Small-scale entrepreneurship creates stability & prosperity
A libertarian solution: Small government supported by small-scale entrepreneurship
“Development is making ready those willing to help themselves.” –Steve Huenneke, from Minot, North Dakota. April 21, 2003.
Problems with top-down “liberal-style” help
A former humanitarian aid worker isn’t who you’d first expect to make a case for small government, which wouldn’t have the capacity to make large and consistent donations to the underprivileged. A book review states: “After six years of economic development work in Africa, Ernesto Sirolli witnessed how little most foreign aid programs were actually doing for the people they hoped to help, from creating a communal tomato field on the banks of the Zambezi river (only to be demolished by the river's hippos at harvest time) to donating snow-plows to African nations! However well intentioned, Sirolli points out, inappropriate development often creates more problems than it solves” In addition, many have noted the dependency created by outside donations. I personally know people who have quit their regular contributions to UNICEF because they have seen reports indicating that feeding hungry people, without addressing root causes of hunger and poverty, has simply created new generations of hungry people.
Limitations of big business
Some have recognized the limit of big government, but turned to big business for solutions. Yet this too has proved an unworkable solution.
An economist Gabre-Madhin (2007) notes: “In the 1980s, it was very fashionable to talk about getting prices right. There was a very influential book about that, which was mainly about getting governments out of the market” (9:49). “Over two decades ago, the world insisted to Africa that markets must be liberalized, that economies must be structurally adjusted. This meant that governments were to remove themselves from the business of buying and selling—which they did rather inefficiently—and let the private market do its magic. Well, what happened over the last 25 years? Did Africa feed itself? Did our farmers turn into highly productive commercial actors” (3:17)? “We know that, in fact, Africa is the only region in the world where hunger and malnutrition are projected to go up over the next 10 years, where the food import bill is now double what it was 20 years ago, where food production per capita has stagnated” (4:30).
Siroli (1999) notes that the approach of big business is that “wealth can be generated in the short term by exploiting natural resources” (p. 145). Alternately, money can be accumulated (or simply shifted around) by people basically gambling by day trading in the stock market. This behavior creates no value for society, though these traders may insist they are working. These approaches require large capital investment to even start, so they are unavailable to most people. Even to the degree that those of small means can participate, they do not create lasting value for society, though they pretend they do, because they get some PR an tax advantage by making charitable donations, bringing us back to the problematic solutions that come from top-down generosity. With globalized free trade, we are now facing in every nation the truth of this statement: “Unbridled capitalism destroys diversity, competition, and ultimately the market, and has to be controlled with anti-trust laws" (Hyde, as cited in Sirolli, 1999, p. 143).
Local ideas + small scale individual initiatives
Siroli (1999) developed a unique alternative to traditional economic development that he called "enterprise facilitation." Instead of coming in with ideas of what people should do and how, he simply got to know local people, spread the word that he was available for confidential consultation about anyone’s small business idea, and sat reading the newspaper in public places. Eventually the first person would show up. He would help locals network, and he would simply mentor them. He didn’t invest in their ideas or take any ownership. In this way depressed communities built hope and prosperity by taking ownership and initiative to build a small business. He is convinced that the individuals’ interest and their own ideas are far more likely to make a business succeed than ideas outsiders come up with. He had remarkable success, but because it was on a small scale for common people, it hasn’t been celebrated.
A libertarian solution
Siroli cites Hyde, a university chair of economics, and “fervent advocate of an economic system which is beyond capitalism, that is, a system which enhances participation in the creation of wealth, not only in its accumulation” (as cited in Sirolli, 1999, pp. 142-143). This is a libertarian solution, one that relies on the responsibility and freedom of individuals to better their situations, but also one that recognizes interdependence with the community.
Hyde continues, promoting an alternative type of free market, rather than the current one that is benefitting disproportionately the super-rich: “Civic economy can be defined as the economy resulting from generalized reciprocity, from people helping people to succeed, with the understanding that the well-being of each member of the community is to everybody's advantage….Civic economy encourages diversity and supports small and medium companies and cooperatives with both legislative and fiscal tools. The result is an entrepreneurial economy where reciprocity matters" (as cited in Sirolli, 1999, p. 143).
Siroli (1999) describes that in his native Northern Italy, "historically, solidarity and reciprocity in the region were the result of weak, not a strong government. Power was more local and the city-states resisted being united into an imperial power” (p. 142). Siroli relates this to "self interest rightly understood," which Alexis de Tocqueville described in Democracy in America as exemplified by communal barn raising. Siroli asks, “Could it be that civic society is the result of rugged individuals working together for mutual advantages? Are we sure that individualism and civic values are irreconcilable” (p. 142)? Traditionally, small towns have valued their sense of community, while individuals valued their personal self-sufficiency and their ability to contribute. My experience living in small towns, at least those not yet dominated by large corporate employers, is that they do reconcile individualism and civic values.
Self-governance
Both Republican and Democrat top-down solutions evidence a self-importance about saving society from the unruly masses, at the same time that policies on both sides lead to the desperation and sense of injustice that motivates some of the worst human behavior. Siroli disagrees with their vision of humanity, citing Dee Hock, “Where the people are not capable of self government, they are incapable of being governed. While we may reach some intended short-term objectives through forced behavior, it is almost always with substantial destructive unforeseen consequences. In such command and control organizations, the intended consequences may or may not happen; the unintended consequences always do" (p. 139).
Putnam, a professor of government at Harvard University, wrote Making Democracy Work after a 20-year study of regional differences. He wrote, “The autocratic governments with high wealth disparity became ultimately impoverished. Where free individuals owned land and sat as equals to the local aristocracy on city councils, they created wealth that is still notable today” (as cited in Siroli, 1999, p. 140). We also have new tools for effective trade using self-governance rather than top-down mandates and trade deals. We have the capacity to increase transparency thru ratings on the internet. We can easily share ideas that yield the best results.
Law and order
Putnam also notes that Southern Italy, where autocratic control had taken hold, is infamous "for car bombings of anti-mafia judges, for corruption and public administration, and for unemployment rates which top 60% in some of the cities" (as cited in Siroli, 1999, p. 141). Regions in the north, in contrast, "are engaged by public issues, not by patronage, they trust one another to act fairly and to obey the law. Social and political networks are organized horizontally, not hierarchically. These civic communities value solidarity, civic participation, and integrity. And here democracy works” (as cited in Siroli, 1999, p. 142).
Community resilience
Siroli (1999) concludes the following: “The freedom to become is the key to unlocking civic society and long-term economic prosperity... 1000 years of prosperity can only be created intelligently by working together, exchanging ideas, sharing technology and resources, and helping each other to do well in the understanding that a myriad of wealthy self-employed people produces an economic system immensely more resilient than any alternative” (p. 145). His book lays out a clear plan for training and success stories for the enterprise facilitation. Unfortunately, we are unlikely to get our state and national governments to invest in this approach, but we may find local chambers of commerce or grant-funding institutions that may be interested to fund local facilitators.
References
Gabre-Madhin, E. (2007). A commodities exchange for Ethiopia.
https://www.ted.com/talks/eleni_gabre_madhin_a_commodities_exchange_for_ethiopia/transcript
Sirolli, E. (1999). Ripples from the Zambezi: Passion, entrepreneurship, and the rebirth of local economies. New Society Publishers.