Hernando de Soto Knows How To Make the Third World Richer than the First
The Peruvian economist says blockchain technologies and social media will transform the planet by securing property rights.
In the spring of 1989, Chinese students occupied Tiananmen Square, erected a replica of the Statue of Liberty, and called for democracy and individual rights. By the fall, people living in East Germany took hammers and chisels to the Berlin Wall, unleashing a wave of revolutions that ultimately led to the collapse of the Soviet Union. It was an auspicious year for human freedom.
Nineteen eighty-nine was also the year that Peruvian economist Hernando de Soto published The Other Path: The Invisible Revolution in The Third World, which radically challenged conventional wisdom about the underlying cause of persistent poverty in the post-colonial landscape. Drawing on his extensive field work with the Peruvian-based think tank the Institute for Liberty and Democracy, de Soto argued that people were pushed into the black market and wider informal economy because governments refused to recognize, document, and promote legal ownership of land and other assets.
Without clear title and the right to transfer property, common farmers understandably refused to invest much in the land they tilled, and they couldn't use it as collateral. This created what de Soto later called "citadels of dead capital" with value that could never be fully accessed.
No one, he argued, would plan for the future if everything they accumulated could just be taken away. As much an activist as an intellectual, De Soto has been called "the world's most important living economist" by former President Bill Clinton. He is credited with changing policy in Peru and elsewhere by pushing governments to create property regimes that are public, transferable, and secure. His latest endeavor is a partnership with Overstock.com founder Patrick Byrne and others to use blockchain technology and social media to create totally public and perfectly transparent records of ownership.
Reason's Nick Gillespie caught up with de Soto in Washington, D.C. in June, where he received the Competitive Enterprise Institute's Julian L. Simon Memorial Award, named for the late free-market economist who believed that "mankind is the ultimate resource."
Interview edited by Ian Keyser. Open edited by Todd Krainin.
Clips from The Power of the Poor with Hernando de Soto courtesy of Free to Choose Media.