Hernando de Soto Polar - Criticism and Responses

Criticism and Responses

De Soto has been criticized by some academics for methodological and analytical reasons, while some activists have criticized de Soto for being a representative figure of the movement for prioritizing property rights.

In his 'Planet of Slums' Mike Davis argues that de Soto, who Davis calls 'the global guru of neo-liberal populism', is essentially promoting what the statist left in South America and India has always promoted – individual land titling. Davis argues that titling is incorporation into the formal economy of cities which benefits more wealthy squatters but is disastrous for poorer squatters, and especially tenants who simply cannot afford incorporation into the fully commodified formal economy.

Grassroots controlled and directed shack dwellers movements like Abahlali baseMjondolo in South Africa and the Homeless Workers' Movement (MTST) in Brazil have strenuously argued against individual titling and for communal and democratic systems of collective land tenure because this offers protection to the poorest and prevents 'downward raiding' in which richer people displace squatters once their neighborhoods are formalized.

An article by Madeleine Bunting for The Guardian (UK) claimed that de Soto's suggestions would in some circumstances cause more harm than benefit, and referred to The Mystery of Capital as "an elaborate smokescreen" used to obscure the issue of the power of the globalized elite. She cited de Soto's employment history as evidence of his bias in favor of the powerful. Reporter John Gravois also criticized de Soto for his ties to power circles, exemplified by his attendance at the Davos World Economic Forum. In response, de Soto told Gravois that this proximity to power would help de Soto educate the elites about poverty. Ivan Osorio of the Competitive Enterprise Institute has refuted Gravois's allegations pointing out how Gravois has misinterpreted many of de Soto's recommendations.

Robert J. Samuelson has argued against what he sees as de Soto's "single bullet" approach and has argued for a greater emphasis on culture and how local conditions affect people's perceptions of their opportunities. The risk that titling will undermine customary forms of tenure and insufficiently protect the rights of land users that depend on the commons, as well as the fear that titling schemes may lead to further reconcentration of land ownership unless strong support is provided to smallholders, has also led the UN Special Rapporteur on the right to food, Olivier De Schutter, to question the insistence on titling as a means to protect security of tenure : while security of tenure matters, he stated in a report to the UN General Assembly presented in October 2010, this should be achieved by registering the rights of landusers and by the adoption of anti-eviction and tenancy laws, rather than by promoting the creation of a market for land rights that could in fact lead to deprive the poor, priced out from such markets, from access to land.

In the World Development journal, a 1990 article by R. G. Rossini and J. J. Thomas of the London School of Economics questioned the statistical basis of de Soto's claims about the size of the informal economy in his first book The Other Path. However, the ILD pointed out, in the same journal, that Rossini and Thomas’ observations "neither the central theme of the book, nor the main body of quantitative evidence displayed to substantiate the importance of economic and legal barriers that give rise to informal activities. Instead, exclusively on four empirical estimates that the book only in passing".

In the Journal of Economic Literature, Christopher Woodruff of the University of California, San Diego criticized de Soto for overestimating the amount of wealth that land titling now informally owned property could unlock, and argues that "de Soto's own experience in Peru suggests that land titling by itself is not likely to have much effect. Titling must be followed by a series of politically challenging steps. Improving the efficiency of judicial systems, rewriting bankruptcy codes, restructuring financial market regulations, and similar reforms will involve much more difficult choices by policymakers. "

This criticism is viewed by some to misjudge de Soto's official opinion. His book Mystery of Capital devotes the majority of its contents to the theory that legal reform is by far the most significant element of property reform.

Roy Culpepper notes that it is often very difficult to establish who owns what among the poor. He also notes that the titling is biased against those who are completely landless and propertyless.

Alan Gilbert finds that in Bogotá, for example, giving legal titles has not created a better housing market or better supply of credit for the poor.

Legal scholar Jonathan Manders has argued that de Soto's vision of property rights reform is the correct one, but that the sequencing of proposed reforms will affect their sustainability over the long term.

Empirical studies by Argentine economists Sebastian Galiani and Ernesto Schargrodsky have taken issue with de Soto's link between titling and the increase in credit to the poor, but have also pointed out that families with titles "substantially increased housing investment, reduced household size, and improved the education of their children relative to the control group". A study commissioned by DFID, an agency of the U.K. government, further summarized many of the complications arising from implementing de Soto's policy recommendations when insufficient attention is paid to the local social context.

There are many explanations regarding how and what in capitalism causes growth, according to de Soto. In an interview with The Economist, he emphasizes the primary role of institutions, and points to successful examples of now-developed countries that reformed their legal system in defense of his property rights-oriented policy recommendations. De Soto's conclusions have inspired other work on microcredit, and the importance of property and business rights. For instance, the World Bank's popular "Doing Business" series (launched in 2004) that provides data for over 175 countries worldwide on opening and closing businesses, obtaining credit, labor laws, and fulfilling contract and property rights, was inspired by the ILD's work in Peru and elsewhere.

De Soto himself has often pointed out that his critics mistakenly claim that he advocates land titling by itself as sufficient for effective development: For example, in the ILD's new brochure he is quoted as saying, "The ILD is not just about titling. What we do is help Governments build a system of public memory that legally identifies all their people, their assets, their business records and their transactions in such a way that they can unleash their economic potential. No economy can develop and prosper without the benefits that clearly registered public documents bestow."

In 2011, de Soto claimed that land titling helped "capture Osama Bin Laden." He was ridiculed in social network Twitter after

On January 31, 2012, de Soto was fined by state intellectual property rights organization INDECOPI for not including the term “coordinator” in addition to his role as author of the The Other Path.