De Soto’s Conquest
This article is from the archive of The New York Sun before the launch of its new website in 2022. The Sun has neither altered nor updated such articles but will seek to correct any errors, mis-categorizations or other problems introduced during transfer.
This week brings news that the Peruvian economist Hernando de Soto has been awarded the Cato Institute’s Milton Friedman Prize for Advancing Liberty. The prize, which is given every two years, carries with it an award of $500,000. A more deserving recipient would be hard to find. As long ago as the 1980s, Mr. de Soto recognized a subtle but important thing. It was that the lack of formal property rights was a significant impediment to growth in developing countries, as significant, perhaps, as poverty or poor education.
As Mr. de Soto noted, persons in the Third World had greater assets than the common stereotypes might indicate. The trouble lay in the fact that they did not always have title to those assets; nor did they, in many cases, live under governments that would respect their property ownership if they could prove it. As Mr. de Soto wrote in the 1980s, a good share of Latin Americans, Asians, and Arabs are trapped. “They have houses but not titles, crops but not deeds; businesses but not statutes of incorporation.”
Such frozen capital is limited in its power. It is not liquid. Selling is hard when one lacks the documents. It cannot be leveraged. This frustrating situation, Mr. de Soto posits, holds poor nations back. From the base of his Institute for Liberty and Democracy in Lima, Mr. de Soto has fought to make what is extralegal and informal official and legal. In Peru, the ILD used an American government grant to revamp the property system, legalizing millions of private holdings. In other countries — from the Philippines to Russia — he has consulted, advised, retrained.
It is true that a pure property rights hawk might take issue with Mr. de Soto’s legalization focus. After all, what sounds to one person like an ownership program for squatters will sound to someone else like an expropriation program. From time to time, Mr. de Soto and his team have found their lives in danger. Twice Mr. de Soto survived assassination attempts by Peru’s “Shining Path.” In his book, “The Other Path”, he wrote of the Third World’s “Long March to private property.” By making citizen owners out of black marketeers, Mr. de Soto is helping capitalism to reconquer the Third World, one citizen at a time.
