Economic Empowerment: Mightier than the Sword?

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William LaraqueMr. William Laraque is advisor for the Empowerment of Global Business Success.
He is also Advisor to governments and enterprise for economic development and job creation

“Imagination, a hefty dose of capital (injected from the bottom up) and government leadership to build, streamline and fortify the laws and structures that let capitalism flourish.” Thus Hernando De Soto provides the recipe which was used for the economic transformation of Peru’s economy as espoused in “The Capitalistic Cure for Terrorism,” his article in the WSJ of 11 October 2014. The fruition of the economic aspiration of entrepreneurs led to Peru’s economic growth and to the sound defeating of Peru’s terrorist Shining Path movement. Started in 1980, at its apex in 1990, the Shining Path controlled 60% of Peru and killed some 30,000 farmers who would not kowtow to the terrorists who would herd them into communes. It turned out that in Peru, the best defense against violence and savagery and an iron ceiling imposed by both government and a business elite, was an economic offensive supported by property rights and enabling government structures and initiatives. These initiatives would empower the poor, the aspirants to a better life and particularly those enterprising in the shadows despite government and taxation.

Over the next two decades after 1993, Peru’s gross national product per capita grew twice as fast as the average in the rest of Latin America, with its middle class growing four times faster. A citizen army, enabled by a supportive government, rose up and smashed the terrorists.

The World Bank calls “informal” the economy of countries, the entrepreneurs who do not pay taxes. Their ranks are surprisingly large in emerging markets where the distribution of wealth and the means of establishing title to land and goods is inequitable. The striving of this constituency is a tumult which cannot be suppressed whether in Peru or Tunisia or in any other economy where bureaucracy is stifling and representation is by caste.

In Peru, the cutting of red tape, the enactment of enabling legislation and the redress of grievances led to the bringing “on the books” of 500,000 jobs and $8 billion in tax revenue from 1990 to 1994.

The poor of Peru weren’t unemployed or underemployed laborers or farmers according to De Soto. They were small entrepreneurs operating “off the books” in Peru’s “informal” economy. They accounted for 62% of Peru’s population and 34% of gross development product and held $70 billion of real-estate assets.

Is economic empowerment of the informal entrepreneur supported by an enabling ecosystem of laws, the redress of grievances and the consistent effort to remove red tape and corruption an anti-terrorism formula? Is it a prescription for the fueling of economic development in terrorist-prone emerging markets? De Soto thinks so. It worked in Peru he notes and could work in the Middle East.

In fact it would work everywhere.

The minority enclaves of Detroit and Missouri are not different from those of Peru or Brazil or Cairo. Unless these underrepresented and economically shunned constituencies are empowered in their pursuit of a better life, they too will turn to violence. Fortunately we have the antidote. Peru has shown the way.

There are enduring testaments to human aspiration and achievement in Peru. In America, we too have enduring monuments to human aspiration and achievement for the “teeming masses yearning to breathe free,” and those who would pursue happiness, namely the Statue of Liberty and the Declaration of Independence.

Government and cities can be institutions and places where ideas go to die. Washington, DC, is such a place. Bureaucracy has made it so. There are places where ideas and aspirations thrive. Governments have empowered success there.

I shall look to the hills for my inspiration. I shall look to Machu Picchu.

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One thought on “Economic Empowerment: Mightier than the Sword?”

  1. I understand and agree with Hernando DeSoto’s perspective. I can see how it worked in Peru and that it can easily apply in the Middle East. I wonder though, what the approach would be for Detroit? I work for a nonprofit in Michigan and would really like to help bring back Detroit. Any ideas?

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