Definition
Dead Capital is a term coined by economist Hernando de Soto to describe assets (such as land, houses, or businesses) that are held informally but lack formal, legal title. Because they are not legally recognized, they cannot be used as collateral for loans, transferred easily, or used to build credit.
Why It Matters
Dead capital is the greatest untapped resource in the developing world. By formalizing property rights, we can unlock trillions of dollars in wealth, empowering millions to participate in the global economy and lift themselves out of poverty.
Core Concepts
- The Trillion-Dollar Asset: In many developing nations, the poor collectively hold assets worth trillions of dollars in informal homes and businesses. However, this wealth is “dead” because it cannot be leveraged to create more wealth.
- The Bell Jar: Informal actors are trapped under a “bell jar” of legality. They operate outside the law not by choice, but because the cost and time required to get formal titles are prohibitive.
- Formalization: The process of converting informal assets into legal property, which “unlocks” their value and allows them to function in a modern capitalist economy.