Hernando de Soto (economist)

Hernando de Soto, 2000

Hernando de Soto Polar (born June 2, 1941 in Arequipa , Peru ) is a Peruvian economist and economic advisor. His development- theoretical approach, based on liberalism , is interdisciplinary . De Soto sees the informal economy in particular as an obstacle to the development of underdeveloped countries and calls for greater institutionalization of property .

Life

De Soto is the son of a diplomat who was the head of the chancellery of the then Socialist President José Luis Bustamante . After the military coup in Peru in 1948, the family emigrated to Europe. De Soto studied economics and politics at the Geneva Institute universitaire de hautes études internationales with a degree in both subjects. After working as an economist at GATT from 1968 to 1971, he was President of the Executive Committee of the Organization of Copper Exporting Countries ( CIPEC ) from 1971 to 1973 , before moving to the Swiss Bank Corporation Consultant Group as a director in 1973.

In 1979 he returned to Peru, initially as a manager of a mining company. In the same year he was appointed governor of the Central Bank of Peru . In 1980 he founded his consultancy Instituto de Libertad y Democracia (ILD), which has its headquarters in Lima, and began his work on the informal sector, which he published in 1986 under the title El otro sendero ("Another path"; German edition: Marktwirtschaft von below , 1992). In it he presents the informal economy of Lima and its problems with economic development. In addition to theoretical work, the institute is primarily concerned with documenting land ownership and the shares in companies of the poorer population. Through this work and the participation in legal and administrative reforms, it was possible in Peru to provide more than 1.2 million families with property rights and to integrate around 380,000 companies that had previously operated in the black market into the formal economic order.

In 1989 de Soto became an advisor to President Alan García Pérez and from 1990 to 1992 economic policy advisor to President Alberto Fujimori , with whom he broke after the coup. In 1996 he began to transfer his concept to other developing countries and in 1997 published a two-volume study on the informal sector in Egypt . In addition to Vladimir Putin , he and his Instituto de Libertad y Democracia have advised 29 heads of state from developing and emerging countries .

The Mystery of Capital

In 2000 he published the work The Mystery of Capital , which appeared in German in 2002 under the title Freedom for Capital . According to the conservative journalist David Frum , he wrote the book as a ghostwriter for de Soto. The book introduces a concept for formalizing informal economic sectors:

The five secrets of capital
1. The secret of missing information
2. The secret of capital
3. The secret of political consciousness
4. Neglected lessons from US history
5. The secret of legislative failure

The six property effects
1. Determine economic potential
2. Integration of information into one system
3. Create accountability
4. Make assets fungible
5. Network people
6. Protect transactions

Blind spot: life outside the bell jar
- Large extra legal sector
- Migration to the cities
- Growing extralegal
- No possibility of using the skills and property
- Competition with the system
- Desire for integration into the system

Blind Spot 2: Life outside the bell jar of yesterday
- Problem is known from history ( guild ...)
- The collapse of the old order is inevitable
- European past is very similar to the present in developing countries.

To the western world
- Better document the situation and potential of the poor
- All people are able to save
- Poor need legally integrated ownership systems
- Mafia organizations are the result of a migration to a world with a larger organizational scale
- Poor is not the problem, it is the solution
- Constructing a property system is the political challenge

Strategies to Overcome Poverty
- Convert articles of association into law

De Soto's work in a theoretical and practical context

De Soto's development theory approach is interdisciplinary, it makes a decisive contribution to the re-evaluation of the term informality and is very closely based on neoliberalism . It ties in with the ideas of the New Institutional Economy: Institutions must participate in economic and social development by approaching the informal market. De Soto's definition of the informal sector differs from others in that he uses only one criterion, that of the illegality of economic activity . De Soto sees the Latin American states still in a mercantilist phase that the western industrialized countries have already overcome.

He argues that one of the main causes of poverty in developing countries is insufficient property security. In extensive studies, de Soto first worked out for Peru, then also for other developing countries, that the less privileged have considerable property and shares in companies, but cannot document this through formal property rights. This informal property ties up “dead capital” because it cannot serve as security for investments and is also less fungible than legally protected property.

