I read this very interesting book around 2003/4. I am told that this book was the basis/inspiration for our MKURABITA programme. For the buzz it created back then, its influence on public policy in many countries, and certainly for the interesting history and background anecdotes entailed in it, I would recommed it. Anyway, let me summarise it quickly, and then make the point I want to make.
de Soto central thesis is that we are poor because we cannot turn our assets into capital. He starts with the obvious: that the basis of a market economy is capital and the basis of capital as an economic tool is rational property law. Therefore, without a complex system to delineate and protect rightful ownership, capital is "dead". He estimates that the poor in the developing countries posses an excess of US$9 trillion in informal assets, indeed a huge sum, that is "locked" for want of title deed. In our own country, where, through the invitation of President Mkapa, de Soto came to do research and design our formalisation programme, "dead" assets are estimated to worth US $29 billion.
de Soto notes that most of "the poor" already possess the assets they need to make a success of their businesses (so they are not really poor). What they lack is the framework in which those assets can become capital. So, de Soto
In that case then, a large part of a country’s commerce is bled off into the underground (informal) economy. This system creates a fundamental problem, the capital moves, but not in a manner transparent and secure enough.
Therefore, his prescription: formalise, formalise, formalise - and the rewards of capitalism will be realised.
Now, with what is going on with the global economy, have we not now learned that formalisation of capital does not make it secure, in that it moves on paper as fast as it can be wiped out.
We now know that, yes, you can have your title and your property can be "protected", but then it can mean and worth nothing.
11 comments:
Dah kwanini hii blog unaandika kwa kiingereza na lugha ya taifa letu ni kiswahili???
Sidhani kama tuna "lugha ya taifa" per se. Tunazo lugha rasmi mbili: Kiswahili na Kiingereza. Kuhusu swali lako: Kiswahili nimezaliwa nacho. Natumia Kiingereza kwasababu nataka nijifunze zaidi hiyo lugha ngeni. Hapa ni ruksa kutumia lugha unayotaka.
Hey TanzanianDream! What is wrong with you? Which language do you need to communicate? Sukuma,Chagga or Kurya? I know that you can speak better your vernecular/local language than Kiswahili. Why did'nt you suggest one of them?.To save time,topic presented in international level so that English is eligible language for it.
kahama
january,
sidhani kama tuki-formalize informal sector hakutakuwa na faida kubwa,kwani,itakuwepo....
je,umeshafikiria mapato ya kodi tutakayokusanya? kuna watu wana-argue kwamba gharama ya kukusanya hiyo kodi itafanya isiwe na faida,sidhani.
kodi ndogo lazima itengenezewe mfumo wenye gharama ndogo...hapa naikumbuka grameer bank.
watu walifikiri masikini hakopesheki,kumbe anakopesheka na faida juu.kwa jamii of course.
financial crisis imetokana na ulafi wa baadhi ya watu na mentality za kucheza kamari walizonazo madalali wa masoko ya fedha. it's all about greed.
ngoja niishie hapa kwasasa.
At this time and era, do we still need Western solutions to African problems?
Faustine
http://drfaustine.blogspot.com/
Alex,
Ni kweli formalisation inapanua wigo wa kodi lakini my view ni kwamba watu wamekimbilia kwenye informality kwasababu ya gharama na intricacies za formalisation. Kama kupata hati inakuchukua miaka sita, most people give up na wanaendelea kujenga na kumiliki bila kujali kuwa na hati. Na inapofika wakati mtu anataka kuuza nyumba yake halali (ingawa hana hati) basi wanaandikishiana kwenye kipande cha karatasi mkataba ambao kwao ni halali lakini kisheria hautambuliki kwa kuwa umefanyika nje ya mfumo wa sheria (extra-legal). Kuna a lot of those transactions zinazoendelea kwasababu aidha watu hawaoni sababu wala faida ya kuingia kwenye mfumo rasmi au wanaona kuingia kunahitaji gharama (hiring lawyers, etc).
In essence, you have to make formalisation cheap and attractive. Point zako on greed na kamari are well taken.
Mwanzoni, nilikuwa shabiki mkubwa sana wa jinsi uchumi wa kimagharibi unavyoendeshwa na hasa dhana nzima ya mtaji na faida (capital and profit).
Lakini zaidi nilikuwa mwongofu (convert) to the idea of individualism ambacho kwa kiasi kikubwa inaendana sana na mfumo wa kibepari (I now detest that word when speaking of capitalism); Haya mambo matatu naamini kwa kiasi kikubwa yanaendana sana na yanakwenda pamoja.
