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Thea Harvey:
I’m actually going to chair this session, and going to take this opportunity again to thank you all for coming. We had applied for a grant from the Kauffman Foundation several months ago, but the speed at which foundations work, we actually found out that we got this grant just two-and-a-half weeks ago. So then I had to put together this session on “Constructing Peace in Post-Conflict Zones with Innovative and Entrepreneurial Tools” at the last minute. So I particularly want to thank these panelists for being available. And Wim came all the way from Finland to be with us today.
So, I'm very excited. I’m not going to talk. I just wanted to thank the panelists, and thank you all for hanging in here with the very packed schedule. It’s been a very exciting conference for me. I just told Jeff, It’s good to leave them wanting more. And the coffee breaks, you can obviously continue these discussions.
So, without further ado, I’m going to give you Romina Laouri, who is from Cyprus, and works with Technology For Peace there in Cyprus, and in Washington, D.C., with the Ashoka Foundation on mobilizing youth organizations for peace activities.
“Using Technology to Promote Lasting Communication and Peace-Building Activities in Cyprus”
by Romina Laouri:
I think I’m actually going to sit. We’re a small group of people.
I’ve been involved in the peace movement in Cyprus for many years now, and I do believe that the case itself provides many different innovative approaches to peace building and conflict and post-conflict situations. But just for the purpose of today, I’m going to focus more on how to use technology to promote communication in peace-building activities in Cyprus.
I think we’ve all witnessed that in recent years there’s been sort of an effort from the EU, from developed countries, from the UN, to use technology, and new technology to accelerate development. Information technology has been exploited in peace-building activities in Cyprus in these two very distinct ways: The one was to break communication barrier between the two different communities, the Greek Cypriot and the Turkish Cypriot communities; and the second, to facilitate the creation of a sort of shared vision between the two communities and finding ways how to achieve that vision. And I’m going to talk more about these as we go along.
But just to give you a couple of really creative example of where to technology has been used already is, I don’t know if many of you know the organization called Seeds for Peace, but it was founded in 1993, and it uses a sort of state-of-the-art technology that enables teenagers across the border to engage in democratic dialogue online through their source library. It supports dialogue, especially during periods of unrest. They focus with teenagers in the Middle East. Sometimes they even have Cypriots, children from Ireland, and because they have this online network where teenagers can interact online, and they really facilitate a dialogue. It helps in the reconciliation and coexistence. The network today has over 2500 youth involved, and they usually come from four [?] conflict regions.
The Watson Institute as well has created a system that facilitates many global debates, and today it actually shifted a little bit in investigating how global actors make use of information technology in world politics.
When it comes to talking about Cyprus, I usually have to start with the question, Where in the world is Cyprus? I assume that actually many of you right here know it’s that little dot right in the middle there. But I think the question for Cyprus goes deeper. And what does it actually mean? What does its location actually mean? And I think we’ve talked yesterday a little bit about how location and natural resources actually matter in conflicts. And it’s the same for Cyprus. Its position is really important. It’s obviously on the crossroads between three major continents, Europe, Asia, and Africa. It has always also been in the middle between a struggle between the East and the West, which has made it a very strategic location. It has had a history of colonial domination, and it only gained its independence in 1960, and in 1974 there was also a brutal war, so it’s not very far away from today. It’s also very close to some of the major players that have played an important role in the last few decades. Greece is not very far away, Turkey is not very far away, and obviously the close distance to the war-torn Middle East conflict is indirectly influencing politics in Cyprus.
But how does the political situation look like today? For those of you who don’t really know much, I’ll just go briefly into it. Cyprus is geographically and nationally divided into two parts through the use of force, the North and the South. The Turkish Cypriots live in the northern part; the Greek Cypriots live in the southern part. Since 1974, citizens have not been allowed to freely cross the border, and it has been controlled by the UN buffer zone. In 2003, the Turkish Cypriot authorities allowed the crossing of the border, so now you are allowed to show your passport, and you can cross for the day and return by night. But even though the borders are sort of open, there’s still no direct telephone, telegraph, or postal connection between the North and the South; so they’re still two very separate communities. Between 1974 and today, with the exception of two periods, ’94-’97, and 2003-2004, which I’m going to talk more about, there were only very sporadic bi-communal efforts that took place on the island.
So what is the challenge in the conflict today? I always like to use this quote by Gumpert and Drucker, who are professors of communications, and they’ve done a lot of research in Cyprus. What they say is that Cyprus is a communication laboratory and anomaly. “It’s a country that’s globally connected, but locally divided. It’s a land divided by bricks, concrete, barbed wire, and other barriers of all shapes and forms that compose the green line.” And it is this communication anomaly that has really pushed peace builders in Cyprus to think about innovative uses of technology.
So how does the method look like? What we’ve used in peace-building activities in Cyprus is a sort of technologically-assisted structured dialogue. I want to briefly mention this, but not go into the details of the method, because it’s actually not something that I’ve developed; but I think it’s important to understand how we’re using it. So Structured Dialogic Design Process, or CDDP, as it’s called, is a technology-assisted methodology developed by the fathers of cybernetics. It’s a very well scientific, grounded methodology. It’s deeply reasoned, rigorously validated for dialogic design, and it’s a way that integrates knowledge for mixed participants into strategic settings. It’s especially effective in resolving multiple conflicts of purpose and values, and it helps you generate a consensus among the participants in both an organizational and inter-organizational strategy.
