For a long time, Western economists failed to appreciate the relationship between private property rights and economic development. Karl Marx saw private property as the source of wealth and called for its elimination to promote equality. A century and a half later, we know that a country without a formal system for registering property rights limits its own economic development and prevents its citizens from realizing their full potential. It’s a simple yet startling fact: The road to economic development runs through the county clerk’s office at the local courthouse.

The great economic divide in the world today is between the 2.5 billion people who can register property rights and the five billion who are impoverished, in part because they can’t. Consider what happens without a formal system of property rights: Values are reduced for privately owned assets; wages are devalued for workers using these assets; owners are denied the ability to use their assets as collateral to obtain credit or as a credential to claim public services; and society loses the benefits that accrue when assets are employed for their highest and best purpose. The Institute for Liberty and Democracy, founded by Hernando de Soto in 1979, estimates that two-thirds of the world’s population lacks access to a formal system of property rights, resulting in undeveloped resources and assets worth an estimated $170 trillion, or 63% of the value of the assets of the U.S.

Increasingly sophisticated data from surveys, satellite photos and the Global Positioning System have resulted in organized knowledge about the location of every visible asset on earth. Yet outside the developed world and some advanced regions of developing countries, there are no accessible records detailing who owns those assets.

Forty years ago one of us—Hernando de Soto—discovered that even in the most primitive societies records exist on who owns what. Based on this discovery, ILD undertook an organized effort in Peru to begin to assimilate and formalize these records to establish a registry of property ownership.

In 1980 the communist-terrorist insurgency known as the Shining Path won support among the poor indigenous people of Peru by enforcing primitive property rights at the point of a gun. We first collaborated in 1990 when Peru sought American assistance to replace the gun with the rule of law by officially recognizing that the indigenous Peruvians’ primitive property records were legal proof of ownership. At that point the Shining Path controlled 60% of Peru’s territory, and the RAND Corp. was predicting that Lima would fall as early as 1992.