Tag Archives: De Soto

Property rights and development: Lessons for Zimbabwe

Earlier this year I was involved in a review of the literature on the relationships between property rights and development commissioned by DFID and led by Future Agricultures partners, the Overseas Development Institute, and supported by the FAC land theme. The focus relates to an important and long-running debate in Zimbabwe about what to do about land tenure in both rural and urban areas.

The review was prompted by a concern by DFID to underpin with solid evidence the claims made in the UK government’s narrative about international development, known as the ‘golden thread’. This emphasises secure property rights as a key element in promoting economic growth and development. The British Prime Minister David Cameron states: “A genuine golden thread would tie together economic, social and political progress in countries the world over… Only then will people escape the fear of seeing their homes bulldozed just because they don’t have property rights.” Such rights would be underpinned by mapping and formal cadastre systems “…using satellite photos to map plots of land that will facilitate the creation of property rights”.

This is a familiar argument, resonant of that made by Peruvian economist Hernando De Soto who claimed that many resources in the developing world are ‘dead capital’, and so underutilised because private property rights have not be assigned. Only through titling programmes, he argued, would dead capital be transformed economic prosperity be realised. While extensively critiqued, this argument has captured the imagination of many policymakers in Africa, including in Zimbabwe where the ‘gold standard’ of private freehold tenure is often held up as the approach to follow.

The reviews, focusing on the post-2000 literature on Africa, looked at the broad relationship between property rights and economic growth, as well as specific areas, including rural and urban contexts, as well as the particular case of water rights. In addition, questions of empowerment were addressed. Just as many similar studies before showed that the evidence for a tight relationship between private property rights and economic growth and development is equivocal. Some studies show a positive relationship, others the opposite. And of course many other factors impinge. This is perhaps especially so for the relationship in rural areas, and linked to rights over land.

For those of us who have been immersed in this debate for years, particularly in Africa, this is no surprise. The 1980s for example saw a flurry of studies that looked at the benefits and costs of land titling, and the consequences for investment, including many by the World Bank. These showed again and again that, while improving security of tenure is essential, this does not have to be achieved through asserting private property rights, and indeed other forms of tenure, including common property, but also a range of registration systems can achieve the same end. The costs of cadastres and formal land titling systems are prohibitive, and can generate conflicts, and the processes of exclusion that occur can have significant negative effects. This is the conclusion drawn by many for Zimbabwe, despite the on-going, ideologically-driven debates.

A recent World Bank study looking at urban and peri-urban land in Burkina Faso and Mali came to much the same conclusion. Elsewhere in Africa, Rwanda has gained prominence as a case where land titling works, but there are also knock-on consequences especially for the poor and marginal of such efforts. In Ethiopia, a country with similarly dense populations in the Highlands, more informal registration systems seem to deliver good results.

The review looked at all these cases, and many more. The review was somewhat hampered, as it was obliged to follow a rather odd DFID-prescribed methodology (then in draft, but now formalised as a practice paper – which is admittedly an improvement on the draft) that had the effect of excluding large parts of the literature. This stipulated that ‘evidence’ as only in refereed journal articles, and had to be assessed in terms of empirically evaluated quantitative impacts of a property-growth relationship. This ‘evidence’ in the guidance is therefore privileged over other sources in terms of assessments of evidence ‘quality’ and ‘reliability. This limited the scope, and introduced particular biases of discipline and case study. The work of economists, and material from Ethiopia was thus over-represented and, according to the final report, “as a result, perspectives from some disciplines are not fully represented, notably history, politics, anthropology, cultural studies and sociology”. Given the subject area, rather a shame to say the least!

The focus on journal articles in particular databases also meant that large chunks of the literature were excluded, including all the fantastic books on the subject, both empirical cases and historical overviews, published over the years, not to mention the important project-based and grey material. To undertake a review on land, property and development in Africa and not include the key works of Sara Berry, Louise Fortmann, Pauline Peters, Elinor Ostrom and others was, to me and other advisors on the project, plain bizarre. Fortunately some flexibility was allowed and some elements of these key foundational insights were in the end included, but not without some difficulty, and some serious questioning of the draft DFID guidance.

