His substantial work in developing countries, de Soto (pictured) said, led to the discovery “that most people actually want more, rather than less, capital and they want their capital to be real and not fictitious”. Remember, de Soto does not work with just statistics but is involved with empirical issues relating to the poor in several developing countries.
De Soto agrees that capitalism is flawed but doesn’t believe this should lead to an anti-capital approach (much like our very own Raghuram Rajan), but instead to a more pro-markets approach. There is no denying that there is an unequal access to capital in India, but while Piketty and his tribe will argue for more state intervention to correct this, de Soto favours an approach where the poor get more economic freedom. In this 2007 interview with this author during a visit to India, he criticised what he called “capitalism for a few” and said:
…if it is perceived as a system that does not provide opportunity for everybody, it will collapse. I favour a market economy that’s open to everybody, not as an act of faith, but simply because I don’t know of a better system.
He also says developing countries should not follow a western model of capitalism:
Capitalism or the market economy never looks exactly the same in any country; it has different cultural traits. Copycat movements of the west are unsuccessful. You have to have a local adaptation.
In fact, in the Independent article, he criticises Piketty for looking at inequality in developing countries through a western lens.
Poverty, The Compassion Cartel, and Environmental Racism
Hernando de Soto had it right: Property rights underpin any and all economic development that is able to actually lift people out of poverty. Thus, the UN’s universal attack on eliminating property rights can never, ever eliminate poverty like they claim. ⁃ TN Editor
In 2006, I was surprised to find myself sitting at a formal dinner in the middle of a 200-year-old debating society at Cambridge University in England. In a few minutes I, and five others were about to engage in a debate over the usefulness of the United Nations. But here, for a few minutes longer, at the long dinner table with the crisp, white tablecloth, I was sitting next to one of my fellow debaters, Salis Shetty, the head of the UN’s Millennium Project.
I had ignored him through most of the dinner, but with just a few minutes left before the debate, I finally turned to him and said, “You realize you don’t have a prayer, don’t you?”
He looked at me and asked, “About what?”
I replied, “Ending poverty by 2015 through the use of redistribution of wealth.” (That was one of the eight listed goals of the UN’s Millennium Project, accepted by world leaders in 2000.)
He said, “Yes, I know.”
I began to talk with him about the need to help the poor escape from poverty on their own rather than being condemned to life-long bread lines. I talked about the need to establish private property rights as a means to build wealth. I mentioned that there was estimated to be almost $10 trillion in “dead capital” (property in the world that no one is allowed to own or invest in). That’s enough capital to help a lot of poor people break out of their dire situation.
Mr. Shetty looked at me as I made these observations and said, “Hernando de Soto.”
“Yes!” That’s exactly whom I was quoting. De Soto is an economist from Peru who has made it his life’s work to help end poverty in the world by promoting private property ownership.
To my amazement Mr. Shetty looked at me and said, “I have associates who are looking on this (de Soto’s ideas) favorably.” Just as he said those words, the call came for us to head to the debating hall for our event. Of course we were on opposite sides.
As soon as the debate was over (I was outnumbered five to one, as usual), I made a beeline to Mr. Shetty and said, “You and I started a conversation and I want to finish it.” A few weeks later I traveled to New York City to meet with him in his UN office. During that meeting, he told me that, in his city in India, the local government was beginning to go over property records and officially register ownership, something that had never been done before. The result was that the economy of the community was starting to improve.
That is exactly the point that Hernando de Soto is making as he travels the world meeting with national leaders. The core reason for poverty is bad government. In most of the world, people may “own” their homes, perhaps via an underground economy, but they have no official records through the government to prove it. Without that official proof or registration, they have no means to use the property for equity loans and investment, so it is essentially dead capital, as de Soto has labeled it.
In his book, “The Mystery of Capital, Why Capitalism Triumphs in the West and Fails Everywhere Else,” de Soto explains the major difference between the American system and most other nations of the world. Here, every single piece of privately held property — homes, even large equipment, is registered. In fact, the County Registrar’s office is one of the most important tools of freedom because it’s where every American can prove ownership of their property. Because of that system, average Americans can use their property as a tool to obtain loans. At least 60% of American companies have been started thorough equity loans on private property. And those privately held companies went on to employ about 60% of the American workforce. That is how private property ownership made the United States the richest nation in the world, almost over night. Lack of such a system is the reason much of the rest of the world fell into extreme poverty. In those cases, the people have no way out of poverty and are forced to rely on government handouts.
