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De Soto: Leading the Way Toward Free Enterprise
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11890 |
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CURRENT ISSUES
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8 / 1987 |
2,311 Words |
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Stephen Schwartz
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Hernando de Soto, like his historical namesake who experienced the New World as a Spanish conquistador, is an explorer. And he, like his predecessor, has entered a new world. In the intellectual and political environment of Peru, a country stricken with all the classic problems of Latin American development, the second Hernando de Soto has brought news of a "discovery" that to many must be exhilarating, to others a source of wonder, and to others still, a cause for alarm and dismay.
For de Soto has begun to educate Peruvians - mostly the poor, rather than the rich - about free enterprise.
De Soto, a 45-year-old economist, heads the Instituto Libertad y Democracia (ILD), or Liberty and Democracy Institute, a pioneering "think tank" on the Latin American scene. He has been described as a "revolutionary intellectual," although, predictably, Peru's lunatic-fringe guerrilla movement known as Shining Path (Sendero Luminoso) has labeled him a prime enemy and has threatened him with death.
As indicated by the title of his recent book, The Other Path (El Otro Sendero), de Soto is offering Peruvians an alternative to ultra-radical violence as a medium for the improvement of people's lives. But he also keeps his distance from those social reformers who, while working through established institutions and supporting democracy, call for government intervention in economic affairs - although their object is a welfare, rather than a totalitarian state. De Soto believes that the best agency for amelioration of poverty consists of people themselves and their own sense and spirit of enterprise.
The Other Path, which sold out its first printing in Peru within a few days and which has become a controversial best-seller in Colombia as well, is more than an argument for free enterprise. It is also a detailed study of the disastrous effects of too much government on the lives of the Peruvian urban classes, many of whom earn their living through the so-called informal sector - what those in the United States call "the underground economy" and what used to be known as "the black market." Millions of Peruvians operate or work in small businesses that exist outside the "normal" scheme of governmental regulation, including taxation.
It isn't easy to do business "normally" in Peru. A column by George Melloan in The Wall Street Journal (March 17, 1987) notes that soon after its establishment in 1980, the ILD carried out a study of the bureaucratic process required to set up a small business legally. They discovered that it took 289 days to clear the red tape and political requirements to start a clothing factory. Twenty-four times they were asked for bribes by government officials, a statistic that will surprise nobody who has done business in or even traveled in Mexico, Central America (except for Costa Rica), or the countries on the northern tier of South America.
To set up a legal small bus company required 1,000 days. It is no wonder, then, that bus and taxi operators in Lima, with its congestion and confusion, should work overwhelmingly "outside the law" and that de Soto has become their hero. He is a kind of anti-bureaucratic intellectual Robin Hood, twitting the incapacities of the Peruvian state while defending the interests of a group of hardworking, entrepreneurial citizens who in the past would be handily labeled as disadvantaged and
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