Nobel Prizes are awarded each year in the months of October and November. The selection of prizewinners starts in the early autumn of the preceding year, when the prize-awarding institutions invite more than 6,000 people throughout the world to nominate candidates for the prizes. Unfortunately this year I was not one of the select few. If I were, however, I have no doubt whom I would nominate: Hernando de Soto - the economist, not the explorer.
Of all the Nobel Prizes awarded each year, the most recognized is the peace prize, which is awarded to the individual(s) "who, during the preceding year, shall have conferred the greatest benefit on mankind" in the area of promoting peace. The peace prize is usually given to prominent heads of state, former heads of state and peace activists. Past recipients include Jimmy Carter, Nelson Mandela and Mikhail Gorbachev. Rarely are economists even considered for the prize, but few have promoted peace through international development and prosperity more than de Soto.
De Soto has devoted his life to opposing the Shining Path revolutionary terrorists in his home country and showing the world through his best-selling book, "El Otro Sendero," the "other path" toward property rights and democratic capitalism. In Peru, de Soto was President Alberto Fujimori's personal representative and principal adviser until he resigned two months before the president's coup d'etat.
Between 1988 and 1995, he and the Instituto Libertad y Democracia were responsible for some 400 initiatives, laws and regulations that modernized Peru's economic system. In particular, they designed and ran Peru's property system, which has given titles to more than 1,200,000 families and brought into the law some 380,000 firms that previously operated in the black market, allowing Peru's poor to acquire more than $9 billion in net benefits. ILD also streamlined government procedures to open up the legal system to greater participation by the majority. In addition, they initiated the policies for the stabilization of Peru's economy, tamed inflation and allowed Peru to return to international financial markets.
This "boots on the ground" approach to economic development is well documented in his follow-up book to "The Other Path," "The Mystery of Capital." Today, de Soto, together with the ILD, is designing and implementing capital-formation programs to empower the poor in Asia, Latin America and the Middle East.
De Soto begins from the premise that all people want the same basic things: life, liberty and property, and they seek all three in whatever living circumstances in which they find themselves. In Mexico, for example, he pointed out in his Cato address upon receiving the Milton Friedman Prize for Advancing Liberty, that "80 percent of the population is in the extralegal (underground) economy, where they own some 6 million businesses, 134 million hectares and 11 million buildings, totaling a value of $315 billion - seven times the size of Mexican oil reserves and 29 times the size of all foreign direct investments since Spain left.
In Egypt, the poor own 92 percent of all the buildings and 88 percent of all the enterprises outside the law - equivalent to 35 times the size of the Cairo Stock Exchange and 55 times the value of all foreign direct investment in Egypt since Napoleon left." All told, "the total value of the real estate held but not legally owned by the poor of the third world and former communist nations is at least $9.3 trillion."
De Soto has received numerous awards, including the Freedom Prize (Switzerland), The Fisher Prize (United Kingdom), The Templeton Freedom Prize (United States) and most recently The Milton Friedman Prize for Advancing Liberty (United States), and I feel he is a worthy candidate for the Nobel Prize.
This week the president lays out his vision for Iraq's going forward. If we are to convert the situation in Iraq and Afghanistan back to one of hope and optimism, there needs to be an approach like the bipartisan effort I have been working on with de Soto for Egypt, only expanded to the entire region from Central Asia to the Middle East - a 21st century Marshall Plan, a plan which we, along with Reps. Jim Turner, D-Texas, and Jane Harman, D-Calif., hope to present to Congress and the White House on June 15. In this endeavor I think he would be wise to seek out the counsel of de Soto because he knows all too well that in order to prevent terrorism from arising again or spreading, force must be leavened with enlightened policies to give people hope of a better life and a democratic future.
De Soto believes the way to breathe life into dormant saving and latent intellectual potential, which will bring the underground economy to the surface, is to construct a legal framework that protects individual property rights, enforces contracts, defines and records deeds, patents and copyrights in a systematic manner, and establishes a rule of law and a system of civil courts to, in De Soto's words, unleash the "capacity of property to reveal the capital that is latent in the assets we accumulate."
De Soto describes the process by which inanimate saving in the West is transformed into living capital: "The single most important source of funds for new businesses in the United States is a mortgage on the entrepreneur's house.
These assets can also provide a link to the owner's credit history, an accountable address for the collection of debt and taxes, the basis for the creation of reliable and universal public utilities, and a foundation for the creation of securities (like mortgage-backed bonds) that can then be rediscounted and sold in the secondary markets."
If the Nobel Prize committee wants to award the prize to someone who is working to bring hope to those in despair, they should seriously consider De Soto for the Noble Peace Prize.