“The reason capitalism has triumphed in the West and sputtered in the rest of the world is because most of the assets in Western nations have been integrated into one formal representational system . . . By transforming people with real property interests into accountable individuals, formal property created individuals from masses. People no longer needed to rely on neighborhood relationships or make local arrangements to protect their rights to assets. They were thus freed to explore how to generate surplus value from their own assets.”-Hernando de Soto, The Mystery of Capital

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In The Mystery of Capital, de Soto raised a fascinating thesis: That the West’s system of record keeping and property recording  is why Capitalism took hold here.

In other regions — namely, Asia, Africa and much of South America, the Peruvian born economist argued that the economic system was highly dependent on elders, neighbors, and recollections — rather than recorded deeds — for transferring property. This would, as you might imagine, stifle the willingness to invest in or lend against property.

Tonight, I want to ask you for actual anecdotes about this. What sort of stories or narratives is anyone familiar with that demonstrate the East’s problems with this, and why it may have stifled the spread of capitalism.

This is for a wicked cool project that I cannot talk about yet . . .

Category: Philosophy, Real Estate

Please use the comments to demonstrate your own ignorance, unfamiliarity with empirical data and lack of respect for scientific knowledge. Be sure to create straw men and argue against things I have neither said nor implied. If you could repeat previously discredited memes or steer the conversation into irrelevant, off topic discussions, it would be appreciated. Lastly, kindly forgo all civility in your discourse . . . you are, after all, anonymous.

57 Responses to “Anecdotes Wanted . . .”

  1. Robert M says:

    This isn’t relevant to anecdotes but the one you cited does speak to truth. It gives prove to contradict the AG who, on the announcement of the umpteenth investigation of the mortgage/housing crisis, said the many of the problems are matters of ethics not criminality. Had MERS, yes my preference it did not exist, simply recorded the mortgages properly there would not be fraud to the terms of securitization for CDO’s. There would not be loss of tax revenue on the local level. There would not be robo signing. The list goes on.

    That this administration does not understand they are destroying law that has made capitalism work is simply………

  2. nebyarg says:

    In Asia, most obviously in India and China, the traditional store of wealth has been in hard assets; gold, diamonds, (jewelry), and real estate. Family’s and their generational wealth often outlive governments and banking systems.
    It was described to me in India, that a business venture of a well to do family was going south and loans were being called. The men had to turn to the matriarch who brought out a “quart” of diamonds to cover the debt! This I believe.
    This way of finance has existed for thousands of years, yet trade and commerce have flourished there since before the Romans knew of India and Marco Polo found the Silk Road. Perhaps, this is not capitalism, but commodity contracts, (futures), and debts were recorded in Babylon.

  3. The Window Washer says:

    Along trek routes in Nepal. Low caste farmers don’t have a way to get a loan against propery that has become a tourist area. So middle caste wealth from outside the area set up hotels and send family members to run them. None of the hotels I saw were situations where a local that made good without outside money.
    To make matters worse in some areas hotel room pricing is set and food is the high margin item.
    Many small villages you can see the locals that used to rent out a few rooms and then next to the village or just some random spot along the trail someone has built a 20-50room hotel where everyone is staying.
    Try saving up to build an addition with a low margin and seasonal business.

    I noticed a lot of this then spent 8hrs sitting next to a young banker on a bus ride. Poor guy he went from “cool someone to practice my english on” to “shit this is worse than being at work.” in about the first 20min.

  4. philipat says:

    I don’t accept this arguement. Most parts of the developing world were, in the recent past, Colonised by Euroopean countries. The administrative systems of the colonising power were, in general, transferred to the host nation(s). Thus, throughout Asia, where I have lived for 35 years and so can address with some knowledge, there are very good legal frameworks, sytems and Government bureaucracies in place to control and record the ownership, and transfer of ownership, of real property.

    I live now in Bali, Indonesia and, whilst Indonesia is not generally recognised for its bueaucratic efficiency, a National land Board maintains meticulous records regarding land ownership and the transfer of real property within an extensive, and very professional, legal framework, initially inherited from the Dutch but since developed locally. There is a nationwide Land Certification system and without such a title deed, real property transactions cannot be conducted. This in a country which, until quite recently, was economically emerging from a feudalist system. I have lived in many other countries in Asia over the years and I believe that the same comments would apply.

    Therefore, at least in so far as Asia is concerned, I believe that the arguement presented is not supported by the facts. Also, hasn’t MERS in the US further complicated this arguement?

  5. mjcostello says:

    The Mystery of Capital is one of my favorites so glad to see it inspiring something cool. And I hope people keep in mind just because our system of property rights has been strong and successful doesn’t mean it can’t be undermined if we let banks and the mortgage companies operate outside the rule of law.

  6. Randel says:

    For some ideas try: Adam Smith’s Theory of Moral Sentiments: On Morals and Why They Matter to a Liberal Society of Free People and Free Markets by Jerry Evensky. The American Economic Association has the article in the Journal of Economic Perspectives here:

    http://www.aeaweb.org/articles.php?doi=10.1257/089533005774357806

    Adam Smith did not just believe in the invisible hand guiding markets. He was one smart guy.

  7. Randel

    This is for a very specific speech, to a very specific audience on a very specific topic.

    This anecdote I seek is a structural element that bridges the first 3 parts to the last 2 . . .

  8. inkmatt says:

    It’s perhaps ironic that a Peruvian economist would neglect the (admittedly atextual) record-keeping system of the Incas. Quipus – colored, knotted threads – was an Incan system for documenting and administering forms of what we call property. Were the Incans capitalists? I don’t know. But de Soto, at least, is a western one.

  9. RW says:

    De Soto is hardly the first: A lot of folks have tried to explain why a relatively barbaric culture — Medieval Western Europe — became so powerful globally.

    Before continuing with your project I strongly recommend you read one of the more intriguing accounts: Alfred W. Crosby’s (1997) book, “The measure of reality: quantification and Western society, 1250-1600″

    From the blurb:

    “Western Europeans were among the first, if not the first, to invent mechanical clocks, geometrically precise maps, double-entry bookkeeping, precise algebraic and musical notations, and perspective painting. More people in Western Europe thought quantitatively in the sixteenth century than in any other part of the world, enabling them to become the world’s leaders. With amusing detail and historical anecdote, Alfred Crosby discusses the shift from qualitative to quantitative perception that occurred during the late Middle Ages and Renaissance.”

