The Mystery of Capital by Hernando De Soto, Hernando Desoto (2000, Hardcover, Illustrated)

Makes sense to me. I will recommend it to friends. It doesn't read fast, but introduced me to a whole new way of thinking about third world development issues, after I just returned from Tanzania.

Desoto lays out his case that Capitalism cannot take hold in the developing world until a legal property rights system is implemented that merges both the informal and formal ownership systems of any given country. When ownership is forced to stay outside the legal system, it is "Dead Capital" and cannot be used to create "surplus wealth" which is what builds economies.

I believe this helps explain why Micro-loans are popular, because individuals outside the formal system can use the loans, but they are not very effective at creating the small businesses with multiple nonfamily employees which pay taxes and thus build schools, hospitals, roads, and police/firefighting forces.

It takes daring and creative nontraditional lawyers to write the new laws combining the informal (extralegal) and formal property rights systems.
Reading between the lines, he suggests doing this can avert terrorism.
6/7/08