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The Mystery Of Capital Why Capitalism Succeeds In The West And Fails Everywhere Else [Hardcover]

Hernando De Soto
4.3 out of 5 stars  See all reviews (91 customer reviews)

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Book Description

Sept. 6 2000
"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 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, but 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.

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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

From Booklist

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

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1 of 1 people found the following review helpful
5.0 out of 5 stars Food For Thought June 9 2002
Format:Hardcover
The last book I read by an economist was over thirty years ago. The book, Das Kapital by Karl Marx, pretty much did me in at wanting to read writings by an economist, so I wasn't sure what to expect when I began this text by Hernando De Soto. I was pleasantly surprised at both how readable it was and the simple power of what is being said. Having earned a Masters in Management with a specialty in International Development, I have to admit at being surprised that I could have missed something so basic as the need to legitimize underground economies, the value of property ownership, and the ability to leverage property ownership, thus creating capital and capital in turn being the life blood of capitalism.
My hat is off to Hernando De Soto and I recommend this book to anyone who cares about the problems of the other two thirds of the world. I especially want to recommend it to people involved in International Development. I have already contacted some of my grad school professors to alert them to this work. I believe that it has serious value in the academic world as a means to create talking points and challenge long held views. If you are looking for answers to one of our planet's more lingering problems (why well meaning International Development efforts continue to fail despite the billions of dollars we pour into them), read this book!
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Format:Paperback|Verified Purchase
Came in good time, book is in good condition but there is a lot of writing in it that was not specified when I bought it. Should be clearer next time.
Thanks for the purchase
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5.0 out of 5 stars The Formula For Growth May 28 2013
By Patrick Sullivan TOP 100 REVIEWER
Format:Paperback|Verified Purchase
This book will explain, why Western economic growth has been so strong. The book also sorts out, the reason why so many non-developed countries have economically lagged the West. It really boils down to one basic principle; private property.

In the developed Western World, citizens have legal protection and legal entitlement to their private property. The legal title enables the owner, to leverage their property into usable capital. The capital generated is then used, by various segments of the society. This is what propels economic growth, in the industrialized world.

This is in complete contrast, to the Third and former Communist World. In these countries, most citizens do not have access to private property laws. They may live in a house of their own construction, but they have no legal title on their home. This also shuts off a vital supply of capital, to the entire society. This shortage of available capital, acts as a drag on any potential economic growth.

De Soto also lists many other examples of economic barriers, in the developing world. He also offers several suggestions, to help transform these countries into growing economies.

This book brings home, the importance of private property and the rule of law. An issue that is largely forgotten, in many parts of the world. Private property laws are the dividing line between prosperity and living in an economic backwater. Until more people realize this fact, progress in the developing world will be impossible.
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5.0 out of 5 stars Le chemin de Damas Feb. 12 2012
Format:Paperback
Cet exposé de réalités et de magouilles économiques m'a ouvert les yeux sur les véritables principes qui condamnent une si grande proportion de l'humanité à la dépossession permanente et les laisse en proie à la corruption.
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2.0 out of 5 stars Mediocre May 10 2002
Format:Hardcover
I would have given 3 stars to this book but coming from a recognised economist as Hernando de Soto I give it only two. Although the book explains in what consists his proposal for the development of the third world, he repeats his idea too much through out the chapters. The examples and methods mentioned didn't satisfy my curiosity for his theory. The book looks more a marketing scheme for selling his idea, which isn't a bad thing, but considering the seriousness of the theme, I would have expected a more professional layout.
After reading this book,go and buy The Myth of Development : Non-Viable Economies and National Survival in the 21st Century, written by Oswaldo de Rivero, a peruvian as Hernando de Soto. Although not advertised as The Mystery of Capital, it has a better book structure and an excellent analysis of the world's current situation and ways to solve it.
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5.0 out of 5 stars A book by an economist May 26 2001
Format:Hardcover
The Mystery of Capital is recommended, among others, by no less than Milton Friedman, Ronald Coase, Margaret Thatcher, and William F. Buckley Jr. That's not why you should read the book. De Soto examines a necessary and misunderstood topic: why are poor countries poor? His arguments and insights make the book a necessary read for the economist, or other educated person.
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.
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Most recent customer reviews
4.0 out of 5 stars DeSoto's theories may also be a forecast for the West
First of all, the used copy of The Mystery of Capital that I bought was in great shape, although a previous reader had underlined passages. Read more
Published on Sept. 18 2009 by Janet D. Gray
3.0 out of 5 stars De Soto: Savant or Charlatan?
Ever since the onset of the Cold-War, development theory has been mired in ideological trench warfare between neo-liberals and Dependency Theory advocates. Read more
Published on March 20 2008 by Justin M. Williams
4.0 out of 5 stars very interesting but one-sided
Great topic and interesting to read. But his argument is somewhat one sided. Indeed, according to his concept, there is way to explain the current surge in China and India. Read more
Published on June 10 2006 by Expat-biz-Hong Kong
5.0 out of 5 stars One of the single best books on Economics I've read
Many of the other reviewers have given excellent in depth summaries of DeSoto's book, and I will not regurgitate what others have already done a good job of saying. Read more
Published on June 23 2004 by J A W
5.0 out of 5 stars Packed With Knowledge!
Hernando de Soto's ideas cannot and should not be ignored. This book will open many eyes to the nature of capital. Read more
Published on June 7 2004 by Rolf Dobelli
5.0 out of 5 stars Thoughts that come on doves' feet guide the world...
Other reviewers have commented on De Soto's originality in relation to prevailing economic tradition. Read more
Published on June 1 2004 by Dieter
5.0 out of 5 stars A Pragmatic approach to the socio-economic issues
Outside the Western borders; capitalism is in crisis not because international globalization is failing but because developing nations have been unable to channel capitalism in... Read more
Published on April 2 2004 by M. A. ZAIDI
5.0 out of 5 stars This Ain't Your Father's Economics!
In the past five years I've read a shade under a thousand books, and this is easily the most important of them. Read more
Published on Jan. 31 2004 by A. Ross
5.0 out of 5 stars optimistic eyeopener
You can not read this book without thinking this author just might be on to something big. The central question or "mystery" of the book as the title suggests is why... Read more
Published on Dec 1 2003 by J. head
3.0 out of 5 stars Good points, but *extremely* repetitive.
A lot of other reviewers have commented on this book based upon the propositions and assertions made in this book, so I won't comment here, except to say DeSoto's book is... Read more
Published on Nov. 22 2003
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