Transcript: Hernando de Soto Polar on Helping the Poor Worldwide | Feb 28, 2004

Hernando De Soto stands at a green podium with a gray paneled wall with wood. A slide projector is beside him and he speaks to an audience. He is in his fifties and has a baldhead and a large brown beard. He wears glasses a black blazer, white shirt and red tie.

Hernando says I'M GOING
TO TALK TO YOU ABOUT THE LAST
BOOK, THE MYSTERY OF
CAPITAL,BUT TO SAY THAT
IT'S NOT A BOOK THAT I PUT
TOGETHER IN A LONELY ROOM, LATE
AT NIGHT, IT'S THE RESULT OF THE
WORK OF MYSELF AND MY
COLLEAGUES, IN DIFFERENT
COUNTRIES THROUGHOUT THE LAST
FIVE YEARS.
UP UNTIL ABOUT FIVE YEARS AGO,
CLOSER TO SIX NOW, WE WORKED IN
PERU, ORIGINALLY AS A THINK TANK
AND THEN GRADUALLY, AS OUR IDEAS
OBTAINED ACCEPTANCE, BUT WEREN'T
BEING IMPLEMENTED, WE THEN
STARTED LEARNING TO DRAFT
LEGISLATION.
AND PASSING IT THROUGH CONGRESS
AND ONCE WE GOT OUR LEGISLATION
THROUGH CONGRESS, WE STARTED
SEEING THAT IT WASN'T BEING
IMPLEMENTED STILL AND SO THEN WE
BECAME IMPLEMENTATORS, WE ARE A
GROUP OF MANAGERS AND WE STARTED
DOING VARIOUS PROJECTS IN PERU
THAT HAD TO DO WITH BRINGING THE
POOR THE EXTRALEGAL ECONOMY
WITHIN THE FORMAL ECONOMY.
AND OF COURSE, WE CAME OUT WITH
SOME TERRIBLE FIGURES,
INDICATING THAT MOST PEOPLE
ACTUALLY HAD ASSETS, BUT THAT
THEY WEREN'T ABLE TO ENTER THE
MAINSTREAM ECONOMY, PEOPLE HAD
HOMES, BUT DIDN'T HAVE TITLES.
PEOPLE HAD COMPANIES, BUT THESE
COMPANIES COULDN'T ISSUE SHARES
AND COULDN'T ISSUE COMMERCIAL
PAPER.
IN OTHER WORDS, PEOPLE HAD
PHYSICAL ASSETS, BUT THEY
COULDN'T USE THEM AS COLLATERAL,
THEY COULDN'T PUT A MORTGAGE ON
THEIR HOUSES, PEOPLE WERE NOT
ABLE TO OBTAIN CREDIT, WERE NOT
ABLE TO ISSUE SHARES TO OBTAIN
INVESTMENT AND THEY COULDN'T
HOOK UP TO SERVICES, NOR SIGN
LONG-TERM CONTRACTS.
GRADUALLY THIS WORK BEGAN
GETTING FAMILIAR OUTSIDE PERU
AND WE STARTED GETTING CALLS
FROM DIFFERENT PLACES, INCLUDING
HEADS OF STATE, SAYING, WE'VE
SEEN THAT YOU'VE TALKED ABOUT
HOW IMPORTANT THE RULE OF LAW IS
TO CREATE A CAPITALIST ECONOMY,
WE'RE ALL EMBARKED IN IT,
BECAUSE IN EFFECT, SINCE 1989
AND THE COLLAPSE OF THE BERLIN
WALL, ALL OF US DEVELOPING
NATIONS AND FORMER SOVIET UNION
COUNTRIES HAVE BEEN TRYING TO
WORK OUR WAY TOWARDS SOME KIND
OF A CAPITALIST REGIME.
WE'VE BEEN STABILISING OUR
CURRENCIES, WE HAVE BEEN
INTRODUCING EQUILIBRIUM IN OUR
FISCAL ACCOUNTS, WE HAVE BEEN
PRIVATISING AND PEOPLE ARE
MARCHING, NOT ONLY ARE THEY
MARCHING, OF COURSE, IN QUEBEC
AND ELSEWHERE, THAT WORRIES ME
MUCH LESS, THEY'RE MARCHING BACK
HOME.
AND THIS ALREADY BEGAN SOME FOUR
OR FIVE YEARS AGO AND SO THERE
WAS CONCERN AND THE THING IS, IT
SEEMS YOU'VE STARTED BEING
SUCCESSFUL IN SOME AREAS IN PERU
WHICH ARE NO LONGER EXPLOSIVE,
IN SPITE OF THE FACT THAT WE HAD
A LA... A STRONG MAOIST
MOVEMENT, COME TO TA... COME TO
US TO TALK ABOUT IT.
SO WHAT WE DID WAS WE PUT
TOGETHER A BUSINESS PLAN.
SINCE BY ABOUT 1995, FUJIMORI
HAD MADE SURE THAT WE COULD NO
LONGER WORK WITHIN PERU, WE
SAID, THE ONLY SOLUTION IS
WORKING OUTSIDE, 'CAUSE WE DON'T
LIKE TO THINK, WE LIKE TO DO, OR
RATHER WE THINK WHILE DOING AND
THAT'S THE ONLY WAY WE STARTED
GETTING RESULTS, SO ONE OF THE
FIRST CALLS THAT WE GOT WHICH
WAS FROM EGYPT, FROM PRESIDENT
MUBARAK WAS RESPONDED BY SAYING,
WE WILL NOT GO TO EGYPT TO TALK
TO YOU ABOUT WHAT WE FOUND OUT
IN PERU, BECAUSE WE KNOW HOW
THAT'S GONNA WORK, YOU'RE GONNA
LISTEN TO US AND YOU'RE GONNA
SAY, OH, THOSE POOR PERUVIANS,
WE THINK IT'S BAD IN EGYPT, IT'S
CERTAINLY NOT THAT BAD.
SO THE ONLY WAY WE'RE GONNA MAKE
SURE THAT WE ARE UNDERSTOOD IS
IF WE FIND OUT WHAT'S GOING ON
IN EGYPT AND IN OTHER COUNTRIES.
AND THEN FIND OUT TO WHAT DEGREE
THE, THE LARGE BLACK MARKETS
THAT WE HAVE IN OUR OWN COUNTRY
ARE A CULTURAL PHENOMENA OR
THEY'RE A UNIVERSAL PHENOMENA,
OR A VERY FAMILIAR PHENOMENA, TO
MOST OF THE WORLD,THAT IS TO
SAY, THE FIVE BILLION PEOPLE OUT
OF THE SIX BILLION WHICH WE ARE
IN THIS WORLD THAT ARE NOT IN
THE DEVELOPED WORLD, THE FORMER
SOVIET UNION COUNTRIES AND THE
DEVELOPING COUNTRIES.

A caption reads "Hernando de Soto. Institute for Liberty and Democracy. ‘The Mystery of Capital. May 24, 2001."

