One man s magnificent mission to free millions from poverty

Core values by John Blundell in The Business

WHO is the person doing most to help fellow human beings in the world today? Most of us would probably plump for Microsoft founder Bill Gates. His philanthropic efforts – now reinforced by Warren Buffett’s tens of billions – are not to be diminished. I salute their efforts, but my hero is Hernando De Soto. He is nominally a Peruvian economist, but he is far more than that.

De Soto offers fresh insights into why so much of humanity is locked into a permanent cycle of poverty and deprivation. His answers are both subtle and elusive yet crashingly obvious. The poor do not have property rights. I do not just mean real estate – fields or homes – though they matter.

I had the good fortune to dine with de Soto, celebrating our 20-year friendship, as he flitted through London recently. We chuckled mightily recalling his last talk at the Institute of Economic Affairs. The first question from the floor went as follows: “If you had 15 minutes with President Putin what would you say?” His booming reply delivered deadpan was: “When I had three hours with President Putin last week I said . . . ”

It is rare to encounter a man so totally dedicated to lifting the penniless of the favelas and shanty towns of Latin America, Africa and Asia with the insight that without property rights people cannot rise.

We in the West take them for granted. I do not mean a three or four-bedroomed home. I mean that tissue of contractible and tradeable relationships we all enjoy. To hold assets in a pension fund is a property right. To own equities in companies is another. At times we all borrow money to differing degrees. To buy a home we need a mortgage. To starting a business we need a source of credit. All this is obvious and unexceptional to us. Yet, here is de Soto’s crucial realisation – in the Third World the masses have little or no property rights. They are excluded. They cannot participate. They are credit-starved.

At first this seems to be a diagnosis for despair. It is further bleak, as de Soto argues, that most overseas aid goes to nourish the governments of flawed or corrupt regimes that are the very agencies suppressing their peoples. Aid seems to have only the most marginal effects in lifting people from poverty.

De Soto’s quip about meeting President Putin is no vanity. It is the way he operates. Rather than drift in endless consultative committees and middle ranking bureaucracies that only defer decisions, de Soto only meets heads of state and he has some 30 who consult him.

He says they have the levers of power if they want to act. They often lack the mental equipment or the right ideas as too many, educated at Ivy League Schools in the US or my own London School of Economics, were inculcated with the ideas of Socialism – that prosperity is created by a bloated State.

However, De Soto detects a sea change. He reports that many national leaders have wearied of the remorseless poverty and corruption sponsored by past aid programmes. They see high hopes in the de Soto formula.

He shared with me the report he had written for Tanzania. The country has been deeply impoverished since independence as its leadership applied socialist ideas to the ruination of its people. The de Soto team is just short of a thousand people in the country. They watch to see how people get around the bungling bureaucracy of mighty departments of state down to petty officials with bribery demands.

What I found encouraging is de Soto’s team of analysts found no shortage of informal degrees of collaboration and exchange. If they have a dispute with a neighbour or over some trade – over a bullock or a cart – nobody goes to an official court. They know they are far too