20:21 Vision and The Mystery of Capital
20:21 Vision- the Lessons of the 20th Century for the 21st, Bill Emmott, Allen Lane/Penguin, 2003, ISBN 0 713 99519 X, 327 pp The Mystery of Capital - why capitalism triumphs in the west and fails everywhere else, Hernando de Soto, Black Swan/Random House, UK, 2001, ISBN 0 552 99923 7, 276 pp. Bill Emmott is Editor of The Economist, from which vantage point he provides a history lesson and political commentary. The book is in two parts: Peace Challenged, around the US role in world affairs post 1945 and prospectively, and Capitalism Questioned, on the varied attitudes to the predominant economic paradigm. Hernando de Soto is a Peruvian economist and much more, who has studied empirically why capitalism has never thrived in third world and ex-communist economies. He explores how it is that up to 80% of people in these economies are effectively shut out of legal enterprise and what might be done about this. From a Christian point of view, his book fills a gaping hole in the big picture treatment of Emmott (though neither author writes as a Christian). Emmott provides a very credible and informative account of how capitalism has displaced more ideologically-based economic arrangements which simply did not work. He also presents a comprehensive commentary on the variety of attitudes to capitalism, summarised in the chapter titles: Unpopular, Unstable, Unequal (within societies), Unequal (between nations) and Unclean! Much food for thought here, but in relation to the most glaring failure of capitalism in the third world, Emmott suggests that "the countries that fail to grow and to improve their people's living standards beyond even a basic level can be divided into two groups. In one, the problem is that there is no real or sustained government, thanks to anarchy, civil war or broader war. In the other, the problem is that government stands in the way, either because it steals money or because it fails to provide the necessary freedoms and opportunities." While he elaborates this to some extent, he does not unpack that last point. Turning then to de Soto's (earlier) book I found a different perspective, focusing on the large proportion of citizens effectively excluded from the formal economy in most third world and ex-communist countries. His history lesson comes from longer ago than the 20th century (apart from Japan) and attempts to analyse how property rights and legal structures became established on a universal basis in developed countries. He sees the third world characterised by a privileged few within a kind of bell jar, while most cannot get the fruits of their labour properly capitalised, though they have substantial assets in the informal sector. He estimates these assets amount to US$ 9.3 trillion in total but they cannot be used as collateral or in trade beyond the immediate informal network. In each of these countries "the bell jar makes capitalism a private club, open only to the privileged few, and enrages the billions standing outside looking in. This capitalist apartheid will inevitably continue until we come to

terms with the critical flaw in many countries' legal and political systems that prevents the majority from entering the formal property system." Emmott's book is a very well-informed and worthwhile perspective on the world today and is hard to fault, save for the deficiency mentioned. Capitalism's "Unpopular" tag he suggests is contradicted by experience of many millions in the 20th century. But it was "a pretty dismal failure" in the decades to 1945 and the reasons for this are explored against the backdrop of Marxist influence. "Capitalism is still widely considered, at least among some intellectuals, to be immoral: too devoted to a vulgar worship of money, too dependent on self-interest and greed, too deeply founded on adversarial individualism. It probably always will be." De Soto echoes this: "capitalism is viewed outside the West with increasing hostility, as an apartheid regime most cannot enter." Emmott acknowledges the proper attractiveness of collaboration but notes that the "successful collective is called the private, capitalist company. It alone has found a way to blend direct financial incentives (aka exploitation) with the natural hierarchical instinct of the human tribe, and to ally both of those with the desire to work with other people and to derive self-esteem and confidence from the resultant sense of belonging." Nevertheless, the paradox for him is that it is viewed with suspicion and hostility. The canard about some multinationals being bigger and more powerful than many countries is discussed and buried, though third world worries about them are acknowledged. Issues of competition, technological innovation, and liberalisation of markets are explored lucidly. "Anti-trust laws are a crucial part of liberal capitalism," to ensure access and equity. He suggests that suspicion of capitalism has been a prime cause of the growth of government in Western democracies, the results of which have often been stultifying and worse. De Soto has undertaken a lot of research in several third world countries including his native Peru, and comes up with some realistic prescriptions for overcoming the chronic and deep-seated deficiencies in third world and formerly communist countries. "With its victory over communism, capitalism's old agenda for economic progress is exhausted and requires a new set of commitments." Macroeconomic reforms are not enough, as globalistation proceeds and trade barriers fall. The most basic deficiencies in many countries are ignored - "most people cannot participate in an expanded market because they do not have access to a legal property rights system that represents their assets in a manner which makes them widely transferable and fungible, that allows them to be encumbered and permits their owners to be held accountable. So long as the assets of the majority are not properly documented and tracked ... they are invisible and sterile in the market place." Thus any market economy is very limited and capitalism is stillborn. I found de Soto both persuasive and helpful. Though he doesn't address the matter specifically, he explains why microenterprise schemes such as brokered by Opportunity International and World Vision and promoted by OCMS are achieving so much in the context of the informal economies of third world countries. This success reinforces de Soto's analysis and confirms his view of the way forward. Emmott has a good bibliography, web site list, and an index. De Soto has index and endnotes with references.

Ian Hore-Lacy April 2003

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