What could be the most adequate real-life example of the fictional, fantastical Pixar movie “Up?” — China’s land–use rights saga! In “Up,” Mr. Frederickson’s entire life and all his cherished memories are threatened when real estate developers want to usurp his home and his land. Through constant harassment, the developers finally force Mr. Frederickson to give up everything he owns – or so they think. To everyone’s surprise, Mr. Frederickson uses thousands of helium balloons to carry his home to the mystical place of his childhood dream: Paradise Falls. In reality, the battle between Mr. Frederickson and the real estate developers reflects the heartaches of many Chinese rural villagers, and unfortunately, the Chinese villagers cannot fly their homes to Paradise Falls.
When I learned about China’s land-use rights system — that all land is owned by the government, and the citizens receive “rights” to use the land — I felt even more fortunate to live in a free country where people are entitled to own private land and personal properties. In recent years, land-use rights in China have been put to the test as corruption among the local government and real estate developers worsens. China’s rapid urbanization and the local governments’ need for additional revenue created a ferocious phenomenon of illegal land seizures. Farmers suffer from losing their land-use rights, and the compensation from the local government often barely makes up the loss.
The Commission on Legal Empowerment of the Poor, co-chaired by Hernando de Soto and Madeleine Albright, has just launched its final report “Making the Law Work for Everyone.” This report addresses the challenge of legal empowerment, or the process through which the poor become protected and are enabled to use the law to advance their rights and their interests, vis-à-vis the state and in the market.
The Commission has conducted 22 national consultation processes with representatives from local governments, academia, civil society, and grassroots movements during the past three years. The final report reflecting all these efforts is a fascinating and insightful document detailing how legal empowerment of the four billion excluded poor world-wide is the key to unlocking vital energies of entrepreneurship needed to end poverty. Notably, the Commission does not recommend any grand top-down reform schemes, but rather focuses on the need for reforms to be driven bottom up and focused on long-term institution building, not quick fixes:
In too many countries, the laws, institutions, and policies governing economic, social, and political affairs deny a large part of society the chance to participate on equal terms. The rules of the game are unfair. This is not only morally unacceptable; it stunts economic development and can readily undermine stability and security. The outcomes of governance – that is, the cumulative effect of policies and institutions on peoples’ lives – will only change if the processes of governance are fundamentally changed.
Creation of wealth rests upon various legal protections, norms, and instruments governing such things as business organizations, corporations, tradable assets, labor contracts, workers associations, venture capital, insurance, and intellectual property. While the same protections and instruments exist in many developing countries, the overwhelming majority has no way to access them. Notwithstanding this reality, the legal underpinnings of entrepreneurship, employment, and market interaction are often taken for granted by traditional approaches to development and standard economic theory.
The Commission concluded that there are four crucial pillars of legal empowerment that reinforce and rely on each other: access to justice and the rule of law, property rights, labor rights, and business rights (individual rights related to conducting business). Therefore, legal empowerment advances the rights and interests of the poor and excluded as citizens and economic actors alike.