Capital to the People!

The Mystery of Capital, by Hernando de Soto, is a must read for anyone who studies or debates free market economics. Capitalism is the most powerful engine for allowing people to lift themselves out of poverty and empowering anyone willing to make the effort to reach their dreams. But in some developing countries, Capitalism is not reaching these goals. This is not because of "market failure", but rather because of government failure. De Soto demonstrates effectively how much damage a government which fails to provide simple, easy, inexpensive and effective registration of property and is therefore unable to enforce property rights can do. Through studies performed in his native Peru and throughout the third world, he illustrates again and again how the entrepreneurship of poor people is thwarted by the governments that are supposed to be protecting their rights.

Consider the Philippines, where it takes 168 steps and 13-25 years to formalize informal urban property. Or Egypt, where the procedure to gain access to desert land for construction and to register these property rights takes 6-14 years and 77 steps. Or Lima, Peru, where 728 bureaucratic steps must be braved, in order to obtain legal title to a home in a validated housing settlement.

The result of this madness? People build concrete and cinder block homes on land they do not own. People are forced to run their businesses illegally because running a legal business is impossible. And under those conditions, although these people have assets, they have no way of turning these assets into capital. Who would write a mortgage on a home built on land whose ownership cannot be determined? Who will finance the expansion of a business which exists only because the authorities have not yet gotten around to shutting it down? How can people escape from poverty, if access to the very basic legal system that capitalism requires is beyond their means.

Please click the link adjacent to the title, in order to order this fine work, and to finally put to rest the illusions of those Socialists who claim that the countries where many are unable to experience the benefits of capitalism is "proof" that capitalism creates wealth only for the few at expense of the many.