Globalization at the Crossroads – Full Video

Despite its critics, globalization has increased
prosperity around the globe. Yet, billions remain in poverty. Two-thirds of the world’s population, four-billion
people, are locked out of globalization. They’re living like this right now; they’re
frustrated, it’s important to let them in. Funding for this program has been provided
by the John Templeton Foundation; serving as a philanthropic catalyst for discovery
in areas engaging life’s biggest questions. Millions of people are living longer, and
better lives today than their grandparents ever dreamed. In the short-term, their fortunes will rise
and fall with the markets, but long-term, their inevitable march toward a better life
is undeniable. Poor people are migrating to the world’s cities
in astounding numbers, embracing globalization despite the risks. And when the laws they
encounter don’t work for them, they create their own. Their quest is no different than that of millions
of Europeans, Americans and Japanese over the past two-hundred years. They too, migrated by the millions, broke
the back of the old order with new legal systems, to launch the Industrial Revolution that became
globalization. And yet today, the poor are still locked out
of the system, and globalization is at the crossroads. Globalization is a civilization in the making.
Civilization has always been designed by elites, and the tendency of elites has always been
to feel that if it just covers themselves and maybe the top ten or twenty percent, it’s
all right. If globalization doesn’t create the space
required for those who are excluded to come in, does not give them the instruments, the
tools with which to prosper, they will be left out as orphans. And these
orphans will end up bringing civilization down. Hernando de Soto is an award-winning author
and economist. He is an advocate for the economic potential of the poor, to lift their countries
out of poverty. …and who runs that? Do you run that? Do
you guys run that? No, no, no. It’s private. Yes. From his native Peru, de Soto travels the
world to document his amazing idea that the poor have far more power than we think. He has discovered the poor actually own the
majority of the world’s assets and enterprises; yet they lack the property rights and business
tools to prosper in a globalized world. And the people who do this are different… The poor have an entrepreneurial potential
that once tapped, can improve the lives of billions. They are the biggest reservoir of entrepreneurship
and creativity that we have in developing countries. They’re the ones willing to take
risks and they’re the ones that are willing to endure all the hardships that it takes
to create, at the beginning, a strong market economy. So we need them more than they need us. Why is it that most Western nations are wealthy,
while so many others are destitute? And why, despite billions of dollars in foreign assistance,
is so much poverty still with us? These questions fascinate Hernando de Soto.
His life has become a quest to understand the roots of poverty, and to do something
about it. This is globalization’s moment of truth. If
globalization wants to survive as a system, it has to leave no orphans behind. In Lima, Peru, Hernando de Soto presides over
the Institute for Liberty and Democracy; the “ILD.” The ILD fields teams of young researchers
and lawyers. They document how people set up extralegal businesses, conduct transactions,
keep records, and, how they buy and sell property, all outside the formal legal system. In time, they offer a blueprint for new inclusive
reforms, based on local practices. De Soto and his team of professionals have
been invited by over thirty heads of state, to help provide access for the poor to their
nations’ business and property institutions. …and at the United Nations, with former
American Secretary of State, Madeleine Albright, de Soto co-chairs the Commission on the Legal
Empowerment of the Poor. I don’t think even policy makers have a good
idea of what they’re facing in the rest of the world. Two-thirds of the world: from Iraq
to Afghanistan, to Peru to China, actually live like this. This is the challenge. So, if you can picture this, put it into your
mind, it will be much easier to take the right policy decisions. You can’t understand this
unless you really see it. The impact of a population locked out of globalization
is clearly visible in Dar es Salaam, Tanzania. Hernando de Soto and his team have been at
work in this poor sub-Saharan country, for over three years, to find out if the absence
of private property rights and inclusive business law are at the root of Africa’s poverty. I think poverty is a terrible thing. It makes
for suffering, it makes for sickness, it makes for a short life, it destructs society, it
makes thieves out of people, it corrupts people. I want prosperity. And yet, Africa and poverty have long been
synonymous. Thirty-three of the poorest countries on earth are in Africa. Now why is that? Are they being exploited
by the West? Is it ethnic? Is it cultural? Is it Colonialism? Is it Imperialism? Capitalist
exploitation? Is it corruption? Dependency politics? The climate? Is it the food? Why
can’t they be as prosperous as the people from the North? Some sociologists suggest that Africans are
culturally different from Western entrepreneurs. Before coming to Africa, the question was:
Is the predominant way of organizing oneself socially the tribal way, the communal way? Is the notion of property rights, of business
exercised by individuals, or voluntary groups that get together, an imposition on the Africans,
or could it be part of their nature? Looking for an answer, ILD researchers criss-crossed
Tanzania seeking data. What they found was remarkable. Eighty-nine percent of all territory and most
business in the country is controlled by private businesses, small ones, made up of poor people,
but private nevertheless; only eleven percent is controlled by tribal authorities. In fact, Africans have been in the business
of trading with each other throughout history, but today most are locked out of the globalized
world. Are Africans entrepreneurial? Look around
you. Any place you go in Africa you will see people, getting organized working. Here, for
