Capitalization by formalization? – Challenging the current paradigm of land reforms

Most of the land reforms in developing countries in recent decades follow a blueprint that is based on the property rights theory. This blueprint was supported by Western government-backed development aid institutions and the World Bank and intends to achieve a capitalization of property rights on land by formalization and individualization. Its supporters expect higher efficiency of the land markets and higher tenure security. The focus of the article is not so much on the formalization efforts themselves, but on the capitalization of the use rights. In contrast to the opinions of the property rights theorists, it is argued that this approach leads to a decoupling of benefits and costs of land use, which causes external costs, encourages rent-seeking behaviour and weakens the state. The central statement of supporters of privatization, namely that this strategy supports the efficiency of land markets, is rejected. Instead, the approach gives way to economically efficient and powerful interests at the expense of other groups and a diversity of living forms. Some evidence is provided using the examples of Germany (as a Western “blueprint”) and Cambodia (as a land in reform process). The plea is to couple the benefits and costs of land use and thus to eliminate external effects. This coupling can be achieved by a “decapitalization” of the use right on land.

► Most land reforms follow the agenda of capitalization by formalized land titles.
► It is illustrated that even the western blueprint has serious shortcomings (example of Germany).
► The transfer of this blueprint in developing countries may result in a disaster (example of Cambodia).
► Land reforms should not be guided by a “one-size-fits-all policy”. Instead, promising features would be decapitalization and a variety of user rights.