The first World Bank Competitive Industries conference on “Making Growth Happen” is just two weeks away. There’s been a thrilling addition to the impressive roster of speakers: A Nobel Prize-winning economist, Professor Joseph Stiglitz of Columbia University, has agreed to deliver one of the keynote addresses on Wednesday, October 16.
What makes this particularly exciting is that Stiglitz – a former Chief Economist of the World Bank – will talk to us not only about his prior work, but will be giving us a taste of what’s coming next. His forthcoming book, co-authored with Bruce Greenwald, “Creating a Learning Society: A New Approach to Growth, Development, and Social Progress," promises to hold a wide range of policy implications.
In anticipation of the talk, and judging by his analyses on his website, I thought I’d share some of my reflections on this theme in Stiglitz’s work and on its relevance for us – as well as some questions that I hope we will tackle during the conference.
Conflict and post-conflict countries traumatized by years of instability are not commonly thought of as a source for entrepreneurial talent. Nonetheless, even under the most difficult circumstances, incredible entrepreneurial and innovative talent can and does surface.
According to the World Bank’s Fragile and Conflict Situations unit, one in four people in the world – more than 1.5 billion – live in fragile and conflict-affected situations. These are countries that are often rife with socio-political instability and large-scale organized crime, resulting in precarious security situations. Although there are consistent efforts from international organizations and NGOs to aid in their transition, as the 2011 World Development Report states, insecurity is one of the biggest developmental challenges of our time. It severely affects a country’s overall economic growth.
Yet even under these circumstances, grassroots entrepreneurship can be a way for people to impact their communities while also promoting economic growth. Still, many in the development community question why entrepreneurship thrives in some places rather than others.
At infoDev, we believe that great ideas can be born anywhere. That philosophy is supported by our recent feasibility study that aimed to gauge the mobile applications sector in Afghanistan and provide recommendations for growth.
Cases like these begin to answer the question posed earlier: why entrepreneurship thrives in some environments versus others. In the future, however, perhaps we should strive to better understand the conditions that foster entrepreneurship and its growth in fragile, less secure environments.
About seven million college graduates are expected to flood the Chinese labor market this year. Seven . . . million . . . hopeful . . . graduates – all looking for work!
The Chinese central government, in response, has been actively pursuing policies that expand employment by supporting the growth of small and medium-size firms, as well as by promoting entrepreneurship among young graduates.
But have these policies been effective? How is China tackling the global challenge of job creation? And are there lessons other countries around the world can learn from China?
Madame Ngetsi of the Democratic Republic of the Congo is one of thousands of women in the world who—despite their talent, drive, and potential to contribute to the economic development of their countries—may never be able to fulfill their dreams of starting their own businesses. Their dreams may be dashed because of outdated legislation that reproduces debilitating gender roles.
If she were a man in the DRC, Madame Ngetsi’s initial steps in starting her business would be to obtain a certificate confirming the headquarters location, notarize the articles of association, and register with the Commercial Registry. As a woman, however, a significant roadblock stands in her way: She is legally mandated to first obtain her husband’s permission to register a business. This legal requirement, found in the family code rather than in any commercial or business code, is fully in effect in the DRC. Permission letters are readily found on file at women-owned company registries. Married men face no such requirement.
The importance of dividing entrepreneurs into two distinct categories: transformational and subsistence was the topic of an inspiring talk of MIT Professor of Entrepreneurship and Finance, Antoinette Schoar at the World Bank. In crude terms, subsistence entrepreneurs are solely concerned about their survival, and are tiny businesses and unlikely to grow or create new jobs. However, it needs to be said that they remain an important economic pillar, especially for developing countries. Contrarily, transformational entrepreneurs, the considerably smaller group of the two, strive for growth, are generally larger business owners, and provide relatively secure employment opportunities for others. They are the catalysts of innovation, job creation, productivity, and competitiveness. This leads to a crucial question for development – should we target our policies towards entrepreneurs with transformational qualities even though they may not be the poorest of the poor since these are the ones that create more, sustainable and (often) productive employment?
‘Imagine you have a lot of mangoes on your farm and your neighbor has lots of tomatoes. You make a bargain and he says he will give you three tomatoes for every mango you give him. If you give him fourteen mangoes, how many tomatoes do you expect him to give back to you?’
