The Charms of Property

The Mystery of Capital: Why Capitalism Triumphs in the West and Fails Everywhere Else

Hernando de Soto
Basic Books, 276 pp., $27.50

No one can tell us with any authority that money makes people happy. But we know that extreme poverty usually makes people unhappy. The World Bank calculates that the number of people in the world living in poverty increased by more than one hundred million since 1987 to approximately 1.2 billion in 1998. This is based on a low threshold of poverty, the equivalent of $1 a day. While the absolute number of poor in the developing world has risen significantly by this measure, the proportion of those in poverty in these nations fell from 28.3 percent in 1987 to 24.0 percent in 1999. Almost all the improvement in poverty rates, however, occurred in East Asia, particularly in China. If we exclude China, the proportion of the developing world living in poverty fell only from 28.5 percent in 1987 to 26.2 percent in 1998. Some progress was also made in reducing the proportion of the poor in South Asia, notably in India. But the percentage of poor people in Latin America and sub-Saharan Africa rose, and there was a huge increase of nearly 25 million poor in Eastern Europe.

If the poverty line is raised to a mere one third of average income in these regions, which I think is a fair measure, the World Bank calculates that 32 percent of the developing world lives in poverty. According to the bank, the proportion of those considered poor rose in Latin America in the last twelve years, and soared in Eastern Europe from 7.5 percent to 25 percent of the population. Poverty in sub-Saharan Africa remained dismally high (in some nations, more than 50 percent), although it did not worsen on average.

In light of these general trends, it is not surprising that traditional measures of social conditions, such as life expectancy and child malnutrition, improved only slightly over ten years. The percentage of malnourished children fell only a few percentage points to about 28 percent in the developing world. In sub-Saharan Africa, malnutrition among children has actually increased during the past ten years. Adult literacy improved in all regions, but only by a few percentage points, again far less than expected. According to the United Nations Development Program, 17 out of 100 of the world’s people have inadequate shelter, 15 are malnourished, 15 are illiterate, 14 have no health services, and 13 will not live past forty.

As we enter the twenty-first century, the third world remains mired in the nineteenth and in some cases the eighteenth century. International agencies such as the World Bank, the International Monetary Fund, and the World Trade Organization have come in for increasing criticism for their failure to deal with poverty. Among scholars and public officials, a new debate has emerged over the emphasis on economic growth itself. Most of the nations in which poverty is widespread have grown slowly, but even when the overall economy is growing, poverty levels in much of South America …

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