Wednesday, September 14, 2016

Peace, Love, and Employment

Steven R. Koltai with Matthew Muspratt, Peace Through Entrepreneurship: Investing in a Startup Culture for Security and Development

You hear so many theories why America and the EU have stable, democratic societies where sign-waving is the most virulent protest you’ll ever encounter. Why are these nations relatively peaceful, while poor nations worldwide incubate violence and terrorism? Perhaps the answer lies not in ethnicity or religion, but in poverty. People who die for their causes may not see a future, and that grim vision may reflect plain old unemployment.

Steven Koltai was a serial entrepreneur and sometime angel investor, before attempting to translate his experience to public service. His sojourn at the State Department taught him about global development ideals, but also taught him why a government procurement system optimized for military purposes doesn’t do humanitarian goals very well. Now a Brookings scholar, Koltai has a proposal for cultivating world peace through home-grown entrepreneurship and jobs.

Traditional American economics, which we’ve tried to export, currently involves cash transfusions to the desperately poor, beside low taxes on the “job creating” rich. But that demonstrably hasn’t worked, here or abroad. Koltai musters generous evidence that startup economics, not coddling the already rich, will create more jobs in desperately poor nations: “In the United States the youngest firms, not our established corporations, account for nearly all net job growth.”

Some might immediately object that getting into the startup business will mean American government picking global economic winners. Not so, Koltai insists: America should instead partner with local governments, companies, and non-profits to cultivate an entrepreneurship “ecosystem” that fosters initiative while creating jobs. America can’t decide which private companies should succeed, but it can, and sometimes has, helped global partners construct startup-friendly cultures.

Steven R. Koltai
Besides his own experience, Koltai bases his positions on others’ theoretical and experimental data. Many European nations, despite not having America’s historic entrepreneurship culture, have invested in global entrepreneurship ventures, to great success. And Koltai quotes liberally from Peruvian revisionist economist Hernando de Soto, whom I’ll be investigating further. He makes the case that transnational prosperity rests on cultural, not monetary, grounds.

Koltai cites nations like Ghana, Rwanda, and Chile, historically poor nations that have recently invested in cultivating local entrepreneurship. Though it's too soon to call these nations rich, all have jumped in international business rankings, attracting valuable global investments. None are dirt-poor anymore, and the more entrepreneurs they have, the more they get. Their investments aren't expensive; money isn't even necessarily a high priority. The culture quickly becoming self-sustaining.

America is uniquely positioned to cultivate worldwide startup economies, as Koltai writes: “America today is revered as the land of entrepreneurship, not just the land of opportunity.” Global entrepreneurs already aspire to open branch offices in Manhattan and Palo Alto. And American leaders have already expressed interest in fostering entrepreneurship. Koltai worked in Hillary Clinton’s State Department, and praises President Obama’s economic rhetoric—while admitting actions often fall short.

The bureaucracy Koltai encountered at State was badly outdated, resistant to top-level changes, and central to a public-private “old boy network.” Therefore, the changes Koltai proposes don’t just involve policy initiatives; he says we already have that. Instead, America needs a non-political procurement apparatus more responsive to small entrepreneurs and today’s rapid innovation culture. He proposes his “Six + Six” approach, to identify, empower, and cultivate both entrepreneurs and culture.

Koltai’s proposed solutions resemble neither libertarian capitalism nor command socialism. Instead, he presents a third-way structure broadly consonant with Distributism, an economic model based on independent operators owning their own tools. Koltai avoids using this term, as he avoids blatantly taking partisan sides throughout. But his proposals will require all conventional “isms” to re-evaluate their existing propositions. Global economic culture is constantly changing. Our humanitarian goals outweigh our party loyalties.

Nor is Koltai na├»ve. He recognizes that simply creating startup companies won’t solve everything overnight. While he writes that new companies create more jobs during their first five years than the rest of their operating lives, he also admits those are the years when most companies fail. “Still,” he writes, “more seedlings, more trees.” Creating a startup culture isn’t about nurturing individual companies; it’s about a culture receptive to risk-taking and invention.

Koltai proposes nothing short of a revolution in American foreign relations. Rather than sending drones to bomb terrorists, we should intercede before they become terrorists, diverting them into constructive enterprises. This means jobs. Over half of captured terrorists admit they felt desperate not from religious or ethnic tensions, but from unemployment. By creating global cultures that employ youth locally, we create a world economically inclined toward creativity and peace.

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