example, we are in an area where different people have gotten together, so they each
make a different part of furniture; that is then brought together and displayed. Do each of you specialize? How do you make
this bed? The people who make this, are different from the people who make
this? Yeah. And the people who do this are different? Different. So, all the spirit of entrepreneurship is
here in Africa, what’s missing are the legal institutions with which people can be brought
together, and become a lot more productive and wealthy. The small, elite, formal sector has a unified
legal system that connects them to the globalized world. But, the ILD has found that eighty-nine percent
of all properties in Tanzania are held extra legally. And ninety-eight percent of all businesses
operate informally or outside the law. They remain disconnected from globalization. What there is in Africa are pieces of law:
it’s like a mosaic. So, it’s a lot of little laws that have to
be brought into one, so that all Africans can understand each other, and then understand
each other with the rest of the world. That’s called globalization. There is a growing feeling in many parts of
the world that capitalism, or globalization, has failed people. But that’s not really a correct statement,
because in most of the world what you’ve got is pre-capitalism, or what I like to call
mercantilism, which was the initial stage of capitalism in the Western countries, where
only a few people had access to the tools of creating wealth. Some people like to call
it crony-capitalism. The important thing is this: capitalism as
a system is not yet functioning in most of the world. And the blame on capitalism is
for the lack of it, rather than because it’s there. Although capitalism is working in the developed
world, developing countries still lack its basic tools. To the farmers of the high Andes, raising
livestock has been a way of life for centuries. Eleuterio Phuyo Teniente, his daughter Juliana,
his son, Edson, and his wife, Ana Jesusa, live in a simple adobe house, in the tiny
village of Inquilpata, Peru. They own nine head of cattle, raise pigs and
ducks, grow corn and potatoes, and produce just enough milk for their family. Today, they’ll take four cows to the weekly
livestock market and offer them for sale. Cows or livestock are a great asset for humble
people all throughout the history of the world. They present a mobile way to keep capital. Capital is often associated with money spent
or invested by capitalists. But in fact, the root word of capital comes from the Latin
word “caput,” meaning head. …which is one of the reasons why many people
say that the word “capital” basically came from “heads of cows.” De Soto has another idea about the source
of the word “capital”. Capital comes from “capita,” “head,” but in
the sense that it’s a concept, that because it is a concept, can only be captured in the
head. In other words, capital doesn’t exist in things.
It is the potential of things that we can see, once they are described in a certain
organized way on a property document. Cattle without titles are regularly sold at
this market, but at a lower price than documented animals. Without a piece of paper, it loses a lot of
its exchange value in the broader market, where it can fetch higher prices for whoever
owns it. The same is true of a person’s most important
asset…their house. On the outskirts of a village in rural Tanzania,
Salum Seif Makanydga owns his home. It’s his major asset, and he paid for it with cash. This small house shelters him and thirteen
other family members. It has five rooms, no kitchen, and an outdoor latrine. Salum and his wife, Amina, live on less than
two dollars a day. A house in a developing country is a shelter,
which cannot be mortgaged, which cannot be used as a reference, which doesn’t have an
address, so it can not be easily located. In the developing world, houses are places
where people live. Period. That’s it. NARRATOR: But in the West, things are different. So, this is it here. It’s on a fifty-five-foot
wide lot, which is pretty unusual for this part of town. Actually a house is more than just a home
in developed countries. It’s a capitalist tool. Robert Parris is a successful realtor in the
northern suburbs of Chicago. He and his buyers and sellers operate within a comprehensive
legal system of property rights. In the West, every building has a virtual
counterpart that exists in documents and databases. This enables buyers to know the actual sale
prices of comparable nearby homes, and if there are any liens or other legal issues
connected to the house. People can learn more from good documents
and databases about a house, than they can by walking through the house. In the West, it’s easier to determine the
true value of a house, and that helps gives the buyers and sellers confidence. Houses are often the main way people grow
their equity. They can be used as collateral, and they can be more easily bought and sold. In the developing world, a home is still its
owners’ major asset, but the value of the house, without proper title is locked up,
unavailable. Capitalism, globalization and free markets
are all about trading property rights. Nowhere is this more apparent than in the global commodities
markets, and there is no better example than the Chicago Mercantile Exchange. My name is Mike Quottrocki, I’m a floor trader
at the Chicago Mercantile Exchange in the live cattle options and futures pit. I buy
and sell futures contracts based on the live cattle contract. All day long Quattrocki trades cattle…by
the thousands. Your adrenaline is going very fast. You’re
asked to do complicated math quickly, in a very, very, split-second maneuver. There’s
lots of pushing, lots of shoving. Today Mike Quattrocki works the floor, although
eighty percent of futures trades at the Chicago Merc are conducted on line. When you look at the big markets of the West,
you see people dealing in symbols. All they deal with are representations of value. What I’m trading today is roughly a thousand
futures contracts. That represents about forty-thousand head of cattle. There’s no physical way that
we could ever transact that, if we actually had to go out to a farm, or a ranch and round
up the cattle, and buy and sell them with each other.
