|
|
Title: The Mystery of Capital: Why Capitalism Triumphs in the West and Fails Everywhere Else
Purchase
Item
Manufacturer: Basic Books
List Price: $16.95
Our Price: $9.25
|
|
| Customer Reviews: |
| The Mystery of Capital: Why Capitalism Triumphs in the West and Fails Everywhere Else by Basic Books Brilliant! | | A deeply interesting read. This book completely changed my outlook on global economics and politics. After reading this book, one will certainly see the world quite differently. | | The Mystery of Capital: Why Capitalism Triumphs in the West and Fails Everywhere Else by Basic Books A narrow view that will help some for awhile and leave many out | I agree with de Soto's main point, and he states it well and often, that each underdeveloped or economically poor nation needs a unified titling system and attendant legal structures in order for untitled (dead) assets to be available for capital use and the creation (or unlocking) of wealth. It seems his main thrust or raison d'être is that this will empower the poor. I think this thrust is at least partly an illusion or an idealism that is more of a goal than an attainable reality. Efforts in Peru, he claims, have started this process, which I take at face value. In the book he also acknowledges difficulties in Peru's efforts, but does not elaborate on them, or propose measures to remedy them.
There is a Wikipedia article on de Soto, which has a section critiquing his theory. I refer you to it, and I will not repeat the critiques here; these are my own thoughts formed before I read the wiki article on de Soto.
Adoption of de Soto's system is no sure guarantee of positive change; there are too many social, legal, historical, and political variables to predict even less-than-universal success. It is not a panacea, leading to significant wealth for most individuals of the masses, or proletariat, if you will. It will have some positive effect, but "the poor you will always have," will remain true.
Upon reflection, I agree that his work and theory are a necessary fundamental reform in developing and former communist nations. However, my conclusion is that this reform effort will lead either to better-than-marginal but not optimal improvement or will again fail. And inevitably it will lead to inequities not foreseen by de Soto. Unfortunately, I can only be a supporter or a critic (I am both at this point); I cannot offer any realistic, well-thought-out, practical alternatives of my own, or anyone else's for that matter.
As for my personal critique of his ideas, first, there is no assurance or even strong probability that reform will lead to systems that have less net cost than their present-day extralegal customs, which is the unstated requirement of the "end user," the untitled landholder or squatter. De Soto describes a more efficient, more sophisticated, but still more costly bureaucracy, replete with more educated technocrats, managers, career civil servants, computer programmers, analysts and systems, to replace the traditional one, with its many steps to ownership. And the benefits to the poor may be short-lived, as I describe below. Faith in de Soto and his reasoning is a thin underpinning or foundation for the wide-ranging changes he proposes.
Second, the extralegal informal systems will not go away; there will always be an extralegal shortcut to "ownership" costing less than the official route to ownership, even if "ownership" is temporary or transitory, merely occupancy. Right of occupancy, sustenance, survival, and procreation is what most of the world's poor want and cannot afford; that is they want enough "capital," more rightly cash, to pay rent and buy food. Right of occupancy, especially if temporary occupancy is sufficient, will always cost less than capital; there is less overhead.
Maslow's hierarchy of needs comes to mind. Where is capital formation on the scale of a squatter's needs? Very distant from the needs for food, shelter, clothing, medical care, sanitation, transportation, education, and meaningful social interaction, that is, family. De Soto proposes to provide something most of the poor do not even know they want or need. See the discussion on education, below. I take his metaphorical point of the need to put on socks before shoes, but I don't have an answer.
Third, in absolute terms of numbers of people, it will help many, but I found de Soto's thesis surprisingly narrow in scope in terms of what classes or demographic segments it will help. Its basic target was a healthy, motivated, fairly intelligent or perceptive individual with a desire to expand his or her individual or small-business entrepreneurial opportunities, whether urban or rural, subsisting in a more or less stable society. To be sure, de Soto's system, if implemented, will help many of these people. There are many people among the under-classes in the world who meet these criteria, but many of the dispossessed are not of this type.
Some of these are the nomads of the world, historic and present day; their way of life will continue to disappear, along with their languages and cultures, because they do not want to embrace the capital culture. This demographic covers such historical and current groups as the Esquimoes (Inuit), Native American Indians, gypsies, yak herders on the Mongolian plain, and Australian aborigines. The UN designates at-risk physical places as World Heritage Sites. Does the UN designate disappearing cultures as World Heritage Cultures, raising our consciousness of them? De Soto offers nothing to them. They cannot be persuaded to join the capital culture on its terms, and decline to adapt the capital culture to theirs, so they will inevitably continue to be consumed or absorbed by the capital culture, losing their identity at least, if not their ability to exist.
