Posted by Entrepreneurialism and society need to relate wholesomely if either is to flourish. In reality, the relationship is broken, in at least three different ways.
First, most countries around the world are not committed to supporting entrepreneurship[i]. Such support requires alignment between politics, law, the monetary system, economics, education, finance, and the whole national culture. The USA, historically one of the friendliest to entrepreneurs, is rapidly becoming frostier for them[ii]. In many countries, entrepreneurs are regarded as a threat to the governing elite, being dispatched to prison if they are “too successful”. In other countries, such as China, any entrepreneur has to toe the line of the ruling party. Even then, an entrepreneur’s success may be ephemeral. This has been seen not only since China became a Communist country in 1949 but specifically over the last few years.
Second, in some cultures, the system supports certain groups or cliques but not the citizenry as a whole. An example of this is my own country of origin, India, where the culture historically supported entrepreneurialism only from one caste: every other caste was penalised for even thinking of any entrepreneurial activity. Officially, an interest rate of between 80% a month and 24% a year[iii] was allowed, depending on the caste of the person to whom money was loaned. Unofficially, the culture endorsed unthinkable interest rates, within living memory rising as high as 3600% per year, leading to millions of people being reduced to virtual slavery or “bonded labour”. Clearly, such a culture won’t allow the average citizen to flourish. No wonder limits were set on usury, and bonded labour abolished, after democracy was established in India – though the reach of the law there is neither wide nor consistent. By contrast, the country with the fairest and most extensive system of support for entrepreneurs is Israel[iv].
The two kinds of breaks mentioned above, and related varieties of “crony capitalism”, were quite common historically, but began to decline with the separation of entrepreneurs from the state, which started as a result of the 16th century Protestant Reformation. This instituted “the rule of law” and popularised Judeo-Christian thinking on morality, creativity, hard work, honest trade, a modest lifestyle, public responsibility and societal good. It resulted in what we call the modern world, impacting not only countries in Northern Europe and North America but most countries round the world[v]. However, as the influence of the Reformation has declined since the 1980s, entrepreneurs and politicians seem to be increasingly arriving again at an entente cordiale to benefit themselves and to disadvantage most citizens.
The third break in the bond between entrepreneurs and society is when entrepreneurs don’t support their own country as much as they should. Indeed, many entrepreneurs abandon their country of origin and move to countries which provide better opportunities or lower tax rates. Economic migration is understandable where the entrepreneurs are poor, or are just starting. But worldwide acceptability of entrepreneurship decreases if established or highly successful entrepreneurs are too greedy[vi].
Such overreach has at least four symptoms:
- Economic blackmail (threatening to move business out of an area if a particular political vote does not go their way – as Marc Benioff, the CEO of Salesforce, did recently);
- Lobbying to tilt the subsidy and tax systems in their own favour (as many significant companies have done for some decades, and as smaller entrepreneurs seem to be doing increasingly);
- Unwillingness to contribute a fair share of taxes for the common benefit (apparently, only a few months ago, HSBC threatened to move out of the U.K., while IKEA and other companies have actually moved out of their countries of origin for those reasons); and
- Reduced, negligible, or little commitment to philanthropy.
In such matters, Western countries had made enviable progress since the 16th century but, even there, progress has reversed noticeably since the 1980s[vii]. The Netherlands, one of the main beneficiaries of the Reformation, now has over a hundred large companies which seem to pay hardly any tax[viii].
By contrast, the Dutch Societal Alliance (MA) and the Healthy-Life-Alliance (HLA) are examples of initiatives being taken by numerous people – including entrepreneurs – who are trying to repair the breaks in the relational circle between entrepreneurship and society.
Entrepreneurial drive toward mutually-beneficial goals is the only way of addressing today’s global “wicked problems”. Relational business models based on stakeholder[ix] value and impact arise from the circle between people, public bodies and private companies – that is, from coherence in society.
About the author:
Prabhu Guptara is Executive Director, Relational Analytics, Cambridge, UK; Member of the Board, Institute of Management, University of St Gallen, Switzerland; and Distinguished Professor of Global Business, Management and Public Policy, William Carey University, India.