    My own take: (1) The invention of village clocks created the myth of invariant time and the concomitant ability to calculate by fixed interval just as (2) the invention of double-entry bookkeeping created a demand for more people who understood basic math with the concomitant increase in the number of people who studied maths and (3) both reinforced conventions that led to science: That there was a consistent way of measuring the world, a compact way of describing it, and therefore a way of sharing insight with others willing to accept those conventions.

    Cultural change is an intricate and marvelous thing and the way habits of thought become shared is probably one its most fascinating aspects.

  10. gregorylent says:

    read “the geography of thought”

    the reason is the same that science or christianity didn’t develop in the “east” .. the self is not separate from creation.

    when the direct experience of connection devolves, you get the “west” … and quantification.

    it’s just a momentary aberration on the path of human evolution. its self-destructiveness will be the end of it.

  11. Futuredome says:

    Acceptance of Science and that lead to the industrial revolution. Asia was backward in this regard for a LONG time.

    Nazism’s success, as funny as it may seem, kept capitalism alive. America stole most of their post-war technology from the Nazi’s. Capitalism requires more and more innovation. Once innovation slow to much, capitalism begins to crumble as we are seeing now.

  12. coleyc says:

    Just think, DeSoto spent a lot of time in Egypt trying to straighten out the housing rights and streamline their government so it would work for the people. Unfortunately Murbarak shelved the whole thing. I bet he is regretting that decision.

    Governments are strangling their populace’s ability to formulate capital since so many people don’t have housing deeds which inhibit their ability to borrow against their homes. There is several trillion left on the table and unable to be borrowed because these administrative backward governments cant get their act together. I do not think microfinance can fill the void. They need more capital. This coupled with straightening out and streamlining other aspects of government, starting a company, hiring/firing etc could unleash massive potential in developing world. Could save the West a pretty penny to boot.

  13. hotei13 says:

    I don’t remember where I read it…but at the time it made sense to me.

    The population density in Western Europe was higher (living within the castle walls). This led to more die offs of the population to disease and unsanitary conditions. The bubonic plague for example.

    Therefore, the accumulated wealth was inherited and passed down to a more concentrated base. A higher concentration of capital.

  14. Bernie X says:

    The East ?

    Pfffttt.

    Try the property title record keeping in Mexico.

  15. bear_in_mind says:

    Hey Barry,

    I don’t know if this is what you’re looking for, but here’s an excerpt of a recent Planet Money story on China that sounds like it might fit. Check it out:

    The Secret Document That Transformed China
    PLANET MONEY
    by DAVID KESTENBAUM and JACOB GOLDSTEIN
    January 20, 2012

    In 1978, the farmers in a small Chinese village called Xiaogang gathered in a mud hut to sign a secret contract. They thought it might get them executed. Instead, it wound up transforming China’s economy in ways that are still reverberating today.

    The contract was so risky — and such a big deal — because it was created at the height of communism in China. Everyone worked on the village’s collective farm; there was no personal property.

    “Back then, even one straw belonged to the group,” says Yen Jingchang, who was a farmer in Xiaogang in 1978. “No one owned anything.”

    SOURCE: http://www.npr.org/blogs/money/2012/01/20/145360447/the-secret-document-that-transformed-china

  16. Transor Z says:

    I’m with Philipat. Not buying the basic premise here.

    The Chinese invented paper currency demand notes in the 9th century and Marco Polo brought the idea back to Europe.

    China and Japan went through xenophobic “closed” periods in response to distrust of Western colonial powers and failed to keep pace technologically and didn’t get the memo that “the West is the best.”

    But if you look at the grand sweep of history, I just don’t get the premise here. Is the question western individualism versus eastern communal (not communist) thinking? China and the Mongols schooled the Europeans in basic commerce… dunno about this one.

  17. lalaland says:

    Well, a major reason that Africa, the Middle East, and Latin America don’t have the kind of either written records or legal infrastructure to support such documentation if it existed isn’t due to any cultural shortcomings of the region’s people or culture, but due to the disruptions imposed on them by colonialism or political disruptions like communism that simply destroyed what records existed.

    Mr. DeSoto talks about the wealth of Egypt’s poor, but Egypt hasn’t had self rule in centuries – it’s legal system was created by ottoman or colonial authorities who had no interest in documenting, or granting, legal rights to poor people. The Catholic priests burned the Mayan books; the Padrones had no interest in granting anyone individual property rights but themselves until recently.

    My guess is it isn’t the documentation that matters, it’s an authority that recognizes the documentation: a full and capable legal system. My own pet theory is that China’s culturally imbued disrespect for intellectual property rights (as we see it anyway) will be a drag on growth fairly soon, because who will patent anything in a country that doesn’t respect patentholders rights (and I don’t mean in the recent-news apple/motorola way – I mean in the basic way)? I think the genius of our legal system isn’t the judge or jury, but the appeals process, personally.

    I used to work at the Metropolitan Museum, and I swear 90% of the ancient texts are either a: talking about how great a king was, b: talking about goods sold or offered as tribute to such kings, or c: gods and things, so there’s a very long history. You can read 5000 year old papyrus inventories any day of the week so recording personal property is certainly not new or western.

    I also think this is at the heart of #ows and much of the anger simmering in America these days fwiw: we feel like the rule of law has been bent (further than usual) to protect the interests of the rentier class – they are corrupting both our civic world (lobbyists) and judicial (judicial elections rather than appointments; failure to pursue criminal charges against white collar criminals, not admitting any wrongdoing SEC charges, etc.).

  18. Bruman says:

    I find it difficult to believe that the Chinese and Indians (or Arabs and Turks) lacked record keeping. It is simply impossible to manage an extensive state apparatus without it, particularly with respect to public administration and taxation, both of which are necessary for military survival.

    In addition, the king or emperor cannot be personally present to judge property disputes, and so judicial systems need to evolve to keep the population from tearing itself apart over every property use dispute. One of Henry II’s great innovations was the development of common law principles so that he did not have to be personally present to dispense justice (although his symbols were present to render authority).

    I’d push you more to Max Weber’s “Protestantism and the Spirit of Capitalism.” It was the protestant idea that each person has an individual relationship to God that helps to promote the idea that each person is responsible for their own salvation – spiritually and then economically. The protestant ethic also helps explain why it is that capitalism – and later, industrialization, developed more completely in England, Germany, and France than in places like Spain and Portugal (who were very involved in counting and record keeping).

