Enterprise Solutions to Poverty

For all of the charitable institutions that we've seen in the last century, these things do not account for the rise out of poverty of the poorest of the poor ... what accounts for this is enterprise - the application of human intelligence, of human action, of human will, of ingenuity into the economic sphere.
- Rev. Robert Sirico

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  • Peter Heslam on Asking the Wrong Questions

    Too much of the development debate is looking at the question of poverty: How do we define it? What are the causes of poverty? But the real question about poverty is the question of wealth: how do we create wealth? So this is the question that Adam Smith addressed in his famous book The Wealth of Nations: what causes that wealth?

    What lifts the poor is the creation of wealth and the empowerment and the dignity and the self-reliance that comes from that.

    More from Peter Heslam
  • Andreas Widmer on Aid vs. Investment

    Consider this: Africa is 12% of the world’s population, yet it receives 29% of all aid in the world, yet only 1.4 percent of foreign direct investment. Africa doesn’t need more aid. Africa needs more investment

    More from Andreas Widmer
  • Eric Kacou on Wealth Creation

    It’s critical that that focus goes from poverty reduction to prosperity creation, inasmuch as this will really change people’s views and really help them transform the way they approach development.

    More from Eric Kacou
  • Michael Miller on What Causes Poverty vs. Wealth

    We need to move away from thinking about poverty and the causes of poverty, and start to move to the real question: what causes wealth?

    More from Michael Miller
  • C. Neal Johnson on the Impact of a Job

    One of the problems we saw in Kazakhstan when I was on the mission field there was that the people didn’t have jobs. The men were out, they didn’t think well of themselves so what did they do? They turned to the bottle; alcoholism problems were really rampant. They’re angry, they’re frustrated, they have no hope in life, and they don’t see any value in their life. But you take that same person, you give them a job, you give them something meaningful, and it can totally change their attitude toward life and gives them hope, gives them promise … So business not only creates valuable goods and services, but we’re creating employment for people that allows them to have a whole different sense of who they are, what their purpose is, and what their hope is for the future. And the social implications of that are just enormous.

    More from C. Neal Johnson
  • Eva Muraya on Dignity and Gainful Employment

    I think it is the height of indignity for a man – or, for that matter, a woman – not to be able to provide, not to be able to guarantee food and shelter. Business creation provides that opportunity for people to have gainful employment, and people can therefore support themselves by providing shelter and food and health for their families. I’ve seen that through my business. We begin to say no to poverty and begin to redeem the dignity of the citizens by virtue of creating business opportunity.

    More from Eva Muraya
  • Eva Muraya on the Social Effects of Business

    If more families in any community are engaged directly in business or benefit as a supplement to business having been created, then you find that people are happier. There’s social cohesion; societies are more amiable.

    More from Eva Muraya
  • Eva Muraya on the Impact of a Business

    I think the most sustainable way is for opportunity to be created, so that people can engage in enterprise…  If you had employed five people, if your business grows, then you will then employ twelve and eighteen and thirty, and a hundred. It’s happened in my business experience. A hundred families are being supported by Color Creations to date, directly. I haven’t even begun to talk about the families supported by the creditors and suppliers that I work with, or the other stakeholders in my business. That’s just one business.

    More from Eva Muraya
  • Malik Fal on Business Promotes Transformation

    When communities receive trucks of United Nation aid… it only goes so far for so long. It’s when you have a local business that’s striving, that’s employing people, that’s enabling employees to send their kids to school to change their habitat, to get the health benefits and so on. This is what really transforms communities.

    More from Malik Fal
  • Malik Fal on Aid vs. Economic Transformation

    Aid can only go so far. Aid can only provide relief, but it doesn’t provide economic transformation. Economic transformation in the long-term, where people learn skills, where they earn high and rising standards of wages and of living, comes from locally run, locally owned businesses. And that’s what’s been missing from the development discussion in Africa.

    More from Malik Fal
  • Rev. Robert A. Sirico on Business as the Path Out of Poverty

    When markets can expand within a juridical framework, with an ethical system at the center, the poor can rise out of poverty and have access to goods, to services, to employment, and to all of the things that a prosperous society can afford.

    More from Rev. Robert A. Sirico
  • Ebow Graham on Aid vs. the Market

    The donors, we are tired of them. All those years, the aid, it has come, come, come. We are still poor… Give us the market; we will come.