De Soto’s book was called “The blueprint for a new industrial revolution,” by the Times of London. Today de Soto travels the world, meeting with world leaders who seek his guidance on how they can end poverty in their nations. Yet, when he tells them the secret is private ownership of property, many balk, telling him with a troubled smile, that the people in their nations “just aren’t ready for such a policy – they don’t understand the concept of private property ownership.” So the promise of a great new financial revolution that could spread wealth and freedom to every corner of the world never gets off the ground.
A few years ago I had the great privilege of a private meeting with Hernando de Soto. He told me a story of one such meeting he had with a national leader. He’s been in enough meetings with world leaders that he can now almost anticipate what they are going to say. In this particular meeting, he said he knew the leader was going to tell him that his people just weren’t ready for private property ownership. So, before the meeting, de Soto sent a team into the neighborhood around the presidential palace and knocked on doors to ask the people if they owned their homes. Every single one of them said yes, they owned their home. So de Soto’s team members asked each to produce any kind of evidence they might have to show that ownership. They did. It might have been a bill of sale, a receipt or even a copy of a will. In any case, they had something to prove their ownership in a country where property ownership was not supported by the government.
De Soto took copies of these items with him to the meeting, and before the discussion could begin about how the people of his country didn’t understand private property ownership, Hernando de Soto spread his evidence on the table and said to the leader, “your people understand property ownership, now let’s discuss how they can legally own it and build capital from it.”
There are three main reasons the world has not experienced de Soto’s new financial revolution. First is bad government led by dictators who refuse to give up their power over the people by supplying them the means for ending poverty. Poverty is very helpful to dictators because poor people are powerless to rise up against them. Poverty is also convenient to rouse the rabble against political opponents and spread fear.
Those who are barely hanging on from meal to meal are easy to scare with threats from any proposal that dares to differ from the redistribution schemes, even if, in the long run, that would be the best means for them to find a way out of poverty. The Left has used this fear effectively to build hate and resistance against those who promote free enterprise.
The second reason the world is sinking into ever greater poverty is the Environmental Movement– the new-style dictatorship that actually prefers people to remain poor, living in mud huts with no infrastructure, running water or electricity. That, they claim, is sustainable.
Believe it or not, there is a worldwide Sustainable Development policy to prohibit funding of development projects in Third World countries if the projects don’t fit the environmental agenda. It’s called the Equator Principles. According to their own documents, the Equator Principles were established in association with the World Bank’s International Finance Corporation in 2003. They have been adopted by at least 73 financial institutions around the world, covering over 70% of international projects such as dams, mines, and pipelines. At least three leading American financial institutions are associates of the Equator Principles, including Bank of America, JP Morgan Chase and Citigroup.
In short, such policy actually leads to what can only be called Environmental Racism. A few white, rich people who live in luxury in their first-world nations have made a determination that some who now live in mud huts with no indoor power and no clean running water must stay that way because these elites have determined it is more ‘sustainable” for the planet.
Stopping development for the poor has become a major drive by Sustainablists. At the Earth Summit in 1992, Chairman Maurice Strong (pictured) famously said “Isn’t the only hope for the planet that the industrial nations collapse? Isn’t it our responsibility to bring that about?” Zero economic growth is the announced goal to assure their well-ordered sustainable society stays dormant, thereby assuring their control. Of course, the result will only be more poor people – all in the name of saving the environment.
But fear not, these same power mongers aren’t satisfied with condemning just those already living in poverty. Apparently they are so determined to control every human action on the planet that they are equally happy to condemn the rest of us to such a future – for the planet, of course. Author Ted Trainer has written a book entitled “Transition to a Sustainable and Just World,” which is really nothing more than a blueprint for establishing Marxist principles into your local community. In the book Trainer writes,
“The alternative has to be the simpler way, a society based on non-affluent lifestyles within mostly small and highly self-sufficient local economies under the local participatory control and not driven by market forces or the profit motive, and with no economic growth. There must be an enormous cultural change away from competitive individualistic acquisitiveness.”
The call for zero economic growth was also heard at the UN’s Rio+20 Summit in 2012. Trainer’s motto for us all is that “you must live on less!” That is their definition of Sustainable Development. Of course they only mean this future for you and me, not the powerful elite.
Such ideas of destroying human civilization are, in fact, rampant throughout the Green movement. Paul Ehrlich, professor of Population Studies at Stanford University demanded that “a massive campaign must be launched to de-develop the United States. De-development means bringing our economic system into line with the realities of ecology and the world resource situation.” Apparently, the advocates of such a desire to make us all poor have missed a very important fact: only in wealthy nations do people have enough money and time to worry about protecting the environment. The poor worry only about one thing – survival. It is also in the poorest areas where population numbers explode. In rich, secure nations populations are actually going down. So it would seem logical that if one wants to protect the environment and reduce populations, then Capitalism would be the economic system of choice. But of course, none of this is really about helping the poor or the ecology. It’s about power.
