A very interesting opinion piece in the Jan. 29 Wall Street Journal notes that both the Nobel Prize winner in economics (Edmund Phelps) and peace (Muhammad Yunus) highlighted the impact of entrepreneurship in their Nobel addresses. “Phelp’s Prize” by Amar Bhide, a professor at Columbia University, and Carl Schramm, president of the Kauffman Foundation, picks at the open wound between plain-old entrepreneuers and social entrepreneurs. I basically agree with them, but I also beg to differ as I think they compare apples and oranges. (I don’t link to the article because I don’t have a subscription to wsj.com.)
Of the 35 winners in economics, 28 never mentioned the word “entrepreneur.” Phelps mentioned it 17 times–more than the total over the previous 19 years! Yunus mentions it 6 times. Twenty-three mentions in two Nobel speeches has to be a record. But it is almost as if the laureatesÂ had a different dictionary in front of them when choosing their words.
Phelps talks about a transformative entrepreneurship that is central to capitalism, by sparking growth of small businesses that become large commercial operations; Yunus talks about microloans that don’t involve economies of scale or lead to significant new enterprises. The writers ask, ” Can turning more beggars into basket weavers make Bangladesh less of a, well, basket case?”
Well, no–but. It’s a false dichotomy–and the writers know it. They note Bangladesh’s export-oriented garment industry as being “larger and more productive than individual craftsman,” which is true, as a way of saying that it is better to provide venture capital to growing businesses than seed capital to individuals. They also note that government reforms, such as those that are now propelling Vietnam to new heights, are more important than microloans. But because the Bangladesh government is intractably backward and corrupt and anti-private business, does that mean that Yunus’s loans are a bad thing? I think the writers are reacting to the hoopla rather than the reality.
I am notÂ an unabashedÂ proponent of microloans, because I agree with the writers that while they may lift individual families out of poverty, they do not scale an economy. But I do not think microloans are a bad thing–how could they be? Some, such as Alexander Cockburn in The Nation (“The Myth of Microloans”), paint microloans as the devil incarnate, due to farmer suicides in India.
To me, the issue is clear: Capital that helps people raise a cow and escape poverty is as good as capital that helps start an Apple Computer. Yes, there’s a difference of scale. But there’s also a difference of context. The two sources of capital are not comparable–one’s inÂ America, one’s in Bangladesh.Â But that doesn’t mean they’re not both productive.
And what about microloans that help build a GrameenPhone, the largest and most successful business in Bangladesh? It would not have been built without microloans that allowed distribution into rural villages, because Grameen Bank would not have backed the project. Does that not count? The authors cannotÂ take a potshot at Yunus’s track record without examining his full portfolio.Â
Straw-man arguments are not compelling. It’s not either-or. Let’s deal with the facts on the ground–and celebrate entrepreneurs and capital that builds businesses of all kinds.