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Commentary |
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In his book The Mystery of Capital, Hernando De Soto does an excellent job of collecting and disclosing data in support of his thesis that Third World capitalism is limited by “dead Capital,” that is, assets generated through extralegal activities, hence its owners have no valid title. De Soto was noting that without a clear, enforceable title to property, an asset became “dead Capital” which its owner couldn’t use as a legal basis for starting a productive enterprise. This behavior is true for most of the Third World, therefore people in those areas make little progress in increasing the average standard of living. Unfortunately, although he discusses Capital extensively, he never actually defines it. Reading between his lines, Capital is the reorganization of tangible and intangible assets in a lawful manner to expedite transformation of low value inputs into surplus high value outputs. Perhaps in a more expansive definition, Capital is the reorganization of property to expedite attainment of a designated goal. The later definition covers armies, which the Third World has in abundance, that rarely produce surplus value, being organized and trained to break things, wound and kill people. I expect, as a good-hearted man, De Soto would prefer the former definition. De Soto’s revisit of American history should enlighten those economists at Ivy League Institutions who appear to have overlooked Third World extralegal assets and the necessity for valid enforceable property titles in global capitalism. Those Ivy Leaguers may not understand but the common people of America certainly do: In movies, Paint Your Wagon and The Last of the Mohicans, in stage plays such as 1776, in Ayn Rand’s Atlas Shrugged, in some of Robert A. Heinlein’s science fiction, and in the words of country and western singer, Gene Autry — “where you sleep out every night, and the only law is right.” Even Princess Leia of Star Wars fame, a character more real to the MTV generation that any of the Founding Fathers, has something to say about the subject and not one of these examples required a detailed explanation for common Americans. They all understood. The scope of De Soto’s work is very focused. He projects ideas for solutions but few practical aspects for program implementation. And assuming that his list of Third World deficiencies were corrected provides no assurance that other factors would not become dynamic limits of equal magnitude to future progress. Also, he makes no mention of the wider applications available to the Old World and the New World. De Soto’s general concept was developed and explained as “virtual wealth” by Frederick Soddy, a Nobel Laureate in Chemistry, writing on economic subjects in the 1920s. The fact that Soddy was a second-rate writer and a socialist living in conservative times did nothing to increase his readership. His book, Wealth, Virtual Wealth and Debt was never widely appreciated, particularly by eminent economists because he wasn’t one of “them.” They universally discredited his ideas and those of the “social credit” movement, another example of failure to recognize a raw diamond amidst the gravel. With a bit of polish, the definition of virtual wealth becomes:
This general concept has world wide applications with, as De Soto demonstrates, larger percentage returns for the Third World, but also offering major benefits for the developed world as expressed in NESARA, The National Economic Stabilization and Recovery Act, a proposed bill available to the U.S. Congress. One can only hope that De Soto’s work will generate a reevaluation of the “invisible” assumptions long held as dogma by the world’s leading economists and a closer examination of economic themes in the works of other writers whose expertise just happens to be in diverse areas. The NESARA Institute |