I never see this cattle! I actually have never been outside of Chicago to the West to see
where these animals are. In the United States and Western Europe, your
documents go to the market and practically work for you and think for you. In developing countries and most of the former
Soviet Union, the majority of people actually have to bring their animals to market. It’s
a cash market. It is late in the afternoon when Eleuterio
finds a potential buyer. If he is interested in making an offer, he’ll hand over hard currency.
The first offer is always low. All over the market cash money is changing
hands. It’s counted, often rejected, and returned. Eleuterio’s buyer is willing to pay more,
and so a deal is struck. People in the developing world have cattle,
land and houses, the same way they do in the Western world. What is missing is the rule
of law, and principally within the rule of law, the property rights systems that allow
identities, that allow risks, and that allow potential to be revealed. A single rule of law, that embraces everyone,
is the basis of globalization, and is absent in most post-communist countries as well. On the shores of the Adriatic Sea, bordering
Greece, Albania is blessed with over two-hundred-and fifty miles of Mediterranean
coastline… …a temperate climate …historic towns, and dazzling archeological
sites. Still, like so many countries in the developing
world, Albania is locked out of globalization. Albania was once ruled by one of the world’s
most repressive communist regimes. Thousands of its citizens were executed. A third of all Albanians spent time in labor
camps, or were interrogated by the national intelligence service. Most farm work was done
by hand. For over fifty years, Albania was impoverished
and unproductive; it is still the poorest nation in Europe. The problems for Albania are not very different
from those of developing countries. We didn’t know that at the beginning, because we thought
we were only going to be called in by developing countries. But in Albania, ninety-three percent of all
businesses and seventy-eight percent of all real estate are still informal, extralegal,
operating outside the law. People live on land that is not officially
titled, and run businesses that are not registered with the government. And the identity system remains complex and
bureaucratic, because when the communists left power, the people threw out their repressive
identification system. You need identities. But you need an identity
system that is very different from the one in the Communist System. You need one where
people can identify themselves in freedom. It’s a completely different ballgame, and
that’s one of the challenges in Albania. Victor Endo and Carla Fosca spearhead the
ILD’s work here. Most people in the West take identity for
granted, because they have an ID card or a driver’s license, which they can use to identify
themselves all over. Everybody in Albania lacks a valid means of identifying themselves. You have to go to your hometown and get a
birth certificate. For most people, that means driving for hours,
then waiting in long lines. Eglantina Melengu hopes to be married next
week, but for her wedding to be legal, she has returned in person to her hometown of
Berat, to obtain her birth certificate, as required by law. The certificate must be gotten at a person’s
birthplace. Even though my wedding is in Tirana, I get my birth certificate in Berat, the city
of my birth. Every time you need to do something related
to the state or the formal institutions, you have to go to your hometown to get your birth
certificate. And birth certificates are only valid for
ninety days. So, if an Albanian citizen wants to borrow money or rent an apartment, he or
she must repeat the process again and again, giving the bureaucracy enormous control over
people’s lives. Without identification, nothing works in a
market. You can’t get credit. You can’t be accountable for your actions. You cannot start
a business without an identity. Who are you working for, if the person can’t
identify themselves? Who are you employing, if you don’t know who your employee is? Identities
are crucial. With birth certificates in hand, Eglantina
and her fianc�, Vitan, can now be married. A few close friends and family join them.
