Third World Countries are Richer Than You Think

written by Bitmark intern, Kenneth Lee

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Capitalism, Capitalism, Capitalism. In a world where many would argue is “western dominated,” Capitalism is revered as the most successful economic system in the world. Many third world countries try to implement this system and fail. But why? Is it because they aren’t as smart as those in the West? Do they not have as much entrepreneurial spirit? Or do they just lack the wealth and resources? A myriad of help campaigns and news media outlets highlighting their grievances condition us to think the above, but in fact, the people in these countries are just as smart, just as willing, and richer than you think. But for various reasons, they cannot turn the capital they have into wealth. Thus they are only rich in what some call “dead capital.”

What is capital?

To understand what dead capital is, let’s define a few things that are considered capital. Capital is a human made, durable product that can be used to produce other goods and services. Some examples of capital goods include:

  • vehicles such as commercial aircraft and cars
  • software used by companies
  • tools that are used by construction workers,
  • buildings such as office buildings, factories, warehouses, and hotels

As long as it’s used for a business purpose and not a consumer purpose, it’s considered capital.

What makes capital “dead”?

Many factors contribute to a capitalist society’s success, but let’s talk about one of the main characteristics: clear documentation of assets. In the West, everything is recorded and documented in a fairly clear manner: office buildings have titles registered by the state or local government; stores have inventory lists for wares and equipment. Processes like these “list” the asset, creating a clear record of ownership in one singular system, and proving its existence in the eyes of the economy. Because these items are well documented (including both the values of the asset as well as the ownership claim attached), they can be more easily transferred into collateral for loans, credit, and other things. This is why documentation is vital — it allows the asset to have a value in the economy (based on, for example, how big a piece of land is, its desirability, who owns it, etc) and it makes the asset more easily transferable when there is a clear owner. When there is verifiable proof of an assets value and clear ownership claim to that asset, it has all the necessary components to turn it into capital. Having these structured systems in place in many aspects of culture and business is one of the many contributing factors that allow capitalism to thrive.

However, in many non-capitalist countries, assets are not recorded in the same clear manner. Because these assets are not represented in registries or documentation, there’s no way to prove its existence and subsequently turn it into capital. “The value of savings among the poor is, in fact, immense — forty times all the foreign aid received throughout the world since 1945,” as stated by Hernando De Soto in his book The Mystery of Capital. So in reality the hurdle they face is that their systems don’t allow the clarity that could turn the many assets they do possess into usable capital. It’s like if you tried to use pesos in America; it has a value, but it isn’t the currency in America and therefore is of no economical use.

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Why does it matter?

Moving toward a more globalized economy, recording all assets is key to economic success; you might think: “Why can’t they just start recording all their assets now?” In an ideal world, where everyone is moral and honest, of course that would be a great solution. However, in countries where three people claim to own the same piece of land and have their own separate made-up documents supporting their claims, it’s hard to confirm who owns what. Without a uniform system, the assets that people possess are difficult to transfer and don’t have clear economic value. Lots of ambiguity arises from these issues. They need a uniform solution that efficiently records their assets without confusion, failures of a broken system, or fear of duplication or criminal activity. In essence there needs to be a trustworthy system that provides the authentication of property records as well as verification of ownership claims in order to rectify the huge amount of dead capital many countries possess.

The Bitmark system was created in order to “level the playing field” within the digital environment by bringing the established rules of western land rights to ownable digital things. Bitmark relies on a blockchain, a public digital ledger of records (property titles, in this case).

By recording your property in the Bitmark blockchain, it is verifiably yours, and viewable along with all other recorded property titles, as well as any transfers of these records. Because of its public nature, any user can submit information to be added to the blockchain. Each record, once added to the blockchain, is resistant to being removed, changed, or added to without detection by other users. This transparency of modification adds a layer of security to your asset records. By permanently recording each item on our blockchain, the public record of who owns what can be rectified if discrepancies between owners arise due to this immutable pointer allowing the asset to be clearly identified by its property title.

Transaction of assets are authenticated by public-key cryptography, making them virtually impossible to fake. The decentralized nature of the network makes data leaks more difficult (there are no central parties to hack).

By bringing more accessibility, security, and automation to outdated systems, the use of blockchain technology to record property has the potential to jump-start a country’s economy. Now the immense amounts of dead capital will be able to be correctly documented, introducing a lot of desired resources into the flow of the economy.

If you are interested in using the Bitmark blockchain to record property or assets, or are interested in a partnership, please contact us! We would love to hear from you at support@bitmark.com.

Sources:

https://www.thebalance.com/capital-goods-examples-effect-on-economy-3306224

https://simplicable.com/new/capital-goods

“The Mystery of Capital: Why Capitalism Triumphs in the West and Fails Everywhere Else” by Hernando De Soto

By Bitmark Inc. on March 5, 2018.

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