Establishment of Formal Title in Developing Nations

So far in this course, what has jumped out at me most were the concepts raised by de Soto [1993] in his article The missing ingredient (see assigned readings). He argues that the presence or absence of formalized property rights is the fundamental deciding factor in the ability of a country to move toward becoming a more developed nation from being considered an under-developed or developing state.

It is an interesting shift from the more traditional approach developed nations take towards attempting to spur economic growth in under-developed nations. They typical approach is to spend billions of dollars to jump start the market economy of a country. de Soto [1993] argues that since "property rights for land represent a large portion of peoples wealth" and in most areas of underdeveloped countries these property rights are not protected by formalized titles, that the majority of "assets of most people in these countries remain outside the market economy."

While I do agree in many respects with this conclusion, I do have reservations about his desire to formalize property rights everywhere, and moreover the desire for a modern market economy more generally. 

What can and does happen during the formalization process of land rights is an inequitable division of land. Inequality  in the system, whether an unintended side effect of corrupt individuals or as a product of the design of the system itself leads to certain individuals or organizations benefiting at the expense of the people whom the land formalization is supposed to help. This can be avoided with a more conscientious managing body, but in many regions of the world where land formalization is going on at a wide scale, the system is open to these sorts of inequalities. 

Additionally, the move to a more formal modern market economy does not necessarily bring benefits to the people it is being imposed upon. Such societies have inequality built into the very fabric of the economic structure, and the people for whom this new economic regime is being implemented are rarely the benefactors of the system. 

I found a great paper that goes into this idea in a fair bit of depth by examining Cambodia and its land administration history. It is worth at least skimming over it as the country has had and still has a very complex progression of land title systems, and faces the consequences of that history. 

Fragmentation of land tenure systems in Cambodia

It is an extremely complex situation and I am not going to try and regurgitate the 36 page paper, but I will give one small description of the situation as it stands in the lowland regions of the country. In essence, the transition to formally titled land in the Cambodian lowlands has not increased security of that title due to the structure of the informal traditional land tenure system. What it has done is exacerbate the process of private land enclosure and the removal of that land from the community system. The new land tenure reform brought to the lowlands has not been able to integrate that community structure and as result the order is breaking down. In addition, the new system has been exploited by corrupt individuals demanding extra payment during the process, and by organizations seeking to benefit themselves exclusively.

So while I do see formalization of land tenure rights as an important part of a developing nations future, one must be very careful with the application of that formalization process. It is not necessarily a good thing for everyone, or even for a majority unless done carefully.