Saturday, 21 March 2009

A Search for Entrepreneurship that Creates the Needed Change

I have the good fortune of attending again another United Nations conference; this time around in the historic city of Londonderry in Northern Ireland, where one of the most recent ‘successful’ peace-making processes in the modern day world is reported to occur. The conference is sponsored by the United Nations University World Institute for Development Economics Research and focused on two distinct themes invariably linked into a progression – conflict and entrepreneurship.

Around 25 individuals were invited for the conference. The batch was composed of economists, psychologists, political scientists, anthropologists, sociologists, among others. Statistically speaking, roughly 40% are young professionals like me while the rest are experts in their different fields. Interestingly, I am one of the 3 people who has not finished or started his Phd yet.

Yesterday’s (20 March 2009) keynote speech was delivered by Professor Zoltan Acs of George Mason University. Zoltan Acs was one of the pioneer thinkers in entrepreneurship and was the most reluctant in the group to think that there is ever a plausible relationship between entrepreneurship and conflict. It is very easy to know why he would say so.

Acs is very certain of his definition of entrepreneurship. Entrepreneurship, for him, is a process where a society allows the best and the brightest to change society through an innovation. He alluded to the Bill Gates type of entrepreneur who has the capacity to transform society in a tremendous way and argued that such a person would not probably exist in a conflict society where the incentive structure and the institutions are not fertile enough to allow these types of creation and innovation to sprout.

I contextualize Acs’ definition in Bohol and ask myself, if there is ever any entrepreneur that would qualify to Acs’ definition? There are several people whom the local papers (the Bohol Chronicle, Sunday Post, etc) describe as entrepreneurs, most of them of Chinese descent, while others are non-locals (e.g. coming from somewhere else and doing business in Bohol). It is not that I have something against the Chinese or the domestic (or foreign) migrants that come to the island, but my question is, do they have the incentive to change the way we live?

At least 40% of the people in Bohol are below the poverty line, if you compute it using the dollar a day criteria or when you use a multiple cluster indicator to measure levels of deprivation. You have a primarily agricultural economy that relied on domestic consumption for growth. You have a thriving tourism industry that provides the needed cash for both local businessmen and the employed. But do entrepreneurs exist here?

Subscribing strictly to Acs definition, it seems that we do not have entrepreneurs in Bohol. First, we have businessmen but they do not engage in tradeable goods. Acs argued that services (hotels, etc) and trading businesses (your supermarkets) do not create tradeable goods that are necessary to have a pervasive multiplier effect on your economy. Trading and service establishments do not create the needed backward and forward linkages (e.g. demand and supply chains) that would make an economy vibrant and hardly maximise the use of factor endowments and factor inputs for greater efficiency gains. Simply put, the businesses we have in Bohol do not create jobs beyond the numbers that it directly employed. They do not create the demand for raw materials, nor do they use our excess educated labour force. They make use of products produced elsewhere and do not stir local production. A cellphone retail chain, for example, like Save and Earn does employ people but it does not in any way create any demand for raw materials, nor do they create alternative distribution channels where others can participate.

Second, businessmen in Bohol do not innovate, in the classic sense of the word. To innovate is to create something out of nothing, by making use of available raw materials and knowledge in the process of creation. They innovate on the ways they sell their merchandise and services, but they do not actually create anything. By “thing” here, we again mean the tradeable goods, one that can be passed on from a production chain participant or a consumer to another.

Third, businessmen in the province do not revolutionize the way the majority of the people live. Yes, we have businessmen getting their merchandise from local farmers, but the farmers are experiencing depressed prices. Yes, we have businesses employing people, but do they pay them well? I happen to talk to several supermarket employees and they receive only half of the legally-mandated daily minimum pay. It is sad to note that most, if not majority of the businessmen we have around are only concerned about their own net benefit, and not everybody else’s. Even our politicians are such, even though they are not businessmen.

Today is a historic day for me, as I sound of this call from Londonderry, to search for at least one entrepreneur in Bohol, one that would qualify strictly to Acs’ definition. This would seem like a desperate call. If you happen to know one, please tell me. Your news will be a great light for me because today, the weather forecast says we will not get to have some sun in Derry.