Why Do Entrepreneurs Operate in the Shadow Economy?

What is the “rule of law” and why does it matter for entrepreneurs? In this video, Democracy that Delivers for Entrepreneurs keynote speaker Hernando de Soto explains how the legal and institutional structures that entrepreneurs and business people in the developed world take for granted are sorely lacking in many developing countries. As a result, those who want to start a business are often forced to operate in the shadows — lacking formal registrations, licenses, and any protection for their property.

De Soto’s organization, the Institute for Liberty and Democracy (ILD), estimated that up to five billion people may be completely shut out of the legal system. The results can be catastrophic and even world-changing.

When Tunisian fruit peddler Mohamed Bouazazi had his cart, scale, and inventory confiscated by a police inspector in 2011, he was so despondent that he set himself on fire — igniting the Arab Spring that brought down several governments around the region.

Bouazizi’s name has now gone down in history, but he was not alone. ILD has found dozens of informal entrepreneurs around the Middle East and North Africa who immolated themselves for similar reasons. In a much less dramatic fashion, these kinds of institutional barriers to entrepreneurship stifle economic growth and opportunity around the world on a daily basis.

On April 9-10, CIPE will host a conference in Chicago, IL, to discuss solutions to these problems and many others faced by entrepreneurs around the world. Join us to learn from leading entrepreneurship and policy experts and to share your ideas and experiences! Single-day and student registration rates are now available, so please register today.

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