Ah.......the Internet. I followed a link from Richard Green to
Yves Smith to an essay by Peter Coy in Business Week, here.
Coy's essay adds some important background information to
Foreclosuregate. But, what really caught my eye was his
mention of Hernando de Soto's The Mystery of Capital: Why
Capitalism Triumphs in the West and Fails Everywhere Else.
My bookcase holds two of de Soto's works, The Mystery of
Capital and The Other Path. Both are well worth reading.
If I read de Soto correctly, the major reason capitalism
works so well in the United States is our well established
system of recording titles to property and our legal system's
historic precedence for both protecting those titles and
support of contract law. It is a legal framework, often
overlooked by those not in the industry, but missing in many
other parts of the world.
Here are a few excerpts from The Mystery of Capital, written
in the year 2000:
Legal property empowers individuals in any culture....
The single most important source of funds for new businesses
in the Untied States is a mortgage on the entrepreneur's
As Adam Smith pointed out, money is the 'great wheel of
circulation,' but it is not capital because value 'cannot consist
in those metal pieces.' In other words, money facilitates
transactions, allowing us to buy and sell things, but it is not
itself the progenitor of additional production.
What creates capital in the West, in other words, is an implicit
process buried in the intricacies of its formal property systems.
The integration of all property systems under one formal
property law shifted the legitimacy of the rights of owners
from the politicized context of local communities to the
impersonal context of law.
By transforming people with property interests into account-
able individuals, formal property created individuals from
masses.......Freed from primitive economic activities and
burdensome parochial constraints, they could explore how to
generate surplus value from their own assets.
I am not a die-hard capitalist. I do not view capitalism as a
credo, Much more important to me are freedom. compassion
for the poor, respect for the social contract, and equal
opportunity. But for the moment, capitalism is the only game
in town. It is the only system we know that provides us with
the tools required to create massive surplus value.