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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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It's become clear by now the fall of the Berlin Wall and the collapse of communism in most places around the globe hasn't ushered in an unequivocal flowering of capitalism in the developing and postcommunist world. Western thinkers have blamed this on everything from these countries' lack of sellable assets to their inherently non-entrepreneurial "mindset." In this book, the renowned Peruvian economist and adviser to presidents and prime ministers Hernando de Soto proposes and argues another reason: it's not that poor, postcommunist countries don't have the assets to make capitalism flourish. As de Soto points out by way of example, in Egypt, the wealth the poor have accumulated is worth 55 times as much as the sum of all direct foreign investment ever recorded there, including that spent on building the Suez Canal and the Aswan Dam.
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 alternate Paperback edition.
The author, president of an influential Peruvian think tank and a prominent Third World economist, sets out to solve the mystery of why some people in the world can create capital and others cannot. Outside the West, in countries as different as Russia and Peru, it is not religion, culture, or race issues that are blocking the spread of capitalism but the lack of a legal process for making property systems work. Implementing major legal change so as to establish a capitalist order involves changing peoples' beliefs, and de Soto contends this is a political rather than a^B legal responsibility. He believes such a change can be achieved if governments seriously focus upon the needs of their poor citizens for a legally integrated property system that can convert their work and savings into capital. Political action is necessary to ensure that government officials seriously accept the real disparity of living conditions among their people, adopt a social contract, and then overhaul their legal system. Mary Whaley
Copyright © American Library Association. All rights reserved --This text refers to an alternate Paperback edition.
Top customer reviews
The only drawback is that he take a tone that he has made an amzing discovery that no one else has ever figured out. This same thing has been proposed by (for example) Landes in the Wealth and Poverty of Nations and in the collection: Culture Matters, both recently. Looking further back into the past, however, F. Hayek discussed this issue in many books as far back as the 30's and it is not so far from ideas explored by Weber at the turn of the century.
I think it would have been a better book if he had pointed readers into ways of exploring the ideas instead of acting like he was the first to discover the concepts. He does present the concepts well and the book is definately worth reading.
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Author: Hernando de Soto.
Publisher: Basic Books, New York (2000).Read more