Hernando says AND SO WE
STRUCTURED OURSELF IN SUCH A WAY
THAT WE PUT UP 150,000 DOLLARS TO START
OFF WITH FROM DONATIONS WE
OBTAINED AND THE GOVERNMENT, THE
RECEIVING GOVERNMENT, GOT
ANOTHER 150,000 DOLLARS AND WITH THOSE
150,000 DOLLARS, WE WOULD THEN DO THE
FIRST STAGE OF OUR PROGRAM
ABROAD, WE'RE NOW WORKING IN
FIVE COUNTRIES, HOPEFULLY WE'LL
BE IN TEN COUNTRIES BY THE END
OF THE YEAR, IS THE DIAGNOSIS,
IN OTHER WORDS, HOW BIG IS THE
BLACK MARKET SECTOR?
SO TO USE
EGYPT AS AN EXAMPLE, SO AS WE
GET QUICKLY INTO A SENSE OF
THESE DIMENSIONS, WE INTRODUCED
THE, THE FINDINGS, OUR RESULTS
ABOUT 1997 TO THE PRESIDENT.
USUALLY THIS IS IN ABOUT FOUR
VOLUMES AND FOR THE PRESIDENT,
HEADS OF STATE DON'T HAVE MUCH
TIME, JUST ONE PAGE.
AND ONE PAGE WITH FOUR DRAWINGS.
AND THE FOUR DRAWINGS WHICH YOU
WILL SEE ARE THE FOLLOWING ONES
WHICH I WILL DESCRIBE AS WE GO
ALONG.
THE FIRST PLACE THAT WE... THE
FIRST THING THAT WE TALK ABOUT
IS NOT THE BLACK MARKET IN ITS
TOTALITY, BECAUSE MUCH OF THE
BLACK MARKET, OF COURSE, IS
INSIDE BUILDINGS.
AND YOU CAN'T SEE WHAT PEOPLE
ARE DOING IN THEIR, IN THEIR
HOMES.
BUT THE HOMES IS SOMETHING YOU
CAN LOOK AT, YOU CAN TAKE YOUR
LIMOUSINE ACROSS TOWN AND YOU
SEE THE HOUSES AND THEY'RE ON
MAPS.
AND THEREFORE, ONE OF THE FIRST
THINGS WE SHOW, THE FIRST
DRAWING, IS A MAP OF THE CITY.
HERE WHAT YOU'VE GOT IN FRONT OF
YOU IS A MAP OF CAIRO.
AND OF COURSE ANYBODY, AND THE
EGYPTIANS IMMEDIATELY UNDERSTOOD
THAT THAT WAS CAIRO, THERE WAS
THE NILE, BUT THEY UNDERSTAND
WHAT WERE THESE COLOUR CODES.
WE SAID, WELL, YOU WELL SEE THAT
THERE ARE NINE COLOURS THERE.
THESE ARE THE NINE DIFFERENT
WAYS THAT EGYPTIANS HAVE OF
HOLDING ONTO THEIR ASSETS
EXTRALEGALLY, OUTSIDE THE LAW.
AND IT SEEMS TO TAKE MOST OF
CAIRO UP AND IT'S TRUE, IT DOES.

A close up of a map of Cairo shows different shades of red over different regions of the city.

Hernando says THEY CORRESPOND TO DIFFERENT
CATEGORIES OF BUILDINGS THAT WE,
AS A MATTER OF FACT, HAD TO
CONSTRUCT ALONG THE WAY.

A slide shows different photos of agricultural land and public buildings. It reads "Arab Republic of Egypt."

Hernando says HERE YOU'VE GOT THE NINE AND YOU
WILL SEE, ON THE EXTREME LEFT,
BUILDINGS ON AGRICULTURAL LAND.
AT THAT TIME, OF COURSE, THE
EGYPTIAN AUTHORITIES SAID
SOMETHING WE ALL KNEW WHICH WAS,
IT IS FORBIDDEN TO BUILD ON
AGRICULTURAL LAND, WE ONLY HAVE
ONE RIVER AND WE DON'T HAVE MUCH
OF AGRICULTURAL LAND AND THAT'S
WHY WE'VE GOT IT IN THE
CONSTITUTION, SO IT'S NOT ONLY
EXTRALEGAL, IT'S
UNCONSTITUTIONAL AND WE ALL
AGREED ON THAT.
HOWEVER, WE'D ALS... WE ALSO
WENT AND COUNTED THE BUILDINGS
ONE BY ONE AND AFTER ONE YEAR,
WE CAME TO THE CONCLUSION,
ABSOLUTELY RIGID CONCLUSION THAT
THERE WERE 4,700,000 BUILDINGS
ON AGRICULTURAL LAND.
(Crowd murmuring)

Hernando says SO THEN WE
STARTED GETTING AN IDEA OF THE
DIMENSIONS AND EGYPT WAS NOT
THAT DIFFERENT FROM PERU.
AND WAS NOT THAT DIFFERENT FROM
EL SALVADOR, WHICH WE'VE ALSO
WORKED IN AND NOT THAT DIFFERENT
FROM MEXICO, SO WE WERE SHARING,
SOMETIMES GOOD NEWS, SOMETIMES
BAD NEWS.
THEN A QUESTION COME BY AND
SAID, WELL, HOW ABOUT THOSE
PUBLIC BUILDINGS IN THE MIDDLE,
YOU CAN'T TELL US THAT THOSE
PUBLIC BUILDINGS, THAT'S PUBLIC
HOUSING, BUILT BY THE EGYPTIAN
GOVERNMENT, ARE EXTRALEGAL, AND
WE SAID, YES, BUT YOU MUST
REMEMBER THAT WHEN YOU BUILT
THOSE PARTICULAR BUILDINGS, THEY
HAD THREE STOREYS HIGH AND YOU
SEE, ACCORDING TO THE
PHOTOGRAPH, THAT THEY'RE SEVEN
STOREYS HIGH, SO THE BIG
QUESTION IS, WHO BUILT THE NEXT
FOUR?
[Laughter]

Hernando says AND THEN WE
STARTED FINDING OUT THAT THE
PEOPLE WHO BUILT THE FIRST THREE

- THE PEOPLE WHO STARTED
HABITING THE FIRST THREE WERE
NOT ONLY HOUSE PEOPLE THAT LIKED
HOUSING, THEY WERE ALSO
ENTREPRENEURS.
AND SO ON THE BASIS OF THE FIRST
PROPERTY RIGHTS THEY GOT, THEY
STARTED BUILDING THE FOUR NEXT
PROPERTY RIGHTS AND PROBABLY
FOUND THERE WAS GOOD BUSINESS,
SO KEPT ON MOVING TO OTHER
PLACES.
THE RESULT, OF COURSE, IS IF YOU
TAKE THE EGYPTIAN RECORDS, YOU
WILL CERTAINLY NOT KNOW WHO
LIVES WHERE, YOU KNOW WHERE THE
HOUSES ARE, BUT YOU DON'T KNOW
WHO'S IN THERE, BECAUSE THAT WAS
SETTLED ALL OUTSIDE THE LAW.
THE FA... THE IMPORTANT FINAL
CONCLUSION ABOUT ALL OF THIS IS
THAT WHEN YOU ADD ALL OF THESE
DIFFERENT HOMES UP, THEY ADD UP
TO ABOUT 241 BILLION DOLLARS.
241 BILLION DOLLARS OF HOMES THAT WE
CALL "DEAD CAPITAL," 'CAUSE THEY
CAN'T BE USED AS MORTGAGES, THEY
CAN'T BE USED EVEN JUST TO
APPROACH A BANK, THE FIRST THING
THAT A BANK ASKS YOU IS WHAT'S
YOUR NAME AND THE SECOND THING
IT ASKS YOU IS WHERE DO YOU LIVE
AND IF YOU DON'T HAVE AN
EXTRALEGAL ADDRESS, YOU'RE AN
OUTLAW, I MEAN, ONE DEFINITION
OF AN OUTLAW IS SOMEBODY WITHOUT
AN OWN ADDRESS.

A slide reads " US$ 241 Billion of Dead Capital. Arab Republic of Egypt." It shows three pie graphs.

