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The Missing Lessons of US History

In order to fully comprehend how this transition took place once just has to take a look at historical events that shaped modern capitalist society. In hindsight, the catalyst behind the change is fairly simple to root out. It was merely the acknowledgment that the extralegal sector was a burgeoning sector of the economy – even thought it escaped official radars – and that barriers to enter the formal system would only encourage people to become part of the informal setup.

America is a good example of a western country that went through the same problems that the developing world is going through today. It is important to note that, like many countries today, the government initially tried to stop the growth of the extralegal sector. However, with the passage of time, the government started to modify the law to integrate informal and formal systems. If we go far back into American history, we find that as the first English colonial governments established themselves, they sought to apply common English law to the land.

However, given that America was very different to England, the laws were difficult to implement and out of place. Colonist did not fully understand these complexities and started to establish their own parallel system, whether it be in politics or property. Plentiful land and rising migration, led to a gradual increase in squatting, which was unnoticeable at first but soon became rampant. Colonies reacted by allowing squatters to inhabit vacant land as long as they met some requirements, sometimes involving building a house, farming on the land, etc.

all within a certain time frame. However, many squatters found these requirements to be burdensome and unpractical. They started to develop their own systems of property representation; devising ways to mark property and avoiding conflict amongst themselves. All this happened to threaten elite, as they feared losing their properties. Thus, resistance towards these squatters began to increase. The government tried to evict trespassers or have them pay up, yet, they resisted, refusing to do both.

Yet, there were those in the government who sympathized with the squatters, as they themselves were immigrants. This allowed one major breakthrough to take place, ‘pre-emption’; a law that forced the rightful owner of the land to payback squatters for improvements upon the land. A failure to do so allowed the squatters to buy the property for a certain amount of money. With the passage of time, squatters became more powerful due to a united front, and the government raised the prices of land well beyond the reach of squatters and made it virtually impossible for them to buy land.

Individual states imposed their own laws and confused matters further. Squatters reacted by forming ‘claim associations’ and ‘miners organizations’ which formed their own rules on property representation with the consent of all the members. Eventually, due to the building numbers of squatters and the political and economic power that they wielded, the government was forced to recognize social contracts outside official law and initiate the gradual integration of the extralegal sector into the formal system.

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