Book review: The Mystery of Capital – Hernando De Soto (2001)


Peruvian economist Hernando de Soto explains what capital is, why it has failed to benefit the majority of mankind and sets out an alternative solution in The Mystery of Capital: Why Capitalism Triumphs in the West and Fails Everywhere Else.

The book looks at the process of transforming dead capital into live capital through the institution of formal property rights. De Soto argues that by integrating such an agreement into a unified formal property rights system, the poor would benefit. The process of creating a formal, unified legal property system is what allowed people in developed nations to leverage property into wealth, De Soto explains.

As a result capitalism could benefit all of human kind, rather than just one-fifth as it currently does, if this approach was taken, he argues. However, Western thinkers have often blamed the failure of capitalism in developing nations on a lack of sellable assets or an inherently non-entrepreneurial mindset, and as a result the crux of the problem has not been addressed.

Whilst the subject matter of the book is complex and typically tedious, the author makes it interesting and thought-provoking. Research is used to detail struggling economies around the word to support the claims made in the book, leading to the reader thinking why hasn’t more been done to address this issue.

The Mystery of Capital gives an enormous insight into capitalism, its benefits and pitfalls, with a convincing explanation and a revolutionary path for the future.