Hernando says AND THEREFORE YOU CAN'T APPROACH
THE FORMAL SYSTEM.
SO HOW MANY PEOPLE LIVE IN THIS
CONDITION IN EGYPT AND THE REPLY
IS, 92 PERCENT OF THE URBAN PEOPLE AND
88 PERCENT OF... OR 83 PERCENT OF THE PEOPLE
IN THE RURAL AREAS.
AND ONE PIE THAT ISN'T IN THERE
IS HOW MANY OF THE PEOPLE, HOW
MANY OF THE ENTREPRENEURS IN
EGYPT WORK OUTSIDE THE LAW, IT'S
A LITTLE BIT HIGHER THAN PERU,
IT'S 88 PERCENT.
BUT THE INTERESTING FACT IS, HOW
MUCH IS 241 BILLION DOLLARS, JUST IN
THE HOUSING, WE'RE NOT EVEN
TALKING ABOUT THE VALUE OF THE
BUSINESSES, THE MACHINERY, THE
CARS, THE TAXIS, THE BUSES, THE
TRUCKS, JUST THE REAL ESTATE.
WELL, 241 BILLION DOLLARS IS 30 TIMES
THE SIZE OF THE CAIRO STOCK
EXCHANGE AND IT IS 55 TIMES
HIGHER THAN ALL FOREIGN
INVESTMENT IN EGYPT OVER THE
LAST 200 YEARS, INCLUDING THE
ASWAN DAM AND THE SUEZ CANAL.
SO THE QUESTION WE TOLD
EGYPTIANS AUTHORITIES THAT THEY
MUST ASK THEMSELVES, WHICH IS
THE ONE WE ALSO TELL, OF COURSE,
LATIN AMERICAN READERS IS, ARE
THE POOR THE PROBLEM OR ARE THE
POOR THE SOLUTION?
BECAUSE THEY SEEM TO HAVE DONE A
LOT OUTSIDE THE LAW, BUT ALL
THEIR ASSETS ARE DEAD CAPITAL,
THEY CAN'T BE LEVERAGED AND OF
COURSE, THEY CERTAINLY CAN'T BE
GLOBALISED, SO HOW DO YOU EXPECT
THEM TO SYMPATHISE WITH
SOMETHING THAT THEY DO NOT
PARTICIPATE IN?
AN IMMEDIATE REACTION TO THESE
KIND OF FIGURES...
IS, OF COURSE, THIS MUST BE
CULTURAL.
YOU BROWN PEOPLE ARE DIFFERENT.
AND YOU JUST DON'T LIKE THE LAW.
AND THE REPLY TO THAT IS, WELL,
YES, IT COULD BE TRUE, I CAN'T
DENY THAT, IT COULD BE TRUE, BUT
BEFORE WE FIND OUT FOR CERTAIN,
MAYBE WE SHOULD SEE WHAT THE
IMPACT OF THE LAW IS ON
COUNTRIES LIKE OURS, SO ONE OF
THE THINGS WE DO, AS PART OF THE
EXERCISE OF DIAG-DIAGNOSTIC, OR
WHAT WE CALL THE ASSESSMENT IN
EACH DEVELOPING COUNTRY WE WORK
INTO, IS MEASURE THE IMPACT ON
THE LAW... OF THE LAW ON POOR
PEOPLE, IN OTHER WORDS, NOT ONLY
SEE THE LAW ON THE BOOKS, BUT
SEE THE LAW AS IT IMPACTS DAILY
LIFE AMONG COMMON PEOPLE.
AND WE DO
THIS THROUGH A VARIETY OF MEANS,
ONE OF THEM IS SIMULATIONS AND
THE OTHER ONE IS WHAT WE LEARNED
FROM ANTHROPOLOGISTS OVER TIME,
WHICH IS LEARN TO LIVE WITH POOR
PEOPLE UNTIL SOMEBODY WHO HAS
ACTUALLY TRIED TO DO IT GIVES
YOU THE LEGAL INFORMATION, YOU
CAN PIECE IT TOGETHER.
TAKES A LOT
OF TIME, YOU HAVE TO BUILD
CONFIDENCE, NOT EVERYBODY LIKES
TO TALK.
SO IN THE CASE OF EGYPT, WE SAW
THAT, LIKE US PERUVIANS, THEY
HAVE A LOT OF SAND DUNES, BUT
MUCH MORE, SO THE QUESTION IS,
WHAT HAPPENS IF SOMEBODY DOESN'T
WANNA GET CLOSE TO THE NILE AND
THEY JUST WANNA BUILD A HOUSE ON
A SAND DUNE?
AND THE QUESTION THEN IS, HOW
MUCH TIME DOES IT GET THEM TO
OBTAIN AN AUTHORISATION TO BUILD
A HOUSE?
AND WHAT REQUIREMENTS ARE
NECESSARY?
AND THE REPLY IS THAT IT
REQUIRES THEM 77 BUREAUCRATIC
STEPS, CONTRACTS WITH GOVERNMENT
AND THEY HAVE TO GO VISIT 31
GOVERNMENT AGENCIES AND THE
WHOLE PROCESS TAKES 17 YEARS,
WORKING EIGHT HOURS A DAY, WHICH
IS A LOT BETTER THAN PERU, WHICH

