Is there anyone out there who doesn't think small business is the lifeblood of any economy? From Washington to Warsaw, politicians and pundits just can't speak highly enough of plucky entrepreneurs. Even in poor countries, entrepreneurship is one of the most important forces underpinning economic growth, but the best way to raise living standards and reduce poverty is not necessarily to make everyone an entrepreneur. So why do so many costly development programs apparently ignore this fact?
Once upon a time, people who wanted to fight poverty believed in direct approaches that solved identifiable problems one by one. If you wanted to make farmers more productive, you gave them fertilizer. If you wanted to boost manufacturing, you set up factories. To help both of these sectors grow and export goods, you built roads and ports. These kinds of investments quelled hunger and raised incomes in many countries. But recently, an indirect approach arose with promises of still greater benefits.
Daron Acemoglu and James Robinson, social scientists and authors of the bestseller Why Nations Fail, showed through their research that open and inclusive institutions could help economies to grow in a more organic way. This new thinking was embodied in the "golden thread" proposed by David Cameron, the British prime minister. In a Wall Street Journal op-ed in 2012, he suggested that countries pursue the "conditions that enable open economies and open societies to thrive: the rule of law, the absence of conflict and corruption, and the presence of property rights and strong institutions." In other words, given the right environment for business, an economy would bloom on its own.
Cameron's view might have been music to the ears of the newspaper's free-market-loving readers, but it also fit well with an existing fad in the global development community: entrepreneurship. Being an entrepreneur allowed poor people to take hold of their destinies, seizing the means of production -- at least on a small scale -- and realizing their full potential in the economy. High-profile investors based in rich countries, like Acumen Fund and Endeavor, strove to support "high-impact" entrepreneurs in poor countries. And microfinance programs made thousands if not millions of small loans to poor people so that they could start their own businesses.
Read more: http://www.foreignpolicy.com/articles/2014/06/09/please_do_not_teach_this_woman_to_fish_microfinance_kiva_entrepreneurship
Actually, make that read more if you dare - it is probably the most horribly designed site since Angelfire shuttered.