In an exclusive interview with Breitbart News, the renowned Peruvian economist Hernando de Soto said that both Pope Francis and Donald Trump suffer from an excessively Eurocentric worldview, leading them to see solutions to social ills in terms of walls and bridges, when what is really needed is a “paradigm change.”
Although he is favorable to social bridge-building and sympathetic to a need for walls, de Soto told Breitbart News that “you cannot continue trying to build Eurocentric horizontal bridges from left to right when it is obvious that our 2nd– and 3rd-world problems require vertical ladders from the bottom to the top.”
“So there they are moving in droves to the cities and the North,” de Soto said, referring to the global migration crisis. “And there are the leaders of the West fighting over walls and bridges, when all we need are ladders.”
Last week, de Soto wrote a sort of “open letter” to Pope Francis, suggesting that the pontiff challenge Donald Trump to take up the cause of property rights worldwide, since the lack of enforced “property borders” holds a majority of the world population back in economic stagnation.
Writing in Fortune magazine, De Soto, a hero of free market apologists and the author of the award-winning 2000 bestseller The Mystery of Capital, noted that 5 billion of the world’s 7 billion people don’t hold the legal title to the property that they own, and so they lack the property rights required “to reside, own assets or do business in their own or any other country.”
This is in large part why so many people of the world can do little to improve their economic status, de Soto argues, because without enforceable property rights, owners “will struggle to have access to credit or the ability to raise capital since borrowers typically need to pledge some kind of property in exchange.”
Despite his conservative credentials, De Soto has earned encomium from both sides of the aisle, from Margaret Thatcher to Koffi Annan. Bill Clinton famously called de Soto “the world’s greatest living economist” and Jack Kemp said he deserved to win the Nobel Peace Prize.
De Soto said that the Pope’s concern with consumerism is largely a first-world problem, whereas lifting people out of their poverty is everybody’s problem.
The public perception of significant economic inequality “leads to violence and bad economics,” de Soto told Breitbart News. Like the ideological movements of the last century, he said, today’s anti-inequality movement feeds on “pretty much the same sentiments that led Westerners to acts of extreme violence the last century.”
“Unequal growth stimulated the rise of communism on the left and fascism and all sorts of repression on the right. The competition raged for decades to see who could best cope with the growing tension between growth and equality,” he said.
Capitalism outperformed Marxism and movements on the right sought to protect little people from abusive government, while leftist parties surged to protect them from abusive businesses, he noted. Yet more importantly, what really made the difference was that “most of their citizens were given the property rights and business organization tools essential to protect and develop their assets and create capital by taking advantage of the large-scale opportunities offered by globalizing markets.”
The real problem now, de Soto argues, is not so much the Westernized parts of the globe, but the other 5 billion “who suffer the worst of all inequalities: no live capital.”
So more than anything else, world leaders need to face the reality of what is happening on a global scale, he said.
“The sooner Pope Francis, Trump and the world’s leadership stop thinking Eurocentric and realize that globalization is simply the West’s 19th-Century Industrial Revolution expanding into today’s developing and former Soviet nations the sooner we will be able to deal with the rising incomes which are the result of people moving from traditional, closed, small-scale modes of production to dividing labor on a global scale and the inequality that comes from handsome, visible rewards to those who serve the market best,” he said.
Yet the necessary condition for businesses to be able to enter the world market, he insists, is for them to have recognizable property rights, something taken for granted in the West, but denied to the majority in the undeveloped world.
“This historic transformation from small to large scale cooperation,” he told Breitbart News, “is painful and many times unfair, but so far it is the unbeatable formula: whether your business is micro or large you need to operate in the context of large-scale markets as it is the only proven way to prosper or survive today.”
De Soto couldn’t resist getting in a dig at fellow economist Thomas Piketty, observing that Piketty’s categorizations of society into left versus right “are Eurocentric and not very helpful.” In 90% of the world, the problem more closely resembles the US in the 1860s, de Soto said, “when President Abraham Lincoln – in the course of his epistolary exchanges with Karl Marx – claimed in his state of the union address that the majority of Americans were neither capital nor labor but a mixture of both.”
The poor must be understood not only as workers and frustrated consumers, de Soto insisted, but rather as entrepreneurs who face nearly insurmountable obstacles. “Frankly, much of inequality comes from the fact that they lack the tools and legal rights needed to create value,” he said.
In his gentle advice to Pope Francis last week, de Soto said he “should challenge the Mexican government to improve property rights for owners of the country’s 10 million urban homes, 137 million hectares and 6 million businesses,” since most Latin American countries “have yet to document the property rights of their own people.”
The real solution to much of poverty is internal to nations that suffer from an inadequate rule of law, especially as regards property borders, de Soto told Breitbart News, so vertical ladders are the key.
“Time for paradigm change,” he said.
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