The municipal clerk pronounces them husband and wife. After their wedding they join dozens of other
wedding couples driving through the capitol on Saturdays. It’s a striking contrast to
the past. In nineteen-ninety-two, the last year of communist
rule, there were just over six-hundred cars in the entire country. Only party officials
and police were authorized to drive. Ordinary citizens faced severe restrictions
on travel and great loss of personal freedom. Before the collapse of communism, moving inside
the country was forbidden. But once it collapsed, overnight there was freedom to move. They
didn’t have property rights; they didn’t have the freedom to do business, so they suddenly
started to do their own thing. These buildings are extremely informal. Most
of them are built on property that is not registered; most of them do not have building
permits. This is informality, or extra-legality, on
a grand scale. Before the night is over, the groom must dance
with a burning handkerchief. It’s a symbol of farewell to a man’s bachelorhood,
and about entering into a new relationship together. Vitan gives the handkerchief away and then,
to show that this is not something to be taken lightly, it is offered back to him several
times. Each time, he rejects it. For fifty years, Albania was one of the most
isolated societies in the world. Tonight, Vitan and Eglantina leave their old
lives behind. For Albanians to leave their past behind,
and take their place in the global economy, they must incorporate their local customs
into a comprehensive legal system, and embrace the rule of law. Africa…the birthplace of humanity. Here, among some of the poorest nations on
earth, Hernando de Soto discovers a window into the process of how local practices become
the basis of the rule of law, and the gateway to globalization. On the broad Serengeti Plain linking Kenya
and Tanzania, the Maasai live as they have for generations. There is no thought of globalization
here. At the center of their society are their cattle.
A Maasai’s cattle are more than simply a food source. They are the source of his wealth. Each morning, young boys lead their livestock
to pasture. From sunrise to sunset, these child shepherds are in charge of their family’s
major possession. Nomadic people are not riding all the time
or walking all the time. They stop, they reside in different places. The fact that they don’t
reside in one place, doesn’t mean that they don’t consider that they’ve got ownership
over things, or rights over things, like the right to use a road. The Maasai live in extended family groups,
inside a circular compound, or “boma.” ILD researchers have found that every society,
including the tribal Maasai, has a concept of private property and ownership. We have also not found one cow, or one bull,
that isn’t branded with a symbol that indicates that its identity belongs to someone in particular. While their land is held in common, each tribal
member has firm and established rights to live, graze livestock, and to use the water
and salt licks on the land. What there always is among humans, unfortunately,
are conflicts. Conflicts are usually about things that they own, or think they own. Historically, the Maasai have had no written
law. They have relied on oral communications. When a Maasai has a dispute, he summons an
elder, or laguananee, like Loishiye Mollel. A laguananee can resolve a variety of disputes,
such as quarrels over inheritances, dishonorable behavior, and most importantly, disputes about
property. They resolve, in the broad majority of cases,
all their conflicts, through adjudications that are legitimate and accepted at each village
level. So they already have an adjudication system. For the Maasai, our traditional rules and
culture are more respected than those of the courts. This is because the Maasai legal system springs
from the people. It reflects their core values and their beliefs. It is “the people’s law.” The law is something that’s spontaneous. We
have thought that the law is the product of legislatures, but in fact, the law is the
product of good habits, good customs that people accept, and that continually incorporate
people’s real dealings with each other into the law. Right now the Maasai rules solve problems
without going to court and spending a lot of money, but still getting a fair trial. The majority of citizens in the world may
be extralegal, but they all want order. It’s a natural human trait. They’ve created their
own law. Rick Ambinga is a mwenykiti; the elected chairman
of his village government in the Kinzudi Goba area of Tanzania. So, they’re changing their customs, too. Yes. They’re evolving… Rick has long conducted village business,
including the transfer of property. In the recent past, property transfers were executed
orally. They bring in members of the community who
are actually neighbors, and therefore know the area where the selling is taking place,
and create in a small ceremony, the public memory that certifies that a transaction took
place. But this public ceremony is very different.
This mwenykiti has made a significant change. He’s created the first standard form within
this village of four-thousand to five-thousand people, so that everybody actually takes away
a symbol, a representation of the act. Historically, all legal documents began as
speech. Is this a typical document, or have you created
a special document? I’m the one who created it. You created the deed. Yes. Yes. This is the first time that there is actually
a certification of somebody being owner. The seller himself never had this. Never. So, this is the beginning of the law, that’s
very interesting. Yeah, exactly. He is at the genesis of the property system
of this country. It’s the first time that they’re going from a Speech Act when they
transfer a good, to actually a Document Act. The creation of these documents is an important
step forward. All over the third world, people are creating
extralegal documents like these to record a variety of transactions, to establish property
rights, to protect their assets, and to connect themselves to expanded markets outside their
village, and eventually with national and global markets. Custom is not enough if you’re going to have
non-customary people coming into your territory, and if you’re going to be migrating, you need
law. The legal framework for property and business
that is evolving today across the developing world; began in the West just a few centuries
ago, and the result was dramatic. It led directly to the greatest period of
economic growth in world history. Starting in the late sixteenth century, Europe
began to experience a revolutionary shift in power. It would have a profound effect
on the law. For centuries, from their hilltop castles,
nobles had owned all below them. This castle represents power as it was in
Europe even up to two-hundred years ago. A few people, the nobility, decided how things
were governed, that’s where the laws came from; that’s where the taxing power came from.