Developing countries do not have, such as the Western industrialized countries, a historically mature infrastructure for documentation of property by land registers , cadastre , register of companies etc. Such formal acquisition of property, according to de Soto prerequisite for the formation of stable markets in developing countries. Only on this basis can economic growth arise and prosperity be created through economic reforms. Without securing legally valid property, all development policy measures will be fruitless.

In addition, registered property is essential for a stable social and political order. It enables improved environmental protection, for example by preventing soil erosion , because legitimate owners have a great interest in maintaining the value of their property. In an economic system structured in this way, tax revenue also increases, and thus the government's scope for action is expanded.

Works

de Soto, Hernando and Cheneval, Francis (Eds.): Realizing Property Rights. Swiss Human Rights Book Vol. 1. Rüffer & Rub 2006, ISBN 978-3-907625-25-5
de Soto, H .: Freedom for Capital! Why capitalism doesn't work worldwide. Berlin: Rowohlt, 2002

literature

Hans-Heinrich Bass , Markus Wauschkuhn: Hernando de Soto - the legalization of the factual . In: D + Z Development and Cooperation , Issue 1/2000, pp. 15–18 ( online , archived website).
R. Bromley: A New Path to Development? The Significance and Impact of Hernando de Soto's Ideas on Underdevelopment, Production, and Reproduction . In: Economic Geography , 1990, pp. 328-348.
Markus Müller: The informal sector - marginal pole or engine of development? University of Hamburg, Institute for Political Science, diploma thesis, 2003.

Web links

Literature by and about Hernando de Soto in the catalog of the German National Library
Institute for Liberty and Democracy - Hernando de Sotos Institute

Individual evidence

^ Announcement of a talk by Hernando de Soto at the University of North Carolina , Carolina Alumni Review , September 17, 2004.
↑ Hernando de Soto: Dead capital and the poor in Egypt, in: Hans-Joachim Stadermann and Otto Steiger (ed.): Verpflichtungsökonomik. Property, Freedom and Liability in the Money Economy (with a biographical appendix), Metropolis, Marburg 2001, 33-79, here 77
↑ Hernando de Soto: Freedom for capital! Why capitalism doesn't work worldwide. Rowohlt, Berlin 2002
↑ An overview can be found in Hernando de Soto: Dead Capital and the Poor in Egypt. In: Hans-Joachim Stadermann and Otto Steiger (eds.): Verpflichtungsökonomik. Property, Freedom and Liability in the Money Economy (with a biographical appendix), Metropolis, Marburg 2001, pp. 33–79, here p. 56.
↑ Hernando de Soto: Dead capital and the poor in Egypt. In: Hans-Joachim Stadermann and Otto Steiger (eds.): Verpflichtungsökonomik. Property, Freedom and Liability in the Money Economy (with a biographical appendix), Metropolis, Marburg 2001, pp. 33–79, p. 52.

personal data
SURNAME	Soto, Hernando de
ALTERNATIVE NAMES	Soto Polar, Hernando de (full name)
BRIEF DESCRIPTION	Peruvian economist
DATE OF BIRTH	June 2, 1941
PLACE OF BIRTH	Arequipa , southern Peru

[1] Announcement of a talk by Hernando de Soto at the University of North Carolina , Carolina Alumni Review , September 17, 2004.

[2] Hernando de Soto: Dead capital and the poor in Egypt, in: Hans-Joachim Stadermann and Otto Steiger (ed.): Verpflichtungsökonomik. Property, Freedom and Liability in the Money Economy (with a biographical appendix), Metropolis, Marburg 2001, 33-79, here 77

[3] Hernando de Soto: Freedom for capital! Why capitalism doesn't work worldwide. Rowohlt, Berlin 2002

[4] An overview can be found in Hernando de Soto: Dead Capital and the Poor in Egypt. In: Hans-Joachim Stadermann and Otto Steiger (eds.): Verpflichtungsökonomik. Property, Freedom and Liability in the Money Economy (with a biographical appendix), Metropolis, Marburg 2001, pp. 33–79, here p. 56.

[5] Hernando de Soto: Dead capital and the poor in Egypt. In: Hans-Joachim Stadermann and Otto Steiger (eds.): Verpflichtungsökonomik. Property, Freedom and Liability in the Money Economy (with a biographical appendix), Metropolis, Marburg 2001, pp. 33–79, p. 52.