Institutions of Capital & Property Representationalism; Wealth Disparities Not Cultural
Immortalist
great to be explained by culture alone.
...The cities of the Third World and the former communist countries are teeming
with entrepreneurs. You cannot walk through a Middle Eastern market, hike up to a
Latin American village, or climb into a taxicab in Moscow without someone trying
to make a deal with you. The inhabitants of these countries possess talent,
enthusiasm, and an astonishing ability to wring a profit out of practically
nothing. They can grasp and use modern technology. Otherwise, American businesses
would not be struggling to control the unauthorized use of their patents abroad,
nor would the U.S. government be striving so desperately to keep modern weapons
technology out of the hands of Third World countries. Markets are an ancient and
universal tradition: Christ drove the merchants out of the temple two thousand
years ago, and Mexicans were taking their products to market long before Columbus
reached America.
But if people in countries making the transition to capitalism are not pitiful
beggars, are not helplessly trapped in obsolete ways, and are not the uncritical
prisoners of dysfunctional cultures, what is it that prevents capitalism from
delivering to them the same wealth it has delivered to the West? Why does
capitalism thrive only in the West, as if enclosed in a bell jar?
...the major stumbling block that keeps the rest of the world from benefiting
from capitalism is its inability to produce capital. Capital is the force that
raises the productivity of labor and creates the wealth of nations. It is the
lifeblood of the capitalist system, the foundation of progress, and the one thing
that the poor countries of the world cannot seem to produce for themselves, no
matter how eagerly their people engage in all the other activities that
characterize a capitalist economy.
...most of the poor already possess the assets they need to make a success of
capitalism. Even in the poorest countries, the poor save. The value of savings
among the poor is, in fact, immense—forty times all the foreign aid received
throughout the world since 1945. In Egypt, for instance, the wealth that the poor
have accumulated is worth fifty-five times as much as the sum of all direct
foreign investment ever recorded there, including the Suez Canal and the Aswan
Dam. In Haiti, the poorest nation in Latin America, the total assets of the poor
are more than one hundred fifty times greater than all the foreign investment
received since Haiti's independence from France in 1804. If the United States
were to hike its foreign-aid budget to the level recommended by the United
Nations—0.7 percent of national income—it would take the richest country on earth
more than 150 years to transfer to the world's poor resources equal to those they
already possess.
But they hold these resources in defective forms: houses built on land whose
ownership rights are not adequately recorded, unincorporated businesses with
undefined liability, industries located where financiers and investors cannot see
them. Because the rights to these possessions are not adequately documented,
these assets cannot readily be turned into capital, cannot be traded outside of
narrow local circles where people know and trust each other, cannot be used as
collateral for a loan, and cannot be used as a share against an investment.
In the West, by contrast, every parcel of land, every building, every piece of
equipment, or store of inventories is represented in a property document that is
the visible sign of a vast hidden process that connects all these assets to the
rest of the economy. Thanks to this representational process, assets can lead an
invisible, parallel life alongside their material existence. They can be used as
collateral for credit. The single most important source of funds for new
businesses in the United States is a mortgage on the entrepreneur's house. These
assets can also provide a link to the owner's credit history, an accountable
address for the collection of debts and taxes, the basis for the creation of
reliable and universal public utilities, and a foundation for the creation of
securities (like mortgage-backed bonds) that can then be rediscounted and sold in
secondary markets. By this process the West injects life into assets and makes
them generate capital.
Third World and former communist nations do not have this representational
process. As a result, most of them are undercapitalized, in the same way that a
firm is undercapitalized when it issues fewer securities than its income and
assets would justify. The enterprises of the poor are very much like corporations
that cannot issue shares or bonds to obtain new investment and finance. Without
representations, their assets are dead capital.
The poor inhabitants of these nations —the overwhelming majority— do have things,
but they lack the process to represent their property and create capital. They
have houses but not titles; crops but not deeds; businesses but not statutes of
incorporation. It is the unavailability of these essential representations that
explains why people who have adapted every other Western invention, from the
paper clip to the nuclear reactor, have not been able to produce sufficient
capital to make their domestic capitalism work.
This is the mystery of capital. Solving it requires an understanding of why
Westerners, by representing assets with titles, are able to see and draw out
capital from them. One of the greatest challenges to the human mind is to
comprehend and to gain access to those things we know exist but cannot see. Not
everything that is real and useful is tangible and visible. Time, for example, is
real, but it can only be efficiently managed when it is represented by a clock or
a calendar. Throughout history, human beings have invented representational
systems —writing, musical notation, double-entry bookkeeping— to grasp with the
mind what human hands could never touch. In the same way, the great practitioners
of capitalism, from the creators of integrated title systems and corporate stock
to Michael Milken, were able to reveal and extract capital where others saw only
junk by devising new ways to represent the invisible potential that is locked up
in the assets we accumulate.
