Customer Reviews

The Other Path: The Invisible Revolution in the Third World

5 star:		(11)
4 star:		(3)
3 star:		(1)
2 star:		(0)
1 star:		(0)

 

 

I love the little jibe provided within the title of Hernando de Soto's "The Other Path." It's a poke at "The Shining Path" (Sendero Luminoso), the Maoist Peruvian terrorist organization that wreaked havoc on de Soto's homeland beginning in 1980. de Soto's attempt in this book is to show that the more effective struggle is to make capitalism more efficient. To those who know de Soto's work, the solutions are well known: build a system of laws that allow one's residents to buy, sell and value property rights; and reduce the complexities and banalities of starting a business.

If you've read de Soto's master work "The Mystery of Capitalism," then there is no new news here. In fact, "The Other Path" will look out-of-date with its yellowing statistics. So why the five stars? As a testament to de Soto's bravery. Think about the guts it took for him to research and publish this book in Peru during the tumultuous and frightening period there. What a statement.

The original version of this book was written in the mid-80's to offer the people and government of Peru specific suggestions to combat Sendero Luminoso by making it possible for ordinary people to have a productive and meaningful participation in the nation's economy. This new printing includes a preface written in 2002 that provides the context and history for non-Peruvian readers and gives some analysis of the successes of the suggested reforms under the Fujimori government.

The first part of the book is a detailed analysis of three sectors of the Peruvian economy: housing, transport, and trade (small manufacturing and retail primarily). In each of these, De Soto demonstrates how the barriers raised by regulation and legal process from both right and left wing governments in Peru have forced the majority of persons participating to do so in informal/illegal ways. The result is that formal activity bears the brunt of taxation and informals have little protection in terms of property rights, contractual instruments, and so on. The net result is that everyone is impoverished. This section of the book can be tough reading because of the amount of detail, but its necessary in order to understand the importance of the second half.

The second half suggests that the Peruvian situation is really the reemergence of mercantilism, not a market economy. De Soto then provides some suggestions to peacefully transitiont to a market economy, and convincing warnings that failure to do so will almost certainly result in a violent transition.

The points that De Soto makes are increasingly significant to non-Peruvians as societies like America have increasingly centralised economies. Ironically, the cover includes blurbs from both Presidents Bush and Clinton. One suspects that netiher of them actually read the book.

In many ways, I am disappointed that I read this book after reading de Soto's other book, "The Mystery Of Capital". Both this and his other book largely contain the same ideas, but "The Other Path" focuses more intently on de Soto's experiences in Peru rather attempting to answer a very broad question. Because "The Other Path" focuses on squarely on Peru, it can more completely chronicle how his ideas have been used to better the lot of poor Peruvians, and have contributed to the defeat of Sendero Luminoso.

I would have preferred it if the book did not purport to be a general answer to terrorism. While his ideas are very applicable with respect to Maoist revolutionaries attempting to (in theory) uplift the poor, they seem less relevant to "non-economic" terrorists, such as certain rich scions of Saudi families that fly airplanes into buildings, for example. But that is a minor point.

Hernando De Soto's "The Other Path" is a much drier read than its follow up "The Mystery of Capital." I'm glad I read TMC first - it gave a global economic perspective that I could relate to and which interested me in reading more of the author's work. The Other Path is very detailed in its portrayal of Peruvian politics, the intricacies of laws governing property rights and transactions, and the evolution of businesses from extralegal to legal operations. While this very book was the tool used by the Peruvian government to successfully solve its terrorism problem in the 1980s, by legalizing the economic operations of the majority of its marginalized citizens, and while its message and methods are even more relevant in the current climate of global terrorism, the step-by-step detail makes it a tedious read and I couldn't get all the way through. I will, at some point, try again, but I'm glad I read The Mystery of Capital first.

I enjoyed this book but was spoiled because I first read "The Mystery of Capital" and then this. This book's stats are somewhat outdated because so much has happened in the last 15-20 years, which takes away from the crispness of the argument, but the argument is still apparent and sound. Although I agree that eliminating government red tape to let more people become a part of the economic system and therefore become plugged into the benefits of the system (eg, a legal work address for customers to reach you at, legal recognition so to advertise, etc.) and thereby allow government to collect more taxes so to (hopefully) put more money toward fighting social problems; I hope de Soto agrees that the economic answer to terroism is not the only answer. Stregthening the economic infrastructure is a strong part of the answer, but much more is also needed for some people to not desire to kill other people, and that may be something which can never be had. Although I would say "The Mystery of Capital" is a must read, this is nonetheless a great supplement to "The Mystery of Capital".

This book should be "required reading" for anyone curious about the impact of law and property rights on economic growth. While De Soto describes in detail the damaging effects of Lima's Spanish Mechantile property/legal system, he also demonstates that human initiative can florish through black market economics to such a degree that the city is "saved" (and even encourages) so-called illegal activity. A classic economic story, and great fun to read.

Personally, the book's main contribution was that it shed many lights on the 'consequences' of delaying (or not granting) formal documents, papers, etc. to property... this is a critical issue esp. to goverment officers in developing countries who do not realise (unintentionally or otherwise) that simply delaying the processing of e.g. business licenses, land applications, etc. will affect the development of their own populace and country. De Soto's work is definately worth reading and preaching to officials and land administrators everywhere...

DeSoto is a genuinely original thinker. This was his first book that argued that regulation in "developing" countries impedes economic development. His most memorable example is one of a small entrepreneur who wants to open a hot dog stand in Peru - with six months of working with government entities - they could get a permit. No wonder why some people choose to work in the grey economy. DeSoto looks at a number of areas where regulation slows down the natural tendency of individuals to be entrepreneurial. The Mystery of Capital - which is his second book - has new data and amplification of his original premise. But this one, which has been translated into many languages and should be used as a guide.

Unlike most political theorists, de Soto has actually gone out and dug up evidence for his work. He starts with an excellent history of Peru, and shuns the concept that those who operate outside the law are necessarily criminals. Indeed, when his Institute for Liberty and Democracty attempted to _follow_ the law to set up a small business, they found out that it was literally impossible!

This book makes many excellent arguments for the removal of many layers of government, and shows the predictable results when government attempts to fix itself with more government.

De Soto does a great job of outlining some of the consequences of excessive regulation and lack of a strong rule of law. In three distict industries (transportation, housing and commerce) De Soto shows how productivity and wealth generation are hampered by poor laws and law enforcement. This book is essential for anyone interested in the microeconomics of development.