ILD | Helping to Build Inclusive Market Economies

The ILD’s remedy is to help developing countries make fundamental institutional changes regarding their property and business environments, encouraging people to enter the legal system and offering them as an incentive those essential legal tools that will not only improve their lives and businesses, but also help them transform their society: fungible property rights, forms to organize their businesses and mechanisms to access expanded markets, nationally and internationally.

Clearly, this is no easy task; nor can it be done from behind a desk. Fundamental institutional reform requires the kind of unique experience the ILD has accumulated over decades and that has given us a new and powerful way of examining a developing economy –to see what works and what doesn’t, what practices have to be scrapped and what can be built upon.

Extralegality does not stroll up to a stranger in a shantytown of the Third World with a smile and a handshake. Our researchers go into the field, digging into a client countries’ legal and extralegal economies to find out what works and what doesn’t –from the point of view of the ordinary property owner and entrepreneur excluded from the system.

They have to find the right agents willing to talk or to make introductions to people who will be helpful; researchers have to be experienced detecting not just extralegal property, buildings or businesses but also the invisible practices and social contracts that allow the denizens of this parallel economy to build and protect those assets. The ILD’s fieldwork thus requires a practiced eye to identify extralegal economic activity where others will see only chaos and illegality –much like the experienced paleontologist who can detect the fossil remains of a dinosaur where the rest of us see just another pile of rocks.

Only with such information in hand are we in a position to create institutional reforms that will merge these two parallel economies into one enhanced legal framework for a modern economy –an inclusive public memory system that will welcome all citizens who want a stake in it, including the poorest. And because this new legal framework will involve norms and practices familiar to the extralegal ones, they are more likely to give the new system a try.

This bottom-up approach to reform, based on extralegal institutions, is what separates the ILD from the hundreds of service, equipment, and “consulting” companies trying to help countries improve their business environments. Their common denominator is a tendency to seek documentation for property or businesses that are already part of the formal economy.

What is unique about the ILD approach is that we address head-on the challenge of how to systematically and massively bring the extralegal economy into the legal economy in a way that will not only boost growth but also address specific social and policy concerns, such as poverty, exclusion, social unrest, populist attacks against “globalization”, and even terrorism.

Such fundamental legal reform cannot take a cookie-cutter approach; one size does not fit Albania, Egypt, Mexico, or Tanzania. Each country has its own specific problems, needs, and timetables, which must be taken into account when designing reforms. Nor can modern market economies be built in developing countries with “quick fixes”. The most effective approach will have to be tailored to the specific problems of each country but also be comprehensive, and implemented gradually over time, step by step. Above all, reformers have to know exactly what they are up against –what the facts are on the ground and what the obstacles are, from the point of view of ordinary people. Change requires knowledge.