PREPARATION:

• Read de Soto, Chapter Four

NOTES:

What is "the mystery of political awareness"?  It's that governments fail to understand (and deal with) comprehensively the changes in their society, one of them being the growth of extralegality:  "Political blindness, therefore, consists of being unaware that the growth of the extralegal sector and the breakdown of the existing legal order are ultimately due to a gigantic movement away from life organized on a small scale toward one organized in a larger context....  Developing and former communist nations must choose to either create systems that allow their governments to adapt to the continual changes in the revolutionary division of labor or continue to live in extralegal confusion [and revolutionary potential] —and that really isn't much of a choice" (de Soto 2000:73/2/1-5, 73/3/11-12, 74/1/1-3).

Note process of urbanization applies to our own society;  it isn't just a Third World phenomenon.

Note that extralegality / informality occurs in the United States too.  (Work w/o paying tax?  Work w/o all requirements met?  Barter?)

Blind spots of governments / policymakers:

• Blind about the current situation:
  • Don't see the processes & forces by which the situation arose, i.e., the reasons for the extralegals migrating to the city in the first place and then the social and legal hostility by which they are made (and kept) extralegal.
  • Not understanding the origins of the problem, they don't see that "the extralegals are here to stay".  This gets in the way of solutions, because it allows policymakers to believe that the situation is an aberration, not a continuing part of life.  It also permits them the fantasy that increased repression will change the situation.
  • Seeing the extralegals as a transitory nuisance, policymakers don't see the wealth and potential of extralegals, which of course is one of de Soto's main points.
• Blind about historical parallels:
  • "Those who don't study history are doomed to repeat it."  Policymakers don't understand that this situation has happened in many other societies in the past.
  • As a consequence, policymakers are unable to take heart and/or direction from this historical perspective.  This perspective de Soto hopes to supply.

The warning:  "Although the picture of precapitalist society and the circumstances of its decline are quite similar in most European countries, the outcome was not always the same.  Countries that made legal efforts to integrate extralegal enterprise prospered more quickly than the countries that resisted change" (de Soto 2000:102/3/1-5).  In an earlier work (The Other Path), de Soto goes on to note that in the countries that delayed the longest (e.g., Russia, Spain, France), the changes were the most violent.  In other words, he is telling the governments and elites of the Third World, you can either accept and make use of change and then prosper, or else you can resist change and lose anyway in a bloody rebellion.

De Soto doesn't emphasize the point, but you should notice that in countries that accepted change, the elites remained on top, by and large;  they simply transformed their wealth from the earlier (agriculture / mercantilist-based) forms of power to the new forms of capital wealth.

Note also that extralegality corrupts government.  Once one person accepts bribes, others believe they would be fools not to.  "Bad money drives out good."