The Power of the Poor
The Law The law is an evolving thing. In Hernando de Sotoís view, the best laws are those that work from the bottom up, rather than being imposed from the top down. The Romans and English generally believed that law had to be discovered rather than enacted or decreed. For example, English common law, which is based on precedent, gave Great Britain and the United States head starts in the development and use of property rights. Common law builds on the wisdom of ages rather than the whims of legislators.

The Un-wilding Of The West

The history of US property law is one where informal customs eventually came to be accepted and ratified by state and national law.

In the 19th Century — out on the American frontier — pioneers were miles and miles from governmental courts and land offices, yet they still needed a way to sort things out between themselves if they were going to live in peace. Though they were far from official law, they invented their own ways of determining who owned what. Federal and state governments saw how they were regulating themselves out on the frontier and, bit by bit, over several decades, adopted and synthesized the laws formally.

The law that prevails today in the West did not come from dusty tomes or official government statute books. It is a living entity, born in the real world and bred by ordinary people long before it got into the hands of professional lawyers. The law had to be discovered before it could be systematized.
For example, a settler secured “Tomahawk Rights” by marking the bark of one or more trees with his initials. He got “Cabin Rights” or “Corn Rights” by building a log cabin or raising a crop of corn. These rights could be bought, sold, or transferred, just like official titles. They helped avoid quarrels, were widely accepted on the frontier, and later became the source of legal titles.

Their politicians, the people they elected to power, started looking to them as constituencies, and started honoring their customs and putting them into the law. So the squatters started by going from being just simple squatters to becoming actually “noble pioneers” and the source of law.

And then another thing happened Ė they started becoming the majority in the country, so even the politicians in Washington had to cater to them. And on 32 occasions, called the Preemption Acts, the Congress actually ruled down the Supreme Court so as to accept the law of the people over the law of the elite and the United States became a real revolution.

Miners in Americaís West went farther than ranchers and farmers. As the continent was developed, miners knew that sooner or later formal law would come. They formed organizations to regulate their extralegal rights and spell out the obligations that individual miners had. They called their often detailed and explicit informal rules “mining district regulations.” The miners knew that it they drafted their regulations carefully, with as much regard as possible to existing US law, sooner or later the government would have to come to terms with them. And in fact, in a space of twenty years, the minersí extralegally generated rights and arrangements had been incorporated into the formal system of US mining law.

European Parallels

There were similar movements in Europe. One was the way feudal lords, living in castles high above, gradually had to cede power to the people and guilds in the towns below. But there are more recent examples. In 19th Century Switzerland, Eugen Huber helped knit a new nation together by creating a unified code of law. Switzerland had been a loose federation of French, Italian, and German regions, each with their own codes and laws. These had to be woven together if the new nation was to move forward.

For Eugen Huber, the source of the law was the voice of common people. And for him, it was also important that the law be simple enough to be understood by a common citizen. He wrote, “Das Gesetz muss aus dem Gedanken des Volkes gesprochen sein,” or, “The law must be spoken from the thoughts of the people.”

Huber didnít invent the law, he didnít go talk to a whole group of university professors to find out what they thought order should look like. He went to the grassroots to find out what people actually did, how they reached deals among themselves, what they understood to be the truth, what they believed in.

The new law was rooted in the social contracts and customs that people already used. This made it easy for the new Swiss law both to gain widespread popular acceptance and to weather the ages.

From that moment on, the Swiss had the same notions of property, the same notions of contract, and every Swiss could be the partner of another Swiss without difficulty. A similar situation has been true in just about every Western country governed by the rule of law:

Successes come when all the grassroots reality, the beliefs of people as to whatís fair and unfair, are actually put inside one law that everybody can understand under one language.

The Westís system of integrated property systems is at most only 200 years old. Japanís is only 50. We are but a few decades ahead of the developing world in our own economic and legal development. Most of our “noble pioneers” were initially illegal squatters.

Like Huber, the Institute for Liberty and Democracy (ILD) is in the business of discovering the laws used by the extralegal majorities in each country they work in. From his experience in working in over 30 developing and post-Soviet countries, de Soto is convinced that most extralegal property and business contracts are basically the same as those found and used in the West.

“Western governments succeeded in lifting the bell jar, but it was an erratic, unconscious process that took hundreds of years,” writes de Soto. The ILD has synthesized what they believe are the essential elements of this process in an effort to save developing nations decades of trial, error, and political battles.

In the developing world, the business and property laws that are followed by the majority of the people are informal law. The elites who live inside bell jars hold property using codified law borrowed from the West.

The Law: Oral to Written

De Soto believes the law moves through several stages: it begins orally, is then written down, and is finally collected in registries where it is cleaned up by professional lawyers and made official.

In The Power of the Poor, we travel to Africa to see how the Maasai use their traditional law to solve various disputes. That law is oral. In many places today it still is — whether in premodern societies of the Amazon or Borneo, or kids making up rules on a schoolyard. Important events, such as marriages and property transfers, are witnessed by oneís neighbors and so become part of the communal memory. These are speech acts. In villages and small town societies where everyone knows each other, oral law suffices. But it is neither scalable or impervious to error.

Over time, and as societies become more populous, these speech acts are recorded in books, so that people who were not at the event could know what had transpired. As time passes and the society develops such that it is impossible for everyone to know each other, these written acts are all gathered, codified and professionalized into formal law. English common law is perhaps the best example of that process.

But it all starts with spoken words, tomahawks, and corn.
Editorís Note: Much of the content of this page is from de Sotoís book, The Mystery of Capital: Why Capitalism Triumphs In the West and Fails Everywhere Else, New York, NY: Basic Books, 2000.