The Milton Friedman Prize for Advancing Liberty

Date and Time
May 6, 2004 4 - 9 PM EDT
Ritz-Carlton Hotel
With Honored Guests Milton and Rose Friedman, Thomas Sowell, Fareed Zakaria, and Hernando De Soto, Recipient, 2004 Milton Friedman Prize for Advancing Liberty.

Hernando de Soto: Winner of the 2004 Milton Friedman Prize

The Cato Institute today announced that the winner of the second biennial Milton Friedman Prize for Advancing Liberty is internationally recognized economist and property rights activist Hernando de Soto.

The prize and its accompanying $500,000 cash award will be presented to de Soto May 6 in San Francisco. Named after Nobel laureate Milton Friedman, the prize is awarded every other year to an individual who has made a significant contribution to advancing human freedom. The first Friedman Prize went to the late British economist Peter Bauer in 2002.

Upon hearing that he had been chosen as the second recipient of the prize, de Soto said: “Receiving the Milton Friedman Prize for Advancing Liberty is an enormous honor for me and my associates who worked, and in some cases died, for the cause of liberty. We are moved by the recognition and by the fact that the award comes from the prestigious Cato Institute that we have long admired.”

Beginning in his native Peru, de Soto has focused on a revolutionary concept that is having repercussions throughout the world’s poor countries: the lack of formal property rights as the source of poverty in poor countries. His decades of pioneering work, for presidents and in the streets on behalf of property rights for the poor, have led to global acclaim.

As de Soto explained in his 1986 book The Other Path, these de facto owners were locked out of the formal, legal economy–and that was the root of the problem. “They have houses but not titles; crops but not deeds; businesses but not statutes of incorporation,” he wrote.

De Soto now travels throughout the world, meeting with current and future heads of state. Mexican president Vicente Fox seeks out de Soto for counsel. He has inspired a far‐​reaching Egyptian government initiative. Philippine presidents Joseph Estrada and Gloria Arroyo have both asked for de Soto’s help.

He has won support from many political leaders, from former president Bill Clinton to former British Prime minister Margaret Thatcher. Impressed, World Bank president James Wolfensohn took de Soto with him to Russia, where he met with President Vladimir Putin.

In 1980, de Soto founded the Institute for Liberty and Democracy, which has conducted breakthrough research on the lack of property rights and has prodded many governments to consider change. For his work on behalf of the poor, the Peruvian Marxist terrorist organization Shining Path launched two assassination attempts on his life. The Shining Path is history, but de Soto continues to help governments and inspire the poor to look ahead to economic freedom and prosperity.

“Hernando de Soto embodies what the Milton Friedman Prize for Advancing Liberty is all about,” says Cato Institute president Edward Crane. “In his books he has made new and important contributions to our understanding of liberty. And he has worked with dedication and effectiveness to bring liberty about, on the ground, in places where it is most needed. Everyone talks about helping the world’s poor. This is a man who figured out how to do it. His work exemplifies the spirit and practice of liberty.”

Friedman agreed in 2001 to lend his name to the award. In a statement about the award, he said: “Those of us who were fortunate enough to live and be raised in a reasonably free society tend to underestimate the importance of freedom. We tend to take it for granted. It has made us in the West more complacent, so having a prize emphasizing liberty is extremely important.”

Hundreds of nominations were received from around the world, and the winner was chosen from 10 finalists by an international selection committee. The committee consists of Anne Applebaum, editorial board, the Washington Post; John Blundell, general director, The Institute of Economic Affairs; Edward H. Crane, president, Cato Institute; Gurcharan Das, author of India Unbound; Rose D. Friedman, co‐​founder, Milton and Rose D. Friedman Foundation for School Choice; Andrei N. Illarionov, economic adviser to Russian president Vladimir Putin; José Piñera, president, International Center for Pension Reform; Frederick W. Smith, chairman and CEO, FedEx Corporation; and Fareed Zakaria, editor, Newsweek International.

About Hernando de Soto

Rare is the economist who finds himself the target of terrorist bombings and assassination attempts, but Hernando de Soto is no ordinary economist. Beginning in his native Peru, de Soto has focused on a revolutionary concept that is having repercussions throughout the world’s poor countries: the lack of formal property rights as the source of poverty in poor countries. His decades of pioneering work for presidents and in the streets on behalf of property rights for the poor have led to global acclaim and recognition.

In 1999 Time magazine chose de Soto as one of the five leading Latin American innovators of the century. Forbes magazine highlighted him as one of 15 innovators “who will re‐​invent your future.” The New York Times Magazine wrote, “To the leaders of poor countries, de Soto’s economic gospel is one of the most hopeful things they have heard in years.” The Economist magazine identified his Institute for Liberty and Democracy as one of the top two think tanks in the world.

De Soto first came to attention in his native country. In 1979, after a successful career in business in Europe, a 38‐​year‐​old Hernando de Soto returned to a Peru plagued by poverty and years of military rule.

