On Entrepreneurs, Capitalism and History

I wrote an article in the most recent issue of the UNIDO magazine, Making It, about the role of entrepreneurs in the development of low-income countries. Entrepreneurship is a difficult issue to approach from a head-on perspective, because it’s very difficult to put a finger on what one can actually do to help entrepreneurs – their raison d’etre is to respond to opportunities, rather than to function within a wider framework of a Government plan. This tends to lead a lot of writers to the standard liberal response of ‘provide an enabling environment’, and to avoid crowding them out, which is essentially the thrust of most of Bill Easterly’s work on his Planners vs. Searchers dichotomy, though I’m not much of a fan of this distinction.

My argument is that focusing on entrepreneurship is misguided, because there’s little shortage of it, and it’s been around for a very long time. Rather, we need to think much more carefully about the systems that allow entrepreneurs the ability to move from being small businessmen to the cornerstone of an economy. What distinguishes Richard Branson or Alan Sugar from the guy selling sea shells outside my local bar in Zanzibar isn’t their basic approach to opportunity, it’s the structures in place that amplify that approach. Referencing Bayly’s Birth of the Modern World (yet again) and De Soto’s Mystery of Capital (for the umpteenth time), I argue that there are specific economic, legal and political realms in which improvements must be made, and interventions undertaken if entrepreneurship is to achieve the same kind of effects in Africa, for example, as it has in America.

These are more than simply refining a market system, but move into the realms of redefining a legal system and property structure to change the incentives and capacities of different economic actors, and in effect, move an economy into modern capitalism, rather than the kind of market-based mixed economy that actually prevails in most of the third world.

I don’t see much evidence of this kind of approach in practical development work, unfortunately, though I’d be very happy to be alerted to examples of this.