[i] For one ranking regarding this, see the World Bank’s “Ease of Doing Business Index” http://www.doingbusiness.org/rankings
[ii] See http://www.kauffman.org/microsites/kauffman-index/rankings/national?Report=StartupActivity; see also http://www.inc.com/magazine/201505/leigh-buchanan/the-vanishing-startups-in-decline.html
[iii] Those rates are from one ancient religious text; other texts prescribe various other rates, in every case dependent on the caste of the borrower: The Manusmriti, translated by George Buhler, Chapter VII, verses 140-142, accessible e.g. at http://hinduwebsite.com/sacredscripts/hinduism/dharma/manusmriti_2.asp
[iv] For a brief discussion of this, see the text of my presentation in Israel on the 18th of February 2016: “http://www.alphamedicus.com/documents/mHealth_Israel_Conference_2016%20_Text_of_Prof_Guptara’s_speech_18February2016.pdf For a longer paper on Israel’s entrepreneur support system, see: http://www.alphamedicus.com/documents/Israel’s_Entrepreneurs_Support_System.pdf
[v] See my chapter, “Towards Creating the Right Kind of Globalisation – Why it does not happen, and what to do about it” in Joseph Straus (Ed.), The Role of Law and Ethics in the Globalized Economy, Max Planck Institute Studies on Intellectual Property, Competition and Tax Law, Volume 10, 2009, Springer Verlag, Berlin, Germany, pages 61-82. For a different but very much fuller view, see Vishal Mangalwadi, The Book That Made Your World, Thomas Nelson, USA, 2011.
[vi] For the latest howl of rage, see http://www.scmp.com/comment/blogs/article/1929324/study-reveals-awfulness-canadian-investor-immigration-income-tax
[vii] The evidence for this is exhaustively documented in Thomas Piketty, Capital in the Twenty-First Century, Harvard University Press, 2014.
[viii] Tax avoidance is of course not limited to the Netherlands: http://www.corporateknights.com/voices/bernard-simon/12331-14592312
and http://www.corporateknights.com/channels/leadership/filing-deadline-14593140
[ix] See Michael Schluter et al, The Relational Lens: Understanding, Measuring and Managing Stakeholder Relationships, due out soon from Cambridge University Press.
Very nice article, and certainly a meaningful point of view.
In my own work, I have simplified the whole issue into its component parts. Universally, we all experience struggles. People can some times overcome these struggles on their own, however often require some help. When enough people seek help from on party, the opportunity to start a “busy”-ness are present. Businesses go through 5 phases: (1) entirely dependent on the owner, (2) education/apprenticeship, (3) mechanization, (4) branding, and (5) information. Aside from the first phase, the rest depend entirely upon developing tools. This is where things get tricky. How does the community consider the ownership of tools? To be more precise, every community, be it through their belief system and/or their collective experience, will have a different attitude toward tools, which is another way of saying property or in technical terms assets.
From a Protestant perspective, the value a business provides to a customer to help them through their struggle accrues mostly to the owner of the tool/property/asset which makes it possible. “Freeing” another from their struggle then becomes an ideal to which all should aspire because it is of value to our fellow man. However, that pre-requisite for freedom can then be mirrored in our attitudes toward the asset itself resulting in the asset owner wanting free “reign” to use their property as they see fit. The legislator then needs to come in and regulate the use of that property to maintain a balance of private and public interest through laws, regulations, and taxation.
However, not everyone has the same views toward property as Protestants do because not everyone is a Protestant. In some communities, the value made possible by the asset accrues principally to the end user directly or indirectly through the intermediary of the state. A quick illustration of such variations can be found in the different interpretations of the hero myth. In Western culture the hero provides some benefit to the community the members of which will then elevate that person to high a position, like village chief, CEO, President, and so on. While in the East, the same hero will leave the community to contemplate life on a mountain top somewhere.
It is said, that when the Chinese e-commerce company was introduced into the US stock market its founder Jack Ma stated that his first responsibility was to the company’s clients and employees. Or something of that sort. This attitude is entirely consistent with an Eastern worldview. Likewise, the conflict in the Middle East can be understood as a rejection of Western values which place the individual above the community which makes sense when you consider the regions resource poor past.
Consequently, although entrepreneurship is common to all societies as a response to a communities struggle to achieve a specific outcome, where we differ is how that value is apportioned. To understand those differences we only need to look the history and present day attitudes toward property.