Extract from the work of Professor Abderrahmane MEBTOUL international expert published in 2033 Edition Gharb for your writing of a subject of burning news on the informal Algeria Face To The Globalisation Stake -Well Governing- Democracy and Market Economy —Hernando De Soto: The Integration of the Informal Sphere: the Basis of a State of Right and the Construction of the Market Economy in Algeria”
I suggest to make, briefly, in evidence, the basis of our work and particularly the under-development, I mean, the difficulty for a state as mine (Peru) to accumulate a capital. The reason by which, this problem has taken a very important place in the Third World and in the former Communist Union Countries, is that they englobe Five Thousands of Millions among the Six Thousands of Millions inhabitants in the World. So, since the demolition of Berlin Wall , there had been in fact, just one adapted system or in the point to be adapted throughout the World, except for North-Chorea and Cuba; this system is the Market Economy which does not mean a savage capitalism. Although certain countries have opted, in the past, for the managed economy and finally choose the Market Economy, the results of the mutations are not what we hopped. It is true that there are interesting cases of progress, but generally a deep deception exists through out the World.
So, our work will be based on 2 main points.
– The confidentiality and property bonds m basis of the exchanges.
– Example of the Importance of the informal sphere and the urgency to integrate it through legal means.
I.The Confidence , basis of exchanges
Aren’t the oppositions to changes and to the achievement of the Market Economy, the consequences of a cultural problem that overcome simple economic categories? For, the main characteristic of the of European cultures, is the confidence that is surely considered as the one that allows the good operation of the Market Economy, let me recall as well, that behind a Market Economy in a capitalistic country, like the pioneers of the economy had described it, the essential power comes from work division.
That is, before the expansion of capitalism in the Occident, in the feudal world, the division of work occurred in small unities.
The Market Economy is, precisely, when important mutations, characterized by the specialization, occur. The fact that a person does not worry to keep her house alone, her garden, her animals, to realize her own tools but to focus herself in only one thing, allows the global growth of the National Health.
This allows productivity, the basis of the increase of the exchanges. This is the fundament of the Market Economy. However other reasons are necessary for the assessment of the Market Economy. But, as it was said before, confidence is important, for it promotes the acceleration of exchange. It must exist a stable currency and obvious arrangement clauses.
In some countries, there is more confidence than in others. Some precise interviews show than in Sweden to the question: “Are you confidence to the other Swedish’s?” the answer is that 65% of Swedish’s reply: “Yes, I’m confident in another Swedish’s,”. In the USA, nearly 54% of the Americans answer yes. When we are in Brazil, just 8 % of the population are confident in other Brazilians, as far as Peruvians are concerned , just 6 % and in Argentina 1 or 2 % .
Then, what’s about Algeria?
Just precise studies can determine this phenomenon. Actually, with the process of Mundialisation the meaning of the confidence , is different in the developed economic scale from the former ones, for it is based above all, on individual relations , remaining dominant in the Third Word , mainly with the revolution of information and telecommunication , leading towards the interculturality, thanks to signs; for, Man gets knowledge in two ways:
The first one: the direct senses and the other one through description. So, it is undeniable, that we can know the truth only by description. All the things one has been taught at school or at the University and those one learns each day, one does it thanks to description. There are portions of paper, they are on movies .
Description is the means that allows to know where is the Truth. So, when you have a geological or geographical map, it is a description. The repere confident of developed countries lies in this description. The direct truth; we never reach it. What one leans through language, through grammar m through letters and numbers is an intermediary means which we created to attract certain realities, places we never reach.
For example, passport that allows one to travel or a credit card. At this state we come back towards confidence. This credit gives the possibility to do a transaction in the developed countries; whereas in the undeveloped ones, we require to pay cash . So, this brings us back to the idea of property certificate asked for in a file; this will represent a guarantee for the exchanges and also a liability for the parties.
However, we can say that capitalism consists in two levels: a world of material things and a world of represented things. The value exists in things that are meant (gestual: to show a passport) and not in material things. For, it’s just only when things are represented that one can give them many functions one can’t give to material ones.