- WHERE WE STARTED OFF, WHICH
IS 21 YEARS AND CERTAINLY A LOT
BETTER THAN THE PHILIPPINES,
WHICH IS 54 YEARS.
SO WHAT WE DO KNOW FROM OUR WORK
ABROAD IS THAT THE LAW IN
DEVELOPING COUNTRIES IS REALLY
THE WORST FEATURE OF
UNDERDEVELOPMENT.
THAT IS TO SAY, THE SOCIAL
CONTRACT, THE WAY PEOPLE HAVE
BEEN... ARE ORGANISED TO TRY AND
CREATE A MARKET ECONOMY IS
TERRIBLE AND NOBODY IS GOING TO
SUCCEED AT CAPITALISM, OR VERY
FEW PEOPLE, WHILE THIS STATE
AFFAIRS GOES ON, SO IT'S NOT A
QUESTION OF SAYING WE'RE GONNA
EDUCATE THEM MORE, WE'RE GONNA
GIVE THEM MORE MICRO-FINANCE,
WE'RE GONNA GIVE THEM EDUCATION
THROUGH TELEVISION, IT'S NOT
GOING TO WORK, BECAUSE
ESSENTIALLY CAPITALISM,
ESSENTIALLY CAPITALISM AND A
MARKET ECONOMY IS A LEGAL
CONSTRUCT.
IT IS FIRST AND FOREMOST A LEGAL
CONSTRUCT, IT'S LIKE A FOOTBALL
GAME, IT'S THE RULES.
YOU TAKE AWAY THE RULES AND YOU
DON'T HAVE A GAME.
IF ONE TEAM HAS 11 PLAYERS AND
THE OTHER ONE HAS 42, IT'S NOT
GONNA BE FAIR.
IF SOMEBODY CAN MAKE A GOAL WITH
THEIR HAND AND THE OTHER PERSON
CAN ONLY DO IT WITH A LEG, IT'S
NOT GONNA BE FAIR.
THE RULES ARE WHAT MAKE
CAPITALISM WORK AND TO START OFF
WITH, THE RULES OF THE GAME IN
DEVELOPING NATIONS JUST AIN'T
WORKING.
JUST AREN'T IN PLACE.
WHAT HAPPENED, WE THINK, IS THAT
SINCE THE SECOND WORLD WAR, MOST
POOR PEOPLE WEREN'T IN THE
SCENE, THEY WERE IN THE
HINTERLAND.
YOU LEARNED ABOUT THEM, LIKE I
DID, THROUGH NATIONAL
GEOGRAPHIC MAGAZINE AND
TODAY THE DISCOVERY CHANNEL,
THEY WERE DIFFERENT.
BUT WHAT HAS HAPPENED SINCE THEN
IS THAT THESE PEOPLE, OVER THE
LAST 40, 50 YEARS, HAVE MOVED.
AND THEY'VE MOVED TO THE CITIES
AND THEY'VE MOVED TO BIGGER
CONCENTRATIONS, BOTH IN THE
FORMER SOVIET UNION AND IN
DEVELOPING COUNTRIES AND THE LAW
WASN'T READY FOR THEM.
AND SINCE THE SYSTEMS TO CREATE
TO CREATE DEMOCRACY DID NOT FEED
BACK FROM PEOPLE, WE KEPT THE
OLD STRUCTURES, WITHIN WHICH
BOURGEOISIES AND OLIGARCHIES
WERE FAMILIAR, BUT THEY WERE NOT
SUITABLE FOR PEOPLE, THIS IS THE
ONLY WAY THAT YOU CAN ACTUALLY
EXPLAIN WHY SO MANY PEOPLE ARE
OUTSIDE THE SYSTEM.
BUT IT ISN'T ONLY A PROBLEM OF
COMING, ENROLLING IN THE SYSTEM.
IT'S ALSO THAT IF YOU DON'T HAVE
PAPER, IF YOU ARE NOT WITHIN THE
SYSTEM, THERE'S A LOT OF THINGS
THAT YOU CANNOT DO IN THE WIDER
MARKET.
YOU MAY REMEMBER THAT WHEN THE
FIRST REAL ECONOMISTS APPEARING
IN THE 18th CENTURY, START OFF
WITH ADAM SMITH, THEY SAID THAT
THE REASON WHY THE MARKET
ECONOMY WAS GOING TO WORK AND
WHY WE WERE GOING TO PRODUCE
ENORMOUS AMOUNTS OF WEALTH, THE
WEALTH OF NATIONS, WAS BECAUSE
THERE WAS GOING TO BE A DIVISION
OF LABOUR.
PEOPLE WERE GONNA GO FROM
WORKING ON A SMALL SCALE, WHERE
YOU BUILT YOUR OWN HOUSE, YOU
MILKED YOUR OWN COW, YOU SOWED
YOUR OWN CROPS, TO A SYSTEM
WHERE EVERYBODY WOULD BE
SPECIALISING, THIS WOULD
INCREASE THE PRODUCTIVITY AND
THEN HE TALKED ABOUT A PIN
FACTORY, HOW PEOPLE THEN COULD
BE MORE PRODUCTIVE AND BECAUSE
THEY WERE CAPABLE OF
INTERCHANGING, THE WHOLE OF
SOCIETY WOULD WORK AS ONE AND
PRODUCTIVITY WOULD INCREASE,
MARX DIDN'T DISAGREE, HE ALSO
AGREED THAT DIVISION OF LABOUR
WAS IMPORTANT.
BUT BOTH OF THEM DIDN'T GIVE
MUCH TIME TO TALK ABOUT THE ROLE
OF THE LAW AND THIS IS, OF
COURSE, NATURAL, BECAUSE IT WAS
STILL AN INCIPIENT MATTER THEN
AND THEY MADE ENORMOUS PROGRESS
FOR ALL OF US TO BENEFIT FROM,
MANY HUNDREDS OF YEARS LATER.
BUT IT WAS OBVIOUS THAT A LOT OF
THE TRANSACTIONS CARRY OUT, OR
MAYBE YOU WESTERNERS CARRY OUT,
THROUGHOUT THE DAY ARE POSSIBLE
TO DO THEM ON A WIDE SCALE WITH
CANADIANS YOU'VE NEVER KNOWN,
WITH NORTH AMERICA... WITH OTHER
U.S. CITIZENS YOU'LL NEVER MEET.
WITH DANISH PEOPLE YOU'VE NEVER
EVEN HEARD OF, BECAUSE
ESSENTIALLY EVERYTHING IS
DOCUMENTED, EVERYTHING IS
REPRESENTED.
AND LEMME TELL YOU WHY THAT'S
IMPORTANT, YOU MAY HAVE NOTICED
THAT I CAME ONTO THIS LECTERN
WITH A LITTLE APPLE.
THAT APPLE, AS YOU MAY HAVE ALSO
NOTICED, IS MY APPLE.
AND I KNOW THAT AMBASSADOR
GOTLIEB HAS SEEN THAT AND I KNOW
HE'S GONNA SAY THAT IT IS MY
APPLE.
AND IT'S IN THE BILL OF THE
HOTEL ROOM THAT I ACTUALLY ASKED
FOR AN APPLE TO BE BROUGHT UP.
AND I KNOW THAT ROGER'S ALSO
GOING TO AGREE THAT IT'S MY
APPLE, BY NOW YOU ALL ARE
CONVINCED IT'S MY APPLE AND THE
QUESTION IS, BY LOOKING AT THE
APPLE, YOU'RE NOT GONNA FIND
OUT, BECAUSE THERE'S NOTHING ON
THE APPLE THAT SAYS IT'S MY
APPLE.
SO AN APPLE IS MY APPLE BECAUSE
IT'S A SOCIAL CONTRACT AND AN
AGREEMENT BETWEEN ALL THE MINDS
HERE THAT IT IS MY PROPERTY.
IN OTHER WORDS, PROPERTY IS NOT
SOMETHING PHYSICAL.
PROPERTY IS THE RESULT OF A
MENTAL PROCESS WHEREBY WE ALL
AGREE THAT THIS BELONGS TO ME.
SO IF I
DON'T HAVE A PIECE OF PAPER THAT
SAYS THAT THIS BELONGS TO ME,
THIS MAY NOT BELONG TO ME,
EXCEPT IN A TRIBAL SOCIETY,
WHICH IS WHAT WE ARE THIS
EVENING, WHERE WE ALL AGREE THAT
IT'S MY APPLE, BUT IN A MORE
COMPLEX MARKET ECONOMY, THAT
ISN'T AROUND, THEREFORE THERE IS
NO PIECE OF PAPER THERE OR THERE
IS NOTHING IN THE APPLE THAT
SAYS WHO OWNS IT, WHETHER I
BOUGHT IT, WHETHER I'VE PAID FOR
IT, WHETHER I'VE ALREADY PAID
SOME OF THE INSTALMENTS, WHETHER
I CAN RENT IN, WHETHER I CAN
PLEDGE IT, WHETHER I CAN
TRANSFER IT, WHETHER THE
NEIGHBOURS WILL ABIDE, WHETHER,
ONE WAY OR ANOTHER, I CAN USE IT
AS COLLATERAL, NOTHING, BECAUSE
THAT REALITY IS AN INTANGIBLE
REALITY.
AND AS YOU WESTERNERS OVER TIME
HAVE DEALT WITH THESE PROBLEMS,
ESPECIALLY OVER THE LAST 300
YEARS, YOU HAVE LEARNED TO
ACTUALLY CERTIFY OWNERSHIP AND
PUT IT IN LEDGERS AND PUT IT IN
PROPERTY TITLES AND ORGANISE
SOMETHING THAT YOU CALL
"PROPERTY RIGHTS."
AND IT IS
IN THAT WORLD OF PROPERTY RIGHTS
THAT IS NOT THE RIGHT OF
PHYSICAL GOODS, BUT IT'S A... IS
OUR RIGHTS THAT TRAVEL ON PAPER,
THAT YOU HAVE MANAGED TO CREATE
A REALITY THAT EVEN GOES BEYOND
OWNERSHIP.
A REALITY OF THE MINDS WHERE
THINGS ACTUALLY ARE ABLE TO
CAPTURE ADDITIONAL VALUE THAT IS
NOT OBVIOUS BY LOOKING AT THE
PHYSICAL OBJECT.
FOR EXAMPLE, AT THIS VERY
MOMENT, IN THIS ROOM, THERE IS
UKRAINIAN TELEVISION AND
BRAZILIAN TV.
YOU KNOW THERE IS, BECAUSE YOU
KNOW THAT IF I ACTUALLY BRING A
TV SET HERE, AND IF I BRING SOME
KIND OF A SATELLITE DISH, WE'RE
GONNA BE ABLE TO HEAR IT AND WE
ALL KNOW THAT IT ISN'T THAT I
SENT A MESSAGE TO THE UKRAINE OR
I SENT A MESSAGE TO BRAZIL, IT'S
THAT IT IS HERE.
SO THERE ARE MANY THINGS AROUND
US THAT ARE THE RESULT OF SOCIAL
BEHAVIOUR THAT CANNOT BE
CAPTURED UNLESS YOU HAVE
INTERMEDIATING DEVICES.
AND THESE INTERMEDIATING
DEVICES, WE INSIST, SINCE WE
HAVE SEEN THE SIDE, THE SIDE OF
THIS ARGUMENT FROM THE SIDE OF
THE POOR, IS PRECISELY WHAT IS
MISSING IN DEVELOPING COUNTRIES,
THE FACT THAT THEY DON'T HAVE
PROPERTY SYSTEMS MEANS THAT MANY
OF THE VALUES ASSOCIATED BY THE
APPLE THAT RESPOND TO OUR
FEELINGS AND OUR SENTIMENTS AND
OUR THOUGHTS ON THE APPLE CANNOT
BE CAPTURED, ORGANISED AND
CONCRETISED.
IN OTHER WORDS, VALUE IS NOT IN
THE PHYSICAL FEATURE OF THE
APPLE, BUT IN... BUT ITS
FUNCTION AND ITS DIFFERENT
STATUSES ARE SET BY THE APPLE,
FOR EXAMPLE, AT THIS MOMENT,

