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The Mystery of Capital or the Mystification of Capital?

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  • Franklin Obeng-Odoom

Abstract

In contemporary political economic analyses of development processes, Hernando De Soto's The Mystery of Capital, has been one of the most discussed, albeit controversial, books. Although well received by global development agencies such as the World Bank, a key exponent of De Soto's work, positing that the creation and institutionalisation of individual property in housing and land revives "dead capital" and creates the conditions that will enable the poor to emerge from abject poverty, has been widely criticised. These criticisms show that (1) the thesis is flawed, (2) the flaw is due to implementational problems and (3) the practical implications arising from the thesis are largely neutral and will neither improve nor worsen poverty. Although agreeing with the first criticism, this paper argues that the second critique must be nuanced, and the third is entirely mistaken. Utilising insights from Joseph Schumpeter, Karl Polanyi and Henry George, it makes the case that applying De Soto's ideas through policy would be ineffective in curbing urban poverty, and actually serve to simultaneously entrench and augment it. Moreover, while finding that De Soto's assumption that the poor possess some economic agency is sound and may, indeed, secure socially beneficial outcomes through pursuing innovative and entrepreneurial endeavours, De Soto's conception of such processes remains largely emasculated from broader political economic considerations.

Suggested Citation

  • Franklin Obeng-Odoom, 2013. "The Mystery of Capital or the Mystification of Capital?," Review of Social Economy, Taylor & Francis Journals, vol. 71(4), pages 427-442, December.
  • Handle: RePEc:taf:rsocec:v:71:y:2013:i:4:p:427-442
    DOI: 10.1080/00346764.2012.761758
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    References listed on IDEAS

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    1. Raju Jan Singh & Yifei Huang, 2015. "Financial Deepening, Property Rights, and Poverty: Evidence from Sub-Saharan Africa," Journal of Banking and Financial Economics, University of Warsaw, Faculty of Management, vol. 1(3), pages 130-151, May.
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    1. Franklin Obeng-Odoom, 2018. "Valuing unregistered urban land in Indonesia," Evolutionary and Institutional Economics Review, Springer, vol. 15(2), pages 315-340, December.
    2. Richmond J. Ehwi & Lewis A. Asante, 2016. "Ex-Post Analysis of Land Title Registration in Ghana Since 2008 Merger," SAGE Open, , vol. 6(2), pages 21582440166, April.
    3. Martina Manara & Erica Pani, 2023. "Institutional work: how lenders transform land titles into collateral in urban Tanzania," Journal of Economic Geography, Oxford University Press, vol. 23(6), pages 1213-1236.
    4. Manara, Martina & Pani, Erica, 2023. "Institutional work: how lenders transform land titles into collateral in urban Tanzania," LSE Research Online Documents on Economics 120208, London School of Economics and Political Science, LSE Library.
    5. Franklin Obeng-Odoom, 2016. "Property in the Commons," Review of Radical Political Economics, Union for Radical Political Economics, vol. 48(1), pages 9-19, March.

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