Streamlining Process and Procedure for Economic Development

In the area of human rights, the problem of violations usually isn’t about inadequacy of current laws.  Many developing countries with relatively new constitutions have laws that are even more protective of our own in the US, but they are not enforced. This can happen for a number of reasons, whether lack of institutional / agency capacity, political forces, corruption, etc.

In other fields that touch upon non-constitutional / basic “rights” issues, regulatory structures and laws conducive to economic development simply are not in place. In a McKinsey study cited by C.K. Prahalad, the cost of microregulations in the areas of import-export, labor laws, and transactions involving land can be as high as 2 to 3% of GDP growth. “Microregulations” are not the laws themselves, but are the often arbitrary bureaucratic interpretation of the laws and how they should be implemented. “Arbitrary” is a signal for unfairness. In the U.S., it invokes an Equal Protection question of unequal application of a law, and in the developing world, arbitrariness often is a precursor to corruption. Additionally, as Prahalad explains, “The consequence of proliferation of microregulations can be the same as not having laws in the first place. An informal sector emerges outside of the law of the land. The private-sector businesses remain small and local. For large firms, corruption becomes the cost of doing business.”

In discussing the importance of building transaction governance capacity (TGC), Prahalad outlines four essential criteria in eliminating systemic arbitrariness. (Government capacity is essential for legal economies to function):

  1. Access to information and transparency for all transactions
  2. Clear process so that selective interpretation by bureaucrats is reduced, if not eliminated
  3. Speed with which the processes can be completed by citizens
  4. Trust in the system (with its faults). Trust is a result of the first three criteria, and is a crucial component of TGC. (See my other writing on the importance of trust)

One exciting project in the Andhra Pradesh region of India integrated these principles in creating an e-Government system around property rights.  As government records, and processes were brought online, the property registration system (the same laws remained on the books) was dramatically streamlined. Again, Prahalad chronicles the key changes:

  1. All the steps that are required are now transparent and easy to access. The sequence of steps to be followed is also clear. All interdependent steps are completed automatically.
  2. In the old system, the officials calculated the value of the land and the associated fees for registration. There were opportunities for selective vale assessment. Now the entire process of calculation is automated with market value assessment algorithms built in. The documents are scanned and stored digitally, reducing the opportunities for them to be lost or displaced.
  3. The entire process of registration of land now takes one hour (from initiation to completion), compared to 7 to 15 days in the old system. Title searches over the past 20 years from 50 different offices can be done in 15 minutes versus 3 days. Certified copies of documents can be obtained in 30 minutes against the three days of the conventional system.

The key question this example brings to mind is what are the mechanisms that can be scaled to other regions? How can we share these best practices and figure out what project aspects can be applied to different areas were land formalization procedures can literally take years?

 

Why Governments and Legal Systems Matter

 

Whether clean water distribution and deliveryinfrastructure development in local communities, or educational programs to teach kids the virtues of hand washing, private endeavors often have innovative, agile business-oriented strategies that are conducive to quick and efficient implementation.

Taking a dynamist, often anti-government perspective to social change, author Virginia Postrel offers an interesting discussion of the role of trust in the evolution of modern societies. In the context of contract creation, Postrel explains, “a dynamic society, then depends not only on preserving fluidity, but on permitting permanence. To learn, we must experiment. But to experiment, we must commit ourselves. And we must find ways to cooperate with others, to extend trust.” By creating clear and predictable rules that are enforceable – i.e., through a legal system – people can take those risks to experiment and innovate.

Postrel (to my great pleasure) calls on the work of economist Hernando de Soto in speaking of the “virtual frontiers” of the third world. While “bad” legal systems often create impediments to business success (In Lima, creation of a small garment factory required 289 days, 11 permits and $1,231 – 32 times the monthly living wage), they are still necessary to create trust between strangers transacting at arms-length. Non-registered business owners will experience a limit on growth with the inability to enforce contracts, as many of them rely on family ties. Homeowners lacking title cannot sell their land, will be hesitant to make improvements, and cannot mortgage it to secure financing for a business.

In a 1989 publication of “What’s Wrong with Latin American Economies,” in Reason magazine (cited by Postrel), de Soto gives an illustrative example of the problem with informal economies in the context of two friends looking to start a button factory:

My friend goes very happily to his home and sees his wife. She says, “now wait a second. Think it over. This fellow, De Soto, you barely know him. This fellow, De Soto, after a year, will know who your clients are, whom to sell to, when to sell, and how to sell them. After a year, he won’t need you…”

As a result, my friend will choose instead to associate with a relative—someone in his extended family. And that person won’t produce buttons as good as mine. So they will have a little company that isn’t going to be very prosperous. I’ll have to do the same. I’ll have to find someone to sell buttons who trusts me because he happens to be family of mine. But he just doesn’t sell buttons the way my friend sells buttons. And, therefore, the two talents that were required to make a successful industry in Lima will not be able to merge. Then some anthropologists from Cornell University will come to Peru and say, “Look at Peruvians. They like to work in small family units.”

