The Mystery Of Capital

"People with nothing to lose are trapped in the grubby basement of the pre-capitalist world." This is the nub of The Mystery of Capital. Read just that one sentence and you catch a glimpse of the reason why, as the author puts it, four-fifths of humanity lack the ability to turn dead assets into live capital.

A great deal of the power of legal property comes from the accountability it creates, argues Hernando de Soto, from the constraints it imposes, the rules it spawns and the sanctions it can apply. The lack of legal property thus explains why citizens in developed and former communist nations cannot make profitable contracts with strangers, cannot obtain credit, insurance or utilities services. Because they have no property to lose, they are only taken seriously as contracting parties by their immediate family and neighbours. To put it another way, while most western homeowners dream about paying off their mortgage, their counterparts in the less developed countries could transform their existence if they could only access such sums.

It's rare to come across a book about such an arcane subject that is simultaneously interesting and illuminating, entertaining and thought-provoking. The Mystery of Capital is all these and more. De Soto paints a procession of vivid pictures, from Cairo to the Wild West, from the Andes to the Urals. "The cities of the Third World and the former communist countries are teeming with entrepreneurs," he says, dismissing the notion that entrepreneurialism is the exclusive preserve of the west. "You cannot walk through a Middle Eastern market, hike up to a Latin American village or climb into a taxi in Moscow without someone trying to make a deal with you. The inhabitants of these countries possess talent, enthusiasm and an astonishing ability to wring a profit out of practically nothing."

In The Mystery of Capital, de Soto believes he points to a way in which capitalism can be used to help developing nations. In his vision, the poor are not the problem. They are the solution. --Brian Bollen

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