On June 18th I attended an IEA lecture addressed by the Peruvian property rights advocate and analyst Hernando de Soto, author of The Other Path and more recently The Mystery of Capital, and I promised a report. I apologise that this is a belated report, but this has also given me time to think. (I also said I hoped to get a picture of the great man, but he rushed away as soon as he’d given his talk and I didn’t manage this.)
De Soto understands that property is a social fact. Property rights are triggered by ownership documents and written records and de Soto makes much of these triggers, often to the point of saying that they are the property. No, the property is the property. But the bits of paper make it clear to the world that this is what it is and who owns it.
De Soto’s key insight is that poor countries are poor not because they don’t contain enough potential property, but because the abundance of informal property that they do contain has mostly not yet been nailed down in writing. It therefore can’t be traded, or used as collateral. There can’t be a modern economy. De Soto’s life’s work is to try to set in motion the political and legal processes necessary to correct this. He lobbies politicians, he speechifies, he writes books. He gives lectures like the one I attended.
Most of what de Soto said at the lecture echoed things I’d already read in The Mystery of Capital. But the question and answer session contained what for me were novelties.
He said that the reason so many of the world’s poor like growing “drugs” is that drugs offer a quick return, in a world of insecure property rights. Contrive more secure property rights, and the poor of, e.g., Columbia would have an incentive to go into more respectable businesses which take longer to yield a profit. Interesting.
How, someone asked do you persuade the existing powers-that-be that clearer property rights are good? How about the police? You have to look at things from their point of view, he said. It is easier to catch criminals if you have a property rights paper trail to follow. Property in other words, doesn’t just attach my home to me, it attaches me to my home. It tells the police where to go if they want to talk to me. Interesting, and somewhat creepy.
He said that that if he wants to get the right things done, he has to let the politicians take the credit. Accordingly he no longer boasts about what “he” has been doing, which is why the website of his Institute for Liberty and Democracy has gone so quiet lately. (I’d wondered about why that was.) So, how much notice are governments actually taking of this man? That he was in a great rush after giving his IEA lecture suggested that he has vital business constantly on the go, but who knows? Not me.
I hope that powerful people are paying attention to this man, because what he says still sounds convincing. Indeed it is the best big idea about ending world poverty that I know of. But although I still think de Soto is a great man, under his influence I find myself seeing property – indeed the entire modern world – in a different and rather gloomier light, almost as a pact with the devil. We must have it, but we all know where “paper trails” can lead.
