This Blog continues from my Blog of 30-January-2013: http://www.weblogbahamas.com/blog_bahamas/2013/01/one-little-country-facing-many-giant-evils-giant-economic-misfocus-antiquated-economic-development-m.html.
Our apparent disdain for entrepreneurship in national economic development has meant that we routinely misallocate resources and waste an inordinate amount of time chasing and competing for large investments. As characterised by William Wong and later quoted by Pam Burnside in “Sustainable living in The Bahamas”, we rely on these ‘mega resorts’ to stimulate economic activity but are often oblivious to the damage they can cause. She said: “I trust that its former “anchor property” mega schemes will be re-examined as the current global debate on living is now focused on the importance of sustainable development”. Unfortunately, the overriding goal has been to attract what has become the ‘Holy Grail’ of our economic development. Certainly, the case since Independence and probably well before this time, during the minority government, so again, well in need of a radical re-think.
Of course, Wong and Burnside were addressing environmental damage but although my Blog is about economic damage and the effects of entrepreneurship on national economic development, I could not agree more with their premise. For too many elected officials, economic development means government-run or subsidised programmes that provide assistance to individual (large) foreign businesses in order to increase local jobs, usually in the hospitality and tourism sector and usually in Nassau (recently has expanded to include Exuma). To rely on such large-scale projects is to ignore the potential (and lasting) benefits of an entrepreneurial culture, which would straddle more industry sectors and which are cited below:
(1) Entrepreneurship promotes Capital Formation – Schumpeter extending Say, who extended Smith, argued that entrepreneurs promote capital formation by mobilising the idle resources of society. They employ their own and the resources of others, which lead to value addition and wealth creation. (In The Bahamas, we have opted for an unhealthy proportion of lawyers, who patently are not wealth creators but wealth consumers!)
(2) Entrepreneurship creates Large-Scale Employment Opportunities – Collectively, entrepreneurs contribute to large-scale employment which can be a chronic problem of underdeveloped nations. (As noted above, we opt for mega projects which are 'quick fixes' and employ thousands but not for longer term solutions that would also employ thousands but not necessarily in one workplace!)
(3) Entrepreneurship promotes Balanced Regional Development - Entrepreneurs help to reduce regional disparities by establishing new, spin-off industries in less developed areas, thereby promoting balanced regional development (In The Bahamas, we have opted for the development and re-development of the 21 x 7 mi. piece of land we call New Providence, which has attracted virtually all of our development resources, including incentives to foreign firms, with a rare exception!)
(4) Entrepreneurship reduces Concentration of Economic Power - Economic power is the natural outcome of industrial and business activity. By increasing the number of entrepreneurs, it ensures that economic power is not concentrated in the hands of a few individuals (In The Bahamas, anecdotally, a (not ‘the’) minority population controls a disproportionate amount of economic power; this is not a bad thing per se, but the power can be more widely distributed in a new economic culture).
(5) Entrepreneurship creates and distributes Wealth - Entrepreneurship stimulates a more ‘equitable redistribution of wealth and income in the interest of the country to more people and geographic areas, thus giving benefit to larger sections of the society’, and thereby creating the much sought after ‘multiplier effect in the economy’ (See above point).
(6) Entrepreneurship increases National Wealth (GDP and GDP Per Capita) – By definition, entrepreneurs are routinely on the look-out for opportunities, which they explore and exploit. Entrepreneurs effectively mobilise resources and capital, develop new products, services and markets, and contribute to national wealth (The Bahamas’ GDP is comprised mainly of tourism, offshore financial services, shipping administration and one or two other industries).
(6) Entrepreneurship improves the Standard of Living – ‘Entrepreneurs play a key role in increasing the standard of living of the people by adopting latest innovations in the production of wide variety of goods and services in large scale that too at a lower cost’ (In The Bahamas, we seek prolonged income in the form of long tenures with a public sector organisation or one large private sector firm as the route to raised standards of living).
(7) Entrepreneurship promotes a Country's Balance of Trade - Entrepreneurs help in promoting a country's balance of trade, by producing goods and services, some of which can be exported (In The Bahamas, we rely on a handful of industries to contribute to our exports; at 162nd in the world, exporting is not something we’re good at!)
(8) Entrepreneurship induces Backward and Forward Linkages in industry - Entrepreneurs thrive on change and maximise profits by innovation, which induces backward and forward linkages from the new developments (We have very few truly innovative firms in The Bahamas).
(9) Entrepreneurship facilitates Overall Economic Development – In the words of Schumpeter, ‘entrepreneurs act as catalytic agents for change’; the creation of a new product, service or market sets in motion ‘the process of industrialisation’ (In The Bahamas, we have managed to retain an ‘employee society’ and remain light years away from becoming an ‘entrepreneurial society’).
(10) Entrepreneurship prevents or mitigates ‘shocks’ in the Economic System – Currently, if a large firm goes out of business or falls on hard times in The Bahamas, hundreds of people are laid off. (In an entrepreneurial culture, the shocks are more widely distributed so the system can better withstand them because a number of smaller firms may lose a few employees, rather than one large firm losing hundreds!)
Why is an Entrepreneurial Culture better, specifically for The Bahamas?
Revising the above in relation to The Bahamas, an entrepreneurial culture would, inter alia:
1. Free us from the economic slavery in which we have embroiled ourselves for all of our 40 years!
2. Give Bahamians more and better control of their economic lives!
3. Protect The Bahamas from external economic shocks, such as recessions in the USA!
4. Create a wealthier country and distribute wealth more widely in the country!
5. Put The Bahamas on a course for sustainable economic development for the future!
6. Relieve Governments of the pressure of having to create jobs because this is not a government's role; instead, its role is to create and maintain the conditions and business environment for firms to start, thrive and grow so that they can create jobs!
7. Change our educational focus so that our youth see entrepreneurship/self-employment as an ‘honourable’ and viable career option!
8. Produce more entrepreneurs who would become our societal idols as we put wealth creation at the centre of our society, rather than wealth consumption (as practised by lawyers and such like)!
9. Get rid of our ‘employee society’ and labour mentality, which means we are always looking for jobs, rather than ways to create jobs, and which have become millstones around our necks!
10. If we are lucky enough to develop competitive entrepreneurial firms, it would assist our balance of trade and put us 'head of the class' in the Caribbean region (currently, Barbados is the trend setter in this regard)!
The white Bahamian population (guesstimated to own as many as 40 – 50% of businesses) has long valued self-employment and enjoyed its fruits. The population at large could learn a lot from this entrepreneurial segment and as a country, we should highlight more their commercial successes. Other ways to start changing our economic culture would be to teach entrepreneurship in our schools (and CoB) and invest in entrepreneurship training in the final years of secondary education. This is an imperative, the importance of which cannot be overstated! Others have called for a capital market driven economy  - but I know of no capital markets that can exist without firms!