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The Mystery Of Capital Why Capitalism Succeeds In The West And Fails Everywhere Else Hardcover – Sep 6 2000

4.3 out of 5 stars 91 customer reviews

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Product Details

  • Hardcover: 288 pages
  • Publisher: Basic Books; First edition (Sept. 6 2000)
  • Language: English
  • ISBN-10: 0465016146
  • ISBN-13: 978-0465016143
  • Product Dimensions: 24.2 x 16.4 x 2.5 cm
  • Shipping Weight: 594 g
  • Average Customer Review: 4.3 out of 5 stars 91 customer reviews
  • Amazon Bestsellers Rank: #181,092 in Books (See Top 100 in Books)
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Product Description

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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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Customer Reviews

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Format: Paperback
In the past five years I've read a shade under a thousand books, and this is easily the most important of them. In it, Peruvian economist de Soto sets out to do nothing less than explain why capitalism has worked in the West and been more or less a total disaster in the Third World and former Communist states. This has long been a pivotal question for anyone interested in the world beyond their own back yard, and there have been plenty of attempts to explain it before (often in terms of history, geography, culture, race, etc.). However, de Soto's is the most compelling and logically argued answer I've come across. But it's not just me. I don't generally quote other reviews, but my general reaction echoes the most respected policy journals, newspapers, and magazines, who tend to repeat the same words in their reviews:"revolutionary", "provocative", "extraordinary", "convincing", "stunning", "powerful", "thoughtful". Perhaps my favorite line comes from the Toronto Globe and Mail: "De Soto demolishes the entire edifice of postwar development economics, and replaces it with the answers bright young people everywhere have been demanding." Of course readers (especially those on the left) will have to swallow a few basic premises from the very beginning, such as "Capitalism stands alone as the only feasible way to rationally organize a modern economy" and "As all plausible alternatives to capitalism have now evaporated, we are finally in a position to study capital dispassionately and carefully." And most importantly, "Capital is the force that raises the productivity of labor and creates the wealth of nations....Read more ›
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Format: Paperback
Ever since the onset of the Cold-War, development theory has been mired in ideological trench warfare between neo-liberals and Dependency Theory advocates. The former clamour for more capitalism and less regulation while the latter favour retrenchment from the economic world system and greater state intervention domestically. Into this impasse, enter Hernando de Soto. In the "Mystery of Capital" this Peruvian writer delicately straddles this partisan divide and delivers a refreshing new look at effective development theory.

De Soto's main arguement is that Third World countries already possess sufficient capital for development. The problem is that these resources are trapped in the static, informal economy and can therefore not be productively harnessed because the legal system and property rights are underdeveloped. Without the stability engenered by proper record-keeping and bereft of the concomitant social attitudes that make capitalism work, therefore, underdeveloped countries are perpetually consigned to poverty.

While de Soto is certainly correct in underscoring how property rights and legal infrastructure are formative in development, however, he fails to adaquately demonstrate how these imperatives can be established in countries where they are lacking. His prescriptions for addressing these legal and attitudinal deficits are cursory and, at times, quixotic. Legal rights in the West were painstakingly established through the crucbile of feudal power dispersion and can not simply be exported to developing countries -- a point belied by de Doto's rather simplisitc diagnosis.

Nevertheless, de Soto delivers an important and timely arguement which moves beyond the shrill and vociferous capitalism-bashing expounded by the conventional left.
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By A Customer on 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
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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