And there are a couple of laws that are really important in this dialogue. I’m not going to mention all of them in the interests of time, but just to give you an example of Ashby’s Laws of Requisite Variety, which basically says that if you’re going to bring a group together and you’re trying to solve a very complex problem, you need to have a diversity between your participants, because if you don’t, then the solutions you’re going to come up with are not going to be the best. So you need to have all kinds of variety in your observers and in your participants.
Also the second one is a pretty important law: Miller’s Law for Requisite Parsimony. He’s actually a famous psychologist that has a theory that a short-term memory can only focus up to seven concepts at a time. So this really important when it comes to dealing with a complex multi-dimensional problem such as ethnic conflict. You need to make sure that you have an environment where participants can really focus on a specific question or a single idea, which CDDP really allows you to do. It focuses on one idea at a time, or comparing one idea with another at a time. I’m not going to go into the detail of the other ones; but I’ll be happy to give them.
So between 1994 and ’97, as I mentioned before, it was when the first peace-building activities really started. By using this method, we came up with this: This is the Turkish Cypriot Problematique. I’m not going to go into detail again, but this is to show you what technology can help us do. [shows very complex diagram]
Q:
Does this help or hinder [the process]?
RL:
Actually, I believe this does help. So all the things—I mean, you don’t have to focus so much on what’s on the right. But what’s on the left is really the factors that influence all other factors. So it helps a group of people with the strategies that are involved within the conflict to really just focus on the four major things. And once you really focus and develop strategies on how to solve those, then the other ones will be influenced. And this is the Turkish Cypriot Problematique. And something very similar came out with the Greek Cypriots, which was this, and some of them are very similar. I’ll be, again, happy to give them if you’re interested in more detail and what that means.
And this is also a map. It’s a historical overview of most bi-communal groups that existed between 1994 and 1997 in Cyprus. What is interesting about this is that the middle group is really what was called the trainers. It was the initial group of peace builders. It involved 16 Greek Cypriots and 16 Turkish Cypriots, and then they had spin-offs of other teams. So they decided on other projects they wanted to work for. There are many other groups at this time, but these are the ones that were active for a longer period of time. You also have many activities that were going on at the time that were one- or two-day events. These are the ones that were sustainable over a long period of time, as you can see from the map. If you see on the extreme left, it’s sort of the timeline, which I don’t know how visible it is. Something, too, to just know as a fact is that at this time there wasn’t much funding going on for these things. It was a bottom-up approach, the citizens, the peace builders involved were really funding most of these activities.
So where does Technology For Peace really come in? In 1997, after three years of a really big momentum in the peace movement, the EU decided to postpone Turkey’s accession negotiations. The Turkish Cypriot authorities were really upset about that, so they decided to retaliate, and what they ended up doing is they banned all bi-communal meetings and stopped to face-to-face dialogues that were happening within the UN buffer zone at that time. They went to the extreme to even not allow the American ambassador or the EU commissioner to cross, which were always allowed to cross at the time. But what this really helped us was that we had to find alternative means of communication across the border. And this is where Tech4Peace came in, and it supported a series of virtual negotiations in co-laboratories online, and it engaged participants through a constructive dialogue, all online.
So really what technology allowed us to do was to keep the channels of communication open, continue peace-building efforts, and not to lose the momentum that was gained throughout those three years.
What is happening today? Just quickly, we’re almost 10 years after all of this has happened. There were negotiations a couple of years ago between the political leaders, and with the help of the U.N. there was a plan developed which today is known as the Annan Plan. It was put into a referendum in the two different communities in April 2004. The Turkish Cypriots voted in favor of it, and the Greek Cypriots voted against it. I’m not going to go into the debate of why this happened or the reasons behind it, but what is important to know is that this negative result has really left a climate of disappointment and disempowerment to the people working in the peace movement.
So what we tried to do last year is create a project where we’re really trying to revive the peace process in a way. And we’ve used the exactly same method as before, but we’ve used the CDDP methodology virtually this time to engage more people. The purpose of this was to investigate really the feasibility of reducing the cost and shortening the time required for this application, while securing that the process remains exact and the same, and is really the same product as before.
Why are we using this method? It’s again, and I think someone mentioned this yesterday, that the more people you have involved in the decision making, the more they feel engaged, and the more invested they feel in the process. It’s the same with this method. You really want to involve everyone so that they can feel ownership and commitment to whatever you’re trying to do. If you don’t have the right stake holders, this is not going to work. Everyone needs to share the same vision in order for this to work.
So what we’ve added new to this is really this new process of doing this in a virtual communication context. And this is just an idea to show you how this works. You have a triggering question, which I think in our case, which we did this last summer, we focused on, just so that you know an example, what are the factors contributing to the widening gap between the two communities? Then you have a couple of different ways: You send invitations by email, and then you collect the factors, the different data. You have reflections and clarifications as needed. Then you do the clustering of the factors, and then, you know, you come to the reports.
