Hernando de Soto on Egypt's Extralegal Economy
Friday, February 4, 2011 11:04 am | By Kelsey Zahourek

In yesterday’s Wall Street Journal, world-renowned Peruvian economist Hernando de Soto penned an op-ed revisiting his 2004 study on Egypt’s extralegal economy and how the events unfolding today could have been shaped by the government’s failures to act on key policy recommendations that would have brought Egypt’s citizens and businesses into the legal market.

In the article de Soto notes the 2004 study found:

He then goes on to explain:

The key question to be asked is why most Egyptians choose to remain outside the legal economy? The answer is that, as in most developing countries, Egypt's legal institutions fail the majority of the people. Due to burdensome, discriminatory and just plain bad laws, it is impossible for most people to legalize their property and businesses, no matter how well intentioned they might be.

The Property Rights Alliance is honored to have the privilege of offering an annual fellowship named after de Soto to a graduate student interested in the areas of intellectual and physical property rights and global affairs.

Each year the fellow produces the annual International Property Rights Index, a comparative study that measures the significance of both physical and intellectual property rights and their protection for economic well-being. In order to incorporate and grasp the important aspects related to property rights protection, the Index focuses on three areas: Legal and Political Environment (LP), Physical Property Rights (PPR), and Intellectual Property Rights (IPR). The 2010 study analyses 125 countries around the globe, representing ninety-seven percent of world GDP.

In the 2010 edition, Egypt ranked 67th with a score of 5.0 out of a possible 10.0. Egypt’s LP score remains fairly low with an outcome of 4.7 with the report noting, “While the other sub-components of the score increased, overall positive change was hampered by a diminution in the Control of Corruption sub-component.”

The entire WSJ article is worth a read. I also encourage you to visit de Soto’s organization, the Insitute for Liberty and Democracy’s website to check out his, as well as the ILD staff’s great work in empowering the world's poor through property rights.

The 2011 edition of the IPRI will be released on March 22.

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The Ninth Freest Country
Friday, January 14, 2011 9:32 am | By Katerina Bricker

The Heritage Foundation released their 2011 Index of Economic Freedom. They briefly define economic freedom as the fundamental right of every human to control his or her own labor and property and in an economically free society they are free to work, produce, consume, and invest in any way they would like, which is protected. This has been tracked for over a decade by the Wall Street Journal and The Heritage Foundation.

Economic freedom is measured from ten components and is assigned a grade from 0 to 100, where 100 is the maximum level of freedom. The ten component scores are averaged to give an overall economic freedom score for that particular country. The ten components to economic freedom are listed below.
  1. Business Freedom
  2. Trade Freedom
  3. Fiscal Freedom
  4. Government Spending
  5. Monetary Freedom
  6. Investment Freedom
  7. Financial Freedom
  8. Property Rights
  9. Freedom from Corruption
  10. Labor Freedom
The property rights component is the ability of individuals to accumulate private property, secured by laws that are fully enforced. The degree to which a country’s law protect private property rights and the degree to which it is enforced are taken into account for the grade of freedom. The more protection of private property rights, the higher that country will score. Out of the 183 countries assessed, New Zealand scored a 95 on the property rights score with 14 other countries trailing with a 90. The US scored an 85.
The United States’ overall score for the ten components is 77.8 percent, which is well above world and regional averages. This makes the US the 9th freest country in the 2011 Index. It has gone down .2 percent from last year. The recent spending spree of the government and the interventionist responses to the economic slowdown has hurt economic freedom. There has been no change in the property rights component since last year. According to the Index the US scored an 85 because their property rights are guaranteed, contacts are secure, and the judiciary is independent.
Reports such as Heritage’s Index of Economic Freedom laid the groundwork for other indices such as PRA’s own International Property Rights Index (IPRI) to be created. The 2010 IPRI analyzes data for 125 countries around the globe on their protection of physical and intellectual property, representing ninety-six percent of world GDP.

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Report Finds Counterfeiting and Piracy Websites Attract Billions
Wednesday, January 12, 2011 2:52 pm | By Kelsey Zahourek

To underscore the threat of online theft, anti-fraud firm Markmonitor released a study examining a range of sites that offered pirated content and counterfeit goods. The study looked at a sampling of 22 brands, both digital content and physical goods, and found that websites that offered pirated or counterfeit versions of those brands generated a staggering 53 billion visits per year with the majority of visits going to sites that offer digital content. While the 53 billion visit number does not equate to the number of downloads or purchases, this study provides a valuable snapshot into the rampant use of these sites to gain access to illegal goods.

The issue of online counterfeiting and piracy gained much needed attention last year as members of the IP industries and those in Congress and the Administration looked to come up with ways to deal with the very real threat online infringement poses to the economy. Activity in this area included the appointment of Victoria Espinel as the first Intellectual Property Enforcement Coordinator, negotiation of the Anti-Counterfeiting Trade Agreement, and Senator Leahy’s introduction of S. 3804, the “Combating Online Infringements and Counterfeits Act.”

The theft of intellectual property is pervasive and not only harms the economy but society as a whole. When an individual or company is no longer able to count on protection to monetize their work the very incentive to create is undermined. Beyond the steps taken by government to combat online infringement highlighted above, I believe it is more important to highlight what private industry is doing to come up with solutions outside of government intervention. Last month it was announced that an industry-led effort was underway to target rogue sites that specialize in peddling counterfeit pharmaceuticals and stop them from doing business. Companies included in the coalition are Microsoft, Google, Visa, Mastercard, American Express, Yahoo, GoDaddy, Neustar, PayPal, and eNom.

Additionally, Google signaled a shift in how its search service deals with counterfeits and piracy. Google will be implementing four changes to its service that include: acting on reliable copyright takedown requests within 24 hours; preventing terms that are closely associated with piracy from appearing in autocomplete; improving its AdSense anti-piracy review; and tweaking search queries to make authorized content more readily available.

These are reasonable steps that could make serious progress in the front to combat intellectual property theft.

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