interview by Michael Cromartie
The Rules of the Capitalist Game
The Mystery of Capital: Why Capitalism Triumphs in the West and Fails Everywhere Else by Hernando de Soto, Basic Books, 276 pp.; $27.50
In the acknowledgments for his new book, The Mystery of Capital: Why Capitalism Triumphs in the West and Fails Everywhere Else (Basic), Hernando de Soto thanks the Smith Richardson Foundation for its support, which included providing a bullet-proof vehicle when de Soto's Peru-based Institute for Liberty and Deomcracy "was being bombed and shot at during the early 1990's." The distinctive mix of practicality and wit in that thank you is characteristic of de Soto, whose book The Other Path was read by policymakers throughout Latin America and around the world. He tackles subjects that have produced mountains of unreadable prose and inconclusive statistics, and emerges with a fresh point of view that is at once utterly practical and conceptually dazzling. Michael Cromartie spoke with de Soto during a recent visit to Washington, D.C.
In the first paragraph of your book you say, "The hour of capitalism's greatest triumph is its hour of crisis. The fall of the Berlin Wall ended more than a century of political competition between capitalism and communism. Capitalism stands alone as the only feasible way to rationally organize a modern economy. At this moment in history, no responsible nation has a choice. As a result, with varying degrees of enthusiasm, Third World and former communist nations have balanced their budgets, cut subsidies, welcomed foreign investment, and dropped their tariff barriers. Their efforts have been repaid with bitter disappointment. From Russia to Venezuela, the past half decade has been a time of economic suffering, tumbling economies, anxiety, and resentment." Why has there been such bitter disappointment?
I think a useful way of looking at this is thinking first of all about the numbers. There are about six billion people living in the world. One billion of these people live in what is generally known as the "West": ...