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For a time in the 1990s, largely thanks to The Other Path, the word “formalization” was the mantra of the World Bank, the U.S. Agency for International Development and other bodies devoted to alleviating poverty. They had finally turned their attention to the arrival city and found a single remedy: home ownership. De Soto’s think tank, the Institute for Liberty and Democracy, advised numerous developing-world governments, spreading the message of formalization, and dozens of poor countries used its advice to grant title deeds to squatters in the 1990s. In 2000, de Soto published an even more successful work, The Mystery of Capital: Why Capitalism Triumphs in the West and Fails Everywhere Else, which contained the shocking assertion that “the total value of the real estate held but not legally owned by the poor of the Third World and former communist nations is at least US$8.3 trillion.”21 If this capital could be unlocked by giving the poor formal ownership of their houses, he wrote, the result would be an economic equivalent to nuclear fission, instantly freeing up a great quantity of untapped capital to build a new middle class in the world’s South and East.

In some places, his ideas were highly successful. In Brazil, as we have seen, the titling of squatted land has worked extremely well in alleviating poverty and building a middle class.22 In Turkey, the massive legalization and titling of self-built gecekondu houses on the outskirts was the beginning of the birth of a new middle class and an economic and political renewal. Likewise, a great number of studies have found that titling has improved lives, by giving the poor more money to invest and by reducing the burdens of holding and securing their land, in Thailand, Ecuador, Nicaragua, and Peru.23 Indian cities have had some success with such programs when they are applied.

Yet, in other places, the simple granting of land titles did little to improve lives. In Colombia and Mexico, it was found that land ownership didn’t give people better access to credit (or if they had it, they didn’t use it). In Jordan, it was found that property rights neither gave people more secure tenure nor created more investment.24 A study of such programs in sub-Saharan Africa found that ownership had actually weakened the security of the new landowners, turning their entire lives into defensive postures against government and business.25 Other studies, in Ghana and Nigeria, found that the poor sometimes did better if they remained squatters within an informal, non-taxpaying economy.26 Still other studies pointed out that formalization, while helping the mass of the poor by giving them a step into the middle class, in fact hurts the poorest of the poor, who don’t have the resources to reach even this bottom rung and end up getting jettisoned back into homelessness or rural poverty.27

Even the original Peruvian experience did not, at first, offer a great example. Although a tentative middle class was originally created in the slums, Fujimori’s monomaniacal application of economic reforms led to a phenomenon known as “Fuji shock.” Hyperinflation was ended and fiscal balance returned, but Peru’s people suffered from dropping wages, increasing food costs, and rising poverty. While some arrival-city residents gained a hold on the middle class, even more middle-class urbanites were plunged into poverty.

Clearly, the simple ownership of land was not the route out of poverty. There had to be something else involved. It is obvious, from the experiences of dozens of arrival cities I’ve observed, that land ownership is invaluable and widely desired by rural migrants and their descendants, but it accomplishes little without a wide and expensive range of government-funded services and supports. This conclusion is backed by research from around the world, which shows that active state spending and involvement, and not just title-granting actions and the goodness of the market, are needed to create social mobility. Arrival cities, one analysis notes, “require a welfare-oriented political will and