At this very moment you are surrounded by waves of Ukrainian, Chinese, and
Brazilian television that you cannot see. So, too, are you surrounded by assets
that invisibly harbor capital. Just as the waves of Ukrainian television are far
too weak for you to sense them directly but can, with the help of a television
set, be decoded to be seen and heard, so can capital be extracted and processed
from assets. But only the West has the conversion process required to transform
the invisible to the visible. It is this disparity that explains why Western
nations can create capital and the Third World and former communist nations
cannot.
The absence of this process in the poorer regions of the world —where five-sixths
of humanity lives— is not the consequence of some Western monopolistic
conspiracy. It is rather that Westerners take this mechanism so completely for
granted that they have lost all awareness of its existence. Although it is huge,
nobody sees it, including the Americans, Europeans, and Japanese who owe all
their wealth to their ability to use it. It is an implicit legal infrastructure
hidden deep within their property systems —of which ownership is but the tip of
the iceberg. The rest of the iceberg is an intricate man-made process that can
transform assets and labor into capital. This process was not created from a
blueprint and is not described in a glossy brochure. Its origins are obscure and
its significance buried in the economic subconscious of Western capitalist
nations.
How could something so important have slipped our minds? It is not uncommon for
us to know how to use things without understanding why they work. Sailors used
magnetic compasses long before there was a satisfactory theory of magnetism.
Animal breeders had a working knowledge of genetics long before Gregor Mendel
explained genetic principles. Even as the West prospers from abundant capital, do
people really understand the origin of capital? If they don't, there always
remains the possibility that the West might damage the source of its own
strength. Being clear about the source of capital will also prepare the West to
protect itself and the rest of the world as soon as the prosperity of the moment
yields to the crisis that is sure to come. Then the question that always arises
in international crises will be heard again: Whose money will be used to solve
the problem?
So far, Western countries have been happy to take their system for producing
capital entirely for granted and to leave its history undocumented. That history
must be recovered. This book is an effort to reopen the exploration of the source
of capital and thus explain how to correct the economic failures of poor
countries. These failures have nothing to do with deficiencies in cultural or
genetic heritage. Would anyone suggest "cultural" commonalities between Latin
Americans and Russians? Yet in the last decade, ever since both regions began to
build capitalism without capital, they have shared the same political, social,
and economic problems: glaring inequality, underground economies, pervasive
mafias, political instability, capital flight, flagrant disregard for the law.
These troubles did not originate in the monasteries of the Orthodox Church or
along the pathways of the Incas.
But it is not only former communist and Third World countries that have suffered
all of these problems. The same was true of the United States in 1783, when
President George Washington complained about "banditti ... skimming and disposing
of the cream of the country at the expense of the many." These "banditti" were
squatters and small illegal entrepreneurs occupying lands they did not own. For
the next one hundred years, such squatters battled for legal rights to their land
and miners warred over their claims because ownership laws differed from town to
town and camp to camp. Enforcing property rights created such a quagmire of
social unrest and antagonism throughout the young United States that the Chief
Justice of the Supreme Court, Joseph Story, wondered in 1820 whether lawyers
would ever be able to settle them.
Do squatters, bandits, and flagrant disregard of the law sound familiar?
Americans and Europeans have been telling the other countries of the world, "You
have to be more like us." In fact, they are very much like the United States of a
century ago when it too was a Third World country. Western politicians once faced
the same dramatic challenges that leaders of the developing and former communist
countries are facing today. But their successors have lost contact with the days
when the pioneers who opened the American West were undercapitalized because they
seldom possessed title to the lands they settled and the goods they owned, when
Adam Smith did his shopping in black markets and English street urchins plucked
pennies cast by laughing tourists into the mud banks of the Thames, when
Jean-Baptiste Colbert's technocrats executed 16,000 small entrepreneurs whose
only crime was manufacturing and importing cotton cloth in violation of France's
industrial codes.
That past is many nations' present. The Western nations have so successfully
integrated their poor into their economies that they have lost even the memory of
how it was done, how the creation of capital began back when, as the American
historian Gordon Wood has written, "something momentous was happening in the
society and culture that released the aspirations and energies of common people
as never before in American history."1 The "something momentous" was that
Americans and Europeans were on the verge of establishing widespread formal
property law and inventing the conversion process in that law that allowed them
to create capital. This was the moment when the West crossed the demarcation line
that led to successful capitalism—when it ceased being a private club and became
a popular culture, when George Washington's dreaded "banditti" were transformed
into the beloved pioneers that American culture now venerates.