Pamoja na hayo, nikiangalia hali ya kiuchumi ya dunia ilivyo sasa nakabiliwa na swali moja kubwa ambalo ni kuwa "Ili nchi au jamii ya watu iwe na maendeleo ya watu wake ni lazima kurasimisha utajiri wa mtu mmoja mmoja (kama anavyoshauri De Soto)? Je yawezekana kurasimisha mali ya jamii nzima na kuiweka katika mikono ya serikali (Uchina na baadhi ya nchi za kikomunisti zimefanya hivyo)?
Je yawezekana jamii kuwa mfumo mchanganyiko (mixed economic system) ambapo kuna vitu ambavyo vinafanywa kwa kiasi kikubwa na mtu mmoja mmoja na vile vinavyofanywa kwa kiasi kikubwa na serikali?
Jibu la hilo swali la mwisho nikiangalia kinachoendelea leo katika nchi za magharibi naweza kusema ndiyo!
Lakini, yawezekana kuna aina nyingine ya mifumo ya kiuchumi/fedha ambayo ni salama zaidi kama ile ya Nchi za Kiislamu? Je nchi za Magharibi zaweza kujifunza Islamic financial systems na kutoka huko kujifunza njia zilizo bora za kuzungusha fedha na faida?
Well, I said I had one question...
http://www.mwanakijiji.com
I personally support De Soto's policy recommendations for developing countries such as Tanzania in his "The Mystery of Capital" book. And from the economic policy point of view, I think "Mkurabita" was a good move as an institutional vehicle for carrying out policy recommendations. Policy recommendations as a recipe is one thing and implementation is something else. There may be some flaws in the execution of Mkurabita but that's not the scope of my comments today. I want to comment on De Soto policy recommendations and not Mkurabita.
Enabling the common man in Tanzania to obtain a title deed for his (let me use "male" here for simplicity's sake, nothing personal to the ladies) piece of land will alone not liberate him from the poverty cycle, but it is one of the critical steps to getting into the first rung of economic development. De Soto is often criticized for being overly ambitious in his analysis of this subject for making a big assumption on land ownership/title deed as if it is the sole economic development determinant. Other than that I think the book provides practical policy recommendations that are worthy taking into considerations as our country continues to undertake land law reforms.
As you know, tenable property rights and a reliable judicial system are key to private sector development. We care about private sector obviously because it creates jobs and that's a great contribution to the society. Enforceable property rights and a reliable judicial system will give local and foreign investors confidence and thus stimulate private sector growth. No sane investor would put a multi-billion $$ investment on a land that he only has a 33-year lease on.
January, in your comments on De Soto's recommendations to formalize the para legal sector earlier, you insinuated that De Soto's recommendations can be dangerous in times of global financial crisis like today. BUT our infants markets in developing countries are not as volatile as international financial markets on London Stock Exchange/Wall Street. So by encouraging people to seek title deeds for properties such as land, I don't think we'll be exposing them to such risks. My general take on the concern that you raised is that let's worry about crossing that bridge when we get to it. As a matter of fact, it will be a good problem to worried about than the worry of how we get people from the predicament of living on almost zero income per day.
Quite frankly Tanzania is in one of those rare times where it serves it well to be a predominantly commodity exporter/trader. Or to put it simply, one cannot lose a stock of bags of beans in his warehouse in Kahama dry port overnight like stocks do on Wall Street. Unless bandits break into one's warehouse in Kahama and sweep everything. And that's totally a different problem!
Inno
Ideas za thinker de Soto hazina contradiction yoyote na matatizo yanatokea sasa kwenye taasisi za fedha na masoko ya mitaji! Kumbuka haya ni matatizo ya muda tu na pia hayataishia kuzifanya mali za watu wa nchi zilizoendelea zitoweke - if the unlikely worst occurs hizo mali zitaishia kufa tu (kuwa dead capital tena - but with a potential to resurrect. Above all hii financial crisis si ya kwanza kutokea - kumbuka the great depression nk.
Mimi ni proponent was mawazo ya de Soto - ingawa nadhani (na de Soto pia anasema) kuwa inatakiwa nguvu kubwa sana (sio ya kuombea kura tu)kuzifanya nchi hizi (non-Western) kujikwamua.
Ideas za thinker de Soto hazina contradiction yoyote na matatizo yanatokea sasa kwenye taasisi za fedha na masoko ya mitaji! Kumbuka haya ni matatizo ya muda tu na pia hayataishia kuzifanya mali za watu wa nchi zilizoendelea zitoweke - if the unlikely worst occurs hizo mali zitaishia kufa tu (kuwa dead capital tena - but with a potential to resurrect. Above all hii financial crisis si ya kwanza kutokea - kumbuka the great depression nk.
Mimi ni proponent was mawazo ya de Soto - ingawa nadhani (na de Soto pia anasema) kuwa inatakiwa nguvu kubwa sana (sio ya kuombea kura tu)kuzifanya nchi hizi (non-Western) kujikwamua.
Thanks for sharing. i really appreciate it that you shared with us such a informative post..
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