by Daniel J. Isenberg
In the latest Ease of Doing Business ranking from the World Bank, one country made a spectacular leap—from 143rd on the list to 67th. It was Rwanda, whose population and institutions had been decimated by genocide in the 1990s. On the World Bank list, Rwanda catapulted out of the neighborhood of Haiti, Liberia, and the West Bank and Gaza, and sailed past Italy, the Czech Republic, Turkey, and Poland. On one subindex in the study, the ease of opening a new business, Rwanda ranked 11th worldwide.
You can see and even smell the signs of Rwanda’s business revolution at Costco, one of the retail world’s most demanding trade customers, where pungent coffee grown by the nation’s small farmer-entrepreneurs is stocked on the shelves. And in Rwanda itself the evidence is dramatic—per capita GDP has almost quadrupled since 1995.
[pic] Rwanda: From Genocide to Costco’s Shelves
This is the kind of change entrepreneurship can bring to a country. As Rwanda’s president, Paul Kagame, put it recently, “Entrepreneurship is the most sure way of development.” He is not a lone voice: Economic studies from around the globe consistently link entrepreneurship, particularly the fast-growth variety, with rapid job creation, GDP growth, and long-term productivity increases.
You’ll see more palpable evidence of surprising entrepreneurial success stories on the Costco shelves. A few steps away from the Rwandan coffee, you can find fresh fish from Chile, which now ranks second only to Norway as a supplier of salmon. The Chilean fish in America’s supermarkets were supplied by hundreds of new fishing-related ventures spawned in the 1980s and 1990s. A few aisles over are memory USBs invented and manufactured in Israel, a country whose irrepressible entrepreneurs have been supplying innovative technologies to the world since the 1970s. And just around the corner, the Costco pharmacy sells generic drugs made by Iceland’s Actavis, whose meteoric rise landed it, in just 10 years, among the top five global generics leaders.
Rwanda, Chile, Israel, and Iceland all are fertile ground for entrepreneurship—thanks in no small part to the efforts of their governments. Though the companies behind the products on Costco’s shelves were launched by innovative entrepreneurs, those businesses were all aided, either directly or indirectly, by government leaders who helped build environments that nurture and sustain entrepreneurship. These entrepreneurship ecosystems have become a kind of holy grail for governments around the world—in both emerging and developed countries.
Unfortunately, many governments take a misguided approach to building entrepreneurship ecosystems. They pursue some unattainable ideal of an ecosystem and look to economies that are completely unlike theirs for best practices. But increasingly, the most effective practices come from remote corners of the earth, where resources—as well as legal frameworks, transparent governance, and democratic values—may be scarce. In these places entrepreneurship has a completely new face.
The new practices are emerging murkily and by trial and error. This messiness should not deter leaders—there’s too much at stake. Governments need to exploit all available experience and commit to ongoing experimentation. They must follow an incomplete and ever-changing set of prescriptions and relentlessly review and refine them. The alternatives—taking decades to devise a model set of guidelines, acting randomly, or doing nothing—all are unacceptable.
But the government cannot do everything on its own; the private and nonprofit sectors too must shoulder some responsibility. In numerous instances corporate executives, family-business owners, universities, professional organizations, foundations, labor organizations, financiers, and, of course, entrepreneurs themselves have initiated and even financed entrepreneurship education,...