Entrepreneurship and Economic Development

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Entrepreneurship and Economic Development

• EBD 482
• Global Entrepreneurship, Spring 07
• Craig Galbraith

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• Globalization is the world-wide reduction of
  trade, capital, institutional, human, and
  information barriers

Globalization is part of a 21st century
industrial revolution, and like all industrial
revolutions in the past it is driven by a surge
in technological innovations, expanded economic
mechanisms, and reformed social institutions. 
History has shown us that like a rumbling train
there are only two choices in the long run get
on board or be left at the station.
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Hernando de Soto

• Peruvian economist (Institute for Liberty and
  Democracy)
• The Other Path The Invisible Revolution in the
  Third World (1989)
• The Mystery of Capital Why Capitalism Triumphs
  in the West and Fails Everywhere Else (2000)
• Focus of property rights and relationship to
  entrepreneurial activity

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Peru and Small Enterprise

• With an initial investment of 18.2 million from
  USAID and CIPE, ILD totally revamped Peru's
  property system, thus allowing its poor to
  acquire almost 10 billion in net benefits i.e.,
  an average annual return of 142 on USAID initial
  investment (Studies by World Bank officials,
  universities, and the Peruvian Government).The
  ILD made major reforms that are difficult to
  quantify economically. For example both the
  Peruvian Army Chief and the leader of the Shining
  Path confirm that ILD reforms crippled Peru's
  terrorist movement. According to Princeton
  University, school attendance increased by 28
  where ILD carried out reforms. In El Salvador
  soldiers and guerrillas were absorbed into civil
  society using ILD property instruments (CIPE, US
  Chamber of Commerce Conference Report).After
  ILD's reforms, 300,000 enterprises were brought
  into the legal sector, increasing tax revenues by
  300 million a year, and generating 560,000 legal
  jobs in Peru.

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De Soto LectureReview Lecture, 2004
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Misleading or Wrong Statements often HeardThe
FACTS say something very different

• The poor have been getting poorer
• Wrong
• 1) Per-capita consumption lt2,200 calories
• 56 (1965), 20 (1985), to 9 (2000)
• Obesity now a bigger health problem in LDCs (WHO)
  
• 2) Extreme poverty lt 1(US) per day
• 28 (1990) to 21 (2001) Only Sub-Saharan
  Africa has increased (source, UN)
• 3) Life expectancy among poor countries has
  increased dramatically since 1960s (except in
  high HIV/AIDS Africa) (source, World Fact book,
  2006)
• 4) Percentage of children in global labor force
  has decreased
• 24 (1965) to 8 (2003)

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In the last 15 years globalization and
liberalization of trade has probably saved more
people from starvation than all of the UN aid
effortsEntrepreneurial Activity has Driven
This

• 95 LDCs have decreased malnutrition
• 22 LDCs have increased malnutrition
• (However, 18 of these 22 LDCs are classified as
  unfree or repressed
• source Economic Freedom Index

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Misleading or Wrong Statements often HeardThe
FACTS say something very different

• Corporations have a lot of global power now
• Wrong
• 1) In only four (out of 16) global industries has
  corporate concentration gone up, mostly stable or
  declining since 1970
• 2) But all less than 60 concentration highly
  competitive
• Income disparity has increased
• Debatable, but probably wrong
• Depends on the measure of income disparity (there
  are about 15 measures)
• Colonization hurt development
• About 50 wrong
• Extractive colonization (Africa) hurt
• Institutional colonization (U.S., Canada, most of
  Latin America) helped tremendously

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Poverty still a problem, but globalization
combined with institutional structures is the
solution
Explaining African Economic Growth
Repressed
High Botswana, Mauritius, South Africa, Ghana,
Uganda Medium Mozambique, Benin, Madagascar,
Senegal, Tanzania Low or Negative Burkina Faso,
Congo, Ethiopia, Nigeria, Cameroon,
Kenya, Malawi, Rwanda, Zambia
Index of Economic Freedom
Free
Average Economic Growth
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More Proof !
Explaining European Growth
Repressed
Free
Index of Economic Freedom
Free
gt5.0 growth
lt0.0 growth
gt8.0 growth
lt2.0 growth
gt4.5 growth
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Periods of Sustain Economic Growthglobalization
is only part of the package for sustained
economic growth
Waterwheels, Gearing, Modern Steel, Plow Advances
- Technology Driven Technology Alone is
not-sufficient (example, ancient
China) Christian monasteries were technology
innovators -- Entrepreneurs Universal language
of business Latin - Lower Cost of Contracts Rise
of feudal system protected traders and farmers
-- New Institutions Banking institutions
General Efficiency of Capital Markets Rise of
formal markets, fewer bandits, crusades -- Lower
Barriers to Trade
400
1000-1300
1780-19thc
1970s to present
Fall of Roman Empire
1st Modern Industrial Revolution
2nd Modern Industrial Revolution
3rd Modern Industrial Revolution
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Periods of Sustain Economic Growth
Lower Cost of Contracts Property
Rights Security Efficiency of Capital
Markets Lower Barriers to Trade Technology Greate
r Entrepreneurial Activity Occurs Under These
Combined Conditions!!!!
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Globalization is not just economic, but also the
expansion of human development, womens rights,
etc.Human Development IndexU.S.
0.944France 0.938Mexico 0.814Zambia 0.397C
ongo 0.379
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Some Gender Statistics

• Gender Develop Index (UN) .792 50th
• Gender Empowerment Index (UN) .563 34th
• Female Decision Makers (ILO) .253 57th
• Female Economic Activity (ILO) .384 25th
• Duration of Education Females (ILO) 12.6 26th
• Female Technical Workers (ILO) 40.3 66th
• Female Earned Income to Males .380 122nd
• Gender Division Index (JMF) not ranked low
• US ranked 1 in Non-discrimination

Mexico Traditionally Lags Behind in Female Power
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Compared to U.S.And Europe
U.S. Leads European Union Countries in Every
Gender Related Statistic, Mexico Lags
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After NAFTA, gender equality is dramatically
improving in Mexico
1 of OECD countries