Today's news confirming the acquisition of the venerable New York Stock Exchange by the Deutsche Borse brings the issue of globalization home to many investors.

Free to Choose TV, which makes available all ten episodes of Milt Friedman's original 1980 television series Free to Choose, as well as all five episodes of the 1990 version of the same series, also contains a link to the excellent discussion of globalization by renowned economist, economic thinker, and advocate of the benefits of the rule of law and capitalism to reduce poverty worldwide Hernando de Soto.

The series is entitled "Globalization at the Crossroads," and it should be required viewing in the nation's schools (especially in the universities, where poverty is often blamed on everything but its real cause).

In the remarkable video, Mr. De Soto explains that on the major exchanges, symbols of property (such as stock symbols or cattle futures) can be traded, unlike the situation that pertains in many parts of the world, where there are no formal mechanisms for representing ownership of property (such as written titles and deeds). Without such mechanisms, as shown in the video, individuals cannot use property that they own -- such as their home -- for borrowing (to start a business for example).

Mr. De Soto offers a unique and insightful explanation for the root of the word "capital," which of course derives from the Latin word for "head." He maintains that the concept of capital is not simply wealth that can be used for production, but the ability to conceptualize wealth, in exactly the same way that the Chicago Exchange can trade hundreds of thousands of cattle futures without actually having to bring hundreds of thousands of cattle onto the floor of the market (which would be required in societies that have no systems for the symbolic representation of ownership).

Thus, the New York Stock Exchange, that most prominent example of the American ability to allocate capital through the rule of law and the symbols of ownership (in this case, stock in companies), is a perfect symbol for the power of globalization that Mr. De Soto is discussing, the ability to participate in commerce with people from all different cultures and groups. On a symbolic level, the merger of the NYSE with the German exchange should be welcomed by all those who believe, as we do, that globalization is beneficial to all participants.

We have referred to Mr. De Soto's work before, in this previous post. We commend him for his strong work in support of the rule of law and the increased ability for people everywhere to add value to others and to improve their own situation.

Subscribe (no cost) to receive new posts from the Taylor Frigon Advisor via email -- click here.