Hernando places the apple on a piece of paper which lays on a table next to Hernando.

Hernando says THIS APPLE IS AN APPLE THAT CAN
BE EATEN, BUT THE MOMENT...
THAT I PLACE IT ON THAT PIECE OF
PAPER, THE APPLE HAS OBTAINED A
NEW FUNCTION, WHICH IS THAT OF
BEING A PAPERWEIGHT.
THINGS OBTAIN FUNCTIONS
ACCORDING TO OUR MINDS AND HOW
WE ARRANGE THEM.
NOW SOMETIMES THIS IS HARD TO
BELIEVE, BUT I CAN BE VERY
CONCRETE, BACK IN PERU, ONE OF
THE THINGS WE STARTED, IN THE
EARLY '90s, WAS A PRIVATISATION
PROCESS.
AND THE WHOLE PRIVATISATION
PROCESS WAS, OF COURSE, PART OF
THE MACROECONOMIC ADJUSTMENT
PROGRAM, WHEREBY GOVERNMENT WAS
GOING TO GET RID OF THOSE
ENTERPRISES THAT IT COULD NOT
RUN AS WELL AS THE PRIVATE
SECTOR.
BUT THE FIRST THING THAT WE
REALISED AS WE WENT INTO THE
PRIVATISATION PROCESS IS THAT
NOBODY WANTED TO BUY THE
COMPANIES, BECAUSE THEY WERE
BADLY TITLED, IN OTHER WORDS,
THERE WAS A PERUVIAN TELEPHONE
COMPANY, FOR EXAMPLE AND IT WAS
WORTH, IN THE STOCK MARKET,
BECAUSE THE OW... THE TELEPHONE
USERS WERE THE OWNERS, ABOUT 57
MILLION DOLLARS.
AND WE REALISED THAT NOBODY,
AT and T, TELEFONICA, BELL SOUTH,
NONE OF THEM WANTED TO BUY IT
UNTIL IT WAS PROPERLY TITLED.
THEY WEREN'T INTERESTED IN
PHYSICAL OBJECTS, THEY WERE ALSO
INTERESTED IN THE TITLES.
AND THEREFORE WE SPENT THREE
YEARS TITLING ALL OUR PROGRAMS,
THAT'S THE FIRST STAGE OF
PRIVATISATION CONSISTS OF.
IT MEANS THAT FIRST OF ALL, WE
ARE ABLE TO ORGANISE THE
INFORMATION IN SUCH A WAY THAT
EVERYBODY CAN READ IT.
KNOWLEDGE BY DESCRIPTION IS WHAT
BERTRAND RUSSELL WOULD HAVE
CALLED IT, AS OPPOSED TO
KNOWLEDGE BY ACQUAINTANCE, WHICH
IS WHEN YOU PHYSICALLY TOUCH
SOMETHING, KNOWLEDGE BY
DESCRIPTION IS THE WAY OF
ORGANISING THINGS SO THAT YOU
CAN PROCESS IT WITH MUCH MORE
SECURITY.
A SIMPLE EXAMPLE IS THAT WHEN I
JUST GOT INTO CANADA NOW, THEY
SAID, WHO ARE YOU AND I SAID I'M
HERNANDO DE SOTO, LEMME START
TALKING ABOUT MYSELF AND THEY
SAID, FORGET THAT, GIMME THE
DESCRIPTION, SO I TOOK OUT MY
PASSPORT AND THEN I FOUND OUT
THAT MY IDENTITY WASN'T IN MY
BODY, IT WAS IN MY PASSPORT AND
WHAT HAPPENS IN THE WEST, IF YOU
THINK ABOUT IT, IS THAT
EVERYTHING THAT YOU OWN, FROM
YOUR BICYCLES UP, ARE ORGANISED
IN A WORLD BY DESCRIPTION, WHICH
IS A SEPARATE AND MENTAL WORLD
THAN THE WORLD OF PHYSICS, EVEN
THE ONE OF PEOPLE.
AND THINGS AND IDEAS TRAVEL WITH
PASSPORTS AND WE DON'T HAVE
PASSPORTS FOR OVER 90 PERCENT OF THE
THINGS THAT WE PRODUCE IN
DEVELOPING COUNTRIES AND THE
THESIS GOES THAT THAT'S WHY WE
ARE POOR. BUT LET'S
COME BACK AGAIN TO THE
PRIVATISATION PROCESS, THE FACT
IS, WE SUBMITTED TO RULES, WE
ABIDED BY THE RIGHT RULES, WE
ALSO DID SOMETHING VERY
IMPORTANT DEMOCRATIC, WHICH IS
WE WENT TO TALK TO ALL THE
POSSIBLE BUYERS OF THE COMPANY,
FOUND OUT HOW THEY WERE ABLE TO
RECOGNISE OWNERSHIP, HOW THEY
WERE ABLE TO SATISFY OR BE
SATISFIED BY RULES THAT WE COULD
ABIDE WITH, WE FOUND OUT THAT
THEY DIDN'T LIKE THE PERUVIAN
JUSTICE SYSTEM AND SO WE FOUND
WAYS OF PUTTING, UH, PUTTING
INTO PLACE DISPUTE RESOLUTION
THAT DIDN'T GO THROUGH THE
CORRUPT AND UNRELIABLE PERUVIAN
COURTS, IN FACT, WE COMPLETELY
REDID, ALL THROUGHOUT LATIN
AMERICA IN THE '90s, THE
PROPERTY SYSTEM FOR LARGE
COMPANIES. AND THE
PERUVIAN TELEPHONE COMPANY WAS
SOLD FINALLY IN '93 IN NOT MANY
DIFFERENT... IN CONDITIONS THAT
WERE NOT DIFFERENT FROM THOSE OF
OTHER STATE CORPORATIONS
THROUGHOUT LATIN AMERICA.
IT WAS SOLD FOR 2 BILLION DOLLARS,
WHICH IS 37 TIMES THE VALUE THAT
IT HAD BACK IN 1990.
THAT'S CAPITAL.
CAPITAL IS THE SURPLUS VALUE
THAT YOU CAN OBTAIN BY BRINGING
ALL OF SOCIETY IN AGREEMENT AS
TO WHO OWNS WHAT AND FIND
DIFFERENT FUNCTIONS FOR IT,
BECAUSE IT CAN BE LEVERAGED INTO
A WORLD THAT ALLOWS IT TO
PARTICIPATE IN A GREATER MARKET.
AND THE PROBLEM WITH THE POOR,
OF COURSE, IN DEVELOPING
COUNTRIES, IS THAT NOT ONLY CAN
NOT THEY PARTICIPATE OUTSIDE THE
