HOMESTEAD: Why The Mystery of Capitalism is important to COG

[Keith Wilde <kwilde@magi.com>]

Yesterday I alerted COG members that this new book by Hernando de Soto
(Basic Books) is important.  Today I offer further justification for my
opinion.

The book has direct, immediate relevance to the "transnational" and
"privatization" groups because the author's main focus is on building
capitalism in Third  World and formerly communist countries. That could be
sufficient justification by itself, for those groups.  However,

Its relevance is much broader than that because it offers an explanation of
the origins and nature of capital and capitalist systems. This is
particularly important because the Economics of Ownership discussion group
were unable to agree that the binary economics rationale devised by Louis
Kelso is a satisfying explanation of why his financial techniques should
work.  The Kelso explanation appears to have a long history of resistance
from economists, and our discussion seems to have evoked many of the
longstanding difficulties.  One consequence of this history is that
enthusiasts for Kelso-type ownership spreading techniques are bitterly
frustrated by economists as a group, and regard the latter as hostile to
the objective of broader capital ownership.  With that as background
context, it is eye-opening to see de Soto demonstrating that economists
have not understood what capital and capitalism really amount to (nor has
anyone else, for that matter), and being applauded by prominent
contemporary economists for shedding new light on an old but neglected
question. 

The Mystery of Capitalism offers an opportunity to eliminate some old
sources of ideological conflict and to thereby enlarge the base of
political support for COG objectives. De Soto's key to the mystery
(supported by a team of cooperators) can be readily applied to explain why
innovators like Kelso and Michael Milken were able to create real wealth
where skeptics suspected pipe dream or scam.

Keith Wilde
Canada Pension Plan
Ottawa
kwilde@magi.com
613 990-8125 (office)
613 747-6847 (res)