Why can't economically backward countries escape poverty?

Why can't economically backward countries escape poverty?

Is it because they don't work hard?

Is it because they lack resources?

Is it because they lack leading corporations to drive the economy?

Do you remember Peru's President Fujimori?

As a Japanese, he ruled South American Peru for 10 years. He was born amidst the support of citizens who desired to develop Peru like Japan.

In the book "The Mystery of Capital" by Hernando de Soto, Fujimori's closest advisor in economic matters, there is astonishing content.

De Soto explored and attempted every possible way for Peru to become an economic power, but ultimately faced difficulties. The reason? The difficulty in capitalizing assets.

Capitalizing assets?

We borrow money by pledging assets like real estate or credit. Banks invest capital based on our assets. This is the process of assets turning into capital.

If you operate a store diligently and generate profits, you create royalties.

That is, capital is created from assets.

In countries like Peru, assets often can't be transformed into capital.

Not only is real estate not registered due to lack of legal regulation, but administrative procedures are also not standardized, resulting in local authorities not recognizing documents from other regions.

While in Korea, relocation is very easy through document or online registration, in economically backward countries, there's a severe lack of trust in officials and inefficiency, requiring physical verification by civil servants.

In such unreliable systems, people rely on physical power, and mafia organizations mediate. Dependency on individuals leads to unpredictable societies. In societies where prediction is difficult, investments for the future become challenging.

Ultimately, economically backward countries are caught in a vicious cycle of urgently addressing practical and conflict resolution issues, leading to the concentration of power.



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