June 17, 2004
Read this book, it's important.
Been reading Peruvian economist Hernando de Soto's 'The Mystery of Capital', in which he tries to and, to my mind, succeeds in explaining why capitalism has worked in the West and been pretty much a complete disaster everywhere else.
 | de Soto starts from the basic premise that "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" - which may cause most anti-capitalists to wince / fume / explode, but which (at least at this point in history) does seem to be a fair working assumption. He certainly puts it to good use. |
According to de Soto, the big problem in the Third World and former Communist states is that while the poor have plenty of assets - e.g. land, homes, businesses, etc. - these pretty much all sit in the extralegal, informal realm. His team's extensive in-country research points to this being the result of massively accelerated urbanisation and population growth, coupled with the inability and unwillingness of the authorities and their legal systems to adapt to the reality of how people are actually living.
Strikingly, when he has intervened in a country and made it much simpler for people to 'legalise' their businesses, tens of thousands of grey / black economy entrepreneurs have done just that, even though they then become liable to pay taxes on what are, in the main, very low margin operations! As it turns out, the cost of doing business extralegally is often greater than doing so legally - think protection money, high interest loans(harking), bribery, etc.
That's just a brief summary - if you're interested or intrigued, I really recommend you read the book. Now all I want is one that explains China's take on capitalism as clearly...
N.B. I think there are some strong analogies between ownership of physical property and ownership of data ('intellectual property'?) in an Information Society. I furthermore believe that if we don't own in law the data that pertains to us then, in a knowledge economy, we run the risk of becoming 'digitally disenfranchised' - little more than chattels ('good little consumers'!) of the States, banks and corporations that issue, control and trade our identities and personal information.
We're not there yet, thankfully, but there's still a large majority in the West who seem content to sleepwalk into a future that, by design*, looks like it could lack some of the basic human values that we have come to take for granted - like privacy, trust and the presumption of innocence. These are things that, unfortunately, have to be fought for again and again - and sometimes it's the very people that we have elected who try to take them away :(
*State and/or corporate.