The paradox is as clear as it is unsettling: Capital, the most essential
component of Western economic advance, is the one that has received the least
attention...
The Mystery of Capital: Why Capitalism Triumphs
in the West and Fails Everywhere Else
by Hernando de Soto (CH1 Excerpt)
http://www.ild.org.pe/tmoc/cp1-en.htm
http://www.amazon.com/exec/obidos/tg/detail/-/0465016154/
tg
What incredible nonsense. Those nations with the ability to accumulate
capital by processing their natural resources are prevented from doing
so by neo-colonialist forces. Consider Iran and nuclear fuel
processing.
-tg
> among the poor is, in fact, immense?forty times all the foreign aid received
> throughout the world since 1945. In Egypt, for instance, the wealth that the poor
> have accumulated is worth fifty-five times as much as the sum of all direct
> foreign investment ever recorded there, including the Suez Canal and the Aswan
> Dam. In Haiti, the poorest nation in Latin America, the total assets of the poor
> are more than one hundred fifty times greater than all the foreign investment
> received since Haiti's independence from France in 1804. If the United States
> were to hike its foreign-aid budget to the level recommended by the United
> Nations?0.7 percent of national income?it would take the richest country on earth
> The poor inhabitants of these nations ?the overwhelming majority? do have things,
> but they lack the process to represent their property and create capital. They
> have houses but not titles; crops but not deeds; businesses but not statutes of
> incorporation. It is the unavailability of these essential representations that
> explains why people who have adapted every other Western invention, from the
> paper clip to the nuclear reactor, have not been able to produce sufficient
> capital to make their domestic capitalism work.
>
> This is the mystery of capital. Solving it requires an understanding of why
> Westerners, by representing assets with titles, are able to see and draw out
> capital from them. One of the greatest challenges to the human mind is to
> comprehend and to gain access to those things we know exist but cannot see. Not
> everything that is real and useful is tangible and visible. Time, for example, is
> real, but it can only be efficiently managed when it is represented by a clock or
> a calendar. Throughout history, human beings have invented representational
> systems ?writing, musical notation, double-entry bookkeeping? to grasp with the
> mind what human hands could never touch. In the same way, the great practitioners
> of capitalism, from the creators of integrated title systems and corporate stock
> to Michael Milken, were able to reveal and extract capital where others saw only
> junk by devising new ways to represent the invisible potential that is locked up
> in the assets we accumulate.
>
> At this very moment you are surrounded by waves of Ukrainian, Chinese, and
> Brazilian television that you cannot see. So, too, are you surrounded by assets
> that invisibly harbor capital. Just as the waves of Ukrainian television are far
> too weak for you to sense them directly but can, with the help of a television
> set, be decoded to be seen and heard, so can capital be extracted and processed
> from assets. But only the West has the conversion process required to transform
> the invisible to the visible. It is this disparity that explains why Western
> nations can create capital and the Third World and former communist nations
> cannot.
>
> The absence of this process in the poorer regions of the world ?where five-sixths
> of humanity lives? is not the consequence of some Western monopolistic
> conspiracy. It is rather that Westerners take this mechanism so completely for
> granted that they have lost all awareness of its existence. Although it is huge,
> nobody sees it, including the Americans, Europeans, and Japanese who owe all
> their wealth to their ability to use it. It is an implicit legal infrastructure
> hidden deep within their property systems ?of which ownership is but the tip of
> that led to successful capitalism?when it ceased being a private club and became
Constantinople
> "Immortalist" <Reanima...@yahoo.com> wrote in message news:<QIydnalTNIy...@comcast.com>...
>
> What incredible nonsense. Those nations with the ability to accumulate
> capital by processing their natural resources are prevented from doing
> so by neo-colonialist forces. Consider Iran and nuclear fuel
> processing.
>
> -tg
That is an exceptional case for obvious reasons.
Immortalist
"Constantinople" <constan...@yahoo.com> wrote in message
news:Xjnmd.5175477$6p.8...@news.easynews.com...
Actually he is right but it is instead the Iranian uses of traditional and
colonial influences that hold them back by their own, or their elite's, choices.
The Western emphasis on the security of transactions allows citizens to move
large amounts of assets with very few transactions. In most developing countries,
by contrast, the law and official agencies are trapped by early colonial and
Roman law, which tilt toward protecting ownership. They have become the
custodians of the wishes of the dead.
...the answer ... lies in restricted access to formal property, both in the
West's past and in developing and former communist countries today. Local and
foreign investors do have capital; their assets are more or less integrated,
fungible, networked, and protected by formal property systems. But they are only
a tiny minority-those who can afford the expert lawyers, insider connections, and
patience required to navigate the red tape of their property systems. The great
majority of people, who cannot get the fruits of their labor represented by the
formal property system, live outside Braudel's bell jar.