  19. theexpertisin says:

    Dictators and Monarchs saw no need for private property. It was “all State, all the time”.

  20. Futuredome says:

    “In 1978, the farmers in a small Chinese village called Xiaogang gathered in a mud hut to sign a secret contract. They thought it might get them executed. Instead, it wound up transforming China’s economy in ways that are still reverberating today.”

    The problem is, they were still a “commune”. What they had before was “state capitalism”. They worked for the “communist” party boss, aka the capitalist. They gave what they produced and gave it to him and then he divided it up as equally as he could. Sound like something else we know?

    All they did afterword, was break groups into their families and allow them to keep what they produced………after sharing the resources to production. Sounds like successfull socialism to me. What they had before was capitalism.

  21. DrSandman says:

    The record-keeping must be “uncorrupted” as well. My Indian office mate in grad school always had to pack an extra suitcase full of “gifts” to bribe officials when she went back home with presents for the family. There were/are no records, of course, of the “gifts” brought into the country — or left behind at customs.

    I think that the #1 idea of “record keeping” for property was in a great stand-up routine by, Eddie Izzard, pointing out that whole countries were appropriated because they (ahem) didn’t have a record of having been owned prior:

    Dress to Kill (1998)

    “We stole countries with the cunning use of flags. Just sail around the world and stick a flag in. “I claim India for Britain!” They’re going “You can’t claim us, we live here! Five hundred million of us!” “Do you have a flag …? “What? We don’t need a flag, this is our home, you bastards” “No flag, No Country, You can’t have one! Those are the rules… that I just made up!…and I’m backing it up with this gun, that was lent to me from the National Rifle Association.” ”

  22. slowkarma says:

    It wasn’t just the East, but also the United States before the US became independent. The former way to measure land often relied on things like big trees, creeks, trails, etc. and the exact land area that a person might own was often impossible to determine. There’s a history of all this in a nice book called “Measuring America: How an Untamed Wilderness Shaped the United States and Fulfilled the Promise of Democracy” by Andro Linklater. It’s available on Amazon.

    You can visually see the difference even today when you fly over land generally east of the Appalachians, and see how crooked the roads were and how odd-shaped the fields often are. But, you get across the mountains and into Ohio, and suddenly, you have grids — that’s because the US adopted a standard system of weights and measures about then, encouraged by the old land speculator (and then President) George Washington. Grids made it possible to very precisely determine quantities of land, price it and sell it, even unseen, without worrying about what the last flood did to the shape of the creek…and unlike the old system, where you had all kinds of conflicting standards brought over from a half-dozen different European countries.

    Worth a read.

  23. buzzer87 says:

    Great – age old question, West vs East.

    I will be the first to admit that societal value and political structure can or cannot be conducive to capitalism. The question I always ask is what causes certain values and political structures? Of course, the question is far to complex to answer fully but certain traits seem to surface. Instead, look at geographical advantages of regions vs other areas.

    There are several theories regarding the relationship between geographic features and national success. Two main features stand out; first, ample navigable water such as deep water ports and navigable rivers. Second, large areas of prime agricultural land. When those two geographic features combine within a nation that nation can move goods cheaper than any other nation. Geographic advantages cause a society to become capital rich without any extra expense on infrastructure. This means that the nation has extra capital to invest in economic expansion.

    The point I am trying to make is that capitalism is only successful in the west because it has ample capital for people to borrow from financial institutions. Instead of discussing what western traits make for more wealth creation; it might be more important to realize more wealth leads to an easier transition into a market economy.

    Maybe the reason Eastern cultures need to revert to a hierarchy to gain financial success is that capital is rare. A region without natural geographic wealth means the powerful strive to secure the finite amount of capital. The constant struggle for resources between tribes results in cultures resistant to market economies and democracy.

  24. readerOfTeaLeaves says:

    I need to re-read De Soto – I think he’s brilliant ;-)
    Also, I have a passionate interest in literacy, and a particular interest in adult illiteracy, and my biggest problem is trying to distill *just a few* of my many stories for this thread.

    Also — I greatly enjoyed reading other comments on this thread.

    ——————–
    In the 1970s, an Aleut woman in Alaska told me a story about how her father “lost his name”. Apparently, he’d been an important man in her clan but when I asked what his name had been, she scoffed and said, “Well, a Government Man said my father had Too Much Name, so then after that he could only be just ‘Makarka’.”

    Probably in the 1930s or 1940s, he’d encountered his first Government Man’s Form. He was to fill out his name, by filling in one letter of his name in each little box on a US government form — something that he’d never encountered before. He knew how to write, but his name had far more letters than the form had boxes.

    Apparently the form only had about 16 little boxes (quite enough for ‘John Smith’ or ‘Doug Evans’, but not enough for “Markarka Chemitovitsky”. So the Government Man told him to write just his first name, because according to his daughter, “That Man told him he couldn’t have so much name, so then after that time, he was only Makarka, because that was all the name he could have.” (I assume the Government Man probably worked for Bureau of Indian Affairs, which in the 70s was utterly loathed by the Aleuts and Eskimos that I knew.)

    This incident would have happened when Alaska was a Territory of the U.S.
    I was very much under the impression that her father believed that he had to follow the Government Man’s decision in the matter of his name.

    Makarka’s daughter did not name any of her children after her father; they all had names like Billy and Joey and Janet. (She had 9 kids and about 15 grandkids by the time she was 40; her first child born when she was 15, her second when she was 16).
    She sure as hell made sure all THEIR names fit on the Government Forms!

    I heard tales that her father had ‘sold her for a bottle of whisky’ to her husband, but I don’t know whether that was actually true. (It was widely believed; I heard it from three people.) Such a transaction would never have been written, but if it had been written would have been recorded using the Latin alphabet to write English words. Her native language had an ‘invented’ pseudo-alphabet, but she’d never learned it.
    —————————————————-

    In the 1960′s, my father had a Kenyan friend that he met in grad school. I once heard them talk about how old children were when they began school in Kenya.

    My father’s friend explained — this would have been mid-1960s — that because there weren’t always birth records that could verify a child’s age, they’d hear things like, “He was born the year the Big River flooded” and have to estimate a child’s age from that colloquial information. The educators would then have to make a guess about whether or not a child ‘qualified’ to enter school that year, or be told to wait till the following school year.

    In the US, we have gone by formal birth records and birth certificates that don’t assess a child’s physiological development, but the Kenyans figured out a way to better assess a child’s physiological readiness for formal schooling.

    They realized that there is a physiological ‘marker’ that shows up when a child finally is able to raise their arm straight up in the air, then lay it across the top of their head and reach their opposite ear. Where my father’s friend came from, the Kenyan ‘test’ for school readiness was to ask a child to reach his/her arm over the top of their head, and if they could reach their ear with their fingers, they were judged to be ready for school.

    (I’ve shared this tale with friends who are teachers, and we’ve all been amazed at how shrewd the Kenyan Readiness Test is for assessing a child’s readiness for school — but it originated in the fact that they lacked formal birth records, so they had to figure out some no-cost, quick, fair way to assess kids. Either a kid can do this, or they can’t. It’s almost spooky.)

    I doubt this system is still in use in Kenya today, but I see it as a kind of sociological marker in a nation acquiring literacy. We take birth records for granted; Kenya had to create their system in the 20th century.

    Kenya was a British colony; this Kenyan was fluent in English and doing graduate work in a US university. Any birth records would have been recorded in English, using the Arabic numeral system we all use today.
    ————————————————–

    Finally, it’s worth noting that record keeping systems of the West are also distinctive to systems of **alphabets**. (I’ve taken some Japanese, and I can state confidently that learning a pictographic system is far more time-consuming than learning Cyrillic or Greek or any other alphabetic system.)

    The writing systems of alphabets lend themselves **far** more easily to rapid learning than a pictographic (if beautiful) system like Chinese or Japanese.
    The ‘code’ for the alphabet is 26 symbols, plus , . : ;
    The Chinese system is said to have 5,000 characters.
    The Japanese use a combo of three writing systems, two of them syllabaries and one based on the Chinese (kanzi).

    In other words, in a culture with an elaborate pictographic writing system, you’re probably going to have far fewer people within any population who can actually master that system and it will take a long time for them to learn it — years!

    I don’t think that Makarka would have ‘lost his name’ in China; he’d probably not have been expected to fit his name into a series of little boxes, as Japanese and Chinese writing systems don’t ‘think that way’.
    But alphabets do.

    People don’t stop to consider that the Protestant Reformation, as well as the beautiful Jewish tradition of scholarship, were based on **alphabets**. Long before the Protestant Reformation, two of the most radical technologies invented by mankind — the Hebrew and Phoenician alphabets — both became the basis for codified legal systems that later functioned as the backbone of property accumulation.

    An alphabet can be mastered by the age of 8. This is not really true for Chinese or Japanese; you can learn the basics, but the whole system requires much more time. (Hindi and Arabic also have alphabets, but I am not at all qualified to comment on those.)

    All writing systems lend themselves to codified law, but *alphabets* — where originally, numbers were letters (think ‘pi’) — lend themselves to codified laws AND to simple record-keeping — far more easily than pictographic systems and syllabaries. (This involves cognitive issues related to neurology that are far beyond the scope of this post, but if interested check out: “Proust and the Squid: The Story and Science of the Reading Brain”.)

    It is worth noting that the Korean government decided a generation ago to ‘invent’ an alphabet, and I’m told that all Korean schoolchildren learn it. If you notice Korea’s phenomenal economic achievement in the past generation, it is intriguing to consider what role their having an alphabetic version of their language played in that extraordinary achievement. I have no knowledge of their government record keeping, however.

    Basically, writing and literacy alter the brain.
    Notably, alphabets were used in the West, whereas in the East you find pictographic and syllabary systems.
    Alphabets work different parts of the brain than pictographic systems work, and as someone with a pretty solid background in reading research, I don’t find it at all surprising that De Soto observes capitalism in geographic regions that use alphabets.
    Indeed, it’s pretty much what I’d expect.
    South America uses Spanish (an alphabet), but there are other language, political, and cultural factors that confound the picture.
    I think De Soto is a brilliant thinker.

    Sorry about being soooo wordy!
    Best of luck with what sounds like a very interesting project.

  25. adid says:

    I haven’t read the book but I get the impression from the excerpt that the capitalism is viewed as a source of a successful society. From my point of view it is just an emanation of a powerful and successful Western civilization. There have been other systems in history associated with successful civilizations. Regarding ours as the ultimate one and, thus, viewing its generalization in other parts of the world as the only path to success would be a limited view.

  26. Jay says:

    Magna Carta

    Magna Carta is an English charter, originally issued in the year 1215 and reissued later in the 13th century in modified versions. The later versions excluded the most direct challenges to the monarch’s authority that had been present in the 1215 charter. The charter first passed into law in 1225; the 1297 version, with the long title (originally in Latin) The Great Charter of the Liberties of England, and of the Liberties of the Forest, still remains on the statute books of England and Wales.

    The 1215 charter required King John of England to proclaim certain liberties, and accept that his will was not arbitrary, for example by explicitly accepting that no “freeman” (in the sense of non-serf) could be punished except through the law of the land, a right which is still in existence today.

    Magna Carta was the first document forced onto an English King by a group of his subjects, the feudal barons, in an attempt to limit his powers by law and protect their privileges. It was preceded and directly influenced by the Charter of Liberties in 1100, in which King Henry I had specified particular areas wherein his powers would be limited.

  27. knockmacool says:

    Pat Kenny (rte.ie) talked to Cullen Murphy about his book God’s Jury – The Inquisition and the Making of the Modern World (Allen Lane). The basic premise is the Inquisition established many of the accounting and recording procedures that allow multi-generational systems of control which previously did not exist. I have not read the book, but Murphy makes the connection to Stalin’s Russia. Murphy is definitely looking at it from a different angle to De Soto, but these books might make good back to back reading

  28. mathman says:

    What’ intriguing to me is the fact that all this “private property” was STOLEN from the natives who were here first and that our system depends on violence to “make it work.” The vaunted capitalist system is based on bullying, bigotry and bandits. No wonder it’s all coming unravelled now.

  29. gstream says:

    In Brazil no one knows exactly who stores essential property and personal (birth records, marriage records, signature registration) data. They have this registration system called ‘cartórios’, which are these staid, soul-sucking offices that charge fees to certify (like notaries), register, and release this sort of information. If you want to know who owns ‘x’ property you gotta go pay about 50 reais (30 odd dollars) to some clerk to look it up and print out some data that might or might not be reliable because there might be a more up-to-date file at some other cartório. And you’ll probably never know because these cartórios don’t have a centralized network. So if you really want fast and accurate info you need to hire an attorney who will hire some clerk or payoff some cartório to get you what you need. If you are poor you are pretty much screwed (I guess if you are poor in Brazil you are screwed for countless other reasons as well).

