I found an old yet interesting article by Thomas Sowell the other day. It is a review about a book The Mystery of Capital by Hernando de Soto. Here are a few of the paragraphs.
It is not really capitalism but poverty that de Soto is most concerned about. He finds most Third World poverty to be both unnecessary and grossly misunderstood.
In many Third World countries, the underground economy is larger than the legal economy, and the total wealth of all the poor "dramatically outweighs the total wealth of the rich."
de Soto's calculation is that the total value of all the real estate held, but not legally owned, by the poor is more than 20 times all direct foreign investment in the Third World and more than 90 times all the foreign aid to all Third World countries over the past three decades.
The crucial theme of the book is that this vast amount of wealth cannot be used, as it is in the west, as investments to create still more wealth and rising standards of living. That is because real estate, businesses and other assets in the underground economies of the Third World cannot be used as collateral to raise capital to finance industrial and commercial expansion. Illegality also creates other economic handicaps.
Third World peoples "have houses but not titles, crops but not deeds, businesses but not statutes of incorporation." Why then do they not get legal titles? Because it can be an unbelievable ordeal, especially for people with little education and in countries where red tape is virtually boundless.
He also gives details on what it takes to legally own property in other countries. The length of time (up to 19 years) and the number of steps (sometimes in the hundreds) is almost jaw-dropping.
That brings me to the questions: How much of poor countries' poverty is self inflicted by their own crazy laws? And do we hinder more than help by sending aid? Would our money/time be better spent in spreading the idea of property rights among the people? Would that motivate them to change their own government?