Capitalism In The West And Fails Everywhere Else: Chapter Summary

In the book “The Mystery of Capital, Why Capitalism Triumphs in the West and Fails Everywhere Else,” by Hernando De Soto argues that the institution of property is necessary for the market economy to function properly. De Soto believes that without formal property, no matter how hard they work; most people will not be able to make money in a capitalist society. In Chapter 3, De Soto identifies the six tasks that a formal system of property performs which are: property fixes the economic potential of assets; Integrating Dispersed Information into One System; Making People Accountable; Making Assets Fungible; Networking People; and Protecting Transaction (De Soto, 49-61). He claims that bringing the assets held by the world’s poor into formal
For example, the land they cultivate is not held legally because they have not been properly surveyed, mapped, and recorded which makes these assets dead capital. A dead capital means an asset that cannot easily be bought, sold, valued or used as an investment. So, basically, they cannot easily be sold or used as security for a loan. The difference between developing countries and Western countries is that the latter have legal structures and established property rights, while the former have informal and often local ownership structures which do not allow them to create capital. It’s not that legal structures are non-existent it just that they are often there, but it is out-of-date, overwhelmed by unreachable to ordinary people. That is what De Soto is trying to prove that having the formal system would be easier and it would increase the wealth of people even to those that are poor and have their farms and lands. De Soto’s team demonstrates the obstacles people from the developing countries go through by following a series of legal procedures. In developing countries in order to the idea of how difficult it was, De Soto, decided to open a small garment workshop on the outskirts of Lima,