    More from Ebow Graham
  • Bishop John Rucyahana on Aid vs. Production

    We need to be able to move from aid to production… a sustainable production. Think for a minute and realize this for a moment: Why is it that the policies of the World Bank and IMF and the world markets business eliminate Africa from the World Market?

    More from Bishop John Rucyahana
  • Kim Tan on the Dignity of the Poor

    I think what people want if you ask the poor, if given a choice between a handout or a hand up that helps them really to have a sense of dignity and independence, to be able to put food on their table by themselves through their own effort. They all want to be able to do that. You know, that is, that is a part of the human aspiration and I think we need to find ways of doing that and it’s enterprise that can really help people do that.

    More from Kim Tan
  • Kim Tan on Enterprise, not Aid

    Growing up in, in Asia, [I saw] the Asian tiger economies—that thirty, forty years ago had a lower GDP than Uganda or Kenya—transform themselves through enterprise, not through aid, not through philanthropy.

    More from Kim Tan
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Enterprise and Wealth Creation

The experience of the last 200 years demonstrates that living standards can be raised even as population density rapidly increases. Innovation and entrepreneurship can and do create new wealth for both the rich and the poor. There are, in other words, enterprise solutions to poverty.

Enterprise can spur wealth creation in several ways. Perhaps the most obvious is through invention, as with the invention and dissemination of the steam engine, or when someone discovers a new use for a natural resource. Oil was little more than a sticky annoyance until inventors figured out how to use it to fuel engines. Telecommunication lines required expensive copper until inventors figured out how to use cheap and abundant sand to produce fiber optic lines.

A less obvious way that business enterprise boosts the rate of wealth creation is through division of labor. At its best, this process frees individuals to focus on jobs that they are especially suited and trained for.

In Mad About Trade, Daniel Griswold uses World Bank figures to summarize the extraordinary progress that the world has made against poverty. For all of human history until 1800, the vast majority of the world’s population lived on a subsistence income. As gains from invention, the division of labor and global trade increased, the proportion of the world’s population living in dire poverty halved by 1950. Between 1980 and 2005, the proportion of the world’s population living in dire poverty halved again. That these improvements came during periods of significant population growth indicates that the world’s workers had become rapidly more productive.

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Table of Contents

  • Enterprise and Wealth Creation
  • Wealth Creation in Developing Nations
  • Business Enterprise as a Worthy Calling
  • The Role of Government in Enterprise
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Wealth Creation in Developing Nations

Development economists increasingly are focusing on encouraging wealth-generating enterprise as the most sustainable method for countries to move from poverty to prosperity. Such efforts are moving forward along several paths, including microfinance, angel investing in small-to-medium size enterprises; and efforts to reform government and lower trade barriers. Churches are also playing a role in such work by supporting microfinance efforts and through efforts at moral formation and cultural transformation, which in turn helps entrepreneurs in the developing world realize their full potential.

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Business Enterprise as a Worthy Calling

Many view business enterprise as greed-based, an attitude that prevents many people from supporting and encouraging enterprise solutions to poverty. In an effort to remove this obstacle, champions of enterprise solutions to poverty note that greed exists in every profession, and that entrepreneurs need not be greedy in order to start and run a successful business. An entrepreneur might be motivated by greed; but she also may be motivated simply by a desire to make a better product, or to provide better opportunities for his or family and community. Labor directed toward the production of something that benefits other people is a worthwhile endeavor. Through such work, people find fulfillment and contribute to the common good. 

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The Role of Government in Enterprise

The idea that government is the primary source of wealth is mistaken.   The experience of Communist economies in the twentieth century demonstrated that, while a domineering state could accelerate industrial development in some cases, it could do so only at immense human cost and at an immense cost to long-term development.

At the same time, government does have a crucial role in the process of wealth creation. Establishing the consistent rule of law where property is protected and contracts enforced is a necessary condition for thriving businesses and the economic growth they bring. When government is riddled with corruption, enacts excessive levels of taxation, or imposes excessive regulatory requirements, business enterprise is stifled and the creative potential of a nation’s citizens remains largely untapped. In sum, governments promote wealth creation by promoting justice and protecting economic freedom.

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