Having made enough money to retire, he decided to devote his life full‐​time to solving the riddle of development: Why are some countries rich and others poor? De Soto knew that Peruvians did not lack entrepreneurial energy. The bustling informal economy of Lima was testament to that. Nor did they lack assets, per se. From countryside to urban shantytown, ownership was governed by a system of informally evolved and acknowledged property rights.

But as de Soto explained in his 1986 book The Other Path, these de facto owners were locked out of the formal, legal economy—and that was the root of the problem. “They have houses but not titles; crops but not deeds; businesses but not statutes of incorporation.”

In 1980 de Soto created the Institute for Liberty and Democracy. The more he and his fellow researchers at the ILD investigated, the more they realized that dealing with the Peruvian state to obtain legal recognition of one’s assets was maddeningly difficult, if not impossible.

As an author and an activist, and later as adviser to President Alberto Fujimori in the early years of his administration, de Soto moved to bring his impoverished fellow countrymen out of the shadow economy and unlock their potential to build wealth, a process that continues today.

From his Peruvian roots, de Soto now can be seen traveling throughout the world, meeting with current and future heads of state. President Vicente Fox of Mexico sought out de Soto for help when he was the governor of the state of Guanajuato, and today de Soto is working with the Fox administration on property rights reform. Egyptian president Hosni Mubarak’s son, Gamal, approached de Soto and today a property rights program is about to be implemented in Egypt. Both Philippine presidents Joseph Estrada and Gloria Arroyo have invited de Soto to help. The New York Times reports that African presidents are faxing him.

De Soto tells these heads of state that their poor citizens are lacking formal legal title to their property and are unable to use their assets as collateral. They cannot get bank loans to expand their businesses or improve their properties. He and his colleagues calculate the amount of “dead capital” in untitled assets held by the world’s poor as “at least $9.3 trillion”—a sum that dwarfs the amount of foreign aid given to the developing world since 1945.

Hernando de Soto has truly revolutionized our understanding of the causes of wealth and poverty. While many scholars have pointed to and explained the importance of property rights to rising living standards, de Soto has asked the hard question of what it takes to get the state to recognize the property rights that function within the communities of the poor. Can they transform the mere physical “extralegal” control of assets into capital, a key to sustained economic development?

De Soto affirmed that they can attain legal status and developed a guide to the “capitalization process” for poor countries. In his activism and in his books The Other Path and The Mystery of Capital, Hernando de Soto has done much more than apply the lessons of economics to old problems; he has asked new questions and provided both new understanding and new hope for transforming poverty into wealth.

De Soto is popular not just in poor nations. He has received support and recognition from many influential Western political corners, ranging from left‐​liberal to conservative. Praise has come from former president Bill Clinton, former U.S. senator Bill Bradley, Nobel laureate Milton Friedman, and former British prime minister Margaret Thatcher. World Bank President James Wolfensohn took de Soto with him on a trip to Russia. He later met with President Vladimir Putin.

De Soto does not limit himself to the intellectual world. He can be seen tirelessly trudging through the impoverished streets and villages in Haiti, Peru, Egypt, and Bali, meeting with sharecroppers, black‐​market dealers, food stand owners, local entrepreneurs, and factory workers. His work with the ILD is pushing the governments of developing countries to simplify and streamline the process of granting property titles.

For his efforts, the Peruvian Marxist terror group Shining Path targeted him for assassination. The institute’s offices were bombed. His car was machine‐​gunned. Today the Shining Path is moribund, but de Soto remains very much alive and a passionate advocate. Delivering formal property rights to the poor can bring them out of the sway of demagogues and into the extended order of the modern global economy. “Are we going to make [capitalism] inclusive and start breaking the monopoly of the left on the poor and showing that the system can be geared to them as well?” That’s de Soto’s challenge and his life’s work.

Articles by Hernando de Soto

Push Property Rights,” the Washington Post, January 6, 2002.
Most People Cannot Participate,” Speech given at the International Conference on Globalisation, October 30, 2001.
The Constituency of Terror,” the New York Times, October 15, 2001.
The Secrets of Nonsuccess,” Time, April 16, 2001.
The Mystery of Capital,” Finance & Development, March 1, 2001.
Why Capitalism Works in the West but Not Elsewhere,” International Herald Tribune, January 5, 2001.
Listening to the barking dogs: property law against poverty in the non‐​West,Focaal — European Journal of Anthropology, no. 41, 2003, pp. 179–185.

