Much the same story could be told of the Philippines, Egypt and other Third World countries. For the entire Third World and the former Communist countries, de Soto's calculation is that the total value of all the real estate held, but not legally owned, by the poor is more than 20 times all direct foreign investment in the Third World and more than 90 times all the foreign aid to all Third World countries over the past three decades. Of course, when all this wealth is divided by hundreds of millions of people, the per capita amount is not enough to make them prosperous, much less wealthy. The crucial theme of the book is that this vast amount of wealth cannot be used, as it is in the West, as investments to create still more wealth and rising standards of living. That is because real estate, businesses and other assets in the underground economies of the Third World cannot be used as collateral to raise capital to finance industrial and commercial expansion.
Illegality also creates other economic handicaps.
Many American businesses were begun by someone who borrowed the money to get started, using his home as collateral. But a home built outside the legal system means that the owner has no legal title and therefore nothing that a bank can accept as collateral. The same is true of businesses created and run without having jumped through all the legal hoops. Because it can be an unbelievable ordeal, especially for people with little education and in countries where red tape is virtually boundless. De Soto and his team of researchers have examined the processes in a number of Third World countries.