Monday, May 10, 2004
Copyright © Las Vegas Review-Journal

EDITORIAL: Capitalism and the masses

Americans used to understand that the first was the best solution for the second

In San Francisco this week, Peruvian economist Hernando de Soto, who in 1980 founded the Lima-based Institute for Liberty and Democracy, accepted the second Milton Friedman Prize for Advancing Liberty.

The $500,000 award, named after Nobel Prize-winning economist Milton Friedman, is awarded by the Cato Institute, a Washington, D.C.-based think tank, to an individual judged to have made a significant contribution to advancing human freedom.

Author of books "The Other Path" and "The Mystery of Capital," de Soto encourages peasants working in marginal jobs to consider themselves part of the "formal" economy. He argues that poor people should use their property -- farms, jitneys, pushcart taco stands, scooters, chickens, huts -- to apply for loans and expand their businesses.

But his philosophy -- which encourages taxi drivers and street corner gum vendors to consider themselves capitalists -- has resulted in political attacks from Latin America's landed aristocracy, authoritarian regimes, labor unions and Peru's Maoist terrorist group, the Shining Path. He's survived at least three attempts on his life, and his office has been sprayed with bullets.

During his 45-minute speech, de Soto -- who named his German shepherds Marx and Engels because "they have no respect for property" -- admonished North Korea, Zimbabwe, Cuba and other authoritarian countries that he said maintained "feudalistic" social contracts which exclude most citizens from property rights.

The Associated Press commented that de Soto "is a rarity among economists: a champion of both capitalism and the rights of the impoverished masses."

Strictly speaking, most economists would probably deny they "champion" any political system. The task of economists is to observe, analyze and report on the system of transactions that allows human beings to divide their labors.

But over the centuries -- despite the failed attempts of Keynesians and other collectivists to hold otherwise -- economists from Adam Smith to Ludwig von Mises to Murray Rothbard to Hernando de Soto have observed that prosperity is most widespread when men and women are left at liberty to accrue wealth and trade their goods and labor freely.

The AP writer is a victim of a common misunderstanding -- that those who champion capitalism favor only the interests of "the greedy rich," while anyone who feels compassion and sympathy for the poor must surely understand the necessity of sending men with guns to the homes of the rich, there to seize some quantity of their stuff and redistribute it to the poor.

The Communists tried it in Russia for three generations. It failed utterly. The only ones who didn't end up broke were the millions who ended up dead.

If it seems unusual to today's Americans to find a learned economist who understands this, then perhaps we need to ask why so many of America's economists (both in our political capitals and on our college campuses) still embrace a mid-20th century redistributive economic model that had already proved a dismal and deadly failure by the time of the deaths of its greatest champions: Lenin, Hitler, Stalin and Mao.