Here is an interesting and funny TED talk by Ernesto Sirolli on economic development and the importance of listening.
He highlights one of the biggest problems in development—the mentality of social engineering that treats people as objects of our charity and compassion instead of subjects and the protagonists of their own story of development. His story about the hippos is fantastic and his quote from Peter Drucker on why you can’t plan entrepreneurship cannot be repeated enough.
“Planning is actually incompatible with an entrepreneurial society and economy.” Planning is the kiss of death of entrepreneurship.
This is another big problem with the development industry. Entrepreneurs don’t just pop out of nowhere, they require certain conditions. Everybody talks about infrastructure and education, but they forget the fundamental institutions of justice—things like clear property title, rule of law, free association and free exchange. These don’t make celebrity campaign but they are essential. Without them entrepreneurs cannot flourish and businesses cannot grow. If you don’t know who owns the property you live and work on then you don’t take risks to build and develop a business because it might be taken away from you.
I am not saying that education is not important. But if people have high levels of education but no rule of law and private property then usually one of three things happens:
- They get angry and frustrated and just give up
- They migrate and use their skills somewhere else
- They become what a colleague calls “political entrepreneurs.”
And that is not a good thing. Instead of creating value for society they go and work for the government where they can gain special access and privileges. This further fuels crony capitalism and the poverty industry, both of which keep the poor excluded.