On capital

I read with great interest the review you published by Marco Kusumawijaya on the book The Mystery of Capital, written by Hernando de Soto.

I have had the pleasure of knowing Hernando for 18 years. His thesis on popular capitalism is of fundamental importance to those of us in the industrialized world. If we one billion affluent people do not figure out how to let you, the developing world, create your own wealth, we cannot survive.

But it is our system that is our wealth. Money is simply a by- product of our system and all our money simply isn't enough to make five billion poor people rich. So the only way to do this is to help you develop a system of making wealth. And as Mr. Kusumawijaya notes, the irony is you already have everything you need. You have enormous potential wealth but lack the system to exploit it effectively.

Mr. Kusumawijaya ends his piece with a question about Japan. How were they transformed from an oligarchy to a modern capitalist state? The answer came too late to be included in the The Mystery of Capital, but it is now a staple of de Soto's presentations because Japan is the only example of this crucial transformation that he was able to document.

When General MacArthur assumed control of Japan after World War II he knew he had to break up the feudal system by giving titles to those who lived on, worked the land.

However, MacArthur did not know how, so he simply ordered his Japanese administrative staff to implement national land reform, but left the means of doing so up to them.

Like all central authorities, they first tried a top-down approach, but this failed. So they went to what you call hukum adat (traditional law). But, as in Indonesia and everywhere else, hukum adat is law assigning property rights only for neighbors. It has little force outside the neighborhood or tribe.

What the Japanese did is precisely what we Americans did; they simply recognized the existing consensus on land tenure. And it worked.

Japan didn't copy the U.S., they knew nothing of our experience. And this suggests that land tenure, like market economies, are fundamental to human experience and not bound by culture. The system that has evolved in the U.S. and elsewhere is an example of rationality, not nationality. Making such a transformation happen in Indonesia is neither particularly expensive nor time-consuming and can be done by you Indonesians yourselves. And, as de Soto says, in the end everyone wins.

PETER F. SCHAEFER

Washington, D.C.