That’s where all control came from. Then, at the dawn of the Industrial Revolution,
Europe was inundated by uncontrollable migration, overwhelming poverty, and massive social unrest. Europe was, as Marx described it, “one big
rural slum.” Less than a-hundred-and-fifty years ago it was “a brutish life,” according
to Hobbes. It’s a situation similar to what you get in third-world countries today. But, the old order and economic structure
were breaking down. Millions left their homes, to travel the world, in search of opportunities
in the emerging markets of the day. They needed now to be able to constitute businesses
of their own. And so the law was forced to recognize those rights. And the law was forced
to recognize that if they bought and they sold and they created, they had to dispose
of their assets. And so the law was forced to become flexible, and allow them to hold
property rights. For the first time, common people were free
to own property and create enterprises of their own. This was a fundamental turning point for mankind.
Before, only a few people could own things, only a few people could authorize business.
Power shifted from the castles on the hilltop, to the villages and the people below. The shift of power to a growing middle class
did not benefit everyone. Civilization had leapt forward, but there was still far to
go. Two powerful engines would fuel the fantastic
growth of the nineteenth and twentieth centuries. The first occurred when the common man secured
the right to own property. For most of human history, less than three
percent of humanity had owned almost all of the world’s land. That was about to change.
De Soto views the American experience from his own perspective. Believe it or not, the United States was a
third-world country a hundred-fifty years, a little bit less or more ago. It was a country where there was disorder.
There was lawlessness, there were migrants coming in from Europe, there were people fighting
for land, there were gangs in New York, you know, right along these streets, stealing,
fighting with each other, not being able to settle things peacefully, the way you can
today in the West. America was built by people searching for
a better future, and they started off in slums, in workshops, in sweatshops and built it to
what it was today. Our origins are the same. We third-worlders would have felt quite at
home in the Montana settlements, in the Gold Rush of California, and even in the Lower
East Side of Manhattan, just a hundred years ago. By the beginning of the twentieth century,
the Lower East Side of New York had become the most densely populated place on earth.
Thousands of immigrants clustered together to create business opportunities, just as
third-world migrants are doing today. Living in small crowded apartments, their
homes were also their work places. This is the very small apartment, made up
of three tiny rooms, where the Levine family lived in 1897. They were Russian-Jewish immigrants,
and they lived here with their two children, and in this three-room apartment they also
worked with three employees. The Levine home has been recreated as part
of the Lower East Side Tenement Museum in Manhattan. It was one of thousands of workshops
lining the streets of the Lower East Side. People came here, in the Lower East Side of
Manhattan, for the same reason they now flock to urban areas in developing countries: jobs,
a better life for themselves and their family. To the immigrants who had never owned land,
the vast, empty spaces of the American West were an irresistible attraction. By the thousands, they went west. Most were young and strong. Taming a wilderness
was not for the weak. Farmers, ranchers, and miners all competed for land. Very few held
legal title. The settling of the American West was a dirty,
violent and for many, deadly adventure. When you were a kid, when I was a kid, and
even now when there are some old reruns on television, we see Wild West films, and in
those Wild West films we see ranchers fighting against farmers, and then you find there are
fights between indigenous Americans and migrants that have come in from Europe. “All right you two, get ’em up!” “Come on, get up and get over there!” Not everybody agreed, not only on who owned
what among farmers, or who had a right to graze here or there among ranchers, but literally
between the farmers and the ranchers. The whole idea of the eighteenth and nineteenth
century of the United States is fraught with all of these romantic films with violence,
but it was really a fight to find out how they could live together eventually without
fighting, because it caused a lot of deaths, and it caused, of course, a lot of misery. Through most of the nineteenth century, the
squatters were a hated presence on the frontier, as they are in many parts of the world today. But in America, squatters ultimately became
legitimate landowners, and how that happened, defined property law in the new republic. They couldn’t actually do good maps, representations
that are faithful to the actual borderlines of where they live or where they work, so
they had to use physical manifestations, symbols, to establish rights. So, in certain areas of the United States,
they had Tomahawk Rights, which meant those areas where you shaved off part of a tree,
probably somebody else shaved part of the same tree to indicate that they had accepted
it. In some cases where they grew corn, for example,
the corn grew from here to there, and that established a right from here to there. So those were actually called Corn Rights,
it was an improvement on the land that gave you the title to it, because you had worked
it. And then afterwards of course, you cut the
trees down to build cabins. It was an improvement, and so on the basis of that, Cabin Rights
were also created. The West was settled as people claimed land,
created towns, and registered deeds in local land offices. People decided that there was enough of a
