Illusions and Realities — Latin America’s Poor: Entrepreneurs, Not Proletarians

The big argument among Latin America’s Catholics today may be symbolized thus: Gustavo vs. Hernando.

Gustavo Gutierrez is a sensitive, intelligent priest of Lima, Peru, the father of liberation theology. In his early writings (The Theology of Liberation, 1971), more than in his recent writings, Gustavo has argued that “class struggle” is a fact of life in Latin America. He has generously employed “Marxist analysis.” This led him to assign to the Latin American poor — whom he very much wanted to help — the role of the “proletariat.”

Hernando de Soto, also from Lima, a layman and once a student of Gustavo’s, is an economist, not a theologian. He also wants to help the poor, and has recently written on their behalf a best-seller in Peru, The Other Shining Light. Hernando has learned through careful surveys that 64 percent of Lima’s poor are not factory workers or hired “proletarians” at all. They are entrepreneurs. They run multitudes of tiny shops, businesses, services, and workplaces of their own.

If you want to help the poor, Gustavo says, you must help proletarians to win the class struggle. If you want to help the poor, Hernando says, you must help small entrepreneurs, who constitute two-thirds of the poor. Proletarians are barely 14 percent. Entrepreneurs outnumber them better than 4 to 1.

It is easy to see why Gustavo’s “Marxist analysis” has as its inevitable outcome socialism — with all the shortages, long lines, regimentation, and unfreedom that socialism worldwide has so far produced in abundance.

Not so surprisingly, Hernando has in mind a quite different revolution. Hernando wants to overthrow the feudal-mercantilist social order of Latin

America’s past and present. Most poor entrepreneurs, he observes, now have to work illegally. Existing law prevents them from gaining incorporation papers. They cannot get credit, legally. They are condemned to working in the black market, to paying usurious black-market interest rates, to living always in fear of the law that still protects the ancient established interests of the old families. They cannot even get title to their land, homes, and shops. They are constrained at every turn by more than half a million laws and regulations, 99 percent of which stem from unelected bureaucrats.

Leading Marxists of Peru have begun to listen to Hernando. He has the poor on his side. He speaks for the poor. He understands the Peruvian (and Latin American) economy better than the Marxists do; they cannot dodge his facts. They cannot evade his skill in organizing the “illegals” (or “informals,” as he prefers) and speaking for their real interests.

Ninety-five percent of the beat-up old cars, taxis, trucks, and buses that pass for public transport in Lima are provided by illegals, who have invested in them more than $1 billion. Fifty percent of the homes built in Lima have been built by illegals (without legal title to the land beneath them). The $8.7 billion worth of low-income housing the illegals have built is forty-seven times more than the state has provided. Without the illegals, economic life in Peru would stop dead.

The Marxist political elites, Hernando charges, are now in cahoots with the ancient elites, keeping the illegals outside the protection of the law. Even so, the illegals succeed.

Think, Hernando says, eyes shining, what they could do if the law included them within it, if they could get legitimate property titles, legitimate credit, legal incorporation, insurance, and the necessities of economic life normal in free economies. Peru could prosper, if it could experience at last the economic revolution of the free economy, if the law supported, rather than strangled, economic activism.

The world-famous Peruvian novelist Mario Vargas Llosa has written in the introduction to The Other Shining Light that Hernando de Soto “champions a program for a transformation of society no less profound than that desired by the most radical ideological sectors. It calls for pulling an ancient tradition out by the roots, a tradition that, because of the inertia, greed, and blindness of the political elites, has blended in with the institutions, customs and traditions of the official nation.” [See “Peru’s Silent Revolution,” pp. 3-8.]

The great novelist continues: “But the revolution analyzed by this study is in no way utopian. It is underway, made a reality by an army of victims of the existing system who, on rebelling against it in the name of the right to work and to live, have discovered the benefits of freedom.”

It will not surprise you to learn, given his revolutionary critique of elites both of the right and the left, that there are many threats on Hernando’s life. He has to take “precautions.”

The liberation promised by socialism has nowhere yet truly liberated: not in Poland, not in Bulgaria, not in China, not in Cuba; so far, not anywhere. By contrast, wherever it has been tried, Hernando’s liberal revolution has quickly liberated from poverty large majorities of the poor.

So, who will win this Great Debate? Gustavo or Hernando? The entrepreneurial poor depend on its outcome.

My fondest hope is that Gustavo will one day join hands with Hernando. The only liberation that truly works for the poor is the building of a liberal society: free economically, free politically, free in conscience and in culture. The poor desperately await such liberation. More and more, they are making


Michael Novak (1933-2017) founded Crisis Magazine with Ralph McInerny in 1982. He held the George Frederick Jewett Chair in Religion and Public Policy at the American Enterprise Institute and was a trustee and visiting professor at Ave Maria University. In 1994, he received the Templeton Prize for Progress in Religion. He was also an emissary to the United Nations Human Rights Commission and to the Conference on Security and Cooperation in Europe.

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