But what’s important to know is that all this process before happened in person. So you would always bring the participants together, which was very difficult if you had about 40 and 50 participants, and it would be very time-consuming. Now all of this is happening virtually, so it’s saving you a lot of time, and participants such as me who don’t even live in Cyprus anymore can also participate in this way. So this is just like a graph of what this can look like. You have all your different equipment, all the different actors, people can use Skype. [Cryerpoint?] is another program that we use that allows you to see even when you’re far away the same page that the people are on, and, you know, telephones [?]. And this is actually what we came up with, which is, if you were to compare the two, ’94 and now, actually there are very similar root causes and factors that influence what needs to get done.
So what are the benefits of using this technology? Obviously it saves you a lot of time. You can have a larger number of participants. Remote participants can also be part of this. There’s less cost and boundaries don’t matter; so whether or not the borders are closed or open, you can still do this, it doesn’t matter.
What are some of the shortcomings? You know, technology just always has its problems, and sometimes something might just not work. But also some of the laws that I’ve mentioned at the beginning have to suffer a little bit. For example, some of the processes that before happened with 50 people, such as the clustering of the factors, now happens with less people, and this requires a certain level of trust between the people that, you know, four people are trusted to do this job, rather than having everyone involved in it. And also, as I said before, and I don’t have this up there, you need to have the right stake holders on board. Otherwise, if not everyone is invested in this, it’s not going to work, which actually was, I think, one of the mistakes and one of the reasons that we had a negative outcome in 2004.
But I guess I’ll just end here.
Thea Harvey:
Now we have Amber Chand. You’re going to tell about your work.
“Working with Craftswomen in Conflict and Post-Conflict Regions to Offer Business as a Potent Vehicle for Sustainable Development”
by Amber Chand:
Well firstly, thank you so much for inviting me to speak at this first inaugural conference.
I bring to this conversation the perspective of an entrepreneur, a peace builder, a global citizen, and a mother. Eighteen months ago I launched my company, the Amber Chand Collection of Global Gifts for Peace and Understanding. The company is an online company that features distinctive, beautiful gifts, handmade by talented and courageous craftswomen living in regions of conflict and post-conflict. The mission of the company is to support women who are the inadvertent victims of war, genocide, civil strife by offering them an international viable market and, at the same time, supporting them in creating a dignified livelihood for themselves and their families.
Similarly the mission of the company is to support American conscious consumers who are looking for meaningful gifts that are affordable, that are beautiful, and tell a compelling story. And the story they tell is of the human spirit, the human capacity for strength, for resilience, for courage, for beauty in the midst of extremely devastating circumstances.
Several factors have gone into the reason I am doing this work in the world. Firstly, I am a refugee from Uganda. In 1973, I together with my family and all people of Indian extraction, were expelled out of Uganda by Idi Amin; so sadly I know what it is like to have lost everything. My family’s possessions were confiscated, our assets were frozen, my father died within three months, and I was left at the age of 21 at the mercy of the world.
Secondly, I have chosen to focus exclusively on women, women in regions of conflict. The statistics are staggering. When I hear that 90 percent of the casualties of war are civilians, and 75 percent of them are women and children; when I hear that two-thirds of the world’s poor are women and children; when I hear that, I think it’s 80 percent of today’s refugees are women and children—it’s when I hear these staggering statistics that I have to ask myself, What is it I can in my humble way do for the women and children of this country, of the world? This does not necessarily exclude men, but this is where my focus is. I am intrigued and deeply committed to bringing women’s voices into the world, to showcasing women’s capacity for peace and peace building. But I do it through one particular way. I do it through the expressions of these women, through their handmade objects, through a weaving, a candle, an embroidery.
I’m shocked, deeply shocked, that we live in a world where there is such a gap between poor and rich, a world in which we have become before—I sometimes don’t even have the words, but I’m so shocked that all of us have created this kind of world for ourselves, a world of excess, a world of intoxication, a world of glamour, when in fact we could, all of us, have a claim to our birthright, which is food on the table, a roof over our head, healthy bodies, access to education for our children. Is this so much to ask of ourselves?
I believe that what we’re experiencing now is the collapse of an entire mindset, a collapse of a paradigm that cannot be sustainable. We are peacemakers in our inherent sense of motivation. I believe we are peace builders. I believe in that. And so my work is to find a way to alleviate poverty, to support these women in creating, as I said before, a livelihood that is dignified.
The company I started is a for-profit company. I like and am committed to the vision of companies, private enterprise, profit-making companies actually going out in the world and doing good. I don’t see a paradox between being a profitable and therefore a sustainable company, and at the same time having what I call a sense of compassionate commerce. To me these are not mutually exclusive. They’re not polarized entities. Why cannot the company be profitable, which means we invest its excess profits into the company and into supporting these projects that I’m involved in, and at the same time, really do good. So, I don’t see a problem with that, and that is what I’m hoping to do with my company.
The inspiration for this company was actually a journey I took to Rwanda. Four years ago I went to Rwanda under the auspices of my previous company, and I met with basket weavers there. They told me an amazing story. They told me that three months after the genocide, 30 women got together under a eucalyptus tree, Hutu and Tutsi women, totally traumatized by what had just happened, and these women looked at each other in their profound grief, and they said to each other, We are going to go mad. Our men have lost their way, and we must find the way. Otherwise we will die with our grief. Amongst these women were some basket weavers, the traditional Rwandan baskets. And they decided, as an experiment in healing, and reconciliation, and peace building, that they would literally weave the traditional basket together, reed by reed, hand in hand. So this vision of Hutu and Tutsi women, women on either side of the conflict coming together, creating a basket, which now no longer was a basket. It had become a symbol for reconciliation, a symbol for healing, an emissary of peace.