That engineer who works on various interpretation cards, is conscious that a large part of the functions they can give to their work comes from this. The great Dutch philosopher, Kant, used to say that Man has five senses. However, although this, he can’t easily hold reality. This cannot be represented by Time. In fact, during the creation of the United States of America (Far West) , when a cow boy wanted to sell his cattle , he used to come with 10 000 pieces of animals and sold them with that way.
Nowadays, he no more goes with his pieces of animals, but with his property files. That has a much more importance for the buyer. (We just have to visit Bourse Stock Exchange throughout the World where daily transactions are evaluated with a lot of Cents of Billions of US Dollars).
So we are in front of a transaction based on information and representation. Cause if we analyse the international financial places, if the Bourse exchanges rates decrease, it means the decrease of the symbols of representation. So, all the capitalist system is essentially a system of representation. If it creates paper that represents values on things, the way can be confident with things and between us, dynamists the system.
The confidence in the Market Economy is not only a cultural phenomenon but the fact that property brings a clear identification that stimulates the confidence with the person with whom we negotiate.
It’s simply, that they hope a legal system which enables some one in Texas, knowing no one in Michigan to be confident, simply because he automatically knows his insurance matriculate. That person is omniscient that both of them are linked and they can develop a feeling of confidence, apart from a personnel contact by description. In fact, it is the law that leads to this confidence and allow the world economy to function, with a unusual multiplication of exchanges in the space of some decodes.
Hence, the importance of the stability of judicial rules, are their appliance in the third world countries. As for example in Peru, a company was privatized. Peruvian phone company it coasted 53 million of dollars in 1990, it was his values in the burse. At the beginning, they was not another customer. The reason why, was that the potential customers disapproved the property certificate of the company. It was not standardized so that neither the Japanese nor the U.S ha understood the value of the clauses of that Peruvian paper .
It asked three years to promulgate a legal amendment to define the property of that company which would correspond to international norms. After this effort of representation the rate of cession was 2 billions of Dollars, that means, 37 much more than the price in value in Lima Bourse Stock Exchange. This example demonstrates that no one will give you money for investment if you don’t present a property document in response to the action. The legal stability of the Peruvian Company allowed the transfer to a specialized market much more important and more specialized, bringing us back to the division of work, basis of the improvement of capitalism.
This gave a much more important to the action to increase the value, to generate other enterprises and other productions that are not obvious (for example: the development of engineering) .
This leads to the problematic of the accumulation of capital that not conditioned by money. This is what Latino-Americans used to believe. That’s why economic policies lead to big inflations in the World. In reality money is not comparable to capital. With money we can evaluate goods, it does not create capital. The property system that able to fixes the value of goods and to extract the plus-value that create a modern economy.
However, there is a dialectic: from the moment things are fixed in terms of property, the credit is possible. The Holland’s had known this, long ago, because when the bank system had begun, they did not begin to transmit money, they begun to save private property certificates on the profits, and once there were private property certificates, they had created money which they used to exchange in return to certificates. Hence credit begun, improving, in his turn, the investment and the actions to sell. For, it is the property that transmits, comparable to a car that has a value; and much more, it is a car that converts the profits into liquidity.
Thus, it is not the liquidity of money but the disponibility of a property that allows the creation of the value, that is the richness of the Nation. This deals with the problematic of the construction of a state based on a state of right. For, when the northern created the property tills they did not only create property, they did, in fact, create the capitalist system, result of a long historical process .
This property legislation has as well generated mechanisms that carry and guarantee the value. That what international experts of IFM and of the Mundial Bank generally used to forget when they advise some undeveloped countries about the problem of how to create capital, they spontaneously answer them : you ought to earn . However, they do not say you to transform the property rights of your country, for them that is an evidence in a developed country, but not at all in a Third World Country.
This leads me to speak about the importance of property certificates.
II – The Informal sphere and the inexistence of property certificates
It is common place that to draw an extra, we need a document that will represent it according to a legal document, let’s say a passport. The question that remains, is to know how many people in the Third World possess actives and documents. And this, relatively different I segments : the place where one’s lives, of commercial funds, from the cigarettes seller to the productive activities and to various declarations of different services, productive or else.
Let’s visit all the Algerian Wilayas, let’s do an register of these actives and let’s report this value to that is given by the official statistics: thus, you will measure, the importance of this sphere that operates out of the legality and that is not inserted in the National Product: why in your suburb, high houses are built with large, deep and high garages, that could contains semi remakes?. Is not to implant an activity?