Articles about Hernando de Soto

A Rightly Won Prize,” the Orange County Register, May 17, 2004.
Capitalism and the Masses,” Las Vegas Review‐​Journal, May 10, 2004.
Economist for the Poor Wins Friedman Prize for Advancing Liberty,“by Peter F. Schaefer, May 6, 2004.
Hernando de Soto: Unlocking the Riches of the Poor,” by Tim Padgett, Time, April 26, 2004.
Dangerous Minds: Hernando de Soto,” by Gene Healy, FOXNews​.com, April 14, 2004.
China’s New Property Rights,” by Peter F. Schaefer, Apple Daily (Hong Kong), April 14, 2004.
Mystery Behind A Different Kind Of Shining,” by Bibek Debroy, the Financial Express (India), April 6, 2004.
A man with the potential to change millions of lives,” by John Blundell, the Scotsman, April 5, 2004.
Peruvian’s theories win global respect,” by Tyler Bridges, Knight Ridder, April 11, 2004.
Free the World’s Oppressed Entrepreneurs,” by Amity Shlaes, Financial Times, April 5 2004.
Peru’s Best Export,” the Wall Street Journal, April 1, 2004.
Economist de Soto Wins Friedman Prize,” the Washington Times, April 1, 2004.
Mideast Miracle?” by Steve Forbes, Forbes​.com, February 16, 2004.
Nobel Heart in Peru,” by J. Bishop Grewell, NRO, October 9, 2003.
The Economist Versus the Terrorist,The Economist, January 30, 2003.
The Poor Man’s Capitalist,” the New York Times, July 1, 2001 (abstract).
Hernando de Soto,” Interview by Dario Fernandez‐​Morera, Rea​son​.com, n.d.

Books by Hernando de Soto

The Mystery of Capital: Why Capitalism Triumphs in the West and Fails Everywhere (Basic Books, 2000)
The Other Path: The Economic Answer to Terrorism (Basic Books, 1989)

Hernando de Soto Video

Commanding Heights: Hernando de Soto,” San Francisco, CA, May 6, 2004.
Thomas Sowell talks about Hernando de Soto,” San Franciso, CA, May 6, 2004.]
Hernando de Soto’s remarks,” San Francisco, CA, May 6, 2004.


“[The ILD] has a profound message not only for the Marxists but also for capitalists. Mr. de Soto’s revolution cuts several different ways.”
Wall Street Journal

“[The ILD] knows why some nations work and others just want to.”

“The best way to understand Latin America’s problems and issues is to read The Other Path. It is a new book which is sweeping Latin America.”
—Bill Bradley,
U.S. Senator

“[The ILD’s] prescription offers a clear and promising alternative to economic stagnation in Latin America and other parts of the world.”
—George Bush,
Former President of the United States announcing NAFTA

“[The ILD’s] ideas on economic citizenship and the essential link between economic and political freedoms within democratic communities hold great promise for development in Latin America.”
—Bill Clinton,
Former President of the United States

“[The ILD’s work is] the most powerful statement of how the government punishes the poor and prevents them from going into business … every lesson applies to the United States.”
—Newt Gingrich,
Former Speaker, U.S. House of Representatives

“[The ILD’s work] should be required reading for all American policy‐​makers dealing with Latin America and the Third World in general.”
—Richard Nixon,
Former President of the United States

“A very important contribution to the problems of developing countries.”
—Javier Pérez de Cuéllar,
Former Secretary General of the United Nations

“De Soto and his colleagues have examined the only ladder for upward mobility … the other path to development and the one true path. It is the people’s path … it leads somewhere. It works.”
—Ronald Reagan,
Former President of the United States

“The tenth anniversary of the publication of The Other Path should be celebrated for various reasons: 1) Because de Soto was dead‐​on in his diagnosis; 2) because he substantially modified Peruvian policy‐​making; 3) because he never feared to confront the political and mercantilist elites who never stopped trying to topple him; 4) because he warned us ahead of time of the dangers of authoritarianism … 5) because in practice he made the reinsertion of Peru into the global economy and the community of nations possible.”
—Alberto Bustamante Belaúnde,
Prime Minister of Peru 1999–2000

“[The ILD’s] pursuit is a major work, one destined to change the way the world understands wealth and poverty. Beyond Keynes, beyond Marx, it gets to the heart of the economic paradox of spreading poverty in an increasingly rich world.”

“For all the criticism, [the ILD] has set imaginations aflame … and has moved beyond research and writing into advocating reform that will help illegal workers, homeowners, and entrepreneurs.”

“A new light on the Third World.”
—Le Monde

“Realistic solutions to narrow the vast gap between elites and the Indian majority.”
New York Times

“Top‐​down guidance not only is subject to getting little things wrong in a big way, but it can also miss the most improtant actor in economic growth: the ground‐​level entrepreneur. This may be where the academics still have the most to learn. A good teacher is Hernando de Soto, the Peruvian who seeks to better the poor by recognizing property rights — giving life to the “dead capital” that they carry in their untitled posessions. De Soto has been cited before in these pages, and he’s just been given the biennial Milton Friedman Prize by the Cato Institute in Washington, an advocate for classical liberalism.”
—Tim Ferguson
Excerpted from “Destination: First World,” Forbes Global, May 10, 2004.