When it comes to alleviating poverty and allowing people to live up to their potential, prize-winning Peruvian economist Hernando de Soto divides the world into two groups: the ones who have defined property rights and those who do not. About two billion people have full rights to the property they live in and the land they farm, according to the director of the Lima-based Institute for Liberty and Democracy. For the 5.3 billion who do not have such rights, the implications are stark: people are unable to leverage their resources to create wealth, and their assets become "dead capital" which cannot be used to generate income or growth.
As a result, the poor remain trapped by the "tragedy of the commons" where their unregistered assets can be stolen by powerful interests, hurting individuals and broader economic development, de Soto said. Legally protected property rights are the key source of the developed world's prosperity, and the lack thereof is the reason why many nations remain mired in poverty, de Soto argued. Providing the world's poor with titles for their land, homes and unregistered businesses would unlock $9.3 trillion in assets, de Soto estimates, an unprecedented sum to reduce poverty. Property titles would allow the poor to use their small homes or land in order to borrow money and start businesses, he said, unlocking the entrepreneurial potential of billions of people.
"There is no such thing as an investment without property rights that are negotiable and transferable," de Soto told the Thomson Reuters Foundation in a phone interview.
"The question is: do people own things in such a way that they can be brought into the global market and make us wealthier?"
Political leaders preparing a new 20-year development plan for urban areas, to be agreed at a U.N. conference in October, will be addressing the challenge of unequal property rights as they face demands for better living standards from a growing global urban population.