Despite all these battles over the nature of evidence, the key findings of the rural review were fairly clear. It notes: “Overall, the evidence reviewed does not fully support the expected outcomes of the conventional economic view on the link between stronger property rights and investment gains”. In particular (from the executive summary):

  • “While present in some cases, links between reduced risk of expropriation and greater application of short and long term investments are not universal or unambiguously clear. There are numerous constraints preventing this causal link occurring, and there is some evidence of a reverse causal relationship: in some cases a greater risk of expropriation encourages certain types of investments”
  •  “The link between strengthening of tenure and increased access to credit is particularly weak, due to numerous other factors which prevent land from being successfully collateralised. These include issues related to credit supply, as well as borrowers’ willingness to mortgage their major asset, land”.
  •  “The evidence on the hypothesis that active land markets result from stronger property rights is mixed. There is some evidence which points to land markets leading to more efficient outcomes where these have not existed before (Ethiopia) but in the majority of cases, (informal) land markets are active under customary systems and there is little evidence to indicate that these are inefficient”
  •  “Whether titling or other tenure strengthening initiatives promise more benefits to women compared to existing tenure arrangements is highly context specific and depends on processes under which changes in tenure occur and are managed. The extent to which women’s greater access to land leads to higher agricultural production also does not appear to be supported by the literature”

No surprises there. What is perhaps more surprising is the wider persistence of the narrative about the role of private property, and especially titling, in economic development, including in Zimbabwe. This, as with the UK’s golden thread, is driven more by ideological commitment than an appreciation of the facts on the ground. Thus, with the benefit of evidence, the firm assertions of the golden thread narrative look distinctly frayed. Given its commitment to evidence-based policy, we will have to see if the statements of UK government officials, from the PM down, will be tempered by the results of its own review. I am not holding my breath. Equally in Zimbabwe, let’s hope that evidence prevails over assumption and prior bias in the on-going, fraught debate about property rights and land tenure reform.

This post was written by Ian Scoones and originally appeared on Zimbabweland

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Why nations fail: perspectives on Zimbabwe

Why Nations Fail: The Origins of Power, Prosperity and Poverty is a provocative new book by MIT and Harvard economists, Daron Acemogu and James Robinson. It is getting a lot of commentary from, among others, Thomas Friedman in the NYT, Paul Collier in the Guardian,  Martin Wolf in the FT and the Economist. It even is linked to a blog. It seems like a big deal which is why I bought it and read it.

Why is the book of interest to those concerned about the future of Zimbabwe? Lumped together with North Korea and Sierra Leone, Zimbabwe is used as an example to illustrate the basic argument that nations fail – and poverty results – because of poor institutions. A basic contrast is made between what they term inclusive and extractive political and economic institutions. Inclusive institutions result in prosperity, and are based on secure property rights, an unbiased legal system and the provision of public services that offer a level playing field for all to be able to participate in economic activity. They result in conditions where people innovate and invest with a sense of security.  By contrast, extractive institutions are dominated by elites, and create privileges and patronage, reducing incentives for entrepreneurship and development.

The nearly 500 pages of the book make the case through a series of intriguing historical examples – from the Ottoman empire to the industrial revolution in England to post-independent Botswana. The array of cases is extraordinary, and it’s a fascinating and absorbing read. Applied to so many contexts and historical periods, the definitions of inclusive and extractive institutions become at times a bit flexible. Arguments for progressive, inclusive approaches are drawn from settings where slavery exists, or where political participation is minimal, for example. And the celebration of the US and Europe are sometimes a bit rich, given growing inequalities, deep poverty within nations and the severe limits of our own political institutions. Also, while the authors acknowledge that extractive institutional settings can result in growth and development – and clearly China is the contemporary example used – they argue that such conditions are fragile and will not persist, although the evidence for China’s decline seems currently limited.

Overall, it is a brave, big-picture argument. It emphasises history, path-dependency, contingency and uncertainty. And it makes politics and power central to the economic analysis. This is all very welcome. But it is of course not novel. Political economy analysis has long argued that politics matter, and power and class configurations, and patterns of inequality, are crucial to the assessment of economic fortunes.  Karl Marx only gets two index entries, and Marxist thought no real discussion, which seems bizarre given this important heritage in economics.

So why is this particular book getting so much air time? The commendations from the great-and-the-good of development economics are certainly impressive, with a slew of Nobel Prize winners offering their endorsements. I guess it’s because the book is written by some well-known and respected academic economists. Once in a while mainstream economics ‘discovers’ things outside its narrow disciplinary confines. Remember the hullabaloo about ‘trust’ or ‘social capital’? Of course classical economics always addressed politics, and it is only in the relatively recent past that this was jettisoned in favour of a narrow focus.  But if this is now mainstream, I am not going to complain. We spend so much time knocking at the door of the citadel of economics, that when the door is opened to debates well known outside, we should probably celebrate (even if a bit cynically).

