What if there was a global movement that had the potential to eliminate poverty and war in our lifetimes by expanding opportunity for the world's poorest people? Most people would regard such a movement as an extraordinary source of hope and progress; it could lay claim to being the most progressive movement on the planet. What is this movement?
Most development economists now agree that the legal institutions of a nation are a primary determinant of how wealthy a nation is. Some sets of legal rules support economic activity and allow for widespread opportunity and wealth creation, other sets of legal rules inhibit economic activity, reduce opportunity, and perpetuate poverty. Given this context, those who care most about alleviating poverty are those who promote those legal systems that allow for widespread opportunity and wealth creation.
One metric of such legal rules is the Fraser Economic Freedom Index, which shows that of the 141 nations ranked, the ten nations with the least economic freedom are:
4. Republic of Congo
8. Central African Republic
12. Democratic Republic of Congo
With the exception of the four oil producing nations, Angola, Venezuela, and Chad, these are among the poorest nations on earth. Without oil, Angola and Chad would also be among the poorest. Venezuela is rapidly destroying its ability to create wealth. Meanwhile, the world's most economically free nations are:
1. Hong Kong (considered as an independent region)
3. New Zealand
With the exception of Chile and Estonia, both of which only recently reached the top ranks of the economically free, these are among the wealthiest nations on earth. Moreover, due to decades of sustained economic growth, Chile is now a middle-income nation, with approximately the same GDP per capita as Russia (the GDP of which is inflated through oil and gas wealth; without these, Chile is now richer on a per capita basis than Russia). Estonia, the Baltic Tiger, is a high income nation, now neck-and-neck with Portugal and rising fast.
In order to think about the value of good legal institutions in a different way, consider that the average wage of an uneducated day laborer in Mexico is $6, whereas that same individual can cross the border into the U.S. and, as an illegal alien, earn $60 per day. While those progressives whose vision is limited to the U.S. might protest the injustices faced by the migrant worker within the U.S., from the perspective of the average Mexican laborer, suddenly earning ten times as much is extremely appealing -- this is why countless Mexicans risk death in order to cross into the U.S. Wouldn't you be tempted to get into a nation where your income would go up tenfold?
To get your mind around the value of legal institutions in a different way, consider the ways in which real estate developers lobby local governments for changes in zoning regulations. Often a change in zoning from residential to commercial can cause land values to double or triple overnight. Similarly, when a piece of land in a developing world nation, with poor legal institutions, is converted into a special economic zone with higher quality legal institutions, land values can skyrocket tenfold or more.
Compare photos of Dubai, before and after free zone designation, and photos of Shenzhen before and after free zone designation to get a sense of the increase in land values resulting from free zone designation. Although Dubai and Shenzhen have dubious reputations, the principal of massive wealth creation through free zones need not be associated with sweatshop manufacturing. In principal one could design an improved legal system that applied Fair Trade principles and used the land value gains to support women's issues. I've proposed both a Women"s Empowerment Free Zone as well as a Fair Trade free zone. The Women's Empowerment Free Zone concept is designed to provide well-funded trust funds around the world dedicated to supporting women and children's causes; a highly progressive proposal.
In a world in which about a third of the world lives on less than a dollar per day, one might expect a sense of urgency around opportunities to alleviate poverty through improving legal systems. And there are many scholars, development experts, and advocates working to improve legal systems so that poverty will end sooner. But it turns out that changing legal systems by means of research, persuasion, education, and legislation is a slow, uncertain process that takes decades.
It is in this context that several innovative thinkers are exploring faster, more dynamic, more entrepreneurial approaches to providing the world's poor with access to world-class legal systems. As we all know, IT entrepreneurs in Silicon Valley and elsewhere have utterly transformed out world. When millions of individuals are allowed to use their creativity to create innovations, and then make those innovations available to millions of others through entrepreneurship, problems that previously seemed impossible to solve are solved quickly and easily. Those of us who were alive in the 1970s remember slide rules, adding machines, typewriters, and expensive long distance calls. The IT revolution has made all of that obsolete.
What if we could apply the power of creativity, innovation, and entrepreneurship to the problem of poverty reduction? More importantly, what if we could apply the power of creativity, innovation, and entrepreneurship to the most highly leveraged aspect of wealth creation, legal system creation itself?
This is the new frontier of poverty alleviation, one in which cutting-edge thinkers are exploring the possibility of creating new legal systems at sea, in localized free cities and zones, in granting NGOs a greater level of sovereignty, in allowing local regions more legal autonomy, and more. The leading venue for exploring this world of entrepreneurial legal system creation is cleverly named "Let a Thousand Nations Bloom," the home to the most progressive movement on the planet, despite the fact that not everyone understands this.