On the evening of May 18, 2010, Humphrey School Dean J. Brian Atwood engaged is a discussion about the global financial crisis with Hernando de Soto, president of the Institute for Liberty and Democracy based in Lima, Peru, as part of the College of Continuing Education's "Great Conversations" series. What follows is an edited transcript of their conversation.
Atwood: You're called a saint in the development community, a rock star, a guru. Your ideas and your books are endorsed by people like Ronald Reagan and Bill Clinton. Why do people on the Left and Right here in America identify with your ideas.
De Soto: First of all, as opposed to conventional wisdom in developing countries--which is that the United States is such a straightforward place--I actually find you are a very complex country. I share with the United States many of what were probably your concerns and challenges in the 19th century. Institutionally, Peru and the other countries I work with are somewhere in your 19th century. There's the barbed wire, there's the cowboys, there's the Indians, there's the gold rush, and there's the fact that many things are settled at gunpoint.
There are Latin-Americanists in the United States. I'm sort of an Americanista in the case of Latin America. I've studied your 19th century. I'm not versed in American history, but those nooks and crannies can tell me how [America] got here, given our same kind of wilderness--that's my take.
Atwood: I've heard you speak about the Wild West here in this country, in terms of the land rush and the way communities developed. Of course, you had people that usurped other people's property rights. You had outlaws, who would steal cattle and do other things, but, eventually, we developed a sense of community in this country, and, obviously, a rule of law society.
You are dealing in the developing world with a lot of illegal behavior or, perhaps, because society doesn't create the framework for legal behavior, the so called informal economy. Talk a bit about that and how that relates to Minnesota. We were part of the Wild West at one time.
De Soto: To me, the rule of law is the opposite of anarchy. Anarchy is not chaos. Anarchy is many laws in one territory, so these people believe in this and these people believe in that. Rule of law is when everybody agrees on the basic rules.
I believe that it's a process and--allow me to be audacious--sometimes Americans aren't actually conscious of what they have built. It was like a train wreck in slow motion to form [this country], and it worked wonders.
What you have in many developing countries is, as we came to be independent countries, our statutes arrived from France or Spain and that was our country. You look to see how many of the people actually obey the law, using this law in their own house, in their own businesses. In most African countries, it's probably only two to 10 percent. The informal economy essentially is that part of the country where there is no real rule of law, where human beings establish the rules. Wherever you go, it's hard to find people who don't make rules. Even when you fuel up, someone says, "He's first, he's second." We all make rules.
So, we deal with that part of the economy that is outside the rules and therefore doesn't have the tools to integrate into the global economy, doesn't see the benefits of social democracy, and constantly rebels against it because they are left outside. The idea is how can we avoid taking 200 to 300 years to get there; how can we do it over the next 10 to 20 years?