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’s a genius.
One thing de Soto has championed in his work is access to capital for people living in an “informal” sector of society. In essence, getting people living in extreme poverty into a modern economy through property titles, banking loans and business development capital.
De Soto has written extensively something he’s called the “invisible wall.” The invisible wall is a barrier that people experience in trying to gain access to formal sector economic instruments. In his book The Other Path (https://en.wikipedia.org/wiki/The_Other_Path:_The_Economic_Answer_to_Terrorism) he talks about the impact of government failures. Failures that create tremendous barriers and bureaucratic blockades for people to gain access to the government “levers” that will allow them to move out of the informal and into the formal sectors of society. In the book, de Soto provides a review of a thought-experiment conducted by he and his colleagues in which they attempted to set-up a business (a shirt manufacturer business) in the City of Lima.
De Soto describes the nearly impossible task of sorting through the paperwork and the bureaucratic morass to get the permits to operate the business. What de Soto found in this experiment, it would take a team of professionals (trained in the legal nuances of filing the right legal documents with the right government offices) at least 278 days working eight hours a day to get 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 complexity of bureaucraticloopholes 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 (http://www.doingbusiness.org/reports/global-reports/doing-business-2017). 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 8thin 2017 report, while New Zealand ranks number 1 (http://www.doingbusiness.org/rankings).
So, what’s all of this got to do with HBI and our work in the world. A lot. You see, although there have been tremendous strides – in great thanks to de Soto and other innovative thinkers – in the world for people living in poverty to find pathways into formal sector economic opportunities, the gains have not been felt by everyone. In fact, in many communities with deep, extreme poverty – the economic mechanisms proposed by de Soto have made little difference.
Why? I think the answer lies in the fact that programs are not about people. What I mean by this – in as much as the Doing Business report helps to create a level of competition for countries to push one another to be better ranked and recognized, having a higher ranking in the Doing Business report does not mean people have better knowledge or skills to actually navigate the complexity of starting a new business or challenge the status quo laws. The model fails to take into account the needs of the people impacted by the expansion of government sector overhauls.
This is where our work comes in. HBI believes that people need the knowledge and skills to be better self-advocates. In fact, people need more that expanded training in self-advocacy, they need to be taught the insights and methods for navigating the systems. To this end, we created the Ines Project (http://www.hbint.org/connecting.html). 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 de Soto 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. We need to invest in programs that help people learn the skills of self-advocacy and systems navigation. We need to help people gain access to the knowledge and skills they need to build their own futures. This means we invest in the development of people – just as much as much as we invest in the development of economies. We help people become their own best advocates. We help people to break down the walls that keep them stuck in poverty and distanced from the resources they 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.