The bell jar makes capitalism a private club, open only to a privileged few, and
enrages the billions standing outside looking in. This capitalist apartheid will
inevitably continue until we all come to terms with the critical flaw in many
countries' legal and political systems that prevents the majority from entering
the formal property system.
########################################
The Mystery of Capital (condensed version of chapter 3)
Walk down most roads in the Middle East, the former Soviet Union, or Latin
America, and you will see many things: houses used for shelter; parcels of land
being tilled, sowed, and harvested; merchandise being bought and sold. Assets in
developing and former communist countries primarily serve these immediate
physical purposes. In the West, however, the same assets also lead a parallel
life as capital outside the physical world. They can be used to put in motion
more production by securing the interests of other parties as "collateral" for a
mortgage, for example, or by assuring the supply of other forms of credit and
public utilities.
Why can't buildings and land elsewhere in the world also lead this parallel life?
Why can't the enormous resources in developing and former communist countries,
which my colleagues at the Institute for Liberty and Democracy (Lima) and I
estimate at $9.3 trillion of dead capital, produce value beyond their "natural"
state? My reply is, dead capital exists because we have forgotten (or perhaps
never realized) that converting a physical asset to generate capital-using your
house to borrow money to finance an enterprise, for example-requires a very
complex process. It is not unlike the process that Albert Einstein taught us
whereby a single brick can be made to release a huge amount of energy in the form
of an atomic explosion. By analogy, capital is the result of discovering and
unleashing potential energy from the trillions of bricks that the poor have
accumulated in their buildings.
Clues from the past
To unravel the mystery of capital, we have to go back to the seminal meaning of
the word. In medieval Latin, "capital" appears to have denoted head of cattle or
other livestock, which have always been important sources of wealth beyond the
basic meat, milk, hides, wool, and fuel they provide. Livestock can also
reproduce themselves. Thus, the term "capital" begins to do two jobs simultaneous
ly, capturing the physical dimension of assets (livestock) as well as their
potential to generate surplus value. From the barnyard, it was only a short step
to the desks of the inventors of economics, who generally defined "capital" as
that part of a country's assets that initiates surplus production and increases
productivity.
Great classical economists such as Adam Smith and, later, Karl Marx believed that
capital was the engine that powered the market economy. In The Wealth of Nations,
Smith emphasized one point that is at the very heart of the mystery we are trying
to solve: for accumulated assets to become active capital and put additional
production in motion, they must be fixed and realized in some particular subject
"which lasts for some time at least after that labour is past. It is, as it were,
a certain quantity of labour stocked and stored up to be employed, if necessary,
upon some other occasion." What I take from Smith is that capital is not the
accumulated stock of assets but the potential it holds to deploy new production.
This potential is, of course, abstract. It must be processed and fixed into a
tangible form before we can release it-just like the potential nuclear energy in
Einstein's brick.
This essential meaning of capital has been lost to history. Capital is now
confused with money, which is only one of the many forms in which it travels. It
is always easier to remember a difficult concept in one of its tangible
manifestations than in its essence. The mind wraps itself around "money" more
easily than "capital." But it is a mistake to assume that money is what finally
fixes capital. Money facilitates transactions, allowing us to buy and sell
things, but it is not itself the progenitor of additional production.
Potential energy in assets
What is it that fixes the potential of an asset so that it can put additional
production into motion? What detaches value from a simple house and fixes it in a
way that allows us to realize it as capital?
We can begin to find an answer by using our energy analogy. Consider a mountain
lake. We can think about this lake in its immediate physical context and see some
primary uses for it, such as canoeing and fishing. But when we think about this
same lake as an engineer would by focusing on its capacity to generate electrical
energy, by means of a hydroelectric plant, as an additional value beyond the
lake's natural state as a body of water, we suddenly see the potential created by
the lake's elevated position. The challenge for the engineer is finding out how
he can create a process that allows him to convert and fix this potential into a
form that can be used to do additional work.
Capital, like energy, is 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.
Although the process that converts the potential energy in the water into
electricity is well known, the one that gives assets the form required to put in
motion more production is not known. This is so because that key process was not
deliberately set up to create capital but for the more mundane purpose of
protecting property ownership. As the property systems of Western nations grew,
they developed, imperceptibly, a variety of mechanisms that gradually combined
into a process that churned out capital as never before.
Hidden conversion process of the West
In the West, this formal property system begins to process assets into capital by
describing and organizing the most economically and socially useful aspects about
assets, preserving this information in a recording system-as insertions in a
written ledger or a blip on a computer disk-and then embodying it in a title. A
set of detailed and precise legal rules governs this entire process. Formal
property records and titles thus represent our shared concept of what is
economically meaningful about any asset. They capture and organize all the
relevant information required to conceptualize the potential value of an asset
and so allow us to control it.
Any asset whose economic and social aspects are not fixed in a formal property
system is extremely hard to move in the market. How can the huge amounts of
assets changing hands in a modern market economy be controlled, if not through a
formal property process? Without such a system, any trade of an asset, say a
piece of real estate, requires an enormous effort just to determine the basics of
the transaction: Does the seller own the real estate and have the right to
transfer it? Can he pledge it? Will the new owner be accepted as such by those
who enforce property rights? What are the effective means to exclude other
claimants? This is why the exchange of most assets outside the West is restricted
to local circles of trading partners.
Developing and former communist countries' principal problem is clearly not the
lack of entrepreneurship: the poor have accumulated trillions of dollars of real
estate during the past forty years. What the poor lack is easy access to the
property mechanisms that could legally fix the economic potential of their assets
so that they could be used to produce, secure, or guarantee greater value in the
expanded market.
Why has the genesis of capital become such a mystery? Why have the rich nations
of the world, so quick with their economic advice, not explained how
indispensable formal property is to capital formation? The answer is that the
process within the formal property system that breaks down assets into capital is
extremely difficult to visualize. It is hidden in thousands of pieces of
legislation, statutes, regulations, and institutions that govern the system.
Anyone trapped in such a legal morass would be hard-pressed to figure out how the
system actually works. The only way to see it is from outside the system-from the
extralegal sector-which is where my colleagues and I do most of our research.
The formal property systems of the West produce six effects that allow their
citizens to generate capital.
(1) Fixing the economic potential of assets. Capital is born by representing in
writing-in a title, a security, a contract, and other such records-the most
economically and socially useful qualities about the asset as opposed to the
visually more striking aspects of the asset. This is where potential value is
first described and registered. The moment you focus your attention on the title
of a house, for example, and not on the house itself, you have automatically
stepped from the material world into the conceptual universe where capital lives.
The proof that formal property is pure concept comes when a house changes hands:
nothing physically changes. Property is not the house itself but an economic
concept about the house, embodied in a legal representation that describes not
its physical qualities but rather economically and socially meaningful qualities
we humans have attributed to the house (such as the ability to use it for a
variety of purposes-for example, to generate funds for investment in a business
without having to sell the house-by providing security to lenders in the form of
liens, mortgages, easements, or other covenants). In advanced nations, this
formal property representation functions as the means to secure the interests of
other parties and to create accountability by providing all the information,
references, rules, and enforcement mechanisms required to do so.
Legal property thus gave the West the tools to produce surplus value over and
above its physical assets. Whether anyone intended it or not, the legal property
system became the staircase that took these nations from the universe of assets
in their natural state to the conceptual universe of capital where assets can be
viewed in their full productive potential.
(2) Integrating dispersed information into one system. The reason capitalism has
triumphed in the West and sputtered in the rest of the world is because most of
the assets in Western nations have been integrated into one formal
representational system. This integration did not happen casually. Over decades
in the nineteenth century, politicians, legislators, and judges pulled together
the scattered facts and rules that had governed property throughout cities,
villages, buildings, and farms and integrated them into one system. This "pulling
together" of property representations, a revolutionary moment in the history of
developed nations, deposited all the information and rules governing the
accumulated wealth of their citizens into one knowledge base. Before that moment,
information about assets was far less accessible. Every farm or settlement
recorded its assets and the rules governing them in rudimentary ledgers, symbols,
or oral testimony. But the information was atomized, dispersed, and not available
to any one agent at any given moment.
Developing and former communist nations have not created unified formal property
systems. In all of these countries I have studied, I have never found just one
legal system but instead dozens and hundreds, managed by all sorts of
organizations, some legal, others extralegal, ranging from small entrepreneurial
groups to housing organizations. Consequently, what people in those countries can
do with their property is limited to the imagination of the owners and their
acquaintances. In Western countries, where property information is standardized
and universally available, what owners can do with their assets benefits from the
collective imagination of a larger network of people.
It may surprise the Western reader that most of the world's nations have yet to
integrate extralegal property agreements into one formal legal system. For
Westerners today, there supposedly is only one law-the official one. Diverse
informal property arrangements, however, were once the norm in every nation-the
West's reliance on integrated property systems is a phenomenon of at most the
last two hundred years. The reason it is so hard to follow the history of the
integration of widespread property systems is that the process took place over a
very long time.
(3) Making people accountable. The integration of all property systems under one
formal property law shifted the legitimacy of the rights of owners from the
political context of local communities to the impersonal context of law.
Releasing owners from restrictive local arrangements and bringing them into a
more integrated legal system facilitated their accountability.
By transforming people with real property interests into accountable individuals,
formal property created individuals from masses. People no longer needed to rely
on neighborhood relationships or make local arrangements to protect their rights
to assets. They were thus freed to explore how to generate surplus value from
their own assets. But there was a price to pay: once inside a formal property
system, owners lost their anonymity while their individual accountability was
reinforced. People who do not pay for goods or services they have consumed can be
identified, charged interest penalties, fined, and embargoed, and can have their
credit ratings downgraded. Authorities are able to learn about legal infractions
and dishonored contracts; they can suspend services, place liens against
property, and withdraw some or all of the privileges of legal property.
Respect in Western nations for property and transactions is hardly encoded in
their citizens' DNA; it is rather the result of having enforceable formal
property systems. Formal property's role in protecting not only ownership but
also the security of transactions strongly encourages citizens in advanced
countries to respect titles, honor contracts, and obey the law. Legal property
thus invites commitment.
The lack of legal property thus explains why citizens in developing and former
communist nations cannot make profitable contracts with strangers and cannot get
credit, insurance, or utilities services: they have no property to lose. Because
they have no legal property, they are taken seriously as contracting parties only
by their immediate family and neighbors. People with nothing to lose are trapped
in the grubby basement of the precapitalist world.
(4) Making assets fungible. One of the most important things a formal property
system does is transform assets from a less accessible condition to a more
accessible condition, so that they can do additional work. Unlike physical
assets, representations of assets are easily combined, divided, mobilized, and
used to stimulate business deals. By uncoupling the economic features of an asset
from its rigid, physical state, a representation makes the asset "fungible"-able
to be fashioned to suit practically any transaction.
By describing all assets in standard categories, an integrated formal property
system enables the comparison of two architecturally different buildings
constructed for the same purpose. This allows one to discriminate quickly and
inexpensively between similarities and differences in assets without having to
deal with each asset as if it were unique.
Standard property descriptions in the West are also written to facilitate the
combination of assets. Formal property rules require assets to be described and
characterized in a way that not only outlines their singularities but also points
out their similarities to other assets, thus making potential combinations more
obvious. Through the use of standardized records, one can determine how to
exploit a particular asset most profitably.
Representations also enable one to divide assets without touching them. Whereas
an asset such as a factory may be an indivisible unit in the real world, in the
conceptual universe of formal property representation it can be subdivided into
any number of portions. Citizens of advanced nations are thus able to split most
of their assets into shares, each of which can be owned by different persons,
with different rights, to carry out different functions.
Formal property representations can also serve as movable stand-ins for physical
assets, enabling owners and entrepreneurs to simulate hypothetical situations in
order to explore other profitable uses of their assets. In addition, all standard
formal property documents are crafted in such a way as to facilitate the easy
measurement of an asset's attributes. By providing standards, Western formal
property systems have significantly reduced the transaction costs of mobilizing
and using assets.
(5) Networking people. By making assets fungible, by attaching owners to assets,
assets to addresses, and ownership to enforcement, and by making information on
the history of assets and owners easily accessible, formal property systems
converted the citizens of the West into a network of individually identifiable
and accountable business agents. The formal property process created a whole
infrastructure of connecting devices that, like a railway switchyard, allowed the
assets (trains) to run safely between people (stations). Formal property's
contribution to mankind is not the protection of ownership: squatters, housing
organizations, mafias, and even primitive tribes manage to protect their assets
quite efficiently. The property system's real breakthrough is that it radically
improved the flow of communications about assets and their potential. It also
enhanced the status of their owners.
Western legal property also provides businesses with information about assets and
their owners, verifiable addresses, and objective records of property values, all
of which lead to credit records. This information and the existence of integrated
law make risk more manageable by spreading it through insurance-type devices as
well as by pooling property to secure debts.
Few seem to have noticed that the legal property system of an advanced nation is
the center of a complex web of connections that equips ordinary citizens to form
ties with both the government and the private sector, and so to obtain additional
goods and services. Without the tools of formal property, it is hard to see how
assets could be used for everything they accomplish in the West.
(6) Protecting transactions. One important reason why the Western formal property
system works like a network is that all the property records (titles, deeds,
securities, and contracts that describe the economically significant aspects of
assets) are continually tracked and protected as they travel through time and
space. Public agencies are the stewards of an advanced nation's representations.
They administer the files that contain all the economically useful descriptions
of assets, whether land, buildings, chattels, ships, industries, mines, or
airplanes. These files will alert anyone eager to use an asset about things that
may restrict or enhance its utilization, such as encumbrances, easements, leases,
arrears, bankruptcies, or mortgages. In addition to public record-keeping
systems, many other private services (escrow and closing organizations,
appraisers, etc.) have evolved to assist parties in fixing, moving, and tracking
representations so they can easily and securely produce surplus value.
Although they are established to protect the security of both ownership and
transactions, it is obvious that Western systems emphasize the latter. Security
is principally focused on producing trust in transactions so that people can more
easily make their assets lead a parallel life as capital. The Western emphasis on
the security of transactions allows citizens to move large amounts of assets with
very few transactions. In most developing countries, by contrast, the law and
official agencies are trapped by early colonial and Roman law, which tilt toward
protecting ownership. They have become the custodians of the wishes of the dead.
Conclusion
Much of the marginalization of the poor in developing and former communist
nations comes from their inability to benefit from the six effects that formal
property provides. The challenge these countries face is not whether they should
produce or receive more money but whether they can understand the legal
institutions and summon the political will necessary to build a property system
that is easily accessible to the poor.
The French historian Fernand Braudel found it a great mystery that at the
inception of Western capitalism, it served only a privileged few, just as it does
elsewhere in the world today:
The key problem is to find out why that sector of society of the past, which I
would not hesitate to call capitalist, should have lived as if in a bell jar, cut
off from the rest; why was it not able to expand and conquer the whole of
society? . . . [Why was it that] a significant rate of capital formation was
possible only in certain sectors and not in the whole market economy of the time?
I believe the answer to Braudel's question lies in restricted access to formal
property, both in the West's past and in developing and former communist
countries today. Local and foreign investors do have capital; their assets are
more or less integrated, fungible, networked, and protected by formal property
systems. But they are only a tiny minority-those who can afford the expert
lawyers, insider connections, and patience required to navigate the red tape of
their property systems. The great majority of people, who cannot get the fruits
of their labor represented by the formal property system, live outside Braudel's
bell jar.
The bell jar makes capitalism a private club, open only to a privileged few, and
enrages the billions standing outside looking in. This capitalist apartheid will
inevitably continue until we all come to terms with the critical flaw in many
countries' legal and political systems that prevents the majority from entering
the formal property system.
The time is right to find out why most countries have not been able to create
open formal property systems. This is the moment, as Third World and former
communist nations are living through their most ambitious attempts to implement
capitalist systems, to lift the bell jar.
http://www.ild.org.pe/papers-art/ch3-cond-en.htm
http://www.amazon.com/exec/obidos/tg/detail/-/0465016154/
>
tooly
exceptionally important part in productivity...and is 'geometrical in impact
over generations'.
2) The 'population' variable in productivity equations have been shown to
carry the substantial 'difference' between advanced and developing nations.
3)some economists have shown that these 'differences' are internal rather
than external in influence...indigenous rather than exogenous. This leads
to the concept of 'primitive' characteristics and 'advanced' characteristics
found in the population itself. This however is not aligned with present
egalitarian hegemony.
4)What this all suggests is that people themselves, are not equal.
Education is the great emancipater and equalizer...but it may take
generations before 'real returns' in productivity are seen [and development
of infrastructures that support higher production and standard of living].
In the meanwhile, the 'advanced' today are 'geometrically' disposed to
increase their advantages over the 'developing' the world. Gaps will get
wider before they get smaller.
tg
Yes, they might succeed in not being dominated by neo-colonialism. Can't have that.
Thelasian
FYI from the Washington Post:
Under the Non-Proliferation Treaty, Iran retains the right to produce
nuclear energy. The Bush administration insists, however, that Iran,
as the world's fourth-largest oil producer and second-largest gas
producer, does not need nuclear energy, even though the United States
approved about 20 nuclear energy plants for Iran before the 1979
revolution.
But Iranians counter that they need nuclear energy, specifically seven
1,000-megawatt plants, to accommodate domestic demand that already
absorbs 1.8 million of the 4 million barrels of oil that Iran produces
daily. Iran's population of 69 million is expected to increase to 90
million in 16 years, the government says.
As a result, Iran could be forced to use all its oil just to meet
domestic demands within 20 years. That would be devastating for an
economy dependent on oil exports for most of its revenue, said Ali
Salehi, Iran's former representative to the International Atomic
Energy Agency.
"This is the worst way of using our oil, especially since we won't
have oil forever," Salehi said. "If we did that, we'd be like the
United States, which is the third-largest producer of oil in the world
but also the first importer of oil."
