The Rational Optimist_ How Prosperity Evolves - Matt Ridley [151]
Property rights are not a silver bullet. In some countries, their formalisation simply creates a rentier class. And China experienced an explosion of enterprise after 1978 without ever giving its people truly secure property rights. But it did allow people to start businesses with relatively little bureaucratic fuss, so another of De Soto’s recommendations is to free up the rules governing business. Whereas it takes a handful of steps to set up a company in America or Europe, De Soto’s assistants found that to do the same in Tanzania would take 379 days and cost $5,506. Worse, to have a normal business career in Tanzania for fifty years, you would have to spend more than a thousand days in government offices petitioning for permits of one kind or another and spending $180,000 on them.
Little wonder that a staggering 98 per cent of Tanzanian businesses are extralegal. That does not mean they are governed by no rules: far from it. De Soto’s study found thousands of examples of documents being used by people on the ground to attest ownership, record loans, embody contracts and settle disputes. Handwritten papers, sometimes signed with thumbprints, are being drafted, witnessed, stamped, revised, filed and adjudicated all over the country. Just as Europeans did before the formal law gradually ‘nationalised’ their indigenous customs, Tanzanians are evolving a system of self-organised complexity to allow them to do business with strangers as well as neighbours. One handwritten, single-page document, for example, records a contract for a business loan between two individuals – the amount of the loan, the interest rate, the payment period and the collateral (the debtor’s house) – and is signed, witnessed and stamped by the local elder.
But these customs, these laws of the people, are a fragmented jigsaw. They work well for sole traders in small communities, but being dependent on local people and local rules they cannot help the ambitious entrepreneur who tries to expand beyond his local community. What Tanzania needs to do, as Europe and America did hundreds of years ago, is not to enforce its unaffordable official legal system, but gradually to encourage this bottom-up, informal law to broaden and standardise itself. De Soto’s team identified sixty-seven bottlenecks that prevent the poor using the legal system to generate wealth.
It is this kind of institutional reform that will in the end do far more for African living standards than dams, factories, aid or population control. In the 1930s, Nashville, Tennessee, was rescued from poverty by its music entrepreneurs, using good local copyright laws to start recording indigenous music, not by the giant dams of the Tennessee Valley Authority. Likewise, Bamako in Mali could build upon its strong musical traditions given the right copyright laws and entrepreneurial spirit. In a neat example of bottom-up change, the poor have taken to mobile telephones with unexpected gusto all across Africa, to the surprise of those who thought this a luxury technology for a later stage of development. In Kenya, despairing of state-controlled landlines, one-quarter of the population acquired a mobile phone after 2000. Kenyan farmers call different markets to find the best prices before setting out with their produce, and are better off for it. Studies of rural villages in Botswana find that the ones that have mobile reception have more non-farm jobs than the ones that do not. Mobile phones not only