Welcome to the professional website and personal weblog of Jeremy Del Rio. Whether you're a client, friend, or curious onlooker, please don't stay a spectator. Engage the conversation. Your contributions matter here.
« A reminder to crucify the flesh daily | Home | New York is M-E-L-T-I-N-G »
No mystery why Capitalism has failed there
By Jeremy | August 1, 2006
... the third in a series of annual reports investigating the regulations that enhance business activity and those that constrain it. New quantitative indicators on business regulations and their enforcement can be compared across 155 countriesâ€â€from Afghanistan to Zimbabweâ€â€and over time...The indicators are used to analyze economic outcomes and identify what reforms have worked, where, and why.Not surprisingly, Western industrial nations and Pacific Rim economies that embraced capitalism following World War II are at the top of the list of "top thirty economies based on the ease of doing business," while developing countries are not. Some of the interesting anecdotes Guy references underscore the challenges Hernando de Soto points to in his brilliant work, The Mystery of Capital: Why Capitalism Triumphs in the West and Fails Everywhere Else. + In Guatemala it takes 1,459 days to resolve simple disputes in court. + If you paid all your business taxes in Sierra Leone, you would pay 164% of gross profit. + The most difficult country to fire an employee is Angola. + It takes 363 days to register property in Bangladesh. De Soto describes situations like these as the "major stumbling block" to economic vitality:
"The major stumbling block that keeps the [non-Western] world from benefitting from capitalism is its inability to produce capital. ... "[Globally,] most of the the poor already possess the assets they need to make a success of capitalism. ... "But they hold these resources in defective forms. ... 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. ... "[P]oor inhabitants of [Third World and former communist nations] -- five-sixths of humanity -- 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 capital out of them. One the greatest challenges to the human mind is to comprehend and gain access to those things we know exist but cannot see." de Soto, pp. 5-7
Topics: books, capitalism, economics, hernando de soto, jobs, poverty | 1 Comment »
August 2nd, 2006 at 3:18 pm
That really resonates with my view of India after living there for a few years. Big international companies can move in and if they do it well, it is a license to print money. But for a local to grow a small business from scratch (not starting with daddy’s millions), into a decent midsized business is almost impossible, largely due to the legal issues and government bureucracy and corruption. If you are not big enough to get above or work the system, you are stuck