Heroic individual entrepreneurs

I personally think that society is responsible for a very significant percentage of what I’ve earned. If you stick me in the middle of Bangladesh or Peru or someplace, you’ll find out how much this talent is going to produce in the wrong soil. I will be struggling thirty years later. I work in a market system that happens to reward what I do very well – disproportionately well.

–          Warren Buffet

Among development workers there is often an inclination to look for inspiring, entrepreneurial, individuals amongst the citizens of developing world who seem to break the mould and aspire to achieve more than their peers. These individuals are a step ahead; they’re hard-working and innovative, and in being so they set higher standards for their society as a whole, ostensibly changing the culture to make it more conducive to development.

This notion lends itself in support of the idea that the target of development interventions should be individuals, most often based on their role in the market. This is what explains the popularity of microfinance initiatives in the last decade, though the idea finds itself appearing in many other reaches of aid and development work – “investing in people” seems to be the general buzz-phrase for it.

Unfortunately, despite the fact that it’s well-meaning, the way in which “investing in people” is currently done is based on a dramatic misjudgment of how development takes place. The entrepreneurial spirit of individuals does not set trends through which development does or does not occur, but rather, the shape of a society’s institutions determines the trends that will find form in the will and actions of individuals.

Institutions, and especially economic systems, have a profound influence in molding the characters of men and women. They may encourage adventure and hope, or timidity and the pursuit of safety. They may open men’s minds to great possibilities, or close them against everything but the risk of obscure misfortune. (Bertrand Russell, Political Ideals)

In any case, as far as the entrepreneurial spirit of individuals goes, poor countries are leaps and bounds ahead of the developed world. This is simply a result of the fact that people have to work a lot harder, and be more innovative in their work, to make a living. In 23 Things They Don’t Tell You About Capitalism economist Ha-Joon Chang points out that in Ghana 66.9 percent of the population outside of the agriculture sector is self-employed, whereas the number is only 12.8 percent for the developed world. “What makes the poor countries poor is not the absence of entrepreneurial energy at the personal level, but the absence of productive technologies and developed social organizations, especially modern firms.”

Unlike poor countries, rich countries are able to, as Chang puts it, “channel the individual entrepreneurial energy into collective entrepreneurship.”

[E]xceptional individuals like Edison and Gates have become what they have only because they were supported by a whole host of collective institutions: the whole scientific infrastructure that enabled them to acquire their knowledge and also experiment with it; the company law and other commercial laws that made it possible for them subsequently to build companies with large and complex organizations; the education system that supplied highly trained scientists, engineers, managers and workers that manned those companies; the financial system that enabled them to raise a huge amount of capital when they wanted to expand; the patent and copyright laws that protected their inventions; the easily accessible market for their products; and so on.

Chang insists, as must I, that “we reject the myth of heroic individual entrepreneurs and help… build institutions and organizations of collective entrepreneurship”. Invest in institutions: that’s the right way to go about investing in people. This will involve, to begin with, shedding the unhealthy fetishization of the private sector currently prevalent within the development sector.

Advertisements

4 responses to “Heroic individual entrepreneurs

  • Pascal R.

    Umair,

    As always, a pleasure as well as a stimulus to read your thoughts. As a colleague of yours this summer, I couldn’t help it but to be intrigued as well as inspired with the rare ”heroic individual entrepreneurs” I met and am still meeting along the way. They are the ones feeding my work, and without them my motivation would be fueled by Nescafé alone. People who have super interesting political knowledge and opinions as well as a vision for Ghana in the future, people who know the agricultural sector better than anyone, having worked in all steps of the value chain while always remaining farmers themselves, and agribusiness geniuses who invite me for tea after work and allow me to learn small small from them.

    But again, you made me think further. These are people who would be there no matter what the public infrastructure is, and as individuals do not have the reach nor power to make significant change for those who need change. Farmers, NGOs, businesses, the Ministry of Agriculture, where to start? Which is the way in? Farmers can step up their game and learn about better practices, manage their money and cultivate more acres. NGOs can stop spending all their money on fuel, trucks and reports to donors, businesses can buy produce at good prices and deliver ploughing in time after the rain. As a short term volunteer like you, I am currently thinking about how my NGO can stop just giving out money to businesses to increase their capacity, but rather work in the businesses for them not to be reliant on NGOs, to develop a business case for their own long term sustainability and impact on farmers

    But we both know that is not what will reform it all. As a body mandated by the government of Ghana to get its hands dirty and work with farmers, what can the Ministry of Agriculture do to strengthen itself as a public institution and alleviate rural poverty? Do they have the means or the penetration power, the reach, to set up crop insurance like in Canada? How could they make sure people eat local rice instead of imported one?

    What possible avenues are there for other institutions to come in?

    I’d like to throw your idea back at you and hear more about what could be done in terms of strengthening institutions. What can the people in power do about it? What can Ghanaians do about it? What can Canadians do about it at home? Advocate? For what?

    Talk soon,
    Pascal

  • Cyril

    Great insight.. keep em coming.

  • Umair

    Hey Pascal,

    Thanks for the comment. I’ve been meaning to reply for a while but the internet out here in the Upper East has been shoddy.

    History can lend a hand in shaping agricultural public policy in Ghana. Looking at which kinds of approaches worked and which didn’t for now-rich countries when they were poor, and what’s been working and what hasn’t for now-poor countries who are trying to become rich, is a good place to start. I’ll send you a paper that Ha-Joon Chang, who’s referenced in this blog post, wrote for The Journal of Peasant Studies in which he looks at the historical record.

    On the issue of credit, for instance, this is some of what he has to say:

    “[I]n Ghana, the World Bank’s insistence that sectoral allocation of (subsidised) credit to agriculture be abolished has made all the major banks, except the state-owned Agricultural Development Bank, move away from funding agriculture – Barclays Bank, one of the two largest privately-owned banks, closed down all its rural branches and the Standard Bank, the other largest private bank, closed down its agricultural department at its head office… While the private sector banks in Ghana have more recently moved into microcredit, little of the credit goes into agriculture. Between 1997 and 2006, only 2 percent of commercial bank loans went to agriculture.”

    He goes on to write that “experiences show that significant involvement of the government in agricultural credit provision is crucial. The simple fact is that, without some subsidy elements and/or mandatory lending to small farmers, private-sector financial institutions are not going to extend enough credits to small farmers.”

    That’s one area of public policy in which, if foreign and domestic policy-setters were serious, Ghana’s own experience and that of others could go a long way in informing policy. Then there’s transportation networks, income stabilization, inputs, processing, research and development, and lots else that needs to be seriously considered.

    As for what can be done to strengthen institutions, the first step is to allow them to exist. The public sector in this country is being destroyed. The fact that agriculture employs half of Ghana’s population and all the small farmers I’ve talked to haven’t seen an extension agent in ages is a travesty. The Ministry of Food and Agriculture, along with other public bodies, needs to be funded properly so that it can claim some semblance of function, faults and all. The faults will diminish over time as it becomes better at trying things out and also becomes more accountable to the public.

    What can we do? We should develop a vision and find and create openings we can work through to help/force the world to progress towards it, whether for the issues discussed here or anything else. And we should be willing to be in it for the long-haul; change doesn’t come quickly.

    Hope your Tamale city stay is giving you lots of new perspective.

    Peace,
    Umair

  • Of lies and us « Jana Ghana Mana

    […] point to stress is the focus on structure. This can be tied in with my previous discussion on institutions. In this case “structure” can serve to be a byword for the “shape of […]

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s

%d bloggers like this: