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The Revenge of the Invisible Hand
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16149 |
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BOOK WORLD
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6 / 1989 |
3,352 Words |
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Jose S. Sorzano
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There are books that possess the magical property of letting us see order and pattern where nothing but disjointed chaos was previously apparent.
Hernando de Soto's The Other Path is one such rare gem. It reveals the underlying pattern--a surprisingly promising one--beneath the ominous anarchy of much of Peru's postwar socioeconomic development. In ranks as a genuine intellectual breakthrough, for it lifts the veil that had obscured our understanding of the underlying logic of economic development in Peru and, by extension, in much of the Third World.
Instead of adopting the conventional view that thriving black markets, illegal trade and violent land invasions are threatening indicators of Peru's social disintegration, de Soto regards them as the inevitable outcome of mixing the asphyxiating embrace of pervasive government regulation with the individual's ceaseless quest for property rights and economic security.
This makes The Other Path a double-barreled, revolutionary book. It also illuminates a deeper reality previously hidden from most observers and will surely have far-reaching policy consequences. For those reasons, de Soto's work has been creating quite a stir both in academic and political circles concerned with economic development. It goes against the grain and, as de Soto himself recognizes, it is predictable that this book will generate harsh criticism from whose who see their pet development doctrines revealed as unworkable and harmful dogmas.
The received wisdom
The late sixties and early seventies were heady times of decolonization. As dozens of new nations became independent from their colonial masters, indigenous elites assumed power with the avowed mission of improving living conditions by fostering rapid economic development.
How to go about it was not in doubt. Indeed, at the time, leading academicians and even lowly graduate students knew with certitude that economic development in newly emerging nations could best be achieved through:
·Authoritarian governments able to organize the mass mobilization of labor resources. The serious business of nation building could not be left to the vagaries of democracy, with its characteristic political zigzags and inconsistency of purpose. With meager capital resources available, it was necessary to harness the countries' plentiful and cheap labor to construct monumental projects such as dams, irrigation canals, steel mills, and railroads.
·Central planning and command economies able to displace the irrationalities and wastefulness of the marketplace. Newly developing nations could not afford the luxury of a bewildering array of consumer products; say, seventeen different brands of deodorants all performing essentially the same function. Such wasteful misallocations were the result of the irrationality of the market. They could, however, be remedied. The social sciences and, especially, economics had advanced sufficiently to allow central planners to outperform the market as an allocation mechanism. Rationality was presumed to be the special virtue of central planning.
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