The invisible (and indispensable) sources of entrepreneurship

Posted on August 16, 2022




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By Michael Miller.

Entrepreneurship is a hot topic these days. There are social, intellectual, educational entrepreneurs, and even “intrapreneurs” (entrepreneurs within their own companies).

Entrepreneurs such as Steve Jobs and Bill Gates have been made model citizens. Magazines such asEntrepreneur and Fast Company constantly value the culture of entrepreneurship. Successive American presidents Barack Obama and Donald Trump (entrepreneurial figure if ever there was one) multiplied the initiatives and policies aimed at promote and to pay homage to contractors.

In summary, these are popular.

This development is generally positive, but I fear it is superficial. While some current images of the radical individualist entrepreneur liberated from notions of right and wrong – such as those conveyed in films The Social Network Where The wolf of Wall Street – can be dangerous, entrepreneurs play an essential role in society that should be welcomed. What is often lacking, however, is an appreciation of the moral and institutional foundations that allow the development of a corporate culture.

Entrepreneurs do not arise spontaneously from nowhere. Nor are they some sort of superhuman transcending the culture around them. Rather, they need institutional and cultural foundations, without which they cannot emerge. Take for example the case of poor countries in the developing world. Like the Peruvian economist Hernando de Soto noted, the developing world “is teeming with entrepreneurs”. Why then do these countries remain so poor? It’s not like people lack entrepreneurial spirit. What they lack is the foundation that allows them to develop their entrepreneurial abilities and convert them into successful, wealth-creating businesses.

Entrepreneurs take risks, they see opportunities that others don’t see, and turn them into a business. It may not be self-evident, but this risk-taking requires stable social foundations. Contractors need to know that the ground is solid before they risk jumping. These foundations include the rule of law, clear property rights, freedom of association, trade, and strong families and communities that foster a culture of trust. In the West, we take these basics for granted, like fish in water. But without them, the entrepreneurial spirit would dry up. Let’s take a look at some of them.

private property

Clear property rights are essential for entrepreneurship.

In some developing countries, more than 50% of land has no clear title deed. Without ownership, people are reluctant to make improvements because their work could be taken away from them. Without this title deed, they cannot use their land as collateral for a loan to start their business.

Imagine how many businesses we would have in the United States if we couldn’t know for sure who owned the land the business was based on. Do you think we would invest a lot of money in its development? The Catholic Church has always emphasized the importance of private property rights, and not just for economic reasons.

In his defense of private property in Rerum NovarumPope Leo XIII emphasizes the importance of property in order to allow families to have the space necessary to live their freedom and their responsibilities.

Right wing state

L’rule of law is the opposite of human rights.

This means that there are clear and transparent rules that everyone observes. How many entrepreneurs would take the risk of launching a new business if they could not be sure that the contracts would be respected?

Again, predictability and fairness are prerequisites for risk taking.

Free Association

In his defense of the new mendicant orders, Saint Thomas Aquinas argued in 1256 that freedom of association was a natural right.

Leo XIII relied on this principle to defend the unions in Rerum Novarumand it also applies to companies, universities and other voluntary associations that form civil society.

When laws and regulations make it difficult to start and maintain a business, it harms both freedom and entrepreneurship. There is an important correlation between economic freedom and prosperity.

free trade

When everyone has the freedom to buy and sell in a market (assuming it’s not something morally wrong, of course), entrepreneurs are encouraged to build businesses.

When markets are tight, it is usually the biggest and most influential companies that convince governments to protect their industries and exclude competition. Not only does this stifle small and medium-sized businesses, but it also hurts the poor who are without political or economic influence.

Culture of trust

Market economies that allow entrepreneurs to take risks and grow don’t last long if they rely on the type of radical individualistic entrepreneur portrayed in social media.

Sustainable market economies require strong levels of trust and honesty, otherwise transaction costs rise and entrepreneurship dries up. This culture of trust and the human virtues that underpin it are not created by the market economy itself. They are developed within strong families, rich religious and moral cultures, and vibrant civil societies.

These are the foundations of entrepreneurship. Businessmen and women must lead by understanding them, explaining them and defending them. Entrepreneurship is part of the Western spirit – it’s in our genes, but it won’t last without the institutional and spiritual capital that brings it to life.

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The invisible (and indispensable) sources of entrepreneurship