the power of the poor

Third World governments come and go, trading monarchy for populism for military autocracy and even for the trappings, at least, of democracy. Yet the poor remain poor: from one to four billion of them, depending on whose estimate you accept. And, as everybody from ACORN to Hugo Chavez will tell you, the movement toward economic globalization doesn't seem to be cutting their numbers.

In this provocative new PBS documentary, Peruvian economist Hernando de Soto argues that globalization has been irrelevant to the world's poor because they've been systematically locked out by legal systems that force them into a shadow economy where their rights aren't recognized and their resources don't benefit them.

In fact, he says in The Power of the Poor with Hernando de Soto, the world's poor are potentially anything but -- they control as much as $1 trillion in unregistered property and unlicensed businesses. But the law prevents them from building their assets into anything beyond a subsistence existence.

``Because they are not legally recognized, because they have no legal identity, because they can't make contact with the outside world, they are not part of globalization,'' de Soto says.

The Power of the Poor is essentially a video version of his 1986 book, The Other Path, well known among economists if not ordinary readers. In the book, de Soto documented the vast so-called informal economy of his native Peru, where millions of poor people live as squatters on unowned land to which they cannot get title and operate businesses without legal licenses or permits.

Without a property title, poor Peruvians can't use their land as collateral for loans to buy equipment for small businesses or seed for their farms. And no lender will put up money for a business operating without legal permits. Without property rights, the taxi drivers and fruit-stall vendors and the rest of the mini-entrepreneurs of Peru's informal sector can't execute contracts, employ other workers or use virtually any tools of a modern economy.

Their twilight existence is not a consequence of capitalism, as Peru's Marxists argued (the title of de Soto's book was a jibe at Shining Path, the country's cold-blooded communist insurgency), but of stifling government rules and bureaucracy. De Soto's researchers (four law students working under the direction of a veteran attorney) discovered it took them nine months to legitimately open a simple sewing business. And though Peruvian law supposedly allowed squatters to claim unowned land on which they lived, it took de Soto's team six years and 207 separate legal procedures to obtain a deed.

The bureaucratic tangle that chokes property rights is not unique to Peru, de Soto argues in The Power of the Poor, but a common problem across the developing world. And by preventing as much as two-thirds of the world's population from either creating wealth or spending it, they victimize the rest of us as well.

``They're also the world largest market,'' de Soto says of the poor. ``We need them as much as they need us.''