Mercantilism, American Style
Hernando de Soto and Property in a Market Economy, Forthcoming
25 Pages Posted: 9 Apr 2009 Last revised: 10 Jun 2010
Date Written: 2009
This paper was prepared for a volume of essays exploring the application of Peruvian economist Hernando de Soto's ideas in a market economy. DeSoto's conviction about the importance of clear titles and stable property rights has had enormous influence on international development policy. The dominance of the property-law aspects of de Soto's work, however, poses a significant difficulty for those interested in thinking about how his ideas apply on the American scene, where titles are clear and property rights stable. But de Soto's central insight -- that third-world poverty results from the inability of the hard working entrepreneurs to harness the wealth generated in the informal economy by transforming it into mainstream capital -- is not simply a property law insight. He also argues that many millions of hard-working entrepreneurs are forced to operate in the informal economy because of regulatory rules that resemble, and are the remnants of, "mercantilism." In many American cities, the regulations governing the economic activities most closely described in The Other Path -- urban transportation and street vending -- are characterized by mercantilist qualities akin to those that concern de Soto: "Popular access to private enterprise is difficult or impossible for the popular classes, the legal system is excessive and obstructive, there are massive public and private bureaucracies...and the state intervenes in all areas of activity." This essay explores these regulations and argues that they ought to concern those interested urban development and the urban poor.
Keywords: urban development, poverty, entrepreneurship
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