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  HOME | Opinion (Click here for more)

Beatrice Rangel: Poverty and Private Property
Former Venezuela Presidential Chief of Staff Beatrice Rangel makes the case for empowering the poor in their slums, barrios, ranchos and fincas with property rights.

By Beatrice E. Rangel

To celebrate the Millennium, the U.N. General Assembly session of 1999 adopted the Millennium Development Goals. One such goal was to eradicate extreme poverty by 2015.

And while inroads were made given that today, only 1% of people still live on less than $1.25 a day, this represents 76 million people worldwide. The proportion for 1990 was 5% -- unfortunately the remaining 1% seems to resist obstinately.

And according to the World Health Organization by the time you read this article, 26 of those poor people will die. Eight will die from lower respiratory infections (TB et al). Six will die of starvation. Five from diseases contracted through contaminated water. Four of HIV. Two of malaria. One giving birth.

From the economic perspective the sole access to an income segment of US$10 per day by this 1% of world population would represent an income flow of about US$182 billion which assuming a flat taxation rate of 10% would bring in $182 million in revenues to governments worldwide.

But far more important, this income stream could qualify recipients for micro credits and technical support. This would set them onto the path to eventually joining the ranks of the middle classes.

So, the question arises. Can this stubborn segment of poverty be reduced further? And can the world economy thrive with this dead weight?

The answer to the first question is a cautious yes while to the second a definite and astounding no.

The world economy can continue to grow even when this proportion increases due to the fact that there will always be other people whose productivity surpasses average productivity rates thus compensating for unproductive people.

But the value of goods and services increases for everyone. This is very much what happens today in the leading economies of the world with uninsured sick people who get their health care at the Emergency Rooms of public and private hospitals. This increases the overall cost of health services including for those who are insured.

As to the issue of how to vanquish poverty, I believe that while great inroads have been made in removing charitable and benevolent aspects of international cooperation to turn programs into means to foster people's creativity and participation in solving their livelihood challenges, most fail to address the core of the problem which is property rights.

Indeed, as explained in the Mercatus Center report on Development, "Secure property rights facilitate economic transactions, ensure efficient and sustainable resource use, allow for the evolution of effective credit markets, improve business climate and investment opportunities, and ensure economic accountability and transparency. Equally, the absence of such rights undermines economic development and hinders governance."

Securing property rights to the world's poor thus seems to be the most significant and urgent task if we are to control ongoing conflicts, the uncontrolled explosion of violence against unarmed civil populations, massive flows of refugees and the dissolution of democracy.

To be sure, absence of property rights is the best invitation to violence and chaos, as humans need to have a sense of belonging and understand what the limitations are to individual will in order to progress.

Property rights provide these elements of cooperation and order. Without them nations float without sense of destination and purpose. Indeed, as the Cato Institute has reported "imagine a country... where nobody can identify who owns what, addresses cannot be verified and the rules that govern property vary from neighborhood to neighborhood, or even from street to street." In this scenario violence thrives and individual strength imposes itself over any other virtue or skill.

At least a third of the world's poor, or a billion people, are living in slums without legal protection of their assets. Granting formal property rights to the poor over the places they inhabit in rural areas could be the first step into effectively fighting poverty through tapping onto the current $9.3 trillion dead capital held by the very poor as occupants of these lands.

Stable land ownership would also increase revenue for local governments through property taxes.

As demand for land and public infrastructure rises, revenue from property taxes would help decentralize and empower previously impoverished residents in developing regions.

People living in developing countries would benefit from property rights to access finance given that their land becomes an asset that can be mortgaged or used as collateral to obtain credits to develop a business or to enhance the property's economic value.

And as holders of properties increase in number and economic capacity the community and the country further their development.

In a nutshell, there is no way to pull the poorest of the poor from their predicament without securing for them property rights.


Beatrice Rangel is President & CEO of the AMLA Consulting Group, which provides growth and partnership opportunities in US and Hispanic markets. AMLA identifies the best potential partner for businesses which are eager to exploit the growing buying power of the US Hispanic market and for US Corporations seeking to find investment partners in Latin America. Previously, she was Chief of Staff for Venezuela President Carlos Andres Perez as well as Chief Strategist for the Cisneros Group of Companies.

For her work throughout Latin America, Rangel has been honored with the Order of Merit of May from Argentina, the Condor of the Andes Order from Bolivia, the Bernardo O'Higgins Order by Chile, the Order of Boyaca from Colombia, and the National Order of Jose Matías Delgado from El Salvador.

You can follow her on twitter @BEPA2009 or contact her directly at BRangel@amlaconsulting.com.


 

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