When I heard that story, I called the basket the Peace Basket of Rwanda. I launched a hundred of them through my former company. We sold out within a day. Customers were saying, Yes! We love not only the basket, but we love what it represents. Within 18 months, the company had sold over 8,000 baskets. This gave me an insight into the capacity and the power of private enterprise to move in very quickly when governments and bureaucracy cannot move, and make something happen. Two years ago, Macy’s picked up—Macy’s, the largest department store in this country—picked up the Rwandan basket and has since then sold 30,000 of them. Today, 2500 women in Rwanda are engaged in basket weaving for Macy’s. I stepped out of that project at the time because my former company had closed. But herein was a model where you saw private enterprise, trade, going into a country, a post-conflict country, and literally making something happen.
A year after my experience in Rwanda, I in my innocence went to Jerusalem. I said, If the Rwandan women could teach us about how to reconcile conflict, what if the women in Israel and Palestine could do the same. So I arrived in Jerusalem a year later and designed an architected a joint venture product between Israeli women and Palestinian women: the Jerusalem Candle of Hope. That candle is actually hollow. It sits on a glass stand. The candle is made of beeswax embedded with olive leaves and flowers. It comes with a tea light, a simple votive. The votive comes in a Palestinian-embroidered bag. Over 6,000 of these candles have sold so far. And the intention is to grow this business so that we have more and more of these women engaged in this.
The point of this project is to support the fact that private enterprise can step in and here’s an activity between people on either side of the checkpoint. And yet I’m able to do this. The embroidered bags are made in Bethlehem. They’re put on a truck, they’re driven across the checkpoint, they’re driven up to Nazareth. In Nazareth, the Israeli women at the candle-making facility unpack the bags, drop little candles in them, package it up, and out of Haifa comes a shipment to my warehouse in central Massachusetts. The intention is to grow this business so that we can support the women on either side of the conflict.
When we asked this women, Do you want to work with each other knowing that you are from either side of the conflict? they looked at us as if we were mad. The question had no relevance. They said to us, You mean if we can have food on our table, a roof over our head, and we have to work with the Israelis, and vice versa? Of course we will do it. Therein lay, I thought, the secret.
The Jerusalem Candle of Hope is one of the signature products on my collection. Today I’m working in Cambodia, Afghanistan, Iraq, Jordan, Guatemala, and the most complex initiative I have launched is the Darfur Basket of Strength. This is coming out of the largest camp in Darfur. This is created by refugee women sitting in the camps today. The vision I had was to create a strategy of livelihood in refugee camps where women are sitting idle and absolutely traumatized. What if we were to bring to them the vision of creating something that they already know how to do, and tell them, not only are you creating this basket as part of your healing; but it is actually going to get shipped out of Khartoum, it is going to the United States, and people in the United States are going to connect to you, to your work, as part of this vision. Three hundred baskets were launched through my enterprise last year, and now I’m working with a rape center in [?], and we are launching income-generating project as part of the rape center. There’s a tent, there’s going to be tea served to the women, a mid-morning meal, child care, so a holistic enterprise; but the ultimate thing is to bring a thousand, two thousand, three thousand, more baskets out of this place so that the women can have a sense of livelihood, and American customers can have the experience of feeling connected to the global community.
That is my story in brief. Thank you so much for listening.
Thea Harvey:
Next we have Wim Naude--did I say it right?—who’s with WIDER at the UN University in Helsinki.
“Entrepreneurship Against the Odds: Fragility and Private Firms with Lessons from Africa”
by Wim Naude:
Good morning. Thank you very much. Thank you, Thea, for the welcome and the invitation.
As Thea indicated, I’m affiliated with the World Institute for Development Economics Research, United Nations University located in Helsinki. Our mission of WIDER is to work on global development issues, and this overlaps, to a large degree, with what the Economists for Peace and Security is doing, especially as far as peace, security, and post-conflict reconstruction for development is concerned.
Just as a kind of commercial, we have recently published a book published by Oxford University Press on post-conflict reconstruction in Africa, and from the 15th of June we’ll be hosting a two-day conference on fragile states and fragile groups in the world economy, during which there will be a couple of sessions devoted specifically to peace and conflict in fragile states in the world. It will be hosted in Helsinki. You will find—I put some flyers at the back on the institute and a copies of my papers are also there. On our website, you will have access to the conference proceedings, and hopefully we’ll put up all of the conference papers there. So please do watch out website also for information regarding our publications on conflict and peace.
In fact, given the overlap between WIDER’s work and the Economists for Peace and Security, I think it’s fair to say that Economists for Peace and Security has got its work cut out for it. There are at this moment almost a billion in the world living in what is described as fragile or failed states. Many of these, especially in Africa, have been in conflict over much of the last half-century, the fortunate fact being that over the last decade, especially since 1992, the number of conflicts in Africa has been reduced and has been falling.
