Nations outside the West view capitalism with suspicion and contempt, and regard it as a system that only benefits the rich countries at the expense of the poor ones. This belief is rooted in the fact that many developing countries have adopted capitalism and globalization to a great extent and yet have failed to reap any benefits from it. In fact, the reverse is usually true.
Latin America is a prime example, who has tried to fit into the global capitalist system four times, failing every time to convert their dead capital to live capital. Instead, they have developed a humongous underground economy, politically instability and worsening law and order situation. Proponents of capitalism and policy makers focused on integrating the developing countries with the globalised world have grossly misunderstood how people and businesses function in this part of the world.
The lack of property rights and the massive unregulated and unorganized sector have incapacitated people to value and trade their property through the formal channels, leaving them with trillions of dead capital. Capital generation, which is the foundation of the capitalist system, is thus missing and this issue is neither understood nor addressed by developed world and economic reformers. The fact that capitalism ultimately leads to concentration of capital and wealth in a few hands may seem to prove Karl Marx right.
Indeed, the rich minority of the developing countries live in ‘fortresses’ to protect themselves from the have-nots who view them hatred and contempt, because it is these people who are able to twist property laws in their favor which the poor cannot do. Marxist thinking provides a better toolkit and understanding of concepts underpinning the political unrest and extralegal structure in the developing countries. However, Marx failed to see formal property as a system which enables mankind to convert its labor into liquid forms that can be used to produce surplus capital.
Marx’s philosophy is thus outdated, since the oppressed people in the developing countries are not those who do not have access to property and assets but those who have plenty of it but are present in the underground sector and do not have mechanism to formalize their assets and turn them into liquid form. Marx, being influenced by the conditions of his time, viewed accumulation of capital as being highly exploitative in nature as property was acquired via looting, slavery and colonialism, all of which do not have government support anymore.
Formal property is not just a method of maintaining records, it is an instrument of thought, bringing everyone on one platform to work together and increase productivity. It helps us understand the assets, drawing similarities and differences between them and mobilize them. Formal property provides capital a representative system, helping us access the latent capital therein. People have always been suspicious of representative symbols. Representative systems, however, are the only way forward, and must be made transparent and simple to avoid exploitation of the vulnerable.
For the developing countries to benefit from the capitalist system like the West, their governments must document the poor’s potential and situation, integrate them in the legal property system and view the poor as the solution and not the problem. This will require an overhaul of the current legal and economic borders so that everyone and not just the elite can benefit from the capitalist system.
De Soto H. , (2003), The Mystery of Capital: Why Capitalism Triumphs in the West and Fails Everywhere Else TN: Basic Books