The Missing Lessons of U.S. History Essay Example for Free

The Missing Lessons of U.S. History Essay In order to examine options for integrating extralegal businesses and individuals into the legal property system, De Soto examines the history of the United States for clues on how this task was successfully accomplished in the past. He found that this integration was accomplished primarily through the adaptation of laws to suit the needs of the majority of the country’s people. De Soto begins his exploration of US history in the sixteenth century, when numerous Western Europeans settled in North America. These early colonists based their legal system on English property law, but these laws were not created to apply to the types of situations faced in the colonies and most of the colonists did not fully understand the minutiae of these laws. Because of this situation, many of the colonists functioned extralegally, with local courts following local customs (rather than British law) when settling disputes. These early settlers were often squatters, occupying land without a legal title. Politicians opposed this practice, and they ordered surveys of the land in order to establish rightful ownership. Their efforts did not work because there were no legal regulations to follow in case of dispute. The success of the squatters to integrate into the system can be seen in Vermont, where a group of squatters led by Ethan Allen actually got Vermont recognized as a state. The majority of squatters, however, found it difficult to integrate into the legal property system because British law did not relate to the way of life in the colonies. These squatters created their own property system, marking trees to indicate possession of a piece of land. They also developed means of settling disputes, transferring parcels of land, and establishing credit. Those in power believed that these practices were in direct violation of the law, and those that engaged in these practices should be prosecuted. These squatters became known for their hatred of the law and sometimes engaged in violence to circumvent official authorities. The situation began to change when authorities recognized that making improvements to the land, paying taxes on land, and making arrangements with neighbors could establish ownership. Squatters who engaged in these practices were allowed to purchase the land in question before it was made available to the general public, a practice known as pre-emption. Pre-emption benefited both the squatters (who could become the rightful owners) and the states (who gained revenue from the sale of the land). More obstacles arose in the nineteenth century when the US gained almost 900 million acres of land. Congress attempted to set prices for this public land but was generally not aware of the situation faced by settlers many miles away from the capital. As a result, much of this land was sold on the black market. During this time there were two legal systems in operation: the official, sanctioned laws and the laws that people lived with on a day-to-day basis. Following Green vs. Biddle, the perception of these squatters changed: politicians began seeing them as hard working pioneers improving the country. Congress gave official, national status to the practice of pre-emption, an important step in integrating the two legal systems in operation. Cooperation amongst extralegals, such as claims associations and miner’s organizations, gave them more political power and forced those in power to take their concerns seriously. De Soto argues that the integration of these two legal systems was an important contributing factor to the US’s economic success. Because the American legal system was built from the ground up, the concerns of the extralegals were taken seriously, and the laws addressed the problems this population faced. Chapter 6, â€Å"The Mystery of Legal Failure† Developing countries have tried for almost two centuries to get more people involved in the legal property system. Their efforts have failed for five reasons: belief that people remain extralegal for tax purposes, lack of proper recording of real estate assets, belief that creating the laws is the only answer, ignoring existing social contracts, and belief that these social contracts can be changed on a whim. De Soto and his team successfully set up practices in Peru to integrate extralegal businesses in to the legal property system. Based on his experiences in Peru and evidence from the history of Western government, De Soto developed a formula, termed the capitalization process, for the successful lifting the bell jar of capitalism. This formula has two components: meeting legal challenges and meeting political challenges. The primary legal challenge is the integration of numerous social contracts into one that all citizens of Third World and former communist countries can abide by. These governments must find out the intricacies of the rules their people live by on a daily basis. These extralegal regulations are often documented, a phenomenon that often goes unnoticed. The recognition of these existing social contracts will facilitate the move to a capitalist economy, but it is not enough. People moving from the extralegal sector to the legal sector also need means by which they can settle disputes, i. e. there needs to be documentation of ownership. Furthermore, many people believe that certain rights come along with property ownership – the right to use and exchange that property as they deem fit. If laws do not allow for the execution of these rights, they will not be followed, and people will move back to the extralegal