

A Century of Explorers
Hernando Cortes: ruthless, greedy, fearless and cleverThis book includes native artwork of Aztec rituals and the arrival of the Spaniards, as well as European paintings of other events described. You will find a Chronology from the founding of Tenochtitlan in 1325 to the death of Cortes in 1566, along with a Glossary, list of Further Reading, and Index. This book is part of the Explorers of the World series, which has 30 titles focusing on explorers from Marco Polo and the Vikings to Sir Edmund Hilary and the Apollo Astronauts.


Legalized Private PropertyMake no mistake about it though, the economic system that an overwhelming majority of the world's people currently operate under is NOT capitalism. "The Mystery of Capital: Why Capitalism Triumphs in the West and Fails Everywhere Else" is Peruvian economist Hernando de Soto's explanation of why capitalism has failed to take root in most of the world's countries.
What de Soto believes that developing countries lack is an integrated property system that would allow the people of these countries to turn their homes into engines of growth. He starts by stating that he has collected data from all over the world and he concludes that the world's poor 'own' real estate assets in excess of trillions of dollars. He then states that the poor are unable to realize the capital potential of these assets because they do not belong to the formal property sector. Instead the world's poor often hold their assets in an informal, extralegal sector.
They do this not because they seek to avoid taxes or because they are engaged in illicit activities but because their governments have made it too difficult and too expensive to get legal. De Soto says that, in Peru, the city of Lima alone requires any person wishing to formalize their title to property to navigate over 200 steps that take years-worth of time. Given the difficulties and expenses involved with this bureaucratic nightmare, the poor often give up and form their own property associations to protect their rights.
De Soto then goes on to say that this is not much different from how things were in the United States up until about the mid-1800s. Modern Americans don't realize the difficulties our ancestors went through in establishing title to their property because there is no clear history of the effort to legalize American property holdings.
De Soto believes this legalization of property holdings is vitally important to the success of capitalism because most start-up enterprises are begun with money raised from someone's home. Without the access to a wider credit market that legalization provides, the developing world's poor are locked into a system that prevents them from expanding their businesses and from gaining economies of scale that would allow them to generate real wealth and jobs.
While all of this seems intuitive, de Soto falls short of adequately backing up his thesis. I am already a believer in the rights to private property so I don't need convincing. However, a majority of the world's people are not believers in private property rights. I assume that it is to them that de Soto is directing his effort. If it is, he needs to include more support for his argument than just assuming the Western concept of private property rights is accepted everywhere in the world.
These failings aside, "The Mystery of Capital" is an important work in that it gets us focusing on what needs to be done to improve the lot of the world's poor. Capitalism, free trade, and private property are the means to improve those lots. However, these concepts will only triumph if most of a country's people are plugged into the system. If they are left out, no matter how successful those concepts may be for the ones on the inside, they will fail to achieve their ultimate goal, which is the improvement of the quality of life for a majority of the world's people.
de Sota supplies one component for economic growthHe states that an individual living outside the West faces an impenetrable wall of rules that bar them from legally established social and economic activities-such as deleterious bureaucracies that retard growth by wielding red-tape. De Sota sent teams to Peru, the Philippines, Egypt, and Haiti and they experienced firsthand how it takes several years to obtain legal verification of assets-years compared to days here in the West. Under these burdens, individuals create new laws-extralegal laws. These social contracts have created a vibrant but undercapitalized sector. This sector is known in economic layman's terms as the underground or informal economy. The author estimates that over half on the inhabitants in developing countries engage in this sector-using Dead Capital. The value of the assets in the informal markets are huge-surpassing the assets of rich countries sometimes. De Sota has brought attention to the core of the problem-he then states that the solution can be found at the heart of the countries.
He supplies the formula to fix the backwardness of the nascent capitalist nations. The first objective is to unify the many social contracts already existing in the extralegal sector into one, all encompassing social contract-by listening to the "barking dogs", or the people. Past attempts with this aim have failed because they have lacked the legitimacy and support from the current extralegal world. De Sota creates a bridge to fix this dilemma-a bridge that integrates old social property customs into a new all encompassing social contract. By working with their people, government leaders can forge a new regulatory framework. The second task is a task of a political nature because the plan outlined above requires the support of the poor, the elite, and the lawyers. The poor will gain the most because they will greatly increase their economic lifestyles with a more unified social property system that will enable them to use their assets as full functioning capital. The elite will harvest gains as well; they will benefit from an expanded market and growing capitalist economy. The lawyers must not use the current law, but instead fine-tune the law and change it to make it work for all.