This means that the number of people in these countries are emerging from conflict environments into peace and enjoying peace, and they are expecting to enjoy the fruits of peace, which will include security and prosperity. Now, given these greater number of people that are moving into peace, these great expectations that entrepreneurship is a mechanism [by which] people can enjoy greater prosperity and can consolidate their peace. We see this in a number of statements. I think it’s perhaps not necessary in the United States to talk about the benefits of entrepreneurship; but I think it’s fair to say that worldwide there’s great enthusiasm for entrepreneurship. We find, for instance, a statement recently made by [?] that “entrepreneurship has emerged as the engine of economic and social development throughout the world.”
The World Bank spends on average about $3 to $4 billion U.S. dollars a year on promoting what they call small businesses and entrepreneurship. They also started a website, a part of their website devoted to entrepreneurship in difficult environments. They’ve got interesting papers on entrepreneurs in Somalia, for instance, where there is no government function. The European Union has said that by 2020 it wants to be the entrepreneurial leader in the world.
So what is this concept, entrepreneurship? Is it something that can really drive growth and development in post-conflict environments? And this is what I want to critically analyze in my paper.
It’s also said as long as you can get entrepreneurship right, you might be able to develop your economy. Danny Roderick and colleague wrote this in 2004, that “the key obstacle to growth in low-income environments is an inadequate level of entrepreneurship.” So it’s a question of lack of entrepreneurship. You just need to increase the supply of entrepreneurship, and it will be this engine of economic growth for countries. I think this is what we need to look at.
Having said that there’s also a traditional response, how do you react if entrepreneurship is beneficial, and if the lack of entrepreneurship is a problem, how do we get more entrepreneurs? How do we increase the supply of entrepreneurship? And the bottom two quotes kind of summarize what the thinking in international development agencies and literature is at the moment: the first one saying, “What impoverished entrepreneur would work day and night to build a new firm, knowing that robber barons will seize it at the first signs of profit?” In other words, we don’t have institutions to protect these entrepreneurs. We don’t have property rights. We don’t have contract enforcements. So the lack of property rights and other institutions will be a disincentive to come about and create business firms. And so [?] need to develop institutions. We need to focus on the rule of law as a precondition for entrepreneurship.
The second quotation states that “business success in a developing economy requires how to take advantage of legal loopholes and who to bribe,” again saying that a lot of activities that entrepreneurs are actually taking in these countries are being limited by constraints, by legal constraints, by regulations, by rules, by obstacles to creating a business, and also by corruption. So here’s another focus point in the policy environment to encourage entrepreneurship is to, say, remove all these obstacles to entrepreneurial entry, make it easier to do business in developing countries.
The World Bank has got a type of index which they measure every year of how difficult it is to do business in a particular country, with the intention that countries should progressively lower the obstacles of doing business. And then the results would be, if we have this institutional formation, and you have the removal of all these obstacles, then you will have the supply of entrepreneurship coming forward, and you’ll have the beneficial effects on the economy.
Now in my paper I argue that it’s not as simple as that. In fact, I very much doubt that the supply of entrepreneurship is the problem in the first place. I think there’s sufficient supply of entrepreneurs, even within war-ravaged countries; and that the problem is rather the allocation of entrepreneurs in terms of what they are doing. And to illustrate that point I think it’s appropriate to ask what is an entrepreneur? How do we define entrepreneurship? It’s often a very wooly concept that’s being used, I think, more loosely than it should be used. In fact, a recent textbook on entrepreneurship had thirteen definitions of entrepreneurship. In the developed world it’s often associated with innovation, with risk-taking, with coordination of production factors, and the starting of a new firm. And I think all of these functions are being done by entrepreneurs in post-conflict societies and in fragile states.
But I think William Baumol in 1990 had a much better definition of entrepreneurs. I think for enlightening ourselves as to what is happening in post-conflict and even conflict states, I think his definition of entrepreneurs a “persons who are ingenious and courageous in finding ways that add to their own wealth, power, and prestige” is perhaps a much better working definition of what we see as entrepreneurs. And Baumol distinguished between productive, unproductive, and destructive entrepreneurship. And seen in this sense, the robber baron in the previous quotation is in fact an entrepreneur, a very destructive entrepreneur, but an entrepreneur nevertheless. Jack [?] also said that “you can obtain wealth by two means: you can either produce it yourself, or you can take somebody else’s.” In other words, predators can also be entrepreneurs and use the same kind of ingenuity and creativity in adding to their wealth. In this way as well, the person who is bribing the officials, the person who’s looking for legal loopholes, is an entrepreneur, albeit a very unproductive entrepreneur.
So what we are looking for is ways and mechanisms of actually encouraging productive entrepreneurship and making the allocation of entrepreneurship rather going in the direction of productive entrepreneurship.
Now within productive entrepreneurship there has been a distinction made between what they call opportunity entrepreneurship and necessity entrepreneurship, indicating that there are different motivational factors driving people to become entrepreneurs. It can either be because they perceive an opportunity, which they pursue and they grow their firm, or it can be because of necessity. Very often necessity entrepreneurship is reflected in the high rates of self-employment that you find in very poor countries. There’s no other choice. There’s no employment opportunities in the formal sector. People resort to informal enterprises. Many people resort to lifestyle-type of enterprises. And the objective of these enterprises is not to grow these enterprises, provide jobs for other people, but to survive. A lot of aid and a lot of effort that are going into developing countries at this moment are rather functioning in keeping these necessity entrepreneurs alive, and not necessarily growing the economy. So it might be productive, but it might not be really high-growth entrepreneurship.
