo).

 

squatter rights:Squatting is way in which to aquire property which may or may not already legally belong to someone but is not currently being used or "improved". The squatter moves onto a piece of land and by their improvements to and habitation of the property they gain possession of it. The legal owner, if there is one, has a given amount of time to invoke their ownership and press charges of trespassing, thereby nullifying the squatters claims to the property. Squatting predates formal property law in this country. In the early 1600's, squatting was such a "problem", the Massachusetts General Court demanded that all land grants be recorded to enable the state to identify the legal owners. In fact, squatting was how some states layed claim to land, by granting the squatters land in the name of the state - posession was 9/10ths of the law. Since squatting was first recognized in the U.S. as a form of land aquisition, "improvement" of the land has always been a necessary part of the individual's claim to the property. In some developing countries, the same necessity for govenrment approved squatting can be seen and compared to the early days of U.S. property laws. With the huge migrations to cities in developing nations, there simply is no way for the govenrments to accomodate the need other than to initiate extra-legal communities (DeSoto, 113-119, 122-36,177-8). -Heather

Photo: Squatter businesses in Calcutta by Vikash Yadav

Photo: Filipino soldiers demolish shanties allegedly built in a Government property at Fort Bonifacio, Taguig city south of Manila Thursday Oct. 12, 2006. About 500 families were left homeless when soldiers, some of them firing shots in the air, effected a "surprised" demolition of their shanties Thursday. (AP Photo/Bullit Marquez)

 

structural adjustment programs: long terms loans from the IMF and World Bank to developing countries, conditioned on market reforms in the recipient countries. These programs are generally created with a goal of moving a country from a mixed economy to a market economy model by reducing the recipient nation's fiscal imbalances, promoting growth and generating new income from exports. Privatization and deregulation, as well as reduction of trade barriers, are common policy changes demanded by the IMF and designed to help the country move towards development and loan repayment.  The fiscal austerity measures demanded by the IMF have not generally resulted in a return to economic growth and several countries have become prolonged users of IMF and World Bank resources.   - Tom Cullinan + Vikash

titling: One of the many reasons why the West has been able to produce high amounts of capital is due to the implementation of legalities such as titling and recording assets. The process of preserving property and wealth in recorded information such as titles helps to organize and capture its 'potential value' (DeSoto, 48). Titling is also important because it helps assets move. Property without any representation in the formal and legal market has no value and is hard to move in the market thus making it hard to determine its real value. Titling secures the interest of parties involved in transactions and creates accountability with information, references and rules. DeSoto states that when you look at the title of a house instead of the house, you step away from the material world and step into the 'conceptual universe where capital lives'. He explains that in the West every piece of land, property and other forms of capital are all legally documented and have titles which makes them worth something. Whereas in the developing world the poor hardly have any legal ownership or titles that show the worth of the land they occupy. DeSoto also argues that legal property, once it has acquired the correct titles, can be used to produce surplus value and helps people realize 'the most productive qualities of their resources' ( DeSoto, 51) Therefore, titling is a necessary legal process that gives property and other forms of assets potential capital value in the market. -Devika.

 

Tomahawk rights: Squatters estabilished "Tomahawk rights," or extralegal property titles, to maintain order. Migrants secured "tomahawk rights" by marking the bark of a deadened tree with the initials of the person who claimed possessory rights to the land. These extralegal rights were accepted by the frontier community and "were bought, sold, and transferred--just like official titles" (117). Later legal titles were based on the foundation of "tomahawk rights," and other variations including "cabin rights" and "corn rights." (DeSoto 116-117) - Ayoti & Courtney

 

undercapitalized sector: Sectors usually found in the Third World and former communist countries that are home to a new form of entrepreneurship (in the form of informal microbusinesses) created by the urban poor. The undercapitalized sector is marked by extralegality and control of real estate and production is held by the poor. In this sector, it is difficult to determine ownership and economic assets have not been formally organized, causing them to become dead capital. According to De Soto, the undercapitalized sector holds the emerging economic powers. -Antonella