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Summary: A great read on socio-economic policy development
Review: In this book Mr. De Soto seeks an answer to why capitalism is succeeding in the West and not in many former communist nations. In general I learned quite a bit from the book and found the sections on law development/social contracts and American property history to be a HUGE learning experience full of insight. If you read this book you can truly learn a lot but you have to read it with an open mind.At times Mr. De Soto is VERY REPETITIVE. Chapters 1-4 keep on repeating his conclusion in different manners and I found that reading those chapters was like him trying to beat his conclusion into my head. His conclusion: Such countries have yet to establish and normalize the invisible network of laws that turns assets from "dead" into "liquid" capital, specifically as it pertains to property and ownership of land. In the West, standardized laws allow us to mortgage a house to raise money for a new venture, permit the worth of a company to be broken up into so many publicly tradable stocks, and make it possible to govern and appraise property with agreed-upon rules that hold across neighborhoods, towns, or regions. Mr De Soto backs up his claims with some profound numbers too. For example, in Egypt, the wealth the poor have accumulated via real estate/property is worth 55 times as much as the sum of all direct foreign investment ever recorded there. He also provides data in the countries of Haiti and Peru. Mr. De Soto provides insights as to how these countries are currently organized/operate via an "extra legal" sector. Rather than operating under a formal code of law local cooperatives enforce and provide dispute resolution and he argues that, since law evolves out of social contract that property laws/organizations could be made a part of the law to help unleash capital through the economy. If you want to read a good book on socio-economics I highly recommend the book.
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Summary: A book by an economist
Review: The Mystery of Capital is recommended, among others, by no less than Milton Friedman, Ronald Coase, Margaret Thatcher, and William F. Buckley Jr. That's not why you should read the book. De Soto examines a necessary and misunderstood topic: why are poor countries poor? His arguments and insights make the book a necessary read for the economist, or other educated person. The main point of The Mystery of Capital is that the seemingly intractable and hopeless situations in Third World countries is due in large part to one common problem: the issue of property rights. Macroeconomic policies make piecemeal improvements (or may improve nothing at all). Money is not the source of the wealth in a nation. Capital is the source of the wealth of nations! Facilitating the proper legal environment is an integral part of the creation and growth of capital, something First World nations had to develop, and something de Soto argues that Third World nations can develop. The book gets a bit dry in the latter half, but is definitely worth the read. De Soto covers legal ramifications and reforms that will help build a bridge for "dead capital" to be converted to "live capital". The Mystery of Capital will be a surprise for some, because of de Soto's synopses here and there about what life is like for those who live in Third World countries, and the enormous amount of (untapped) wealth the people of Third World Nations possess. De Soto is a decent economist, in part because he draws from so many disciplines and sources. He also did a prodigious amount of observation and collection of data (hardly an ivory tower academic). If you have an interest in developmental economics, law and economics, entrepreneurship, History of Thought, Economic History (especially that of the U.S.), or political science, among other areas, The Mystery of Capital is especially for you. I recommend the book to any social scientist - the book is so well done and relevant that you may find yourself developing an interest in any of the above! econ
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Summary: This Ain't Your Father's Economics!
Review: In the past five years I've read a shade under a thousand books, and this is easily the most important of them. In it, Peruvian economist de Soto sets out to do nothing less than explain why capitalism has worked in the West and been more or less a total disaster in the Third World and former Communist states. This has long been a pivotal question for anyone interested in the world beyond their own back yard, and there have been plenty of attempts to explain it before (often in terms of history, geography, culture, race, etc.). However, de Soto's is the most compelling and logically argued answer I've come across. But it's not just me. I don't generally quote other reviews, but my general reaction echoes the most respected policy journals, newspapers, and magazines, who tend to repeat the same words in their reviews:"revolutionary", "provocative", "extraordinary", "convincing", "stunning", "powerful", "thoughtful". Perhaps my favorite line comes from the Toronto Globe and Mail: "De Soto demolishes the entire edifice of postwar development economics, and replaces it with the answers bright young people everywhere have been demanding." Of course readers (especially those on the left) will have to swallow a few basic premises from the very beginning, such as "Capitalism stands alone as the only feasible way to rationally organize a modern economy" and "As all plausible alternatives to capitalism have now evaporated, we are finally in a position to study capital dispassionately and carefully." And most importantly, "Capital is the force that raises the productivity of labor and creates the wealth of nations.... it is the one thing that the poor countries of the world cannot seem to produce for themselves no matter how eagerly their people engage in all the other activities that characterize a capitalist economy." No matter how badly some of us may want to hold on to cherished ideals of collectivist economies, the reality is that at present these are only viable on a micro scale. For the moment, capitalism has won, and the only question is how to make it work to improve the lives of the bulk of the world. De Soto writes: "I do not view capitalism as a credo. Much more important to me are freedom, compassion