Contemporary Visionmakers - Hernando de Soto

With almost half of the world’s population surviving on less than two dollars a day and one fifth on less than one dollar, global progress in the fight against poverty in developing countries is declining


Hernando de Soto, a Peruvian economist, has recognized that one important cause of third world impoverishment is the absence of deeded property.  De Soto’s quest is to help the poor acquire legal rights to the property they live on. In a New York Times Magazine story by Mathew Miller, de Soto said:


“Imagine a country… where nobody can identify who owns what, addresses cannot be verified and the rules that govern property vary from neighborhood to neighborhood, or even from street to street."


This is what life is like, he says, for 80 percent of the people in the developing world and the former Communist Countries. Through ‘extra-legal’ businesses and home building, de Soto reckons, the world’s poor have accumulated assets worth $9 trillion – 20 times the direct foreign investment in the third world since the Berlin Wall fell and more than 46 times as much as the World Bank has lent in the last three decades.”


Because these assets are not legally titled, they cannot function as capital. Hernando de Soto’s proposition is simple: the legal ratification of ownership creating collateral.  Hernando de Soto contends that such formalization would effectively “turn ‘dead capital’ into fuel for growth.” 


Governments of Mexico, Egypt, the Philippines, Haiti, and other public and private sector leaders, are exploring how de Soto’s vision could be applied locally. On the problem of determining property lines where no formal systems of titling exist, de Soto’s solution is as pragmatic as it is visionary:


“You know when you have crossed onto someone else’s property in Bali because – a different dog barks.  The dogs know.”


One man’s simple idea… an idea that could change the world. Extraordinary challenges require extraordinary leadership. That leadership must come from each of us.


© Patrick O’Neill 2009. All rights reserved.



Posted on June 3, 2009 and filed under Contemporary Visionmakers.