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Review and evaluate de Soto (2003), identifying the key arguments he develops, explaining their broader significance and offering a critique based upon your wider reading.

Review and evaluate de Soto (2003), identifying the key arguments he develops, explaining their broader significance and offering a critique based upon your wider reading.

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An essay for the 2011 Undergraduate Awards Competition by Camilla Thompsell. Originally submitted for Geographies of Uneven Development at Queen’s University Belfast, with lecturer Dr Niall Majury in the category of Agricultural & Environmental Sciences
An essay for the 2011 Undergraduate Awards Competition by Camilla Thompsell. Originally submitted for Geographies of Uneven Development at Queen’s University Belfast, with lecturer Dr Niall Majury in the category of Agricultural & Environmental Sciences

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Published by: Undergraduate Awards on Aug 29, 2012
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10/27/2013

 
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Review and evaluate de Soto (2003), identifying the key arguments hedevelops, explaining their broader significance and offering a critiquebased upon your wider reading.
Introduction
Hernando de Soto’s ideas have revived interest in using property
rights to engender economic development and poverty reduction (Daley and Hobley 2005: 4). Whilst work on
urban land tenure had ‘
received scant attention... until the 1980s’ 
, by the 1990s de Soto’s
concepts were making a major impact (Payne 2002:6).De Soto is a populist (Gilbert 2002: 3), extremely influential
1
(Clift 2003: 8, Englund et al.2005: 1, Gilbert 2002: 1, Rose 2010: 22) Peruvian entrepreneur and development economistwith experience in international trade and development
2
(Mitchell 2005: 305-6, Clift 2003: 8)whose experience has led him to a keen recognition of the importance of legal rights inrelation to economics.
3
 He is a leading advocate for neoliberal philosophy
4
and the economics associated with thisburgeoning movement
5
and his foundation, the Institute for Liberty and Democracy (IDL)
6
,has had great success in persuading Peru to follow policies based on these ideas
7
.
1
Since 1997, he has been consulted by the governments of Haiti, Egypt, Mexico, and the Philippines andexpects to be working with 25 governments over the next two years (Clift 2003: 8).
2
De Soto headed the Committee of the Intergovernmental Council of Copper Exporting Countries (CIPEC) andhas worked on the General Agreement on Tariff and Trade (Mitchell 2005: 306).
3
Encountering a mining enterprise who bought rights to gold deposits where locals were already panning for 
gold, he developed a theory involving property rights as capital explained in his book, ‘
The Mystery of Capital’ 
(2000), as will be discussed below (Mitchell 2005: 306, De Soto 2000).
4
 
Central to their orthodoxy, neoliberals hold that ‘
privileging of property rights is a foundational condition of liberty 
’. This fundamental tenet is essential to De Soto’s line of reasoning (Plehwe, Walpen and
Neunhoffer 2006:2).
 
2De Soto is no dry academic
8
and his works should be read as much as polemical tracts asacademic studies.
De Soto’s arguments
 
De Soto starts from an (unexamined) assumption that capitalism provides best route of economic development. He argues that
 
attempts to introduce capitalism to Third World andformer Soviet nations have failed this is because they had been
 
‘built on sand’ 
(without astandardised system of property rights (De Soto 2003: 179)), because
 
basic laws must bepresent for capitalist macroeconomic policies to be successful
 
and in particular 
 
‘capitalismrequires the bedrock of the rule of law beginning with that of property’ 
 
(De Soto 2003: 179)
.
 In essence De Soto makes two claims (De Soto 2003):(a) a standardised system of property rights
 
is essential to economic development (the
‘importance of title claim’
);(b) a methodology based on converting local traditions of land-rights into a written codeand a formalised land title system is the best means of producing such a system (the
‘tradition
-
based methodology claim’
).
5
Neoliberalism was born from a 1946 University of Chicago Law School Free Market Project creating a minor intellectual philosophy which developed to set up the think-tank Mont Pelerine Society and gradually expoundedthis philosophy into effective political tools, becoming a political orthodoxy in the West (Mitchell 2005: 304).
6
The IDL is a highly influential think-tank (Clift 2003: 10) which has been greatly involved in policy making. Its
power has led to it being described as a ‘
chool for the country’ 
(Kleiner 2004: 7).
7
De Soto was the principle political advisor to Alberto Fujimori, creating a dramatic finance stabilisation plan
which led to an extreme recession (‘
Fujishock’ 
) in the early 1990s (Mitchell 2005: 308, Roberts 1996: 97). This
provided the context for De Soto’s natural experiment from 1992 onwards, in the pilot titling program, as
discussed below.
8
 
Part of De Soto’s skill is in telling stories that everyone can relate to, using powerful metaphors to demonstrate
his points. (Clift 2003: 8)
 
3
The importance of title claim
De Soto sees property as fundamentally an asset that needs to be representable as capitalwithin a capitalist system (Lemanski 2011: 58). He argues that land titling creates value byrecording and securing economic aspects of an asset in location and thus providing apowerful developmental tool (De Soto 2003).He suggests that legal property rights assign assets into a conceptual universe. Citing
Searle he proposes they generate capital by giving ‘
a new status to some phenomenon... not solely in virtue of physical features 
(Searle 1995: 46)
and therefore they can be a ‘
mediating device 
’, capturing and storing value to run a market economy
(De Soto 2003: 182). CitingBowden (1992), he argues that legal recognition allows assets to be made
‘ 
fungible 
’ 
 
(DeSoto 2003: 180) and mobilised and thus provides the potential to increase value, andconsequently economic growth. Property can then create capital through leverage andtransaction (De Soto 2003).
He proposes that lack of ownership records means that wealth of the poor becomes ‘
dead 
capital’ 
 
(De Soto 2003: 180). It cannot be used as collateral for loans and trading the assetis difficult.
The tradition-based methodology claim
De Soto argues that formal property must be universally acceptable and therefore brought
within a ‘
social contract 
 
(De Soto 2003: 182). The developing world must create formalproperty titles and that this is best
achieved by discovering the localised ‘
 people’s law’ 
andthen codifying this into a universally accepted system (which, he argues, is how Westernnations built their property systems) (De Soto 2003: 183).

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