Winston Churchill’s famous quote about democracy – it’s “the worst form of government, except for all those other forms that have been tried” – is a cliché. But it’s a cliché for a good reason: despite all the messiness and short-term setbacks, liberal democracy coupled with free markets is the only political system that works in the long run. When Churchill uttered those words in 1947, this was an idealistic statement. Since the collapse of Communism in 1989 and the “third wave” of democratization in the late 1990s, his statement became accepted wisdom.
The recent financial crisis, the resurgence of authoritarianism in Russia, the economic success of China, and backsliding by countries like Turkey and Thailand that were thought to be established democracies have led some to question the viability of the democratic, free market system. In a recent article for the The Wall Street Journal, Francis Fukuyama vigorously rebuffs those critics.
Entrepreneurs drive change. They provide the ideas, initiative, and leadership to invigorate development and transform society. They are therefore pivotal partners of the Center for International Private Enterprise (CIPE) in the pursuit of its mission: to strengthen democracy around the globe through private enterprise and market-oriented reform.
As drivers of change, entrepreneurs often assume leadership roles in society. With their initiative, problem-solving ability, and new perspectives, entrepreneurs become a leading constituency for reform. Still, entrepreneurs need a little help. While entrepreneurs are present everywhere, the ones with access to market institutions, rule of law, and economic freedom have a tremendous advantage.
As we celebrate Global Entrepreneurship Week in the lead up to CIPE’s 30th anniversary year, we have gathered lessons from international thought leaders on how to build entrepreneurial ecosystems. CIPE’s special report “Creating the Environment for Entrepreneurial Success” offers glimpses into scaleable, sustainable solutions to innovation and growth. Featuring experts such as Hernando de Soto, Robert Litan, Jonathan Ortmans, Mary Shirley, and more, this report suggests ways we can go beyond helping select entrepreneurs and actually nurture entrepreneurship as an entire system of innovation and opportunity.
Take a look now at priorities for promoting entrepreneurship in the next emerging markets. Borrow from the lessons that experts have accumulated in getting ecosystem frameworks right while capitalizing on local ideas. And start thinking about how you’ll join the conversation on creating the environment for entrepreneurial success.
John D. Sullivan is Executive Director of CIPE.
Entrepreneurship is an ancient, universal phenomenon, and yet takes on new meaning and vitality this week. This week, the Center for International Private Enterprise (CIPE) joins millions of innovators, dreamers, and leaders across the world in celebrating Global Entrepreneurship Week and recognizing the contributions of entrepreneurs to development and freedom. CIPE is proud to be an official partner of this global event, founded by the Ewing Marion Kauffman Foundation and Enterprise UK.
The U.N. Convention Against Corruption has now entered into force as a result of 38 countries ratifying the convention out of the 140 that have signed the treaty. The Convention, which was adopted by the U.N.’s General Assembly in October 2003 is built on four pillars of prevention and criminalization of corruption, international cooperation, and asset recovery. The Convention provides a number of valuable tools to stimulate governments to make corruption a crime and to punish those who abuse their public office for private gain, as well as to punish those who seek special advantage by bribing or engaging in corrupt acts. Thus, the Convention goes after both the demand side (government officials) and the supply side (firms and private individuals) of corruption.
I’d like to suggest though, that the United Nations consider a second set of tools in the fight against corruption, namely institutional economics. The New Institutional Economics (NIE) is based on the concept that institutions (rules, norms, and values) are the foundation of business and economic behavior according to Nobel Laureate Douglass North who helped to create NIE. Corruption is and should be a crime. However, in order to fight this crime we need to understand how corruption occurs. That is where NIE comes in. According to the work that a number of CIPE partners around the world have done, many countries have overlapping or conflicting laws and regulations. This creates the opportunity for government officials to demand bribes from business people. Also, when government officials, like customs officers, have a lot of discretionary authority to interpret rules or regulations, that creates the opportunity for private firms to pay to get the decision that they want.
Hernando de Soto first described the world of the informal entrepreneurs who get locked out of the legal system by a maze of red tape and bureaucracy in his landmark book, The Other Path. The World Bank has taken this a step further in building their Doing Business Report and database. Both de Soto and the Bank show how it can take months to register a firm, get a contract enforced, or protect private property. NIE can help in the fight against corruption by giving us tools to:
- Diagnose the enabling conditions that allow corruption to thrive
- Design better institutions (rules, regulations)
- Create level playing fields where the honest entrepreneur isn’t put at a disadvantage by corrupt officials and business competitors.
- Reduce and work to eliminate the incentives for corruption.
Economic and institutional reform can’t do it alone. Criminalization and enforcement have to be a big part of the picture. However, why not do both? The U.N. should take up the issues identified by the World Bank, CIPE, and thousands of entrepreneurs and urge their member governments to add NIE as part of a full anti-corruption tool kit.