De Soto’s Excellent Path
An adaptation from the Feb. 24, 2014, issue of NR


Furthering his case, he brought Alaskans to the Amazon, “in full regalia.” One of them said, “My name is Bobbi, and I am an indigenous woman from the U.S. I am now running a $2.3 billion company, and I tell you, I’m not ethnically averse to it.” Her counterpart, or would-be counterpart, from the Amazon said, “My name is Irene, and I’m a Bora [a member of a particular tribe], and I have no legal property, and I’m poor as all hell.” Obviously, de Soto grants that there will be local or national adaptations of universal ideas and mechanisms — the Japanese do capitalism in a Japanese way, for example. But he does not accept that economic freedom is suited to some and not others. Pleas about culture can be excuses for the status quo, including the protection of privilege. If you want to know what the poor really want, you should ask them.

William F. Buckley Jr. often asked, “How do you explain the continuing success of socialist politicians in the Third World, and elsewhere, when socialism is manifestly a failure and capitalism the opposite?” He got a variety of answers. De Soto says that capitalists make gross mistakes, and socialists capitalize on them (so to speak). Socialists present themselves as checks and balances on capitalism. The capitalist he sees in Peru, says de Soto, may talk the language of economic freedom, the way plain old dictatorships adopt the rhetoric of Marxism — but he is really concerned with his own interest, regardless of others’. “By ‘capitalism’ or ‘economic freedom,’ he does not mean what Bill Buckley, you, and I mean.” That is a problem.

In the United States, President Obama is making inequality of income a big issue, and it is a big issue elsewhere, too, of course. De Soto notes that there is some “human need for leveling.” And people are sensitive to enormous and unnatural-seeming gaps between rich and poor. In Peru, he says, there is a lot of money to be made in mining, “which is perfectly legitimate.” (De Soto himself was a businessman in mining.) But what do you have to do to be involved in this field? You need a concession, which means that the state has to give you some kind of property right over the subsoil. You have to pay significant fees and jump through many hoops. The native people living on top of those mines, or around them, are not likely to get a concession. And they are ripe for the Marxist language of exploitation. “How do you beat socialism?” de Soto asks. “You make sure that everything you do that helps business reaches everybody.” Drawing on his bottomless fund of American idioms, he continues, “Make sure that what’s good for General Motors is also good for the Peruvian Indian, and we’ll wipe them out” — not the Indians, but the socialists.

Since 2008, and the onset of the financial crisis, the capitalist idea has had a hard time of it. But the trends are still with us, says de Soto. “Outside of North Korea and Cuba, everyone accepts that a competitive economy, without privileges, is what is best for the poor” and society at large. What the Left falls back on, he says, is a lack of political viability. They say, “The people are just not ready for that kind of thing yet.” Then there is the curse of “romantic nationalism,” as de Soto calls it — nationalism of the kind represented by the late Hugo Chávez in Venezuela.

I bring up a potentially painful subject, and I introduce it this way: For 20 years, there were exactly two anti-Communists east of the Hudson River (I exaggerate a little): Richard Pipes, the historian of Russia at Harvard University, and Solzhenitsyn (who lived in Vermont). And they were at odds. This was unhappy for admirers of them both. In the whole of Latin America, there are exactly two classical liberals (again, I exaggerate). They are both Peruvian, and they are both from Arequipa, and they are even distant cousins (I learn from de Soto). I am talking, of course, about de Soto and Vargas Llosa. De Soto says he never thinks about their split, until curious people like me bring it up. It happened so long ago. He takes me through the story step by step. He and Vargas Llosa were close friends and comrades. Since the split, there has been occasional sniping between them. They have not seen each other in almost 25 years, except fleetingly: De Soto has spotted Vargas Llosa on the street a couple of times; Vargas Llosa has gone in another direction. I have only one side of the story, of course. Will these two titans ever reconcile? I could not say, but it would be a reconciliation to cause smiles worldwide.

I have talked with de Soto late into the night — late into two nights, actually — and I ask him the big question concerning the United States, which also concerns everybody else: Are we going down the tubes? Is the sun setting on us? Nonsense, says de Soto. We are so far ahead of everyone else, second place is not even close. The U.S. is still a model to peoples all over. We have done better than any other country in “bringing people in,” which is to say, including them in our legal and economic systems. We can show other countries how to achieve liberty and democracy and the resulting prosperity, and save them some steps: The United States has evolved a great deal since the Revolution or the Wild West or some other period you might name. Poor countries can take intelligent shortcuts.

De Soto has his detractors, as everyone does, and some of this detraction is probably driven by envy: De Soto is famous and laureled, and regarded by many as a guru. But he is clearly doing work of extraordinary value. He is like a physician who knows what ails the patient and the medicine he needs. And if the patient won’t take it — or some government won’t let him have it — that is another problem that needs working on.

— Jay Nordlinger is a senior editor of National Review.