The Other Path
| File:Cover of The Other Path Book.jpg | |
| Author | Hernando de Soto Polar |
|---|---|
| Language | English |
| Subject | Black Market, Informal Sector |
| Genre | Economics |
| Published | Basic Books; Reprint edition (September 5, 2002) |
| Media type | Hardcover, Paperback |
| Pages | 352 (Reprint ed.) |
| ISBN | ISBN 0465016103 (Reprint ed.) Parameter error in {{ISBNT}}: invalid character |
| Preceded by | The Mystery of Capital: Why Capitalism Triumphs in the West and Fails Everywhere Else |
The Other Path: The Economic Answer to Terrorism is a book by Peruvian economist Hernando de Soto Polar which describes the informal sector and underground economy of Peru in the 1980s. The book was a top seller in both Latin American and the United States while also receiving international critical acclaim for its impact on economic growth and development in Latin America.
De Soto discusses the failures of government enforced regulations regarding property rights and how underground economies became a dominating presence in Peru as a result. In the book, de Soto explains how the rigid bureaucratic barriers and lack of legal structuring caused Peruvian citizens to have "houses but not titles; crops but not deeds; businesses but not statutes of incorporation". The difficulty for Peruvian citizens to acquire basic property rights forced them to participate and develop its own underground economy. De Soto's accounts in the book how he and his organization, the Institute for Liberty and Democracy (ILD), solved this unstable situation through expansive reform.
Summary
The first half of the book describes the informal economy present in Peruvian society at the time, how it became established, how it operated, and the results of this economic state. The second half focuses on the analysis of this system of exchange and how it differed from mercantilism, feudalism, and market economy. The final chapter offers solutions to the present and future situation in Peru in a variety of ways.
The Other Path illustrates how the poor have become a new class of entrepreneurs and why and how they organize themselves outside the law. It makes the case that social and political peace will not be possible until all of those who know that they are excluded feel they have a fair chance to achieve the standards of the West. (pg.xxi)
Statistics
De Soto includes a significant amount of statistics involving the informal economy and Peru throughout history.
History of Peru
- Between 1940 and 1981 Peru's urban population increased almost fivefold (from 2.4 to 11.6 million). (pg.7)
- The population of the capital city multiplied by 7.6 times during this period. In 1940 it housed 8.6% of the country's population; it now contains 26% (pg.8)
De Soto and the Institute for Liberty and Democracy History
- From 1984 through 1995, every president of Peru called on the Institute for Liberty and Democracy to help change the country. Local polls indicated that ILD influence in the nation was surpassed only by the president, the armed forces, and the Catholic Church. (pg.xxi)
- Over the next decade, until 1995, the ILD designed rules, procedures, and organizations to help the government listed to its own people. During that period, the ILD initiated some four hundred major laws and regulation and managed one of the world's largest property creation projects. (pg.xxiii)
- On the real estate side, they brought down the administrative time needed to record the property of poor from more than a dozen years to 1 month, and cut the costs by 99%. Some 300,000 owners whose property on average at least doubled in value. By 2000, some 1.9 million buildings on urban land had entered the legal system. (pg.xxv-pgxxvii)
- On the business side, they cut the cost of entering business from some 300 days down to one. By 1994, over 270,000 formerly extra legal entrepreneurs had entered the legal economy, creating over half a million new jobs and increasing tax revenues by US$1.2 billion. (pg.xxvi-xxvii)
- As the farmers switched to legal crops, Peru's participation in the international cocaine market began gradually to descend from 60% to 25%. (pg.xxvii)
- To get a marriage license, which used to take 720 hours of bureaucratic hassles, was reduced to 120 hours. (pg.xxx)
Peruvian Bureaucracy and the Informal/Extralegal Economy
- The ILD reports that since 1990, 85% percent of all new jobs in Latin American and the Carribean have been created in the extralegal sector. (pg.xxxiv)
- The "extralegal" sector represented the majority of Peruvians at its peak. It represented 60-80% of the nation's population, constructed seven out of every ten buildings, built and owned 278 out of Lima's 331 markets, operated 56% of all business of the nation, retail of over 60% of foodstuffs, and operated 86% of all buses. (pg.xviii-pg.xviiii)
- 48% of the economically active population and 61.2% of work hours are devoted to informal activities which contribute 38.9% of the GDP recorded in the national accounts (pg.12)
- The state operated legal and administrative bureaucracies created substantial lags for Peruvians in this time period. It took entrepreneurs 13 years to build a retail market for food, 21 years to obtain authorization to construct a legally titled building on wasteland, 26 months to get authorization to operate a new bus route, and nearly a year to gain legal license to operate a sewing machine for commercial purposes. (pg.xviiii)
Critical Acclaim
United States Senator Bill Bradley referred to The Other Path as "The best way to understand Latin America's problems and issues". President Bill Clinton, George H. W. Bush, and Richard Nixon were among those who publicly praised the book and de Soto.
References
- ^ de Soto Polar, Hernando (5 September 2002). The Other Path: The Economic Answer to Terrorism (Reprint ed.). Basic Books.