Courtesy Reuters

The Spirit of Capitalism

In This Review

The Mystery of Capital: Why Capitalism Succeeds in the West and Fails Everywhere Else

By Hernando de Soto
Basic Books, 2000
245 pp. $27.00
Purchase

Culture Matters: How Values Shape Human Progress

Edited by Lawrence E. Harrison and Samuel P. Huntington
Basic Books, 2000
304 pp. $35.00
Purchase

The triumphant religion of the twentieth century was not Christianity or Islam but economic growth. Over the decades, governments throughout the world jumped onto the growth bandwagon as a way to expand national power, relieve abject poverty, and create social justice. True, they argued and fought over the best way for societies to create and distribute wealth. Communism, capitalism, and socialism in their various forms all vied for supremacy. But now a consensus seems to have emerged. Free trade, free markets, and international investment are the intellectually anointed paths to prosperity. Communism and socialism are definitely out.

Yet the consensus is more fragile than it seems. Not only are there conspicuous dissenters, most visibly the street protesters in Seattle and Prague; there is also the inconvenient fact that today's global capitalism has yet to produce anything like universal prosperity. Much of humanity still lies in the grip of extreme poverty. The World Bank estimates that 1.2 billion people -- a fifth of the world's population -- live on less than $1 a day. Worse, little progress has been made since the late 1980s, when the new global capitalism began flourishing. From 1987 to 1998, the share of sub-Saharan Africa's population living on less than $1 a day remained constant at around 46 percent. The story was the same in Latin America and the Caribbean, where the poverty rate stayed steady at about 16 percent from 1987 to 1998. In South Asia, it fell from 45 to 40 percent, but that region's rapid population growth added 50 million people to the ranks of the poor. Only East Asia (including China) experienced notable success, with the region's poverty rate dropping from 27 to 15 percent.

The truth is that global capitalism's benefits are spotty. Some societies have not tried it, and elsewhere others have achieved only scant success. Global capitalism faces an "hour of crisis," contends the Peruvian development expert Hernando de Soto in The Mystery of Capital, because countries as different as Russia and Venezuela are disillusioned by failed excursions into market economics.

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