In 2004, at the meeting of the World Economic Forum, Bill Clinton publicly declared that Hernando De Soto - founder and president of the Institute of Liberty and Democracy (ILD) in Lima and consultant to numerous heads of state - was probably the world's most important living economist. He and ILD have been for the most part dedicating themselves to a question that already haunted the French economist Fernand Braudel: Why capitalism triumphs in the West and fails everywhere else? De Soto claims he has found the answer. His book published in 2000, The Mystery of Capital, is setting out his argument: it is not a matter of wiping capitalism out but, on the opposite, to give Third World and former communist countries a chance to get the necessary conditions to benefit from it.
[...] Mindful of the fact that the single most important source of funds for new businesses in the United States is a mortgage on the entrepreneur's house, De Soto's plan is to make homeowners out of the poor squatters, providing the extralegal world with individual property titles. Once that is done, the poor will have access to credit, loans and investments as their dead assets are transformed into capital. Secure property rights probably are, as he asserts it, the “hidden architecture” of modern economies. [...]
[...] The fact that the title only refers to the West and seems to forget Japan and, more recently, the successful conversion to capitalism of Asian countries such as Taiwan and South Korea and other countries such as Chile also tends to show that De Soto uses a catchy formula to promote his idea. This leads to a lot of regrettable repetitions throughout the book. Furthermore, it is a pity that De Soto dismisses the argument of culture - to explain why poor nations have not succeeded in implementing capitalism yet - too quickly. [...]
[...] When read in conjunction with an analysis such as the one about China published by The Economist last week to make China even richer Let the peasants own their The Economist, Volume 378 Number 8470, March 25th-31st 2006), The Mystery of Capital has much explanatory power. In the article, one could read “Giving peasants marketable ownership rights, and developing a legal system to protect them, would bring huge economic benefits. If peasants could mortgage their land, they could raise money to boost its productivity. [...]
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