Roots of Prosperity

by R. Glenn Hubbard and William Duggan

The lessons of history, from the Roman Empire to Africa today, suggest that if we want to reduce poverty in emerging markets, regulation reform and business success are prerequisites, not outcomes.

In the history of economic success, no two countries have ever followed identical paths. But there is a universal pattern nonetheless: Nations rise out of poverty when elements of a thriving business sector replace the previous economic system.

The factors necessary for this transition are known. Since 2004, the World Bank has tracked them each year in countries around the world for its Doing Business report. (The most recent version is Doing Business 2009: Comparing Regulation in 181 Economies, by the World Bank and the International Finance Corporation [Palgrave Macmillan, 2009].) The report specifies 10 forms of government regulation that affect the various phases of a company’s life cycle: starting a business, obtaining licenses (such as construction permits), employing workers, registering property, getting credit, protecting investors, paying taxes, trading across borders, enforcing contracts, and closing a business. The fewer impediments that government places before entrepreneurs in any of these areas, and the less time it takes (for example, to stand in line) and the less money is required (for fees or bribes), the more business-friendly the country is — and the more prosperous.

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Woody Tasch, founder of Slow Money Alliance, a nonprofit that hopes to do for capitalism what the Slow Food movement has done for food and agriculture, would recommend you invest closer to home.

Money—not the paper stuff in your wallet, but the bits of data that whip around the world in billions of instantaneous transactions each day—moves too fast. So argues Edward “Woody” Tasch, a venture capitalist with a seemingly anticapitalistic ambition: to put the brakes on our money, bring it closer to home, and elevate sustainability over profits and growth.

For Tasch, it’s a goal more than 20 years in the making. In 1989, he founded one of the nation’s first venture capital funds with a conscience, but it failed to attract the $25 million in investment for which he had aimed. Later came Investors’ Circle, a network of about 150 venture capitalists, angel investors, and foundations that launched in 1992; as chairman, Tasch orchestrated the distribution of more than $130 million to hundreds of sustainable business start-ups.

Source:  GOOD.is

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