Mysteries of capital or mystification of legal property

187 De Soto's Mysteries of capital is a visionary plea to governments in the Third World and the former Soviet Union to adopt formal property law in order to facilitate economic development. In particular, the potential for creating capital out of the assets held under 'extra-le-gal' property must be mobilized. For only formal legal property has the properties and functions that can lead to development. It does so, according to De Soto, by fixing the economic potential of assets; by integrating dispersed information into one system that transcends the typically local operations of extra-legal assets ; by making people accountable; by networking people and protecting their transactions (p. 49 ff.). This form of property, De Soto claims, caused the rise of capitalism and popular welfare in the West, and it needs to be introduced in developing countries and the former Second World. In particular, the opportunities of formal property must be opened up to the poor, the many enterprising people operating in extra-legal sectors. For, and this is the other grand message , the poor are not really poor. They are enterprising, they save, and together hold vast assets that constitute the largest possible source of potential capital for development (p. 34). However, these assets are held in defective form (p. 5): as dead capital (p. 210). While there is nothing basically wrong with such extra-legal property, it is not sufficiently codified and fungible to have a broad range of application aside from its own geographic parameters (p. 180). It cannot be turned into liquid capital and traded outside its narrow local confines, nor be used as collateral for productive investment (p. 7). The marginality of the poor and their assets is largely due to their inability to benefit from the functions of formal capital (p. 66). So these assets have to be legalized (p. 165). While governments have formal property laws and made attempts to open them up to the poor, most citizens cannot get access, De Soto continues (p. 153). The legal and administrative systems are bad, cumbersome, over-bureaucratized (p. 156). Moreover, these laws are not informed by the traditional laws and the new rules emerging in the informal sectors in the cities. For people have their own law (p. 170). Legal pluralism is ubiquitous. In order to draw in the poor and their assets, the new property laws must be in reference to existing social contracts and …