    The cartórios are owned by private parties. It’s some holdover from Portuguese colonial days. Some of these cartórios are worth bajillions to the owners. It really is like a mafia.

    I can’t even try to hide my hatred for this system. I’ve spent countless hours walking around Rio just chasing all this paper. I have my signature certified with 5 different cartórios just because I happened to be in that neighborhood when I needed something notarized. And for what? It’s easy to falsify this sort of stuff. I have total sympathy for anyone in Brazil who chooses to bypass the formal economy and just figure out other ways of doing things. My lord, the DMV in the worst city in the US is like getting a massage from bikini models compared to cartórios.

    I am 100% on board with what de Soto is talking about. I think the Brazilian federal government would greatly improve the quality of life of its citizens and the reliability and accessibility of its information if it just bought out these cartórios and instituted a giant centralized system for housing this information. Federal government is very strong in Brazil and this would be right up their alley. I would pay the cartório owners whatever they asked just to get rid of them.

  30. Raleighwood says:

    Not sure if this is helpful.

    The Pakistani-Peruvian Axis – Carroll Quigley

    I read this recently and found this section fascinating (the rest of the book was too) – he looked at South America in a manner I have never conceived.

    http://www.freerepublic.com/focus/f-news/2807571/posts

  31. Steve L says:

    With a law background you might appreciate this
    about landownership in Hawaii. Not all recording
    of land in the (eventual) United States went as
    it had been done in the original colonies…

    - Up to 1848, the king owned all lands. Parcels
    were divided among warrior chiefs and select
    others. Chiefs then divided parcels to lesser
    chiefs and others for service.

    - Divisions of land were known only to and
    pointed out by elders of villages.

    - A massive quitclaim effort was made in 1848
    starting with the king and working on downward
    through the chiefs to individual landowners.

    - This series of ‘maheles’ for the quitclaim took a period of 39
    consecutive days to complete, but the (law) court considers the acts
    to be equivalent to work all done in a single day.

    - The testimony of “Kanaaina” or
    individuals acquainted with land
    are used in court and in one case
    bounds of a 16,000
    acre parcel on Maui known only by name
    were set using only the testimony of
    kanaaina and what they knew of the land.

    (From Brown’s Boundary Control and Legal Principles)

  32. Chico says:

    Niall Ferguson’s Civilization: The West and the Rest dedicates chapter three to a similar theme. He argues that property rights, the rule of law and related concepts are one of six reasons the West has dominated the world for the 500 year period from about 1500 to 2000.

  33. Expat says:

    In Asia there is an oral tradition of ownership. I was walking through the streets of Phnom Penh and some guys came up to me with guns and said “Give us your money and watch.” I gave them my money and watch just because they said to.

  34. Liminal Hack says:

    The dominance of western Europe is not much to do with capitalism, although it may be fair to say that adoption of capitalism helped it maintain a dominant position it had already acquired beforehand. My take on European dominance is roughly (and chronologically)

    1) The middle east and asia was relatively more decimated by the black death. This coincided with the collapse of the Mongol Empire (who were the original cause of the spread of the Black Death), leaving a huge power vacuum in the east.
    2) The east-west axis of europe has always been more condusive to agriculture and propagation of common crops than continents with a major north-south axis like asia and america. This is a point from Jared Diamond.
    3) The old indian and chinese cultures, due to predilection for hard assets, ran permanent budget surpluses which caused them to sink a vast quantity of gold and silver. Basically gold and silver went to china and india ‘to die’. In return, the west got real goods.
    4) Enclosure of the commons in europe began from the 13th century and accelerated through to the 18th and 19th. Enclosure forced people off the land and into towns where they acted as cheap surplus labour which is the absolute foundation of any capitalist system. Forced land enclosures by manorial lords were the genesis of property rights in europe. A second round of enclosures were vital to sustain the Industrial Revolution for this reason.
    5) Europe was geographically favoured in terms of maritime access and in terms of access to America. Coupled with a cultural impulse to explore and points 3 and 5 above this gave Europe an advantage in exploration and colonisation and conquest. The latter was mainly accomplished by exporting disease, to which europeans were mostly immune by virtue of point (2).

    Then in the 16th century protestantism comes on the scene and ties all the above together, by providing a morale rationale for capitalism and sanctifying financial assets and their acquisition in the eyes of the lord. Both forms of christianity were excuse enough for the enslavement of the New World however.

    By the 17th century Europe has achieved a massive head start which was cemented by the spread of capitalism, and most crucially, by fiat money, which was invented by the british when they started using government bonds in the late 17th century since when they have been used extremely successfully as a hard-money substitute and as the foundation for a private economy based on debt and socially formalised fractional reserve banking.

  35. Liminal Hack says:

    Also see the wonderful tome:

    Power and Plenty: Trade, War, and the World Economy in the Second Millennium (Princeton Economic History of the Western World)

    for much more on this subject:

    http://www.amazon.com/Power-Plenty-Millennium-Princeton-Economic/dp/069111854X

  36. wisedup says:

    big topic for the Big Picture for sure.
    My take is our success is due in part to luck – Magna Carta is a good example – and part because our ancestors suffered from schizophrenia.
    God is all powerful so our legal system (w/o which the record keeping means nothing so here I disagree with De Soto) is based the threat of God (– so help me God) but he makes no claim on social/personal life.
    If religion is inchoate, it lacks authority to enforce oaths, promises, loans etc.
    If religion is complete, no escape/development is possible – sacrificing livestock ad infinitum makes for poor business.
    The West has been straddling the fence for at least 500 years, a mere eye blink in human civilization.

  37. aleiro says:

    I think the biggest reason capitalism has survived and flourish is enforcement of contract law dating back to the 1880s. No need for a thesis (or book for that matter), holding individuals accountable (aka confidence) is what gets participates to enter the a market. Now how do you explain 2006-2008 is another post entirely, people only a very few were held accountable, something the US govt needs to work on in my opinion.

  38. Petey Wheatstraw says:

    The only true capital is political power.

    And, as Mao said, “All political power comes from the barrel of a gun.”

