Most development economists agree that secure property rights matter for growth. The logic seems straightforward: when people know their assets won't be seized, they invest more, plan longer, and build wealth. Yet this consensus masks a profound puzzle.

If property rights are so obviously important, why do most countries struggle to establish them? The answer reveals something uncomfortable about development: knowing what works and making it work are entirely different problems. Legal reform is the easy part. The hard part is everything else.

This isn't just an academic concern. Billions of people live in systems where their homes, businesses, and savings exist in legal limbo—vulnerable to expropriation, excluded from formal credit, trapped in arrangements that discourage the very investments that could lift them out of poverty.

Consider a simple question: Would you plant an orchard that takes seven years to bear fruit if you weren't sure you'd still own the land in three? The answer explains why insecure property rights devastate long-term investment. When ownership is uncertain, people rationally focus on activities with quick returns—even when patient capital would yield far more.

This logic extends beyond agriculture. Uncertain property rights make physical assets nearly worthless as collateral. A house that can't be legally verified can't secure a business loan. Land without clear title can't be mortgaged to fund education. The result is a credit-starved economy where only those with existing wealth or political connections can access capital.

The informal economy problem runs deeper still. In many developing countries, the majority of businesses and properties exist outside the legal system. Hernando de Soto famously estimated that the world's poor hold trillions in "dead capital"—assets that can't be leveraged because they lack formal recognition. These aren't marginal operations. They're entire economic systems operating in legal shadows.

The consequences compound across generations. Without secure rights, families can't reliably pass assets to children. Entrepreneurs can't grow beyond what they can personally oversee and defend. Communities can't attract outside investment. The economy stays small, personal, and defensive—organized around protection rather than production.

Takeaway

Insecure property rights don't just reduce investment—they reshape entire economic systems around short-term thinking and defensive behavior, creating poverty traps that persist across generations.

Here's where most property rights initiatives fail: they confuse passing laws with changing reality. Peru's famous titling program under Hernando de Soto's influence distributed millions of property titles in the 1990s and 2000s. The economic transformation that was supposed to follow largely didn't arrive. Why?

Legal reform without enforcement capacity creates what economists call "paper rights"—titles that exist in registries but carry no practical weight. If courts can't resolve disputes, if police can't prevent seizures, if registries can't reliably track ownership, then titles are just expensive paperwork. The formal system exists, but it doesn't function.

Judicial independence presents an even thornier challenge. Property rights ultimately mean nothing if politically connected actors can manipulate courts. When the powerful can use legal processes to expropriate the weak, formal property systems become tools of extraction rather than protection. Many countries have discovered that creating courts is easier than insulating them from political pressure.

Perhaps most critically, property rights require sustained political commitment across administrations. Land reform creates winners and losers. Existing elites often benefit from informal systems they can manipulate. Formalizing property threatens these arrangements. Without deep political coalitions supporting reform, new governments can simply allow enforcement to wither—maintaining laws on paper while gutting them in practice.

Takeaway

Property rights reform fails when it mistakes legal change for institutional change. Laws require enforcement infrastructure, judicial independence, and durable political commitment—the very things most difficult to build.

Yet some countries have succeeded, and their experiences reveal patterns worth studying. Vietnam's land reforms beginning in 1993 transformed agricultural productivity by granting households long-term use rights to collectively owned land. Crucially, these rights were enforceable, transferable, and inheritable—creating security without requiring ideological abandonment of collective ownership.

What made Vietnam work? The reforms aligned with powerful interests. Local officials gained from increased agricultural output and tax revenue. Farmers gained obvious benefits. The Communist Party gained legitimacy. Reform succeeded because it created winners at every level of the system.

Rwanda's post-genocide land registration program offers different lessons. Beginning in 2008, the country systematically registered millions of parcels using low-cost technologies and community-based adjudication. The program succeeded partly because the genocide had devastated existing power structures—creating unusual political space for comprehensive reform.

Peru's mixed results complete the picture. Where titling was accompanied by investments in credit access and enforcement, outcomes improved. Where titles were distributed without supporting infrastructure, little changed. The lesson isn't that titling doesn't work—it's that titles are necessary but insufficient. Successful reform requires complementary investments in institutions, infrastructure, and political sustainability.

Takeaway

Property rights reforms succeed when they create aligned incentives across political levels, build practical enforcement capacity, and invest in the complementary institutions that make formal rights meaningful.

Property rights sit at a peculiar intersection of economics and politics. Economists understand their importance; the evidence is overwhelming. But establishing them requires navigating political terrain that economic analysis alone cannot map.

The countries that have succeeded share a common thread: they found ways to align reform with existing power structures rather than simply opposing them. They built coalitions, created winners, and invested in the unglamorous work of enforcement and adjudication.

For development practitioners, the implication is clear. Legal reform is the beginning, not the end. The real work lies in building institutions that make rights meaningful—and finding the political pathways that make such institutions sustainable.