A new report on entrepreneurship in Chile from the Global Entrepreneurship Monitor finds that despite strong efforts to improve entrepreneurship in their economy, there is little progress to report.
(O)ne discouraging sign is that opportunity entrepreneurship has...decreased, which is related to economic development. And that is what is typically found in more developed countries like New Zealand, the United States, Australia, Canada or Ireland. This indicator went from 8.5% of the population to 8.2%. According to Amoros, it is worrisome that opportunity entrepreneurship in Chile, in addition to having fallen, is very focused on not very innovative projects that have a low growth potential, which have a very low economic impact.
The last sentence from this quote is quite telling. Chile has set its sites on major, "home run" innovation projects. Their entrepreneurship agenda includes major government support for R&D projects and financial support for major commercialization.
This mirrors an alarming trend that we are seeing throughout the world. Governmental officials are engaging in socialized entrepreneurship, which is entrepreneurship guided by public policy makers, managed by bureaucrats, and funding through public dollars. In the US we see these examples of this in recent proposals to insert the SBA into angel financing of entrepreneurial ventures (see this recent post).
Socialized entrepreneurship has not worked. While public policy makers and their minions can pick some initial market winners, they have not proven to be successful in sustaining entrepreneurial economic growth and development over the long-term.
Long term sustained entrepreneurial economic development comes from free and open markets.
If Chile wants to become an entrepreneurial success story, their governmental officials should understand that "less is more." Less government regulation and less tax burden will generate more entrepreneurship over the long term. They should also move away from the current Ivory Tower view that the only good entrepreneurship for economic development is that which is high growth, high potential.
Grass roots, micro entrepreneurship is where small business owners can get their start. They learn, they gain confidence, and they find promising markets. In the US we began our current entrepreneurial economic expansion in large part through such grassroots efforts. It may take more time to see the results, but it creates sustainable economic growth. It also helps create an entrepreneurial culture, which is critical for widespread business development.
The lessons from Chile is not that the government needs to redirect their policy toward entrepreneurial development. They need to drop their reliance on socialized entrepreneurship and let the markets build real long-term prosperity.