NEIGHBOURHOOD OR THE TRIBE, THEY
CAN'T EVEN GET INTO THE GLOBAL
ECONOMY.
BUT JUST THE POSSIBILITY OF
PAPERISING SOMETHING IN PERU
THAT ALLOWS IT TO GET INTO THE
GLOBAL ECONOMY MEANS THAT ITS
VALUE CAN INCREASE.
IT'S A GOOD THING TO HAVE
GLOBALISATION, BUT OF COURSE, IF
80 TO 90 PERCENT OF EGYPTIANS AND
PERUVIANS AND FILIPINOS ARE NOT
PAPERISED, DON'T HAVE PASSPORTS
TO ACCOMPANY THEIR PHYSICAL
GOODS, OR EVEN THEIR IDEAS, THEY
CAN'T PARTICIPATE IN THIS WORLD
AND ANY SOCIOLOGIST WILL TELL
YOU THAT THEN A PHENOMENON
CALLED "LEVELLING" KICKS IN,
WHICH IS THAT THOSE WHO DON'T
BENEFIT WILL DISAGREE THAT THE
10 PERCENT WHO CAN CONTINUE TO BE
THERE.
THAT IS WHY, IN DEVELOPING
COUNTRIES, WE HAVE ALWAYS
GLOBALISED OUR ELITE, BUT OUR
POOR PEOPLE HAVE REMAINED BEHIND
TO BE THE SUBJECTS OF THE
NATIONAL GEOGRAPHIC
MAGAZINE AND THE DISCOVERY
CHANNEL.
BUT THEY CAN'T FORM CAPITAL,
BECAUSE CAPITAL IS SURPLUS
VALUE.
AND THIS WAS A DIFFICULT CONCEPT
RIGHT FROM THE BEGINNING, AS A
MATTER OF FACT, MARX, WHO WAS
PROBABLY A MUCH BETTER ANALYST
OF WHAT CAPITAL MEANT, SAID THIS
IS THE CRUCIAL PART OF THE
ECONOMY, I MEAN, THE WHOLE IDEA,
THE CAPITAL CITY OF A NATION,
CAPITAL PUNISHMENT, A CAPITAL
ISSUE, INDICATES THAT CAPITAL IS
THE MOST IMPORTANT PART OF THE
BODY.
THAT'S WHY YOU HAVE CHAPTERS
THAT BEGIN AT THE PAGE AND
FOOTNOTES, CHAPTERS COME FROM
CAPITAL.
THE IDEA IS THAT THEY SAW EARLY
ON, WHEN YOU WERE MAKING YOUR
TRANSITION FROM PATRIMONIALISM
AND FEUDALISM TO A SYSTEM OF
MARKET ECONOMY, ABOUT 250 YEARS
AGO, THAT THE ABILITY TO
UNDERSTAND AND CAPTURE VALUE WAS
THE CRUCIAL ASPECT THAT WAS
GONNA MAKE THE MARKET ECONOMY
WORK.
WHAT THEY DIDN'T LEAVE CLEAR,
AND WHAT... THAT'S WHAT I TRY
AND EXPLAIN IN
THE
MYSTERY OF CAPITAL,IS
THAT CAPITAL IS CAPTURED ON
PAPER.
IT'S ABSTRACT AND IT'S
CONCRETISED ON PAPER OR IN SOME
KIND OF A DESCRIPTION
ANNOTATION.
AND ALL THE STUFF WE MAKE IN
DEVELOPING COUNTRIES, AND WE
PROVED WE ARE ENTREPRENEURS, IS
NOT CAPTURED IN THE LEGAL SYSTEM
THAT ALLOWS IT TO BE PRODUCTIVE.
IT IS CAPITAL, AS THE ECONOMIST
SAYS, STUFF THAT BEGATS STUFF.
THERE'S ANOTHER THING THAT, OF
COURSE, I THINK ADAM SMITH SAID
THAT CAPITAL IS BECAUSE IT CAME
FROM MEDIEVAL LATIN AND MEDIEVAL
LATIN SAYS THAT CAPITAL COMES
FROM THE WORD CAPITA
OR CAPUT, THE HEAD.
IT IS SOMETHING SO ABSTRACT AND
SO ABSOLUTELY SOPHISTICATED THAT
CAN ONLY BE CAPTURED BY THE
HEAD, IT CANNOT BE CAPTURED BY
THE HANDS.
NOW THE FACT THAT SOMETHING THAT
IS OUTSIDE PHYSICAL THINGS
SHOULD BE ABLE TO LEAD TO MORE
VALUE SOUNDS AWFULLY ESOTERIC,
THOUGH I HOPE I HAVE MADE A CASE
FOR IT NOT BEING ESOTERIC,
BECAUSE WE'VE SEEN HOW WE'VE
CREATED CAPITAL WHEN WE
PRIVATISE IN LATIN AMERICA.
WHAT WE HAVE BEEN ABLE TO DO, OR
KNOW HOW TO DO, IS HOW TO GIVE
THE SAME... THE BENEFIT OF THE
SAME EXERCISE TO THE POOR.
BUT, YOU KNOW, IT'S FOR AGES
THAT PHILOSOPHERS HAVE BEEN
SAYING THAT THE MOST IMPORTANT
THINGS ARE OUTSIDE OUR VIEW.
THE WHOLE IDEA OF CARL GUSTAV
JUNG ABOUT THE SUBCONSCIOUS, THE
COLLECTIVE SUBCONSCIOUS, WAS
THAT IT IS MUCH BIGGER THAN THE
CONSCIOUS, AS A MATTER OF FACT,
HE USED TO SAY, IF YOU WANT AN
IDEA OF PROPORTIONS, THINK OF A
MAN ON A RAFT WITH A CANDLE
THAT'S LIT, WHATEVER YOU CAN
SEE, THANKS TO THAT CANDLE, IS
CONSCIOUSNESS, THE REST IS
DARKNESS.
THAT'S THE UNCONSCIOUSNESS AND
THAT'S WHY YOU ACTUALLY NEED TO
FIND OUT WHAT THE UNCONSCIOUS
IS, BECAUSE IT'S THE LARGER PART
OF LIFE.
PLATO, OF COURSE, AGREED WITH
HIM MANY THOUSANDS OF YEARS
BEFORE, HE SAID WE WERE ALL LIKE
PRISONERS IN A CAVE, WE ARE
CONTINUALLY LOOKING AT A WALL
THAT'S GOT SHADOWS, BUT WE NEVER
ACTUALLY GET TO SEE THINGS, WE
ONLY PERCEIVE SHADOWS AND THAT'S
WHY YOU NEED PHILOSOPHY AND
THAT'S WHY YOU NEED TO PERFECT
HUMAN TECHNOLOGY, TO BE ABLE,
FROM THE SHADOWS TO INTERPRET
WHAT REALITY IS ALL ABOUT.
KANT AGREED, KANT SAID, WE, IN HIS
CRITIQUE OF PURE REASON,
