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In this, his classic book on the informal economy of Peru and the reasons why poverty can be a breeding ground for terrorists, Hernando De Soto describes the forces that keep people dependent on underground economies: the bureaucratic barriers to legal property ownership and the lack of legal structures that recognize and encourage ownership of assets. It is exactly these forces, de Soto argues, that prevent houses, land, and machines from functioning as capital does in the West—as assets that can be leveraged to create more capital. Under the Fujimori government, de Soto's Institute for Liberty and Democracy wrote dozens of laws to promote property rights and bring people out of the informal economy and into the legitimate one. The result was not only an economic boon for Peru but also the defeat of the Shining Path, the terrorist movement and black-market force that was then threatening to take over the Peruvian government. In a new preface, de Soto relates his work to the present moment, making the connection between the Shining Path in the 1980's and the Taliban today.
Of all the terrorist movements since World War II that had any realistic potential to form a national government, only one was decisively defeated on the battleground of ideas. Sendero Luminoso, the Shining Path, arose in Peru in 1980. It was distinguished by both the radicalism of its Maoist ideology and the viciousness of its tactics. An American diplomat, Bernard Aronson, called the Shining Path "the most murderous guerilla group ever to operate in the Western Hemisphere" and compared them to the Khmer Rouge. At one point this group commanded eighty thousand followers-two-thirds the size of Great Britain's standing army-and was the single largest political organization in the country.
The task of making the Shining Path politically irrelevant was accomplished primarily by ideological means. Hernando de Soto offered an alternative vision of Peru's poor. Rather than see them as the proletariat, he showed that they were in fact budding entrepreneurs whose greatest desire was not to bring down the market economy but to join it.
|5||The Costs and Importance of the Law||131|
|6||The Redistributive Tradition||189|
|7||The Parallel with Mercantilism||201|