Managing local practices in global contexts
Managing local practices in global contexts

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Managing local practices in global contexts

3.2 Institutions in flux

Although the implosion of the Soviet Union, after the dismantling of the Berlin Wall in 1989, has extended the flow of global capitalism, de Soto (2000) argues that the lack of capitalist institutions – and specifically legally enforceable rights to own property – has frustrated Western expectations about achieving increased prosperity through free-market economic development: ‘Ten years ago, few would have compared the former Soviet bloc nations to Latin America. But today they look astonishingly similar: strong underground economies, glaring inequality, pervasive mafias, political instability, capital flight, and flagrant disregard for the law’ (de Soto, 2000, p. 209). Meanwhile, much of Africa lies beyond the institutions of global commerce and contains many of the poorest nations on earth. Figure 1 shows the global distribution of poverty: the darker the colour, the greater the poverty.

Figure 1
Figure 1 The distribution of global poverty (Source: Clegg, 2004)

Symbolic representations of property (such as a valid credit card or a home-owner's mortgage account) make it possible to pick up the phone to reserve a hotel room or borrow money against the increased equity in a house or other asset. Your rights to legally defined property, including intellectual property covered by patents and copyright underpin market-rational transactions that drive capitalism, specialisation and the division of labour in the world's leading economies. However, the legally enforceable institutional infrastructure that connects symbolic representations of property to the power to ‘get things done’ (for example, through credit card transactions) does not extend to the vast majority of the world's population. De Soto (2000) estimates that completing more than 200 bureaucratic steps necessary to claim title to the land in a shantytown around Lima would take (working eight hours a day) something in the order of 21 years. His research also suggests that similarly long periods apply in such diverse countries as the Philippines and Egypt. Local institutions lack the capacity to translate local assets into the currency of globally recognised symbols.

Possessing the icons of global capitalism – such as Nike shoes – is not the same as being a participating member of the capitalist process in which existing wealth can be used to produce additional value. In de Soto's analysis, the assets that could otherwise sustain local investment in the development and commercial exploitation of local resources cannot be converted into capital – and capitalism needs capital:

When you step out the door of the Nile Hilton, what you are leaving behind is not the high-technology world of fax machines and ice makers, television and antibiotics. The people of Cairo have access to all those things.

What you are really leaving behind is the world of legally enforceable transactions on property rights. Mortgages and accountable addresses to generate additional wealth are unavailable even to those people in Cairo who would probably strike you as quite rich. Outside Cairo, some of the poorest of the poor live in a district of old tombs called ‘the city of the dead’. But almost all of Cairo is a city of the dead – of dead capital, of assets that cannot be used to their fullest. The institutions that give life to capital – that allow one to secure the interests of third parties with work and assets – do not exist here.

(de Soto, 2000, p. 16)

For some writers who have been concerned with the economic expansion of Asia, the problem of translating local knowledge into wealth need not rely on a cloned version of Anglo-Saxon capitalism.


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