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The Mystery of Capital

3.96 of 5 stars 3.96  ·  rating details  ·  2,188 ratings  ·  177 reviews
From the most important economist in the Third World, a revolutionary and practical plan for transforming underperforming economies-based on the forgotten history of how wealth was created in the West.
ebook, 350 pages
Published June 18th 2003 by Basic Books (AZ) (first published January 1st 2000)
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Written by a Peruvian author, this book is wonderfully enlightening for anyone interested in issues of 3rd World economic development.

De Soto's central thesis is quite simple: you can't solve the problem of stagnant, poverty-stricken economies unless you figure out how to make credit available so that people can start and operate businesses. But you can't get credit if you have no assets to secure it with. And you have no significant assets you can call your own if you can't establish title to
Vicky Sherwood
everything your soc prof fails to consider
More than most conservatives, Hernando De Soto understands that, even with the death of Cold War socialism, the “advocates for capitalism are intellectually on the retreat” (209). “The hour of capitalism’s greatest triumph is its hour of crisis.” Perhaps this explains the recent rise in panicked defenses of free markets, though most of these defenses simply regurgitate Reagan-era arguments with no realization of how the debate has shifted and deepened. De Soto observes, “for those who have not n ...more
Jun 19, 2008 Seth rated it 5 of 5 stars  ·  review of another edition
Recommended to Seth by: My brother
Best Economic Development book I ever read. It's thought provoking and it resonates. Third World poverty could dramatically shrink if property owners had a legitimate claim to their real property. I thought micro lending was the answer to most of Latin America's problems (it still is a partial answer), however, De Soto convinces me that most of the Third World already owns enough property to leverage themselves out of poverty if only formal property and legal systems could legitimize their prope ...more
This book explains the importance of property rights to the success of capitalist systems. In order for a society to use its assets to their fullest potential, it needs a legal system that transforms wealth into "living capital." "Living capital" can be leveraged to create further wealth: for example, in the U.S. most new enterprises are funded by mortgages on the entrepreneur’s home. But in a society that does not clearly define and protect ownership, such strategies are impossible.
This explain
شمس الدين
لم اقرأ كتاب منذ فترة يحمل هذا الكم من التحيزات المعرفية للحضارة التي ينتسب اليها الكاتب .... عندما ابحر فيه سوف اكتب انتقاداتي له تباعا لان التحفظات عليه لا آخر لها
This book puts forward the stunning notion that one of the things that keeps poor countries poor is that they have most of their value locked up in defunct land, which is tended (but not owned) by squatters and people who don't have titles to it. DeSoto's idea is that land reform in these countries would end up allowing the poor to buy, sell, and borrow the things they already have. All it would really take is streamlining title acquisition and land-use laws.

I haven't really read much criticism
Nov 04, 2008 Hotspur rated it 5 of 5 stars  ·  review of another edition
Recommends it for: anyone
Recommended to Hotspur by: National Public Radio
Shelves: nf-essays
An amazing book that investigates the power of informal economic infrastructures. Latin America had a higher per capita income than North America in 1789. What happened? Why did capitalism take root in North America and why did it fail elsewhere? Now that Capitalism's big rival is for intents vanquished, the capitalist society is the only viable option for economic growth left for the developing countries. DeSoto's brilliant work examines the impediments to economic growth in the developing worl ...more
Miro Nguyen
A must read book to understand how western countries are so successful, pointing out a way to help developing countries, not just copying blindly, have to understand the roots. A true manifestation of how brilliant human beings are.
This book makes only one point: countries need robust, accessible-to-all property systems to succeed at free-market capitalism. This is, of course, the answer to the question in the book's provocative subtitle. But the book's singular focus does not hinder it from being thorough or effective: de Soto draws from both personal experiences working on extralegal property systems in Peru and a wide range of historical and economic sources. Quoted include economists, legal experts, politicians, histor ...more
Cambridge Programme for Sustainability Leadership
One of Cambridge Sustainability's Top 50 Books for Sustainability, as voted for by our alumni network of over 3,000 senior leaders from around the world. To find out more, click here.