consensus to write all of this up, and create a more abstract order
based on maps, clear coordinates and longitude lines, but it all started with tomahawks,
with corn, and with cabins. The inalienable rights, guaranteed by the
Founding Fathers in the American Constitution, had set great changes in motion. They were, in their time, the people that
flipped the notion of who owned the world. No longer were the squatters “scruffy criminals,”
but “noble pioneers,” transforming a wilderness. It all starts off with squatters who want
to live in peace. First come the people, then comes the property, and then comes the rule
of law. And so, America’s first great engine of growth
was the extension of property ownership to the common man. The second was the modern
business organization, which, in time, became the foundation of globalization. Turning water into steam unlocks a powerful
new force. It’s much the same with capital. Transforming
business laws and systems… …unlocks the productive potential in capital
and creates great wealth. America’s railroads are a prime example. In the early eighteen-hundreds, European and
American businesses were largely organized as family enterprises or partnerships. Families were too small to organize large-scale
business; you had to accumulate the value of many families put together. The development of the railroads in the United
States required huge amounts of capital. The Industrial Revolution was really also
a commercial revolution. The Industrial Revolution would not have been possible without the corporation. It was once impossible to form a corporation
without a special legislative act. When that changed, the railroads conquered the continent. The common man now commanded more powerful
industrial and financial tools than ever before. In less than one-hundred years, private property
ownership, and the creation of the modern company had launched America on the fast track
to prosperity. In another time and place, a victorious army
would extend these same principles to a conquered nation, and the result was nothing short of
amazing. Just after World War II, Japan was a nation
defeated…its industries destroyed, and roads and rail systems in shambles. The country
lay in ruin. Then, in less than thirty years, this feudal society was transformed into one
of the most prosperous on earth. Modern Japan, an economic miracle, how did
they do it? The general perception is that Japan began
its modernization with the Meiji Restoration in the latter half of the nineteenth century,
which to a point is true. The Meiji reformed Japanese industry and many
laws. They built automobiles, machines, they built
a navy; they built airplanes. But in feudal Japan, the majority of Japanese
people remained powerless and poor, dominated by a military minority bent on expansion. There are dozens of revolts of peasants against
the system; they’re not happy. De Soto and the ILD pieced it all together,
through extensive archival research and interviews with village elders all over Japan. What is fascinating about maps and books,
of course, is that they are voices to us talking from the past. In a provincial archive, de Soto and his team
discovered simple posters that promoted a pre-war concept of land reform. I went to the ministry of agriculture and
found the posters of the reform. Have you seen this? This is the promotion of the reform. That’s right, that’s right; promotion of the
reform…and here, it was considered an anti-poverty program. The poster divides Japanese society into four
levels. At the bottom are the common people; small
farmers and businessmen, shown with their extralegal property, which they held at the
discretion of the feudal lord. These extralegal holdings were recorded on maps that were four-hundred
years old. To us that indicated that the little people
did have their own parcels of land, but they paid taxes to the absentee landlord. You see, it says basically that: “the law
comes from the ground up.” …because that’s what you did, you found
out who was doing what on the land, it was certified by political authorities, it was
documented, and it was put into your cadastres. One man incorporated those early concepts
of land reform into post-war reconstruction. General MacArthur, the supreme commander of
the allied forces, at this desk, in Japan, decided to support the trend that he already
found alive in Japan to empower individual Japanese. What the 1946 reforms did was to convert extralegal
property and business rights into legal rights, empowering millions of Japanese overnight. …and that turned Japan, which was essentially
in economic terms, a feudal country, into a modern economy. It remains the most successful and widespread
property reform in modern history. After Japan’s property reforms of the 1940s,
the country took off like a bullet train. This is what a property revolution actually
does, because the property revolution is not only about people getting titles to things,
but about the fact that as things are now represented by titles, by records and pieces
of paper that can be moved around much easier than the physical objects themselves, the
speed at which transactions can take place also multiplies many-fold. This is Shibuya, the center of Tokyo; lots
of energy, lots of action. And this proves that once you get your institutions right,
your property rights and obligations into place, you can create, in less than half a
century, a market economy. It doesn’t have to take an eternity. We now know what makes
it work. One of Japan’s former rivals, and the most
populous nation on earth, has joined the world market and, in record time, has become more
prosperous than ever. How relevant are de Soto’s ideas in this twenty-first
century communist society? In a single generation, one-point-three billion
Chinese are now fueling the world’s fastest-growing economy. I visited Shanghai about thirty years ago,
and none of these buildings existed at that time. It’s mushroomed, like out of nowhere.