This brings us to what I think is really the elusive concept of entrepreneurship that eventually one would like to stimulate and develop within developing countries, and that is high potential growth entrepreneurship, which is entrepreneurship which will grow your economy, which will create more jobs. The Global Entrepreneurship Monitor defines this as startup businesses that aim within five years to employ at least 20 people and to be using technologies that weren’t available in the last year or two. These are more dynamic firms.
And having said that, I must also add that the measurement of entrepreneurship is very difficult. It makes the analysis a little bit difficult. It makes the measurement and looking at the success of policy more difficult as such. But conceptually, this is the type of entrepreneurship that you also see in countries like the U.S. in Silicon Valley and in the rapid growth of ip firms in the U.S. And this is something that many developing countries would like to replicate.
Now what do you see in terms of entrepreneurship? If we start to measure differences between necessity, productive, unproductive entrepreneurship, indeed the empirical evidence shows that there’s a lot of entrepreneurial activities that do not contribute to economic growth. Consider the report of the 2002 Global Entrepreneurship Monitor. Very little empirical relation between many entrepreneurial activities and growth. And also in some instances, as Baumol indicated, the entrepreneur may even lead a parasitical existence that is actually damaging to the economy. So entrepreneurship might not be that positive in all senses for peace and security.
In fact, if we look at war, what Baumol himself wrote was that there was a good connection between growth and wealth in Middle Ages Europe. And he also referred to the “unprecedented prosperity enjoyed afterwards by the countries on the losing side of the Second World War.”
A recent book by Rutland, actually a thesis, said “much of the U.S.’s growth after the Second World War has been due to technologies emerging from war contexts.”
Nafzinger as well, documented the profits that many firms and entrepreneurs are actually making in Africa conflict situations. In during periods of war and conflict, you find substantial evidence of entrepreneurship at work. And during conflict, entrepreneurs fulfill three functions: First, they obtain funds to sustain conflict. I recently read that the Tamil rebels in Sri Lanka managed to obtain $3, 4, 500 million U.S. every year to put into their war. It requires a lot of entrepreneurial effort to raise that amount of money.
Overcoming the adverse impacts of conflict: We’ve heard, for instance, that entrepreneurs can and do provide even public services. In Somalia, in 1991, the government as well as the national airline collapsed. The private sector stepped. Today there’s five private airlines, there’s a price war between the different airlines; and in many other countries it’s documented that entrepreneurs are even providing public services.
And then of course there are more negative aspects of exploiting profitable opportunities arising from the conflict, which include mining, smuggling, preferential rationing systems, the theft of humanitarian supplies, banditry, and predation on individuals.
This is during war. What happens after war? Well, and this is where the problem in terms of post-conflict reconstruction comes about; because during the war, the rulers, the war lords, the smugglers—they all develop substantial business interests, and this makes the achievement of peace [very] difficult, as they profit from war and not from peace.
And there’s three main channels through which the wartime economic effort impacts on the postwar: The first is that wartime entrepreneurial activities provide capital for postwar investment, and not necessarily in pro-growth activities. Secondly, it provides means for wartime actors to obtain political power after the war. And thirdly, it provides incentives for entrepreneurs to undermine government institutions, especially if it clashes with their own markets. You find examples of this in Angola, for instance, where, you know, large producers are actually preventing government from proceeding with straight liberalization. Also what you find after the war is that much of the destruction of infrastructure, the flight of human and financial capital create substantial challenges for postwar entrepreneurship.
All of these things have been documented in terms of empirical evidence. They show that there’s no automatic peace dividend from the end of a civil war, and that there could also be a war overhang effect.
After a war, we also have to be aware that the transition process itself can create many opportunities for unfavorable outcomes. These opportunities include new opportunities for rents in privatization, in the construction industry and reconstruction of infrastructure. It includes patronage or limit access orders, as for instance as developed in Russia after its transition, and is developing at the moment in South Africa. You also find regulatory capture by big agents in the transition process.
There’s also the big threat of continued military spending, which diverts resources. It often happens that the [base of?] interest during the war in terms of military expenditure continues after war. It creates a lot of tax burdens or spending […?] within the government, it raises taxes, taxes lead to illegal smuggling—that’s been documented --, it also leads to high inflation, it leads to capital flight, and thus perpetuates the macro-economic imbalances that are in fact necessary to promote investment
So macro-economic stability, good governance, and institutional reform may not lead to automatic resurgence of the private sector. In fact, some countries which have avoided the prescriptions of institutional reform, such as Viet Nam and China, are counted among the fastest growing countries in the world.
So the conclusion is that there’s not a lack of entrepreneurship in fragile states or post-conflict states, and that entrepreneurship is not necessarily intrinsically good or bad, but depends on the effect of the structure of the economy, the incentive structures in society, whether entrepreneurship activities will be allocated towards productive or destructive activities.
