The Other Path: The Economic Answer to Terrorism

Front Cover
Basic Books, 2002 - Business & Economics - 273 pages
2 Reviews
In this, his classic book on the informal economy of Peru and the reasons why poverty can be a breeding ground for terrorists, Hernando De Soto describes the forces that keep people dependent on underground economies: the bureaucratic barriers to legal property ownership and the lack of legal structures that recognize and encourage ownership of assets. It is exactly these forces, de Soto argues, that prevent houses, land, and machines from functioning as capital does in the West--as assets that can be leveraged to create more capital. Under the Fujimori government, de Soto's Institute for Liberty and Democracy wrote dozens of laws to promote property rights and bring people out of the informal economy and into the legitimate one. The result was not only an economic boon for Peru but also the defeat of the Shining Path, the terrorist movement and black-market force that was then threatening to take over the Peruvian government. In a new preface, de Soto relates his work to the present moment, making the connection between the Shining Path in the 1980's and the Taliban today.
 

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Contents

Part 1
3
Migration
7
A Hostile Reception
10
From Migrants to Informals
11
Informal Housing
17
The Informal Acquisition of Property
19
The Historical Evolution of Informal Housing
33
The Long March toward Private Property
55
The Costs of Informality
151
The National Economic Consequences of the Costs of Formality and Informality
173
The Law as a Determinant of Development
177
The Redistributive Tradition
189
The Parallel with Mercantilism
201
A Mercantilist Country?
208
The Decline of Mercantilism and the Emergence of Informals
210
Collapse
220

Informal Trade
59
Types of Informal Trade
62
The Historical Evolution of Informal Trade
75
The March toward Markets
91
Informal Transport
93
Types of Informal Transport
94
The Historical Evolution of Informal Transport
105
The Mystery of Cyclical Bankruptcies
124
Part 2
131
The Costs of Formality
132
The Costs of Access
133
Conclusion
231
Violence
233
The Survival of Mercantilism
235
Political Voluntarism
237
Left and RightWing Mercantilists
239
The Promise of Human Capital
242
An Agenda for Change
244
Final Remarks
255
Epilogue
259
Index
265
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About the author (2002)

Hernando de Soto is President of the Institute for Liberty and Democracy (ILD), headquartered in Lima, Peru. He was named one of the five leading Latin American innovators of the century by Time magazine in its May 1999 issue on "Leaders for the New Millennium." De Soto played an integral role in the modernization of Peru's economic and political system as President Alberto Fujimori's Personal Representative and Principal Adviser. His previous book, The Other Path, was a best seller throughout Latin America and the U.S. He and ILD are currently working on the practical implementation of the measures for bringing the poor into the economic mainstream introduced in The Mystery of Capital. He lives in Lima, Peru.

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