Another demographic group and a reality de Soto ignores is the vast population of "displaced persons," economic or political refugees. Does he really think Kenya will grant land titles to the occupants of the formal and informal refugee camps inside its borders? Not gonna happen. If this is the case for Kenya, the same outcome applies to any other host country of refugees. The fact is displaced people seldom if ever go home. Even if they could, many do not, since they were born in the host country and never knew the homeland their parents or ancestors lost. Nor are they assimilated into the host countries for hundreds of years. They are lost, disenfranchised and powerless. What does de Soto offer them?
Take Palestine. Granting formal property rights for the land upon which they squat, or even statehood to those occupying Gaza, is not what they want. They want their land inside Israel back, which they were forced out of in 1949. Regardless of the legality or morality of that event, it is a fact on the ground some 59 years later. Their "barking dogs," which de Soto believes will determine ownership, are not even on the land they want to claim.
Fourth, de Soto ignores some pertinent historic and present day facts. He does not mention the historic range wars fought in the United States, or their corollary in England (initiated by the Enclosure Act), when open range ranchers and herders clashed with those who would fence lands, preventing passage of herds. The "fencers" won, and became the property owners. The free-rangers lost, and had to settle down or disappear. If any of these cultures remain, they will continue to lose under de Soto's system. What does de Soto offer them? Or is it too late and these cultures are gone? Are the Bedouins all settled oil magnates now?
He also ignores a big reality, China. Many of those who gleefully chimed "Communism is dead" when the Berlin wall fell still have their head in the sand ignoring the gargantuan communist machine chewing up capital, oil, and other physical commodities such as steel and cement. Seen the price of oil lately? Gold? Does China have anything to do with these price rises? You bet.
There is plenty of extralegal mercantilism and even some extralegal capitalism going on as an undercurrent in China. Is capitalism, as practiced by the individual or corporate entrepreneur, officially sanctioned throughout China? No. And even though some formal capitalistic economic zones exist, e.g. Hong Kong, Shenzhen, Singapore, and the rest, they will continue to be tightly contained and controlled. China remains a collectivist society, politically and economically, but it is as "capitalist" as any other successful nation; it formally produces, buys, and sells seemingly unlimited quantities of the world's goods, and manages the creation, use and flow of a vast amount of capital without a state-sanctioned private-enterprise capital system. By the measuring stick of Western capitalism China is a successful capitalist system, and will continue to be successful, regardless of its deplorable records on individual human rights, the environment, industrial safety and democracy.
How does de Soto figure this into the apparent world view he espouses that it can't be done any other way than the way he describes? It is being done successfully in another way. Does China, the country, lack capital? The book was published in 2000. Perhaps this was before China was recognized for what it is becoming, a behemoth economic engine.
Fifth, De Soto's solution may work in a society that is more or less unified as a functional society, even a chaotic or heavily bureaucratic one. Intractable centuries-old land claims between disparate (non-functional, or if I may coin a phrase "bi-functional") societies occur over and over in history, and continue to happen today. We call these claims "wars." These claims come from different cultures whose only method of resolution is war and repeatedly claiming, losing and reclaiming lost territory. Europe just got tired after two world wars and gave up trying to fight with itself; the combatant claimants are silenced, dead, or dormant. But Europe is only a recently and tenuously unified or functional society with a very short history of internal peace, compared to its bloody history.
Then, consider the present-day claims of Serbs, Bosnians, Macedonians, the new Kosovoians, the Turks and Kurds, the Basques and Spanish, the Irish "problem" and so on. India and Pakistan are constantly on the brink of nuclear war over disputed property. What does de Soto offer them?
Sixth, another issue which de Soto practically ignores is literacy, numeracy, and education in general, in terms of its effect on a person's ability to use capital to create, manage, retain and increase wealth. Giving title to land to a person unsophisticated in the ways of ownership is inviting them to be preyed upon by the economically sophisticated classes. As the comedian Gallagher said, "It is a miracle a fool and his money ever got together in the first place." Even if the miracle of titling occurs, and in some places it will, many unsophisticated, newly-minted landowners will soon be disenfranchised of their new capital and find themselves on the fringe of society again, back in a familiar-looking extralegal sector. How would de Soto address this inevitable outcome?
This is my main concern about de Soto's program and theory: He uses education to entice the poor into accepting his view, but does not propose how to equip them to function with the novum organum. No one in a capitalist society will prevent someone from making a bad deal once they have title and capital, as long as the deal is legal. I am concerned de Soto's reforms will be short-lived benefits to those he proposes to help. The bureaucracies and ruling wealthy classes, however, will live on and swell with renewed power.
Seventh, de Soto downplays the tenacity of those holding power. He says they will see the inevitable benefits, and naively implies they will happily relinquish their power voluntarily to squatters, e.g. capital stored in vast land tracts, if they would just listen to him. When did this ever happen peacefully in history? It happened when one government bought the land holdings claimed by another government. Examples of peaceful land transactions were the Louisiana purchase and the Alaska purchase. In both cases the seller government (France or Russia) did not have title to the land sold, as any Native American Indian or Inuit will tell you. But individuals or governments do not lightly give up what they have worked decades, in the case of individuals, or centuries, in the case of countries, to hoard, explaining why most land reform and wealth redistribution events or movements are violent revolutions.