It’s incredible what happens when you just change the rules of the game. I have never
seen such massive growth! And yet, within China exist all of the problems
of a developing nation: an enormous internal migration, hundreds of millions underemployed,
living in stark poverty, and tens of thousands of unreported riots, and civil disturbances
every year. But China has become a major force in the
globalized world. The Chinese transformation began not because
of ideology. It was just that thirty years after the Communist Revolution, the leader,
Deng Xiaoping, understood quite clearly that his neighbors, Japan, Taiwan and South Korea,
were prospering like China wasn’t. The prime minister said, “Look, I don’t care what color
the cat has, the important thing is that it catches mice.” He saw that property rights,
good business rules, competition, were rewarding people and were lifting the neighbors out
of poverty. And that’s how the Chinese Revolution begins. As a result, China’s middle class is rapidly
expanding. In special economic zones, along the eastern seaboard, new rules for business
and property have transformed the lives of millions. The Suzhou Industrial Park is an impressive
window on China’s future. Here, de Soto learns more about the secrets of China’s success. How do you do? I’m fine, thank you, welcome. I’m delighted to be here. Thank you. Welcome. And, uh, I’m Daisy and
I’m deputy general manager of the science park. Thank you very much and I’m Hernando. I’m
from Peru; I’m delighted to be here. Oh well, welcome… yes. Thank you. You have an impressive setup here… A cooperative venture between China and Singapore,
the park is home to twenty-seven-hundred foreign corporations, employing four-hundred-thousand
people. They live and work in this two-hundred-and-eighty-eight
square kilometer complex. The Suzhou Industrial Park is the number one
location for foreign investment in China, and has attracted over twenty-billion dollars
to date. Elsewhere in China and throughout the developing
world, it can take years to cut through the red tape required to open a business. But
in Suzhou, it’s a one-stop process. You have chosen a successful model, which
is the Singapore model. Yes. You’ve basically built a city the size of
Geneva, Switzerland. Ha! Ha! Yes! …to study the market economy. Right! So, we have many of these high-tech
emerging companies in this campus. So here, this is Vincent, the CEO… Hello! How are you? A distinct product of globalization, the Suzhou
Industrial Park is a dramatic demonstration of what can happen when property rights and
good business laws are put to work, and it is happening in China. Well, here we are at the Shanghai railway
station, where you can see lots of people are coming into the city, looking for opportunities
because, in effect, regulations have changed. The possibility of forming enterprises and
employing people has meant that Shanghai offers you a possibility of lifting yourself out
of poverty. Vast areas of traditional housing in China’s
eastern cities are being replaced by modern high-rises. And people can now obtain leases
on land and houses that extend for up to seventy years. In Shanghai alone, eighty percent of
the people own long-term leases to their homes. But in much of the countryside, the past prevails
and the land is owned collectively. The whole notion of property rights has been
pretty alien to formally socialist countries, because, right from the beginning, Marx said
it, in the nineteenth century, “Property is theft.” The Chinese are proceeding cautiously in the
countryside, afraid that Marx may have been right after all. The Western colonial powers that dominated
China at the end of the nineteenth century left bitter memories of foreign ownership. There’s a fear about a past that was real,
that existed. A remnant of that past is perhaps China’s
most challenging problem today; the growing income gap between those in the cities and
those in the countryside. Jeffrey Riedinger has spent many years working
with farmers in rural China. Dean of International Studies and Programs at Michigan State University,
he is studying how land-use rules here affect farm production. In the late 1990s, the government wanted to
change the incentives and give farmers long-term security of rights, so they adopted some laws
that meant that farmers had thirty-year use rights. The farmers have no right to sell the land,
or the lease, for a profit, but a thirty-year guarantee is a marked improvement. But even
with national government support, there can be local problems. Local village officials might see opportunities
to take the land from the farmers and reallocate it for a price, to a developer who wants to
put in a factory, or a housing development. But where land reform is implemented, there
are positive results. Zhao Di Zhu and her husband now have land
security, and are investing in the future. They’ve built two new buildings and acquired
more pigs and chickens. Not long ago, they built a fish farm and now
it supplies most of their income. Land reform has unlocked new opportunity. …shrimp ponds, orchards, greenhouses, facilities
