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Dead Capital |
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Copyright © 2000 by Dave Badtke |
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Have you ever asked yourself who owns the vast stretches of land you see when you’re driving through the west, perhaps in Nevada, where there’s nothing for miles except desert, extending out to distant mountains, where there are no grazing animals, no houses, just miles and miles of natural terrain save for the road on which you’re driving and a network of wire fences, running along the road with perpendicular branches that vanish in the distance? While you might not know who owns the vistas, you know that someone does, for there is no part of the U.S. that does not have a documented owner. Obviously, property ownership is governed by our laws, and it would be easy for us to believe that it was this way before our founding fathers set pen to paper. But Hernando de Soto argues in his fascinating new book, The Mystery of Capital: Why Capitalism Triumphs in the West and Fails Everywhere Else, that our property laws over the last two centuries have changed significantly to meet the demands of a country that wanted vast western territories developed. And because of our legal flexibility, the capital created in the U.S. by property laws has been extremely productive even though the primary purpose of the laws was the protection of property rights. In contradistinction, the third world is drowning in a sea of dead capital. According to de Soto, third-world property is also owned, but if you try to figure out by whom, you are frustrated by endless bureaucracy, differing documentation standards, and a lack of coordination between government agencies. De Soto’s Institute for Liberty and Democracy (ILD) has done research during the last decade that indicates that the overwhelming majority of people living in third-world shanty towns and villages have no clear title to property. As a result, these extralegals cannot get mortgages, buy insurance, or use their property as collateral. Their capital is dead; to quote Adam Smith, their capital is not “a stock of assets accumulated for productive purposes.” The value of third-world dead capital has been measured by the ILD to be worth more than 9.3-trillion dollars, an amount that is larger than twice the total U.S. circulating money supply and that is almost as large as the total worth of all companies listed on the stock exchanges of the 20 most developed countries. De Soto believes that U.S. history teaches us what a third-world country, which the U.S. was 200 years ago, must do to give life to dead capital. While vast areas of the U.S. were legally owned prior to westward expansion, the land was quickly occupied by illegal settlers who improved the land and made it productive. Because the overwhelming majority of U.S. citizens were recent immigrants, public opinion valued settlers’ rights over legal property rights. As a result, many states modified their property laws to support illegal occupation. The new state of Kentucky passed occupancy legislation that gave settlers title to land if their taxes were paid and if they had lived on the land for seven years. In Green v. Biddle, brought by the heirs of a large landowner, the U.S. Supreme Court decided in 1821 that Kentucky’s occupation laws were unconstitutional. Kentucky courts said nuts to that, following public opinion rather than the Supremes, and found technical, legally ridiculous ways to ignore the ruling. Even the powerful U.S. Senator Henry Clay had to concede that squatters’ rights held sway over property rights. By 1853, eleven states, including California, had passed occupancy legislation similar to Kentucky’s. Similarly, the 1862 Holmstead Act, granting settlers 160 acres of free land if they simply agreed to live on it, was less an expression of government generosity than an acknowledgment that the land had already been illegally settled. While today’s property laws seem ironclad, supported as they are by vast networks of courts and title companies, our path to the present demonstrates that in many ways we were more socialistic than capitalistic when we passed legislation giving land titles to squatters. De Soto believes that similar land-reform legislation is required in the third-world if the U.S. example is to be followed. Since de Soto may run for President of Peru, his book should be required reading by all who might be inclined to call him a socialist or communist should he win the election and decide to give extralegals title to land which, in some cases, may be owned by U.S. interests. With our tragic involvement in the assassination of Chile’s democratically elected President Allende still raw in our memories, it is well to remember that sanctimonious mythology and pronouncements are frequently at odds with history. Better, de Soto says, is to remember what U.S. legal history has taught us: “The way law stays alive is by keeping in touch with social contracts pieced together among real people on the ground.” |
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- Dave Badtke can be contacted at: www.CarquinezReview.com; Dave@Badtke.com; PO Box 763, Benicia, CA 94510; or by calling 707-745-5540.
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