Hernando de Soto - Expensivity

Hernando de Soto’s Early Life and Education

Hernando de Soto Polar (b. 1941) was born in the old colonial city of Arequipa, in southern Peru.

Arequipa—which is the second-largest city in the country, a regional capital, and the seat of Peru’s Constitutional Court—is situated at an elevation of more than 7,600 ft. Although the city was built by the Spanish conquistadors, the name “Ariquipa” is of Quechua origin.

To understand de Soto’s academic orientation, as well as to appreciate some of the passion driving his thinking, one must understand that the extremely violent, communist revolutionaries who called themselves the “Sendero Luminoso” [Shining Path] were active in his native region for many years, from around 1982 until 2018, when the group was officially disbanded.

De Soto’s father was a lawyer and diplomat. Following the military coup in Peru in 1948, the elder de Soto went into exile with his family, taking a job with the International Labour Organization in Geneva, Switzerland.

De Soto attended elementary and secondary school at the International School of Geneva, spending most of his summers back in Peru.

For his higher education, de Soto first attended the Universidad Nacional de San Agustín (UNSA) [National University of Saint Augustine] in Arequipa. Founded in 1828, UNSA is one of the oldest and most-prestigious universities in Peru. A little later, de Soto transferred to the University of Geneva, where he obtained his bachelor’s degree.

In 1967, de Soto was awarded a master’s degree in international law and economics from the Institut de Hautes Études Internationales et du Développement [Graduate Institute of International and Development Studies, now known as the Graduate Institute], also in Geneva.

Hernando de Soto’s Career

After receiving his master’s degree, de Soto took a job as an economist with the General Agreement on Tariffs and Trade (GATT) organization, headquartered in Geneva.

Over the next decade or so, de Soto held positions as an economist with the Committee of the Copper Exporting Countries Organization, as CEO of Universal Engineering Corporation, and as a principal for Swiss Bank Corporation.

In 1979, de Soto returned home to Peru, where he happened to encounter and enter into discussions with the Austrian economist and Nobel laureate, Friedrich A. Hayek, who was visiting Lima, the Peruvian capital, at the time.

In addition to providing de Soto with inspiration and motivation, Hayek put him in touch with Antony Fisher, the organizer of the Atlas Economic Research Foundation [now known as the Atlas Network], which, among other things, provides funding for groups around the world that promote free-market economics and free enterprise.

With help from Fisher and his organization, de Soto founded the Instituto Libertad y Democracia (Institute for Liberty and Democracy] (ILD) in Lima at the end of the following year, in December of 1980.

De Soto has now served as president of the ILD—which Britain’s leading business magazine, The Economist, has called one of the two most-important think tanks in the world—for more than 40 years.

In 1986, de Soto wrote his first book, El Otro Sendero [The Other Path], whose title alludes to free-market economics as an alternative to the bloody revolutionary politics of the Shining Path guerillas. The book was later translated into English (see details below).

In 2000, de Soto published the book for which he is principally known, The Mystery of Capital (originally written in English, and subsequently translated into Spanish, as well as some 30 other languages). This book—which sold over 2,000,000 copies worldwide and made de Soto internationally famous—will be discussed below.

Following an earlier flirtation in 2001 with Peru’s contentious presidential politics, in 2021 de Soto ran for his country’s top political office under the auspices of the Avanza País [Forward, Country!] party. Out of a field of 18 candidates, de Soto came in fourth.

De Soto has received numerous international awards recognizing his work, including the Deutsche Stiftung Eigentum [German Foundation for Property] award, the Milton Friedman Prize for Advancing Liberty, the Economist Magazine’s Global Award for Entrepreneurship Research, the Adam Smith Award, and the Julian L. Simon Memorial Award, to name a few.

Hernando de Soto’s Ideas

De Soto’s central idea is that the reason why capitalism seems unable to raise third-world countries out of poverty in the way it has European and European-descended countries has nothing whatever to do with ethnic or general “cultural” differences.

Rather, it has solely to do with the absence of legal institutions which secure individual rights to own, buy, and sell property.

Already in his first book, El Otro Sendero, originally published in 1986, de Soto had written:

Imagine a country where nobody can identify who owns what, addresses cannot be verified, people cannot be made to pay their debts, resources cannot be conveniently turned into money, ownership cannot be divided into shares, descriptions of assets are not standardized and cannot be easily compared, and the rules that govern property vary from neighborhood to neighborhood or even from street to street.

Obviously, owning, buying, and selling property under such conditions is bound to be a highly precarious undertaking.

In The Mystery of Capital, De Soto’s 2000 follow-up to his first book, he essentially expands upon this thesis and provides much more evidence for its correctness.

In a memorable statement summarizing the way he sees himself and his historical situation, De Soto has said:

Soy un liberal del siglo XIX, que se encuentra enfrentado a un rival muy honorable que se llama Karl Marx.

[I am a nineteenth-century liberal who finds himself facing a very honorable rival named Karl Marx.]