Wrapping up the Mike Davis El Nino/imperalism/democide/foundations of the 3rd world tome "Late Victorian Holocausts" (its not genocide, but it certainly has a high body count covering some 70-90 million needless deaths from 1870-1910) , I find this post a refreshing reminder to pick de Soto's book up. Some light amid the darkness of crushing history...

A rather crushing article about the real world effects of de Soto's theories here:

http://www.slate.com/Default.aspx?id=2112792&

It rather strikes me as a superficial article with airy "arguments" rather than anything "crushing."

If there was data cited and support from econometric studies, it might be interesting. As it is, strikes me as empty argument based on impressionistic reaction.

Well, given that Soto's theories in Mystery merely identify the problem and broadly sketch the dimensions, it's not terribly surprising to find that some real-world implementations are more difficult than others.

Certainly one can't transition instantaneously from extralegal to legal property ownership, particularly if other factors common to developing countries (e.g. lawlessness, corruption, underdeveloped and/or risk averse lenders) are present. As far as I can tell, de Soto has not advocated that position either.

The Other Path (reading it now) appears to be a very detailed case study on Peru and its gradual, highly consultative transition (e.g. the incorporation of extralegal "customs" into formal law). I may comment on it later.

I would not discount the value of de Soto's ideas based on the above article. Not enough data.

To build on eerie's comments, the supposedly "crushing" article - actually nothing but word-smithing and language play typical of left 'critiques' - identifies issues that are not specific to de Soto's ideas - e.g. elite manipulation of laws, expropriation to serve rentier elites, but are endemic and systematic in emerging markets.

The issue e.g. of manipulation and pricing shanties out due to rising land value has nothing to do with de Soto's concepts at all, but on the emerging markets real estate boom. The same slum dwellers w/o title are still getting expropriated, but those w/o titles have zero legal chanels.

The financing issue of course is another one, there obviously the issue is not the issue of title as such (and the collective property title idea the author pimps is utterly stupid in this respect), but rather financial intermediation failures that are general again to the system.

I am particularly knowledgeable in this area as I work directly on such problems - how to grow market in an emerging market given fixed cost basis for the financial institution, etc.

The value of the shanty is not the problem at all - there the author shows utter lack of understanding - rather it is the size and cost of micro-loans. In this instance one is looking at a problem that ironically the West - and the Left whankers share a part in this - has helped generate by insisting on certain "standards" for emerging markets financial institutions as well as "working conditions and labour rights" for credit officers that raise the cost of making small loans above the probable return.

A solution to this appears to be various forms of micro-credit, although not NGO style micro-credit, but more along the lines of micro-institutions with lower cost-bases - exempted from the shiney rules imposed by IFI, Basel, and labour agitators.

There you can lower the cost basis on loans such that they become profitable.

Well, in any case, this merely illustrates the Slate writer's whacks at de Soto were hardly "crushing" and generally ill-informed.

Of course, it should be emphasised that most of the issues are real ones, but ones that are general and endemic, and touch all market participants from bottom up to almost the top. However, those in the informal world, without title or documentable participation in the economy are even worse positioned. On the other hand, being in the formal world is not a magical resolution - and the informal world exists for economic reasons, that is strong disincentives that are often there because they serve domestic elite interests although at the expense of the larger economy.

De Soto identified a real problem and suggested a path of attack for one part of the problem. That is a start as there are no magic bullets.

While it does seem to me that de Soto has a real point, nonetheless, I do find the article something like crushing. Your critique, "eerie", of his Cambodia example is good, but still, his article is certainly not "word-smithing", and it is certainly less ideological than yours with your constant swipes at the "labour agitators", etc. There are plenty of examples as to why micro-credit standards are necessary to avoid predatory lending.

Neither the micro-credit model nor de Soto's ideas are really a way to "sell capitalism to the poor"; it is merely a desperate life support to desperate people. This is why Mohammad Yunus is famous, but also why micro-credit is not causing industrial revolutions.

While it does seem to me that de Soto has a real point, nonetheless, I do find the article something like crushing. Your critique, "eerie", of his Cambodia example is good, but still, his article is certainly not "word-smithing", and it is certainly less ideological than yours with your constant swipes at the "labour agitators", etc. There are plenty of examples as to why micro-credit standards are necessary to avoid predatory lending.

Neither the micro-credit model nor de Soto's ideas are really a way to "sell capitalism to the poor"; it is merely a desperate life support to desperate people. This is why Mohammad Yunus is famous, but also why micro-credit is not causing industrial revolutions.