WE ONLY HAVE FIVE SENSES AND
THAT'S NOT ENOUGH TO CAPTURE
REALITY.
IN FACT, WE NEVER REALLY CAPTURE
REALITY, WE ALWAYS GO THROUGH
REPRESENTATIONS.
WE ALWAYS GO THROUGH MANMADE
REPRESENTATIONS AND THAT'S WHY
HE THOUGHT THAT PAINTING WAS
WONDERFUL, OR MUSIC. IN OTHER
WORDS, WE HAD TO REPRESENT
THROUGH SIGNS THAT WERE
EFFICIENT MUSICAL NOTES, SO AS
TO BE ABLE TO PLAY ONE DAY WHAT
ANOTHER PERSON HAD PLAYED A
PREVIOUS DAY.
WITHOUT ANNOTATION, WITHOUT WAYS
TO REPRESENT SOUND, YOU COULDN'T
PLAY IT AGAIN.
THE OTHER DAY AT THE INSTITUTE,
OUR FELLOWS AT THE ECONOMICS
DEPARTMENT TRIED TO MULTIPLY 279
BY 438 WITH ROMAN NUMBERS AND IT
TOOK THEM HALF AN HOUR AND SEVEN
PAGES.
THEN, WHEN DECIDED TO TAKE
ADVANTAGE OF THE NEW ANNOTATION
SYSTEMS OF REPRESENTATION THAT
CAME INTO OUR CIVILISATION IN
THE SEVENTH CENTURY, WHICH ARE
THE INDIGO ARAB NUMBERS, WITH
THE ZERO THAT WE HAVE TODAY,
THEY WERE ABLE TO DO IT IN SEVEN
LINES AND IN SCARCELY 20
SECONDS.
THE QUALITY OF THE
REPRESENTATION DETERMINES HOW
EFFICIENTLY YOU CAN ACTUALLY
MANAGE NOT ONLY PROCESSES AND
NOT ONLY PHYSICAL GOODS, BUT HOW
YOU CAN UNDERSTAND AMONG EACH
OTHER.
THAT'S WHY CARL POPPER, BEFORE
HE DIED, TALKED ABOUT THE
ENORMOUS IMPORTANCE OF WHAT HE
CALLED "WORLD THREE," WHICH HE
SAID GUIDED ESSENTIALLY OUR
POSSIBILITY OF PROGRESS
THROUGHOUT THE WORLD.
WORLD THREE IS THE WORLD IN
WHICH OUR IDEAS AND OUR SYSTEMS
LIVE, WHICH IS COMPLETELY
DIFFERENT FROM THE PHYSICAL
WORLD AND WHAT WE'RE SAYING IS
THAT DEVELOPING COUNTRIES ARE
MISSING PART OF WORLD THREE,
IT'S NOT PHYSICAL, IT DOESN'T
HAVE TO DO WITH CHARITY, IT HAS
TO DO WITH THE POSSIBILITY OF
ORGANISING AND TRANSFERRING
VALUE AND THAT IS DONE THROUGH
LAW AND THE GREAT PITY IS THAT
LAWYERS KNOW ALL ABOUT
REGULATIONS, AT LEAST IN MY
COUNTRY, BUT HAVE NO IDEA OF
WHAT THE LAW IS, NOR ITS
PREDOMINANT FUNCTION WITHIN A
CAPITALIST SYSTEM.
AND WE ECONOMISTS SOMETIMES
BELIEVE THAT IT'S ALL ABOUT
NUMBERS AND NOW WE'RE STARTING
TO FIND OUT THAT IT IS NOT ABOUT
NUMBERS, IT'S ABOUT INSTITUTIONS
AND IT IS ABOUT LAW.
AND RECENTLY A GREAT AMERICAN
PHILOSOPHER CALLED PAUL WEISS
SAID THAT AS YOU DISCOVER IN
SCIENCE AND TECHNOLOGY AND IN
PHILOSOPHY DIFFERENT MATTERS
THAT ACTUALLY ORGANISE LIFE, YOU
START FINDING OUT THAT THERE'S
SOME THAT CONSTITUTE A REALITY.
AND THE THESIS OFTHE
MYSTERY OF CAPITAL IS
THAT THE PROPERTY SYSTEMS THAT
YOU HAVE IN THE WEST AND THAT
YOU TAKE SO MUCH FOR GRANTED,
BECAUSE THEY'RE BORING IN THE
FIRST PLACE AND BECAUSE THAT'S
THE WORLD ALWAYS SEEMS TO HAVE
BEEN, ACTUALLY WAS WHAT
PERMITTED YOU, OVER THE LAST TWO
CENTURIES, TO MAKE AN ENORMOUS
ADVANCE OVER THE REST OF THE
WORLD.
THE REST OF US, WHO ARE TRAPPED
WITHIN THE FIVE-SIXTHS OF
HUMANITY THAT IS IN THE
DEVELOPING WORLD AND THE FORMER
SOVIET UNION NATIONS.
AND WHO WILL NOT ABLE... EVER BE
ABLE TO RELEASE THE VALUES IN
OUR APPLES UNTIL WE, IN EFFECT,
ARE ABLE TO REPRESENT THEM AND
BE ABLE TO CREATE CAPITAL.
NOW SINCE I HAVE JUST A FEW
LITTLE MOMENTS LEFT, LET ME TELL
YOU, BECAUSE THIS ALL SOUNDS
VERY SIMPLE AND I HOPE IT SOUNDS
SIMPLE, OTHERWISE IT'S... THE
SPEECH WON'T HAVE WORKED, BUT
THE... IT'S ACTUALLY, IN A WAY,
QUITE COMPLEX.
HOW DO YOU BUILD A LEGAL SYSTEM
THAT RESPECT?
BECAUSE IT'S NOT THAT WE HAVEN'T
BEEN FOLLOWING YOU.
I MEAN, WHAT OUR LAW STUDENTS DO
ABROAD AND WHAT OUR LEGISLATORS
IN PERU DO IS DEFINITELY TRAVEL
TO DEVELOPED COUNTRIES, TO
CANADA, TO FRANCE AND WE COPY
YOUR LAWS.
WE PHOTOCOPY THEM, WE TRANSLATE
THEM INTO SPANISH, WE SAY, SINCE
THIS WORKED IN CANADA AND
SWITZERLAND, IT MUST WORK BACK
HOME.
AS A MATTER OF FACT, FOR THOSE
OF YOU WHO HAVE VISITED LIMA, IT
MIGHT BE INTERESTING TO KNOW
THAT THE TRAFFIC REGULATIONS OF
LIMA ARE THE TRAFFIC REGULATIONS
OF ZURICH, BECAUSE TRAFFIC IS SO
WELL ORGANISED THERE AND THOSE
WHO HAVE DRIVEN IN LIMA KNOW
THAT SOMEHOW OR OTHER, IT
DOESN'T WORK.
[Laughter]

