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  • Property Rights: Key to Generating Wealth and Stability

    “Confronting Egypt is a festering economic crisis that threatens to shatter that nation’s [already] fragile social peace and alter political orientation. For too many years Cairo has postponed sorely needed structural economic reforms.” These words are a somber assessment given to Egypt’s lack of institutional reform by The Heritage Foundation 25 years ago.

    Echoing a similar message, Hernando De Soto, one of the furthermost authorities on analyzing the critical linkage between property rights and economic development, has compellingly articulated in his powerful op-ed:

    Bringing the majority of Egypt’s people into an open legal system is what will break Egypt’s economic apartheid. Empowering the poor begins with the legal system awarding clear property rights to the $400 billion-plus of assets that we found they had created. This would unlock an amount of capital hundreds of times greater than foreign direct investment and what Egypt receives in foreign aid.

    Leaders and governments may change and more democracy might come to Egypt. But unless its existing legal institutions are reformed to allow economic growth from the bottom up, the aspirations for a better life that are motivating so many demonstrating in the streets will remain unfulfilled.

    Indeed, property rights anchored in the independence, transparency, and effectiveness of the judicial system are a key determinant of economic growth and development. In other words, capital accumulation over long periods of time can occur only where effective protection of property rights is provided. This relationship is confirmed in The Heritage Foundation’s Index of Economic Freedom. As shown in the chart, property rights and economic prosperity go hand in hand. On average, GDP per capita is over 10 times higher in nations with the strongest property rights than in those with the weakest property rights.

    The facts are clear: Strong protection of property rights has proven to be the most effective means for unlocking “economic growth from the bottom up.”

    Posted in International [slideshow_deploy]

    6 Responses to Property Rights: Key to Generating Wealth and Stability

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    4. Larry Welch, Idaho says:

      One of the many "miracles" attending the prosperity enjoyed by our country was the foundational work of John Marshall and the supreme court in establishing property rights and contract law at our beginning.

    5. Tom Georgia says:

      The phrase, "economic growth from the bottom up" is a redundancy.

    6. O_Henry says:

      I think advancing the concept of private property rights in Islamic societies such as Egypt is very much to be desired. However, it faces enormous problems. The framers of the US Constitution consulted the Bible and Blackstone's Commentary on the Law to inform them as to a "proper" view of law, rights of man, and other topics such as private property and ownership. This has worked well in the west where Biblical values are incorporated into daily life and society. However, in places of the world where Sharia Law and the Koran are the societal base the concepts of personal responsibility are blurred and to postulate that an individual actually "owns" and "controls" land, material, and wealth is a revolutionary idea. The Caliph or Caliphate that Allah appoints owns everything and everything is made to serve the Allah and his Caliph. Therefore, private property ownership can be considered contrary to the teachings of Islam. If my understanding is a correct read of the Koran and Sharia Law; it appears that one is pounding a square peg into a round hole when one seeks to put a Biblically originated/western ideal on top of any society whose fundamental mores are Islamic. Consider the concept of banking as it developed in the west and how non-existent banking has been in traditional Islamic societies (many fundamental banking practices are considered usery by Islam). It is difficult it is for Islamic societies to have banks for similar reasons that it is difficult for private property rights. However, give it your best effort and good luck, Egypt! You'll need it!

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