“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

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.

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.

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.

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.

See: http://www.povertycure.org – Advancing Entrepreneurial Solutions to Poverty

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