Eighth, there is little mention of the effect of an explosion of capital will have on the environment, the earth we live upon, and its ability to keep us alive. It is not necessarily or inherently "better" or sustainable to increase capital growth exponentially, without some vision as to where it is taking us.
In conclusion, with the gigantic possible exception of China, which may once again find itself occupying the position of preeminent civilization in the centuries to come, what de Soto proposes is, to paraphrase Churchill, a change to the system of capital formation which is the worst possible change in the world, except for all the other changes proposed, tried, and abandoned. That is to say, what have we got to lose by giving it a shot?
I hope de Soto comes back with another tome addressing some of the issues I tried to raise. He is a brilliant man, and has a remarkable track record. I admire his intellect, his ideals, and his willingness, even insistence, to put his ideas to real-world tests.
In the week of March 23, 2008, I will take this book to Haiti in order to leave it there, perhaps in the airport in Port au Prince. | | The Mystery of Capital: Why Capitalism Triumphs in the West and Fails Everywhere Else by Basic Books One idea book | | A one idea book by Peruvian economist Hernando de Soto: that capitalism will flourish in the Third World (where clearly it has not, give de Soto one mark for honesty) if the poor there, who live in many cases in land that is not legally theirs, would be given a title to the land. Once given a title, they would have collateral to enter the legal market. The idea is interesting; certainly, anybody who has been in a bustling third world market has seen it as a haven for capitalism, not socialism. But the notion that this would be a cure-all for third world poverty is preposterous. Worse, de Soto gives figures of wealth held by the poor (but not under legal title) that seems frankly dubious. Like most one idea books, the author ends up overselling its idea (which is not bad in itself). | | The Mystery of Capital: Why Capitalism Triumphs in the West and Fails Everywhere Else by Basic Books Insightful | I thought this was a fantistic book. The author compares the sorry state of property rights in the third world today with identical problems in earlier periods of US history.
Rich countries are frequently blamed for the problems in poor countries but this book shows why that blame is misplaced. This book also shows why billions of dollars in foreign aid have not and can not eliminate third world poverty. | | The Mystery of Capital: Why Capitalism Triumphs in the West and Fails Everywhere Else by Basic Books Clear, Precise, Cogent and Important Thoughts | Although De Soto is trumpeted in the halls of the Chicago School as a person directly in line with his ideological primogeniteurs, it is clear that De Soto is not an ideologue.
His main thesis is that property rights are one of the fundamental underpinnings of western capitalism. Property rights allow the smooth functioning of capital accumulation without the diversion of too many supernumerary laws and institutions, and form the base impedements that allow capital markets, lending institutions and wealth creation mechanisms to function smoothly. If property rights are not highly developed then the "friction" this creates in the movement of capital impedes growth. As a concrete example, people in Africa and much of Latin America and Asia live in hovels that do represent accumulations of capital, but because these hovels, many owned by squatters cannot be leveraged to create capital or cannot be lent against. They in effect at dead capital because their ownership is in limbo. Advanced societies have smooth functioning property laws and markets that allow the process of wealth creation.
All of this is simple and De Soto does chronicle, as well as he can the underlying condition of dead capital formation, historical development of property rights and solid policies for implementing more legal property controls in the third world.
De Soto is also profoundly motivated to move backward societies forward and feels the poverty profoundly. In this sense he is very much a thinking man's economist and not an ideologue.
The one thing I would state is that the concepts De Soto is propounding are simple in nature and scope. As such I think that De Soto does repeat himself from time to time. Also the historical developments of property rights in the US is a good example of how a country with essentially third-world property rights, emerged to relatively advanced property rights. But I do think that his historical scholarship suffers a little as an Economist outside of his area of interest.
The writing style, though good, is not so exciting at times and would do better with a bit more details on specific human examples. But that should not detract from its scholarship. | | The Mystery of Capital: Why Capitalism Triumphs in the West and Fails Everywhere Else by Basic Books Product Description | "The hour of capitalism's greatest triumph," writes Hernando de Soto, "is, in the eyes of four-fifths of humanity, its hour of crisis." In The Mystery of Capital, the world-famous Peruvian economist takes up the question that, more than any other, is central to one of the most crucial problems the world faces today: Why do some countries succeed at capitalism while others fail?In strong opposition to the popular view that success is determined by cultural differences, de Soto finds that it actually has everything to do with the legal structure of property and property rights. Every developed nation in the world at one time went through the transformation from predominantly informal, extralegal ownership to a formal, unified legal property system. In the West we've forgotten that creating this system is also what allowed people everywhere to leverage property into wealth. This persuasive book will revolutionize our understanding of capital and point the way to a major transformation of the world economy. | | The Mystery of Capital: Why Capitalism Triumphs in the West and Fails Everywhere Else by Basic Books Amazon.com | | 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 |
| |