But what does such a book imply for development? It has some harsh implications. Much of the ‘policy advice’ based on technocratic assumptions will, it suggests, simply not work. As William Easterly comments in his review in the Wall Street Journal, the basic conditions for development are not ones amenable to aid projects or technical advice, but require political and institutional transformation. This may take long periods, requiring the capturing of particular moments – ‘critical junctures’ – and often almost a revolutionary overturning of existing power structures and economic relations to provide the space for inclusive institutions to emerge. Because history matters, and is so difficult to escape, some transitions – for example from colonialism to independence – may not be enough to remove the shackles of extractive institutions. A more radical change may be required.

This is fighting talk, but what does this mean for somewhere like Zimbabwe? The usual stereotypes about Zimbabwe are trotted out in the book, and the sources used for the assessment of contemporary politics seem to be solely journalistic reports, but the basic prognosis is probably sound enough. Zimbabwe inherited a highly extractive political and institutional set up at independence. This was based on a highly unequal, racialised distribution of land and economic power. This was not challenged by the new leaders, and indeed became the basis of their own power, allowing a small group to emerge as a new black elite. Extractive institutions suited their ambitions, and they made full use of them. It is, of course, a well known, depressing tale.

The book does not dwell on Zimbabwe’s land reform, but comments on other reforms where elite privilege was overturned (a particularly evocative example is presented from the Roman empire). Such redistributive reforms allowed new institutions to emerge that spread the gains more widely. However, they only work if security is provided and inclusive political institutions co-evolve with new economic opportunities. The book hails ‘property rights’ as the solution, but this is presented in a rather uncritical and simplistic fashion, often echoing, although not referring to, the problematic analysis of Hernando de Soto. But actually it is security over property and the gains of economic activity and innovation that is critical, rather than any particular form of private property – and so is reliant on the wider political and institutional conditions prevailing.

So, following that other well-know political economist Vladimir Lenin, what is to be done? In Zimbabwe a ‘critical juncture’ was clearly the post 2000 land reform. While there was certainly elite capture, it has opened up potential economic opportunities for many, overturning long-standing historical inequalities. But there have as yet been no moves to establish inclusive political and economic institutions to support this. The GNU has failed, and western powers and others remain at arms’ length. The opportunity of this moment may have been lost, as the extractive tendencies of a powerful elite in trouble hold sway. Was land reform in Zimbabwe one of those historical moments that the book covers which did not result in the necessary institutional revolution: a tragically missed opportunity? Or is there still a chance?

This book, for all its flaws and simplifications, offers some interesting pointers to the way forward, and the urgent need in places like Zimbabwe to focus not on ‘development’ in the normal technocratic mould, but on some radical political and institutional transformations which will allow the land reform to realise its potential for economic change for the better. It’s a long shot, and it may be too late, but progressives across the divides should take heed.

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Dead capital: De Soto’s fallacies in Zimbabwe

A recent opinion piece in the Zimbabwe Independent by Eddie Cross, was titled “Land: Africa’s greatest but still dead asset”. It very clearly picked up on Hernando De Soto’s ideas on ‘dead capital’ and the need for clear property rights on land and other assets in order to release their value.

Cross’s article is extraordinary for its failure to engage with the substantial critique of this argument, presenting a simplistic and patronising perspective on ‘tribal’ (sic) tenure systems. It is doubly extraordinary as the author is the MDC-T’s Policy Coordinator General and is a member of the National Executive of the party, as well as being MP for Bulawayo South.

It demonstrates perfectly the poverty of understanding and debate on this subject in many quarters. The MDC’s website carries only a very general statement on land and agriculture, but if future policy is being informed by the sort of arguments presented in this article it is a tragedy. Even the World Bank rejects the simplistic argument that individual property rights are the solution to economic growth, and particularly around land where registration and titling approaches have long been shown to be costly and ineffective.

The article betrays a remarkable lack of understanding of African tenure and land governance systems, and offers a simplistic narrative peddled by right-wing think tanks, such as the Cato Institute (whose strap-line is ‘Individual Liberty, Free Markets and Peace’). Indeed, Cross himself wrote a Cato Institute paper on land reform with this line of argument in 2009.

However, this perspective has been widely challenged. For example, Ben Cousins and colleagues at PLAAS produced an excellent briefing paper a few years back which challenged the claims of De Soto and his followers. The central criticisms they focus on are “his oversimplification of the informal economy and associated property relations”. The paper is short and well worth reading. Virtually all the criticisms they outline are repeated in almost pure form in Cross’s piece.

They conclude: “De Soto’s ideas have mesmerised many policy makers and politicians, but a significant body of scholars and land reform practitioners are concerned that his policy prescriptions are highly misleading”. Policy makers, they argue, “must resist the temptation to seek simplistic solutions to poverty of the kind offered by De Soto”.  It seems Eddie Cross, like others, has been mesmerised. Let’s hope the MDC does not come out with highly misleading and simplistic policy prescriptions too.

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