No Magic Bullet
BHAGWATI, JAGDISH
No Magic Bullet The Mystery of Capital: Why Capitalism Succeeds in the West and Fails Everywhere Else By Hernando de Soto Basic. 320 pp. $27.50. Reviewed by Jagdish Bhagwati Arthur...
...Andre Meyer Senior Fellow, Council on Foreign Relations...
...A full accounting may soon be made now that the CIA has finally agreed to release its documents on the episode...
...Instead, we must read him for his acute insights and for the great eloquence with which he tells us a few important home truths that we ignore at our peril...
...I would say, yes and no...
...Allende had a barrel chest and a confident air that exuded charisma...
...And that tool, in essence, is the ability to convert vast amounts of property held by countless numbers of the poor and notso-poor into effective tradable assets through the creation of unified markets for legal titles...
...The corrective would hardly diminish his celebrity...
...Unless I am badly mistaken, de Soto produces no evidence that the growth of a successful titles market has led anywhere at all to capitalist activity not induced by other causes...
...De Soto is on the right track...
...This would enable the multitudes to raise money that they could put to productive use in capitalist activity...
...Suppose an orderly market for titles was established in, say, Haiti or Zaire...
...If one takes away de Soto's hubris and views his analysis simply as focusing on a most interesting and neglected aspect of the transition of economies from rags to riches, his bookbecomes farmore credible...
...Thus when I learned soon after being asked to review this hyperpublicized book that he would be speaking at the Council on Foreign Relations, I couldn't resist the temptation to attend...
...De Soto reminded me immediately of Salvador Allende, whom I had met at Palacio de la Moneda just a few months before he was assassinated in the CIAassisted 1973 coup by General Augusto Pinochet...
...Would that automatically lead to an outbreak of capitalist activity, or would it merely facilitate the activity if it were already planned...
...Once this book has gotten onto the bestseller lists, as it well deserves to, perhaps de Soto could issue a revised edition that tempers its exaggerated claims...
...Still, there is another strand in de Soto's analysis, somewhat mixed up with his central theme, that is worth noting...
...When he was told the streets were filling with demonstrators opposed to his education reforms, he strode out with his Education Minister and fearlessly confronted them...
...De Soto has the same charisma in person, and so does his book...
...No single explanation, though, can give you a handle on a process as complex as economic development...
...True, the way to sell books is to make tall claims, yet that strategy, while good for one's public reputation, is bad for one's scholarly reputation...
...author, "The Wind of the Hundred Days: How Washington Mismanaged Globalization" Most authors possess a defining quality that sometimes jumps out at you from their pages...
...Moreover, as we all now know, the inhibiting devices are often a rich man's best friend: The rich get around them, the masses de Soto is talking about cannot...
...He goes back to a history he rightly claims we have either failed to read or have forgotten...
...In the case of Hernando de Soto, I have long admired the robustness and élan of his writing...
...His message is that although capitalism has delivered growth and prosperity in the rich countries (as asserted in a vainglorious but erroneously triumphalist fashion by Francis Fukuyama), it has not succeeded in the poor and former Communist countries because those economies have lacked its central tool...
...Such countries stifle nascent capitalist activity by imposing a slew of what economists call "transaction costs" on new enterprises...
...His team has documented at length, what many economists have long discussed (including Padma Desai and me in India: Planning for Industrialization [1970...
...De Soto edifyingly reviews the evolution of such a market in the United States, and of the rule of law that came to delineate and guide it...
...William F. Buckley Jr.'s puckishness, John Kenneth Galbraith's cultivated prose, Gore Vidal's acerbic wit—each is manifest in their respective works and public personas...
...De Soto is a public intellectual, however, so his approach is consistent with his personality and also serves to further the role he has chosen to play...
...Is his confidence as misplaced as Allende's was...
...But there remains the hard question de Soto does not really address...
...In beautiful prose, he seeks to present us with the alchemy of capitalist success, putting all his eggs into one basket of explanation and prescription...
...The most one might hope to do is provide a necessary condition for development...
...enumerating all those that would assure it is beyond our grasp...
...But we need to ignore the hyperbole about his having found the magic bullet that would slay backwardness and extend the benefits of capitalism worldwide...
...It is all done brilliantly enough to give a rival author writer's block...
...Reviewed by Jagdish Bhagwati Arthur Lehman Professor of Economics, Columbia...
...It has a vitality, a life force, that literally grabs you as you read along...
...That is, in lands of Kafkaesque controls and knee-jerk interventionism—with their concomitant low growth rates and abysmal impact on profound poverty— it takes months, even years, to get past all the controls and start a business...
Vol. 83 • November 2000 • No. 5
