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Closing Remarks Brian Dabson, RUPRI, May 20, 2005
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Federal Reserve Bank of St. Louis
Striking the Right Notes on Entrepreneurship Conference
April 18-20, 2005, Memphis, TN

Closing Remarks

Brian Dabson
Research Professor, Truman School of Public Affairs, University of Missouri-Columbia
Associate Director, Rural Policy Resource Institute (RUPRI)

I have really enjoyed this conference and I am pleased at this opportunity to respond to what Ive
seen and heard over the past day and a half. I arrived with some prepared remarks just in case
there was nothing said that would get my pulse racing. But I need not have worried because our
host, Bill Poole, gave a presentation yesterday lunchtime that really got me going.

Mr. Pooles thesis was essentially that the role of government was to set the broad conditions for
entrepreneurship activity an efficient legal system, protected property rights, and effective
institutions that can reduce transaction costs and then get out of the way. He attacked the notion
of active policies that would in any way modify or distort the efficiency of the market on the basis
that market forces if left alone would lead to appropriately distributed entrepreneurial activity. He
even distrusted the notion of public infrastructure investment, preferring user fees to repay bond
financing rather than direct taxation. This was indeed a Free Enterprise 101 class.

My knee jerk reaction, based on 35 years of working in community and economic development on
both sides of the Atlantic was to dismiss Mr. Pooles arguments as being yet another example of
the dismal science of economics at play, where the market is regarded as infallible in spite of the
evidence to the contrary. After all, my new role in life is to be an advocate for rural communities
and regions that know first hand what it is like to be left to the mercy of the market plundering of
natural resources, disinvestment in critical infrastructure, and places to be ignored except at
election time.

But there is much in Mr. Pooles presentation that I wholeheartedly agree with. Governments are
not good at picking winners; subsidies and tax breaks (except in relation to research and
development) are generally wasteful and counterproductive. I also agree that governments should
not try to get involved directly in businesses, but I do not agree that they have no role to play in
creating entrepreneurial climates. As an aside, we do have to be careful, however, not to be single
issue advocates there is more to life and community than entrepreneurship.

Mr. Poole compared entrepreneurial activity in the US with that of Western Europe and not
surprisingly concluded that there was something in the American make-up that makes us naturally
more competitive, innovative, creative, and flexible. This has an echo in the conclusions of the
Global Entrepreneurship Monitor reports prepared by Babson College and the London Business
School. The 2003 report showed the US to have the seventh highest rate of entrepreneurial
activity out of 31 countries surveyed and the highest among G7 countries. The authors noted:
Entrepreneurship in the United States continues to thrive at very high levels and seems to be
moving ahead of the general recovery of the country. The United States outranks the rest of the Brian Dabson, RUPRI, May 20, 2005
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world on key entrepreneurship conditions such as financial support, entrepreneurship education
and training, and social norms favoring entrepreneurshipthe entrepreneurship sector is poised to
become an even more important protagonist in the future economic growth of the country.

But there are two important caveats that need to be made to this optimistic and somewhat self-
congratulatory statement.

First, the US may be the seventh out of 31 countries in terms of entrepreneurial activity, but it is
worth noting who else is in the top ten. These include a group of South American countries
Venezuela, Argentina, Chile and Brazil, and of course, China. These are our real competitors and
we are in no position to sit on our laurels.

Second, entrepreneurial activity within the US is not evenly distributed. There is entrepreneurial
activity in all regions but rural regions and inner cities are not, as the deceased but not forgotten
National Commission on Entrepreneurship put it, participating in the entrepreneurial revolution.

I contend that long-term competitiveness for the US cannot be secure unless entrepreneurship
activity is more equitably spread across and within states. I am in the middle of a tour of public
speaking engagements which are taking me to rural West Virginia, Texas, Kansas, Mississippi,
California, Pennsylvania, Oregon, and Oklahoma. Few of my audiences are likely to take kindly to
the notion that they should be passive about their struggling economies and wait for market forces
to assert themselves. Im afraid the Mr. Pooles Las Vegas model will not cut it for the Delta,
Appalachia, the Heartlands, or Indian Country.

I believe that it is critical to appropriately position entrepreneurship within economic development
policy and practice. Think of a pyramid, where the base is entrepreneurship this is where the
most effort and resources should be spent creating an environment of encouragement and
support for initiative and creativity. This, in turn, improves the ability of regions and communities to
retain and expand existing businesses retention being the middle band of the pyramid. This, in
turn, improves the same regions and communities attractive to incoming businesses and
investment the recruitment apex of the pyramid. Where the assets of a region or community are
the least well-developed, the emphasis of policy needs to be on building and capitalizing upon
human entrepreneurial assets, not on desperately trying to attract from elsewhere in a race to the
bottom.

So where would I start with entrepreneurship policy? I begin with a sense of trepidation, because
effective and groundbreaking initiatives can be enabled with good policy and incentives, as we
found with the Kellogg/CFED Entrepreneurship Development Systems in Rural America project,
and can be just as easily be squashed by poor policy and bad implementation.

1. I would remove all direct business and farm subsidies that are market distorting.
2. I would divert these resources into investments in two things offering affordable health
care, and building the effectiveness, quality, and capacity of key institutions to support
entrepreneurial climates in their regions and communities universities, community
colleges, community development corporations, chambers and so on.
3. I would make all financial support to the plethora of business advice and technical
assistance agencies conditional upon them operating as parts of functioning systems Brian Dabson, RUPRI, May 20, 2005
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responding to the needs of entrepreneurs, rather than as freestanding supply-led
programs.
4. I would encourage all K-12 schools to embed entrepreneurship and financial literacy
components into their curricula.
5. I would use public dollars to incent research and development through the land grant
university and community college systems in technologies, innovations, and processes
that open up competitive markets for small rural-based businesses.
6. I would use block grant funds to encourage regional collaboration between local
government that would enable health, social services, transportation, and ecological
services to become entrepreneurial opportunities across rural America.

So you see, I agree with Bill Poole up to a point but in getting government out of the way, we
should not rule out taking opportunities for strategic public investment that can make a difference in
poor communities and regions.