{"id":253,"date":"2015-09-22T23:08:49","date_gmt":"2015-09-23T03:08:49","guid":{"rendered":"http:\/\/commoncents.blogwyrm.com\/?p=253"},"modified":"2023-05-06T18:58:27","modified_gmt":"2023-05-06T22:58:27","slug":"hernando-de-soto","status":"publish","type":"post","link":"https:\/\/commoncents.blogwyrm.com\/?p=253","title":{"rendered":"Hernando de Soto"},"content":{"rendered":"

In doing the research for the previous post on China and government held debt<\/a> and the earlier one on energy usage and wealth creation<\/a>, one country stood out \u2013 the country of Peru.\u00a0 It stood out not because it topped any particular list but because of the great strides that Peru has taken over the last quarter century to reform it government and economy.\u00a0 These reforms are reflected in the very low ratio of government held debt to GDP and in the relatively high efficiency with which it uses energy to create wealth.<\/p>\n

During the 1980s, the situation in Peru was quite different.\u00a0 Hyperinflation<\/a>, which totaled in at an amazing 2,220,200% in the five year period from 1985 to 1990, was a crippling problem, social unrest lead to the rise of the Marxist Shining Path (Sendero Luminoso)<\/a>, and the population had little to no faith in the government, dubbing even their president as Alan \u2018Crazy Horse\u2019 Garcia<\/a>.<\/p>\n

During the 1990s, Peru elected Alberto Fujimori<\/a> and his policies helped put the country on a stable trajectory and get its macroeconomic house in order.\u00a0 But how exactly did he accomplish this transformation?\u00a0 Well government is complicated and any success it enjoys has many creators but the Peruvian economist Hernando de Soto<\/a> played a big role.<\/p>\n

\"Hernando<\/a><\/p>\n

de Soto was born in the Peruvian city of Arequipa in 1941 but was moved to Switzerland in 1948 following a military coup and the self-exile of his father a diplomat.\u00a0 When de Soto returned to Peru he found that the economic situation was appalling.\u00a0 In reaction to this, he founded the Institute for Liberty and Democracy (ILD) whose influence helped to enact over four hundred laws and regulations enabling the poorer members of Peruvian society to benefit from the having access to capital.<\/p>\n

de Soto is perhaps best known for his experiments with the \u2018stopwatch\u2019.\u00a0 The idea behind his experiment is to determine how long it takes for a prospective entrepreneur to open a business.\u00a0 In other words, de Soto hopes to quantify the transaction cost required to become a legitimate business owner who operates within the law and enjoys the corresponding privileges, including formal recording of the title of ownership and well-defined protection of assets under the rule of law.<\/p>\n

What he found was depressing.\u00a0 He tried to setup a small shirt factor and discovered that it would take 278 full days to get all of the permits needed and that, along the way, the would-be business man had to navigate a level of corruption where the bribe was the accepted currency.\u00a0 NPR recently aired an engaging piece on de Soto\u2019s efforts<\/a> which premiered on their Planet Money regular feature.<\/p>\n