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Entrepreneurialism and National Security

Entrepreneurs are often thought of as risk-takers and visionaries who sometimes pursue lofty goals well beyond their financial resources. Revered for their ability to either enhance the value of existing businesses, or create entirely new categories of economic value, entrepreneurs play an important role in national economic health and economic competitiveness. What is less recognized, and becoming increasingly important, is the role entrepreneurs also play in national security.

Just as the rate of global HIV infection was acknowledged to be a national security threat by the Bush administration, the deficit of entrepreneurs in many parts of the world is contributing to economic and political instability. The world is facing a dangerous convergence of high urbanization (the highest rate in human history) and perilously high unemployment rates — particularly among young people and women — who in many countries are entirely excluded from the economic process. The deficit of risk capital and a cultural aversion to failure are in many countries sowing the seeds increasing economic and political volatility.

The self-proclaimed Islamic State (Daesh) would have a hard time attracting young recruits in an environment favoring repeated economic risk-taking.

That Daesh is attracting adherents from all over the world suggests that marginalized, underemployed and angry youth need something to be hopeful about in the here and now — not in the hereafter. However, entrepreneurship is not an export product that can be promoted as part of a grand bargain or a trade transaction.

Rather, it is an attribute that thrives on indigenous resources, such as the ease of doing business, vibrant capital markets and, most importantly, a local talent pool of risk-takers.

While there is no index measuring the fear of failure, the inability of entrepreneurs and aspiring risk-takers to reinvent themselves (or not) in many parts of the world can create a cultural impediment to building new businesses and business models. This challenge is particularly evident in Europe, where many of the preconditions for entrepreneurship are in place, yet cultural norms and strict educational and career paths make entrepreneurship the road less traveled. Ironically, the ‘entrepreneur deficit’ is even alive and well in a thriving economy such as Singapore, where the state has assumed much of the entrepreneurial role, and many locals have not been encouraged to be entrepreneurial.

While it is not feasible to measure the precise economic and policy conditions that spark entrepreneurship, successful entrepreneurs are masters at overcoming the odds and thinking outside of the box. And it seems clear that creating the basic enabling conditions that foster entrepreneurialism – such as a strong regulatory environment, clean judiciary, and emphasis on good government – is surely a prerequisite. That said, it is easier to measure and identify the impediments. Chief among them is a top heavy economy with significant state involvement that crowds out new market entrants, slows the pace of innovation, and consumes the lion’s share of available capital. State patronage is a breeding ground for cronyism, nepotism and corruption, leading to a mistrust of business.

Such challenges are highly prevalent in emerging and developing markets, putting a heavy yoke around the neck of aspiring entrepreneurs. While a strong regulatory regime and rules for market conduct improve the state of entrepreneurship, in many advanced markets over-regulation creates friction and high costs that only the largest organizations can overcome. Economic Darwinism already produces a high mortality rate for most start-ups, adding regulatory complexity merely increases the risks start-ups and small businesses must overcome.

Many international efforts to spur entrepreneurship, particularly in developing countries, often labor under the aid and development apparatus, which has difficulty measuring an economic return on investment. Creating a cadre of risk-takers and forming entrepreneurial clusters is a stabilizing force in any economy. People attempting to create these preconditions through international efforts would be wise to remember that entrepreneurship is not an export, but rather an idea.

Frameworks granting market access, removing barriers for firms of all sizes to trade their goods and services, would be a great catalyst for growth. Similarly, structures that would increase the fluidity and patience of equity capital would draw more prospective entrepreneurs off the sidelines. Solutions de-risking cross border investments, while protecting investor returns and the ability to repatriate earnings would lure more investors in the support of global entrepreneurship. Where entrepreneurship thrives, economies grow and the foundation for political stability strengthens. That is a national security imperative that should not be ignored.

This article was originally posted in The Huffington Post.