Entrepreneurship as Diplomacy

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Blog Post
Title Entrepreneurship as Diplomacy
Author Catherine Kirby; Dylan Dickens
Content status Tabled
Publication date
Notes tabled post until more info on South America context and more knowledge of how new administration will handle Obama's programs.
© edegan.com, 2016

Entrepreneurship as Diplomacy As the largest driver of economic growth, the innovation market and entrepreneurship ecosystem are key component of any nation’s financial engine. Intaking a fuel of novel ideas and motivated business people to churn out almost all new businesses and the vast majority of new jobs, micro and macro economists agree that entrepreneurship has resounding positive effects. Entrepreneurship has also been linked to noneconomic benefits such as community development, social change and increases in egalitarianism and democracy. Through promoting entrepreneurship, the United States has a unique opportunity to utilize diplomacy to improve the perception of America abroad while also improving the lives of the nations the U.S. targets. Historic Cases

Chile The “Miracle of Chile,” is an example of how entrepreneurship-focused economic policy can uplift a nation through economic and democratic reform to a place on the global stage. When army chief Augusto Pinochet led a successful coup d’etat in 1973 against democratically elected socialist President Salvador Allende, he inherited a yet unimplemented economic policy known as El ladrillo, translated literally to “the brick.” Co-created by right-wing Chilean economists, University of Chicago taught U.S. economists and the CIA, El ladrillo recommended deregulation and privatization. Specifically it made the central bank independent, cut tariffs, privatized the state-controlled pension system, state industries and banks, and reduced taxes. Pinochet’s stated aim was to “make Chile not a nation of proletarians, but a nation of entrepreneurs.” Chile’s GDP rate of growth went from -5% in 1973 to 5% in 2004, but that was not even considered its most powerful effect. As American economist Milton Friedman, one of the architects of the plan stated, “the Chilean economy did very well, but more importantly, in the end the central government, the military junta, was replaced by a democratic society. So the really important thing about the Chilean business is that free markets did work their way in bringing about a free society.”

Brazil Nelson A. Rockefeller believed that South America needed a strong middle class similar to the United States to ensure success and help solve economic problems. Additionally, this initiative aimed at strengthening U.S.-Latin American relations with entrepreneurship as diplomacy. He intended to spark this success founding a mutual fund called Fundo Crescinco, hoping it would motivate participation from the middle class in Brazil. The fund also included many Brazilian-owned enterprises, contributing to their development. While his fund cannot be credited with being the single founder of a middle class in Brazil, Fundo Crescinco did aid in the development of the Brazilian stock market. Additionally, Fundo Crescinco did achieve an amount of middle-class participation while producing a profitable mutual fund. The press coverage of the mutual fund involved 64 news mentions: 36 favorable mentions, 21 neutral, and 7 unfavorable references. Overall, IBEC (The International Basic Economy Corporation) through Fundo Crescinco made a significant profit and Brazil acquired a valuable corporation.

Current U.S. Efforts: Spark Initiative The Spark Initiative furthers former President Obama’s goal of advancing entrepreneurship globally. The programs listed below are not a complete list of Obama administration initiatives, but they showcase the variety of implemented organizations. These programs differ greatly from the huge initiatives in Chile and Brazil especially on size. However, their subtlety and grassroots background is their strength. The changes seen would be bottom up instead of top down, perhaps a more valuable shift to a nation than forced top down change.

Global Entrepreneur Summit The Global Entrepreneur Summit links emerging entrepreneurs from around the world with leaders from business, government and innovation organizations. These summits, previously held in Turkey, Malaysia, and Morocco, have led to many initiatives, collaborations between nations, and increased economic opportunities for participants.

MEPI The U.S.-Middle East Partnership Initiative focuses on expanding entrepreneurship in the Middle East and Northern Africa (MENA) region. Regionwide, it has invested $4 million in youth entrepreneurship through national and region-wide start-up competitions for student-run businesses. This region-wide effort involves 22,000 young people. In Saudi Arabia, the focus is on female social entrepreneurship. The program involves taking 100 female college students and empowering them to take leadership roles in their communities through social entrepreneurship. For example, after horrific floods in Jeddah, participants organized online campaigns to clean up the city and hold public officials accountable MEPI started Project Liftoff, based in a variety of countries in MENA, to support high-impact entrepreneurs. In Yemen, the project will involve promoting entrepreneurship to 30,000 secondary students and rural youth to help them become active citizens.

WECREATE Implemented in Africa, Women’s Entrepreneurial Centers of Resources, Education, Access, and Training for Economic Empowerment (WECREATE) serve as center community locations containing resources for women. Partnering with Caterpillar, the Japanese government, and the State Department, these centers aim to launch 563 new startups, create 7,206 new jobs, certify 915 female mentors and coaches, train 97 female entrepreneurial champions, mentor and train 6,075 women entrepreneurs. The program will additionally train men and boys to be “agents of change” and learn about the benefits of women empowerment.

MUSEIC The Mexico-U.S. Entrepreneurship and Innovation Council (MUSEIC) works to encourage innovative entrepreneurship and cross border relations between nations. This program has sponsored a variety of activities including seminars, conferences, and startup boot camps. The seminars, one hosted in Mexico City and the other hosted in Guadalajara, set the basis for the La Idea Business Pitch Competition. This event had over 850 participants; of the 16 finalists, two were mexican. Looking Toward the Future Despite all of the potential benefits of entrepreneurial foreign policy, there seems to be a disconnect between these proposed successes and actual implementation. Inc.com reports that U.S. venture capital, both private and public, largely avoid foreign companies. Foreign Affairs calls for more developing nations to follow venture capital strategies in their near future. While past precedent such as the “Miracle of Chile,” and current programs at the State Department lend credence to the policy of “developmental entrepreneurship,” implementation still appears to be falling short. If more smart policies focused on non-competition, entrepreneurial institutions, available capital, and ecosystem growth can be implemented in viable nations abroad, perhaps future socio economic miracles can spring up all throughout the world.