    Mao himself was the result of Capitalism’s end game, in the East (there has not been one ruler in history who has not been a capitalist, at heart. Asian rulers are no exception).

    I don’t see land, property, or other “capital” rights being honored due to record keeping at any point in the history of Western civilization.

    The maps of national boundaries — drawn and redrawn over the past 500 years — show just how flimsy these records are as a claim to ownership of capital or property. Certainly, there are still cases of European Jews trying to have their capital (stolen by the Germans, most recently), returned, and finding that, despite having recorded proof to their claims, getting back that which was stolen isn’t, at all, a matter of the power of good record keeping. In a less radical example, nothing has stopped governments from taking from the unfavored to give to the favored (in our culture, by easement), so that those in political power can pick winners and losers, thereby reinforcing the power structure.

    The idea (and it is only an idea), that the Rule of Law (not laws themselves), will protect the individual within the system keeps capitalism in check to the extent that the system can be trusted to work on a superficial level. Can anyone actually argue, at this point, that the Constitution hasn’t been violated right, left, and regular, with the consent of a modestly comfortable majority of the governed, since the day it was put down on paper as the law? If the Constitution is null and void, then how enforceable is any law subordinate to it? Isn’t our current dilemma one of a breakdown of the Rule of Law — allowing the disenfranchisement of enough of the governed to make the system unstable? Is anyone who gets up and goes to work for another each morning (and lately, for less and less compensation), a capitalist within our capitalist system, or do they simply support the capitalists who employ them?

  39. Arequipa01 says:

    Last year in an area around Balsa Puerto- a river town between Moyobamba and Yurimaguas, 14 shamans/curanderos were murdered in a very short period of time. Some UN official named Roger Rumrill tried to blame it on the religious fervor of recently evangelized protestants operating from the cover of the municipal government.
    Hmm. Smokescreen, protestant sects have been present in the Peruvian Amazonas for decades- in fact they even had planes until the CIA may have [wink wink] given the Peruvian Air Force the ok to shoot down a prop plane with an American family- killing all a mother and a child (a 7 month old girl named Charity- cue Lee Greenwood ‘And I’m proud to be an American, / where at least I know I’m free’).

    How’s that for a Mystery of Capital -mmm? Ironically, and with no connection at all (ahem) a Spanish E&P is operating in the same area. Curisoso, no?

    Final, thought Hernando ‘Cara de Poto’ is brilliant in the exact proportion that his readers in English are unaware of the granular reality which he references to ‘make his point’.

  40. MikeDonnelly says:

    If DeSoto is correct, then do CDO’s MBS and the rest of the alphabets that make ownership of hard assets more difficult to untangle and more difficult to prove ownership… does that cause the U.S. to move in the wrong direction ?

  41. @Randel:

    I too am a big fan of Adam Smith … and especially his recognition of the need for a level playing field and healthy civil society so thanks for the link.

    But while he clearly understood the role of self-interest… both he and economists across the board (especially Randian Objectivists) seems unaware of what I call the “Altruism problem” which I describe briefly here:

    Biological altruism is not about being nice… or at least not always.
    Its function is rooted in defining in-group from out-group and is roughly tied to Dunbar’s Number.

    While intellectual and cultural factors truly can and do expand the boundaries of our conception of the in-group….

    There will always, by necessity be a disconnect between our lizard brain’s reaction vs our reasoning brain’s reaction to that boundary.

    (and its always important to remember that our reasoning brain evolved to serve the lizard brain)

    You will be more emotionally impacted by the death of your dog than the death of a 100,000 people far away you’ve never met.

    No point in feeling guilty about that… if it were otherwise you’d never be able to function. You’d be prostrate from the onslaught of constant grief.

    But this ‘biological altruism’ problem leads to problems in governance (decision mechanisms) which, as we’ve oft seen in history leads to cycles of oligarchy, corruption and collapse.

    (And crony capitalism)

    This would likely be a hurdle faced by any social species on any planet attempting to scale beyond its roots.

    It may be why the universe is so damned quiet… but that’s just wild speculation.

    Nevertheless, I suspect the path through this social bottleneck is very narrow… and that most social species don’t make it.

    I’d suggest paying attention to our roots… there are clues there.

    P.S. Leveling the playing field in the political arena requires technical assistance in my opinion.

    The Chagora Model: Scaling Speech and Accountability
    http://culturalengineer.blogspot.com/2012/01/chagora-model-scaling-speech-and.html

  42. Joel50 says:

    “The West’s system of record keeping and property recording is why Capitalism took hold here.”

    Surely this is a vital reason. And it shines a light on the destruction wrought by the MERS offensive that generated enormous profits by undermining that very thing!

  43. bishophicks says:

    As Chico said above, Niall Furguson believes that property rights, including the government’s power to maintain records and enforce ownership rights was a big part of why the west leaped ahead.

    http://www.youtube.com/watch?v=xpnFeyMGUs8

    When I saw the video of his talk, it made me think of an article written by Hernando DeSoto about the destruction of economic facts that was taking place as a result of the mortgage crisis. The lax record keeping, improper transfers, violations of trust agreements and document forgeries were all clouding the “who owns what” picture. If trustworthy property transfer and ownership records are a foundation of our success and the answer to the question of “who owns what” starts to depend on who is more powerful or who has more politicians in their back pocket then, well, we’re screwed.

    http://www.businessweek.com/magazine/content/11_19/b4227060634112.htm

  44. kcowan says:

    I think you are into a causation versus correlation argument. There are many factors that have contributed to the rise of capitalism in the west. Certainly the record-keeping of real property made it easier to transfer it between parties thereby undoing dynasties and making a more mobile population. But that was insufficient to explain the phenomenon. Taxation plays a role, making trading in capital goods easier (less frictional costs). More disposible income plays a role, enabling new entrants to amass wealth in order to take chances. Access to capital plays a role. Just try to get a mortgage in Mexico! The banking system played a role making capital available. Credit scoring played a role in helping bankers make wise lending decisions (up until recently). Liquidity played a role, enabling people to unwind unstrategic moves. Investment banking played a role. In fact, that is what distinguishes the US from other western societies (until recently).

    But the US is better than Canada or Mexico in creating wealth, and certainly the land registry system in Mexico leaves much to be desired even though their Bolsa is doing better than the NYSE.