De Soto’s story demonstrates that without functioning governments, market efficiencies fail, because people will not contract outside of their trusted social networks. They do not have incentives to improve their land or create new economic opportunity because legal structures that offer protection are often ill-functioning or lacking entirely. While governments may be slow and cumbersome at times, they are an essential building block to sustainable economic development. By strengthening structures that respect property rights, private contracts and individual rights, private parties will be given a greater opportunity to thrive in the developing world.

 

Mobile media and design solutions in developing countries

Dead capital is a people and invisible process problem.  Luckily mobile phones are getting smarter at connecting these 2 things all the time.  Here is a link to a Frog Design mobile ethnography project.

We are interested in partnering internationally with local property activists who use multi-media and technology to frame the local people, process and property problems in their Dead Capital cities.  Get in touch with us in the comments section.

Media presence halts demolitions in Vila Taboinha

State Sponsored Demolitions. Despite a concerted resistance effort by residents of Vila Taboinha and frantic action by community groups and the public defenders earlier in the week, a bulldozer rolled into the community and started demolishing houses. Late the previous day, an accord had supposedly been reached between the community and the Housing Sub-Secretary of Rio de Janeiro, which would grant Vila Taboinha a 30 day reprieve until the residents and their houses had been registered by the prefeitura. However, registration was still taking place in the community hall as the bulldozer began its work.

Residents successfully halted work using their camera phones. Early claims that the houses to be demolished were uninhabited turned out to be unfounded when representatives from Catalytic Communities (CatComm) arrived in the community to document the demolition. The houses that were demolished were indeed inhabited – and the inhabitants helplessly watched the homes that they had built with their own hands reduced to rubble.

By the time the two representatives from CatComm had arrived, about half a dozen homes had already been bulldozed. As soon as they started filming the bulldozer pulled out and parked, the driver unwilling to continue under a foreign gaze. The CatComm filmers were immediately apprehended by police ,who demanded they hand over their documents. The police attempted to intimidate the CatComm reps with claims that their presence and activity was illegal, and that they would be handed over to the federal police. The team calmly stood their ground to the rising consternation of the police who, in their floundering for leverage, plainly admitted, “We don’t want to show this”.

Alternative media journalists and residents share their images. What followed was nothing less than electrifying. The community, fortified by the presence of foreign eyes, rallied in support of the Catcomm volunteers, quietly closing a circle around the scene. Community members welcomed the volunteers to the neighborhood, calling out support, denouncing the police intimidation and bearing witness with a dozen camera phones extended, filming the confrontation from every angle.

The police were paralyzed, unable to carry on their charade under such inescapable scrutiny. The documents were returned, the team released back into the embrace of the community. The Bulldozer slunk out, defeated for one more day.

That afternoon, the young, newly inspired journalists from the community gathered with Catcomm and members of several other community groups to collaborate and exchange footage. There, on a broken pool table, as the bytes flew back and forth between devices, the knowledge was breathed into Vila Taboinha that the eyes and ears of the world could now be reached.

Film4Rio Pilot Project

Ashoka is hosting a competition to inspire ideas around the problem of “dead capital” in the developing world. Dead capital is land inhabited by slum dwellers that has not been formalized through the legal title process (and worth  $9.3 trillion!). This may not sound that serious, but imagine if you had no power to sell the land you live on, leverage it as security, or invest in improvements for fear it would be taken away from you at any time.

The Center for Live Capital is working in partnership with a phenomenal 10 year old organization in Rio called Catalytic Communities (CatComm). The LiveCapital platform will use google maps to track infrastructure / services, the formalization process, and local media capture (filmed and uploaded by locals via cameras + mobile phones). Essentially, we will be curating multi-media to form visual narratives and storytelling around the problem of dead capital. By collecting information and communicating stories of the problem, we hope to give local activists the tools they need to press for procedural reform to make it easier to register, transfer and own property.

The organization in Rio (CatComm) is our pilot project. We have helped them create a submission for the Ashoka Changemakers competition to win $50,000 for the Film4Rio project. Rio favela communities face mass forced evictions (already!) as the 2015 Olympics approach. CatComm trains favela residents to use video, social media and storytelling to capture land conflicts. They also document how developments in infrastructure often stabilize property rights, as communities with greater investment are less likely to be removed. In Rio, the public defenders then use the media to defend communities against forced eviction.

Please follow out progress as we work to highlight CatComm’s work around property rights in Rio.