The Power of the Poor
 
The Challenge of a World Excluded Four billion people are locked out of the capitalist system and the rule of law that governs it. Itís not because they donít want to come in, itís because laws and institutions are not friendly to them. We exclude them at great risk.
The Great Migration Across the globe, millions are on the move in the biggest migration in human history. They are going from farms to cities, and from poorer to richer nations. For the first time in mankindís history on earth, more people now live in urban areas than rural. This brings unique and difficult challenges.
Shanty Towns: How the Bottom Two Thirds Live In the shanty towns of the world, two thirds of humanity are locked in poverty. Thereís no drinkable water, sewers, and little electricity. Though they work very hard, these people remain firmly shut out of the economic mainstream.
Paper Walls De Soto has documented that in the world of the poor, it takes months or years to get an official title to a home, write legal contracts, or legally open a business. It takes hundreds of steps to set up a corporation. There is no credit. The poor canít prove that the house they live in, their largest asset, is even theirs.

Since they canít get into the formal economy, they have set up their own, informal economy. It exists outside the formal written system, but has its own specific rules and processes.
The Work of the ILD: Investigating Informality in the Field De Sotoís organization, the Institute for Liberty and Democracy (ILD), sends scores of researchers out into the slums and rural areas of developing world to gather data. They have found that, though the vast majority of citizens in most developing nations live outside the official, well-connected economic system, they all still have very specific rules to govern their interactions. The ILDís goal: to help developing nations give the poor access to the business and property institutions that will allow them to participate in the broader economy.
The Majority Live Outside the System We in the developed world are, by far, the minority. If we do not make capitalism and globalization accessible to the poor, de Soto says, then they will bring the system down, as they have done in the past. De Soto has seen this process at work, first hand, with the Shining Path.
Identity in a Globalized World With a quick trip through airport customs, de Soto shows two ways of identifying people. One is only good for people we know. The other is for people we donít know. Our identities are not contained in our persons, but in official documents. Most of the human race doesnít have these documents.
A Farmerís Dilemma We meet Eusebio Atau, whose family has worked for generations on land that they cannot prove is theirs. For him, land is like gold or money. His story illustrates the dilemma most farmers in the world face: without title to the land they work, they cannot buy seed or fertilizer, educate their children, or improve their businesses.
Assaulted by Impossibility: The Shining Path Gets a Foothold The poor and extra-legal find that every avenue to prosperity, safety, and a better life is blocked. And when that happens, people get angry and look for alternatives. In Peru in the 1990s, that alternative was the Shining Path, a violent terrorist organization. They recruited their foot soldiers from among the poor and disenfranchised. While the Shining Path vowed to tear down the system from the outside, the ILD worked to reform it from within.
Bottom Up Law: A Lesson From Switzerland Swiss history gives de Soto a lesson in how to build an inclusive system. Switzerland used to be one of the poorest countries in Europe. Its per capita income, in fact, was approximately the same as Peru. It was still just a loose federation of French, German, Italian, and Romish independent regions, each with its own codes and laws. But a new Swiss legal code worked from the bottom up to unify the nation.
Reform & the Defeat of the Shining Path In 1992, the Shining Path took its war to the streets of Lima, with a series of bombings and killings. They came close once, destroying the ILD offices.

De Soto and the ILD openly took on the Shining Path. The Shining Path almost brought the government down, and in the process, tried three times to assassinate de Soto. The ILD believed that giving poor people title to their land would turn them away from the Shining Path, because it would help them to start businesses and eventually improve their lives. The threat of Shining Path violence enabled the ILD to pressure the government and ruling elites into accepting much needed reforms. People chose property rights and access to the system over terrorists.

The Shining Path lost the war and Peru emerged as the only country in the world to defeat its homegrown terrorists both politically and militarily.
Two Success Stories Two successful Peruvian entrepreneurs share their rags to riches stories of business success. Both used their property titles to their shanty town homes as collateral to start their businesses. Both have moved from the extra-legal to legal worlds. With legality came access to the modern tools of business and the ability to greatly expand their businesses. Today they are accepted members of Lima society.
A Day to Celebrate: Titles Come to the Farmers of Palomar The farmers and inhabitants of the small, highland Peruvian village of Palomar celebrate a major milestone in their lives with a pachamanca, a Peruvian barbecue. We watch as, after generations of waiting, they finally receive the titles to their land and rejoice.
Unlocking the Power of the Poor The efforts of the ILD have paid off. Today, almost half of Peruís twenty eight million citizens have titles to their homes and businesses. The reforms helped increase the nationís economic growth rate to one of the highest in South America.

The ILD work in Peru provides a template for change across the globe. Inclusion and access can change societies within a generation. In our turbulent world, Hernando de Soto has discovered an essential truth: ideas are as important as concrete and steel and in the end can triumph over bullets and bombs.

Hernando de Soto has discovered the Power of the Poor.