Monday, March 22, 2010

Book: The Mystery of Capital

After spending a few days watching Judge Judy while our parents were at work, we decided to sink our teeth into something with more substance. No, we're not talking about birds. Our parents - while they claim to care for us - will not allow prey in the house. We wanted topical substance, so we turned to development economics.

We have long been following the plight of the intelligent, yet unfortunate, Moscow street dogs (and here) but have never understood why simple things like bitch friendly bluetooth keyboards are beyond their reach. Hernando de Soto provides an interesting answer in his book The Mystery of Capital.

De Soto posits that, while capitalism has spread like wildfire during the past twenty years, systems for tracking, transferring, and legitimizing capital have not developed. This means that capitalism only operates for a small section of the world's population - those who already had capital. Most of the world's wealth, in fact, is held in informal sectors and most of the world's businesses are informal. De Soto and his students attempt to open legally recognized businesses around the world and find that the process is so fraught with expense, uncertainty, and hassle that entrepreneurs are not able to bear the burden. So, the shop owner in the Haitian slum - to use one of the book's most timely examples - can never leverage their assets to provide capital for a business.

We like de Soto - his respect for the intelligence and spirit of the world's poor is infectious. Like westerners who ascribe third world poverty simply to 'cultural differences' - a euphemism for 'they are not as smart as us' - canine potential is also grossly misunderstood. You would be surprised how many other bitch bloggers are out there using a pseudonym to avoid uncomfortable comparisons of intelligence with their dull-witted human owners.

If you have always wondered why a Moscow street dog - who can learn to commute into town on the metro - cannot have access to simple blogging tools, or why a Filipino - who can rebuild after a slum fire destroys their home and business - can never break the cycle of poverty; you should read The Mystery of Capital. De Soto offers substantive policy prescriptions while avoiding the trap of calling for more foreign direct investment or blaming 'culture.' Mr. de Soto, we salute you (or at least we would if we had hands).

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