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Title: The Mystery of Capital: Why Capitalism Triumphs in the West and Fails Everywhere Else by Hernando Desoto, Hernando de Soto, Hernando de Soto ISBN: 0-465-01615-4 Publisher: Basic Books Pub. Date: 08 July, 2003 Format: Paperback Volumes: 1 List Price(USD): $16.95 |
Average Customer Rating: 4.25 (84 reviews)
Rating: 3
Summary: great ideas, something missing
Comment: Having done agricultural planning in 20+ Third-World countries, I find that De Soto makes some vital points. First, that globalism, the international free flow of capital, touches only a small minority. Second, that property titling and registration procedures in those countries are so slow and expensive that few people can afford them. They are inappropriate to these countries. One might say that also of the justice procedures of these countries. The book misses what practically all pundits miss. It fails to look at What Works. Taiwan is the prize example, where the reforms of the Fifties made industrial capitalists out of small rural landowners and created a broad market for industrial products that led to dynamic industrial exports. I was a prime pusher of the Second Land Reform of Vietnam, starting in the late Sixties. It had a radical retention limit which afforded some land to everyone. It moved fast, thanks to 1)excellent mapping, 2) computerization and 3)procedures managed by the villagers themselves. It immediately led to lots of on-farm investment, particularly in low-lift pumps. Someone please send a copy to Bill Gates. He uniquely has the money and the talent to do the job everywhere.
Rating: 5
Summary: An Unsexy, Yet Compelling Solution
Comment: So often we hear the solution to poverty and inequality in the developing world can be solved by fancy trade agreements, or glitzy technical solutions such as providing high speed internet connections. Then Hernando De Soto comes along with the most unsexy solution imaginable: reform the system of property rights.
You (or at least I) would not expect a argument on local codes and regulations on property rights with respect to economic development to be easy reading, and I wouldn't recommend taking this to the beach. But it is surprisingly easy to read and De Soto provides a delicate and readable touch. De Soto gains a lot of credibility because he clearly has gotten his hands dirty in the very countries and issues he writes about.
To summarize his findings, in the developing world, property and business ownership is difficult for the middle and lower classes to achieve, and they live outside the "bell jar" of the privileged in the developing world, who do not face these difficulties. Failure to achieve legal property rights and ownership, these classes are greatly restricted in acquiring capital to improve their properties or grow their business.
This is not to say the poor and middle class are lawless in these countries. On the contrary, De Soto demonstrates that informal and customary systems of property rights exist outside the legal framework of the country. In fact, such conditions existed in the United States and Europe, and over time, laws in these countries were adapted to reflect and integrate these extralegal agreements. De Soto argues that this must also take place in the developing world for capitalism to truly thrive.
So it is not oppressive "First World" countries exploiting the "Third World", nor the lack of free market principles, that is holding the developing world back. De Soto is arguing for a strong central government to serve the will of all the people, if these countries are to be successful.
This unique, but very compelling argument by a top notch economist and good writer is highly recommended and really essential reading for anyone interested in economic development.
Rating: 5
Summary: A Pragmatic approach to the socio-economic issues
Comment: Outside the Western borders; capitalism is in crisis not because international globalization is failing but because developing nations have been unable to channel capitalism in their countries. Most people in these nations view capitalism with skepticism. To them it is a private apartheid system that benefits only the West and the elites of the developing countries. The fact that more people throughout the world wear Nike shoes; flash Casio watches; drive Ford cars and dine at Mc Donalds; is not an indicator of capitalism.
The Issue:
Latin Americans do not have to be reminded. On at least four occasions since their independence from Spain in the 1820's, they have tried to become part of global capitalism and failed. They restructured their debts; stabilized their economies by controlling inflation; liberalized trade; privatized government assets; undertook debt equity swaps and overhauled their tax systems. At the consumer level they imported all sorts of American and European goods. But their lack of success is in their misplaced directive. Fact lifeblood of capitalism is placed in nothing but Capital.
The Resolution:
Desoto has taken a very pragmatic approach to the problem; by taking both a historical approach as to how the West traveled the path of Capitalism and undertaking a detailed research in the extent of dead capital stagnant in the developing world. He professes that just like the west in the early days; in the developing world there was a migration of people to cities during the industrialization. This migration created squatter colonies; and around them developed supporting economy. Bureaucracy and painful property registration system (taking 14-17 years); prevents registration of property. In essence creating dead capital; in such a system nobody can identify who owns what; addresses cannot be verified; people cannot get credit or debits; resources (land assets) cannot be converted into money or securities, description of assets are not standardized and cannot be easily compared; and rules of property law changes from neighborhood to neighborhood. By streamlining the registration of dead property lying outside the legal system eliminates all the issues above; and benefits the people by making credit/debit easily accessible to them, by taking loans with property as a security.
Facts:
Desoto from his years of research of underground economies taken from a very varied group of countries (Haiti, Egypt, Philippines, Peru) has found some very startling facts about dead capital.
In Egypt the Dead capital is 241,2 Billion, which is 55X foreign direct investment (FDI) up to 1996, 30X market value of Cairo Stock Exchange; 13X accumulated foreign reserves; 6X total savings in commercial banks in Egypt.
In Philippines the Dead capital is 132,9 Billion ; which is 14X total FDI; 7X total savings in commercial banks; 4X market value of Philippines Stock Exchange.
In Peru the Dead capital is 74,2 Billion; which is 14X FDI up to 1995; 11X capital of the largest public enterprises in Peru; 8X total savings in commercial banks in Peru.
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Title: The Other Path: The Economic Answer to Terrorism by Hernando De Soto, June Abbott ISBN: 0465016103 Publisher: Basic Books Pub. Date: 03 September, 2002 List Price(USD): $15.00 |
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Title: Globalization and Its Discontents by Joseph E. Stiglitz ISBN: 0393324397 Publisher: W.W. Norton & Company Pub. Date: April, 2003 List Price(USD): $15.95 |
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Title: The Elusive Quest for Growth: Economists' Adventures and Misadventures in the Tropics by William Easterly ISBN: 0262550423 Publisher: MIT Press Pub. Date: 08 August, 2002 List Price(USD): $19.95 |
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Title: Development as Freedom by Amartya Sen ISBN: 0385720270 Publisher: Anchor Pub. Date: 15 August, 2000 List Price(USD): $15.00 |
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Title: The Commanding Heights : The Battle for the World Economy by Daniel Yergin, Joseph Stanislaw ISBN: 068483569X Publisher: Free Press Pub. Date: 02 April, 2002 List Price(USD): $16.00 |
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