The shrinking middle class and the widening gap between the rich and the poor pose serious threats to social and financial stability, and, indeed, the Group of Twenty leaders have committed to “help to reduce inequality and poverty.” A major impediment to upward mobility is the inability of the poor to use their property, in which they sometimes hold only de facto, not de jure, rights, as collateral to obtain credit. This policy brief takes a novel approach to overcoming that impediment, explaining why commercial law should — and analyzing how it pragmatically could — recognize those de facto rights to enable the poor to borrow to start businesses or otherwise create wealth. 

  • Steven L. Schwarcz is a CIGI senior fellow and the Stanley A. Star Professor of Law & Business at Duke University. At CIGI, Steven leads research on systemic risk and financial regulation, corporate governance of systemically important firms, cross-border resolution measures and sovereign debt restructuring.