A report titled Making the Law Work for Everyone (pdf, 110 pages) finds that 4 billion people – the majority of the world’s people – are excluded from the rule of law. It argues that “in the 21st century, legal empowerment of the four billion excluded is the key to unlocking vital energies needed to end poverty and build a more stable and peaceful world."
The report, by the Commission on Legal Empowerment of the Poor, a group co-chaired by former U.S. Secretary of State Madeleine K. Albright and Peruvian economist Hernando de Soto, calls on governments, international institutions and civil society to make legal empowerment a top agenda item in the fight against global poverty.
The report finds that half the people in urban areas worldwide live in squatter settlements and work in the informal economy. Even larger numbers live in isolated rural areas with limited secure access to land and other resources. They operate outside the law by entering into informal labor contracts, running unregistered businesses, and often occupy land to which they have no formal rights. For example, in the Philippines, 65 percent of homes and businesses are unregistered, in Tanzania 90 percent. Overall, the informal economy accounts for over a third of the developing world‘s economy.
The report finds that when the laws of society act as a barrier to the poor, then the idea of the law as a legitimate institution of democratic governance is injured. In contrast, by expanding legal protection, more citizens develop an increased stake in the maintenance of a peaceful social order and the stability of the local government. The Commission argues that strategies that expand legal empowerment to the poor have an impact not just on their opportunities to prosper but also on the broader issues of stability, peace and democratic governance.
The report argues that no modern market economy can function without law and power can only be legitimized by submitting to the law. It identifies four crucial pillars which must be central in national and international efforts aimed at the legal empowerment of the poor:
Access to justice and rule of law – in this context, according to the report, more than seven in ten children in the world’s least developed countries do not have birth certificates or other registration documents. As they grow older, they live in homes, sell their labor and open small businesses without formal papers or recourse to justice.
Property rights – to be fully productive, assets need to be formally recognized by a system that includes both individual and collective property rights and that recognizes customary rights. This requires that businesses’ and properties’ assets are valued and recorded in standard records, titles and contracts in order to protect households and businesses. Moveable and fixed property should be available to the poor to use as collateral to obtain credit, business loans and mortgages and thus benefit from its intrinsic economic power.
Labor rights – informal work accounts for over half of total employment in developing countries and as much as 90% in some South Asian and African countries. Giving workers secure labor rights encourages them – and their employers – to invest in new skills that enhance their productivity.
Business rights – obtaining a license, the first step to registering a business, is often blocked by bureaucratic ‘red tape’ and costly fees. A recent study of 12 Latin American countries by the Inter-American Development Bank found that only 8 of all enterprises are legally registered and that nearly 23 million businesses operate informally. Business owners cannot get formal bank loans, enforce contracts or expand beyond a personal network of familiar customers and partners. It is also difficult for owners to pass their companies to their children. Formalization also allows arrangements such as limited liability companies, which help contain personal risk and shield assets.
More information
- Legal empowerment fact sheet (pdf, 8 pages)
- Resumen ejecutivo La Ley: Clave para el Desarrollo sin Exclusiones - 4 mil millones de personas - la mayoría de la población mundial - están excluidas del Estado de Derecho. El informe de la Comisión para el Empoderamiento Legal de los Pobres, presidida conjuntamente por la ex Secretaria de Estado de los Estados Unidos, Madeleine K. Albright y el economista peruano Hernando de Soto, apela a gobiernos, instituciones internacionales y a la sociedad civil a hacer del empoderamiento legal un tema de prioridad máxima en el programa de lucha mundial contra la pobreza.
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