Behind this, there exist activities, all these considerations suppose an under ground economy. These imply some influences on the structuration of towns that are built every where and any where. The question, one must ask himself is the following: if there are intellectuals, physical in Algeria, how many among these have a little valuable by the state? That is all the paradox of the construction of the Market Economy, and in general terms, the construction of a state cause without tills it is impossible to built a modern society.
However this informal sphere is a great reservoir of richness, much more durable than petrol. It is not particular to Algeria, it also exist in Peruvian in Mexico, in Egypt and in a great majority of the 3rd World Countries. So since Algeria is a Mediterranean country, I give you the results of long years, the entrepreneurs have legally built 4 millions Seven Cents of Thousands buildings on agricultural areas.
So these buildings exit without any certificate represent an inadequate capital although they represent a value of 50 Billions of Dollars with the impossibility to mortgage them or to use them as an asset, and the impossibility to banks to her with whom they can lend their money.
Another example: at the beginning the state has built in some suburbs in Cairo, social building with 2 floors for the middle and poor Class during a period of few years; and according to our investigations, we state more than six floors. So, we have 4 more floors in which a population 3 times much more important than predicated. They 4 floors were built without a legal agreement relatively to the complicity of the local authorities.
So how can we measure the value and what the extension of the illegal economy in Egypt in terms of building? This represents obstacles to the management of a state that no more plunify its needs in water, its consumption in electricity, your phone, evacuation piper and other services presentations. This is also applicable to Peru where statistics prove that in Lima 36% and 40% of the lack of electric energy exist mainly in informal sectors. More than this, without little, there is no address. And from the moment there is no address, the invoiced costs raises up terribly.
As far, the state looses a great of the input, in terms of electrical energy and water , mainly with the anarchic links justifying the necessity to raise up the prices to support the whole charges.
Without reaching the option of inflationist certificate, it ought exist a correlation between the certificate and legal document. According to our first estimations, 92% of the construction in Egypt is out of low, and 88% of the industrial production remains in informal sphere with a dead capital evaluated approximately around 245 Billions US dollars. That is 55 limes much more important than all the investment of all Egypt from the petrol of Napoleon, including the Suez Canal and Aswan barrage, 30 times much more than the bar of value in Cairo. 50 limes much more than all the loans of the Mundial Bank and 100 limes much more than the direct subsidiaries of Egypt since the Second World War.
So, the real richness is hide in Egypt, it is not represented. This is applicable to the Third World Countries, among them Indonesia, Peru ; it’ not applicable only to Arab Countries contrary to assertions naked of all logics according to which the Arab culture is opposed to the respect of right. This situation is the mirror of a complex social structuration in which this sphere qualified as “Illegal” is not relatively autonomic as regard as local bureaucratic sphere.
In fact, we attempted to know, thanks to our researches, how much time it takes if one wants to buy a right, which is the obtaining of property official document. If one has to respect all the steps, the whole procedures to obtain a legal document, it takes 11 years (to this we have to add the weakness of political and economic culture of the mere citizen and also the amount of illegal files) in the traditional administrations that have not , most of the time a system of informatization .
We have, as well, to measure the average of time to avoid the destruction and thus to negotiate (merchandise) with the bureaucracy (corruption). An Egyptian spent, in this way, between 3 or 6 years in his life during their negotiations. Our researches in Mexico, proved that only and 78 % of the Mexicans work illegally and their profits are evaluated around 315 Billions Dollars and this to refer to the same method of investigation .
That problem is relative to 6 Millions PME and 11 Millions buildings. These 315 Billions represent 7 times the declared value of petrol . This situation is not specific to the third World countries. We have only to do a flash-back to the political, social and economical history ; mainly in the United States of America or that of Japan throughout two centuries. The creation of the United States of America begun from informal acts ; the movies realized about the Far West , are an alive sample : actually, it was common place to see each parcel of earth taken with guns .
Who used to own a property certificate at that time ? The formal sphere and legislation , basis of representation studied formerly, set up progressively in the United State of America, the contractual relations , basis of the Market Economy, took place gently to individual ones .
