The Rule of Law

Concepts: rule of law

Time: 1 class period

Procedures:

1. Display or distribute "The Obstacles to Legality." Read and discuss with students, emphasizing how important it is to people trying to make their way up in the world that the law provide a secure foundation for their efforts.

Possible discussion questions include:

• What are the costs and benefits of starting a legal business for a working class or poor person in Peru? Emphasize that deSoto's team was being paid for their efforts to deal with the bureaucracy; the average person would have to make a living at the same time he was trying to start the business. The benefits are clearly the security that legal status offers, but the opportunity cost is huge, especially for poorer people with little to fall back on.
• Most people get money to start or expand businesses, build houses, buy farm equipment. etc. by borrowing it. How do the difficulties of securing legal status that deSoto describes affect people's ability to invest and take risks in hopes of bettering their economic situation? Collateral is necessary for loans. Because we know that the law recognizes and upholds a person's title to his home, he can use the home as collateral for a mortgage loan. If he can't pay the mortgage, the bank knows it can claim the home, so it is willing to risk lending him the money. If no one trusts that your ownership of your home or business is protected and secured by the law, then you can't use it for collateral.
• Do you think the issues deSoto raises are a bigger problem for the rich or for the poor? Although students may be tempted to reply that the rich tend to have property and the poor don't, remind them that the rich are better able to protect their property themselves. They can hire someone to guard their homes, stores, businesses. A poor family must leave one worker at home everyday if they fear that squatters will come in and take their home and the law won't help them get it back.

2. Distribute "The Rule of Law." Direct students to read it carefully, either for homework or in class. (If you distribute the handout for homework, do not include the blank chart.) Divide students into small discussion groups and allow them time to answer the discussion questions and fill in the chart as a group.
3. Display the completed chart from the teacher answer guide, or discuss student charts in large group. Debrief, tailoring the discussion to make sure that students understand the differences between the rule of law and the rule of men.