U.N. COMMISSION ON EMPOWERMENT OF THE POOR

We have learnt what works and what does not in the struggle against global poverty, those countries that have done the best are those that respect property rights, have independent courts, a professional public service, accountable, replaceable politicians, democracy and human rights. They are key factors in development, economic progress as well as good in themselves.

These realities have been forced home to me in recent years during my days as Director General of the World Trade Organisation and now in my new life in business, working in Ministries and my travels as a do-gooder. That’s why I was delighted recently to be invited to be a member of a United Nations-sponsored High Level Commission on the legal empowerment of the poor. It’s a distinguished group of eminent people. Other than my good self, members include: Fernando Cardoso, former President of Brazil; Benjamin Mkapa, the President of Tanzania; Ernesto Zedillo, former President of Mexico; Lawrence Summers, President of Harvard University and former Secretary of the Treasury of the United States of America. The panel also includes Anthony Kennedy, a U.S. Supreme Court Justice, Iranian Nobel Peace prize winner Shirin Ebadi, and Lahkdar Brahimi, former head of the United Nations Mission to Iraq and Afghanistan. The Commission is co-chaired by former U.S. Secretary of State Madeleine Albright and Peruvian economist Hernando de Soto.

President Mkapa, Tanzania’s President, at the launch pointed out that because most Tanzanians hold their property outside the law they were considered poor, yet studies showed that the extra-legal economy in Tanzania now holds assets of US$29 billion, much more than all the aid and investment over many decades. 98% of all businesses operate outside the legal system, and 89% of all properties are held outside the legal system. Formalising these investments and ownership would revolutionise the economy.

I know Hernando de Soto very well, his landmark studies and book, ‘The Mystery of Capital’ which explains that the poor in poor countries have assets and succeed mainly in the informal economy outside the legal system is one of the most important studies in the past 20 years. The story of successful economies is their capacity to protect private investment and allow people to borrow against their assets. Most start-up businesses in the West are based on loans against properties. Yet most jobs and businesses in poor countries are outside the legal system because they don’t trust the rule of law.

• Throughout Latin America 80% of all real estate is held outside the law.
• The extra-legal sectors in the developing world account for 50-70% of all working people and are responsible for one-fifth to more than 2/3’rds of the total output of the Third World.
• The assets of the poor in Egypt alone are more than 50 times all the foreign investment ever recorded including the funding of the Suez Canal and the Aswan Dam.
• In Haiti the value of the extra-legal real estate was 10 times the value of the holdings of the Haitian Government. The assets of the poor are still 150 times greater than all the foreign investment received in 200 years.

But in Haiti it can take 65 bureaucratic steps and 2 years to lease land for 5 years with the right to purchase.

In Egypt it can take 77 bureaucratic procedures at 31 public and private agencies to acquire and register a ‘lot’ on state-owned desert land. This takes 5 to 14 years. It can take 45 steps and 2 years to establish a barber shop!

This explains why millions build their homes and businesses illegally.

The evidence is overwhelming that the model which delivers the best results in lifting living standards is where rights are upheld, corruption exposed by competition, and an active civil society polices these policies. Studies of the poorest countries show that the most democratic do the best. This Commission’s work has the potential to change lives. I’m very excited because this is very real.