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In their landmark report, Why Many Developing Countries Just Aren’t, Roll and Talbott
discuss institutional arrangements and policies that have particular resonance in fueling
economic development. The variables having the highest level of significance are
property rights, black market activity, and regulation.
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Strong property rights, reduced
black market activity (or formalization of the economy) and low regulation are key
drivers of such growth. Hence, societies that seek to liberalize to the point of being able
to construct sustainable representative democratic governance should focus on these
activities early on.
Property rights and registered deeds of ownership--or more generally, the
formally-recognized right of ownership--are particularly important. Hernando de Soto,
President of the Instituto Libertad y Democracia in Lima, Peru explained, “Instruments
that are well registered so that you can protect yourself from uncertainty and fraud by
law, and so you can use these objects as a form of currency for massive and frequent
transactions and information… If I were to show you a certain quantity of francs and gold
you wouldn’t believe it was mine. But you believe this document that I am showing you--
you believe my ownership because of this representation, this ‘paperized’ form of letting
you know that I have an asset with which I can settle a debt or buy something from
you.”
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This enhanced value from the registration of property is not symbolic. It is real
and it is immediate. “[W]here we have titled versus where people have not been titled…--
where hew have titled after the first year production on average has gone up 58% over the
people who have not been titled and registered… Where we have titled and registered in
Convention