Dawn Ritch, Contributor
PUBLIC DEFENDER Howard Hamilton, who proposes a $2 billion donation from the private sector to the inner cities, ($4 billion if the Government matched the funds as he now elaborates) said that my column last week "....encapsulated the misunderstanding...voiced by most critics of my proposal."
Any financial transaction that doesn't have the notion of private profit, and moreover faces an uncertain future, is a donation. His own understanding of business and charity is anything but perfect, and no charity has yet raised money on the Jamaican Stock Exchange, which is the vehicle he would like to use for this scheme.
In his letter to the editor of the 26th instant Mr. Hamilton never once mentioned the word "profit", nor indeed the words "Kingston Restoration Company", which company's physical and human restoration achievements in the Kingston inner city far superseded anything conceived in his programme.
He did say, however, that "One of the fundamental human rights is the right to human dignity which at first blush may seem to be a social issue, but a man without a job is a man without dignity."
Dignity is indeed a social issue, and many people who have jobs are without dignity, so it plainly has nothing to do with economics. No one can give anyone dignity, that important choice only an individual can make for him or herself. Unless mentally ill.
Mr. Hamilton also wrote "The creative genius and artistic talent of our people lie buried in the grime of our inner city..."
Apparently he does not recall the 1970s movie about Jamaica, which starred Calvin Lockhart, a black Bahamian movie actor who in the movie said "Every Nigger is a Star". This was indeed the title of the movie, and Mr. Lockhart, who was living in Jamaica at the time, was taken as specifically referring to black Jamaicans. This has always been my view entirely, and without embarrassment.
The thing is, that one only looks for diamonds in grime, not stars. And as stars, we should be looked for in the skies, not in the gutters.
Choice
"Crime" is again, however, another important individual choice, unless of course there is no access to water. Then it becomes the Government's public policy, not anything to do with the private sector. Mr. Hamilton should therefore be campaigning in the inner cities to have grimy places and people wash themselves as a social duty, not to mention dignity. Donations, even multi-million dollar ones, can never alter that necessity.
What is most lacking in the inner cities is a knowledge and belief in the right ways of doing things. And this is where KRC, backed by private sector funding and multilateral agencies, is successfully performing an admirable function, and is undeserving of Mr. Hamilton's neglect.
Hernando de Soto, the celebrated Peruvian economist, has just published a book "The Mystery of Capital: Why Capitalism Triumphs in the West and Fails Everywhere Else". In it he states ".... with varying degrees of enthusiasm, Third World and former communist nations have balanced their budgets, cut subsidies, welcomed foreign investment and dropped their tariff barriers. Their efforts have been repaid with bitter disappointments. From Russia to Venezuela - the past half decade has been a time of economic suffering, tumbling incomes, anxiety and resentment."
The Sunday Times, a respected U.K. newspaper, reported in its issue of 27 August 2000: "De Soto's answer to the question of why capitalism does not work for most of the world eschews most of the usual explanations. It is not, he says, due to lack of entrepreneurship - look at the ability of millions in the Third World to eke a living out of nothing - culture, race, religion or climate. Instead, most countries simply lack the basic ingredients of capitalism - capital".
'Dead' capital
Or rather, they lack the ability to unlock the capital that already exists. Most capital in the developing world is 'dead', he (de Soto) says, and as a result it cannot perform its proper economic function.
The 'poor' in much of the developing world are not poor at all. They have assets and they have savings. In Egypt, de Soto and his researchers found that the assets held by the poor were 55 times the amount of direct foreign investment the country has received, including the Suez Canal and the Aswan dam.
Worldwide, he estimates, the accumulated capital of the poor is worth $9,300 billion (6,300 billion pounds sterling), more than America's gross domestic product. The problem is that most of this capital is effectively useless, because it cannot be used as collateral, consisting of property built on land where legal ownership has not been established, black economy unincorporated businesses or obscure operations being run without proper documentation.
"Because the rights to these possessions are not adequately documented, these assets cannot readily be turned into capital, cannot be traded outside of narrow local circles, where people know and trust each other, cannot be used as a share against an investment", he writes.
Without adequate property rights for the assets they own, the poor are stuck in poverty. And legitimising these assets is so tortuous a process as to be beyond most peoples' reach. In Mr. de Soto's native Peru, he found, establishing a legitimate small business involved huge costs and, even with a team of experts engaged full-time, took nearly a year.
Getting legal permission to build a house on state-owned land takes seven years in Peru, while in the Philippines the process of obtaining legal authorisation for a house built on urban land takes between 13 and 25 years. Nearly five million Egyptians live in illegally built houses, so difficult is it to obtain permission to build on state-owned desert land.
Giving the poor that ability to make capital work for them has its roots firmly in economic theory. Legally enforceable property rights provided the basis for America's economic development in the days of the pioneers, while the absence of them has been a prime factor in Russia's post- Cold War failure. It is easy to see why Margaret Thatcher, who revitalised capitalism in Britain partly by enabling more people to own their homes and to hold shares, finds his ideas appealing.
But can it be a solution to the failure of capitalism in most of the world? Mr. de Soto's institute has been working with the Governments of Peru, Egypt, the Philippines and Haiti for some time. The plans are in place, but the results are proving slow to show through.
"Giving the poor property rights is more complicated than it sounds. For every apparently legitimate claim over a parcel of land, there will be at least one counter claim."
Naive
All of which goes to show Mr. Hamilton is naive about the nature of poverty.
His grasp of Jamaican reality is also thin. He calls for a Government contribution in the form of single digit interest rates on loans to investors in restoration of the city of Kingston, as well as "making land in the inner city available for purchase or lease at depressed prices." Mr. Hamilton apparently hasn't noticed that Jamaican investors aren't borrowing money, not even in hopes of profit, much less for schemes like his. And that land in the inner city, whether privately or publicly owned is already at depressed prices, and those who have it would love to sell and can't. Mr. Hamilton, there are no buyers.
The Government's Tax Incentive Programme for Urban Renewal has indeed been poorly supported as Mr. Hamilton said. But jobs can't be provided without capital. Mr. de Soto seems to be saying that the poor need to learn some respect for capital, their own and other people's.
