‘Dead capital’ killing reserves – by Michel Kelly-Gagnon, Special to QMI Agency (Sudbury Star – December 16, 2011)

The Sudbury Star is the City of Greater Sudbury’s daily newspaper

Michel Kelly-Gagnon is president of Montreal Economic Institute ( www.iedm.org)

Several years ago, I was asked by a journalist to explain why people in Third World countries were poor while we were rich. She had never heard any other explanation than the Marxist claim that those poor nations were being exploited and deprived of their wealth by evil and greedy multinationals.

I told her about the ground-breaking research done by famed Peruvian economist Hernando de Soto. He showed convincingly how their own governments systematically prevented the populace from accumulating capital and creating wealth.

When it takes months of paperwork and it costs a small fortune in bribes to simply register a small business, when everything you possess can be taken away because property rights are not recognized or enforced, it’s awfully difficult for entrepreneurship to flourish. De Soto estimated there exists at least $9.3 trillion US in what’s termed “dead capital,” untitled assets held by the world’s poor.

I was reminded of this when I read the news about the sorry fate of the native residents of Attawapiskat in northern Ontario. These people live in awful conditions reminiscent of those in Third World shantytowns. They have little control over their immediate environment and because of this, little incentive to feel responsible about it.

Ottawa certainly sends money, huge amounts of it actually, on a per capita basis. But instead of being invested, this capital is consumed or diminished through waste and corruption, as arguably is a large part of foreign aid.

And just as in Third World countries, First Nations people who live on reserves have no, or insecure, property rights on their land. The partial rights of individual ownership that do exist cannot be fully exploited. The land is owned by the federal Crown, which has been managing reserves for over a century on the basis of the paternalistic Indian Act.

How can this situation be reversed? There are Canadians who have come to the same conclusions as de Soto.

“The Indian Act reserve system substantially reduces land value and promotes low value land use. It prevents us from accessing the equity in our lands, raises our costs of doing business and discourages investment,” says former chief Manny Jules, who now works to advance the First Nations Property Ownership Initiative.

For the rest of this column, please go to the Sudbury Star website: http://www.thesudburystar.com/ArticleDisplay.aspx?e=3407522

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