Entrepreneurship in Failed States
View the discussion at: http://rru.worldbank.org/Discussions/topics/topic56.aspx
(Open for comments until December 6th)
Discussion moderated by Ian Bannon and Tim Harford
The inventiveness of entrepreneurs in some failed states borders on the legendary. Yet that success is fragile, inherently limited and rare. How can donor agencies support, sustain and spread these achievements?
Entrepreneurs in Somalia have used three tactics to operate in an institutional vacuum. First, they have “imported institutions,” for example by using banking systems in nearby countries. Second, they have used clans and other local networks of trust to help with contract enforcement, payment and transmission of funds. Third, they have simplified transactions to a point where other tactics are not needed. How can these tactics be reinforced or defended? Are there others that can be supported?
There are inherent limits to what the private sector can achieve without the support of a capable state to enforce property rights and provide basic public goods. But there is also a risk that a failed state will be replaced by a predatory one. How can fledgling states be encouraged to support, rather than predate on, entrepreneurs?
Entrepreneurs often need to bridge religious, ethnic or tribal boundaries to get things done. Can entrepreneurship be harnessed for peace and reconciliation?
Many failed states have a large Diaspora with money, experience and energy. How can the expertise and financial capital of diasporas be encouraged?