Although the cost of a nuclear reactor is much higher than a plant for
fossil fuels, Iranian experts say the savings that would come from
being able to export more of its oil as a result would pay for a
nuclear facility in two to three years.
SOURCE: Desire for Nuclear Empowerment a Uniting Factor in Iran
Issue Seen as Matter Of Independence, Reaction to U.S.
By Robin Wright
Washington Post Staff Sunday, November 14, 2004; Page A25
Constantinople
>
>>Constantinople <constan...@yahoo.com> wrote in message news:<Xjnmd.5175477$6p.8...@news.easynews.com>...
>>
>>>tg wrote:
>>>
>>>
>>>>"Immortalist" <Reanima...@yahoo.com> wrote in message news:<QIydnalTNIy...@comcast.com>...
>>>>
>>>>What incredible nonsense. Those nations with the ability to accumulate
>>>>capital by processing their natural resources are prevented from doing
>>>>so by neo-colonialist forces. Consider Iran and nuclear fuel
>>>>processing.
>>>>
>>>>-tg
>>>
>>>That is an exceptional case for obvious reasons.
>>
>>
>>Yes, they might succeed in not being dominated by neo-colonialism. Can't have that.
So you agree it is exceptional, and so your implied generalization to a
ban on countries "processing their natural resources" is false.
Immortalist
"Thelasian" <thel...@yahoo.com> wrote in message
news:848aafc.04111...@posting.google.com...
Insight: In the socialist revolutionary movements, whether in Russia, China or
South America, the leaders always emphasized the necessity for land reform. Was
there a real social evil they were trying to remedy?
TB: There undoubtedly were many landlords who owned disproportionately large
amounts of property which had been acquired by politics, rather than by economic
exchange. However, land reform really was a euphemism for confiscation and
subsequent control and ownership by the state. In the case of Russia, [Pyotr]
Stolypin, the prime minister who was assassinated before the revolution, was in
fact trying to privatize what essentially had been collectively owned property.
His proposal might have prevented the Russian revolution from taking place.
The people in the U.S. State Department thought that land reform was a good idea,
and they attempted to impose land reforms in a number of countries, with
disastrous effects. Take, for example, Chile -- where the reformist policies of
the 1960s led to the election of Salvador Allende; and then there were Vietnam,
Iran and finally El Salvador in the 1980s. In all of these countries the State
Department land-reform policies actually precipitated the very events they were
supposed to prevent.
http://www.findarticles.com/p/articles/mi_m1571/is_n40_v14/ai_21278592
Why could the Romans afford to build an empire but not maintain it? Why did the
Pilgrims and Ireland starve? What was wrong with the land reforms in Iran,
Vietnam, and El Salvador that led to political upheaval? Why are Arab nations
persistently underdeveloped? Conversely, what did Britain do right ahead of
everyone else? What did America learn from Britain, and then forget to teach
others? What is China doing right today and does it need democracy to prosper
(did Hong Kong?)? What don't the World Bank and the International Monetary Fund
understand?
The answers are given not in an abstract economic treatise but in the engaging
stories of individuals and nations living and experimenting and, with surprising
infrequency, finding the right formula for prosperity: security of private
property, freedom of exchange, enforcement of contract, and equality before the
law.
http://dpcopy.tripod.com/1_fw/fw_1a04.html
Iran just needs to rethink its property rights;
The Noblest Triumph : Property and Prosperity Through the Ages
by Tom Bethell
http://www.amazon.com/exec/obidos/tg/detail/-/0312223374/
tg
Yes, thanks. Also to the point, the NPT permits uranium enrichment,
which is what would allow them to gain economic independence and use
their oil and gas resources as they see fit.
I don't doubt for a minute that they would like to go nuclear (if they
don't already have a couple bought from North Korea or FSU), but the
real threat is that they have such a clear economic plan. What if a
future Iraq also decided that building their own processing plants was
a better idea than being a neo-colony of the USA. Pretty powerful
little economic union there, and trouble for SUV's everywhere.
-tg
Thelasian
The ironies are compounded by the fact that the US encouraged Iran to
use nuclear energy, so as to free up oil for exports, and even offered
to sell Iran the same uranium enrichment facilities that the US is
complaining about now:
LINKS:
National Security Decision Memorandum 292
US-Iran Nuclear Cooperation
April 22 1975
Page 1: http://www.ford.utexas.edu/library/document/nsdmnssm/nsdm292a.htm
Page 2: http://www.ford.utexas.edu/library/document/nsdmnssm/nsdm292b.htm
National Security Memorandum 324
Negotiation of a Nuclear Agreement with Iran
April 20 1976
http://www.ford.utexas.edu/library/document/nsdmnssm/nsdm324a.htm