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The De Soto Delusion

Peruvian Economist Hernando de Soto'sideas for helping the poor have made hima global celebrity. Now, if only thoseideas worked.

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By John Gravois

Updated Saturday, Jan. 29,2005,

at 12:33 AM!

"t#s $avos %ee&, %hi'h (eans it#sti(e )or the %or*d#s (ostin)*uentia* peop*e to

+as& in the 'at'hy %isdo( o)ernando de Soto.

Author o) The Mystery ofCapitaland The Other Path,

ar('hair 'onsu*tant to nu(erousheads o) state, and %hite

&ni-ht )or the 'ause o) property)or(a*iation/ernando deSoto is pra'ti'a**y the patronsaint o) the -*o+a* e*ite. At *astyear#s annua* (eetin- o) theor*d 'ono(i' oru(, Bi***inton, the event#s uno))i'ia*&in-, pu+*i'*y de'*ared that de

Soto %as pro+a+*y the %or*d#s(ost i(portant *ivin-e'ono(ist. or the *e)t, de Sotohas )or(u*ated the (ostsee(in-*y pra'ti'a* ideas )orredu'in- -*o+a* poverty. or theri-ht, de Soto o))ers the (ost'o(pe**in- %ay to (ar&et'apita*is( to the poor.

Be-innin- %ith his )irstpro4e'ts in eru in the (id6#90s,de Soto#s ideas have +eenpa'&a-ed and pedd*ed a** overthe

!hird or*d/+y the or*d

Ban&, +y the U.S. A-en'y )or"nternationa* $eve*op(ent, and +y deSoto#s o%n 7i(a thin& tan&, the

"nstitute )or 7i+erty and $e(o'ra'y/as the ne% 'onventiona*



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%isdo( )or )i-htin-poverty. 8n the %hite+oard, de Soto#s ideas

)*atter the i(a-inationsand sensi+i*ities o)$avos6 typesparti'u*ar*y theA(eri'an ones. But onthe -round, it turns outthat de Soto#s ideas aredoin- very *itt*e to so*vethe a'tua* pro+*e(s o)poor peop*e.

$e Soto#s vision o)the !hird or*d isinstin'tive*yappea*in-. e sees

industrious, entrepreneuria* s*u(6

d%e**ers, toi*in- %ith +ound*essin-enuity, yet *ivin- in ho(es and

o%nin- +usinesses thatare theirs on*y +y de)a'to possession and

4ury6ri--ed *o'a*a-ree(ents, not +y de

4uredeed and tit*e. $e Soto'a**s a** this in)or(a**y he*d

property dead 'apita*,

+e'ause it 'an#t +e *evera-ed toprodu'e -ro%th/it 'an#t +e(ort-a-ed, +e'ause it *a'&s aproper tit*e to -uarantee it as'o**atera*. e says there are-o+s and -o+s o) this dead

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stu)) out there: ;9.3 tri**ion %orth,+y his esti(ate, s&u*&in- in the-hetto.

Mind)u* o) the )a't that thesin-*e (ost i(portant sour'e o))unds )or ne% +usinesses in theUnited States is a (ort-a-e onthe entrepreneur#s house, deSoto#s p*an is,


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ro( the )ie*d, theverdi'ts are ro**in- in: "nso(e 'orners o) the

%or*d, the *and6 tit*in-pro-ra(s inspired +y deSoto#s %or& are provin-(ere*y ine))e'tive. "nother p*a'es, they aresho%in-

the(se*ves to +edo%nri-ht har()u* tothe poor peop*e theyset out to he*p.

irst, the (ere*y use*ess:

"n various parts o)the !hird or*d,ne%*y *e-a*ied

s


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"n p*a'es %here rea* estate(ar&ets are +uoyant, tit*esturn out to +e


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re*o'ation sites severa* (i*esoutside o) the 'ity, %here there%ere no 4o+s and %here the pri'e

o) 'o((utin- to and )ro('entra* hno( enh a+out ;2per day surpassed %hateverdai*y %a-e they had +eenearnin- in to%n +e)ore the )ires.Mean%hi*e, the +urned6outinner 'ity *and passedi((ediate*y to so(e o) the%ea*thiest property deve*opersin the 'ountry. ro(inenta(on- the( %as this -uy,a(+odia#s ri'hest thu-.

Sin'e then, a si(i*ar pattern has'ontinued e*se%here in the 'ity,says A*ain $urand67asserve, a*and6 (ana-e(ent e>pert %hohas %or&ed in a(+odia durin-the *ast 'oup*e o) years."nvestors have +een +uyin-

s


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a))ord to +other %ith)inan'ia* *evera-e, ris&,and rea* estate (ar&ets.

or very poor s


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te(porari*y insu*atin- s*u(s )ro(the 'o((er'ia* *and (ar&et +y-rantin- in)or(a*

nei-h+orhoods -roups *andri-hts )or so(e period o) ti(e.$urin- that period, he says,the nei-h+orhood 'an +eup-raded and +asi' servi'es+rou-ht in, a**o%in- *andva*ues to in'h up to%ard parity%ith the surroundin- rea*estate (ar&et. !hen, a)ter anu(+er o) years, thenei-h+orhood -ets a )u**,-roup *and tit*e, %hi'h 'anthen +e su+divided intoindividua* tit*es i)

peop*e are %i**in- to ta&e on the'osts. By ta&in- thesein're(enta* steps, he says, youshe*ter the poor )ro( the sho'&o) a tit*in- -o*d rush.

But sad*y, the $avos set doesn#thave a 'rush on Geo))rey 5ayne,and de Soto has never sat do%n)or a de+ate %ith hi(. =or, in)a't, does de Soto see( to payattention to any o) the *a%yers,ur+an p*anners, -eo-raphers,so'io*o-ists, or e'ono(i'deve*op(ent e>perts %ho have'ata*o-ued the rea*6*i)e )*a%s inhis

ideas.

" did 'at'h up %ith de Soto(yse*) 4ust a)ter $avos a'oup*e o) years a-o, and "

as&ed hi( )or his o%n so*ution to thes


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don#t see( to +e a%are o)that, de Soto si(p*yo))ered: " 'an (a&e

the( a%are.

John Gravois is a

writer living inWashington, D.C.

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