Can this man end world poverty?

In the 1500s, Hernando de Soto conquered the Americas. Can his 21st century namesake conquer the global problem of poverty?

Bono, Vladimir Putin, the Pope and George W Bush; it's a pretty disparate constituency. What links these and many other public figures from all shades of the political spectrum is their admiration for Hernando de Soto, economist, author and architect of the Third Way.

Bill Clinton called him the "world's greatest living economist" and Time magazine rated him as one of the most influential people in the world. De Soto's Institute for Liberty and Democracy (ILD) was awarded the 2006 Innovation Award by The Economist.

His views on ending world poverty have also made him enemies; he survived three assassination attempts at the hands of the communist Shining Path in his native Peru. His best selling book, The Other Path was published in 1987 has been credited with undermining the regime before its ultimate demise. The ILD was instrumental in changing Peru's property law, bringing many hundreds of thousand of people into the formal economy.

For nearly a decade, de Soto and the ILD advised President Fujimori, who rose to power following the years of communist rule and from whom de Soto distanced himself in the mid-1990s. Last month, Fujimori was extradited back to Peru to stand trial for corruption, murder and human rights violations.

Post 9/11 de Soto's stock rose ever higher as The Other Path was grasped as the economic answer to terrorism. It was followed by another bestseller in 2000, The Mystery of Capital: Why Capitalism Triumphs in the West and Fails Everywhere Else, which develops his ideas.

The Irish Times met up with him in a small room of a plush London hotel, after he'd delivered a speech on the role of innovation to a room of global business leaders.

"In my part of the world, we figure globalisation touches only 20-25 per cent of the population," says de Soto, pointing toward the room in which he has just performed.

"These people will tell you they see the benefits - a better car, healthcare, a new cell phone. But getting to the first 20-30 per cent of the system is a cinch. The remaining 70-80 per cent is a problem. Business people think wealth will trickle down to the impoverished majority," he says, but "it never just trickles down".

De Soto is concerned the divide between the privileged minority and the rest is widening, sowing the seeds of political unrest. This discontent manifests itself in the growing radicalisation within religious groups.

"Marx offered a diagnosis, he just wasn't so good about what to do about it. When you cannot identify the true nature of the problem you'll end up with generalisations, such as muslims are different because 'they pray on mats'.

"Basically it's about being left behind: nobody wants to be left behind. You are not going to be satisfied to think you can be Donald Trump's employee, you have to know, somewhere in your dreams, that you can also be him," he says. "The 70-80 per cent of Latin Americans and Chinese know that there's no chance of that."

De Soto's theories are based on the legal ownership of property: this is, he believes, what divides the 'haves' and 'have nots'. In the third world and in former communist eastern Europe, most people live in the black economy, their assets cannot be used as a basis of growing their wealth.

This "dead capital" contrasts with the "live capital" enjoyed by those in the advanced economies of the West, who are able to leverage the money tied up in their homes or in the formal banking system to generate further wealth. Critics say that for many people living in poverty, being brought in to the formal economy would mean paying taxes they cannot afford, particularly as they are forced to pay out to gang leaders and organised mafias.

However, he says, imposing property law is "the only way we're able to capture capital". Being able to prove ownership of land and property allows people to borrow money, to take risks, to become entrepreneurs: the basis of every successful economy.

"If you don't have credit you don't have credibility," he says.

"You don't have a legal identity. You don't have the limited liability, you can't raise capital, nobody wants to take a risk on you.

"It is not as though there are no legal systems in developing countries - Alexandria had a library when many of us where still grunting. The problem is that they (third world countries) have law that is inapplicable to today's technology and today's needs in the market."

Real globalisation requires what he calls "some creative destruction, or at least the need to find a way of working with institutions run by the remaining Louis XIVs of this world."

Bridging these two worlds requires the buy-in from the world's leaders and of the institutions of the United Nations. To this end, he has set up a commission on the legal empowerment of the poor chaired by former US Secretary of State Madeline Albright and including Mary Robinson.

He attributes his popularity among politicians across the globe to being able to offer "concrete solutions" rather than rhetoric. "When I sat down with President Putin, we connected straight away because I know what he faces," he says.

"He wants leaders in western Europe to put property rights on their agenda and to understand what he is trying to do. This could be used in the terms of aid offered to third world countries."

Sovereignty could be reduced in importance if we were to sort out individual property rights, says de Soto.

"Alsace-Lorraine has gone backwards and forwards between Germany and France for hundreds of years. Sovereignty has changed, and is flexible and weak. But in Alsace-Lorraine, Monsieur Dupont still lives where he always lived, as does Herr Schmidt.

"Once you talk about who owns what you can start putting down the basis of peace. They want to deal with something more concrete than sovereignty, it is about who owns what," he explains.

"We talk to both Palestinians and Israelis because we see part of the issue there is property rights. Once you get property rights in there, Israeli encroachments become more difficult," he says.

Beneath what appears to be about religion is an issue about rule of law, he says.

Opinion de Soto

'De Soto's ideas about how to empower the world's poor represent one of the most significant economic insights of our time.' Ex-US president Bill Clinton

'Land titling is made to sound like a free lunch... de Soto's own experience in Peru suggests that land titling by itself is not likely to have much effect. Titling must be followed by a series of politically challenging steps.' Christopher Woodruff, associate professor of Economics, University of San Diego

'The 10th anniversary of the publication of The Other Path should be celebrated... because de Soto was dead-on in his diagnosis... because in practice he made the reinsertion of Peru into the global economy and the community of nations possible.' Alberto Bustamante Belaúnde, former Peruvian prime minister

'He [de Soto] conjures up a myth about popular capitalism. He is fanning the illusion that anyone, anywhere, can become a fully fledged capitalist.' Alan Gilbert, professor of Geography, University College, London

'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.' Ex-US president Ronald Reagan

'Given the contestability of property rights anywhere, establishing who owns what among the poor in developing countries is an enormous undertaking that de Soto downplays.' Roy Culpepper, president of Canada's North-South Institute