The best way to protect freedom and encourage economic growth is to enforce private property rights, and Peruvian economist Hernando de Soto has been awarded the Milton Friedman Prize for Advancing Liberty for his efforts to bring bring rights to the poorest nations in the world.
It’s not hard to understand why Marxist (search) radicals found de Soto’s ideas so dangerous. They threatened the monopoly the political left (Marxist and non-Marxist) held over solutions to the problems of the world’s poor. For years, statist development experts had sought top-down solutions, operating under the implicit assumption that poor people in the Third World were largely incapable of entrepreneurship. De Soto utterly rejected that patronizing viewpoint, and, beginning in his native Peru, focused on the lack of formal property rights as the source of poverty in poor countries. As an author and an activist, and later as adviser to Peruvian President Alberto Fujimori (search), de Soto worked to bring impoverished Peruvians out of the shadow economy, and unlock their potential for wealth.When people have public recognition and protection of their property rights the natural economic incentives of capitalism come into play and people are motivated to work hard and produce. What's more, banks can lend money for capital investment if they're assured that the assets of their debtors won't be arbitrarily confiscated by the state on a whim.
weeell, yes, but more accurately "property rights coupled with a history of rule of law are the basis of wealth and wealth creation."
Property rights are the basis, but the concept that you have a right to property has to be backed up by something other than who has the bigger gun. Property rights don't mean anything if the judiciary and executive/law enforcment branches are corrupt. Look at Russia, the *stans, or Venezuela. You need to actually have a law that is respected to make the notion of property have meaning so that companies and banks will invest. They have to believe that legally, they will get those rights backed up by more than paper.
Friedman had of course said that property rights were the basis for everything long ago; later he amended it, saying that he hadn't made the notion of the rule of law explicit enough, or hadn't through it all through, but numerous countries had convinced him that the rule of law was a prior necessity.
His point: the rule of law doesn't spontaneously generate out of property rights.