for pigs. Where they don’t have security of rights,
they’re more merely mining the land, rather than engaged in some kind of sustainable agriculture. It seems that China is experimenting with
two important Western economic ideas: property rights and free markets. And the question now, of course, is whether
they will be able to extend, what today benefits about two-hundred-fifty million, three-hundred-million
people, to the rest of the economy. We hope the Chinese government will be able to carry
this out and extend it to the majority. The constitutional revolutions that shaped
Japan and the West continue to resonate across the globe. In country after country, there is solid proof
that as people gain access to an open, free market economy, they prosper. We all talk about the benefits of globalization;
there is no doubt that large- scale markets allow everybody to prosper; so much more because
specialization actually starts working on a worldwide scale. …and yet, for all its measurable benefits,
globalization is under attack. Globalization is in trouble, because these
people who want to join the system haven’t felt that there is a hand reaching out to
them. It’s not enough that they want to be capitalists; it’s not enough that they are
entrepreneurs; it is the fact that they are missing the institutions to link up with us. Exclusion causes anger. There are no more fertile fields for terrorist
recruiters, than the shantytowns of the developing world.
If we can bring them into the legal system they will then have a stake to play in the
capitalist game. Otherwise, they will always be on the outside looking in. And every day
as they see the disparities of wealth, they’ll get angrier and angrier. The world’s poor actually control a vast storehouse
of resources. Unleash that latent power; combine it with
their proven entrepreneurial spirit, and the poor have the potential to enter the mainstream
of a globalized world. This is globalization’s moment of truth. If
globalization wants to survive as a system, it has to leave no orphans behind. Funding for this program has been provided
by the John Templeton Foundation; serving as a philanthropic catalyst for discovery
in areas engaging life’s biggest questions.

  1. These people who have found ways to live & have no THINGS to protect will be unaffected when too big too fail on a global level hits. It has brought US down & we saw a greed that does not stop until it has it all. Small community banking brings prosperity but the control freaks are, well, control freaks.

  2. This is perhaps one of the most positive things I have heard about globalisation. People shouldnt have to move away from their country to have a decent way of living.

  3. Dr Hernando De Soto, congratulations on an eye-opening documentary. I only wonder why this is not taught in universities? Please, please consider a visit to India and a thorough schooling to both university students and those in charge of economic policy, to stay well away from excess rule-making.

  4. The bushman of Sudan, the Chinaman of Beijing, the American of NY City DO NOT have the same values….. The bushman does not care about my mom's heart problem, Christmas, the NY Rangers, or American culture and history. The NY'er doesn't care about Grandma Wong's digestive worms, Chinese New Year or Buddha. The Chinaman doesn't care about voodoo spirits, what the kasaba crop is doing, or if the village is low on tatoo ink…… We care about our values, our tribe, our history. That is the reality. We can be civil to each other, but that doesn't mean I will let the Chinese impose their values on me or reduce my standard of living for the Sudanese bushman.

    x1000 FUCK GLOBALISM x1000

  5. As soon as he said 89% of the land is owned by small but private companies I went ahead and disliked this video. Is there a problem with average people controlling lands and resources?

  6. Capitalism, free market & globalisation are an organize mafia setup to looting underdeveloped countries.
    The goal of globalisation has nothing to do with the creation of wealth accross the world & well been of people.
    Globalisation is an economic & political system created to enrich the rich mainly from the western world.

  7. I have nothing against Mr. De Soto but it took twenty years of studying economies to figure out that personal property ownership is essential for wealth and a higher standard of living to prosper. Even if you have never heard of Adam Smith, The last 100 years, this has not been kept a secret…

  8. Hernando needs to clarify that by Globalization that he means Freedom, democracy, and capitalism for all, not socialism as globalism has come mean. Another word co-opted by the Left. !Bravo Hernando!

  9. Power of the poor; entrepreneurship 00:00
    Questions: Why still in poverty? 03:35
    Locked out of Capitalism? 5:35
    Peru 10:10
    Chicago 12:50
    Albania 17:05
    Tanzania 23:40
    Swiss – 30:20
    America 32:45
    Japan 40:45
    Shanghai 45:35

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