This video is the simplified, dinner-table outreach version of the World Bank argument put forth by Hernando de Soto, the Peruvian economist famous for saying that capitalism is failing in Third World countries because of complicated legal systems. De Soto and the World Bank advocate widespread privatization of extra-legal and squatter neighborhoods in order to bring them all under a single power, one common notion: the formal property-ownership system.

In his book The Mystery of Capital: Why Capitalism Triumphs in the West and Fails Everywhere Else, de Soto is apologetic about the “existing game”. But he writes,

The Marxist tool kit is better geared to explain class conflict than capitalist thinking, which has no comparable analysis or even a serious strategy for reaching the poor in the extralegal sector.

That’s interesting, because later in the book he says,

Marx would probably be shocked to find how in developing countries much of the teeming mass does not consist of oppressed legal proletarians but of oppressed extralegal small entrepreneurs with a sizable amount of assets.

Dickens would probably be shocked, too. (De Soto makes a reference to Oliver Twist in the video.) Oliver Twist, scrummaging around in Fagin’s underground den of thieves, is a representation of the poorest of the poor – the social and economic “underclass” of the class system – who are mistreated by people even slightly higher then them on the social scale. Anyone anywhere may have a “sturdy spirit” – like an Oliver Twist – under a any kind of circumstances. But that appeal to the entrepreneurial spirit of the poor and their assets is also just a really bad intellectual anachronism: the poor have always had “sizable amount of assets” in the eyes of the colonizers and the realtors.

When de Soto talks about the benefits of capitalism that the poor can achieve through formal titles, he is referring to land reform in a vacuum, in complete isolation. (Mystery of Capital is not different in that sense from the film.) Without any analysis of the specific rights — usufruct, mineral, transfer, autonomy, development, etc. — that would be conferred by the formal title, no one can be sure if land-titling (an expensive process itself) would benefit the poor at all. But even more to the point, legal property rights are simply a recipe for legal appropriation, a way to pick more from the pockets of the poor through legal land reform.

Third World governments do not like having huge informal settlements so close to the places where exploitation originates: the factories, the banks, the inner-urban core. For years governments have burned down these villages, killed the inhabitants, or just bulldozed them. Many countries signed agreements with the UN against “forced evictions,” but many countries are still eager to eradicate this population. Kenya is infamous for repeatedly violating this agreement in the district of Kibera, the largest slum in Africa. Aside from forced eviction, what can governments do? This is why the World Bank/ De Soto argument is increasing in popularity.

What is the aim of this policy? It would be great if formalizing property rights for the poorest would improve peoples’ lives on a practical level, but improving lives of the inner-city poor this is not the aim of the policy. The aim of the policy is to pacify this group so they do not resort to terrorism or revolutionary ideology. This is what de Soto’s book The Other Path is all about. It details how including poor people in public decisions can reduce terrorism.

Reviewers were quick to point out that de Soto committed a fallacy almost every right-wing academic after 9/11 committed, namely, equivocating poverty with terrorism. More importantly, his ideas come from a position of privilege, where the only solutions to poverty he’s interested in are ones that reduce terrorism, so the two-thirds of the world don’t “bring down the existing game”. The rhetoric of raising standards of living is merely an afterthought.

The central locations of many informal settlements slated for formalization make them irresistible targets for “urban renewal” and gentrification by large-scale developers who have “the political influence and financial power to solve the very confusing ownership problems,” explains Ozlem Dundar, a Turkish scholar who studied the gecekondu (squatted slum) neighborhoods around Istanbul. Once a neighborhood’s assets are the objects of interest for wealthy landowners, the property and capital acquisitions soon follow. Land-titling serves a function in Third World developing countries – to prevent class war, or at least to legitimate it. But to drive the point further, it the preferred way for legally appropriating what assets the poor do have. Meanwhile the guarantor of land rights (states) are no longer liable for conditions in the slums; the state is no longer liable.

The Philippines, a pilot country for the World Bank’s new global strategy for urban development, is a case in point. The Bank identified 253 poor “areas for priority development,” beginning with a vast section of squatter housing along the shores of Manila. Investments “trickled straight up to the land developers and the construction industry,” wrote Erhard Berner in a 2000 paper called Poverty Alleviation and the Eviction of the Poorest in the Journal of Urban and Regional Research. A poor village in Pasig, also, was widely heralded as a model project for poor families, with Pope Paul VI as an official sponsor of the operation. But within five years of the World Bank involved in Pasig, writes Berner,

All the original dwellers had left because their lots had been sold to wealthy families.

The program’s failure led the World Bank to change its focus to sites-and-services provisions in newer settlement areas outside metro Manila. “These remote locations discouraged gentrification,” writes Mike Davis in Planet of Slums. However, the gentrification had essentially already taken place.

Titling in slums creates dramatic disparities, and often a lot of the money goes to ‘slumlords’. Sociologist Susan Eckstein wrote that 25 to 50 percent of the original squatters, from the 1960s and 70s, built small vecindades which they in turn rented to poorer newcomers. This later evolved into a “two-tiered housing market” that reflected a “downward socioeconomic leveling of the population”: although some older residents had thrived as ‘landlords’, the new renters had far less hope of socioeconomic mobility than earlier generations. By the turn of the century the number of poor had increased, but with the two-tiered housing market in place the colonia as a whole could no longer be called the “slum of hope”.

The Lopez Portillo administration in Mexico City (1976 – 1982) encouraged squatter settlements to sell their property at market rates, which resulted in the middle-class gentrification of formerly poor colonias in prime, inner-city locations. This time-period in Mexico City’s history is particularly interesting because the economic structure changed so rapidly in just a few years. With land titling, these changes take place so fast it is difficult to unravel their complexities years later. And by then, the price of a lawyer competent enough to make the case for small land use conflicts, and who is well-versed in adverse possession law, would be out of reach for the poorest.

De Soto acknowledges the existence of informal laws, an “extra-legal” formulation, that operate in the urban slums and the squats. Capitalism, he says, will not work in these areas unless they all obey the same rules and regulations as international capitalist systems. If the extra-legal sector is not the brave new – entrepreneurial-spirited – world envisioned by de Soto, it is certainly still a living museum of human exploitation. What miseries have been narrated by Dickens, Gorky or Zola that do not exist somewhere in the Third World today? Land-titling, the peripheral nation’s equivalent of globalized gentrification, is in my opinion the proverbial wolf in sheep’s clothing.

Many contemporary theorists are reluctant to recognise the globalisation of capitalist production and its world market as a fundamentally new situation and a significant historical shift. The theorists associated with the world-systems perspective, for example, argue that from its inception, capitalism has always functioned as a world economy, and therefore those who clamor about the novelty of its globalisation today have only misunderstood its history. Certainly, it is important to emphasise both capitalism’s continuous foundational relationship to (or at least a tendency toward) the world market and capitalism’s expanding cycles of development. But, without underestimating these real and important lines of continuity, we think it is important to note that what used to be conflict or competition among several imperialist powers has in many important respects been replaced by the idea of a single power that overdetermines them all, structures them in a unitary way, and treats them under one common notion of right that is decidedly postcolonial and postimperialist.

– Toni Negri, Empire