Challenges faced by being your own boss in a heavily regulated economy
David Hauck is the Monitor's Africa and Americas editor. He was the lead writer in a special report in the Monitor on a World Bank study which shows the maze of red tape and corruption that entrepreneurs must navigate before they even stock a shelf. Closer to home, he recently helped his wife start her own business in Boston's South End neighborhood.
You make little mention of the educational infrastructure of highly regulated and corrupt countries. My guess would be that these countries do not have anything approaching universal public education, thus causing a distortion in the number of individuals capable of making the complex economic decisions required in starting a business. Your thoughts?
The report is not necessarily talking about businesses that require complex economic decisions to open their doors. It's mom-and-pop convenience stores and tailor shops and the like, that are being regulated out of existence. And if a good base of these kinds of enterprises could get rolling, over the long run it would generate more jobs, a larger tax base, and ultimately more government money to improve public education. Then as time goes on, a more-educated populous can improve the types of business they create.
What role does gender equality, or the lack thereof, play in a country's having a high threshold, or a low threshold, for an individual's starting his/her business?
One development expert I spoke with said that his group finds women more receptive than men to the idea of deregulation. The barriers for women entrepreneurs tend to be even higher than for men. Not only do they have to deal with government obstacles, but cultural and societal ones as well. One sure-fire way to find a job after being turned down by men is to become the boss. So in places like Senegal and Nigeria, women have really gotten behind the idea of streamlining regulation.
Let me ask a philosophic question. Granted that capitalism frees (and rewards) the energies of the individual entrepreneur, isn't one significant reason for a lack of individual business startups in many less "developed" countries, due to the fact that the social order places a premium on families and family alliances rather than individual expression and initiative? This necessarily creates an obstacle to individual action. Isn't it conceivable that highly regulated societies reflect cultural norms that do not recognize individuality or value it as highly? This then becomes a cultural difference, a cultural expression of group cohesion, not a matter of corruption and abusive regulations limiting entrepreneurial activity.
Even countries that put a premium on families and family alliances - Italy and countries throughout Latin America come to mind - have thriving informal economies. You can't go anywhere in Latin America without finding countless stalls and vendors selling everything from toilet paper to transistor radios. Adam Smith's invisible hand is at work in all corners of the globe. The trick is getting these people into the formal economy - where they can enforce contracts and acquire credit and be taxed. The World Bank, and Hernando De Soto nearly 20 years earlier, found that there really isn't a place on earth where this idea of the free exchange of goods and services doesn't apply, it's just that the governments make it nearly impossible for their people to do it legally.
Is it fair to say that heavily regulated countries also have a heavily regulated press limiting the amount of information available to make sound business decisions - react to market changes, advertise, recruit workers? Should we look to a fledgling free press as a precursor to a country evolving towards an economy that will create and reward individual businessmen and women? And conversely, the more restricted a country's press is, the more likely it will be that its economy and individual citizens will be less prosperous?
It's a mixed bag, but countries with less-regulated businesses tend to have freer media. The report points out how countries that regulate business start-up tend to have government tentacles in every aspect of society, the press included. The head of the team who put the report together made a point to tell me how helpful the press has been in disseminating the report's findings. More than 700 articles have been written worldwide, most of them by local papers in small towns in places like Nepal and Brazil.