Property Rights and Democratic Development post-COVID

07.08.2021 | Anna Kompanek

Why Property Rights Matter to Democratic Development

COVID-19 created a global emergency on many levels, affecting already disadvantages social groups. As the UN Women site notes, there is now major concern that the pandemic and its impact will slow fragile progress on gender equality, including in relation to land and property rights. Widespread informality in many emerging and frontier markets further complicates the recovery.

A recent book by the World Bank, The Long Shadow of Informality, produced the first analysis of the role of informality during the COVID pandemic. Given that informal economic activity is concentrated in labor-intensive service sectors, informal workers are especially vulnerable to economic implications of social distancing and lockdowns. Informality, in turn, leads to weak rule of law and corruption.

The Importance of Property Rights

This pervasive economic exclusion, exacerbated by the pandemic, has a direct impact on the quality of democratic governance. When property rights are effectively denied to large segments of society, democracy likewise remains limited in scope because its cornerstone – wide participation by all – does not grow. The need to broaden property rights, especially for small entrepreneurs who build wealth and opportunity, is thus paramount.

Extending property rights is often narrowly understood as issuing property titles. Clearly, though, a title remains just a piece of paper if the institutions that make it meaningful are absent or weak. As illustrated by the International Property Markets Scorecard, a systems analysis tool jointly developed by CIPE and IHC Global, relevant institutions include property rights laws and enforcement, access to credit by small businesses, democratic governance, rational dispute resolution, financial transparency, and appropriate regulations. Because of the strong linkages between those institutions, when some of them remain deficient the whole system underpinning a country’s democratic development prospects is threatened and ordinary citizens suffer the consequences.

When property rights are effectively denied to large segments of society, democracy likewise remains limited in scope because its cornerstone – wide participation by all – does not grow.

If a citizen does not have a legal title to his or her assets, these assets cannot be used as collateral for lending. If the justice system is inefficient or inaccessible, contracts remain unenforceable. If business regulations are too complex and costly to comply with, entrepreneurs are forced into the informal sector. Finally, if democratic governance is weak, businesses have no means of transparently raising their needs and concerns with the decisionmakers and have no say in how the rules that affect their livelihood are made. To be a vehicle for broad-based prosperity, property rights need to be accessible to all parts of the society and require the mechanisms of democratic representation, impartial judges, and financial oversight. In other words, they must be an integral part of a democratic rule of law system. The challenge post-COVID will be to establish equitable property market regimes as a part of larger governance and economic reforms.

Strengthening Property Markets in Nigeria

Fragile democracies are in the greatest danger of failure if those institutions are not established and nurtured. To that end, CIPE’s work in Nigeria, for instance, has focused on advocating for better democratic and market-oriented reforms through state business agendas, strengthening governance structures and reforms in private sectors across the country, and women’s economic empowerment.

By exercising freedom of association and collectively making their voices heard in a policy debate, entrepreneurs – male and female alike – can help design policies crucial to wealth creation, equity and to the economic prospects of their countries.

When it comes to women’s property rights specifically, CIPE and its local partner Association of Nigerian Women Business Network (ANWBN) have engaged with the Nigerian chapter of the International Real Estate Federation, FIABCI-Nigeria, to leverage the International Property Markets Scorecard methodology for assessing local conditions with the focus on the state of Lagos and attention to the gender dimension of property rights’ protection. FIABCI-Nigeria – even under difficult COVID conditions – conducted a series of consultations on the six core elements of the scorecard, engaging diverse stakeholders to incorporate their views and verify desktop research results.

Bill Endsley of World Citizen Consulting, who has been working with FIABCI-Nigeria on this effort, commented, “When you see the dynamism of the entrepreneurs in Lagos and hear from the experts including attorneys, government officials and property market stakeholders, it is clear that there is huge economic potential for a wide section of the population that is not being realized.” The consultations resulted in a new version of the Nigeria scorecard that will be further discussed with ANWBN and other stakeholders to get at policy recommendations relevant to women’s empowerment in particular.

By exercising freedom of association and collectively making their voices heard in a policy debate, entrepreneurs – male and female alike – can help design policies crucial to wealth creation, equity and to the economic prospects of their countries. In that context, property rights and the institutions that uphold them are not just a means of building individual prosperity. Instead, they benefit society as a whole by spreading wealth and power, providing opportunities for growth, building a tax base, and encouraging participation in economic and political processes.

This blog is in part based on an earlier CIPE article. Read the full article here.