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

Hernando de Soto

Book cover

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 think much of de Soto’s writing. The main beef I had with the book was that it was written almost entirely in generalities. That’s unfortunate, because de Soto’s topic would seem fertile ground for lots of engaging anecdotes about extralegal businessmen in the developing world, the crazy amounts of red tape that his team ran into when trying to register businesses legally, etc. The only anecdote that he manages to tell is a good one, about barking dogs in Indonesia alerting him to where property boundaries stood. But he stays on a very high level, and spends what seemed like a third or half of the book talking about the development of property rights in America, which is pretty much just his aggregation of other people’s research. (He also is a heavy user of the phrase, “As Person X points out,” which for some reason is a pet peeve of mine.)

At the end of the day, there’s something that makes me sad in de Soto’s thesis, and I’m not sure whether it’s his fault or the fault of capitalism itself. What he really means, when he says that people need property rights so that they can put their capital to work, is that people need property rights so that they can promise strangers that the strangers can take their houses away from them if they don’t pay back their loans. That seems to me like a somewhat sad goal for the capitalist to hang his hat on.

My Goodreads rating: 2 stars