mad anthony

Rants, politics, and thoughts on politics, technology, life,
and stuff from a generally politically conservative Baltimoron.

Tuesday, December 05, 2006

You are richer than you think, and you probably don't realize why...

Via a link in the off topic section of fatwallet comes an interesting article on the world's wealth, based on a study by the UN.

There are some interesting stats in the article - it takes $500,000 in assets to be among the world's 1% wealthiest, $61,000 to be among the top 10% in the world, and the average American has around $143,000 in assets. But 50%

Reading the article, with it's giant quote from a Canadian economist about how global income inequality is rising and it's heading that 40% of the world's weath is owned by 1% of the population, you would get the idea that the US and global capitalism is responsible for the income inequalities. The quote in the big pink box misses the second half of the economist's quote, which isn't really gone into:

here is a whole group of problems in developing countries that make it difficult for people to build up assets, which are important, since life is so precarious," Davies said.

Very true. And that issue isn't private property or capitalism - it's a lack of private property, without which capitalism can't work. Hernando Desoto has written an interesting book about this subject. Much of the reason many African and South American countries don't have much wealth is that they don't have a good system of private property in relationship to land ownership. People don't get deeds or titles to their land, and that means that they don't really own the land under their dwelling. If you don't own the land under your house, and don't know who does (unlike, say, Baltimore's ground rent system, where you do know), you aren't going to dump money into, say, granite countertops, because you don't have title to the house and can't really sell it. More importantly, you can't use it as equity - lots of people in the US have taken out HEL's and HELOC's - loans against the equity in their homes. If you don't have a title, you can't use that equity, and that means you can't use money for things like education or starting a business.

DeSoto also points out in his book how hard it is to open a business legally in many countries, because of the regulation, the steps you need to go through, the people you need to pay off to get permits. That is another thing that blocks success in other countries.

So I think the UN Study tells us a lot about countries. It's no accident that the countries with strong systems of property rights have the most wealth. It's a shame the article didn't go into it, but instead leaves the average reader feeling like Americans probably got their wealth through global explotation, on the backs of poorer countries.


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