The third reason for depressed economies and a growing number of poor is what I call the “Compassion Cartel.” Government, private charities and foundations have made poverty big business. It’s the excuse for nearly every governmental spending program. Help the poor! Tax the rich! How dare they get wealthy while others suffer? And the preferred way to eliminate poverty is redistribution of wealth. It’s easy to convince someone to donate to a cause when emotions and guilt are employed. Reason and rational thought take a backseat.
Back to my debate in Cambridge: After the debate was over, the hosts sponsored a reception. As I entered the door, I was confronted by one of the students, who asked with puzzlement – “sir, you really don’t believe in redistribution of wealth?”
I answered, “No, it’s theft.”
And she said, “But if you have more than you need, shouldn’t you share it with someone who needs it?”
I said, “Why should I?”
She looked like I had slapped her. Here she was, one of the bright young students at one of the great schools in the world, and she had never heard an argument against redistribution of wealth or for a free market. As I spoke to her, giving detail after detail about how a free market and property can eliminate poverty, more than 50 other students began to gather around.
I explained that if I take money from each of them today to feed someone more unfortunate, then tomorrow they will need another meal –and again the next day, and the next. You have gained nothing in the battle to help them, other than to delay their agony another day. At best you have offered a band aid. At worse, such policy doesn’t prevent poverty. Something else is causing that poverty and you haven’t addressed it. So, tomorrow there will be more poor, and more the next. And each time you will be forced to provide more and more aid from your now dwindling funds, until one day you too may find yourself forced to be in the receiving line. When I finished my explanation there was a moment of silence and then the young student said, “What an interesting point of view. How can I learn more?”
I wanted to scream “Economics 101!”
Today, anyone who points out such economic facts in a failed welfare system is called heartless and probably racist. What kind of evil person calls helping the poor theft? Well, take a good look at the world we live in. According to Mr. Shetty’s Millennium Project, there are currently 1.2 billion people living in poverty. Fifty thousand deaths a day occur worldwide as a result of poverty. Every year more than 10 million children die of hunger and preventable diseases. More than half the world’s population lives on less that $2 per day and 800 million people go to bed hungry every night.
To combat all of this we have the Compassion Cartel. We have thousands of charitable organizations and faith-based programs designed to feed the children, along with education programs designed to create awareness of poverty and starvation. Their ads run on television nightly pulling at our heartstrings to “do something.” Most of these charities have built huge private organizations, with highly paid administrators working out of impressive buildings with large staffs. That doesn’t include the huge government programs operating at an even larger scale on your tax dollars. As I said, poverty is big business.
Every politician preaches the gospel of helping the poor and as a result, more than half of every American’s pay check disappears into government coffers even before it hits our own pockets. Billions of dollars of aid pour into federal and international programs to distribute to countries around the world to help feed the poor. Poverty reductions have been set. Goals have been announced, Deadlines for ending poverty have been determined and every national and international leader has signed documents to pledge that poverty must be eradicated. In 2015 it was called Agenda 2030. In 2019 it’s called the Green New Deal.
What is the result of this worldwide focus on poverty? Well, we have more poor! It’s a growth industry. Why? Because not one of these programs offers a single plan to allow the poor to help themselves. Instead, the Compassion Cartel has sentenced every single poor person in the world to a future of life-long breadlines, allowing them to be victims of demagogues, con artists and harsh, hopeless, futureless lives. There is no consideration for their goals and dreams and no real understanding of the hopelessness of their lives. And the middle class of once wealthy nations like the United States is quickly dissolving under the burden of the redistribution schemes. Result – more poor in our once proud nation.
If the self-proclaimed compassion industry had true concern for the poor, it would begin an international drive to empower the poor by allowing them to build their own wealth – thereby getting themselves off of the breadlines.
Hernando de Soto has offered that way. He has called for the establishment of private property rights that would allow people around the world to build personal wealth and the ability to invest in new enterprises that would, in return, employ more, help build infrastructure to allow still more to have electricity, heat, cooling and clean water in their homes, improving health and the quality of their lives. Step by step these improvements would lead to creating more wealth worldwide, reducing the burden on the rest of us, and in turn, help all of us build even more wealth, strengthening quality of life. Help the poor help themselves and it will also help you. That is a winning compassion for all.
But to take such a step would require a rejection of socialism and an embracing of capitalism. And that, says the Compassion Cartel, can never be allowed, because that would lead to empowering individuals to control their own lives. Instead, in the name of compassion, sustainable oppression in a well-ordered society is so much more efficient.
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