I’m a big fan of the world-renowned Peruvian economist Hernando de Soto Polar. His work is considered to be some of the most important, modern thinking on poverty and property rights for informal sector economies. It’s a bit of an understatement to say he is a genius.
One thing de Soto champions in his work is access to capital for people living in the “informal” sectors of society. De Soto is pushing for more people living in extreme poverty to gain access into a modern economy through property titles, banking loans, and business development capital.
De Soto has written extensively on the barrier people experience in breaking through to the formal economic sector - something he’s called the “invisible wall.” In his book The Other Path he talks about the impact of government failures in propagating such invisible walls. He cites failures in legal structures and government infrastructure that act as bureaucratic blockades for people to access the levers that will allow them to move out of the informal and into the formal sectors of society.
De Soto and his colleagues conducted an experiment to fully demonstrate the impact of such tremendous bureaucratic complexities. In the experiment, de Soto attempted to set-up a small business (shirt manufacturing) in the city of Lima. De Soto describes the nearly impossible task of sorting through the paperwork and the bureaucratic morass to receive the permits to operate the business. What de Soto found in this thought-experiment, is that it would take a team of professionals (trained in the legal nuances of filing legal documents) at least 278 days, eight hours a day, to gain the permit to operate a small business like the t-shirt factory they proposed. Two hundred and seventy-eight days. And that is a team of trained professionals who know how to grease the skids and follow the mind-numbing bureaucratic loopholes and legal complexities.
De Soto called this complex set of bureaucratic and legal barriers the invisible wall. He went on to champion a number of great programs from the lessons he learned in his early work. One such program is the Doing Business report series with the World Bank. The Doing Business report ranks economies, governments around the world, based on the climate and conditions to conduct business. It's a metric on the regulatory environments and government conduciveness to opening a new business or registering a property. To give you an idea – the U.S. ranks 8th in 2017 report, while New Zealand ranks number one.
There have been tremendous equity strides – in great thanks to de Soto and other innovative thinkers – for people living in poverty to find pathways into formal sector economies. These gains have not been felt by everyone. In fact, in many communities with deep troubling levels of extreme poverty – the government overhauls that strip away bureaucratic complexities have made little difference. Why?
I think the answer rests in the fact that programs are not about people. What I mean by this is . . . in as much as something like the Doing Business report helps to create competition for countries to push one another to be better ranked and recognized for having a higher ranking does not always translate to expanded knowledge or skills for people to actually navigate the complexity of starting a new business or challenge the status quo. The model of strictly overhauling government structures fails to take into account the need to better prepare people to navigate these new government sector overhauls.
This is where the work of HBI comes in. We believe people need the knowledge and skills to better navigate government systems and structures. Equally, we believe people need opportunities to learn and practice the skills of self-advocacy. The insights and methods for navigating service delivery are complex and challenging - but they are not impossible skills to learn. What people need are "roadmaps" to navigate complexity. To this end, we created the Ines Project. The goal of the Ines Project is to help families with medically fragile children learn the knowledge and gain access to the skills they need to better work with the Peruvian healthcare system. Essentially, we are working with families to have the skills to be better capable of taking advantage of the new structures being develop in progressive political environments.
The work of government sector overhaul is critically important. The movement of people from informal to formal sector economic participation is a huge mechanism for advancing the lives of people living in poverty. It is, however, not enough. There is a need for expanded investment in programs that prepare people to advocate through any system under any circumstance so they can define their own futures. When we do this, invest in people, we will truly break down the invisible walls that seem to keep people stuck in poverty and distanced from the resources they so desperately deserve.
The HBI Blog is a rotating journal from our staff. Our Blog is a series of messages from the field, insights from our work, and lessons in service.