Dr. W. Edwards Deming posed this important question often in his many four-day seminars; should any nation be poor? Deming’s solution was to focus on the improvement of quality and set off his famous chain reaction[i]:
- Improve Quality
- Costs decrease because of less rework, fewer mistakes, fewer delays, snags, better use of machine-time and materials
- Productivity Improves
- Capture the market with better quality and lower price
- Stay in Business
- Provide jobs and more jobs
Over the last three decades, I have been privileged to help organizations set off this chain reaction as an improvement advisor. It is one of the principle joys in my work. However, the structure that must exist for individuals to contribute to their organization and society depends on the view of private property and the rule of law in that society.
The idea of private property and the protection of individual rights for that property had the unintended consequence of establishing the rule of law. Individuals were now separated from the masses. Violating the law could result not only in being thrown into prison, but losing your property and adversely impacting the livelihood and security of your family.
The rule of law and private ownership of property enables the owner to “bet the farm” and invest capital into a business. Too many underdeveloped countries and massive poverty have made it difficult for the average person to buy a home, a task that many of us in the West take for granted. Facing this challenge, many people are not allowed to build on the land they are occupying. In Egypt it takes between 6-14 years to secure a deed. If, during this process, you tell the bureaucrats that you are occupying the land, you can be fined and arrested. The government bureaucracy becomes a barrier to the people using their property to build and to improve the quality of life for themselves and their children.
Hernando De Soto[ii] has observed that many of these nations have large percentages of land that is “dead capital,” dead meaning it cannot be used to create wealth. In Haiti, 68% of the urban land and 97% of the rural land are not formally registered. It takes 4,112 days and 111 steps to get land ownership. Until this problem is resolved, Haiti will probably remain poor no matter how much money is provided by the developing world. Unfortunately, tourists will continue to wonder why the housing looks so temporary and shoddy.
F.A. Hayek[iii] has described the connection of private property and freedom:
What our generation has forgotten is that the system of private property is the most important guaranty of freedom, not only for those who own property, but scarcely less for those who do not. It is only because the control of the means of production is divided among many people acting independently that nobody has complete power over us, that we as individuals can decide what to do with ourselves. If all the means of production were vested in a single hand, whether it be nominally that of "society" as a whole or that of a dictator, whoever exercises this control has complete power over us.
Once the governments of emerging nations establish private property and protect the rights of the individual with the rule of law, their citizens can use the capital to build better lives instead of just sleeping on it. These free citizens can exercise their talents and creative potential to unleash Deming’s Chain Reaction, improving the quality of life for their community and nation.
[i] W. E. Deming, Out of the Crisis MIT, Cambridge, Mass., 1986, p. 3
[ii] Hernando De Soto, The Mystery of Capital – Why Capitalism Triumphs in the West and Fails Everywhere Else (2000), Published by Basic Books, NY. The reader may also be interested in visiting a web site dedicated to helping countries establish the structure necessary to succeed. Please visit the Institute for Liberty and Democracy at: http://www.ild.org.pe/
[iii] F. A. Hayek. The Road to Serfdom: Text and Documents--The Definitive Edition (The Collected Works of F. A. Hayek, Volume 2) (Kindle Locations 1764-1767). Kindle Edition
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