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How many "Souths" are there in the world? The answer is simple, as many as there are "Norths". In Italy, "North" is often a synonym of development, richness, flexibility and dynamism. "South" is frequently perceived as a metaphor for underdevelopment, rigidity and perhaps even a "gangster" mentality. For this and for other reasons, the "South" is not only a geographic area, even if it is a given that the "South" mentality is more widespread in some Southern areas of the world than in others. If what we have said regarding the South is correct, we could adopt the same logic about the "North". The "North" is also not only a geographic area, although the amount of development and sense of civic duty is often more widespread in this area rather than in others. "North" and "South" assume the physiognomy of a complex archetype in our society. Alongside degraded political, economical and cultural realities, one can find significantly contrasting examples of responsible citizenship characterized by a very high "social capital" value; as even in the very heart of the best and most efficient social realities you may still find worrisome pockets of profound inhumanity. Many of the so called "first worlds", or "Norths", are more and more populated by an "underclass" as a result of a kind of "overdevelopment". The expression "underclass" represents the existential condition of all those who are cut off from civil society (see the works of Charles Murray). This marginalization does not necessarily arise from the lack of material wealth, but is the result of a way of life in which the essential elements for a balanced existence (e.g. work, family and community) are perceived and experienced in a distorted and subversive way. What characterizes this lifestyle is not so much an income insufficient to live a dignified life, as much as a kind of social disorganization--a social and affective poverty as well as the inability to behave in a responsible manner by adopting certain values. In this Hobbesian-type of selfishness, social trust and cooperation are excluded, while selfishness and isolation are the norm. These are just a few of the topics discussed by Benedict XVI in his recent encyclical, Caritas in veritate, taking up again the concept of "overdevelopment" formulated by Pope John Paul II in Sollicitudo Rei Socialis (1987).

With this understanding of the problem of development, the concept of "human capital" and its corollary, "social capital", can be seen as a significant part of a domestic and international order: values which must be promoted through the recognition of inalienable rights to political, economic and cultural participation.

In this regard, the reflections made by the Peruvian economist Hernando De Soto in "The other path" and "The Mystery of Capital", may be of particular interest. De Soto's objective is to explore the source of capital, the way it is created, and the remedy for deficiencies that characterize the many projects to fight poverty. The concept developed by De Soto is that goods live double lives: first, as performing a physical function (i.e., dead capital), for example, a house in its use as a dwelling, and on the other hand, expressing a potential value (i.e., live capital)--you can use your house as collateral to borrow money to finance a business. In this way, capital has a double dimension: that which is physical and that of a generation of surplus value. Thus, the formalization of property rights, an expression characterizing the historical events of the West, allows us to make use of not only the tangible aspect of an asset, but also the fact that it can be combined and divided, thereby developing its creative potential. De Soto points out that ultimately the formal system of property rights can be likened to a hydroelectric plant: it is here that we find the birthplace of capital and the reason that capitalism has triumphed in the West and failed in the rest of the world.

The way in which our author describes the process of formalization of property rights is very interesting. He examines the history of their establishment in the fledgling nation of the United States of America, that only 150 years ago was a Third World country, showing the living link between the legalization of property and the creation of capital. After careful research in the field, our author has found that in the Philippines, the current situation is even worse than in other countries of the Third World and former communist countries. For example, 57% of city dwellers and 67% of the rural population are living in homes to which they are not connected by any legal right of ownership and, which therefore, are dead capital. De Soto's thesis is that leaders of Third World and former communist countries have no need to become clients of Western governments and international financial institutions. It is enough that they understand that "in the middle of their neighborhoods and slums, there are--if not acres of diamonds--trillions of dollars ready to be used provided they manage to unravel the mystery of how assets are transformed into live capital".

Just as the water enclosed in a lake is needed to produce fungible hydroelectric energy, human activities need a "formal system of property rights" to produce surplus value significantly. De Soto has identified six properties that reveal the effects of the mystery of capital: to fix the economic potential of assets; to integrate dispersed information into one system, to make people accountable; to make fungible assets, linked to individuals; to protect transactions. The proposal of our author lies in the formulation of a concrete working agenda to start a "capitalization process" which is translated into a modern property legislation, bringing into a legal framework those whose activities and existence are outside of the law. It is law which establishes the economic potential of property as having an autonomous dimension, a value "separated" from the physical asset which therefore allows men to grasp its productive potential. "It is the law that connects the assets in the financial circuits and investment. And it is the representation of fixed assets in legal documents of ownership which gives them the power to create added value".

De Soto's study, in addition to being an indispensable business tool in terms of public policy, is a valuable provocation that has fomented the debate on the actual potential of microcredit, Globalization and patterns of development. He proposes an alternative to the classic "dependency theory" which attempts to explain the misery of all the "Souths" with the idea of development as a zero sum game, in which wealth is data to be distributed rather than a dynamic process of pure creation of value. Such a concept of development is always limited by a negative source principle of "sustainability"--when the number of men on earth becomes the figure of sustainability, we coin terms like "overpopulation" and the inevitable result is political, economic and cultural barbarism.

Reflecting on the formalization of the right to private property from an idea of dynamic development represents an essential task for all those who seriously care about the promotion of a stable and sustainable development in all the "Souths" (starting with ourselves in Italy). The Tocqueville-Acton Studies Center is engaged in careful and creative research about ways to develop policies aimed at integral development, under which, in light of the Social Doctrine of the Church, to making concrete, in the words of John Paul II--a true "capitalism", an "enterprise economy", a "market economy" or, simply, a "free economy" (Centesimus Annus, no. 42). In other words, supporting an intensive economic development, widespread and enduring, characterized by decentralized and widespread capital (in all its dimensions), by the role of trade unions involved so that entrepreneurs pursue the productive reinvestment of their profits while combating monopolies (both public and private), and promoting the growth of competition within a clear regulatory framework.

Flavio Felice is an adjunct fellow at AEI and the president of the Acton-Tocqueville Studies Centre.

Photo Credit: iStockphoto/University of Texas