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The Mystery of Capital: Why Capitalism Triumphs in the West and Fails Everywhere Else Paperback – July 9, 2003
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No, the real problem is that such countries have yet to establish and normalize the invisible network of laws that turns assets from "dead" into "liquid" capital. In the West, standardized laws allow us to mortgage a house to raise money for a new venture, permit the worth of a company to be broken up into so many publicly tradable stocks, and make it possible to govern and appraise property with agreed-upon rules that hold across neighborhoods, towns, or regions. This invisible infrastructure of "asset management"--so taken for granted in the West, even though it has only fully existed in the United States for the past 100 years--is the missing ingredient to success with capitalism, insists de Soto. But even though that link is primarily a legal one, he argues that the process of making it a normalized component of a society is more a political--or attitude-changing--challenge than anything else.
With a fleet of researchers, de Soto has sought out detailed evidence from struggling economies around the world to back up his claims. The result is a fascinating and solidly supported look at the one component that's holding much of the world back from developing healthy free markets. --Timothy Murphy --This text refers to an out of print or unavailable edition of this title.
Copyright © American Library Association. All rights reserved --This text refers to an out of print or unavailable edition of this title.
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He and his team are convinced that the problem is the lack of well defined property rights. He notes that the poor in under-developed countries have assets, but that their real property is often owned informally, and thus cannot be used to generate capital. As a result, the crucial role of real property is simply absent in under-developed countries.
He proposes the obvious solution --- formalization of informal property rights and notes that acquisition of property through informal means (squatting) has a storied history in the United States and other developed nations. DeSoto understands that formalization will be politically difficult, but points out that both rich and poor will benefit economically. One might call it "trickle up economics."
Finally, formal property rights are under attack in developed nations, through overly intrusive land use and environmental regulations. It is well to reflect upon the potential for slipping toward a system that allows virtual squatters to seize or nullify property rights through regulation, threatening a principal source of national income.
At the other pole are holistic, multifaceted explanations, taking into account history, culture, economics, religion--the whole nine yards. Such accounts may be more intellectually satisfying, but often lead to frustration by convincing us that the problems are too complicated, too resistant to quick fixes, for practical solutions.
The Mystery of Capital falls for the most part in the first camp. It's author, Hernando de Soto, is one of the 3rd World's most dedicated and intelligent reformers. He wants desperately to do something to help the poor, and has been heroically influential--and successful--in arguing against the failed statist solutions long in vogue in Latin America. Now he wants to move beyond criticism to a positive agenda for change. De Soto's impeccably pro-capitalist credentials make his initial criticism especially convincing: actual capitalism in most of the world is restricted to a small elite, while most remain on the outside looking in.
The question is whether de Soto's solution is equally convincing.Read more ›
The main point of The Mystery of Capital is that the seemingly intractable and hopeless situations in Third World countries is due in large part to one common problem: the issue of property rights. Macroeconomic policies make piecemeal improvements (or may improve nothing at all). Money is not the source of the wealth in a nation. Capital is the source of the wealth of nations! Facilitating the proper legal environment is an integral part of the creation and growth of capital, something First World nations had to develop, and something de Soto argues that Third World nations can develop.
The book gets a bit dry in the latter half, but is definitely worth the read. De Soto covers legal ramifications and reforms that will help build a bridge for "dead capital" to be converted to "live capital". The Mystery of Capital will be a surprise for some, because of de Soto's synopses here and there about what life is like for those who live in Third World countries, and the enormous amount of (untapped) wealth the people of Third World Nations possess.
De Soto is a decent economist, in part because he draws from so many disciplines and sources. He also did a prodigious amount of observation and collection of data (hardly an ivory tower academic). If you have an interest in developmental economics, law and economics, entrepreneurship, History of Thought, Economic History (especially that of the U.S.Read more ›
Most Recent Customer Reviews
Powerful. Shows how easily (conceptually) and difficult (actually) it is to improve economic conditions around the world.Published 2 months ago by Will
Puts into perspective that our wealth and success is not some genetic mutation inherited from our forefathers, but that it can be had by all mankind.Published 4 months ago by frank
Book in great condition, quick shipping. Highly recommend this book for anyone interested in economics and why the developing world is such a mess.Published 4 months ago by Jack N.
Hernando DeSoto always offers such an interesting perspective. Yes this book is a bit dated (I chuckled at the comments on mortgage backed securities... oops). Read morePublished 4 months ago by Shane C. Pruyne
In many poor economies capital exists as dead capital, locked up in extralegal arrangements and as such is unable to be leveraged. Read morePublished 7 months ago by Jason Leininger
A thorough explanation of complexity and necessity of third and second world governments to establish foundations needed to support prosperity through capitalism. Read morePublished 10 months ago by So Cal