Making Poor Nations Rich: Entrepreneurship and the Process of Economic Development by B. Powell (Stanford: Stanford University Press, 2008, pp. 480, ISBN-10: 0804757321).

✍ Scribed by Tim Vorley

• Publisher: John Wiley and Sons
• Year: 2010
• Tongue: English
• Weight: 30 KB
• Volume: 22
• Category: Article
• ISSN: 0954-1748
• DOI: 10.1002/jid.1532

✦ Synopsis

Entrepreneurship has emerged as one of the hot debates between academic and policymakers alike in recent times, and this book presents an insightful examination of entrepreneurship in the world's poorer countries. Traditional economic theory has been largely deficient in understanding entrepreneurship, and moreover, why some countries become rich while others become poor. To this end, the book offers a number of case studies from Asia, Africa, Europe and South America considering why some counties are rich and others poor, why some become rich and why some fail despite signs of development.

With entrepreneurs a part of almost every culture, one of the central questions posed by the book is why economic development does not occur uniformly or with equality. In addressing this question the book contributes to the new growth school, which has seen geographical and other explanations replaced with a focus on institutions and policy. The book states its aim as to 'push forward the current debate further in the direction of an appreciation for the critical role that entrepreneurs and the institutional environment of private property rights and the economic freedom play in economic development' (p. 2). Following an interesting foreword by Deepak Lal which emphasises the importance of institutions and ideologies in economic development, and a more comprehensive introduction from Powell, the book is structured in three parts.

The first part considers the role of entrepreneurs in creating economic growth and why some institutional environments are more effective than others through four key essays. The chapters in this section each identify the variation and disparity in wealth which is evident around the world, and how variation in entrepreneurship and economic freedom affects economic development. The foundation of the book's argument is laid in Mancur Olson's 1996 contribution, Why Some Nations Are Rich, and Others Poor, which concludes that differences in performance can only be attributed to differences in the 'quality' of institutional and policy environments. This position is developed in Chapter 3, Holcombe's (1998) paper Entrepreneurship and Economic Growth, which develops a model of entrepreneurial growth. Baumol and Lawson elaborate on the nature of the institutional environment that underpins entrepreneurial and economic development in Chapters 4 and 5. Baumol's (1990) essay, Entrepreneurship: Productive, Unproductive and Destructive, identifies how entrepreneurs respond to incentives through the examination of historic episodes from ancient Rome to the Industrial Revolution, and observes that policy is central to economic performance. In the final chapter of the section, Economic Freedom and Property Rights, Lawson states what should be an obvious message that '[S]ocieties that organise themselves with private property, rule of law, and free markets outperform, on almost every measurable margin ' (p. 131).

Having laid the foundations, the second and third parts present a series of case studies of institutional environments and policy, examining how changes have affected economic performance and entrepreneurial development. Chapters 6 (Ayittey) and 7 (Vargas Llosa) present case studies of Africa and Latin America respectively, identifying similar themes to explain underdevelopment including institutional and ideological impediments both of which represent the ultimate route of any reformation. The account of Boettke et al. in Chapter 8 details Romania's largely unsuccessful reformation, which echoes Baumol's argument that rewarding unsuccessful entrepreneurs ultimately harms economic performance. The final chapter of the second part, Johansson's study of Sweden identifies the impact of (over)intervention on entrepreneurship, and how it has reduced the propensity to pursue entrepreneurial behaviour and consequently seen economic growth slow.