sector because extralegal protocols are in line with prevailing social contracts. Most of these social contracts are solid enough to form the basis of official law. The process of discovering these existing social contracts is referred to by the author as following the barking dogs, a terminology acquired from his experiences in Indonesia. Additionally, the new laws must be created in such a way that people can transform their property into capital. The successful implementation of these new laws requires considerable political power and effort. The institution of these new laws is made more difficult by the fact that existing laws often protect those in power – they stand to lose out if more people are integrated into the system. Political leaders must listen to the poor of their country and get these people on their side because the support of this population is necessary to the implementation of legal property systems. These political leaders, armed with the support of the majority of the population and evidence of this population’s economic power, will be better equipped to gain the support of the country’s elite. The argument must be framed in such a way that the elite see that they have much to gain from the transformational process. In attempting to gain the support of the elite, political leaders can also stress the one important benefit of property system reform: reduced crime rate. Once the support of the poor and elite has been won, political leaders must address the lawyers and technicians. Lawyers in Third World and former communist countries have traditionally been trained to defend existing laws. De Soto contends that lawyers have the power to undermine capitalism’s success and must be re-educated to expand the reach of the law. They must also learn the economic consequences of their activities. The technicians must be capable of keeping accurate records of property. One major stumbling block that needs to be faced in this respect is that many people in Third World countries conceive of property as a physical asset. As such it is not dealt with by legal and economic departments. Any political leader looking to reform the property system must be an effective communicator because property system reform is an issue that effects every member of a country. Chapter 7, â€Å"By Way of Conclusion† Capitalism’s crisis outside of the West stems from the fact that most of the world’s population views capitalism as something restricted to the privileged elite. Reform efforts must be directed at educating people of developing countries that they have much to gain from participation in the legal property system and, by extension, capitalism. As the success of capitalism is contingent upon capital, developing nations must engage in reforms so that assets and potential are accurately represented. Current globalization efforts have focused on getting governments of developing countries to stabilize their currencies and develop the frameworks for international trade. However, these efforts have been based on the erroneous assumption that the governments’ policies already take into consideration the needs of its citizens. This trend perpetuates capitalism’s bell jar: the majority of the world’s population becomes more and more distanced from capitalism. It also leads to the confirmation of Karl Marx’s premonition: capitalism will fail because capital will ultimately be concentrated in the hands of a few elite. One result of capitalism’s bell jar is the continuation of class conflicts that should have ended with the Cold War. These class conflicts are not explained by theories of capitalism, rather they are best explained in Marxist terms. Marx emphasized the importance of property above and beyond its physicality. He grasped that non-physical characteristics of property had the potential to convert property to other, more useful, forms. Marxist theory, however, is not enough to understand the complexities of the issue. Marx did not understand the motivating power of property ownership, and he did not recognize that the property system itself has characteristics that give value to assets and allow them to be converted into capital. Detailed understanding of the property system will allow for progress in terms of development. Furthermore, a good property system allows people to conceive of abstract concepts (such as potential) in concrete terms. Without this capacity, people will continue to think about property and the global economic market in physical terms. Those opposed to capitalism have been quicker to recognize the intangible aspects of the property system than capitalists. For many of the anti-capitalists, their fear of capitalism stems from these intangible aspects. In reforming the property system, forms of written documentation must be simple, transparent, and easily comprehensible if capitalism is to be able to speak to the majority of the world’s population. De Soto examines the cultural contingency of capitalism and argues that the notion of property ownership is compatible with all major cultures, not just those with a prevalent Protestant work ethic. The main problem, therefore, is not with capitalism in theory: it is with the manner in which people try to institute capitalism. Successful implementation of capitalism would be simple and effective if governments would listen to the poor of their country, recognize that their poor citizens save money, see the necessity of legal property systems, accept the fact that violence is not a peripheral concern, see the poor as the solution to the violence, and communicate better with people to make the necessary legal changes.