By Brian Francis From Barbados Nation News

The entrepreneurial state – Part 1

THE HISTORY OF ECONOMIC THOUGHT is replete with discussions about the role of governments versus the business community in transforming the financial landscape of countries all around the world. That debate in the literature goes as far back as the 17th century with the works of pioneers and great thinkers such as Adam Smith.

In the contemporary era, that discussion once again took centre stage a mere eight years ago following the 2008/2009 global financial and economic crisis that has wreaked havoc on many countries, including those here in the Caribbean.

The real issue at hand ought to be the role that governments and the private sector can play in not only managing economies, but also in the reconfiguration of our socio-economic architecture to make our societies more responsive to the needs of present and future generations.

Some pundits have cleverly argued that the private sector has to be the engine of economic growth and development, with the government providing the necessary infrastructure to facilitate expansion of business activities, despite the failures in monitoring and supervisions that took place within the housing industry in the United States that led eventually to the most recent global recession.

One of the strongest arguments in favour of allowing private enterprises to drive economic expansion is the notion that governments do not create jobs; the private sector does.

An alternative view is that the presence of market failures in the free marketplace makes it inevitable that the role of governments in managing and reshaping economies must be enhanced for the good of all, including the private sector.

While such an idea often meets with stiff resistance by those who promote free enterprises as the way forward, there are numerous examples of countries throughout the world that support the idea of governments leading the way of rebuilding economies. This writer wishes to classify such actions by governments as those of the entrepreneurial state.

Those success stories have been captured succinctly in Stephen S. Cohen and Bradford J. DeLong’s book Concrete Economics: The Hamilton Approach To Economic Growth And Policy, a highly recommended must-read for all.

As a sample, this is what the authors had to say in reference to the role that can be played by governments in economic transformation: “It is not wrong to say that the east Asian development model was invented in the United States. Central to it is the concept of the development state, and, in the words of Financial Times columnist Martin Wolf: ‘It was America and Hamilton that invented that idea.’ Pioneered by Hamilton, implemented in the late-nineteenth century by Bismarck’s Germany, transplanted to east Asia by Japan, adopted by Korea, and then – with significant variations and at world-reshaping scale – by China, the east Asian development model has delivered unprecedentedly rapid growth and transformative development.”

How often have we in the Caribbean been presented with the “Asian miracle” as a success story pertaining to economic growth and development that we should embrace? Have the proponents of this model ever seriously highlighted the critical role that governments have played in bringing about economic changes in those countries? Are we in the Caribbean prepared to accept and implement this notion of the developmental state in order to reconfigure our ailing economies?

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The entrepreneurial state – Part 2

IN LAST WEEK’S COLUMN, I introduced the vitally important concept of “the entrepreneurial state” within the context of the roles that can be played by governments in shaping the economic landscape of countries whether small or large, rich or poor, resourceful or not.

This week’s contribution brings to light a rather critical issue which should deepen the public’s understanding of how and why we in the Caribbean, as well as other countries, need an entrepreneurial state.

You see, for several decades some economists and pundits have been strongly promoting the idea that the private sector is more efficient than the public sector and that governments ought to step aside and allow businesses to lead the way towards economic growth and development via the free marketplace.

Evidently, that model has not worked to the full expectation of its main exponents and proponents. The 2008-2009 global economic and financial crisis is a blistering example of what can potentially happen if and when governments fail miserably to properly oversee, effectively regulate and closely monitor what is happening within the private sector.

Hence, therefore, there is a distinct motivation for us in the Caribbean with extremely small, open economies to seek alternative strategies to promote economic growth and development. In doing so, we must appropriately address and defeat the narrow ideology of “the private sector does everything, with the state’s role confined to that of fairly passive facilitator” and with a minimum of “regulation” of private sector activities.

After all, understanding the structure of our economies, the constraints we have to live with forever and determining what works best for us are all things that must be taken on board in our quest to achieve economic prosperity. The model we choose to guide us going forward has to be consistent with our realities.

To strengthen the case for an entrepreneurial state, it is worth reminding all and sundry that nearly every major technological breakthrough in the United States for the last one hundred years was a product of state, yes, state, not private sector research and development. These technological advances include (i) the information revolution – Internet, satellite television, global positioning system and (ii) even such everyday kitchen items like non-stick pots, pans, saucepans, and frying pans.

Further country experiences that include, for example, the issue of industrial policy: the targeting of “winners” by the state and the close state-private sector collaboration in setting and achieving specified socioeconomic goals; the role of the ministry of international trade and industry in Japan’s economic transformation, which some have labelled an economic miracle; other aspects of how Japan, then South Korea and more recently China have all achieved their economic outcomes; and the magnificent success of Singapore, a country the size of Jamaica, should reinforce the significance of the entrepreneurial state in shaping the economic and financial landscapes of our countries.

Need your humble servant convince you more of the urgency of streamlining and implementing the notion of an entrepreneurial state to advance our socioeconomic cause here in the Caribbean?

Remember the old adage: “If it is not broken then do not fix it.” Our recent economic history illustrates without ambiguity that our strategies and approaches to growth and development are broken and hence in need of urgent reconfigurations. A new modus operandi is therefore inevitable and the model of an entrepreneurial state fills that void passably.

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