The Mystery of Capital argues that capital is the engine of a market economy and that property rights - namely, the ability to have secure title over land and housing - provide the mechanism. De Soto notes that, more than a decade after the fall of Marxism, the expected capitalist revolution has not occurred. Capita
De Soto has a point, namely that the biggest reason for the continued laggardness of people in developing countries to "catch up" with those in the developed world lies in the convoluted local legal structures that favor those with the power, money, influence, and the wherewithal to navigate their way through the system. As in it is cheaper and easier to just stay outside of the legal system altogether and cobble together an implicit, grassroots alternative to it. Hence the overwhelming majority ...more
Charles Allan
Here's an argument for individual rights, openness and equality before the law:

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

De Soto is a Peruvian economist that tackles one of the oldest mysteries: how can societies unlock their human potential? The answer, as he argues, lies in individual rights and a predictable, open legal system. Which the third world poor lack.

But how do you establish such a thing? De Soto's central idea is that the
Dec 07, 2008 Aaron rated it 5 of 5 stars  ·  review of another edition
Recommends it for: anyone wondering about how land relates to capitalism
Recommended to Aaron by: Stephen Goode
This book is incredible!
I have always suspected that our historical squatting of land in the U.S. is what fueled the U.S economic machine.

This book documents this notion and demonstrates that it was the formation of a formal property system that ultimately created capital that could be used for businesses and innovation.

A must read.

My two cents....

It was land that propelled capitalism in the U.S and it is land that now seems to be dragging our system down. Never did our forefathers imagine th
Sanford Forte
This is an important book; perhaps one of the most important books written about economic development and capitalism in the last few decades.

Anyone who studies or has an interest in how Capitalism works (or could work) in developing economies - and, what optimal preconditions are necessary for the success of Capitalism, will profit from reading this book.

Hernando de Soto is a Peruvian economist whose research clearly shows that coordinated, legally-encoded, well-understood-and-agreed on rights
Idiot savant. What de Soto (and his army of lackeys) get is that the rule of law is essential to a country's economic well-being. If government is a rat's nest system of incoherent law theory it will simply be a nuisance to righteous people, and an instrument of oppression to be used by evil people. Law-enforcing systems provide the essential framework for growth by not hindering, and stopping evil people from hindering.

However, de Soto never gets beyond saying that the current bureaucratic syst
Scott Goddard
Property rights, de Soto posits, are the sine qua non to achieve economic development. For this reason, countries that are bereft of such arrangements - namely developing and socialist-leaning nations - have not experienced rapid growth in spite of embracing the free-market. The function or rather, functions, of property rights is/are multifarious; they serve the purpose of improving civil order and mitigating crime, allowing individuals to borrow through credit intermediation, and making the pr ...more
Hernando de Soto (just like the explorer) spent his career with the UN. This book does the service of providing a "boots on the ground" survey of the bureaucracy that impedes clear claim's to property rights. In extreme cases, for over decades or never. Every developed economy was preceded by strong property rights. His book makes a fascinating case for the critically important link between very strong property rights and economic development. Hernando de Soto is easy to read.
A wonderfully argued book on the advantages that we westerners have over much of the rest of the world in firmly established, transferable, and accountable property rights. de Soto slashes away at the cultural arguments that many authors make in celebration of the west (I'm thinking of Niall Ferguson here), and instead focuses on the structures that allow for individuals to build up credit through the acquisition of property. It is this which enables risk taking and, and debt creation allowing f ...more
The author gives a brilliant and yet simple analysis of why frontier markets economies failed in fiscal policies. He break down the steps that are needed to bring changes and prosperity to struggling economies. One of the best, realistic, clear and easy to read book in its genre.
Chris Davis
I read this on vacation some years ago and it was riveting. De Soto actually opened business in many countries and compares shares the hardships and experiences he had. A great book on the problems that plague countries with capital formation.
I'll admit. I didn't completely finish this book. The first few chapters summarized the overall theory, which I found fascinating, but I got bored with all the detailed economics in the last 3/4 of the book and felt ready to move on.

