Madeleine Bunting Is Off Base On Entrepreneurship

She writes for the Guardian and seems to be a socialist. She finishes her recent blog post on microfinance with:

"The gist of the argument is that the enthusiasm for microfinance has been rooted in the myth of the heroic individual entrepreneur, the rags to riches fairytales, Dick Whittington style."

See Is microfinance a neoliberal fairytale?

But just because some or maybe most of these microfinance outfits are not really working out as publicized does not necessarily mean that entrepreneurs and entrepreneurship is not important. She says that

"But wealth creation, outside of fairytales, is very rarely the result of individual effort. Rather it is a collective endeavour – requiring skills and knowledge – in institutions such as companies, co-operatives."

But who starts new firms? To me, an individual will be the catalyst for them. There has to be a first person who says "let's open a donut shop." There is no group mind such that several people all have the same thought at the same instant to start a new business. So for her to make fun of the "myth of the heroic individual entrepreneur" is off base. If we don't say entrepreneurs are or can be heroes, why say that doctors, teachers, fire fighters, etc are? We could say that we don't need heroes to do those things-just a good system or organization.

Saying that entrepreneurs cannot be heroes directs people away from that activity. People respond to incentives and incentives are not all just monetary. Knowing that you might be held in high esteem for taking the risk of starting a new business should matter.

Then she says

"microfinance could actually inhibit poverty reduction by diverting attention and resources from the much more important state co-ordinated policy interventions, financial institutions and investment strategies that have been crucial to the success of fast-growing economies such as Vietnam, China and South Korea."

I don't know much about the role of "state co-ordinated policy interventions" in those countries, but I know that there are critics of industrial policy and MITI in Japan who say that Sony and other companies were successful because they decided to go their own way and not listen to MITI. See this post by David Henderson. Also, surely she would agree that not all "state co-ordinated policy interventions" work. So do they add more wealth on balance once the failures are taken into account? Maybe there are studies out there on that but I don't know that literature.

Then she says that

"microfinance is not very successful at creating prosperous small businesses in the long run. Much was made of the "telephone ladies" in the 1990s who took out microloans to buy mobiles and rent them out. Initially they made handsome profits, but as Chang points out their income has dropped dramatically. If a business idea works and is accessible to poor people, everyone will pile in"

Well, all those new entrants are helping to create wealth, something she says is not resulting from microfinance. I don't think you need to continually have above normal profit to create wealth

Finally, who does she think are heroes? Bureaucrats? Central planners? Does she think individuals should just sit around waiting for a bureaucrat to get things going?

This article from the New Yorker says that the state preventing entrepreneurship in the Middle East is one of the problems they face

The Tyrant Tax

Bunting seems to want more government control of the economy. But here is a very good statistic from the book The Economics of Macroissues:

"Thus for the poorest 10 percent of the population in highly capitalist countries, average per capita income is about $5,900 per year. For the poorest 10 percent of the population in the least capitalist countries, average income is under $750 per year."

But more capitalism (and therefore more entrepreneurship) is not what Ms. Bunting wants. She wants more government control, less capitalism and less entrepreneurship. But that seems to lead to more poverty.