  45. trickgnosis says:

    The classic sociological work on these questions:

    Max Weber *The Protestant Ethic and the Spirit of Capitalism*

    Available in its entirety here:
    http://www.archive.org/details/protestantethics00webe

  46. pintelho says:

    2 things.
    My family is Portugues and I know that the land they inherited were only recently properly recorded by the “town hall”…surveyors rarely used actual land plot marks and instead used landmarks like “the third tree left of the creek”…Now they are all staked with concrete plot marks.

    On a recent trip to Thailand, I inquired about real estate and I was told that in order to purchase real estate in Thailand you must have a co-owner that is a Natural Born Thai citizen…that person must own 51% of the property….so that’s why I didn’t quit life as I knew it and didn’t move to my Paradise Island home on Kho Chang…

  47. MrBean says:

    The problem with De Soto is his starting point. Outside of subsistence existence, there are three types of employment. One can sell his labor, make a product or service (service being different from labor due to multiple employers or customers), or collect rents (be an actual landlord, collect dividends from investments, or other financial endeavors). All three of these imply some sort of market economy that would include various forms of government except for slavery. A capitalist economy implies that individuals can use capital (which can be accumulated can be through savings or borrowings) to start, expand, or buy some business enterprise. Buying land and equipment for farming, buying land, buildings, and equipment for manufacture or the provision of services, essentially the purchase of that which is needed to start, buy, or expand some business. This does not include the purchase of a house for habitation however necessary it might be for ‘living’.

    The question De Soto raises is whether the ‘legal’ ownership, that is, ownership as describe by legal authority and enforced by judicial and government means, is necessary for capitalism to flourish. In the case of a proprietorship, sole or partner, the answer must be no. But in the case of a joint stock company, the answer must be yes. A joint stock company is the formal observation of legal rights, duties, and responsibilities with in a formal, hence legal, forum. Thus, disputes that arise are usually settled in the more formal setting courts of law where officials preside and operate. A partnership, when acting in an informal manner need not resort to official legal means. The participants can reach their agreements by mutual consent.

    The problem raised by De Soto may be as simple as two or more individuals agreeing to raise one or more crops on a piece of land that none of them own. The land in question may belong to the government or to absentee land owners, who become silent partners, so to speak, but do not share in the profits, if any. The partners are taking a certain risk that if their endeavor is discovered they may lose all of their investment in time and materials (seeds used in planting however acquired). Thus, what De Soto is speaking to is not so much the formation of capital and its uses, but of risk taking, the essence of the use of capital. Capital, by itself, is not capitalism nor is formal ownership of the means of capital (land, factories, etc). It is the risk to which he speaks that matters and that by formal and legal means such risk is reduced.

    I have houses in the United States, Mexico, and France. I have also spent significant portions of my time in other foreign countries. What I have are a series of observations that I believe illustrate the point made De Soto. In France, I have a house in a small village in the Haut Marne. Most of the houses use wood heat. That is, unless you use electricity, which is very expensive during the winter, or natural gas, you burn wood in one or more fireplaces or wood stoves. It is not unusual for a house hole to use ten cords or more of wood each winter. Every village has its public forest land and every household has a right to cut firewood for its own use. But most people do not sue that right. Not everyone is comfortable using a chainsaw or has the other tools and equipment to harvest timber. So one buys wood for heating from those who make it a business. Some individuals may even own their own woodland for the purpose of cutting and selling firewood. While it may take a certain amount of capital to establish a wood fuel business, the cost is fairly low. But consider the market. There is a limited supply of customers, meaning that the demand is limited. Thus, one buys wood for cash, no VAT is charged or paid, and there are just enough wood sellers to match wood buyers. The market is in equilibrium. To an extent, legal rights are extended and secured, but these tend to be minimal. Imagine if wood fired heat was made illegal. That is always a risk that both home owners and wood sellers have over their heads. Hence, we have in De Soto’s terms a problem that the use of wood heat and the right to sell wood are not expressly supported by law. But the business is upheld by informal agreements.

    Next, we go to Mexico. I have a house in a small town full of my wife’s relatives and other strangers. I would estimate the population to be about five to seven thousand inhabitants. There really aren’t any restaurants as you would fine in Colima or a large city. There are perhaps some fifty ‘houses’ that serve meals according to the customer base and the demand. Some do only lunch, some do only dinner, some do only breakfast, most do a combination or the three. You might see three to five tables, depending of the size of the house (just like many village houses in Europe, these almost always have common walls). All these eateries are family establishments, owned and operated by family members. And very few have a license or are inspected on a regular basis (or any basis, for that matter) by the health department. Note that it is almost as cheap to eat out as it is to prepare one’s own meals. Add to that all the carts that prepare tacos or hot dogs and hamburgers and such, food service is a large part of the economy. If you want your hair cut or styled, there are many women who have set up in their front room the facilities, however crude or modern, for that purpose. One can walk down the street and see people selling clothes and other items in the front room of their houses. Make note that there are larger and ‘official’ stores, public places of expressed business. But these larger establishments are few. This is a type of ‘capitalism’ in that whether one is selling tourist stuff on the sidewalk or prepared food, there is a certain amount of investment that has taken place. Those who sell the tourist stuff in the squares usually buy a year’s worth of goods and then spend the coming year selling what they had bought. In a good year they may buy a little more, in a bad one, they buy less because they have left overs to sell. Again, this tends to be a static supply and demand economy. It only grows because the population grows. And here, the emphasis on life is family. Here the definition of the good life differs greatly from that of Mexico city. De Soto, because of his social and educational background, over looks so much of the social impact on a capitalist economy at this level. Here, the capitalism works only enough to ensure a life where values other than the accumulation of wealth come first. A roof over your head, food to eat, a shirt on your back and some spending money, those are the main goals because family and extended family matter.

    Unfortunately, for most educated individuals, the idea has taken hold that capitalism is about the accumulation of wealth and its use for bigger and better. Thus, those in countries where all the various ideas that we take for granted are missing are the explanation of why ‘capitalism’ as we tend to think of it in this modern day, doesn’t work well or work enough. Remember, Adam Smith did not ‘invent’ the idea of capitalism, he was only describing behavior according to his ideals on moral philosophy. If one is a University of Chicago Department of Economics trained PhD, one looks at societies with ‘modern eyes’. One tends to see what is ‘missing’ from different societies that one takes as a given in one’s own society. Is De Soto correct in his assumptions about the need for formal legal procedures on personal property and real estate to support capitalism? Yes and no. As we have seen in this country, formal legal procedures have not protected ‘capitalism’ from the corruption of government and business. One needs as much informal agreement and acceptance to make capitalism work well.

