Guess How This Neoliberal Guru Thinks the World Can Win the War on Terror?

Davos is a place of bad ideas. It's a place where one, in order to have an idea expressed, much less applauded, must accept the premise that finance capitalism and its core features of neoliberal economic policy and global political order are dogma. From this premise one is allowed to float any idea they wish but one, above all, must not challenge this core axiom.

Given these limitations and the pressure to pander to the libertarian and neoliberal orthodoxies inherent in a room of the super-rich, it is only logical Peruvian economist Hernando de Soto’s jazzy techno-libertarianism solution to global poverty would have a home at Davos, the infamous billionaire and world leader getaway in Switzerland.

De Soto’s thesis is one he’s been peddling for a long time. It basically goes like this: give the poor ownership of whatever small corner of life they have—shanty homes, rural farms—and this type of “property formalization” will unleash their entrepreneurial spirit and thus increase standards of living for them and billions of poor around the globe.

No need for radical wealth distribution (conveniently enough for his target audience), the poor, if provided the property, legal tools and micro-loans, will collectively bootstrap their way into the middle class. Naturally de Soto is the darling of the bipartisan corporate center in the United States. He’s been called “the Friedrich von Hayek of Latin America” and former President Bill Clinton praised de Soto as “the world's greatest living economist.” It’s a model he’s been pushing for some time, despite being generally bunk, but the rise of ISIS over the past two years marks the first time he’s repackaged his capitalism-saves-all pitch as way of defeating the Muslim terrorist baddies. And it’s here his ideas go from toxic to laughable.

In a piece written for Davos this January, de Soto spins the Arab Spring not as a populist opposition to dictators (most of whom are backed by the lynchpin of capitalism, the United States), but a scrappy revolt of entrepreneurs against state interference in commerce:

...ordinary people became convinced that their lives, assets, and businesses had been subject for too long to the predations of arbitrary rulers. That same estrangement is felt nowadays in the Middle East and North Africa.

After all, the Arab Spring began when a poor Tunisian entrepreneur, Mohamed Bouazizi, set himself on fire in December 2010 to protest the merciless expropriation of his business. He committed suicide – as his brother Salem told me in an interview recorded for American public television – for “the right of the poor to buy and sell.”

It’s a neat fable and a deeply cynical one. Yes, Bouazizi was upset at arbitrary taxation, but his frustration grew out of a despotic and corrupt government, not an absence of Cato-like capitalism that de Soto advances. Or maybe he wasn’t. Ventriloquizing the dead to suit one’s political ends, especially when it involves cherry-picking quotes from the dead person’s brother, is just the kind of ideological sleight-of-hand peddlers like de Soto make their fortunes on. Maybe this was his grievance, maybe it wasn’t. But to paint the Arab Spring as an urge to unleash libertarian capitalism on the Middle East is beyond glib. Of the grievances listed by the protesters at Tahrir Square in 2011, not a single one mentioned the right to buy and sell, nor did they make any mention of capitalism or commerce. 

De Soto’s shock therapy method is not just an abstraction. Though he deals mainly in whiteboard models, his radical ideology has seen disastrous consequences in the real world. Though he paints a glowy picture in the pages of the Wall Street Journal, Pando’s Mark Ames explained last year that this is less than a complete portrait:

During those first two years when De Soto served under Fujimori, human rights abuses were rampant. Fujimori death squads—with names like the "Grupo Colina"—targeted labor unions and government critics and their families. Two of the worst massacres committed under Fujimori’s reign, and for which he was later jailed, took place while De Soto served as his advisor and drug czar.

The harsh free-market shock-therapy program that De Soto convinced Fujimori to implement resulted in mass misery for Peru. During the two years De Soto served as Fujimori’s advisor, real wages plunged 40%, the poverty rate rose to over 54% of the population, and the percentage of the workforce that was either unemployed or underemployed soared to 87.3%.

How exactly would this type of Randian havoc stabilize the Middle East? It’s unclear, though presumably de Soto can keep moving the goalpost and insist his platonic system was never really put in place.

The U.S., as it turns out, has attempted radical right-wing shock therapy in the Middle East and the results didn’t lead to less terrorism, but the opposite. After the U.S.-led coalition invaded Iraq and destroyed its civil society in 2003, those who took over turned Iraq into a libertarian paradise. As Naomi Klein wrote in 2007:

And yet his solution to this crisis was to immediately fling open the country's borders to absolutely unrestricted imports: no tariffs, no duties, no inspections, no taxes. Iraq, Bremer declared two weeks after he arrived, was "open for business". Overnight, Iraq went from being one of the most isolated countries in the world, sealed off from the most basic trade by strict UN sanctions, to becoming the widest-open market anywhere.

Raw capitalism was unleashed and while many of de Soto’s policies that focus on property rights weren’t as paramount as his theories lay out, it was capitalism in the truest sense of the word. Low regulation, virtually no income tax and very loose regulations.

What resulted was a decade of chaos marked by a rise of al Qaeda in Iraq that would eventually become ISIS. While it’s not accurate to blame ISIS on capitalism, it’s more than fair to say unfettered capitalism did nothing to stop it. And it did nothing to stop it because radical experimentation rarely accounts for a whole host of factors best not mentioned in front of billionaires; namely colonialism, class, sectarianism, and the backing of dictators and Salafists elements by the West.

But de Soto’s sophistry gets even more bizarre in his recounting of the Arab Spring:

The West’s failure to encourage Arab governments to establish, protect, and enhance their citizens’ property rights (and provide them with the means) created a vacuum, into which stepped the region’s romantic nationalists and their terrorist offshoots, which are now sending their foot soldiers to Europe.

What does this even mean? ISIS and al Qaeda are decidedly not nationalist. They’re the opposite of nationalist—they wish to erase national borders and set up a supra-national caliphate.

The offensive lumping of nationalism with terrorism is where de Soto really tips his hand. De Soto is pushing the dissolution of states as such on the altar of global finance, presumably managed by his target audience in Manhattan, London and Geneva as a way of ending the already abstract “war on terror.” Never mind the support of terrorism by Saudi Arabia, never mind Qatar’s supplying of weapons to jihadists in Syria, never mind U.S. support of Egypt’s reactionary, murderous dictator Sisi—the Arab Spring failed and terrorism rose because the West didn’t “encourage” property laws.

This type of libertarian navel-gazing would be risible if it weren't so orientalist and damaging. Without a sober examination of the West's participation in extremism and its willingness to support dictators, any subsequent conversation about how best to tinker with Middle East economies is abstract to the point of meaninglessness. Would de Soto's plan work in the hypothetical frictionless vacuum where U.S. interests are not animated by greed and violence? Possibly, but we'll never know because those whose egos he's stroking at Davos have no interest in examining these issues in earnest, which is why they instead busy themselves with this type of TED talk white noise that leaves everyone blameless and nobody challenged.


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