for the poor, respect for the social contract, and equal opportunity. But for the moment, to achieve those goals, capitalism is the only game in town. It is the only system we know that provides us with the tools required to create massive surplus value." According to De Soto, the problem outside the West is that while the poor have plenty of assets (land, homes, businesses), these assets lie overwhelmingly in the extralegal, informal realm. De Soto's on the ground research reveals that this is the result of an accelerated process of urbanization and population growth, coupled with the inability of legal systems to adapt to the reality of how people live. What has happened is that throughout the Third World, the costs of making assets legal (obtaining proper title to a house, registering a business, etc.), are so prohibitive both in terms of time and money, that the assets end up being what de Soto calls"dead capital." In the West, a web of financial and legal networks enable people to use their assets to create further wealth, through such tools as mortgages, publicly traded stocks, and the like. Outside the West, most people live and work outside the kind of invisible asset management infrastructure that we take for granted, and thus are unable to use their assets for the "representational purposes" we are able to. Thus the full set of capitalist tools are not available to them and it becomes incredibly hard to realize any kind of upward mobility. One of the key sections of the book is "The Missing Lessons of U.S. History", in which de Soto demonstrates how the US faced the exact same challenge several hundred years ago. The difference is that the legal system was flexible enough over a century and a half to realign itself with the reality being created on the ground by an energetic citizenry. However, it occurred over the long-term and long ago, and has thus been forgotten by history. What de Soto says needs to be understood is that the less developed nations of today are trying to accomplish the same thing over a much shorter time and with much greater populations, and without a clear understanding of how the West managed to do it. The ultimate challenge is raising the social awareness and political backing necessary to implement major legal change in the face of resistance from an entrenched bureaucracy and elites who benefit from the status quo. This is a daunting and provocative challenge-but not impossible. Of course, all of the above is greatly simplified, so anyone interested in the state of the world should read it for themselves. De Soto's writing is remarkably clear (especially for an economist), and no background in economics or law is needed to follow his argument. There is a little repetition here and there, but always in the service of making sure the reader doesn't miss the big picture. In the end, whether you agree with his thesis or not, I guarantee it'll challenge your preconceived notions about global capitalism.
Rating: 
Summary: great ideas, something missing
Review: Having done agricultural planning in 20+ Third-World countries, I find that De Soto makes some vital points. First, that globalism, the international free flow of capital, touches only a small minority. Second, that property titling and registration procedures in those countries are so slow and expensive that few people can afford them. They are inappropriate to these countries. One might say that also of the justice procedures of these countries. The book misses what practically all pundits miss. It fails to look at What Works. Taiwan is the prize example, where the reforms of the Fifties made industrial capitalists out of small rural landowners and created a broad market for industrial products that led to dynamic industrial exports. I was a prime pusher of the Second Land Reform of Vietnam, starting in the late Sixties. It had a radical retention limit which afforded some land to everyone. It moved fast, thanks to 1)excellent mapping, 2) computerization and 3)procedures managed by the villagers themselves. It immediately led to lots of on-farm investment, particularly in low-lift pumps. Someone please send a copy to Bill Gates. He uniquely has the money and the talent to do the job everywhere.
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Summary: An Unsexy, Yet Compelling Solution
Review: So often we hear the solution to poverty and inequality in the developing world can be solved by fancy trade agreements, or glitzy technical solutions such as providing high speed internet connections. Then Hernando De Soto comes along with the most unsexy solution imaginable: reform the system of property rights. You (or at least I) would not expect a argument on local codes and regulations on property rights with respect to economic development to be easy reading, and I wouldn't recommend taking this to the beach. But it is surprisingly easy to read and De Soto provides a delicate and readable touch. De Soto gains a lot of credibility because he clearly has gotten his hands dirty in the very countries and issues he writes about. To summarize his findings, in the developing world, property and business ownership is difficult for the middle and lower classes to achieve, and they live outside the "bell jar" of the privileged in the developing world, who do not face these difficulties. Failure to achieve legal property rights and ownership, these classes are greatly restricted in acquiring capital to improve their properties or grow their business. This is not to say the poor and middle class are lawless in these countries. On the contrary, De Soto demonstrates that informal and customary systems of property rights exist outside the legal framework of the country. In fact, such conditions existed in the United States and Europe, and over time, laws in these countries were adapted to reflect and integrate these extralegal agreements. De Soto argues that this must also take place in the developing world for capitalism to truly thrive. So it is not oppressive "First World" countries exploiting the "Third World", nor the lack of free market principles, that is holding the developing world back. De Soto is arguing for a strong central government to serve the will of all the people, if these countries are to be successful. This unique, but very compelling argument by a top notch economist and good writer is highly recommended and really essential reading for anyone interested in economic development.
