A decent article on the subject of institutional reform and economic development. However, the highlights are essentially a courtesy of Hernando de Soto.

Link to Full-Text Speech

Highlights:

"Among the institutions that are most crucial to economic growth are those that enable a country to allocate capital to its most productive uses.  Such institutions establish and maintain strong property rights, an effective legal system, and a sound and efficient financial system."

"Hernando de Soto, in his important book The Mystery of Capital, argues that the inability of the poor in developing countries to acquire property rights is a central reason that they are unable to gain access to capital and so remain mired in poverty.  For example, the use of collateral is a crucial tool that helps the financial system make loans because it reduces losses when loans go sour.  A person who would pledge land or capital for a loan must, however, legally own the collateral.  Unfortunately, as de Soto has documented, legalizing the ownership of capital is extremely expensive and time consuming for the poor in developing countries.  In one of his many astonishing examples, obtaining legal title to a dwelling on urban land in the Philippines required taking 168 bureaucratic steps through 53 public and private agencies over a period of 13 to 25 years."

"Setting up a simple business in the United States generally requires only filling out a form and paying a nominal licensing fee.  In contrast, de Soto's researchers found that legally registering a small garment workshop in Peru required 289 days; at 6 hours per day, the cost was about $1,200, which was approximately thirty times the monthly minimum wage."