I’m going to be very quick about this, because time is running out. I’ve documented in more detail in my paper. The problem is that, as […?] has written last year in a paper published by the National Bureau for Economic Research is that the type of institutional change that you want to engineer to move from this limited-access [?] to open-access [?] is very difficult; so we don’t have at this stage, I think, sufficient knowledge of the institutional transformation process needed. Together with that, [?] recently wrote that entrepreneurship in developing countries is one of the least studied significant economic and social phenomenon in the world today, and it’s compounded in these countries that are in post-conflict situations that we do not have sufficient quantitative data. It would be wonderful to have the data set like in the United States, a panel study on entrepreneurship dynamics, which is a longitudinal study of entrepreneurs. There’s nothing similar in developing countries that one can use to look at the dynamics of entrepreneurs as you can.
But there are certain lessons that I draw in my paper from the East European and former Soviet Union countries, as well as the African literatures […?], which I think contain a number of lessons. And I discuss this in my paper. Time is running out. But it’s important to understand the context of poverty and conflict. It’s important to understand the institutional reform process about which I just was speaking about. Then also, very important, and I think this touches on the previous presentation we had: Engage your displaced communities, your refugees. There’s more than ten million people in refugee camps at the moment in the world. And there’s probably just as many people that have been displaced, mobile entrepreneurs that have fled, that have immigrated to other countries. The recent estimate is that the volume of money being remitted by émigrés and diasporas across the world back to their own countries amounts to $100 billion U.S. per year. It’s almost twice the volume of aid to the developing world every year, which is by displaced communities. You need to look at the return of refugees into their countries. You need to look at the demobilization of soldiers into their countries, their access to land, etc. And I think this is something that is very often ignored in the literature on entrepreneurship in post-conflict societies.
Realistic visions of enlarging market sizes and market access, which also relates to the fact that most of the firms in these countries are small firms. One needs to understand that small firms have different obstacles, and there are, for instance, transport costs. Many of the countries in Africa that are in conflict are also landlocked countries, which creates huge trade barriers. That needs to be overcome if there is sufficient market access for entrepreneurial development. It will also means that they would need to look at regional integration to get over those transport barriers. And then of course the inter-regional factors of conflict therefore has a spillover effect on different economies and makes it more difficult for landlocked countries to actually achieve this if there are conflicts in the whole region.
Human and financial capacity and then private sector support modalities are also discussed. One point that I want to make is that post-conflict countries should move to what they call a developmental state. What I mean by that is not a state that’s intrusive, but a state that is strong, but that it is substantial. […?] in developing countries to actually reduce the state, to make the state smaller. Many of the private sector entrepreneurs have actually benefited from making the state smaller in some of these countries; so that the capacity of many governments to provide support for the private sector in developing countries is not what it should be.
I also make a case for the support of inputs, and not inputs; specifically inputs such as knowledge capital in the process. And then on decentralization, especially in Africa. You don’t find the same kind of localization and decentralization in Africa as you, for instance, find in Asia; and it’s remarkable that when you go into smaller areas out of the capital cities in African countries that there’s very [little] locality marketing going on, people that know about local opportunities to the same extent that they know in Asia. I think this is very important also for providing small business services; but it would be decentralized to where the small business owners are actually located.
And then—it’s about my time, but I’ll conclude on a positive note. And that is to say that if one can get the institutional framework right, the prognosis for entrepreneurship to lead to a resurgent private sector in post-conflict countries is quite good. Empirical evidence shows that the average rate of growth in a cross-country sample of post-conflict states for the five years following was 5.9 percent. In fact, in most of the former East European and Soviet Union countries, the resurgence of the private sector has been underestimated. For instance, the share of the private sector in GDP increased from 0 percent in 1989 to over 65 percent in most of these countries. In China, just between 1988 and 1995, in the rural areas, the number of self-employed entrepreneurs increased by 50 million. I think figures are indicating that it’s about 100 million entrepreneurs in the U.S. Within that small space of time, China delivered 50 million entrepreneurs, and it’s probably doubled in the meantime. In Africa, which last year has registered one of its highest growth rates in a couple of decades following the decline of conflict since 1992, you’ve seen in the mobile sector that cell phone owners have increased from about 2 million in 1998 to currently over 100 million; and it’s estimated that in 15 years’ time there will be more cell phone owners in Africa than in the United States—which has got huge implications for various strategies to encourage entrepreneurship and trade.
So the prognosis is very good, and I think that the challenge is to put all these different institutional frameworks in place that can lead to allocation of entrepreneurship into a more positive [?]. And I think on that note let me conclude. Thank you very much.
TH:
Okay, we’ll take a few minutes for questions, comments, discussion.
Q:
Can I ask Ms. Laouri, you listed in your downsides of your internet connectivity thing a couple of things, but I didn’t see there lack of eye-to-eye contact. We could do this conference electronically, and I think it would be of much less benefit to all of us. I wonder—I’m not trying to criticize—but I wonder how you measure that benefit, and what you feel you lose by not having it, and what you feel you gain relative to that by using the method you use.
RL:
I totally agree. I think there’s something to be missed out of that. […?] to use this method before 2003 in Cyprus, there wouldn’t have been another way. If you’re not allowed to cross the borders, and if you’re not allowed to meet anywhere, this is the only way it can happen.
Now the way we’ve done this now, in 2006, the people already knew each other; so it was very different. So we haven’t actually measured how it would be in terms of you have groups of people that don’t know each other at all. I don’t really know how that would be effected, but it definitely has. It would be a completely different feeling, like all online interaction.
Q:
[…?] the internet conductivity to at some point bring them together somehow and do that more effectively once you […?].
