With President Obama seeking to nationalize more and more private industry, Michael Moore promoting his latest socialist agit-prop and the left gleefully proclaiming the death of capitalism, a documentary special airing tonight offers a welcome antidote.
“The Power of the Poor with Hernando de Soto” airs Oct. 8 at 10:00 pm ET on PBS. Produced by Free to Choose Media and funded by the John Templeton Foundation, the documentary posits – and proves – a simple, powerful hypothesis: fair, unfettered access to the market economy will lift millions of the world’s people out of poverty and inoculate them against extremism.
The hour-long special is hosted by renowned Peruvian economist Hernando de Soto, the founder of Peru’s Institute for Liberty and Democracy (ILD) and an advocate for property rights. In the film, he takes viewers on a tour of shanty towns around Lima, Peru the likes of which can be found across the developing world.
In Peru during the 1970s and 80s, millions left subsistence agriculture behind and migrated to Peru’s cities. Across the developing world, the migration continues and major cities grow by hundreds of thousands of people each year. “The poor are no longer isolated,” de Soto said. “They are here, knocking at the door, demanding to be let in.”
These vast squatter communities that ring the cities in poor countries are teeming with what de Soto called “candidates for capitalism.” Indeed, they are already engaged in their own “extralegal” market activity. The economist estimated that 98 percent of all business done in Peru is extralegal, initiated by entrepreneurs who operate outside the official legal and commercial system.
Visiting a small, unlicensed grocery story in one of the shanty towns, de Soto called the proprietor “an entrepreneur. She took a full risk, without any guarantees. You can’t get tougher than that.”
But why are millions of businesses like hers extralegal? Because the game is rigged against them. Unlike the U.S. and other developed nations, common people in the third world don’t have legal identities, and often have no title to the land on which they live and work. Without property, people and businesses have no access to credit. They can’t tap into the global economy.
According to de Soto, in Peru, working with a well-placed lawyer friend of his, he could get the permitting and legal standing needed for a legitimate business within 30 days. But what of the displaced poor that have flooded the cities? It might take them nine times as long. Obtaining title to their property can take one of the undocumented poor more than 6 years and more than 200 procedural steps.
The economist founded ILD in 1981 to investigate this “shadow economy” and help tear down the “paper wall” that kept Peru’s poor out of the legal marketplace. The reforms ILD advocated were both morally right and practical. Peru at the time was beset by a Maoist terror group known as the Shining Path.
“The overwhelming majority of [the poor around Lima] came and moved to become part of the capitalist system,” de Soto explained. “And if they’re not able to enter, they’re going to say that the system failed them. They will then start believing those prophets, those ideologues who say that capitalism is only reserved for very few.”
Over time, the ILD’s reforms were adopted by the Peruvian government. Millions of poor in the countryside received title to their land. Legal barriers to establishing businesses came down. The Shining Path lost support among the people and was eradicated.
Peru is an example of what can be achieved when economic liberty is extended to as many people as possible, and de Soto now travels the world advocating for a similar enfranchisement of the poor in other developing countries. It’s an important mission. As de Soto said about the world’s four billion poor: “Either we give them a stake in the game, or they’re going to bring down the existing game as many times as is necessary, until they’re able to participate in it.”
