30 March 2007

Entrepreneurship vs. State Direction as the answer for Africa

How to foster Economic Development in Developing Countries? Are Entrepreneurs or State Direction the answer? These questions still remain unanswered after over 50 years of aid agencies working in the field and academics theorizing.

William Easterly wrote his view on this in the Wall Street Journal:

"Economists involved in Africa then and now undervalued free markets, instead coming up with one of the worst ideas ever: state direction by the states least able to direct. The free market is no overnight panacea; it is just the gradual engine that ends poverty. African entrepreneurs have shown what they are capable of. They have, for example, launched the world’s fastest growing cell phone industry to replace the moribund state landlines. What a tragedy, therefore, that aid agencies have foisted the poorest economics on the world on the poorest people in the world for 50 years. The hopeful sign is that many independent Africans themselves are increasingly learning the economics of how to get rich, rather than on how to stay poor."

A commentator on the Private Sector Development Blog of the World Bank, in my opinion, balances Easterly's argument well: "A market based approach which does not define an effective stewardship role for government is as unlikely to produce sustainable development as a statist approach."

This topic is closely related to an essay on "How can Economic Development Policies foster Social Entrepreneurship?" that I started to am write for my Masters... and a super interesting project proposal with Elise and Tomas... more soon!