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Summary: A Pragmatic approach to the socio-economic issues
Review: Outside the Western borders; capitalism is in crisis not because international globalization is failing but because developing nations have been unable to channel capitalism in their countries. Most people in these nations view capitalism with skepticism. To them it is a private apartheid system that benefits only the West and the elites of the developing countries. The fact that more people throughout the world wear Nike shoes; flash Casio watches; drive Ford cars and dine at Mc Donalds; is not an indicator of capitalism. The Issue:
Latin Americans do not have to be reminded. On at least four occasions since their independence from Spain in the 1820's, they have tried to become part of global capitalism and failed. They restructured their debts; stabilized their economies by controlling inflation; liberalized trade; privatized government assets; undertook debt equity swaps and overhauled their tax systems. At the consumer level they imported all sorts of American and European goods. But their lack of success is in their misplaced directive. Fact lifeblood of capitalism is placed in nothing but Capital. The Resolution:
Desoto has taken a very pragmatic approach to the problem; by taking both a historical approach as to how the West traveled the path of Capitalism and undertaking a detailed research in the extent of dead capital stagnant in the developing world. He professes that just like the west in the early days; in the developing world there was a migration of people to cities during the industrialization. This migration created squatter colonies; and around them developed supporting economy. Bureaucracy and painful property registration system (taking 14-17 years); prevents registration of property. In essence creating dead capital; in such a system nobody can identify who owns what; addresses cannot be verified; people cannot get credit or debits; resources (land assets) cannot be converted into money or securities, description of assets are not standardized and cannot be easily compared; and rules of property law changes from neighborhood to neighborhood. By streamlining the registration of dead property lying outside the legal system eliminates all the issues above; and benefits the people by making credit/debit easily accessible to them, by taking loans with property as a security. Facts:
Desoto from his years of research of underground economies taken from a very varied group of countries (Haiti, Egypt, Philippines, Peru) has found some very startling facts about dead capital.
In Egypt the Dead capital is 241,2 Billion, which is 55X foreign direct investment (FDI) up to 1996, 30X market value of Cairo Stock Exchange; 13X accumulated foreign reserves; 6X total savings in commercial banks in Egypt.
In Philippines the Dead capital is 132,9 Billion ; which is 14X total FDI; 7X total savings in commercial banks; 4X market value of Philippines Stock Exchange.
In Peru the Dead capital is 74,2 Billion; which is 14X FDI up to 1995; 11X capital of the largest public enterprises in Peru; 8X total savings in commercial banks in Peru.
Rating: 
Summary: Valuable if you're interested in 3rd world countries
Review: Why Capitalism failed everywhere but succeeded in the West? This is a question that haunts many politicians and economists in 3rd world countries and in the West as well. Eventually the mystery became a quarrel between the two worlds, having the third claiming that Capitalism is just a hoax for the West to tap into their trifling fortunes, and the first claiming that 3rd world countries are failing to implement Capitalism efficiently. The author of this book, Hernando De Soto, is siding with the second team in this dispute. And for that purpose he extends a very strong argument, which is that 3rd world countries failed to utilize the most basic element of Capitalism. And that would be Capital itself! De Soto defines what he calls "Dead Capital" as property and real estate that is not fungible and can serve only in its most basic usage. Capital goes dead when the government fails to establish a real estate system that is accessible to the common public and is appropriate to the people and their property. What De Soto found after years of research and study is that in most developing and ex-communist countries the real estate systems are troublesome, drastically complicated, and out of touch with the real world. These systems nurtured a burgeoning extralegal style of living, where capital and businesses are not adherent to the legal systems of those countries. Instead, they work based on laws and regulations the people developed themselves among their social circles. De Soto extends many shocking statistical information proving that 3rd world countries posses vast amounts of dead capital in their extralegal sectors. The author describes this capital as dead because property in extralegal sectors cannot serve as collateral for loans, are not fungible, and their transactions are not protected by the law. De Soto believes that the poor people living in extralegal sectors of 3rd world countries are the real entrepreneurs of their countries. They are very innovative in creating jobs and forming their own systems of protecting assets and their transactions. The author says that the biggest mistake of their governments is that they are trying to enforce the legal system on them when they should adopt their systems instead. But how come the West never encountered this problem, you wonder. Wrong, the author tells you. The West did go through this and had to sort out many extralegal property and real estate into the legal system. But the West didn't enforce the law on extralegal property, instead they adopted the various extralegal systems and integrated them into the law. The author extends a thorough research in the U.S. history to explain in detail what created the problem of extralegal property and how the Americans overcame it. One thing you'll notice if you read the book to that point is that the book is too long for its topic. And even though it's little less than 300 pages, but by page 150 I felt that the author had said everything he wanted to say. I believe that once an author begins to say "like I said in chapter x" numerous times he should stop immediately. However this is a valuable book indeed and I learned a lot of lessons from it. De Soto is a man who will not make a claim without being able to back it with intensive and thorough research and study. His arguments are sound and make a great deal of sense. If you're interested in the economies of 3rd world and ex-communist countries then I recommend buying this book. This book might fail to appeal you otherwise.
