Friday, August 26, 2005

Winning in Iraq, listening to De Soto

I followed a link from instapundit to an article by Michael Fumento:

After a discussion of the progress in Fallujah comes the money quote:
Navy Lt. Cameron Chen

I still don't understand why there isn't more commerce. It seems plain that hardware stores and gas stations are in demand. I read that many fundamentalist Muslims still consider any form of interest as being usury and have not embraced the cycle of debt and capital that feeds our economy. Most property is not used to secure collateral because of lack of deeds or titles and there is no entrepreneurial spirit. Maybe I am not reading the signs properly but I have yet to see a bank.

That last sentences could come from one of Hernando De Soto's books. I have to confess to having started two, but finished neither. One of them is called "The other Path: The Economic Answer to Terrorism". I bought it with enthusiasm, thinking it would apply to the current GWOT, then put it down for a bit when I realized he was talking about Marxist terror, in particular Sendero Luminoso (Or "Shining Path", his title being a reference to that name). Now I think he may be on to something.

Not that the terrorists blowing themselves up in Iraq are motivated by economics, but that a sure-fire way for the government there to get more support from the public would be to issue title certificates. Iraqis could get mortgages, start businesses, and feel more secure in their homes. Those all have to be good things.

The quote above mentions problems with Islamic banking, but those can be gotten around. In fact there are some very large banks in the Gulf States that employ Islamic scholars to verify that their "loans" (often structured as partnerships to avoid the ban on usury) pass Koranic muster. The fundamental problem in Iraq seems to be the same as the problem in Peru and Egypt and all over the world: poor people don't have good title to their property.

Seems to me that Fallujah would be a perfect place to start this work, since we had to throw everyone out of the city to fight there, and then had to determine who to let back in, give them all i.d. cards and so on. Presumably we were involved in getting them back into the right houses as well. Of course it may be that everyone there knows who owns what, even in the absence of a formal title. De Soto frequently makes the point that it is not that the poor don't own things, and know what they own, and even have community support for their ownership, it is just government recognition of that ownership that is lacking.

I had read no discussion of this issue, but a quick google led to an interview with Ramesh Ponnuru where De Soto is specifically asked about Iraq, and says "... so no property rights, no modern Iraq."

The article was written in 2003, and De Soto had apparently been contacted by the Bush administration, so perhaps this was attempted, but failed to come to fruition. Possibly it was considered of lesser import given the ongoing violence. Possibly just another missed opportunity.

It is also very interesting to think about in the context of the current problems Iraq is having with coming up with a constitution. Most of the commentary I have seen has discussed the role of Islam, and Federalism. A strong support for property rights is apparently in there according to this text:

10. a. The Iraqi citizen has a complete and unconditional right to ownership in all parts of Iraq
without limitation.
[Oddly, this is one of the few rights that is absolute, not depending on implementing
b. Private ownership is protected. Nobody may be prevented from using his property except
within the boundaries of law. Nobody may be deprived of something he owns except for
purposes of public welfare in cases specified by law and in the manner stipulated therein and with
the condition of just and prompt compensation.

That seems pretty good. But we need to do more.


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