The general theme of this book is that 3rd world/post-Communist countries are in fact extremely wealthy (they have a lot of things), but because they don't have the legal framework to make property ownership and the representation/transferring of assets possible, it
Douglas Wilson
What an eye-opening book this one was! Everyone who has a heart for the globally poor needs to read it. Along with everyone who pretends to have a heart for the poor.
Lily Borovets
Гарна думка, що стосується будь-кого, кому здається, що достатньо просто зробити копіпейст бізнесу, що працює десь на Заході.

"Істина в тому, що юристи надмірно поглинені вивченням і адаптацією західних законів. В університетах їм втовкмачили в голову, що місцева правова практика - це не справжній закон, а щось романтичне, вивчення чого краще залишити фольклористам і антропологам. Але якщо юристи хочуть взяти участь у створенні гарних законів, їм слід покинути бібліотеки і познайомитися з життям
Skimmed the best parts. Two of my favorite parts:

"Joseph Reid argues that the old order broke down because widespread corruption permeated all its institutions and divided the population into those who could outwit the system and those who could not. He also notes that a legal system that encouraged some people to break the law and made others suffer from it would inevitably lose prestige among both constituencies... Politicians finally understood that the problem was not people but the law, whi
Nick Klagge
De Soto's thesis is, I think, a strong one: capitalism fails most people in the developing world because developing countries generally don't have usable systems of property rights that would allow them to treat their assets as capital.

I have been familiar with de Soto's ideas since the beginning of college, but had never gotten around to reading the book until now. I have to say that I don't think I had missed out on much by not reading the book. He may be a perceptive economist, but I didn't
M.G. Bianco
I really liked this book, De Soto did a good job of identifying the real reason capitalism fails outside of the west: property rights. Too often do we blame their culture for it failing, ignoring the fact that they succeed at capitalism when they come to the west.

Only downside, I disagree with the role the government has to play in making capitalism successful outside of the west. He acknowledges that those societies have "property rights" through currently existing, "extralegal" social contract
Billie Pritchett
I haven't seen any writing pointing this out, but Hernando de Soto shares his name with a Spanish conquistador. I had first heard the name in Spanish class, and a visit to Wikipedia told me about some of his exploits. This is unfortunate for the author of this book Hernando de Soto. De Soto in The Mystery of Capital examines several Third World countries that have people who own a lot of property but whose countries do not show that these people have rights to their property. This is because thi ...more
Tom Nixon
Before I get to the meat of this review, I have a small confession to make: I was supposed to read this book ten years ago for my Intro to the Politics of Developing Areas class. Needless to say, I didn't- the fall of 2002 was my one, regrettably insane semester- as most days this class met the Professor (Professor Moreno, whom I also took Latin American Politics with- she was pretty good) had this lamentable habit of going over by about 5 minutes each and every time. And as I had to haul my ass ...more
Eric Gold
The Mystery of Capitalism poses a very interesting claim: that the world's poor don't lack money (or even resources, persay). The poor, his research team deduced, possess nearly $9.3 trillion in real estate, nearly 10x the combined value of major world stock exchanges. The problem is that this property is "extra-legal" (i.e. not officially held, but de facto held). So all of this "dead capital" is locked up, restrained and unable to actually "work" for the poor like it does in the West. This poi ...more
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The Other Path Realizing Property Rights O Mistério do Capital: Por que o capitalismo dá certo nos países desenvolvidos e fracassa no resto do mundo L'économie informelle comment y remédier ? Kenapa Kapitalisme Berjaya di Barat dan Gagal di Tempat Lain

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“In Haiti, untitled rural and urban real estate holdings are together worth some 5.2 billion. To put that sum in context, it is four times the total of all the assets of all the legally operating companies in Haiti, nine times the value of all assets owned by the government, and 158 times the value of all foreign direct investment in Haiti's recorded history to 1995.” 3 likes
“The way law stays alive is by remaining in touch with social contracts pieced together among real people on the ground.” 1 likes
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