The American Spectator

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br> De Soto was invited by the Indonesian government to advise on the 90 percent of Indonesians living outside the legal system. He knew little about the country, but as he crossed the rice fields of Bali he noticed that a different dog would bark as he entered a different property. p>The West itself once had a similarly ramshackle legal infrastructure, he argues. But in time its institutions evolved, and governments gradually came to accept the informal arrangements and incorporate them into uniform codes and rules. br> /p>

Ownership once represented by dogs, fences, and armed guards is now represented by records, titles and shares. The moment Westerners were able to focus on the title of a house and not just the house itself, they achieved a huge advantage over the rest of humanity. With titles, shares and property laws, people could suddenly go beyond looking at their assets as they are (houses used for shelter) to thinking about what they could be (security for credit to start or expand a business). Through widespread, integrated property systems, Western nations inadvertently created a staircase that allowed their citizens to climb out of the grubby basement of the material world into the realm where capital is created.

br> I don't know of anyone else who has delved so profoundly into the problem of economic growth. We are talking about something as basic as how a country rises above the subsistence level. No one else, as far as I know, has come close to analyzing the problem. The officially approved development economists with their destructive land-reform schemes and their dedication to foreign aid as the answer to all ills haven't come close to understanding their own subject. Yet they have been working on it for 60 years.

WHEN THE FOUNDATION OF ANY FIELD or discipline has been misunderstood for decades, and that field is itself fundamental, as is the case here, then we are onto something interesting. And that is the case with de Soto's work. A related issue much in the news -- illegal immigration -- illustrates the point. There are said to be 11 million illegals in the country. Some say they are essential to the economy, others view them less kindly. I will take no position on their benefits or costs, but ask a more basic question. Why are they here at all? Most of them come across the Mexican border.

Now the truth is that the great majority of people, Mexicans included, would rather live and work in their native country. It is preferable to trekking across deserts, risking death by exposure and thirst, climbing fences and fording rivers in exchange for part-time labor in fields and sculleries in a land where they don't even speak the language. So why don't they stay in Mexico and work there?

Because they can't find jobs, we are always told. And inquisitiveness stops right there. No jobs in Mexico. But why are there not?

Why does the U.S. create millions of jobs every year and Mexico create refugees? In all the hundreds of newspaper and magazine articles I have read about immigration, I have not once seen this question addressed. What exactly is wrong in Mexico? Clearly Mexicans are effective workers, otherwise they wouldn't be in demand as day laborers here. Mexicans come with brains and muscles like everyone else.

Journalists have shown no interest in this question. Years ago, I wrote a few articles about the Mexican economy but short of spending time in that country it is not easy to discover the truth. A great deal of agricultural labor clearly became uneconomic and millions of peasants moved to Mexico City where they set up shanties and encampments. If the president of that country, Vicente Fox, knows what's wrong, he seems incapable of doing anything about it.

Hernando de Soto's organization was invited to Mexico and did some work on the question. He says that only 6 percent of Mexican enterprises are legal, the rest are informal. If you want yours legalized, it will take you four years with no certainty in the outcome.

I don't think World Bank officials understand these matters and may not be interested. With their huge tax-free salaries, their lives are already comfortable enough and they are not about to leave their desks and go delving into the complexities of property registration or the customary law of those dreadful shanty towns. For the officers of the development banks and the aid agencies, "the economy" of the countries they oversee is confined to what happens in the centrally located skyscrapers. Activity in the slums that surround them is as remote from their concerns as it is from the legal system itself. It is outside the law and outside their purview.

Journalists will not take an interest unless the president of the United States leads the way. Clearly there is ideological bias here. Journalists are not of their own accord going to start talking about the indispensability of formalized and registered property. De Soto himself said that when he is invited into some Third World country, tact is essential. He can't just advocate property rights. They were successfully demonized for so long that he has to be diplomatic if he is to keep the politicians on his side.

IT'S GOOD, THEREFORE, that Grover Norquist has taken an interest in the subject and has organized an affiliate group, the Property Rights Alliance. A fellowship will be named after Hernando de Soto.

Liberia's Ellen Johnson-Sirleaf, promptly canonized as Africa's "first female elected leader," happened to be in town at the same time as de Soto. When she stopped by the Washington Post, she was asked (according to the editorial page editor) "how she will plead her case for aid to Bush." Not whether but how, notice, and I think that for the Washington establishment, that is the only imaginable way to get an African economy off the ground. In Washington, wealth is thought of as something transferred, not created.

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