The Mystery of Capital - Book Review

Introduction

The book “The Mystery of Capital: Why Capitalism Triumphs in the West and Fails Everywhere Else” is authored by Hernando De Soto. It basically discusses how dead capital is converted to live capital with the help of a wide range of institutions of formal property rights. The author is of the opinion that the integration of extralegal covenants into a cohesive and unified system of formal property rights helps the poor around the world through the establishment of 'fictitious commodities'. Most of the examples cited in this book are related to Peru along with several other countries of Latin America. This is mainly because of the fact the author is himself of Peruvian descent.

Discussion

Published in the year 200, Hernando discusses the economic systems of Latin America, particularly during the debt crisis of the 1980s and the oil shocks of the 1990s. This period was marked by the emergence of neo-liberal political policies which were mainly the result of the International Monetary Fund. According to De Soto, there are five 'mysteries of capital'. They are the mystery of:

missing information,

capital,

political awareness,

missing lessons of US history, and

legal failure

In his book, De Soto explains that free markets have come up short in the third world mainly due to the absence of ways to access formal property. Indeed, an immense part of their populaces manage such a variety of lawful obstructions to formally distinguish their property (the rare assets over which they have control) that their choices are either abdication or passage into the informal extralegal segment (the black market). In De Soto's book, the black market is a guaranteeing origin of results (p. 88), as opposed to a wellspring of blame for the issues of poverty.

De Soto, distinguishes between various stereotypes that are usually used by the western nations for third-world countries. According to him, while nearly 80% of the total population of the world is poor, this population mostly belongs to the third world and underdeveloped countries rather than western nations. De Soto is stating that while dichotomies of riches do exist, “poor people” do have belonging yet fail to offer the capability to process extra esteem from those belongings. Although eighty percent still survives, De Soto wishes to empower that part of the populace to understand their possessions with a specific end goal to fittingly join the capital diversion.

Altering the budgetary potential of possessions requires a systematic and thorough translation of the man-made financial and social systems. Considering the massive potential that such systems have, property can be viewed with much speculation or even be acknowledged as guarantee. De Soto believes that it is paramount to view this potential since, with the capacity to influence holdings, one would not be able to surplus worth. Hence, the abundance of legal properties blessed the western nations, particularly the United States, with the instruments needed in order to process surplus esteem well beyond its physical assets. In this context, De Soto explained that cash cannot possible help one to procure ...