Why Globalization Only Works For Industrialized Western Nations
         

Imagine a country where nobody can identify who owns what, addresses cannot be verified, people cannot be made to pay their debts, resources cannot easily be turned into money, ownership cannot be divided into shares, descriptions of assets are not standardized and cannot be easily compared, and the rules that govern property vary neighborhood to neighborhood or even from street to street.  To be useful, capital must be first represented in a property document where it can be assigned a status that allows it to generate additional value. What people possess is not “pauperized” in such a way to produce capital. There are no enforceable legal representations.

 

Assets outside the West are held in defective forms: houses built on land whose ownership rights are not adequately recorded, unincorporated businesses with undefined liability, industries located where financiers and investors cannot see them.  Because the rights to these possessions are not adequately documented, these assets cannot readily be turned into capital, cannot be traded outside of narrow local circles where people know and trust each other, cannot be used as collateral for a loan and cannot be used as an investment.

 

Third world and former Communist nations have been unable to give their citizens access to this representational process.  The citizens do have things but they lack the process to represent their property and create capital.  They have houses but no titles, crops but no deeds, businesses but not statutes of incorporation.  They have adopted everything from the West from paper clips to nuclear reactors but have insufficient capital to make their domestic capitalism work.

 

In the West, every parcel of land, every building, every piece of equipment or store of inventories is represented in a property document that is the visible sign of a vast hidden process which connects all these assets to the rest of the economy.  Assets lead an invisible parallel life alongside their material existence. They can be used as collateral for credit.  The single most important source of funds for a new business in the US is a mortgage on the entrepreneur’s house.  It links a credit history, an accountable address for the collection of debts and taxes, the basis for the creation of reliable and universal utilities and a foundation for the creation of securities.