As far as Japan is concerned , the passage from feudality to capitalism occurred thanks to the generalisation of property certificates , without neglecting the traditions . So, we ought to avoid any form of utopian visions. We usually think that the reform of the right for property, in a country , is a matter of, ( as we theoretically taught it at the University) and such , to be accessible by the poor and to establish a system of Right. This is not true . We have to integrate all the procedures (among them common right ) , because there is a system of codification within that informal sphere. In most of the countries, the higher class undertakes acts, generally disapproved by the government , but bearing a transactive value inside that informal sphere.
So we can argue that the Government is too much behind a society that establish some conventions which would allow it to function. In other words , people who spontaneously set conventions among themselves , homogenize them . For, a Government establishes a certain reliance when it inserts this sphere , with guaranteed and concrete actions, without coercing and bureaucratic oppressions .
The application of this mutation of spontaneous right that the well-governing of a State becomes toughened , thus , leading to a much more social economy , since these thousands of entrepreneurs managing in the informal sphere, will pay fees and are concerned by the development of the society.
So , during that period of difficult transition, this implies a perfect collaboration between the different Ministry Departments ( Finances , Law , Interior Affairs , etc….) and an effective involvement of some segments among the civil society in that sphere.
Conclusion
To conclude, we can put forward , though there isn’t a uiversal stereotype, the lesson we can take from the Occident is that there is a necessity of a symbiosis between the fictive concrete ( formalization ) and the real , that is, the representation . This brings us back to the fundamental problematic taking in consideration, however , the vital cohesion between the North and the South , the collapse of which would be worst full for the future of Humanity. As well, since there is no Right, nothing else couldn’t work, without speaking about the risk of autoritarism and abuse that would penalize principally the poor citizen .
So , the right for property is vital and the integration of the informal sphere is decisive, if we wish to create a Market Economy which does not yet exist in most of the Third World Countries . In politics , the importance of the informal sphere is a problem .
The ” Illicit ” enterprises and the promoting agencies, have gathered profits which have a value of 9 Billions of Billions Dollars US within the undeveloped countries, and in the former communist countries, in other terms, this represents 20 times much more than the direct foreign investment in the Third World and 46 times as much as the Mundial Bank rental during these three last decades. This sphere , faithfully to the social mutations ant to the process of the Market Economy has a dynamism which is an opportunity for the development of the Third World Countries .
We have to ask ourselves about the existence of the liability of a government when the governors used to manage only for the profit of economical effects . It is in fact an obstacle for the political stability as the perception of the social classes will not exist, in terms of Marxist philosophy.
Meanwhile, we can also state political manipulations in fragile states . Doesn’t this explain the difficulty with which the Market Economy develop? Since a large part of the social forces in that real sphere ( only 10% to 20% of the activities apt to manage legally and certain organisations , however inconsiderable could they be, but active ones,) pretend to speak in the name of all the collectivity and disapprove the reforms, consequently to the cultural weight inherited from the stereotype of the development based on State segment.
So, the dominant sphere, the informal one , faithful to the axes of the Market Economy which consists in satisfying a solvable demand, is politically margined. Only the integration could lead towards the expansion of the Market Economy . The Market Economy answers to the universal norms with, however, some social specifiities .
The State plays a regulating role to conciliate efficiency with social justice , the strength of a State depending on its morality I mean , in the respect of Right , in the respect of rules. It is comparable to football: it an amount of rules we are obliged to respect to avoid the marginalization.
So, if each country wants to play football with its own rules, there won’t ever be a Mundial Cup . There must be a standardization of the norms . This has strongly linked with the construction of the State. It is sure that Freedom must exist in each country but the principal aim should be the harmonization between the different socio-political systems . The instauration of the Market Economy implies, as well, the development of a State of Right . This has a link with the creation of a political and social Democracy. Historical experiences show that there is no Market Economy without Democracy. For example, we have seen a very-well developed Market Economy in Latino-America during Pinochet government , as well as in Singapore and in South Chorea .
But, really, I don’t think that this achievement will resist in the future without Democracy , cause it will over last with its perenity. This dynamics will give new social resources with new needs , hence more freedom and more participation in the management . And the only way to adjust ourselves to an economy in perpetual mutation, is to establish a relation with the national environment and the international one, as well. For this purpose, we have to place pure democratic mechanisms progressively.
