Poverty Reading List

The Mystery of Capital book review

The Mystery of Capital: Why Capitalism Triumphs in the West and Fails Everywhere Else

by Hernando Desoto

I think it is pretty much unanimously agreed to by most economists that in order to unleash the full potential of the wealth creation process of capitalism that a nation needs to have a reasonable and predictable methodology for defining and managing property rights.

I highly recommend Hernando de Soto’s book, The Mystery of Capital (subtitle: Why Capitalism Triumphs in the West and Fails Everywhere Else), where he explores the history of property rights in the developed world and the state in developing world nations. He argues for the essential nature of well-defined property rights to transform the trillions of $ of “dead capital” (property which is owned through the unofficial “extra-legal” market) into leveragable capital which we take for granted in the developed world. One of the most interesting sections is when he describes the extended time (75+ years) it took in USA for property rights to become reasonably established. He argues that we expect developing nations to implement our current system in a very short period of time which isn’t the process the USA (and all other developed nation systems) went through! It is inherently a political process and politics takes time for new systems to soak into the fabric of the society and displace the entrenched status quo which has many beneficiaries.

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