  48. DeDude says:

    I don’t think it is the recording as much as it is the respect for, and enforcement of, property rights – regardless of the owners class or status. If some rich or powerful guy can just come and take over your property, then there is a limited incentive to collect any other kind of wealth other than that which you can put in a box and hide deep in the woods. In other words, when property rights are not enforced consistently for everybody, savings become stale assets that are not invested productively. Furthermore, the lower classes become reluctant to invest huge efforts into entrepreneurial efforts if they don’t know for sure that they will be allowed to retain the fruits of their efforts. That is one of the reasons that US has been so successful in attracting talented people from all over the world. The rags to riches stories were not just myths in this country because you could be sure that nobody would just confiscate what you had saved.

  49. Lord says:

    Greg Clark’s Farewell to Alms certainly discusses the long history of literacy and numeracy in the west from the Doomsday book to the highly detailed household records kept as far back as the 13th century. He also argues while the east had a highly educated administrative sector, from what evidence exists this did not permeate deeply throughout society. The writing probably made it more difficult even though they had arabic numerals earlier.

  50. Lord says:

    I recall seeing Elizabethan administrative proceeding involving Shakespeare’s family and the wool trade and French vital statistics recorded by churches are probably the oldest and most comprehensive in existence.

  51. kurtwestphal says:

    I’m going to disagree with philipat Says

    i have chinese indonesian relatives and professional friends who live and do business in Indonesia, in/outside of jakarta, the title process, isn’t mature or pragmatically existent, there is no escrow. relatives own property and squatters will set up businesses on the property w/o establishing leasing or terms … it’s messy and unsophisticated.. i can’t speak for Bali, perhaps is better there, but it’s simply not clear cut as philipat claims and definitely slows down business

  52. CentralIowaFarmer says:

    When I was a political science student in college, we spent a few weeks on Locke and other philosophers who followed Locke, and we kind of threw out the syllabus when we discussed the basic “property v. possession” argument. That central idea taught me how the world worked; allowed me to understand a lot more about the world, United States (history and capitalism unique to the world). I suspect that the US was the only country founded on 40 acres and a mule. Helps me understand that it seems next to impossible that the US will continue to function as a democracy. Chad Ray was my political science professor, and did an excellent job of opening my eyes. If you don’t grasp the concept or the difference of a “property” v. a “possession” you won’t go far in the industrial world. Which leads us to MF Global…..

    http://en.wikipedia.org/wiki/Labor_theory_of_property

    http://en.wikipedia.org/wiki/John_Locke

    http://www.central.edu/academics/majors/philosophy/

  53. MrBean,

    nice Post~

    and, while, I think, I ken your intent..

    http://www.thefreedictionary.com/ken

    here..”…Unfortunately, for most educated individuals, the idea has taken hold that capitalism is about the accumulation of wealth and its use for bigger and better…”

    I believe that “indoctrinated” may be a better word-choice than “educated” ..

    http://www.thefreedictionary.com/indoctrinated
    ~~

    this..”…If one is a University of Chicago Department of Economics trained PhD, one looks at societies with ‘modern eyes’. One tends to see what is ‘missing’ from different societies that one takes as a given in one’s own society…”

    though, is a fine (sound) point.

    but, sadly, the U of C is, hardly, unique..

    We would, all, do well by reflecting, more often, on this http://search.yippy.com/search?query=the+Federal+Reserve+bought+the+Economics+Profession&tb=sitesearch-all&v%3Aproject=clusty “Idea”..

    broadly, you are illuminating the Difference between “Financial Capitalism”, and “Market-Based Economics”..

    (broadly, as a reminder, “Finance” and “Economics” are Not synonyms.)
    http://www.thefreedictionary.com/synonym

    and, again, to your Point(s), “Our” perceptions have been so warped, by that which We’ve ‘learned’, even our ‘Definitions’ have been skewed..

  54. Theravadin says:

    A couple of thoughts. A big part of what you are discussing is standardization. You might be interested in a recent radio program on the program “Ideas” on CBC: http://www.cbc.ca/ideas/episodes/ , the Wed. Jan 25 edition.

    The related story is about the limits of standardization. I once did the ISO environmental training for a major forest management company. The question came up: “What do you do if you spot a forest fire while driving to work?” The ISO answer? “Stop the truck and fill out the incident form!”

    Hmmm, no, actually, I don’t think that I’ll do that.

    So part of the question is: “How do you determine and enact appropriate levels of standardization to enable economic activity rather than blocking it in a flood of mindless activity?”

  55. Justin says:

    Hey Barry,

    I remembered some anecdotes from “Commanding Heights – The Battle for the World Economy” section with de Soto about Kenyan coffee growers. You can see the video in the clip at the bottom of this page in the “Storyline” section at this link –
    http://www.pbs.org/cgi-registry/2wgbh/commandingheights/searchresults.pl?searchstring=property+rights&go.x=0&go.y=0

    The Kenyan grower is at the end of the 7 minute clip.

  56. kaleberg says:

    Wheat farming is much less efficient than rice farming, so European population densities were always lower. That made labor more expensive and allowed workers to negotiate for more money and more power, including the power to keep more of what they earned. More expensive, uppity workers made for higher returns on capital. You can trace the rise of Europe to the Black Death in the 14th century which led to the social changes in which capitalism could grow.

  57. reedsch says:

    Interesting thesis but I have 2 issues with it…

    1) Use of the definite article: “The reason capitalism has triumphed…” not “A reason…” or “One reason…” .

    2) “People no longer needed to rely on neighborhood relationships or make local arrangements…” How does concrete record keeping (albeit granted a useful tool for trades covering time and distance) alter the social contract, turning people into “accountable individuals”? Certainly easy enough to cut off fingers without a signed commitment from a miscreant counterparty. Chinese in general are far more reliant on family & village business networks than westerners (you wanna argue the point go ahead and try to get something from them up front, big nose) , and their record-keeping history far exceeds our own, so as a first-order cause it fails right there. Who can count the number of times it’s been said, “it’s not worth the paper it’s written on” ?

    To me the far greater question is what happened in Europe to awaken it from its 1000-year slumber and set off the Renaissance and subsequently the Industrial Revolution. Free markets, accounting, and capital have existed for millenia. Steam engines and electricity in useful form did not.