Friday, November 4, 2016

The Importance of Economic Inclusion

Hernando de Soto's work is particularly valuable, given the fact he focuses not only on the vital role of free markets, but also of economic inclusion. In a recent Project Syndicate article, "Columbia Between the FARC and the People", he explains how Columbia still struggles with its own internal divisions, in terms of economic inclusion.

Indeed, the explanations de Soto offers, might not have been immediately obvious after their recent election, given the fact that Columbia's president, Juan Manuel Santos, won the 2016 Nobel Peace prize for his efforts in what has has already been a 52 year civil war in his country. To the casual observer, this award likely made sense. But why did the voters reject the deal? Hernando de Soto takes a closer look:
Compare Columbia's experience with that of Peru, which defeated its own guerrilla movement, The Shining Path, in less than a dozen years, from 1980 to 1992, with more than 85% popular support. Peru was able to achieve a lasting peace for two reasons.
First, the Peruvian government focused on creating rights for the poor people whom the guerrillas controlled, and it codified those rights in its 1991 agreements with the United States and the United Nations. By contrast, Santos, despite his good intentions, negotiated a peace plan that creates rights for the FARC. 
Second, The Peruvian government won strong support from its citizens, because it never ceded its sovereign right as the country's sole negotiator...Santos, on the other hand, surrendered a degree of Columbian sovereignty by allowing negotiations with the FARC to be brokered by the unelected government of a foreign country with its own agenda: Cuba. Then he treated the guerrillas as equals by negotiating substantive matters with them.  
Peru's government finally defeated the Shining Path, when it became clear how the guerrillas had negotiated a series of rights with local citizens, in areas which lacked both legal protections and economic complexity. Once the government discovered the ledgers of these locally determined rights, they took it upon themselves to protect poor citizens by legalizing standardizing, and harmonizing the means by which these citizens were able to gain access to the marketplace. Hernando de Soto adds:
When the guerrillas no longer controlled the ledgers, they could no longer claim to be defenders of the community rights.   
Even though these issues appear more pertinent today for nations lacking in economic complexity, there are important lessons nonetheless, for any nation which pays little attention to the lack of economic freedom among its poorer citizens. How much sovereignty - albeit that of a symbolic nature - has already been ceded to special interests? No amount of government redistribution, can substitute for the fact that all citizens need sufficient monetary representation, and the ability to work productively with existing resource capacity.

Granted, smaller nations are better positioned to note the ongoing concerns of their citizens who are economically, socially and geographically isolated. Whereas larger nations such as the U.S. are somewhat disadvantaged in this regard. All the more so, as many rural citizens struggle to maintain the long auto commutes that are necessary for both work and vital time based services.

Given today's economic uncertainties, governments may need to consider the kinds of production rights which would give isolated citizens more local control over their own destinies. Only consider how many rights to knowledge use and services production are presently off the table, for lower income citizens with insufficient income to access the time and knowledge based services of higher income levels. This is just one reason why some voters aren't positive about the electoral process. Even though both Democrats and Republicans may attempt to "reach out" to rural voters at election time, few have become fully aware, how important it is for rural citizens and others with low income levels, to maintain strong means of economic inclusion.

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