De Sota's real world studies and solutions make sense in my mind. He identified a problem and supplied the solution. He may fall short though in his solution because a complex capitalist economy requires much more infrastructure than only property rights-of course I mean other forms of capital, such as human capital. By De Sota is on the right tract; a capitalist economy demands strict and discrete property laws that enable individuals to utilize their assets. His premise is right-under capitalism, the rich get richer, and the poor get poorer. In the third world, the poor don't have access to their assets, and they thus flounder in the extralegal sector.
Excellent Advice for Third World LeadersIn the book, de Soto argues that it is the inability to produce capital, rather than a lack of respect for private property or the rule of law per se, which inhibits rapid economic growth in the third world. He notes there is a difference between protecting property rights and producing capital. Specifically, he states that over time in the West, mechanisms were developed within systems of property rights to produce capital very quickly. He asserts that many westerners are oblivious to these mechanisms, and that they "...view them as parts of the system that protects property, not as interlocking mechanisms for fixing the economic potential of an asset in such a way that it can be converted into capital."
He defines property as a mediating device that captures and stores the mechanisms necessary to run a market economy. He states that it "...seeds the system by making people accountable and assets fungible, by tracking transactions, and so providing all the mechanisms required for the monetary and banking system to work and for investment to function." He relates the idea of property to capital by pointing out that - rather than a mere representation of assets on paper - it is a process through which a society extracts value from those assets. Therefore, property is not the assets themselves but an expression of how those assets should be used.
From this, de Soto develops his theory of how the West grew rich. He argues that American property systems flourished because they incorporated legal rights to allow people to use their property to create capital. He lists occupancy, preemption, homesteading, miners' laws, and other mechanisms for bringing informal property rights into the legal arena as examples of how Western systems created a new economic order providing the right incentives for massive growth to occur. He believes this evolution occurred under America's legal umbrella rather than Britain's because America's system responded to shifting political attitudes more quickly than Britain's - where the common law had entrenched a static system hostile to extralegal notions of property.
These extralegal notions of property are crucial, de Soto notes, because they dominate most economic transactions in the third world. He points out that with their formal economies so heavily regulated, black markets are the only systems available to most third world residents. As a result, most businesses in the third world incur heavy visible costs in the form of paying bribes, making payments outside legal channels, and operating through dispersed networks without a source of credit. However, the largest costs - which are invisible - are the absence of institutions necessary to create incentives for people to raise investment funds, achieve economies of scale, or protect their innovations in the marketplace.
Thus, de Soto argues, the problem with most proposals to establish property rights and the rule of law is that they ignore existing black market institutions that already guide economic activity in third world countries. He explains that when new legal institutions are created, those institutions must embrace contracts and arrangements that exist under the black market, or they will be rejected over time. He believes the solution is for reformers to codify black market rules so they can be made uniform within individual countries. Thus, leaders can compare these rules to other newly proposed frameworks and create an individual set that best enables them to create a system that is legitimate and self-enforceable over time.
De Soto's book sheds important light on many of the problems inherent in development economics. His insights into the evolution of market institutions to provide incentives for people to both protect their property and use it productively explain many of the frustrations experienced by officials at international aid agencies and third world governments. These leaders would do well to heed his advice.


Entering a murky worldBacardi has sought to use US laws to put a stranglehold on Cuban trade. This includes sponsoring the Helms-Burton Act that tightens the 40-year blockade. The author comments that "the text is so severe and over-arching that doubtless not even the laws and treaties imposed on African colonies by the European powers have contained such a degree of arrogance and lack of respect for a sovereign nation."
Bacardi lawyers were also heavily involved in writing the new trade laws that mean Cuban brands are no longer recognized in the US. Havana Club rum's French partner Pernod-Ricard (the major competitor to Bacardi) has convinced the European Union that such moves are an infringement of fair-trading laws.
Bacardi and others are aiming not just to remove Castro from power but establish Cuba as a colony of the US with chosen front men running the place.


Wow, this is really history?!

Good read!