Hernando says NOW THERE
ARE TWO EXPLANATIONS TO THAT,
ONE, OF COURSE, IS THAT WE'RE
JUST CULTURALLY NOT SUITED TO
DRIVE CARS, WHICH IS A STRONG
ARGUMENT.
[Laughter]

Hernando says AND THE
OTHER ONE IS THAT MAYBE THAT'S
NOT THE WAY YOU BUILD A LAW.
ABOUT EIGHT YEARS AGO...
MY FIRST BOOK,
THE OTHER
PATH,WAS TRANSLATED INTO
BAHASA INDONESIAN AND I WAS
THRILLED, BECAUSE IT'S RIGHT AT
THE OTHER SIDE OF THE GLOBE FROM
PERU.
AND BESIDES THAT, I ALWAYS HEARD
FROM ALL THE AEROPLANE PILOTS I
WAS ABLE TO TALK TO THAT BALI,
WHICH IS AN ISLAND OF INDONESIA,
IS THE MOST BEAUTIFUL PLACE IN
THE WORLD.
SO I SAID, GREAT, LET'S GO SEE
IT AND I WENT THERE WITH MY WIFE
AND I DID THE USUAL THING,
TALKED TO A FEW PEOPLE, WENT ON
A FEW TV PROGRAMS AND THEN WE
WENT OFF TO BALI, WHICH WAS THE
REAL OBJECTIVE OF THE MISSION.
AND THERE
WE WERE IN BALI AND I GOT A CALL
FROM A FRIEND, WHO SAID, YOU
KNOW, PRESIDENT SOEHARTO HAS
SEEN WHAT YOU'RE DOING AND SO
HAS HIS CABINET, THEY'D LIKE TO
TALK TO YOU BECAUSE THEY KNOW,
NOT ONLY WHAT THE BOOK IS ABOUT,
THEY'RE STARTING TO UNDERSTAND
THE PHILOSOPHY, BUT THEY'VE GOT
THE... THEY KNOW THAT IT'S
ACTUALLY WORKING PARTS OF PERU,
SO THEY HAVE... THIS IS VERY
IMPORTANT TO US AND I SAID, OF
COURSE, I'D BE DELIGHTED TO GO
MEET THEM, I NEVER MET THE... I
NEVER TALKED TO AUTHORITIES
OUTSIDE MY OWN CONTINENT, LET'S
DO THAT.SO I WENT
TO JAKARTA AND I MET WITH THEM
FOR A DAY AND I REMEMBER THERE
THEY WERE, THE PRESIDENT, THERE
WAS ALSO A MINISTER CALLED EMIL
SALIM, ANOTHER ONE THAT'S CALLED
SONI HERSONO, A THIRD ONE WAS
CALLED... THE MINISTER OF
FINANCE WAS CALLED RADUSZ AND
THEN THIS MAN, HERSONO, STANDS
UP WITH THE MINISTER OF LANDS
AND SAYS, LOOK, DON'T FILL US
WITH ALL THE WISHY-WASHY THEORY
YOU'RE ONE DAY GONNA TELL ALL
THESE CANADIANS ABOUT.
GET TO THE CONCRETE STUFF.
HOW DO YOU FIND OUT WHO OWNS
WHAT? 'CAUSE WE KNOW THAT 92 PERCENT OF THE
HOMES, TO BEGIN WITH, OR
BUILDINGS IN JAKARTA, ARE SIMPLY
NOT IN THE RECORDING SYSTEM, THE
REASON WE CAN'T TITLE THEM AND
WE CAN'T ORGANISE THEM ON A
KNOWLEDGE BASE AND BE ABLE TO
CREATE ALL THOSE LEGAL LINKS AND
WEBS WHICH WILL ALLOW US TO NOT
ONLY MULTIPLY VALUE, BUT ALSO
CREATE A SECURITY SYSTEM, SO WE
KNOW WHERE THE THIEVES HIDE OUT,
WHERE THE REBELS ARE, IS BECAUSE
WE CAN'T FIND THAT INFORMATION,
HOW DID YOU DO IT IN PERU?
SO WE HAVE A SYSTEM, I MEAN,
THAT'S WHAT MY ORGANISATION
DOES, IT STOPPED THINKING A LONG
TIME AGO AND IT STARTED JUST
CONSTRUCTING AND IT'S A LONG
PROCESS AND IT'S COMPLEX AND
IT'S TEDIOUS, BUT IT WORKS.
BUT I KNEW THE POLITICIANS,
INDONESIAN POLITICIANS, THEY
WERE LIKE PERUVIAN POLITICIANS,
HAD ABOUT THE ATTENTION SPAN OF
A FRUIT FLY, AND THEREFORE YOU
HADDA COME IN VERY QUICK AND
ILLUSTRATE IT AND A METAPHOR
CAME INTO MY HEAD, WHICH WAS
BASED ON REALITY.
I'D BEEN WALKING UP AND DOWN
BALI AND IT'S A BEAUTIFUL AREA,
ALL YOU DO IS WALK, BECAUSE THEY
HAVE THESE BEAUTIFUL RICE FIELDS
AND THEY'RE ALL MATURING AT
DIFFERENT TIMES, SO THE YELLOW
AND ORANGES AND GREENS AND
THEY'RE SURROUNDED BY THESE PALM
TREES AND THERE'S THIS TERRACED
AGRICULTURE AND THESE PAGODAS,
IT'S REALLY PARADISE.
BUT I ALWAYS KNEW, WHEN I WAS
WALKING THERE, THAT EVERY TIME I
CHANGED PROPERTY, A DIFFERENT
DOG BARKED, SO I TOLD THEM, YOU
HAVE TO TALK TO INDONESIA DOGS,
THEY'VE GOT ALL THE INFORMATION
YOU NEED.
[Laughter]

Hernando says NOW THE
FACT IS THAT THE INDONESIA DOGS,
OF COURSE, HAVEN'T MADE A DEAL
AMONG THEMSELVES, THEIR OWNERS
HAVE AND THAT'S WHY ONE OF THE
MINISTERS SAID, AH...
(Speaking in foreign language)

- WHICH MEANS THE PEOPLE'S LAW,
I SAID, THAT'S EXACTLY IT.
IN ALL OF OUR COUNTRIES,
DEVELOPING COUNTRIES, ASIDE FROM
THE BAD LAW THAT OUR
BOURGEOISIES HAVE CREATED AFTER
BEING EDUCATED IN WESTERN
UNIVERSITIES, THE POOR PEOPLE
HAVE ACTUALLY MADE ARRANGEMENTS
AMONG THEMSELVES AND THEY'RE
VERY EFFICIENT, THE TROUBLE IS
THAT THEY'RE SMALL.
THEY GO FOUR BLOCKS IN CAIRO,
IT'S 16 BLOCKS IN JAKARTA, IT'S
18 BLOCKS IN LIMA AND JUST LIKE
THE UNIFIED COMMERCIAL CODE OF
THE UNITED STATES, YOU GOTTA
BRING IT ALL TOGETHER.
JUST LIKE ALL THE DIFFERENT
LEGISLATIONS AND PRACTICES IN
CANADA, YOU GOTTA STANDARDISE
THEM, YOU GOTTA BE ABLE TO
UNDERSTAND THEM.
THAT'S THE ONLY WAY YOUR
IMMIGRATION SERVICE IS GONNA BE
ABLE TO READ A PROVING PASSPORT.
AND THAT'S THE EXERCISE, THAT'S
BASICALLY IT, BUT THAT MEANS
THAT YOU HAVE TO STOP SEEING
POOR PEOPLE AS INFERIOR.
YOU HAVE TO KNOW THAT WHEREVER
YOU GO IN THE WORLD, HUMAN
BEINGS, ONCE THERE'S MORE THAN
THREE OR FOUR OF THEM, WILL GET
ORGANISED AND WILL COLLABORATE,
BECAUSE THEY'RE SOCIAL ANIMALS.
AND THE LAW IS ESSENTIALLY A
DISCOVERY PROCESS, IT'S NOT A
PROCESS WHEREBY SOME PEOPLE
THINK THEY'RE EDUCATED AND THAT
THEY CAN TELL EVERYBODY ELSE
WHAT TO DO.
THE LAW IS BORNE THROUGH
CONSULTATIONS, IT IS SOMETHING
THAT IS AUTOMATICALLY HAPPENS
WHEN YOU CONSULT PEOPLE AND WE
IN DEVELOPING COUNTRIES AND THE
FORMER SOVIET UNION STOPPED
TALKING TO PEOPLE A LONG TIME
AGO.
AND THE BASICALLY HAVE COME OUT
WITH THESE TREMENDOUS CULTURAL
ARGUMENTS OF SAYING, THEY NEED
TO BE EDUCATED AND THAT'S
BOLOGNA, BECAUSE THEY'VE GOT AN
ORDER AND NO MATTER HOW MUCH WE
TRY TO IMPOSE AN EXTERNAL ORDER
ON THEM, THEIRS WILL SURVIVE.
SO THE BOOK IS NOT A MAGIC
BULLET.
I DON'T PRETEND TO HAVE A MAGIC
BULLET.
I JUST THINK THAT WE HAVE REALLY
COME UPON SOMETHING THAT IS
RATHER, UH, VERY IMPORTANT AND I
WANNA THANK YOU ALL FOR BEING
HERE TONIGHT TO LISTEN TO IT,
THANK YOU.

[Applause]

Watch: Hernando de Soto Polar on Helping the Poor Worldwide