Whenever I get gloomy about the state of the world, I think about the streets of Durban (South Africa) where entrepreneurs crowd beachside streets selling their wares. General opinion is that we live in a world inexorably split between the haves and haves-not, but I don’t see that. It seems to me that human beings everywhere are striving daily to reconcile that divide. It’s not always dignified or newsworthy; but they’re always there — farmers, traders, street vendors, shopowners, tailors, cobblers, rickshaw drivers, restauranteurs. They go about their business every day, despite the absence of widely recognized institutions to support and protect their activities. It’s clear when walking around any developing country – entrepreneurship actually is all around.
A December 22 New York Times Op-ed by David Brooks aptly captures institutions’ importance for unleashing entrepreneurship. It’s the presence of widely meaningful, broadly recognized, and justly enforced rules and regulations for business transactions that allows entrepreneurs to promote the health and well-being of people at all income levels. Brooks notes that such institutions prepare an economy for the dramatic changes needed to eliminate poverty, using the word “protocol” to represent the innovations that emerge as entrepreneurs seek to improve their customers’ and their own quality of life.
When it comes down to a description of why entrepreneurs have yet to produce prosperity everywhere, Brooks argues for why culture remains a perpetual stumbling block for entrepreneurship:
A protocol economy tends toward inequality because some societies and subcultures have norms, attitudes and customs that increase the velocity of new recipes while other subcultures retard it. Some nations are blessed with self-reliant families, social trust and fairly enforced regulations, while others are cursed by distrust, corruption and fatalistic attitudes about the future. It is very hard to transfer the protocols of one culture onto those of another.
Culture certainly plays a role in development. Expectations about gender roles, social castes, ethnic divisions, and other elements all affect the development process. Such elements are institutions themselves, guiding human behavior toward one pattern or another. Culture might be an obstacle to development, but there are many beyond culture, and culture itself is not immutable. Generalizing some cultures as cursed recalls a memorable passage from Hernando de Soto’s The Mystery of Capital:
Many westerners have been led to believe that what underpins their successful capitalism is the work ethic they have inherited or the existential anguish created by their religions–in spite of the fact that people all over the world all work hard when they can and that existential angst or over-bearing mothers are not Calvinist or Jewish monopolies….Therefore, a great part of the research agenda needed to explain why capitalism fails outside the West remains mired in a mass of unexamined and largely untestable assumptions labeled “culture,” whose main effect is to allow too many of those who live in the privileged enclaves of this world to enjoy feeling superior.
What de Soto and his Institute of Liberty and Democracy – and CIPE – have always found, when working in many of the world’s most barren institutional environments, is that entrepreneurship truly is all around. The Mystery of Capital incorporates research from Peru, Mexico, Haiti, Egypt, and the Philippines. CIPE has worked with informal sector entrepreneurs in numerous other settings, all facing problems congruous in consequence though diverse in detail.
The challenge is not to directly change cultures averse to entrepreneurship. Risk-takers are everywhere—as are the risk-averse. Unleashing entrepreneurship is a matter of creating institutions that reward successful risk-taking without penalizing the risk averse, allowing cultures to move along the development ladder at their own pace, with each culture subject to change on its own terms. Entrepreneurship isn’t the only force shaping culture; but the changes it can potentially bring happen to include the eradication of poverty.
Published Date: December 29, 2009