This question, amongst others, has been asked in the 2009 and 2011 Kenya FinAccess surveys. If you got the answer to this question right (see end of the blog for the correct answer), congratulations! It may be an indication that you are financially literate. Or would you rather be financially capable? ‘Financial Literacy’ and ‘Financial Capability’ are two terms many have heard about and usually they are used interchangeably. However, in a recent World Bank publication, which tries to ‘Make Sense of Financial Capability Surveys around the World’, the authors (Perotti, Zottel, Iarossi, and Bolaji-Adio) reviewed key approaches to measure financial literacy and capability. In doing so, they identified Financial Literacy to be often associated with financial knowledge.
The very word “scandal” has a negative connotation. The dictionary definition says scandals are “associated with a disgraceful action or circumstance, or an offense caused by fault or misdeed” – and therefore, by definition, scandals damage someone’s reputation. No one wants to be involved in a scandal.
But: What if something good could actually come out of a scandal? Could some scandals become the source of good news?
When it comes to the disclosure of financial and business interests by public officials, the eruption of a scandal evidently can produce positive results.
From the United States in the 1970s to the recent scandals involving high-profile public figures in France, along with countless other examples worldwide, many high-profile scandals provide the impetus for the establishment or reform of disclosure systems. Initially, scandals push the issue of public officials’ integrity to the forefront of public debate. Discussions get heated up by colorful articles in the media about public officials’ wealth, both legitimate and illegitimate.
But, fortunately, some countries manage to keep their focus on the most important aspects of public officials’ financial misdeeds, without becoming distracted by breathless media gossip about the size of their bank accounts or vacation homes. Some countries take the opportunity to realize that an effective disclosure system requires the real attention.
Brace yourself for some dramatic new evidence about innovation and entrepreneurship – and and circle the dates October 16 and 17 on your calendar.
Propelling leading-edge ideas about competitiveness, Professor Mariana Mazzucato will be among the luminaries at a major conference at the World Bank in mid-October, organized by the Bank's global practice on Competitive Industries. An all-star array of policymakers, academics, business leaders and development practitioners will focus on today's top global economic-policy challenge: spurring growth and job creation.
Exploring “Making Growth Happen: Implementing Policies for Competitive Industries,” the conference in the Bank's Preston Auditorium will include Mazzucato among
some of the world’s foremost analysts of competitiveness. A professor at the University of Sussex in the U.K., Mazzucato’s iconoclastic new book – “The Entrepreneurial State: Debunking Public vs. Private Sector Myths” – is now rocking the economics world. Mazzucato's insights are forcing a rethinking about the essential role of the public sector in driving the investments that are shaping the modern economy.
Public sector? Shaping the economy? Yes, you read that right: Mazzucato amasses persuasive evidence that the government-funded development and deployment of advanced technologies has been pivotal in changing the economic landscape.
Government’s role as a growth catalyst has been just as creative as the role of the private sector – and perhaps even more venturesome. Despite their buccaneering bravado, for-profit firms have lately shied away from high-stakes, high-risk investments in unproven technologies. Mazzucato refutes the defeatist dogma that claims, falsely, that public-sector investment can never do anything right.
One of the winning 'startup' teams at Pivot East2013 (Credit: PivotEast)
Innovation competitions of all sorts have become prevalent throughout Africa, from hackathons to ideation challenges, demo days, code jams, bootcamps, roadshows, and pitch fests, the list is endless. This development is almost parallel to the rise of tech hubs (BongoHive counts about 100 African hubs) that have sprung up from Dakar to Dar Es Salaam.
While it’s evident that events and competitions are valuable opportunities—especially for young innovators looking to leave their mark—more advanced ecosystems, like Nairobi’s, have already begun to show signs of competition fatigue and competition hopping.
(Credit: WSDOT, Flickr Creative Commons)
Creating 100 million jobs in developing countries will require outrageous ambition, as I discussed in my blog post in April about the Competitive Industries Practice’s work with our clients. Since then, the world’s jobs challenge has become no less severe. If anything, the outlook has worsened.
In India, where I’m based, the economic outlook has continued to deteriorate. Industrial output did not just stop growing in the last quarter: It shrank by about 1 percent. In the country with, by far, the largest number of new workers entering the global labor pool, the engine of job creation is not just stalled: It may be going in reverse. Across the developing world, including in East Asia, the last six months have seen growth slowdowns and setbacks in job creation. The slow recovery in the developed world is not reducing unemployment quickly enough, if at all.
So as we prepare to return from our summer vacations, this is a good time for World Bank staff to think about how to do things differently and how to take the lead in tackling the jobs crisis. What will it take for Competitive Industries to help our clients and counterparts deliver under these difficult circumstances?
It clearly can’t be done by the CI practice alone. Implementing solutions – fast – requires working across traditional sectors, at full speed.