RL:
There’s definitely video conferencing and those capabilities that are something you can bring in. We try to do that, but we didn’t really have the resources to do it yet; so we have [?] and we have Skype, and those kinds of things; but the video was still not there. But that could be something that could be brought in eventually.
Lucy Webster:
I’m wondering if any of you have any concept as to the extent to which these entrepreneurial approaches in developing countries and such cover the total problem. [Are] there other ways that you can get something going, and then it is copies a wide region, and then another region picks it up, etc., etc. And having just failed to call my son on his cell phone in Tanzania, I’m fascinated by the incidence of cell phones throughout Africa. I think, you know, I’d just like to have more of a sense of big one can make these kind of things, and how much one can deal with the total scope of the problem.
WN:
I’m not sure that I understand your question correctly. Are you asking whether the imitation of technologies in Africa and other post-conflict states can have wide-ranging effects?
LW:
[…?] if you avoid the exploitative aspects, can it deal with ten percent, or fifty percent of the problem of extreme poverty?
WN:
Well, I hope that it will be able to eradicate the problem of extreme poverty. I mean, in fact, if you look at African problems, the growth rates that they’ve averaged in the 1960s, if they had maintained that, they would have easily have reached the millennium development goals by 2014. In fact, the prognosis now is that African countries can grow an average of about 7 percent a year, they should be able to off extreme poverty by 2014. And I think, yes, in my view the prognosis is there. We’ve seen that at least the empirical evidence already shows that in […?] sample of countries post-conflict, 6 percent growth rates were in fact achieved. So yes, I certainly think that it’s possible to at least get rid of extreme poverty if you can entice the productive entrepreneurs to do their thing.
TH:
I want to follow up on that. The growth from GDP that we’re seeing is largely driven by these very small entrepreneurial businesses; that is, not in large extractive organizations and things like that? That’s a question.
WN:
Yeah. If you look at some of the booming economies in Africa, you find at the moment, which is very encouraging, is that they’re all experiencing a consumption boom, which means that also consumption is definitely increasing, and that it will have an effect on poverty.
It is true that much of the growth in some of the post-conflict countries is driven by the very reason they often fell into the conflict, and that is natural resources that they have, which is more sometimes of a bain than a boon. And at the moment the commodity growth is really benefiting a lot of African countries. But the claim for entrepreneurship, and that’s one of the benefits that people are associating with entrepreneurship, is that if you ally entrepreneurs to take opportunities [on, you can?] diversify the economies. And there’s also substantial evidence and an argument made in The Journal of Development Economics not long ago that entrepreneurs can actually crowd out opportunities for [?], because [?] typically takes place because there’s some opportunity for a monopoly, […?]. Now if entrepreneurship can actually provide alternatives and substitutes, it can dissipate this type of rings that people try to [?]. So the argument is really that yes, entrepreneurs, if they’re unfettered, can really play a positive role in that regard.
The third thing that I think is important as well which, in my view, almost creates a case for government subsidies in a sense because there’s a positive [?] involved, is the argument that [?] also has written in his paper on [“Economic Development to Self-Discovery”?] where he says that what entrepreneurs are doing is they are fulfilling a cost recovery function. What he means by that is that ex ante in a poor developing country or post-conflict state, you don’t know which type of activities are going to be profitable or not. So somebody has got to do that kind of discovery function. Many entrepreneurs discover that certain activities are not profitable, and they go under; but other people see that, and they don’t follow suit. They see the successful opportunities that are being signaled by successful entrepreneurs, and they follow suit without having to have gone through that risk of putting their own capital and time on the line.
So this […?] growth, and what it does is it actually tells that economy what are you good at, what are your opportunities that are available […?] be as a country. So that is also a very positive function that entrepreneurship can play in post-conflict countries; But it’s not always obviously clear what this country should be doing. I mean, many of these countries, when you talk to policy makers, they’re really looking around to other countries to see what they are doing. Oh, they are going to [buying?] fields, or they are going into this type of technology. They want to replicate, but they don’t know whether that is something that the country really has a comparative advantage of doing or is really good at. And I think if you do have entrepreneurs that can perceive opportunities and can grab opportunities, they can fulfill their type of development function. So it’s more than just growth.
AC:
I’d like to just kind of comment on that from the perspective of my work. By investing in these women, there’s something that happens in that psychological model that you’re not coming in and giving them a handout, you’re not subsidizing their enterprise; you’re really coming in and saying, I’m investing in you as a business partner. And it’s remarkable to me how the women I’m working with in eight of these regions of the world are so delighted when the opportunity is offered for them to unleash their own resourcefulness, capacity to initiate, to create enterprises.
I just heard that 100 women in the refugee camp in Darfur have stepped forward now that they know there’s going to be a basket-weaving initiative, and there’s an excitement generated in the camp because they sense that here’s an opportunity for them to really be creative and take initiative. So the entrepreneur instinct is there, I think. Actually it’s a human—[end Side A]—
RL:
--social entrepreneurs, and I think they also play a really important role in especially conflict and post-conflict societies, really focusing on the social problems, but not necessarily gaining a profit out of it.
TH:
So we have a bunch of more hands, which we don’t have time to cover everybody, so I want to suggest that we continue this as an informal discussion in the dining room. Thank you very much. [end recording] |