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Summary: Packed With Knowledge!
Review: Hernando de Soto's ideas cannot and should not be ignored. This book will open many eyes to the nature of capital. The author suggests a radically simple yet enormously challenging way of bringing the world's impoverished billions onto the track of capitalism and development: give them legal property rights to what they "own." The author's intriguing case is that a lack of property rights - not a lack of entrepreneurial zeal or competence - stymies development in the former East Bloc and Third World countries. This seemed to be a shockingly original notion when the author first propounded it in his bestseller The Other Patch, and it still does. If the book has a flaw, we warn, it is that the author's undisguised missionary ardor sometimes makes one wonder whether he is merely a zealot. Even if he were one, the book would merit reading.
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Summary: Thoughts that come on doves' feet guide the world...
Review: Other reviewers have commented on De Soto's originality in relation to prevailing economic tradition. They have also praised his style - very clear prose, interspersed by passages of honest elegance. Yet, for me, at least, what stands out most about De Soto is his interest in discovery, in reawakening a long forgotten question. Who asks oneself seriously what capital is today? Is one even generally capable of understanding the question of what capital is? I doubt it - the first reaction is ridicule. Of course one knows what capital is, for one lives in a capitalistic society. One can hardly take such a question seriously. Yet, this provocative question moves this book. De Soto has carried out first-hand research among the boiling global centres of 'marginal' economic activity. He has not looked for the 'right' theoretical answer to the question of capital, rather, he has tried to discover a way to pose, and answer, the question meaningfully. Meaningfully for whom? To those who have forgotten - those in the West - and to those who wish to learn in the developing world and the former communist nations. What is capital? Other reviewers have criticised De Soto for redundancy, repetition. These criticisms are off the mark. De Soto has discovered the conceptual solution to the question of the potential of capital: a legitimate system of representation of property. Yet, he can not simply elaborate it in a few words, for one does not still understand the question he is answering. Because it is disturbing and fleeting, it is very difficult to grasp. Thus it requires constant reformulation. Shakespeare used parallel structure, De Soto uses masterful analogies (I particularly like his profound observation on something so seemingly apparent as barking dogs). De Soto also tries to situate his thought within diverse traditions of Western thought, combining Continental philosophy with American analytics (it is rare to see someone who is capable of synthesizing Derrida with Wittgenstein, to say nothing of Searle!). He seems to be trying to say the same thing in many different ways - yet it is very difficult to understand what that thing (capital) is. De Soto helps the reader by offering many different pathways to the thing (capital) itself. I feel that De Soto might have engaged more deeply with Plato's thoughts on representation and his analysis of the cave parable is somewhat superficial. A more in-depth engagement might provide the basis for a rethinking of some of the precepts behind private property and capital, which De Soto simply accepts as given. This is a personal quibble only, however, as such speculation would reduce the clarity of the book, and thereby reduce its tremendous practical value for concrete action, obviously the author's main intent. De Soto has written a masterpiece around a a simple kernal of truth. It seems so obvious in hindsight! Yet, it is the very stillness of those words in which it is expressed which will bring on a storm.
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Summary: optimistic eyeopener
Review: You can not read this book without thinking this author just might be on to something big. The central question or "mystery" of the book as the title suggests is why the developed countries of the world have become so good at producing capital and the majority of countries are unable to emulate them. The optimistic point of view of this book is that the amount of unutilized capital in even in the poorest of countries still dwarfs the amount of annual foreign aid they receive. The author contends that when the riddle of how to release this untapped resource is solved the market dynamics will take over and the benefits will be reaped. The major economic power for most of the poorer countries of the world is in the underground economy. Keeping the underground economy outside the legal system and the protection it provides stifles the country's growth. The populace of every country has already maximized their competitive advantage within the rules of their local marketplace. What remains to be done is to legalize the marketplace laws over that particular nation as a whole. A national system that incorporates this underground market and legalizes it will obtain the market dynamics that the developed countries enjoy. The author is a noted economist from a third world country, the fact that he is from a third world country may have helped him question the idea of capital production. The author feels that economists from developed countries have forgotten their own economic history and gloss over the importance of a legalized marketplace. This was a very well written book, with the ideas well thought out and many examples of what happened in the USA as it progressed from a former colony, a third world country, to take a position among the developed industrialized countries of the world.
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